[FACING PAGE]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1996
Commission File Number: 33-56334
VK/AC Holding, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3852549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Van Kampen American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois
Attn: Ronald A. Nyberg, Esq. 60181
(Address of principal executive offices) (Zip Code)
(630) 684-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days
X Yes No
As of June 30, 1996 there were 2,317,474 shares of the registrant's
Class A Common Stock, par value $.01 per share ("Class A Common Stock"), and
117,817 shares of the registrant's Class B Common Stock, par value $.01 per
share ("Class B Common Stock"), outstanding. There is no established public
trading market for any class of the registrant's common equity securities.
VK/AC Holding, Inc.
Form 10-Q
For The Quarter Ended June 30, 1996
Index
Page
Part I: Financial Information.......................................... 2
Item 1: Financial Statements
Consolidated Balance Sheets at June 30, 1996 (unaudited)
and December 31, 1995...................................... 2
Consolidated Statements of Income (unaudited) for the
Three Months Ended June 30, 1996 and 1995 and for
the Six Months Ended June 30, 1996 and 1995................ 3
Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended June 30, 1996 and 1995.................... 4
Notes to Consolidated Financial Statements (unaudited)........ 5
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8
Part II: Other Information.............................................15
Signatures ...........................................................16
Exhibits ...........................................................17
<TABLE>
VK/AC HOLDING, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In 000's except for par value and shares)
<CAPTION>
6/30/96 12/31/95
----------- -----------
Assets (Unaudited)
- ------
<S> <C> <C>
Cash and Cash Equivalents $ 1,183 $ 1,585
Cash Equivalents Segregated Under Regulation or Collateral Agreement 10,000 10,000
Short-Term Investments - Mutual Funds, at market 44,391 40,544
Receivables 52,969 41,696
Trading Inventory, at market 75,285 71,875
Furniture, Equipment, and Leasehold Improvements, net 22,452 22,312
Deferred Company Funded Distribution Costs, net 288,038 259,822
Deferred Financing Costs, net 12,006 13,012
Excess of Cost over Fair Value of Net Assets Acquired, net 518,210 526,917
Net Assets of Discontinued Operations 26,433 25,760
Other Assets 7,571 8,583
----------- -----------
Total Assets $ 1,058,538 $ 1,022,106
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities
- -----------
Bank Loans $ 329,100 $ 331,100
Senior Secured Notes 150,000 150,000
Accounts Payable and Accrued Expenses 57,271 76,988
Payable to Affiliates, net 4,880 2,828
Payable to Trustee 11,551 5,587
Deferred Compensation 24,507 21,957
Deferred Income Taxes 74,088 55,617
----------- -----------
Total Liabilities 651,397 644,077
----------- -----------
Redeemable Common Stock
- -----------------------
At redemption value of $295 per share at June 30, 1996 and $200 per share
at December 31, 1995; 156,210 shares outstanding at June 30, 1996;
155,673 shares outstanding at December 31, 1995 46,082 31,135
----------- -----------
Stockholders' Equity
- --------------------
Junior Non-Cumulative Participating Preferred Stock, $200 par value,
32,500 shares authorized; 32,500 shares issued and outstanding
at June 30, 1996 and December 31, 1995 6,500 6,500
Class A Common Stock, $.01 par value; 3,250,000 shares authorized,
2,163,255 nonredeemable shares issued, 2,161,264 nonredeemable
shares outstanding at June 30, 1996; 2,163,792 nonredeemable shares
issued, 2,161,264 nonredeemable shares outstanding at December 31, 1995 22 22
Class B Common Stock, $.01 par value, nonvoting, 3,250,000 shares
authorized; 117,817 shares issued and outstanding at June 30, 1996
and December 31, 1995 1 1
Additional Paid-In Capital 299,185 299,292
Retained Earnings 55,749 41,584
----------- -----------
361,457 347,399
Less Treasury Stock, Class A Common Stock, at cost; 1,991 shares at
June 30, 1996; 2,528 shares at December 31, 1995 (398) (505)
----------- -----------
Total Stockholders' Equity 361,059 346,894
----------- -----------
Total Liabilities & Stockholders' Equity $ 1,058,538 $ 1,022,106
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
VK/AC HOLDING, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(In 000's except per share data)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
- --------
Investment Advisory Fees $ 73,756 $ 61,169 $ 145,266 $ 118,380
Distribution of Investment Products 8,318 7,862 15,111 15,060
Fiduciary Fees 2,251 2,116 4,574 4,131
Other Revenue 1,772 2,483 3,377 4,084
----------- ----------- ----------- -----------
Total Revenues 86,097 73,630 168,328 141,655
----------- ----------- ----------- -----------
Expenses
- --------
Compensation and Benefits 24,901 23,797 48,753 45,321
Amortization of Deferred Company Funded
Distribution Costs 15,618 12,223 30,243 23,921
Occupancy 8,136 7,543 16,787 14,435
Marketing and Promotion 8,812 6,742 16,404 14,480
Other Expenses 7,491 8,982 14,116 15,518
Reimbursements (14,223) (11,968) (28,097) (23,472)
Interest and Acquisition Expenses:
Amortization of Excess of Cost over Fair
Value of Net Assets Acquired 4,278 4,499 8,558 9,016
Interest Expense 8,521 11,038 17,426 21,993
Amortization of Deferred Financing Costs 503 503 1,006 1,006
----------- ----------- ----------- -----------
Total Expenses 64,037 63,359 125,196 122,218
----------- ----------- ----------- -----------
Income From Continuing Operations Before Taxes 22,060 10,271 43,132 19,437
Income Tax Provision 8,994 4,000 17,596 7,635
----------- ----------- ----------- -----------
Income From Continuing Operations 13,066 6,271 25,536 11,802
Discontinued Operations:
Income From Discontinued Operations, net of tax 828 311 1,482 648
Gain on Disposal of Discontinued Operations,
net of tax of $1,387 -- -- 2,035 --
----------- ----------- ----------- -----------
Net Income $ 13,894 $ 6,582 $ 29,053 $ 12,450
=========== =========== =========== ===========
Earnings per share:
Primary:
Net Income (Loss) From Continuing
Operations Available to Common
Shareholders $ (0.70)$ 2.48 $ 4.08 $ 4.01
Income From Discontinued Operations 0.32 0.12 0.57 0.26
Gain on Disposal of Discontinued
Operations -- -- 0.77 --
----------- ----------- ----------- -----------
Net Income (Loss) Available to Common
Shareholders $ (0.38)$ 2.60 $ 5.42 $ 4.27
=========== =========== =========== ===========
Assuming Full Dilution:
Net Income (Loss) From Continuing
Operations Available to Common
Shareholders $ (0.69) 2.48 4.02 4.01
Income From Discontinued Operations 0.31 0.12 0.56 0.26
Gain on Disposal of Discontinued
Operations -- -- 0.77 --
----------- ----------- ----------- -----------
Net Income (Loss) Available to Common
Shareholders $ (0.38)$ 2.60 $ 5.35 $ 4.27
=========== =========== =========== ===========
Weighted Average Common Shares and
Common Share Equivalents: (In 000's)
Primary 2,612 2,536 2,612 2,537
Assuming Full Dilution 2,647 2,536 2,648 2,537
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
VK/AC HOLDING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In 000's)
<CAPTION>
Six Months
Ended June 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 29,053 $ 12,450
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 3,045 2,909
Amortization:
Deferred Company Funded Distribution Costs 30,243 23,921
Excess of Cost over Fair Value of Net
Assets Acquired 8,558 9,016
Deferred Financing Costs 1,006 1,006
Gain on Sale of Subsidiary (3,422) --
Net Change in:
Short-Term Investments - Mutual Funds (3,847) (7,431)
Receivables (11,273) (3,098)
Trading Inventory (3,410) 18,366
Net Assets of Discontinued Operations (673) (397)
Other Assets (1,994) (4,330)
Accounts Payable and Accrued Expenses (20,717) (6,965)
Payable to Affiliates, net 2,052 (1,129)
Payable to Trustee 5,964 13,412
Deferred Compensation 2,550 3,512
Deferred Income Taxes 18,471 129
----------- -----------
Total Adjustments 26,553 48,921
----------- -----------
Net Cash Provided by Operating Activities 55,606 61,371
----------- -----------
Cash Flows from Investing Activities:
Proceeds from Sale of Subsidiary 7,577 --
Deferred Company Funded Distribution Costs (58,459) (28,655)
Net Additions of Fixed Assets (3,185) (2,966)
----------- -----------
Net Cash Used by Investing Activities (54,067) (31,621)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from Borrowings, net 13,000 --
Loan Principal Payments (15,000) (48,100)
Stock Issuance -- 9,036
Reissuance of Treasury Stock 59 430
----------- -----------
Net Cash Used by Financing Activities (1,941) (38,634)
----------- -----------
Net Decrease in Cash and Cash Equivalents (402) (8,884)
Cash and Cash Equivalents:
Beginning of Period 1,585 21,328
----------- -----------
End of Period $ 1,183 $ 12,444
=========== ===========
Supplementary Disclosure of Cash Flow Information:
Cash paid for: Income Taxes $ 882 $ 2,504
Interest 18,060 22,454
</TABLE>
See accompanying notes to consolidated financial statements.
VK/AC Holding, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
Note 1 - Basis of Presentation
The consolidated financial statements include the accounts of VK/AC Holding,
Inc. ("VK/AC Holding") and its subsidiaries, Van Kampen American Capital, Inc.
("VKAC"), McCarthy, Crisanti & Maffei, Inc. ("MCM"), and Advantage Capital
Corporation ("Advantage Capital") (VK/AC Holding together with its
subsidiaries, the "Company"). All material intercompany accounts and
transactions have been eliminated in consolidation.
The consolidated financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission with respect to quarterly financial statements. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. VK/AC Holding's
Annual Report on Form 10-K for the year ended December 31, 1995, filed with
the Securities and Exchange Commission, includes the information and note
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles and should be
referred to for further information. The Company believes that the
accompanying consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
Company's consolidated financial position as of June 30, 1996 and December 31,
1995, its consolidated results of operations for the three months ended June
30, 1996 and 1995, and the six months ended June 30, 1996 and 1995, and its
consolidated cash flows for the six months ended June 30, 1996 and
1995.
Primary and fully diluted earnings per share are computed based upon the
weighted average number of shares outstanding during the period, including
shares of redeemable common stock.
Note 2 - Redeemable Common Stock
The shares of redeemable common stock are reported on the balance sheets at
redemption value, which, at June 30, 1996, is based upon the estimated
per share merger consideration to be paid in connection with the
Acquisition as more fully described in Note 3. The accretion to redemption
value of $14,887,950 has been reflected as a reduction of retained
earnings at June 30, 1996 and as a reduction of net income available to
common stockholders for the three months ended June 30, 1996 and for the
six months ended June 30, 1996 in determining earnings per share. This
accretion reduced primary and fully diluted earnings per share for the
three months ended June 30, 1996 by $5.70 and $5.62, respectively, and
for the six months ended June 30, 1996 by $5.70 and $5.62, respectively.
Options to purchase shares of Class A Common Stock were granted to certain
members of management and other employees of the Company pursuant to a stock
option plan, under which such options will vest over a period of time up to
five years.
VK/AC Holding, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
Stock options transactions consisted of the following:
<TABLE>
<CAPTION>
Number of
Options
---------------
<S> <C>
Balance, December 31, 1995 365,832
Granted; exercise price $200 1,912
Exercised (537)
Cancelled (8,906)
---------------
Balance, June 30, 1996 358,301
===============
<FN>
<F1>As of June 30, 1996, 121,652 options had vested and the Company granted an
aggregate of 3,350 deferred stock units to certain employees.
</TABLE>
Note 3 - Agreement and Plan of Merger
On June 24, 1996, VK/AC Holding announced it had entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Morgan Stanley Group Inc.
("Morgan Stanley"), MSAM Holdings II, Inc. and MSAM Acquisition Inc., pursuant
to which MSAM Acquisition Inc. will be merged with and into VK/AC Holding and
VK/AC Holding will be the surviving corporation. Following the merger, VK/AC
Holding will be a wholly owned subsidiary of Morgan Stanley.
Subject to a number of conditions being met, it is currently anticipated that
the consummation of the transactions contemplated by the Merger Agreement (the
"Acquisition") will occur by the end of November, 1996. At the closing, MSAM
Acquisition Inc. will pay approximately $740 million (based on VKAC's
long-term debt outstanding as of July 31, 1996) in cash to the stockholders
of VK/AC Holding (excluding certain management stockholders), and to persons
owning options to purchase stock of VK/AC Holding, subject to certain purchase
price adjustments set forth in the Merger Agreement. To the extent that
pre-tax income prior to the closing of the Acquisition permits the repayment
of VKAC's long-term debt, the purchase price for the equity interests in VK/AC
Holding will be increased by the amount of debt repaid. The purchase price
also is subject to certain adjustments based, among other things, on assets
under management of the Company at the time of closing. It is contemplated
that as part of the Acquisition certain officers and directors of the Company
will contribute to MSAM Holdings II, Inc. their existing shares of common
stock of VK/AC Holding in exchange for approximately $25 million of shares
of preferred stock of MSAM Holdings II, Inc. which, in turn, will be
exchangeable into common stock, par value $1.00 per share, of Morgan Stanley
at specified times over a four year period. Such shares of preferred stock
will represent, in the aggregate, 5% of the combined voting power in MSAM
Holdings II, Inc., the remainder of which will be indirectly owned by Morgan
Stanley and its affiliates.
VK/AC Holding, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
Note 4 - Discontinued Operations
On January 2, 1996, Advantage Capital, a retail broker-dealer, was sold to
SunAmerica, Inc. The Company currently has no intention of re-entering the
retail broker-dealer business. By agreement with SunAmerica, Inc., the
Federal and state income tax assets and liabilities of Advantage Capital
relating to periods prior to its sale were assumed by VKAC.
On June 4, 1996, by resolution of the Board of Directors, the Company
formalized its intent to dispose of MCM, a registered investment advisor
under the Investment Advisers Act of 1940, through such distribution to
stockholders. Accordingly, the consolidated financial statements of the
Company have been reclassified to report separately the net assets and
operating results of the discontinued operations.
The results of operations for Advantage Capital and MCM for the three months
ended June 30, 1996 and 1995 and the six months ended June 30, 1996 and 1995,
which are classified separately as discontinued operations in the accompanying
consolidated statements of income, are summarized as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1996 1995 1996 1995
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues $ 9,058 $ 9,946 $ 17,821 $ 19,129
============ ============== ============= ===============
Income Before Income Taxes $ 1,593 $ 511 $ 2,812 $ 1,041
Income Taxes $ 765 $ 200 $ 1,330 $ 393
------------ ------------- ------------ -------------
Net Income $ 828 $ 311 $ 1,482 $ 648
============ ============== ============= ===============
</TABLE>
Net assets of discontinued operations consist principally of accounts
receivable and excess of cost over fair value of net assets acquired.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
VK/AC Holding, Inc. ("Holding") and Van Kampen American Capital, Inc.
("VKAC"), a wholly-owned subsidiary of Holding, were organized in 1992 to
acquire a company then named The Van Kampen Merritt Companies, Inc. ("VKM")
and certain of its subsidiaries. Effective February 17, 1993, VKAC acquired
VKM and VKM merged with and into VKAC (the "VKM Acquisition").
On December 20, 1994, Holding and VKAC acquired American Capital Management &
Research, Inc. and its subsidiaries (the "AC Acquisition"). American Capital
Management & Research, Inc. (together with its subsidiaries, "American
Capital") then merged into VKAC.
The Company sold Advantage Capital Corporation ("ACC"), its retail
broker-dealer subsidiary, acquired as a result of the AC Acquisition, for $7.6
million in January 1996.
On June 24, 1996, Holding announced it had entered into an Agreement and Plan
of Merger (the "Merger Agreement") with Morgan Stanley Group Inc. ("Morgan
Stanley"), MSAM Holdings II, Inc. and MSAM Acquisition Inc., pursuant to which
MSAM Acquisition Inc. will be merged with and into Holding and Holding will be
the surviving corporation. Following the merger, Holding will be a wholly
owned subsidiary of Morgan Stanley. Subject to a number of conditions being
met, it is currently anticipated that the consummation of the transactions
contemplated by the Merger Agreement (the "Acquisition") will occur by the end
of November 1996. At the closing, MSAM Acquisition Inc. will pay
approximately $740 million (based on VKAC's long-term debt outstanding as of
July 31, 1996) in cash to the stockholders of Holding (excluding certain
management stockholders), and to persons owning options to purchase stock of
Holding, subject to certain purchase price adjustments set forth in the Merger
Agreement. To the extent that pre-tax income prior to the closing of the
Acquisition permits the repayment of VKAC's long term debt, the purchase price
for the equity interests in Holding will be increased by the amount of debt
repaid. The purchase price also is subject to certain adjustments based,
among other things, on assets under management of the Company at the time of
closing. It is contemplated that as part of the Acquisition certain officers
and directors of the Company will contribute to MSAM Holdings II, Inc., their
existing shares of common stock of Holding in exchange for approximately $25
million of shares of preferred stock of MSAM Holdings II, Inc., which, in
turn, will be exchangeable into common stock, par value $1.00 per share, of
Morgan Stanley at specified times over a four year period. Such shares of
preferred stock will represent, in the aggregate, 5% of the combined voting
power in MSAM Holdings II, Inc., the remainder of which will be indirectly
owned by Morgan Stanley and its affiliates.
Holding will engage in certain preparatory transactions prior to the
Acquisition, including the distribution to current stockholders of Holding of
(i) all of Holding's investment in McCarthy, Crisanti & Maffei, Inc. ("MCM"),
a wholly owned subsidiary engaged in the business of distributing research and
financial information, (ii) all of Holding's investment in Hansberger Global
Investors, Inc., a company in which VK/AC Holding made a minority investment
in May 1996, and (iii) certain related cash amounts.
Unless the context otherwise requires, the term "Company" as used herein means
Holding and its subsidiaries. The following discussion should be read in
conjunction with the unaudited consolidated financial statements and related
notes found in "Item 1 - Financial Information" and the Company's Form 10-K
for the fiscal year ended December 31, 1995, since they contain important
information that may be helpful in evaluating the Company's results of
operations and financial condition. MCM's and ACC's financial condition and
results of operations are shown as discontinued operations in the Financial
Information.
Overview
The Company markets and provides investment advisory and administrative
services to open end and closed end funds ("Funds"), unit investment trusts
("UITs") and institutional clients ("Institutional Accounts") which consist of
insurance companies, pension funds, municipalities, high net worth individuals
and mutual funds sponsored by third parties. As of June 30, 1996, the Company
had more than $57 billion of assets under management and/or supervision,
including $35.5 billion in over 100 open end and closed end Funds, $4.9
billion in the Van Kampen American Capital Prime Rate Income Trust ("Prime
Rate Trust"), $5.6 billion in assets managed on behalf of Institutional
Accounts and $11.6 billion in UITs. The Company's total assets under
management rose from $41 billion at June 30, 1995 to $46 billion at June 30,
1996 as a result of increased market values of equity and fixed income
securities during this period and increased sales of Fund shares, particularly
Class B shares of certain open end Funds and the Prime Rate
Trust.
The Company also has transfer agency and trust company capabilities through
ACCESS Investor Services, Inc. ("ACCESS") and through Van Kampen American
Capital Trust Company.
The investment management industry has exhibited rapid growth in recent years,
driven by a combination of favorable stock and bond market performance and
demographic trends. Industry sales of equity funds are affected by stock
market performance and, to a lesser extent, interest rates. A strong stock
market stimulates investment in equity funds; low interest rates also favor
equity investments because of the diminished attractiveness of fixed income
investment alternatives. Industry sales of bond funds, particularly those
that invest in long-term fixed income tax-exempt municipal securities, are
affected by the relationship between long-term and short-term interest rates,
the strength of the stock market and the perception of investors concerning
certain proposed tax regulations and the future direction of interest rates.
Based on industry sales from 1994 to the present, demand for municipal bond
funds has decreased significantly and demand for fixed income funds in general
has slowed. The Company attributes this decline primarily to the combination
of certain proposed changes in federal income tax regulations which may impact
the future tax status of municipal securities, the strength of the stock
market and the general uncertainty of investors over the future direction of
interest rates. The Company believes that by significantly broadening its
product offerings through the AC Acquisition (more than one-third of the
Company's Fund assets under management as of June 30, 1996 were in equity
Funds), it has helped to offset the potential negative impact of declining
interest in its fixed income Funds.
The Company's investment advisory fee revenues, which accounted for 84% of the
Company's total revenues in 1995 and 86% of its total revenues for the quarter
ended June 30, 1996, consist primarily of (i) fees for managing the assets of
the Funds (including ten open end Funds distributed by PFS Investments, Inc.
and advised by the Company (the "Common Sense Funds")), and the Institutional
Accounts, (ii) "12b-1 fees" which arise from the reimbursement of certain
distribution expenses, including reimbursement of commissions paid to
unaffiliated retail distribution firms for selling Class B and Class C shares
of open end Funds and (iii) administrative fees paid by the closed end Funds
and the Prime Rate Trust. The Company's investment advisory fees fluctuate
due to changes in the total value of the assets under management and are
calculated based on daily, weekly or quarterly average balances, depending on
the Fund or Institutional Account. Variations in the level of the assets
under management are due to both net sales (gross sales less redemptions of
Fund shares) and market value changes. Consequently, significant fluctuations
in the prices of securities (e.g., as the result of substantial changes in the
equity and fixed income markets resulting from changes in interest rates,
inflation rates or other economic factors) or the level of redemptions of open
end Funds may affect materially the amount of assets under management and thus
the Company's revenue and profitability.
Revenues from the distribution of the Company's investment products are
primarily derived from (i) the sales charge, less an applicable concession to
dealers, for the sale of UIT units, which is the largest contributor to
distribution revenues, (ii) the net profit realized or net loss incurred to
the extent that the market price of securities deposited by the Company in a
UIT exceeds or is less than the original cost of the securities to the
Company, (iii) the net profit realized or net loss incurred to the extent that
the public offering price of UIT units increases or decreases before the UIT
units are sold, (iv) a portion of the sales charge paid by investors who buy
open end Fund Class A shares and (v) certain concessions and fees that the
Company receives as U.S. distributor for the Govett Family of Funds.
A significant portion of the Company's operating expenses is attributable to
amortization of deferred Company funded distribution costs, which originates
primarily from the commissions and sales expense paid by the Company to
unaffiliated retail distribution firms for selling Class B and Class C shares
of open end Funds, the Prime Rate Trust and most of the closed end Funds.
These up-front expenditures are capitalized and amortized to match, through
straight line amortization, future investment advisory fee revenues derived
from management advisory contracts for these Funds. The amortization periods
for these costs vary from four to ten years, depending upon the Fund type.
Because amounts capitalized in prior years have not been fully amortized, this
expense tends to grow each year as amortization of current year additions to
this expense item is added to that of prior years.
The Company provides daily pricing and ongoing credit surveillance services
for its UITs and certain of the Funds. The Company also furnishes accounting,
legal, pricing, transfer agency and shareholder services to certain of the
Funds and UITs. The Company receives payments from such Funds and UITs equal
to the cost of providing these services, which payments are reflected as
"reimbursements." In July 1995, ACCESS, which had been the transfer agent
for only some of the open end Funds, was appointed the transfer agent for all
of the open end Funds, which resulted in the addition of personnel and the
incurrence of other costs which are reimbursable by the open end
Funds.
Results of Operations
The following tables list the investment advisory fees and assets under
management by source for the three month and six month periods ended June 30,
1996 and 1995:
<TABLE>
<CAPTION>
Three Months 1996 Six Months 1996
Ended June 30 Compared Ended June 30 Compared
Investment Advisory Fees (in millions) 1996 1995 to 1995 1996 1995 to 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Funds:
Open End:
Equity $22.1 $16.7 32% $ 42.9 $ 31.9 34%
Fixed Income 21.9 21.5 2 44.0 42.3 4
Prime Rate Trust 12.7 5.7 123 23.6 10.3 129
Closed End:
Equity 0.1 0.1 -- 0.2 0.2 --
Fixed Income 14.6 14.7 (1) 29.7 29.1 2
Institutional Accounts 2.3 2.5 (8) 4.9 4.6 7
--------- --------- --------- ---------
Total $73.7 $61.2 20% $145.3 $118.4 23%
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1996
June 30 Compared
Assets Under Management (in billions) 1996 1995 to 1995
--------- --------- ---------
<S> <C> <C> <C>
Funds:
Open End:
Equity $14.9 $11.4 31%
Fixed Income 13.2 13.8 (4)
Prime Rate Trust 4.9 2.4 104
Closed End:
Equity 0.1 0.1 --
Fixed Income 7.3 7.3 --
Institutional Accounts 5.6 6.0 (7)
--------- ---------
Total $46.0 $41.0 12%
========= =========
</TABLE>
Fund assets under management increased by $5.4 billion or 15% from June 30,
1995 to June 30, 1996, primarily as a result of growth in equity open end Fund
assets and Prime Rate Trust assets. Equity open end Fund assets grew 31%
during the period due to $0.9 billion of net sales and market value
appreciation of $2.6 billion. The Prime Rate Trust accounted for sales of $2.6
billion during the period. Fixed income Fund assets decreased by $0.6 billion
or 4% from June 30, 1995 to June 30, 1996, as a result of net
redemptions.
Institutional Account assets under management decreased by approximately 7%
from June 30,1995 to June 30, 1996 as a result of a reduction in the level of
accounts managed for certain affiliates of Xerox Corporation, partially offset
by new accounts, additional sales to existing accounts and market value
increases.
Income from continuing operations before interest and acquisition expenses and
income taxes ("Operating Earnings") for the second quarter of 1996 was $35.4
million, an increase of $9.1 million or 34% over the corresponding period of
1995. For the six months ended June 30, 1996 Operating Earnings was $70.1
million, $18.7 million or 36% greater than the same period of 1995.
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Revenues increased during the quarter ended June 30, 1996 by $12.5 million or
17% over the same period in 1995, primarily due to an increase in investment
advisory fees. Investment advisory fees increased during the second quarter of
1996 by $12.5 million or 20% over the same period in 1995, due primarily to
greater assets under management, significant growth in the Prime Rate Trust,
which has a higher investment advisory fee rate than the other Funds, and
increased sales of Class B shares of open end Funds, which generate 12b-1 fees
to compensate for Company funded distribution costs. Advisory fees earned for
managing the Common Sense Funds were $6.8 million for the three months ended
June 30, 1996, compared to $5.7 million for the three months ended June 30,
1995.
Total expenses excluding interest and acquisition expenses ("Operating
Expenses") increased during the second quarter of 1996 by $3.4 million to
$50.7 million or 7% over the corresponding period of 1995. Compensation and
benefits expense increased during the second quarter of 1996 by $1.1 million
or 5% over the same period in 1995. Growth in this expense resulted from
annual salary increases and the additional costs of ACCESS personnel to
service the additional open end Funds as discussed above. Amortization of
deferred Company funded distribution costs increased during the second quarter
of 1996 by $3.4 million or 28% over the same period in 1995, due principally
to increased sales of shares of the Prime Rate Trust, which resulted in
approximately $2.7 more in amortization expense for the quarter. Marketing and
promotion expense increased by $2.1 million or 31%, primarily as a result of
higher sales of Funds and UITs, which were $2.0 billion in the second quarter
of 1996 compared to $1.6 billion in the same period of 1995. Other expenses
decreased by $1.5 million or 17%, due to certain nonrecurring expenses in 1995
related to the combination of VKM and American Capital and certain of the
Funds. Reimbursements increased during the second quarter of 1996 by $2.3
million over the same period in 1995, primarily due to higher personnel and
occupancy costs incurred in 1996 as a result of ACCESS being named transfer
agent to all of the open end Funds beginning in July 1995.
Interest and acquisition expenses during the second quarter of 1996 decreased
by $2.7 million compared to the same period in 1995, due largely to a decrease
in interest expense of $2.5 million or 23%, resulting from lower bank
borrowings and lower interest rates. The Company's achievement of certain
financial ratios under its secured credit facility resulted in a reduction of
its effective interest rate beginning in the first quarter of 1996.
Income from continuing operations before taxes for the three months ended June
30, 1996 increased by $11.8 million over the corresponding period in 1995, due
to higher operating income and lower interest and acquisition expenses.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues increased during the first six months of 1996 by $26.7 million or 19%
over the same period of 1995, primarily due to an increase in investment
advisory fees. Investment advisory fees increased during the first six months
of 1996 by $26.9 million or 23% over the same period of 1995, due primarily to
greater assets under management, significant growth in the Prime Rate Trust,
which has a higher investment advisory fee rate than the other Funds, and
increased sales of Class B shares of open end Funds, which generate 12b-1 fees
to compensate for Company funded distribution costs. Advisory fees earned for
managing the Common Sense Funds were $13.4 million for the six months ended
June 30, 1996 as compared to $11.0 million for the six months ended June 30,
1995.
Operating Expenses increased during the first six months of 1996 by $8.0
million to $98.2 million or 9% over the corresponding period in 1995.
Compensation and benefits expense increased to $48.8 million for the first six
months of 1996, an 8% increase over the prior year period. This was due
primarily to annual salary increases and the expansion of ACCESS as described
above. Amortization of deferred company funded distribution costs increased
during the first six months of 1996 by $6.3 million or 26% over the same
period of 1995, due principally to increased sales of the Prime Rate Trust,
which resulted in $5.2 million more in amortization expense for the first six
months of 1996. Occupancy expense increased during the first six months of
1996 by $2.4 million or 16% over the same period of 1995, due to increased
data processing costs related to ACCESS. Marketing and promotion expense
increased during the first six months of 1996 by $1.9 million or 13% over the
same period of 1995, related to increased sales of Funds and UITs in the first
six months of 1996 over those of the 1995 period. Other expenses decreased
during the first six months of 1996 by $1.4 million or 9% compared to the same
period of 1995, due to combination-related expenses incurred in 1995 as
discussed above. Reimbursements increased during the first six months of 1996
by $4.6 million or 20% over the same period of 1995, due primarily to
increases in compensation and benefits and occupancy expenses attributable to
ACCESS.
Interest and acquisition expenses decreased during the first six months of
1996 by $5.0 million compared to the same period of 1995, due largely to a
decrease in interest expense of $4.6 million or 21%, resulting from lower bank
borrowings and lower interest rates. The Company's achievement of certain
financial ratios under its secured credit facility resulted in a reduction of
its effective interest rate for the six months ended June 30, 1996.
Income from continuing operations before taxes for the six months ended June
30, 1996 increased by $23.7 million over the corresponding period of 1995, due
to higher operating income and lower interest and acquisition expenses.
Liquidity and Capital Resources
The Company's primary source of liquidity during the first six months of 1996
and 1995 was cash generated from operations, which totaled $76.1 million
(including $7.6 million in cash proceeds from the sale of ACC) and $49.3
million, respectively. Cash from operations permitted the Company to prepay
$70 million of long-term debt in 1995, fund the Company's working capital
needs and finance its capital expenditures, including the funding of deferred
Company funded distribution costs. The Company's cash flow from operations
during 1996 also funded the payment in the first quarter of 1996 of
approximately $20 million in annual employee bonuses earned and accrued during
1995, and the prepayment in the second quarter of 1996 of $15 million of
long-term debt.
The Company incurred substantial indebtedness in connection with the VKM
Acquisition and the AC Acquisition. As of June 30, 1996, the Company had
outstanding $425 million of indebtedness (excluding $54.1 million of
collateralized borrowings of Van Kampen American Capital Distributors, Inc.
("VKAC Distributors"), VKAC's broker-dealer subsidiary), consisting of $150
million in the form of the Company's 9.75% Senior Secured Notes due 2003 (the
"Notes") and $275 million in borrowings pursuant to the Company's secured
credit facility, $250 million of which was outstanding under a term loan
facility and $25 million of which was outstanding under a $100 million
revolving credit facility. The revolving credit facility is available to meet
the ongoing working capital and business needs of the Company.
In 1995, the Company prepaid $70 million under the term loan facility, and in
March 1996 it prepaid an additional $40 million under the term loan facility
with $40 million of borrowings under the revolving credit facility, of which
$10 million was repaid in May 1996 and $5 million was repaid in June 1996.
Pursuant to waiver agreements, the parties to the secured credit facility
agreed to waive the requirement that the above referenced prepayments be
applied in reverse order of maturity and permitted such prepayments to be
applied to fully prepay the 1996 and 1997 principal payments, and to prepay
$35 million of the $71.25 million 1998 principal payment. With respect to the
remaining $250 million borrowed under the term loan facility, the Company is
required to make principal payments of $36.25 million in 1998 and $71.25
million in each year thereafter through the year 2001. All amounts outstanding
under the revolving credit facility will become due upon the final maturity of
the term loan facility. The $150 million aggregate principal amount of the
Notes matures in 2003 with no prior scheduled mandatory prepayments.
Prepayments of outstanding indebtedness under the Notes and the secured credit
facility may be required in certain circumstances, including the sale by
Holding, VKAC or any of its subsidiaries of certain assets, and certain change
of control-related events.
VKAC's obligations under the secured credit facility and the Notes are secured
by all of the issued and outstanding capital of its significant subsidiaries,
and certain cash and other collateral of VKAC, including certain stock of
certain future subsidiaries. VKAC's obligations under the secured credit
facility and the Notes are also guaranteed by the Company, which guarantees
are secured by a pledge of the Company of all of the outstanding stock of VKAC
and certain other collateral of the Company. The Company's secured credit
facility and the indenture governing the Notes (the "Indenture") contain
various events of default, various affirmative and negative covenants,
including restrictions on the ability of the Company to incur indebtedness,
incur liens and other encumbrances, pay dividends or make other restricted
payments, become liable on guarantees and other contingent obligations, enter
into agreements with respect to mergers or consolidations, sell or transfer
assets, make investments or capital expenditures, make acquisitions, make
loans and advances, enter into transactions with affiliates, create
subsidiaries or engage in new types of business, a negative pledge with
respect to unencumbered assets, and, in the case of the secured credit
facility, certain net worth, leverage and fixed charge coverage restrictions.
Except for the execution of the Merger Agreement, for which the Company has
notified the banks party to the secured credit facility, the financial
covenants and other restrictions set forth in the secured credit facility and
the Indenture governing the Notes were satisfied during the quarter and six
months ended June 30, 1996.
In connection with the consummation of the transactions contemplated by the
Merger Agreement, the Company will be required to repay its indebtedness under
the secured credit facility or obtain a waiver of certain provisions of such
credit facility. With respect to the Indenture, the consummation of the
transactions contemplated by the Merger Agreement will constitute a "Change of
Control" (as defined in the Indenture), which will entitle the holders of the
Notes to require the Company to repurchase their Notes at 101% of their
outstanding principal amount. At this time, the disposition of the Company's
outstanding indebtedness under the secured credit facility upon consummation
of the transactions contemplated by the Merger Agreement has not yet been
determined.
VKAC Distributors also incurs certain additional short-term bank loans to fund
the purchase of securities related to the UIT business for such subsidiary's
inventories. The $54.1 million outstanding at June 30, 1996 is payable on
demand and bears interest at approximately 1/2% over the federal funds rate.
This loan is secured by VKAC Distributors' UIT trading inventory.
The Company believes that cash generated from operations and borrowing
resources will be adequate to permit the Company to meet both its current debt
service requirements and working capital needs in the foreseeable future,
including the funding of anticipated levels of future commissions in
connection with sales of shares of closed end Funds, open end Funds and the
Prime Rate Trust. The Company also anticipates that the letters of credit and
trading inventory financing facilities provided to VKAC Distributors in
connection with its sponsorship of new UITs and the overnight financing of its
trading inventory, respectively, will remain available. However, no assurance
can be given as to the adequacy of such funds or continued availability of
such facilities.
The Company is a holding company formed for the purpose of effecting the VKM
Acquisition and has no substantial independent operations. VKAC is a services
company which primarily provides administrative services to its operating
subsidiaries and virtually all of its revenues are derived from such operating
subsidiaries. Payment by VKAC of interest and principal due on the Notes or
under the Company's secured credit facility and payment of the Company's
obligations under its guarantees of VKAC's obligations are dependent upon cash
payments from their subsidiaries. This cash flow is effected through the
payment of dividends and intercompany service charges, as required by the
Company's secured credit facility.
Effect of Hedging Against Market Value Changes in UIT Inventories
The Company's broker-dealer subsidiary, VKAC Distributors, regularly purchases
and holds in inventory for its own account securities to be deposited into
UITs and holds for sale primary and secondary UIT units. These inventory
positions are regularly marked to market, resulting in profit or loss. The
market values of securities and UIT units fluctuate. In addition, in
connection with a primary UIT offering, if securities are sold or deposited
into UITs at a price below VKAC Distributors' cost, VKAC Distributors will
incur a loss with respect to such difference. The Company uses United States
Treasury and municipal bond index futures contracts, which are types of
derivative financial instruments, primarily to hedge against market value
changes in its UIT trading inventory. Although it is the Company's policy to
protect its inventory through hedging, it does not hedge the entire inventory,
nor does hedging provide total protection against market value loss. The
Company's hedging activities with respect to its UIT inventories during the
periods ended June 30, 1996 and 1995 have not had a material impact on the
Company's revenues.
Forward-Looking Statements
This section titled "Management's Discussion and Analysis of Financial
Condition and Results of Operations," contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding, among other items, (i) cash flow
sufficient to fund the Company's debt service requirements and working capital
needs and (ii) anticipated trends in the Company's business and the investment
management industry. Forward-looking statements are typically identified by
the words "believe," "expect," "anticipate," "intend," "estimate," and similar
expressions. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results could
differ materially from these forward-looking statements as a result of, among
other things, (i) changes in the investment management industry as a result of
economic or regulatory influences, (ii) changes in the competitive
marketplace, including new products and pricing changes by the Company's
competitors, and (iii) changes resulting from the consummation of the
transactions contemplated by the Merger Agreement. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their dates. The Company undertakes no obligation to publicly
update or revise any forward-looking statements.
Part II: OTHER INFORMATION
Item 1: Legal Proceedings. Not applicable.
Item 2: Changes in Securities. Not applicable.
Item 3: Defaults Upon Senior Securities. Not applicable.
Item 4: Submission of Matters to a Vote of Securities Holders. A
Written Consent of the majority stockholder of Holding was
executed on June 21, 1996, relating to approval of the sale
of Holding by way of a merger with and into MSAM Acquisition
Inc., an indirect wholly owned subsidiary of Morgan Stanley
Group Inc., on the terms and subject to the conditions set
forth in an Agreement and Plan of Merger, dated as of June
21, 1996, among Holding, Morgan Stanley Group Inc., MSAM
Holdings II, Inc. and MSAM Acquisition Inc.
Item 5: Other Information. Not applicable.
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits. The exhibits required by Item 601 of Regulation S-K and
filed herewith are listed in the Exhibit Index which follows the
signature page and immediately precedes the exhibits filed.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Registrant during the second quarter ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VK/AC HOLDING, INC.
Date: August 14, 1996 /s/ WILLIAM R. RYBAK
William R. Rybak
Executive Vice President and
Chief Financial Officer
(principal financial officer and
duly authorized officer of
Registrant)
VK/AC HOLDING, INC.
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit
Number Description
1 None
2.1 Agreement and Plan of Merger, dated as of June 21, 1996,+
among VK/AC Holding, Inc., Morgan Stanley Group Inc.,
MSAM Holdings II, Inc. and MSAM Acquisition Inc.
2.2 Stock Purchase Agreement, dated as of May 13, 1996, +
between Hansberger Global Investors, Inc., as Seller, and
VK/AC Holding, Inc., as Buyer.
3.1 Restated Certificate of Incorporation of CDV Holding, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 of CDV Acquisition
Corporation and CDV Holding, Inc., Registration No.
33-55676).
3.2 Bylaws of VK/AC Holding, Inc., as amended. (incorporated
by reference to Exhibit 3.2 to VK/AC Holding, Inc.'s Quarterly
Report on Form 10-Q for the first quarter ended March 31,
1995, Commission File No. 33-56334).
3.3 Certificate of Amendment, dated as of December 20, 1994,
of The Van Kampen Merritt Companies, Inc. (incorporated by
reference to Exhibit 3.1 of VK/AC Holding, Inc.'s Report on
Form 8-K dated December 20, 1994, filed with the
Commission on January 4, 1995, Commission File No.
33-56334).
3.4 Certificate of Amendment, dated as of January 19, 1995, of
Van Kampen/American Capital, Inc. (incorporated by
reference to Exhibit 3.4 to VK/AC Holding, Inc.'s Form 10-K
for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).
3.5 Third Restated Certificate of Incorporation of VKM Holding,
Inc. (incorporated by reference to Exhibit 3.2 of VK/AC
Holding, Inc.'s Report on Form 8-K dated December 20,
1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).
10.1 Subordinated Credit Agreement, dated as of May 13, 1996,+
between Hansberger Global Investors, Inc. and VK/AC
Holding, Inc.
10.2 Shareholders' Agreement, dated as of May 13, 1996, +
between Hansberger Global Investors, Inc. and VK/AC
Holding, Inc.
11 Statement re computation of per share earnings. +
27 Financial Data Schedule +
- --------------------
+ Filed herewith
AGREEMENT AND PLAN OF MERGER
Dated as of June 21, 1996
among
VK/AC HOLDING, INC.,
MORGAN STANLEY GROUP INC.,
MSAM HOLDINGS II, INC.
and
MSAM ACQUISITION INC.
Index of Documents
------------------
1. Agreement and Plan of Merger, dated as of June 21, 1996, among VK/AC Holding,
Inc., Morgan Stanley Group Inc., MSAM Holdings II, Inc., and MSAM Acquisition
Inc.
2. Letter, dated June 21, 1996, with respect to the disclosure by VK/AC Holding,
Inc. of certain matters.
3. Letter, dated June 21, 1996, with respect to certain undertakings by the
Clayton & Dubilier Private Equity Fund IV Limited Partnership.
AGREEMENT AND PLAN OF MERGER
among
VK/AC HOLDING, INC.,
MORGAN STANLEY GROUP INC.,
MSAM HOLDINGS II, INC.
and
MSAM ACQUISITION INC.
