<PAGE> 1
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
REPUBLIC NEW YORK CORPORATION
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it is determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form of Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[Republic New York Logo]
REPUBLIC NEW YORK CORPORATION
452 FIFTH AVENUE
NEW YORK, NEW YORK 10018
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Republic New York Corporation to be held on September 9, 1999 at 11:00 a.m., New
York time. The meeting will be held at the office of Republic New York
Corporation at 452 Fifth Avenue, New York, New York. Notice of the special
meeting is enclosed.
At the special meeting you will be asked to consider and vote on a proposal
to approve a merger of Republic New York Corporation and a subsidiary of HSBC
Holdings plc. As a result of the merger, Republic New York Corporation would
become a wholly owned subsidiary of HSBC Holdings plc. EACH OUTSTANDING SHARE OF
REPUBLIC NEW YORK CORPORATION COMMON STOCK WOULD BE CONVERTED INTO THE RIGHT TO
RECEIVE $72 IN CASH. THIS WILL BE A TAXABLE TRANSACTION.
This proxy statement gives you detailed information about the merger we are
proposing, and includes our merger agreement as an appendix. You can also obtain
information about Republic New York Corporation from publicly available
documents filed with the Securities and Exchange Commission. We encourage you to
read the proxy statement carefully.
Your board of directors has determined that the merger is in the best
interest of and advisable for Republic New York Corporation and its
stockholders, and has approved the merger. The board of directors recommends
unanimously that you vote FOR approval of the merger and the merger agreement.
We urge you to vote promptly and deliver your proxy. By voting your proxy
now you will not be precluded from attending the meeting. You may revoke your
proxy at any time until the meeting. In the event you find it convenient to
attend the meeting, you may, if you wish, withdraw your proxy and vote in
person.
Thank you, and I look forward to seeing you at the special meeting.
Very truly yours,
/s/ Dov Schlein
Dov Schlein
Chairman of the Board
and Chief Executive Officer
This proxy statement is dated August 9, 1999 and was first mailed to
Republic New York Corporation stockholders on or about August 9, 1999.
<PAGE> 3
[Republic New York Logo]
REPUBLIC NEW YORK CORPORATION
452 FIFTH AVENUE
NEW YORK, NEW YORK 10018
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 1999
------------------------
NOTICE IS HEREBY GIVEN THAT, pursuant to the call of the board of directors
of Republic New York Corporation, a Maryland corporation ("Republic
Corporation"), a special meeting of stockholders of Republic Corporation will be
held on September 9, 1999 at 11:00 a.m., New York time, at 452 Fifth Avenue, in
the Borough of Manhattan, in the City and State of New York, for the purpose of
considering and voting upon a proposal to approve the merger of Republic
Corporation with a subsidiary of HSBC Holdings plc on the terms and conditions
set forth in a Transaction Agreement and Plan of Merger, dated as of May 10,
1999, by and among HSBC Holdings plc, a public limited company organized under
the laws of England, Safra Republic Holdings S.A., a company organized under the
laws of Luxembourg, and Republic Corporation, pursuant to which, among other
things, each outstanding share of common stock, par value $5.00 per share, of
Republic Corporation will be converted, upon the effectiveness of the merger,
into the right to receive $72 in cash, without interest.
The record date and hour for determining holders of common stock entitled
to notice of and to vote at the meeting, including any adjournment thereof, have
been fixed as of the close of business on August 6, 1999.
By order of the board of directors,
/s/ William F. Rosenblum, Jr.
William F. Rosenblum, Jr.,
Senior Vice President and
Corporate Secretary
August 9, 1999
THE BOARD OF DIRECTORS OF REPUBLIC CORPORATION RECOMMENDS UNANIMOUSLY THAT
STOCKHOLDERS VOTE FOR THE MERGER AT THE SPECIAL MEETING.
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY.
<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT WILL REPUBLIC CORPORATION COMMON STOCKHOLDERS RECEIVE IN THE MERGER?
A. Holders of Republic Corporation common stock will receive $72 in cash for
each share of Republic Corporation common stock.
Q. WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A. The cash consideration received in the merger will be generally taxable to
U.S. holders of Republic Corporation common stock to the extent they
recognize gain.
Q. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A. HSBC and Republic Corporation expect to complete the merger in the fourth
quarter of 1999. Because the merger is subject to governmental approvals, the
companies cannot predict the exact timing.
Q. HOW CAN I VOTE?
A. After you have carefully read this proxy statement, mail your signed proxy
card in the enclosed postage-paid envelope as soon as possible so that your
shares may be represented and voted at the special meeting. You may also give
voting instructions by telephone or through the internet by following the
instructions provided with this proxy statement. You may also vote in person
by attending the special meeting.
No matter which voting method you choose, if your shares are held in "street
name" (i.e., in the name of a broker, bank or other record holder), you must
direct the record holder as to how to vote your shares.
Q. MAY I CHANGE MY VOTE?
A. Yes. You may withdraw your proxy or change your vote by delivering a
later-dated, signed written notice of revocation or proxy card before the
special meeting or by voting in person at the special meeting. At any time
before the meeting you may also withdraw your proxy or change your vote by
telephone or on the internet as described in this proxy statement.
Q. SHOULD I SEND IN MY COMMON STOCK CERTIFICATES NOW?
A. No. After the merger is complete, instruc-tions will be sent explaining how
you can exchange your Republic Corporation stock certificates for cash.
Q. WHOM CAN I CALL WITH QUESTIONS?
A. If you have more questions about the merger, you should contact:
Republic New York Corporation
452 Fifth Avenue
New York, NY 10018
Attention:
Office of the Corporate Secretary
Telephone: (212) 525-6100
i
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................... 1
General............................. 1
The Companies....................... 1
Republic New York Corporation....... 1
Safra Republic Holdings S.A......... 1
HSBC Holdings plc................... 1
The Merger Agreement................ 1
The Safra Republic Public Tender/
Exchange Offer................... 2
Result of the Merger and the Safra
Republic Public Tender/Exchange
Offer............................ 2
Exchange Procedures................. 2
No Appraisal Rights................. 2
Material U.S. Federal Income Tax
Consequences..................... 2
Market Price Information............ 2
The Special Meeting................. 3
Vote Required to Approve the
Merger........................... 3
Our Recommendation to Stockholders.. 3
Stockholders Agreement.............. 3
Our Reasons for the Merger.......... 3
Opinion of Financial Advisor........ 4
Conditions to Completion of the
Merger........................... 4
Regulatory Approvals................ 4
Termination of the Merger
Agreement........................ 4
Expenses............................ 4
Stock Option Agreement.............. 4
Interests in the Merger that Differ
from Your Interests.............. 5
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF REPUBLIC
CORPORATION......................... 6
MARKET PRICES OF REPUBLIC CORPORATION
COMMON STOCK........................ 8
THE SPECIAL MEETING................... 9
General............................. 9
Matters to be Considered............ 9
Voting Procedures................... 9
Information about Voting............ 9
Solicitation of Proxies............. 10
Record Date and Voting Rights....... 10
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recommendation of the Board......... 11
PARTIES TO THE MERGER................. 11
Republic Corporation................ 11
HSBC................................ 12
Merger Sub.......................... 12
THE MERGER............................ 13
General............................. 13
Background of the Merger............ 13
Reasons for the Merger.............. 15
OPINION OF GOLDMAN, SACHS & CO. ...... 15
THE AGREEMENT......................... 21
The Merger.......................... 21
Closing Date and Effective Time..... 21
The Safra Republic Public
Tender/Exchange Offer............ 21
Treatment of Securities in the
Merger........................... 21
Governance of Successor
Corporation...................... 23
Integration of Legal Entities....... 23
Representations and Warranties...... 23
Conduct of Business Pending the
Merger........................... 24
Additional Agreements............... 26
Bonuses and Profit Sharing.......... 27
Stock Options and Other Awards...... 28
Conditions to the Merger............ 29
Termination......................... 30
Amendment........................... 31
Extension; Waiver................... 31
Expenses............................ 31
No Appraisal Rights................. 31
STOCK OPTION AGREEMENT................ 31
Exercise of the Option.............. 33
Registration Rights................. 33
Repurchase of Option and/or
Shares........................... 34
Treatment of Option in the Event a
Third Party Acquires Republic
Corporation...................... 34
Assignment of Option and Option
Agreement........................ 34
HSBC's Profit Limited............... 34
HSBC May Surrender Option to
Republic Corporation for Cash.... 34
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Representations and Warranties...... 35
Voting of Option Shares............. 35
Option Not Currently Exercisable.... 35
STOCKHOLDERS AGREEMENT................ 35
REGULATORY MATTERS.................... 36
Federal Reserve Board............... 36
Other Authorities................... 36
Safra Republic Public Tender/
Exchange Offer and Bank Merger
Approval......................... 36
Status of Regulatory Approvals and
Other Information................ 37
INTERESTS OF CERTAIN PERSONS.......... 37
Certain Consequences of the
Merger........................... 39
OWNERSHIP OF VOTING SECURITIES BY
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.......................... 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES TO STOCKHOLDERS........ 43
CERTAIN CONSEQUENCES OF THE MERGER.... 43
Certain Litigation Matters.......... 43
FORWARD-LOOKING STATEMENTS MAY PROVE
INACCURATE.......................... 44
INDEPENDENT PUBLIC AUDITORS........... 44
OTHER MEETINGS........................ 44
WHERE YOU CAN FIND MORE INFORMATION... 45
</TABLE>
<TABLE>
<S> <C>
APPENDIX A Transaction Agreement and Plan of Merger
APPENDIX B Stock Option Agreement
APPENDIX C Stockholders Agreement
APPENDIX D Opinion of Goldman, Sachs & Co.
</TABLE>
iii
<PAGE> 7
SUMMARY
This summary highlights certain information from this proxy statement. It
does not contain all of the information that is important to you. To understand
the merger fully, we urge you to read carefully the entire proxy statement, as
well as the other documents attached to this proxy statement. See "WHERE YOU CAN
FIND MORE INFORMATION" (See page 45).
GENERAL
We propose a merger of Republic Corporation with a wholly owned subsidiary
of HSBC. In connection with the merger, HSBC will also commence a public
tender/exchange offer in Luxembourg and Switzerland for the shares of common
stock of Safra Republic Holdings S.A. not owned by Republic Corporation.
The merger requires the approval of the holders of a majority of Republic
Corporation common stock.
THE COMPANIES (SEE PAGE 11)
REPUBLIC NEW YORK CORPORATION
452 Fifth Avenue
New York, New York 10018
Republic Corporation is a registered bank holding company. Its principal
banking subsidiary is Republic National Bank of New York, which, at March 31,
1999, accounted for approximately 93% of Republic Corporation's consolidated
assets. Republic Corporation provides a wide range of financial products and
services principally through five broad segments:
- Private Banking
- Consumer Financial Services
- Lending
- Global Treasury
- Global Markets
On March 31, 1999, Republic Corporation had total assets of $50.5 billion,
total deposits of $32.7 billion and total stockholders' equity of $3.2 billion.
SAFRA REPUBLIC HOLDINGS S.A.
32 Boulevard Royal
22449 Luxembourg
Republic Corporation owns approximately 49% of the common stock of Safra
Republic, a Luxembourg holding company which owns banks in France, Switzerland,
Gibraltar, Luxembourg, Monaco and Guernsey. On March 31, 1999, Safra Republic
had total assets of $20.9 billion, total deposits of $15.9 billion and total
stockholders' equity of $2.0 billion.
HSBC HOLDINGS PLC
10 Lower Thames Street
London EC3R 6AE
United Kingdom
HSBC is one of the largest banking and financial services organizations in
the world, operating through long-established businesses in its five core
regions: Europe, the Hong Kong Special Administrative Region of the People's
Republic of China, the rest of Asia-Pacific, North America and Latin America.
Through its network of more than 5,000 offices in 79 countries and
territories, HSBC provides a comprehensive range of financial services to
personal, corporate, institutional and private banking clients. HSBC's shares
are held by some 165,000 shareholders in more than 90 countries and territories.
At December 31, 1998, HSBC had total assets of $483 billion, total deposits
of $343 billion and total shareholders' equity of $27 billion.
THE MERGER AGREEMENT (SEE PAGE 21)
We have attached the merger agreement to this document as Appendix A.
Please read the merger agreement. It is the legal document that governs the
merger.
In the merger, Republic Corporation will merge with a subsidiary of HSBC.
Republic Corporation will be the surviving company of the merger, and will
become a wholly owned subsidiary of HSBC. Each Republic Corporation stockholder
will be entitled to receive $72 in cash in the merger for each share of common
stock. The outstanding preferred stock of Republic Corporation will not be
changed in the merger.
The board of directors of Republic Corporation has recommended unanimously
that holders of Republic Corporation common stock vote in favor of the merger
and the merger agreement.
1
<PAGE> 8
THE SAFRA REPUBLIC PUBLIC TENDER/EXCHANGE OFFER (SEE PAGE 21)
In connection with the merger, HSBC will commence a public tender/exchange
offer in Luxembourg and Switzerland for the outstanding shares of Safra Republic
common stock not owned by Republic Corporation. In the Safra Republic public
tender/exchange offer, HSBC will offer each common shareholder of Safra Republic
$72 in cash per common share or, at the shareholder's option, for all or any
common shares tendered, a note of HSBC in a principal amount equal to $72 per
common share.
Your approval is not required for the completion of the Safra Republic
public tender/exchange offer. If, however, HSBC does not acquire through the
Safra Republic public tender/exchange offer and the merger at least 66 2/3% of
the outstanding common stock of Safra Republic, HSBC will not be required to
consummate the merger.
The board of directors of Safra Republic has recommended that holders of
Safra Republic common stock tender their shares to receive the cash
consideration in the Safra Republic public tender/exchange offer.
An entity in which Mr. Edmond J. Safra has an ownership interest has agreed
with HSBC to tender the 20.8% of the outstanding common shares of Safra Republic
it owns in the Safra Republic public tender/exchange offer. Republic Corporation
owns approximately 49% of the outstanding common shares of Safra Republic.
Accordingly, the 66 2/3% condition should be satisfied if the other conditions
to the merger are satisfied.
RESULT OF THE MERGER AND THE SAFRA REPUBLIC PUBLIC TENDER/EXCHANGE OFFER
We expect that the merger and the Safra Republic public tender/exchange
offer will be completed at the same time. Assuming that the merger and the Safra
Republic public tender/exchange offer are consummated, HSBC will acquire control
of the business operations of Republic Corporation and Safra Republic. HSBC will
then own, directly or indirectly, 100% of the common stock of Republic
Corporation and at least 66 2/3% of the outstanding shares of common stock of
Safra Republic.
EXCHANGE PROCEDURES (SEE PAGE 22)
You must surrender your Republic Corporation common stock certificates to
receive the $72 in cash per share. Do not send us your certificates until you
receive written instructions after we have completed the merger. If you do not
surrender your certificates within twelve months after the completion of the
merger (or by an earlier date on which the right to receive $72 in cash per
share would become the property of any government unit), the $72 cash per share
payment will, if permitted by law, be paid to HSBC, to whom you should then look
for payment.
NO APPRAISAL RIGHTS (SEE PAGE 31)
Under Maryland law, Republic Corporation's common stockholders have no
dissenters' appraisal rights in connection with the merger.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 43)
With respect to U.S. federal income tax consequences, the cash
consideration received by you in the merger will be generally taxable to you,
and you will recognize gain or loss in an amount determined by the difference
between the cash received in the merger and your tax basis in the Republic
Corporation common stock you exchange for that cash payment. You are urged to
consult your tax advisor with respect to the tax consequences of the merger,
including the effects of applicable state, local, foreign or other tax laws.
MARKET PRICE INFORMATION
The common stock of Republic Corporation is listed and traded on the New
York Stock Exchange under the symbol "RNB" and on the London Stock Exchange. On
May 3, 1999, one week before the initial public announcement concerning the
merger, the closing sale price per share of Republic Corporation common stock on
the New York Stock Exchange was $60.125. On May 7, 1999, the last trading date
before the initial joint public announcement concerning the merger, the closing
sale price per share of Republic Corporation common stock on the New York Stock
Exchange was $70. The average closing sale price for Republic Corporation common
stock for the 60-day and the 30-day periods
2
<PAGE> 9
ended May 7, 1999 was $48.06 and $52.24, respectively. On August 5, 1999, a
recent trading day prior to the date of this proxy statement, the closing price
per share of Republic Corporation common stock on the New York Stock Exchange
was $70.56.
THE SPECIAL MEETING (SEE PAGE 9)
The special meeting will be held at 11:00 a.m., New York time, on September
9, 1999, at 452 Fifth Avenue, New York, New York 10018. At the special meeting,
you will be asked to approve the merger and the merger agreement and to act upon
any other matter that may be properly raised at the special meeting.
VOTE REQUIRED TO APPROVE THE MERGER (SEE PAGE 10)
To approve the merger and the merger agreement, the holders of at least a
majority of the outstanding shares of Republic Corporation common stock entitled
to vote at the special meeting must vote in favor of doing so. Thus, a failure
to vote or an abstention has the same effect as voting against the merger. Mr.
Edmond J. Safra and certain entities in which he has an ownership interest have
agreed with HSBC to vote the 29.5% of the outstanding Republic Corporation
common stock they own in favor of the merger.
Holders of Republic Corporation's outstanding preferred stock are not
entitled to vote at the special meeting.
If you are unable or do not wish to attend the special meeting, you may
vote your shares by telephone, through the internet, or by mailing us your proxy
card. You may vote in person if you attend the special meeting. You can revoke
your proxy at any time before we take a vote at the special meeting by sending a
written notice revoking the proxy or a later-dated proxy to the Corporate
Secretary of Republic Corporation, by giving subsequent voting instructions by
telephone or through the internet or by attending the special meeting and voting
in person.
No matter which voting method you choose, if your shares are held in
"street name" (i.e., in the name of a broker, bank or other record holder), you
must direct the record holder as to how to vote your shares.
OUR RECOMMENDATION TO STOCKHOLDERS (SEE PAGE 11)
The board of directors of Republic Corporation believes that the merger is
advisable and in your best interest, and recommends unanimously that you vote
FOR approval of the merger and the merger agreement.
STOCKHOLDERS AGREEMENT (SEE PAGE 35 AND APPENDIX C)
In connection with the merger, Mr. Edmond J. Safra and certain entities in
which he has an ownership interest have entered into a stockholders agreement
with HSBC.
Mr. Safra and these other entities have committed to vote their shares of
Republic Corporation common stock (approximately 29.5% of the total number of
shares outstanding) for approval of the merger and the merger agreement. An
entity in which Mr. Safra has an ownership interest has agreed to tender its
shares of Safra Republic common stock (approximately 20.8% of the total number
of shares outstanding) in the Safra Republic public tender/exchange offer.
OUR REASONS FOR THE MERGER (SEE PAGE 15)
The board of directors of Republic Corporation determined unanimously to
recommend approval of the merger and the merger agreement based on its
consideration of a number of factors, including:
- the strategic options available to Republic Corporation
- competitive conditions in the financial services industry
- the premium to recent market prices and book value represented by the $72
per share to be received by the stockholders of Republic Corporation
- regulatory issues related to the transaction
- the opinion of Goldman Sachs
- the decision by Mr. Safra to support the transaction
3
<PAGE> 10
OPINION OF FINANCIAL ADVISOR (SEE PAGE 15 AND APPENDIX D)
On May 9, 1999, Goldman, Sachs & Co. orally advised the Republic
Corporation board of directors that, as of such date, the cash merger
consideration of $72 per share is fair from a financial point of view to the
holders of Republic Corporation common stock. Goldman Sachs confirmed its oral
opinion by delivering a written opinion dated May 10, 1999. Goldman Sachs
subsequently confirmed and updated its earlier opinion by delivering a written
opinion dated August 6, 1999. We have attached the opinion of Goldman Sachs,
dated August 6, 1999, as Appendix D. You should read the Goldman Sachs opinion
completely to understand the assumptions made, matters considered and
limitations of the review undertaken by Goldman Sachs in providing its opinion.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 29)
The obligation of each party to complete the merger depends on a number of
conditions being met, including Republic Corporation stockholder approval and
regulatory approvals. If HSBC does not acquire through the Safra Republic public
tender/exchange offer and the merger at least 66 2/3% of the outstanding common
stock of Safra Republic, HSBC will not be required to consummate the merger.
