SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Republic New York Corporation
(Name of Issuer)
Common Stock, Par Value $5.00 Per Share
(Title of Class of Securities)
760719104
(CUSIP Number)
Richard E. T. Bennett
General Manager and Group Legal Adviser
HSBC Holdings plc
10 Lower Thames Street
London EC3R 6AE
United Kingdom
44-171-260-0926
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 10, 1999
(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 ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box: [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
*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 (the "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>
CUSIP No. 760719104
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
HSBC Holdings plc ("HSBC")
IRS Identification Number Pending
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC, OO (See Item 3)
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
England
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7. SOLE VOTING POWER
2,600 shares (See Item 5)
8. SHARED VOTING POWER
31,044,228 (See Items 4 - 6)(1)
9. SOLE DISPOSITIVE POWER
2,600 (See Item 5)
10. SHARED DISPOSITIVE POWER
None
<PAGE>
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,046,828 (See Items 4 - 6)(1)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
29.5% (1)
14. TYPE OF REPORTING PERSON
HC
(1) The reporting person disclaims beneficial ownership of 31,044,228 of
such shares (constituting approximately 29.5% of the outstanding shares
of Republic New York Corporation common stock). Beneficial ownership of
such 31,044,228 shares is being reported hereunder solely because the
reporting person may be deemed to have beneficial ownership of such
shares as a result of the Stockholders Agreement described in Items 4
and 5.
<PAGE>
Item 1. Security and Issuer
This statement relates to shares of common stock, par value $5.00 per share (the
"RNYC Common Stock"), of Republic New York Corporation ("RNYC"). The address of
RNYC's principal executive offices is 452 Fifth Avenue, New York, NY 10018.
Item 2. Identity and Background
(a) - (c) and (f). This statement is being filed by HSBC Holdings plc, a
bank holding company organized and existing under the laws of England ("HSBC").
HSBC is an international banking and financial services company headquartered in
London, United Kingdom. HSBC provides complete financial services to individuals
and institutions through a network comprising more than 5,000 offices in 79
countries and territories, operating in the Asia-Pacific region, Europe, the
Americas, the Middle East and Africa. HSBC's principal operating entity in the
US, HSBC Bank USA, is a New York State regional banking institution with 374
branches in New York and two in Pennsylvania. The address of HSBC is 10 Lower
Thames Street, London EC3R 6AE, United Kingdom.
The name, business address, present principal occupation or employment and
citizenship of each director and executive officer of HSBC are set forth in
Annex A hereto and are incorporated herein by reference.
(d) - (e). During the last five years, neither HSBC nor, to the best
knowledge of HSBC, any executive officer or director of HSBC, has been (i)
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
has been 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 violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to the RNYC Stock Option Agreement described in Item 4, RNYC has
granted to HSBC an option to purchase up to 20,929,000 shares of RNYC Common
Stock at a price of $72.00 per share, exercisable only upon the occurrence of
certain events. The exercise of such option to purchase the full number of
shares of RNYC Common Stock currently covered thereby would require aggregate
funds of $1,506,888,000. If HSBC were to purchase shares of RNYC Common Stock
pursuant to the RNYC Stock Option Agreement, HSBC currently anticipates that
such funds would be provided from HSBC's working capital.
Item 4. Purpose of Transaction
On May 10, 1999, HSBC, RNYC and Safra Republic Holdings S.A. entered into a
Transaction Agreement and Plan of Merger (the "Merger Agreement"), pursuant to
which a wholly owned Maryland corporate subsidiary of HSBC will be merged with
and into RNYC (the "Merger"), with RNYC being the surviving corporation.
As a result of the Merger, each outstanding share of RNYC Common Stock
(excluding treasury and certain other shares) will be converted into the right
to receive $72.00 in cash. All outstanding RNYC preferred stock (excluding
treasury and certain other shares) shall remain unchanged as issued and
outstanding preferred stock of the surviving corporation. Consummation of the
Merger would result in the RNYC Common Stock ceasing to be listed on the New
York Stock Exchange and the International Stock Exchange of the United Kingdom
and The Republic of Ireland, Ltd. and becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Act.
Pursuant to the Merger Agreement, RNYC has agreed not to pay quarterly
dividends on RNYC Common Stock in excess of current quarterly dividends.
The Merger is subject to the satisfaction of certain conditions including
receipt of RNYC stockholder and regulatory approvals, as set forth in the Merger
Agreement. The Merger Agreement is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
As a condition and inducement to HSBC's entering into the Merger Agreement,
RNYC entered into a Stock Option Agreement (the "RNYC Stock Option Agreement")
with HSBC whereby RNYC has granted to HSBC an option (the "Option") to purchase
up to 20,929,000 newly-issued shares of RNYC Common Stock at a price of $72.00
per share, exercisable only upon the occurrence of certain events. Under certain
circumstances set forth in the RNYC Stock Option Agreement, HSBC, as grantee of
the Option, may relinquish the Option in exchange for a payment of $325 million
or, under certain circumstances, for a larger amount. The Notional Total Profit
(as defined in the RNYC Stock Option Agreement) which HSBC, as grantee of the
Option, may realize from the Option may not exceed $425 million. The RNYC Stock
Option Agreement is attached hereto as Exhibit 99.2, and is incorporated herein
by reference.
As a further condition and inducement to HSBC's entering into the
Merger Agreement, RNYC Holdings Limited, a Gibraltar corporation ("Holdings"),
Congregation Beit Yaakov (solely as beneficiary of a life estate of shares
beneficially owned by RNYC Holdings Limited and, together with Holdings, the
"Stockholder"), Saban S.A., a Panamanian corporation and Mr. Edmond J. Safra
entered into a Stockholders Agreement (the "Stockholders Agreement") with HSBC
whereby the Stockholder has agreed to vote its shares of RNYC Common Stock in
favor of the Merger Agreement and the Merger for the period specified in the
Stockholders Agreement and not to consent to any Alternative Transaction (as
defined in the Stockholders Agreement) or any action that would materially
delay, prevent or frustrate the transactions contemplated by the Merger
Agreement, and has granted an irrevocable proxy to HSBC solely to effectuate
such agreement. Holdings is the record and, subject to the life estate of
Congregation Beit Yaakov, beneficial owner of 31,044,288 shares of RNYC Common
Stock. The Stockholders Agreement is attached hereto as Exhibit 99.3 and is
incorporated herein by reference.
The preceding summary of certain provisions of the Merger Agreement, the
RNYC Stock Option Agreement and the Stockholders Agreement, copies of which are
filed as exhibits hereto, is not intended to be complete and is qualified in its
entirety by reference to the full text of such agreements.
HSBC may, from time to time, make purchases of up to an aggregate of 4.99%
of the outstanding RNYC Common Stock in open market purchases or otherwise. Any
such purchases in excess of $15 million would be subject to the prior filing of
a notification form pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended and the expiration or early termination of the waiting
periods thereunder.
Except as set forth in this Item 4, HSBC has no plans or proposals which
relate to or would result in any of the matters set forth in clauses (a) through
(j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) and (b). Pursuant to the RNYC Stock Option Agreement, HSBC has the
right, exercisable only in certain circumstances, none of which have occurred as
of the date hereof, to acquire up to 20,929,000 shares of RNYC Common Stock (the
"Option Shares"), which represents beneficial ownership of approximately 19.9%
of the shares of RNYC Common Stock currently outstanding (and approximately
16.6% of the shares that would be outstanding following such exercise). If HSBC
were to acquire such shares, it would have sole voting and, subject to certain
restrictions set forth in the RNYC Stock Option Agreement, investment power with
respect thereto; provided that HSBC has agreed that for one year from the date
of exercise, in connection with any RNYC stockholder meeting at which a vote is
taken with respect to an Acquisition Proposal (as defined in the RNYC Stock
Option Agreement), HSBC shall vote all shares of RNYC Common Stock acquired
pursuant to the Option then beneficially owned by it in the same proportion as
all other outstanding shares of RNYC Common Stock. Because of the limited
circumstances in which the Option is exercisable, HSBC disclaims beneficial
ownership of the Option Shares.
Pursuant to the Stockholders Agreement, the Stockholder has granted HSBC an
irrevocable proxy to implement its voting agreement as to the Merger and certain
related matters with respect to 31,044,288 shares of RNYC Common Stock (the
"Proxy Shares"), which represents approximately 29.5% of the shares of RNYC
Common Stock currently outstanding. As a result of the Stockholders Agreement,
HSBC may be considered to have shared voting power with respect to the Proxy
Shares. HSBC does not have any investment power with respect to the Proxy
Shares. Because of the limited scope of the proxy granted pursuant to the
Stockholders Agreement, HSBC disclaims beneficial ownership of the Proxy Shares.
As of May 17, 1999, certain HSBC subsidiaries (and, therefore, HSBC) may be
deemed to be the beneficial owner of, to the best of HSBC's knowledge, 2,600
shares of RNYC Common Stock, which shares are held in a fiduciary capacity (the
"Fiduciary Shares"). HSBC subsidiaries have sole voting and investment power
with respect to all of such Fiduciary Shares. HSBC disclaims beneficial
ownership of all of the Fiduciary Shares.
To the best of its knowledge, no executive officer or director of HSBC
beneficially owns any shares of RNYC Common Stock.
(c) Except for the Option Agreement and the Stockholders Agreement, there
have been no transactions in shares of RNYC Common Stock by HSBC, or, to the
best knowledge of HSBC, any of HSBC's executive officers and directors during
the past 60 days.
(d) As described in paragraphs (a) and (b) above, HSBC and various
subsidiaries of HSBC may be deemed to be beneficial owners of shares of RNYC
Common Stock in trust accounts for customers with sole, shared or no investment
powers. The beneficiaries of such trust accounts have the power to direct the
payment of dividends and proceeds from the sale of such shares.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
See Items 4 and 5.
Except as set forth in Items 3, 4, 5 and 6, neither HSBC nor, to the best
knowledge of HSBC, any of its directors or executive officers, has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any other person with respect to any securities of RNYC.
Item 7. Materials to be Filed as Exhibits
99.1 Transaction Agreement and Plan of Merger, dated as of May 10, 1999, by and
among HSBC Holdings plc, Republic New York Corporation and Safra Republic
Holdings S.A.
99.2 Stock Option Agreement, dated as of May 10, 1999, by and between Republic
New York Corporation and HSBC Holdings plc.
99.3 Stockholders Agreement, dated as of May 10, 1999, by and among RNYC
Holdings Limited, Congregation Beit Yaakov, Saban S.A., Mr. Edmond J. Safra
and HSBC Holdings plc.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
May 19, 1999
HSBC HOLDINGS PLC
/s/ Richard E.T. Bennett
--------------------------
Name: Richard E.T. Bennett
Title: General Manager and
Group Legal Advisor
<PAGE>
ANNEX A
Identity and Background
-----------------------
The following table sets forth the names, addresses and principal
occupations of the directors and executive officers of HSBC. Except as set forth
below, the principal business address of each such director and executive
officer is the address of HSBC Holdings plc, 10 Lower Thames Street, London EC3R
6AE, United Kingdom. Unless otherwise specified, each of such directors and
executive officers is a citizen of United Kingdom of Great Britain and Northern
Ireland.
Name and Principal Business
Address Occupation
- --------------------------- ----------
J R H Bond Group Chairman of HSBC
and executive Director
Baroness Dunn, DBE Deputy Chairman and senior
John Swire & Sons Limited non-executive Director of HSBC.
Swire House Executive Director of John Swire &
59 Buckingham Gate Sons, Limited.
London SW1E 6AJ
United Kingdom
Sir Peter Walters Deputy Chairman and senior
22 Hill Street non-executive Director. Deputy
Mayfair Chairman of EMI Group plc.
London W1X 7FU
United Kingdom
K R Whitson Group Chief Executive and
executive Director.
Lord Butler, GCB, CVO Non-executive Director. Master,
The Master's Lodgings University College, Oxford.
University College
Oxford OX1 4BH
United Kingdom
R K F Ch'ien, CBE Non-executive Director. Chairman,
3910-3911 Jardine House Inchcape Greater China. Director
1 Connaught Place Central of Inchcape plc. Chairman of HSBC
Hong Kong SAR Private Equity Management Limited
Citizen of China and Co-Chairman of Beijing CAST
Information System Technology Co.,
Ltd.
D E Connolly, OBE Non-executive Director. Chartered
1 Queen's Road Central Accountant.
Hong Kong SAR
W R P Dalton Executive Director. Director and Chief
Executive, Midland Bank plc and Chairman
of Forward Trust Group Limited.
D G Eldon Executive Director.
1 Queens Road Central Chairman of The Hongkong and
Hong Kong SAR Shanghai Banking Corporation Limited.
D J Flint Executive Director. Group Finance
Director of HSBC.
W K L Fung, OBE Non-executive Director. Group
Lifung Centre Managing Director and Chief
888 Cheung Sha Wan Road Executive Officer of Li & Fung
Hong Kong SAR Limited.
Citizen of China
S K Green Executive Director Investment
Banking and Markets.
Lord Marshall Non-executive Director.
Berkeley Square House Chairman of British Airways Plc, Inchcape
Berkeley Square plc and Ivensys plc. Deputy Chairman of
London W1X 6BAof British Telecommunications plc.
United Kingdom
C Miller Smith Non-executive Director. Chairman of
ICI Group Headquarters Imperial Chemical Industries plc.
9 Millbank
London SW1P 3JF
Sir Brian Moffat, OBE Non-executive Director.
British Steel plc Chairman of British Steel plc.
15 Marylebone Road
London NW1 5JD
M Murofushi Non-executive Director.
ITOCHU Corporation Chairman of ITOCHU Corporation.
54 Kita-Aoyama 2-Chome
Minato-Ku
Tokyo 107-8077 Japan
Citizen of Japan
Sir Wilfrid Newton, CBE Non-executive Director.
24 Berkeley Square Chairman of Raglan Properties plc, Jacobs
London W1X SHB Holdings PLC and Mountcity Holdings Limited.
United Kingdom
C E Reichardt Non-executive Director.
Wells Fargo Bank, NA
420 Montgomery Street
12th Floor
San Francisco, CA 94104
Citizen of the United States
H Sohmen, OBE Non-executive Director. Chairman
World Wide Shipping of World-Wide Shipping Agency Limited,
23rd Floor World-Wide Shipping Group Limited,
9 Des Voeux Road West World Maritime Limited, World Shipping and
Hong Kong SAR Investment Company Limited, World Finance
Citizen of Austria International Limited and N&T Argonaut AB.
Sir Adrian Swire Non-executive Director.
John Swire & Sons Limited Executive Director and Honorary
Swire House President of John Swire & Sons Limited.
59 Buckingham Gate
London SW1E 6AJ
United Kingdom
R G Barber Group Company Secretary of HSBC.
D Beath General Manager and Group Audit
Controller of HSBC.
R E T Bennett General Manager and Group
Legal Adviser of HSBC.
I M Burnett Chief Executive, HSBC Americas Inc.
One HSBC Center and President and Chief Executive,
Buffalo, New York 14203 HSBC Bank USA.
V H C Cheng, OBE Executive Director, The Hongkong
Hang Seng Bank and Shanghai Banking Corporation Limited
83 Des Voeux Road Central and Chief Executive Officer, Hang Seng Bank.
Hong Kong SAR
Citizen of China
A Dixon, OBE Deputy Chairman, The British
East Building Bank of the Middle East.
312/45 Al-Suq Road
Bur Dubai, United
Arab Emirates
M F Geoghegan President and Chief Executive
Rua Tenete Francisco Ferreira Officer of Banco HSBC Bamerindus.
de Souza 766 Bloco 2 ala 06
Presidencia
Vila Hauer Curitiba PR
CEP: 81-630-020 Brazil
A P Hope General Manager Group Insurance of HSBC.
Bishops Court
27/33 Artillery Lane
London E17LP
United Kingdom
A W Jebson Group General Manager Technical
Services of HSBC.
C P Langley, OBE Executive Director, the Hongkong
Corporation and Shanghai Banking Limited.
1 Queen's Road Central
Hong Kong SAR
M B McPhee Group General Manager
Credit and Risk of HSBC.
A Mehta Chief Executive Officer, The Hongkong
1 Queen's Road Central and Shanghai Banking Corporation Limited.
Hong Kong SAR
Citizen of India
Y A Nasr President and Chief Executive Officer,
Suite 300 Hongkong Bank of Canada.
885 West Georgia Street
Vancouver, BC
Canada
Citizen of the United States
T W O'Brien Deputy Chairman and Chief Executive
No. 2 Leboh Ampang Officer, HSBC Bank Malaysia Berhad.
50100 Kuala Lumpur
R M J Orgill Group General Manager and
Global Head of
Corporate and
Institutional Banking
of HSBC.
R C Picot Group Chief Accountant of HSBC.
J C S Rankin General Manager and Chief Executive Officer
21 Collyer Quay Singapore, The Hongkong and Shanghai
19-00 Hongkong Bank Building Banking Corporation Limited.
Singapore 049320
R A Tennant General Manager Group Human Resources
of HSBC.
<PAGE>
Exhibit
Number Description
- ----------------------------------------------------------
99.1 Transaction Agreement and Plan
of Merger, dated as of May 10, 1999,
by and among HSBC Holdings plc,
Republic New York Corporation and
Safra Republic Holdings S.A.
99.2 Stock Option Agreement, dated as of
May 10, 1999, by and between
Republic New York Corporation and
HSBC Holdings plc.
99.3 Stockholders Agreement, dated as of
May 10, 1999, by and among RNYC
Holdings Limited, Congregation Beit
Yaakov, Saban S.A., Mr. Edmond J.
Safra and HSBC Holdings plc.
[Conformed Copy]
TRANSACTION AGREEMENT AND PLAN OF MERGER
by and among
HSBC HOLDINGS PLC,
REPUBLIC NEW YORK CORPORATION
and
SAFRA REPUBLIC HOLDINGS S.A.
Dated as of May 10, 1999
<PAGE>
TABLE OF CONTENTS
TRANSACTION AGREEMENT AND PLAN OF MERGER
Page
ARTICLE I
THE MERGER
1.1 The Merger.............................................2
1.2 Effective Time.........................................2
1.3 Effects of the Merger..................................2
1.4 Effect on the Company Capital Stock....................2
1.5 Exchange Procedures....................................3
1.6 Options................................................5
1.7 Restricted Shares......................................6
1.8 1998 Long Term Incentive Compensation Plan.............6
1.9 Articles of Incorporation..............................7
1.10 Bylaws................................................7
1.11 Directors and Officers of Surviving Corporation.......7
1.12 Integration of Legal Entities.........................7
ARTICLE II
CLOSING; DISCLOSURE; STANDARDS
2.1 Closing Date...........................................7
2.2 Deliveries at Closing..................................8
2.3 Disclosure Schedules...................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Organization................................9
3.2 Capitalization.......................................10
3.3 Authority; No Violation..............................11
3.4 Consents and Approvals...............................12
3.5 Reports..............................................13
3.6 Financial Statements.................................13
3.7 Broker's Fees........................................14
3.8 Absence of Certain Changes or Events.................14
3.9 Legal Proceedings....................................15
3.10 Tax Matters.........................................15
3.11 Employee Benefits Plans; ERISA......................15
3.12 SEC Reports.........................................19
3.13 Licenses; Compliance with Applicable Law............19
3.14 Certain Contracts...................................19
3.15 Agreements with Regulatory Agencies.................20
3.16 Derivative Instruments..............................20
3.17 Undisclosed Liabilities.............................21
3.18 Environmental Matters...............................21
3.19 Year 2000...........................................22
3.20 Labor Matters.......................................22
3.21 Fairness Opinion....................................22
3.22 Transactions with Affiliates........................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEST EUROPE
4.1 Corporate Organization...............................23
4.2 Capitalization.......................................24
4.3 Authority; No Violation..............................25
4.4 Consents and Approvals...............................25
4.5 Reports..............................................26
4.6 Financial Statements.................................26
4.7 Broker's Fees........................................27
4.8 Absence of Certain Changes or Events.................27
4.9 Legal Proceedings....................................28
4.10 Tax Matters.........................................28
4.11 Employee Benefits Plans; ERISA......................28
4.12 Licenses; Compliance with Applicable Law............31
4.13 Certain Contracts...................................31
4.14 Agreements with Regulatory Agencies.................32
4.15 Derivative Instruments..............................32
4.16 Undisclosed Liabilities.............................33
4.17 Environmental Matters...............................33
4.18 Year 2000...........................................33
4.19 Labor Matters.......................................34
4.20 Fairness Opinion....................................34
4.21 Transactions with Affiliates........................34
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
5.1 Corporate Organization...............................34
5.2 Authority; No Violation..............................35
5.3 Consents and Approvals...............................36
5.4 Financing............................................36
5.5 Financial Reports....................................36
5.6 Litigation; Regulatory Action........................37
5.7 Absence of Certain Changes...........................37
5.8 Year 2000............................................37
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Business Prior to the Effective Time......38
6.2 Forbearances of the Company and SRH..................38
6.3 Covenants of Parent..................................40
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters...................................40
7.2 Access to Information................................42
7.3 Board Recommendations................................43
7.4 Other Offers.........................................43
7.5 Stockholder Approval.................................44
7.6 Legal Conditions to Merger...........................45
7.7 Indemnification; Directors'and Officers'Insurance....45
7.8 Further Assurances...................................46
7.9 Advice of Changes....................................47
7.10 Employee Benefits...................................47
7.11 Takeover Statutes...................................48
7.12. Environmental Audit................................48
7.13. The Offer..........................................48
7.14 Merger Sub..........................................49
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation
To Effect the Merger................................49
8.2 Conditions to Obligations of Parent and Merger Sub..50
8.3 Conditions to Obligations of the Company............51
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination.........................................51
9.2 Effect of Termination...............................53
9.3 Amendment...........................................53
9.4 Extension; Waiver...................................53
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties
and Agreements.....................................53
10.2 Expenses...........................................54
10.3 Notices............................................54
10.4 Interpretation.....................................55
10.5 Counterparts.......................................56
10.6 Entire Agreement...................................56
10.7 Governing Law......................................56
10.8 Severability.......................................56
10.9 Publicity..........................................56
10.10 Assignment; Third Party Beneficiaries.............56
10.11Waiver of Jury Trial................................57
10.12Definitions and Usage...............................57
Exhibit A - Option Agreement
<PAGE>
TRANSACTION AGREEMENT AND PLAN OF MERGER
TRANSACTION AGREEMENT AND PLAN OF MERGER, dated as of May 10, 1999 (this
"Agreement"), by and among HSBC Holdings plc, a public limited company organized
and existing under the laws of England ("Parent"), Republic New York
Corporation, a Maryland corporation (the "Company") and Safra Republic Holdings
S.A., a societe anonyme organized and existing under the laws of Luxembourg
("SRH").
WHEREAS, Parent has determined that it is in its best interests and in the
best interests of Parent's stockholders to consummate the business combination
transaction provided for herein in which an existing or newly formed, wholly
owned Maryland corporate subsidiary of Parent ("Merger Sub") will, subject to
the terms and conditions set forth herein, merge with and into the Company (the
"Merger") so that the Company is the surviving and successor corporation
(hereinafter sometimes called the "Successor Corporation") in the Merger;
WHEREAS, Parent has determined that it is in its best interests and in the
best interests of Parent's stockholders for a newly formed wholly owned
subsidiary of Parent ("Offer Sub"), subject to the terms and conditions set
forth herein, to make an offer (the "Offer") to acquire all of the outstanding
shares of SRH Common Stock (as defined in Section 4.2) not owned by the Company;
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders to consummate the Merger,
subject to the terms and conditions set forth herein;
WHEREAS, the Board of Directors of SRH has determined that it is in the
best interests of SRH and its stockholders for its stockholders to sell their
shares of SRH pursuant to the Offer;
WHEREAS, as a condition to, and concurrently with, the execution of this
Agreement, Parent is entering into a Stockholders Agreement (the "Stockholder
Agreement") with RNYC Holdings Limited, Congregation Beit Yaakov (together with
RNYC Holdings Limited, the "Stockholder"), Saban S.A. (the "Stockholder Parent")
and Mr. Edmond J. Safra, and certain of their respective affiliates pursuant to
which the Stockholder has agreed to vote in favor of the Merger;
WHEREAS, as a condition to, and concurrently with, the execution of, this
Agreement, Parent and the Company are entering into a stock option agreement
(the "Option Agreement") in the form attached hereto as Exhibit A;
WHEREAS, prior to the date hereof the Board of Directors of the Company has
approved and declared advisable this Agreement and the Merger and has approved
(including for purposes of Sections 3-601 through 3-604 and 3-701 through 3-709
of the General Corporation Law of the State of Maryland (the "MGCL")) the Option
Agreement and the Stockholder Agreement, upon the terms and subject to the
conditions set forth herein and therein;
WHEREAS, the Board of Directors of SRH has approved this Agreement and the
Offer and has recommended the Offer, upon the terms and subject to the
conditions set forth herein;
WHEREAS, upon its formation, Merger Sub will execute and deliver a copy of
this Agreement and become a party hereto; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and the Offer and also to prescribe
certain conditions to the Merger and the Offer.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the MGCL, at the Effective Time (as defined in Section 1.2),
Merger Sub shall merge with and into the Company. The Company shall be the
Successor Corporation in the Merger, and shall continue its corporate existence
under the laws of the State of Maryland. Upon consummation of the Merger, the
separate corporate existence of Merger Sub shall terminate.