-------------------------
Dated as of June 21, 1996
-------------------------
TABLE OF CONTENTS
-----------------
ARTICLE I
THE MERGER
Page
1.1. The Merger.......................................................... 2
1.2. Effective Time...................................................... 2
1.3. Organizational Documents, Directors and Officers of
the Surviving Corporation......................................... 3
1.4. Further Assurances.................................................. 3
1.5. Conversion of Common Stock, Preferred Stock and Options4
1.6. Acquisition Price................................................... 6
1.7. Dissenting Shares................................................... 7
1.8. Payment of Merger Consideration and Other Amounts................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company....................... 9
2.1.1. Authorization; No Conflicts; Status of
VKAC Group, etc........................................... 9
2.1.2. Capitalization.............................................. 11
2.1.3. Financial Information....................................... 12
2.1.4. Undisclosed Liabilities..................................... 13
2.1.5. Absence of Changes.......................................... 13
2.1.6. Taxes....................................................... 17
2.1.7. Properties and Assets....................................... 21
2.1.8. Contracts................................................... 22
2.1.9. Intellectual Property....................................... 24
2.1.10. Insurance................................................... 25
2.1.11. Litigation.................................................. 26
2.1.12. Compliance with Laws and Other
Instruments; Governmental Approvals....................... 26
2.1.13. Environmental Matters....................................... 27
2.1.14. Affiliate Transactions...................................... 28
2.1.15. Government Regulation....................................... 28
2.1.16. Funds; Sub-Advisory Funds; Clients.......................... 32
2.1.17. Labor Matters, etc.......................................... 34
2.1.18. ERISA....................................................... 34
2.1.19. Brokers, Finders, etc....................................... 36
2.1.20. List of ERISA Clients....................................... 36
2.1.21. Hedging Activities.......................................... 36
2.1.22. Financial Projections....................................... 36
2.1.23. Assets Under Management..................................... 37
2.2. Representations and Warranties of the Parent, Holdco
and the Buyer..................................................... 37
2.2.1. Corporate Status; Authority for
Agreement................................................. 37
2.2.2. No Conflicts, etc........................................... 37
2.2.3. Litigation.................................................. 38
2.2.4. Brokers, Finders, etc....................................... 38
2.2.5. No Disqualifying Participants............................... 38
2.2.6. Financing................................................... 39
2.2.7. Section 15(f) Materials..................................... 39
ARTICLE III
COVENANTS
3.1. Covenants of the Company............................................ 39
3.1.1. Conduct of Business......................................... 39
3.1.2. No Solicitation............................................. 40
3.1.3. Access and Information...................................... 41
3.1.4. Subsequent Financial Statements, Debt
Prepayments and Filings................................... 42
3.1.5. Public Announcements........................................ 42
3.1.6. Further Actions............................................. 43
3.1.7. Compliance with Investment Company
Act Section 15............................................ 45
3.1.8. Qualification of the Funds; Tax Affairs..................... 46
3.1.9. ERISA Clients............................................... 48
3.2. Covenants of the Parent, Holdco and the Buyer....................... 48
3.2.1. Public Announcements........................................ 48
3.2.2. Further Actions............................................. 48
3.2.3. Compliance with Investment Company
Act Section 15............................................ 49
3.2.4. Employee Matters Subsequent to the
Effective Time............................................ 51
3.2.5. List of Affiliates.......................................... 52
3.2.6. Contribution Agreement...................................... 52
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Each Party............................. 53
4.1.1. HSR Act Notification........................................ 53
4.1.2. No Injunction, etc. ........................................ 53
4.1.3. Contribution Agreement ..................................... 53
4.1.4. Assets Under Management..................................... 53
4.2. Conditions to Obligations of the Parent, Holdco and
the Buyer......................................................... 53
4.2.1. Representations; Performance................................ 54
4.2.2. Consents.................................................... 54
4.2.3. MCM Indemnity............................................... 54
4.2.4. Resignation of Directors.................................... 55
4.2.5. Opinion of Counsel.......................................... 55
4.2.6. Proceedings................................................. 55
4.2.7. Govett Agreements........................................... 55
4.2.8. FIRPTA Certification........................................ 55
4.3. Conditions to Obligations of the Company............................ 55
4.3.1. Representations, Performance, etc. ......................... 56
4.3.2. Consents.................................................... 56
4.3.3. Merger Consideration........................................ 56
4.3.4. Certain Indebtedness........................................ 57
4.3.5. Opinions of Counsel......................................... 57
4.3.6. Corporate Proceedings....................................... 57
ARTICLE V
TERMINATION
5.1. Termination......................................................... 57
5.2. Effect of Termination............................................... 58
ARTICLE VI
DEFINITIONS, MISCELLANEOUS
6.1. Definition of Certain Terms......................................... 58
6.2. Survival of Representations and Warranties.......................... 74
6.3. Expenses; Transfer Taxes............................................ 75
6.4. Severability........................................................ 75
6.5. Notices............................................................. 75
6.6. Miscellaneous....................................................... 76
6.6.1. Headings.................................................... 76
6.6.2. Entire Agreement............................................ 77
6.6.3. Counterparts................................................ 77
6.6.4. Governing Law............................................... 77
6.6.5. Binding Effect.............................................. 77
6.6.6. Assignment.................................................. 77
6.6.7. No Third Party Beneficiaries................................ 78
6.6.8. Waiver of Jury Trial........................................ 78
6.6.9. Amendment; Waivers.......................................... 78
6.6.10. Certain Disclosure......................................... 78
SCHEDULES AND EXHIBITS
Exhibit A --Adjustment Based on Assets Under
Management
Exhibit B --Form of MCM Indemnification Agreement
Exhibit C-1 --Form of Opinion of General Counsel of the Company
Exhibit C-2 --Form of Opinion of Special Counsel to the Company
Exhibit D --Form of Opinion of Special Counsel to the Buyer
Schedule 2.1.1(b) --Company Conflicts and Governmental Approvals
Schedule 2.1.1(c) --Due Organization
Schedule 2.1.2(a) --Owners of Preferred Stock and Common Stock
Schedule 2.1.2(b) --Equity Interests of the VKAC Group
Schedule 2.1.2(c) --Option Holders
Schedule 2.1.2(d) --Agreements with Respect to Capital Stock
Schedule 2.1.2(e) --Other Investments
Schedule 2.1.5 --Changes Since December31, 1995
Schedule 2.1.6(a) --Tax Returns; Payment of Taxes
Schedule 2.1.6(b) --Tax Extensions
Schedule 2.1.6(c) --Group For Tax Purposes; Tax Filing Jurisdictions
Schedule 2.1.6(d) --Tax Audits and Assessments
Schedule 2.1.6(f) --Tax Sharing Arrangements
Schedule 2.1.6(g) --Regulated Investment Company Exceptions
Schedule 2.1.6(j) --Real Property in Transfer Tax Jurisdictions
Schedule 2.1.6(k) --Qualified Stock Purchases
Schedule 2.1.7 --Real Property
Schedule 2.1.8(a) --Contracts
Schedule 2.1.8(b) --Contract Exceptions
Schedule 2.1.8(c) --Investment Advisory Clients
Schedule 2.1.8(f) --Proprietary and Preferred Vendors
Schedule 2.1.9(a) --Intellectual Property
Schedule 2.1.9(b) --Intellectual Property Infringements
Schedule 2.1.10 --Insurance Policies
Schedule 2.1.11 --Litigation
Schedule 2.1.12(a) --Compliance with Laws
Schedule 2.1.12(b) --Governmental Approvals
Schedule 2.1.14 --Affiliate Transactions
Schedule 2.1.15(a) --Regulatory Compliance: Investment Advisers
Schedule 2.1.15(b) --Regulatory Compliance: Broker-Dealers
Schedule 2.1.15(c) --Funds and Sub-Advisory Funds
Schedule 2.1.15(f) --Regulatory Compliance: Transfer Agent
Schedule 2.1.15(g) --Regulatory Compliance: Trust Companies
Schedule 2.1.18(a) --ERISA Plans
Schedule 2.1.19 --Brokers, Finders, etc.
Schedule 2.1.20 --ERISA Accounts
Schedule 2.2.2 --Parent and Buyer Conflicts and Governmental Approvals
Schedule 3.1.1 --Conduct of Business
Schedule 3.1.6(f) --Other Consents
Schedule 3.2.4(c) --Change of Control
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of June 21,
1996, among VK/AC Holding, Inc., a Delaware corporation (the "Company"),
Morgan StanleyGroup Inc., a Delaware corporation (the "Parent"), MSAM
Holdings II, Inc., a Delaware corporation and a wholly owned subsidiary
of the Parent("Holdco"), and MSAM Acquisition Inc., a Delaware
corporation and a wholly owned subsidiary of Holdco (the "Buyer").
WITNESSETH:
WHEREAS, the Company is a Delaware corporation
having authorized capital of (i) 32,500 shares of Preferred Stock, all
of which shares are issued and outstanding on the date hereof, (ii)
3,250,000 shares of Class A Common Stock, of which 2,317,474 shares are
issued and outstanding on the date hereof and (iii)3,250,000 shares of
Class B Common Stock, of which 117,817 shares are issued and outstanding
on the date hereof;
WHEREAS, the Company owns all of the issued and
outstanding capital stock of Van Kampen American Capital, Inc., a
Delaware corporation ("VKAC");
WHEREAS, the Buyer wishes to acquire the Company
on the terms and conditions and for the consideration described in this
Agreement (capitalized terms used herein without definition having the
meanings specified therefor in Section6.1);
WHEREAS, the Parent, Holdco and the Designated
Managers have entered into a Contribution Agreement dated as of the date
hereof (the "Contribution Agreement");
WHEREAS, in furtherance of such acquisition, (i)
the Boards of Directors of the Company and the Buyer have approved a
merger of the Buyer with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement, and
have directed that this Agreement be submitted to their respective
stockholders for adoption, and (ii) each of the holder of a majority of
the shares of Common Stock issued and outstanding on the date hereof and
Holdco, as the sole stockholder of the Buyer, has approved the Merger,
upon the terms and subject to the conditions set forth in this Agreement,
in each case pursuant to a written stockholder consent; and
WHEREAS, the Company, the Parent, Holdco and the
Buyer desire to make certain representations, warranties and agreements
in connection with the Merger and also to prescribe various conditions
to the Merger;
NOW, THEREFORE, in consideration of the mutual
promises, covenants, representations and warranties made herein and of
the mutual benefits to be derived therefrom, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger. In accordance with and subject to the terms and
provisions of this Agreement and the DGCL, at the Effective Time: (i) the
Buyer shall be merged with and into the Company, the separate existence
of the Buyer shall cease and the Company shall be the surviving corporation
(the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of Delaware; (ii) all rights, privileges,
immunities, powers, purposes, franchises, properties and assets of the
Company and the Buyer shall vest in the Surviving Corporation; and (iii)
all debts, liabilities, obligations, restrictions, disabilities and
duties of the Company and the Buyer shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving
Corporation.
1.2. Effective Time. Upon the terms and subject to the
conditions of this Agreement, no later than the second Business Day after
the satisfaction or waiver of the conditions set forth in Article IV, the
Company shall execute and file a Certificate of Merger (together with any
other documents required by Applicable Law to effectuate the Merger) with
the Secretary of State of the State of Delaware in accordance with Sections
251 and 103 of the DGCL (the "Certificate of Merger"). Prior to such
filing, a closing (the "Closing") will be held at the offices of Davis Polk
& Wardwell, 450 Lexington Avenue, New York, New York (or such other place
as the parties may agree), for the purpose of confirming all of the
foregoing. The Merger shall become effective simultaneously with the
filing of the Certificate of Merger. The date and time when the Merger
shall become effective is referred to in this Agreement as the "Effective
Time."
1.3. Organizational Documents, Directors and Officers of the
Surviving Corporation. Certificate of Incorporation. From and after
the Effective Time, the Certificate of Incorporation of the Buyer in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended,
altered or repealed as provided therein or by Applicable Law.
(b) By-Laws. From and after the Effective Time, the by-laws of
the Buyer in effect immediately prior to the Effective Time shall be the
by-laws of the Surviving Corporation until thereafter amended, altered or
repealed as provided therein.
(c) Directors and Officers. From and after the Effective Time,
the directors of the Buyer immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, each to hold office in accordance with the
certificate of incorporation and by-laws of the Surviving Corporation
until his or her successor is elected or appointed, as the case may be,
and qualified or until his or her earlier death, resignation,
disqualification or removal.
1.4. Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation its right, title or interest in,
to or under any of the rights, privileges, immunities, powers, purposes,
franchises, properties or assets of the Company or the Buyer, or (b)
otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors or their designees
shall be authorized to solicit in the name of the Company or the Buyer
any third party consents or other documents required to be delivered by any
third party, to execute and deliver, in the name and on behalf of the
Company or the Buyer, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of the Company or the Buyer,
all such other acts and things necessary, desirable or proper to vest,
perfect or confirm its right, title or interest in, to or under any of
the rights, privileges, immunities, powers, purposes, franchises,
properties or assets of the Company or the Buyer and otherwise to carry out
the purposes of this Agreement.
1.5. Conversion of Common Stock, Preferred Stock and Options.
Common Stock and Preferred Stock in General. Each share of Common Stock
and Preferred Stock outstanding at the Effective Time (except for (x) any
shares of Common Stock then held in the treasury of the Company or by any
Subsidiary of the Company, (y) Dissenting Shares and (z) any shares of
Common Stock then held by Holdco) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
Per Share Merger Consideration (such amounts, in the aggregate, the "Merger
Consideration").
(b) Shares Held by the Company, a Subsidiary or Holdco. Each share
of Common Stock that at the Effective Time is held in the treasury of the
Company, by any Subsidiary of the Company or by Holdco shall, by virtue
of the Merger and without any action on the part of the Company, any such
Subsidiary or Holdco, be cancelled and retired and cease to exist,
without any conversion thereof.
(c) No Rights as Stockholders. The holders of certificates
representing shares of Common Stock shall as of the Effective Time cease to
have any rights as stockholders of the Company, except such rights, if any,
as holders of Dissenting Shares may have pursuant to the DGCL, and,
except as aforesaid, their sole right shall be the right to receive their
share of the Merger Consideration, as determined and paid in the manner set
forth in this Agreement.
(d) Employee Options. At the Effective Time, each option
outstanding at such time under the VK/AC Holding, Inc. Stock Option Plan
(the "Option Plan") and the Management Stock Option Agreements entered into
pursuant to the Option Plan (each, an "Employee Option"), whether or not
vested, other than any Employee Option subject to an Acknowledgment, Waiver
and Agreement between the Company and the holder thereof (each such
agreement, a "Stock Option Waiver"), shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled for
the right to receive from the Surviving Corporation at the Effective Time
an amount of cash in dollars (subject to reduction for any applicable
withholding Taxes) equal to the product of (i) the excess of the Per
Share Merger Consideration over the exercise price per share of such
Employee Option, and (ii) the number of shares of Class A Common Stock
subject to such Employee Option. On the Business Day immediately preceding
the Effective Time, the Company shall deliver to the Buyer a certificate,
signed by an officer of the Company, setting forth (A) the aggregate amount
(the "Total Employee Option Cancellation Amount") payable by the
Surviving Corporation under this Section 1.5(d) without reduction for
applicable withholding Taxes and (B) the aggregate applicable withholding
Taxes payable with respect thereto.
(e) Deferred Stock Units. Each deferred stock unit outstanding
at such time under the separate Deferred Stock Agreements between the
Company and employees of members of the VKAC Group (each such employee, a
"Grantee," each such agreement, a "Deferred Stock Agreement" and each such
unit, a "Deferred Stock Unit") and each Employee Option outstanding at such
time that is subject to a Stock Option Waiver, in each case whether or
not vested, shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled in exchange for the right, subject
to and in accordance with the terms of the applicable Deferred Stock
Agreement in the case of the Deferred Stock Units, or the applicable
Stock Option Waiver in the case of the Employee Options, to receive from
the Surviving Corporation an amount of cash in dollars (subject to
reduction for any applicable withholding Taxes) equal to (i) in the case of
such Deferred Stock Unit, the Per Share Merger Consideration, and (ii) in
the case of such Employee Option, the product of (A) the excess of the
Per Share Merger Consideration over the exercise price per share of such
Employee Option, and (B) the number of shares of Class A Common Stock
subject to such Employee Option.
(f) Travelers Option and Jones Option. On the Business Day
immediately preceding the Effective Time, the Company shall prepare and
deliver to the Parent, Holdco and the Buyer: (i) in the event that the
Effective Time occurs after January 1, 1997, a certificate setting forth
(x) the number of shares of Class B Common Stock for which the Travelers
Option would become exercisable on the Closing Date (the "Travelers
Option Shares"), based upon the Average Annual Net Asset Value Increase (as
defined in the Travelers Option Agreement) as of the Business Day
immediately preceding the date such certificate is delivered and (y) (A)
the aggregate amount payable by the Surviving Corporation at the
Effective Time to Travelers in respect of the cancellation of the Travelers
Option without reduction for applicable withholding Taxes (such amount, the
"Travelers Option Cancellation Amount"), and (B) the aggregate applicable
withholding Taxes payable with respect thereto, if any; and (ii) a
certificate setting forth (x) the number of shares of Class A Common
Stock for which the Jones Option would become exercisable on the
Effective Time (the "Jones Option Shares"), based upon the Average Annual
Net Asset Value Increase (as defined in the Jones Option Agreement) as of
the Business Day immediately preceding the date such certificate is
delivered and (y) (A) the aggregate amount, if any, payable by the
Surviving Corporation at the Effective Time to E.D. Jones in respect of the
cancellation of the E.D. Jones Option without reduction for applicable
withholding Taxes (such amount, the "Jones Option Cancellation Amount") and
(B) the aggregate applicable withholding Taxes payable with respect
thereto.
(g) Common Stock of the Buyer. At the Effective Time, each share
of common stock of the Buyer then issued and outstanding shall, by virtue
of the Merger and without any action on the part of the Buyer, be converted
into and become one fully paid and nonassessable share of common stock, par
value $1.00 per share, of the Surviving Corporation.
1.6. Acquisition Price. Amount. The "Acquisition Price" shall
be $1,175,000,000, subject to adjustment as provided in Section 1.6(b).
(b) Adjustments to Acquisition Price. The Acquisition Price
shall be subject to the following two adjustments:
(i) The Acquisition Price shall be adjusted prior to the
Effective Time in accordance with the formula set forth in Exhibit A
hereto. At or prior to 12:00 noon, New York City time, on the Business Day
immediately preceding the Effective Time, the Company shall deliver to the
Buyer a certificate, signed by an officer of the Company, setting forth
the Closing Assets Under Management and the Market Assets Under Management
as of the close of business on the second Business Day immediately
preceding the Effective Time. Such certificate will include information
with respect to each open end Fund, the Prime Rate Trust and the
Institutional Accounts (including each Sub-Advisory Fund), and will show
the amount and calculation of the adjustment, if any, to the Acquisition
Price pursuant to Exhibit A hereto and this Section 1.6(b)(i).
(ii) In addition to the adjustment provided for in clause (i), the
Acquisition Price shall be reduced by: (A) the Adjusted Senior Notes
Amount; (B) the Adjusted Bank Debt Amount; and (C) 50% of the Transaction
Expenses up to an amount of such Expenses not to exceed $16,000,000 and
100% of any such Expenses in excess of $16,000,000. Two Business Days
prior to the Effective Time, the Company shall deliver to the Buyer a
certificate, executed by the president and the chief financial officer of
the Company, setting forth the individual amounts, if any, by which the
Acquisition Price will be adjusted pursuant to the foregoing clauses (A),
(B) and (C), together with reasonable supporting calculations for each
component of such adjustments, such determinations to be made as of the
Business Day (the "Determination Date") that is six Business Days prior
to the Effective Time.
(iii) The Acquisition Price shall be increased by an amount equal
to the product of (i) the Acquisition Price, as adjusted pursuant to
Section 1.6(b)(ii) but without regard to Section 1.6(b)(i) and this Section
1.6(b)(iii), times (ii) Base LIBOR (as defined in the Credit Agreement)
plus .15 of 1%, times (iii) a fraction, the numerator of which shall be the
number of days from and including the Determination Date to the Effective
Time and the denominator of which shall be 360. The Buyer and the
Company shall for federal Income Tax purposes treat the increase in the
Acquisition Price pursuant to this Section 1.6(b)(iii) as a portion of
the acquisition price for the Company, not as interest.
1.7. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Common Stock which are held by stockholders
who shall have effectively dissented from the Merger and perfected their
appraisal rights in accordance with the provisions of Section 262 of the
DGCL (the "Dissenting Shares"), shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, but the
holders thereof shall be entitled to payment from the Surviving Corporation
of the appraised value of such shares in accordance with the provisions
of Section 262 of the DGCL.
1.8. Payment of Merger Consideration and Other Amounts. Surrender
of Certificates, etc. Prior to the Effective Time, the Parent, Holdco, the
Buyer and the Company shall enter into an exchange agent agreement (the
"Exchange Agent Agreement") with a bank or trust company designated by
the Company and reasonably acceptable to the Buyer pursuant to which such
bank or trust company shall act as exchange agent (the "Exchange Agent")
for the payment of the Merger Consideration. As soon as practicable
after the Effective Time, each holder of a certificate or certificates
which immediately prior to the Effective Time represented outstanding
shares of Common Stock or Preferred Stock (the "Certificates") shall,
upon surrender to the Exchange Agent of such Certificate or Certificates
and acceptance thereof by the Exchange Agent, be entitled to the amount
of cash (rounded to the nearest $0.01) into which the aggregate number of
shares of Common Stock or Preferred Stock previously represented by such
Certificate or Certificates surrendered shall have been converted
pursuant to Section 1.5(a) of this Agreement. The Exchange Agent shall
accept such Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. The Exchange Agent
shall deliver all funds which each holder of Common Stock or Preferred
Stock is entitled to receive pursuant to this Section 1.8 within one
Business Day following such holder's surrender of such holder's
Certificates. The Buyer shall furnish to the Exchange Agent prior to or at
the Effective Time all funds required to make such payments. No interest
will be paid or accrued on the Merger Consideration upon the surrender of
the Certificates. All payments in respect of shares of Common Stock or
Preferred Stock which are made in accordance with the terms hereof shall be
deemed to have been made in full satisfaction of all rights pertaining to
such shares. With respect to any Certificate alleged to have been lost,
stolen or destroyed, the owner or owners of such Certificate shall be
entitled to the Merger Consideration in respect of such Certificate upon
delivery to the Exchange Agent of an affidavit of such owner or owners
setting forth such allegation and a bond sufficient to indemnify the
Parent, Holdco and the Surviving Corporation against any claim that may
be made against any of them on account of the alleged loss, theft or
destruction of any such Certificate or the delivery of such Merger
Consideration.
(b) Payments in Respect of Options. At or prior to the Effective
Time, the Buyer shall pay to the Company an amount equal to the Total
Employee Option Cancellation Amount, the Jones Option Cancellation Amount
and, if the Effective Time occurs after January 1, 1997, the Travelers
Option Cancellation Amount, net in each case of withholding Taxes, if
any, which amounts shall be paid by the Surviving Corporation to the
Persons entitled to receive such amounts pursuant to Sections 1.5(d) and
(f).
(c) Endorsement of Certificates; Transfer Taxes. If Merger
Consideration is to be delivered to a Person other than the Person in whose
name the Certificate surrendered in exchange therefor is registered, it
shall be a condition to delivery of such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the Person requesting such Merger
Consideration shall pay any transfer or other Taxes required by reason of
the payment to a Person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Exchange Agent and
the Surviving Corporation that such Tax has been paid or is not applicable.
(d) Status of Certificates. Until surrendered in accordance with
the provisions of this Section 1.8, from and after the Effective Time, each
Certificate (other than (i) Certificates representing shares of Common
Stock held in the treasury of the Surviving Corporation, by any
Subsidiary of the Surviving Corporation or by Holdco and (ii) Dissenting
Shares in respect of which appraisal rights are perfected) shall
represent for all purposes only the right to receive a portion of the
Merger Consideration as determined and paid in the manner set forth in this
Agreement.
(e) No Further Transfers. After the Effective Time there shall
be no transfers on the stock transfer books of the Surviving Corporation of
the shares of Common Stock or Preferred Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration as provided in Section
1.8(d).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company . The Company
represents and warrants to the Parent, Holdco and the Buyer as follows:
2.1.1. Authorization; No Conflicts; Status of VKAC Group, etc.
Authorization, etc. The Company has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by it. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, by the Company have
been duly authorized by all requisite corporate action of the Company. This
Agreement has been duly executed and delivered by the Company and
constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) No Conflicts. Except as set forth in Schedule 2.1.1(b), the
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will
not contravene, result in any violation of, loss of rights or default
under, constitute an event creating rights of acceleration, termination,
repayment or cancellation under, entitle any party to receive any payment
pursuant to, or result in the creation of any Lien upon any of the
properties or assets of any member of the VKAC Group under, (i) any
provision of the Organizational Documents of any member of the VKAC
Group, (ii) any Applicable Law applicable to any member of the VKAC Group
or any Fund or any of their respective properties or (iii) any Contract,
except for, in the case of this clause (iii), any such contraventions,
violations, losses, defaults, accelerations, terminations, repayments,
cancellations or Liens that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Except as set
forth in Schedule 2.1.1(b), no Governmental Approval (other than pursuant
to the HSR Act) or other Consent is required to be obtained or made by
any member of the VKAC Group or any Fund in connection with the execution
and delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby.
(c) Due Organization, etc. Schedule 2.1.1(c) sets forth a
correct and complete list of each member of the VKAC Group, its form and
jurisdiction of organization and each jurisdiction in which such member
is qualified to do business. Each member of the VKAC Group is a
corporation, partnership, limited liability company, trust or trust company
duly organized, validly existing and in good standing under the laws of
such member's jurisdiction of organization, with the requisite corporate,
partnership, company, trust or trust company power and authority, as
applicable, to carry on its business as now conducted and to own or lease
and to operate its properties as and in the places where such business is
now conducted and such properties are now owned, leased or operated.
Each member of the VKAC Group is duly qualified to do business and is in
good standing as a foreign corporation, partnership, limited liability
company, trust or trust company, as applicable, in all jurisdictions in
which the failure to be so qualified, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on such
member of the VKAC Group.
(d) Organizational Documents, etc. The Company has made
available to the Buyer complete and correct copies of the Organizational
Documents, as in effect on the date hereof, of each member of the VKAC
Group. The Buyer has been given the opportunity to inspect the corporate
minutes and stock transfer books of the Company and VKAC.
2.1.2. Capitalization. The Company. The authorized capital
stock of the Company consists of (i) 3,250,000 shares of Class A Common
Stock, of which 2,317,474 shares as of the date hereof are issued and
outstanding, (ii) 3,250,000 shares of Class B Common Stock, of which
117,817 shares as of the date hereof are issued and outstanding and (iii)
32,500 shares of Preferred Stock, all of which shares as of the date hereof
are issued and outstanding. All of the outstanding shares of Preferred
Stock and Common Stock have been duly authorized, validly issued, fully
paid and nonassessable. The record owners as of the date hereof of the
Preferred Stock and the Common Stock are listed in Schedule 2.1.2(a).
(b) Other Members of the VKAC Group. Schedule 2.1.2(b) sets
forth a complete and correct description of the authorized stock or other
equity interests of each member of the VKAC Group (other than the
Company) and the amount of such stock or other equity interests that are
issued and outstanding as of the date hereof. All of such outstanding
shares of stock or other equity interests of each member of the VKAC
Group (other than the Company) have been duly authorized and validly issued
and are fully paid and nonassessable, and are owned beneficially and of
record by the member of the VKAC Group or other Person specified on such
Schedule 2.1.2(b).
(c) Options. There are 358,301 shares of Class A Common Stock
reserved for issuance upon exercise of the Employee Options outstanding
on the date hereof, 57,750 shares of Class A Common Stock reserved for
issuance upon exercise of the Jones Option, 120,222 shares of Class B
Common Stock reserved for issuance upon exercise of the Travelers Option
(the Employee Options, the Jones Option and the Travelers Option,
collectively, the "Options"), 3,350 shares of Class A Common Stock reserved
for issuance in connection with Deferred Stock Units outstanding on the
date hereof, 32,500 shares of Class A Common Stock reserved for issuance
upon exchange of the Preferred Stock for such shares and 3,132,183 shares
of Class B Common Stock reserved for issuance upon exchange of shares of
Class A Common Stock for such shares. There are Options relating to
536,273 shares of Common Stock outstanding as of the date hereof, and the
Company has not agreed to, nor does it have commitments to, issue options
relating to any additional shares of Common Stock. The Travelers Option
will terminate without having become exercisable so long as the Effective
Time occurs prior to January 1, 1997. Schedule 2.1.2(c) sets forth a
complete and correct list of all holders of Options as of the date hereof
(collectively, the "Option Holders") and all holders of Deferred Stock
Units as of the date hereof, including the exercise price of each such
Option and the number of shares of Common Stock issuable upon exercise
thereof and upon vesting of each such Deferred Stock Unit.
(d) Other Agreements with Respect to Capital Stock. There are no
preemptive or similar rights on the part of any Person with respect to
the issuance of any shares of capital stock of the Company or any other
member of the VKAC Group, except for such rights as may be set forth in the
Registration and Participation Agreement. Except (i) for this Agreement,
(ii) in respect of the Options and the Deferred Stock Agreements, (iii)
in respect of certain repurchase rights with respect to the shares of Class
A Common Stock held by current or former officers or employees of the
Company or any of its Subsidiaries and (iv) and as set forth in Schedule
2.1.2(c) or 2.1.2(d), currently there are no subscriptions, options,
warrants or other similar rights, agreements or commitments of any kind
obligating the Company or any other member of the VKAC Group to issue or
sell, or to cause to be issued or sold, or to repurchase or otherwise
acquire, any shares of its capital stock or any securities convertible into
or exchangeable for, or any options, warrants or other similar rights
relating to, any such shares.
(e) Other Investments. Except as set forth in Schedule 2.1.2(e)
and except for securities of and other interests in members of the VKAC
Group, investments in publicly traded securities acquired or held in the
ordinary course of business as trading inventory, investments in the
Company's investment products and cash equivalents, no VKAC Company holds
any outstanding securities or other interests in any corporation,
partnership, company, joint venture or other entity.
2.1.3. Financial Information. The Company has delivered to the Buyer
the Financial Statements. The Financial Statements have been prepared in
all material respects in accordance with generally accepted accounting
principles in the United States applied on a consistent basis ("GAAP")
throughout the periods presented in the Financial Statements, except, in
the case of the Company Financial Statements as at and for the three months
ended March 31, 1996, for normal year-end audit adjustments and the absence
of footnotes. The consolidated balance sheets of the Company and its
Subsidiaries included in the Company Financial Statements present fairly in
all material respects the financial position of the Company and its
Subsidiaries as at the respective dates thereof; and the consolidated
statements of income, statements of stockholders' equity and statements
of cash flow of the Company and its Subsidiaries included in the Company
Financial Statements present fairly in all material respects the results of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the respective periods indicated. The statements of net
assets or statements of assets and liabilities and investment portfolio
included in the Fund Financial Statements for each of the Funds present
fairly in all material respects the financial position of such Fund as at
the respective dates thereof, and the statements of operations and
statements of changes in net assets included in the Fund Financial
Statements for each of the Funds present fairly in all material respects
the results of operations and changes in net assets of such Funds for the
respective periods indicated.
2.1.4. Undisclosed Liabilities. The VKAC Group is not subject to any
obligation or liability of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, and, to the
knowledge of the Company, there is no existing condition, situation or
set of circumstances which would reasonably be expected to result in such
an obligation or liability, that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, other than (i)
obligations and liabilities contemplated by or in connection with this
Agreement or the transactions contemplated hereby, (ii) as and to the
extent disclosed or reserved against in the audited consolidated balance
sheet as at December 31, 1995 included in the Company Financial
Statements and (iii) obligations and liabilities incurred since December
31, 1995 in the ordinary course of business consistent with past
practices and not prohibited by this Agreement.
2.1.5. Absence of Changes. Since December 31, 1995, except (i) as
set forth in Schedule 2.1.5, (ii) as reflected or reserved against in the
Financial Statements, or (iii) as contemplated by (including, without
limitation, Section 3.1.1) or in connection with this Agreement or the
transactions contemplated hereby, the business of the VKAC Group and, to
the knowledge of the Company, the Funds have been conducted in the ordinary
course consistent with past practices and no member of the VKAC Group
and, to the knowledge of the Company, no Fund has:
(a) undergone any change in its business, financial condition, results
of operations or properties (other than changes of a general economic or
political nature, including but not limited to changes in the net asset
value of any Fund or Sub-Advisory Fund resulting from fluctuations in
market price) that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect;
(b) in the case of the Company or the Funds, declared, set aside, made
or paid any dividend or other distribution in respect of its capital
stock or repurchased, redeemed or otherwise acquired any shares of its
capital stock, except, in the case of the Funds, in the ordinary course
of business consistent with past practices;
(c) issued or sold any shares of its capital stock of any class or any
options, warrants or other similar rights, agreements or commitments of any
kind to purchase any such shares or any securities convertible into or
exchangeable for any such shares, except (i) for issuances or sales of
shares of capital stock of the Funds in the ordinary course of business
consistent with past practices and (ii) as permitted under Section 3.1.2;
(d) in the case of any member of the VKAC Group, incurred, assumed,
guaranteed or prepaid any indebtedness for borrowed money (including,
without limitation, letters of credit) or issued or sold any debt
securities, except for any such incurrence, assumption, guarantee or
prepayment of (i) indebtedness under the Credit Agreement which, in the
case of prepayments after the date hereof, shall not exceed the Permitted
Debt Prepayment Amount for the applicable period, (ii) indebtedness under
the BONY Loan Agreement for the purpose of financing trading inventory in
the ordinary course of business consistent with past practices or (iii)
other indebtedness in the ordinary course of business consistent with
past practices in an aggregate amount not exceeding $5,000,000;
(e) mortgaged, pledged or otherwise subjected to any Lien any of its
properties or assets, tangible or intangible, except for Permitted
Encumbrances or in the ordinary course of business consistent with past
practices;
(f) entered into (i) any agreement or commitment involving more than
$1,000,000 that, pursuant to its terms, is not cancelable without penalty
on 60 days' notice or less or (ii) any other agreement, commitment or other
transaction, other than (A) any agreement, commitment or other
transaction involving an expenditure of not more than $500,000 or (B)
Investment Advisory Contracts, distribution agreements, Underwriting
Agreements and Custodian/Transfer Agent Agreements entered into in the
ordinary course of business consistent with past practices;
(g) paid (or committed to pay) any bonus or other incentive compensation
to any officer, director, partner, employee or sales representative or
granted (or committed to grant) to any officer, director, partner, employee
or sales representative any other increase in compensation, except in
each case in the ordinary course of business consistent with past practices
or pursuant to the terms of any agreement or commitment existing at
December 31, 1995;
(h) (i) entered into, adopted or amended in any material respect, any
employment, collective bargaining, deferred compensation, severance,
retirement, bonus, profit-sharing, stock option or other equity, pension or
welfare plan or agreement maintained for the benefit of any officer,
director, partner, employee or sales representative or (ii) granted any
severance or termination pay to any officer, director, partner, employee or
sales representative, except in any such case in the ordinary course of
business consistent with past practices, as required under Applicable Law
or, in the case of clause (ii), for any such grant required to be made
pursuant to any plan, agreement or commitment existing at December 31,
1995;
(i) suffered any strike or other labor dispute that has had or would
reasonably be expected to have a Material Adverse Effect;
(j) suffered any loss of employees or customers that has had or would
reasonably be expected to have a Material Adverse Effect;
(k) amended its certificate of incorporation or by-laws or any other
Organizational Documents;
(l) granted any rights or licenses under any of its trademarks or
trade names or other Company Intellectual Property or entered into any
licensing or similar agreements or arrangements other than in the
ordinary course of business consistent with past practices;
(m) made any material changes in policies or practices relating to
selling practices, returns, discounts or other material terms of sale or
accounting therefor, including any material change in sales load
reallowance policies with respect to sales of shares of the Funds;
(n) in the case of any Fund, had any action taken by the Board of
Directors or Trustees of such Fund other than in the ordinary course of
business consistent with past practices or as contemplated by or in
connection with this Agreement;
(o) changed in any material respect its accounting practices, policies
or principles, other than any such changes as may be required under GAAP;
(p) in the case of any VKAC Company, amended or agreed to amend (i)
any fee arrangement with respect to services provided by it to any Fund,
(ii) any fee arrangement with any Person relating to the distribution of
shares of any Fund or (iii) any fee arrangement existing under any
Investment Advisory Contract;
(q) in the case of any Fund, amended or agreed to amend the
distribution-related fees payable to any Person in connection with the
distribution of its shares, or otherwise amended the terms applicable to
any existing class of its shares, or authorized the creation of a new class
of shares;
(r) suffered any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting its properties or assets which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect; or
(s) taken any action or omitted to take any action that would result
in the occurrence of any of the foregoing.
2.1.6. Taxes. (a) Filing of Returns and Payment of Taxes. Except as
set forth on Schedule 2.1.6(a), all material Returns required to be filed
on or before the date hereof have been filed in accordance with
Applicable Law and all material Returns required to be filed on or before
the Closing Date will have been filed by the Closing Date in accordance
with Applicable Law or, in each case, the time for filing such Returns
shall have been validly extended as set forth in Schedule 2.1.6(b). Except
for Taxes set forth on Schedule 2.1.6(a), the following Taxes
(collectively, "Company Taxes") have (or, in the case of Taxes that
become due after the date hereof and on or before the Closing Date, by
the Closing Date will have) been duly paid: (i) all Taxes shown to be due
on such Returns and (ii) all material Taxes due and payable on or before
the date hereof and all material Taxes due and payable on or before the
Closing Date that are or may become payable by the VKAC Companies or
chargeable as a Lien upon the assets thereof (whether or not shown on any
Return). Except as set forth on Schedule 2.1.6(a), all material Employment
and Withholding Taxes required to be withheld and paid on or before the
date hereof, and all material Employment and Withholding Taxes required
to be withheld and paid on or before the Closing Date, have been or by
the Closing Date will have been duly paid to the proper Governmental
Authority or properly set aside in accounts for such purpose. Except as set
forth on Schedule 2.1.6(a), all interest and penalties in respect of
material Taxes that were not timely paid have been paid.
(b) Extensions, etc. Except as set forth on Schedule
2.1.6(b), (i) no agreement or document extending or waiving, or having
the effect of extending or waiving, the period of assessment or
collection of any Company Taxes or Employment and Withholding Taxes, and no
power of attorney with respect to any such Taxes, has been executed or
filed with the IRS or any other taxing authority; (ii) none of the VKAC
Companies has requested any extension of time within which to file any
Return and has not yet filed such Return; and (iii) there are no requests
for rulings in respect of any Company Taxes or Employment and Withholding
Taxes pending between any VKAC Company and any Governmental Authority.
(c) Tax Filing Groups; Income Tax Jurisdictions. Except as
set forth on Schedule 2.1.6(c), none of the VKAC Companies is or has been
at any time a member of any affiliated, consolidated, combined or unitary
group for Tax purposes. Set forth on Schedule 2.1.6(c) for the VKAC
Companies are all countries, states, provinces, cities or other
jurisdictions in which any material Tax is properly payable by any VKAC
Company.
(d) Copies of Returns; Audits; etc. The Company has (or by
the Closing Date will have) made available to the Buyer complete and
accurate copies of all Returns as filed and, if applicable, as amended,
with respect to all open Tax periods that have been filed or will be
required to be filed (after giving effect to all valid extensions of time
for filing) on or before the Closing Date. Except as set forth on Schedule
2.1.6(d), (i) no Company Taxes or Employment and Withholding Taxes have
been asserted in writing (or, to the knowledge of the Company, after
January 31, 1995, orally) by any Governmental Authority to be due in
respect of any open Tax period, (ii) no revenue agent's report or written
(or, to the knowledge of the Company, after January 31, 1995, orally)
assessment for Taxes has been issued by any Governmental Authority in the
course of any audit with respect to Company Taxes or Employment and
Withholding Taxes for any open Tax period and (iii) no issue has been
raised by any Governmental Authority in writing (in a writing that has been
received by the VKAC Companies) or, to the knowledge of the Company,
after January 31, 1995, orally in the course of any audit that has not been
completed with respect to Company Taxes or Employment and Withholding
Taxes. Except as set forth on Schedule 2.1.6(d), all Returns filed with
respect to Tax years of the VKAC Companies through the Tax year ended
December 31, 1983, have been closed or are Returns with respect to which
the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired. The audits of the Returns
with respect to federal Income Taxes for the following taxable periods have
been completed: All taxable periods beginning on or after September 9,
1983 and ended on or prior to December 31, 1986. The Returns with
respect to federal Income Taxes for the following taxable periods are
currently under audit by the IRS: 1987 through 1992. Except as set forth on
Schedule 2.1.6(d), there is no judicial or administrative claim, audit,
action, suit, proceeding or, to the knowledge of the Company, investigation
now pending or threatened against or with respect to any VKAC Company in
respect of any Company Tax, Employment and Withholding Tax or Tax Asset.
Except as set forth on Schedule 2.1.6(d), there is no reasonable basis
for any deficiency, claim or adjustment of additional Company Taxes or
Employment and Withholding Taxes of which the Company is aware. Except as
set forth on Schedule 2.1.6(d), there are no Liens for Taxes upon the
assets of any VKAC Company except Liens for current Taxes not yet due or
being contested in good faith and by appropriate proceedings.
(e) Section 1445(a) of the Code. The Buyer will not be required
to deduct and withhold any amount pursuant to section 1445(a) of the Code
upon the payment of the Merger Consideration pursuant to this Agreement.
(f) Tax Sharing Agreements. Except as set forth on Schedule
2.1.6(f), (i) none of the VKAC Companies is a party to or bound by or has
any obligation under any Tax sharing agreement or arrangement and (ii) no
VKAC Company is currently under any contractual obligation to pay any
amounts of the type described in clause (ii) or (iii) or the definition
of "Tax."
(g) Regulated Investment Company, etc. (i) As to each of the
Funds other than those to which the provisions of paragraph (ii) or (iii)
of this Section 2.1.6(g) apply: Except as set forth on Schedule
2.1.6(g), (A) each of such Funds made or will make the election set forth
in section 851(b) of the Code for its first taxable year for which it
represented to its shareholders that it was a RIC; (B) except for its
current taxable year and other than Van Kampen American Capital Pace Fund
prior to June 30, 1977, each of such Funds has qualified as a RIC, for such
first taxable year and for each succeeding taxable year; (C) except for
failure to comply with the provisions of section 852(a)(1) of the Code,
each of such Funds would qualify as a RIC, for its current taxable year
if the last day of its most recent fiscal quarter ended on or prior to
the date of this Agreement were treated as the last date of such taxable
year and (D) no such Fund has any earnings and profits accumulated in any
taxable year in which it did not qualify as a RIC.
As of the Closing Date, each of such Funds will have qualified as
a RIC, for each of its taxable years ended prior to the Closing Date, other
than Van Kampen American Capital Pace Fund prior to June 30, 1977. As of
the Closing Date, except for failure to comply with the provisions of
section 852(a)(1) of the Code, (E) each of such Funds whose taxable years
end within three months after the Closing Date would so qualify for its
taxable year during which the Closing Date occurs if the Business Day
immediately preceding the Closing Date were treated as the last date of
such taxable year, and (F) except for a failure to comply with section
851(b)(4) of the Code that would not prevent such Fund from curing such
failure under section 851(d) of the Code and that is consistent with past
practice of such Fund and with such Fund's fiduciary obligations, each of
such Funds would so qualify for its taxable year in which the Closing
Date occurs if the last day of its most recent fiscal quarter ended on or
prior to the Closing Date were treated as the last date of such taxable
year.
(ii) In the case of Van Kampen American Capital Exchange Fund,
Van Kampen American Capital Monthly Accumulation Plans and each of the
Funds that is a unit investment trust, other than those unit investment
trusts that have made the election set forth in section 851(b) of the
Code (to which the provisions of paragraph (i) of this Section 2.1.6(g)
shall apply), such Fund is not and has not been at any time since its
inception (or, if later, the effective date of section 851(f) of the
Code) an association taxable as a corporation for federal Income Tax
purposes. Van Kampen American Capital Exchange Fund is and has been
since its inception treated as a partnership for federal Income Tax
purposes. Van Kampen American Capital Monthly Accumulation Plans is and
has been since its inception (or, if later, the effective date of section
851(f) of the Code) treated as a business arrangement to which the
provisions of such section 851(f) apply. All portions of each Fund that is
a unit investment trust, other than a unit investment trust that has made
the election set forth in section 851(b) of the Code, are and have been
since their inception subject to subpart E of part I of subchapter J of
chapter 1 of subtitle A of the Code.
(iii) Each of the Van Kampen American Capital Navigator Funds is
organized as a "socit d'investissement capital variable compartiments
multiples" under the laws of Luxembourg. Each such Fund maintains its
principal office, as defined for purposes of section 864(b)(2)(A)(ii) of
the Code, outside the United States.
(iv) Except as set forth on Schedule 2.1.6(g), all material
Tax returns, reports, declarations, forms or information statements
relating to Taxes required to be filed by any Fund with any Governmental
Authority, or provided by any Fund to any other Person, on or before the
Closing Date (the "Fund Returns") have been duly filed, or provided to
the appropriate Person, by or on behalf of such Fund in accordance with all
applicable laws. Except as set forth on Schedule 2.1.6(g), as of the
time each Fund Return was filed or provided to the relevant Person, such
Fund Return was accurate and complete in all material respects. Except
as set forth on Schedule 2.1.6(g), all material Taxes payable by or on
behalf of any Fund on or before the date hereof have been timely paid, or
withheld and remitted, to the appropriate Governmental Authority. Except
as set forth on Schedule 2.1.6(g), there is no judicial or administrative
claim, audit, action, suit, proceeding or investigation now pending or to
the knowledge of the Company, threatened against or with respect to any
Fund in respect of any Tax.
(h) Reserves for Taxes. As of the date hereof, the financial
statements of the VKAC Companies reflect charges, accruals and reserves
to cover taxes and deferred taxes that are adequate in all material
respects in accordance with GAAP. As of the Closing Date, the financial
statements of the VKAC Companies will reflect charges, accruals and
reserves to cover taxes and deferred taxes that are adequate in all
material respects in accordance with GAAP. All information set forth in
the Financial Statements, including the notes thereto, relating to tax
matters is true and complete in all material respects in accordance with
GAAP.
(i) Section 481 Adjustment. No VKAC Company is or will be
required to include any adjustment in taxable income for any Post-Closing
Tax Period under Section 481(c) of the Code (or any similar provision of
the Tax laws of any jurisdiction) as a result of a change in method of
accounting for a Pre-Closing Tax Period or pursuant to the provisions of
any agreement entered into with any Taxing Authority on or before the
Closing Date with regard to the Tax liability of any VKAC Company for any
Pre-Closing Tax Period.
(j) Real Property. Except as set forth on Schedule 2.1.6(j),
none of the VKAC Companies owns any interest in real property in the
State of New York or in any other jurisdiction in which a Tax is imposed on
the transfer of a controlling interest in an entity that owns any
interest in real property.
(k) Qualified Stock Purchases. Except as set forth on
Schedule 2.1.6(k), no VKAC Company has consummated a "qualified stock
purchase" within the meaning of section 338 of the Code since December
20, 1994.
2.1.7. Properties and Assets. Schedule 2.1.7 sets forth a complete
and correct list, as of the date hereof, of all real property leased by any
member of the VKAC Group (the "Real Property"), including the names of each
of the parties to such lease and the location of the applicable
property. None of the members of the VKAC Group owns any real property.
Each member of the VKAC Group has valid title to all material personal
property owned by it, and valid leasehold interests in all real and
material personal property leased by it, in each case free and clear of
all Liens, except (i) Liens specified in Schedule 2.1.7 or reflected in the
Financial Statements, (ii) Liens for Taxes not yet delinquent or which
are being contested in good faith by appropriate proceedings if adequate
reserves with respect thereto are maintained on its books in accordance
with GAAP, (iii) statutory Liens incurred in the ordinary course of
business consistent with past practices that have not had and would not
reasonably be expected to have a Material Adverse Effect and (iv) Liens
which do not materially detract from the value or materially interfere with
the use of the properties affected thereby (the exceptions described in the
foregoing clauses (i), (ii), (iii) and (iv) being referred to
collectively as "Permitted Encumbrances"). Schedule 2.1.7 sets forth a
list of each real property lease under which any VKAC Company is a lessee
as to which the consummation by the Company of the transactions
contemplated hereby would result in a violation of, loss of rights or
default under or constitute an event creating rights of acceleration,
termination or cancellation under such lease.