Receipts of regulatory approvals for the Safra Republic public tender/exchange
offer and for the merger of Republic National Bank of New York and HSBC Bank USA
are also conditions to the merger.
A party to the merger agreement could choose to complete the merger even
though a condition has not been satisfied, so long as the law allows it to do
so. We cannot be certain when, or if, the conditions to the merger will be
satisfied or waived, or that the merger will be completed.
REGULATORY APPROVALS (SEE PAGE 36)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System. Once the Federal Reserve Board approves
the merger; we have to wait from 15 to 30 days before we can complete the
merger, during which time the United States Department of Justice could decide
to challenge the merger. We also cannot complete the merger unless it is
approved by the New York State Banking Board, and the merger receives the
approval of or non-opposition by other federal, state and foreign regulatory
authorities.
In order for us to complete the merger, we also need to obtain the
regulatory approvals required for the merger of Republic National Bank of New
York and HSBC Bank USA. In addition, we cannot complete the merger unless all
necessary regulatory approvals required for the consummation of the Safra
Republic public tender/exchange offer have been received by HSBC and Safra
Republic.
HSBC and Republic Corporation have filed with the Federal Reserve Board and
other regulatory authorities all the required applications or notices necessary
to complete the merger, the Safra Republic public tender/exchange offer and the
merger of Republic National Bank of New York and HSBC Bank USA.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 30)
Republic Corporation, Safra Republic and HSBC may mutually decide at any
time to terminate the merger agreement without completing the merger. Also,
either Republic Corporation or HSBC can decide to terminate the merger agreement
in a number of other situations, including the final denial of a necessary
regulatory approval, the failure of Republic Corporation stockholders to approve
the merger or the failure to complete the merger by December 31, 1999.
EXPENSES (SEE PAGE 31)
Whether or not the merger is completed, the parties will each pay their own
fees and expenses, except that Republic Corporation and HSBC will evenly divide
the costs and expenses of printing and mailing this document and the fees that
have been paid to the Securities and Exchange Commission in connection with the
merger.
STOCK OPTION AGREEMENT (SEE PAGE 31 AND APPENDIX B)
Republic Corporation, as a condition of HSBC entering into the merger
agreement, granted HSBC an option to purchase shares of
4
<PAGE> 11
Republic Corporation common stock, which option may be exercised only if
specified events occur. These events generally are business combinations with or
acquisition transactions relating to Republic Corporation, such as a competing
merger or the sale of a substantial amount of its assets or stock. The option
could discourage other companies from trying or proposing to combine with
Republic Corporation before we complete the merger.
If the option is exercised, HSBC may purchase a number of shares equal to
up to 19.9% of the outstanding shares of Republic Corporation common stock. The
purchase price under the option is $72 per share. The profit obtainable by HSBC
under the option, if it becomes exercisable, effectively will not exceed $425
million or be less than $325 million.
HSBC cannot exercise its rights under the option unless certain events
occur. We do not know of any event that has occurred as of the date of this
document that would allow HSBC to exercise its rights under the option.
INTERESTS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS (SEE PAGE 37)
Some of Republic Corporation's directors and executive officers have
interests in the merger that are different from, or in addition to, your
interests as Republic Corporation stockholders. These interests exist because of
rights under benefit and compensation plans maintained by Republic Corporation
and also, in the case of the executive officers, under employment and consulting
agreements and supplemental pension arrangements with Republic Corporation.
These employment agreements may provide some executive officers of Republic
Corporation with severance benefits if their employment is terminated following
the merger. Also, in connection with the merger, a limited retention program is
being developed for employees of Republic Corporation's wholly owned business
units worldwide.
Following the merger, HSBC will provide for the indemnification of the
officers and directors of Republic Corporation for events occurring before the
merger.
5
<PAGE> 12
SELECTED HISTORICAL CONSOLIDATED FINANCIAL
DATA OF REPUBLIC CORPORATION
The following table sets forth, in summary form, selected financial data of
Republic Corporation for each of the years in the five-year period ended
December 31, 1998, and for the three months ended March 31, 1998 and 1999. The
information is derived in part from and should be read in conjunction with the
consolidated financial statements of Republic Corporation included in the
documents incorporated by reference in this proxy statement.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,(1)
------------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Summary of
Income:
Net interest income... $ 846,474 $ 818,899 $ 962,185 $ 1,027,865 $ 1,034,263 $ 260,282 $ 257,299
Provision for credit
losses.............. 19,000 12,000 32,000 16,000 8,000 4,000 4,000
Net interest income
after provision for
credit losses....... 827,474 806,899 930,185 1,011,865 1,026,263 256,282 253,299
Other operating
income................ 386,368 412,881 446,115 528,308 288,598 122,596 154,481
Other operating
expenses............ 721,476 821,665(2) 785,754 903,843 978,565 251,742 352,849(2)
Income before income
taxes............... 492,366 398,115 590,546 636,330 336,296 127,136 54,931
Net income............ 340,008 288,649 418,840 449,108 248,047 117,474 46,502
Net income applicable
to common stock --
diluted............. 315,853 256,764 386,027 423,281 220,248 110,420 40,111
Per Share of Common
Stock(3):
Net income per share
(after dividends on
preferred stock):
Basic............... $ 2.97 $ 2.39 $ 3.58 $ 3.99 $ 2.09 $ 1.05 $ 0.38
Diluted............. 2.85 2.32 3.54 3.94 2.07 1.03 0.38
Book value............ 18.69 21.62 25.01 27.03 24.62 28.07 25.95
Dividends declared.... 0.66 0.72 0.76 0.92 1.00 0.25 0.26
Dividend Payout
Ratio(4).............. 23.16% 31.03% 21.47% 23.35% 48.31% 24.27% 68.42%
Average Number of Common
Shares Outstanding (in
thousands)(3):
Basic............... 102,001 104,641 107,481 105,625 104,328 104,901 103,335
Diluted............. 110,963 110,512 109,189 107,461 106,236 106,736 105,041
Consolidated Average
Balances:
Interest-bearing
deposits with
banks............... $ 7,878,149 $ 7,627,905 $ 5,697,285 $ 4,679,550 $ 4,174,467 $ 4,200,687 $ 2,975,242
Investment
securities.......... 13,156,678 13,008,038 19,411,217 23,007,196 24,416,077 24,932,649 22,848,300
Loans, net of unearned
income.............. 9,894,195 9,527,725 11,979,678 13,540,850 13,576,115 12,847,051 13,591,236
Interest-earning
assets.............. 33,362,571 32,697,960 40,018,656 44,997,740 46,063,187 45,850,914 42,491,809
Total assets.......... 41,421,947 41,514,836 48,634,040 55,020,539 53,792,038 54,928,250 47,905,944
Total deposits........ 22,096,833 22,922,932 28,631,975 31,821,358 31,871,441 32,845,037 29,847,154
Total long-term
debt................ 4,924,002 4,120,206 4,019,216 4,397,055 4,744,518 4,742,391 4,463,837
</TABLE>
6
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,(1)
------------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred stock....... 630,592 635,457 574,685 454,673 500,000 500,000 500,000
Common stockholders'
equity.............. 2,010,976 2,149,970 2,541,687 2,880,863 2,829,368 2,953,027 2,573,600
Return on:
Average interest-
earning assets(5)... 1.02% 0.88% 1.05% 1.00% 0.54% 1.04% 0.44%
Average total
assets(5)........... 0.82 0.70 0.86 0.82 0.46 0.87 0.39
Average common
stockholders'
equity(6)........... 15.71 11.94 15.19 14.69 7.78 15.16 6.32
Average Stockholders'
Equity(7) to:
Average total
assets.............. 6.38% 6.71% 6.41% 6.06% 6.19% 6.29% 6.42%
Average loans, net of
unearned income..... 26.70 29.23 26.01 24.63 24.52 26.88 22.61
Consolidated Ratio of
Earnings to Fixed
Charges(8):
Excluding interest on
deposits............ 1.96x 1.79x 1.98x 1.85x 1.45 1.75x 1.32x
Including interest on
deposits............ 1.37 1.24 1.31 1.29 1.15 1.23 1.12
</TABLE>
- ---------------
(1) The results of operations for the three months ended March 31, 1998 and 1999
are not audited, but, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods have been
included. The results for the three months ended March 31, 1999, which
include rate of return ratios on an annualized basis, are not necessarily
indicative of the results that may be expected for the full year or any
other interim period.
(2) Includes a pre-tax provision for restructuring and related charges of $120
million in 1995 and a $97 million pre-tax restructuring charge in the first
quarter of 1999.
(3) Per share data and average common shares outstanding have been restated for
all periods, to give effect to a two-for-one stock split paid on June 1,
1998 in the form of a 100% common stock dividend.
(4) Calculated as dividends declared per common share divided by diluted
earnings per common share.
(5) Based on net income.
(6) Based on net income applicable to common stock -- diluted.
(7) Stockholders' equity includes preferred stock and common stockholders'
equity.
(8) For the purpose of computing the consolidated ratio of earnings to fixed
charges, earnings represent consolidated income before income taxes plus
fixed charges. Fixed charges excluding interest on deposits consist of
interest on long-term debt and short-term borrowings and one-third of rental
expense (which is deemed representative of the interest factor). Fixed
charges including interest on deposits consist of the foregoing items plus
interest on deposits.
7
<PAGE> 14
MARKET PRICES OF REPUBLIC CORPORATION COMMON STOCK
Republic Corporation common stock is listed on the New York Stock Exchange
under the symbol "RNB" and on the London Stock Exchange. The following table
shows the dividends and the high and low sale prices per share of Republic
Corporation common stock on the New York Stock Exchange for the periods
indicated, adjusted to reflect the two-for-one common stock split effected on
June 1, 1998:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter........................................ $31.75 $28.00 $0.19
Second Quarter....................................... 32.69 28.00 0.19
Third Quarter........................................ 35.50 29.25 0.19
Fourth Quarter....................................... 44.31 34.44 0.19
YEAR ENDED DECEMBER 31, 1997
First Quarter........................................ $49.63 $39.63 $0.23
Second Quarter....................................... 54.44 41.63 0.23
Third Quarter........................................ 58.00 53.31 0.23
Fourth Quarter....................................... 59.94 50.88 0.23
YEAR ENDED DECEMBER 31, 1998
First Quarter........................................ $68.00 $51.44 $0.25
Second Quarter....................................... 73.25 60.13 0.25
Third Quarter........................................ 71.50 36.19 0.25
Fourth Quarter....................................... 48.00 37.19 0.25
YEAR ENDED DECEMBER 31, 1999
First Quarter........................................ $48.44 $36.56 $0.26
Second Quarter....................................... 70.00 45.56 $0.26
Third Quarter (through August 5, 1999)............... 70.63 68.38 N/A
</TABLE>
On May 3, 1999, one week before the initial public announcement concerning
the merger, the closing sale price per share of Republic Corporation common
stock on the New York Stock Exchange was $60.125. On May 7, 1999, the last
trading date before the initial joint public announcement concerning the merger,
the closing sale price per share of Republic Corporation common stock on the New
York Stock Exchange was $70. The average closing sale price for Republic
Corporation common stock for the 60-day and 30-day periods ended May 7, 1999 was
$48.06 and $52.24, respectively. On August 5, 1999, a recent trading day prior
to the date of this proxy statement, the reported closing sale price per share
of Republic Corporation common stock on the New York Stock Exchange was $70.56.
Republic Corporation stockholders are urged to obtain current information with
respect to the price of the Republic Corporation common stock.
8
<PAGE> 15
THE SPECIAL MEETING
GENERAL
This Proxy Statement is first being mailed by Republic New York
Corporation, a Maryland corporation ("REPUBLIC CORPORATION"), to the holders
("STOCKHOLDERS") of the common stock, par value $5.00 per share, of Republic
Corporation (the "COMMON STOCK") on or about August 9, 1999, and is accompanied
by the notice of the special meeting of Stockholders of Republic Corporation
(the "SPECIAL MEETING") and a form of proxy that is solicited by the board of
directors of Republic Corporation (the "BOARD") for use at the Special Meeting
to be held on September 9, 1999, at 11:00 a.m., New York time, at 452 Fifth
Avenue, New York, New York, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Special Meeting, Stockholders will be asked to consider and vote on
the proposal to approve the merger of Republic Corporation with a subsidiary of
HSBC Holdings plc, a public limited company organized under the laws of England
("HSBC"), on the terms and conditions set forth in a Transaction Agreement and
Plan of Merger, dated as of May 10, 1999 (the "AGREEMENT"), by and among
Republic Corporation, HSBC and Safra Republic Holdings S.A., a company organized
under the laws of Luxembourg ("SAFRA REPUBLIC"), and the transactions
contemplated thereby. Pursuant to the terms of the Agreement, a wholly owned
subsidiary of HSBC will merge with and into Republic Corporation (the "MERGER")
so that Republic Corporation is the surviving corporation. In the Merger,
Stockholders will receive $72 in cash, without interest, for each share of
Common Stock (the "MERGER CONSIDERATION"). The Stockholders may also be asked to
vote on a proposal to adjourn or postpone the Special Meeting, which adjournment
or postponement could be used for the purpose, among others, of allowing
additional time for soliciting votes to approve the Merger and the Agreement.
VOTING PROCEDURES
The accompanying form of proxy is for use at the Special Meeting if you are
unable or do not wish to attend the Special Meeting and vote in person. You may
revoke your proxy before it is exercised, by submitting to the Corporate
Secretary of Republic Corporation written notice of revocation or a properly
executed proxy of a later date, or by attending the Special Meeting and electing
to vote in person or by giving subsequent voting instructions by phone or
through the internet. Written notices of revocation and other communications
with respect to the revocation of proxies should be addressed to Republic New
York Corporation, 452 Fifth Avenue, New York, New York 10018, Attention: Office
of the Corporate Secretary. All shares of Common Stock represented by valid
proxies received pursuant to this solicitation, and not revoked before they are
exercised, will be voted in the manner specified therein. If no specification is
made, the proxies will be voted in favor of the matters to be voted upon at the
Special Meeting, including approval of the Merger and the Agreement, but no
proxy that has been voted against approval of the Merger and the Agreement will
be voted in favor of any adjournment or postponement of the Special Meeting for
the purpose of soliciting additional proxies.
INFORMATION ABOUT VOTING
Stockholders of record may vote by signing, dating and mailing the proxy
card in the postage-paid envelope provided, or by using the toll-free telephone
number or the internet voting site listed on the accompanying instructional
sheet, following the specific instructions included thereon. If your shares of
Common Stock are held by a bank, broker or other nominee, you will receive
instructions from them, including instructions on how to give voting
instructions by telephone or on the internet, which you must follow in order to
have your shares voted. Whichever of these methods you select to transmit your
instructions, the persons named on the enclosed proxy card will vote your shares
in accordance with your instructions. If you sign a proxy card without giving
specific voting instructions,
9
<PAGE> 16
your shares will be voted in favor of the Merger and the Agreement, unless your
shares of Common Stock are held by a bank, broker or other nominee, in which
case your shares will not be voted.
The method by which you vote will not limit your right to vote at the
Special Meeting if you decide to attend in person. If your shares of Common
Stock are held by a bank, broker or other holder of record, you will need proof
of ownership to be admitted to the Special Meeting. A recent brokerage statement
or letter from your bank or broker are examples of proof of ownership. Even
though proof of ownership will entitle you to admission to the Special Meeting,
if you are a beneficial owner of Common Stock and want to vote your shares in
person, you must obtain a completed and executed proxy in your name from your
bank, broker or other holder of record in order to vote at the Special Meeting.
If you are an employee and a participant in the Republic Corporation Profit
Sharing and Savings Plan or the 1998 Long Term Incentive Compensation Plan, you
will receive a separate card for all the shares of Common Stock allocated to
your account under each of these plans that will serve as your voting
instruction card for Wachovia Bank N.A., the trustee for these plans. Your
instructions to the plan trustee will be held in strict confidence and will be
made available only to the inspectors of election at the Special Meeting, none
of whom will be an employee of Republic Corporation or any of its subsidiaries.
Pursuant to the terms of these plans, any shares held by the plan trustee as to
which it has not received voting instructions by September 2, 1999 will be voted
in the same manner, proportionately, as the shares as to which voting
instructions have been received.
SOLICITATION OF PROXIES
Republic Corporation will bear the entire cost of soliciting the proxies,
except that HSBC and Republic Corporation have each agreed to pay one half of
the printing and mailing costs of this Proxy Statement and related materials. In
addition to the solicitation of proxies by mail, Republic Corporation will, if
necessary, request banks, brokers and other record holders to send proxies and
proxy materials to the beneficial owners of Common Stock to obtain their voting
instructions. Republic Corporation will reimburse these record holders for their
reasonable expenses in sending proxy materials to beneficial owners. If
necessary, Republic Corporation may use several of its regular employees, who
will not be specially compensated, to solicit proxies.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of Republic Corporation's by-laws, the Maryland
General Corporation Law and the rules of the New York Stock Exchange, Inc. (the
"NYSE"), we have fixed August 6, 1999 as the record date for the determination
of Stockholders entitled to notice of and to vote at the Special Meeting (the
"RECORD DATE"). Accordingly, only persons who were Stockholders of record at the
close of business on the Record Date will be entitled to notice of and to vote
at the Special Meeting. The presence of the holders of at least a majority of
the shares of Common Stock outstanding on the Record Date, whether in person or
by properly executed and delivered proxy, will constitute a quorum for purposes
of the Special Meeting. The number of shares of Common Stock entitled to be
voted at the Special Meeting is 104,793,164. On the Record Date, there were
2,647 Stockholders of record. Holders of shares of Common Stock present in
person at the Special Meeting but not voting, and shares of Common Stock for
which Republic Corporation has received proxies but with respect to which
holders of such shares have abstained, will be counted as present at the Special
Meeting for purposes of determining the presence or absence of a quorum for the
transaction of business. Brokers, banks or record holders who hold shares of
Common Stock in nominee or street name for customers who are the beneficial
owners of such shares may not give a proxy to vote those shares without specific
instructions from such customers. Shares represented by proxies returned by a
broker holding such shares in street name will be counted for purposes of
determining whether a quorum exists, even if such shares are not voted in
matters where discretionary voting by the broker is not allowed ("BROKER
NON-VOTES"). Each share of Common Stock entitles its holder to one vote. The
affirmative vote of the holders of at least a majority of the shares of Common
Stock outstanding on the Record Date is required to approve the
10
<PAGE> 17
Merger and the Agreement. Holders of shares of Republic Corporation's
outstanding preferred stock are not entitled to vote on the matters to be
considered at the Special Meeting.
Since approval of the Merger and the Agreement requires the affirmative
vote of the holders of at least a majority of the shares of Common Stock
outstanding on the Record Date, an abstention, failure to vote or broker
non-vote will have the same effect as a vote against the Merger and the
Agreement. Accordingly, the Board urges Stockholders to complete, date and sign
the accompanying proxy and return it promptly in the enclosed, postage-paid
envelope.
RECOMMENDATION OF THE BOARD
The Board has approved unanimously the Merger and the Agreement. The Board
believes that the Agreement and the transactions contemplated thereby are in the
best interests of and advisable for Republic Corporation and the Stockholders,
and recommends unanimously that the Stockholders vote FOR approval of the Merger
and the Agreement. See "THE MERGER -- REASONS FOR THE MERGER."