1.2 Effective Time. On the Closing Date (as defined in Section 2.1), the
Merger shall become effective upon the acceptance for record of articles of
merger (the "Articles of Merger") by the State Department of Assessments and
Taxation of Maryland (the "Maryland Department"), or at such later time as shall
be specified in the Articles of Merger (but not later than 30 days after
acceptance for record by the Maryland Department), in accordance with the MGCL
and by making all other filings of the Articles of Merger or recordings required
by the MGCL in connection with the Merger. The term "Effective Time" shall be
the date and time when the Merger becomes effective, as set forth in the
Articles of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Section 3-114 of the MGCL.
1.4 Effect on the Company Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, the Company or the
holder of any of the Company securities:
(a) Outstanding Company Common Stock. Each share of common stock, par value
$5.00 per share, of the Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock held (i) in the Company's treasury ("Treasury Shares") or
(ii) directly or indirectly by Parent or the Company or any of their respective
wholly owned Subsidiaries (except for Fiduciary and DPC Shares (as defined in
Section 1.4(d)) shall become and be converted into the right to receive $72.00
in cash (the "Merger Consideration").
(b) Outstanding Company Preferred Stock. Each share of (i) Company Dutch
Auction Rate Transferable Securities Preferred Stock, Series A (the "Company
Series A DARTs"), (ii) Company Dutch Auction Rate Transferable Securities
Preferred Stock, Series B (the "Company Series B DARTs"), (iii) Company
Adjustable Rate Cumulative Preferred Stock, Series D (the "Company Series D
Preferred Stock"), (iv) Company $1.8125 Cumulative Preferred Stock (the "Company
$1.8125 Preferred Stock") and (v) Company $2.8575 Cumulative Preferred Stock
(the "Company $2.8575 Preferred Stock"), excluding any Treasury Shares, issued
and outstanding immediately prior to the Effective Time, shall remain unchanged
as issued and outstanding preferred stock of the Successor Corporation following
the Effective Time.
(c) Merger Sub Stock. The shares of stock of any class or series of Merger
Sub issued and outstanding immediately prior to the Effective Time shall become
shares of stock of the Successor Corporation at the Effective Time having the
same terms, rights and preferences, and shall thereafter constitute all of the
issued and outstanding stock of the Successor Corporation, except as provided in
Section 1.4(b); provided, that such terms, rights and preferences, and the
issuance by the Successor Corporation of stock having such terms, rights and
preferences, may not violate the terms, or require the approval of the holders
of, the Company Preferred Stock (as defined in Section in 3.2).
(d) Treasury Shares; Fiduciary and DPC Shares. At the Effective Time, all
shares of the Company Common Stock or Company Preferred Stock that are owned by
the Company as Treasury Stock and all shares of the Company Common Stock or
Company Preferred Stock that are owned, directly or indirectly, by Parent or the
Company or any of their respective wholly owned Subsidiaries (other than shares
of the Company Common Stock or Company Preferred Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise held
in a fiduciary or custodial capacity that are beneficially owned by third
parties and other than any shares of the Company Common Stock or Company
Preferred Stock held by Parent or the Company or any of their respective
Subsidiaries in respect of a debt previously contracted (all such shares being
referred to herein as "Fiduciary and DPC Shares")) shall be canceled and shall
cease to exist and shall not be entitled to receive or be converted into the
right to receive the Merger Consideration or other consideration therefor.
1.5 Exchange Procedures. (a) At and after the Effective Time, each
certificate (each, a "Certificate") previously representing shares of Company
Common Stock shall (except as specifically set forth in Section 1.4) represent
only the right to receive the Merger Consideration, without interest.
(b) At the Effective Time, Parent or Merger Sub shall deposit, or shall
cause to be deposited, with a bank or trust company (which may be an affiliate
of Parent or the Company) (the "Exchange Agent"), for the benefit of the holders
of the Certificates, (such cash (without any interest) being hereinafter
referred to as the "Exchange Fund") to be paid pursuant to this Article I in
exchange for outstanding shares of Company Stock entitled to receive the Merger
Consideration.
(c) As promptly as practicable after the Effective Time, Parent shall send
or cause to be sent to each former holder of record of shares of Company Common
Stock (other than shares that are not to be canceled in exchange for Merger
Consideration pursuant to Section 1.4(d)) immediately prior to the Effective
Time, transmittal materials for use in exchanging such stockholder's
Certificates for the Merger Consideration. Parent shall cause any check in
respect of the Merger Consideration which such Person shall be entitled to
receive to be delivered to such stockholder upon delivery to the Exchange Agent
of Certificates representing such shares of Company Common Stock (or indemnity
reasonably satisfactory to Parent and the Exchange Agent, if any of such
Certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid pursuant to this Article I
upon such delivery. Parent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable to any holder of Certificates such
amounts (if any) as Parent determines are required to be deducted or withheld
under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of such Certificates.
(d) At the Effective Time, holders of Company Common Stock shall cease to
be, and shall have no rights as, stockholders of the Company, other than to
receive any dividend or other distribution with respect to the Company Common
Stock with a record date occurring prior to the Effective Time and the Merger
Consideration. From and after the Effective Time, there shall be no transfers on
the stock transfer records of the Company of any shares of the Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to Parent or the Successor
Corporation, they shall be canceled and exchanged for the Merger Consideration
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Section 1.7.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for twelve months after the Effective Time shall be
paid to Parent. Any stockholders of the Company who have not theretofore
complied with this Article I shall thereafter look only to Parent for payment of
the Merger Consideration in respect of each share of Company Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of the
Exchange Agent, Parent, the Company, Merger Sub or the Successor Corporation
shall be liable to any former holder of Company Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such Person of a bond in such amount as Parent may reasonably direct
as indemnity against any claim that may be made against it with respect to such
Certificate, Parent shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
1.6 Options. At the Effective Time, each option to purchase a share of the
Company Common Stock (an "Option" and, collectively, the "Options") outstanding
and unexercised as of the Effective Time granted pursuant to the 1985 Incentive
Stock Option Plan, the 1985 Non-Qualified Stock Option Plan, the 1995 Long Term
Incentive Stock Plan, any other equity-based plans or agreements of or with the
Company, any of its Subsidiaries or SRH providing for the granting of options
with respect to Company Common Stock (collectively, the "Company Stock Option
Plans") shall be canceled, whether or not then exercisable or vested, and shall
represent the right to receive the following consideration in settlement
thereof. With respect to any Option which is, as of the Effective Time, vested,
the Successor Corporation (or any trust that is adopted in connection with any
such Company Stock Option Plan) shall pay to the optionholder thereof the
excess, if any, of the Merger Consideration over such Option's exercise price
(the "Option Spread") as soon as practicable after the Effective Time. With
respect to any Option which is not, as of the Effective Time, vested, the
Successor Corporation (or any trust that is adopted in connection with any such
Company Stock Option Plan) shall pay to the optionholder thereof the Option
Spread as soon as practicable after the date when (but only if) such Option
would otherwise have vested had such Option not been canceled pursuant hereto;
provided, however, with respect to any optionholder whose employment is
terminated without cause by the Successor Corporation or any of its Subsidiaries
while such Option would have been outstanding had it not been canceled pursuant
hereto, such Option shall be deemed to vest on the date of such termination. At
the Effective Time, each option to purchase a share of the SRH Common Stock (as
defined in Section 4.2) (a "SRH Option" and, collectively, the "SRH Options")
outstanding and unexercised as of the Effective Time granted pursuant to the
1989 Stock Option Plan, any other equity-based plans or agreements of or with
SRH or any of its Subsidiaries providing for the granting of options with
respect to SRH Common Stock (collectively, the "SRH Stock Option Plans") shall
be canceled, whether or not then exercisable or vested, and shall represent the
right to receive the following consideration in settlement thereof. With respect
to any SRH Option which is, as of the Effective Time, vested, SRH (or any trust
that is adopted in connection with any such SRH Stock Option Plan) shall pay to
the optionholder thereof the excess, if any, of the Merger Consideration over
such SRH Option's exercise price (the "SRH Option Spread") as soon as
practicable after the Effective Time. With respect to any SRH Option which is
not, as of the Effective Time, vested, SRH (or any trust that is adopted in
connection with any such SRH Stock Option Plan) shall pay to the optionholder
thereof the SRH Option Spread as soon as practicable after the date when (but
only if) such SRH Option would otherwise have vested had such SRH Option not
been canceled pursuant hereto; provided, however, with respect to any
optionholder whose employment is terminated without cause by SRH or any of its
Subsidiaries while such SRH Option would have been outstanding had it not been
canceled pursuant hereto, such SRH Option shall be deemed to vest on the date of
such termination. Notwithstanding the foregoing, no optionholder shall be
entitled to any payment hereunder unless he or she delivers to Parent a consent
to the cancellation of the Option or SRH Option (as the case may be) in a form
to be prescribed by Parent. All payments made pursuant to this Section 1.6 shall
be reduced by all applicable withholding taxes and other similar charges.
1.7 Restricted Shares. At the Effective Time, each share of restricted
stock (a "Restricted Share" and, collectively, the "Restricted Shares")
outstanding and not yet vested as of the Effective Time issued pursuant to a
Company Stock Option Plan, the 1985 Restricted Stock Plan, the Restricted Stock
Election Plan, the 1995 Long Term Incentive Stock Plan, any other equity-based
plans or agreements of or with the Company or any of its Subsidiaries providing
for the granting of restricted stock awards with respect to Company Common Stock
(collectively, the "Company Equity Plans" and together with the Company Stock
Option Plans, the "Company Stock Plans") shall be canceled and shall represent
the right to receive the following consideration in settlement thereof. The
Successor Corporation (or any trust that is adopted in connection with any such
Company Equity Plan) shall pay to the holder of a Restricted Share the Merger
Consideration as soon as practicable after the date when (but only if) such
Restricted Share would otherwise have vested had such Restricted Share not been
canceled pursuant hereto; provided, however, with respect to any awardholder
whose employment is terminated without cause by the Successor Corporation or any
of its Subsidiaries while such Restricted Share would have been outstanding had
it not been canceled pursuant hereto, such Restricted Share shall be deemed to
vest on the date of such termination. At the Effective Time, each share of
restricted stock (a "SRH Restricted Share" and, collectively, the "SRH
Restricted Shares") outstanding and not yet vested as of the Effective Time
issued pursuant to an SRH Stock Option Plan, the 1989 Stock Award Plan, any
other equity-based plans or agreements of or with SRH or any of its Subsidiaries
providing for the granting of restricted stock awards with respect to SRH Common
Stock (collectively, the "SRH Equity Plans" and together with the SRH Stock
Option Plans, the "SRH Stock Plans") shall be canceled and shall represent the
right to receive the following consideration in settlement thereof. SRH (or any
trust that is adopted in connection with any such SRH Equity Plan) shall pay to
the holder of an SRH Restricted Share the Merger Consideration as soon as
practicable after the date when (but only if) such SRH Restricted Share would
otherwise have vested had such SRH Restricted Share not been canceled pursuant
hereto; provided, however, with respect to any awardholder whose employment is
terminated without cause by SRH or any of its Subsidiaries while such SRH
Restricted Share would have been outstanding had it not been canceled pursuant
hereto, such SRH Restricted Share shall be deemed to vest on the date of such
termination. Notwithstanding the foregoing, no holder shall be entitled to any
payment hereunder unless he or she delivers to the Parent a consent to the
cancellation of the Restricted Share or SRH Restricted Share (as the case may
be) in a form to be prescribed by Parent. All payments made pursuant to this
Section 1.7 shall be reduced by all applicable withholding taxes and other
similar charges.
1.8 1998 Long Term Incentive Compensation Plan. The right under the 1998
Long Term Incentive Compensation Plan to make additional investments in Company
Common Stock shall cease as of the date hereof and any portion of an award under
the 1998 Long Term Incentive Compensation Plan invested in, or measured by
reference to the value of, a share of Company Common Stock (each such portion,
an "Incentive Compensation Award" and, collectively, the "Incentive Compensation
Awards") as of the Effective Time shall be converted, as of the Effective Time,
into a dollar credit under the 1998 Long Term Incentive Compensation Plan equal
to the Merger Consideration.
1.9 Articles of Incorporation. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company's articles of incorporation (as
now in effect) shall be the articles of incorporation of the Successor
Corporation until thereafter amended in accordance with applicable law.
1.10 Bylaws. Subject to the terms and conditions of this Agreement, at the
Effective Time, the bylaws of Merger Sub shall be the bylaws of the Successor
Corporation until thereafter amended in accordance with applicable law.
1.11 Directors and Officers of Surviving Corporation. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (a) the directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Successor Corporation
and (b) the officers of Merger Sub immediately prior to the Effective Time shall
be the officers of the Successor Corporation; such directors and officers shall
hold office in accordance with the Successor Corporation's bylaws and applicable
law.
1.12 Integration of Legal Entities. The parties agree to cooperate and take
all reasonable requisite action prior to or following the Effective Time to
merge or otherwise consolidate legal entities (effective at or after the
Effective Time) to the extent desirable in Parent's good faith judgment for
commercial, regulatory or other reasons, and further agree that Parent may at
any time change the method of effecting the Merger, including, without
limitation, by transferring the capital stock of Merger Sub to another direct or
indirect wholly owned Subsidiary of Parent or by merging another direct or
indirect wholly owned subsidiary of Parent with and into the Company or merging
the Company with or into Merger Sub or another direct or indirect subsidiary of
Parent, and the Company shall cooperate in such efforts, including by entering
into an appropriate amendment to this Agreement, provided, however, that any
such actions shall not (a) alter or change the amount or kind of (or tax
treatment for) Merger Consideration to be paid to holders of the Company Common
Stock as provided for in this Agreement or (b) materially delay receipt of any
approval referred to in Section 8.1(b) or the consummation of the transactions
contemplated by this Agreement.
ARTICLE II
CLOSING; DISCLOSURE; STANDARDS
2.1 Closing Date. The closing of the transactions provided for in this
Agreement (the "Closing") shall be held at the offices of Cleary, Gottlieb,
Steen & Hamilton, One Liberty Plaza, New York, New York 10006, at 10:00 A.M. on
the third business day after the satisfaction or waiver (subject to applicable
law) of the latest to be satisfied or waived of the conditions (other than those
conditions to be satisfied at the Closing) set forth in Sections 8.1, 8.2 and
8.3 hereof or at such other place and on such other date as shall be agreed to
by the parties hereto. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
2.2 Deliveries at Closing. Subject to the provisions of Article VIII, on
the Closing Date there shall be delivered to Parent and the Company the
documents and instruments required to be delivered under Article VIII.
2.3 Disclosure Schedules. (a) Prior to the execution and delivery of this
Agreement, the Company and SRH have each delivered to Parent, and Parent has
delivered to the Company and SRH, a schedule (in the case of the Company, the
"Company Disclosure Schedule," in the case of SRH, the "SRH Disclosure Schedule"
and, in the case of Parent, the "Parent Disclosure Schedule") setting forth,
among other things, in each case with respect to specified sections of this
Agreement, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more of such party's representations or warranties
contained in Article III, in the case of the Company, Article IV, in the case of
SRH, or Article V, in the case of Parent or to one or more of such party's
covenants contained in Article VI; provided, however, that notwithstanding
anything in this Agreement to the contrary except as set forth in the last
sentence of Section 3.9(a) and the last sentence of Section 4.9(a), (i) no such
item is required to be set forth in a Disclosure Schedule as an exception to a
representation or warranty if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 2.3(b), and (ii) the mere inclusion of an item in a
Disclosure Schedule as an exception to a representation or warranty shall not be
deemed an admission by a party that such item represents a material exception or
material fact, event or circumstance or that such item has had or would have a
Material Adverse Effect with respect to the Acquired Companies or Parent,
respectively.
(b) No representation of the Company contained in Article III (other than
Section 3.2 and Section 3.8(a)) or of SRH contained in Article IV (other than
Section 4.2 and Section 4.8(a)) or of Parent contained in Article V shall be
deemed untrue or incorrect for any purpose under this Agreement, and no party
hereto shall be deemed to have breached a representation or warranty for any
purpose under this Agreement, in any case as a consequence of the existence or
absence of any fact, circumstance or event unless such fact, circumstance or
event, individually or when taken together with all other facts, circumstances
or events inconsistent with any representations or warranties contained in
Article III, in the case of the Company, Article IV, in the case of SRH, or
Article V, in the case of Parent, has had or would be reasonably likely to have
a Material Adverse Effect with respect to the Acquired Companies or Parent,
respectively. For all purposes of determining whether any facts or events
contravening a representation or warranty contained herein constitute,
individually or in the aggregate, a Material Adverse Effect, representations and
warranties contained in Article III (other than Section 3.8(a)) or IV (other
than Section 4.8(a)) or V shall be read without regard to any reference to
materiality or Material Adverse Effect set forth therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as Previously Disclosed, the Company hereby represents and warrants
to each of Parent and Merger Sub as follows:
3.1 Corporate Organization. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland. The Company is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA"). The Company has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
True and complete copies of the articles of incorporation and bylaws of the
Company, as in effect as of the date of this Agreement, have previously been
made available by the Company to Parent.
(b) The Company has Previously Disclosed to Parent a complete and correct
list of all of the Company's Subsidiaries. Except for the capital stock and
securities referred to in the immediately following sentence, there are no
outstanding shares of capital stock or other equity securities of any such
Subsidiary, options, warrants, stock appreciation rights, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any capital stock or other
equity securities of such Subsidiary, or contracts, commitments, understandings
or arrangements by which such Subsidiary may become bound to issue additional
shares of its capital stock or other equity securities, or options, warrants,
scrip or rights to purchase, acquire, subscribe to, calls on or commitments for
any shares of its capital stock or other equity securities. All of the
outstanding shares of capital stock or other securities evidencing ownership of
the Company's Subsidiaries are validly issued, fully paid and (except as
otherwise required by law) non-assessable and, except as Previously Disclosed,
such shares or other securities are owned by the Company or its wholly owned
Subsidiaries free and clear of any lien, claim, charge, option, encumbrance,
mortgage, pledge or security interest (a "Lien") with respect thereto. Each of
the Company's Subsidiaries (i) is a duly organized and validly existing
corporation, partnership, limited liability company or other legal entity under
the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing (to the extent the concepts of "qualification to
do business" and "good standing" exist) in all jurisdictions (whether
supranational, federal, state, local or foreign) where its ownership or leasing
of property or the conduct of its business requires it to be so qualified, and
(iii) has all requisite corporate, partnership or other power and authority to
own or lease its properties and assets and to carry on its business as now
conducted. The Company Disclosure Schedule sets forth a list of all Persons
deemed to be a subsidiary of the Company or any of its Subsidiaries within the
meaning of the BHCA together with each such entity's jurisdiction of
organization.
(c) The minute books of the Company and of each of its Significant
Subsidiaries accurately reflect in all material respects all material corporate
actions taken by their stockholders and Boards of Directors (including
committees of their Boards of Directors) since January 1, 1996.
3.2 Capitalization. The authorized capital stock of the Company consists
solely of (a) 150 million (150,000,000) shares of Company Common Stock, of which
105,171,929 shares were outstanding as of May 6, 1999; and (b) 19,999,000 shares
of preferred stock, without par value ("Company Preferred Stock"), of which (i)
625 shares have been designated Company Series A DARTs, all of which are
outstanding as of the date hereof; (ii) 625 shares have been designated as
Company Series B DARTs, all of which are outstanding as of the date hereof;
(iii) 1.5 million (1,500,000) shares have been designated as Company Series D
Preferred Stock, all of which are outstanding as of the date hereof; (iv) 3
million (3,000,000) shares have been designated as Company $1.8125 Preferred
Stock, all of which are outstanding as of the date hereof; and (v) 3 million
(3,000,000) shares have been designated as Company $2.8575 Preferred Stock, all
of which are outstanding as of the date hereof. As of the date hereof no shares
of Company Common Stock or Company Preferred Stock were held in the Company's
treasury. No shares of Company Common Stock are reserved for issuance, except
for 1,469,918 shares of the Company Common Stock reserved for issuance in
connection with the Company Stock Plans. All of the issued and outstanding
shares of Company Common Stock have been duly authorized and validly issued and
are fully paid, non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except for the Option Agreement
and except as provided below, the Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, stock appreciation rights,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Company Capital Stock (as defined below) or any other equity
securities of Company or any securities representing the right to purchase or
otherwise receive any shares of Company Capital Stock or requiring any payment
relating to the value or market price of Company Capital Stock. The Company has
Previously Disclosed a list, as of May 6, 1999, of the Option holders, the
number of Options held by each such holder, the date of each Option to purchase
the Company Common Stock granted, the expiration date of each such Option, the
vesting schedule of each such Option, the Company Stock Option Plan pursuant to
which each such Option was granted and the price at which each such Option may
be exercised under the applicable Company Stock Option Plan. The Company has
Previously Disclosed a list, as of May 6, 1999, of the Restricted Share holders,
the number of Restricted Shares held by each such holder, the vesting schedule
of each such Restricted Share and the Company Stock Plan pursuant to which each
such Restricted Share was granted. The Company has Previously Disclosed a list,
as of May 6, 1999, of the Incentive Compensation Award holders and the number of
Incentive Compensation Awards held by each such holder. Except as Previously
Disclosed, since May 6, 1999, the Company has not (i) issued any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock, other than shares of Company Common Stock issued upon the
exercise, settlement or conversion of Options, Restricted Shares and Incentive
Compensation Awards outstanding as of December 31, 1998, as described in the
immediately preceding sentence or (ii) taken any actions which would cause an
antidilution adjustment under any outstanding Options, Restricted Shares or
Incentive Compensation Awards of the Company. Except as Previously Disclosed,
there are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire, or to register for
sale, any shares of capital stock of the Company or any of its Subsidiaries.
Except as Previously Disclosed, there are no outstanding contractual obligations
of the Company or any of its Subsidiaries to vote or to dispose of any shares of
the capital stock of any of its Subsidiaries. The Company Common Stock and the
Company Preferred Stock are referred to collectively as the "Company Capital
Stock."
3.3 Authority; No Violation. (a) The Company has full corporate power and
authority to execute and deliver this Agreement and the Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of the Company prior to the date hereof (which
approval satisfies in full the requirements of the MGCL regarding approval by a
board of directors), and such approval is in full force and effect. The Board of
Directors of the Company has adopted a resolution declaring advisable the Merger
and the other transactions contemplated hereby. The Board of Directors of the
Company has directed that this Agreement and the transactions contemplated
hereby be submitted to the Company's stockholders for approval at a meeting of
such stockholders and, except for the approval of this Agreement by the
affirmative vote of the holders of a majority of the votes of the outstanding
shares of the Company Common Stock entitled to vote thereon, no other corporate
proceedings on the part of the Company and no other stockholder votes are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. As of the date hereof, the Board of Directors of the
Company has resolved to recommend that the Company's stockholders approve the
Merger. This Agreement has been duly and validly executed and delivered by the
Company and (assuming due authorization, execution and delivery by Parent and
SRH) constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. In addition, the Board of
Directors has taken all requisite action such that the freezeout, special
shareholder voting and other requirements imposed by Sections 3-601 through
3-604 and 3-701 through 3-709 of the MGCL, and the provisions of any other
applicable "freezeout", "fair price", "moratorium", "control share acquisition"
or other similar anti-takeover statute or regulation enacted under state,
federal or foreign laws, are not applicable to the Merger, this Agreement, the
Option Agreement or the Stockholder Agreement or the transactions contemplated
by this Agreement, the Option Agreement and the Shareholders Agreement. No
holder of Company Capital Stock shall have the right to appraisal or to demand
or receive payment of the fair value of such Company Capital Stock from the
Successor Corporation or any other Person pursuant to the MGCL or otherwise.
(b) Neither the execution and delivery of this Agreement and the Option
Agreement by the Company, nor the consummation by the Company of the Merger, nor
compliance by the Company with any of the terms or provisions hereof and
thereof, will (i) violate any provision of the articles of incorporation or
bylaws of the Company or any of its Subsidiaries or (ii) assuming that the
consents and approvals referred to in Section 3.4 are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, or violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by or rights or
obligations under, or result in the creation of any Lien (or have any of such
results or effects, upon notice or lapse of time, or both) upon any of the
respective properties or assets of the Company or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, contract, or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party, or by which they or any of their respective properties, assets or
business activities may be bound or affected.
3.4 Consents and Approvals. Except for (a) the requisite filings with,
notices to and approval of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") under the BHCA and the Bank Merger Act, the U.K.