2.1.8. Contracts. Schedule of Contracts, etc. Schedule 2.1.8(a)
sets forth a correct and complete list, as of the date hereof, of all
Contracts. The term "Contracts" means all written agreements, contracts
and commitments of the following types to which any member of the VKAC
Group is a party or by which any member of the VKAC Group or its respective
properties is bound and which is currently in effect, as amended,
supplemented, waived or otherwise modified as of the date hereof: (i)
agreements, contracts and commitments for the performance of investment
advisory or investment management services for clients (the "Investment
Advisory Contracts"); (ii) agreements, contracts and commitments for the
distribution of shares of the Funds or any other mutual funds, closed end
companies, variable annuities or other similar products to which any of the
top 20 selling agents (which such agents represented more than 54% of the
sales of such products during the year ended December 31, 1995) of the
investment products of the VKAC Group (measured by sales of such products
during the year ended December 31, 1995) is a party (the "Selling
Agreements") and underwriting agreements with the Funds as to which any
member of the VKAC Group is the principal underwriter (the "Underwriting
Agreements"); (iii) custody, transfer agent and other similar material
agreements (the "Custodian/Transfer Agent Agreements"); (iv) employment,
consulting, retention and collective bargaining agreements, if any, with
officers, directors, key employees, former employees or sales
representatives; (v) mortgages, indentures, security agreements relating to
indebtedness for borrowed money, letters of credit, loan agreements and
other material agreements, guarantees and instruments relating to the
borrowing of money or extension of credit; (vi) material licenses and other
similar material agreements involving Intellectual Property rights; (vii)
joint venture, partnership and similar agreements; (viii) stock purchase
agreements (other than any such agreements pursuant to which the Company
issued Preferred Stock or Common Stock to any Person), asset purchase
agreements and other acquisition or divestiture agreements; (ix) material
agreements, contracts and commitments with respect to the sharing or
capping of fees or other payments received from any Client or other
Person or the sharing of expenses of any other Person; (x) personal
property leases providing for annual rentals of $1,000,000 or more; (xi)
agreements, contracts and commitments for the purchase of supplies,
services, equipment or other assets that provide for either (A) annual
payments by the VKAC Group of $500,000 or more or (B) aggregate payments by
the VKAC Group of $1,000,000 or more; (xii) any other agreements, contracts
or commitments that are material to the business, financial condition,
results of operations or properties of the VKAC Group, taken as a whole;
and (xiii) any guaranty of any of the foregoing. The Company has made
available to the Buyer for inspection complete and correct copies of all
Contracts, including a fee schedule, where applicable.
(b) No Defaults, etc. Except as set forth in Schedule 2.1.8(b) and
excluding any failure to obtain Consents with respect to the Contracts
listed in Schedule 2.1.1(b), (i) each Contract is in full force and
effect in all material respects, and (ii) there does not exist under any
material Contract any material event of default, or any event or
condition that, after notice or lapse of time or both, would constitute a
material event of default, on the part of any member of the VKAC Group
or, to the knowledge of the Company, on the part of any other party to
any material Contract. Except as disclosed in Schedule 2.1.8(b), no member
of the VKAC Group is subject to any contract, agreement or commitment
materially restricting or limiting the type or scope of business or
operations that it may conduct now or immediately after the Effective Time.
(c) Certain Investment Advisory Clients. Schedule 2.1.8(c) sets
forth a correct and complete list of each investment advisory client of the
VKAC Companies as of the date hereof. Except as set forth on Schedule
2.1.8(c), as of the date hereof each such client is being served by the
VKAC Company specified on such Schedule and the Company has not received
written notice from any such client of, and, to the knowledge of the
Company, no such client has stated orally, its intention to terminate its
Investment Advisory Contract.
(d) Certain Selling Agents. As of the date hereof, the Company has
not received written notice from any selling agent that is a party to any
Selling Agreement of, and, to the knowledge of the Company, no such party
has stated orally, its intention to terminate its Selling Agreement.
(e) Investment Contracts. To the knowledge of the Company, and
except as would not reasonably be expected to have a Material Adverse
Effect on any VKAC Company or Fund party thereto, (x) each Investment
Advisory Contract, Selling Agreement, Underwriting Agreement and Custodian/
Transfer Agent Agreement and any renewal thereof after the date hereof
and prior to the Effective Time has been duly authorized, executed and
delivered by each party thereto and, to the extent applicable, has been
adopted in compliance with Section 15 of the Investment Company Act and
is a valid and binding agreement of each such party, enforceable in
accordance with its terms (subject to bankruptcy, insolvency, moratorium,
fraudulent transfer and similar laws affecting creditors' rights
generally and to general equity principles) and (y) each of the Company
and, to the knowledge of the Company, the other party thereto is in
compliance in all material respects with the terms of each Investment
Advisory Contract, Selling Agreement, Underwriting Agreement and Custodian/
Transfer Agent Agreement to which it is a party, and no event has
occurred or condition exists that constitutes or with notice or the passage
of time would constitute a material default by any member of the VKAC Group
thereunder.
(f) Status. Schedule 2.1.8(f) sets forth a complete and correct
list of the top 20 firms (measured by sales of Fund shares during the
year ended December 31, 1995) that distribute shares of the Funds with whom
the VKAC Group has a proprietary vendor or preferred vendor relationship as
of the date hereof.
2.1.9. Intellectual Property. Schedule of Intellectual
Property. Schedule 2.1.9(a) sets forth a correct and complete list of
all of the trade or service marks and all other material Intellectual
Property used in the business and operations of the VKAC Group as of the
date hereof (the "Company Intellectual Property") and sets forth the
owner and nature of the interest of the VKAC Group therein. The Company
has previously made available to the Buyer correct and complete copies of
all licenses, sublicenses or other similar agreements (including any
amendments thereto) set forth on Schedule 2.1.9(a). Except as set forth in
Schedule 2.1.9(a), the VKAC Group has the legal right to use the Company
Intellectual Property in connection with the business as currently
conducted by the VKAC Group and, except as set forth on Schedule
2.1.1(b), immediately after the Effective Time, the Surviving Corporation
or its Subsidiaries will have such right to the same extent and on the same
terms as the VKAC Group was entitled to use the Company Intellectual
Property immediately prior to the Effective Time.
(b) No Infringement, etc. To the knowledge of the Company, the
business and operations of the VKAC Group as currently conducted do not
infringe or otherwise conflict with any rights of any Person in respect
of any Intellectual Property. To the knowledge of the Company, none of the
Company Intellectual Property owned by any member of the VKAC Group is
being materially infringed or otherwise materially used or available for
use by any Person other than a member of the VKAC Group, except as set
forth in Schedule 2.1.9(a) or (b). No Company Intellectual Property
owned by any member of the VKAC Group is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use
thereof by any member of the VKAC Group with respect to its business or
restricting the licensing thereof by such member to any Person. Except
as set forth on Schedule 2.1.9(b), no member of the VKAC Group has
entered into any agreement to indemnify any other Person against any charge
of infringement of Intellectual Property, other than pursuant to any such
agreements entered into in connection with the use of commercially
available information systems applications.
2.1.10. Insurance. Schedule 2.1.10 sets forth a correct and
complete list of all insurance policies and fidelity bonds maintained on
the date hereof by or for the benefit of the members of the VKAC Group
and the Funds. The Company has made available to the Buyer complete and
correct copies of all such policies and bonds, together with all riders and
amendments thereto as of the date hereof. As of the date hereof, such
policies and bonds are in full force and effect, and all premiums due
thereon have been paid. The members of the VKAC Group have complied in all
material respects with the terms and provisions of such policies and bonds.
Except as set forth on Schedule 2.1.10, there is no claim in excess of
$100,000 by any member of the VKAC Group or any Fund pending as of the date
hereof under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
bonds. Such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since the
Relevant Date and are of the type and in amounts customarily carried by
Persons conducting businesses similar to the businesses of the VKAC
Group. If so requested by the Parent, the VKAC Companies will have their
insurance broker(s) notify the underwriters of such policies and bonds of
the transactions contemplated by this Agreement and advise such insurance
broker(s) to maintain all such policies and bonds in accordance with
their terms until further notice. Immediately after the Effective Time,
the members of the VKAC Group shall continue to have coverage under the
policies and bonds set forth in items 2, 3, 4, 5, 6, 7, 8, 10 and 11 of
Schedule 2.1.10. The fidelity insurance, the directors and officers
liability insurance, and errors and omissions policies and all other
insurance coverage of each member of the VKAC Group and, to the knowledge
of the Company, each Fund has been since the Relevant Date maintained in
accordance with Applicable Law.
2.1.11. Litigation. Except as set forth in Schedule 2.1.11, there
is no judicial or administrative action, suit, investigation, inquiry or
proceeding pending or, to the knowledge of the Company, threatened that (a)
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or result in any liability on the part of the
VKAC Group in an amount in excess of $2,000,000 individually or
$5,000,000 in the aggregate or (b) questions the validity of this Agreement
or of any action taken or to be taken by any member of the VKAC Group in
connection herewith.
2.1.12. Compliance with Laws and Other Instruments; Governmental
Approvals. Compliance with Laws, etc. Except as disclosed in
Schedule 2.1.12(a), no member of the VKAC Group and, to the knowledge of
the Company, no Fund is in material violation of or material default under,
or has at any time since the Relevant Date materially violated or been in
material default under, (i) any Applicable Law applicable to it or any of
its properties or business or (ii) any provision of its Organizational
Documents. Schedule 2.1.12(a) sets forth a correct and complete list of all
consent decrees or other similar agreements entered into by any member of
the VKAC Group with any Governmental Authority after the Relevant Date or
prior to the Relevant Date if currently in effect.
(b) Governmental Approvals. Except as disclosed in Schedule
2.1.12(b), all material Governmental Approvals necessary for the conduct of
the business and operations of each member of the VKAC Group have been duly
obtained and are in full force and effect. There are no proceedings
pending or, to the knowledge of the Company, threatened that would
reasonably be expected to result in the revocation, cancellation or
suspension, or any materially adverse modification, of any such
Governmental Approval, and except with respect to Governmental Approvals
set forth on Schedule 2.1.1(b), the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any such revocation, cancellation, suspension or
modification.
(c) Filings. Since the Relevant Date, the VKAC Group has filed
all material registrations, reports, statements, notices and other
material filings required to be filed with the Commission or any other
Governmental Authority by any member of the VKAC Group, including all
required amendments or supplements to any of the above (the "Filings").
The Filings complied in all material respects, where applicable, with the
requirements of the Securities Act, the Exchange Act, the Advisers Act
and the Investment Company Act. As of their respective dates, each of
the Filings constituting prospectuses, statements of additional
information, Part II of Form ADVs or annual reports on Form 10K did not
contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
has made or will make available to the Buyer complete and correct copies of
(i) all Filings made within the past two years (including but not limited
to all filings on Form ADV, Form TA, Form NSAR and Form BD), (ii) of all
audit reports received by any member of the VKAC Group from the
Commission or any other Governmental Authority and all written responses
thereto made by any such member during the past two years, (iii) copies
of all inspection reports provided to any VKAC Company by the Commission or
any state regulatory authority during the past two years and (iv) all
correspondence relating to any inquiry or investigation provided to any
VKAC Company by the Commission or any state regulatory authority during the
past two years.
2.1.13. Environmental Matters. Each member of the VKAC Group is and
has been in compliance in all material respects with all Environmental Laws
applicable to it and its properties, and no Environmental Activity has
otherwise occurred in material violation of any Environmental Law for which
any member of the VKAC Group may be responsible. No member of the VKAC
Group has any material liabilities, absolute or contingent, in connection
with any Environmental Activity or under any Environmental Law. To the
knowledge of the Company, all Real Property is free from contamination in
all material respects from any Hazardous Materials (including but not
limited to asbestos). All material permits, licenses, registrations and
authorizations required under applicable Environmental Laws as currently in
effect for the conduct of the business and operations of the VKAC Group
have been obtained and are presently in effect, and there are no material
violations thereof outstanding.
2.1.14. Affiliate Transactions. Schedule 2.1.14 sets forth a
correct and complete list of all agreements, arrangements or other
commitments in effect as of December 31, 1995 between any member of the
VKAC Group, on the one hand, and any Affiliate of any member of the VKAC
Group, other than another member of the VKAC Group or the Funds and other
than, in the case of any officer or employee of the Company or any of its
Subsidiaries who may be deemed to be an Affiliate, in the ordinary course
of business consistent with past practices, on the other hand. Since
December 31, 1995, except as set forth in Schedule 2.1.14, no member of the
VKAC Group has entered into any agreement, arrangement or other
commitment or transaction with any Affiliate of the Company, other than
another member of the VKAC Group or the Funds and other than, in the case
of any officer or employee of the Company or any of its Subsidiaries who
may be deemed to be an Affiliate, in the ordinary course of business
consistent with past practices.
2.1.15. Government Regulation. Investment Advisers. Each of Van
Kampen American Capital Investment Advisory Corp., Van Kampen American
Capital Management, Inc., Van Kampen American Capital Advisors, Inc., Van
Kampen American Capital Asset Management, Inc. and Van Kampen Merritt
Equity Advisors Corp. (collectively, the "Registered Investment
Advisers") is, and at all times required by the Advisers Act during the
past five years has been, duly registered as an investment adviser under
the Advisers Act. Except as set forth in Schedule 2.1.15(a), each of the
Registered Investment Advisers is, and at all times required by
Applicable Law (other than the Advisers Act) during the past two years
has been, duly registered, licensed or qualified as an investment adviser
in each state where the conduct of its business required such registration,
licensing or qualification, except for any such failure to be so
registered, licensed or qualified that would not reasonably be expected
to have a Material Adverse Effect on such Registered Investment Adviser.
Each such United States federal and state registration, license or
qualification, as of the date hereof, is listed in Schedule 2.1.15(a) and
is in full force and effect. No VKAC Company other than the Registered
Investment Advisers is or has been during the past five years an
"investment adviser" within the meaning of the Advisers Act, required to be
registered, licensed or qualified as an investment adviser under the
Advisers Act or subject to any material liability or disability by reason
of any failure to be so registered, licensed or qualified. None of the
VKAC Companies is or has been during the past five years an Investment
Company.
(b) Broker-Dealers. Each of Van Kampen American Capital
Distributors, Inc. and American Capital Contractual Services, Inc.
(collectively, the "Registered Broker-Dealers") is, and at all times
required by the Exchange Act during the past five years has been, a broker-
dealer duly registered under the Exchange Act and a member firm in good
standing of the NASD and, to the extent required, the Municipal
Securities Rulemaking Board. Except for any Registered Broker-Dealer set
forth on Schedule 2.1.15(b), each of the Registered Broker-Dealers is,
and at all times required by Applicable Law (other than the Exchange Act)
during the past two years has been, duly registered, licensed or
qualified as a broker-dealer in each state where the conduct of its
business required such registration, licensing or qualification, except for
any such failure to be so registered, licensed or qualified that would
not reasonably be expected to have a Material Adverse Effect on such
Registered Broker-Dealer. Each such United States federal and state
registration, license or qualification, as of the date hereof, is listed in
Schedule 2.1.15(b) and is in full force and effect. Except for any
Registered Broker-Dealer set forth on Schedule 2.1.15(b), no VKAC Company
other than the Registered Broker-Dealers is or has been during the past
five years required to be registered, licensed or qualified as a broker-
dealer under the Exchange Act, or subject to any material liability or
disability by reason of any failure to be so registered, licensed or
qualified, except for any such failure that would not reasonably be
expected to have a Material Adverse Effect on such VKAC Company.
(c) Funds and Sub-Advisory Funds. Schedule 2.1.15(c) sets forth
each Investment Company for which a VKAC Company acts as investment
adviser, sponsor or manager as of the date hereof, including but not
limited to mutual funds, closed end companies, unit investment trusts and
any other pooled investment vehicle (whether or not registered)
(collectively, the "Funds"), and each Investment Company for which a VKAC
Company acts as an investment subadviser as of the date hereof (the "Sub-
Advisory Funds"). Each of the Funds and, to the knowledge of the
Company, the Sub-Advisory Funds that is or during the past five years in
the case of the Funds and two years in the case of the Sub-Advisory Funds
has been required by the Investment Company Act to be registered with the
Commission as an investment company under the Investment Company Act is,
and at all times required by the Investment Company Act during the past
five years or two years, as the case may be, has been, so registered.
Except with respect to the Funds and the Sub-Advisory Funds, no VKAC
Company acts as investment adviser or subadviser to any Investment Company.
Each VKAC Company that acts as investment adviser or subadviser to a Fund
or Sub-Advisory Fund has a written Investment Advisory Contract pursuant to
which such VKAC Company serves as investment adviser or subadviser to
such Fund or Sub-Advisory Fund. As of the date hereof, no VKAC Company and
no "interested person" of any VKAC Company, as such term is defined in
the Investment Company Act, receives or is entitled to receive any
compensation directly or indirectly (a) from any Person in connection
with the purchase or sale of securities or other property to, from or on
behalf of any of the Funds or Sub-Advisory Funds, other than bona fide
ordinary compensation as principal underwriter, distributor or sponsor
for the Funds, or (b) from the Funds or Sub-Advisory Funds or their
respective security holders for other than bona fide investment advisory,
sub-advisory or other services.
(d) Codes of Ethics, etc. The VKAC Companies have adopted a
formal code of ethics and a written policy regarding insider trading, a
complete and accurate copy of each of which has been made available to
the Buyer. Such code of ethics complies in all material respects with
Section 17(j) of the Investment Company Act, Rule 17j-1 thereunder and
Section 204A of the Advisers Act. Such insider trading policy complies
in all material respects with Section 204A of the Advisers Act and
Section 15(f) of the Exchange Act. The policies of the VKAC Companies as
of the date hereof with respect to avoiding conflicts of interest are as
set forth in the most recent Form ADV or policy manual of the VKAC
Companies, as amended, which has been made available to the Buyer. To
the knowledge of the Company, there have been no violations of such code
of ethics or such policies that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(ii) Each Fund that is registered under the Investment Company Act
has duly adopted procedures pursuant to Rules 17a-7, 17e-1 and 10f-3
under the Investment Company Act, to the extent applicable. Each Fund that
is registered under the Investment Company Act has for the past two years
been operated and is currently operating in compliance in all material
respects with Rules 17a-7, 17e-1 and 10f-3 thereunder, to the extent
applicable.
(e) No Disqualifications. (i) No member of the VKAC Group, (ii) no
Person "associated" (as defined under the Advisers Act) with any member
of the VKAC Group and (iii) with respect to the Funds, no Person within the
scope of Section 9(a) of the Investment Company Act, is or has been
during the past two years subject to any disqualification that would be a
basis (A) for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Advisers Act or Rule 206(4)-
4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act,
(B) for disqualification as an investment adviser or a principal
underwriter for an investment company pursuant to Section 9(a) of the
Investment Company Act or (C) for prohibition from holding certain
positions pursuant to Section 411 of ERISA and, to the knowledge of the
Company, there is no proceeding or investigation, and no basis for any
proceeding or investigation, that would reasonably be expected to become
the basis for any such disqualification, denial, suspension, revocation
or prohibition.
(f) Transfer Agent. ACCESS Investor Services, Inc. (the
"Transfer Agent") is, and at all times required by the Exchange Act
during the past five years has been, duly registered as a transfer agent
under the Exchange Act. Except as set forth in Schedule 2.1.15(f), the
Transfer Agent is, and at all times required by Applicable Law (other
than the Exchange Act) during the past two years has been, duly registered,
licensed or qualified as a transfer agent in each state where the conduct
of its business required such registration, licensing or qualification,
except for any such failure to be so registered, licensed or qualified that
would not reasonably be expected to have a Material Adverse Effect on the
Transfer Agent. Each such United States federal and state registration,
license or qualification, as of the date hereof, is listed in Schedule
2.1.15(f) and is in full force and effect. No VKAC Company other than
the Transfer Agent is or has been during the past five years a "transfer
agent" within the meaning of the Exchange Act, or required to be
registered, licensed or qualified as a transfer agent under the Exchange
Act, or subject to any material liability or disability by reason of any
failure to be so registered, licensed or qualified, except for any such
failure that would not reasonably be expected to have a Material Adverse
Effect on such VKAC Company.
(g) Trust Companies. Except as set forth in Schedule 2.1.15(g),
Van Kampen American Capital Trust Company is, and at all times required
by Applicable Law during the past two years has been, duly registered,
licensed or qualified as a trust company in each state, if any, where the
conduct of its business required such registration, licensing or
qualification, except for any such failure to be so registered, licensed or
qualified that would not reasonably be expected to have a Material
Adverse Effect on such company. Each such registration, license or
qualification, as of the date hereof, is listed in Schedule 2.1.15(g) and
is in full force and effect. No VKAC Company other than Van Kampen
American Capital Trust Company is or has been during the past two years
required to be registered, licensed or qualified as a trust company under
any Applicable Law, or subject to any material liability or disability by
reason of any failure to be so registered, licensed or qualified, except
for any such failure that would not reasonably be expected to have a
Material Adverse Effect on such VKAC Company.
(h) Other Entities. The members of the VKAC Group and each of
their partners or employees which are or who are required to be
registered as a registered representative, an investment adviser
representative, insurance agent or a sales person with the Commission,
the securities or insurance commission of any state or any self-
regulatory body is duly registered as such and such registration is in full
force and effect, except where the failure to be so registered or to have
such registration in full force and effect would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
2.1.16. Funds; Sub-Advisory Funds; Clients. Fund Compliance with
Legal and Other Requirements. Each Investment Advisory Contract with
respect to any Fund and, to the knowledge of the Company, with respect to
any Sub-Advisory Fund, and each Underwriting Agreement, during the past
five years in the case of a Fund and two years in the case of a Sub-
Advisory Fund, has been duly adopted and maintained in compliance in all
material respects with Section 15 of the Investment Company Act.
(ii) Since the Relevant Date, each Fund has been operated in
compliance with its respective objectives, policies and restrictions,
including without limitation those set forth in the applicable prospectus
and registration statement for a Fund or governing instruments for a
client, except where lack of compliance would not reasonably be expected
to have a Material Adverse Effect.
(iii) To the extent that any VKAC Company has acted as a fiduciary,
plan administrator or other service provider where such VKAC Company is
deemed to be a fiduciary to any employee benefit plan that is subject to
ERISA, such VKAC Company during the past four years has complied with the
requirements of ERISA and the Code in the performance of its duties and
responsibilities with respect to such plan, except any such failures to
comply that would not reasonably be expected to have a Material Adverse
Effect on such VKAC Company.
(b) Status of the Funds and Sub-Advisory Funds. Except where the
violation of any of the representations and warranties contained in this
Section 2.1.16(b) would not reasonably be expected to have a Material
Adverse Effect:
(i) (A) The shares of each Fund are qualified for sale, or an
exemption therefrom is in full force and effect, in each state and
territory of the United States and the District of Columbia to the extent
required by Applicable Law; (B) all outstanding shares of each Fund that
were required to be registered under the Securities Act have been sold
pursuant to an effective registration statement filed thereunder; (C) all
outstanding shares of each Fund have been duly authorized, validly issued
and are fully paid and nonassessable and (D) each Fund and, to the
knowledge of the Company, each Sub-Advisory Fund is currently operating
in compliance with Applicable Law, has been operating in compliance with
Applicable Law of (1) any U.S. federal Governmental Authority for the
past five years and (2) any other Governmental Authority for the past two
years and is not subject to any stop order or similar order restricting the
sale of its shares.
(ii) To the knowledge of the Company, (a) no Fund registration
statement contained, as of its effective date, (b) no Fund proxy
statement contained, as of its date, and (c) no current prospectus (which
term, as used in this Agreement, shall include any related statement of
additional information and any private placement memorandum), as amended or
supplemented, relating to a Fund, contained or contains any untrue
statement of a material fact or omitted or (in the case of any such current
prospectus) omits to state a material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the knowledge of the Company,
each such current prospectus and all current advertising and marketing
materials relating to a Fund and, to the extent applicable, relating to any
VKAC Company complies in all material respects with the Securities Act, the
Investment Company Act, applicable provisions of state law and, in the case
of such advertising and marketing materials only, in form and substance
with the applicable rules of the NASD.
(iii) Each Fund and, to the knowledge of the Company, each Sub-Advisory
Fund that is a juridical entity is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and
has the requisite corporate, trust or partnership power and authority to
own its properties and to carry on its business as it is now conducted, and
is qualified to do business in each jurisdiction where it is required to do
so under Applicable Law.
2.1.17. Labor Matters, etc. No member of the VKAC Group is a party to
or bound by any collective bargaining agreement. Each member of the VKAC
Group has materially complied for the past four years and is in material
compliance with all applicable provisions of United States federal, state
and local laws pertaining to the employment or termination of their
respective employees.
2.1.18. ERISA. Schedule of Plans, etc. Schedule 2.1.18(a) sets
forth a list of each written "employee benefit plan," within the meaning of
section 3(3) of ERISA, and each written bonus, incentive or deferred
compensation, stock option or other equity, severance, retention, change in
control or other employee benefit plan, program or arrangement,
including, but not limited to, those providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits and retirement benefits, (x) that is maintained by any member of
the VKAC Group or any ERISA Affiliate of any member of the VKAC Group or to
which any member of the VKAC Group or any ERISA Affiliate of any member
of the VKAC Group contributes or is obligated to contribute and (y) under
which any employee of any member of the VKAC Group is or may become
entitled to, or any former employee thereof is currently entitled to, an
accrued benefit (collectively, the "Plans"). For purposes of this
Section 2.1.18, "ERISA Affiliate" of any entity means any other entity
which, together with such entity, is treated as a single employer under
section 414(b), (c) or (m) of the Code. The Company has made available
to the Buyer correct and complete copies of all written Plans, all
related trust agreements and the most recent IRS Form 5500 filed in respect
of any such Plan. Except as disclosed on Schedule 2.1.18(a), each Plan
intended to be qualified under section 401(a) of the Code has received a
favorable determination letter from the IRS as to its qualification under
the Code and, to the knowledge of the Company, (x) no amendment has been
made to any such Plan since the date of its most recent determination
letter that would reasonably be expected to result in the
disqualification of such Plan and (y) no other event has occurred with
respect to any such Plan which would reasonably be expected to adversely
affect the qualification of such Plan. The Company has provided to the
Buyer copies of the most recent Internal Revenue Service determination
letters received with respect to each such Plan.
(b) No Minimum Funding Standards, etc. No Plan is subject to the
minimum funding standards of section 302 of ERISA or section 412 of the
Code. No Plan is a multiemployer plan (as defined in section 3(37) of
ERISA) or a multiple employer plan and no Plan is maintained in
connection with any trust described in section 501(c)(9) of the Code. No
material liability to the Pension Benefit Guaranty Corporation in respect
of any Plan or any other plan subject to Title IV of ERISA maintained by
any member of the VKAC Group or any ERISA Affiliate of any member of the
VKAC Group has been incurred pursuant to the provisions of Title IV of
ERISA by any member of the VKAC Group or any ERISA Affiliate of any
member of the VKAC Group.
(c) Operation of the Plans, etc. Each of the Plans has been
operated and administered in material compliance with its terms and all
Applicable Law, including but not limited to ERISA and the Code. There are
no material claims pending or, to the knowledge of the Company,
threatened by or on behalf of any employee of any member of the VKAC
Group involving any such Plan (other than routine claims for benefits under
the terms of any such Plan). All contributions required to have been
made to any Plan or any other plan subject to Title IV of ERISA
maintained by any member of the VKAC Group or any ERISA Affiliate of any
member of the VKAC Group by any member of the VKAC Group or any ERISA
Affiliate of any member of the VKAC Group pursuant to Applicable Law
(including, without limitation, ERISA and the Code) have been made.
(d) Code Section 280G. There is no contract, agreement, plan or
arrangement covering any employee of any member of the VKAC Group that,
to the knowledge of the Company, individually or collectively, would
reasonably be expected to give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code.
2.1.19. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Company
in such manner as to give rise to any valid claim against any member of the
VKAC Group or the Buyer for any brokerage or finder's commission, fee or
similar compensation, other than as set forth in Schedule 2.1.19, and by
Goldman, Sachs & Co. and Merrill Lynch & Co., Inc., in each case whose
fee for services provided in respect of this Agreement and the transactions
contemplated hereby shall be paid by the Company.
2.1.20. List of ERISA Clients. Schedule 2.1.20 sets forth a
correct and complete list of each Client (other than a Client that is a
Client solely by reason of its investment in a Fund that is an Investment
Company) that, to the knowledge of the Company, is (i) an employee
benefit plan, as defined in Section 3(3) of ERISA (unless the Client has
represented to the Company that it is a governmental plan, church plan or
otherwise not subject to Title I of ERISA or Code section 4975 or the
Company reasonably believes that it is not subject to Title I of ERISA or
Code section 4975) or (ii) a person acting on behalf of such a plan
(hereinafter referred to as an "ERISA Client").
2.1.21. Hedging Activities. The derivative products held by any
VKAC Company were acquired (i) for the purpose of hedging against market
value changes in such VKAC Company's trading inventory relating to its unit
investment trust business in the ordinary course of business consistent
with past practices or (ii) to hedge its variable rate debt.
2.1.22. Financial Projections. The financial projections relating
to the VKAC Companies that have been delivered to the Parent or the Buyer
by the Company were made in good faith and, to the knowledge of the
Company, were not unreasonable when made.
2.1.23. Assets Under Management. As of the close of business on
June 20, 1996, the aggregate amount of assets under management for (i) the
open end Funds was $27,797,424,000, (ii) the Prime Rate Trust was
$4,804,106,000 and (iii) the Institutional Accounts (including the Sub-
Advisory Funds) was $3,310,303,000.
2.2. Representations and Warranties of the Parent, Holdco and the
Buyer. The Parent, Holdco and the Buyer represent and warrant to the
Company as follows:
2.2.1. Corporate Status; Authority for Agreement. Each of the
Parent, Holdco and the Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Each of the
Parent, Holdco and the Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by it. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, by the Parent, Holdco
and the Buyer have been duly authorized (except for the authorization of
the shares of common stock of the Parent that will be issuable to the
Designated Managers in exchange for certain shares of preferred stock of
Holdco as contemplated by the Contribution Agreement) by all requisite
corporate action of the Parent, Holdco and the Buyer. This Agreement has
been duly executed and delivered by each of the Parent, Holdco and the
Buyer and constitutes the valid and legally binding obligation of the
Parent, Holdco and the Buyer, enforceable against each of them in
accordance with its terms. Each of the Parent, Holdco and the Buyer has all
requisite corporate power and authority to carry on its business as now
conducted and to own or lease or to operate its properties as and in the
places where such business is now conducted and such properties are now
owned, leased or operated.
2.2.2. No Conflicts, etc. Except as set forth in Schedule 2.2.2, the
execution and delivery by the Parent, Holdco and the Buyer of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any violation of, loss of rights or default under, constitute
an event creating rights of acceleration, termination, repayment or
cancellation under, entitle any party to receive any payment pursuant to,
or result in the creation of any Lien upon any of the properties or
assets of the Buyer under, (i) any provision of the Organizational
Documents of the Parent, Holdco or the Buyer, (ii) any Applicable Law
applicable to the Parent, Holdco, the Buyer or any of their respective
properties or (iii) any agreement or other instrument to which the
Parent, Holdco or the Buyer is a party or by which the Parent, Holdco or
the Buyer or any of its properties is bound, except, in the case of
clause (iii), for violations, losses, defaults, accelerations,
terminations, repayments, cancellations or Liens that would not
reasonably be expected to have a material adverse effect on the ability
of the Parent, Holdco or the Buyer to consummate the Merger and the other
transactions contemplated hereby. Except as set forth in Schedule 2.2.2,
no Governmental Approval or other Consent (other than pursuant to the HSR
Act) is required to be obtained or made by the Parent, Holdco or the
Buyer in connection with the execution and delivery of this Agreement or
the consummation by the Parent, Holdco and the Buyer of the transactions
contemplated hereby.
2.2.3. Litigation. There is no judicial or administrative action,
proceeding or investigation pending or, to the knowledge of the Parent,
Holdco or the Buyer, threatened which (a) questions the validity of this
Agreement or any action taken or to be taken by the Parent, Holdco or the
Buyer in connection herewith, or (b) would reasonably be expected to have a
material adverse effect on the business, financial condition, results of
operations or properties of the Parent, Holdco or the Buyer or the
ability of the Parent, Holdco or the Buyer to consummate the Merger and the
other transactions contemplated hereby.
2.2.4. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Parent,
Holdco, the Buyer or any of their Affiliates in such manner as to give rise
to any valid claim against the Company, any other member or Affiliate of
the VKAC Group or any stockholder of the Company for any brokerage or
finder's commission, fee or similar compensation.
2.2.5. No Disqualifying Participants. The consummation of the Merger
will not cause any member of the VKAC Group to become subject to any
disqualification that would be a basis (i) for denial, suspension or
revocation of registration as an investment adviser under Section 203(e) of
the Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under
Section 15 of the Exchange Act, (ii) for disqualification as an
investment adviser or a principal underwriter for an investment company
pursuant to Section 9(a) of the Investment Company Act or (iii) for
prohibition from holding certain positions pursuant to Section 411 of
ERISA.
2.2.6. Financing. The Buyer will have available as of the
Effective Time immediately available funds sufficient to consummate the
transactions contemplated by this Agreement.
2.2.7 Section 15(f) Materials. Neither the Parent, Holdco, the
Buyer nor any of their respective Affiliates is aware of any documents,
records, memoranda, work papers or other written materials that would
reasonably be likely to be evidence that the requirements of any of the
provisions of Section 15(f) of the Investment Company Act have not been
or will not be met in respect of this Agreement and the transactions
contemplated hereby, except for such as have been furnished to the
Company or described in writing to the Company in reasonable detail.
ARTICLE III
COVENANTS
3.1 Covenants of the Company.
3.1.1. Conduct of Business. From the date hereof to the Effective
Time, except as contemplated by or in connection with this Agreement or the
transactions contemplated hereby, as described on Schedule 3.1.1 or as
consented to by the Parent, any request for such consent to be considered
by the Parent in good faith, the Company will, and will cause each of the
VKAC Companies to and, subject to applicable fiduciary duties to the Funds,
will use its reasonable best efforts to cause each of the Funds to:
(a) carry on its business in the ordinary course consistent with past
practices, and use all reasonable best efforts (to the extent consistent
with good business judgment) to preserve intact its present business
organization, keep available the services of its executive officers and key
employees, and preserve its relationships with customers, clients,
suppliers and others having material business dealings with it;
(b) not amend its certificate of incorporation or by-laws or other
Organizational Document;
(c) not merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially all of the assets of, or otherwise
acquire any business or any corporation, partnership, association or
other business organization or division thereof;
(d) not engage in any transaction with the Buyer, the Parent or their
Affiliates that would be a violation of the Investment Company Act, the
Advisers Act, ERISA or other Applicable Law, provided that none of the
Company, any other VKAC Company or any Fund will be in breach of this
Section 3.1.1(d) if it engages in a transaction with an Affiliate of the
Buyer or the Parent that violates ERISA unless the Company, such other VKAC
Company or such Fund engaging in such transaction has or reasonably
should have had knowledge of such affiliation;
(e) not take any action or omit to take any action, which action or
omission would result in a breach or inaccuracy of any of the
representations and warranties set forth in Section 2.1.5 at, or as of
any time prior to, the Effective Time;
(f) not sell any assets outside the ordinary course of business
consistent with past practices;
(g) not sell, transfer or otherwise dispose of any CDSC Assets;
(h) not agree or commit to do any of the foregoing referred to in
clauses (a)-(g); and
(i) promptly advise the Buyer of any fact, condition, occurrence or
change known to the Company that is reasonably expected to have a
Material Adverse Effect or cause a breach of this Section 3.1.1.
3.1.2. No Solicitation. From the date hereof to the earlier of the
Effective Time and the termination of this Agreement, the Company shall
not, and shall not permit any member of the VKAC Group or any officer,
director, partner, employee, agent or advisor of any member of the VKAC
Group to, directly or indirectly, (a) solicit, initiate or encourage any
proposals for, or enter into any discussions with respect to, a merger or
other business combination involving the Company or VKAC or the acquisition
of shares of capital stock of any member of the VKAC Group or all, or
substantially all, of the assets of any member of the VKAC Group (an
"Acquisition Proposal") or (b) furnish or cause to be furnished in
connection with any proposals described in clause (a) above any non-
public information concerning the business and operations of any member
of the VKAC Group to any Person (other than the Parent, Holdco, the Buyer
and their agents and representatives and the Company and their agents and
representatives). From the date hereof to the Effective Time, the
Company shall not, and shall not permit any member of the VKAC Group to,
sell, transfer or otherwise dispose of, grant any option or proxy to any
Person with respect to, create any Lien upon, or transfer any interest
in, any shares of capital stock of any VKAC Company, other than (i) as
contemplated by or in connection with this Agreement or the transactions
contemplated hereby, (ii) such sales, transfers, dispositions, grants and
creations to or in favor of the Company or (iii) pursuant to any
agreement or commitment existing on the date hereof. If at any time
after the date hereof and prior to the Effective Time, the Company or any
of its representatives is approached by, or receives an offer from, any
third party concerning an Acquisition Proposal or a request to provide
information referred to in clause (b) above, the Company will promptly
disclose such offer or request to the Parent and will keep the Parent fully
informed of the nature, details and status of any such offer or request.
3.1.3. Access and Information. From the date hereof to the Effective
Time, the Company will, and will cause each member of the VKAC Group to,
give to the Parent and the Parent's accountants, counsel and other
representatives reasonable access during normal business hours to such of
the VKAC Companies' and the Funds' respective offices, properties, books,
contracts, commitments, reports and records relating to the VKAC
Companies and the Funds, and to furnish them or provide them access to
all such documents, financial data, records and information with respect to
the properties and businesses of the VKAC Companies as the Parent shall
from time to time reasonably request, provided that the foregoing shall
be under the general coordination of the Company and shall be subject to
the Confidentiality Agreement. In addition, from the date hereof to the
Effective Time the Company will, and will cause each member of the VKAC
Group to, permit the Parent and the Parent's accountants, counsel and other
representatives reasonable access to such personnel of the VKAC Group
during normal business hours as may be necessary to or reasonably requested
by the Parent in its review of the properties of the VKAC Group and the
Funds, the business affairs of the VKAC Group and the Funds and the above-
mentioned documents and records, provided that the Company shall have the
right to have its representatives participate in such discussions with
personnel of the VKAC Group and the Funds and such discussions shall be
subject to the Confidentiality Agreement.
3.1.4. Subsequent Financial Statements, Debt Prepayments and Filings.
From the date hereof to the Effective Time, the Company will cause the
members of the VKAC Group to make available to the Parent, promptly after
the same become available, copies of (i) the monthly management reports for
the VKAC Group substantially in the form furnished to the senior management
of the Company, together with such monthly financial statements furnished
to such management and (ii) the financial statements of the Funds as the
same are filed with the Commission.
(b) After the date hereof and until the Effective Time, within five
Business Days after the end of each month, the Company shall deliver a
certificate to the Buyer, signed by the chief financial officer of the
Company, setting forth the aggregate amount of loans that were prepaid
under the Credit Agreement during such month and the Pre-Tax Income as of
the end of such month.
(c) From the date hereof to the Effective Time, the Company will
file, or cause to be filed, with the Commission or other relevant
Governmental Authority, and promptly thereafter make available to the
Parent, copies of each registration, report, statement, notice or other
filing required to be filed by any member of the VKAC Group with the
Commission or any other Governmental Authority under the Exchange Act,
the Advisers Act, the Investment Company Act, the Securities Act or any
other Applicable Law. All such registrations, reports, statements, notices
or other filings shall comply in all material respects with Applicable Law.
(d) From the date hereof to the Effective Time, the Company will
cause the members of the VKAC Group to make available to the Parent,
promptly after the same become available, (i) copies of all inspection
reports provided to any VKAC Company by the Commission or any state
regulatory authority or any self-regulatory agency and (ii) all
correspondence and other documents relating to any inquiry or investigation
provided to any VKAC Company by the Commission or any state regulatory
authority or any self-regulatory agency.
3.1.5. Public Announcements. From the date hereof to the Effective
Time, except as required by Applicable Law, the Company shall not, and
shall not permit any member of the VKAC Group to, make any public
announcement in respect of this Agreement or the transactions
contemplated hereby without the prior consent of the Parent.
3.1.6. Further Actions. Generally. From the date hereof to the
Effective Time, the Company will, and will cause each member of the VKAC
Group to, use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated
hereby.
(b) Filings, etc. From the date hereof to the Effective Time,
the Company will, as promptly as practicable, file or supply, or cause to
be filed or supplied, all applications, notifications and information
required to be filed or supplied by or on behalf of the Company or any
member of the VKAC Group pursuant to Applicable Law in connection with this
Agreement, the Merger or the consummation of the other transactions
contemplated hereby, including but not limited to filings pursuant to the
HSR Act. From the date hereof to the Effective Time, the Company, as
promptly as practicable, will make, or cause to be made, all such other
filings and submissions under any Applicable Law applicable to the
Company or any member of the VKAC Group and give such reasonable
undertakings, as may be required for the Company to consummate the Merger
and the other transactions contemplated hereby.
(c) Investment Company Consents. The members of the VKAC Group
shall use their reasonable best efforts to (i) cause the boards of
trustees/directors of Investment Company Clients to approve, and to solicit
their respective shareholders as promptly as practicable with regard to the
approval of, new investment advisory agreements and related ancillary
agreements for such Clients, and (ii) cause the boards of trustees/
directors of Investment Company Clients to approve, to the extent such
approval is required by Applicable Law or the terms of existing
agreements relating to such services, new agreements relating to any
other services provided by members of the VKAC Group to Investment
Company Clients, including, but not limited to, such agreements relating to
the distribution of fund shares, fund administration, accounting and
transfer agency, in each case referred to in clauses (i) and (ii) above,
such approval to be effective on or as promptly as practicable after the
Effective Time, pursuant to the provisions of Section 15 of the
Investment Company Act, and consistent with all requirements of the
Investment Company Act applicable thereto, provided that, in the case of
both such clauses (i) and (ii), such agreements are identical in all
material respects to the existing agreements other than the term of the
agreement and other than such non-material changes as may be made in
order to make any such agreement consistent with other agreements of the
same type to which any VKAC Company is a party.
(d) Certain Other Consents. As promptly as practicable after
execution of this Agreement, the Company shall cause the Clients of the
VKAC Group listed on Schedule 2.1.8(c)(A)(9) to be informed of the
transactions contemplated by this Agreement and shall request the written
Consent of such Clients to the transaction, such Consents to be in form and
substance satisfactory to the Parent in its reasonable judgment. If such
Consent is not received from any such Client within 60 days, the Company
will promptly send a new notice advising such Client of its intention to
continue the advisory services, pursuant to the Company's existing
contracts with such Clients, subject to such Client's right to terminate
such contract within 45 days of receipt of such notice, and that each
such Client's consent will be implied if it continues to accept the
services without rejection during such specified 45-day period. At least
two weeks prior to the Effective Time, the Company shall also use its
reasonable best efforts to contact personally each such Client which has
not yet executed a Consent to inquire as to such Client's intentions unless
the Parent in its sole discretion agrees to waive this requirement with
respect to any such Client.
(e) Consent Procedures. In connection with obtaining the
Consents required by subsections (c) and (d), the Company shall (i) keep
the Parent informed of the status of obtaining Client Consents, (ii)
facilitate the Parent's or the Buyer's communication with Clients regarding
Consents, (iii) provide to the Parent draft proxy statements and (iv) to
the extent applicable, deliver to the Parent prior to the Closing copies of
all executed Client Consents and make available for inspection the
originals of such Consents prior to the Closing.
(f) Other Consents. The Company, as promptly as practicable,
will use its reasonable best efforts to obtain, or cause to be obtained,
the Consents listed on Schedule 3.1.6(f).
(g) Other Actions. The Company will use, and cause each member
of the VKAC Group to use, its reasonable best efforts to take, or cause
to be taken, all other actions necessary, proper or advisable in order
for them to fulfill their obligations in respect of this Agreement and
the transactions contemplated hereby. The Company will, and will cause
each member of the VKAC Group to, coordinate and cooperate with the
Parent in exchanging such information and supplying such reasonable
assistance as may be reasonably requested by the Parent in connection
with the filings and other actions contemplated by Section 3.2.2.
(h) Notice of Certain Events. From the date hereof to the
Effective Time, the Company shall promptly notify the Parent of:
(i) any fact, condition, event or occurrence known to the Company
that will or reasonably may be expected to result in the failure of any
of the conditions contained in Sections 4.1 and 4.2 to be satisfied;
(ii) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(iii) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement; and
(iv) any actions, suits, claims, investigations or proceedings commenced
or, to the knowledge of the Company, threatened against, relating to or
involving or otherwise affecting any member of the VKAC Group which, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 2.1.11 or which relate to the
consummation of the transactions contemplated by this Agreement.
3.1.7. Compliance with Investment Company Act Section 15. The
Company will not take and, prior to the Effective Time, will cause each
member of the VKAC Group not to take, any action not contemplated by this
Agreement that would have the effect, directly or indirectly, of causing
the requirements of any of the provisions of Section 15(f) of the
Investment Company Act not to be met in respect of this Agreement and the
transactions contemplated hereby. In addition, the Company will not fail
to take, and, prior to the Effective Time, will not cause any member of the
VKAC Group to fail to take, any action if the failure to take such action
would have the effect, directly or indirectly, of causing the
requirements of any of the provisions of Section 15(f) of the Investment
Company Act not to be met in respect of this Agreement and the transactions
contemplated hereby.
3.1.8. Qualification of the Funds; Tax Affairs. (a) Subject to
applicable fiduciary duties to the Funds, the Company will cause the VKAC
Companies to refrain from, and will use its reasonable best efforts to
cause each of the Funds to refrain from, taking any action after the date
hereof and on or prior to the Closing Date (a) (i) in the case of each of
the Funds to which the provisions of paragraph (i) of Section 2.1.6(g)
apply, that would prevent such Fund from qualifying as a RIC, or that would
require such Fund to take actions in order to so qualify that would have
a material adverse effect on such Fund, (ii) in the case of each of the
Funds to which the provisions of paragraph (ii) of Section 2.1.6(g)
apply, that would cause it to be an association taxable as a corporation
for federal Income Tax purposes, (iii) in the case of Van Kampen American
Capital Monthly Accumulation Plans, that would prevent any portion
thereof from being treated as a business arrangement to which the
provisions of section 851(f) of the Code apply, (iv) in the case of Van
Kampen American Capital Exchange Fund, that would prevent it from being
treated as a partnership for federal Income Tax purposes or (v) in the case
of the unit investment trusts to which the provisions of paragraph (ii)
of Section 2.1.6(g) apply, that would prevent any portion thereof from
being subject to subpart E of part I of subchapter J of chapter 1 of
subtitle A of the Code, or (b) that would conflict in any material
respect with the registration statement, prospectus and other offering
materials of such Fund.