PARTIES TO THE MERGER
REPUBLIC CORPORATION
Republic Corporation, a registered bank holding company under the Bank
Holding Company Act of 1956 (the "BHCA"), was incorporated in 1973 under the
laws of Maryland. Republic Corporation provides a wide range of financial
products and services principally through five broad business segments:
- Private Banking
- Consumer Financial Services
- Lending
- Global Treasury
- Global Markets
The principal banking subsidiary of Republic Corporation is Republic
National Bank of New York ("REPUBLIC BANK"), which, along with its subsidiaries,
accounted for approximately 93 percent of the consolidated assets of Republic
Corporation on March 31, 1999. Republic Bank is active, domestically and
internationally, in the precious metals markets, the foreign currency markets
and the capital markets as a dealer and intermediary for its institutional,
corporate and individual clients. Republic Bank buys and sells banknotes
denominated in various currencies and ships U.S. dollars to and from financial
institutions in nearly 40 countries.
Republic Corporation also provides a full range of services for high-net
worth individuals throughout the world, including deposit, lending, trading,
treasury, investment management products, trust, custody, estate planning,
philanthropic advisory services and asset allocation products. Republic
Corporation also provides various retail banking, investment, insurance and home
financing services and products. Republic Corporation's lending activities
include domestic and international private banking, small business, middle
market, factoring, national and international corporations, commercial real
estate and precious metal lending.
Republic Corporation also owns approximately 49% of Safra Republic. Safra
Republic, a Luxembourg holding company, was established in 1988. Safra Republic
owns six European banks with branches in France, Switzerland, Gibraltar,
Luxembourg, Monaco and Guernsey. As of March 31, 1999, Safra Republic had total
assets of $20.9 billion, total deposits of $15.9 billion and total shareholders'
equity of $2.0 billion.
11
<PAGE> 18
Republic Corporation's other subsidiaries include Republic Business Credit
Corporation, a factoring and asset-based lender, Republic New York Securities
Corporation, a broker-dealer, and Republic Bank California National Association,
a commercial bank in California.
On March 31, 1999, Republic Corporation had total assets of $50.5 billion,
total deposits of $32.7 billion and total stockholders' equity of $3.2 billion.
The principal executive offices of Republic New York Corporation are located at
452 Fifth Avenue, New York, New York 10018 and its telephone number is (212)
525-6100. All references to Republic Corporation herein refer to Republic
Corporation and its subsidiaries, unless the context requires otherwise.
HSBC
HSBC is one of the largest banking and financial services organizations in
the world, with market capitalization of $70 billion at December 31, 1998.
HSBC's shares are held by 165,000 shareholders in more than 90 countries and
territories. It is incorporated in England with limited liability and has its
registered office and principal executive offices at 10 Lower Thames Street,
London EC3R 6AE, United Kingdom. HSBC's telephone number is 44-0171-260-0500.
Through its network of more than 5,000 offices in 79 countries and
territories, HSBC provides a comprehensive range of financial services to
personal, corporate, institutional and private banking clients.
HSBC's principal commercial banking products and services include deposits,
lending and related services, treasury and capital markets operations, trade
services, leasing, finance factoring, payments and cash management, insurance
and custodial services. HSBC also provides a comprehensive range of investment
banking and related financial services.
As of December 31, 1998, HSBC had total assets of $483 billion, total
deposits of $343 billion and total shareholders' equity of $27 billion.
MERGER SUB
On May 12, 1999, HSBC formed RNYC Merger Corporation, a Maryland
corporation ("MERGER SUB"), for the sole purpose of consummating the Merger. On
May 20, 1999, Merger Sub executed a joinder agreement and became a party to the
Agreement. As of the date of this Proxy Statement, Merger Sub has not conducted,
and does not plan to conduct, any business activities other than activities in
furtherance of the Merger.
12
<PAGE> 19
THE MERGER
GENERAL
This section of the Proxy Statement describes the material aspects of the
Merger, including the principal provisions of the Agreement. The following
information, insofar as it relates to matters contained in or contemplated by
the Agreement, is qualified in its entirety by reference to the full text of the
Agreement, which is attached as Appendix A to this Proxy Statement. Stockholders
are urged to read the Agreement in its entirety. All information contained in
this Proxy Statement with respect to HSBC and its subsidiaries has been supplied
by HSBC for inclusion herein and has not been independently verified by Republic
Corporation.
BACKGROUND OF THE MERGER
In late December 1998 and early 1999, a senior executive of HSBC and Mr.
Rodney Leach, an outside director of Safra Republic, discussed informally
whether there could be mutual interest in a transaction involving the
acquisition of Republic Corporation and Safra Republic by HSBC. The HSBC
executives inquired whether, in the event that such a transaction appeared
strategically desirable, Mr. Edmond J. Safra would be likely to give his
support, which HSBC would require as a condition to a transaction. Mr. Leach
then contacted Mr. Jeffrey Keil, who is also an outside director of Safra
Republic and a former director and president of Republic Corporation.
Conversations and meetings were then held among Messrs. Safra, Keil, Leach
and Mr. Walter Weiner, the then chief executive officer of Republic Corporation
and a director of Safra Republic. Among the issues discussed were the increasing
consolidation, globalization and competition in the banking and financial
services industries, the future financial prospects and strategic options of
Republic Corporation and Safra Republic, the desirability of HSBC as a merger
partner, Mr. Safra's health and the methodology for conducting a sale if a sale
were a potential strategic course. After considering these issues, it was
decided to respond to HSBC as described in the next paragraph. Because Republic
Corporation and Safra Republic believed that any form of auction sale process
would be highly detrimental to them, and because HSBC had stated that such a
process was unacceptable to it, such a course was not pursued.
Following these conversations and meetings, HSBC was informed that,
although neither Republic Corporation nor Safra Republic was for sale, each
institution's board of directors, as a matter of its duty to stockholders, would
consider a firm offer at a significant market premium. At a subsequent meeting
attended by Mr. Keil and representatives of HSBC, HSBC informed Mr. Keil that
HSBC would be prepared to consider making offers substantially over the then
current market prices of Republic Corporation and Safra Republic.
Republic Corporation and Safra Republic then retained financial, accounting
and legal advisors to assist them in considering a possible transaction with
HSBC. These advisors included IRR Advisors, LLC, with which Mr. Keil is
associated. Meetings were subsequently held between representatives of HSBC and
Republic Corporation and Safra Republic. Among the issues discussed at these
meetings, as well as in telephone conversations, were price, the form of
consideration, and the structure of and process for a possible transaction. At a
meeting held on March 24, 1999, the parties could not reach agreement on a
number of issues. Therefore, they mutually agreed to discontinue all
discussions.
Following the March 24 meeting, Republic Corporation and Safra Republic and
their advisors had contacts with several other institutions, none of which
indicated that it was prepared to make an offer for Republic Corporation and
Safra Republic at a significant market premium.
In mid-April, a senior executive of HSBC called Mr. Keil and indicated that
it might be productive to resume discussions. A series of meetings was then held
among the parties and their legal and financial advisors to discuss price and
other terms and conditions of a possible transaction.
13
<PAGE> 20
On April 27, 1999, Republic Corporation, Safra Republic and HSBC executed a
confidentiality agreement, and representatives of the parties commenced due
diligence. Representatives of Republic Corporation and HSBC commenced a series
of meetings to discuss the business and financial terms of the business
combination. Cleary, Gottlieb, Steen & Hamilton, counsel to HSBC, and Sullivan &
Cromwell, counsel to Republic Corporation, began the drafting and negotiation of
definitive documentation with respect to a possible business combination,
including drafts of the Agreement and a Stock Option Agreement between Republic
Corporation and HSBC (the "OPTION AGREEMENT") which HSBC stated it would require
as a condition to its willingness to enter into a definitive merger agreement
with Republic Corporation. Discussions and negotiations continued during the
following week with respect to the potential transaction, including with respect
to the financial terms of the proposed combination. Concurrently, HSBC and its
counsel had discussions and negotiations with Mr. Safra and the other proposed
parties to the Stockholders Agreement and their counsel regarding the proposed
terms of the Stockholders Agreement, which HSBC stated it would also require as
a condition to its willingness to enter into a definitive merger agreement with
Republic Corporation.
At a special joint meeting of the Board and the board of directors of Safra
Republic on May 8, 1999, senior management of Republic Corporation and Safra
Republic, together with representatives of IRR Advisers, LLC, Goldman Sachs,
Sullivan & Cromwell and Ballard Spahr Andrews & Ingersoll, LLP, special Maryland
counsel to Republic Corporation, reviewed for the Board the discussions and
contacts with HSBC to date, the financial terms of the proposed transaction with
HSBC and the proposed terms of the Agreement, the Option Agreement and the
Stockholders Agreement. Goldman Sachs delivered a presentation regarding the
global financial services environment, a review of certain strategic
alternatives for Republic Corporation and a detailed financial review of the
proposed transaction. See "OPINION OF GOLDMAN, SACHS & CO." Following this
presentation, Goldman Sachs indicated that it expected to be able to deliver its
opinion that, as of May 9, 1999, the Merger Consideration is fair from a
financial point of view to Stockholders. Representatives of Sullivan & Cromwell
reviewed the terms of the proposed Agreement, the proposed Option Agreement and
the proposed Stockholders Agreement and, together with a Ballard Spahr
representative, discussed the legal principles applicable to the Board's
decision regarding approval of the proposed Agreement and the proposed Option
Agreement. Following these discussions and extensive questions by the Board to
Republic Corporation senior management and its financial and legal advisors, the
members of the Board authorized senior management of Republic Corporation to
attempt to complete final negotiation of the proposed Agreement and the Option
Agreement.
On May 9, 1999, the Safra Republic board of directors met and reviewed and
discussed again the proposed transaction and its terms. Later in the day the
Board also met to discuss again the proposed transaction and to review the
revised terms of the proposed Agreement, the proposed Option Agreement and the
proposed Stockholders Agreement. Goldman Sachs made an additional presentation
and rendered an oral opinion that, as of May 9, 1999, the Merger Consideration
is fair from a financial point of view to Stockholders. Additional questions
were presented by the Board to Republic Corporation senior management and its
financial and legal advisors. A separate meeting was then held of the outside
directors of Republic Corporation at which the transaction was discussed further
and questions were asked of Republic Corporation's financial and legal advisors.
Following this meeting, the outside directors voted unanimously to approve the
Agreement and the Option Agreement and the transactions contemplated thereby.
The full Board then voted unanimously to approve the Merger, the Agreement and
the Option Agreement and the transactions contemplated thereby.
Early in the morning of May 10, 1999, Republic Corporation, Safra Republic
and HSBC executed and delivered the Agreement, Republic Corporation and HSBC
executed and delivered the Option Agreement and HSBC, Mr. Safra and the other
parties executed and delivered the Stockholders Agreement and a press release
was issued regarding the Merger and the Safra Republic public tender/ exchange
offer (the "OFFER").
14
<PAGE> 21
REASONS FOR THE MERGER
In reaching its conclusion that the Merger is in the best interests of and
advisable for Republic Corporation and the Stockholders, and in approving the
Merger, the Agreement, the Option Agreement and the transactions contemplated
thereby, the Board considered and reviewed with Republic Corporation's senior
management, as well as its financial and legal advisors, a number of factors,
including the following:
- the strategic options available to Republic Corporation
- competitive conditions in the financial services industry
- the terms of the Merger, the Agreement and the Option Agreement as
negotiated, and the terms of the Stockholders Agreement
- the fact that the Merger Consideration on a per share basis represented a
substantial premium over recent market prices and book value per share of
Common Stock
- the strategic and financial review conducted by Goldman Sachs, and the
oral opinion of Goldman Sachs provided on May 9, 1999 (subsequently
confirmed in writing) that, as of such date, the Merger Consideration is
fair from a financial point of view to Stockholders
- regulatory issues related to the transaction
- the decision by Edmond J. Safra to support the transaction
- the interests of Republic Corporation's officers and directors that are
different from, or in addition to, the interests of Stockholders
generally (see "INTERESTS OF CERTAIN PERSONS"). The Board was aware of
these interests when it approved the Merger, the Agreement, the Option
Agreement and the transactions contemplated thereby
- the fact that approval of the Merger requires the consent of a majority
of the outstanding shares of Common Stock entitled to vote thereon
The foregoing discussion of the information and factors considered by the
Board is not meant to be exhaustive, but includes the material matters
considered by the Board. In reaching its determination to approve the Merger,
the Agreement, the Option Agreement and the transactions contemplated thereby,
the Board did not assign any relative or specific weight to the foregoing
factors, and individual directors may have considered various factors
differently.
OPINION OF GOLDMAN, SACHS & CO.
On May 9, 1999, Goldman Sachs orally advised the Board that, as of such
date, the Merger Consideration to be received by the Stockholders pursuant to
the Agreement is fair from a financial point of view to the Stockholders.
Goldman Sachs confirmed its oral opinion by delivering a written opinion dated
May 10, 1999. Goldman Sachs subsequently confirmed and updated its earlier
opinion by delivering a written opinion dated August 6, 1999.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED AUGUST 6,
1999, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX D
TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE OPINION OF
GOLDMAN SACHS REFERRED TO HEREIN DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW
ANY STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER. WE URGE YOU TO READ THE
OPINION IN ITS ENTIRETY.
15
<PAGE> 22
In connection with its opinion, Goldman Sachs, among other things:
- reviewed the Agreement;
- reviewed Annual Reports to Stockholders and Annual Reports on Form 10-K
of Republic Corporation for the five years ending December 31, 1998;
- reviewed certain interim reports to Stockholders and Quarterly Reports on
Form 10-Q of Republic Corporation;
- reviewed certain other communications from Republic Corporation to the
Stockholders;
- reviewed certain internal financial analyses and forecasts for Republic
Corporation prepared by its management;
- held discussions with members of the senior management of Republic
Corporation regarding the past and current business operations, financial
condition and future prospects of Republic Corporation;
- reviewed the reported price and trading activity for the Common Stock;
- compared certain financial and stock market information for Republic
Corporation with similar information for certain other companies the
securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the banking and thrift industry and other industries generally; and
- performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed that accuracy and
completeness for purposes of rendering its opinion. Goldman Sachs is not an
expert in the evaluation of loan portfolios for purposes of assessing the
adequacy of allowances for losses with respect to those portfolios. In addition,
Goldman Sachs did not review individual credit files or make an independent
evaluation or appraisal of the assets and liabilities of Republic Corporation or
any of its subsidiaries, and Goldman Sachs has not been furnished with any
evaluation or appraisal. Goldman Sachs' advisory services and its opinion have
been provided for the information and assistance of the Board in connection with
its consideration of the transaction contemplated by the Agreement and Goldman
Sachs' opinion does not constitute a recommendation as to how any Stockholder
should vote with respect to the proposed transaction.
Goldman Sachs was also engaged by Safra Republic to act as its financial
advisor in connection with the Offer. Goldman Sachs evaluated the consideration
for each of the Stockholders and Safra Republic common shareholders separately
in order to determine the fairness from a financial point of view for each.
Goldman Sachs was not requested to engage in, and did not participate in, any
negotiations with HSBC and Republic Corporation or Safra Republic. In addition,
Goldman Sachs was requested to contact and solicit indications of interest from
only a limited number of third parties in acquiring all or part of Republic
Corporation and was not requested to contact or solicit indications of interest
from third parties with respect to acquiring Safra Republic.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Board on May
9, 1999. Goldman Sachs used substantially the same type of financial analyses in
connection with providing its written opinion dated May 10, 1999 and its written
opinion dated August 9, 1999, attached hereto as Appendix D. The summary of
financial analyses includes information presented in tabular format. THE TABLES
SHOULD BE READ TOGETHER WITH THE TEXT.
Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Common Stock and analyzed the
Merger Consideration in relation to the price of the Common Stock on the
dates referenced below. This analysis indicated that the Merger
Consideration represented a 20% premium to the closing market price on the
NYSE of $60.125 on May 3, 1999 as reported by Bloomberg L.P. (the "MAY 3
RECENT MARKET PRICE"), and a 55%
16
<PAGE> 23
premium to the closing market price on the NYSE of $46.5625 on April 1,
1999 as reported by Bloomberg L.P. (the "APRIL 1 UNDISTURBED MARKET
PRICE"). Goldman Sachs also analyzed the Merger Consideration as multiples
of earnings per share ("EPS") and book value per share for Common Stock.
This analysis indicated that the Merger Consideration reflected:
- a multiple of 50.3x latest twelve months ("LTM") EPS at March 31, 1999;
- a multiple of 21.4x LTM EPS at March 31, 1999 before restructuring
charges and writeoffs;
- a multiple of 18.1x estimated 1999 EPS provided by Republic Corporation;
and
- a multiple of 3.2x tangible book value per share at March 31, 1999.
In addition, Goldman Sachs reviewed the historical monthly trading
prices for the five-year period ending April 30, 1999 for the Common Stock
and the relationship between these Common Stock prices and movements in:
- the S&P 500;
- a composite index of seven selected companies in the banking and thrift
industry, comprised of GreenPoint Financial Corp., North Fork
Bancorporation, Inc., Astoria Financial Corporation, Dime Bancorp, Inc.,
Sovereign Bancorp, Inc., Peoples Bancorp Inc. and Webster Financial
Corporation (the "SELECTED BANKS AND THRIFTS");
- a composite index of six selected U.S. Money Center Banks comprised of
Citigroup Inc., Bank of America Corporation, Bank One Corporation, The
Chase Manhattan Corporation, First Union Corporation and Fleet Financial
Group, Inc. (pro forma for its acquisition of BankBoston Corporation)
(the "SELECTED NATIONAL MONEY CENTER BANKS"); and
- a composite of three other comparable companies comprised of Mellon Bank
Corporation, Northern Trust Corporation and UST Corp. (the "OTHER
COMPARABLE COMPANIES").
Goldman Sachs also reviewed the monthly historical trading prices for
the Common Stock for the five-year period ending April 30, 1999 as a
multiple of book value per share of the Common Stock and as a multiple of
I/B/E/S International, Inc. ("IBES") estimates for forward twelve month
EPS. IBES is a data service that monitors and publishes compilations of
earnings estimates by selected research analysts regarding companies of
interest to institutional investors.
Comparison of Selected Companies. Goldman Sachs reviewed and compared
certain financial information relating to Republic Corporation to
corresponding financial information, ratios and public market multiples for
the Selected Banks and Thrifts, the Selected National Money Center Banks
and the Other Comparable Companies (collectively, the "SELECTED
COMPANIES"). The Selected Companies were chosen because they are publicly
traded companies in the banking and thrift industry and for purposes of
this analysis may be considered similar to Republic Corporation. Goldman
Sachs calculated and compared various financial multiples and ratios,
including price/EPS ("P/E") ratios. The multiples and ratios for Republic
Corporation were based on estimated 1999 EPS provided by Republic
Corporation and estimated 2000 EPS based on the estimated 1999 EPS and an
assumed annual growth rate of 7.5% (as provided by Republic Corporation)
and the multiples for each of the Selected Companies were based on the most
recent publicly available information. Furthermore, the multiples for
Republic Corporation were calculated:
(1) assuming a price of $46.5625 per share (the April 1 Undisturbed
Market Price) (the "APRIL 1 UNDISTURBED MARKET PRICE CASE");
(2) assuming a price of $60.125 per share (the May 3 Recent Market
Price) (the "MAY 3 RECENT MARKET PRICE CASE"); and
(3) assuming the price of $72 per share of Common Stock to be
received in connection with the Merger (the "MERGER PRICE CASE").
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<PAGE> 24
The following table compares selected ratios and multiples for
Republic Corporation and the Selected Companies:
<TABLE>
<CAPTION>
SELECTED COMPANIES REPUBLIC CORPORATION
--------------------- -------------------------------
MAY 3
APRIL 1 RECENT
UNDISTURBED MARKET MERGER
MARKET PRICE PRICE
RANGE MEDIAN PRICE CASE CASE CASE
----------- ------ ----------- ------ ------
<S> <C> <C> <C> <C> <C>
P/E ratio using estimated 1999 EPS... 11.0x-26.4x 14.9x 11.7x 15.1x 18.1x
P/E ratio using estimated 2000 EPS... 10.0x-23.6x 13.0x 10.9x 14.1x 16.8x
Price as a multiple of book value per
share.............................. 1.6x-6.9x 2.9x 1.8x 2.3x 2.8x
Price as a multiple of tangible book
value per share.................... 2.2x-8.9x 4.0x 2.1x 2.7x 3.2x
</TABLE>
Financial data for the Selected Companies in the foregoing analyses is for
the year ended December 31, 1998, except for financial data for Republic
Corporation, which is for the twelve months ended March 31, 1999. EPS
estimated for the Selected Companies in the foregoing analyses were based
on latest median EPS estimates from IBES, except for EPS estimated for Bank
of America Corporation, which were based on Goldman Sachs' estimates.
Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis for the Common Stock on a stand-alone basis through
2008. The analysis was performed using estimated 1999 EPS of $3.98 provided
by Republic Corporation and a compound annual growth rate ("CAGR") of 7.0%.
Goldman Sachs calculated the net present value of dividends from 1999 to
2008 using these EPS estimates, a target capital ratio of 6.5% of assets,
the assumption that all excess capital was paid out in the form of
dividends and discount rates of 11.0%, 13.0%, 15.0% and 17.0%. Goldman
Sachs calculated terminal values based on P/E multiples ranging from 14.0x
estimated 2009 EPS to 22.0x estimated 2009 EPS and then discounted these
terminal values using discount rates of 11.0%, 13.0%, 15.0% and 17.0%. This
analysis showed that the implied share values ranged from a low of $36 to a
high of $80. Goldman Sachs also performed a discounted cash flow analysis
assuming a constant terminal multiple of 18.0x and EPS CAGR ranging from
3.0% to 11.0%. All of the other assumptions were the same as in the
foregoing discounted cash flow analysis. This analysis showed that the
implied share values ranged from a low of $37 to a high of $84.
Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to 25 selected transactions since 1997 in the banking
and thrift industry with an announced deal value greater than $1 billion
(the "SELECTED TRANSACTIONS").
The following table compares information with respect to the Merger
and the ranges, medians and means for the Selected Transactions:
<TABLE>
<CAPTION>
THE
SELECTED TRANSACTIONS MERGER
------------------------------ ------
MERGER
PRICE
RANGE MEAN MEDIAN CASE
----------- ----- ------ ------
<S> <C> <C> <C> <C>
Purchase price as a multiple of LTM EPS............ 19.2x-69.5x 26.7x 23.7x 21.4x
Purchase price as a multiple of tangible book value
per share of common stock........................ 2.4x-6.0x 4.1x 4.0x 3.2x
Purchase price as a multiple of book value per
share of common stock............................ 2.1x-5.4x 3.6x 3.6x 2.8x
</TABLE>
Theoretical Value of Republic Corporation Excluding Safra
Republic. Goldman Sachs analyzed the portion of the Merger Consideration
attributable to Republic Corporation's business excluding its 49% ownership
of Safra Republic ("REPUBLIC CORPORATION REMAINING BUSINESS") as multiples
of EPS and book value per share attributable to the Republic Corporation
Remaining Business as compared to the Merger Consideration as multiples of
EPS and book value per share of Republic Corporation and as compared to the
portion of the Merger Consideration attributable to Republic
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<PAGE> 25
Corporation's investment in Safra Republic ("REPUBLIC CORPORATION'S SAFRA
INVESTMENT") as multiples of EPS and book value per share attributable to
Republic Corporation's Safra Investment. For the purposes of this analysis,
it was assumed that:
- Republic Corporation received $72 for each share of Safra Republic common
stock held by it;
- Republic Corporation had a tax basis of $864.1 million in these shares of
Safra Republic common stock; and
- Republic Corporation was taxed at a rate of 35% of the proceeds.
The following table compares selected ratios and multiples for the
Republic Corporation Remaining Business, Republic Corporation and Republic
Corporation's Safra Investment:
<TABLE>
<CAPTION>
REPUBLIC
CORPORATION REPUBLIC
REMAINING REPUBLIC CORPORATION'S
BUSINESS CORPORATION SAFRA INVESTMENT
----------- ----------- ----------------
<S> <C> <C> <C>
P/E ratio using LTM EPS........................... 22.6x 21.4x 18.7x
P/E ratio using estimated 1999 EPS provided by
Republic Corporation............................ 17.8x 18.1x 19.1x
Price as a multiple of book value per share at
December 31, 1998............................... 3.05x 2.79x 2.24x
Price as a multiple of tangible book value per
share at December 31, 1998...................... 3.74x 3.19x 2.24x
</TABLE>
Goldman Sachs then performed the same analysis assuming no tax on
Republic Corporation's realization of the value of Republic Corporation's
Safra Investment. The following table compares selected ratios and
multiples for the Republic Corporation Remaining Business, Republic
Corporation and Republic Corporation's Safra Investment assuming no tax on
Republic Corporation's realization of the value of Republic Corporation's
Safra Investment:
<TABLE>
<CAPTION>
REPUBLIC
CORPORATION REPUBLIC
REMAINING REPUBLIC CORPORATION'S
BUSINESS CORPORATION SAFRA INVESTMENT
----------- ----------- ----------------
<S> <C> <C> <C>
P/E ratio using LTM EPS.............................. 20.3x 21.4x 24.2x
P/E ratio using estimated 1999 EPS provided by
Republic Corporation............................... 16.0x 18.1x 24.7x
Price as a multiple of book value per share at
December 31, 1998.................................. 2.74x 2.79x 2.90x
Price as a multiple of tangible book value per share
at December 31, 1998............................... 3.36x 3.19x 2.90x
</TABLE>
The amount of EPS attributable to the Republic Corporation Remaining
Business and Republic Corporation's Safra Investment in the foregoing
analyses were based on estimates provided by Republic Corporation and
equity accounting of earnings for Republic Corporation's Safra Investment
based on a 49% ownership of Safra Republic, adjusted for the tax difference
between jurisdictions of Republic Corporation and Safra Republic of 21%.
Theoretical Valuation of Business Units. Goldman Sachs analyzed the
theoretical value of each of five business units of Republic Corporation:
Private Banking, Consumer Financial Services, Lending, Global Markets and
Global Treasury. For the purposes of this analysis, valuation ranges were
assumed to be:
- 18.0x to 22.0x LTM earnings for Private Banking;
- 15.0x to 20.0x LTM earnings for Consumer Financial Services;
- 10.0x to 15.0x LTM earnings for Lending;
- 1.40x to 1.80x book value for Global Markets; and
- 1.00x to 1.20x book value for Global Treasury.
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<PAGE> 26
It was further assumed that the business units were sold for cash, the tax
rate on these sales was 35% and Republic Corporation's tax basis in the
business units was equal to the tangible book value per share of the Common
Stock. This analysis indicated that the theoretical value per share of
Republic Corporation as a result of selling all of the business units
ranged from $41 to $51 per share. Before taxes, the theoretical value per
share under this analysis would range from $52 to $66 per share. The actual
amount of taxes will depend on a number of factors including, but not
limited to, the structure of each individual transaction, the order of each
sale, the tax basis of the assets of each business unit and the tax rate
applied to each transaction. Earnings and book value of each business unit
were based on the segment analysis as presented in Republic Corporation's
1998 Annual Report on Form 10-K.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all these analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Republic Corporation or the Merger. The analyses were prepared for purposes of
Goldman Sachs' providing its opinion to the Board as to the fairness of the
Merger Consideration from a financial point of view, and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by these analyses. Because these analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, future results
may differ materially from those forecast.
As described above, Goldman Sachs' opinion to the Board was one of many
factors taken into consideration by the Board in making its determination to
approve the Merger and the Agreement. The foregoing summary does not purport to
be a complete description of the analysis performed by Goldman Sachs and is
qualified by reference to the written opinion of Goldman Sachs set forth in
Appendix D to this Proxy Statement.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Republic Corporation
selected Goldman Sachs as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the Merger. Goldman Sachs is familiar with Republic
Corporation, having provided certain investment banking services to Republic
Corporation from time to time, including having acted as its financial advisor
in connection with the Agreement.
Goldman Sachs provides a full range of financial advisory and securities
services, may in the future provide financial advisory services to HSBC, and, in
the course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of Republic
Corporation, Safra Republic or HSBC for its own account and for the account of
customers.
Pursuant to a letter agreement, dated May 7, 1999 (the "GOLDMAN SACHS
ENGAGEMENT LETTER"), Republic Corporation engaged Goldman Sachs to act as its
financial advisor in connection with the Merger. Pursuant to the terms of the
Goldman Sachs Engagement Letter, Republic Corporation has agreed to pay Goldman
Sachs upon consummation of the Merger, a transaction fee equal to 0.10% of the
aggregate consideration paid in the Merger (a fee of approximately $7.6
million). Republic Corporation has agreed to reimburse Goldman Sachs for
reasonable out-of-pocket expenses, including fees and disbursements for Goldman
Sachs' counsel, plus any sales, use or similar taxes (including additions to
such taxes, if any) arising in connection with the matters referred to in the
Goldman Sachs Engagement Letter. Republic Corporation has also agreed to
indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws. Pursuant to a separate letter
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<PAGE> 27
agreement, Safra Republic engaged Goldman Sachs to act as its financial advisor
in connection with the Offer. Pursuant to the terms of this letter agreement,
Safra Republic has agreed to pay Goldman Sachs upon consummation of the Offer, a
transaction fee equal to 0.10% of the aggregate consideration paid in the Offer
(a fee of approximately $2.6 million). Safra Republic has also agreed to
indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws.
THE AGREEMENT
The following is a summary of the material terms of the Agreement, a copy
of which is attached hereto as Appendix A. All references to and summaries of
the Agreement in this Proxy Statement are qualified in their entirety by
reference to the Agreement.
THE MERGER
The Agreement provides that, subject to the approval of the Merger by
Stockholders, approval by certain regulatory authorities, and satisfaction of
certain other conditions, Merger Sub will merge with and into Republic
Corporation. After the Merger, Merger Sub will no longer be a separate
corporation. Republic Corporation will survive the Merger. Immediately following
the Merger, Republic Corporation, as the "SUCCESSOR CORPORATION", will be a
subsidiary of HSBC with all its common stock owned by HSBC. As a result of the
Merger, all of the properties, assets, rights, privileges, immunities, powers
and purposes of Republic Corporation and Merger Sub will vest in the Successor
Corporation. All liabilities and obligations of Republic Corporation and Merger
Sub will become the liabilities and obligations of the Successor Corporation.
For accounting purposes, the Merger will be accounted for as a purchase.
CLOSING DATE AND EFFECTIVE TIME
Subject to the provisions of the Agreement, on the closing date (the
"CLOSING DATE"), articles of merger will be filed with the State Department of
Assessments and Taxation of Maryland ("SDAT") by the parties in accordance with
Maryland General Corporation Law ("MGCL"). The Closing Date will be either the
third business day after the satisfaction (or waiver) of all the conditions set
forth in the Agreement, or another time or date agreed to by the parties. In
accordance with the MGCL, the Merger will become effective when the articles of
merger are accepted for record by the SDAT, or at a later time, not to exceed
thirty days after the SDAT's acceptance for record of the articles of merger,
provided in the articles of merger. In addition, on the Closing Date all other
filings and recordings required to be made under the MGCL in connection with the
Merger will be made. In this Proxy Statement, the term "EFFECTIVE TIME" refers
to the date and time when the Merger becomes effective.
THE SAFRA REPUBLIC PUBLIC TENDER/EXCHANGE OFFER
In the Offer, HSBC will offer each common shareholder of Safra Republic $72
in cash per common share or, at the shareholder's option for all or any common
shares tendered, a note of HSBC in a principal amount equal to $72 per common
share tendered. Safra Republic has given its consent to HSBC pursuant to Section
7.13 of the Agreement for HSBC to provide as optional alternate consideration
the note of HSBC. Republic Corporation will not tender its approximately 49%
common stock ownership of Safra Republic in the Offer. As a result of the Offer,
HSBC will acquire the shares of common stock of Safra Republic which are
currently owned by international investors and by Mr. Edmond J. Safra. An entity
in which Mr. Safra has an ownership interest has agreed to tender its shares of
Safra Republic common stock in the Offer (see "STOCKHOLDERS AGREEMENT") and has
indicated that it will elect to receive $72 per share in cash. As a combined
result of the Merger and the Offer, HSBC will acquire 100% of the shares of
Common Stock and, directly or indirectly, at least 66 2/3% of the shares of
common stock of Safra Republic.
TREATMENT OF SECURITIES IN THE MERGER
Common Stock. At the Effective Time, each share of Common Stock issued and
outstanding immediately prior to the Effective Time, except for those shares
described in the next sentence, will be converted into the right to receive $72
per share in cash, without interest. Shares held directly or
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<PAGE> 28
indirectly by HSBC or Republic Corporation or any of their respective wholly
owned subsidiaries (other than shares 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 held in respect of a debt previously contracted) will not convert
into the right to receive the Merger Consideration, and instead will be canceled
and will cease to exist after the consummation of the Merger. At the Effective
Time, the Common Stock will cease to exist, and holders of Common Stock will
have no rights as Stockholders, other than the rights to receive the Merger
Consideration and any dividend or distribution on the Common Stock with a record
date prior to the Effective Time. Republic Corporation will not recognize any
transfer of Common Stock that occurs on or after the Effective Time.
Preferred Stock of Republic Corporation. Each share of Republic
Corporation preferred stock will remain unchanged as the outstanding preferred
stock of Successor Corporation.
Exchange Procedures. At and after the Effective Time, stock certificates
formerly representing shares of Common Stock (each, a "CERTIFICATE") will
represent only the right to receive the Merger Consideration.
At the Effective Time, Merger Sub will deposit, or cause the deposit of an
amount (the "EXCHANGE FUND"), equal to the product of the Merger Consideration
and the number of shares of Common Stock entitled to receive the Merger
Consideration with a bank or trust company (which may be an affiliate of HSBC or
Republic Corporation). This bank or trust company is referred to as the
"EXCHANGE AGENT". The exchange fund will be deposited with the exchange agent
for the benefit of the holders of the Certificates. The holders of Common Stock
will not receive the benefit of any interest earned by the exchange fund.
Immediately after the Effective Time, the exchange agent will mail or deliver a
letter of transmittal to each holder of record of a Certificate. The letter of
transmittal will contain instructions for use by a holder surrendering
Certificates in exchange for the Merger Consideration. You should not return
Certificates with the proxy card enclosed with this Proxy Statement and should
not forward Certificates to the exchange agent or HSBC, unless and until you
receive a letter of transmittal following the Effective Time. Certificates will
be handled in accordance with the letter of transmittal.
When a Certificate is properly surrendered to the exchange agent, together
with a properly completed and duly executed letter of transmittal, the holder of
the Certificate will be entitled to receive in exchange for the Certificate a
check in an amount equal to the product of the Merger Consideration and the
number of shares of Common Stock represented by the Certificate surrendered, and
the Certificate surrendered will be canceled. No interest will be paid or accrue
on the Merger Consideration, regardless of the time it is received by a
Stockholder. In the event of a transfer of ownership of any shares of Common
Stock not registered in the transfer records of Republic Corporation, a check
for the Merger Consideration may be issued to the person to whom the shares were
transferred if the transferred Certificate is presented to the exchange agent,
accompanied by documents sufficient, in the discretion of HSBC, to evidence an
effective transfer and that all applicable stock transfer taxes have been paid.
HSBC will be entitled to deduct and withhold from the Merger Consideration such
amounts (if any) as HSBC determines are required under applicable United States
federal, state or local or foreign tax law. If amounts are withheld by HSBC, the
amounts withheld will be treated for all purposes of the Agreement as having
been paid by HSBC to the holder of the Certificate.
Unclaimed Portion of Exchange Fund. Any portion of the exchange fund that
remains unclaimed by Stockholders for twelve months after the Effective Time
will be paid to HSBC. After the remaining portion of the exchange fund is paid
to HSBC, Stockholders must look only to HSBC for payment of the Merger
Consideration in exchange for Certificates which they have not surrendered.
However, the exchange agent, HSBC, Republic Corporation, Merger Sub and the
Successor Corporation will not be liable for the payment of any amounts properly
delivered to a public official in accordance with abandoned property, escheat or
other similar laws.
Lost, Stolen or Destroyed Certificates. In the event that any Certificate
is lost, stolen or destroyed, HSBC will not be required to deliver the Merger
Consideration to the person claiming such Certificate to be lost, stolen or
destroyed unless such person makes an affidavit attesting to its ownership and,
if
22
<PAGE> 29
required by HSBC, posts a bond in an amount required by HSBC as indemnity
against any future claim against HSBC for the Merger Consideration deliverable
in respect of the Certificate.
GOVERNANCE OF SUCCESSOR CORPORATION
At the Effective Time, the directors of the Successor Corporation will be
the persons holding such positions with Merger Sub immediately prior to the
Effective Time. Such persons will continue to serve in their capacities as
directors of the Successor Corporation until their successors are elected or
appointed and qualified.
INTEGRATION OF LEGAL ENTITIES
Republic Corporation and HSBC have agreed to take all reasonably necessary
actions in order to merge or consolidate their respective subsidiaries,
including the merger of Republic Bank and HSBC Bank USA (the "BANK MERGER").
The consummation of the Bank Merger and the integration of other
subsidiaries of Republic Corporation and HSBC is not a condition to the
completion of the Merger. Obtaining regulatory approval for the Bank Merger,
however, is a condition to the consummation of the Merger. See "CONDITIONS TO
THE MERGER".
REPRESENTATIONS AND WARRANTIES
The Agreement contains representations and warranties of Republic
Corporation, Safra Republic and HSBC, including representations and warranties
regarding their respective due organization, good standing, and authority to
enter into the Agreement. Representations and warranties in the Agreement are
generally subject to a materiality qualification, meaning generally that a
breach of a representation or warranty will not occur unless such breach (1)
with respect to Republic Corporation and Safra Republic, causes a material
adverse effect on the financial condition, properties, business or results of
operations of Republic Corporation, Safra Republic and their subsidiaries, taken
as a whole; or (2) with respect to Republic Corporation, Safra Republic and
HSBC, would materially impair such company's ability to perform its obligations
under the Agreement.
HSBC has also made certain additional representations and warranties
concerning itself to Republic Corporation and Safra Republic regarding:
- availability of adequate financing for the Merger
- accuracy of financial reports
- absence of litigation and adverse regulatory actions
- absence of material adverse changes since December 31, 1998 and
- Year 2000 preparedness
Republic Corporation made additional representations and warranties
concerning itself and its subsidiaries to HSBC and Merger Sub regarding:
- capitalization and ownership of subsidiaries; good standing and authority
to do business of subsidiaries
- accurate books and records and outstanding and authorized securities
- authority to execute the Agreement and consummate the Merger;
enforceability of the Agreement
- requisite action taken to ensure nonapplicability of Maryland or other
takeover laws to the Merger, the Agreement, the Option Agreement and the
Stockholders Agreement
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<PAGE> 30
- consummation of the Merger will not violate its charter, by-laws or
applicable laws and the Merger will not cause accelerations or defaults
under agreements
- required consents and regulatory approvals for the Merger
- accuracy of financial statements and absence of material adverse changes
since December 31, 1998 and conduct of business in ordinary course since
December 31, 1998
- absence of liability for broker's or finder's fees in connection with the
Merger
- absence of a special dividend or distribution since December 31, 1998,
absence of extraordinary splits, combinations or reclassifications of
capital stock since December 31, 1998 and absence of changes in
accounting methods since December 31, 1998
- absence of pending or threatened legal actions or investigations and
absence of injunctions, orders or judgments
- employee benefit plans and compliance with applicable law, including the
U.S. tax code, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and applicable employment-related laws and regulations
- prudent entry into and required performance under derivatives instruments
and absence of undisclosed liabilities since December 31, 1998
- absence of adverse regulatory actions under environmental laws and
absence of environmental liabilities
- Year 2000 preparedness
- relations between employees and management and absence of work stoppages
and other job actions since January 1, 1996
Safra Republic made substantially the same representations and warranties
regarding itself and its subsidiaries to HSBC as were made by Republic
Corporation.