Financial Services Authority (the "FSA"), the Hong Kong Monetary Authority (the
"HKMA"), and the Federal Banking Commission of Switzerland (the "FBC") (b) the
filing of any required applications or notices with the New York State Banking
Department, (c) the filing with the Securities and Exchange Commission (the
"SEC") of the Proxy Statement (as defined in Section 7.1(a)) in definitive form,
(d) the filing of the Articles of Merger with the Maryland Department pursuant
to the MGCL, (e) any consents, authorizations, approvals, filings or exemptions
in connection with compliance with the applicable provisions of supranational,
federal, state and foreign laws (including, without limitation, securities and
insurance laws) relating to the regulation of broker-dealers, futures commission
merchants, commodities trading advisors, commodities pool operators, investment
advisers and insurance agencies and any applicable domestic or foreign industry
self-regulatory organization or stock exchange ("SRO"), and the rules of the New
York Stock Exchange (the "NYSE"), the Philadelphia Stock Exchange, the
International Stock Exchange, the Swiss Electronic Exchange or the Luxembourg
Stock Exchange, (f) the approval of the Merger by the requisite vote of the
stockholders of the Company, (g) the expiration of any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") or any consents, authorizations, approvals, filings or exemptions
required by any other applicable antitrust law or merger regulation, including
Council Regulation No. 4064/89 of the European Community (the "EC Merger
Regulation"), (h) such additional consents and approvals set forth in Section
3.4 of the Company Disclosure Schedule, (i) the filing of the Offer Circular (as
defined in Section 7.1(a)) with, and the approval of such Offer Circular by, the
Luxembourg Commission for the Supervision of the Financial Sector (the "CSFS"),
the Luxembourg Stock Exchange and the Swiss Electronic Exchange, and (j)
consents, authorizations, approvals, filings and registrations the failure of
which to obtain or make would not be reasonably likely to result in a Material
Adverse Effect on the Acquired Companies or prevent or materially delay
consummation of the Merger, the Offer or the Bank Merger, no consents,
authorizations or approvals of or filings or registrations with any
supranational, federal, state, local or foreign court, administrative agency or
commission or other governmental or regulatory authority or instrumentality
(each a "Governmental Entity") or, of or with any other Person by or on behalf
of the Company, are necessary in connection with (x) the execution and delivery
by the Company of this Agreement, (y) the consummation by the Company and the
Bank of the Merger and the Bank Merger, respectively or (z) the consummation by
Parent or Offer Sub of the Offer. As of the date hereof, the Company has no
reason to believe that any Requisite Regulatory Approvals (as defined in Section
8.1(b)) will not be obtained or satisfied, as the case may be.
3.5 Reports. The Company and each of its Subsidiaries have filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1996 with (a) the SEC, (b) any SRO and (c) any other federal, state, local or
foreign governmental or regulatory agency or authority (collectively with the
SEC and the SROs, "Regulatory Agencies"), and all other reports, registrations
and statements required to be filed by them since January 1, 1996, including,
without limitation, any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state, or any Regulatory
Agency, and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of the Company and its Subsidiaries, no
Regulatory Agency has initiated any proceeding or, to the Knowledge of the
Company, investigation into the business or operations of the Company or any of
its Subsidiaries since January 1, 1996. Except as Previously Disclosed, there is
no unresolved violation, or material criticism or exception, by any Regulatory
Agency with respect to any report, registration or statement relating to any
examinations of the Company or any of its Subsidiaries.
3.6 Financial Statements. The Company has previously made available to
Parent and to SRH copies of (a) the consolidated balance sheets of the Company
and its Subsidiaries as of December 31, 1997 and December 31, 1998, (b) the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1996 through 1998, inclusive, as reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed with the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in each case accompanied by the audit report of the
Company's independent public accountants, and (c) the unaudited consolidated
interim financial statements of the Company included in the draft provided to
Parent prior to the date hereof of the financial statements to be included in
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999 (excluding notes, the "Draft Company Financial Statements"). The
financial statements referred to in the preceding sentence (including the
related notes, where applicable) fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
for the respective fiscal periods or as of the respective dates therein set
forth, and any financial statements filed by the Company with the SEC under the
Exchange Act after the date of this Agreement (including the related notes,
where applicable) will fairly present in all material respects (including the
related notes, where applicable) (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount) the
results of the consolidated operations and changes in stockholders' equity and
consolidated financial position of the Company and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; each
of such statements (including the related notes, where applicable) comply (and,
in the case of the financial statements filed after the date of this Agreement,
will comply) in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto;
and each of such statements (including the related notes, where applicable) has
been prepared (and, in the case of the financial statements filed after the date
of this Agreement, will be prepared) in all material respects in accordance with
United States generally accepted accounting principles ("GAAP") or regulatory
accounting principles, as applicable, consistently applied during the periods
involved, except, in each case, as indicated in such statements or in the notes
thereto. The books and records of the Company and its Subsidiaries have been,
and are being, maintained in all material respects in accordance with GAAP or
regulatory accounting principles, as applicable, and any other applicable legal
and accounting requirements.
3.7 Broker's Fees. Neither the Company nor any of its Subsidiaries nor any
of their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement or the Option Agreement, except that the Company has retained
International Real Returns LLC and Goldman, Sachs & Co. as its financial
advisors, pursuant to compensation arrangements which have been disclosed in
writing to Parent prior to, and will not be modified subsequent to, the date of
this Agreement.
3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in the Company Reports (as defined in Section 3.12) filed prior to the date of
this Agreement, since December 31, 1998, no event has occurred and no fact or
circumstance shall have come to exist or come to be known which, directly or
indirectly, individually or taken together with all other facts, circumstances
and events (described in any paragraph of this Article III or otherwise), has
had, or is reasonably likely to have, a Material Adverse Effect with respect to
the Acquired Companies.
(b) As of the date of this Agreement, except as publicly disclosed in the
Company Reports filed prior to the date hereof or as Previously Disclosed, since
December 31, 1998, the Company and its Subsidiaries have carried on their
respective businesses in the ordinary and usual course consistent with their
past practices (excluding the incurrence of fees and expenses of professional
advisors related to this Agreement and the transactions contemplated hereby) and
there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect
to any Company Capital Stock, other than regular quarterly cash
dividends on the Company Common Stock and dividends payable on the
Company Preferred Stock in accordance with their terms as of the date
of this Agreement;
(ii) any split, combination or reclassification of any Company
Capital Stock or any issuance or the authorization of any issuance of
any other securities in respect of, or in lieu of or in substitution
for shares of the Company Capital Stock, except for issuances of
Company Common Stock upon the exercise of Options awarded prior to the
date hereof in accordance with the terms of the Company Stock Option
Plans; or
(iii) except insofar as required by a change in GAAP, any
change in accounting methods, principles or practices by the Company or
any of its Subsidiaries.
3.9 Legal Proceedings. (a) Neither the Company nor any of its Subsidiaries
is a party to any, and there are no pending or, to the Knowledge of the Company,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature ("Claims and
Proceedings") (i) against the Company or, to the Knowledge of the Company, any
of its Subsidiaries, (ii) against any person who is currently an executive
officer or director of the Company or any of its Subsidiaries with respect to
any of their actions as such or (iii) as of the date hereof, challenging the
validity or propriety of the transactions contemplated by this Agreement or the
Option Agreement. The Company has Previously Disclosed a list of all pending or,
to the Knowledge of the Company, threatened Claims and Proceedings which, in
each case, seek, or could result in, damages or other amounts payable by the
Company or its Subsidiaries, in excess of $3 million ($3,000,000).
(b) There is no injunction, order, judgment or decree imposed upon the
Company or, to the Knowledge of the Company, any of its Subsidiaries or the
assets of the Company or any of its Subsidiaries.
3.10 Tax Matters. (a) The Company and each of its Subsidiaries has duly
filed all Tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and such returns and reports are true, correct and
complete in all material respects. The Company and each of its Subsidiaries has
paid (or the Company has paid on its behalf) or made provision (in accordance
with GAAP) for all Taxes for all past and current periods for which the Company
or any of its Subsidiaries is liable.
(b) As used in this Agreement, the term "Taxes" includes all supranational,
federal, state, local and foreign income, franchise, property, sales, use,
excise and other taxes, including, without limitation, obligations for
withholding Taxes from payments due or made to any other Person and any
interest, penalties or additions to tax.
3.11 Employee Benefit Plans; ERISA. (a) Except as Previously Disclosed,
neither the Company nor any of its Subsidiaries maintain or contribute to, or
have any obligation to contribute to, or have any liability, direct or indirect,
contingent or otherwise (including, without limitation, a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement) with
respect to, any material employment, consulting, severance pay, termination pay,
retirement, deferred compensation, retention or change in control plan, program,
arrangement, agreement or commitment, or an executive compensation, incentive
bonus or other bonus, pension, stock option, restricted stock or equity-based,
profit sharing, savings, life, health, disability, accident, medical, insurance,
vacation, or other employee benefit plan, program, arrangement, agreement, fund
or commitment, including any "employee benefit plan" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
providing benefits to any current or former employee, consultant or director of
the Company or any of its Subsidiaries or any current or former employee,
consultant or director of any entity with respect to which the Company or its
Subsidiaries is a successor (collectively the "Company Benefit Plans"). True and
complete copies of each Company Benefit Plan, including, but not limited to, any
trust instruments and/or insurance contracts, if any, forming a part thereof,
all amendments thereto and the most recent determination letters issued by the
Internal Revenue Service, all government and regulatory approvals received from
any foreign Regulatory Agency, the most recent summary plan descriptions
(including any material modifications) and the most recent audited financial
reports for any funded Company Benefit Plan have been supplied or made available
to Parent. Except as Previously Disclosed: (i) neither the Company nor any of
its Subsidiaries has made any promise or commitment, whether legally binding or
not, to create any additional Company Benefit Plan or modify or change any
existing Company Benefit Plan that would materially increase the benefits
provided to any employee or former employee, consultant or director of the
Company or any Subsidiary thereof; and (ii) since December 31, 1998 there has
been no material change, amendment, modification to, or adoption of, any Company
Benefit Plan.
(b) With respect to each Company Benefit Plan: (i) if intended to qualify
under Section 401(a), 401(k) or 403(a) of the Code such plan has received a
favorable determination letter from the Internal Revenue Service, and the
Company is not aware of any circumstances likely to result in revocation of such
favorable determination or such qualification; (ii) it has been operated and
administered in all material respects in compliance with its terms and all
applicable laws and regulations (including but not limited to ERISA, the Code
and any relevant foreign laws and regulations); (iii) there are no material
pending or, to the Knowledge of the Company, threatened claims against, by or on
behalf of any Company Benefit Plans (other than routine claims for benefits);
(iv) to the Knowledge of the Company, no material breaches of fiduciary duty
have occurred; (v) no non-exempt prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code has occurred, assuming that the
taxable period of such transaction expired as of the second anniversary of the
date hereof, which would subject the Company or any Subsidiary to material
liability; (vi) no material Lien imposed under the Code, ERISA or any foreign
law exists; and (vii) all contributions, premiums and expenses to or in respect
of such Company Benefit Plan have been timely paid in full or, to the extent not
yet due, have been adequately accrued on the Company's consolidated financial
statements.
(c) Neither the Company nor any of its Subsidiaries has incurred or
reasonably expects to incur, either directly or indirectly (including as a
result of an indemnification obligation), any material liability under Title I
or IV of ERISA or the penalty, excise tax or joint and several liability
provisions of the Code or any foreign law or regulation relating to employee
benefit plans, and to the Knowledge of the Company, no event, transaction or
condition has occurred, exists or is expected to occur which could result in any
such material liability to the Company, any of its Subsidiaries or, after the
Closing, to Parent.
(d) The Company and each of its Subsidiaries has complied with, and each
such Company Benefit Plan conforms in operation and form to, all applicable
legal requirements, including, but not limited to, ERISA and the Code, in all
material respects.
(e) With respect to each "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) as to which either the Company or any
Subsidiary may incur any liability under Section 302 or Title IV of ERISA or
Section 412 of the Code:
(i) no such plan is a "multiemployer plan" (within the meaning
of Section 3(37) of ERISA) or a "multiple employer plan" (within the
meaning of Section 413(c) of the Code);
(ii) no such plan has been terminated so as to result,
directly or indirectly, in any material liability, contingent or
otherwise, of either the Company or any Subsidiary under Title IV of
ERISA;
(iii) no complete or partial withdrawal from such plan has
been made by the Company or any Subsidiary, or by any other Person, so
as to result in a material liability to the Company or any Subsidiary,
whether such liability is contingent or otherwise;
(iv) to the Knowledge of the Company, no proceeding has been
initiated by any Person (including the Pension Benefit Guaranty
Corporation (the "PBGC")) to terminate any such plan or to appoint a
trustee for any such plan;
(v) to the Knowledge of the Company, no condition or event
currently exists or currently is expected to occur that could result,
directly or indirectly, in any material liability of the Company or any
Subsidiary under Title IV of ERISA, whether to the PBGC or otherwise,
on account of the termination of any such plan;
(vi) no "reportable event" (as defined in ERISA) for which the
30-day reporting requirement has not been waived has occurred with
respect to any such plan, nor has any notice of such event or similar
notice to any foreign Regulatory Agency been required to be filed for
any Company Benefit Plan within the past 12 months nor will any such
notice be required to be filed as a result of the transactions
contemplated by this Agreement;
(vii) no such plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and section 412 of the
Code, respectively), whether or not waived, and neither the Company nor
any of its Subsidiaries has provided, or is required to provide,
security to any Company Benefit Plan pursuant to Section 401(a)(29) of
the Code; and
(viii) the transactions contemplated hereby will not result in
any event described in section 4062(e) of ERISA.
(f) Except as Previously Disclosed, with respect to each Company Benefit
Plan that is a "welfare plan" (as defined in Section 3(1) of ERISA), neither the
Company nor any Subsidiary has any obligations to provide health, life
insurance, or death benefits with respect to current or former employees,
consultants or directors of the Company or any of its Subsidiaries beyond their
termination of employment or service, other than as required under Section 4980B
of the Code, and each such Company Benefit Plan may be amended or terminated at
any time without incurring liability thereunder. Except as Previously Disclosed,
there has been no communication to any employee, consultant or director of the
Company or any Subsidiary that would reasonably be expected to promise or
guarantee any such retiree health or life insurance or other retiree death
benefits on a permanent basis.
(g) Except as Previously Disclosed, the consummation of the transactions
contemplated hereby, either alone or in combination with another event, (whether
contingent or otherwise) will not (i) entitle any current or former employee,
consultant or director of the Company or any Subsidiary or any group of such
employees, consultants or directors to any payment; (ii) increase the amount of
compensation due to any such employee, consultant or director; (iii) accelerate
the vesting or funding of any compensation, stock incentive or other benefit;
(iv) result in any "parachute payment" under Section 280G of the Code (whether
or not such payment is considered to be reasonable compensation for services
rendered); or (v) cause any compensation to fail to be deductible under Section
162(m), or any other provision of the Code or any similar foreign law or
regulation.
(h) Under each Company Benefit Plan which is a single-employer plan and any
foreign plan that is a defined benefit plan, as of the last day of the most
recent plan year ended prior to the date hereof, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA or, with respect to any foreign plan, as determined under
any equivalent law or practice (in each case as determined on the basis of the
actuarial assumptions contained in Company Benefit Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Company
Benefit Plan or, with respect to any foreign plan not subject to any funding
requirement, if such liabilities did exceed such assets the amount thereof was
properly reflected on the financial statements of the Company or its respective
Subsidiaries, and there has been no material adverse change in the financial
condition of such Company Benefit Plan (with respect to either assets or
benefits) since the last day of the most recent plan year.
(i) The Company has Previously Disclosed a true, correct and complete
schedule of all extensions of credit made to the executive officers and
directors of the Company and its Subsidiaries and their related interests (all
as defined under FRB Regulation "O"), all of which have been made in compliance
with Regulation O.
(j) Except as Previously Disclosed, to the Knowledge of the Company, no
Company Benefit Plan, or Company or any Subsidiary, is under audit or is the
subject of an audit or investigation by the IRS, the U.S. Department of Labor,
the PBGC or any other federal or state governmental agency, nor is any such
audit or investigation pending or threatened.
(k) Except as Previously Disclosed, neither the Company nor any Subsidiary
maintains any plan, program or arrangement or is a party to any contract that
provides any benefits or provides for payments to any Person in, based on or
measured by the value of, any equity security of, or interest in, the Company or
any Subsidiary.
(l) All Company Benefit Plans established pursuant to the laws of a country
other than the United States (the "Foreign Plans") have been established,
operated, administered and maintained in compliance with all laws, regulations
and orders applicable thereto. All premiums, contributions and any other amounts
required by applicable Foreign Plan documents or applicable laws to be paid or
accrued by the Company and any of its Subsidiaries have been paid or accrued as
required.
3.12 SEC Reports. The Company has made available to Parent an accurate and
complete copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since January 1, 1997 by the
Company or any of its Subsidiaries with the SEC pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act (the "Company
Reports"), and (b) communication mailed by the Company to its stockholders since
January 1, 1997. As of the date of filing or mailing, as the case may be, no
such registration statement, prospectus, report, schedule, proxy statement or
communication contained (and no registration statement, prospectus, report,
schedule, proxy statement or communication filed or mailed after the date of
this Agreement will contain) any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading, except that information as of a later date (but filed
before the date hereof) shall be deemed to modify information as of an earlier
date. Since January 1, 1997, the Company and each of its Subsidiaries has timely
filed (and will timely file after the date of this Agreement) all reports and
other documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all such reports complied (and,
in the case of all reports and other documents filed after the date of this
Agreement, will comply) in all material respects with the published rules and
regulations of the SEC with respect thereto.
3.13 Licenses; Compliance with Applicable Law. The Company and each of its
Subsidiaries holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to all, and have complied with and are not in default under any,
applicable law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries has Knowledge of, or has
received notice of, any violations of any of the above.
3.14 Certain Contracts. Except as Previously Disclosed, neither the Company
nor any of its Subsidiaries is a party to or bound by any contract, arrangement,
commitment or understanding (a) as of the date hereof, with respect to the
employment, termination or compensation of any directors, executive officers,
key employees or material consultants (other than oral contracts of employment
at will which may be terminated without penalty), (b) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC) that has not been filed with or incorporated by reference in the Company
Reports, (c) which contains any material non-compete or exclusivity provisions
with respect to any business or geographic area in which business is conducted
with respect to the Company or any of its affiliates or which restricts the
conduct of any business by the Company or any of its affiliates or any
geographic area in which the Company or any of its affiliates may conduct
business or requires exclusive referrals of any business, (d) except as
contemplated by Article I hereof or as set forth in Section 3.11 of the Company
Disclosure Schedule (including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan) any of the benefits of which
will be increased, or the funding, vesting or payment of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or (e) which would prohibit or materially delay the consummation of
the Merger or the Offer. The Company has previously made available to Parent
true and correct copies of all employment, termination and compensation
agreements (including deferred compensation) with executive officers, key
employees or material consultants which are in writing and to which the Company
or any of its Subsidiaries is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14, whether or not set
forth in Section 3.14 of the Company Disclosure Schedule, is referred to herein
as a "Company Contract", and neither the Company nor any of its Subsidiaries has
Knowledge of, or has received notice of, any violation of any Company Contract
by any of the other parties thereto.
3.15 Agreements with Regulatory Agencies. Except as Previously Disclosed,
neither the Company nor any of its Subsidiaries is subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any supervisory letter from or has adopted
any board resolutions at the request of, any Regulatory Agency or other
Governmental Entity, that restricts the conduct of its business or has resulted,
or could reasonably be expected to result, in a liability or that in any manner
relates to its capital adequacy, its credit policies, its management or its
business (each, whether or not set forth in the Company Disclosure Schedule, a
"Company Regulatory Agreement"), nor has the Company or any of its Subsidiaries
(a) been advised since January 1, 1996 by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any such
Company Regulatory Agreement or (b) any Knowledge of any pending or threatened
regulatory investigation.
3.16 Derivative Instruments. Any swaps, caps, floors, futures, forward
contracts, option agreements, and any other derivative financial instruments,
contracts or arrangements (including such instruments, contracts or arrangements
with respect to precious metals or other commodities, collectively, "Derivative
Instruments"), whether entered into for the account of the Company or one of its
Subsidiaries or for the account of a customer of the Company or one of its
Subsidiaries, were entered into in the ordinary course of business and in
accordance with prudent business practice and rules, regulations and policies of
any Regulatory Authority applicable to the Company and its Subsidiaries, and, to
the Company's Knowledge, with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of the
Company or one of its Subsidiaries enforceable in accordance with their terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. The Company and each
of its Subsidiaries have duly performed in all respects all of their obligations
thereunder to the extent that such obligations to perform have accrued, and, to
the Company's Knowledge, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
3.17 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of the Company
included in the financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, liabilities identified in
Section 3.17 of the Company Disclosure Schedule and liabilities incurred in the
ordinary course of business consistent with past practice since December 31,
1998, neither the Company nor any of its Subsidiaries has incurred any liability
of any nature required by GAAP to be reflected in a balance sheet prepared in
accordance with GAAP.
3.18 Environmental Matters. (a) The Real Property, and to the Knowledge of
the Company, the Loan Properties are in compliance with all applicable federal,
state, county and local law (including, without limitation, common law),
regulation or requirement relating to the human health and safety, protection of
the environment or natural resources ("Environmental Law"), except for
noncompliance that would not reasonably be expected to result in a material
liability to the Company or any of its Subsidiaries.
(b) There is no suit, claim, action or proceeding pending or, to the
Knowledge of the Company, threatened, before any Governmental Entity, Regulatory
Agency or other forum in which the Company or any of its Subsidiaries has been
or, with respect to threatened proceedings, may be, named as a defendant (i) for
alleged noncompliance (including by any predecessor), with any Environmental Law
or (ii) relating to any release, spill, emission, disposal, migration or other
discharge in, into or onto the environment of any pollutant, chemical, or any
substances, materials or wastes which are identified or regulated under any
Environmental Law (each, a "Release").
(c) To the Knowledge of the Company, there are no facts or circumstances
which would provide a reasonable basis for any suit, claim, action or proceeding
as described in Section 3.18(b) that would reasonably be expected to result in
material liability to the Company or any of its Subsidiaries.
(d) To the Knowledge of the Company, there has been no Release in, on,
under or affecting any Real Property or Loan Property.
(e) None of the Real Properties is on the National Priority List (NPL) or
the Comprehensive Environmental Response Compensation and Liability Information
System (CERCLIS), or is the subject of any investigation, remediation or cleanup
of any contamination or potential contamination;
(f) None of the Real Properties are subject to, or as a result of this
transaction would be subject to, the requirements of the New Jersey Industrial
Site Recovery Act, the New Jersey Environmental Cleanup Responsibility Act, or
to any other state or local Environmental Laws which require notice, disclosure,
cleanup or approval prior to transfer of such assets, properties, businesses or
operations or which would impose liens on such assets, properties, businesses or
operations.
(g) The Company and its Subsidiaries do not participate in the management
of any Loan Property within the meaning of 40 C.F.R. ss. 300.1100(c).
3.19 Year 2000. Neither the Company nor any of its Subsidiaries has
received, nor to the Knowledge of the Company are there facts that would
reasonably be expected to form the basis for the issuance of, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulatory Letter No. SR 98-3 (SUP), dated March 4,
1998). The Company has disclosed to Parent a complete and accurate copy of its
plan, including its good faith estimate of the anticipated associated costs, for
addressing the issues set forth in the Year 2000 guidance papers issued by the
Federal Financial Institutions Examination Council, including the statements
dated May 5, 1997, entitled "Year 2000 Project Management Awareness," December
17, 1997, entitled "Safety and Soundness Guidelines Concerning the Year 2000
Business Risk," and October 15, 1998, entitled "Interagency Guidelines
Establishing Year 2000 Standards for Safety and Soundness," as such issues
affect any of the Company or its Subsidiaries. Between the date of this
Agreement and the Effective Time, the Company shall use its reasonable best
efforts to implement such plan.
3.20 Labor Matters. (a) Except as Previously Disclosed, (i) the employees
employed by the Company or any Subsidiary are not represented by any labor union
or other labor representative or organization (ii) there are no contracts,
arrangements, commitments or understandings with or to a labor union or other
labor organization, including any collective bargaining agreements or other
similar arrangements in effect with respect to such employees and, (iii) there
are no other persons attempting to represent or organize or purporting to
represent for bargaining purposes any employees employed by the Company or any
Subsidiary.
(b) Except as Previously Disclosed, (i) since January 1, 1996 there has not
occurred or been threatened any strikes, slow downs, picketing, work stoppages,
concerted refusals to work or other similar labor activities with respect to
employees employed by the Company or any Subsidiary and (ii) no material
grievance or arbitration or other proceeding arising out of or under any
collective bargaining agreement is pending or threatened.
(c) The Company and each Subsidiary is in material compliance with all
legal requirements (including any legal obligation to engage in affirmative
action) relating to the employment of former, current, and prospective
employees, independent contractors and "leased employees" (within the meaning of
section 414(n) of the Code) and there are no complaints, charges or claims
against the Company or any Subsidiary pending or, to the Knowledge of the
Company, threatened in respect thereof.
3.21 Fairness Opinion. On or before the date hereof, Goldman, Sachs & Co.
has delivered its opinion to the Company's Board of Directors that the Merger
Consideration is fair, from a financial point of view, to the holders of the
Company Common Stock, a true and correct copy of which has been delivered to
Parent.
3.22 Transactions with Affiliates. Except as disclosed in the Company
Reports filed prior to the date hereof, from January 1, 1999 through the date
hereof there have been no transactions, agreements, arrangements or
understandings between the Company or any of its Subsidiaries, on the one hand,
and the Company's affiliates (other than wholly owned Subsidiaries of the
Company) or other Persons, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEST EUROPE
Except as Previously Disclosed, SRH hereby represents and warrants to
Parent as follows:
4.1 Corporate Organization. (a) SRH is a societe anonyme duly organized,
validly existing and in good standing under the laws of Luxembourg. SRH has the
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
True and complete copies of the articles of incorporation of SRH, as in effect
as of the date of this Agreement, have previously been made available by SRH to
Parent.