(b) After the date hereof and until the Closing Date, the
Company shall supply to the Parent all calculations and other written
information it produces or receives with respect to the qualification as
RICs of the Funds to which the provisions of paragraph (i) of Section
2.1.6(g) apply within 5 Business Days after such calculations or
information are produced or received. As promptly as possible, and in no
event later than the Closing Date, the Company shall deliver to the
Parent (i) with respect to each of such Funds, a full description of the
reasons, if any (other than failure to comply with the provisions of
section 852(a)(1) of the Code) that such Fund would fail to qualify as a
RIC for its then-current taxable year if the last day of its most recent
fiscal quarter ended on or prior to the Closing Date were treated as the
last date of such taxable year and (ii) with respect to each of such
Funds whose taxable year ends within three months after the Closing Date, a
full description of the reasons, if any, (other than failure to comply with
the provisions of section 852(a)(1) of the Code) that such Fund would
fail to qualify as a RIC for its then-current taxable year if the
Business Day immediately preceding the Closing Date were treated as the
last date of such taxable year. As promptly as possible, and in no event
later than three Business Days after the date hereof, the Company shall
deliver to the Parent with respect to each of such Funds, a full
description of the reasons, if any (other than failure to comply with the
provisions of section 852(a)(1) of the Code) that such Fund would fail to
qualify as a RIC for its current taxable year if June 19, 1996 were treated
as the last day of such taxable year.
(c) Without the prior written consent of the Parent, none of the
VKAC Companies shall, to the extent it may affect or relate to the VKAC
Companies, make or change any Tax election (other than making an election
pursuant to section 338(h)(10) of the Code with respect to the sale of
Advantage Capital Corporation pursuant to Section 5.8 of the Stock Purchase
Agreement between SunAmerica Inc. and the Company, dated as of December 21,
1995), change any annual Tax accounting period, adopt or change any
method of Tax accounting, file any amended Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim
a Tax refund, consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment or take or knowingly
omit to take any other similar action (but excluding the Company's
reporting the distribution of MCM and Hansberger as a taxable disposition
on its Return for the taxable year in which the distributions occur) if (i)
any such action or omission would have the effect of increasing the Tax
liability or reducing any Tax Asset of any VKAC Company, the Parent or
any Affiliate of the Parent by more than $25,000 or (ii) all such actions
or omissions would, in the aggregate, have the effect of increasing the Tax
liability or reducing any Tax Asset of any VKAC Company, the Parent or
any Affiliate of the Parent by more than $100,000. The Company shall
notify Lou Palladino of Morgan Stanley & Co. Incorporated at 1251 Avenue of
the Americas, 21th floor, New York, New York 10020, in writing of any
proposed action or omission that would require the Parent's consent
pursuant to this Section 3.1.8(c).
(d) After the date hereof and until the Closing Date, the VKAC
Companies shall conduct all affairs relating to Taxes only in good faith
and in a manner consistent with past practices of the VKAC Companies.
3.1.9. ERISA Clients. As soon as practicable following the date of
this Agreement, the Company and the Parent shall cooperate and, in
connection therewith, shall each use its reasonable best efforts, to
identify each written contract or agreement in effect as of the date of
this Agreement entered into by any member of the VKAC Group with or on
behalf of any ERISA Client pursuant to which, to the knowledge of the
Company or the Parent, in each case, after due inquiry, the Parent or any
of its Affiliates has agreed to: (i) execute securities transactions;
(ii) provide any other goods or services; or (iii) purchase, sell, exchange
or swap securities or other economic interests therein or derivatives
thereof, including, but not limited to, rights to receive or obligations to
pay interest or principal under any debt obligation or rights to receive or
obligations to pay interest or principal denominated in a particular
security.
3.2. Covenants of the Parent, Holdco and the Buyer.
3.2.1. Public Announcements. From the date hereof to the Effective
Time, except as required by Applicable Law, neither the Parent, Holdco
nor the Buyer shall, nor shall any of them permit any of their Affiliates
to, make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior consent of the Company.
3.2.2. Further Actions. Generally. The Parent, Holdco and the
Buyer agree to use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated hereby.
(b) Filings, Consents, etc. Each of the Parent, Holdco and the
Buyer will, as promptly as practicable, file or supply, or cause to be
filed or supplied, all applications, notifications and information required
to be filed or supplied by or on behalf of it or its Affiliates pursuant to
Applicable Law in connection with this Agreement, the Merger or the
consummation of the other transactions contemplated hereby, including but
not limited to filings pursuant to the HSR Act. Each of the Parent, Holdco
and the Buyer, as promptly as practicable, (i) will make, or cause to be
made, all such other filings and submissions under any Applicable Law
applicable to the Parent, Holdco, the Buyer or any of their respective
Affiliates, and give such reasonable undertakings, as may be required for
the Parent, Holdco and the Buyer to consummate the Merger and the other
transactions contemplated hereby, (ii) will use its reasonable best efforts
to obtain, or cause to be obtained, all Consents (including, without
limitation, all Governmental Approvals) necessary to be obtained by it or
any of its Affiliates in order for it so to consummate the Merger and
such transactions, and (iii) will use its reasonable best efforts to
take, or cause to be taken, all other actions necessary, proper or
advisable in order for it to fulfill its obligations in respect of this
Agreement and the transactions contemplated hereby. Each of the Parent,
Holdco and the Buyer will coordinate and cooperate with the Company,
including by supplying such reasonable assistance and information (which
information shall be correct and complete and shall conform in all material
respects with the requirements of all Applicable Laws) as may be reasonably
requested by the Company, in connection with the filings and other
actions contemplated by Section 3.1.6.
(c) Notice of Certain Events. At all times prior to the
Effective Time, the Parent, Holdco and the Buyer shall promptly notify
the Company of:
(i) any fact, condition, event or occurrence known to either of
them that will or reasonably may be expected to result in the failure of
any of the conditions contained in Sections 4.1 and 4.3 to be satisfied; and
(ii) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Parent, Holdco or the Buyer,
threatened against, relating to or involving or otherwise affecting the
Parent, Holdco or the Buyer which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 2.3.3 or
which relate to the consummation of the transactions contemplated by this
Agreement.
3.2.3. Compliance with Investment Company Act Section 15. No
Unfair Burden, etc. The Parent, Holdco and the Buyer acknowledge that the
Company has entered into this Agreement in reliance upon the benefits and
protections provided by Section 15(f) of the Investment Company Act. Each
of the Parent, Holdco and the Buyer shall not take, and each of them
shall cause its Affiliates not to take, any action not contemplated by this
Agreement that would have the effect, directly or indirectly, of causing
the requirements of any of the provisions of Section 15(f) of the
Investment Company Act not to be met in respect of this Agreement and the
transactions contemplated hereby, and each of them shall not fail to
take, and, after the Effective Time, shall not cause any member of the VKAC
Group to fail to take, any action if the failure to take such action
would have the effect, directly or indirectly, of causing the
requirements of any of the provisions of Section 15(f) of the Investment
Company Act not to be met in respect of this Agreement and the transactions
contemplated hereby. In that regard, each of the Parent, Holdco and the
Buyer shall conduct its business and shall, subject to applicable fiduciary
duties to the Funds and the Sub-Advisory Funds, use its reasonable best
efforts to cause each of its Affiliates to conduct its business so as to
assure that, insofar as within the control of the Parent, Holdco, the Buyer
or their respective Affiliates:
(i) for a period of three years after the Effective Time, at least 75%
of the members of the Board of Directors or trustees of each of the Funds
that is registered under the Investment Company Act and that continues
after the Effective Time its existing or a replacement Investment
Advisory Contract with any of the VKAC Companies, the Parent, Holdco, the
Buyer or any Affiliate of the Parent, Holdco or the Buyer are not (A)
"interested persons" of the investment manager of such Fund after the
Effective Time, or (B) "interested persons" of the present investment
manager of such Fund;
(ii) for a period of two years after the Effective Time, the investment
advisory fee paid to any VKAC Company by any Fund or Sub-Advisory Fund that
is registered under the Investment Company Act shall not be increased,
nor shall any waiver in effect on the date hereof of any portion of such an
investment advisory fee be allowed to expire except in accordance with
the terms of such waiver and except, in each case, (x) pursuant to an
exemptive order naming the Funds as parties issued by the Commission,
subject in each case to each of the conditions set forth in such
exemptive order having been satisfied in the reasonable judgment of C&D
Fund IV, or (y) with the prior written consent of C&D Fund IV; and
(iii) for a period of two years after the Effective Time, there shall not be
imposed on any of the Funds or Sub-Advisory Funds that is registered
under the Investment Company Act an "unfair burden" as a result of the
transactions contemplated by this Agreement, or any terms, conditions or
understandings applicable thereto.
(b) Certain Terms. The terms used in quotations in this Section
3.2.3 shall have the meanings set forth in Section 15(f) or Section
2(a)(19) of the Investment Company Act.
(c) No Assignment of Investment Advisory Contracts. For a period
of three years from the Effective Time, none of the Parent, Holdco, the
Buyer, any of their respective Affiliates nor any of the VKAC Companies
will voluntarily engage in any transaction which would constitute an
assignment of any Investment Advisory Contract with any Fund that is
registered under the Investment Company Act currently managed by any of the
VKAC Companies to which the Parent, Holdco, the Buyer, any such Affiliate
or any VKAC Company is a party without first obtaining a covenant in all
material respects the same as that contained in this Section 3.2.3.
3.2.4. Employee Matters Subsequent to the Effective Time.
(a) Employee Plans and Agreements. From and after the Effective
Time, the Parent, Holdco and the Buyer will, and will cause each member
of the VKAC Group to, honor, without modification, perform all acts and pay
all amounts required or due under or with respect to each Plan and each
agreement which relates to any current or former employee of the VKAC Group
or the terms of any such employee's employment or termination of
employment, including without limitation, all employment, retention, change
of control, employment protection, severance, termination, consulting,
deferred compensation, executive pension and retirement, welfare and fringe
benefit agreements, plans and programs, except for any modification to
any such Plan or agreement to the extent permitted in accordance with
Section 3.2.4(d).
(b) Maintenance of Employee Benefits. For a period of two years
from the Effective Time, the Parent or the Buyer will, or will cause the
VKAC Companies to, continue to maintain employee and retiree compensation
and benefit plans, programs, arrangements and policies (other than equity
based plans) for the benefit of current and former employees of the VKAC
Group which provide compensation and benefits that are substantially
comparable, in the aggregate, to those provided by the VKAC Companies for
the benefit of such employees and former employees immediately prior to the
Effective Time.
(c) Change of Control. Each of the Parent, Holdco and the Buyer
acknowledges and agrees that the consummation of the transactions
contemplated by this Agreement will constitute a "change of control" of the
Company for purposes of each Plan and each program, policy and agreement
covering any current or former employee of the VKAC Group identified in
Schedule 3.2.4(c) and, accordingly, agrees to, and to cause the Company and
each other member of the VKAC Group to, honor all provisions under such
Plans, programs, policies and agreements relating to a change of control.
(d) Modifications. Notwithstanding the foregoing, nothing in
this Section 3.2.4 shall preclude the Buyer from seeking to (i) modify
any employment agreement with the consent of the affected employee or
employees or (ii) modify any Plan to the extent such modification is
permitted by the terms of such Plan and is consistent with Section
3.2.4(b).
(e) Withholding Taxes. Following the Effective Time, the Parent
shall, or shall cause the Surviving Corporation to, pay on a timely basis
all withholding Taxes payable by the Surviving Corporation in connection
with the transactions contemplated by Sections 1.5(d), 1.5(e) and 1.5(f).
3.2.5. List of Affiliates. As soon as practicable following the date
hereof, the Parent shall deliver to the Company a list of each entity
that is an Affiliate of the Parent, Holdco or the Buyer.
3.2.6. Contribution Agreement. Each of the Parent, Holdco and the
Buyer agree to use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by the Contribution Agreement and, in connection therewith,
will not agree to amend or modify any of the closing conditions set forth
in the Contribution Agreement in a way that would impair the ability of the
parties thereto to satisfy such conditions on or before the Effective Time,
provided that nothing in this Section 3.2.6 shall prohibit the parties to
the Contribution Agreement from unilaterally agreeing to terminate such
agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Each Party. The obligations of
the Company, the Parent, Holdco and the Buyer to effect the Merger and to
consummate the other transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Effective Time of the following
conditions:
4.1.1. HSR Act Notification. In respect of the notifications of
the Parent, Holdco and the Buyer on the one hand and the Company on the
other hand pursuant to the HSR Act, the applicable waiting period and any
extensions thereof shall have expired or been terminated.
4.1.2. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree
or judgment of any court or other Governmental Authority, and no action
or proceeding brought by any Governmental Authority shall be pending at the
Effective Time before any court or other Governmental Authority to
restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated hereby, and there shall not have been
promulgated, entered, issued or determined by any court or other
Governmental Authority to be applicable to this Agreement any Applicable
Law making illegal the consummation of the transactions contemplated hereby
and no proceeding brought by any Governmental Authority with respect to the
application of any such Applicable Law shall be pending.
4.1.3. Contribution Agreement. If the Contribution Agreement has not
been terminated prior to the Effective Time, the transactions
contemplated by the Contribution Agreement shall have been consummated.
4.1.4. Assets Under Management. Market Assets Under Management shall
not be less than $26,933,875,000 and Closing Assets Under Management
shall not be less than $30,525,058,000 or more than $41,298,608,000.
4.2. Conditions to Obligations of the Parent, Holdco and the Buyer.
The obligations of the Parent, Holdco and the Buyer to effect the Merger
and to consummate the other transactions contemplated hereby shall be
subject to the fulfillment (or waiver by the Buyer) at or prior to the
Effective Time of the following additional conditions, which the Company
agrees to use its reasonable best efforts to cause to be fulfilled:
4.2.1. Representations; Performance. The representations and
warranties set forth in Section 2.1 shall have been true and correct in all
material respects at and as of the date hereof, and shall be true and
correct in all respects at and as of the Effective Time as though made at
and as of the Effective Time, without regard to any qualification as to
materiality or Material Adverse Effect contained therein, except to the
extent that any failure to be true and correct at and as of the Effective
Time would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, provided that the accuracy of any
representation or warranty that by its terms speaks only as of the date
hereof or another date prior to the Effective Time shall be determined
solely as of the date hereof or such other date, as the case may be. The
Company shall have duly performed and complied in all material respects
with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Effective Time. The
Company shall have delivered to the Parent and the Buyer a certificate,
dated the Effective Time and signed by the President or a Vice President of
the Company, to the effect set forth above in this Section 4.2.1 and with
respect to the matters set forth in Section 4.1.4.
4.2.2. Consents. All Consents required to be made or obtained by the
Company or any member of the VKAC Group in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby shall have been made or obtained that are (i)
Governmental Approvals, Consents of the Boards of Directors or Trustees
of the Funds or Consents of any member of the VKAC Group, (ii) Consents
of shareholders of the Prime Rate Trust and (iii) the Consents listed in
Schedule 3.1.6(f). Copies of all such Consents shall have been delivered
to the Parent. All Governmental Approvals required to be made or
obtained by the Parent, Holdco, the Buyer or their respective Affiliates in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby shall have been made
or obtained.
4.2.3. MCM Indemnity. An Indemnification Agreement, dated as of
the Effective Time, substantially in the form of Exhibit B hereto, and a
tax sharing agreement reasonably satisfactory to the Buyer, shall have been
entered into by MCM.
4.2.4. Resignation of Directors. All directors of the VKAC Companies
whose resignations shall have been requested by the Parent in writing not
less than ten Business Days prior to the Effective Time shall have
submitted their resignations or been removed from office effective as of
the Effective Time.
4.2.5. Opinion of Counsel. The Buyer shall have received favorable
opinions, in each case addressed to it and dated the Closing Date, from the
General Counsel of the Company and from Debevoise & Plimpton, special
counsel to the Company, with respect to the matters and substantially in
the form set forth in Exhibits C-1 and C-2 hereto, respectively.
4.2.6. Proceedings. All corporate and other proceedings of the
Company and the VKAC Group that are required in connection with the
transactions contemplated by this Agreement, and all documents and
instruments incident to such proceedings, shall be reasonably
satisfactory to the Buyer and its counsel, and the Buyer and its counsel
shall have received all such documents and instruments, or copies
thereof, certified if requested, as may be reasonably requested.
4.2.7. Govett Agreements. Within five Business Days following the
delivery to the Company of a notice from the Parent requesting the
Company to terminate any Govett Agreement, the Company shall have sent
written notice under such Govett Agreement to terminate such agreement.
4.2.8. FIRPTA Certification. The Parent and the Buyer shall have
received (a) a certification from the Company, dated no more than 30 days
prior to the Closing Date and signed by a responsible corporate officer
of the Company, that the Company is not, and has not been at any time
during the five years preceding the date of such certification, a United
States real property holding company, as defined in section 897(c)(2) of
the Code, and (b) proof reasonably satisfactory to the Parent and the Buyer
that the Company has provided notice of such certification to the
Internal Revenue Service in accordance with the provisions of Treasury
regulations section 1.897-2(h)(2).
4.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger and to consummate the other transactions
contemplated hereby shall be subject to the fulfillment (or waiver by the
Company), at or prior to the Effective Time, of the following additional
conditions, which each of the Parent, Holdco and the Buyer agrees to use
its reasonable best efforts to cause to be fulfilled:
4.3.1. Representations, Performance, etc. The representations and
warranties set forth in Section 2.2 shall have been true and correct in all
material respects at and as of the date hereof, and shall be true and
correct in all material respects at and as of the Effective Time as
though made at and as of the Effective Time except to the extent that any
failure to be true and correct would not reasonably be expected to
materially adversely affect the ability of the Parent, Holdco and the Buyer
to consummate the transactions contemplated by this Agreement, provided
that the accuracy of any representation or warranty that by its terms
speaks only as of the date hereof or another date prior to the Effective
Time shall be determined solely as of the date hereof or such other date,
as the case may be. The Parent, Holdco, the Buyer and their respective
Affiliates shall have duly performed and complied in all material
respects with all agreements and conditions required by this Agreement to
be performed or complied with by them prior to or at the Effective Time.
The Parent, Holdco and the Buyer shall have delivered to the Company a
certificate or certificates, dated the Effective Time and signed by the
President or a Vice President of each of them, to the effect set forth
above in this Section 4.3.1.
4.3.2. Consents. All Consents required to be made or obtained by the
Buyer or its Affiliates in connection with the execution and delivery of
the Agreement or the consummation of the transactions contemplated hereby
shall have been made or obtained that are (i) Governmental Approvals or
(ii) other Consents not included in clause (i), except for any such other
Consents the failure of which to be made or obtained would not reasonably
be expected to adversely affect the ability of the Buyer or its
Affiliates to consummate the transactions contemplated hereby. Copies of
all such Consents shall have been delivered to the Company. All
Governmental Approvals required to be made or obtained by any member of the
VKAC Group in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby shall
have been made or obtained.
4.3.3. Merger Consideration. The Buyer shall have deposited with the
Exchange Agent the Merger Consideration, and with the Company (net of
applicable withholding Taxes, if any) the Total Employee Option
Cancellation Amount, the Jones Option Cancellation Amount and, if the
Effective Time occurs after January 1, 1997, the Travelers Option
Cancellation Amount, in each case, in immediately available funds.
4.3.4. Certain Indebtedness. The Buyer shall have provided for
either (i) the repayment of all borrowings outstanding under the Credit
Agreement immediately prior to or as of the Effective Time, the payment
of all other amounts then due and payable thereunder and the termination of
the Credit Agreement or (ii) a waiver by the requisite lenders under the
Credit Agreement of all defaults and events of default that may occur as
a result of the Merger and the other transactions contemplated hereby.
4.3.5. Opinions of Counsel. The Company shall have received a
favorable opinion, addressed to it and dated the Closing Date, from Davis
Polk & Wardwell, special counsel to the Buyer, with respect to the
matters and substantially in the form set forth in Exhibit D hereto.
4.3.6. Corporate Proceedings. All corporate and other proceedings of
the Buyer and its Affiliates in connection with the transactions
contemplated by this Agreement, and all documents and instruments
incident thereto, shall be reasonably satisfactory to the Company and its
special counsel, and the Company and such counsel shall have received all
such documents and instruments, or copies thereof, certified if
requested, as may be reasonably requested.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the written agreement of the Buyer and the Company;
(b) by the Company, on the one hand, or the Buyer, on the other hand, by
written notice to the other after 5:00 p.m., New York City time, on
February 1, 1997 if the Effective Time shall not have occurred by such date
(unless the failure of the Effective Time to occur shall be due to any
material breach of this Agreement by the party seeking to terminate),
unless such date is extended by the mutual written consent of the Company
and the Buyer;
(c) by the Company if there has been a breach on the part of the Parent,
Holdco or the Buyer of the covenants of the Parent, Holdco and the Buyer
set forth herein, or any failure on the part of the Parent, Holdco, the
Buyer or any of their respective Affiliates to perform its obligations
hereunder (provided that the terminating party shall have performed and
complied with, in all material respects, all agreements and covenants
required by this Agreement to have been performed or complied with by
such terminating party) prior to such time, such that, in any such case,
any of the conditions to the effectiveness of the Merger set forth in
Section 4.1 or 4.3 could not be satisfied on or prior to the termination
date contemplated by Section 5.1(b); or
(d) by the Buyer, if there has been a breach on the part of the
Company of its covenants set forth herein or any failure on the part of the
Company to perform its obligations hereunder (provided that the terminating
party shall have performed and complied with, in all material respects, all
agreements and covenants required by this Agreement to have been
performed or complied with by such terminating party) prior to such time,
such that, in any such case, any of the conditions to the effectiveness
of the Merger set forth in Sections 4.1 or 4.2 could not be satisfied on or
prior to the termination date contemplated by Section 5.1(b).
5.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 5.1, this Agreement shall become void
and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto,
or any of its directors, officers, employees, agents, consultants,
representatives, advisers, stockholders or Affiliates, except for any
liability resulting from any party's breach of this Agreement and except
that the provisions of Article VI shall survive any such termination.
ARTICLE VI
DEFINITIONS, MISCELLANEOUS
6.1. Definition of Certain Terms. The terms defined in this
Section 6.1, whenever used in this Agreement (including in the Schedules)
shall have the respective meanings indicated below for all purposes of this
Agreement. All references herein to a Section, Article or Schedule are
to a Section, Article or Schedule of or to this Agreement, unless otherwise
indicated.
Acquisition Price: as defined in Section 1.6(a).
Acquisition Proposal: as defined in Section 3.1.2.
Adjusted Bank Debt Amount: the sum of (i) the principal amount of
all loans outstanding on the Determination Date under the Credit Agreement,
plus any accrued and unpaid interest thereon on the Determination Date,
minus (ii) all Transaction Expenses that have been paid prior to the
Determination Date, plus (iii) the absolute amount of Working Capital at
the Determination Date, if the actual amount is a negative number plus (iv)
the amount, if any, by which the Total Debt Prepayment Amount exceeds the
Permitted Debt Prepayment Amount determined as of the Determination Date.
Adjusted Senior Note Amount: $153,000,000 plus accrued and unpaid
interest as of the Determination Date on the outstanding principal amount
of VKAC's 9_% Senior Secured Notes due 2003.
Advisers Act: the Investment Advisers Act of 1940, as amended, and
the rules and regulations of the Commission promulgated thereunder.
Affiliate: of a Person means a Person that directly, or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, the first Person, including but not limited to a
Subsidiary of the first Person, a Person of which the first Person is a
Subsidiary, or another Subsidiary of a Person of which the first Person
is also a Subsidiary. "Control" (including the terms "Controlled by" and
"under common Control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities,
by contract, as trustee or executor, or otherwise.
Aggregate Employee Option Exercise Price: an amount equal to the
sum of the respective exercise price under each Employee Option outstanding
immediately prior to the Effective Time, whether or not vested,
multiplied by the respective number of shares of Class A Common Stock
subject to each such Employee Option.
Aggregate Jones Option Exercise Price: an amount equal to the
exercise price under the Jones Option multiplied by the number of Jones
Option Shares.
Aggregate Travelers Option Exercise Price: an amount equal to the
exercise price under the Travelers Option multiplied by the number of
Travelers Option Shares.
Agreement: this Agreement and Plan of Merger, including the Schedules
and Exhibits hereto.
American Capital Companies: collectively, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital Asset Management, Inc.,
ACCESS Investor Services, Inc., Van Kampen American Capital Trust
Company, Van Kampen American Capital Exchange Corporation, Van Kampen
American Capital Services, Inc., American Capital Contractual Services,
Inc., American Capital Shareholders Corporation and Advantage Capital
Credit Services, Inc.
Applicable Law: all applicable provisions of all (i) statutes,
laws, rules, administrative codes, regulations or ordinances of any
Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, injunctions, judgments, awards and decrees of any Governmental
Authority.
BONY Loan Agreement: the General Loan and Security Agreement, dated
as of February 3, 1989, between Van Kampen American Capital Distributors,
Inc. and The Bank of New York, as amended, supplemented, waived or
otherwise modified from time to time.
Business Day: a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required
by law to close.
Buyer: as defined in the introductory paragraph of this Agreement.
C&D Fund IV: The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership.
CDSC Assets: assets reflected on the Company's balance sheet in
respect of deferred company funded distribution costs (including 12b-1
receivables).
Certificate of Merger: as defined in Section 1.2.
Certificates: as defined in Section 1.8(a).
Class A Common Stock: the Class A Common Stock, par value $.01 per
share, of the Company.
Class B Common Stock: the Class B Common Stock, par value $.01 per
share, of the Company.
Client: any client (including any Fund or Sub-Advisory Fund) to which
the Company or any of its Subsidiaries or Affiliates provides investment
management, investment advisory, administration or distribution services on
the date hereof or on the Closing Date, as the case may be.
Closing: as defined in Section 1.2.
Closing Assets Under Management: the aggregate assets of such of the
open end Funds, the Institutional Accounts (including the Sub-Advisory
Funds) and the Prime Rate Trust as to which any VKAC Company (i) has
received shareholder Consent or, in the case of Institutional Accounts
(other than a Sub-Advisory Fund), has followed the procedures set forth
in Section 3.1.6(d) or other procedures reasonably acceptable to the Parent
and no VKAC Company has been notified, orally or in writing, as of the
close of business on the second Business Day immediately preceding the
Effective Time, of any such Institutional Account's intention to
terminate its relationship with the applicable VKAC Company and (ii) will
act as investment adviser, subadviser or manager immediately following
the Effective Time, determined as follows:
(x) in the case of open end Funds and Sub-Advisory Funds,
based on the average of such aggregate amount over the 10-day period
immediately prior to the second Business Day immediately preceding the
Effective Time, provided that, as of any date of determination, the
aggregate assets of such Funds and Sub-Advisory Funds shall be deemed to be
equal to the sum of (i) the aggregate net asset values of the outstanding
shares of such Funds and Sub-Advisory Funds as of June 20, 1996 or, if
later, the first date on which such Fund or Sub-Advisory Fund issued
shares, plus (ii) the aggregate number of shares of such Funds and Sub-
Advisory Funds issued since such date (including dividend reinvestments)
multiplied by the respective net asset values of such shares when issued,
minus (iii) the aggregate number of shares of such Funds and Sub-Advisory
Funds redeemed since such date multiplied by the respective net asset
values of such shares when redeemed;
(y) in the case of the Prime Rate Trust, its aggregate assets
shall be deemed to be equal to the sum of (i) the aggregate net asset
values of the outstanding shares of the Prime Rate Trust as of June 20,
1996, plus (ii) the aggregate number of shares of the Prime Rate Trust
issued after June 20, 1996 to the close of business on the second
Business Day immediately preceding the Effective Time (including dividend
reinvestments), multiplied by the respective net asset values of such
shares when issued, minus (iii) the aggregate number of shares of the Prime
Rate Trust redeemed since such date multiplied by the respective net
asset values of such shares when redeemed; and
(z) the aggregate assets of such Institutional Accounts (other
than the Sub-Advisory Funds) shall be deemed to be equal to the sum of
(i) the aggregate assets under management of such Institutional Accounts as
of June 20, 1996 or, if later, the date on which such Institutional Account
was created, plus (ii) the aggregate amount of assets deposited in such
Institutional Accounts from such date to the close of business on the
second Business Day immediately preceding the Effective Time, based upon
the respective asset values at the time of such deposits, minus (iii) the
aggregate amount of assets withdrawn, or for which oral or written notice
of withdrawal has been given, from Institutional Accounts (including
terminated Institutional Accounts) from such date to the close of
business on the second Business Day immediately preceding the Effective
Time, based upon the respective asset values at the time of such
withdrawals or terminations.
Closing Date: the date of the Closing.
Code: the Internal Revenue Code of 1986, as amended.
Commission: the Securities and Exchange Commission.
Common Stock: the Class A Common Stock and the Class B Common Stock.
Company: as defined in the introductory paragraph of this Agreement.
Company Financial Statements: the consolidated financial statements
of the Company and its Subsidiaries as at and for the three months ended
March 31, 1996 and the years ended December 31, 1995 and 1994, including in
each case a balance sheet, a statement of income, a statement of
stockholders' equity and a statement of cash flows, together, in the case
of such financial statements as at and for the years ended December 31,
1995 and 1994, with an audit report thereon by KPMG Peat Marwick, dated
January 26, 1996 except for the second and following paragraphs of Note 15,
as to which the date is June 4, 1996.
Company Intellectual Property: as defined in Section 2.1.9(a).
Company Taxes: as defined in Section 2.1.6(a).
Confidentiality Agreement: that letter agreement, dated March 4,
1996, between Morgan Stanley & Co. Incorporated and the Company.
Consent: any consent, approval, authorization, waiver, permit,
license, grant, exemption or order of, or registration, declaration or
filing with, any Person, including but not limited to any Governmental
Authority.
Contract: as defined in Section 2.1.8(a).
Contribution Agreement: as defined in the fourth recital of this
Agreement.
Credit Agreement: the Amended and Restated Credit Agreement, dated as
of December 20, 1994, among VKAC, the Company, the banks named therein
and Chemical Bank, as administrative agent, collateral agent and issuing
bank, and Chemical Bank and The Chase Manhattan Bank, N.A., as managing
agents, as amended, supplemented, waived or otherwise modified from time to
time.
Custodian/Transfer Agent Agreements: as defined in Section 2.1.8(a).
Deferred Stock Agreement: as defined in Section 1.5(e).
Deferred Stock Unit: as defined in Section 1.5(e).
Designated Managers: the employees of any member of the VKAC Group
who are parties to the Contribution Agreement as of the Effective Time.
Determination Date: as defined in Section 1.6(b)(ii).
DGCL: the General Corporation Law of the State of Delaware, as in
effect from time to time.
Disclosed Matter: any fact that was (i) disclosed by the Company, any
of its Subsidiaries or any Fund or any of their respective employees,
attorneys, accountants or financial and other advisers
("Representatives") to Parent, Holdco, the Buyer or any of their respective
Representatives and reviewed by Parent, the Buyer or any of their
respective Representatives or (ii) discovered by Parent, Holdco, the
Buyer or any of their respective Representatives and discussed with the
Company, any of its Subsidiaries or any Fund or any of their respective
Representatives, in each case on or prior to the date hereof.
Dissenting Shares: as defined in Section 1.7.
Effective Time: as defined in Section 1.2.
Employee Option: as defined in Section 1.5(d).
Employment and Withholding Taxes: any federal, state, local,
foreign or other employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care or other similar
tax, duty or other governmental charge or assessment or deficiencies
thereof and all Taxes required to be withheld by or on behalf of each of
the VKAC Companies in connection with amounts paid or owing to any
employee, independent contractor, creditor or other party (including, but
not limited to, all interest and penalties thereon and additions thereto
whether disputed or not).
Environmental Activity: any storage, holding, release, emission,
discharge, generation, disposal, handling or transportation of any
Hazardous Materials.
Environmental Laws: all Applicable Laws relating to the protection of
the environment, to human health and safety, or to any Environmental
Activity, including, without limitation, (i) the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, and the Occupational Safety and Health
Act, and (ii) all other requirements pertaining to reporting, licensing,
permitting, investigation or remediation of emissions, discharges or
releases of Hazardous Materials into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use,
sale, treatment, receipt, storage, disposal, transport or handling of
Hazardous Materials.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliate: as defined in Section 2.1.18(a).
ERISA Client: as defined in Section 2.1.20.
Exchange Act: the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
Exchange Agent: as defined in Section 1.8(a).
Exchange Agent Agreement: as defined in Section 1.8(a).
Filings: as defined in Section 2.1.12(c).
Financial Statements: the Company Financial Statements and the Fund
Financial Statements.
Fund Financial Statements: the audited financial statements of each
of the Funds (excluding the unit investment trusts) for the two most
recently completed fiscal years which have been filed with the
Commission, together with reports on such year-end statements by such
Fund's independent public accountants, including, in each case, a statement
of net assets or statement of assets and liabilities and investment
portfolio, a statement of operations and a statement of changes in net
assets.
Fund Returns: as defined in Section 2.1.6(g)(iv).
Funds: as defined in Section 2.1.15(c).
GAAP: as defined in Section 2.1.3.
Governmental Approval: any Consent of, with or to any Governmental
Authority.
Governmental Authority: any nation or government, any state or
other political subdivision thereof, including, without limitation, any
governmental agency, department, commission or instrumentality of the
United States, any State of the United States or any political
subdivision thereof, or any stock exchange or self-regulatory agency or
authority.
Govett Agreements: (i) the Master Agreement, dated September 1994,
among John Govett & Co. Limited and various of its affiliates and various
members of the VKAC Group and (ii) the Underwriting Agreement, dated
November 17, 1995, between The Govett Funds, Inc. and Van Kampen American
Capital Distributors, Inc. (successor by merger to American Capital
Marketing, Inc.).
Hazardous Materials: any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, (ii) requires
investigation, removal or remediation under any Environmental Law, or is
defined as a "hazardous waste" or "hazardous substance" thereunder, or
(iii) is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is regulated by any
Governmental Authority or Environmental Law.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
Holdco: as defined in the introductory paragraph of this Agreement.
Income Tax: any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, net worth, capital, profits or windfall profits tax or other similar
tax, estimated tax, duty or other governmental charge or assessment or
deficiencies thereof (including, but not limited to, all interest and
penalties thereon and additions thereto whether disputed or not).
Institutional Accounts: Clients, other than the Funds, OakRe Life
Insurance Company and the Cova Series Trust, as to which any VKAC Company
acts as investment adviser, subadviser or manager.
Intellectual Property: United States and foreign trademarks,
service marks, trade names, trade dress, copyrights, and similar rights,
including registrations and applications to register or renew the
registration of any of the foregoing; United States and foreign letters
patent and patent applications; and inventions, processes, designs,
formulae, trade secrets, know-how and all similar intellectual property
rights.
Investment Advisory Contracts: as defined in Section 2.1.8(a).
Investment Company: as defined in the Investment Company Act.
Investment Company Act: the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
IRS: the Internal Revenue Service.
Jones Option: the option to purchase up to 57,750 shares of Class A
Common Stock granted to The Jones Financial Companies, a Limited
Partnership, pursuant to the Jones Option Agreement.
Jones Option Agreement: The Amended and Restated Stock Option
Agreement, dated as of June 1, 1995, between the Company and The Jones
Financial Companies, a Limited Partnership.
Jones Option Cancellation Amount: as defined in Section 1.5(f).
Jones Option Shares: as defined in Section 1.5(f).
knowledge of the Company: the actual knowledge, after due inquiry, of
Don G. Powell, Dennis J. McDonnell, William R. Molinari, William R.
Rybak, Ronald A. Nyberg, Paul R. Wolkenberg, Alan T. Sachtleben, Peter W.
Hegel, William N. Brown, Douglas B. Gehrman, Robert Peck, Jack Zimmerman,
Scott West, Gary DeMoss, Jeffrey W. Maillet, Robert J. Froehlich, Gwen
Shaneyfelt and Walter E. Rein.
Lien: any mortgage, pledge, hypothecation, security interest,
encumbrance, title retention agreement, lien, charge or other similar
restriction.
Market Assets Under Management: the aggregate assets of such of the
open end Funds, the Institutional Accounts (including the Sub-Advisory
Funds) and the Prime Rate Trust as to which any VKAC Company (i) has
received shareholder Consent or, in the case of Institutional Accounts
(other than a Sub-Advisory Fund), has followed the procedures set forth
in Section 3.1.6(d) or other procedures reasonably acceptable to the Parent
and no VKAC Company has been notified, orally or in writing, as of the
close of business on the second Business Day immediately preceding the
Effective Time, of any such Institutional Account's intention to
terminate its relationship with the applicable VKAC Company and (ii) will
act as investment adviser, subadviser or manager immediately following
the Effective Time, determined as of the close of business on the second
Business Day immediately preceding the Effective Time based on the
average of such aggregate amount over the 10-day period immediately prior
to such date.
Material Adverse Effect: with respect to any Person or Persons, a
materially adverse effect on the business, financial condition, results
of operations or properties of such Person or Persons, taken as a whole
in the event that there is more than one such Person, other than any such
materially adverse effect arising because of the identity of the Buyer, the
Parent or any of their respective Affiliates, and provided that neither a
decline in the securities markets nor in assets under management of any
Fund or Sub-Advisory Fund shall be taken into account in determining if a
materially adverse effect shall have occurred. Any reference in this
Agreement to "Material Adverse Effect" without a reference to a specific
Person or Persons shall mean a Material Adverse Effect on the VKAC Group,
taken as a whole.
MCM: McCarthy, Crisanti & Maffei, Inc., a New York corporation.
Merger Consideration: as defined in Section 1.5(a).
NASD: National Association of Securities Dealers, Inc.
Option Holder: as defined in Section 2.1.2(c).
Option Plan: as defined in Section 1.5(d).
Options: as defined in Section 2.1.2(c).
Organizational Documents: as to any Person, if a corporation, its
articles or certificate of incorporation and by-laws; if a partnership, its
partnership agreement; and if some other entity, its constituent documents.
Per Share Merger Consideration: an amount of cash in dollars (rounded
to the nearest $0.0001) determined by dividing (i) an amount equal to the
sum of (A) the Acquisition Price, (B) the Aggregate Employee Option
Exercise Price, (C) the Aggregate Jones Option Exercise Price and (D) in
the event that the Closing Date occurs after January 1, 1997, the Aggregate
Travelers Option Exercise Price, by (ii) an amount equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior to
the Effective Time (including the number of shares of Common Stock
subject to the Contribution Agreement), (B) the aggregate number of
shares of Class A Common Stock subject to the Employee Options
immediately prior to the Effective Time, whether or not vested, (C) the
Jones Option Shares, (D) in the event that the Closing Date occurs after
January 1, 1997, the Travelers Option Shares, (E) the number of shares of
Preferred Stock outstanding immediately prior to the Effective Time and (F)
the number of Deferred Stock Units outstanding immediately prior to the
Effective Time.
Permitted Debt Prepayment Amount: as of the end of any calendar month,
the Prepayment Target for such month, provided that (x) if Pre-Tax Income
as of the end of such month is less than Pre-Tax Income Target as of the
end of such month, then the Permitted Debt Prepayment Amount shall be the
Prepayment Target minus the amount of such shortfall and (y) if Pre-Tax
Income as of the end of such month is greater than Pre-Tax Income Target as
of the end of such month, then the Permitted Debt Prepayment Amount shall
be the Prepayment Target plus 50% of such excess; provided further that
if the Determination Date is any day other than on the last Business Day of
any month, "Prepayment Target" and "Pre-Tax Income Target" for the month in
which the Determination Date occurs shall be equal to (A) the amount
therefor determined as of the end of the preceding month plus (B) a pro
rata amount (based on the number of days elapsed in the month in which
the Determination Date occurs) of the difference between (i) the Prepayment
Target or the Pre-Tax Income Target, as the case may be, for the end of the
month in which the Determination Date occurs and (ii) the Prepayment Target
or the Pre-Tax Income Target, as the case may be, as of the end of the
preceding month.
Permitted Encumbrances: as defined in Section 2.1.7.
Person: any natural person or any firm, partnership, limited
liability partnership, association, corporation, limited liability company,
trust, business trust, Governmental Authority or other entity.
Plans: as defined in Section 2.1.18(a).
Post-Closing Tax Period: any Tax period (or portion thereof) ending
after the close of business on the Closing Date.
Pre-Closing Tax Period: any Tax period (or portion thereof) ending on
or before the close of business on the Closing Date.
Prepayment Target: with respect to the period as of the end of any
month, the amount set forth on Exhibit E for such month below the heading
"Cumulative Debt Repayment Target."
Pre-Tax Income: pre-tax income of the VKAC Group on a consolidated
basis determined in accordance with GAAP for the period from July 1, 1996
to the Determination Date without giving effect to extraordinary items.
Pre-Tax Income Target: with respect to the period as of the end of
any month, the amount set forth on Exhibit E for such month below the
heading "Cumulative Pre-Tax Target Income."
Preferred Stock: the Junior Non-Cumulative Participating Preferred
Stock, par value $200.00 per share, of the Company.
Preferred Stock Trustee: Van Kampen American Capital Trust Company,
as trustee with respect to The Van Kampen American Capital, Inc. Profit
Sharing and Savings Plan pursuant to the Master Defined Contribution
Trust Agreement, dated as of December 20, 1994, between the Company and Van
Kampen American Capital Trust Company, as amended, supplemented, waived
or otherwise modified from time to time.
Prime Rate Trust: the Van Kampen American Capital Prime Rate Income
Trust.
Real Property: as defined in Section 2.1.7.
Registered Broker-Dealers: as defined in Section 2.1.15(b).
Registered Investment Advisers: as defined in Section 2.1.15(a).
Registration and Participation Agreement: the Registration and
Participation Agreement, dated as of February 17, 1993, as amended by
Amendment No. 1 to Registration and Participation Agreement, dated as of
April 15, 1994, Amendment No. 2 to Registration and Participation
Agreement, dated as of December 20, 1994, and Amendment No. 3 to
Registration and Participation Agreement, dated as of May 1, 1995, among
the Company and certain stockholders of the Company.
Relevant Date: February 17, 1993, with respect to the Van Kampen
Companies (without giving effect to any merger into such companies of the
American Capital Companies); or December 20, 1994, with respect to the
American Capital Companies.
Return: any return, report, declaration, form, claim for refund or
information statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, required to be
filed by or on behalf of any VKAC Company.
RIC: a "regulated investment company" within the meaning of section
851 of the Code.
Securities Act: the Securities Act of 1933, as amended.
Selling Agreements: as defined in Section 2.1.8(a).
Stock Option Waiver: as defined in Section 1.5(d).
Sub-Advisory Funds: as defined in Section 2.1.15(c).
Subsidiary: each corporation or other Person in which a Person owns
or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or
other equity interests.
Surviving Corporation: as defined in Section 1.1.
Tax: (i) any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales, use, excise, custom duties, transfer, registration,
stamp, premium, real property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment, social security,
disability, workers' compensation, payroll, withholding, estimated or other
similar tax, duty or other governmental charge of any kind whatsoever
(including, but not limited to, all interest and penalties thereon and
additions thereto whether disputed or not), (ii) any liability of any
VKAC Company for the payment of any amounts of the type described in clause
(i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, or of being a party to any agreement or
arrangement whereby liability of any VKAC Company for payments of such
amounts was determined or taken into account with reference to the
liability of any other Person, and (iii) any liability of any VKAC
Company for the payment of any amounts as a result of being party to any
tax sharing agreement with respect to the payment of any amounts of the
type described in clause (i) or (ii) as a result of any obligation to
indemnify any other Person.
Tax Asset: any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could reduce Taxes through carryovers or carrybacks to other
taxable years (including, without limitation, deductions and credits
related to alternative minimum Taxes).
Total Debt Prepayment Amount: the aggregate amount of loans under the
Credit Agreement prepaid from the date hereof to the Determination Date.
Total Employee Option Cancellation Amount: as defined in Section
1.5(d).
Transaction Expenses: (i) the fees and expenses payable to Goldman,
Sachs & Co. and Merrill Lynch & Co., Inc. in connection with the Merger;
(ii) the fee payable to Gordon McMahon, a director of the Company, in
connection with the Merger; (iii) the fees and expenses of Debevoise &
Plimpton, as special counsel to the Company, and of Friedman & Kaplan, as
special counsel to the Designated Managers, incurred in connection with the
transactions contemplated by the Merger Agreement; (iv) the expenses, costs
and fees incurred by the Company in connection with any and all Consents
required to be obtained by the VKAC Companies in connection with the
transactions contemplated hereby; and (v) all transfer Taxes (including any
real property transfer gains Taxes but excluding stock transfer Taxes) that
relate to or result from the Merger.
Transfer Agent: as defined in Section 2.1.15(f).
Travelers Option: the option to purchase up to 120,222 shares of
Class B Common Stock granted to The Travelers Inc. pursuant to the
Travelers Option Agreement.
Travelers Option Agreement: The Stock Option Agreement, dated as of
December 20, 1994, between the Company and The Travelers Inc.
Travelers Option Cancellation Amount: as defined in Section 1.5(f).
Travelers Option Shares: as defined in Section 1.5(f).
Underwriting Agreements: as defined in Section 2.1.8(a).
Van Kampen Companies: collectively, the Company, VKAC, Van Kampen
American Capital Investment Advisory Corp., Van Kampen American Capital
Management, Inc., Van Kampen American Capital Distributors, Inc., VSM Inc.,
VCJ Inc., Van Kampen Merritt Equity Holdings Corp. and Van Kampen Merritt
Equity Advisors Corp.