CONDUCT OF BUSINESS PENDING THE MERGER
During the period from May 10, 1999 to the Effective Time, except as
expressly contemplated or permitted by the Agreement or the Option Agreement,
Republic Corporation and Safra Republic have each agreed both as to themselves
and their subsidiaries to:
- conduct its business in the usual ordinary course consistent with past
practice
- use reasonable best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and
retain the services of key officers and key employees
- take no intentional action which would adversely affect or delay in any
material respect the ability of either HSBC, Safra Republic or Republic
Corporation to obtain any necessary regulatory approvals
- use reasonable best efforts to obtain any third party approvals that are
necessary or appropriate for the Successor Corporation to conduct the
business of Republic Corporation and its subsidiaries as currently
conducted following the Effective Time
Republic Corporation and Safra Republic have each also agreed that it will
not, nor will it permit any of its respective subsidiaries to, without the
consent of HSBC or as specifically contemplated by the Agreement:
- other than in the ordinary course of business consistent with past
practice, borrow money, except short-term borrowings to refinance
existing short-term indebtedness, borrowings under existing lines of
credit and borrowings to finance subsidiary debt owed to it, to assume,
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guarantee, or otherwise become responsible for another's obligations, or
make any loan or advance
- other than in the ordinary course of business consistent with past
practice, incur any capital expenditures, obligations or liabilities
- adjust, split, combine or reclassify any capital stock; declare or pay
any dividend, except regular quarterly cash dividends consistent with
past practice and dividends on preferred stock under the terms of the
preferred stock and dividends paid in the ordinary course of business by
any subsidiary or make any other distribution on its capital stock
- 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
- grant any additional stock options or restricted shares of capital stock
or any right to acquire any shares of capital stock or any right based on
the value of shares of capital stock
- issue any additional shares of capital stock, except in connection with
the exercise of options granted prior to May 10, 1999 under employee
benefit plans
- enter into any agreement, understanding or arrangement with respect to
the sale or voting of its capital stock
- sell or otherwise dispose or encumber any of its property or assets,
including the capital stock of its subsidiaries, other than to a wholly
owned subsidiary, or cancel, release or assign any indebtedness, except
in the ordinary course of business consistent with past practice or
pursuant to contracts or agreements in force on May 10, 1999
- make material investments in, including by capital contribution or
property transfer, or purchase the assets of, any entity other than a
wholly owned subsidiary, except in the ordinary course of business
consistent with past practice
- enter into or terminate any material agreement or lease, or make any
material change to any of its material agreements or leases, other than
renewals without material changes of terms except in the ordinary course
of business consistent with past practice
- increase the compensation, pension or fringe benefits of current or
former employees, consultants or directors of it or any of its
subsidiaries, or vest, fund or pay retirement benefits not required by
existing benefit plans disclosed in the Agreement or become a party to,
amend or commit to any benefit plan or agreement or employment,
severance, consulting, retention, change in control, termination,
deferred compensation or incentive pay agreement with or for any current
or former employee, consultant or director, or accelerate the vesting,
funding or payment of any compensation payment or benefit, other than in
the ordinary course of business consistent with past practice or as
required by law or by contracts in effect as of May 10, 1999 disclosed in
the Agreement
- change its methods of accounting in effect at December 31, 1998, except
as required by changes in generally accepted accounting principles, or
change any of its methods of reporting income and deductions for federal
income tax purposes from those used in preparing federal income tax
returns for the taxable years ending December 31, 1998 and 1997, except
as required by changes in law
- adopt or implement any amendment to its charter, certificate of
incorporation or by-laws (or similar documents) or any other plan of
merger or reorganization
- take any intentional action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth
in the 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
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not being satisfied or in a violation of any provision of the Agreement,
except, as may be required by applicable law
ADDITIONAL AGREEMENTS
The Agreement also contains the following additional agreements among
Republic Corporation, Safra Republic and HSBC.
Preparation of Proxy Solicitation Materials and Offering Documents. Each
of Republic Corporation, Safra Republic and HSBC will cooperate in the
preparation of this Proxy Statement, other proxy solicitation materials in
connection with the Special Meeting and an offer document to be filed by HSBC or
its European merger subsidiary in connection with the Offer. Republic
Corporation and Safra Republic have agreed to furnish HSBC with all information
concerning Republic Corporation and Safra Republic as HSBC may reasonably
request in connection with the preparation of these documents.
Preparation and Filing of Regulatory Notices and Applications. Republic
Corporation, Safra Republic and HSBC will prepare and file all notices and
applications with any applicable regulatory authority, and seek confirmation
that no such authority objects to the consummation of the Merger. The parties
will furnish to each other, upon request, information necessary or advisable in
connection with any notice or filing with a governmental entity or third party
and provide each other an opportunity to review in advance any filings or
written material incorporating the information. The parties will advise each
other of communications with governmental entities whose approval is necessary
for the transactions contemplated by the Agreement.
Access to Information. Republic Corporation and Safra Republic will and
will cause their subsidiaries to afford HSBC and its representatives the
opportunity to examine their books, records and reports received from or filed
with regulatory bodies and otherwise provide HSBC access to information
concerning their businesses and operations and ability to consummate the Merger,
the Offer and related transactions. Pursuant to a confidentiality agreement
dated April 27, 1999 among Republic Corporation, Safra Republic and HSBC, each
of the parties is required to keep confidential information regarding the other
parties furnished to it in connection with the Merger.
Board of Directors Recommendation. Republic Corporation has agreed that
the Board would continue to recommend approval of the Merger and the Agreement
by Stockholders, subject to certain exceptions in order for the Board to comply
with its duties.
Competing Offers. Republic Corporation has agreed that it will not and
will not allow its officers, directors, advisors or subsidiaries to directly or
indirectly solicit offers from third parties, or enter into negotiations, to
engage in a merger or acquisition, a sale of a substantial portion of its assets
or the assets of any of its significant subsidiaries, a sale of 10% or more of
the voting power of Republic Corporation or 25% or more of the voting power of
any of its significant subsidiaries, or a substantially similar transaction.
Safra Republic has agreed that it will not and will not allow its officers,
directors, advisors or subsidiaries to directly or indirectly solicit offers
from third parties, or enter into negotiations, to engage in a sale of 10% or
more of the voting power of Safra Republic or 25% or more of the voting power of
any of its subsidiaries or the sale of a substantial portion of its assets or
the assets of any of its subsidiaries. In addition, Republic Corporation and
Safra Republic have agreed that they will not disclose any nonpublic information
relating to Republic Corporation and Safra Republic or any of their subsidiaries
to any person that may be considering making a proposal to engage in such
prohibited transactions.
However, Republic Corporation and Safra Republic may negotiate with a third
party that makes an unsolicited proposal to engage in a prohibited transaction
if, in the opinion of outside counsel, it is necessary to do so in order for the
Board or the board of directors of Safra Republic to comply with their duties to
stockholders under applicable law and if such third party executes a
confidentiality agreement in connection with its receipt of nonpublic
information. If Republic Corporation or Safra Republic engages in any such
negotiations, it will notify HSBC, and will keep HSBC informed of the details
and status of negotiations. Republic Corporation and Safra Republic have agreed,
on behalf of
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themselves and their subsidiaries, directors, officers and advisors, to
terminate all discussions regarding any merger proposals from third parties
received prior to May 10, 1999. The Agreement does not prohibit Republic
Corporation or the Board from taking and disclosing to Stockholders a position
with respect to a merger proposal by a third party to the extent required under
the Securities Exchange Act of 1934, or from making any disclosure regarding
such a proposal to Stockholders which, in the judgment of Republic Corporation's
outside counsel, is required under applicable law, so long as Republic
Corporation and the Board observe all of their obligations under the Agreement.
Compliance With Legal Conditions. HSBC, Republic Corporation and Safra
Republic will use their reasonable best efforts to take all actions necessary to
comply with all legal requirements, obtain required consents and authorizations
of governmental entities and third parties, and secure the regulatory approvals
required to consummate the Merger, the Offer and the Bank Merger. HSBC, however,
is not required to agree to any legal requirement which would constitute a
Burdensome Condition (see "CONDITIONS TO THE MERGER" below).
Indemnification and Directors' and Officers' Insurance. HSBC has agreed
that the charter and by-laws of the Successor Corporation will provide for the
indemnification of present and former directors and officers of Republic
Corporation to the extent currently provided in the charter and by-laws of
Republic Corporation, and that such indemnification provisions will not be
amended or repealed for six years after the Effective Time, unless HSBC provides
the same level of indemnity to Republic Corporation's directors and officers.
HSBC will also cause the continuation of the directors' and officers' liability
insurance policies under which persons serving as directors and officers of
Republic Corporation immediately prior to the Effective Time are covered.
However, HSBC will not be required to expend more than 200% of the amount
currently expended by Republic Corporation for such insurance. HSBC also agreed
to provide for the indemnity of Republic Corporation's directors and officers in
the event HSBC merges with a third party. HSBC also undertook to continue
present indemnification for directors and officers of Safra Republic.
Advice of Changes. HSBC, Republic Corporation and Safra Republic will
promptly advise each other of the occurrence of any change or event having a
material adverse effect on it, or which it believes would cause a material
breach of any of its representations, warranties or covenants contained in the
Agreement, or that would be reasonably likely to prevent or delay the
satisfaction of any of the conditions in the Agreement.
Employee Benefits. From and after the Effective Time, for purposes of
eligibility and vesting (but not for purposes of benefit accruals), HSBC will,
or will cause the Successor Corporation to, recognize prior service recognized
under the plans of Republic Corporation or Safra Republic or any of their
subsidiaries of each employee of Republic Corporation or Safra Republic or any
of their subsidiaries as of the Effective Time ("REPUBLIC EMPLOYEES" and "SRH
EMPLOYEES," respectively) as service under HSBC's or its subsidiaries' employee
benefit plans in which such Republic Employees and SRH Employees are eligible to
participate following the Effective Time. Beginning at the Effective Time, HSBC
will waive, or will cause the Successor Corporation to waive, any pre-existing
conditions or limitations and eligibility waiting periods under any group health
plans of HSBC with respect to Republic Employees and SRH Employees and their
eligible dependents, to the extent that those persons were covered or would have
been covered under the group health plans of Republic Corporation or Safra
Republic immediately prior to the Effective Time. Beginning at the Effective
Time, HSBC will give, or will cause the Successor Corporation to give, Republic
Employees and SRH Employees credit for the plan year in which they begin
participation in HSBC's plans towards applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the commencement of
participation. Beginning at the Effective Time, the Successor Corporation will
honor in accordance with its terms each Company Benefit Plan (as defined in the
Agreement).
BONUSES AND PROFIT SHARING
Republic Corporation has provided that 1999 employee incentive compensation
bonuses, including contractual, performance, sales programs and other incentive
awards, and profit sharing awards will be
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paid in accordance with Republic Corporation's past practice, subject to the
continued achievement of Republic Corporation's 1999 individual unit and
corporate-wide business plans.
STOCK OPTIONS AND OTHER AWARDS
Options to Purchase Common Stock. At the Effective Time, each option to
purchase a share of Common Stock ("REPUBLIC STOCK OPTION") that is outstanding
and unexercised under Republic Corporation's 1985 Incentive Stock Option Plan,
1985 Non-Qualified Stock Option Plan, 1995 Long Term Incentive Stock Plan and
other equity-based plans or agreements of Republic Corporation or its
subsidiaries (including Safra Republic) providing for the granting of options to
purchase Common Stock will be canceled, whether or not it has vested. Holders of
a vested Republic Stock Option will be entitled to receive as soon as
practicable after the Effective Time from the Successor Corporation (or a trust
established in connection with the Republic Stock Options) the excess, if any,
of the Merger Consideration over the exercise price of the Republic Stock Option
under the terms of the Republic Stock Option less any amounts required to be
withheld under applicable tax law (the "REPUBLIC STOCK OPTION CONSIDERATION").
The Successor Corporation (or a trust established in connection with the
Republic Stock Options) will pay to each holder of a Republic Stock Option that
has not vested at the Effective Time the Republic Stock Option Consideration in
respect of such option as soon as practicable after the time when (but only if)
the Republic Stock Option would have vested if not canceled. In the event that a
holder of a Republic Stock Option that would have been outstanding (had it not
been cancelled) is terminated without cause, the holder will be entitled to
payment of the Republic Stock Option Consideration as if the option had vested
on the date of termination. No holder of a Republic Stock Option (whether or not
it has vested) will be entitled to the Republic Stock Option Consideration in
respect of the Republic Stock Option unless the holder has signed a consent to
the cancellation of the Republic Stock Option in a form prescribed by HSBC.
Restricted Stock of Republic Corporation. At the Effective Time, each
share of restricted Common Stock outstanding and not yet vested under Republic
Corporation's 1985 Restricted Stock Plan, the Restricted Stock Election Plan,
1995 Long Term Incentive Stock Plan and other equity-based plans or agreements
of Republic Corporation or its subsidiaries providing for the granting of awards
of shares of restricted Common Stock will be canceled. The Successor Corporation
(or a trust adopted in connection with an equity award plan) will pay to each
holder of a share of restricted Common Stock the Merger Consideration (plus
interest as agreed by Republic Corporation and HSBC) as soon as practicable
after the date when (but only if) the share of restricted Common Stock would
have vested had it not been canceled. If a holder of a share of restricted
Common Stock that would have been outstanding (had it not been canceled) is
terminated without cause, the holder will be entitled to payment of the Merger
Consideration (plus interest as described above) as if the holder's restricted
Common Stock had vested on the date of termination. No holder of shares of
restricted Common Stock will be entitled to any payment for the shares unless
the holder has signed a consent to the cancellation of shares of restricted
Common Stock in a form prescribed by HSBC. All amounts paid to holders of shares
of restricted Common Stock will be less amounts required to be withheld under
applicable tax law.
1998 Long Term Incentive Compensation Plan. The right of employees under
the Republic Corporation 1998 Long Term Incentive Compensation Plan to make
additional investments in Common Stock ceased on May 10, 1999. At the Effective
Time, any portion of an award granted under the 1998 Long Term Incentive
Compensation Plan invested in, or measured by reference to the value of, a share
of Common Stock will convert into a dollar credit under the plan equal to the
Merger Consideration. As agreed by Republic Corporation and HSBC, if a Republic
Employee is terminated without cause, the Republic Employee will be entitled to
amounts payable on his or her awards as if the awards had vested on the date of
termination. All amounts paid on awards will be less amounts required to be
withheld under applicable tax law.
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CONDITIONS TO THE MERGER
All Parties. Each party's obligation to effect the Merger is subject to
the satisfaction at, or prior to, the Effective Time of the following
conditions:
- The Agreement and the Merger must be approved by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock.
- All of the regulatory approvals required to consummate the Merger, the
Offer and the Bank Merger (the "REQUISITE REGULATORY APPROVALS") must
have been obtained and remain in full force and effect.
- No court of competent jurisdiction shall have issued an order,
injunction, decree or other restraint preventing the consummation of the
Merger, or the related material transactions contemplated by the
Agreement, that is then in effect, and no governmental entity shall have
enacted a statute, rule, regulation or order which prohibits or
materially restricts the consummation of the Merger.
HSBC and Merger Sub. The obligations of HSBC and Merger Sub to effect the
Merger are subject to the satisfaction of the following conditions (unless
waived by HSBC):
- Subject to any applicable materiality qualifications, each representation
and warranty of Republic Corporation and Safra Republic must be true and
correct as of the Closing Date (or such earlier date as may be specified
in the representation and warranty). See "REPRESENTATIONS AND WARRANTIES"
above. Republic Corporation and Safra Republic will deliver certificates
to this effect to HSBC, signed by their respective chief executive
officers and chief financial officers.
- Republic Corporation and Safra Republic must have performed in all
respects all of their obligations under the Agreement on or prior to the
Closing Date, except for failures to comply that would not be reasonably
likely, individually or together, to have a material adverse effect on
Republic Corporation and Safra Republic and their subsidiaries. This
exception for failures to perform obligations that would not have a
material adverse effect on Republic Corporation and Safra Republic and
their subsidiaries will not apply to any failure by Republic Corporation
or Safra Republic to obtain the Board's recommendation and approval of
the Merger, to comply with covenants forbidding solicitation of other
offers to purchase Republic Corporation and Safra Republic and to comply
with covenants related to the convening of the Special Meeting and
obtaining the approval of the Agreement by Stockholders. Republic
Corporation and Safra Republic will each deliver a certificate stating
that it has complied with these requirements to HSBC, signed by its
respective chief executive officer and chief financial officer.
- All approvals (other than the Requisite Regulatory Approvals) that are
necessary for the conduct by the Successor Corporation of the business of
Republic Corporation and its subsidiaries as conducted following the
Effective Time must have been obtained and must remain in full force and
effect, except for approvals the failure of which to obtain would not
result in a material adverse effect on Republic Corporation and Safra
Republic.
- No governmental entity shall have commenced litigation seeking to
restrain, prevent or unwind the Merger or impose material sanctions or
penalties as a result of the Merger, or seeking to prevent HSBC from
having full authority to control and manage the Successor Corporation or
Safra Republic after the Effective Time.
- The directors of Republic Corporation, Safra Republic and their
subsidiaries must have resigned, unless HSBC requests otherwise.
- No Requisite Regulatory Approval shall have imposed a condition which, in
the judgment of the board of directors of HSBC, would reduce the benefits
to HSBC of the Merger, the Offer and the Bank Merger (taken as a whole)
to such an extent that had these conditions been known to HSBC on May 10,
1999, it would not have entered into the Agreement (a "BURDENSOME
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CONDITION"). HSBC has agreed that conditions related to the integration
of computer systems and certain conditions related to additional capital
requirements in connection with the Bank Merger would not be considered a
Burdensome Condition.
- Immediately prior to the Effective Time, taking into account all shares
validly tendered pursuant to the Offer and assuming consummation of the
Merger, HSBC would own at least 66 2/3% of the common stock of Safra
Republic.
Republic Corporation. The obligation of Republic Corporation to effect the
Merger is subject to the satisfaction of the following conditions:
- Subject to any applicable materiality qualifications, each representation
and warranty of HSBC must be true and correct as of the Closing Date (or
such earlier date as may be specified in the representation and
warranty). See "REPRESENTATIONS AND WARRANTIES" above. HSBC will deliver
a certificate to this effect signed by its group financial director to
Republic Corporation and Safra Republic.
- HSBC must have performed in all respects all of its obligations under the
Agreement on or prior to the Closing Date, except for failures to comply
that would not be reasonably likely, individually or together, to have a
material adverse effect on HSBC. HSBC will deliver a certificate to this
effect signed by its group financial director to Republic Corporation and
Safra Republic.
- The Offer must have closed or be simultaneously closing at the Effective
Time, and HSBC must have provided evidence reasonably satisfactory to
Republic Corporation and Safra Republic that it will purchase the shares
of Safra Republic common stock tendered in connection with the Offer.
TERMINATION
Termination By Consent of Parties. The Agreement may be terminated at any
time prior to the Effective Time, even if the Stockholders have approved the
Merger, if HSBC, Republic Corporation and Safra Republic agree in writing to
terminate the Agreement.
Termination By Any Party.
- Any of HSBC, Republic Corporation or Safra Republic may terminate the
Agreement if any governmental entity which must grant a Requisite
Regulatory Approval has denied approval of the Merger and the denial has
become final and nonappealable, or any governmental entity of competent
jurisdiction has issued a final nonappealable injunction permanently
enjoining or otherwise prohibiting the transactions contemplated by the
Agreement.
- Any of HSBC, Republic Corporation or Safra Republic may terminate the
Agreement if the Merger has not been consummated by December 31, 1999,
unless the failure is caused because the party seeking to terminate the
Agreement has failed to perform its obligations under the Agreement.