(b) SRH has Previously Disclosed to Parent a complete and correct list of
all of SRH's Subsidiaries. Except for the capital stock and securities referred
to in the immediately following sentence, there are no outstanding shares of
capital stock or other equity securities of any such Subsidiary, options,
warrants, stock appreciation rights, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any capital stock or other equity securities of such
Subsidiary, or contracts, commitments, understandings or arrangements by which
such Subsidiary may become bound to issue additional shares of its capital stock
or other equity securities, or options, warrants, scrip or rights to purchase,
acquire, subscribe to, calls on or commitments for any shares of its capital
stock or other equity securities. All of the outstanding shares of capital stock
or other securities evidencing ownership of SRH's Subsidiaries are validly
issued, fully paid and (except as otherwise required by law) non-assessable and,
except as Previously Disclosed, such shares or other securities are owned by SRH
or its wholly owned Subsidiaries free and clear of any Lien with respect
thereto. Each of SRH's Subsidiaries (i) is a duly organized and validly existing
corporation, partnership, limited liability company or other legal entity under
the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing (to the extent the concepts of "qualification to
do business" and "good standing" exist) in all jurisdictions (whether
supranational, federal, state, local or foreign) where its ownership or leasing
of property or the conduct of its business requires it to be so qualified, and
(iii) has all requisite corporate, partnership or other power and authority to
own or lease its properties and assets and to carry on its business as now
conducted.
(c) The minute books of SRH and of each of its Subsidiaries accurately
reflect in all material respects all material corporate actions taken by their
stockholders and Boards of Directors (including committees of their Boards of
Directors) since January 1, 1996.
4.2 Capitalization. The authorized capital stock of SRH consists solely of
400,000,000 shares, consisting of (a) 200,000,000 authorized common shares, each
with a $2.50 par value (the "SRH Common Stock"), of which 71,324,048 shares were
issued and outstanding as of the date hereof; and (b) 200,000,000 authorized
preferred shares, each with a $2.50 par value (the "SRH Preferred Stock"), of
which (i) 1,250,000 have been designated as 7.20% Series A Cumulative Preferred
Stock (the "West Series A Preferred Stock"), all of which were issued and
outstanding as of the date hereof and (ii) 1,500,000 have been designated as
6.35% Series B Cumulative Preferred Stock (the "West Series B Preferred Stock"),
all of which were issued and outstanding as of the date hereof. As of December
31, 1998, 721,986 shares of SRH Common Stock and no shares of SRH Preferred
Stock were held in SRH's treasury. All of the outstanding shares of SRH Common
Stock are admitted to the official listing of the Luxembourg Stock Exchange and
all of the outstanding shares of SRH Preferred Stock are admitted to the
official listing on the Luxembourg Stock Exchange and the Frankfurt Stock
Exchange. No shares of SRH Common Stock or SRH Preferred Stock are reserved for
issuance, except for 473,670 shares of SRH Common Stock reserved for issuance in
connection with the 1989 Stock Award Plan of SRH at December 31, 1998. All of
the issued and outstanding shares of SRH Common Stock and SRH Preferred Stock
have been duly authorized and validly issued and are fully paid, non-assessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. Except as provided below, SRH does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, stock appreciation
rights, commitments or agreements of any character calling for the purchase or
issuance of any shares of SRH Capital Stock (as defined below) or any other
equity securities of SRH or any securities representing the right to purchase or
otherwise receive any shares of SRH Capital Stock or requiring any payment
relating to the value or market price of SRH Capital Stock. SRH has Previously
Disclosed a list, as of May 6, 1999, of SRH Option holders, the number of SRH
Options held by each such holder, the date of each SRH Option to purchase SRH
Common Stock granted, the expiration date of each such SRH Option, the vesting
schedule of each such SRH Option, the SRH Stock Option Plan pursuant to which
each such SRH Option was granted and the price at which each such SRH Option may
be exercised under the applicable SRH Stock Option Plan. SRH has Previously
Disclosed a list, as of May 6, 1999, of the SRH Restricted Share holders, the
number of SRH Restricted Shares held by each such holder, the date of each SRH
Restricted Share granted, the expiration date of each such SRH Restricted Share,
the vesting schedule of each such SRH Restricted Share, the SRH Stock Plan
pursuant to which each such SRH Restricted Share was granted and the price, if
any, at which each such SRH Restricted Share may be settled under the applicable
SRH Stock Plan. Except as Previously Disclosed, since December 31, 1998, SRH has
not (i) issued any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock, other than shares of
SRH Common Stock issued upon the exercise, settlement or conversion of SRH
Options and SRH Restricted Shares outstanding as of May 6, 1999, as described in
the immediately preceding sentence or (ii) taken any actions which would cause
an antidilution adjustment under any outstanding SRH Options or SRH Restricted
Shares. Except as Previously Disclosed, there are no outstanding contractual
obligations of SRH or any of its Subsidiaries to repurchase, redeem or otherwise
acquire, or to register for sale, any shares of capital stock of SRH or any of
its Subsidiaries. Except as Previously Disclosed, there are no outstanding
contractual obligations of SRH or any of its Subsidiaries to vote or to dispose
of any shares of the capital stock of any of its Subsidiaries. The SRH Common
Stock and the SRH Preferred Stock are referred to collectively as the "SRH
Capital Stock."
4.3 Authority; No Violation. (a) SRH has full power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of SRH prior to the date hereof (which
approval satisfies in full the requirements of Luxembourg Law regarding approval
by a board of directors), and such approval is in full force and effect. The
Board of Directors of SRH has recommended to SRH's stockholders to tender their
Shares of SRH Common Stock in the Offer. No other proceeding on the part of SRH
and no stockholder vote is necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by SRH and (assuming due authorization, execution and
delivery by Parent and the Company) constitutes a valid and binding obligation
of SRH, enforceable against SRH in accordance with its terms. In addition, the
Board of Directors of SRH has taken all requisite action such that the
provisions of any applicable "freezeout", "fair price", "moratorium", "control
share acquisition" or other similar anti-takeover statute or regulation, are not
applicable to the Merger, the Offer or the other transactions contemplated by
this Agreement.
(b) Neither the execution and delivery of this Agreement by SRH, nor the
consummation by the Company of the Merger or SRH of the Offer, nor compliance by
SRH with any of the terms or provisions hereof or thereof, will (i) violate any
provision of the articles of association (or similar documents) of SRH or any of
its Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 4.4 are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to SRH or any
of its Subsidiaries or any of their respective properties or assets, or violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by or
rights or obligations under, or result in the creation of any Lien (or have any
of such results or effects upon notice or lapse of time, or both) upon any of
the respective properties or assets of SRH or any of its Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, contract, or other instrument or
obligation to which SRH or any of its Subsidiaries is a party, or by which they
or any of their respective properties, assets or business activities may be
bound or affected.
4.4 Consents and Approvals. Except for (a) the requisite filings with,
notices to and approval of the Federal Reserve Board under the BHCA and the Bank
Merger Act, the FSA, the HKMA and the FBC, (b) the filing of any required
applications or notices with the New York State Banking Department, (c) the
filing with the SEC of the Proxy Statement in definitive form, (d) the filing of
the Articles of Merger with the Maryland Department pursuant to the MGCL, (e)
any consents, authorizations, approvals, filings or exemptions in connection
with compliance with the applicable provisions of supranational, federal, state,
local and foreign laws (including, without limitation, securities and insurance
laws) relating to the regulation of broker-dealers, futures commission
merchants, commodities trading advisors, commodities pool operators, investment
advisers and insurance agencies and any applicable SRO, and the rules of the
NYSE, the Philadelphia Stock Exchange, the International Stock Exchange, the
Swiss Electronic Exchange or the Luxembourg Stock Exchange (f) the approval of
the Merger by the requisite vote of the stockholders of the Company, (g) the
expiration of any applicable waiting period under the HSR Act or any consents,
authorizations, approvals, filings or exemptions required by any other
applicable antitrust law or merger regulation, including the EC Merger
Regulation, (h) such additional consents and approvals set forth in Section 4.4
of the SRH Disclosure Schedule, (i) the filing of the Offer Circular with, and
the approval of such Offer Circular by, the CSFS, the Frankfurt Stock Exchange,
the Luxembourg Stock Exchange and the Swiss Electronic Exchange, and (j)
consents, authorizations, approvals, filings and registrations the failure of
which to obtain or make would not be reasonably likely to result in a Material
Adverse Effect on the Acquired Companies or prevent or materially delay
consummation of the Merger, the Offer or the Bank Merger, no consents,
authorizations or approvals of or filings or registrations with any Governmental
Entity or, of or with any other Person by or on behalf of SRH, are necessary in
connection with (x) the execution and delivery by SRH of this Agreement, or (y)
the consummation by SRH of the Offer. As of the date hereof, SRH has no reason
to believe that any Requisite Regulatory Approvals will not be obtained or
satisfied, as the case may be.
4.5 Reports. SRH and each of its Subsidiaries have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 1996 with
any Regulatory Agencies, and all other reports, registrations and statements
required to be filed by them since January 1, 1996, including, without
limitation, any report or statement required to be filed pursuant to the laws,
rules or regulations of Luxembourg or any Regulatory Agency, and have paid all
fees and assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of SRH and its Subsidiaries, no Regulatory Agency has initiated any
proceeding or, to the Knowledge of SRH, investigation into the business or
operations of SRH or any of its Subsidiaries since January 1, 1996. Except as
Previously Disclosed, there is no unresolved violation, material criticism, or
exception by any Regulatory Agency with respect to any report, registration or
statement relating to any examinations of SRH or any of its Subsidiaries.
4.6 Financial Statements. SRH has previously made available to Parent
copies of (a) the consolidated statements of condition of SRH and its
Subsidiaries as of December 31, 1997 and December 31, 1998, (b) the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1996 through 1998, in each case accompanied by the
audit report of KPMG Audit Reviseurs d'entreprises, SRH's independent public
accountants and (c) the unaudited consolidated interim financial statements of
SRH for the fiscal quarter ended March 31, 1999. The financial statements
referred to in the preceding sentence (including the related notes, where
applicable) fairly present in all material respects the consolidated financial
position of SRH and its Subsidiaries for the respective fiscal periods or as of
the respective dates therein set forth. Each of such statements (including the
related notes, where applicable) has been prepared (and, in the case of the
financial statements filed after the date of this Agreement, will be prepared)
in all material respects in accordance with GAAP or regulatory accounting
principles, as applicable, consistently applied during the periods involved,
except, in each case, as indicated in such statements or in the notes thereto.
The books and records of SRH and its Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP or regulatory
accounting principles, as applicable, and any other applicable legal and
accounting requirements.
4.7 Broker's Fees. Neither SRH nor any of its Subsidiaries nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with the Merger or related transactions contemplated by this Agreement, except
that SRH has retained International Real Returns LLC and Goldman, Sachs & Co. as
its financial advisors, pursuant to compensation arrangements which have been
disclosed in writing to Parent, and will not be modified subsequent to, the date
of this Agreement.
4.8 Absence of Certain Changes or Events. (a) Except as Previously
Disclosed in the SRH Disclosure Schedule, since December 31, 1998, no event has
occurred and no fact or circumstance shall have come to exist or come to be
known which, directly or indirectly, individually or taken together with all
other facts, circumstances and events (described in any paragraphs of this
Article IV or otherwise), has had, or is reasonably likely to have, a Material
Adverse Effect with respect to the Acquired Companies.
(b) As of the date of this Agreement, except as Previously Disclosed in the
SRH Disclosure Schedule, since December 31, 1998, SRH and its Subsidiaries have
carried on their respective businesses in the ordinary and usual course
consistent with their past practices (excluding the incurrence of fees and
expenses of professional advisors related to this Agreement and the transactions
contemplated hereby) and there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect
to any SRH Capital Stock, other than regular annual cash dividends on
SRH Common Stock and dividends payable on SRH Preferred Stock in
accordance with their terms as of the date of this Agreement;
(ii) any split, combination or reclassification of any SRH
Capital Stock or any issuance or the authorization of any issuance of
any other securities in respect of, or in lieu of or in substitution
for shares of SRH Capital Stock, except for issuances of SRH Common
Stock upon the exercise of SRH Options awarded prior to the date hereof
in accordance with the terms of SRH Stock Option Plans; or
(iii) except insofar as required by a change in GAAP or other
applicable generally accepted accounting methods, any change in
accounting methods, principles or practices by SRH or any of its
Subsidiaries.
4.9 Legal Proceedings. (a) Neither SRH nor any of its Subsidiaries is a
party to any, and there are no pending or, to the Knowledge of SRH, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature (i) against SRH or, to
the Knowledge of SRH, any of its Subsidiaries, (ii) against any person who is
currently an executive officer or director of SRH or any of its Subsidiaries
with respect to any of their actions as such or (iii) challenging the validity
or propriety of the transactions contemplated by this Agreement. SRH has
Previously Disclosed a list of all pending or, to the Knowledge of SRH,
threatened Claims and Proceedings which, in each case, seek, or could result in,
damages or other amounts payable by SRH or its Subsidiaries, in excess of $3
million ($3,000,000).
(b) There is no injunction, order, judgment or decree imposed upon SRH or,
to the Knowledge of SRH, any of its Subsidiaries or the assets of SRH or any of
its Subsidiaries.
4.10 Tax Matters. SRH and each of its Subsidiaries has duly filed all Tax
returns and reports required to be filed by it, or requests for extensions to
file such returns or reports have been timely filed and granted and have not
expired, and such returns and reports are true, correct and complete in all
material respects.
4.11 Employee Benefit Plans; ERISA. (a) Except as Previously Disclosed,
neither SRH nor any of its Subsidiaries maintain or contribute to, or have any
obligation to contribute to, or have any liability, direct or indirect,
contingent or otherwise (including, without limitation, a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement) with
respect to, any material employment, consulting, severance pay, termination pay,
retirement, deferred compensation, retention or change in control plan, program,
arrangement, agreement or commitment, or an executive compensation, incentive
bonus or other bonus, pension, stock option, restricted stock or equity-based,
profit sharing, savings, life, health, disability, accident, medical, insurance,
vacation, or other employee benefit plan, program, arrangement, agreement, fund
or commitment, including any "employee benefit plan" as defined in Section 3(3)
of ERISA providing benefits to any current or former employee, consultant or
director of SRH or any of its Subsidiaries or any current or former employee,
consultant or director of any entity with respect to which SRH or its
Subsidiaries is a successor (collectively the "SRH Benefit Plans"). True and
complete copies of each SRH Benefit Plan, including, but not limited to, any
trust instruments and/or insurance contracts, if any, forming a part thereof,
all amendments thereto and the most recent determination letters issued by the
Internal Revenue Service, all government and regulatory approvals received from
any foreign Regulatory Agency, the most recent summary plan descriptions
(including any material modifications) and the most recent audited financial
reports for any funded SRH Benefit Plan have been supplied or made available to
Parent. Except as Previously Disclosed: (i) neither SRH nor any of its
Subsidiaries has any plan or commitment, whether legally binding or not, to
create any additional SRH Benefit Plan or modify or change any existing SRH
Benefit Plan that would materially increase the benefits provided to any
employee or former employee, consultant or director of SRH or any Subsidiary
thereof; and (ii) since December 31, 1998 there has been no material change,
amendment, modification to, or adoption of, any SRH Benefit Plan.
(b) With respect to each SRH Benefit Plan: (i) if intended to qualify under
Section 401(a), 401(k) or 403(a) of the Code such plan has received a favorable
determination letter from the Internal Revenue Service, or if intended to
qualify under any law or regulation of any foreign jurisdiction or Regulatory
Agency such plan so qualifies, and SRH is not aware of any circumstances likely
to result in revocation of such favorable determination or such qualification;
(ii) it has been operated and administered in all material respects in
compliance with its terms and all applicable laws and regulations (including but
not limited to ERISA, the Code and any relevant foreign laws and regulations);
(iii) there are no material pending or, to the Knowledge of SRH, threatened
claims against, by or on behalf of any SRH Benefit Plans (other than routine
claims for benefits); (iv) to the Knowledge of SRH, no material breaches of
fiduciary duty have occurred; (v) no non-exempt prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Code has occurred
which would subject SRH or any Subsidiary to material liability; (vi) no
material Lien imposed under the Code, ERISA or any foreign law exists; and (vii)
all contributions, premiums and expenses to or in respect of such SRH Benefit
Plan have been timely paid in full or, to the extent not yet due, have been
adequately accrued on SRH's consolidated financial statements.
(c) Neither SRH nor any of its Subsidiaries has incurred or reasonably
expects to incur, either directly or indirectly (including as a result of an
indemnification obligation), any material liability under Title I or IV of ERISA
or the penalty, excise tax or joint and several liability provisions of the Code
or any foreign law or regulation relating to employee benefit plans, and to the
Knowledge of SRH, no event, transaction or condition has occurred, exists or is
expected to occur which could result in any such material liability to SRH, any
of its Subsidiaries or, after the Closing, to Parent.
(d) SRH and each of its Subsidiaries has complied with, and each such SRH
Benefit Plan conforms in operation and form to, all applicable legal
requirements, domestic or foreign, including, but not limited to, ERISA and the
Code, in all material respects.
(e) With respect to each "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) as to which either SRH or any Subsidiary may
incur any liability under Section 302 or Title IV of ERISA or Section 412 of the
Code:
(i) no such plan is a "multiemployer plan" (within the meaning
of Section 3(37) of ERISA) or a "multiple employer plan" (within the
meaning of Section 413(c) of the Code);
(ii) no such plan has been terminated so as to result,
directly or indirectly, in any material liability, contingent or
otherwise, of either SRH or any Subsidiary under Title IV of ERISA;
(iii) no complete or partial withdrawal from such plan has
been made by SRH or any Subsidiary, or by any other Person, so as to
result in a material liability to SRH or any Subsidiary, whether such
liability is contingent or otherwise;
(iv) no proceeding has been initiated by any Person (including
the PBGC to terminate any such plan or to appoint a trustee for any
such plan;
(v) to the Knowledge of SRH, no condition or event currently
exists or currently is expected to occur that could result, directly or
indirectly, in any material liability of SRH or any Subsidiary under
Title IV of ERISA, whether to the PBGC or otherwise, on account of the
termination of any such plan;
(vi) if any such plan were to be terminated as of the Closing
Date or if any Person were to withdraw from such plan, neither SRH nor
any Subsidiary would incur, directly or indirectly, any material
liability under Title IV of ERISA;
(vii) no "reportable event" (as defined in ERISA) for which
the 30-day reporting requirement has not been waived has occurred with
respect to any such plan, nor has any notice of such event or similar
notice to any foreign Regulatory Agency been required to be filed for
any SRH Benefit Plan within the past 12 months nor will any such notice
be required to be filed as a result of the transactions contemplated by
this Agreement;
(viii) no such plan which is subject to Section 302 of ERISA
or Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and section 412 of the
Code, respectively), whether or not waived, and neither SRH nor any of
its Subsidiaries has provided, or is required to provide, security to
any SRH Benefit Plan pursuant to Section 401(a)(29) of the Code; and
(ix) the transactions contemplated hereby will not result in
any event described in section 4062(e) of ERISA.
(f) Except as Previously Disclosed, with respect to each SRH Benefit Plan
that is a "welfare plan" (as defined in Section 3(1) of ERISA), neither SRH nor
any Subsidiary has any obligations to provide health, life insurance, or death
benefits with respect to current or former employees, consultants or directors
of SRH or any of its Subsidiaries beyond their termination of employment or
service, other than as required under Section 4980B of the Code, and each such
SRH Benefit Plan may be amended or terminated at any time without incurring
liability thereunder. Except as Previously Disclosed, there has been no
communication to any employee, consultant or director of SRH or any Subsidiary
that would reasonably be expected to promise or guarantee any such retiree
health or life insurance or other retiree death benefits on a permanent basis.
(g) Except as Previously Disclosed, the consummation of the transactions
contemplated hereby, either alone or in combination with another event, (whether
contingent or otherwise) will not (i) entitle any current or former employee,
consultant or director of SRH or any Subsidiary or any group of such employees,
consultants or directors to any payment, (ii) increase the amount of
compensation due to any such employee, consultant or director (iii) accelerate
the vesting or funding of any compensation, stock incentive or other benefit;
(iv) result in any "parachute payment" under Section 280G of the Code (whether
or not such payment is considered to be reasonable compensation for services
rendered); or (v) cause any compensation to fail to be deductible under Section
162(m), or any other provision of the Code or any similar foreign law or
regulation.
(h) Under each SRH Benefit Plan which is a single-employer plan and any
foreign plan that is a defined benefit plan, as of the last day of the most
recent plan year ended prior to the date hereof, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA or, with respect to any foreign plan, as determined under
any equivalent law or practice (in each case as determined on the basis of the
actuarial assumptions contained in SRH Benefit Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such SRH
Benefit Plan, and there has been no material adverse change in the financial
condition of such SRH Benefit Plan (with respect to either assets or benefits)
since the last day of the most recent plan year.
(i) SRH has Previously Disclosed a true, correct and complete schedule of
all extensions of credit made to the executive officers and directors of SRH and
its Subsidiaries and their related interests that are required to be reported to
any applicable Regulatory Authority.
(j) Except as Previously Disclosed, no SRH Benefit Plan, or SRH or any
Subsidiary, is under audit or is the subject of an audit or investigation by the
IRS, the U.S. Department of Labor, the PBGC or any other federal or state
governmental agency, nor is any such audit or investigation pending or
threatened.
(k) Except as Previously Disclosed, neither SRH nor any Subsidiary
maintains any plan, program or arrangement or is a party to any contract that
provides any benefits or provides for payments to any Person in, based on or
measured by the value of, any equity security of, or interest in, SRH or any
Subsidiary.
4.12 Licenses; Compliance with Applicable Law. SRH and each of its
Subsidiaries hold all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses under and pursuant to all,
and have complied with and are not in default under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any Governmental
Entity relating to SRH or any of its Subsidiaries, and neither SRH nor any of
its Subsidiaries has Knowledge of, or has received notice of, any violations of
any of the above.
4.13 Certain Contracts. Except as Previously Disclosed, neither SRH nor any
of its Subsidiaries is a party to or bound by any contract, arrangement,
commitment or understanding (a) as of the date hereof, with respect to the
employment, termination or compensation of any directors, executive officers,
key employees or material consultants (other than oral contracts of employment
at will which may be terminated without penalty), (b) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC), (c) which contains any material non-compete or exclusivity provisions with
respect to any business or geographic area in which business is conducted with
respect to SRH or any of its affiliates or which restricts the conduct of any
business by SRH or any of its affiliates or any geographic area in which SRH or
any of its affiliates may conduct business or requires exclusive referrals of
any business, (d) except as contemplated by Article I hereof or as Previously
Disclosed (including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan) any of the benefits of which will
be increased, or the funding, vesting or payment of the benefits of which will
be accelerated, by the occurrence of any of the transactions contemplated by
this Agreement, or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement or (e)
which would prohibit or materially delay the consummation of the Offer or the
Merger. SRH has previously made available to Parent true and correct copies of
all employment, termination and compensation (including deferred compensation)
agreements with executive officers, key employees or material consultants which
are in writing and to which SRH or any of its Subsidiaries is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section 4.13, whether or not Previously Disclosed, is referred to herein as a
"SRH Contract", and neither SRH nor any of its Subsidiaries has Knowledge of, or
has received notice of, any violation of the above by any of the other parties
thereto.
4.14 Agreements with Regulatory Agencies. Except as Previously Disclosed,
neither SRH nor any of its Subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any board resolutions at
the request of, any Regulatory Agency or other Governmental Entity, that
restricts the conduct of its business or has resulted, or could reasonably be
expected to result, in a liability or that in any manner relates to its capital
adequacy, its credit policies, its management or its business (each, whether or
not set forth in SRH Disclosure Schedule, a "SRH Regulatory Agreement"), nor has
SRH or any of its Subsidiaries (a) been advised since January 1, 1996 by any
Regulatory Agency or other Governmental Entity that it is considering issuing or
requesting any such SRH Regulatory Agreement or (b) any Knowledge of any pending
or threatened regulatory investigation.
4.15 Derivative Instruments. Any Derivative Instruments, whether entered
into for the account of SRH or one of its Subsidiaries or for the account of a
customer of SRH or one of its Subsidiaries, were entered into in the ordinary
course of business and, in accordance with prudent business practice and rules,
regulations and policies of any Regulatory Authority applicable to SRH and its
Subsidiaries, and to SRH's Knowledge, with counterparties believed to be
financially responsible at the time and are legal, valid and binding obligations
of SRH or one of its Subsidiaries enforceable in accordance with their terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. SRH and each of its
Subsidiaries have duly performed in all respects all of their obligations
thereunder to the extent that such obligations to perform have accrued, and
there are no breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
4.16 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of SRH disclosed
to the Parent for the period ended December 31, 1998, liabilities identified in
Section 4.17 of the SRH Disclosure Schedule and liabilities incurred in the
ordinary course of business consistent with past practice since December 31,
1998, neither SRH nor any of its Subsidiaries has incurred any liability of any
nature required by GAAP to be reflected in a balance sheet prepared in
accordance with GAAP.