VKAC: as defined in the second recital to this Agreement.
VKAC Companies or VKAC Group: the Company, VKAC and VKAC's direct and
indirect Subsidiaries.
Working Capital: Working Capital Assets minus Working Capital
Liabilities.
Working Capital Assets: as of any date, all cash and cash equivalents
(whether or not restricted), short-term investments, receivables, trading
inventory and investments in VKAC funds related to deferred compensation,
in each case as set forth on the consolidated balance sheet of the VKAC
Group, in accordance with GAAP.
Working Capital Liabilities: as of any date, all broker-dealer
loans (including loans outstanding under the BONY Agreement), accounts
payable and accrued expenses (excluding accrued interest on loans under the
Credit Agreement and the Senior Notes), payables to Affiliates (MCM/ACC),
payables to trustees, all outstanding indebtedness incurred after the
date of this Agreement under Section 2.1.5(d)(iii), deferred compensation
and current income taxes payable in each case as set forth on the
consolidated balance sheet of the VKAC Group, in accordance with GAAP,
excluding (i) deferred Taxes and (ii) any accrued but unpaid Transaction
Expenses.
6.2. Survival of Representations and Warranties. The
representations and warranties, and covenants and other obligations to be
performed prior to or at the Effective Time, contained in this Agreement or
in any certificate delivered in connection herewith shall survive the
execution and delivery of this Agreement but shall not survive the
Effective Time, and any and all breaches of such representations and
warranties and covenants and other obligations shall be deemed to be waived
as of the Effective Time.
6.3. Expenses; Transfer Taxes. Except as set forth below in this
Section 6.3 and except with respect to Transaction Expenses, the Company,
on the one hand, and the Parent, Holdco and the Buyer, on the other hand,
shall bear their respective expenses, costs and fees (including
attorneys' fees) in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this Agreement and
compliance herewith, whether or not the transactions contemplated hereby
shall be consummated. All Transaction Expenses shall be borne by the
Company, and the Acquisition Price shall be adjusted in respect thereof
as provided in Section 1.6(b)(ii). The Parent, Holdco and the Buyer shall
bear all stock transfer Taxes that relate to or result from the Merger.
6.4. Severability. If any provision of this Agreement is
inoperative or unenforceable for any reason, such circumstances shall not
have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any
other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatsoever. The invalidity of any one or
more phrases, sentences, clauses, Sections or subsections of this Agreement
shall not affect the remaining portions of this Agreement.
6.5. Notices. All notices, requests, demands and other
communications made in connection with this Agreement shall be in writing
and shall be (a) mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or (b) transmitted by hand
delivery or reputable overnight delivery service, addressed as follows:
(i) if to the Company, to:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60187
Telecopy: (708) 684-6155
Telephone: (708) 684-6363
Attention: Ronald A. Nyberg, Esq.
With a copy to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Telecopy: (212) 407-5252
Telephone: (212) 407-5200
Attention: Mr. Alberto Cribiore
and to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
(ii) if to the Parent, Holdco or the Buyer, to:
Morgan Stanley Asset Management, Inc.
1321 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 296-7778
Telephone: (212) 296-7125
Attention: Mr. James M. Allwin
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Telephone: (212) 450-4000
Attention: John R. Ettinger, Esq.
or, in each case, at such other address as may be specified in writing to
the other parties hereto.
6.6. Miscellaneous.
6.6.1. Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.6.2. Entire Agreement. This Agreement, including the Schedules and
Exhibits, and the Confidentiality Agreement constitute the entire
agreement, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof.
6.6.3. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
6.6.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT THE LAWS
OF THE STATE OF DELAWARE SHALL MANDATORILY APPLY. THE PARENT, HOLDCO,
THE BUYER AND THE COMPANY HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA LOCATED IN THE STATE, CITY AND COUNTY OF NEW YORK
SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS
OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND
HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT
OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH
DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR
PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THE VENUE THEREOF MAY NOT BE APPROPRIATE, AND THE PARTIES HERETO
IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING
SHALL BE HEARD AND DETERMINED IN SUCH A NEW YORK STATE OR FEDERAL COURT.
THE PARENT, HOLDCO, THE BUYER AND THE COMPANY HEREBY CONSENT TO AND GRANT
ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE
SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR
OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 6.5, OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY
LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
6.6.5. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
6.6.6. Assignment. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
6.6.7. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns, except that
each Person that is a stockholder of the Company, or that holds any Options
or Deferred Stock Units, immediately prior to the Effective Time shall be a
third party beneficiary with respect to the covenants of the Parent, Holdco
and the Buyer set forth in Section 3.2.3.
6.6.8. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (C) IT MAKES THIS WAIVER VOLUNTARILY AND (D) IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.6.8.
6.6.9. Amendment; Waivers. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is
sought. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the
rights of the party granting such waiver in any other respect or at any
other time. Neither the waiver by any of the parties hereto of a breach of
or a default under any of the provisions of this Agreement, nor the failure
by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of
a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder.
6.6.10. Certain Disclosures. To the extent that any Disclosed
Matter can reasonably be deemed to constitute an exception to any of the
representations or warranties made by the Company in Section 2.1.6, such
Disclosed Matter shall be deemed to have been adequately disclosed in the
Schedules hereto for purposes of the representations and warranties
contained in Sections 2.1.6, 2.1.3 and 2.1.4.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
VK/AC HOLDING, INC.
By: /s/ Ronald A. Nyberg
------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
MORGAN STANLEY GROUP INC.
By: /s/ Eileen K. Murray
------------------------
Name: Eileen K. Murray
Title: Treasurer
MSAM HOLDINGS II, INC.
By: /s/ Harold Schaaff
----------------------
Name: Harold Schaaff
Title: Vice President and Secretary
MSAM ACQUISITION INC.
By: /s/ Harold Schaaff
----------------------
Name: Harold Schaaff
Title: Vice President and Secretary
Exhibit A
Adjustment to Acquisition Price
Based on Assets Under Management
--------------------------------
The amount of the increase or decrease in the Acquisition Price
pursuant to Section 1.6(a)(i) shall be equal to the amount determined
pursuant to the following formula:
1. If Closing Assets Under Management is greater than $37.707 billion but
is equal to or less than $39.503 billion, increase Acquisition Price
by the product of .0115 times the excess of Closing Assets Under
Management over $37.707 billion.
2. If Closing Assets Under Management is greater than $39.503 billion,
increase Acquisition Price by $20.649 million plus the product of .0231
times the excess of Closing Assets Under Management over $39.503
billion.
3. If Closing Assets Under Management is equal to or greater than $34.116
billion and equal to or less than $37.707 billion, no change in
Acquisition Price.
4. If Closing Assets Under Management is less than $34.116 billion but
greater than or equal to $32.321 billion, decrease Acquisition Price
by the product of .0115 times the excess of $34.116 billion over
Closing Assets Under Management.
5. If Closing Assets Under Management is less than $32.321 billion,
decrease Acquisition Price by $20.649 million plus the product of .0231
times the excess of $32.321 billion over Closing Assets Under Management.
Exhibit B
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of ________, 1996, made by
McCarthy, Crisanti & Maffei, Inc., a New York corporation (the "Company"), in
favor of VK/AC Holding, Inc., a Delaware corporation ("VKAC Holding") and
Morgan Stanley Group Inc., a Delaware corporation ("Morgan Stanley").
WHEREAS, VKAC Holding has entered into an Agreement and Plan of
Merger with Morgan Stanley, Holdco and the Buyer, dated as of June 21, 1996
(as such agreement may be amended, the "Merger Agreement");
WHEREAS, prior to the closing of the transactions contemplated by
the Merger Agreement, VKAC Holding intends to distribute to its common
stockholders (the "MCM Spin-off") all of the outstanding common stock of a new
Delaware corporation ("MCM Holding") to be formed by VKAC Holding for the
purpose of holding all of the outstanding common stock of the Company, which
is currently a wholly-owned subsidiary of VKAC Holding (collectively, MCM
Holding, the Company and the subsidiaries of the Company, the "MCM
Group");
WHEREAS, in connection with the MCM Spin-off, the Company and VKAC
Holding have entered into a Tax Sharing Agreement, dated as of _________,
1996, (the "Tax Sharing Agreement"); and
WHEREAS, pursuant to Section 4.2.3 of the Merger Agreement, it is a
condition to the obligations of Morgan Stanley and the Buyer that the Company
shall have entered into an Indemnification Agreement with respect to the
ownership of the stock of the Company and of MCM Holding prior to the MCM
Spin-off;
NOW THEREFORE, in consideration of the promises herein contained and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, VKAC Holding and Morgan Stanley hereby agree
as follows:
1. Indemnity. (a) The Company (hereinafter sometimes referred to
as the "Indemnitor") hereby agrees to indemnify and hold harmless VKAC
Holding, Morgan Stanley and their respective affiliates, successors and
assigns (collectively, the "Indemnitees"), from and against, and to pay or
reimburse each Indemnitee for, any and all claims, actions, causes of action,
suits, judgments, losses, taxes, liabilities, damages, obligations, costs and
expenses including, but not limited to, reasonable attorneys' fees (and the
costs and expenses, including reasonable attorneys' fees and expenses, of
enforcing the Company's obligations hereunder) incurred by any of the
Indemnitees in connection with or arising from (each, an "Indemnifiable Loss")
incurred or suffered by any of the Indemnitees, whether arising before, on or
after the MCM Spin-off, (i) except as otherwise provided in the Tax Sharing
Agreement, of or relating to the MCM Group or arising from or in connection
with the conduct of the business of the MCM Group, including but not limited
to taxes of the MCM Group to the extent that such taxes are attributable to
income, assets or operations of the MCM Group and VKAC Holding has not
previously received a payment with respect thereto, (ii) the ownership of the
stock of the Company and MCM Holding prior to the MCM Spin-off (other than any
taxes imposed upon VKAC Holding or any of its subsidiaries as a consequence of
the Spin-Off) and (iii) the Guarantee, dated December 7, 1993, by Van Kampen
American Capital, Inc. of the Company's obligations under the Lease Agreement,
dated December 7, 1993, between the Company, as lessee, and The Chase
Manhattan Bank, N.A., as lessor, with respect to certain premises occupied by
the Company on the 37th floor of the building located at One Chase Manhattan
Plaza, New York, New York.
(b) Any indemnity payable hereunder shall be made on an after-tax
basis (taking into account both the deductibility of the Indemnifiable Loss
and the inclusion in income of the indemnity payment and using for this
purpose the maximum statutory rate applicable to the recipient of such
indemnity payment for the relevant taxable year).
2. Claims. In the case of any claim asserted by a third party
against an Indemnitee, notice shall be given by such Indemnitee to the
Indemnitor promptly after such Indemnitee shall have received (i) notice of
the commencement by a third party of any suit or other proceeding against or
otherwise involving such Indemnitee or (ii) information from a third party
alleging the existence of a claim against such Indemnitee, in either case,
with respect to which indemnification may be sought under this Agreement (a
"Third-Party Claim"); provided that the failure of such Indemnitee to give
notice as provided by this Section 2 shall not relieve the Indemnitor of its
obligations under this Agreement, except to the extent that the Indemnitor is
materially damaged as a result of such failure to give notice. Within 30 days
after receipt of such notice, the Indemnitor may (i) by giving written notice
thereof to such Indemnitee, acknowledge liability for such indemnification
claim and at its option and at its sole cost and expense assume the defense of
any claim or any litigation resulting therefrom, provided that counsel for the
Indemnitor, who shall conduct the defense of such claim or litigation, shall
be reasonably satisfactory to such Indemnitee, and such Indemnitee may
participate in such defense at such Indemnitee's expense, or (ii) object to
the claim for indemnification set forth in the notice delivered by such
Indemnitee pursuant to this Section 2, provided that if the Indemnitor does
not within such 30-day period give such Indemnitee written notice objecting to
such indemnification claim and setting forth the grounds therefor, the
Indemnitor shall be deemed to have acknowledged its liability for such
indemnification claim. The Indemnitor, in the defense of any such claim or
litigation, shall not, except with the prior written consent of the Indemnitee
against whom the claim was made or the litigation was brought, consent to
entry of any judgment or enter into any settlement that provides for
injunctive or other non-monetary relief affecting such Indemnitee or that does
not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnitee of a release from all liability with respect to
such claim or litigation. In the event that an Indemnitee shall in good faith
determine that such Indemnitee has available to it one or more defenses or
counterclaims that conflict with one or more of those that may be available to
the Indemnitor in respect of such claim or any litigation relating thereto,
such Indemnitee shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
any such claim at the sole cost of the Indemnitor, provided that if such
Indemnitee does so take over and assume control, such Indemnitee shall not
consent to entry of any judgment or settle such claim or litigation without
the prior written consent of the Indemnitor. In the event that the Indemnitor
does not exercise its right to assume the defense of any matter as above
provided, the Indemnitee shall have the right (but not the obligation) to
defend against any such claim or demand.
3. Cooperation. The Indemnitees and their affiliates shall make
available to the Indemnitor and its attorneys and accountants, and the
Indemnitor and its affiliates shall make available to the Indemnitees and
their attorneys and accountants, at reasonable times and for reasonable
periods, during normal business hours, all books and records in its possession
or under its control reasonably requested by the Indemnitor relating to any
matter with respect to which indemnification is being provided pursuant to
this Agreement, and the Indemnitees and the Indemnitor, and their respective
affiliates, shall render to the Indemnitor or the Indemnitees, as the case may
be, such assistance as may be reasonably required to ensure prompt and
adequate prosecution or the defense of any suit, claim or proceeding,
including using its reasonable efforts to make available for interviews and to
give testimony those officers or employees of the Indemnitees or the
Indemnitor, or their respective affiliates, as the Indemnitor or the
Indemnitees, as the case may be, may reasonably request; provided, however,
that in each such case, any expense reasonably incurred by the Indemnitees in
connection therewith shall be promptly paid by the Indemnitor upon submission
to the Indemnitor of an itemized request for such payment.
4. Subrogation. The Indemnitor shall be subrogated to any claims
or rights of the Indemnitees against any other person with respect to any
Indemnifiable Loss assumed or borne by the Indemnitor. The Indemnitees shall
cooperate with the Indemnitor to the extent reasonable under the circumstances
consistent with the provisions of Section 3, at the expense of the Indemnitor,
in connection with the assertion by the Indemnitor of any such claim against
any such other persons.
5. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and addressed to:
(i) if to the Indemnitor:
McCarthy, Crisanti & Maffei, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Attention: President
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
(ii) if to the Indemnitees:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60187
Telecopy: (708) 684-6155
Telephone: (708) 684-6363
Attention: Ronald A. Nyberg, Esq.
with a copy to:
Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 296-7778
Telephone: (212) 296-7125
Attention: James M. Allwin
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Telephone: (212) 450-4000
Attention: John R. Ettinger, Esq.
(iii) or, as to any party, at such other address as shall be designated by
such party in a written notice to other parties.
All such notices and other communications shall be made by certified
mail, postage prepaid, and shall be effective the third business day after
being deposited in the mails; provided that such notices and other
communications may be faxed, telegraphed, telexed or delivered by hand
delivery, but in any such case shall be effective only when receipt is
confirmed in writing by the party to which sent.
6. Waivers; Remedies. No failure on the part of Indemnitees to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
7. Amendments, Etc. No amendment, waiver, modification, discharge
or termination of any provisions of this Agreement, and no consent to any
departure by the Indemnitor herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Indemnitee or Indemnitees
affected thereby, and then such amendment, waiver, modification, discharge,
termination or consent shall be effective only in the specific instance and
for the specific purpose for which given. Any such amendment, waiver,
modification, discharge, termination or consent shall be effective only if
approved by the directors of the applicable Indemnitees who are unaffiliated
with the Indemnitor.
8. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW).
9. Parties in Interest. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties
hereto, and any attempt to assign this Agreement without such consent shall be
void and of no effect. This Agreement shall be binding on and enforceable
against the Indemnitor and its successors and permitted assigns, and shall
inure to the benefit of and be enforceable by the Indemnitees and their
respective successors and permitted assigns.
10. Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
Page 1
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Indemnitor and the Indemnitees has
caused this Indemnification Agreement to be duly executed and delivered by its
officer duly authorized as of the date first written above.
MCCARTHY, CRISANTI &
MAFFEI, INC.
By ______________________
Name:
Title:
VK/AC HOLDING, INC.
By ______________________
Name:
Title:
MORGAN STANLEY GROUP INC.
By ______________________
Name:
Title:
Page 2
Exhibit C-1
________ __, 1996
Morgan Stanley Group Inc.
MSAM Holdings II, Inc.
MSAM Acquisition Inc.
c/o Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Secretary of
VK/AC Holding, Inc., a Delaware corporation (the "Company"). As such, I and
other members of the Office of the General Counsel of the Company have
counseled the Company in connection with the execution and delivery of the
Agreement and Plan of Merger, dated as of June 21, 1996 (the "Merger
Agreement"), among the Company, Morgan Stanley Group Inc., a Delaware
corporation (the "Parent"), MSAM Holdings II, Inc., a Delaware corporation
("Holdco"), and MSAM Acquisition Inc., a Delaware corporation (the "Buyer"),
and the transactions contemplated thereby. Capitalized terms used herein and
not otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, I have reviewed or caused to be reviewed under my
supervision the Merger Agreement.
I have examined and relied upon the representations and warranties
as to factual matters contained in or made pursuant to the Merger Agreement
and have examined and relied upon originals or copies, certified or otherwise
identified to my satisfaction, of such other agreements, instruments,
certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates, corporate or other records, authorizations, proceedings and
other instruments, and have made such additional examinations and conducted
such other investigations of fact and law, as I have deemed necessary or
appropriate for the purposes of rendering the opinions expressed below. I
have assumed the genuineness of all signatures of, and the authority of,
persons signing the Merger Agreement on behalf of parties thereto other than
the Company and the authenticity of all documents submitted to me as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies.
Based upon the foregoing, I am of the opinion that:
Corporate Status. Each Significant Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization, with the requisite corporate power and authority
to carry on its business as now conducted. Each Significant Subsidiary is
duly qualified to do business and is in good standing as a foreign corporation
in all jurisdictions in which the failure to be so qualified, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect. As used herein, "Significant Subsidiary" means the companies listed
on Annex I hereto.
Capitalization. The authorized capital stock of the Company
consists of (i) 3,250,000 shares of Class A Common Stock, of which __________
shares are issued and outstanding, (ii) 3,250,000 shares of Class B Common
Stock, of which 117,817 shares are issued and outstanding and (iii) 32,500
shares of Preferred Stock of which 32,500 shares are issued and
outstanding.
As of the date of the Merger Agreement, to the best of my knowledge,
there were _______ shares of Class A Common Stock reserved for issuance upon
exercise of the Employee Options outstanding on the date thereof, 57,750
shares of Class A Common Stock reserved for issuance upon exercise of the
Jones Option, 120,222 shares of Class B Common Stock reserved for issuance
upon exercise of the Travelers Option (the Employee Options, the Jones Option
and the Travelers Option, collectively, the "Options"), 3,350 shares of Class
A Common Stock reserved for issuance in connection with Deferred Stock Units
outstanding on the date thereof, 32,500 shares of Class A Common Stock
reserved for issuance upon exchange of the Preferred Stock for such shares and
3,132,183 shares of Class B Common Stock reserved for issuance upon exchange
of shares of Class A Common Stock for such shares. There were Options
relating to _________ shares of Common Stock outstanding as of the date of the
Merger Agreement, and since the date thereof the Company has not agreed to,
nor does it have commitments to, issue options relating to any additional
shares of Common Stock.
To the best of my knowledge, there are no preemptive or similar
rights on the part of any Person with respect to the issuance of any shares of
capital stock of the Company or any other member of the VKAC Group, except for
such rights as may be set forth in the Registration and Participation
Agreement. Except (i) for this Agreement, (ii) in respect of the Options and
the Deferred Stock Agreements, (iii) in respect of certain repurchase rights
with respect to shares of Class A Common Stock held by current or former
officers or employees of the Company or any of its Subsidiaries and (iv) as
set forth in Schedule 2.1.2(c) or 2.1.2(d) of the Merger Agreement, there are
no subscriptions, options, warrants or other similar rights, agreements or
commitments of any kind obligating the Company or any other member of the VKAC
Group to issue or sell, or to cause to be issued or sold, or to repurchase or
otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable for, or any options, warrants or other
similar rights relating to, any such shares.
No Conflict. Except as set forth in Schedule 2.1.1(b) to the
Merger Agreement, the execution and delivery by the Company of the Merger
Agreement, and the consummation of the transactions contemplated thereby, will
not result in any violation of, loss of rights or default under, constitute an
event creating rights of acceleration, termination, repayment or cancellation
under, entitle any party to any payment pursuant to or result in the creation
of any Lien (or any obligation to create any Lien) upon any of the properties
or assets of any member of the VKAC Group under (i) any provision of the
Organizational Documents of any member of the VKAC Group or (ii) to the best
of my knowledge, any Material Contract, except for, in the case of clause
(ii), any such violations, losses, defaults, accelerations, terminations,
repayments, cancellations or Liens that, individually and in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. As used
herein, "Material Contract" shall mean any Contract that would be a "material
contract" of any member of the VKAC Group within the meaning of Item
601(b)(10) of Securities and Exchange Commission Regulation S-K, without
giving effect (except as to management contracts) to clause (iii)(A) of such
Item 601(b)(10).
Litigation . To the best of my knowledge, except as set forth in
Schedule 2.1.11 of the Merger Agreement, there is no judicial or
administrative action, suit, investigation, inquiry or proceeding pending or
threatened that (a) individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or result in any liability on the
part of the VKAC Group in an amount in excess of $2,000,000 individually or
$5,000,000 in the aggregate or (b) questions the validity of the Merger
Agreement or of any action taken or to be taken by any member of the VKAC
Group in connection therewith.
Regulatory Matters. Each of the Registered Investment Advisers is
duly registered as an investment adviser under the Advisers Act. Each such
registration is in full force and effect. Each of the Registered Investment
Advisers is not registered and is not required to be registered as a
broker-dealer under federal law, and is not a member and is not required to be
a member of any self-regulatory organization. Each of the Registered
Broker-Dealers is a broker-dealer duly registered under the Exchange Act and a
member firm in good standing of the NASD, and, to the extent required, the
Municipal Securities Rulemaking Board. Each such registration is in full
force and effect. No VKAC Company other than the Registered Broker-Dealers is
required to be registered, licensed or qualified as a broker-dealer under the
Exchange Act, or subject to any material liability or disability by reason of
any failure to be so registered, licensed or qualified. Except with respect
to the Funds and the Sub-Advisory Funds, no VKAC Company acts as investment
adviser or subadviser to any Investment Company. The Transfer Agent is duly
registered as a transfer agent under the Exchange Act. Such registration is
in full force and effect. No VKAC Company other than the Transfer Agent is a
"transfer agent" within the meaning of the Exchange Act, or required to be
registered, licensed or qualified as a transfer agent under the Exchange Act,
or subject to any material liability or disability by reason of any failure to
be so registered, licensed or qualified. None of the VKAC Companies is an
Investment Company. Van Kampen American Capital Trust Company is duly
registered, licensed or qualified as a trust company in the State of Texas and
such registration, license or qualification is in full force and
effect.
Certain Approvals and Contracts. The approval of each investment
advisory agreement with a Client of the Registered Investment Adviser which is
an Investment Company required in connection with the performance by the
parties of the Merger Agreement has been effected in accordance with the
provisions of Section 15 of the Investment Company Act. Each Investment
Advisory Contract with respect to any Fund, and each Underwriting Agreement,
has been duly adopted and maintained in compliance in all material respects
with Section 15 of the Investment Company Act. With respect to each client of
the VKAC Group listed on Schedule 2.1.8(c)(A)(9) of the Merger Agreement the
assets of which have been included by the Company in determining Closing
Assets Under Management and Market Assets Under Management under the Merger
Agreement, a Consent has been obtained in accordance with the provisions of
Section 3.1.6(d) of the Merger Agreement which, to my knowledge, is consistent
with the requirements of the Advisers Act as interpreted by the staff of the
Commission in Jennison Associates Capital Corp. (avail. Dec. 2,
1985).
I am a member of the Bar of the State of Illinois and express no
opinion as to matters governed by any laws other than the laws of the State of
Illinois, the Federal laws of the United States of America, the General
Corporation Law of the State of Delaware and, with respect to the opinion
expressed in the last sentence of paragraph (5) above, the State of Texas. In
rendering the opinions set forth above, I have, with your permission, relied
on certain members of my staff with respect to certain matters covered in this
opinion.
I am delivering this opinion to you pursuant to Section 4.2.6 of the
Merger Agreement and no person other than you is entitled to rely on this
opinion.
Very truly yours,
Significant Subsidiaries
Annex I
Van Kampen American Capital, Inc.
Van Kampen American Capital Investment Advisory Corp.
Van Kampen American Capital Asset Management, Inc.
Van Kampen American Capital Management, Inc.
Van Kampen American Capital Distributors, Inc.
ACCESS Investor Services, Inc.
Van Kampen American Capital Trust Company
American Capital Contractual Services, Inc.
Van Kampen American Capital Advisors, Inc.
Exhibit C-2
_________ __, 1996
Morgan Stanley Group Inc.
MSAM Holdings II, Inc.
MSAM Acquisition Inc.
c/o Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
We have acted as special counsel to VK/AC Holding, Inc., a Delaware
corporation (the "Company"), in connection with the execution and delivery of
the Agreement and Plan of Merger, dated as of June 21, 1996 (the "Merger
Agreement"), among the Company, Morgan Stanley Group Inc., a Delaware
corporation (the "Parent"), MSAM Holdings II, Inc., a Delaware corporation
("Holdco"), and MSAM Acquisition Inc., a Delaware corporation (the "Buyer"),
and the transactions contemplated thereby. Capitalized terms used herein and
not otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, we have participated in the preparation of the Merger
Agreement.
We have examined and relied upon the representations and warranties
as to factual matters contained in or made pursuant to the Merger Agreement
and have examined and relied upon originals or copies, certified or otherwise
identified to our satisfaction, of such other agreements, instruments,
certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates, corporate or other records, authorizations, proceedings and
other instruments, and have made such additional examinations and conducted
such other investigations of fact and law, as we have deemed necessary or
appropriate for the purposes of rendering the opinions expressed below. We
have assumed the genuineness of all signatures of, and the authority of,
persons signing the Merger Agreement on behalf of parties thereto other than
the Company and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies.
Based upon the foregoing, we are of the opinion that:
Corporate Status; Merger Agreement; Etc. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite corporate power
and authority to execute and deliver the Merger Agreement, to perform its
respective obligations thereunder and to consummate the transactions
contemplated thereby. The execution and delivery of the Merger Agreement, and
the consummation of the transactions contemplated thereby, have been duly
authorized by all requisite corporate action of the Company. The Merger
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization or other laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
No Conflict. The execution and delivery by the Company of the
Merger Agreement, and the consummation of the transactions contemplated
thereby, will not result in any violation of any New York State or federal
law, rule or regulation or the Delaware General Corporation Law (it being
understood that the rules and regulations of a self regulatory body or
organization such as the National Association of Securities Dealers, Inc.
shall not be deemed to be federal laws, rules or regulations).
Governmental Approvals. Except for filings in connection with
the Merger which will become effective after the Closing and other
Governmental Approvals to be made or obtained after the Closing (none of which
are required to be made prior to the Closing), no Governmental Approval (other
than pursuant to the HSR Act, which Governmental Approval has been obtained)
required by the laws of the State of New York, the federal laws of the United
States or the Delaware General Corporation Law is required to be obtained or
made by the Company in connection with the execution and delivery of the
Merger Agreement or the consummation of the transactions contemplated thereby
other than those which have been obtained or made.
We are members of the Bar of the State of New York and express no
opinion as to matters governed by any laws other than the laws of the State of
New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware.
We are delivering this opinion to you pursuant to Section 4.2.6 of
the Merger Agreement and no person other than you is entitled to rely on this
opinion.
Very truly yours,
Debevoise & Plimpton
Page 1
Exhibit D
______________ _____, 1996
VK/AC Holding, Inc.
One Park View Plaza
Oakbrook Terrace, Illinois 60181
Each of the Designated Managers
Party to the Contribution Agreement
Referred to herein
Ladies and Gentlemen:
We have acted as special counsel to MSAM Acquisition Inc., a
Delaware corporation (the "Buyer"), MSAM Holdings II, Inc., a Delaware
corporation ("Holdco"), and Morgan Stanley Group Inc., a Delaware corporation
(the "Parent"), in connection with (i) the execution and delivery of the
Agreement and Plan of Merger, dated as of June 21, 1996, (the "Merger
Agreement"), among VK/AC Holding, Inc., a Delaware corporation (the Company"),
the Parent, Holdco and the Buyer, and (ii) the execution and delivery of the
Contribution Agreement, dated as of June 21, 1996 (the "Contribution
Agreement"), among the Parent, Holdco and the Designated Managers, and the
transactions contemplated thereby. Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, we have participated in the preparation of the Merger
Agreement and the Contribution Agreement.
We have examined and relied upon the representations and warranties
as to factual matters contained in or made pursuant to the Merger Agreement
and the Contribution Agreement and have examined and relied upon originals or
copies, certified or otherwise identified to our satisfaction, of such other
agreements, instruments, certificates of public officials, certificates of
officers or other representatives of the Buyer and others, and such other
documents, certificates, corporate or other records, authorizations,
proceedings and other instruments, and have made such additional examinations
and conducted such other investigations of fact and law, as we have deemed
necessary or appropriate for the purposes of rendering the opinions expressed
below. We have assumed the genuineness of all signatures of, and the
authority of, persons signing the Merger Agreement and the Contribution
Agreement on behalf of parties thereto other than the Buyer, Holdco and the
Parent and the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such
copies.
Based upon the foregoing, we are of the opinion that:
Corporate Status; Authority for AgreementsThis opinion to cover
such other agreements in addition to the Contribution Agreement as Parent or
Holdco may enter into pursuant to Section 6.1(c) of the Contribution
Agreement.; Etc. Each of the Parent, Holdco and the Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. All of the outstanding shares of capital stock of the
Buyer are owned by Holdco, and all the outstanding shares of capital stock of
Holdco are owned by Parent, except for the Preferred Stock referred to below
being issued to the Designated Managers pursuant to the Contribution
Agreement. Each of the Parent, Holdco and the Buyer, as the case may be, has
the requisite corporate power and authority to execute and deliver the Merger
Agreement, and the Contribution Agreement, to perform its respective
obligations thereunder and to consummate the transactions contemplated
thereby. The execution and delivery of the Merger Agreement and the
Contribution Agreement, and the consummation of the transactions contemplated
thereby, have been duly authorized by all requisite corporate action of the
Parent, Holdco and the Buyer, as the case may be. Each of the Merger
Agreement and the Contribution Agreement has been duly executed and delivered
by each of the Parent, Holdco and the Buyer, as the case may be, and
constitutes the legal, valid and binding obligation of each of them,
enforceable against each of them, as the case may be, in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization or other laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Validity of Shares. The shares of 4% Exchangeable Redeemable
Preferred Stock, par value $100 per share (the "Preferred Stock"), of Holdco
to be issued to the Designated Managers pursuant to the Contribution Agreement
have been duly authorized and, when issued and delivered in accordance with
the terms of such Contribution Agreement, will be validly issued, fully paid
and non-assessable. The Certificate of Designation of the Preferred Stock has
been duly authorized by Holdco, and has been duly filed with the Secretary of
State of the State of Delaware. The shares of common stock, par value $1.00
per share, of the Parent issuable in exchange for the Preferred Stock have
been duly authorized and, when issued and delivered in exchange for shares of
the Preferred Stock in accordance with the terms thereof, will be validly
issued, fully paid and nonassessable.To be included in the opinion if the
Preferred Stock is issued.
No Conflict.See Note 1. The execution and delivery by each of
the Parent, Holdco and the Buyer, as the case may be, of the Merger Agreement
and the Contribution Agreement, and the consummation of the transactions
contemplated thereby, will not result in any violation of (i) any provision of
the certificate of incorporation, by-laws of other organizational documents of
such party or (ii) any New York State or federal law, rule or regulation or
the Delaware General Corporation Law (it being understood that the rules and
regulations of a self regulatory body or organization such as the National
Association of Securities Dealers, Inc. shall not be deemed to be federal
laws, rules or regulations).
Governmental Approvals.See note 1. Except for filings in
connection with the Merger which will become effective after the Closing and
other Governmental Approvals to be made or obtained after the Closing (none of
which are required to be made prior to the Closing), no Governmental Approval
required by the laws of the State of New York, the federal laws of the United
States or the Delaware General Corporation Law is required to be obtained or
made by the Parent, Holdco or the Buyer, as the case may be, in connection
with the execution and delivery of the Merger Agreement and the Contribution
Agreement or the consummation of the transactions contemplated thereby other
than those which have been obtained or made.
We are members of the Bar of the State of New York and express no
opinion as to matters governed by any laws other than the laws of the State of
New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware (but including only those federal and
New York State and Delaware laws which, in our experience, are normally
applicable to transactions of this type).
We are delivering this opinion to you pursuant to Section 4.3.5 of
the Merger Agreement and Section 6.3 of the Contribution Agreement and no
person other than you is entitled to rely on this opinion.
Very truly yours,
Davis Polk & Wardwell
Schedule of Cumulative Pre-Tax
Income Target Amount and Cumulative
Debt Prepayment Target Amounts
-----------------------------------
Cumulative Pre-Tax Cumulative Debt
Month Income Target Prepayment Target*
- ----- ------------------ ------------------
($ in millions)
July $ 7.3 $15
August 14.9 20
September 22.3 35
October 30.4 45
November 38.3 55
December 47.0 65
January 56.0 75
* Based on the assumption that debt outstanding under the Credit
Agreement on the date hereof is $275,000,000.
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is entered into as of this 13th day of May,
1996, by and between HANSBERGER GLOBAL INVESTORS, INC., a Delaware corporation
with its principal place of business at 515 East Las Olas Boulevard, Fort
Lauderdale, Florida (*HGI*), and VK/AC HOLDING, INC., a Delaware corporation
with its principal place of business at One Parkview Plaza, Oakbrook Terrace,
Illinois (*VK/AC*).
WHEREAS, HGI has authorized 20,000,000 shares of its Common Stock, par
value $.01 per share (*Common Stock*), having the designations, preferences,
limitations and rights provided for in the Amended and Restated Certificate of
Incorporation of HGI (the *Charter*);
WHEREAS, on the date hereof, 7,800,000 shares of Common Stock are issued,
outstanding and held by Thomas L. Hansberger (*Hansberger*) and SLW Family
L.P., a Delaware limited partnership for which Hansberger serves as the sole
general partner (which shares of Common Stock held by Hansberger and SLW
Family L.P. are referred to as the *Hansberger Shares*), and the parties
contemplate that Hansberger, and any officers and employees of HGI as
Hansberger may designate, may subscribe for and purchase up to an additional
200,000 shares of Common Stock for a price per share equal to the cash price
per share paid by VK/AC hereunder;
WHEREAS, the parties contemplate that up to an additional 3,136,000
shares of Common Stock may be issued or reserved for issuance to HGI*s current
and future officers and employees other than Hansberger (collectively, the
*Employees*) pursuant to a restricted stock program, or offered and sold to
such Employees on such terms, as may be established by the Board of Directors
of HGI;
WHEREAS, the parties contemplate that each of Max C. Chapman, Jr. and
Sassoon Holdings Pte Ltd., a Singapore corporation, or an affiliate thereof
(collectively, the *Other Investors*), will subscribe for and purchase 942,000
shares of Common Stock pursuant to separate stock purchase agreements; and
WHEREAS, VK/AC desires to subscribe for and purchase 2,666,000 shares of
Common Stock, and HGI desires to sell such shares to VK/AC.
NOW, THEREFORE, in consideration of the mutual agreements, undertakings
and covenants set forth in this Stock Purchase Agreement, and for other good
and valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Purchase and Sale of Shares of Common Stock. Subject to the terms
and conditions of this Stock Purchase Agreement, at the Closing (as defined in
Section 2.1 below), HGI will issue and sell to VK/AC, and VK/AC will subscribe
for and purchase from HGI, an aggregate of 2,666,000 shares of Common Stock
(the *VK/AC Shares*) for an aggregate purchase price of $1,333,000.
2. Closing Date; Conditions to Closing; Deliveries.
2.1. Closing and Closing Date. Subject to the conditions in
Section 2.2 below, the closing will take place on May 13, 1996, or on such
other date as HGI and VK/AC may agree, at the offices of Morgan, Lewis &
Bockius LLP, 1800 M Street, N.W., Washington, DC or at such other place as HGI
and VK/AC may agree (the *Closing*). The date of the Closing is referred to
as the *Closing Date.*
2.2. Conditions to Closing.
(a) Conditions Precedent to VK/AC*s Obligations to Close.
The obligations of VK/AC to purchase the VK/AC Shares on the Closing will be
subject to the fulfillment on or before the Closing Date of the following
conditions:
(i) The representations and warranties made by
HGI contained in this Stock Purchase Agreement will be true and correct when
made, and will be true and correct on the Closing Date with the same force and
effect as if they had been made on the Closing Date.
(ii) VK/AC will have received from HGI all items
required to be delivered pursuant to Section 2.3(a) below.
(iii) HGI will have received $3,700,000 in
consideration for the Hansberger Shares.
(iv) HGI will have filed the Charter, as amended
and restated substantially in the form attached to this Stock Purchase
Agreement as Exhibit A, with the Secretary of State of the State of
Delaware.
(v) HGI will have amended and restated its
By-Laws substantially in the form of the by-laws (the *By-Laws*) attached to
this Stock Purchase Agreement as Exhibit B.
(vi) Alberto Cribiore will have been or
simultaneously with the Closing will be appointed as a director of HGI.
(b) Conditions Precedent to HGI*s Obligations to Close.
The obligations of HGI to sell to VK/AC the VK/AC Shares on the Closing will
be subject to the fulfillment on or before the Closing Date of the following
conditions:
(i) The representations and warranties made by
VK/AC contained in this Stock Purchase Agreement will be true and correct when
made, and will be true and correct on the Closing Date with the same force and
effect as if they had been made on the Closing Date.
(ii) HGI will have received from VK/AC all items
required to be delivered pursuant to Section 2.3(b) below.
2.3. Deliveries.
(a) Deliveries of HGI at the Closing. HGI will make the
following deliveries to VK/AC on the Closing Date:
(i) A stock certificate registered in the name
of VK/AC for the VK/AC Shares, which stock certificate will bear the legend
set forth in Section 6 below and the legend set forth in Section 7 of the
Shareholders* Agreement (as defined below).
(ii) A certificate, executed by the Chairman of
HGI, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in Sections 2.2(a)(i), (iv) and (v) above.
(iii) A copy of a long form good standing
certificate for HGI issued by the Secretary of State of the State of Delaware,
dated as of a date within thirty (30) days of the Closing Date.
(iv) Copies of the Charter and the By-Laws then
in effect, as certified by the Secretary of HGI.
(v) A certificate of incumbency signed by the
Secretary of HGI, certifying the name, title and signature of HGI*s officer
executing this Stock Purchase Agreement and the other agreements to be
executed by HGI in connection with the Closing.
(vi) An opinion letter from counsel to HGI,
substantially in the form attached as Exhibit C, addressed to VK/AC and dated
as of the Closing Date.
(vii) A shareholders* agreement, substantially in
the form attached as Exhibit D (the *Shareholders* Agreement*), executed by
HGI and Hansberger.
(viii) An employment agreement, between HGI and
Hansberger, substantially in the form attached as Exhibit E (the *Employment
Agreement*), executed by HGI and by Hansberger.
(ix) A subordinated credit agreement,
substantially in the form attached as Exhibit F (the *Credit Facility*), and
the subordinated credit note referred to therein (the *Subordinated Note*),
each executed by HGI.
(x) Evidence that HGI has obtained insurance
against such hazards, in such amounts and from such insurers as is reasonably
satisfactory to VK/AC.
(b) Deliveries of VK/AC at the Closing. VK/AC will make
the following deliveries to HGI on the Closing Date:
(i) A certified bank check or wire transfer in
the aggregate amount of the purchase price set forth in Section 1 of this
Stock Purchase Agreement.
(ii) The Shareholders* Agreement, executed by
VK/AC.
(iii) The Credit Facility, executed by VK/AC.
(iv) An opinion letter from special counsel to
VK/AC, substantially in the form attached as Exhibit G, addressed to HGI and
dated as of the Closing Date.
(v) A letter from the legal department of VK/AC
stating those changes or amendments to HGI*s Form ADV that are necessary or
appropriate to reflect thereon the purchase by VK/AC of the VK/AC Shares
pursuant to this Stock Purchase Agreement (other than purely factual matters
stated in this Stock Purchase Agreement) and other matters relating to VK/AC,
its affiliates, and their respective directors, officers, employees and agents
that are required to be disclosed on HGI*s Form ADV.
3. Representations and Warranties of HGI. Except to the extent set
forth on HGI*s Disclosure Schedule delivered by HGI to VK/AC with respect to
only those Sections of this Stock Purchase Agreement specified therein (the
*HGI Schedule*), which HGI Schedule contains, with respect to each matter
disclosed therein, a specific reference to the representation and warranty to
which such matter is an exception, HGI represents and warrants to VK/AC as
follows:
3.1. Organization and Standing. HGI is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. HGI*s wholly-owned subsidiary, Hansberger Global Investors
Limited (*HGIL*), is a private limited liability company duly organized and
validly existing under the laws of Ireland. HGI and HGIL each has all
requisite corporate power and authority to own and lease its properties and to
conduct its business as presently conducted. HGI and HGIL each is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which it owns or leases properties or
conducts business so as to require such qualification and in which the failure
to qualify would have a Material Adverse Effect on HGI (as defined below).
The minute books and stock records of HGI and HGIL, copies of which have been
provided to VK/AC, are complete and accurate. For purposes of this Stock
Purchase Agreement, *Material Adverse Effect on HGI* means any change or
effect that would be materially adverse to the financial condition, business,
or operations of HGI and HGIL taken as a whole.
3.2. Subsidiaries, Etc. Other than HGIL, HGI has no
subsidiaries and does not own any capital stock, security, partnership
interest or other equity interest of any kind in any corporation, partnership,
joint venture, association or other entity.
3.3. Capitalization. As of the date of this Stock Purchase
Agreement, HGI*s authorized capital stock consists only of 20,000,000 shares
of Common Stock, of which 7,800,000 shares are issued and outstanding. As of
the date of this Stock Purchase Agreement, HGIL*s authorized capital stock
consists only of 1,000,000 Ordinary Shares, of which 160,000 shares are issued
and outstanding. There are no treasury shares held by HGI or HGIL. All
outstanding shares of Common Stock are, and the VK/AC Shares will, when issued
and delivered, be, validly issued, fully paid and non-assessable. All
outstanding shares of HGIL*s Ordinary Shares are validly issued, fully paid
and non-assessable. A current list of the holders of HGI*s shares of Common
Stock and HGIL*s Ordinary Shares is attached to this Stock Purchase Agreement
as HGI Schedule 3.3. Moreover, except as set forth on HGI Schedule 3.3, no
person owns of record or beneficially any shares of Common Stock or shares of
HGIL and, except for the shares of Common Stock to be issued or sold to the
Other Investors or Employees, (i) no subscription, warrant, option,
convertible security or other right (contingent or other) to purchase or
otherwise acquire from HGI or HGIL any equity securities of HGI or HGIL has
been authorized or is outstanding; and (ii) there is no commitment by HGI or
HGIL to issue shares, subscriptions, warrants, options, convertible securities
or other similar rights or to distribute to holders of equity securities any
evidence of indebtedness or assets. Except as set forth in HGI Schedule 3.3,
HGI has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any other interest therein or to pay
any dividend or make any other distribution in respect
thereof.
3.4. Authorization. HGI has all necessary corporate power to
enter into this Stock Purchase Agreement and into the Shareholders* Agreement,
the Employment Agreement, the Credit Facility, and the Subordinated Note
(collectively, the *Related Agreements*), to issue and deliver the VK/AC
Shares pursuant to this Stock Purchase Agreement and to carry out the
transactions contemplated by this Stock Purchase Agreement and the Related
Agreements to be carried out by it. The execution, delivery and performance
by HGI of this Stock Purchase Agreement and the Related Agreements and the
consummation by HGI of the transactions contemplated by this Stock Purchase
Agreement and the Related Agreements to be consummated by HGI on or before the
Closing have been duly authorized by all requisite corporate action on the
part of HGI. This Stock Purchase Agreement and the Related Agreements,
assuming the due authorization, execution, delivery and performance of this
Stock Purchase Agreement and the Related Agreements by VK/AC, constitute valid
and binding obligations of HGI, enforceable against it in accordance with
their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors* rights and to general equity principles.
3.5. Breach. Neither HGI nor HGIL is in violation or breach of
or default under, nor has HGI or HGIL received written notice of any violation
or breach of or default under any of the terms, conditions or provisions of,
the Charter or the By-Laws or, in the case of HGIL, Certificate of
Incorporation and Memorandum and Articles of Association of HGIL, or any
indenture, mortgage or deed of trust or other contract, agreement, lease,
instrument, court order, judgment, arbitration award or decree to which it is
a party or by which it is bound, except for any such violation, breach or
default that would not reasonably be expected to have a Material Adverse
Effect on HGI.
3.6. Compliance with Laws.
(a) Each of HGI and HGIL is in compliance with all and
has not received written notice of any violation of or default under any
existing requirements of laws, Federal, state, local and foreign, and existing
requirements of all governmental bodies or agencies having jurisdiction over
it, the failure to comply with which would have a Material Adverse Effect on
HGI. Without limiting the foregoing, each of HGI and HGIL is in compliance
with all, and neither HGI nor HGIL has received written notice of any
violation of or default under any, laws, regulations, ordinances, rules,
orders, judgments, and decrees applicable to it or its operations, the failure
to comply with which would have a Material Adverse Effect on HGI.