- HSBC may terminate the Agreement if there has been a material breach of
any of the covenants or agreements or any of the representations or
warranties in the Agreement on the part of Republic Corporation or Safra
Republic which is not cured within 30 days following written notice to
the party committing the breach, or cannot be cured prior to December 31,
1999. Republic Corporation or Safra Republic may terminate the Agreement
if there has been a material breach of any of the covenants or agreements
or any of the representations or warranties in the Agreement on the part
of HSBC which is not cured within 30 days following written notice to
HSBC, or cannot be cured prior to December 31, 1999. In order to be a
cause for termination by any party a breach must constitute, either
individually or together with other breaches, the failure of the
obligations of the breaching party described under "CONDITIONS TO THE
MERGER".
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Termination By HSBC or Republic Corporation. Either HSBC or Republic
Corporation may terminate the Agreement if Stockholders fail to approve the
Merger.
Termination By HSBC. HSBC may terminate the Agreement under the following
circumstances:
- if the Board withdraws or modifies in a manner adverse to HSBC its
favorable recommendation of the Merger;
- if the board of directors of Safra Republic recommends that the
shareholders of Safra Republic not accept the cash consideration in the
Offer;
- if either Republic Corporation or Safra Republic negotiates with a third
party in connection with an offer to acquire Republic Corporation or
Safra Republic; or
- if any governmental entity which must grant a Requisite Regulatory
Approval has granted the approval subject to a Burdensome Condition and
the Burdensome Condition has become final and nonappealable.
AMENDMENT
The Agreement may be amended in writing by agreement of the parties at any
time, except that after approval of the Merger by Stockholders, no amendment may
be made without the approval of Stockholders to the extent such approval is
required by the MGCL. HSBC and Republic Corporation may amend the Agreement
without the consent of Safra Republic if the amendment does not affect the terms
and conditions of the Offer.
EXTENSION; WAIVER
At any time prior to the Effective Time, any party to the Agreement may, to
the extent legally allowed, extend the time for the performance of any of the
obligations or other acts of the other parties, waive inaccuracies in the
representations and warranties of the other parties contained in the Agreement
or in any document delivered pursuant to the Agreement, or waive compliance by
any other party with any of the conditions and agreements contained in the
Agreement for the benefit of the waiving party.
EXPENSES
Whether or not the Merger is completed, the parties will each pay their own
fees and expenses in connection with the Merger, except that Republic
Corporation and HSBC will evenly divide the costs and expenses of printing and
mailing this Proxy Statement and the filing fee that has been paid to the
Securities and Exchange Commission in connection with this Proxy Statement.
NO APPRAISAL RIGHTS
Under Maryland law, Stockholders have no dissenters' appraisal rights in
connection with the Merger.
STOCK OPTION AGREEMENT
HSBC required that Republic Corporation enter into the Option Agreement in
order to induce HSBC to enter into the Agreement. Republic Corporation's entry
into the Option Agreement is also part of the consideration received by HSBC in
exchange for entering into the Agreement. The Option Agreement was entered into
by Republic Corporation and HSBC on May 10, 1999.
The following description of the Option Agreement is qualified in its
entirety by reference to the text of the Option Agreement, a copy of which is
attached to this Proxy Statement as Appendix B and which is incorporated by
reference into this Proxy Statement.
Acquirors and target corporations often enter into arrangements such as the
Option Agreement in connection with mergers and acquisitions in order to
increase the likelihood that the transactions will be consummated. Agreements
such as the Option Agreement compensate the acquiror for its efforts
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and the expenses, losses and opportunity costs incurred by it if the merger is
not consummated because a third party acquires or attempts to acquire the target
corporation. Republic Corporation and HSBC entered into the Option Agreement to
accomplish these objectives. The Option Agreement may discourage third parties
from offering to acquire Republic Corporation prior to the Merger, even if a
third party were prepared to pay Stockholders a higher price than the Merger
Consideration.
Under the Option Agreement, Republic Corporation granted HSBC an
unconditional, irrevocable option (the "OPTION") to purchase up to 20,929,000
shares of Common Stock. This number of shares may be increased in the event that
Republic Corporation issues Common Stock after May 10, 1999, so that the amount
of shares of Common Stock subject to purchase under the Option equals 19.9% of
the outstanding Common Stock. However, the number of shares subject to purchase
under the Option Agreement may not exceed 19.9% of the number of outstanding
shares of Common Stock.
The exercise price of the Option is $72 per share, which is the same amount
as the Merger Consideration. The exercise price is subject to adjustment in the
event of a stock split, stock dividend, recapitalization or other similar
occurrence.
The Option will become exercisable in whole or in part if both an "INITIAL
TRIGGERING EVENT" and a "SUBSEQUENT TRIGGERING EVENT" occur prior to the
occurrence of an "EXERCISE TERMINATION EVENT". These terms are defined below.
The Option Agreement defines the term "INITIAL TRIGGERING EVENT" to mean
any one of the following events or transactions:
- Republic Corporation or any of its subsidiaries, without HSBC's prior
written consent, agrees to engage with a third party in a merger or
acquisition involving Republic Corporation or any of its significant
subsidiaries (that is, a subsidiary which comprises at least 10% of the
assets of Republic Corporation), a sale of all or a substantial portion
of the assets of Republic Corporation or any significant subsidiary, or a
sale of 10% or more of the voting power of Republic Corporation or 25% or
more of the voting power of any significant subsidiary (the "ACQUISITION
TRANSACTION") or the Board recommends that Stockholders approve or accept
any such Acquisition Transaction.
- Republic Corporation or any of its subsidiaries, without HSBC's consent,
authorizes, recommends, proposes (or publicly announces its intention to
authorize, recommend or propose) to engage in an Acquisition Transaction
with a third party, or authorizes or engages in (or publicly announces
its intention to authorize or engage in) any negotiations regarding an
Acquisition Transaction with a third party, or the Board fails to
recommend or publicly withdraws or modifies (or publicly announces its
intention to withdraw or modify), in any manner adverse to HSBC, its
recommendation that Stockholders approve the Merger and the Agreement, in
connection with an Acquisition Transaction.
- Stockholders vote and fail to approve the Merger and the Agreement at the
Special Meeting, or the Special Meeting is not held or is canceled prior
to the termination of the Agreement if, prior to the Special Meeting (or
if the Special Meeting is not held or is canceled, prior to such
termination), any third party makes, or discloses an intention to make, a
public proposal to engage in an Acquisition Transaction.
- A third party acquires or obtains the right to acquire 10% or more of the
outstanding shares of Common Stock, or any group which does not include
HSBC or a subsidiary of HSBC is formed which owns 10% or more of the
shares of Common Stock then outstanding.
- A third party makes a proposal to Stockholders to engage in an
Acquisition Transaction.
- Republic Corporation breaches any covenant or obligation contained in the
Agreement in anticipation of engaging in an Acquisition Transaction, if
the breach would allow HSBC to terminate the Agreement and is not cured
prior to the date on which HSBC sends a written notice to Republic
Corporation stating that it intends to exercise the Option.
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- A third party files an application or notice with any federal or state
regulatory or governmental authority for approval or notice of intention
to engage in an Acquisition Transaction.
The Option Agreement defines the term "SUBSEQUENT TRIGGERING EVENT" to mean
either of the following:
- A third party or group which does not include HSBC or a subsidiary
acquires 25% or more of the outstanding Common Stock.
- Republic Corporation or any of its subsidiaries, without HSBC's consent,
agrees with a third party to engage in an Acquisition Transaction, except
that, for purposes of this paragraph only, "ACQUISITION TRANSACTION"
means a merger or acquisition involving Republic Corporation or any of
its significant subsidiaries, sale of all or a substantial portion of the
assets of Republic Corporation or any subsidiary which comprises at least
25% of the assets of Republic Corporation, or sale of 25% or more of the
voting power of Republic Corporation or 25% or more of the voting power
of any subsidiary which comprises at least 25% of the assets of Republic
Corporation.
The Option Agreement defines the term "EXERCISE TERMINATION EVENT" to mean
any one of the following:
- the Effective Time;
- Termination of the Agreement prior to the occurrence of an Initial
Triggering Event, unless HSBC terminates the Agreement as a result of a
breach of a covenant or a willful breach of a representation by Republic
Corporation; or
- 18 months after the termination of the Agreement, subject to extension in
order to obtain required regulatory approvals, if the termination is
concurrent with or follows an Initial Triggering Event or if HSBC effects
the termination in response to a breach of a covenant or a willful breach
of a representation by Republic Corporation. However, if an Initial
Triggering Event continues or occurs beyond the termination and prior to
the end of the 18-month period, the Exercise Termination Event will be 12
months from the expiration of the last Initial Triggering Event to expire
but in no event later than 18 months after the termination.
The purchase of any shares of Common Stock by exercise of the Option is
subject to compliance with applicable law, including the receipt of necessary
approvals under the BHCA.
EXERCISE OF THE OPTION
If the Option becomes exercisable, HSBC may exercise it, in whole or in
part, and from time to time upon written notice to Republic Corporation
specifying the number of shares to be purchased and the date of purchase, which
must be between 3 and 60 business days from the day the notice is sent to
Republic Corporation. HSBC's right to exercise the Option is subject to
extension in order to obtain required regulatory approvals and comply with
applicable regulatory waiting periods.
REGISTRATION RIGHTS
If a Subsequent Triggering Event occurs prior to an Exercise Termination
Event, HSBC will have the right for 12 months (subject to extension due to
applicable regulatory application and waiting periods) to require Republic
Corporation to file a registration statement with the Securities and Exchange
Commission to allow the public sale of the shares to be purchased upon exercise
of the Option. Republic Corporation has granted HSBC two such rights to demand
registrations. Republic Corporation will bear the costs associated with any
required registrations. In connection with any required registration, HSBC may
require Republic Corporation to become a party to an agreement with an
underwriter that is underwriting an offering of shares. By becoming a party to
such an underwriting agreement, Republic Corporation may subject itself to
potential liabilities and indemnify the underwriter of the offering.
33
<PAGE> 40
REPURCHASE OF OPTION AND/OR SHARES
Any time after an Acquisition Transaction, or upon the acquisition by any
person of 50% or more of the then outstanding Common Stock, unless a Subsequent
Triggering Event has occurred prior to an Exercise Termination Event, upon
request Republic Corporation must repurchase the Option and all or any part of
the shares received upon the full or partial exercise of the Option from HSBC.
Republic Corporation's repurchase of the Option will be at a price per share
equal to the amount by which the market price of a share of Common Stock exceeds
$72 per share (as adjusted to take account for stock splits and like
occurrences), plus HSBC's reasonable out-of-pocket expenses. For purposes of the
repurchase of the Option, the market price of a share of Common Stock will be
the highest offered price for the Common Stock, whether by public or private
tender or agreement or, if higher, the highest closing price on the NYSE per
share of Common Stock or, in the event of a sale of Republic Corporation's
assets, the sum of the price paid for such assets, plus the market value of the
remaining assets divided by the number of shares of outstanding Common Stock. In
the event that Republic Corporation is prohibited by law or regulation from
repurchasing the Option or the shares received upon full or partial exercise of
the Option, it must use its best efforts to obtain required regulatory
approvals.
TREATMENT OF OPTION IN THE EVENT A THIRD PARTY ACQUIRES REPUBLIC CORPORATION
In the event that Republic Corporation is acquired by a third party, or
merges with a third party and Republic Corporation is not the surviving
corporation, the agreement governing the acquisition or merger must provide that
the Option will convert into a similar option to purchase shares of the
acquiring or surviving entity.
ASSIGNMENT OF OPTION AND OPTION AGREEMENT
HSBC may assign the Option within 12 months after a Subsequent Triggering
Event occurs, if the Subsequent Triggering Event occurs before an Exercise
Termination Event. However, prior to obtaining approval from the Board of
Governors of the Federal Reserve System to acquire the shares of Common Stock
subject to the Option, HSBC may only assign the Option pursuant to a widely
dispersed offering of Common Stock unless the Federal Reserve Board approves an
alternative assignment.
Republic Corporation may not assign its rights and obligations under the
Option Agreement without HSBC's consent.
HSBC'S PROFIT LIMITED
The Option Agreement provides that the Option may not be exercised for a
number of shares that would result in the Option holder's receiving a net total
profit greater than $425 million. The amount of the holder's profit is
calculated by adding (without regard to taxes) amounts received by the Option
holder from any repurchase by Republic Corporation of all or part of the Option,
the Option holder's net profit on Republic Corporation's repurchases of shares
purchased through exercise of the Option, the Option holder's profit on its sale
to third parties of shares purchased through exercise of the Option and any
amounts received through the sale of all or part of the Option.
HSBC MAY SURRENDER OPTION TO REPUBLIC CORPORATION FOR CASH
HSBC may, at any time following Republic Corporation's merger with or
acquisition by a third party and prior to an Exercise Termination Event,
surrender the Option and all shares acquired through exercise that it still
holds. If HSBC were to surrender the Option and any shares, Republic Corporation
would be required to pay to HSBC in cash, $325 million plus, if applicable, the
amount paid by HSBC for shares acquired through exercise of the Option minus
amounts received in sales of such shares.
In the event that Republic Corporation is prohibited by law or regulation
from making the required cash payment to HSBC on HSBC's surrender of the Option,
Republic Corporation must use its best efforts to obtain needed regulatory
approvals.
34
<PAGE> 41
REPRESENTATIONS AND WARRANTIES
Republic Corporation represented and warranted to HSBC that Republic
Corporation has the required corporate authority to enter into and carry out the
Option Agreement, that the Option Agreement has been authorized and that
Republic Corporation's performance under the Option Agreement will not violate
any agreements to which Republic Corporation is a party or any law to which it
is subject, including Maryland takeover laws.
HSBC represented and warranted to Republic Corporation that it has the
required corporate authority to enter into and carry out the Option Agreement,
and that the Option and any shares of Common Stock acquired under the Option are
not being acquired with an intent to distribute the Option or shares publicly.
VOTING OF OPTION SHARES
HSBC agreed that from one year after the date of exercise of the Option, it
will vote all of its shares in any vote on an Acquisition Transaction in the
same proportion as all other shares are voted concerning the proposal.
OPTION NOT CURRENTLY EXERCISABLE
To the best of Republic Corporation's knowledge, the Option is not
exercisable as of the date of this Proxy Statement.
STOCKHOLDERS AGREEMENT
Simultaneously with the entry by the parties into the Agreement, Edmond J.
Safra, Saban S.A., RNYC Holdings Limited and Congregation Beit Yaakov entered
into a Stockholders Agreement with HSBC, dated May 10, 1999 (the "STOCKHOLDERS
AGREEMENT"). The following description of the Stockholders Agreement is
qualified in its entirety by reference to the Stockholders Agreement, a copy of
which is attached to this Proxy Statement as Appendix C and which is
incorporated by reference into this Proxy Statement. Neither Republic
Corporation nor Safra Republic is a party to the Stockholders Agreement but the
Board approved it for purposes of exempting it from certain takeover statutes
that would otherwise apply. HSBC required that the stockholders enter into the
Stockholders Agreement as a condition of its entry into the Agreement. The
purpose of the Stockholders Agreement is to assure HSBC that a large block of
Common Stock will be voted in favor of the Agreement and the Merger, and that a
large block of shares of Safra Republic will be tendered to HSBC in the Offer.
As of the date of this Proxy Statement, the stockholders who are parties to the
Stockholders Agreement beneficially own 31,044,226 shares of Common Stock,
constituting approximately 29.5% of the shares outstanding, and, except for
Congregation Beit Yaakov, 14,699,124 shares of Safra Republic common stock,
constituting approximately 20.8% of the shares outstanding.
Under the Stockholders Agreement, the stockholders who are parties thereto
agreed to vote their shares of Common Stock in favor of the Merger and the
Agreement at the Special Meeting, and not to consent to Republic Corporation's
entry into an alternative transaction. A relevant stockholder of Safra Republic
also agreed to tender its shares of Safra Republic common stock to HSBC when
HSBC commences the Offer. The stockholders agreed that they will vote and
tender, as applicable, additional shares of Common Stock and Safra Republic
common stock acquired by the stockholders after the date of the Stockholders
Agreement. The stockholders have granted an irrevocable proxy in favor of
certain persons identified by HSBC to vote their shares. The Stockholders
Agreement will terminate if the Agreement is terminated in accordance with its
terms, except that if the Agreement is terminated under certain circumstances
relating to an alternative transaction, the obligation to vote against an
alternative transaction continues for an additional six months.
The Stockholders Agreement restricts the power of the stockholders to
transfer shares of Common Stock and Safra Republic common stock, and prohibits
the stockholders from soliciting or encouraging alternative offers to purchase
the stock of either company.
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<PAGE> 42
REGULATORY MATTERS
FEDERAL RESERVE BOARD
The Merger is subject to prior approval by the Federal Reserve Board under
Section 3 of the BHCA, and prior notice to the Federal Reserve Board under
Section 4 of the BHCA. Section 3 of the BHCA requires the Federal Reserve Board,
when approving a transaction such as the Merger, to take into consideration the
financial and managerial resources (including the competence, experience and
integrity of the officers, directors and principal shareholders) and future
prospects of the existing and proposed institutions, and the convenience and
needs of the communities to be served. In considering financial resources and
future prospects, the Federal Reserve Board will, among other things, evaluate
the adequacy of the capital levels of the parties to a proposed transaction.
Section 3 of the BHCA prohibits the Federal Reserve Board from approving a
merger if it would result in a monopoly, or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of banking
in any part of the United States, or if its effect in any section of the country
would be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner result in a restraint of trade, unless the
Federal Reserve Board finds that the anti-competitive effects of a merger
clearly are outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. In addition, under the Community Reinvestment Act of 1977, as amended,
the Federal Reserve Board must take into account the record of performance of
the existing insured depository institutions in meeting the credit needs of the
entire community, including low and moderate-income neighborhoods, served by
such institutions.
Under Section 4 of the BHCA and related regulations, the Federal Reserve
Board must consider whether the performance of HSBC's and Republic Corporation's
nonbanking activities on a combined basis can reasonably be expected to produce
benefits to the public (such as greater convenience, increased competition and
gains in efficiency) that outweigh possible adverse effects (such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices). This consideration includes an
evaluation of the financial and managerial resources of HSBC and Republic
Corporation and the effect of the proposed transaction on those resources.
The Merger generally may not be consummated until 30 days (which may be
shortened to 15 days with the consent of the U.S. Department of Justice (the
"DOJ")) following the date of Federal Reserve Board approval, during which time
the DOJ may challenge the Merger on antitrust grounds. The commencement of an
antitrust action by the DOJ would stay the effectiveness of the Federal Reserve
Board's approval, unless a court specifically ordered otherwise.
OTHER AUTHORITIES
The Merger is subject to the approval of or notice to certain other state
and foreign regulatory authorities, including the New York State Banking Board
("NYSBB"). The Bank Merger is also subject to the approval of the NYSBB.
SAFRA REPUBLIC PUBLIC TENDER/EXCHANGE OFFER AND BANK MERGER APPROVAL
Receipt of required regulatory approvals for the Offer and the Bank Merger
is also a condition to the Merger (see "THE AGREEMENT -- CONDITIONS TO THE
MERGER"). The Offer requires the approval of the offer circular by the
Luxembourg Commission for the Supervision of the Financial Sector and by certain
European stock exchanges. In the Bank Merger, HSBC Bank USA will be merged into
Republic Bank after Republic Bank has been converted from a national bank into a
New York state-chartered bank with membership in the Federal Reserve System. The
completion of the Bank Merger requires the approval of the Federal Reserve Board
under the Bank Merger Act and the Federal Reserve Act and the approval of the
NYSBB under the New York Banking Law.
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<PAGE> 43
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION
HSBC and Republic Corporation have filed all applications and notices and
have taken other appropriate action with respect to the Requisite Regulatory
Approvals. The Agreement provides, as described in more detail under the caption
"THE AGREEMENT -- CONDITIONS TO THE MERGER," that the obligation of each of HSBC
and Republic Corporation to consummate the Merger is conditioned upon the
receipt of the Requisite Regulatory Approvals, including the approvals of the
Federal Reserve Board, the NYSBB and certain other state and foreign regulatory
authorities. There can be no assurance that any governmental agency will approve
or take any required action with respect to the Merger or the timing thereof,
and that such approvals or action will not be subject to an unduly Burdensome
Condition that would cause the conditions to the Merger not to be satisfied (see
"THE AGREEMENT -- CONDITIONS TO THE MERGER") or cause HSBC to exercise its right
under certain circumstances to terminate the Agreement (see "THE
AGREEMENT -- TERMINATION") or otherwise be conditioned upon matters that would
cause the parties to abandon the Merger or that no action will be brought
challenging such approvals or action or, if such a challenge is made, the result
thereof. The Merger also cannot take place until the expiration of applicable
statutory waiting periods. To date, an application and notice, pursuant to the
BHCA, have been filed with the Federal Reserve Board, an application pursuant to
the New York Banking Law has been filed with the NYSBB and an application
pursuant to the Bank Merger Act has been filed with the Federal Reserve Board
and such applications and notice are pending at this time.
The Merger cannot proceed in the absence of the Requisite Regulatory
Approvals. There can be no assurance that such regulatory approvals will be
obtained, or as to the dates of any such approvals. There can likewise be no
assurance that the DOJ or other governmental authorities will not challenge the
Merger, or, if such a challenge is made, as to the result thereof. HSBC and
Republic Corporation believe that the Merger does not raise substantial
antitrust or other significant regulatory concerns.
INTERESTS OF CERTAIN PERSONS
Certain members of Republic Corporation's management have interests in the
Merger that are in addition to their interests as Stockholders generally.
Moreover, as described below, they will receive certain benefits in addition to
their interests as Stockholders. The members of the Board were aware of these
interests and considered them, among other things, before the Board approved the
Merger and the Agreement.
To assure itself of continued access to their services, particularly in
light of the Agreement, Republic Corporation entered into employment agreements
with Mr. Elias Saal, Mr. Stephen J. Saali, Mr. Dov C. Schlein and Mr. Vito S.
Portera (the "EXECUTIVES") having a five-year term (four, in the case of Mr.
Portera) (the "EMPLOYMENT PERIOD"), which are effective as of April 30, 1999
(together, the "EMPLOYMENT AGREEMENTS").
Under the Employment Agreements, each Executive will continue in the same
position and have the same title with Republic Corporation as he held prior to
April 30. The annual base salaries of each Executive (the "BASE SALARY") were
increased pursuant to the Employment Agreements, effective as of January 1, 1999
to $450,000 for Mr. Schlein, $425,000 for Mr. Saal, $400,000 for Mr. Saali and
$375,000 for Mr. Portera. In the case of each of the Executives (other than Mr.
Portera), such Base Salaries will increase automatically by $100,000 ($125,000
in the case of Mr. Schlein) on May 1, 2000, if the Executive is still employed
on such date. Each Executive will also receive an annual bonus if Republic
Corporation achieves specified performance objectives related to its
profitability, with the target bonus (the "TARGET BONUS") for each Executive
fixed at a stated multiple of the Executive's Base Salary (3.75 in the case of
Messrs. Schlein and Portera, 3.5 for Mr. Saali and 4.85 for Mr. Saal); however,
in no event will the annual bonus amount be less than a guaranteed minimum
amount of $1 million less his annual Base Salary, which guaranteed minimum
amount for 1999 is $550,000 for Mr. Schlein, $575,000 for Mr. Saal, $600,000 for
Mr. Saali and $625,000 for Mr. Portera. If a change in control (as defined in
the Employment Agreement, "CHANGE IN CONTROL") occurs and Republic Corporation
has "net income" (as
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<PAGE> 44
defined in the Employment Agreements), the Executive shall be paid at least the
Target Bonus for the year in which the Change in Control occurs and in each
subsequent year until the end of the Employment Period. If the Executive is
still employed on January 1, 2000 or, if earlier the Closing Date of the HSBC
transaction (or any other transaction which would constitute a Change of
Control), the Employment Agreements also provide for payment to each Executive
(except for Mr. Portera) of a one-time incentive award ("INCENTIVE AWARD") equal
to $1,000,000 ($1,250,000 for Mr. Saal) payable January 1, 2000.
If an Executive's employment terminates for any reason other than Cause or
a voluntary termination by the Executive without Good Reason (as such terms are
defined in the Employment Agreements), Republic Corporation shall pay or provide
certain additional termination benefits to the Executive (or his estate). Each
Executive will be entitled to a lump sum payment which (i) in the case of
Messrs. Schlein and Portera will equal three times his Base Salary and Target
Bonus, and (ii) in the case of Messrs. Saal and Saali, will equal the Base
Salary and Target Bonus that would have been payable to the Executive through
the end of the term of his Employment Agreement (using the Base Salary and
Target Bonus in effect on the date of termination). Additionally, in such
circumstances, a terminated Executive will vest in all his outstanding
restricted stock and other awards previously awarded; receive a pro-rated bonus
for his year of termination; be provided with lifetime medical and dental
coverage for himself and his spouse and dependent children under 25 (which shall
be secondary to any other coverage the Executive has); and receive any other
benefits due him under the terms of Republic Corporation's employee benefit
plans and programs. In these circumstances, each of the Executives (other than
Mr. Portera whose SERP (as defined below) benefit will be calculated according
to the provisions of the SERP) will also receive enhanced SERP benefits, in each
case assuming that the Executive had attained the age he would have attained had
he remained employed for the full term of the Employment Agreement (except in
the case of Mr. Saali, who would be assumed to have attained the age and
completed the service that he would have attained or completed at the end of the
term of his Employment Agreement and to have final average pay equal to his
annual Base Salary and Target Bonus). To assure that such Executive receives the
full benefit of the specified termination benefits, if the amount payable to an
Executive under the Employment Agreement or any other amount payable to the
Executive would subject such Executive to the excise tax under Section 4999 of
the U.S. tax code, Republic Corporation will generally make an additional
payment to such Executive such that after the payment of all income and excise
taxes, the Executive will be in the same after-tax position as if no excise tax
under Section 4999 of the U.S. tax code has been imposed (the "GROSS-UP
PAYMENT").
The Employment Agreements are intended to assure a successor in interest to
Republic Corporation the services of the Executives during a transition period
of one year following any Change of Control, and the Employment Agreements allow
for certain changes to an Executive's title, position and duties to occur prior
to the first anniversary of such an event without permitting the Executive to
quit immediately upon such adverse change in his circumstances and receive the
termination benefits available under the Employment Agreement. If such an
adverse change in an Executive's terms and conditions of employment occurs
during the first year following a Change of Control, the Executive may quit
during a 60-day period immediately following the first anniversary of such an
event, and will then be entitled to receive the termination benefits available
under the Employment Agreement. Further, each Executive has agreed not to
compete against Republic Corporation, not to solicit clients and employees of
Republic Corporation and not to interfere with or damage (or attempt to
interfere with or damage) any relationship between Republic Corporation and any
client or prospective client for the term of the Employment Agreement and for a
period of one year following the date of termination of employment by Republic
Corporation or the Executive for any reason. Each Executive also agreed not to
divulge, reveal or communicate any confidential information relating to Republic
Corporation at any time.
Republic Corporation has also implemented a Supplemental Executive
Retirement Plan for the Executives (the "SERP"). The SERP is intended to provide
an aggregate retirement benefit, taking into account the participant's benefit
under the Retirement Plan of Republic National Bank of New York (a
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<PAGE> 45
tax-qualified defined benefit retirement plan), payable after the Executive
attains age sixty-five, equal to sixty-five percent (65%) of the Executive's
final average compensation (generally, a five-year average of the participant's
highest salary and bonus) accrued over fifteen years (meaning that the Executive
is entitled to 1/15 of the benefit for each year of service) (the "SUPPLEMENTAL
BENEFIT"). The SERP constitutes an unfunded obligation of Republic Corporation
and any assets that may be set aside for the purpose of the payment of benefits
would be held in a "rabbi trust" (a "TRUST") and would be subject to Republic
Corporation's creditors in the event of insolvency. Within five days of the
occurrence of a Change in Control (as defined in the SERP), Republic Corporation
shall contribute to a Trust an amount equal to the present value of each
Executive's Supplemental Benefit accrued to date.
Previously, Mr. Weiner had announced his intention to relinquish his
position as Chairman of the Board and Chief Executive Officer of Republic
Corporation and Republic Bank, to be effective as of the annual meeting of
Stockholders in April, 1999. In accordance with that announcement, Mr. Weiner
relinquished those positions at the annual meeting on April 21, 1999.
Subsequently, as a result of the proposed transaction with HSBC, the Board
requested Mr. Weiner to continue to serve Republic Corporation in an executive
position, without title, to help facilitate the closing of the transaction and
to provide general advice and support during this period. Upon his termination
of employment with Republic Corporation, Mr. Weiner will receive $200,000 per
year for three years under the terms of a consulting agreement he previously
entered into with Republic Corporation in 1997. Republic Corporation also
expects to enter into an agreement with Mr. Weiner providing for the following.
For his continuing services as an employee in 1999, Mr. Weiner will receive base
salary at an annual rate of $220,750 and an annual bonus not to exceed $1.5
million. In connection with the closing of the transaction, Mr. Weiner will
receive a success bonus of $1 million. In consideration of Mr. Weiner's agreeing
to abide by certain restrictive covenants generally for two years after his
termination of employment and other terms and conditions, Mr. Weiner will
receive a payment of $2 million and a lump sum payment of $2 million as a
supplemental retirement benefit.
Also, in connection with the Merger, Republic Corporation and HSBC have
agreed and have allocated $20 million to a retention program for employees of
Republic Corporation's wholly owned business units worldwide.
CERTAIN CONSEQUENCES OF THE MERGER
Republic National Bank of New York (Suisse) S.A. ("RNB SUISSE"), the
Geneva-based banking subsidiary of Safra Republic and an affiliate of Republic
Bank, leases office space in various locations in Geneva, Switzerland for use in
its banking business from Edmond J. Safra and several real estate companies
owned by Mr. Safra. The rental payments for 1998 in respect of such leases were
approximately $9,795,853. The rents pursuant to all such leases are based on
independent appraisals of the fair rental value of such properties. Such
transactions were conducted in the normal course of business on substantially
the same terms as those prevailing for comparable transactions with other
persons and do not involve more than the normal risk of collectability nor
present other unfavorable features.
The lease relating to RNB Suisse's headquarters building in Geneva, which
has a term expiring on December 31, 2002, provides that the lease may be
terminated by either party with two years' notice (except as to the sixth and
seventh floors, the lease on which may be terminated on notice of one week) in
the event that Mr. Safra ceases to own at least seven million shares in Republic
Corporation. Mr. Safra has indicated that he intends to cause Safra S.A., the
landlord on the lease, to terminate the lease following the closing of the
Merger. However, he has also indicated a willingness to cause Safra S.A. to
enter into negotiations with RNB Suisse with a view to agreeing to new lease
agreements. The precise terms of any new arrangements will depend on the outcome
of currently pending negotiations. However, the intention is that any new lease
arrangements will be at fair market rental.
Republic Corporation is the owner of a United States trademark for a shield
design which is also the emblem of Mr. Safra and his family. The shield design
is used by Republic Corporation in signage,
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<PAGE> 46
brochures, advertisements and other places. Pursuant to agreements with Saban,
S.A., Saban, S.A. is currently licensed to use the trademark in the United
States. The agreements also provide that if at any time Saban, S.A. shall be the
owner of less than ten percent of the stock of Republic Corporation, Republic
Corporation is obligated to assign all its right, title and interest in and to
the trademark to Saban, S.A., and within six months to cease using the shield
design or any confusingly similar design in and to remove the design from,
signage, brochures, advertisements and other places where it is used.
OWNERSHIP OF VOTING SECURITIES BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of March 31, 1999, as to the
persons who are known by Republic Corporation to own beneficially more than five
percent of the outstanding Common Stock. The following table also shows, as of
March 31, 1999, the beneficial ownership of Republic Corporation's Common Stock
by all directors and executive officers of Republic Corporation as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OR TITLE BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------- -------------------- ----------------
<S> <C> <C>
Edmond J. Safra................................. 31,044,226(1) 29.5%
2, Place du Lac
Geneva, Switzerland
Sanford C. Bernstein & Co., Inc. ............... 9,084,806(2) 8.5%
767 Fifth Avenue
New York, NY 10153
Dodge & Cox..................................... 6,557,658(3) 6.1%
One Sansome Street, 35th Floor
San Francisco, CA 94104
Cyril S. Dwek................................... 129,788 .1%
(Vice Chairman of the Board of Republic Bank
and Vice Chairman of Republic Corporation and
Director of Republic Bank)
Ernest Ginsberg................................. 52,807(4) (*)
(Vice Chairman of the Board of Republic Bank
and Vice Chairman of Republic Corporation and
Director of Republic Bank)
Nathan Hasson................................... 41,851(5)(14) (*)
(Vice Chairman of the Board and Treasurer of
Republic Bank, Vice Chairman of Republic
Corporation and Director of Republic Bank)
Peter Kimmelman................................. 4,724(6) (*)
(Director of Republic Bank)
Leonard Lieberman............................... 1,500 (*)
(Director of Republic Bank)
William C. MacMillen, Jr........................ 13,404 (*)
(Director of Republic Bank)
Peter J. Mansbach............................... 6,200 (*)
(Director of Republic Bank)
Martin F. Mertz................................. 15,000 (*)
(Director of Republic Bank)
James L. Morice................................. 660(7) (*)
(Director of Republic Bank)
</TABLE>
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<PAGE> 47
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OR TITLE BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------- -------------------- ----------------
<S> <C> <C>
E. Daniel Morris................................ 2,000 (*)
(Director of Republic Corporation)
Janet L. Norwood................................ 1,500 (*)
(Director of Republic Bank)
John A. Pancetti................................ 80,300(8) (*)
(Director of Republic Bank)
Vito S. Portera................................. 20,230(9)(14) (*)
(Vice Chairman of the Board of Republic Bank
and Vice Chairman of Republic Corporation and
Director of Republic Bank)
William P. Rogers............................... 60,000 (*)
(Director of Republic Bank)
Elias Saal...................................... 42,090(14) (*)
(President of Republic Bank and Chairman of
the Executive Committees of the Board of
Directors of Republic Bank and Republic
Corporation and Director of Republic Bank)
Stephen J. Saali................................ 5,235(14) (*)
(President of Republic Corporation, Vice
Chairman of the Board of Republic Bank and
Director of Republic Bank)
Dov C. Schlein.................................. 65,640(10)(14) (*)
(Chairman of the Board and Chief Executive
Officer of Republic Bank and Chairman and
Chief Executive Officer of Republic
Corporation and Director of Republic Bank)
Rodney G. Ward.................................. 10,100 (*)
(Vice Chairman of the Board of Republic Bank
and Director of Republic Bank)
Walter H. Weiner................................ 125,635(11)(12) .1%
(Executive Officer of Republic Corporation and
Director of Republic Bank)
George T. Wendler............................... 31,468(13)(14) (*)
(Vice Chairman and Chairman of the Credit
Committee of Republic Corporation, Vice
Chairman of the Board of Republic Bank and
Director of Republic Bank)
All directors and executive officers as a group
(25 persons).................................. 899,096 .8%
</TABLE>
- ---------------
(1) Mr. Safra is the principal stockholder of Republic Corporation through his
ownership of all the outstanding shares of Saban, S.A., which owns
31,044,226 shares of Republic Corporation (including 29,986,070 shares
through its wholly owned subsidiary, RNYC Holdings Limited, a Gibraltar
bank holding company).
(2) Sanford C. Bernstein & Co., Inc. has filed a Form 13-G reporting its
beneficial ownership, as of February 5, 1999, of 9,084,806 shares, over
which it had sole dispositive power. As of such date, Bernstein also
disclosed that it had sole voting power over 4,510,590 shares, and shared
voting power over 1,174,845 shares.
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<PAGE> 48
(3) Dodge & Cox has filed a Form 13-G reporting its beneficial ownership, as of
February 10, 1999, of 6,557,658 shares, over which it had sole dispositive
power. As of such date, Dodge & Cox also disclosed that it had sole voting
power over 5,953,908 shares, and shared voting power over 73,800 shares.
(4) Mr. Ginsberg owns these shares jointly with his wife.
(5) Includes 26,251 shares which Mr. Hasson owns jointly with his wife.
(6) Includes 674 shares owned by Mr. Kimmelman's wife in which he disclaims any
beneficial interest. On May 10, 1999, Mr. and Mrs. Kimmelman sold 4,724
shares.
(7) Includes 600 shares which Mr. Morice owns jointly with his wife and 60
shares owned by Mr. Morice's son, in which 60 shares Mr. Morice disclaims
any beneficial interest.
(8) Includes 80,000 shares which Mr. Pancetti owns jointly with his wife.
(9) Includes 4,150 shares held by a trust controlled by Mr. Portera.
(10) Includes 41,690 shares which Mr. Schlein owns jointly with his wife, and
1,450 shares owned by Mr. Schlein's daughter, in which 1,450 shares Mr.
Schlein disclaims any beneficial interest.
(11) Includes 49,480 shares for Walter H. Weiner which were awarded pursuant to
Republic Corporation's 1985 Restricted Stock Plan and 1995 Long Term
Incentive Stock Plan, and 56,949 shares which were issued pursuant to
Republic Corporation's Restricted Stock Election Plan, all of which are
subject to a substantial risk of forfeiture until after the termination of
Mr. Weiner's employment with Republic Corporation.
(12) Includes 6,210 shares owned by a Keogh Plan pension trust of which Mr.
Weiner is the beneficiary and 3,430 shares owned by Mr. Weiner's wife in
which he disclaims any beneficial interest.
(13) Includes 18,218 shares which Mr. Wendler owns jointly with his wife.
(14) Includes 15,600 shares for Nathan Hasson, 11,000 shares for Vito S.
Portera, 11,090 shares for Elias Saal, 5,085 shares for Stephen J. Saali,
22,500 shares for Dov C. Schlein and 13,250 shares for George T. Wendler
which were selected pursuant to the 1998 Long Term Incentive Compensation
Plan, and which are subject to a substantial risk of forfeiture for various
restricted periods, the latest of which expires January 31, 2004.
(*) Less than .1%
42
<PAGE> 49
MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES TO STOCKHOLDERS
The following is a summary of the material United States federal income tax
consequences of the Merger to the Stockholders. The summary does not purport to
be a description of all tax consequences that may be relevant to Stockholders,
and assumes an understanding of tax rules of general application. It does not
address special rules which may apply to Stockholders based on their tax status,
individual circumstances or other factors unrelated to the Merger. Stockholders
are encouraged to consult their own tax advisors regarding the Merger.
The receipt of cash in exchange for Common Stock pursuant to the Merger
will be a taxable transaction for federal income tax purposes, and may also be a
taxable transaction under applicable state, local and foreign tax laws. A
Stockholder will generally recognize gain or loss for federal income tax
purposes in an amount equal to the difference between such Stockholder's
adjusted tax basis in the Common Stock, and the amount of cash received in
exchange therefor. Such gain or loss will be a capital gain or loss if such
Common Stock is held as a capital asset, and will be a long-term capital gain or
loss if, at the Effective Time, the holding period for such Common Stock was
more than one year.
The foregoing discussion may not apply to Stockholders who acquired their
Common Stock pursuant to the exercise of employee stock options or other
compensation arrangements with Republic Corporation, or who are not citizens or
residents of the United States or who are otherwise subject to special tax
treatment. Each Stockholder is urged to consult his, her or its tax advisor with
respect to the tax consequences of the Merger, including the effects of
applicable state, local, foreign or other tax laws.
Under the federal income tax backup withholding and information reporting
rules, unless an exemption applies, HSBC is required to and will withhold 31% of
all payments to which you are entitled in the Merger, unless you provide a U.S.
taxpayer identification number and you certify under penalties of perjury that
the number is correct. If you are an individual, your taxpayer identification
number is your social security number. If you are not an individual, your
taxpayer identification number is your employer identification number. You
should complete and sign the substitute Form W-9, which will be included with
the letter of transmittal to be returned to the exchange agent, in order to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exception exists and is proved in a manner satisfactory to
the exchange agent. In addition, unless you are entitled to an exemption, HSBC
is required to report the payment and other required information to the Internal
Revenue Service. In general, if you are a corporation or a foreign individual
who provides to the exchange agent a completed and signed Form W-8 certifying to
your non-U.S. status, you will not be subject to the backup withholding and
information reporting requirements. Any amounts withheld will be allowed as a
refund or a credit against your U.S. federal income tax liability for that year
if you provide the required information to the Internal Revenue Service.
CERTAIN CONSEQUENCES OF THE MERGER
As a result of the Merger, Merger Sub will be merged with and into Republic
Corporation and Republic Corporation will become a subsidiary of HSBC. Following
consummation of the Merger, the Common Stock will be delisted from the New York
Stock Exchange and the London Stock Exchange and deregistered under the
Securities Exchange Act of 1934 and will no longer be publicly traded. The
Republic Corporation preferred stock will remain outstanding as preferred stock
of the Successor Corporation.
CERTAIN LITIGATION MATTERS
Two purported class actions challenging the Merger have been filed by
people who allege they are and were Stockholders. The lawsuits, styled Topaz v.
Republic New York Corp., et al. (Index No. 99/109708), and Lewis v. Republic New
York Corp., et al. (Index No. 99/110108), were filed in the Supreme Court of the
State of New York, County of New York on May 10 and May 13, 1999,
43
<PAGE> 50
respectively. Plaintiffs allege that the proposed acquisition undervalues the
Common Stock by ignoring the full value of its assets and future prospects and
that defendants, who include Republic Corporation and the members of the Board
as well as Edmond J. Safra and HSBC, are using their positions of power and
control and their access to internal information to benefit themselves to the
detriment of the Stockholders. Plaintiffs also allege that the proposed
acquisition significantly undervalues Republic Corporation and overvalues Safra
Republic, to pay a significantly higher price to shareholders of Safra Republic,
including directors and controlling stockholders of Republic Corporation.
Plaintiffs seek injunctive relief against consummation of the transaction,
rescission of the transaction in the event it is consummated and compensatory
damages, counsel and other fees, and such other relief as the court may deem
appropriate. Defendants deny the allegations of wrongdoing and believe the
claims asserted are entirely without merit. Defendants' time to answer the
complaint has not yet expired.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Republic Corporation has made forward-looking statements in this document
(and in documents incorporated by reference in this document) that are subject
to risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of our operations or the performance of
the new company after the merger is completed. When we use any of the words
"believes," "expects," "anticipates," "estimates" or similar expressions, we are
making forward-looking statements. Many possible events or factors could cause
these results or performance to differ materially from those expressed in our
forward-looking statements. These possible events or factors include the
following:
- interest rates and foreign exchange rates change unfavorably;
- general economic and financial markets conditions, either nationally or
globally, are less favorable than expected;
- legislation or regulatory changes adversely affect the businesses in
which the combined company would be engaged; or
- failure to obtain required approvals and consents or otherwise to satisfy
the conditions to the consummation of the Merger.
INDEPENDENT PUBLIC AUDITORS
KPMG LLP serves as Republic Corporation's independent certified public
accountant. A representative of KPMG LLP will be at the Special Meeting to make
a statement if they desire to do so and to answer the questions of Stockholders.
OTHER MEETINGS
Republic Corporation will hold its 2000 annual meeting only if the Merger
is not consummated before the time of such annual meeting. In the event that the
2000 annual meeting is held, Stockholder proposals to be included in Republic
Corporation's proxy statement for the next annual meeting of Stockholders must
be received by the Corporate Secretary of Republic Corporation not later than
November 20, 1999. Upon receipt of any such proposal, Republic Corporation will
determine whether or not to include such proposal in the proxy statement and
proxy in accordance with regulations governing the solicitation of proxies.
Also, pursuant to Republic Corporation's by-laws, in order for a
Stockholder to nominate a candidate for director or raise other business from
the floor of the next annual meeting, written notice of such nomination or other
business proposal must be given to the Corporate Secretary of Republic
Corporation not later than December 23, 1999 and not earlier than November 23,
1999. The notice must include the information required by the by-laws. These
advance notice requirements are separate from and in addition to the
requirements a Stockholder must meet to have a proposal included in the proxy
statement. Notice must be given to the Corporate Secretary of Republic New York
Corporation at its principal executive offices, 452 Fifth Avenue, New York, New
York 10018.
44
<PAGE> 51
Copies of Republic Corporation's by-laws will be furnished without charge
to any Stockholder upon written request to the Corporate Secretary.
WHERE YOU CAN FIND MORE INFORMATION
Republic Corporation files reports, proxy statements and other information
under the Securities Exchange Act of 1934. You may read and copy this
information at the public reference room of the Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. You may obtain copies of such materials
by mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and in Chicago at 500 Madison Street,
Suite 1400, Chicago, Illinois 60661, at prescribed rates. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers, like Republic Corporation,
who file electronically with the Commission. The address of that site is
http://www.sec.gov. In addition, you can inspect and copy such materials at the
public reference facilities of the Commission at its Regional Offices in New
York, 7 World Trade Center, Suite 1300, New York, New York 10048. You can also
inspect reports, proxy statements and other information concerning Republic
Corporation at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The Commission allows Republic Corporation to "incorporate by reference"
information into this Proxy Statement. This means that Republic Corporation can
disclose important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
considered to be a part of this Proxy Statement, except for any information that
is superseded by other information that is set forth directly in this document.
The following documents previously filed by Republic Corporation with the
Commission are hereby incorporated by reference in this Proxy Statement: (i) the
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, as filed
March 9, 1999; (ii) the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, as filed May 14, 1999 and (iii) the Current Reports on Form 8-K
filed on May 11 and August 5, 1999 and Form 8-K/A filed on May 14, 1999.
In addition, Republic Corporation incorporates by reference all documents
filed with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 between the date of this Proxy Statement and the
date of the Special Meeting. Any statements contained in a document incorporated
or deemed to be incorporated by reference shall be deemed to be modified or
superseded for the purposes of this Proxy Statement to the extent that a
statement contained in this Proxy Statement or in any other subsequently filed
document that also is or is deemed to be incorporated by reference in this Proxy
Statement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
This Proxy Statement incorporates certain Republic Corporation documents by
reference which are not presented or delivered with this Proxy Statement. You
can obtain these Republic Corporation documents (other than exhibits to such
documents not specifically incorporated by reference in such documents) without
charge by making a written or oral request to Republic New York Corporation, 452
Fifth Avenue, New York, New York, Attention: Office of the Corporate Secretary;
telephone number (212) 525-6100. If you request such documents, Republic
Corporation will send the requested documents to you by first-class mail within
one business day of receiving your request. In order to ensure timely delivery
of the documents, any request should be made by September 2, 1999.
You should rely only on the information contained in, or incorporated by
reference into, this Proxy Statement to vote on the Merger and the Agreement. No
one has been authorized to provide you with information that is different from
what is contained in, or incorporated by reference into, this Proxy Statement.
This Proxy Statement is dated August 9, 1999. You should not assume that the
information contained in, or incorporated by reference into, this Proxy
Statement is accurate as of any date other than that date, and the mailing of
this Proxy Statement to Stockholders shall not create any implication to the
contrary.
45
<PAGE> 52
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION REGARDING THE SPECIAL MEETING OR THE MERGER THAT IS NOT CONTAINED
IN THIS PROXY STATEMENT. YOU SHOULD NOT RELY UPON ANY INFORMATION OR
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT, AS SUCH INFORMATION AND
REPRESENTATIONS HAVE NOT BEEN AUTHORIZED BY US. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION IN
THIS PROXY STATEMENT OR IN THE AFFAIRS OF REPUBLIC CORPORATION OR HSBC SINCE THE
DATE OF THIS PROXY STATEMENT.
DATED AUGUST 9, 1999
NEW YORK, NEW YORK
BY ORDER OF THE BOARD OF DIRECTORS
/S/ WILLIAM F. ROSENBLUM, JR.
WILLIAM F. ROSENBLUM, JR.
SENIOR VICE PRESIDENT AND
CORPORATE SECRETARY
46
<PAGE> 53
APPENDIX A
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> 54
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
THE MERGER
1.1 The Merger.................................................. A-2
1.2 Effective Time.............................................. A-2
1.3 Effects of the Merger....................................... A-2
1.4 Effect on the Company Capital Stock......................... A-2
1.5 Exchange Procedures......................................... A-3
1.6 Options..................................................... A-4
1.7 Restricted Shares........................................... A-4
1.8 1998 Long Term Incentive Compensation Plan.................. A-5
1.9 Articles of Incorporation................................... A-5
1.10 Bylaws...................................................... A-5
1.11 Directors and Officers of Surviving Corporation............. A-5
1.12 Integration of Legal Entities............................... A-5
ARTICLE II
CLOSING; DISCLOSURE; STANDARDS
2.1 Closing Date................................................ A-6
2.2 Deliveries at Closing....................................... A-6
2.3 Disclosure Schedules........................................ A-6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Organization...................................... A-7
3.2 Capitalization.............................................. A-7
3.3 Authority; No Violation..................................... A-8
3.4 Consents and Approvals...................................... A-9
3.5 Reports..................................................... A-10
3.6 Financial Statements........................................ A-10
3.7 Broker's Fees............................................... A-11
3.8 Absence of Certain Changes or Events........................ A-11
3.9 Legal Proceedings........................................... A-11
3.10 Tax Matters................................................. A-11
3.11 Employee Benefit Plans; ERISA............................... A-12
3.12 SEC Reports................................................. A-14
3.13 Licenses; Compliance with Applicable Law.................... A-15
3.14 Certain Contracts........................................... A-15
3.15 Agreements with Regulatory Agencies......................... A-15
3.16 Derivative Instruments...................................... A-15
3.17 Undisclosed Liabilities..................................... A-16
3.18 Environmental Matters....................................... A-16
3.19 Year 2000................................................... A-16
3.20 Labor Matters............................................... A-17
3.21 Fairness Opinion............................................ A-17
3.22 Transactions with Affiliates................................ A-17
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEST EUROPE
4.1 Corporate Organization...................................... A-17
4.2 Capitalization.............................................. A-18
4.3 Authority No Violation...................................... A-19
4.4 Consents and Approvals...................................... A-19
4.5 Reports..................................................... A-20
4.6 Financial Statements........................................ A-20
4.7 Broker's Fees............................................... A-20
4.8 Absence of Certain Changes of Events........................ A-21
4.9 Legal Proceedings........................................... A-21
4.10 Tax Matters................................................. A-21
4.11 Employee Benefit Plans; ERISA............................... A-21
4.12 Licenses; Compliance with Applicable Law.................... A-24
4.13 Certain Contracts........................................... A-24
4.14 Agreements with Regulatory Agencies......................... A-24
4.15 Derivative Instruments...................................... A-25
4.16 Undisclosed Liabilities..................................... A-25
4.17 Environmental Matters....................................... A-25
4.18 Year 2000................................................... A-25
4.19 Labor Matters............................................... A-26
4.20 Fairness Opinion............................................ A-26
4.21 Transactions with Affiliates................................ A-26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
5.1 Corporate Organization...................................... A-26
5.2 Authority; No Violation..................................... A-27
5.3 Consents and Approvals...................................... A-27
5.4 Financing................................................... A-28
5.5 Financial Reports........................................... A-28
5.6 Litigation; Regulatory Action............................... A-28
5.7 Absence of Certain Changes.................................. A-28
5.8 Year 2000................................................... A-28
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Business Prior to the Effective Time............. A-29
6.2 Forbearances of the Company and SRH......................... A-29
6.3 Covenants of Parent......................................... A-30
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters.......................................... A-31
7.2 Access to Information....................................... A-32
7.3 Board Recommendation........................................ A-33
7.4 Other Offers................................................ A-33
7.5 Stockholder Approval........................................ A-34
7.6 Legal Conditions to Merger.................................. A-34
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
7.7 Indemnification; Directors' and Officers' Insurance......... A-35
7.8 Further Assurances.......................................... A-36
7.9 Advice of Changes........................................... A-36
7.10 Employee Benefits........................................... A-36
7.11 Takeover Stautes............................................ A-37
7.12 Environmental Audit......................................... A-37
7.13 The Offer................................................... A-37
7.14 Merger Sub.................................................. A-37
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the A-38
Merger......................................................
8.2 Conditions to Obligations of Parent and Merger Sub.......... A-38
8.3 Conditions to Obligations of the Company.................... A-39
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination................................................. A-39
9.2 Effect of Termination....................................... A-40
9.3 Amendment................................................... A-40
9.4 Extension; Waiver........................................... A-41
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements... A-41
10.2 Expenses.................................................... A-41
10.3 Notices..................................................... A-41
10.4 Interpretation.............................................. A-42
10.5 Counterparts................................................ A-43
10.6 Entire Agreement............................................ A-43
10.7 GOVERNING LAW............................................... A-43
10.8 Severability................................................ A-43
10.9 Publicity................................................... A-43
10.10 Assignment; Third Party Beneficiaries....................... A-43
10.11 Court Proceedings........................................... A-43
10.12 Definitions and Usage....................................... A-43
</TABLE>
<PAGE> 57
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.
A-1
<PAGE> 58
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 Outstanding 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
A-2
<PAGE> 59
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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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(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
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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
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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. sec. 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
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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
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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
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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
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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
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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 of 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 compensa-
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tion, 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;
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(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
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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
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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,
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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
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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
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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
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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,
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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
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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
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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.
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(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
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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
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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.
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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
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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
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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.
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(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 66 2/3% 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;
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(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
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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, New York 10006
Attention: James F. Munsell, Esq.
Victor I. Lewkow, Esq.
Fax: (212) 225-3999
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<PAGE> 98
and
(b) if to the Company, to:
Republic New York Corporation
452 Fifth Avenue
New York, New York 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, 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, 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.
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<PAGE> 99
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.
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<PAGE> 100
"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.
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<PAGE> 101
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
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)
</TABLE>
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<PAGE> 102
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
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
</TABLE>
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<PAGE> 103
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
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)
</TABLE>
(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.
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
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<PAGE> 104
APPENDIX B
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
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<PAGE> 105
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
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<PAGE> 106
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
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<PAGE> 107
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,
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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)
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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 "Mar-
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ket/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.
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(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. 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
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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. 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
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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.
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(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
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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. 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
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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.
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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.
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
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APPENDIX C
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.
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"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
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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) 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
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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) 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
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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
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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
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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.
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(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 injunction 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
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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.
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(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
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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.
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
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SCHEDULE A
STOCKHOLDER PARTIES
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
RNYC Holdings Limited....................
Fax: --
Attention: --
Congregation Beit Yaakov.................
Fax: --
Attention: --
Saban S.A................................
Fax: --
Attention: --
Edmond J. Safra..........................
Fax: --
</TABLE>
<PAGE> 130
[GOLDMAN SACHS LETTERHEAD] APPENDIX D
PERSONAL AND CONFIDENTIAL
August 6, 1999
Board of Directors
Republic New York Corporation
452 Fifth Avenue
New York, NY 10016
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of the outstanding shares of Common Stock, par value
$5.00 per share (the "Shares"), of Republic New York Corporation (the "Company")
of the $72.00 per Share in cash to be received by such holders pursuant to the
Transaction Agreement and Plan of Merger, dated as of May 10, 1999, by and among
HSBC Holdings plc ("HSBC"), Safra Republic Holdings S.A. ("Safra") and the
Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Goldman,
Sachs & Co. provides a full range of financial advisory and securities services,
may in the future provide financial advisory services to HSBC, and, in the
course of its normal trading activities may from time to time effect
transactions and hold securities, including derivative securities, of the
Company, Safra or HSBC for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Proxy Statement relating to the Special Meeting of Stockholders
of the Company to be held in connection with the Agreement; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five years
ended December 31, 1998; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company; certain other communications from the
Company to its stockholders; and certain internal financial analyses and
forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding the
past and current business operations, financial condition and future prospects
of the Company. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market information
for the Company with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the banking and thrift industry and other
industries generally and performed such other studies and analyses as we
considered appropriate.
As you are aware, we have been engaged by both the Company and Safra to
advise their respective Boards of Directors as to the fairness from a financial
point of view to the respective stockholders of each company of the proposed
consideration to be paid by HSBC to each respective set
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Republic New York Corporation
August 6, 1999
Page Two
of stockholders. We provided an opinion letter dated May 10, 1999 to the Board
of Directors of Safra as to the fairness from a financial point of view to the
stockholders of the proposed consideration to be paid by HSBC to the Safra
stockholders as of such date. We were requested to evaluate the consideration
for each company's set of stockholders separately in order to determine the
fairness from a financial point of view for each. We were not requested to
engage in, and did not participate in, any negotiations with HSBC and the
Company or Safra. In addition, we were requested to contact and solicit
indications of interest from only a limited number of third parties in acquiring
all or part of the Company and were not requested to contact or solicit
indications of interest from third parties with respect to acquiring Safra.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. We are not experts in the
evaluation of loan portfolios for purposes of assessing the adequacy of
allowances for losses with respect thereto. In addition, we have not reviewed
individual credit files nor, except as noted above, have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
their subsidiaries and we have not been furnished with any such evaluation or
appraisal. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to whether or
not any holder of Shares should vote such Shares in connection with such
transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $72.00
per Share in cash to be received by the stockholders of Shares pursuant to the
Agreement is fair from a financial point of view to such stockholders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
--------------------------------------
(GOLDMAN, SACHS & CO.)
D-2
<PAGE> 132
REPUBLIC NEW YORK CORPORATION
PROXY
Special Meeting of Stockholders
September 9, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Republic New York Corporation, a Maryland
corporation (the "Corporation"), hereby appoints, jointly and severally, Peter
Kimmelman, William C. MacMillen, Jr., and James L. Morice as proxies for the
undersigned, each with the full power to appoint his substitute, and hereby
authorizes them to attend, and to vote all shares of Republic New York
Corporation Common Stock that the undersigned is entitled to vote at the
Special Meeting of Stockholders of the Corporation to be held at 452 Fifth
Avenue, City and State of New York, on September 9, 1999, at 11:00 a.m., New
York time, or any adjournment or postponement thereof, in accordance with the
instructions on the reverse side hereof and in their discretion upon such other
business as may properly come before the meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the undersigned if
personally present at the meeting.
Unless instructions are given on the reverse side, this Proxy will be
voted FOR Item 1 on the reverse side hereof. With respect to matters as to
which discretionary authority is granted above, this Proxy will be voted in
accordance with the discretion of the proxies hereinabove appointed, but no
proxy that has been voted against approval of Item 1 will be voted in favor of
any adjournment or postponement of the Special Meeting for the purpose of
soliciting additional proxies.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE HEREOF AND
RETURN IN PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 133
SPECIAL MEETING OF STOCKHOLDERS
REPUBLIC NEW YORK CORPORATION
September 9, 1999
----------------------------
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS
Please Detach and Mail in the Envelope Provided
Please mark your
[X] vote as in this
example.
The Board of Directors recommends a vote "FOR" Item 1.
Item 1 -- Approval of the merger of Republic New York Corporation with a
subsidiary of HSBC Holdings plc on the terms and conditions set forth
in a Transaction Agreement and Plan of Merger, dated as of May 10,
1999, by and among HSBC Holdings plc, a public limited company
organized under the laws of England, Safra Republic Holdings S.A., a
company organized under the laws of Luxembourg, and Republic New York
Corporation, pursuant to which, among other things, each outstanding
share of common stock, par value $5.00 per share, of Republic New York
Corporation will be converted, upon the effectiveness of the merger,
into the right to receive $72 in cash, without interest.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND MEETING [ ]
Receipt is hereby acknowledged of the Republic New York Corporation Notice of
Special Meeting of stockholders and accompanying Proxy Statement and any proxy
heretofore given is hereby revoked.
- ---------------------------------- ---------------------------------
Account Number Common
Signature(s) Date , 1999
------------------------------------ -----------------
NOTE: Please sign as name appears hereon. Joint owners should each sign.
If signer is a corporation, please sign the full corporate name by
duly authorized officer. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