4.17 Environmental Matters. (a) The Real Property, and to the Knowledge of
SRH, the Loan Properties are in compliance with all applicable Environmental
Laws, except for noncompliance that would not reasonably be expected to result
in a material liability to SRH or any of its Subsidiaries.
(b) There is no suit, claim, action or proceeding pending or, to the
Knowledge of SRH, threatened, before any Governmental Entity, Regulatory Agency
or other forum in which SRH or any of its Subsidiaries has been or, with respect
to threatened proceedings, may be, named as a defendant (i) for alleged
noncompliance (including by any predecessor), with any Environmental Law or (ii)
relating to any Release.
(c) To the Knowledge of SRH, there are no facts or circumstances which
would provide a reasonable basis for any suit, claim, action or proceeding as
described in Section 4.17(b), except for noncompliance that would not reasonably
be expected to result in a material liability to SRH or any of its Subsidiaries.
(d) To the Knowledge of SRH, there has been no Release in, on, under or
affecting any Real Property or Loan Property.
4.18 Year 2000. SRH has carried out a review to evaluate the extent to
which the business or operations of SRH or any of its Subsidiaries will be
affected by the Year 2000 Problem (as defined below). As a result of such
review, SRH has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect or result in any material loss or
interference with the business or operations of the Acquired Companies. SRH
reasonably believes, after due inquiry, that the suppliers, vendors, customers
or other material third parties used or served by SRH and its Subsidiaries are
addressing or will address the Year 2000 Problem in a timely manner. SRH is in
compliance with all applicable requirements of any Governmental Entity relating
to the Year 2000 Problem and has not received any correspondence from or
provided any written information to any Governmental Entity relating to the Year
2000 Problem other than as Previously Disclosed, complete and accurate copies of
which have been made available to Parent. SRH has previously provided to Parent
complete and accurate copies of all of its internal plans, including estimates
of the anticipated associated costs, for addressing the Year 2000 Problem as it
relates to SRH and its Subsidiaries. "Year 2000 Problem" means the risk that
computer hardware or software applications will not record, store, process,
calculate and present calendar dates falling on and after January 1, 2000, and
calculate information dependent upon or relating to such dates, in the same
manner and with the same functionality, data integrity and performance as such
products record, store, process, calculate and present calendar dates falling on
or before December 31, 1999, and calculate information dependent on or relating
to such dates.
4.19 Labor Matters. (a) Except as Previously Disclosed, (i) the employees
employed by SRH or any Subsidiary are not represented by any labor union or
other labor representative or organization (ii) there are no contracts,
arrangements, commitments or understandings with or to a labor union or other
labor organization, including any collective bargaining agreements or other
similar arrangements in effect with respect to such employees and, (iii) there
are no other persons attempting to represent or organize or purporting to
represent for bargaining purposes any employees employed by SRH or any
Subsidiary.
(b) Except as Previously Disclosed, (i) since January 1, 1996 there has not
occurred or been threatened any strikes, slow downs, picketing, work stoppages,
concerted refusals to work or other similar labor activities with respect to
employees employed by SRH or any Subsidiary and (ii) no material grievance or
arbitration or other proceeding arising out of or under any collective
bargaining agreement is pending or threatened.
(c) SRH and each Subsidiary is in material compliance with all legal
requirements (including any legal obligation to engage in affirmative action)
relating to the employment of former, current, and prospective employees and
independent contractors and there are no complaints, charges or claims against
SRH or any Subsidiary pending, or to the knowledge of the SRH, threatened in
respect thereof.
4.20 Fairness Opinion. On or before the date hereof, Goldman, Sachs & Co.
has delivered its opinion to SRH's Board of Directors that the consideration to
be offered by Parent or Offer Sub to the holders of SRH Common Stock in the
Offer is fair, from a financial point of view, to the holders of SRH Common
Stock, a true and correct copy of which has been delivered to Parent.
4.21 Transactions with Affiliates. Except as Previously Disclosed, from
January 1, 1997 through the date hereof there have been no transactions,
agreements, arrangements or understandings between SRH or any of its
Subsidiaries, on the one hand, and SRH's affiliates (other than wholly owned
Subsidiaries of SRH) or other Persons, on the other hand, that would, if SRH
were an Exchange Act Reporting Company, be required to be disclosed under Item
404 of Regulation S-K under the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as Previously Disclosed, Parent hereby represents and warrants to
the Company and SRH as follows:
5.1 Corporate Organization. Parent is a public limited company duly
organized and validly existing under the laws of England. Promptly following the
date hereof, Merger Sub will be a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland, and all of its
outstanding capital stock will be owned directly or indirectly by Parent. Merger
Sub will be formed solely for the purpose of engaging in the transactions
contemplated hereby, will conduct its operations only as contemplated hereby and
will engage in no other business activities other than activities conducted in
furtherance of the transactions contemplated hereby; provided, however, that
Merger Sub may incur indebtedness that does not contravene any other provision
hereof, including Section 5.4. Parent has the requisite power and authority to
own or lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business (to the
extent the concept of "qualification to do business" exists) in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary.
5.2 Authority; No Violation. (a) Parent has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Merger Sub will have full corporate power and
authority to enter into and deliver this Agreement and become a party hereto,
and to consummate the transactions contemplated hereby.
(b) The consummation of the transactions contemplated hereby has been duly
and validly approved by a duly authorized committee of the Board of Directors of
Parent, and will be duly and validly approved by the Board of Directors of
Merger Sub, and Parent will cause the stockholder or stockholders of Merger Sub
to approve the Merger. No other corporate proceedings on the part of Parent and
no vote of Parent's stockholders are necessary to consummate the transactions
contemplated hereby.
(c) The execution and delivery of this Agreement by Parent has been duly
and validly authorized in accordance with applicable law. This Agreement has
been duly and validly executed and delivered by Parent and (assuming due
authorization, execution and delivery by the Company and SRH) constitutes a
valid and binding obligation of Parent, enforceable against Parent in accordance
with its terms.
(d) Neither the execution and delivery of this Agreement by Parent, nor the
consummation by Parent and Merger Sub of the Merger and the Offer, nor
compliance by Parent and Merger Sub with any of the terms or provisions hereof,
will (i) violate any applicable law or the memorandum and articles of
association, certificate of incorporation, bylaws or other organizational
documents of Parent or Merger Sub, as applicable, or (ii) assuming that the
consents and approvals referred to in Section 5.3 are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets, or violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or assets of Parent
or any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement,
contract or other instrument or obligation to which Parent or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
5.3 Consents and Approvals. Except for (a) the requisite filings with,
notices to and approval of the Federal Reserve Board under the BHCA and the Bank
Merger Act, the FSA, the HKMA, and the FBC, (b) the filing of any required
applications or notices with the New York State Banking Department, (c) the
filing with the SEC of the Proxy Statement in definitive form, (d) approval of
the Merger by the board of directors of Merger Sub and by the stockholders of
Merger Sub in accordance with the MGCL and the filing of the Articles of Merger
with the Maryland Department pursuant to the MGCL, (e) any consents,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of supranational, federal, state, local and
foreign laws (including, without limitation, securities and insurance laws)
relating to the regulation of broker-dealers, investment advisers and insurance
agencies and any applicable SRO, and the rules of the NYSE, the Philadelphia
Stock Exchange, the International Stock Exchange, the Swiss Electronic Exchange
or the Luxembourg Stock Exchange, (f) the approval of the Merger by the
requisite vote of the stockholders of the Company, (g) the expiration of any
applicable waiting period under the HSR Act or any consents, authorizations,
approvals, filings or exemptions required by any other applicable antitrust law
or merger regulation, including the EC Merger Regulation, (h) such additional
consents and approvals set forth in Section 5.3 of the Parent Disclosure
Schedule, (i) the filing of the Offer Circular with, and the approval of such
Offer Circular by, the CSFS, the Luxembourg Stock Exchange and the Swiss
Electronic Exchange, and (j) consents, authorizations, approvals, filings and
registrations the failure of which to obtain or make would not be reasonably
likely to result in a Material Adverse Effect on Parent or prevent or materially
delay consummation of the Merger, the Offer or the Bank Merger, no consents,
authorizations or approvals of or filings or registrations with any Governmental
Entity or, of or with any other Person by Parent, are necessary in connection
with (x) the execution and delivery by Parent and Merger Sub of this Agreement,
(y) the consummation by Merger Sub of the Merger or by HSBC Bank USA of the Bank
Merger or (z) the consummation by Parent or Offer Sub of the Offer. As of the
date hereof, Parent has no reason to believe that any Requisite Regulatory
Approvals will not be obtained or satisfied without imposition of a Burdensome
Condition, as the case may be.
5.4 Financing. Parent will have available all the funds necessary to
perform its obligations under this Agreement, including consummating the
transactions contemplated by this Agreement on the terms contemplated hereby and
make the payment of all fees and expenses relating to such transactions.
5.5 Financial Reports. Parent has previously made available to the Company
and SRH copies of (i) the consolidated balance sheets of Parent and its
Subsidiaries as of December 31, 1998, (ii) the related consolidated statements
of income, changes in stockholders' equity and cash flows for the fiscal year
1998 as reported in its Annual Report for the fiscal year ended December 31,
1998 (the "Parent Financial Reports") in each case accompanied by the audit
report of its independent public accountants. The Parent Financial Reports
(including the related notes, where applicable) fairly present in all material
respects the consolidated financial position of Parent and its Subsidiaries for
the respective fiscal periods or as of the respective dates therein set forth;
each of such statements (including the related notes, where applicable) comply
in all material respects with applicable accounting requirements; and each of
such statements (including the related notes, where applicable) has been
prepared in all material respects in accordance with generally accepted
accounting principles in the United Kingdom or regulatory accounting principles,
as applicable, consistently applied during the periods involved, except, in each
case, as indicated in such statements or in the notes thereto.
5.6 Litigation; Regulatory Action. (a) No litigation, claim or other
proceeding before any court or governmental agency is pending against it or, to
its Knowledge, any of its Subsidiaries and, to its Knowledge, no such
litigation, claim or other proceeding has been threatened, in each case that
would or would reasonably be expected to have a Material Adverse Effect on
Parent.
(b) Neither it nor, to its Knowledge, any of its Subsidiaries or
properties, is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
of similar submission to, or extraordinary supervisory letter from, any
Regulatory Authority.
(c) Neither it nor, to its Knowledge, any of its Subsidiaries, has been
advised by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.
5.7 Absence of Certain Changes. Except as publicly disclosed in London
prior to the date hereof, since December 31, 1998, (i) it and its Subsidiaries
have conducted their respective businesses in the ordinary and usual course
consistent with past practice and (ii) no event has occurred and no fact or
circumstance shall have come to exist or come to be known which, directly or
indirectly, individually or taken together with all other facts, circumstances
and events (described in any paragraph of this Article V or otherwise), has had,
or is reasonably expected to have a Material Adverse Effect with respect to
Parent.
5.8 Year 2000. Neither Parent nor any of its Subsidiaries has received, nor
to the Knowledge of Parent are there facts that would form the basis for the
issuance of, a Year 2000 Deficiency Notification Letter. Parent has a plan for
addressing the Year 2000 Problem and Parent's United States operations have
plans for addressing the issues set forth in the Year 2000 guidance papers
issued by the Federal Financial Institutions Examination Council, including the
statements dated May 5, 1997, entitled "Year 2000 Project Management Awareness,"
December 17, 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk," and October 15, 1998, entitled "Interagency Guidelines
Establishing Year 2000 Standards for Safety and Soundness," as such issues
affect any of Parent or its Subsidiaries, as applicable. Between the date of
this Agreement and the Effective Time, Parent shall use its reasonable best
efforts to implement such plans.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Business Prior to the Effective Time. During the period from
the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Option Agreement, the Company
and SRH shall each, and shall cause its respective Subsidiaries to, (a) conduct
their business only in the usual, regular and ordinary course consistent with
past practice, (b) use reasonable best efforts to maintain and preserve intact
their business organization, employees and advantageous business relationships
and retain the services of their key officers and key employees, (c) take no
intentional action which would adversely affect or delay in any material respect
the ability of either Parent, SRH or the Company to obtain any Requisite
Regulatory Approvals and (d) use reasonable best efforts to obtain any third
party approvals that are necessary or appropriate for the Successor Corporation
to conduct the business of the Company and its subsidiaries as currently
conducted following the Effective Time.
6.2 Forbearances of the Company and SRH. During the period from the date of
this Agreement to the Effective Time, except as Previously Disclosed or except
as expressly contemplated or permitted by this Agreement or the Option
Agreement, neither the Company nor SRH shall, nor shall either permit any of its
Subsidiaries to, without the prior written consent of Parent:
(a) other than in the ordinary course of business consistent with past
practice, incur (i) any indebtedness for borrowed money (other than deposits and
similar liabilities, short-term indebtedness incurred to refinance existing
short-term indebtedness, indebtedness of the Company's Subsidiaries to the
Company or any of its wholly owned Subsidiaries, indebtedness of SRH's
Subsidiaries to SRH or any of its wholly owned Subsidiaries and indebtedness
under existing lines of credit), assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity, or make any loan or advance or (ii) any capital
expenditures, obligations or liabilities;
(b) (i) adjust, split, combine or reclassify any capital stock; (ii) make,
declare or pay any dividend (except, (A) regular annual or quarterly cash
dividends (with record and payment dates consistent with past practice) at a
rate not in excess of the rate heretofore in effect on the Company Common Stock
or the SRH Common Stock and dividends on the Company Preferred Stock or SRH
Preferred Stock pursuant to the terms thereof and (B) dividends paid in the
ordinary course of business by any wholly owned Subsidiary of the Company or of
SRH) or make any other distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or any securities
or obligations convertible into or exchangeable for any shares of its capital
stock; (iii) grant any additional Options, Restricted Shares, Incentive
Compensation Awards, SRH Options or SRH Restricted Shares, or grant any Person
any right to acquire any shares of its capital stock or any right the value of
which is based on the value of shares of its capital stock, (iv) issue any
additional shares of capital stock, other than with respect to the conversion of
convertible securities outstanding as of the date hereof pursuant to their terms
and the exercise, conversion or settlement of Options or SRH Options granted
prior to the date hereof pursuant to the Company Stock Plans or the SRH Stock
Plans; or (v) enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
material properties or assets, including, without limitation, capital stock in
any Subsidiaries of the Company or of SRH, to any individual, corporation or
other entity other than a direct or indirect wholly owned Subsidiary, or cancel,
release or assign any indebtedness to any such Person or any claims held by any
such Person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of this
Agreement;
(d) except for transactions in the ordinary course of business consistent
with past practice, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation, limited partnership or
other entity other than a wholly owned Subsidiary;
(e) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any material lease, contract or
agreement, or make any material change in any of its material leases, contracts
or agreements, other than renewals of leases, contracts or agreements without
material changes of terms;
(f) other than in the ordinary course of business consistent with past
practice or as required by law or contracts in effect as of the date hereof set
forth in Section 6.2 of the Company Disclosure Schedule or of the SRH Disclosure
Schedule, increase in any manner the wages, salaries, compensation, pension or
other fringe benefits or perquisites of any current or former employees,
consultants or directors of the Company or of SRH or any of their respective
Subsidiaries, or vest, fund or pay any pension or retirement allowance other
than as required by any existing Company Benefit Plans or SRH Benefit Plans
disclosed in the Company Disclosure Schedule or the SRH Disclosure Schedule to
any such current or former employees, consultants or directors or become a party
to, amend or commit itself to any pension, retirement, profit-sharing or welfare
benefit plan or agreement or employment, severance, consulting, retention,
change in control, termination, deferred compensation or incentive pay agreement
with or for the benefit of any current or former employee, consultant or
director or accelerate the vesting, funding or payment of any compensation
payment or benefit (except pursuant to the terms of existing plans or agreements
disclosed on the Company Disclosure Schedule or on the SRH Disclosure Schedule);
(g) settle any material claim, action or proceeding involving money damages
or waive or release any material rights or claims, except in the ordinary course
of business consistent with past practice;
(h) change its methods of accounting in effect at December 31, 1998, except
as required by changes in GAAP or, in the case of SRH and its Subsidiaries,
other applicable generally accepted accounting principles, or change any of its
methods of reporting material items of income and deductions for Tax purposes
from those employed in the preparation of the Tax returns of the Company and of
SRH for the taxable years ending December 31, 1998 and 1997, except as required
by changes in law or regulation or as Previously Disclosed;
(i) adopt or implement any amendment to its articles or certificate of
incorporation, articles of association, bylaws (or similar documents) or any
plan of consolidation, merger or reorganization;
(j) take any intentional action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Article VIII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law,
regulation or safe and sound banking practices; or
(k) agree to, or make any commitment to, take any of the actions prohibited
by this Section 6.2.
6.3 Covenants of Parent. During the period from the date of this Agreement
to the Effective Time, except as expressly contemplated by this Agreement,
Parent shall, and shall cause its Subsidiaries to, (a) not take, or agree to, or
make any commitment to take, any action, without the prior written consent of
the Company and of SRH (which consent shall not be unreasonably withheld or
delayed), that is intended or may reasonably be expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Article VIII not being
satisfied or in a violation of any provision of this Agreement, except, in every
case, as may be required by applicable law, regulation or safe and sound banking
practices (b) take no intentional action which would adversely affect or delay
in any material respect, the ability of either Parent, SRH or Company to obtain
any Requisite Regulatory Approval and (c) use its reasonable best efforts to
obtain any third party approvals that are necessary or appropriate for the
Successor Corporation to conduct the business of the Company and its respective
Subsidiaries as currently conducted following the Effective Time.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters. (a) Each of the Company, SRH and Parent agrees to
cooperate in the preparation of (i) the proxy statement and other proxy
solicitation materials of the Company (the "Proxy Statement") and all related
documents) in connection with the Company Meeting (as defined in Section 7.5)
and (ii) an offer document to be filed by Parent and/or Offer Sub with the CSFS
and any other applicable Regulatory Authority and/or stock exchange in
connection with the Offer (the "Offer Circular"). Provided Parent has cooperated
as required above, the Company agrees to file the Proxy Statement in preliminary
form with the SEC as promptly as reasonably practicable and to file the final
Proxy Statement as soon as reasonably practicable after any SEC comments with
respect to the preliminary Proxy Statement are resolved. Parent shall file the
Offer Circular with the CSFS and any other applicable Regulatory Authority
and/or stock exchange at such time as it shall reasonably determine is necessary
in order to consummate the Offer in accordance with Section 7.13. The Company
and SRH agree to furnish to Parent all information concerning the Company and
SRH, their Subsidiaries, officers, directors and stockholders as may be
reasonably requested in connection with the foregoing.
(b) Each of the Company, SRH and Parent agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to stockholders and
at the time of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or any statement which, in the light
of the circumstances under which such statement is made, will be false or
misleading with respect to any material fact, or which will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier statement in the
Proxy Statement or any amendment or supplement thereto and (ii) the Offer
Circular at the date of mailing, and at the time of the consummation of the
Offer, will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. Each of the Company, SRH and Parent further
agrees that if it shall become aware prior to the Effective Time (or the
consummation of the Offer) of any information furnished by it that would cause
any of the statements in the Proxy Statement (or the Offer Circular) to be false
or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or misleading,
to promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement (or the Offer Circular).
(c) The Company, SRH and Parent, as appropriate, shall promptly prepare and
file all requisite notices and applications with respect to the Merger and the
Offer with the Federal Reserve Board, the CSFS, the FSA, the HKMA, the FBC and
any other applicable local, state, federal or foreign Regulatory Agency and as
required under the HSR Act, the EC Merger Regulation or any other applicable
antitrust laws or merger regulations, and shall seek confirmation that no
Regulatory Agency objects to the consummation of the transactions contemplated
by this Agreement.
(d) Subject to proviso to the first sentence of Section 7.6, the parties
hereto shall cooperate with each other and use their reasonable best efforts to
promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including, without limitation,
the Merger and the Offer), and to comply fully with the terms and conditions of
all such permits, consents, approvals and authorizations of all such
Governmental Entities. Parent, the Company and SRH shall, to the extent
practicable, consult each other on, in each case subject to applicable laws
relating to the exchange of information, all the information relating to the
Company, SRH or Parent, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(e) Parent, SRH and the Company shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the Offer Circular or any
other statement, filing, notice or application made by or on behalf of Parent,
SRH, the Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
(f) Parent, SRH and the Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement.
7.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange or transfer of information, the Company
and SRH shall, and shall cause their respective Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of Parent,
access, during normal business hours during the period prior to the Effective
Time, to all properties, books, contracts, commitments and records and, during
such period, the Company and SRH shall, and shall cause their respective
Subsidiaries to, make available to Parent (i) a copy of each report, schedule,
registration statement and other document filed or received during such period
pursuant to the requirements of the supranational federal, state, local or
foreign securities laws or banking laws (other than reports or documents which
the Company and SRH are not permitted to disclose under applicable law) and (ii)
all other information concerning their business, properties and personnel as
Parent may reasonably request. Neither the Company nor SRH nor any of their
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of their
respective customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, or binding agreement entered into
prior to the date of this Agreement, but shall disclose the nature of all such
withheld information. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Company and SRH shall furnish Parent
with all reasonable information relevant to its ability to consummate the
Merger, the Offer and the other transactions contemplated hereby.
(b) Each of Parent, the Company and SRH shall hold all information
furnished by or on behalf of any other party or any of such party's Subsidiaries
or representatives pursuant to Section 7.2(a) or (b) or otherwise in confidence
to the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated April 27, 1999, among the Company, SRH and
Parent (the "Confidentiality Agreement").
(c) No investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
7.3 Board Recommendation. (a) The Company's Board of Directors has adopted
a resolution recommending approval of this Agreement and the Merger by the
Company's stockholders, and except as provided in the next sentence, the Board
of Directors of the Company shall at all times recommend approval of the Merger
by the Company's stockholders. The Board of Directors of the Company shall be
permitted to withdraw or modify in a manner adverse to Parent and Merger Sub (or
not to continue to make) its recommendation to its stockholders if, but only if,
(a) in the opinion of the Company's outside counsel, such action is required in
order for the Board of Directors of the Company to comply with duties applicable
to directors under applicable law, (b) the Company has given Parent five
business days' prior notice of its intention to withdraw or modify such
recommendation and the Company's Board of Directors has considered any proposed
changes to this Agreement (if any) proposed by Parent and (c) the Company has
fully and completely complied with Section 7.4; provided that, unless a court of
competent jurisdiction shall have determined that under the MGCL the Board is
required to have the ability to revoke such resolution, the Company's Board of
Directors shall under no circumstance revoke the resolution adopted prior to the
execution hereof determining that the Merger is advisable.
(b) SRH's Board of Directors has adopted a resolution recommending, and at
all times shall recommend, that holders of SRH Common Stock tender their shares
pursuant to the Offer, except in order for the Board of Directors to comply with
duties applicable to directors under applicable law.
7.4 Other Offers. The Company, SRH and their respective Subsidiaries, and
the officers, directors, financial or legal advisors of the Company, SRH and
their respective Subsidiaries, will not, directly or indirectly, (a) take any
action to solicit, initiate or encourage any Acquisition Proposal or Alternative
Offer or (b) engage in negotiations with, or disclose any nonpublic information
relating to the Company, SRH or any of their respective Subsidiaries or afford
access to the properties, books or records of the Company, SRH or any of their
respective Subsidiaries to, any Person that may be considering making, or has
made, an Acquisition Proposal or Alternative Offer; provided that the Company
and SRH may, in response to an unsolicited written proposal from a third party
regarding an Acquisition Proposal or Alternative Offer engage in the activities
specified in clause (b) of this Section 7.4, if (i) in the opinion of the
outside counsel of the Company or of SRH, as the case may be, such action is
required for the Board of Directors of the Company or of SRH, as the case may
be, to comply with the duties applicable to directors under applicable law and
(ii) the Company or SRH has received from such third party an executed
confidentiality agreement with terms not materially less favorable to the
Company or to SRH than those contained in the Confidentiality Agreement. The
Company and SRH will immediately notify Parent orally and will promptly (and in
no event later than 24 hours after the relevant event) notify Parent in writing
(which oral and written notices shall identify the Person making the Acquisition
Proposal or Alternative Offer or request for information and set forth the
material terms thereof) after having received any Acquisition Proposal or
Alternative Offer, or request for nonpublic information relating to the Company
or SRH or any of their respective Subsidiaries or for access to the properties,
books or records of the Company, SRH or any of their respective Subsidiaries by
any Person who is considering making or has made an Acquisition Proposal or
Alternative Offer. The Company and SRH will keep Parent fully and currently
informed of the status and details of any such Acquisition Proposal or
Alternative Offer or request and any related discussions or negotiations. The
Company and SRH shall, and shall cause their respective Subsidiaries and
directors, officers and financial and legal advisors to, cease immediately and
cause to be terminated all activities, discussions or negotiations, if any, with
any Persons conducted heretofore with respect to any Acquisition Proposal or
Alternative Offer. Nothing in this Section 7.4 shall prohibit the Company or its
Board of Directors from taking and disclosing to the stockholders of the Company
a position with respect to an Acquisition Proposal by a third party to the
extent required under the Exchange Act or from making such disclosure to the
stockholders of the Company or of SRH which, in the judgment of the outside
counsel of the Company or of SRH, is required under applicable law; provided
that nothing in this sentence shall affect the obligations of the Company and of
SRH and their respective Boards of Directors under any other provision of this
Agreement. For purposes of this Agreement, "Alternative Offer" means any offer
or proposal for, or any indication of interest in (a) an acquisition of
securities representing 10% or more of the voting power of SRH or 25% or more of
the voting power of any Subsidiary of SRH or (b) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of SRH or any of its Subsidiaries. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in (w) a merger or consolidation, or any similar transaction, involving
the Company or any Significant Subsidiary of the Company, (x) a purchase, lease
or other acquisition or assumption of all or a substantial portion of the assets
or deposits of the Company or all or substantially all of the assets or deposits
of any Significant Subsidiary of the Company, (y) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of beneficial ownership (the term "beneficial ownership" for purposes
of this Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act, and the rules and regulations thereunder) of securities
representing 10% or more of the voting power of the Company or more than 25% of
SRH any Significant Subsidiary of the Company, or (z) any substantially similar
transaction.