(b) All governmental approvals necessary for the conduct
of the business of HGI and HGIL have been obtained and are in full force and
effect, and HGI and HGIL each hold all requisite approvals, licenses and
registrations, including securities-related approvals, licenses and
registrations, in each jurisdiction in which it conducts business so as to
require such qualification and in which the failure to qualify would have a
Material Adverse Effect on HGI.
(c) Each of HGI and HGIL has filed all material
registrations, reports, statements, notices, other filings, and amendments or
supplements to any such filings (the *Filings*) required to be filed with any
Federal, state, or foreign governmental or regulatory body, including, without
limitation, the U.S. Securities and Exchange Commission (the *SEC*) and the
applicable governmental body in each state or other jurisdiction in which HGI
or HGIL is registered or required to be registered as an investment adviser.
Each of the Filings, as of their respective filing dates, complied in all
material respects, where applicable, with the applicable laws, rules and
regulations in the jurisdictions where filed, including, without limitation,
the Investment Advisers Act of 1940, as amended (the *Advisers Act*), the
Investment Company Act of 1940, as amended (the *Investment Company Act*), and
the rules and regulations of the SEC under the Advisers Act and the Investment
Company Act. HGI has made available to VK/AC a true, complete, and correct
copy of HGI*s current Form ADV.
3.7. Litigation. There are no actions, suits, or proceedings
pending or, to the best of HGI*s knowledge, threatened against HGI or HGIL or
with respect to HGI*s or HGIL*s properties or assets, at law or in equity in
any court or before any Federal, state, local, foreign or other governmental
department, commission, board, bureau, agency, or instrumentality.
3.8. Governmental Consent. Except for Form ADV and related
filings that may be required under Federal and/or state or foreign securities
laws (which will be timely made), no permit, consent, approval or
authorization of, or filing with, any governmental regulatory authority or
agency is required to be obtained or made by HGI or HGIL in connection with
the execution, delivery and performance by HGI of this Stock Purchase
Agreement and the Related Agreements, or the consummation by HGI of the
transactions contemplated by this Stock Purchase Agreement and the Related
Agreements to be consummated by it on or before the Closing.
3.9. Conflict with Documents. Neither the execution, delivery
and performance by HGI of this Stock Purchase Agreement or the Related
Agreements, nor the consummation of the transactions contemplated hereby or
thereby to be consummated by HGI, either immediately or with the passage of
time or the giving of notice or both, will:
(a) Conflict with or cause a breach or default under any
of the terms, conditions or provisions of, result in a termination or
modification of, or cause any acceleration of any obligation of HGI or HGIL
under any contract, lease or other instrument to which HGI or HGIL is bound or
by which any of HGI*s or HGIL*s properties or assets may be affected, except
for any such conflict, breach, default, termination, modification or
acceleration that would not reasonably be expected to have a Material Adverse
Effect on HGI or materially impair the ability of HGI to perform its
obligations under this Stock Purchase Agreement and the Related
Agreements;
(b) Conflict with the provisions of the Charter, the
By-Laws or, in the case of HGIL, HGIL*s Certificate of Incorporation and
Memorandum and Articles of Association, or any statute, law, rule or
regulation or any order, judgment, decree, indenture, mortgage, lease or other
agreement or instrument to which HGI or HGIL is a party or any of their
properties or assets are subject, except for any such conflict that would not
reasonably be expected to have a Material Adverse Effect on HGI or materially
impair the ability of HGI to perform its obligations under this Stock Purchase
Agreement and the Related Agreements; or
(c) Result in the creation or imposition of any lien,
charge or encumbrance against HGI or HGIL or any of their properties or
assets, except for any such lien, charge or encumbrance that would not
reasonably be expected to have a Material Adverse Effect on HGI or materially
impair the ability of HGI to perform its obligations under this Stock Purchase
Agreement and the Related Agreements.
3.10. Taxes. Except as would not reasonably be expected to have
a Material Adverse Effect on HGI: (a) each of HGI and HGIL has filed all
applicable Federal, state, local and foreign tax returns required to be filed
to date in accordance with the provisions of law pertaining to such tax
returns, and has paid all taxes, interest, penalties and assessments required
to have been paid to date; and (b) neither HGI nor HGIL has been advised in
writing that any of its returns, Federal, state, local or foreign, have been
or are being audited as of the date of this Stock Purchase Agreement.
3.11. Insurance. HGI maintains insurance on all of its and
HGIL*s insurable properties. All such insurance policies are in full force
and effect and, to the best of HGI*s knowledge, neither HGI nor HGIL is in
default of any provision of any such policies. Neither HGI nor HGIL has
received written notice from any issuer of any such insurance policies of its
intention to cancel or refusal to renew any policy issued by it. The hazards
insured against by such policies, and the amounts of coverage, are, to the
best of HGI*s knowledge, substantially similar to the hazards insured against
and the amounts of coverage carried by corporations of established reputation
engaged in the same or similar business as is HGI or HGIL and similarly
situated.
3.12. Assets. Each of HGI and HGIL has good and marketable title
to all of its assets free and clear of all liens, charges, claims,
encumbrances and defects of any kind or character. All equipment, furniture
and fixtures, and other tangible personal property of HGI and HGIL are, except
for ordinary wear and tear, in good operating condition and repair and do not
require any repairs other than normal routine maintenance to maintain such
property in good operating condition and repair, except for any failure to be
in such good condition or repair that would not reasonably be expected to have
a Material Adverse Effect on HGI.
3.13. Financial Statements. HGI has made available to VK/AC
copies of HGI*s unaudited financial statements for the fiscal year ended
December 31, 1995 and HGIL*s unaudited financial statements for the fiscal
year ended December 31, 1995, and there are no regularly prepared balance
sheets of HGI or HGIL as of any date from December 31, 1995 to the date of
this Stock Purchase Agreement. Such unaudited financial statements present
fairly in all material respects the financial condition of HGI or HGIL, as the
case may be, at the dates indicated and the results of operations of HGI or
HGIL, as the case may be, for the periods indicated. To the best of HGI*s
knowledge, neither HGI nor HGIL has any liabilities that would have a Material
Adverse Effect on HGI, other than those (i) reflected or disclosed in such
unaudited financial statements; or (ii) disclosed in the HGI Schedule. HGI
agrees that it will cause HGI*s consolidated financial statements for the
fiscal year ended December 31, 1995 to be audited by its independent
accountants and will deliver to VK/AC copies of its audited consolidated
financial statements for such period, which financial statements will have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby (except as may be
noted in such financial statements), promptly upon the same being made
available to HGI by its independent accountants (but in no event later than 90
days from the date hereof).
3.14. Absence of Material Changes. Since December 31, 1995:
(a) There has not been any change in the financial
condition, business, prospects or affairs of HGI or HGIL, or any physical
damage or loss to any of their respective properties or assets or to the
premises occupied by either of them (whether or not such damage or loss is
covered by insurance), other than any such change, physical damage or loss
that has not had a Material Adverse Effect on HGI;
(b) Neither HGI nor HGIL has taken any action outside of
the ordinary and usual course of business, except as related to the
transactions contemplated by this Stock Purchase Agreement and the Related
Agreements;
(c) Neither HGI nor HGIL has borrowed any money or become
contingently liable for any obligation or liability of others;
(d) Each of HGI and HGIL has paid all of its debts and
obligations as they became due;
(e) Neither HGI nor HGIL has incurred any debt, liability
or obligation of any nature to any party except for obligations arising from
the purchase of goods or the rendition of services in the ordinary course of
business;
(f) HGI has not declared, set aside, made or paid any
dividend or other distribution in respect of its capital stock;
(g) Neither HGI nor HGIL has issued or sold any shares of
its capital stock of any class or any options, warrants or other similar
rights, agreements or commitments of any kind to purchase any such shares or
any securities convertible into or exchangeable for any such shares;
(h) Neither HGI nor HGIL has mortgaged, pledged or
otherwise subjected to any lien any of its material properties or assets,
tangible or intangible, except in the ordinary course of business:
(i) Neither HGI nor HGIL has knowingly waived any right
of substantial value;
(j) Each of HGI and HGIL has maintained its books,
accounts and records in the usual, customary and ordinary manner; and
(k) Each of HGI and HGIL has used its reasonable best
efforts to preserve its business organization intact, to keep available the
services of its employees and to preserve its relationships with customers,
suppliers and others with whom it deals.
3.15. No Brokers. All negotiations relating to this Stock
Purchase Agreement and the transactions contemplated by this Stock Purchase
Agreement have been conducted by HGI without the intervention of any person or
firm in such manner as to give rise to any valid claim against the parties to
this Stock Purchase Agreement for a brokerage commission, finder*s fees, or
similar compensation.
3.16 Absence of Disqualification. Neither HGI, HGIL, their
respective affiliates, nor any of their respective directors, officers,
employees or agents is a person described in Sections 9(a)(1)-(3) or
9(b)(1)-(6) of the Investment Company Act or Section 203(e)(1)-(7) of the
Advisers Act (a *Disqualified Person*) or is subject to any proceeding that
could result in HGI, HGIL, their respective affiliates, or any of their
respective directors, officers, employees or agents becoming a Disqualified
Person.
4. Representations and Warranties of VK/AC. VK/AC represents and
warrants to HGI as follows:
4.1. Authorization. VK/AC has all necessary corporate power to
enter into this Stock Purchase Agreement and the Related Agreements to which
it is a party and to carry out all of the transactions contemplated by this
Stock Purchase Agreement and the Related Agreements to be carried out by it.
The execution, delivery and performance by VK/AC of this Stock Purchase
Agreement and the Related Agreements to which VK/AC is a party and the
consummation of the transactions contemplated by this Stock Purchase Agreement
and the Related Agreements to be consummated by VK/AC on or before the Closing
have been duly authorized by all requisite corporate action on the part of
VK/AC. This Stock Purchase Agreement and the Related Agreements to which
VK/AC is a party have been duly executed and delivered by VK/AC and, assuming
the due authorization, execution, delivery and performance of this Stock
Purchase Agreement and the Related Agreements by HGI and Hansberger, as
applicable, constitute valid and legally binding obligations of VK/AC,
enforceable against it in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors* rights and to
general equity principles.
4.2. Approvals. Neither the consent of any third party nor the
consent, approval, order, or authorization of, or registration, declaration,
or filing with, any governmental authority is required to be obtained or made
by VK/AC in connection with the execution and delivery by VK/AC of this Stock
Purchase Agreement or the Related Agreements to which VK/AC is a party or the
consummation by VK/AC of the transactions contemplated by this Stock Purchase
Agreement and the Related Agreements to be consummated by it on or before the
Closing.
4.3. Conflict with Documents. Neither the execution, delivery
and performance by VK/AC of this Stock Purchase Agreement or the Related
Agreements to which VK/AC is a party, nor the consummation of the transactions
contemplated hereby or thereby to be consummated by VK/AC, either immediately
or with the passage of time or the giving of notice or both, will:
(a) Conflict with the provisions of VK/AC*s Third
Restated Certificate of Incorporation, By-Laws or any statute, law, rule or
regulation or any order, judgment, decree, indenture, mortgage, lease or other
agreement or instrument to which VK/AC is a party, or any of its properties or
assets are subject, except for any such conflict that would not reasonably be
expected to have a material adverse effect on VK/AC or materially impair the
ability of VK/AC to perform its obligations under this Stock Purchase
Agreement and the Related Agreements to which VK/AC is a party; or
(b) Result in the creation or imposition of any lien,
charge or encumbrance against VK/AC or any of VK/AC*s properties or assets,
except for any such lien, charge or encumbrance that would not reasonably be
expected to have a material adverse effect on VK/AC or materially impair the
ability of VK/AC to perform its obligations under this Stock Purchase
Agreement and the Related Agreements to which VK/AC is a party.
4.4. Investment Purpose. VK/AC is acquiring the VK/AC Shares
for investment for its own account and not with a view to, or for resale in
connection with, any distribution of the VK/AC Shares. VK/AC understands that
the VK/AC Shares have not been registered under the Securities Act of 1933, as
amended (the *Securities Act*) or under any state securities laws, and, as a
result having not been registered, are subject to substantial restrictions on
transfer. VK/AC acknowledges that the VK/AC Shares are subject to certain
transfer restrictions and options set forth in the Shareholders*
Agreement.
4.5. Access to Information. VK/AC has had full access to the
properties, personnel, books, and records of HGI and has been afforded ample
opportunity to discuss and raise questions with HGI and its shareholders,
officers, and directors, concerning the operations and business plans of
HGI.
4.6. No Brokers. All negotiations relating to this Stock
Purchase Agreement and the transactions contemplated by this Stock Purchase
Agreement have been conducted by VK/AC without the intervention of any person
or firm in such manner as to give rise to any valid claim against the parties
to this Stock Purchase Agreement for a brokerage commission, finder*s fees, or
similar compensation.
4.7. Absence of Disqualification. Neither VK/AC, its
affiliates, nor any of their respective directors, officers, employees or
agents is a Disqualified Person or, except as otherwise disclosed to HGI in
writing, is subject to any proceeding that could result in VK/AC, its
affiliates, or any of their respective directors, officers, employees or
agents becoming a Disqualified Person.
5. Use of Proceeds. HGI covenants and agrees that it will use the
proceeds from the sale of the VK/AC Shares to VK/AC solely for working capital
purposes in the ordinary course of business as currently contemplated or as
otherwise agreed to by HGI*s Board of Directors.
6. Restrictions on Transfer of Common Stock. Each certificate or
instrument representing the VK/AC Shares will bear the following legend, until
such VK/AC Shares have been registered under the Securities Act or sold
pursuant to Rule 144 or Regulation A thereunder, together with any legend
required under the Shareholders* Agreement, as applicable:
*THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THE SHARES MAY NOT BE OFFERED FOR
SALE, TRANSFERRED OR RESOLD IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH LAWS.*
7. Further Assurances. HGI and VK/AC agree to execute and deliver
all such other instruments and take all such other actions as either party may
reasonably request from time to time before or after the Closing Date and
without payment of further consideration, in order to effectuate the
transactions provided for in this Stock Purchase Agreement. The parties will
cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken as part of their
respective obligations under this Stock Purchase Agreement.
8. Confidential Material. For so long as VK/AC holds or has a
beneficial interest in any of the VK/AC Shares and for a period of two (2)
years thereafter, VK/AC will treat, and will use its reasonable best efforts
to ensure that its directors, officers, employees, agents and representatives
(including financial advisors, accountants, valuation firms and other agents
or representatives) treat, all Confidential Material (as defined below) of HGI
confidentially and not disclose it except in accordance with this Section;
provided, that (a) any Confidential Material may be disclosed to VK/AC*s
agents and representatives who (i) need to have access to such information,
and (ii) are directed by VK/AC to treat such Confidential Material
confidentially; (b) any Confidential Material may be disclosed (i) to VK/AC
Permitted Transferees (as defined in the Shareholders* Agreement), including
their directors, officers, employees, and affiliates and their respective
agents and representatives, for use in connection with an investment in HGI or
the VK/AC Sale, provided that such persons are directed by VK/AC to treat such
Confidential Material confidentially; and (ii) in communications (including,
without limitation, a proxy statement) to VK/AC*s stockholders in connection
with a sale or other disposition (including by merger) of (A) at least a
majority of the stock of VK/AC now held by The Clayton & Dubilier Private
Equity Fund IV Limited Partnership or (B) shares of VK/AC*s common stock in a
public offering, but, in the case of either (A) or (B) above, only to the
extent that VK/AC, in its reasonable judgment, determines that the disclosure
of such Confidential Material is legally required; and (c) Confidential
Material may be disclosed to the extent required by law or by the order or
decree of any court or other governmental authority; provided, however, that
the party legally compelled to disclose the Confidential Material will provide
HGI with prompt notice of that fact so that HGI may attempt to obtain a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section 8. In the event that VK/AC ceases for any reason
to hold any VK/AC Shares, VK/AC will promptly deliver to HGI or destroy all
Confidential Material (and all copies thereof) in the possession of VK/AC or
any of its directors, officers, and employees, and will use its reasonable
best efforts to ensure that its agents and representatives deliver to HGI or
destroy all Confidential Material (and all copies thereof) in the possession
of such agents and representatives. Notwithstanding the return or destruction
of the Confidential Material, VK/AC will continue to be bound by its
confidentiality obligations hereunder. For purposes of this Section, the term
*Confidential Material* is defined as all information furnished in writing or,
if subsequently confirmed in writing as confidential, orally by HGI or any of
its directors, officers, employees, agents or representatives to VK/AC or any
of its directors, officers, employees, agents or representatives in connection
with this Stock Purchase Agreement and the transactions contemplated hereby
and all notes, analyses, compilations, studies, or other documents to the
extent that such documents contain or reflect any such information; provided,
however, that *Confidential Material* will not include information that (x) is
currently available in the public domain or becomes generally available to the
public other than as a result of a disclosure by VK/AC or any of its
directors, officers, employees, agents or representatives; (y) is currently in
the possession of or known by VK/AC and which VK/AC has obtained without any
obligation to maintain such information as confidential; or (z) was made
available to VK/AC on a non-confidential basis from a source other than HGI or
its directors, officers, employees, agents or representatives, provided, that
such source did not make such information available in violation of a
confidentiality agreement with HGI or any of its directors, officers,
employees, agents or
representatives.
9. Miscellaneous.
9.1. Waivers and Amendments. No waiver by either party of any
term or condition, or the breach of any term or condition, in any one or more
instances, will be deemed or construed as a further or continuing waiver of
any such term or condition or breach or a waiver of any other term or
condition. No provision of this Stock Purchase Agreement may be waived
without a written instrument signed by the waiving party. This Agreement may
not be changed, amended, discharged or terminated other than by an agreement
in writing signed by both of the parties to this Stock Purchase
Agreement.
9.2. Governing Law. This Stock Purchase Agreement and all
questions relating to its validity, interpretation, performance and
enforcement will be governed by and construed in accordance with the internal
laws of the State of Delaware.
9.3. Successors and Assigns. Except as otherwise expressly
provided in this Stock Purchase Agreement, the terms and conditions of this
Stock Purchase Agreement will be binding on and inure to the benefit of the
parties to this Stock Purchase Agreement and to their respective successors
and assigns. Nothing in this Stock Purchase Agreement, express or implied, is
intended to confer on any party other than the parties to this Stock Purchase
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Stock Purchase
Agreement.
9.4. Entire Agreement. This Stock Purchase Agreement and the
other agreements and documents delivered pursuant to this Stock Purchase
Agreement constitute the full and entire understanding and agreement among the
parties with regard to the subject matter of this Stock Purchase Agreement and
of such other agreements and documents, and supersede all prior agreements,
understandings, inducements or conditions, express or implied, oral or
written, with respect to the subject matter of this Stock Purchase Agreement
and of such other agreements and documents.
9.5. Notices. Unless otherwise provided, all notices, requests,
demands and other communications required or permitted under this Stock
Purchase Agreement will be in writing and will be deemed to have been duly
made and received: (i) upon personal delivery or confirmed facsimile to the
party to be notified; (ii) three (3) business days after deposit with the
United States Post Office, by certified or registered mail or by first class
mail, postage prepaid, addressed as set forth below; or (iii) one (1) business
day after deposit with Federal Express or another reputable overnight courier
(for next business day delivery), shipping prepaid, addressed as set forth
below:
(a) If to HGI, then to:
Hansberger Global Investors, Inc.
515 East Las Olas Boulevard
Fort Lauderdale, FL 33301
Attn: Thomas L. Hansberger
Chairman and Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
Attn: Kathryn B. McGrath, Esquire
(b) If to VK/AC, then to:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attn: Ronald A. Nyberg, Esquire
with a copy to each of:
The Clayton & Dubilier Private Equity Fund IV
Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attn: Clayton & Dubilier Associates IV Limited
Partnership
Attn: Mr. Alberto Cribiore
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: Woodrow W. Campbell, Esquire
Either party may change the address to which communications are to be sent by
giving two (2) business days* advance notice of such change of address to the
other party in conformity with the provisions of this Section providing for
the giving of notice.
9.6. Payment of Expenses. HGI and VK/AC will bear their
respective expenses, costs and fees (including attorneys* and auditors* fees)
in connection with the transactions contemplated by this Stock Purchase
Agreement, regardless of whether the transactions contemplated by this Stock
Purchase Agreement are consummated.
9.7. Headings. The headings contained in this Stock Purchase
Agreement have been inserted for convenience of reference only, and neither
such headings nor the placement of any term of this Stock Purchase Agreement
under any particular heading will in any way restrict or modify any of the
terms or provisions of this Stock Purchase Agreement.
9.8. Severability. The provisions of this Stock Purchase
Agreement will be deemed severable, and if any part of any provision is held
to be illegal, void, voidable, invalid, nonbinding or unenforceable, in its
entirety or partially, or as to any party, for any reason, such provision may
be changed, consistent with the intent of the parties to this Stock Purchase
Agreement, to the extent reasonably necessary to make the provision, as so
changed, legal, valid, binding and enforceable. If any provision of this
Stock Purchase Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable, in its entirety or partially, or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties to this Stock Purchase Agreement to make it fully legal,
valid, binding and enforceable, then such provision will be stricken from this
Stock Purchase Agreement, and the remaining provisions of this Stock Purchase
Agreement will not in any way be affected or impaired, but will remain in full
force and effect.
9.9. Survival. All of the provisions of this Stock Purchase
Agreement other than the provisions set forth in Sections 1 and 2 will survive
the consummation of the transactions provided for in this Stock Purchase
Agreement.
9.10. Execution; Counterparts. This Stock Purchase Agreement may
be executed in any number of counterparts, each of which will be deemed to be
an original as against any party whose signature appears on such counterpart,
and all of which will together constitute one and the same instrument. This
Stock Purchase Agreement will become binding when one or more counterparts of
this Stock Purchase Agreement, individually or taken together, bear the
signatures of all of the parties to this Stock Purchase Agreement.
IN WITNESS WHEREOF, the parties have caused this Stock Purchase
Agreement to be duly executed and delivered as of the day and year first
written above.
HANSBERGER GLOBAL INVESTORS, INC.
By: /s/ Thomas L. Hansberger
Thomas L. Hansberger
Chairman and Chief Executive Officer
VK/AC HOLDING, INC.
By: /s/ Ronald A. Nyberg
Ronald A. Nyberg, Esquire
Executive Vice President and General Counsel
EXHIBIT 10.1
SUBORDINATED CREDIT AGREEMENT
This AGREEMENT is entered into as of this 13th day of May, 1996, by and
between HANSBERGER GLOBAL INVESTORS, INC., a Delaware corporation with its
principal place of business at 515 East Las Olas Boulevard, Fort Lauderdale,
Florida (*HGI*), and VK/AC HOLDING, INC., a Delaware corporation with its
principal place of business at One Parkview Plaza, Oakbrook Terrace, Illinois
(*VK/AC*).
WHEREAS, the parties desire to enter into an agreement providing for the
making of subordinated term loans by VK/AC to HGI;
WHEREAS, it is a condition to HGI*s and VK/AC*s obligations to consummate
the transactions contemplated by the Stock Purchase Agreement, dated as of May
13, 1996, by and between HGI and VK/AC (the *Stock Purchase Agreement*), that
the parties enter into this Agreement; and
WHEREAS, the parties desire that certain of HGI*s obligations arising
under this Agreement will be treated as subordinated loans in order to qualify
as capital in accordance with net capital requirements to which HGI is subject
from time to time (the *Net Capital Requirements*);
NOW, THEREFORE, in consideration of the mutual agreements, undertakings
and covenants set forth in this Agreement, and for other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. Term Loans.
1.1. The Loans. From and after the date of this Agreement (the
*Effective Date*), until the earliest of (a) December 31, 2001, (b) the date
on which HGI receives written notice from VK/AC of its termination of the
Commitment (as defined below) pursuant to Section 4 below, (c) the date on
which HGI receives written notice from VK/AC of an Event of Default under
Section 5 below, or (d) the closing of the VK/AC Sale (as defined below),
VK/AC will make loans (collectively, the *Loans,* and individually, a *Loan*)
to HGI on the terms set forth in this Agreement, at such times and from time
to time and in such amount as to each Loan as HGI will request pursuant to
Section 1.3 below, provided that the aggregate principal amount of all of the
Loans made pursuant to this Section 1.1 will not exceed three million three
hundred thirty-three thousand dollars ($3,333,000). HGI may not reborrow Loan
amounts that have been repaid or prepaid. For purposes of this Agreement, the
*VK/AC Sale* means (x) the sale or other disposition (including by merger) of
substantially all of the assets of VK/AC or at least a majority of the stock
of VK/AC now held by The Clayton & Dubilier Private Equity Fund IV Limited
Partnership or (y) an underwritten public offering of VK/AC*s common stock,
prior to or simultaneously with either of which VK/AC distributes or otherwise
transfers all of the common stock, par value $.01 per share, of HGI then held
by VK/AC to stockholders of VK/AC. For purposes of this Agreement, the
obligation of VK/AC to make Loans pursuant to this Agreement will be referred
to as the *Commitment.* Notwithstanding any provision of this Agreement to
the contrary, the Commitment will not terminate on the closing of the VK/AC
Sale, unless HGI or Thomas L. Hansberger, the Chairman of HGI (*Hansberger*),
has received written notice or has actual knowledge of the proposed date of
such closing at least five (5) business days before such
date.
1.2. The Note. The Loans will be evidenced by a subordinated credit
note (the *Note*) in substantially the form of Exhibit A attached to this
Agreement, executed and delivered by HGI on the Effective Date and dated as of
the Effective Date, in a principal amount equal to three million three hundred
thirty-three thousand dollars ($3,333,000) and payable, together with any
accrued and unpaid interest, on the Termination Date (as defined below) to the
order of VK/AC, subject to prepayments pursuant to Section 1.5 below. At the
time of its issuance, Schedule 1 of the Note will be endorsed to show the
principal amount of any Loan made on such date. Thereafter, whenever any Loan
is made or repaid, in full or in part, the holder of the Note will record the
transaction on Schedule 1 of the Note along with the principal balance
outstanding under the Note after giving effect to the making or repayment of
such Loan. Until the Termination Date, VK/AC may hold the Note even though
there may be, from time to time, no borrowings evidenced by the Note. For
purposes of this Agreement, the *Termination Date* means the earliest of (a)
December 31, 2001, (b) the first date on which VK/AC is entitled to receive a
demand prepayment pursuant to Section 1.5(b) below, or (c) the date on which
HGI receives written notice from VK/AC of an Event of Default under Section 5
below.
1.3. Notice of Loans. HGI will give VK/AC at least five (5)
business days*, or, if notice is being given in anticipation of the closing of
the VK/AC Sale, two (2) business days*, prior written notice specifying the
amount and date of each Loan requested to be made hereunder. If such notice
is being given in anticipation of the closing of the VK/AC Sale, such notice
will so state and may provide that the Loan thereby requested to be made will
only be made immediately prior to or simultaneously with the closing of the
VK/AC Sale. HGI will request Loan amounts from VK/AC in equal proportion to
the Loan amounts requested from the Other Investors (as defined in the
Shareholders* Agreement, dated as of May 13, 1996, by and among HGI, VK/AC and
Hansberger (the *Shareholders* Agreement*)); provided, however, that if HGI is
requesting a Loan in anticipation of the closing of the VK/AC Sale, the amount
of such Loan need not be in equal proportion to the Loan amounts requested, if
any, from the Other Investors. On the date specified, VK/AC will deposit
immediately available funds to the general deposit account of HGI specified in
the notice pursuant to this Section 1.3; provided, however, that VK/AC will
not be required to make such a deposit if an Event of Suspension under Section
4 below or an Event of Default under Section 5 below has occurred and is
continuing or, after the giving of notice or the passage of time or both,
would occur and VK/AC: (a) provides written notice to HGI, within two (2)
business days of having received HGI*s request for a Loan or Loans, stating
that such an Event of Suspension or Event of Default has occurred or, after
the giving of notice or the passage of time or both, would occur and
specifying in reasonable detail the nature of the event; or (b) has previously
provided written notice thereof to HGI pursuant to Section 1.5, 4 or 5
below.
1.4. Interest. The Note will bear interest on the principal amount
of any Loans outstanding from time to time, payable semi-annually on the
fifteenth day of each May and November at a rate per annum (on the basis of a
year of 365 days or 366 days, as the case may be) equal to ten percent (10%)
(the *Rate of Interest*). The first interest payment will be payable at least
six (6) months from the Effective Date. If the Rate of Interest is determined
to exceed the maximum rate of interest permitted by applicable law, the Rate
of Interest will be reduced to the maximum rate of interest permitted by
applicable law. HGI may, at its sole option, elect to capitalize any
semi-annual interest payment by adding all or a portion of the amount of the
accrued interest to the outstanding principal amount of the Loans, and the
holder of the Note will record such an addition on Schedule 1 of the
Note.
1.5. Prepayment.
(a) Optional Prepayment. Subject to the limitations of this
Section and Section 1.6 below, HGI will have the right at any time after the
first anniversary of the Effective Date and from time to time to prepay all or
any part of the Loans, without penalty but with all interest accrued on the
amount of such prepayment to the date of such prepayment, by giving VK/AC not
less than five (5) business days* prior written notice specifying the date on
which such prepayment will be made and the amount of principal and interest to
be prepaid. Such prepayment will become due on the date specified in such
notice; provided, however, that to the extent required under the Net Capital
Requirements, no such prepayment may be made on the Note pursuant to this
Section 1.5(a), and any obligation of HGI to make the prepayment will be
suspended and will not mature, for so long as, after giving effect to such
prepayment (and to all payments of payment obligations under any other
subordinated agreement then outstanding the maturity or accelerated maturities
of which are scheduled to fall due within six (6) months after the date such
prepayment is to occur pursuant to this Section 1.5(a) or on or prior to the
date on which the Payment Obligation (as defined in Section 1.6 below) in
respect of such prepayment is scheduled to mature disregarding this Section
1.5(a), whichever date is earlier), without reference to any projected profit
or loss of HGI, either (A) aggregate indebtedness of HGI (excluding, in
accordance with the Net Capital Requirements, amounts in respect of
subordinated loans qualifying as capital) exceeds one thousand percent
(1,000%) of its net capital, or, if HGI is operating pursuant to paragraph
(a)(1)(ii) of 17 C.F.R. * 240.15c3-1, its net capital is less than five
percent (5%) of aggregate debit items computed in accordance with 17 C.F.R. *
240.15c3-3a, or (B) the net capital of HGI is less than one hundred and twenty
percent (120%) of the minimum dollar amount required to be maintained by HGI
under the Net Capital Requirements. Notwithstanding the above, no prepayment
pursuant to this Section 1.5(a) may be made, and any obligation of HGI to make
the prepayment will be suspended and will not mature, without the prior
written approval of any state securities regulatory commission or authority
that has net capital requirements to which HGI is subject (an *Examining
Authority*) requiring such approval.
(b) Demand Prepayment. Subject to the limitations of this
Section 1.5(b) and Sections 1.6 (other than 1.6(a)), 1.7 and 10.3 below, HGI
will have the obligation to prepay the outstanding Loans in their entirety,
without penalty but with all accrued and unpaid interest thereon, within ten
(10) business days of receipt of written notice from VK/AC demanding such
prepayment after an Event of Suspension described in Section 4.1, 4.3 or 4.5
below or after the earliest of the following dates: (i) the date of death or
Incapacity (as defined in the Employment Agreement, dated as of May 13, 1996,
by and between HGI and Hansberger (the *Employment Agreement*)) of Hansberger;
(ii) the date on which Hansberger, members of his immediate family, including
his spouse, children (including adopted and step children) and grandchildren
(*Family*), and trustees of one or more trusts established for the benefit of
Hansberger or his Family do not hold or have voting rights with respect to in
the aggregate at least ten percent (10%) of the shares of HGI*s outstanding
Class A Common Stock, par value $.01 per share; or (iii) the date on which
Hansberger ceases to be Chairman and Chief Executive Officer (*CEO*) of HGI or
is otherwise materially in breach of the Employment Agreement as would
constitute grounds for termination for *Cause* as defined in the Employment
Agreement; provided, however, that HGI's obligation to prepay the outstanding
Loans and any accrued and unpaid interest thereon will be suspended, and will
not mature, regardless of the date of VK/AC's demand, until six (6) months
after the last business day of the calendar month in which both HGI and any
Examining Authority have received written notice of VK/AC's demand for
prepayment; and provided further, that no such demand may be made within six
(6) months after the Effective Date. Notwithstanding the foregoing, any
prepayment otherwise required to be made pursuant to this Section 1.5(b) may
be deferred by HGI, at its option and on written notice to VK/AC, for up to
six (6) months from the date on which such prepayment obligation arises.
During any such suspension or deferral period, the outstanding principal
amount of the Loans will continue to, and any accrued and unpaid interest
will, bear interest at the Rate of Interest.
If, on the accelerated maturity date pursuant to this Section 1.5(b), the
Payment Obligation is suspended pursuant to Section 1.6(a) below and
liquidation of HGI has not commenced on or prior to such accelerated maturity
date, then notwithstanding Section 1.6(a) below the Payment Obligation will
mature on the day immediately following such accelerated maturity date,
subject to the suspension or deferral periods set forth in the immediately
preceding paragraph, and, in any such event, the payment obligations of HGI
with respect to all other subordination agreements then outstanding will also
mature at the same time, but the rights of the respective lenders to receive
payment under the Payment Obligation or any other payment obligation of HGI,
together with accrued interest, will remain subordinate as required by Section
1.6(c) below.
Within five (5) business days of the occurrence of any event that would permit
VK/AC to demand a prepayment pursuant to this Section 1.5(b), HGI will provide
written notice to VK/AC specifying in reasonable detail the nature of such
event. VK/AC must then provide written notice to HGI and any Examining
Authority of VK/AC*s intent to demand prepayment pursuant to this Section
1.5(b).
1.6. Net Capital Requirement Restrictions on Loans.
(a) Suspension of Payments. To the extent required under the
Net Capital Requirements and notwithstanding any provision of this Agreement
to the contrary other than Sections 1.5(b) and 5, the obligation of HGI to
repay any outstanding Loan and accrued and unpaid interest thereon under this
Agreement (the *Payment Obligation*) will be suspended and will not mature for
so long as, after giving effect to such payment (together with the payment of
any payment obligation under any other subordination agreement scheduled to
mature at the same time as or before the Payment Obligation), either (i) the
aggregate indebtedness of HGI (excluding, in accordance with the Net Capital
Requirements, amounts in respect of subordinated loans qualifying as capital)
exceeds twelve hundred percent (1,200%) of its net capital, or, if HGI is
operating pursuant to paragraph (a)(1)(ii) of 17 C.F.R. * 240.15c3-1, its net
capital is less than five percent (5%) of aggregate debit items computed in
accordance with 17 C.F.R. * 240.15c3-3a, or (ii) the net capital of HGI is
less than one hundred and twenty percent (120%) of the minimum dollar amount
required to be maintained by HGI under the Net Capital
Requirements.
(b) Limitations on Payments and Prepayments. Notwithstanding
any provision of this Agreement to the contrary, no payment or prepayment
will be made under this Agreement of principal of the Loans or of the accrued
and unpaid interest thereon if the effect of such payment or prepayment would
be inconsistent with the Net Capital Requirements.
(c) Subordination. The obligations of HGI under this Agreement
with respect to the payment of principal of and interest on the Loans will be
and are subordinate in right of payment and subject to the prior payment or
provision for payment in full of all claims of all other present and future
creditors of HGI arising out of any matter occurring prior to the date on
which the related Payment Obligation matures consistent with the provisions of
the Net Capital Requirements, except for claims that are the subject of
subordination agreements that rank on the same priority as or are junior to
the claim of VK/AC under this Agreement. On the occurrence of any Event of
Default pursuant to Section 5 below, VK/AC will not be entitled to participate
or share, ratably or otherwise, in the distribution of the assets of HGI until
all claims of all other present and future creditors of HGI, to the extent
such claims are senior to the claims of VK/AC under this Agreement and the
Note, have been fully satisfied.
(d) Use of Proceeds. The cash proceeds of Loans will, to the
extent required under the Net Capital Requirements, be used and dealt with by
HGI as part of its capital and will be subject to the risks of the business.
HGI will have the right to deposit any cash proceeds of Loans in an account or
accounts in its own name in any bank or trust company.
1.7. Limitations on Termination. Notwithstanding any provision of
this Agreement to the contrary, this Agreement will not be subject to
cancellation by either VK/AC or HGI, and this Agreement may not be terminated,
rescinded, or modified by mutual consent or otherwise, if the effect thereof
would be inconsistent with the Net Capital Requirements. This Agreement may
not be terminated prior to the expiration of one (1) year from the Effective
Date.
1.8. Limitations on Transferability and Encumbrance. This Agreement
may not be transferred, sold, assigned, pledged, or otherwise encumbered or
otherwise disposed of, and no lien, charge or other encumbrance may be created
or permitted to be created on this Agreement, without the prior written
consent of any Examining Authority to the extent such consent is required
under the Net Capital Requirements.
1.9. Holiday Payments. If any payment to be made by HGI will
become due on a Saturday, Sunday or other day on which commercial banks in
Fort Lauderdale, Florida are closed, such payment will be made on the next
business day, and any such extension of time will be included in computing any
interest in respect of such payment.
2. Affirmative Covenants. HGI covenants that so long as this Agreement
remains in effect or any of the principal of or interest on the Loans is
unpaid, HGI will:
2.1. Financial Statements, Etc.
(a) Furnish to VK/AC within one hundred and twenty (120)
calendar days after the end of each fiscal year, a consolidated balance sheet
of HGI as at the close of such fiscal year and consolidated statements of
income, cash flows and changes in shareholders* equity of HGI for such year,
such annual financial statements to be prepared in accordance with generally
accepted accounting principles consistently applied (except as may be noted in
such financial statements), together with a certificate of HGI, dated as of
the end of such year and signed by an officer of HGI, stating that there has
been no occurrence of any condition, event or act which constitutes, or would
constitute with the passage of time or giving of notice or both, an Event of
Suspension under Section 4 below or an Event of Default under Section 5 below,
or if HGI will be so in default or if any such condition, event or act will
have occurred and is continuing, specifying nature and status of each such
default, condition, event and act; and
(b) Furnish to VK/AC within sixty (60) calendar days after the
end of each of the first three fiscal quarters of each fiscal year, a
consolidated balance sheet of HGI as at the close of such fiscal quarter and
consolidated statements of income, cash flows and changes in shareholders*
equity of HGI for such quarter, such interim financial statements to be
prepared in a manner consistent with the annual financial statements and
consistent with generally accepted accounting principles (subject to normal
year-end audit adjustments and the omission of footnotes required by generally
accepted accounting principles), together with a certificate of HGI, dated as
of the end of such quarter and signed by an officer of HGI, stating that there
has been no occurrence of any condition, event or act which constitutes, or
would constitute with the passage of time or giving of notice or both, an
Event of Suspension under Section 4 below or an Event of Default under Section
5 below, or if HGI will be so in default or if any such condition, event or
act will have occurred and is continuing, specifying the nature and status of
each such default, condition, event and act.
2.2 Existence. Preserve and maintain, and cause each of its
subsidiaries to preserve and maintain, its existence and all of its material
rights, privileges and franchises, and preserve, and cause each of its
subsidiaries to preserve, all of their respective properties, useful or
necessary in their respective businesses, in good working order and condition;
provided, that nothing in this Section 2.2 will prevent the abandonment or
termination of any line of business or the abandonment or termination of the
existence of any subsidiary of HGI if: (a) in the reasonable opinion of HGI,
such abandonment or termination is in the interest of HGI or any of its
subsidiaries, as the case may be, will not have a material adverse effect on
the ability of HGI to perform its obligations under this Agreement and under
the Note, and will not have a Material Adverse Effect on HGI (as defined
below); and (b) such abandonment or termination would not, with or without the
passage of time, the giving of notice or both, constitute a material breach or
violation of or default under, or cause a right of acceleration, suspension or
termination to arise under, (i) any agreement between HGI and VK/AC, or (ii)
any other agreement, material to HGI and its subsidiaries taken as a whole, to
which HGI or any of its subsidiaries is a party. For purposes of this
Agreement, *Material Adverse Effect on HGI* means any change or effect that
would be materially adverse to the financial condition, business, or
operations of HGI and its subsidiaries taken as a whole.
2.3. Notice of Litigation. Promptly give written notice to VK/AC
of any action, suit or proceeding against HGI or any of its subsidiaries or
with respect to any of their respective properties or assets at law or in
equity in any court or before any Federal, state, municipal, foreign or other
governmental department, commission, board, bureau, agency, or instrumentality
which: (a) if adversely determined against HGI or such subsidiary on the
basis of the allegations and information set forth in the complaint or other
notice of such action, suit or proceeding, or in the amendments of such
action, suit or proceeding, would have a Material Adverse Effect on HGI; or
(b) states a claim in excess of $50,000, except as covered by
insurance.
2.4. Insurance. Maintain insurance with respect to HGI*s insurable
properties and business, and cause each of its subsidiaries to maintain
insurance with respect to its insurable properties and business to the extent
that any such subsidiary is not covered under HGI*s insurance, against such
hazards and in such amounts as is, to the best of HGI*s knowledge,
substantially similar to the hazards insured against and the amounts of
coverage carried by corporations of established reputation engaged in the same
or a similar business as is HGI and its subsidiaries and similarly
situated.
2.5. Payment of Taxes. Pay and discharge, and cause each of its
subsidiaries to pay and discharge, all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits, or on any
property belonging to it, prior to the date on which penalties attach to such
assessments, charges or levies; provided, that neither HGI nor any of its
subsidiaries will be required to pay any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by appropriate
proceedings.
2.6. Access to Books. On written request by VK/AC, give, and cause
its subsidiaries to give, any representative of VK/AC reasonable access during
normal business hours to, and permit, and cause its subsidiaries to permit,
such representative to examine, copy and make extracts from, books, records
and documents in the possession of HGI or any of its subsidiaries relating to
HGI*s or its subsidiaries* business, operations, and financial condition;
provided, that such information will only be used by VK/AC and its
representatives in connection with evaluations of performance under and
administration of this Agreement.
2.7. Notice of Default. Promptly notify VK/AC in writing of any
condition or event which constitutes, or would constitute with the passage of
time or giving of notice or both, an Event of Suspension under Section 4
below or an Event of Default under Section 5 below.
2.8. Compliance with Laws, Etc. Comply, and cause each of its
subsidiaries to comply, with all applicable laws, rules, regulations, orders
or other requirements of any national, Federal, state, local or foreign
governmental authority or agency, regulatory commission or other body having
jurisdiction over HGI or such subsidiary, the noncompliance with which would
have a Material Adverse Effect on HGI.
3. Negative Covenants. HGI covenants that so long as this Agreement
remains in effect and any of the principal of or interest on the Loans is
unpaid, without VK/AC*s consent, HGI will not:
3.1. Indebtedness. Incur, assume, guarantee or suffer to exist or
otherwise become liable, and will cause each of its subsidiaries not to incur,
assume, guarantee or suffer to exist or otherwise become liable, in respect of
any indebtedness for money borrowed or liability evidenced by notes, bonds,
debentures, or similar obligations, other than: (a) the Note; (b) the notes,
substantially in the form of the Note, issued by HGI to the Other Investors,
pursuant to subordinated credit agreements substantially in the form of this
Agreement; (c) trade payables; (d) debt incurred in the ordinary course of
business up to an aggregate of $750,000 at any one time outstanding; and (e)
intercompany indebtedness between or among HGI and its wholly-owned
subsidiaries.
3.2. Dividends. (a) Declare or pay cash dividends; or (b) permit
any less-than-wholly- owned subsidiary of HGI that is subject to HGI*s control
(a *Partial Subsidiary*) to declare or pay a non-pro rata dividend if such
Partial Subsidiary, together with any other Partial Subsidiaries of HGI that
have declared or paid a non-pro rata dividend during the preceding
twelve-month period, collectively (i) own at least thirty-three percent (33%)
of the assets and properties (calculated as of the fiscal quarter-end
immediately preceding the record date of the latest such dividend) of HGI and
its subsidiaries taken as a whole, or (ii) generate at least thirty-three
percent (33%) of the net income (based on the four fiscal quarters immediately
preceding the record date of the latest such dividend) of HGI and its
subsidiaries taken as a whole.
3.3. Sale of Assets, Consolidation, Merger, Etc. (a) Sell, lease,
transfer or otherwise dispose of all or substantially all of its properties
and assets, other than to one of its wholly-owned subsidiaries that shall
assume HGI*s obligations under this Agreement; (b) consolidate with or merge
into any corporation or other entity in a transaction in which HGI is not the
surviving corporation unless the survivor assumes HGI*s obligations under this
Agreement; (c) liquidate or dissolve; or (d) permit any subsidiary that is
subject to HGI*s control (a *Material Subsidiary*) to sell, lease, transfer or
otherwise dispose of all or substantially all of such Material Subsidiary*s
properties and assets (other than to HGI or any of HGI*s other wholly-owned
subsidiaries) or permit any such Material Subsidiary to consolidate with or
merge into any corporation (other than HGI or any of HGI*s wholly-owned
subsidiaries so long as HGI or such wholly-owned subsidiary shall be the
survivor), in either case if such Material Subsidiary, together with any other
subsidiaries of HGI that have engaged in any such sale, lease, transfer, other
disposition, consolidation or merger during the preceding twelve-month period
(each, an *Included Subsidiary*), collectively (i) own at least thirty- three
percent (33%) of the assets and properties of HGI and its subsidiaries taken
as a whole (with the assets and properties of each Included Subsidiary
measured as of the end of the fiscal quarter immediately preceding its sale,
lease, transfer, other disposition, consolidation or merger, and the assets
and properties of HGI and its subsidiaries taken as a whole measured as of the
fiscal quarter immediately preceding the latest of such events), or (ii)
generate at least thirty-three percent (33%) of the net income of HGI and its
subsidiaries taken as a whole (with the net income of each Included Subsidiary
measured based on the four fiscal quarters immediately preceding its sale,
lease, transfer, other disposition, consolidation or merger, and the net
income of HGI and its subsidiaries taken as a whole measured based on the four
fiscal quarters immediately preceding the latest of such
events).