7.5 Stockholder Approval. The Company shall call a meeting of its
stockholders (the "Company Meeting") to be held as soon as reasonably
practicable for the purpose of obtaining the requisite stockholder approval
required in connection with the Merger. The Company shall recommend (subject to
Section 7.3) that its stockholders approve the Merger and shall use its
reasonable best efforts to obtain the requisite stockholder approval of the
Merger. Without limiting the generality of the foregoing, unless a court of
competent jurisdiction shall have determined that holding a meeting under such
circumstances would be impermissible under the MGCL, the Company agrees that its
obligations pursuant to the first sentence of this Section 7.5 shall not be
altered by the commencement, public proposal, public disclosure or communication
to the Company of any Acquisition Proposal, or a decision by the Board of
Directors of the Company to withdraw or modify in a manner adverse to Parent or
Merger Sub (or not to continue to make) its recommendation to its stockholders
to approve the Merger.
7.6 Legal Conditions to Merger. Each of Parent, SRH and the Company shall,
and shall cause its Subsidiaries to, use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and the Offer and, subject to the
conditions set forth in Article VIII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by the Company, SRH or Parent or any of their respective
Subsidiaries in connection with the Merger, the Offer and the Bank Merger;
provided that Parent shall not be obligated to agree to any Burdensome
Condition. For purposes of this Agreement, "Burdensome Condition" means any
conditions, restrictions or requirements which the Board of Directors of Parent
reasonably determines would, individually or in the aggregate, (a) reduce the
benefits of the Merger, the Offer and the Bank Merger (considered as a single
transaction) to such a degree that Parent would not have entered into this
Agreement had such conditions, restrictions or requirements been known at the
date hereof or (b) have, or would reasonably be expected to have, a material and
adverse effect on the Acquired Companies following the Effective Time, it being
understood that neither (i) a condition preventing the integration of the
computer systems of the Company or SRH or their respective Subsidiaries with
those of Parent or its Subsidiaries until after January 1, 2000 or (ii) a
condition imposed by U.S. federal or state bank regulatory authorities in
connection with the Bank Merger that requires the raising of capital in the bank
surviving the Bank Merger consistent with regulatory precedent shall be deemed a
Burdensome Condition.
7.7 Indemnification; Directors' and Officers' Insurance. (a) The articles
of incorporation and bylaws of the Successor Corporation shall contain, to the
extent permitted by the MGCL, the provisions with respect to limitation of
liability and indemnification set forth in the articles of incorporation and
bylaws of the Company on the date hereof, which provisions shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of the
Indemnified Parties (as defined below) in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
actions or omissions relating to the transactions contemplated hereby); provided
that the articles of incorporation and bylaws of the Successor Corporation shall
not be required to contain such provisions if Parent otherwise provides the same
level of indemnification rights to such individuals as contained in the articles
of incorporation and bylaws of the Successor Corporation without giving effect
to changes permitted by this proviso.
(b) From and after the Effective Time, Parent shall cause the Successor
Corporation to indemnify, defend and hold harmless, to the fullest extent
permitted by the MGCL, the present and former officers and directors of the
Company or any of its Subsidiaries in their capacities as such (each an
"Indemnified Party") against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time (including, without limitation, actions or omissions relating to
the transactions contemplated hereby).
(c) Parent shall use its reasonable best efforts to cause the persons
serving as officers and directors of the Company immediately prior to the
Effective Time to be covered for a period of six years from the Effective Time
by the directors' and officers' liability insurance policy maintained by the
Company (provided that Parent may substitute therefore policies of at least the
same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time (including, without limitation, actions or omissions
relating to the transactions contemplated hereby) which were committed by such
officers and directors in their capacity as such; provided, however, that in no
event shall Parent be required to expend more than 200% of the current amount
expended by the Company (the "Insurance Amount") to maintain or procure
insurance coverage pursuant hereto; and provided further, that if Parent is
unable to maintain or obtain the insurance called for by this Section 7.7(c),
Parent shall use its reasonable best efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(d) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
assume the obligations set forth in this Section 7.7.
(e) The constituent documents or board resolutions of SRH shall contain, to
the extent permitted by Luxembourg law, the provisions with respect to
limitation of liability and indemnification set forth in such constituent
documents or board resolutions on the date hereof, which provisions shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of the present and former officers and directors of SRH or any of its
Subsidiaries (in their capacities as such) in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
actions or omissions relating to the transactions contemplated hereby); provided
that such constituent documents or board resolutions shall not be required to
contain such provisions if Parent otherwise provides the same level of
indemnification rights to such individuals as contained in such constituent
documents without giving effect to changes permitted by this proviso.
(f) The provisions of this Section 7.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.8 Further Assurances. At and after the Effective Time, the officers and
directors of the Successor Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company, SRH or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company, SRH or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Successor Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company or of SRH acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
7.9 Advice of Changes. Parent and the Acquired Companies shall promptly
advise the other parties of any change or event having, or which could have, a
Material Adverse Effect on it or them, as applicable, or which would be
reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants contained herein or would be reasonably
likely to cause any of the conditions in Article VIII not to be satisfied or to
cause the satisfaction thereof to be materially delayed.
7.10 Employee Benefits. (a) From and after the Effective Time, Parent
shall, or shall cause the Successor Corporation to, recognize prior service
recognized under the plans of the Company or SRH or any of their Subsidiaries of
each employee of the Company or SRH or any of their respective Subsidiaries as
of the Effective Time (the "Company Employees" and the "SRH Employees",
respectively) as service under the employee benefit plans of Parent or its
Subsidiaries for purposes of eligibility and vesting (but not for purposes of
benefit accruals) in which such Company Employee or SRH Employee is eligible to
participate following the Effective Time. From and after the Effective Time,
Parent shall, or shall cause the Successor Corporation to, (i) cause any
pre-existing conditions or limitations and eligibility waiting periods under any
group health plans of Parent or its Subsidiaries to be waived with respect to
the Company Employees, and the SRH Employees and their eligible dependents to
the extent that such Company Employees, SRH Employees and their eligible
dependents were covered or would have been covered under the group health plans
of the Company or SRH immediately prior to the Effective Time and (ii) give each
Company Employee and SRH Employee credit, for the plan year in which such
Company Employee or SRH Employee commences participation in the plans of Parent
or its Subsidiaries, towards applicable deductibles and annual out-of-pocket
limits for expenses incurred prior to the commencement of participation. Parent
shall maintain employee benefit plans, programs, policies and arrangements for
Company Employees and SRH Employees which provide benefits that are no less
favorable in the aggregate to those provided under the applicable employee
benefit plans (as defined in Section 3(3) of ERISA (excluding plans exempt under
Section 201(2) of ERISA)) of the Company or SRH and their respective
Subsidiaries generally available to Company Employees or SRH Employees in effect
immediately prior to the Effective Time (other than the Republic 1999
Reorganization Severance Plan), until the earlier of (1) one year after the
Effective Date or (2) the time that Parent or its Subsidiaries makes available
to such Company Employees and SRH Employees employee benefit plans, programs,
policies and arrangements that are no less favorable in the aggregate than are
provided to similarly situated employees of Parent or its Subsidiaries in the
applicable jurisdiction. From and after the Effective Time, the Successor
Corporation shall honor, fulfill and discharge, and shall cause its Subsidiaries
to honor, fulfill and discharge, in accordance with the terms, each existing
Company Benefit Plan.
(b) As soon as practicable following the date hereof, the Company and SRH
will offer to enter into retention bonus and pay guarantee agreements with key
employees of the Company and SRH, as determined and approved by Parent in
consultation with the Company. In no event shall any amount be payable under any
such agreement prior to the Effective Time.
(c) As of the Effective Time, the Company or SRH shall remove, or cause to
be removed from each and every plan, program, agreement or arrangement any right
of any participant thereunder to invest in, or receive a distribution in,
Company Common Stock or SRH Common Stock, as the case may be, including without
limitation, the Profit Sharing and Savings Plan of Republic National Bank of New
York and except with respect to awards and rights as set forth in Sections 1.6,
1.7 and 1.8 hereof, shall cancel, as of the Effective Time, any then outstanding
award of Company Common Stock or SRH Common Stock or right the value of which is
based on the value of Company Common Stock or SRH Common Stock (and any
obligation of the Company, SRH or any of their respective Subsidiaries to
deliver such an award or right); provided that the Company or SRH may substitute
a cash payment therefor of equivalent value determined as of the Effective Time.
7.11 Takeover Statutes. The Company and SRH will take all steps necessary
to exempt (or continue the exemption of) the Merger, the Offer, this Agreement,
the Option Agreement and the Stockholder Agreement and the transactions
contemplated hereby and thereby (including, without limitation, exercise of the
Option (as defined therein)) from, or if necessary challenge the validity or
applicability of, any applicable "moratorium", "control share", "fair price" or
other antitakeover laws and regulations of any state or foreign jurisdiction, as
now or hereafter in effect.
7.12. Environmental Audit. The Company, SRH or their respective
Subsidiaries, as applicable, shall conduct an environmental audit prior to
foreclosure on any real property securing any loan if it has Knowledge that any
chemical, product, substance, material or waste that would reasonably be
expected to result in a liability material to the Company, SRH or their
respective Subsidiaries under any Environmental Law was or is present,
manufactured, generated, used, recycled, reclaimed, released, stored, treated or
disposed of at, in or from such property, and provide the results of such audit
to, and consult with, Parent regarding the significance of such audit prior to
foreclosure on any such property.
7.13. The Offer. Provided that this Agreement shall not have been
terminated in accordance with Article IX, Parent shall, or shall cause Offer Sub
to, commence an offer to acquire all outstanding shares of SRH Common Stock not
owned, directly or indirectly, by the Company at a price of $72.00 per share of
SRH Common Stock. Parent shall, and shall cause Offer Sub, to use its reasonable
efforts to cause the Offer to be consummated at, or as soon as possible
following, the Effective Time. The obligation of Parent or Offer Sub to
consummate the Offer and to accept for payment and to pay for any shares of SRH
Common Stock tendered pursuant thereto shall be subject only to the conditions
set forth in Article VIII to this Agreement and to the prior or concurrent
consummation of the Merger (collectively, the "Offer Conditions"), which are for
the sole benefit of Parent and Offer Sub and may be asserted by Parent or Offer
Sub regardless of the circumstances giving rise to any such condition, or waived
by Parent or Offer Sub in whole or in part at any time and from time to time in
its sole discretion; provided, that in no event shall Parent or Offer Sub
purchase any shares of SRH Common Stock pursuant to the Offer if the Merger
shall not have occurred or concurrently occur. The Company and SRH agree that no
shares of SRH Common Stock held by the Company, SRH or any of their respective
Subsidiaries will be tendered to Parent or Offer Sub pursuant to the Offer.
Parent and Offer Sub will not, without the prior written consent of SRH, (i)
decrease or change the form of the consideration payable in the Offer, (ii)
decrease the number of shares of SRH Common Stock sought pursuant to the Offer,
(iii) impose additional conditions to the Offer or change the Offer Conditions
(provided, that Parent or Investor in its sole discretion may waive any such
conditions and, in connection therewith, substitute a less restrictive
condition) or (v) make any other change in the terms or conditions of the Offer
which is materially adverse to the holders of the shares of SRH Common Stock.
Notwithstanding the foregoing, Parent and SRH may, without the consent of the
Company or SRH, (x) extend the Offer, if at the scheduled expiration date of the
Offer any of the Offer Conditions shall not have been satisfied or waived, until
such time as all conditions are satisfied or waived, (xi) extend the Offer for
any period required by any statute, rule, regulation, interpretation or position
of any Governmental Authority applicable to the Offer, and (xii) extend the
Offer for any reason on one or more occasions for an aggregate of not more than
15 business days beyond the latest expiration date that would otherwise be
permitted under clauses (x) and (xi) of this sentence. Subject to the Offer
Conditions and the terms and conditions of this Agreement, Parent shall, and
Parent shall cause Offer Sub to, accept for payment, and pay for, all shares of
SRH Common Stock validly tendered and not withdrawn pursuant to the Offer as
soon as practicable after the expiration of the Offer.
7.14 Merger Sub. Parent will, as promptly as practicable following the date
hereof, form Merger Sub under the MGCL and cause Merger Sub to execute and
become a party to this Agreement. From the date of its formation to the
Effective Time, Merger Sub shall not, and Parent shall cause Merger Sub not to,
engage in any business or other activities, other than activities in furtherance
of the Merger and this Agreement or as otherwise permitted by this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger and the Offer shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the affirmative vote of holders
of a majority of the outstanding shares of the Company Common Stock entitled to
vote thereon.
(b) Other Approvals. All regulatory approvals and non-objections required
to consummate the Merger, the Offer and the Bank Merger shall have been obtained
and shall remain in full force and effect, and all statutory waiting periods
shall have expired (including, if applicable, the expiration or termination of
any waiting period under the HSR Act, the EC Merger Regulation or any other
applicable antitrust laws or merger regulations) (all such approvals,
non-objections and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals"). For the avoidance of doubt, the
term "Requisite Regulatory Approvals" shall be deemed to include the approval or
non-objection of the FBC.
(c) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger, the Offer or any of the other material transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, materially restricts or makes illegal the
consummation of the Merger.
8.2 Conditions to Obligations of Parent and Merger Sub. The obligation of
each of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. Subject to Section 2.3(b), the
representations and warranties of the Company and of SRH set forth in this
Agreement shall be true and correct in all respects as of the Closing Date
(except to the extent such representations and warranties expressly speak as of
a specified earlier date, in which case such representations and warranties
shall be true as of such earlier date) as though made on and as of the Closing
Date; and Parent shall have received certificates signed on behalf of each of
the Company and of SRH by their respective Chief Executive Officers and Chief
Financial Officers to such effect.
(b) Performance of Obligations of the Company and of SRH. The Company and
SRH shall have performed in all respects all obligations required to be
performed by each of them under this Agreement on or prior to the Closing Date
(except to the extent that any failure to so comply (other than with respect to
Sections 7.3, 7.4 and 7.5) would not be reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect with respect to the Acquired
Companies), and Parent shall have received certificates signed on behalf of each
of the Company and of SRH by their respective Chief Executive Officers and Chief
Financial Officers to such effect.
(c) Approvals. All third party approvals (other than the Requisite
Regulatory Approvals) that are necessary for the conduct, immediately following
the Effective Time, by the Successor Corporation or SRH of the business of the
Company and its Subsidiaries or SRH and its Subsidiaries, as applicable,
substantially as currently conducted (except for any such approval the failure
of which to obtain would not result in a Material Adverse Effect on the Acquired
Companies) shall have been obtained and shall remain in full force and effect.
(d) No Litigation. No Governmental Entity shall have commenced any
litigation seeking to restrain, prevent or unwind the Merger or the Offer or
impose material sanctions or penalties as a result thereof or seeking to prevent
Parent from having full authority to control and manage the Successor
Corporation or SRH after the Effective Time.
(e) Resignation of Directors. Except as otherwise requested by Parent in
writing, the directors of each of the Company, SRH and their respective
Subsidiaries shall have executed letters of resignation effective at the
Effective Time, in the case of the Directors of the Company, and at such time as
their successors have been duly elected and qualified, in the case of SRH and
their respective Subsidiaries.
(f) No Burdensome Condition. No Requisite Regulatory Approval shall have
imposed any Burdensome Condition.
(g) Minimum Tender. Immediately prior to the Effective Time and the
consummation of the Offer, assuming consummation of the Merger and the purchase
of all shares of SRH Common Stock then validly tendered and not withdrawn
pursuant to the Offer, Parent would own, directly or indirectly, at least 662/3%
of the outstanding SRH Common Stock.
8.3 Conditions to Obligations of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject to Section 2.3(b), the
representations and warranties of Parent set forth in this Agreement shall be
true and correct, as of the Closing Date (except to the extent such
representations and warranties speak as of a specified earlier date, in which
case such representations and warranties shall be true as of such earlier date)
as though made on and as of the Closing Date; and the Company shall have
received a certificate signed on behalf of Parent by the Group Financial
Director to such effect.
(b) Performance of Obligations of Parent. Parent shall have performed in
all respects all obligations required to be performed by it under this Agreement
at or prior to the Closing Date (except to the extent that any failure to so
comply would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect with respect to Parent), and the Company shall have
received a certificate signed on behalf of Parent by the Group Financial
Director to such effect.
(c) Offer. The Offer shall have closed or be closing contemporaneously with
the Effective Time and Parent shall have provided evidence reasonably
satisfactory to the Company that it, Offer Sub or their designee promptly will
purchase shares of SRH Common Stock tendered thereto.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of the
Company of the matters presented in connection with the Merger:
(a) by mutual consent of Parent, the Company and SRH in a written
instrument executed and delivered in accordance with their respective applicable
laws;
(b) by either Parent, the Company or SRH if any Governmental Entity which
must grant or satisfy, as the case may be, a Requisite Regulatory Approval has
denied approval of the Merger and such denial has become final and
nonappealable, or any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable injunction permanently enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement;
(c) by either Parent, the Company or SRH if the Merger shall not have been
consummated on or before December 31, 1999, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such party
set forth herein;
(d) by either Parent, the Company or SRH if there shall have been a
material breach of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement on the part of the
Company or SRH (in the case of Parent) or Parent (in the case of the Company),
which breach (other than a breach of Section 7.4) is not cured within 30 days
following written notice to the party committing such breach, or which breach,
by its nature or timing, cannot be cured prior to the date referred to in
Section 9.1(c); provided that such breach, if occurring or continuing on the
Closing Date, would constitute, individually or in the aggregate with other such
breaches, the failure of the conditions set forth in Sections 8.2(a), 8.2(b),
8.3(a) or 8.3(b), as applicable;
(e) by either Parent or the Company if any approval of the stockholders of
the Company required for the consummation of the Merger and the transactions
contemplated hereby shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof;
(f) by Parent if (i) the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Parent its favorable recommendation
of the Merger or (ii) the Board of Directors of SRH shall have recommended that
shareholders of SRH not accept the Offer and tender their shares pursuant
thereto or (iii) the Company or SRH determines to negotiate (it being understood
and agreed that "negotiate" shall not be deemed to include the provision of
information to, or the request and receipt of information from, any Person that
submits an Acquisition Proposal or Alternative Offer or discussions regarding
such information for the sole purpose of ascertaining the terms of such
Acquisition Proposal or Alternative Offer and determining whether the Board of
Directors will in fact engage in, or authorize, negotiations) with any Person
other than Parent or its affiliates in connection with an Acquisition Proposal
or Alternative Offer; and
(g) by Parent if any Governmental Entity which must grant or satisfy, as
the case may be, a Requisite Regulatory Approval has granted such approval
subject to a Burdensome Condition, and such grant and related Burdensome
Condition have become final and nonappealable.
9.2 Effect of Termination. In the event of termination of this Agreement by
either Parent or the Company as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect, and none of Parent, SRH, the Company,
any of their respective Subsidiaries or any of the officers or directors of any
of them shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except that (a) Sections
7.2(b), 9.2 and 10.2 through 10.12 shall survive any termination of this
Agreement, (b) such termination shall not affect the Option Agreement or the
Stockholder Agreement (which shall remain in effect pursuant to their respective
terms unless terminated in accordance therewith) and (c) notwithstanding
anything to the contrary contained in this Agreement, neither Parent, SRH, nor
the Company shall be relieved or released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement or the
Option Agreement; provided that in no event shall any party hereto be liable for
any remote or punitive damages.
9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by Parent, the Company and SRH at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company; provided, however, that after any approval of the
transactions contemplated by this Agreement by the stockholders of the Company,
to the extent required by the MGCL, there may not be, without further approval
of such stockholders, any amendment of this Agreement; provided further that any
amendment to this Agreement not affecting the terms or conditions of the Offer
may be entered into by Parent and the Company without the consent or approval of
SRH. This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, subject to
compliance with applicable law, Parent, SRH and the Company may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto for its benefit, (b) waive
any inaccuracies in the representations and warranties of the other parties for
its benefit contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein
for the waiving party's benefit. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for those covenants and agreements contained herein which by their
terms apply in whole or in part after the Effective Time.
10.2 Expenses. Except as otherwise provided in this Section, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense; provided,
however, that the costs and expenses of printing and mailing the Proxy
Statement, and all filing and other fees paid to the SEC in connection with the
Merger, shall be borne equally by Parent and the Company.
10.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a)......if to Parent, to:
HSBC Holdings plc
10 Lower Thames Street
London EC3R 6AE
United Kingdom
Attn: Group Company Secretary
Fax: 011-44-171-260-8249
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attention: James F. Munsell, Esq.
Victor I. Lewkow, Esq.
Fax: (212) 225-3999
and
(b)......if to the Company, to:
Republic New York Corporation
452 Fifth Avenue
New York, NY 10018
Attn: Paul L. Lee, Esq.
Executive Vice President and
General Counsel
Fax: 212-525-8447
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York 10004
Attention: H. Rodgin Cohen, Esq.
Mitchell S. Eitel, Esq.
Fax: (212) 558-3588
and
(c)......if to SRH, to:
Safra Republic Holdings S.A.
32 Boulevard Royal
22449 Luxembourg
Attn: Leigh Robertson
Fax: 011-352-22-46-52
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York 10004
Attention: H. Rodgin Cohen, Esq.
Mitchell S. Eitel, Esq.
Fax: (212) 558-3588
and to
Evinger, Hoss & Prussen
2, Place Winston Churchill, B.P. 425
L-2014 Luxembourg
Attn: Jean Hoss, Esq.
Fax: 011-352-44-22-55
10.4 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement, unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require the
Company, SRH, Parent or any of their respective directors, Subsidiaries or
affiliates to take any action which would violate any applicable law (including
any bank secrecy law), rule or regulation. Notwithstanding any other provision
of this Agreement, neither Parent, on the one hand, nor the Company or SRH on
the other, shall be deemed to have failed to comply with any of its obligations
hereunder (other than the giving of notice contemplated by Section 9.1(d)) to
the extent such failure is due to a breach (subject to the standard set forth in
Section 2.3(b)) by the other party of any of its representations, warranties or
covenants set forth herein.
10.5 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
10.6 Entire Agreement. This Agreement (including the Company Disclosure
Schedule, the SRH Disclosure Schedule, the exhibits attached hereto and all
other documents and instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof other than
the Option Agreement and the Confidentiality Agreement; provided that Section 5
of the Confidentiality Agreement shall not affect the representations and
warranties of any party hereto.
10.7 Governing Law. Except as required by mandatory provisions of the MGCL,
this Agreement shall be governed by and construed in accordance with the laws of
the State of New York applicable to agreements made and to be performed entirely
within such state.
10.8 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.9 Publicity. Neither Parent, the Company nor SRH shall, nor shall any of
them permit any of its Subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to, or otherwise make
any public statement concerning, the transactions contemplated by this Agreement
without the consent of the other parties, which consent shall not be
unreasonably withheld or delayed and, in any event, only after consultation with
the other parties to the extent feasible.
10.10 Assignment; Third Party Beneficiaries. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided that Parent may assign its
obligation to make the Offer to any direct or indirect wholly owned Subsidiary.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 7.7, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
10.11 Court Proceedings.
(a) Waiver of Jury Trial. Each of the parties hereto irrevocably waives any
and all right to trial by jury in any legal proceeding arising out of or related
to this Agreement or the transactions contemplated hereby.
(b) Governmental Entity. Notwithstanding any provision herein, no party
shall be required to commence any action against any Governmental Entity in
order to perform its obligations hereunder.
10.12 Definitions and Usage. (a) For purposes of this Agreement:
"Acquired Companies" means the Company (or, at and after the Effective
Time, the Successor Corporation) and SRH.
"affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
The term "control" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Agreement and Plan of Merger, the Company Disclosure
Schedule, the SRH Disclosure Schedule and all Exhibits hereto.
"Bank" means Republic National Bank of New York.
"Bank Merger" means the merger of the Bank with HSBC Bank USA (formerly
Marine Midland Bank).
"Loan Property" means with respect to any Person, any property securing a
loan made by such Person or any of its Subsidiaries or which is deemed to be
owned by such Person or any of its Subsidiaries.