4. Events of Suspension. If any of the following events occurs and is
continuing (each, an *Event of Suspension*), VK/AC may, at its option and on
written notice to HGI, (i) suspend the Commitment with respect to new Loans
until such time as HGI has cured the Event of Suspension in all material
respects, or (ii) terminate the Commitment:
4.1. Payment Default. Subject to Section 10.3 below, HGI defaults
in the payment of any principal of or interest on the Note when the same
becomes due and payable, and, in the case of any default in the payment of
interest, such default continues for a period of five (5) business days, or,
in the case of any default in the payment of principal or in the prepayment of
principal and interest, such default continues for a period of two (2)
business days, from the earlier of the day on which HGI (i) has received
written notice of such default from VK/AC specifying in reasonable detail the
nature of the default, or (ii) knows or should know, in the exercise of
reasonable diligence, of the occurrence of such default.
4.2. Event Permitting Demand Prepayment. Any event described in
Section 1.5(b)(i), (ii) or (iii) above occurs.
4.3. Default on Covenants, Etc. Subject to Section 10.3 below, HGI
defaults in any material respect in the performance of any covenant contained
in Sections 2 or 3 of this Agreement or any other material covenant or
undertaking on its part contained in this Agreement, and such default is not
cured within ten (10) business days after written notice of such default to
HGI by VK/AC specifying in reasonable detail the nature of the default.
4.4. Event of Default. Any Event of Default pursuant to Section 5
below occurs.
4.5. Breach of Representations and Warranties. Any representation
and warranty made by HGI in Section 8 of this Agreement will prove to have
been incorrect in any material respect on or as of the date of this
Agreement.
5. Events of Default. Notwithstanding Section 1.6(a) above but subject
to the subordination provisions of Section 1.6(c) above, the Commitment will
terminate and the Payment Obligation under this Agreement will, on written
notice to HGI by VK/AC, become due and payable if any Event of Default (as
defined below) occurs, and the date of any such Event of Default will be the
date on which the payment obligations with respect to all of HGI*s other
subordinated credit agreements then outstanding will mature. The following
will constitute *Events of Default*:
5.1. Bankruptcy, Etc. HGI: (a) applies for or consents to the
appointment of, or the taking of possession of HGI or of its property by, a
receiver, custodian, trustee or liquidator; (b) admits in writing its
inability to pay its debts as they become due; (c) makes a general assignment
for the benefit of creditors; (d) is adjudicated as bankrupt or insolvent; (e)
files a voluntary petition in bankruptcy or a petition or answer seeking
reorganization, an arrangement with creditors or to take advantage of any
insolvency law or an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization, arrangement or insolvency
proceeding; or (f) initiates an action of dissolution or liquidation.
5.2. Involuntary Action for Bankruptcy, Etc. Without the
application, approval or consent of HGI, a proceeding is instituted, in any
court of competent jurisdiction, seeking in respect of HGI: adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a re-adjustment of debts, the
appointment of a trustee, receiver, custodian, liquidator or a similar person
for HGI or of all or substantially all of its assets, or other similar relief
in respect of HGI under any bankruptcy or insolvency law; and, if such
proceeding is being contested by HGI in good faith, the same continues
undismissed, or unstayed and in effect, for any period of sixty (60)
consecutive calendar days.
5.3. Bankruptcy, Etc. of Subsidiaries. Any of the events described
in Section 5.1 or 5.2 above occurs with respect to any of HGI*s subsidiaries,
and, in VK/AC*s reasonable judgment, such event will have a Material Adverse
Effect on HGI.
5.4. Revocation or Suspension of Investment Adviser Registration or
Status by Examining Authority. HGI*s Examining Authority revokes or suspends
(and does not reinstate within ten (10) calendar days) HGI*s registration or
status as an investment adviser, and, in VK/AC*s reasonable judgment, such
revocation or suspension will have a Material Adverse Effect on HGI.
5.5. Revocation of Investment Adviser Registration by the Securities
and Exchange Commission. The Securities and Exchange Commission revokes (and
does not reinstate within (10) calendar days) HGI*s registration as an
investment adviser.
5.6. Excessive Indebtedness. To the extent required under the Net
Capital Requirements, the aggregate indebtedness of HGI (excluding, in
accordance with the Net Capital Requirements, amounts in respect of
subordinated loans qualifying as capital) exceeds one thousand five hundred
percent (1,500%) of its net capital, or, if HGI is operating pursuant to
paragraph (a)(1)(ii) of 17 C.F.R. * 240.15c3-1, its net capital is less than
two percent (2%) of aggregate debit items computed in accordance with 17
C.F.R. * 240.15c3-3a, throughout a period of fifteen (15) consecutive business
days, commencing on the day that HGI first determines and notifies any
Examining Authority or any Examining Authority first determines and notifies
HGI of such fact.
6. Confidential Material. For so long as VK/AC beneficially owns or
has any interest in any portion of the Note and for a period of two (2) years
thereafter, VK/AC will treat, and will use its reasonable best efforts to
ensure that its directors, officers, employees, agents and representatives
(including financial advisors, accountants, valuation firms and other agents
or representatives) treat, all Confidential Material (as defined below) of HGI
confidentially and not disclose it except in accordance with this Section;
provided, that (a) any Confidential Material may be disclosed to VK/AC*s
agents and representatives who (i) need to have access to such information,
and (ii) are directed by VK/AC to treat such Confidential Material
confidentially; (b) any Confidential Material may be disclosed (i) to VK/AC
Permitted Transferees (as defined in the Shareholders* Agreement), including
their directors, officers, employees, and affiliates and their respective
agents and representatives, for use in connection with an investment in HGI or
the VK/AC Sale, provided that such persons are directed by VK/AC to treat such
Confidential Material confidentially, and (ii) in communications (including,
without limitation, a proxy statement) to VK/AC*s stockholders in connection
with the VK/AC Sale, but only to the extent that VK/AC, in its reasonable
judgment, determines that the disclosure of such Confidential Material is
legally required; and (c) Confidential Material may be disclosed to the extent
required by law or by the order or decree of any court or other governmental
authority; provided, however, that the party legally compelled to disclose the
Confidential Material will provide HGI with prompt notice of that fact so
that HGI may attempt to obtain a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Section 6. In the event
that VK/AC ceases for any reason to beneficially own any portion of the Note,
VK/AC will promptly deliver to HGI or destroy all Confidential Material (and
all copies thereof) in the possession of VK/AC or any of its directors,
officers, and employees, and will use its reasonable best efforts to ensure
that its agents and representatives deliver to HGI or destroy all Confidential
Material (and all copies thereof) in the possession of such agents and
representatives. Notwithstanding the return or destruction of the
Confidential Material, VK/AC will continue to be bound by its confidentiality
obligations hereunder. For purposes of this Section, the term *Confidential
Material* is defined as all information furnished in writing or, if
subsequently confirmed in writing as confidential, orally by HGI or any of its
directors, officers, employees, agents or representatives to VK/AC or any of
its directors, officers, employees, agents or representatives in connection
with this Agreement and the transactions contemplated hereby and all notes,
analyses, compilations, studies, or other documents to the extent that such
documents contain or reflect any such information; provided, however, that
*Confidential Material* will not include information that (x) is currently
available in the public domain or becomes generally available to the public
other than as a result of a disclosure by VK/AC or any of its directors,
officers, employees, agents or representatives; (y) is currently in the
possession of or known by VK/AC and which VK/AC has obtained without any
obligation to maintain such information as confidential; or (z) was made
available to VK/AC on a non-confidential basis from a source other than HGI or
its directors, officers, employees, agents or representatives, provided, that
such source did not make such information available in violation of a
confidentiality agreement with HGI or any of its directors, officers,
employees, agents or representatives. The obligations of VK/AC hereunder will
survive the consummation of the transactions hereunder and the termination of
this Agreement.
7. Injunctive Relief with Respect to Use of Information and
Confidentiality. VK/AC acknowledges and agrees that the covenants and
obligations of VK/AC in Sections 2.6 and 6 of this Agreement with respect to
the use of information and confidentiality relate to special, unique and
extraordinary matters and that a violation of the terms of such covenants and
obligations will cause HGI irreparable injury for which adequate remedies are
not available at law. Therefore, VK/AC agrees that HGI will be entitled to an
injunction, restraining order or such other equitable relief (without the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain VK/AC from committing any violation of
the covenants and obligations contained in Sections 2.6 and 6 of this
Agreement. These injunctive remedies are cumulative and in addition to any
other rights and remedies HGI may have at law or in equity.
8. Representations and Warranties. HGI represents and warrants to
VK/AC as of the Effective Date as follows:
8.1. Organization and Standing. HGI is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. HGI*s wholly-owned subsidiary, Hansberger Global Investors
Limited (*HGIL*), is a private limited liability company duly organized and
validly existing under the laws of Ireland. HGI and HGIL each has all
requisite corporate power and authority to own and lease its properties and to
conduct its business as presently conducted. HGI and HGIL each is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which it owns or leases properties or
conducts business so as to require such qualification and in which the failure
to qualify would have a Material Adverse Effect on HGI.
8.2. Subsidiaries, Etc. Other than HGIL, HGI has no subsidiaries
and does not own any capital stock, security, partnership interest or other
equity interest of any kind in any corporation, partnership, joint venture,
association or other entity.
8.3. Authorization. HGI has all necessary corporate power to enter
into this Agreement, to issue and deliver the Note pursuant to this Agreement,
and to carry out the transactions contemplated by this Agreement. The
execution, delivery and performance by HGI of this Agreement have been duly
authorized by all requisite corporate action on the part of HGI. This
Agreement, assuming the due authorization, execution, delivery and performance
of this Agreement by VK/AC, constitute valid and binding obligations of HGI,
enforceable against it in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors* rights and to
general equity principles.
9. Certain Securities Matters.
9.1. Legend. The Note will be imprinted with a legend substantially
in the following form:
*THIS NOTE WAS ORIGINALLY ISSUED AS OF MAY 13, 1996, AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS. THE TRANSFER OF THIS NOTE IS
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE SUBORDINATED CREDIT
AGREEMENT. THE ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE
PROVISIONS TO THE HOLDER OF THIS NOTE WITHOUT CHARGE ON WRITTEN
REQUEST.*
9.2. Present Representations. VK/AC represents and warrants to HGI
as of the Effective Date that (a) VK/AC is acquiring the Note for investment
for its own account and not with a view to, or for resale in connection with,
any distribution of the Note; (b) VK/AC understands that the Note has not been
registered under the Securities Act of 1933, as amended (the *Securities Act*)
or under any state securities laws, and, as a result of having not been
registered, is subject to substantial restrictions on transfer; and (c) all
negotiations relating to this Agreement, the transactions contemplated by this
Agreement, and the Note have been conducted by VK/AC without the intervention
of any person or firm in such manner as to give rise to any valid claim
against the parties to this Agreement for a brokerage commission, finder*s
fee, or similar compensation.
10. Miscellaneous.
10.1. Waivers and Amendments. No waiver by any party of any
condition, or the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, will be deemed
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition. No provision of this Agreement may be
waived without a written instrument signed by the waiving party. This
Agreement may not be changed, amended, discharged or terminated other than by
an agreement in writing signed by both of the parties to this Agreement. The
parties agree to amend this Agreement and the Note, as applicable, as
reasonably necessary to reflect any changes requested in writing from time to
time by any Examining Authority.
10.2. Governing Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement will be governed
by and construed in accordance with the internal laws of the State of
Delaware. Any percentage under Section 1.5(a), 1.6(a) or 5.6 above will be
changed to such other percentage as may be made applicable under the Net
Capital Requirements, effective immediately on the delivery of written notice
thereof by HGI to VK/AC, which notice will be accompanied by a copy of the
provisions of the Net Capital Requirements containing the applicable
percentage.
10.3. Successors and Assigns. Except as otherwise expressly
provided in this Agreement, the terms and conditions of this Agreement will be
binding on and inure to the benefit of the parties to this Agreement and to
their respective heirs, executors, administrators and permitted successors and
assigns. No party or their respective heirs, executors, administrators or
permitted successors and assigns may Transfer (as defined below) either this
Agreement or any portion of the Note without the prior written consent of both
of the parties hereto, and any purported Transfer in violation of this
provision will be void; provided, however, that VK/AC may, consistent with
applicable law and subject to Sections 1.8 and 9 above, Transfer this
Agreement to the VK/AC Representative (as defined in the Shareholders*
Agreement), as agent for the holder or holders of the Note, and Transfer this
Agreement or all or any portion of the Note to any VK/AC Permitted Transferee
(as defined in the Shareholders* Agreement), and any VK/AC Permitted
Transferee may Transfer this Agreement or all or any portion of the Note to
another VK/AC Permitted Transferee; provided further, that there may not be
more than ten (10) holders, in addition to VK/AC, of all or any portion of the
Note at any one time. Notwithstanding any other provision of this Agreement,
in the event that there is more than one (1) holder of all or any portion of
the Note and except in the case of any failure to make, give or furnish any
payment, prepayment, notice or anything else to VK/AC, HGI will have four (4)
weeks, from the date on which it receives notice that any such holder did not
receive any payment, prepayment, notice or anything else that HGI was
obligated to furnish to such holder, to make such payment, prepayment, or
notice or furnish such other thing, and an Event of Suspension under Section 4
above, an Event of Default under Section 5 above, the right to demand
prepayment under Section 1.5(b) above, or the termination of the Commitment
will not arise or be deemed to have occurred solely as the result of any such
delay. Nothing in this Agreement, express or implied, is intended to confer
on any party other than the parties to this Agreement or their respective
permitted successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. For purposes of this
Agreement, *Transfer* means transfer, sell, assign, pledge, hypothecate,
give, create a security interest in or lien on, place in trust (voting or
otherwise), or in any other way encumber or dispose of an interest in or
rights in or to, directly or indirectly (including by merger) and whether or
not voluntarily, by operation of law or
otherwise.
10.4. Registration, Registration of Transfer and Exchange. HGI
will cause to be kept at its principal office a register (the *Register*) in
which, subject to such reasonable regulations as it may prescribe, HGI will
provide for the registration of the Note and the registration of transfers of
all or any portion of the Note. Subject to Sections 1.8, 9 and 10.3 above, at
any time, and from time to time, the holder of the Note may transfer all or
any portion of such Note on tender of such Note at the principal office of
HGI, duly endorsed by, or accompanied by a written instrument of transfer in
form reasonably satisfactory to HGI duly executed by, the holder of the Note
or his, her or its attorney duly authorized in writing. HGI will be the
registrar for the purpose of registering the Note and transfers of all or any
portion of the Note as provided in this Section. On tender for registration
of transfer of all or any portion of the Note at its principal office, HGI
will execute, and deliver in the name of the designated transferee or
transferees and, if only a portion of the Note is being transferred, in the
name of the holder of the Note, one or more notes in substantially the form of
the Note and subject to this Agreement in the same manner as the Note
(*Notes*), which Notes will be deemed to be portions of the Note, in the
principal amounts requested by the holder requesting registration of transfer,
and of a like aggregate principal amount. At the option of a holder of all or
any portion of the Note and on tender for registration of exchange of all or
any portion of the Note at its principal office, HGI will exchange the Note,
or portion thereof so tendered, for one or more Notes, in the principal
amounts requested by the holder requesting the exchange, and of a like
aggregate principal amount. Whenever the Note or portion thereof is tendered
for exchange, HGI will execute and deliver the Notes which the holder making
the exchange is entitled to receive. All Notes issued on any registration of
transfer or exchange of the Note pursuant to this Section 10.4 will be the
valid obligations of HGI, evidencing the same indebtedness, and entitled to
the same benefits under this Agreement, as the Note tendered on such
registration of transfer or exchange. No service charge will be made for any
registration of transfer or exchange of the Note, but HGI may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of the
Note. HGI, by its execution of this Agreement, agrees that it will not cause
or permit the transfer of any portion of the Note to be reflected in the
Register except in accordance with the terms of this
Agreement.
10.5. Entire Agreement. This Agreement and the other documents
delivered pursuant to this Agreement constitute the full and entire
understanding and agreement among the parties with regard to the subject of
this Agreement and of such other documents, and supersede all prior
agreements, understandings, inducements or conditions, express or implied,
oral or written, with respect to the subject of this Agreement and of such
other documents.
10.6. Notices. Unless otherwise provided, all notices, requests,
demands and other communications required or permitted under this Agreement
will be in writing and will be deemed to have been duly made and received:
(i) upon personal delivery or confirmed facsimile to the party to be notified;
(ii) three (3) business days after deposit with the United States Post Office,
by registered or certified mail or by first class mail, postage prepaid,
addressed as set forth below; or (iii) one (1) business day after deposit with
Federal Express or another reputable overnight courier (for next business day
delivery), shipping prepaid, addressed as set forth below:
(a) If to HGI, then to:
Hansberger Global Investors, Inc.
515 East Las Olas Boulevard
Fort Lauderdale, FL 33301
Attn: Thomas L. Hansberger, Chairman and Chief
Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
Attn: Kathryn B. McGrath, Esquire
(b) If to VK/AC, then to:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attn: Ronald A. Nyberg, Esquire
with a copy to each of:
The Clayton & Dubilier Private Equity Fund IV Limited
Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attn: Clayton & Dubilier Associates IV Limited
Partnership
Attn: Mr. Alberto Cribiore
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: Woodrow W. Campbell, Esquire
Either party may change the address to which communications are to be sent by
giving two (2) business days* advance notice of such change of address to the
other party in conformity with the provisions of this Section providing for
the giving of notice.
10.7. Payment of Expenses. HGI and VK/AC will bear their
respective expenses, costs and fees (including attorneys* and auditors* fees)
in connection with the transactions contemplated by this Agreement, regardless
of whether the transactions contemplated by this Agreement are consummated.
10.8. Headings. The headings contained in this Agreement have
been inserted for convenience of reference only, and neither such headings nor
the placement of any term of this Agreement under any particular heading will
in any way restrict or modify any of the terms or provisions of this
Agreement.
10.9. Severability. The provisions of this Agreement will be
deemed severable, and if any part of any provision is held to be illegal,
void, voidable, invalid, nonbinding or unenforceable, in its entirety or
partially, or as to any party, for any reason, such provision may be changed,
consistent with the intent of the parties to this Agreement, to the extent
reasonably necessary to make the provision, as so changed, legal, valid,
binding and enforceable. If any provision of this Agreement is held to be
illegal, void, voidable, invalid, nonbinding or unenforceable, in its entirety
or partially, or as to any party, for any reason, and if such provision cannot
be changed consistent with the intent of the parties to this Agreement to make
it fully legal, valid, binding and enforceable, then such provision will be
stricken from this Agreement, and the remaining provisions of this Agreement
will not in any way be affected or impaired, but will remain in full force and
effect.
10.10. Execution; Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed to be an original as
against any party whose signature appears on such counterpart, and all of
which will together constitute one and the same instrument. This Agreement
will become binding when one or more counterparts of this Agreement,
individually or taken together, bear the signatures of all of the parties to
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first written above.
HANSBERGER GLOBAL INVESTORS, INC.
By: /s/ Thomas L. Hansberger
Thomas L. Hansberger
Chairman and Chief Executive Officer
VK/AC HOLDING, INC.
By: /s/ Ronald A. Nyberg
Ronald A. Nyberg, Esquire
Executive Vice President and General Counsel
EXHIBIT A
FORM OF SUBORDINATED CREDIT NOTE
HANSBERGER GLOBAL INVESTORS, INC.
$3,333,000 Dated as of May 13, 1996
FOR VALUE RECEIVED, the undersigned, HANSBERGER GLOBAL INVESTORS, INC., a
Delaware corporation with its principal place of business at 515 East Las Olas
Boulevard, Fort Lauderdale, Florida (*HGI*), hereby promises to pay to the
order of __________________, a ________ corporation with its principal place
of business at _____________________________________________ (*Holder*),
pursuant to the Subordinated Credit Agreement, dated as of May 13, 1996, by
and between HGI and VK/AC Holding, Inc. (the *Subordinated Credit Agreement*),
the sum, as evidenced by the principal balance outstanding on Schedule 1 of
this Note, of (a) the lesser of (i) three million three hundred thirty-three
thousand dollars ($3,333,000) and (ii) the aggregate unpaid principal amount
of the Loans made by the Holder to HGI pursuant to Section 1.1 of the
Subordinated Credit Agreement, plus (b) any accrued interest that may be added
to the principal amount of this Note pursuant to Section 1.2 of the
Subordinated Credit Agreement, on or before December 31, 2001, with interest
on the unpaid principal sum from the date of the delivery of this Note at a
rate per annum (on the basis of a year of 365 days or 366 days, as the case
may be) equal to ten percent (10%).
This Note is issued in accordance with and subject to the additional
terms and conditions set forth in this Note and the Subordinated Credit
Agreement.
1. Subject to certain limitations described in Sections 1.6 and 1.7 of
the Subordinated Credit Agreement, principal on this Note will be repaid on
the Termination Date as determined pursuant to the Subordinated Credit
Agreement. Interest will be payable semi-annually on the fifteenth day of
each May and November with the first interest payment being payable at least
six (6) months from the date of this Note. HGI may, at its sole option, elect
to capitalize any semi-annual interest payment by adding all or a portion of
the amount of the accrued interest to the outstanding principal amount of the
Loans, and the Holder of this Note will record such an addition on Schedule 1
of this Note. If any payment of principal of this Note will become due on a
Saturday, Sunday or other day on which commercial banks in Fort Lauderdale,
Florida are closed, such payment will be made on the next succeeding business
day and any such extension of time will be included in computing any interest
in respect of such payment.
2. This Note is the Note referred to in Section 1.2 of the Subordinated
Credit Agreement and is subject to the terms and conditions of the
Subordinated Credit Agreement, as amended from time to time. Unless otherwise
defined in this Note, all terms used in this Note which are defined in the
Subordinated Credit Agreement will have meanings assigned to them in the
Subordinated Credit Agreement, as at any time amended.
3. The obligations of HGI under this Note with respect to the payment
of principal and interest will be and are subordinate in right of payment and
subject to the prior payment or provision for payment in full of all claims of
all other present and future creditors of HGI arising out of any matter
occurring prior to the date on which the related Payment Obligation matures
consistent with the provisions of the Net Capital Requirements, except for
claims that are the subject of subordination agreements that rank on the same
priority as or are junior to the claim of Holder under the Subordinated Credit
Agreement. On the occurrence of any Event of Default pursuant to Section 5 of
the Subordinated Credit Agreement, Holder will not be entitled to participate
or share, ratably or otherwise, in the distribution of the assets of HGI until
all claims of all other present and future creditors of HGI, to the extent
such claims are senior to the claims of Holder under the Subordinated Credit
Agreement and this Note, have been fully satisfied.
4. The cash proceeds of Loans will, to the extent required under the
Net Capital Requirements, be used and dealt with by HGI as part of its capital
and will be subject to the risks of the business. HGI will have the right to
deposit any cash proceeds of Loans in an account or accounts in its own name
in any bank or trust company.
5. Subject to certain limitations described in Section 1.6 of the
Subordinated Credit Agreement, HGI, at its option, may prepay all or any part
of the principal amount of this Note on the terms provided in Section 1.5(a)
of the Subordinated Credit Agreement. Subject to certain limitations
described in Sections 1.6 and 1.7 of the Subordinated Credit Agreement, this
Note is subject to demand prepayment as provided in Section 1.5(b) of the
Subordinated Credit Agreement.
6. Subject to certain limitations described in Section 1.6 of the
Subordinated Credit Agreement, if an Event of Default will occur, the
principal of this Note may become or be declared due and payable in the manner
and with the effect provided in the Subordinated Credit Agreement.
7. No failure or delay by Holder to insist on the strict performance of
any term of this Note or to exercise any right, power or remedy consequent on
a breach of this Note and no acceptance of any prepayment of principal or
accrued interest on account of this Note during the continuance of any such
breach, will constitute a waiver of any such term or of any such breach; nor
will any single or partial exercise by Holder of any right under this Note
preclude any other or further exercise of that right or the exercise of any
other right. No waiver of any breach will affect or alter this Note, which
will continue in full force and effect.
8. All terms of this Note will be binding on and inure to the benefit
of and be enforceable by the successors and assigns of HGI or Holder, as the
case may be.
9. THIS NOTE WAS ORIGINALLY ISSUED AS OF MAY 13, 1996, AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS
SET FORTH IN THE SUBORDINATED CREDIT AGREEMENT. THE ISSUER OF THIS NOTE WILL
FURNISH A COPY OF THESE PROVISIONS TO THE HOLDER OF THIS NOTE WITHOUT CHARGE
ON WRITTEN REQUEST.
10. This Note will be governed, construed and interpreted strictly in
accordance with the internal laws of the State of Delaware. Both HGI and
Holder agree to stipulate in any future proceeding that this Note is to be
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Delaware, even if it was, in fact,
executed and delivered elsewhere.
11. All notices, requests and demands will be given to or made on HGI at
its address set forth in Section 10.6 of the Subordinated Credit Agreement or
at such other address as may have been furnished in writing by HGI to Holder.
All notices, requests and demands given or made in accordance with the
provisions of this Note will be deemed to have been given or made as provided
in Section 10.6 of the Subordinated Credit Agreement.
12. On the receipt of evidences of the loss, theft, destruction or
mutilation of this Note and, in the case of any such loss, theft and/or
destruction, on receipt of indemnification reasonably satisfactory to HGI and,
in the case of any such mutilation, on surrender and cancellation of this
Note, HGI will make and deliver in lieu thereof, a new note of like tenor and
in the aggregate principal amount equal to the principal amount of this Note
at the time of such loss, theft or destruction, or at the time of such
surrender in the case of the mutilation thereof.
13. If the interest rate payable under this Note is determined to exceed
the maximum rate of interest permitted by applicable law, the rate of interest
payable under this Note will be reduced to the maximum rate of interest
permitted by applicable law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed on
the date first above written.
HANSBERGER GLOBAL INVESTORS, INC.
By:
Thomas L. Hansberger
Chairman and Chief Executive Officer
Attest:
Kimberley A. Scott
Assistant Secretary
SCHEDULE 1
<TABLE>
SUBORDINATED CREDIT NOTE
BORROWING AND PAYMENTS OF PRINCIPAL
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<CAPTION>
Date Amount of Amount of Amount of Amount of Unpaid Notation made by
Borrowing Interest Principal Paid Principal
Added as or Prepaid Balance
Principal
<S> <C> <C> <C> <C> <C>
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</TABLE>
EXHIBIT 10.2
SHAREHOLDERS* AGREEMENT
This Shareholders* Agreement is entered into as of this 13th day of May,
1996, by and among HANSBERGER GLOBAL INVESTORS, INC., a Delaware corporation
with its principal place of business at 515 East Las Olas Boulevard, Fort
Lauderdale, Florida (*HGI*), VK/AC HOLDING, INC., a Delaware corporation with
its principal place of business at One Parkview Plaza, Oakbrook Terrace,
Illinois (*VK/AC*), and THOMAS L. HANSBERGER, an individual residing at 1300
Brickel Drive, Fort Lauderdale, Florida 33301 (*Hansberger*).
WHEREAS, HGI and VK/AC are entering into a Stock Purchase Agreement,
dated as of May 13, 1996 (the *Stock Purchase Agreement*), under which VK/AC
is acquiring 2,666,000 shares of HGI*s Common Stock, par value $.01 per share
(*Common Stock*);
WHEREAS, on the date hereof, 7,800,000 shares of Common Stock are issued,
outstanding and held by Hansberger and SLW Family L.P., a Delaware limited
partnership for which Hansberger serves as the sole general partner, and the
parties contemplate that Hansberger, and any officers and employees of HGI as
Hansberger may designate (collectively, the *Designated Employees*), may
subscribe for and purchase up to an additional 200,000 shares of Common Stock
for a price per share equal to the cash price per share paid by VK/AC under
the Stock Purchase Agreement;
WHEREAS, the parties contemplate that up to an additional 3,136,000
shares of Common Stock may be issued or reserved for issuance to HGI*s current
and future officers and employees other than Hansberger (collectively, the
*Employees*) pursuant to a restricted stock program, or offered and sold to
such Employees on such terms, as may be established by the Board of Directors
of HGI;
WHEREAS, the parties contemplate that each of Max C. Chapman, Jr. and
Sassoon Holdings Pte Ltd., a Singapore corporation, or an affiliate thereof
(collectively, the *Other Investors*), will subscribe for and purchase 942,000
shares of Common Stock pursuant to separate stock purchase agreements;
WHEREAS, the parties deem it to be in the best interests of HGI and its
shareholders to ensure that, subject to certain conditions, designees of
Hansberger and VK/AC or the VK/AC Representative (as defined below) serve on
HGI*s Board of Directors;
WHEREAS, the parties desire to enter into an agreement specifically
enforceable against each of them pursuant to which they agree to vote their
shares of Common Stock in the manner and for the purposes specified in this
Shareholders* Agreement;
WHEREAS, the parties desire to enter into an agreement specifying
limitations on the transfer of shares of Common Stock, including any shares
acquired as a result of any stock split, stock dividend, recapitalization or
the like (the *Shares*);
WHEREAS, HGI and Hansberger desire that VK/AC and VK/AC Permitted
Transferees remain CD&R Related Persons (as each such term is defined below)
so long as they hold any of the Shares; and
WHEREAS, it is a condition to HGI*s and VK/AC*s obligations to consummate
the transactions contemplated by the Stock Purchase Agreement that the parties
hereto enter into this Shareholders* Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, undertakings
and covenants set forth in this Shareholders* Agreement, and for other good
and valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Governance Matters.
1.1. Composition of Board of Directors. Each person (other than
HGI) who is the holder of shares of Common Stock or other voting capital stock
of HGI or who controls any such shares, and is a party to or otherwise bound
by this Shareholders* Agreement, whether by joinder or otherwise
(*Shareholder*), agrees to vote all such shares held or controlled by such
Shareholder so as to provide, and HGI will use its reasonable best efforts to
cause, the Board of Directors of HGI to be comprised of not more than five (5)
members, of whom: One (1) member will be designated in writing by VK/AC or, on
and after the date (the *Transition Date*) on which a majority of the Shares
held by VK/AC and VK/AC Permitted Transferees are held by VK/AC Permitted
Transferees, the VK/AC Representative; and the remainder will be designated in
writing by Hansberger.
1.2 Amendment of Charter. Each Shareholder agrees to vote all
shares held or controlled by such Shareholder so as to provide, and HGI will
use its reasonable best efforts to cause, Article Four of the Amended and
Restated Certificate of Incorporation of HGI to be appropriately amended,
promptly after the date hereof, to require the consent of a majority of the
holders of shares of Common Stock at the time outstanding in order to effect
or validate any matters that would be subject to the veto described in Section
1.3 below.
1.3. Voting on Major Matters. Subject to Section 1.4 below, HGI and
Hansberger agree that neither HGI nor any of its subsidiaries will take any
action in respect of a Major Matter (as defined below) if VK/AC or, on and
after the Transition Date, the VK/AC Representative, has vetoed such Major
Matter by written notice delivered as provided below. HGI will give prompt
(but in no event less than five (5) business days*) prior written notice to
VK/AC or the VK/AC Representative, as the case may be, of any proposal to
approve any Major Matter and, on receipt of prior written notice of the
election by VK/AC or the VK/AC Representative, as the case may be, to veto the
Major Matter, Hansberger will vote all shares of Common Stock and other voting
capital stock of HGI held or controlled by him, and use his reasonable best
efforts to cause any directors designated by him to vote, against the Major
Matter. For purposes of this Section 1.3, a *Major Matter* will
mean:
(a) The authorization or issuance of additional shares of any
class of HGI*s or any of its subsidiaries* capital stock or other equity
interests, other than (i) not more than 942,000 shares of Common Stock
contemplated to be subscribed for and purchased by each of the Other
Investors; (ii) not more than 200,000 shares of Common Stock that Hansberger
or the Designated Employees may subscribe for and purchase for a price per
share equal to the cash price per share paid by VK/AC under the Stock Purchase
Agreement; and (iii) not more than 3,136,000 shares of Common Stock to
Employees pursuant to a restricted stock program, or offered and sold to such
Employees on such terms, as may be established by the Board of Directors of
HGI; provided in each case that no shares of Common Stock, or any interest
therein or right thereto, may be issued or granted to any Other Investor,
Designated Employee or Employee unless, in the reasonable judgment of the
Board of Directors of HGI, such issuance or grant is made pursuant to, and
such Other Investor, Designated Employee or Employee, as the case may be, is
bound by, terms that are no more favorable in the aggregate (other than, in
the case of any Employee, with respect to the purchase price of such Common
Stock) to such Other Investor, Designated Employee or Employee than the terms
in the Stock Purchase Agreement and this Shareholders* Agreement to which
VK/AC is subject;
(b) Any increase in the size of the Board of Directors of HGI;
(c) The incurrence (including through any guarantee) by HGI or
any of its subsidiaries of indebtedness for borrowed money, other than
intercompany indebtedness between or among HGI and its wholly-owned
subsidiaries, indebtedness under the Credit Facility (as defined in the Stock
Purchase Agreement) or substantially similar credit facilities arranged with
the Other Investors (under which the aggregate amount of indebtedness
(excluding amounts attributable to interest) may not exceed $2,355,000 in the
aggregate), or line of credit with a bank in the ordinary course of business,
so long as borrowings under the Credit Facility are outstanding; or
(d) Any merger, recapitalization, reorganization, acquisition
of any material business or disposition of any material portion of the
business of HGI and its subsidiaries taken as a whole.
1.4. Duration and Extent of Obligations.
(a) The obligations of VK/AC under Section 1.1 above will
cease if at any time Hansberger and Hansberger Permitted Transferees (as
defined in Section 2.1(a) below) hold in the aggregate less than ten percent
(10%) of HGI*s issued and outstanding Shares.
(b) The obligations of Hansberger and HGI under Sections 1.1
and 1.3 above will cease (i) if at any time VK/AC or, on or after the
Transition Date, the VK/AC Representative ceases to be a CD&R Related Person;
or (ii) if at any time VK/AC and the VK/AC Permitted Transferees hold in the
aggregate less than ten percent (10%) of HGI*s issued and outstanding Shares.
(c) For purposes of this Shareholders* Agreement, *CD&R
Related Person* means (i) Clayton, Dubilier & Rice, Inc. (*CD&R*), any
investment vehicle managed by CD&R, or any entity at least sixty-six percent
(66%) of the voting interests of which are controlled by an investment vehicle
managed by CD&R (any such investment vehicle or entity, a *CD&R Investment
Vehicle*); and (ii) subject to the proviso below, any of the ten largest
stockholders of VK/AC, measured by number of shares owned on a fully diluted
basis, who (A) are stockholders of VK/AC as of the date hereof; and (B) become
shareholders of HGI solely as a result of the distribution or other transfer
by VK/AC of Shares to stockholders of VK/AC prior to or simultaneously with
(x) a sale or other disposition (including by merger) of substantially all of
the assets of VK/AC or of at least a majority of the stock of VK/AC now held
by The Clayton & Dubilier Private Equity Fund IV Limited Partnership (*Fund
IV*) or (y) a public offering of shares of VK/AC*s common stock (such
distribution or other transfer by VK/AC of Shares, the *VK/AC Share
Distribution,* and such stockholders of VK/AC, the *Participating VK/AC
Stockholders*); provided, however, that a Participating VK/AC Stockholder will
be a CD&R Related Person only for so long as (x) CD&R, a CD&R Investment
Vehicle or an individual who is a shareholder, officer or professional
employee of CD&R (the *VK/AC Representative*) shall have all power and
authority to vote, and act on behalf of such Participating VK/AC Stockholder
in respect of all matters relating to, the Shares held by such Participating
VK/AC Stockholder; (y) such power and authority shall be evidenced by a
written agreement or other instrument (an *Authorization*) containing
provisions providing, among other things, that the granting of such power and
authority to the VK/AC Representative shall effectively not be revocable in
whole or in part by the Participating VK/AC Stockholder for so long as such
Participating VK/AC Stockholder shall hold or beneficially own any Shares; and
(z) the VK/AC Representative will, effective on or before the date of the
VK/AC Share Distribution, have become a party to this Shareholders* Agreement
by filing with HGI an executed letter, substantially in the form attached as
Exhibit A (the *Shareholder Letter*).
(d) Nothing in this Section 1 will require that any party
refrain from or take any action that is prohibited by applicable law or is
determined by such person, in good faith and with advice of counsel to such
effect, to conflict with the proper discharge by such party of its fiduciary
obligations.
2. Restrictions and Obligations Relating to Transfers of Shares. No
Shareholder will Transfer (as defined below) any Shares held or hereafter
acquired by it except as permitted under this Shareholders* Agreement, and any
purported Transfer in violation of the provisions of this Shareholders*
Agreement will be void. For purposes of this Shareholders* Agreement,
*Transfer* means transfer, sell, assign, pledge, hypothecate, give, create a
security interest in or lien on, place in trust (voting or otherwise), or in
any other way encumber or dispose of an interest in or rights in or to,
directly or indirectly (including by merger) and whether or not voluntarily,
by operation of law or otherwise. VK/AC agrees that it will not directly or
indirectly enter into any binding agreement with respect to or involving a
sale or other disposition (including by merger) of substantially all of the
assets of VK/AC or of at least a majority of the stock of VK/AC now held by
Fund IV unless the VK/AC Share Distribution has occurred or such binding
agreement provides that it shall occur prior to or simultaneously with the
effectiveness of such sale or other disposition. HGI, by its execution of
this Shareholders* Agreement, agrees that it will not cause or permit the
Transfer of any Shares held by a Shareholder to be reflected on HGI*s books
except in accordance with the terms of this Shareholders*
Agreement.
2.1. Permitted Transfers.
(a) Permitted Transfers by Hansberger.
(i) Family Members. Hansberger may, consistent with
applicable law, Transfer any of the Shares held by him to (a) members of his
immediate family, including his spouse, children (including adopted and step
children), grandchildren, or trustees of one or more trusts established for
the benefit of Hansberger or the above-listed family members, provided,
however, that Hansberger retains the power and authority to exercise all
voting rights, and to act on behalf of such persons or trusts in respect of
all matters, related to such Shares; (b) any guardian or conservator
appointed for Hansberger; or (c) on or after Hansberger*s death, by will,
intestacy laws, or the law of survivorship, to Hansberger*s legal
representative, heirs or legatees (collectively, *Hansberger Permitted
Transferees*). Each Hansberger Permitted Transferee may, consistent with
applicable law, Transfer any of the Shares held by such Hansberger Permitted
Transferee to another Hansberger Permitted Transferee.
(ii) Employees of HGI. Hansberger and the Hansberger
Permitted Transferees may, consistent with applicable law, Transfer to
Employees of HGI up to such number of Shares held by Hansberger or such
Hansberger Permitted Transferees as are equal to twenty-five percent (25%) of
the number of shares of Common Stock issued and outstanding on the date hereof
(as such number may be increased or decreased to reflect any stock split,
stock dividend, recapitalization or the like); provided, however, that
Hansberger retains the power and authority to exercise all voting rights, and
to act on behalf of such persons or trusts in respect of all matters, related
to such Shares, and such power and authority shall be evidenced by an
Authorization containing provisions providing, among other things, that the
granting of such power and authority to Hansberger shall effectively not be
revocable in whole or in part by such Employees for so long as such Employees
shall hold or beneficially own any Shares.
(b) Permitted Transfers by VK/AC. VK/AC may, consistent with
applicable law, Transfer any of the Shares held by it to CD&R Related Persons
(*VK/AC Permitted Transferees* and, together with the Hansberger Permitted
Transferees, the *Permitted Transferees*). Each VK/AC Permitted Transferee
may, consistent with applicable law, Transfer any of the Shares held by it to
another VK/AC Permitted Transferee. Each VK/AC Permitted Transferee who is
both a natural person and a Participating VK/AC Stockholder may, consistent
with applicable law, Transfer his or her interest in any of the Shares (i)
with Hansberger*s prior written consent, to members of his or her immediate
family, including his or her spouse, children (including adopted and step
children), grandchildren, or trustees of one or more trusts established for
the benefit of such Participating VK/AC Stockholder or the above-listed family
members; (ii) to any guardian or conservator appointed for such Participating
VK/AC Stockholder; or (iii) on or after such Participating VK/AC Stockholder*s
death, by will, intestacy laws, or the law of survivorship, to the legal
representative of such Participating VK/AC Stockholder*s estate and, with
Hansberger*s prior written consent, to such Participating VK/AC Stockholder*s
heirs or legatees (and any person to whom Shares are transferred in accordance
with this sentence shall be a VK/AC Permitted Transferee in respect of such
Shares).
(c) Conditions of Transfer. Any Transfer under this Section
2.1 will be subject to the condition that the Permitted Transferee, if not
then a party to this Shareholders* Agreement, will simultaneously with such
Transfer become a party to this Shareholders* Agreement by filing with HGI an
executed Shareholder Letter. After such Permitted Transferee has filed the
Shareholder Letter with HGI, HGI, on the surrender for cancellation of the
certificate or certificates representing all of the Shares Transferred to the
Permitted Transferee, properly endorsed, will deliver to the Permitted
Transferee a certificate for the appropriate number of the Shares with the
legends set forth in Section 7 below, as applicable, printed on such
certificate; and such Permitted Transferee will thereupon become a Shareholder
for all purposes of this Shareholders* Agreement, without, however, in any way
discharging the Shareholder making the Transfer from any obligations hereunder
if such Shareholder holds or beneficially owns any Shares after such Transfer.
Any Transfer under Section 2.1(b) will be subject to the condition that (i)
VK/AC (prior to the Transition Date) or the VK/AC Representative (on and after
the Transition Date) shall retain or be granted all power and authority to
vote, and act on behalf of any such VK/AC Permitted Transferee in respect of
all matters relating to, the Shares in which such VK/AC Permitted Transferee
has an interest; (ii) such power and authority shall be evidenced by an
Authorization containing provisions providing, among other things, that the
granting of such power and authority to the VK/AC Representative shall
effectively not be revocable in whole or in part by such transferee for so
long as such transferee shall hold or beneficially own any Shares; and (iii)
the VK/AC Representative will, effective on or before the Transition Date,
have become a party to this Shareholders* Agreement by filing with HGI an
executed Shareholder Letter. Any Transfer made pursuant to this Section 2.1
may be made without reference to, or compliance with, the provisions of
Section 2.2 below.
2.2. Rights of First Offer. Hansberger, VK/AC, or any Permitted
Transferee may, consistent with applicable law, Transfer any Shares held by
such shareholder (the *Transferring Shareholder*) to a third party if such
Shares are first offered to VK/AC or, after the Transition Date, the VK/AC
Representative, on behalf of VK/AC and the VK/AC Permitted Transferees, as
applicable, in the case of a Transfer by Hansberger or a Hansberger Permitted
Transferee, or to Hansberger, in the case of a Transfer by VK/AC or a VK/AC
Permitted Transferee (the person to whom such Shares are first offered, the
*Non-Transferring Shareholder*), in accordance with the terms of this Section.
Hansberger may assign to HGI his right under this Section 2.2 to make a first
offer to purchase Shares held by VK/AC and the VK/AC Permitted Transferees, as
applicable, if VK/AC and the VK/AC Permitted Transferees are offering to sell
all (but not less than all) of the Shares held by them.
(a) Initial Notice. The Transferring Shareholder must give
prior written notice to the Non-Transferring Shareholder of any proposed
Transfer of Shares (the *Initial Notice*). The Initial Notice will indicate
the number of Shares proposed to be Transferred and the other material terms
(including purchase price) of such proposed Transfer. If the Transferring
Shareholder will have received any offer from any third party in respect of a
Transfer of Shares, the Initial Notice will include the material terms
(including the purchase price) of that offer. Such Initial Notice will
constitute a solicitation for firm offers, during the periods described in
Section 2.2(b) below, to buy all or any portion of the Shares specified in the
Initial Notice (collectively, *Firm Offers,* and individually a *Firm
Offer*).
(b) Offer Period. The Non-Transferring Shareholder will,
within sixty (60) days after receipt of the Initial Notice, give written
notice to the Transferring Shareholder of the Non- Transferring Shareholder*s
intent to make or not to make a Firm Offer, stating the number of Shares to be
purchased by such Non-Transferring Shareholder and the proposed purchase price
per share. The failure of a Non-Transferring Shareholder to respond within
the sixty (60) day period will be deemed to be a statement that the
Non-Transferring Shareholder does not intend to make a Firm Offer. Every Firm
Offer made to the Transferring Shareholder will be irrevocable for six (6)
months (the *Offer Period*) after its receipt by the Transferring Shareholder.
At any time during the Offer Period, the Transferring Shareholder may (i)
accept a Firm Offer; (ii) accept, subject to Section 2.2(c) below, an offer
from a third-party purchaser, but only if such offer is on terms (including
price) more favorable in the aggregate to the Transferring Shareholder than
those offered by the Non- Transferring Shareholder; or (iii) decide not to
sell the Shares.
(c) Participation Rights. If the Transferring Shareholder
accepts an offer of a third-party purchaser pursuant to the last sentence of
Section 2.2(b) above, the Transferring Shareholder will give prompt prior
written notice (but in any event not less than twenty (20) days prior to the
closing of the proposed sale) to the Non-Transferring Shareholder, stating the
terms of such offer (the *Second Notice*). Any such Transfer by the
Transferring Shareholder to a third-party purchaser will be subject to the
Non-Transferring Shareholder*s right to include in such Transfer, on the same
terms on which the Transfer by the Transferring Shareholder is being made, up
to a percent age of the then issued and outstanding Shares held or controlled
by such Non-Transferring Shareholder equal to that percentage of the then
issued and outstanding Shares held or controlled by the Transferring
Shareholder that the Transferring Shareholder wishes to Transfer; provided
that a Non-Transferring Shareholder desiring to participate in such Transfer
will (i) within ten (10) days after receipt of the Second Notice, give written
notice to the Transferring Shareholder of such Non- Transferring Shareholder*s
intent to participate in the Transfer and the number of Shares it desires to
Transfer; and (ii) make such reasonable representations, warranties and
covenants, and provide such indemnifications with respect thereto, to the
third-party purchaser to the same extent as the Transferring Shareholder will
have so made or provided and otherwise abide by such terms as the Transferring
Shareholder makes or is subject to in such Transfer.
(d) Subject to this Shareholders* Agreement. Any Shares at
any time Transferred pursuant to this Section 2.2 will remain subject to the
terms of this Shareholders* Agreement. Any sale under this Section 2.2 will
be subject to the condition that the transferee, if not then a party to this
Shareholders* Agreement, will simultaneously with such Transfer become a party
to this Shareholders* Agreement by filing with HGI an executed Shareholder
Letter.
(e) Certificates. After a transferee pursuant to this Section
2.2 has filed with HGI the Shareholder Letter and fulfilled all of its
obligations to the Transferring Shareholder (and the Non-Transferring
Shareholder if it is participating in the Transfer), HGI, on the surrender for
cancellation of the certificate or certificates representing all of the Shares
covered by the offer properly endorsed, will deliver to such transferee a
certificate or certificates for the appropriate number of Shares with the
legend set forth in Section 7 below printed on such certificate or
certificates; and such transferee will thereupon become a Shareholder for all
purposes of this Shareholders* Agreement, without, however, in any way
discharging the Transferring Shareholder and participating Non-Transferring
Shareholder, if applicable, from any obligations hereunder if such
Shareholder(s) hold or beneficially own any Shares after such
Transfer.
3. VK/AC Option to Purchase the Hansberger Shares. On the death or
Incapacity (as defined below) of Hansberger, VK/AC or, after the Transition
Date, the VK/AC Representative, on behalf of VK/AC and the VK/AC Permitted
Transferees, as applicable, will have the option, in accordance with the terms
of this Section 3, to purchase all, but not less than all, of the Shares then
held by Hansberger and the Hansberger Permitted Transferees (the *Hansberger
Shares*) at an aggregate purchase price equal to the Formula Price (as defined
in Section 3.1 below) multiplied by a fraction the numerator of which is the
number of Hansberger Shares and the denominator of which is the number of
Shares then issued and outstanding. For purposes of this Shareholders*
Agreement, *Incapacity* has the meaning set forth in the Employment Agreement
(as defined in the Stock Purchase Agreement).
3.1. Formula Price. For purposes of this Shareholders* Agreement,
the *Formula Price* means the price, on the date of determination, at which
HGI would change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or sell and both having reasonable knowledge
of relevant facts, taking into consideration all factors relevant to
determinations of value, including as applicable, (a) the types of business
engaged in by HGI; (b) analysis of recent public trading values or purchase
prices of comparable investment management companies adjusted for relevant
differences between the HGI and the respective comparable companies; (c)
Hansberger*s involvement in HGI*s business or his absence therefrom; (d) a
control premium; and (e) a liquidity discount based on Transfer restrictions
relating to the Shares. The Formula Price will be determined, using customary
investment banking methodologies, by a nationally recognized investment bank
or an similar expert on the financial valuation of investment management
businesses and their securities (an *Expert*).
3.2. Mechanics.
(a) VK/AC or the VK/AC Representative, as applicable, will,
within thirty (30) days after receipt of written notice of Hansberger*s death
or Incapacity, give written notice to Hansberger or the Hansberger
Representatives (as defined below), as applicable, of VK/AC*s or the VK/AC
Representative*s intent, as the case may be, to exercise its option under this
Section 3.
(b) VK/AC or the VK/AC Representative, as applicable, will, in
the first instance, select the Expert responsible for determining the Formula
Price (the *VK/AC Expert*), and such Expert will determine the Formula Price
within thirty (30) days of delivery of the first written notice of an intent
to exercise the option under this Section 3. If Hansberger, the Hansberger
Permitted Transferees or their respective legal representatives, heirs or
legatees (collectively, the *Hansberger Representatives*) disagree with the
Formula Price determined by the VK/AC Expert, they will notify VK/AC or the
VK/AC Representative, as applicable, in writing to that effect, such Formula
Price will be disregarded, and the Formula Price will be determined as
follows:
(i) Within fifteen (15) days of the Hansberger
Representatives* written notice to VK/AC or the VK/AC Representative, as
applicable, of their disagreement with the Formula Price determined by the
VK/AC Expert, the Hansberger Representatives (as a group) will select an
Expert (the *Hansberger Expert*), and such Hansberger Expert and the VK/AC
Expert will, within fifteen (15) days of the appointment of the Hansberger
Expert, together select a third Expert.
(ii) The three (3) Experts will each, within thirty (30)
days of the selection of the third Expert, make its estimate of the Formula
Price, and the Formula Price will be the average of the two (2) estimates that
differ the least from each other.
(c) VK/AC or the VK/AC Representative, as applicable, may
exercise its option within thirty (30) days of the determination of the
Formula Price in accordance with Section 3.2(b) above. If VK/AC or the VK/AC
Representative, as applicable, elects not to or fails to give written notice
of its intent to exercise its option within the thirty (30) day period
specified in Section 3.2(a) above or to exercise its option within the thirty
(30) day period specified in this Section 3.2(c), such option will expire, and
Hansberger and the Hansberger Permitted Transferees may freely Transfer their
Shares without any obligation under this Shareholders* Agreement to offer
VK/AC or the VK/AC Representative, as applicable, the opportunity to make an
offer for or purchase their Shares.
3.3. Certificates. HGI, on the surrender for cancellation of the
certificate or certificates representing all of the Hansberger Shares
Transferred to VK/AC, the VK/AC Representative, and the VK/AC Permitted
Transferees, as applicable, properly endorsed, will deliver to VK/AC, the
VK/AC Representative, and the VK/AC Permitted Transferees, as applicable, a
certificate or certificates for the appropriate number of Shares with the
legend set forth in Section 7 below printed on such certificate or
certificates.
3.4. Expenses. The Hansberger Representatives will pay the fees and
expenses of any Expert selected by them, VK/AC or the VK/AC Representative,
on behalf of VK/AC and the VK/AC Permitted Transferees, as applicable, will
pay the fees and expenses of any Expert selected by it, and HGI will pay the
fees and expenses of any *third* Expert selected under Section 3.2(b)(i)
above; provided, however, that if for any reason VK/AC or the VK/AC
Representative, as applicable, after having given notice of an intent to
exercise its option (which notice is not revoked or rescinded before the
selection of any Experts pursuant to Section 3.2(b)(i) above), does not
exercise its option within the thirty (30) day period specified in Section
3.2(c), VK/AC or the VK/AC Representative, on behalf of VK/AC and the VK/AC
Permitted Transferees, as applicable, will pay the fees and expenses of all
Experts selected pursuant to Section 3.2(b) above.
4. Hansberger Option to Purchase VK/AC Shares. If at any time after
the date of this Shareholders* Agreement, (i) VK/AC and the VK/AC Permitted
Transferees hold in the aggregate less than ten percent (10%) of HGI*s issued
and outstanding Shares; or (ii) the Requisite VK/AC Principal Shareholders (as
defined in Section 6.1) demand a registration of Shares pursuant to Section
6.1 of this Shareholders* Agreement, Hansberger will have the option, in
accordance with the terms of this Section 4, to purchase (A) in the case of
clause (i) above, all, but not less than all, of the Shares then held by VK/AC
and the VK/AC Permitted Transferees, or (B) in the case of clause (ii) above,
all, but not less than all, of the Shares requested by such Requisite VK/AC
Principal Shareholders to be so registered (the *VK/AC Shares*) at an
aggregate purchase price equal to the Formula Price (as defined in Section 3.1
above) multiplied by a fraction the numerator of which is the number of VK/AC
Shares and the denominator of which is the number of Shares then issued and
outstanding. In consideration for the VK/AC Shares, Hansberger may, at his
option, deliver to VK/AC or the applicable VK/AC Permitted Transferees, as the
case may be, a promissory note, payable by Hansberger to VK/AC or such VK/AC
Permitted Transferees, as the case may be, in the aggregate principal amount
of such purchase price, substantially in the form attached to this
Shareholders* Agreement as Exhibit B. Hansberger may assign to HGI his option
under clause (i) of the first sentence of this Section 4 or under clause (ii)
of the first sentence of this Section 4 if the Requisite VK/AC Principal
Shareholders have demanded registration and there is a registration of all
(but not less than all) of the Shares then held by VK/AC and the VK/AC
Permitted Transferees; provided, (x) HGI will pay the purchase price for such
Shares in cash; and (y) Hansberger will unconditionally guarantee the payment
by HGI of fees and expenses of Experts in accordance with Section 4.3 below to
the extent that Hansberger has assigned his option to HGI and HGI has failed
to make such payments.
4.1. Mechanics.
(a) Hansberger will, within thirty (30) days after receipt of
written notice that (i) VK/AC and the VK/AC Permitted Transferees hold in the
aggregate less than ten percent (10%) of HGI*s issued and outstanding Shares;
or (ii) the Requisite VK/AC Principal Shareholders have demanded registration
of Shares pursuant to Section 6.1 of this Shareholders* Agreement, give
written notice to VK/AC or the applicable VK/AC Permitted Transferees, as the
case may be, of Hansberger*s intent to exercise his option under this Section
4.
(b) Hansberger will, in the first instance, select the Expert
responsible for determining the Formula Price, and such Expert will determine
the Formula Price within thirty (30) days of Hansberger*s written notice of
his intent to exercise his option under this Section 4. If VK/AC or the
applicable VK/AC Permitted Transferees, as the case may be, disagree with the
Formula Price determined by the Expert selected by Hansberger, they will
notify Hansberger in writing to that effect, the Formula Price determined by
the Expert selected by Hansberger will be disregarded, and the Formula Price
will be determined as follows:
(i) Within fifteen (15) days of VK/AC*s or the applicable
VK/AC Permitted Transferees*, as the case may be, notice to Hansberger of its
or their disagreement with the Formula Price determined by the Expert selected
by Hansberger, VK/AC and the applicable VK/AC Permitted Transferees, as the
case may be, will select an Expert, and such Expert and the Expert selected by
Hansberger will, within fifteen (15) days of the last of their appointments,
together select a third Expert.
(ii) The three (3) Experts will each, within thirty (30)
days of the selection of the third Expert, make its estimate of the Formula
Price, and the Formula Price will be the average of the two (2) estimates that
differ the least from each other.
(c) Hansberger may exercise his option within thirty (30) days
of the determination of the Formula Price in accordance with Section 4.1(b)
above. If Hansberger elects not to or fails to give written notice of his
intent to exercise his option within the thirty (30) day period specified in
Section 4.1(a) above or to exercise his option within the thirty (30) day
period specified in this Section 4.1(c), the option will expire.
4.2. Certificates. HGI, on the surrender for cancellation of the
certificate or certificates representing all of the VK/AC Shares Transferred
to Hansberger, properly endorsed, will deliver to Hansberger a certificate for
the appropriate number of Shares with the legend set forth in Section 7 of
this Shareholders* Agreement printed on the certificate.
4.3. Expenses. VK/AC and the applicable VK/AC Permitted
Transferees, as the case may be, will pay the fees and expenses of any Expert
selected by them, Hansberger will pay the fees and expenses of any Expert
selected by him, and HGI will pay the fees and expenses of any *third* Expert
selected under Section 4.1(b) above; provided, however, that if for any reason
Hansberger, after having given notice of his intent to exercise his option
(which notice is not revoked or rescinded before the selection of any Experts
pursuant to Section 4.1(b)(i) above), elects not to or fails to exercise his
option within the thirty (30) day period specified in Section 4.1(c),
Hansberger will pay the fees and expenses of all Experts selected pursuant to
Section 4.1(b) above.
5. Formula Buy-Back. VK/AC or, on or after the Transition Date, the
VK/AC Representative, on behalf of VK/AC and the VK/AC Permitted Transferees,
as applicable, may request that HGI, by written notice received by HGI at
least one hundred twenty (120) days before November 15, 2000, purchase all of
the Shares then held by VK/AC and the VK/AC Permitted Transferees on such date
at an aggregate purchase price in cash equal to the Formula Price (as defined
in Section 3.1 above) multiplied by a fraction the numerator of which is the
number of such Shares and the denominator of which is the number of Shares
then issued and outstanding. For purposes of this Section 5, (a) the Formula
Price will be determined in accordance with the procedures set forth in
Section 4.1(b) above; (b) certificates will be delivered in accordance with
Section 4.2 above; and (c) VK/AC or the VK/AC Representative, on behalf of
VK/AC and the VK/AC Permitted Transferees, as applicable, and HGI will each
pay the fees and expenses of any Expert selected by it, and HGI will pay the
fees and expenses of any *third* Expert selected under Section 4.1(b).
Subject to the last sentence of this Section 5, Hansberger hereby agrees that,
if for any reason HGI is unwilling or unable to purchase the Shares held by
VK/AC and the VK/AC Permitted Transferees pursuant to this Section 5,
Hansberger will purchase such Shares on the same terms and pursuant to the
same procedures provided for above; provided, however, that, in consideration
for such Shares, Hansberger may, at his option, deliver to VK/AC or the VK/AC
Representative, as applicable, cash or a promissory note or notes, payable by
Hansberger to VK/AC and the VK/AC Permitted Transferees, as the case may be,
in the aggregate principal amount of such purchase price, substantially in the
form attached to this Shareholders* Agreement as Exhibit B. Neither VK/AC nor
the VK/AC Representative will be entitled to require that Hansberger purchase
the Shares held by VK/AC and the VK/AC Permitted Transferees pursuant to this
Section 5 if (i) VK/AC or the VK/AC Representative, on behalf of VK/AC and the
VK/AC Permitted Transferees, as applicable, has previously purchased the
Hansberger Shares pursuant Section 2.2 or Section 3 above; or (ii) Hansberger
has died or is Incapacitated.
6. Registration Rights.
6.1. Demand Registrations.
(a) Requests for Registration. At any time after the
earlier of (i) November 15, 2000; or (ii) the end of the first calendar
quarter in which HGI*s assets under management on a discretionary basis exceed
fifteen billion dollars ($15,000,000,000), (A) the holders of at least two
thirds of the Shares then held by VK/AC and its Permitted Transferees (each a
*Principal Shareholder*), if any (collectively, the *Requisite VK/AC Principal
Shareholders*), and (B) the holders of at least two thirds of the Shares then
held by Hansberger and his Permitted Transferees (each a *Principal
Shareholder*), if any (collectively, the *Requisite Hansberger Principal
Shareholders*), may each demand registration (a *Demand Registration*) under
the Securities Act of 1933, as amended (the *1933 Act*), of at least that
number of Registrable Securities (as defined in Section 6.7(a) below) held by
such Principal Shareholders as is, together with the Registrable Securities
requested to be included pursuant to Section 6.1(b), equal to fifteen percent
(15%) of the Shares then issued and outstanding. To accomplish such demand,
the Principal Shareholders requesting the Demand Registration (the *Requesting
Principal Shareholders*) will send written notice of the demand to HGI,
specifying the number of Registrable Securities sought to be registered. The
Requisite Hansberger Principal Shareholders and the Requisite VK/AC Principal
Shareholders each will have the right to one Demand Registration at HGI*s
expense pursuant to Section 6.1(c) below and the additional right to one
Demand Registration at their own expense pursuant to Section 6.1(c) below;
provided, however, that the Principal Shareholders as a group will not have
the right to more than one Demand Registration in any six (6) month period.
Notwithstanding anything to the contrary contained in this Section 6, no
Demand Registration may be made under this Section 6.1 either within three (3)
months after the effective date of the most recent registration statement
filed by HGI under the 1933 Act (other than registration statements on Forms
S-4, S-8, or any other form not available for registering the Registrable
Securities for sale to the public, or any successor to such forms) or if less
than fifty percent (50%) of the Registrable Securities held by the Requesting
Principal Shareholders are to be registered.
(b) Procedure. Within ten (10) days after receipt of such a
demand, HGI will give written notice of such requested registration to all
other holders of Registrable Securities and will include in such registration,
subject to the allocation provisions below, all other Registrable Securities
with respect to which HGI has received written requests for inclusion within
twenty (20) days after HGI*s mailing of such notice, plus any securities of
HGI that HGI chooses to include on its own behalf.
(c) Expenses. In a Demand Registration at HGI*s expense, HGI
will pay the Registration Expenses (as defined in Section 6.7(b) below), but
the Underwriting Commissions (as defined in Section 6.7(d) below) will be
shared by HGI and those holders of Registrable Securities whose Registrable
Securities are included in the Demand Registration in proportion to any
securities included on their behalf. In a Demand Registration at the
Requesting Principal Shareholders* expense, the Registration Expenses and
Underwriting Commissions will be shared by HGI and those holders of
Registrable Securities whose Registrable Securities are included in the Demand
Registration in proportion to any securities included on their
behalf.
(d) Priority on Demand Registrations. If a Demand
Registration is underwritten, and the managing underwriters advise HGI and the
Requesting Principal Shareholders in writing that in their opinion the number
of Registrable Securities requested to be included exceeds the number that can
be sold in such offering, at a price reasonably related to fair value, HGI
will allocate the securities to be included in such Demand Registration as
follows: first, the Registrable Securities requested to be registered by the
Requesting Principal Shareholders pro rata on the basis of the respective
Registrable Securities requested for sale by them; second, Registrable
Securities requested to be included in such Demand Registration by the
Registering Shareholders pursuant to Section 6.1(b), pro rata on the basis of
the Registering Shareholders* respective ownership interests in HGI; third,
any securities that HGI desires to include on its own behalf; and fourth, any
equity securities that other shareholders of HGI having piggyback rights have
requested HGI to include in such Demand Registration, pro rata on the basis of
such shareholders* respective ownership interests in HGI. A Demand
Registration will not be considered to be the Requesting Principal
Shareholders* Demand Registration under Section 6.1(a), and HGI will pay the
Registration Expenses of such Demand Registration, if the registration
statement requested by such Shareholders does not become effective for any
reason.
(e) Selection of Underwriters. If any Demand Registration is
underwritten, the selection of investment banker(s) and manager(s) and the
other decisions regarding the underwriting arrangements for the offering will
be made by HGI and the Requesting Principal Shareholders.
(f) Restrictions on Demand Registrations. HGI will not be
obligated to effect any Demand Registration within six (6) months after the
effective date of a previous Demand Registration or any registration in which
the Principal Shareholders were given piggyback rights pursuant to Section 6.2
below.
6.2. Piggyback Registrations.
(a) Right to Piggyback. Whenever HGI proposes to register
any of its securities under the 1933 Act (other than a Demand Registration),
whether on its behalf or on behalf of the holders of such securities, and the
registration form to be used may be used for the registration of Registrable
Securities (a *Piggyback Registration*), HGI will give prompt written notice
to all holders of Registrable Securities and will include in such Piggyback
Registration, subject to the allocation provisions below, all Registrable
Securities with respect to which HGI has received written requests for
inclusion within twenty (20) days of such notice. HGI will not select a form
of registration statement which imposes, for its use, limitations on the
maximum value or number of securities to be registered if these limitations
would preclude registration of the Registrable Securities that HGI has been
requested to include in such registration.
(b) Piggyback Expenses. In all Piggyback Registrations, HGI
will pay the Registration Expenses related to the Registrable Securities of
the Registering Shareholders (as defined in Section 6.7(c) below), but the
Registering Shareholders will pay the Underwriting Commissions related to
their Registrable Securities.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of HGI, and the
managing underwriters advise HGI in writing that in their opinion the number
of securities requested to be included in such registration exceeds the number
that can be sold in such offering, at a price reasonably related to fair
value, HGI will allocate the securities to be included as follows: First,
the securities HGI proposes to sell on its own behalf; second, Registrable
Securities requested to be included in such registration by the Registering
Shareholders, pro rata on the basis of the Registering Shareholders*
respective ownership interests in HGI; and third, any equity securities that
other shareholders of HGI having piggyback rights have requested HGI to
include in such Piggyback Registration, pro rata on the basis of such
shareholders* respective ownership interests in HGI.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is initiated as an underwritten secondary registration on behalf
of holders of HGI*s securities (other than a Demand Registration pursuant to
Section 6.1 above), and the managing underwriters advise HGI in writing that
in their opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering, at a price
reasonably related to fair value, HGI will allocate the securities to be
included as follows: first, the securities requested to be included by the
holders initiating such registration; and second, Registrable Securities
requested to be included in such registration by the Registering Shareholders,
pro rata on the basis of the Registering Shareholders* respective ownership
interests in HGI.
(e) Selection of Underwriters. If any Piggyback Registration
is underwritten, the selection of investment banker(s) and manager(s) and the
other decisions regarding the underwriting arrangements for the offering will
be made by HGI, if the registration is under Section 6.2(c) above, or by the
holders initiating such registration, if the registration is under Section
6.2(d) above.
6.3. Holdback Agreements. Neither HGI nor any holder of
Registrable Securities will effect any public sale or distribution of equity
securities of HGI or any securities convertible into or exchangeable or
exercisable for such securities during the seven (7) days prior to and the
ninety (90) days after any underwritten Demand Registration or underwritten
Piggyback Registration has become effective (except as part of such
underwritten registration).
6.4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to Section 6.1 or 6.2 of this Shareholders* Agreement, HGI will, as
expeditiously as possible:
(a) Prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements to such a registration statement
or prospectus, HGI will furnish each Registering Shareholder with copies of
all such documents proposed to be filed) as promptly as practical;
(b) Prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may be
necessary to keep such registration statement effective for a period of not
less than one hundred twenty (120) days;
(c) Furnish to each Registering Shareholder such number of
copies of such registration statement, each amendment and supplement to such
registration statement and the prospectus included in such registration
statement (including each preliminary prospectus), and such other documents as
such Registering Shareholder may reasonably request in order to facilitate the
disposition of the Registrable Securities held by such Registering
Shareholder;
(d) Use its best efforts to register or qualify such
Registrable Securities under such other securities or state *Blue Sky* laws of
such jurisdictions as the managing underwriter(s) may reasonably request;
(e) Notify each Registering Shareholder, at any time when a
prospectus relating to the registration statement is required to be delivered
under the 1933 Act within the period that HGI is required to keep the
registration statement effective, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements in such prospectus not misleading, and, at the request of any such
seller, HGI will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statement in such prospectus not
misleading;
(f) Cause all such Registrable Securities to be listed or
included on securities exchanges on which similar securities issued by HGI are
then listed or included;
(g) Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) Enter into such customary agreements (including an
underwriting agreement in customary form) and take such other customary
actions as may be reasonably necessary to expedite or facilitate the
disposition of such Registrable Securities;
(i) Obtain an opinion from counsel to HGI experienced in
securities law covering such matters of the type customarily covered in
opinions of issuer*s counsel;
(j) Obtain a *comfort* letter addressed to HGI from its
independent public accountants in customary form and covering such matters of
the type customarily covered by *comfort* letters; and
(k) Make available for inspection by any Registering
Shareholder, any underwriter participating in any disposition and any
attorney, accountant or other agent retained by any such seller or any
underwriter, all financial and other records, pertinent corporate documents
and properties of HGI, and cause HGI*s officers, directors and employees to
supply all information reasonably requested by any such seller or any such
underwriter, attorney, accountant or agent in connection with such
registration statement.
6.5. Indemnification.
(a) HGI hereby indemnifies, to the extent permitted by law,
each Principal Shareholder, its officers and directors, and each person who
controls such holder (within the meaning of the 1933 Act), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission
or alleged omission to state in such a registration statement, prospectus or
preliminary prospectus a material fact required to be stated in such a
registration statement, prospectus or preliminary prospectus or necessary to
make the statements in such a registration statement, prospectus or
preliminary prospectus not misleading except insofar as the same are caused by
or contained in any information furnished in writing to HGI by such holder
expressly for use in such a registration statement, prospectus or preliminary
prospectus or by any such holder*s failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements to the
registration statement or prospectus after HGI has furnished such holder with
a sufficient number of copies of the same. In connection with an
underwritten offering, HGI will indemnify the underwriters, their officers and
directors, and each person who controls such underwriters (within the meaning
of the 1933 Act) to the same extent as provided above with respect to the
indemnification of the Principal Shareholders.
(b) In connection with any registration statement in which a
Registering Shareholder is participating, each such holder will furnish to HGI
in writing such information as is reasonably requested by HGI for use in any
such registration statement or prospectus and will indemnify, to the extent
permitted by law, HGI, its directors and officers and each person who controls
HGI (within the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact or any omission or alleged omission of a material fact
required to be stated in the registration statement or prospectus or any
amendment or supplement to the registration statement or prospectus or
necessary to make the statements in the registration statement or prospectus
or any amendment or supplement to the registration statement or prospectus not
misleading, but only to the extent that such untrue statement or omission is
contained in information so furnished in writing by such holder specifically
for use in preparing the registration statement. Notwithstanding the
foregoing, the liability of a Registering Shareholder under this Section
6.5(b) will be limited to an amount equal to the net proceeds actually
received by the Registering Shareholder from the sale of Registrable
Securities covered by the registration statement.
(c) Any person entitled to indemnification under this Section
6 will (i) give prompt notice to the indemnifying party of any claim with
respect to which it seeks indemnification; and (ii) unless in such indemnified
party*s reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnified party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
such claim may be settled unless such settlement includes an unconditional
release of all indemnified parties, whether or not named in the claim. An
indemnifying party who is not entitled, or elects not, to assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) If the indemnification provided for in this Section 6.5 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or expense referred
to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, will contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage, liability or
expense, in such proportion as is appropriate to reflect the relative fault of
the indemnifying party, on the one hand, and of the indemnified party, on the
other hand, in connection with the statements or omissions that resulted in
such loss, claim, damage, liability or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the
parties* relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f)(1) of the Securities
Act) will be entitled to contribution from any person who was not guilty of
fraudulent misrepresentation.
6.6. Participation in Underwritten Registrations. No Registering
Shareholder may participate in any underwritten registration under this
Section 6 unless such holder (a) agrees to sell such holder*s securities on
the basis provided in any underwriting arrangements approved by the persons
entitled to approve such arrangements under Sections 6.1(e) above or 6.2(e)
above, and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
6.7. Definitions.
(a) The term *Registrable Securities* means (i) the Shares
held by VK/AC and VK/AC Permitted Transferees, (ii) the Hansberger Shares,
(iii) the Shares held by the Other Investors and their respective Permitted
Transferees (as defined in the shareholders* agreements between HGI, each such
Other Investor, and Hansberger), and (iv) any securities issued or to be
issued with respect to the shares referred to above by way of a share dividend
or share split or in con nection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been effectively registered under the
1933 Act and disposed of in accordance with the registration statement
covering them or are Transferred pursuant to Rule 144 (or any similar
provision then in force).
(b) The term *Registration Expenses* means all expenses
incident to HGI*s performance of or compliance with Section 6 of this
Shareholders* Agreement, including without limitation all registration and
filing fees, fees and expenses of compliance with securities or state *Blue
Sky* laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges or electronic
quotation systems, and fees and disbursements of counsel for HGI and of all
independent certified public accountants, underwriters (other than
Underwriting Commissions) and other persons retained by HGI.
(c) The term *Registering Shareholders* means registered
holders of Registrable Securities who request inclusion of all or a portion of
their shares of Registrable Securities in a Demand Registration pursuant to
Section 6.1(b) above or a Piggyback Registration pursuant to Section 6.2(a)
above.
(d) The term *Underwriting Commissions* means all underwriting
discounts or commissions relating to the sale of securities of HGI, but
excludes any expenses reimbursed to underwriters.
6.8. Limitations on Subsequent Registration Rights. From and after
the date of this Shareholders* Agreement, HGI may enter into an agreement with
any holder or prospective holder of any securities of HGI that would allow
such holder or prospective holder to include such securities in any
registration filed under Sections 6.1 or 6.2 of this Shareholders* Agreement.
However, HGI will not enter into any such agreement without the prior written
consent of the beneficial holders of a majority of the outstanding Registrable
Securities unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only
to the extent that the inclusion of its securities would not reduce the amount
of the Registrable Securities that the holders thereof would be entitled to
include in such registration.
7. Legend on Share Certificates. The certificates for all Shares held
by Shareholders which are currently outstanding or are at any time after the
date of this Shareholders* Agreement issued or Transferred will bear the
following legends, until (a) in the case of the first legend, such Shares are
validly Transferred to persons who are not parties to or otherwise bound or
required to be bound by this Shareholders* Agreement (whether by joinder or
otherwise) or in the case of a sale of such Shares pursuant to a Demand or
Piggyback Registration pursuant to Section 6, or this Shareholders* Agreement
is terminated; and (b) in the case of the second legend below, such Shares
have been registered under the Securities Act or, subject to the provisions of
this Shareholders* Agreement, as applicable, sold pursuant to Rule 144 or
Regulation A thereunder:
*THIS CERTIFICATE AND THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT IN ALL RESPECTS TO THE PROVISIONS OF A SHAREHOLDERS*
AGREEMENT, DATED AS OF MAY 13, 1996, BY AND AMONG HANSBERGER
GLOBAL INVESTORS, INC. (THE *COMPANY*), VK/AC HOLDING, INC., AND
THOMAS L. HANSBERGER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY, WHICH SHAREHOLDERS* AGREEMENT, AMONG OTHER
THINGS, IMPOSES VARIOUS RESTRICTIONS ON THE TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, GIFT, PLACEMENT IN TRUST
(VOTING OR OTHERWISE), OR OTHER ENCUMBRANCE OR DISPOSAL OF AN
INTEREST IN, DIRECTLY OR INDIRECTLY AND WHETHER OR NOT
VOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE, THE COMPANY*S
COMMON STOCK, PAR VALUE $.01 PER SHARE (THE *COMMON STOCK*), AND
GRANTS TO CERTAIN SHAREHOLDERS OF THE COMPANY CERTAIN OPTIONS TO
PURCHASE AND SELL SHARES OF THE COMPANY*S COMMON
STOCK.*
*THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE. THE SHARES MAY NOT BE OFFERED FOR SALE,
TRANSFERRED OR RESOLD IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH LAWS.*
Any Transfer of any Shares will be reflected on the books of HGI only in
accordance with the provisions of this Shareholders* Agreement and the
provisions of Delaware law.
8. Specific Performance. The parties recognize that the obligations
imposed on them in this Shareholders* Agreement are special, unique, and of
extraordinary character, and that, in the event of breach by any party,
damages will be an insufficient remedy. Consequently, it is agreed that the
parties to this Shareholders* Agreement may have specific performance (in
addition to damages) as a remedy for the enforcement of this Shareholders*
Agreement without proving damages.
9. Arbitration. Any controversy or claim arising out of, or relating
to, this Shareholders* Agreement, or the breach of this Shareholders*
Agreement, will be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction over such a controversy or claim. The place of arbitration will
be Fort Lauderdale, Florida. Any determinations made by the arbitrators will
be final and binding on all of the parties to this Shareholders* Agreement and
their permitted successors and assigns.
10. Reporting to Facilitate Regulatory Disclosures. In order to
facilitate HGI*s compliance with disclosure and other obligations to which it
is subject under Federal and applicable state law, each Shareholder agrees to
notify HGI promptly in writing of any information or change in information
relating to that Shareholder that HGI is required to disclose in its Uniform
Application for Investment Adviser Registration on Form ADV, as amended from
time to time.
11. Miscellaneous.
11.1. Waivers and Amendments. No waiver by any party of any
condition, or the breach of any term or covenant contained in this
Shareholders* Agreement, whether by conduct or otherwise, in any one or more
instances, will be deemed or construed as a further or continuing waiver of
any such condition or breach or a waiver of any other condition. No provision
of this Shareholders* Agreement may be waived without a written instrument
signed by the waiving party. This Shareholders* Agreement may not be changed,
amended, discharged or terminated other than by an agreement in writing signed
by HGI, the Requisite Hansberger Principal Shareholders, and the Requisite
VK/AC Principal Shareholders.
11.2. Governing Law. This Shareholders* Agreement and all
questions relating to its validity, interpretation, performance and
enforcement will be governed by and construed in accordance with the internal
laws of the State of Delaware.
11.3. Permitted Successors and Assigns. Except as otherwise
expressly provided in this Shareholders* Agreement, the terms and conditions
of this Shareholders* Agreement will be binding on the parties to this
Shareholders* Agreement and to their respective representatives, permitted
successors and assigns, but rights and interests under this Shareholders*
Agreement will be assignable only in accordance with, and to the extent
expressly permitted in, this Shareholders* Agreement. Nothing in this
Shareholders* Agreement, express or implied, is intended to confer on any
party other than the parties to this Shareholders* Agreement or their
respective permitted successors and assigns any rights, remedies, obligations
or liabilities under or by reason of this Shareholders* Agreement.
11.4. Entire Agreement. This Shareholders* Agreement and the
other agreements and documents delivered pursuant to this Shareholders*
Agreement constitute the full and entire understanding and agreement among the
parties with regard to the subject of this Shareholders* Agreement and of such
other agreements and documents, and supersede all prior agreements,
understandings, inducements or conditions, express or implied, oral or
written, with respect to the subject of this Shareholders* Agreement and of
such other agreements and documents.
11.5. Notices. Unless otherwise provided, all notices, requests,
demands and other communications required or permitted under this
Shareholders* Agreement will be in writing and will be deemed to have been
duly made and received: (i) upon personal delivery or confirmed facsimile to
the party to be notified; (ii) three (3) business days after deposit with the
United States Post Office, by certified or registered mail or by first class
mail, postage prepaid, addressed as set forth below; or (iii) one (1) business
day after deposit with Federal Express or another reputable overnight courier
(for next business day delivery), shipping prepaid, addressed as set forth
below:
(a) If to HGI, then to:
Hansberger Global Investors, Inc.
515 East Las Olas Boulevard
Fort Lauderdale, FL 33301
Attn: Thomas L. Hansberger
Chairman and Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
Attn: Kathryn B. McGrath, Esquire
(b) If to VK/AC, then to:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attn: Ronald A. Nyberg, Esquire
with a copy to each of:
The Clayton & Dubilier Private Equity Fund IV Limited
Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attn: Clayton & Dubilier Associates IV Limited
Partnership
Attn: Mr. Alberto Cribiore
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: Woodrow W. Campbell, Esquire
Either party may change the address to which communications are to be sent by
giving two (2) business days* advance notice of such change of address to the
other party in conformity with the provisions of this Section providing for
the giving of notice.
11.6. Headings. The headings contained in this Shareholders*
Agreement have been inserted for convenience of reference only, and neither
such headings nor the placement of any term of this Shareholders* Agreement
under any particular heading will in any way restrict or modify any of the
terms or provisions of this Shareholders* Agreement.
11.7. Severability. The provisions of this Shareholders*
Agreement will be deemed severable, and if any part of any provision is held
to be illegal, void, voidable, invalid, nonbinding or unenforceable, in its
entirety or partially, or as to any party, for any reason, such provision may
be changed, consistent with the intent of the parties to this Shareholders*
Agreement, to the extent reasonably necessary to make the provision, as so
changed, legal, valid, binding and enforceable. If any provision of this
Shareholders* Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable, in its entirety or partially, or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties to this Shareholders* Agreement to make it fully legal,
valid, binding and enforceable, then such provision will be stricken from this
Shareholders* Agreement, and the remaining provisions of this Shareholders*
Agreement will not in any way be affected or impaired, but will remain in full
force and effect.
11.8. Survival. The provisions of Sections 6.5, 8, 9, 10 and 11
of this Shareholders* Agreement will survive the Transfer by a Shareholder of
all Shares held by such Shareholder and the termination of this Shareholders*
Agreement.
11.9. Execution; Counterparts. This Shareholders* Agreement may
be executed in any number of counterparts, each of which will be deemed to be
an original as against any party whose signature appears on such counterpart,
and all of which will together constitute one and the same instrument. This
Shareholders* Agreement will become binding when one or more counterparts of
this Shareholders* Agreement, individually or taken together, bear the
signatures of all of the parties to this Shareholders* Agreement.
IN WITNESS WHEREOF, the parties have caused this Shareholders*
Agreement to be duly executed and delivered as of the day and year first
written above.
HANSBERGER GLOBAL INVESTORS, INC.
By: /s/ Thomas L. Hansberger
Thomas L. Hansberger
Chairman and Chief Executive Officer
/s/ Thomas L. Hansberger
THOMAS L. HANSBERGER
VK/AC HOLDING, INC.
By: /s/ Ronald A. Nyberg
Ronald A. Nyberg, Esquire
Executive Vice President and General Counsel
EXHIBIT A
FORM OF SHAREHOLDER LETTER
Board of Directors
Hansberger Global Investors, Inc.,
Dear Sirs:
The undersigned (i) [is the VK/AC Representative] [is a VK/AC Permitted
Transferee] [is a Hansberger Permitted Transferee] (as defined in the
Shareholders* Agreement, dated as of May 13, 1996, by and among Hansberger
Global Investors, Inc., VK/AC Holding, Inc., and Thomas L. Hansberger (the
*Shareholders* Agreement*), and (ii) hereby agrees to become, and by signing
below hereby is, a party to the Shareholders* Agreement and agrees to be bound
by all of the terms and provisions thereof applicable to the undersigned.
This election will be binding on the executor, administrator, legal
representative, trustee, guardian, receiver, successor, or assignee of the
undersigned, as applicable.
Very truly yours,
EXHIBIT B
FORM OF PROMISSORY NOTE
THOMAS L. HANSBERGER
$_________.00 __________ __, ____
FOR VALUE RECEIVED, the undersigned, THOMAS L. HANSBERGER, an individual
residing at ________________ (*Hansberger*), hereby promises to pay to the
order of _______________________________ (*Holder*), the principal sum of
___________ dollars ($_________.00) with interest on the unpaid principal sum
from the date of the delivery of this Note at the prime rate of interest per
annum as published in The Wall Street Journal (Eastern Edition) on the date of
issuance of this Note (which interest rate is __.__%). If the date of
issuance of this Note falls on a Saturday or Sunday, then the interest rate on
this Note will be the prime rate of interest as published in the Wall Street
Journal (Eastern Edition) on the Friday immediately preceding the date of
issuance of this Note.
This Note is issued in accordance with and subject to the additional
terms and conditions herein set forth.
1. Principal on this Note will be repaid in cash three (3) years from
the date of this Note (the *Payment Date*). Interest on the outstanding
principal amount of this Note will be payable in cash semi-annually with the
first Interest Payment being payable six (6) months from the date of this
Note.
2. This Note is the Promissory Note referred to in Sections 4 and 5
of the Shareholders* Agreement, dated as of the 13th day of May, 1996 by and
among Hansberger Global Investors, Inc., VK/AC Holding, Inc., and
Hansberger.
3. Hansberger, at his election, may prepay all or any part of the
principal amount hereof, without penalty but with all interest accrued on the
amount of such prepayment to the date thereof, by giving to Holder not less
than five (5) calendar days prior written notice, which notice shall be
irrevocable, specifying the date on which such prepayment will be made and the
amount of principal and interest, respectively, to be prepaid.
4. If Hansberger fails to pay to Holder the accrued interest or
principal due on this Note on or prior to any interest payment date or the
repayment date specified in the notice described in Paragraph 3 hereof, as the
case may be, Hansberger will be deemed to be in default, and Holder will have
the right to accelerate the Note (in the case of any non-payment of interest,
if such default continues for a period of ten (10) days from the earlier of
the day on which Hansberger (i) has received written notice from Holder of
such default, or (ii) knows or, with the exercise of reasonable diligence,
should have known of such default) and if accelerated, all outstanding
principal of and accrued interest on this Note will become immediately due and
payable to Holder. Notwithstanding the ten (10) day cure period above, in the
case of the death of Hansberger, the legal representative of Hansberger*s
estate (the *Hansberger Representative*) will have thirty (30) days to cure
any default in the payment of accrued interest or principal due on this Note
on any interest payment date or repayment date specified in the notice
described in Paragraph 3 hereof occurring after the appointment of the
Hansberger Representative, or thirty (30) days after the appointment of the
Hansberger Representative to cure any such default occurring after
Hansberger*s death but prior to the appointment of the Hansberger
Representative, before Holder will have the right to accelerate the Note.
Holder will have the right to accelerate the payment of the principal of and
accrued but unpaid interest on the Note if, in the event of Hansberger*s
death, the Hansberger Representative fails at any time to maintain in
Hansberger*s estate assets sufficient to repay (i) on the Payment Date the
principal of and accrued but unpaid interest on the Note; and (ii) all other
liabilities to which such estate may be subject. The Hansberger
Representative will give the Holder prompt (but not less than five business
days*) prior written notice of any distribution of assets that might cause the
assets in Hansberger*s estate to be insufficient to satisfy such repayment
obligations and other liabilities. Holder will have the right to accelerate
the payment of the principal of and accrued but unpaid interest on the Note if
Hansberger should become insolvent or make a general assignment for the
benefit of creditors, or file a petition in bankruptcy, or if a petition in
bankruptcy should be filed against him, or if a receiver of substantially all
the Hansberger*s property or assets should be appointed and such petition or
appointment is not vacated or otherwise stayed within sixty (60) days
thereafter.
5. No failure or delay by Holder to insist on the strict performance
of any term hereof or to exercise any right, power or remedy consequent on a
breach thereof and no acceptance of any prepayment of principal or accrued
interest on account of this Note during the continuance of any such breach,
will constitute a waiver of any such term or of any such breach; nor will any
single or partial exercise by Holder of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. No waiver of
any breach will affect or alter this Note, which will continue in full force
and effect.
6. All terms of this Note will be binding on and inure to the benefit
of and be enforceable by the successors and assigns of Hansberger or Holder,
as the case may be.
7. This Note will be governed, construed and interpreted strictly in
accordance with the internal laws of the State of Delaware. Both Hansberger
and Holder agree to stipulate in any future proceeding that this Note is to be
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Delaware, even if it was, in fact,
executed and delivered elsewhere.
8. All notices, requests and demands will be given to or made on
Hansberger at his address set forth herein or at such other address as may
have been furnished in writing by Hansberger to Holder. All notices, requests
and demands given or made in accordance with the provisions of this Note will
be deemed to have been given or made three business days after deposited in
the mails postage prepaid, by certified or registered mail or, if sent by
Federal Express, Airborne Courier or other reputable overnight courier, one
business day after such sending.
9. On the receipt of evidences of the loss, theft, destruction or
mutilation of this Note and, in the case of any such loss, theft and/or
destruction, on receipt of indemnification reasonably satisfactory to
Hansberger and, in the case of any such mutilation, on surrender and
cancellation of this Note, Hansberger will make and deliver in lieu thereof, a
new note of like tenor and in the aggregate principal amount equal to the
principal amount of this Note at the time of such loss, theft or destruction,
or at the time of such surrender in the case of the mutilation thereof.
10. If the interest rate payable on this Note is determined to exceed
the maximum rate of interest permitted by applicable law, the rate of interest
payable on this Note will be reduced to the maximum rate of interest permitted
by applicable law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed on
the date first above written.
Thomas L. Hansberger
<TABLE>
VK/AC HOLDING, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(In 000's except per share data)
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------------- ----------------------------------------------
1996 1995 1996 1995
---------------------- ---------------------- ---------------------- -----------------------
Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $13,894 $13,894 $6,582 $6,582 29,053 29,053 12,450 12,450
Less Accretion to Redemption Value (14,888) (14,888) 0 0 (14,888) (14,888) (1,620) (1,620)
---------------------- ---------------------- ---------------------- -----------------------
Net Income (Loss) Available to
Common Stockholders (994) (994) 6,582 6,582 14,165 14,165 10,830 10,830
---------------------- ---------------------- ---------------------- -----------------------
Weighted Average Common Shares 2,434 2,434 2,410 2,410 2,434 2,434 2,406 2,406
Effect of Stock Options Calculated
According to Treasury Stock Method 145 180 93 93 145 181 98 98
Preferred Shares Convertible into
Common Shares 33 33 33 33 33 33 33 33
---------------------- ---------------------- ---------------------- -----------------------
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding 2,612 2,647 2,536 2,536 2,612 2,648 2,537 2,537
---------------------- ---------------------- ---------------------- -----------------------
Earnings (Loss) Per Share ($0.38) ($0.38) $2.60 $2.60 $5.42 $5.35 $4.27 $4.27
===================== ====================== ====================== ======================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CAPTION>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 11183 11183
<SECURITIES> 44391 44391
<RECEIVABLES> 52969 52969
<ALLOWANCES> 0 0
<INVENTORY> 75285 75285
<CURRENT-ASSETS> 0<F1> 0
<PP&E> 22452 22452<F1>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1058538 1058538
<CURRENT-LIABILITIES> 0<F1> 0<F1>
<BONDS> 150000 150000
0 0
6500 6500
<COMMON> 46105 46105
<OTHER-SE> 354536 354536
<TOTAL-LIABILITY-AND-EQUITY> 1058538 1058538
<SALES> 0 0
<TOTAL-REVENUES> 86097 168328
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9024 18432
<INCOME-PRETAX> 22060 43132
<INCOME-TAX> 8994 17596
<INCOME-CONTINUING> 13066 25536
<DISCONTINUED> 828 1482
<EXTRAORDINARY> 0 2035
<CHANGES> 0 0
<NET-INCOME> 13894 29053
<EPS-PRIMARY> (0.38) 5.42
<EPS-DILUTED> (0.38) 5.35
<FN>
<F1>
Industry does not use a classified balance sheet.
</FN>
</TABLE>