"Material Adverse Effect" means, (A) with respect to the Acquired
Companies, any effect that (1) is or is reasonably likely to be material and
adverse to the condition (financial or otherwise), business, liabilities,
properties, assets, prospects or results of operations of the Acquired Companies
and their Subsidiaries taken as a whole other than any change, effect, event or
occurrence arising out of the performance by the parties of their obligations
under this Agreement provided, however, that Material Adverse Effect shall not
be deemed to include the impact of (i) changes in banking and other laws of
general applicability or interpretations thereof by courts or governmental
authorities, (ii) changes in GAAP or regulatory accounting requirements
applicable to banks and their holding companies generally, (iii) actions or
omissions of a party to this Agreement taken with the prior written consent of
the other parties to this Agreement, in contemplation of the transactions
contemplated hereby, (iv) any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring charges, in each case
taken with the prior approval of Parent, in connection with the Merger, in each
case in accordance with GAAP, (v) any response of clients or customers of the
Acquired Companies or their Subsidiaries to the announcement of the Merger and
the Offer, and (vi) changes in general economic conditions affecting banks and
their holding companies generally except to the extent that such changes have an
adverse effect on the Acquired Companies and their Subsidiaries taken as a whole
that is greater than the adverse effect on comparable entities or (2) would
materially impair the ability of such Person to perform its obligations under
this Agreement or to consummate the transactions contemplated hereby; and
(B) with respect to Parent, any effect that would materially impair the
ability of Parent to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Previously Disclosed" with respect to any party means information set
forth in the portion of such party's Disclosure Schedule corresponding to the
provision of this Agreement to which such information relates; provided that
information which, on its face, reasonably should indicate to the reader that it
relates to another provision of this Agreement shall also be deemed to be
Previously Disclosed with respect to such other provision.
"Real Property" means, with respect to any Person, any property currently
or formerly owned or operated by such Person or one of its Subsidiaries and all
improvements related thereto, including but not limited to all branches, OREO,
or property held for the account of another.
"Subsidiary" and "Significant Subsidiary" shall have the meanings ascribed
to them in Rule 1-02 of Regulation S-X of the SEC. Notwithstanding the
foregoing, for purposes of this Agreement, SRH shall not be deemed a Subsidiary
or a Significant Subsidiary of the Company.
A reference in this Agreement to any statute shall be to such statute as
amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Acquisition Proposal 7.4
Agreement Recitals
Alternative Offer 7.4
Articles of Merger 1.2
BHCA 3.1(a)
Burdensome Condition 7.6
Certificate 1.5(a)
Claims and Proceedings 3.9
Closing 2.1
Closing Date 2.1
Code 1.5
Company Recitals
Company $1.8125 Preferred Stock 1.4(b)
Company $2.8575 Preferred Stock 1.4(b)
Company Benefit Plans 3.11(a)
Company Capital Stock 3.2
Company Common Stock 1.4(a)
Company Contract 3.14
Company Disclosure Schedule 2.3(a)
Company Employees 7.10(a)
Company Equity Plans 1.7
Company Meeting 7.5
Company Preferred Stock 3.2
Company Regulatory Agreement 3.15
Company Reports 3.12
Company Series A DARTs 1.4(b)
Company Series B DARTs 1.4(b)
Company Series D Preferred Stock 1.4(b)
Company Stock Option Plans 1.6
Company Stock Plans 1.7
Company Employees 7.10(a)
Confidentiality Agreement 7.2(b)
CSFS 3.4
Derivative Instruments 3.16
Designated Key Employees 6.11
Draft Company Financial Statements 3.6
EC Merger Regulation 3.4
Effective Time 1.2
Environmental Law 3.18(a)
ERISA 3.11(a)
Exchange Act 3.6
Exchange Agent 1.7
Exchange Fund 1.7
FBC 3.4
Federal Reserve Board 3.4
Fiduciary and DPC Shares 1.4(d)
Foreign Plans 3.11(l)
FSA 3.4
GAAP 3.6
Governmental Entity 3.4
HKMA 3.4
HSR Act 3.4
Incentive Compensation Award 1.8
Indemnified Party 7.7(b)
Injunction 8.1(c)
Insurance Amount 7.7(c)
Lien 3.1(b)
Maryland Department 1.2
Merger Recitals
Merger Consideration 1.4(a)
Merger Sub Recitals
MGCL Recitals
NYSE 3.4
Offer Recitals
Offer Circular 7.1
Offer Conditions 7.13
Offer Sub Recitals
Option Agreement Recitals
Option 1.6
Option Spread 1.6
Parent Recitals
Parent Disclosure Schedule 2.3(a)
Parent Financial Reports 5.5
PBGC 3.11(e)
Proxy Statement 7.1
Regulatory Agencies 3.5
Release 3.18(b)
Requisite Regulatory Approvals 8.1(b)
Restricted Share 1.7
SEC 3.4
Securities Act 3.12
SRH Recitals
SRH Benefit Plans 4.11
SRH Capital Stock 4.2
SRH Common Stock 4.2
SRH Contract 4.13
SRH Disclosure Schedule 2.3(a)
SRH Employees 7.10(a)
SRH Equity Plans 1.7
SRH Option 1.6
SRH Option Spread 1.6
SRH Preferred Stock 4.2
SRH Regulatory Agreement 4.14
SRH Restricted Share 1.7
SRH Stock Option Plans 1.6
SRH Stock Plans 1.7
SRO 3.4
Stockholder Recitals
Stockholder Agreement Recitals
Stockholder Parent Recitals
Successor Corporation Recitals
Taxes 3.10(b)
Treasury Shares 1.4(a)
Year 2000 Deficiency
Notification Letter 3.19(c)
Year 2000 Problem 4.18(c)
(c) A fact, event, circumstance or occurrence shall be within a Person's
"Knowledge" if, with respect to the Company or any of its Subsidiaries, such
fact, event, circumstance or occurrence is or was actually known by any of the
Company's or the relevant Subsidiary's executive officers or directors, or, with
respect to the Parent or any of its Subsidiaries, such fact, event or
circumstance or occurrence is or was actually known by any of Parent's or the
relevant Subsidiary's executive officers or directors, or, with respect to SRH
or any of its Subsidiaries, such fact, event or circumstance or occurrence is or
was actually known by any of SRH's or the relevant Subsidiary's executive
officers or directors (or persons serving in a similar capacity to directors
under applicable law).
(d) The symbol "$" and the word "dollar" or "dollars" shall refer to the
lawful currency of the United States of America.
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and SRH have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
HSBC HOLDINGS PLC
By: /s/ David J. Shaw
---------------------
Name: David J. Shaw
Title: Authorized Signatory
REPUBLIC NEW YORK CORPORATION
By: /s/ Dov C. Schlein
---------------------
Name: Dov C. Schlein
Title: Chairman and
Chief Executive Officer
SAFRA REPUBLIC HOLDINGS S.A.
By: /s/ A. Leigh Robertson
---------------------
Name: A. Leigh Robertson
Title: General Manager
and Attorney-in-Fact
By: /s/ Claude Marx
---------------------
Name: Claude Marx
Title: Attorney-in-Fact
[Conformed Copy]
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated May 10, 1999 between Republic New York
Corporation, a Maryland corporation ("Issuer"), and HSBC Holdings plc, a public
limited company organized and existing under the laws of England ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into a Transaction Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto concurrently with this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 20,929,000 fully paid and nonassessable shares of Issuer's common stock, par
value $5.00 per share (the "Common Stock"), at a price of $72.00 per share (the
"Option Price"); provided, however, that in the event Issuer issues or agrees to
issue any shares of Common Stock (other than as permitted under the Merger
Agreement) at a price less than the Option Price (as adjusted pursuant to
Section 5), the Option Price shall be equal to such lesser price; provided,
further, that in no event shall the number of shares of Common Stock for which
this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding
shares of Common Stock at the time of exercise. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
is subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, such number (including
the number of shares theretofor issued pursuant to this Option) equals 19.9% of
the number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to breach any provision of the Merger Agreement.
2. Exercise; Closing. (a) The Holder (as defined below) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as defined below) and a Subsequent Triggering Event
(as defined below) shall have occurred prior to the occurrence of an Exercise
Termination Event (as defined below), provided that the Holder shall have sent
written notice of such exercise (as provided in subsection (f) of this Section
2) within 180 days following such Subsequent Triggering Event (or such later
period as provided in Section 10).
(b) Each of the following shall be an "Exercise Termination
Event":
(i) the Effective Time (as defined in the Merger Agreement)
of the Merger;
(ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event, except a termination
by Grantee pursuant to Section 9.1(d) of the Merger Agreement as
a result of a breach of a covenant by Issuer or a willful breach
of a representation by Issuer; or
(iii) the passage of 18 months after termination of the
Merger Agreement (or such later period as provided in Section 10)
if such termination (A) follows or is concurrent with the
occurrence of an Initial Triggering Event or (B) is a termination
by Grantee pursuant to Section 9.1(d) of the Merger Agreement as
a result of a breach of a covenant by Issuer or a willful breach
of a representation by Issuer; provided that if an Initial
Triggering Event continues or occurs beyond such termination and
prior to the passage of such 18- month period, the Exercise
Termination Event shall be 12 months from the expiration of the
Last Triggering Event (as defined below) but in no event more
than 18 months after such termination.
The "Last Triggering Event" shall mean the last Initial Triggering Event to
expire. The term "Holder" shall mean Grantee and any other person that shall
become a holder of the Option in accordance with the terms of this Agreement.
(c) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC"), including Safra Republic Holdings S.A.
and its subsidiaries) (each an "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction
(as defined below) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders
of Issuer approve or accept any Acquisition Transaction (other
than the Merger referred to in the Merger Agreement). For
purposes of this Agreement, "Acquisition Transaction" shall mean
(w) a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X) of Issuer, (x) a purchase, lease or
other acquisition or assumption of all or a substantial portion
of the assets or deposits of Issuer or all or substantially all
of the assets or deposits of any Significant Subsidiary of
Issuer, (y) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of beneficial
ownership (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of
the Exchange Act, and the rules and regulations thereunder) of
securities representing 10% or more of the voting power of Issuer
or more than 25% of any Significant Subsidiary of Issuer, or (z)
any substantially similar transaction; provided, however, that in
no event shall any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of its
wholly-owned Subsidiaries or involving only any two or more of
such wholly-owned Subsidiaries, be deemed to be an Acquisition
Transaction, if such transaction is not entered into in violation
of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee
Subsidiary or shall have authorized or engaged in, or announced
its intention to authorize or engage in, any negotiations
regarding an Acquisition Transaction with any person other than
the Grantee or a Grantee Subsidiary (it being understood that the
provision, request or receipt of information referred to in the
parenthetical in Section 9.1(f)(ii) of the Merger Agreement shall
not be deemed to constitute negotiations), or the Board of
Directors of Issuer shall have failed to recommend or shall have
publicly withdrawn or modified, or publicly disclosed that, in
the absence of the Option it would withdraw or modify, or
publicly announced its intention to withdraw or modify, in any
manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the Merger;
(iii) The shareholders of Issuer shall have voted and failed
to approve the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger
Agreement or shall have been canceled prior to termination of the
Merger Agreement if, prior to such meeting (or if such meeting
shall not have been held or shall have been canceled, prior to
such termination), any person (other than the Grantee or a
Grantee Subsidiary) shall have made a proposal to Issuer or its
stockholders by public announcement or written communication that
is or becomes the subject of public disclosure to engage in an
Acquisition Transaction;
(iv) (a) Any person other than Grantee, any Grantee
Subsidiary, Mr. S or his affiliates or any Issuer Subsidiary
acting in a fiduciary or similar capacity in the ordinary course
of its business, shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the then
outstanding shares of Common Stock or (b) any group (the term
"group" having the meaning assigned in Section 13(d)(3) of the
Exchange Act), other than a group of which the Grantee or any
Grantee Subsidiary is a member, shall have been formed that
beneficially owns 10% or more of the shares of Common Stock then
outstanding;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its stockholders to
engage in an Acquisition Transaction;
(vi) Issuer shall have breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in
an Acquisition Transaction and such breach (x) would entitle
Grantee to terminate the Merger Agreement and (y) shall not have
been cured prior to the Notice Date (as defined below); or
(vii) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed
with any federal or state regulatory or governmental authority an
application for approval or notice of intention to engage in an
Acquisition Transaction.
(d) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person or by a group other than
Grantee or any Grantee Subsidiary of beneficial ownership of 25%
or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (c) of this Section 2,
except that the percentage referred to in clause (y) shall be 25%
and that the percentage referred in the definition of a
Significant Subsidiary shall be changed from 10% to 25%.
(e) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(f) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve Board
or any other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(g) At the closing referred to in subsection (f) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer; provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(h) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (g) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares of Common Stock purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(i) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities Act"),
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend is
not required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares of Common Stock
delivered pursuant hereto have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(j) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (f) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and covenants
herein, Issuer agrees: (i) that it shall at all times maintain, free from
subscriptive or preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA") or the Change in Bank Control Act of 1978, as
amended, or any state or other federal banking law, prior approval of or notice
to the Federal Reserve Board or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer to duly and effectively issue shares of Common
Stock pursuant hereto; (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution; and (v) not to enter or agree
to enter into any Acquisition Transaction unless the other party or parties
thereto agree to assume in writing all of Issuer's obligations hereunder;
provided that nothing in this Section 3 or elsewhere in this Agreement shall be
deemed to authorize Issuer to breach any provision of the Merger Agreement.
Notwithstanding any notice of revocation delivered pursuant to the proviso to
Section 7(c), a Holder may require such other party or parties to perform
Issuer's obligations under Section 7(a) unless such other party or parties are
prohibited by law or regulation from such performance.
4. Exchange; Replacement. This Agreement (and the Option granted hereby) is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. Adjustments. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof and the Option Price shall be appropriately adjusted in
such manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such transaction
to provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Registration. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within twelve (12) months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare, file and keep
current a shelf registration statement under the 1933 Act covering this Option
and any shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become effective
and remain current in order to permit the sale or other disposition of this
Option and any shares of Common Stock issued upon total or partial exercise of
this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain effective
for a period not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary, in
the judgment of the Grantee or the Holder, to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance of such shares of Common Stock issuable
pursuant to this Option as promptly as practical following such reduction and no
reduction in the number of shares of Common Stock to be sold by the Holder shall
thereafter occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such registration,
Issuer shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in secondary offering underwriting agreements for the Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
pursuant to this Section 6 be increased by reason of the fact that there shall
be more than one Holder as a result of any assignment or division of this
Agreement.
7. Repurchase of Option and/or Option Shares. (a) At any time after the
occurrence of a Repurchase Event (as defined below), (i) at the request of the
Holder, delivered prior to an Exercise Termination Event (or such later period
as provided in Section 10), Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
(x) the amount by which (A) the Market/Offer Price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this Option
may then be exercised plus (y) Grantee's reasonable out-of-pocket expenses (to
the extent not previously reimbursed) and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to (x) the
Market/Offer Price multiplied by the number of Option Shares so designated plus
(y) Grantee's reasonable out-of-pocket expenses (to the extent not previously
reimbursed). The term "Market/Offer Price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (iii) the highest closing
price per share of Common Stock within the six-month period immediately
preceding the date on which the Holder gives notice of the required repurchase
of this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm mutually selected by the Holder or Owner, as the case
may be, and reasonably acceptable to the Issuer.
(b) The Holder or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares, as the case may be, in accordance with the provisions of this
Section 7. Prior to the later of (x) the date that is five business days after
the surrender of the Option and/or certificates representing Option Shares and
the receipt of such notice or notices relating thereto and (y) the day on which
a Repurchase Event occurs, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price or the portion thereof that Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter shall
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, that portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, in each case within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as the case may be, the Option Repurchase Price or
the Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option and/or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price and/or the Option Share Repurchase Price that Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by Issuer described in the first sentence of this subsection
(c), or shall be scheduled to occur at any time before the expiration of a
period ending on the thirtieth day after such date, the Holder shall nonetheless
have the right to exercise the Option until the expiration of such 30-day
period.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of Common
Stock; provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
8. Substitute Option. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to consolidate with
or merge into any person, other than Grantee or one of its Subsidiaries, or
engage in a plan of exchange with any person other than Grantee or one of its
Subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger or the acquiror in such plan of exchange, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger or plan
of exchange, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger or plan of exchange represent less than 50% of the outstanding voting
shares and voting share equivalents of the merged or acquiring company, or (iii)
to sell or otherwise transfer all or substantially all of its or any Significant
Subsidiary's assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as defined below) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if
other than Issuer), (ii) the acquiring person in a plan of
exchange in which Issuer is acquired, (iii) Issuer in a merger or
plan of exchange in which Issuer is the continuing, surviving or
acquiring person, and (iv) the transferee of all or substantially
all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
(or similar equity interest) issued by the issuer of the
Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of
a share of the Substitute Common Stock for the six-month period
immediately preceding the consolidation, merger or sale in
question but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option;
provided, that if the terms of the Substitute Option may not, for legal reasons,
be the same as the Option, such terms shall be as similar as possible to the
terms of the Option and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a), and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. Repurchase of Substitute Option and/or Option Shares. (a) At the request
of the holder of the Substitute Option (the "Substitute Option Holder"), the
Substitute Option Issuer shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the sum of (x) the amount by which (i) the Highest Closing Price (as
defined below) exceeds (ii) the exercise price of the Substitute Option,
multiplied by the number of shares of Substitute Common Stock for which the
Substitute Option may then be exercised (y) Grantee's reasonable out-of-pocket
expenses (to the extent not previously reimbursed), and at the request of the
owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
(x) the Highest Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Grantee's reasonable out-of-pocket expenses (to the extent
not previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise their respective right to require the Substitute
Option Issuer to repurchase the Substitute Option or the Substitute Shares, as
the case may be, pursuant to this Section 9 by surrendering for such purpose to
the Substitute Option Issuer, at its principal executive office, the agreement
for such Substitute Option (or, in the absence of such an agreement, a copy of
this Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares, as the case may
be, in accordance with the provisions of this Section 9. As promptly as
practicable, and in any event within five business days after the surrender of
the Substitute Option and/or certificates representing Substitute Shares and the
receipt of such notice or notices relating thereto, the Substitute Option Issuer
shall deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price or, in either case, the portion thereof which
the Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer, following a
request for repurchase pursuant to this Section 9, shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and shall
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, in each case, within five business days after the date on which the
Substitute Option Issuer is no longer so prohibited; provided, however, that if
the Substitute Option Issuer at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 is prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. Extension. The period for exercise of certain rights under Sections 2,
6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(c) The execution, delivery and performance of this Agreement does not or
will not, and the consummation by Issuer of any of the transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of or a
default under, its charter, or the comparable governing instruments of any of
its subsidiaries, or (ii) a breach or violation of or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which it or any of its subsidiaries is subject that,
individually or in the aggregate, would have a material adverse effect on the
ability of Issuer to perform its obligations hereunder.
(d) To the best of Issuer's knowledge neither Section 3-601 to 3-604 or
3-701 to 3-709 of the Maryland General Corporation Law nor any other "fair
price", "moratorium", "control share acquisition" or other similar anti-takeover
statute or regulation enacted under state or federal laws in the United States
applicable to the Issuer or any of its Subsidiaries is applicable to this
Agreement or any of the transactions contemplated hereby.
12. Representations, Warranties and Covenants of Grantee.
(a) Grantee hereby represents and warrants to Issuer that Grantee has all
requisite corporate power and authority to enter into this Agreement and,
subject to any approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Grantee. This
Agreement has been duly executed and delivered by Grantee.
(b) Grantee hereby represents and warrants to Issuer that the Option is not
being, and any shares of Common Stock or other securities acquired by Grantee
upon exercise of the Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under the Securities
Act.
(c) In the event that Grantee or any of its affiliates exercises the
Option, then until one year from the date of exercise, in connection with any
Issuer stockholder meeting at which a vote is taken with respect to an
Acquisition Proposal (as defined in the Merger Agreement), Grantee and its
affiliates shall vote all Option Shares then beneficially owned by them in the
same proportion as all other outstanding shares of Common Stock are voted with
respect thereto.
13. Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 12 months
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 15 days following the date
on which the Federal Reserve Board approves an application by Grantee under the
BHCA to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board.
14. Notional Total Profit. (a) Notwithstanding any other provision of this
Agreement, this Option may not be exercised for a number of shares as would, as
of the date of exercise, result in a Notional Total Profit (as defined below) of
more than $425 million; provided that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(b) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
7, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 7, less (y) the Grantee's purchase price for
such Option Shares, (iii) (x) the net price received by Grantee (or any of its
affiliates) pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party,
less (y) the Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee (or any of its affiliates) on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any amount equivalent to
the foregoing with respect to the Substitute Option.
15. Surrender. (a) Grantee may, at any time following a
Repurchase Event and prior to the occurrence of an Exercise Termination Event
(or such later period as provided in Section 10), relinquish the Option
(together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price (as defined
below); provided, however, that Grantee may not exercise its rights pursuant
to this Section 15 if Issuer has repurchased the Option (or any portion
thereof) or any Option Shares pursuant to Section 7. The "Surrender Price"
shall be equal to $325 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii) minus, if applicable, the
excess of (B) the net price, if any, received by Grantee (or any of its
affiliates) pursuant to the sale of Option Shares (or any other securities
into which such Option Shares were converted or exchanged) to any unaffiliated
party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be delivered,
from time to time, to Grantee, the portion of the Surrender Price that it is no
longer prohibited from paying, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of surrender pursuant to paragraph (b) of this
Section 15 is prohibited under applicable law or regulation from paying to
Grantee the Surrender Price in full, (i) Issuer shall (A) use its reasonable
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to make such payments,
(B) within five days of the submission or receipt of any documents relating to
any such regulatory and legal approvals, provide Grantee with copies of the
same, and (c) keep Grantee advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same and (ii) Grantee
may revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, the Exercise Termination
Date shall be extended to a date six months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of this Section
15(c) (during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 15).
16. Best Efforts. Each of Grantee and Issuer will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary for the consummation of the transactions
contemplated by this Agreement, including without limitation making application
to list the shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
17. Specific Performance. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
18. Severability. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
19. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement or such other address as shall be
provided in writing.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such state.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
22. Expenses. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
23. Entire Agreement. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
24. Captions; Capitalized Terms. The section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
REPUBLIC NEW YORK CORPORATION
By: /s/ Dov C. Schlein
----------------------
Name: Dov C. Schlein
Title: Chairman and
Chief Executive Officer
HSBC HOLDINGS PLC
By: /s/ David J. Shaw
----------------------
Name: David J. Shaw
Title: Authorized Signatory
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of May 10, 1999,
is entered into by and among RNYC Holdings Limited, a Gibraltar corporation,
("Principal Stockholder"), Congregation Beit Yaakov (solely as beneficiary of a
life estate of Owned Shares (as defined below) beneficially owned by Principal
Stockholder) (together with Principal Stockholder, the "Stockholder"), Saban
S.A., a Panamanian corporation ("Stockholder Parent") and Mr. Edmond J. Safra
("Mr. Safra") and HSBC Holdings plc, an English public limited company
("Parent").
WHEREAS, simultaneously with the execution of this Agreement, Parent, Safra
Republic Holdings, S.A., a societe anonyme organized under the laws of
Luxembourg ("SRH"), and Republic New York Corporation, a Maryland corporation
(the "Company"), are entering into a Transaction Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement") providing, among other
things, for the merger of a wholly owned subsidiary of Parent ("Sub") with and
into the Company (the "Merger"); and
WHEREAS, as of the date hereof, Stockholder is the Beneficial Owner (as
defined below) of, and has the sole right to vote and dispose of, 31,044,228
shares of common stock, par value $5.00 per share ("Common Stock"), of the
Company (the "Owned Shares"); and
WHEREAS, as of the date hereof, Stockholder Parent is the Beneficial Owner
of, and has the sole right to vote and dispose of, 14,699,124 shares of common
stock, $5.00 par value (the "SRH Stock"), of SRH (the "Owned SRH Shares"); and
WHEREAS, in the Merger Agreement Parent has agreed, subject to the
conditions set forth therein, to make an offer to purchase for cash all of the
shares of SRH Stock not owned by the Company; and
WHEREAS, as an inducement and a condition to their entering into the Merger
Agreement and incurring the obligations set forth therein, Parent has required
that Stockholder, Stockholder Parent and Mr. Safra (individually, a "Stockholder
Party" and collectively, the "Stockholder Parties") enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein and in
the Merger Agreement, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Certain Definitions. Capitalized terms used but not defined in this
Agreement are used in this Agreement with the meanings given to such terms in
the Merger Agreement. In addition, for purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. For
purposes of this Agreement, with respect to any Stockholder Party, "Affiliate"
shall not include the Company and the Persons that directly, or indirectly
through one or more intermediaries, are controlled by the Company.
"Beneficially Owned" or "Beneficial Ownership" with respect to any
securities means having beneficial ownership of such securities (as determined
pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase "within
60 days" in paragraph (d)(1)(i) thereof), 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 Affiliates
of such Person and all other Persons with whom such Person would constitute a
"Group" within the meaning of Section 13(d) of the Exchange Act and the rules
promulgated thereunder.
"Beneficial Owner" with respect to any securities means a Person which has
Beneficial Ownership of such securities.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
"Proposed Business Combination" means the transactions contemplated by the
Merger Agreement.
"Transfer" means, with respect to a security, the sale, transfer, pledge,
hypothecation, encumbrance, assignment or disposition of such security or the
Beneficial Ownership thereof, the offer to make such a sale, transfer or other
disposition, and each option, agreement, arrangement or understanding, whether
or not in writing, to effect any of the foregoing. As a verb, "Transfer" shall
have a correlative meaning.
2. No Disposition or Solicitation.
(a) During the term of this Agreement, Stockholder agrees that except as
contemplated by this Agreement, it will not Transfer or agree to Transfer any
Common Stock Beneficially Owned by it other than with Parent's prior written
consent, or grant any proxy or power-of-attorney with respect to any such Common
Stock other than pursuant to this Agreement.
(b) During the term of this Agreement, Stockholder Parent agrees that
except as contemplated by this Agreement, it will not Transfer or agree to
Transfer any SRH Stock Beneficially Owned by it other than with Parent's prior
written consent, or grant any proxy or power-of-attorney with respect to any
such SRH Stock other than pursuant to this Agreement.
(c) Each Stockholder Party agrees, that from and after the date hereof,
except as contemplated by this Agreement, it or he and their respective
Affiliates and representatives, will not directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, or provide any non-public information to, any Person relating to, or
otherwise facilitate any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company, SRH or any of
their respective subsidiaries or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets of, the
Company or SRH or any of their respective subsidiaries other than the Proposed
Business Combination (an "Alternative Transaction").
(d) Each Stockholder Party agrees that unless required by applicable law,
neither it nor any of its Affiliates shall make any press release, public
announcement or other communication with respect to the business or affairs of
the Company, SRH, this Agreement, or Parent, including this Agreement, the
Merger Agreement and the Option Agreement and the transactions contemplated
hereby and thereby, without the prior written consent of Parent.
(e) Stockholder agrees that it will not issue any shares of capital stock
to any Person. Stockholder Parent agrees that it will not Transfer or agree to
Transfer any capital stock of the Stockholder, and that it will take all action
necessary to cause the Stockholder to timely comply with all its obligations
under this Agreement.
(f) Stockholder Parent agrees that it will not issue any shares of capital
stock to any Person. Mr. Safra agrees that he will not Transfer or agree to
Transfer any stock of Stockholder Parent except as may result from the laws of
descent and distribution (any such transfer to be subject to Section 13(d)
hereof) and that he will take all action necessary to cause each of Stockholder
Parent and Stockholder to timely comply with all of its obligations under this
Agreement.
3. Stockholder Vote; Offer.
(a) Stockholder agrees that, unless this Agreement has been terminated in
accordance with its terms, (i) at such time as the Company conducts a meeting of
or otherwise seeks a vote or consent of its stockholders for the purpose of
approving the Merger Agreement and the Merger (such meeting or any adjournment
thereof, or such consent process, the "Company Meeting"), it will vote, or
provide a consent with respect to, all Common Stock (including the Owned Shares)
then Beneficially Owned by Stockholder in favor of the Merger Agreement and the
Merger and (ii) it will (at any meeting of stockholders) vote its shares of
Common Stock (including the Owned Shares) against, and it will not consent to,
any Alternative Transaction or any action that would materially delay, prevent
or frustrate the transactions contemplated by the Merger Agreement.
Without limiting the foregoing, it is understood that the obligations under
clause (i) above shall remain applicable in respect of each meeting of
stockholders of the Company duly called for the purpose of approving the Merger
Agreement and the Merger regardless of the position of the Company's Board as to
the Merger at the time of such meeting, and that the obligations under clause
(ii) above shall continue as set forth in Section 11.
(b) Stockholder Parent agrees that, unless this Agreement has been
terminated in accordance with its terms, at such time as Parent or Parent's
designee makes the Offer as contemplated by the Merger Agreement Stockholder
Parent will, within 10 business days after commencement of the Offer, duly
tender all of the shares of SRH Stock then owned by it into the Offer, in
accordance with the terms thereof, and will not subsequently withdraw such
tender, provided that Stockholder Parent may withdraw such tender if the Merger
Agreement has been terminated in accordance with its terms.
4. Reasonable Efforts to Cooperate. Each Stockholder Party will (a) use all
reasonable efforts to cooperate with the Company, SRH, Parent and Sub in
connection with the transactions contemplated by the Merger Agreement, (b)
promptly take such actions as are necessary or appropriate to consummate such
transactions, and (c) provide any information reasonably requested by the
Company, SRH, Parent and Sub for any regulatory application or filing made or
approval sought for such transactions (including filings with the Securities and
Exchange Commission).
5. Additional Stock.
(a) Stockholder agrees that any additional shares of Common Stock acquired
by it or over which it acquires Beneficial Ownership, whether pursuant to
existing stock option agreements, warrants or otherwise, shall be subject to the
provisions of this Agreement. Stockholder Parent and Mr. Safra each agree that
if it or he should acquire record or Beneficial Ownership of any shares of
Common Stock, the term Stockholder shall be deemed to be modified to include it
or him, as the case may be.
(b) Stockholder Parent agrees that any additional shares of SRH Stock
acquired by it or over which it acquires Beneficial Ownership, whether pursuant
to existing stock option agreements, warrants or otherwise, shall be subject to
the provisions of this Agreement. Stockholder and Mr. Safra. each agree that if
it or he should acquire record or beneficial ownership over any shares of SRH
Stock, the term Stockholder Parent shall be deemed to be modified to include it
or him, as the case may be.
6. Irrevocable Proxy.
(a) (i) In furtherance of the agreements contained in Section 3(a) of this
Agreement, the Stockholder hereby irrevocably (to the extent set forth herein)
grants to, and appoints, Parent and JRH Bond, Group Chairman of Parent, KR
Whitson, Group Chief Executive Officer of Parent, and DJ Flint, Group Finance
Director of Parent, in their respective capacities as officers of Parent, and
any individual who shall hereafter succeed to any such office of Parent, and
each of them individually, Stockholder's proxy and attorney-if-fact (with full
power of substitution), for and in the name, place and stead of Stockholder, to
vote all shares of Common Stock beneficially owned by Stockholder, or grant a
consent or approval in respect of such shares, or execute and deliver a proxy to
vote such shares, (x) in favor of the Merger and the Merger Agreement and
approval of the terms thereof and each of the other transactions contemplated by
the Merger Agreement and (y) against any Alternative Transaction or any other
matter referred to in Section 3(a)(ii) hereof, in each case to the extent the
Stockholders Parties are required to so vote under Section 3.
(ii) The Stockholder represents and warrants to Parent and Sub that any
proxies heretofore given in respect of its Owned Shares are not irrevocable, and
that any such proxies are hereby revoked.
(iii) The Stockholder hereby affirms that the irrevocable proxy set forth
in this Section 6(a) is given in connection with, and in consideration of, the
execution of the Merger Agreement by Parent, and that such irrevocable proxy is
given to secure the performance of the duties of the Stockholder under this
Agreement. The Stockholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Such
Stockholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 2-507 of the Maryland General Corporation Law. The proxy granted in this
Section 6(a) shall remain valid until terminated pursuant to Section 12 hereof.
(b) The irrevocable proxy granted pursuant to Section 6(a) shall
automatically terminate and be revoked upon termination of this Agreement in
accordance with its terms.
7. Covenant of Stockholder Parties. Each Stockholder Party agrees that it
will take all action necessary to (i) permit (a) the Owned Shares to be acquired
in the Merger and (b) the voting of the Owned Shares in accordance with the
terms of this Agreement and (ii) prevent creditors in respect of any pledge of
Owned Shares from exercising their rights under such pledge.
8. Representations, Warranties and Covenants of Stockholder Parties. Each
Stockholder Party hereby represents and warrants to, and agrees with, Parent and
Sub as follows (it being understood that the representations and warranties made
by Congregation Beit Yaakov are made severally and only with respect to the
Owned Shares held by it):
(a) Such Stockholder Party has all necessary power and authority and legal
capacity to execute and deliver this Agreement and perform its or his
obligations hereunder. No other proceedings or actions on the part of such
Stockholder Party are necessary to authorize the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by such
Stockholder Party and constitutes the valid and binding agreement of such
Stockholder Party, enforceable against such Stockholder Party in accordance with
its terms except (i) to the extent limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) (i) The Stockholder Parties are the sole Beneficial Owners of the Owned
Shares. The Stockholder has good and marketable title to all of the Owned
Shares, free and clear of all liens, claims, options, proxies, voting agreements
and security interests, except for (x) liens, claims, options, proxies, voting
agreements and security interests and (y) pledges of Owned Shares previously
disclosed to Parent, in each case, that would not have a material adverse effect
on the ability of the Stockholder Parent to perform its obligations under this
Agreement. The Owned Shares constitute all of the capital stock of the Company
Beneficially Owned by any of the Stockholder Parties and none of the Stockholder
Parties or its or his Affiliates is the Beneficial Owner of, or has any right to
acquire (whether currently upon lapse of time, following the satisfaction of any
conditions, upon the occurrence of any event or any combination of the
foregoing) any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock.
(ii) The Stockholder Parties (other than the Stockholder) are the sole
Beneficial Owners of the Owned SRH Shares, free and clear of all liens, claims,
options, proxies, voting agreements and security interests, except for liens,
claims, options, proxies, voting agreements and security interests that would
not have a material adverse effect on the ability of the Stockholder Parent to
perform its obligations under this Agreement. The Owned SRH Shares constitute
all of the capital stock of SRH Beneficially Owned by any of the Stockholder
Parties and none of the Stockholder Parties or its or his Affiliates is the
Beneficial Owner of, or has any right to acquire (whether currently, upon lapse
of time, following the satisfaction of any conditions, upon the occurrence of
any event or any combination of the foregoing) any shares of SRH Stock or any
securities convertible into or exchangeable or exercisable for shares of SRH
Stock.
(d) Stockholder Parent has sole Beneficial Ownership, free and clear of all
liens, claims, options, proxies, voting agreements and security interests, of
(i) all outstanding capital stock of Stockholder and (ii) 14,699,124 shares of
SRH Stock, representing approximately 20% of the shares of SRH Stock
outstanding. Mr. Safra has Beneficial Ownership of all of the outstanding
capital stock of Stockholder Parent. No other Person has any right to acquire
(whether currently, upon lapse of time, following satisfaction of any
conditions, upon the occurrence of any event, or any combination of the
foregoing) Beneficial Ownership of, any capital stock of Stockholder or
Stockholder Parent or any securities convertible into or exchangeable or
exercisable for shares of any such capital stock.
(e) Neither the execution and delivery of this Agreement by any Stockholder
Party nor the consummation of the transactions contemplated hereby will (i)
conflict with, result in any violation of, require any consent under or
constitute a default (whether with notice or lapse of time or both) by such
Stockholder Party under such Stockholder Party's constituent documents (in the
case of the Stockholder and Stockholder Parent) or any mortgage, bond,
indenture, agreement, instrument or obligation to which such Stockholder Party
is a party or by which such Stockholder Party or by which any of the Owned
Shares or the Owned SRH Shares are bound; (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency or governmental
body that is binding on such Stockholder Party; or (iii) constitute a violation
by such Stockholder Party of any law or regulation of any jurisdiction, in each
case except for violations, conflicts or defaults that would not have a material
adverse effect on the ability of any Stockholder Party to perform its
obligations under this Agreement.
(f) Each Stockholder Party understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon such Stockholder Party's
execution, delivery and performance of this Agreement. Each of the Stockholder
and the Stockholder Parent acknowledges that its irrevocable proxy set forth in
Section 6(a) is granted in consideration of the execution and delivery of the
Merger Agreement by Parent.
9. Representations and Warranties of Parent and Sub. Parent represents and
warrants to the Stockholder Parties that Parent has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Parent
will not constitute a violation of, conflict with or result in a default under,
(i) any contract, understanding or arrangement to which Parent is a party or by
which it is bound or requires the consent of any other Person or any party
pursuant thereto, (ii) any judgment, decree or order applicable to Parent, or
(iii) any law, rule or regulation of any jurisdiction, in each case except for
violations, conflicts or defaults that would not have a material adverse effect
on the ability of the Parent to perform its obligations under this Agreement;
and this Agreement constitutes a legal, valid and binding agreement on the part
of Parent, enforceable against Parent in accordance with its terms, except as
such enforceability may be limited by principles applicable to creditors' rights
generally or governing the availability of equitable relief. The execution and
delivery by Parent of this Agreement and the consummation by Parent of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Parent and no other corporate proceedings on the part of
Parent are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent.
10. Non-Competition. (a) Solely as an inducement to Parent's and Sub's
entering into the Merger Agreement and for no other consideration, Mr. Safra
agrees not to engage in any aspect of a Covered Business (as hereinafter
defined) other than on behalf of the Company, SRH, the Successor Corporation or
any of their respective Subsidiaries for the period of time commencing on the
Closing Date and ending on the seventh anniversary of the Closing Date;
provided, however, that if after such seventh anniversary of the Closing Date,
Mr. Safra shall found, establish, invest (other than as contemplated by clause
(b)(i) and clause (c) below) in any Competitor, Parent shall have the right, but
not the obligation, to invest in such Competitor on a 50/50 basis with Mr. Safra
pursuant to an agreement among shareholders containing buy/sell arrangements
which would permit one party to purchase the interest of the other upon
termination of the co-ownership.
(b) Mr. Safra shall be deemed to be engaging in a Covered Business if he:
(i) directly or indirectly, individually or through another Person,
whether or not for compensation, participates in the ownership, management,
operation or control of any Competitor (as hereinafter defined) or is
employed by or performs consulting services for any Competitor; provided,
that nothing herein shall be deemed to prevent Mr. Safra from having record
or Beneficial Ownership of less than 5% (including shares or other
securities underlying options or other convertible securities, stock
appreciation rights, phantom stock or similar rights, whether or not
currently exercisable) of any publicly-traded company unless such ownership
is accompanied by an employment, consulting or similar arrangement pursuant
to which he participates in the management, operation or control of such
company;
(ii) directly or indirectly, individually or through another Person,
solicits any Person who was a customer or prospective customer of the
Company, SRH, the Successor Corporation or any of their respective
Subsidiaries at any time prior to the Effective Time with a view to
inducing such customer or prospective customer to enter into an agreement
or otherwise do business with any Competitor with respect to a Covered
Business, or attempts directly or indirectly to induce any such customer or
prospective customer to terminate its relationship with the Company, SRH,
the Successor Corporation or any of their respective Subsidiaries or to not
enter into a relationship with the Company, SRH, the Successor Corporation
or any of their respective Subsidiaries, as the case may be;
(iii) directly or indirectly, individually or through another Person
releases any customer or prospect lists of the Company, SRH, the Successor
Corporation or any of their respective Subsidiaries, or any other documents
or other information (whether or not such information is in writing)
proprietary to the Company, SRH or any of their respective Subsidiaries or
any customer of the Company, SRH, the Successor Corporation or any of their
respective Subsidiaries, or otherwise confidential or non-public, to any
Person, except with the prior written consent of the Company, SRH, the
Surviving Corporation or any of their respective Subsidiaries or as may be
required pursuant to the order of a court of competent jurisdiction; or
(iv) offers, directly or indirectly, individually or through another
Person, employment to any employee of the Company, SRH, the Successor
Corporation or any of their respective Subsidiaries or directly or
indirectly attempts to induce any such employee to leave the employ of the
Company, SRH, the Successor Corporation or any of their respective
Subsidiaries or aids or assists any other Person in doing so; provided that
nothing herein shall be deemed to prevent Mr. Safra from employing,
directly or indirectly, any of the individuals separately agreed to in
writing by the Parent and Mr. Safra.
(c) For purposes of Section 10(a) and Section 10(b):
(i) A "Covered Business" is the provision of banking, brokerage,
trading or other financial services in which the Company, SRH or any of
their respective Subsidiaries is engaged on the Closing Date. For purposes
of this Agreement, "Covered Business" shall not include any of the
following activities, and Mr. Safra shall not be deemed to be engaging in a
Covered Business if he engages, directly or indirectly, solely in any one
or more of the following activities:
(A) managing and investing assets beneficially owned, directly or
indirectly, by Mr. Safra or members of his immediate family;
(B) managing or investing assets beneficially owned by any other
Person and providing related advisory services provided that:
(I) any such Person will directly or indirectly be or represent
ultimately an investor which is a natural person and not any form of
mutual fund, unit trust or other fund held publicly;
(II) the number of such ultimate investors shall not exceed one
hundred (100);
(III) any such arrangements will be "private," in that the
availability of any such services will not be advertised or publicized
in any form whatsoever and will remain confidential;
(IV) any assets managed and invested as permitted by this clause
(B) will be managed and invested together with the assets managed and
invested as permitted by clause (A) above, as pooled and joint
investments (or arrangements similar to pooled and joint investments)
("pooled investments") on the basis that of such pooled investments,
the assets managed and invested pursuant to clause (A) above will
constitute a majority in aggregate value of the pooled investments and
the aggregated value of the assets managed as pooled investments
(including those managed pursuant to clause (A) above), without taking
account of investment results, does not exceed $5 billion;
(V) Mr. Safra does not accept for management pursuant to this
clause (B), assets or the proceeds of assets that, to the best
knowledge of Mr. Safra were removed from accounts managed by the
Company, SRH or any of their respective Subsidiaries; and
(VI) the Company, SRH or one or more of their Subsidiaries will
act as custodian (in accordance with their standard fees) for
investments and/or liquid funds included in the pooled investments
referred to in subclause (IV) above;
(C) ownership of any securities beneficially owned by Mr. Safra on the
date of this Agreement and any business activities that Mr. Safra or his
Affiliates are engaged or participating in on the date of this Agreement
(other than business activities conducted by or through the Company, SRH or
any of their respective Subsidiaries) to the extent Mr. Safra or his
affiliates are engaged or participating in such business activities on the
date of this Agreement.
(ii) A "Competitor" is any Person which engages in any Covered
Business.
(d) Mr. Safra hereby agrees that:
(i) Each of the covenants contained in Section 10(b)(i)-(iv) hereof
shall be construed as a separate covenant.
(ii) If any provision of this Section 10 or portion hereof is so
broad, in scope or duration, so as to be unenforceable, such provision or
portion hereof shall be interpreted to be only so broad as is enforceable.
(e) Mr. Safra agrees to deliver promptly to Parent, upon the request of
Parent, the Company, SRH or the Surviving Corporation following the Effective
Time, all documents (and all copies thereof, in written, electronic or any other
form whatsoever) relating to the business of the Company, SRH, the Surviving
Corporation or any of their respective Subsidiaries, and all property associated
therewith, which he may then possess or have under his control.
(f) The parties hereto hereby declare that it is impossible to measure in
money the damages which will accrue to Parent, the Company and SRH by reason of
a failure by Mr. Safra to perform any of his obligations under this Section 10.
Accordingly, if Parent, the Company, SRH, the Surviving Corporation or any of
their respective Subsidiaries institutes any action or proceeding to enforce the
provisions hereof, to the extent permitted by applicable law, Mr. Safra hereby
waives the claim or defense that Parent, the Company, SRH, the Surviving
Corporation or any of their respective Subsidiaries has an adequate remedy at
law, and Mr. Safra will not argue in any such action or proceeding the claim or
defense that any such remedy at law exists. Parent acknowledges that family
members and associates of Mr. Safra are engaged in activities that constitute
Covered Business and that from time to time Mr. Safra may have discussions with,
including providing advice to, such persons with respect to such activities.
Parent agrees that such discussions are not restricted by this Section 10 so
long as Mr. Safra does not participate in the active management of these
business activities. In addition, Section 10 shall not restrict any social and
informal discussions in which Mr. Safra engages with any person regarding the
banking business.
(g) The restrictions in this Section 10 shall be in addition to any
restrictions imposed on Mr. Safra by statute or at common law or otherwise.
(h) Notwithstanding Section 11 hereof, the provisions of this Section 10
shall survive the Effective Time of the Merger.
11. Termination. Except as provided in Section 10(h), this Agreement, and
all rights and obligations of the parties hereunder, shall terminate on the
earlier of (a) the Effective Time of the Merger pursuant to the Merger Agreement
and (b) the date upon which the Merger Agreement is terminated in accordance
with its terms; provided that, in the case of the termination of this Agreement
upon the happening of the event described in clause (b) above, the obligations
of the Stockholder under Section 3(a)(ii) and the proxy granted pursuant to
Section 6(a)(i), but solely for use as described in clause (y) thereof (to the
extent such proxy relates to the voting obligation under Section 3(a)(ii), shall
not terminate, but shall remain in effect, until the date that is six months
after such termination if (x) a proposal for an Alternative Transaction shall
have been made prior to such termination and (y) the Merger Agreement is
terminated in accordance with its terms pursuant to Section 9.1(e) or (f) of the
Merger Agreement or by Parent pursuant to 9.1(d) of the Merger Agreement;
provided, however, that the term of this Agreement shall be extended by a period
of days equal to the duration of any temporary or permanent order, writ or
injuction issued by a court of competent jurisdiction that invalidates, impedes
or enjoins the operation or enforcement of this Agreement, the Merger Agreement
or any agreement contemplated hereby or thereby or entered into in connection
herewith or therewith.
12. Miscellaneous.
(a) This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, among all the parties hereto with
respect to the transfer or voting of shares of Common Stock or SRH Stock.
(b) Each Stockholder Party agrees that this Agreement and the respective
rights and obligations of such Stockholder Party hereunder shall attach to any
shares of Common Stock and any shares of SRH Stock, and any securities
convertible into such shares, that may become Beneficially Owned by such
Stockholder Party.
(c) Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
(d) This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties and their respective successors,
personal or legal representatives, executors, administrators, heirs,
distributees, devisees, legatees and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party (whether by operation of law or otherwise) without the
prior written consent of the other parties; provided, that Parent may assign any
or all rights under this Agreement to Sub or any other Subsidiary. 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.
(e) This Agreement may not be amended, changed, supplemented, or otherwise
modified or terminated, except upon the execution and delivery of a written
agreement executed by the parties hereto; provided, that Parent may waive
compliance by any other party with any representation, agreement or condition
otherwise required to be complied with by any other party under this Agreement
or release any other party from its obligations under this Agreement, but any
such waiver or release shall be effective only if in writing executed by Parent.
(f) All notices and other communications hereunder shall be in writing and
shall be deemed given upon (a) transmitter's confirmation of a receipt of a
facsimile transmission, (b) confirmed delivery by a standard overnight carrier
or when delivered by hand or (c) the expiration of five business days after the
day when mailed by certified or registered mail, postage prepaid, addressed at
the address for such party set forth below.
(i) If to a Stockholder Party, to such Stockholder Party at the
address set forth beside its name on Schedule A hereto with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Fax: (212) 474-1000
Attention: George J. Gillespie, III
(ii) If to Parent, to:
HSBC Holdings plc
10 Lower Thames Street
London EC3R 6AE
United Kingdom
Fax: 011-44-171-260-8249
Attention: Group Company Secretary
With a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Fax: (212) 225-3999
Attention: James F. Munsell and Victor I. Lewkow
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
(g) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without affecting the validity or
enforceability of the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
(h) Each Stockholder Party acknowledges and agrees that in the event of any
breach of this Agreement, Parent would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that (a)
each Stockholder Party will waive, in any action for specific performance, the
defense of adequacy of a remedy at law, and (b) Parent shall be entitled, in
addition to any other remedy to which it may be entitled at law or in equity, to
compel specific performance of this Agreement.
(i) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) EXCEPT TO THE EXTENT THAT MANDATORY PROVISIONS OF THE MARYLAND GENERAL
CORPORATION LAW ARE APPLICABLE, THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SUCH STATE.
(k) 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. "Include," "includes," and "including" shall
be deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import.
(l) This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which, taken together, shall constitute one
and the same instrument.
(m) Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement may be
brought in any federal court located in the State of New York or any New York
state court, and each of the parties hereby consents to the non-exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient form. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 12(f)
shall be deemed effective service of process on such party.
13. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company or SRH makes
any agreement or understanding herein in his capacity as such director or
officer. Each Stockholder Party signs solely in his capacity as the record
holder and beneficial owner of the Owned Shares or the Owned SRH Shares, as the
case may be, and nothing herein shall limit or affect any actions taken by a
Stockholder Party in his capacity as an officer of director of the Company or
SRH to the extent specifically permitted by the Merger Agreement.
14. Further Assurances. From time to time, at Parent's request and without
further consideration, each Stockholder Party shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RNYC HOLDINGS LIMITED
By: /s/ C. G. Rodney Leach
----------------------
Name: C. G. Rodney Leach
Title: Director
By: /s/ Jean Hoss
----------------------
Name: Jean Hoss
Title: Director
CONGREGATION BEIT YAAKOV
By: /s/ Walter H. Weiner
----------------------
Name: Walter H. Weiner
SABAN S.A.
By: /s/ C. G. Rodney Leach
----------------------
Name: R. Leach
Title: Director
By: /s/ Jean Hoss
----------------------
Name: Jean Hoss
Title: Director
EDMOND J. SAFRA
By: /s/ Edmond J. Safra
----------------------
Edmond J. SAFRA
HSBC HOLDINGS PLC
By: /s/ David J. Shaw
----------------------
Name: David J. Shaw
Title: Authorised Signatory
<PAGE>
SCHEDULE A
----------
STOCKHOLDER PARTIES
-------------------
NAME ADDRESS
- ---- -------
RNYC Holdings Limited
Fax:
Attention:
Congregation Beit Yaakov
Fax:
Attention:
Saban S.A.
Fax:
Attention:
Edmond J. Safra
Fax:
