SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary information statement [ ]Confidential, for use of the Commission
only (as permitted by Rule 14c-5(d)(2))
[X] Definitive information statement
DUFF & PHELPS CREDIT RATING CO.
--------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, no par value per share
(2) Aggregate number of securities to which transaction applies:
5,699,826
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
$100.00
(4) Proposed maximum aggregate value of transaction:
542,384,556
(5) Total fee paid:
$108,477
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filings.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
Date Filed:
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PRELIMINARY INFORMATION STATEMENT
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Tel: (312) 368-3100; Fax: (312) 422-4121
May 11, 2000
Dear Fellow Stockholder,
The attached Notice of Special Meeting of Stockholders and Information
Statement are being furnished to you in connection with a special meeting of
stockholders (the "Special Meeting") of Duff & Phelps Credit Rating Co., an
Illinois corporation (the "Company"), which will be held on June 1, 2000 at the
Company's New York offices located at 17 State Street (12th Floor), New York,
N.Y. 10004 commencing at 10:00 a.m. local time.
We are holding this meeting to obtain stockholder approval of an
Agreement and Plan of Merger, as amended (the "Merger Agreement"), approved by
the board of directors of the Company on March 6, 2000 providing for the merger
of FSA Acquisition Corp. ("Purchaser") with and into the Company ("Merger").
Under the Merger Agreement, each share of Duff & Phelps' outstanding common
stock, other than shares owned in Duff & Phelps' treasury or held by Purchaser,
Fimalac, Inc., a Delaware corporation, or Fimalac S.A., a societe anonyme
organized under the laws of the Republic of France ("Parent") (or any direct or
indirect wholly owned subsidiary thereof), or shares with respect to which
dissenters' rights are properly exercised under Illinois law, will be converted
into the right to receive $100.00 in cash.
The Merger is the second and final step of the acquisition of the
Company by Parent. The first step was a tender offer by Purchaser, which is a
subsidiary of Parent, for the outstanding shares of common stock of the Company
(the "Shares") at $100.00 per Share in cash. Purchaser acquired approximately
4,495,179 of the Company's outstanding Shares pursuant to the tender offer,
which expired at 12:00 midnight, New York City time, on April 11, 2000.
The affirmative vote of a majority of the outstanding shares of common
stock of the Company entitled to vote will be necessary to approve the Merger
Agreement. As a result of the consummation of Purchaser's tender offer,
Purchaser owns and has the right to vote a sufficient number of outstanding
shares such that approval of the Merger Agreement at the Special Meeting is
assured without the affirmative vote of any other stockholder.
You are welcome to attend the special meeting; however, you are not
being asked for a proxy and are requested not to send one. The accompanying
Information Statement explains the terms of the Merger. Please read the
accompanying Information Statement carefully.
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We appreciate your loyalty and support as a stockholder of our Company
in the past and as we move forward with this transition to a new ownership.
Sincerely,
/s/ Marc Ladreit de Lacharriere
-------------------------------
Marc Ladreit de Lacharriere
Chairman and Chief Executive Officer
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Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2000
To the Stockholders of Duff & Phelps Credit Rating Co.:
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting")
of stockholders of Duff & Phelps Credit Rating Co. (the "Company") will be held
on June 1, 2000 at 10:00 a.m. local time, at 17 State Street (12th Floor), New
York, N.Y. 10004, for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger dated as of March 6, 2000, as
amended by Amendment No. 1 dated as of May 4, 2000 ("Merger
Agreement") (copies of which are attached as Exhibit A to the
accompanying Information Statement) providing for the merger
of FSA Acquisition Corp., a Delaware corporation and an
indirect substantially wholly owned subsidiary of Fimalac
S.A., a societe anonyme organized under the laws of the
Republic of France, with and into the Company.
2. To consider and act upon any other business that may be
properly brought before the Special Meeting or any adjournment
or postponement thereof.
You are cordially invited to attend the Special Meeting; however,
proxies are not being solicited for the Special Meeting. If you wish to vote
your Shares, you or your representative must be present in person at the Special
Meeting.
Stockholders of the Company will be entitled to assert dissenters'
rights under Sections 11.65 and 11.70 of the Illinois Business Corporation Act
of 1983, as amended, which are attached as Exhibit B to the accompanying
Information Statement. In order to assert such rights, a stockholder is required
to adhere strictly to certain statutory requirements. Stockholders intending to
exercise their dissenters' rights must deliver to the Company, before the taking
of the vote at the Special Meeting, a written demand for payment for his or her
outstanding shares of common stock of the Company if the merger is consummated
and may not vote in favor of the merger. You are urged to review Exhibit B in
its entirety.
Neither the Company nor its management is soliciting your proxy and you
are requested not to send one.
By order of the board of directors,
/s/ Marie Becker
----------------
Marie Becker
Secretary
Chicago, Illinois
Dated: May 11, 2000
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DUFF & PHELPS CREDIT RATING CO.
55 EAST MONROE STREET
CHICAGO, ILLINOIS 60603
INFORMATION STATEMENT
This Information Statement is being furnished to holders of shares of
common stock, no par value, of Duff & Phelps Credit Rating Co. ("Shares"), an
Illinois corporation (the "Company"), in connection with a special meeting of
stockholders (the "Special Meeting") to be held on June 1, 2000, at 17 State
Street (12th Floor), New York, N.Y. 10004, commencing at 10:00 a.m. local time.
At the Special Meeting, stockholders will consider and vote on a proposal to
approve and adopt an Agreement and Plan of Merger approved by the board of
directors of the Company on March 6, 2000, as amended by Amendment No. 1 on May
4, 2000 ("Merger Agreement"), providing for, among other things, the merger (the
"Merger") of FSA Acquisition Corp., a Delaware corporation (the "Purchaser"),
with and into the Company. As a result of the Merger, you will receive $100.00
in cash for each Share you own, and the Company will become an indirect
substantially wholly owned subsidiary of Fimalac S.A., a societe anonyme
organized under the laws of the Republic of France.
The Merger is the final step of the acquisition of the Company by
Parent. The first step was a tender offer (the "Offer") commenced by Purchaser
on March 15, 2000 for all of the outstanding Shares at a purchase price of
$100.00 per Share, net to the seller in cash. Pursuant to the Offer, which
expired at 12:00 midnight, New York City time, on April 11, 2000, Purchaser
acquired 4,495,179 Shares.
Purchaser currently beneficially owns approximately 97% of the
outstanding Shares. Because Purchaser will vote all Shares it beneficially owns
in favor of the Merger Agreement, approval is assured, and the board of
directors of the Company is not soliciting your proxy.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is being first mailed to stockholders on May
11, 2000.
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TABLE OF CONTENTS
SUMMARY TERM SHEET.............................................................8
THE PARTIES...................................................................12
THE SPECIAL MEETING...........................................................13
Place, Date and Time.................................................13
Purpose of the Special Meeting.......................................13
Matters to be Considered at the Meeting; Effect of Approval
of the Merger Agreement............................................13
Record Date; Voting at the Meeting...................................13
Vote Required........................................................14
Approval Assured.....................................................14
Procedures for Exchange of Certificates..............................15
SPECIAL FACTORS...............................................................16
BACKGROUND OF THE MERGER......................................................16
REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARD OF
DIRECTORS............................................................20
OPINION OF P.J. SOLOMON.......................................................22
CERTAIN EFFECTS OF THE MERGER.................................................24
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.................................25
THE MERGER AGREEMENT..........................................................26
Company Stock Options................................................26
Effective Time.......................................................26
Representations and Warranties.......................................26
No Solicitation of Transactions......................................28
Directors and Officers of the Company Following the Merger...........29
Indemnification......................................................30
Conditions to Consummation of the Merger.............................31
Termination..........................................................31
Fees and Expenses....................................................33
OTHER MATTERS.................................................................33
Conduct of the Business of the Company After the Merger..............33
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Regulatory Matters...................................................34
Dissenters' Rights...................................................35
Financing............................................................36
Expenses of the Transaction..........................................37
INTERESTS OF CERTAIN PERSONS IN THE MERGER....................................37
FEES PAYABLE TO P.J. SOLOMON..................................................38
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY..............................................................38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...............................39
TRANSACTIONS BETWEEN PARENT AND THE COMPANY...................................41
ACCOUNTING TREATMENT..........................................................41
WHERE YOU CAN FIND MORE INFORMATION...........................................41
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SUMMARY TERM SHEET
A special meeting of the stockholders of Duff & Phelps Credit Rating
Co. is being called at which the stockholders will consider and vote on the
merger of FSA Acquisition Corp., which owns approximately 97% of the outstanding
shares of Duff & Phelps Credit Rating Co., with and into Duff & Phelps Credit
Rating Co. WE ARE NOT ASKING YOU FOR A PROXY IN CONNECTION WITH THE SPECIAL
MEETING AND YOU ARE REQUESTED NOT TO SEND US A PROXY. The following are some of
the questions that you, as a stockholder of Duff & Phelps Credit Rating Co., may
have and the answers to those questions. We urge you to read carefully the
remainder of this information statement because the information in this summary
term sheet is not complete. Additional important information is contained in the
remainder of this information statement.
WHEN AND WHERE IS THE SPECIAL MEETING? WHAT IS THE PURPOSE OF THE SPECIAL
MEETING?
The special meeting of stockholders of Duff & Phelps Credit Rating Co.
is being held on June 1, 2000, at 17 State Street (12th Floor), New York, N.Y.
10004 for the purpose of considering and voting to approve the merger of FSA
Acquisition Corp. with and into Duff & Phelps Credit Rating Co., following which
FSA Acquisition Corp. will cease to exist and Duff & Phelps Credit Rating Co.
will be the surviving corporate entity. See "THE SPECIAL MEETING".
WHAT IS THE HISTORY OF THE MERGER?
The merger is the second and final step of the acquisition of Duff &
Phelps Credit Rating Co. by Fimalac S.A., a French societe anonyme, acting
through its indirect substantially wholly owned subsidiary, FSA Acquisition
Corp. The first step was a tender offer commenced by FSA Acquisition Corp. on
March 15, 2000 for all of the outstanding shares of common stock of Duff &
Phelps Credit Rating Co. The tender offer expired at midnight, New York City
time, on April 11, 2000, and FSA Acquisition Corp. acquired in the tender offer
approximately 97% of the outstanding shares of Duff & Phelps Credit Rating Co.
Following the consummation of the merger, Duff & Phelps Credit Rating Co. will
be an indirect substantially wholly owned subsidiary of Fimalac S.A. See
"BACKGROUND OF THE MERGER".
WHO ARE FSA ACQUISITION CORP. AND FIMALAC S.A.?
FSA Acquisition Corp. is a Delaware corporation that has carried on no
business other than in connection with its recent tender offer to purchase all
of the outstanding shares of common stock of Duff & Phelps Credit Rating Co. FSA
Acquisition Corp. is indirectly substantially wholly owned by Fimalac S.A., a
French societe anonyme. Fimalac S.A. is a diversified French corporation engaged
principally in activities aimed at providing products and services to the
business sector, including credit rating services through its Fitch IBCA
subsidiaries. See "THE PARTIES".
WHAT WILL HAPPEN TO MY SHARES UPON THE MERGER?
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Upon the proposed merger of FSA Acquisition Corp. with and into Duff &
Phelps Credit Rating Co., each share of common stock of Duff & Phelps Credit
Rating Co. held by you will be converted into the right to receive $100.00, net
to you, in cash, and you will cease to have any ownership interest in, or any
rights as a stockholder of, Duff & Phelps Credit Rating Co. See "CERTAIN EFFECTS
OF THE MERGER".
HOW DO I RECEIVE THE MERGER CONSIDERATION?
Promptly after the merger becomes effective, Harris Trust Company of
New York, the depositary, will send you a letter of transmittal containing
instructions for the surrender by you of certificates representing shares. In
order to receive the payment to which you are entitled, you must surrender your
share certificate(s) together with a duly executed and properly completed letter
of transmittal (and any other documents that may be required) as instructed in
the letter of transmittal. Do not send your share certificates at this time;
wait for instructions from Fimalac S.A. or Harris Trust Company of New York
after the merger becomes effective. See "THE SPECIAL MEETING -- Procedures for
Exchange of Certificates".
WHAT WILL HAPPEN TO ANY OPTIONS TO PURCHASE SHARES HELD BY ME UPON THE MERGER?
Any options to purchase shares held by you became immediately
exercisable at the time FSA Acquisition Corp. purchased shares pursuant to the
tender offer. Any option to purchase shares held by you that has not been
exercised by you prior to the date on which the merger becomes effective will be
automatically canceled and you will be entitled to receive from Duff & Phelps
Credit Rating Co. for each share previously subject to the option an amount in
cash, less applicable withholding taxes, equal to any excess of $100.00 over the
exercise price of the option. See "THE MERGER AGREEMENT-- Company Stock
Options".
ARE THERE ANY CONDITIONS TO THE MERGER?
Yes. The obligations of each party to effect the merger is subject to
the satisfaction or waiver of various conditions at or prior to the time at
which the merger becomes effective, including the vote of the stockholders of
Duff & Phelps Credit Rating Co. and other customary closing conditions. In
addition, FSA Acquisition Corp. is not required to effect the merger if certain
representations and warranties made by Duff & Phelps Credit Rating Co. in the
merger agreement were not truthful when made. See "THE MERGER AGREEMENT --
Conditions to Consummation of the Merger".
WHAT DOES THE BOARD OF DIRECTORS OF DUFF & PHELPS CREDIT RATING CO. THINK OF
THE MERGER?
The board of directors of Duff & Phelps Credit Rating Co. has
unanimously approved the merger agreement, as amended, and (1) determined that
the merger and the merger agreement are advisable, fair to, and in the best
interest of, Duff & Phelps Credit Rating Co., (2) approved the merger and the
merger agreement and declared their advisability and (3) recommended that its
stockholders approve and adopt the merger and the merger agreement. See "THE
BOARD'S RECOMMENDATION".
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WHAT DID THE BOARD OF DIRECTORS OF DUFF & PHELPS CREDIT RATING CO. CONSIDER IN
MAKING ITS RECOMMENDATION?
In making its recommendation in favor of the merger, the board of
directors of Duff & Phelps Credit Rating Co. considered a number of factors,
including the consideration to be paid in the merger and the fact the $100.00
per share to be paid to the stockholders of Duff & Phelps Credit Rating Co. is
approximately 27% higher than the closing stock price per share on March 6,
2000, the day on which the board of directors of Duff & Phelps Credit Rating Co.
approved the sale of Duff & Phelps Credit Rating Co. to FSA Acquisition Corp.
The board of directors of Duff & Phelps Credit Rating Co. also considered the
opinion of its financial advisor, Peter J. Solomon Company Limited, that the
$100.00 per share cash consideration to be paid to the stockholders of Duff &
Phelps Credit Rating Co. is fair, from a financial point of view, to the
stockholders. See "REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARD OF
DIRECTORS".
HOW MANY VOTES ARE REQUIRED TO APPROVE THE MERGER?
The approval of the merger will require the vote of the holders of a
majority of the outstanding shares, with holders of shares being entitled to one
vote per share held by them on April 14, 2000, which is the record vote for the
meeting. See "THE SPECIAL MEETING -- Record Date; Voting at the Meeting" and
"THE SPECIAL MEETING -- Vote Required".
WILL MY VOTE HAVE ANY EFFECT ON WHETHER THE MERGER IS APPROVED?
No. FSA Acquisition Corp. owns approximately 97% of the outstanding
shares, and therefore has sufficient voting power to constitute a quorum at the
special meeting and to approve all matters to be considered at the special
meeting, regardless of the presence or vote of any other stockholder. FSA
Acquisition Corp. will vote all shares it owns in favor of the merger. As a
result, the merger will be approved and adopted at the special meeting even if
no stockholder other than FSA Acquisition Corp. votes in favor of the merger.
See "THE SPECIAL MEETING -- Approval Assured".
HOW DO I VOTE IF I WISH TO VOTE?
If you wish to vote your shares, you or your representative must be
present in person at the special meeting to be held on June 1, 2000 at 10:00
a.m. local time.
WHAT IF I DO NOT AGREE WITH THE MERGER OR THE AMOUNT TO BE PAID TO ME FOR EACH
SHARE? DO I HAVE THE RIGHT TO DISSENT?
You are entitled to assert dissenters' rights under Illinois law. In
order to assert such rights, you must deliver to Duff & Phelps Credit Rating Co.
prior to the time at which the vote is taken at the special meeting a written
demand for payment for your shares in the event the merger is consummated, and
you may not vote in favor of the merger at the special meeting. Following a
demand for payment, Duff & Phelps Credit Rating Co. will provide you with an
estimate of the fair value of the shares with supporting documentation and will
agree to purchase your shares at the estimated fair value of the shares. If you
do not agree with the estimated fair value of the shares,
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Illinois law provides procedures pursuant to which you may obtain an appraisal
of the value of the shares. See "OTHER MATTERS -- Dissenters' Rights".
HOW WILL I BE TAXED ON THE MERGER?
The receipt of cash for shares in the merger will be a taxable
transaction for U.S. federal income tax purposes (and may also be a taxable
transaction under applicable state, local or other tax laws). In general, a
stockholder will recognize gain or loss for such purposes equal to the
difference between the amount of cash received pursuant to the merger and such
stockholder's adjusted tax basis in the shares. The foregoing may not be
applicable to a stockholder who acquired shares pursuant to the exercise of
employee stock options or certain other stockholders. See "UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES".
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE MERGER?
If you have any questions about the merger, please call Marie Becker,
Secretary of Duff & Phelps Credit Rating Co., at (312) 368-3100.
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Throughout this Information Statement, the term "Merger" means the
merger of FSA Acquisition Corp., a Delaware corporation (the "Purchaser"), with
and into Duff & Phelps Credit Rating Co., an Illinois corporation (the
"Company"), with the Company being the surviving corporation. The term "Merger
Agreement" means the Agreement and Plan of Merger among Fimalac S.A., a French
societe anonyme, Fimalac, Inc., a Delaware corporation, Purchaser and the
Company, dated as of March 6, 2000, as amended by Amendment No. 1 dated as of
May 4, 2000, copies of which are attached as Exhibit A and are hereby
incorporated by reference. The term "Offer" means the tender offer by Purchaser
to purchase all of the outstanding shares of common stock, no par value, of the
Company (the "Shares") at a purchase price of $100.00 per Share.
THE PARTIES
Duff & Phelps Credit Rating Co.
The Company is an Illinois corporation with its principal executive
offices located at 55 East Monroe Street, Chicago, Illinois 60603 where its
telephone number is (312) 368-3100. The Company issues credit ratings on
domestic and international corporate bonds, sovereign bonds, preferred stocks,
commercial paper, certificates of deposit, structured financings and insurance
company claims paying ability, and, to a lesser extent, on municipal securities.
Fimalac S.A.
Fimalac S.A. (the "Parent") is a societe anonyme organized under the
laws of the Republic of France with its principal offices located at 97 rue de
Lille, 75007 Paris, France. The telephone number of Parent is (33-1)
47.53.61.75. Parent is a diversified French corporation engaged principally in
activities aimed at providing products and services to the business sector. Its
principal lines of business are: credit rating services through its Fitch IBCA
subsidiaries ("Fitch IBCA"), storage of chemical substances through its
subsidiary LBC S.A., assembly and supply of franking machines and office
equipment through its subsidiaries SECAP S.A. and ANFA S.A. and the distribution
of professional hand tools and garage equipment through its FACOM group. Parent
is a public company listed on the Paris Bourse.
FSA Acquisition Corp.
The Purchaser is a newly incorporated Delaware corporation organized by
Parent in connection with the Offer and has not carried on any activities other
than in connection with the Offer and the Merger. The principal offices of the
Purchaser are located at One State Street Plaza, New York, NY 10004. The
telephone number of Purchaser is (212) 908-0500.
Fimalac, Inc.
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Fimalac, Inc. ("Fimalac-U.S.") is a Delaware corporation with its
principal offices located at One State Street Plaza, New York, NY 10004, where
its telephone number is (212) 908-0500. Fimalac-U.S. is a holding company
through which Parent holds its ownership interest in certain U.S. subsidiaries.
Surviving Corporation
The Company will be the surviving corporation in the Merger (the
"Surviving Corporation"). Pursuant to the Merger Agreement, the directors of
Purchaser will be the directors of the Surviving Corporation, and the executive
officers of Purchaser will be the executive officers of the Surviving
Corporation.
THE SPECIAL MEETING
Place, Date and Time
A special meeting of the stockholders of the Company will be held on
June 1, 2000 at 17 State Street (12th Floor), New York, N.Y. 10004 commencing at
10:00 a.m. local time (the "Special Meeting").
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and vote on:
o a proposal to approve and adopt the Merger Agreement
o any other business that properly comes before the
Special Meeting
At the Special Meeting, holders of Shares of the Company of record as
of the close of business on the Record Date (defined under "THE SPECIAL MEETING
- -- Record Date; Voting at the Meeting" below) will be eligible to vote upon the
recommendation of the board of directors of the Company to approve and adopt the
Merger Agreement.
Matters to be Considered at the Meeting; Effect of Approval of the Merger
Agreement
At the Special Meeting, holders of Shares of the Company as of the
Record Date will be asked to consider and vote upon a proposal to approve and
adopt the Merger Agreement.
Under Illinois law, a plan of merger must initially be approved by the
majority vote of the members of the board of directors of the corporation prior
to submission of such plan to such corporation's stockholders. In accordance
with Illinois law, the board of directors of the Company has approved the Merger
Agreement and has directed that it be submitted to the stockholders for their
approval.
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Record Date; Voting at the Meeting
The board of directors has fixed the close of business on April 14,
2000 as the record date (the "Record Date") for the determination of the
stockholders entitled to notice of, and to vote at, the Special Meeting and any
adjournments and postponements of the Special Meeting. On the Record Date, there
were 4,656,454 Shares outstanding, which Shares were held by approximately 26
holders of record. The Shares are the only authorized and outstanding voting
securities of the Company. Each holder of Shares as of the Record Date is
entitled to cast one (1) vote per Share, exercisable in person or by properly
executed proxy, upon each matter properly submitted for the vote of the
stockholders at the Special Meeting. Votes at the Special Meeting will be
tabulated by an Inspector of Election appointed by the Company.
The holders of a majority of the outstanding shares of the Company
present in person or represented by proxy will constitute a quorum for the
transaction of business at the Special Meeting. If a quorum is not present, the
Special Meeting may be adjourned from time to time, until a quorum is present.
Abstentions and broker non-votes will be counted as present for purposes of
determining the presence of a quorum at the Special Meeting for the transaction
of business.
The board of directors of the Company has determined that the right to
receive $100.00 in cash for each Share (the "Merger Consideration") is fair to,
and in the best interests of, stockholders of the Company. However, any holder
of record of Shares as of the Record Date who, prior to the vote on the Merger
at the Special Meeting, makes a written demand by following the procedures
prescribed under Sections 11.65 and 11.70 of the Illinois Business Corporation
Act of 1983, as amended ("Illinois Law"), has the right to payment of the "fair
value" of such Shares by the Company, as the Surviving Corporation in the
Merger, in lieu of receiving the consideration provided under the Merger
Agreement (the "Dissenters' Rights"). A summary of the procedures relating to
the exercise of Dissenters' Rights under Illinois Law is included in this
Information Statement under "OTHER MATTERS -- Dissenters' Rights" and the full
text of Sections 11.65 and 11.70 of Illinois Law is included in Exhibit B
hereto, and is hereby incorporated by reference.
Vote Required
The approval and adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of the outstanding Shares entitled
to vote at the Special Meeting. A failure to vote, an abstention from voting, or
a broker non-vote, will have the same legal effect as a vote cast against
approval of the Merger Agreement. Brokers, and in many cases nominees, will not
have discretionary power to vote on the proposals to be presented at the Special
Meeting.
Approval Assured
As of the Record Date, Purchaser owned approximately 97% of the Shares.
Therefore, Purchaser has sufficient voting power to constitute a quorum and to
approve all matters to be considered at the Special Meeting, regardless of the
vote of any other stockholder. Purchaser will vote all Shares it beneficially
owns in favor of the Merger
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Agreement. As a result, the Merger Agreement will be approved and adopted at the
Special Meeting even if no stockholder other than Purchaser votes in favor of
this proposal.
Procedures for Exchange of Certificates
Parent or Purchaser will deposit with Harris Trust Company of New York
(the "Depositary and Paying Agent") the aggregate Merger Consideration to which
holders of Shares will be entitled when, pursuant to the Merger Agreement,
Purchaser will be merged with and into the Company ("Effective Time"). Promptly
after the Effective Time, the Surviving Corporation will cause to be mailed to
each record holder, as of the Effective Time, of a certificate or certificates
(the "Certificates") that, prior to the Effective Time, represented Shares (i) a
form of letter of transmittal (which will specify that delivery will be
effected, and risk of loss and title to the Certificates will pass, only upon
proper delivery of the Certificates to the Depositary and Paying Agent, and will
be in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates for
payment of the Merger Consideration therefor. Stockholders should not return
their Certificates until they receive a letter of transmittal.
Upon the surrender of each such Certificate formerly representing
Shares, together with such letter of transmittal and any additional documents as
may reasonably be required by Parent or the Depositary and Paying Agent, in each
case duly completed and validly executed in accordance with the instructions
thereto, the Depositary and Paying Agent will pay the holder of such Certificate
the Merger Consideration multiplied by the number of Shares formerly represented
by such Certificate, in exchange therefor, and such Certificate will forthwith
be canceled. Until so surrendered and exchanged, each such Certificate (other
than Shares held by Parent, Fimalac-U.S., Purchaser or the Company, or any
direct or indirect subsidiary thereof) will represent solely the right to
receive the Merger Consideration. No interest will be paid or accrue on the
Merger Consideration.
If the Merger Consideration (or any portion thereof) is to be delivered
to any person other than to the person in whose name the Certificate formerly
representing Shares surrendered in exchange therefor is registered, it is a
condition to such exchange that the Certificate so surrendered be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such exchange pay to the Depositary and Paying Agent any transfer or
other taxes required by reason of the payment of the Merger Consideration to a
person other than the registered holder of the Certificate surrendered, or
establish to the satisfaction of the Depositary and Paying Agent that such tax
has been paid or is not applicable.
Promptly following the date which is six months after the Effective
Time, Parent will cause the Depositary and Paying Agent to deliver to the
Surviving Corporation all cash and documents in its possession relating to the
Offer and Merger and the Depositary and Paying Agent's duties will terminate
thereafter. Thereafter each holder of a Certificate formerly representing a
Share may surrender such Certificate to the Surviving Corporation and (subject
to applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration, without any interest thereon.
<PAGE>
16
None of Parent, Fimalac-U.S., Purchaser or the Company will be liable
to any holder of Shares for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Parent or the Depositary and Paying Agent will be entitled to deduct
and withhold from the Merger Consideration otherwise payable pursuant to the
Merger Agreement to any holder of Shares such amounts as Parent or the
Depositary and Paying Agent is required to deduct and withhold with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent or the Depositary and Paying Agent, such
withheld amounts will be treated as having been paid to the holder of the Shares
in respect of which such deduction and withholding was made by Parent or the
Depositary and Paying Agent.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Merger is the second and final step of the acquisition of the
Company by Parent. The first step was a tender offer by Purchaser for the
Company's outstanding Shares at $100.00 per Share in cash. Purchaser acquired
approximately 97% of the Company's outstanding Shares pursuant to the tender
offer, which expired at 12:00 midnight, New York City time, on April 11, 2000.
The background of the Merger is as follows:
In the Fall of 1997, the board of directors of the Company determined
to explore strategic alternatives to maximize stockholder value. In connection
with that determination, in December 1997, the Company retained Peter J. Solomon
Company Limited ("P.J. Solomon") to prepare a confidential information
memorandum describing the Company and to assist the Company in identifying
parties that might be interested in a possible transaction with the Company.
Between December 1997 and May 1998, the Company authorized P.J. Solomon to
contact approximately 20 selected companies to discern their level of interest
in pursuing a transaction with the Company. Nine of the selected companies
entered into confidentiality agreements and were provided with the confidential
information memorandum prepared by P.J. Solomon. For a variety of reasons,
including conflicts of interest, lack of synergies and insufficient valuation,
none of the companies that were provided with the confidential information
memorandum expressed further interest regarding a possible transaction with the
Company. Accordingly, the engagement of P.J. Solomon was terminated. The Company
did not authorize P.J. Solomon to contact Parent because Parent had recently
completed its acquisition of Fitch Investors Service, L.P. ("Fitch") and was
believed to be too occupied by the combination of Fitch and IBCA Inc. to have
any interest in the Company.
Prior to June 1999, the executive officers of the Company were familiar
with the business and operations of Parent through the activities in the credit
rating business of its wholly owned subsidiary Fitch IBCA.
<PAGE>
17
In June 1999, Robin Monro-Davies, Chief Executive Officer of Fitch
IBCA, called Paul J. McCarthy, then Chairman and Chief Executive Officer of the
Company, to ask whether Mr. McCarthy might be interested in meeting to explore
the possibility of a business combination between the Company and Fitch IBCA. On
September 17, 1999, Mr. Monro-Davies met with Mr. McCarthy in New York City to
discuss the possibility of a combination between the companies.
At the regular quarterly meeting of the board of directors on August
17, 1999, at which all of the directors were present, Mr. McCarthy advised the
board of directors of the preliminary contact received by the Company from
Parent regarding the possibility of a business combination.
On October 11, 1999, Mr. McCarthy was contacted by another third party
which expressed an interest in discussing a possible business combination with
the Company. Later in October 1999, Mr. McCarthy met with the executive vice
president of such third party to generally discuss the possibility of a business
combination with the Company.
At the regular quarterly meeting of the board of directors on November
11, 1999, at which all of the directors were present, Mr. McCarthy advised the
board of directors of the meetings he had had with Mr. Monro-Davies and the
executive vice president of the other third party, and the board of directors
discussed the possibility of a business combination between the Company and
either Fitch IBCA or the other third party.
In December 1999, Mr. McCarthy and Philip T. Maffei, then President of
the Company, met with the executive vice president of the other third party to
further explore on a preliminary basis the possibility of a business combination
between the Company and the other third party.
In December 1999, Mr. Monro-Davies again contacted Mr. McCarthy and
indicated that Parent was interested in proceeding further with discussions
regarding a possible business combination between the Company and Fitch IBCA.
Mr. Monro-Davies and Mr. McCarthy then scheduled a meeting in January 2000 with
Marc de Lacharriere, President of Parent. On January 18, 2000, Messrs. McCarthy
and Maffei met in New York City with Mr. de Lacharriere, Veronique Morali,
Managing Director of Parent, Mr. Monro-Davies and Stephen Joynt, President of
Fitch IBCA, to discuss the possibility of a business combination between the
Company and Fitch IBCA. The parties acknowledged that Parent would be a unique
buyer and that the synergies between the Company and Fitch IBCA would permit the
combined companies to better compete with the two major credit rating agencies.
The parties noted that the strengths of Fitch IBCA in U.S. securitization
markets, global banking, European rating activities and U.S. public finance
would complement the Company's expanded corporate rating capability and broader
coverage of the insurance sector, in addition to the Company's strong structured
finance group and international network. The parties also discussed the possible
structures of a combination between the Company and Fitch IBCA.
Following the January meeting with representatives of Parent, counsel
for the Company delivered to counsel for Parent a draft confidentiality
agreement and the parties began to negotiate the terms thereof. In response to
the initial draft, Parent requested that the Company agree to negotiate
exclusively with Parent regarding a potential business combination, but the
Company declined to accept pending evolution of discussions. On January 25,
2000, the Company and Parent entered into a confidentiality agreement in
<PAGE>
18
which Parent agreed, among other things, to keep information it obtained from
the Company confidential, to refrain from soliciting employees of the Company,
and not to make an unsolicited offer to acquire the Company.
Following the execution of the confidentiality agreement, the Company
transmitted to Parent certain preliminary commercial and legal information with
respect to the Company. On February 11, 2000, Parent requested through its
counsel additional information regarding the Company, but the Company declined
to provide such additional information pending the outcome of further
discussions.
On February 2, 2000, Messrs. McCarthy and Maffei again met with the
executive vice president of the other third party to continue preliminary
discussions regarding a possible business combination with the Company.
During the regular quarterly meeting of the board of directors on
February 18, 2000, Mr. McCarthy updated all the members of the board of
directors on the status of the business combination discussions between the
Company and each of Parent and the other third party. The members of the board
of directors then discussed the benefits and disadvantages of the possible
business combinations.
On February 24, 2000, Mr. de Lacharriere, Ms. Morali and Mr. Joynt met
again with Messrs. McCarthy and Maffei in New York City. Mr. de Lacharriere, Ms.
Morali and Mr. Joynt expressed Parent's continued interest in pursuing a
business transaction with the Company and indicated that Parent was prepared to
make a cash offer for the outstanding Shares at a price of $95.00 per Share. The
representatives of Parent also stated that Parent had available to it funding
necessary to complete the Offer and Merger so that there would be no financing
contingency in the definitive agreement. The parties engaged in further
negotiations and at the end of the meeting, Mr. de Lacharriere stated that
Parent was prepared to make a cash offer of $100.00 per Share, subject to the
satisfaction of a number of conditions, including agreement on the structure of
the transaction, the satisfactory completion of due diligence and the
negotiation of a definitive agreement. Parent also requested that the Company
commit to negotiate exclusively with Parent for a limited period of time, but
the Company stated that it was not prepared to provide exclusivity and reserved
the right to communicate with the other third party with which it had had prior
discussions.
Following the meeting with the representatives of Parent, on February
24, 2000, Mr. McCarthy contacted the members of the board of directors by
telephone to advise them of the offer made by Parent. On February 24, 2000, the
Company again engaged P.J. Solomon to review the terms of the proposed
transaction from a financial point of view and to perform such other financial
advisory services as requested by the Company.
After the meeting between representatives of the Company and Parent
through the execution of the Merger Agreement, Parent and its advisors conducted
more intensive due diligence with respect to the Company and were in regular
contact with the Company and its advisors relating thereto.
On February 25, 2000, Mr. McCarthy was contacted by the executive vice
president of the other third party that had previously expressed an interest in
a possible business combination with the Company. Mr. McCarthy advised the other
third party that the Company had received a cash offer for a business
combination at a significant
<PAGE>
19
premium to its current market valuation and that Parent was beginning to prepare
appropriate documentation. No further contact was received from the other third
party and no business combination proposal was ever received from such other
third party.
On February 28, 2000, Mr. McCarthy received a letter from Ms. Morali
stating Parent's continued interest in acquiring the Company and requesting that
the Company enter into a 14 day exclusive period during which the Company would
not discuss or negotiate any other potential business combination. The Company
advised Parent that the Company would not enter into such an exclusivity
agreement with respect to discussions and negotiations regarding potential
business combinations. In response to repeated requests from Parent and its
counsel for assurances that the Company was negotiating in good faith, however,
on February 29, 2000, the Company provided a letter to Parent stating that the
Company intended to engage in good faith negotiations with Parent with respect
to a business combination and that it was not engaged in negotiations with
respect to a possible combination with any other third party. Furthermore, the
Company agreed that prior to March 7, 2000, it would not take any further steps
to solicit proposals with respect to any other potential business combinations
while negotiating with Parent and that in the event that the Company was
contacted by a third party with respect to a business combination, the Company
would promptly advise Parent of any such proposal.
On February 29, 2000, Parent's counsel provided the Company with an
initial draft of an agreement and plan of merger. During the next week,
representatives of the Company and Parent and their counsel and financial
advisors negotiated the terms of the Merger Agreement, while Parent continued
its due diligence review of the Company. On March 2, 2000, each of the directors
of the Company was provided with a notice of meeting of the board of directors
called for March 6, 2000, an agenda of the meeting, material relating to the
fiduciary duties of the board of directors in connection with a potential
business combination transaction, and a copy of the draft agreement and plan of
merger, which had been marked to reflect the revisions proposed by the Company,
its counsel and financial advisors.
On March 5 and 6, 2000, representatives of the Company and counsel and
financial advisors for the Company met with representatives of Parent and
counsel and financial advisors for Parent in New York City to continue
negotiating the terms and conditions of the agreement and plan of merger.
On March 6, 2000, the board of directors met in New York City to
discuss Parent's offer. Mr. McCarthy reviewed the background of the Company's
relationship with Parent and discussed the terms of the proposed transaction.
The directors discussed the reasons for engaging in a combination with Parent.
The Company's counsel reviewed the terms of the Merger Agreement and the
conditions to Parent's obligation to complete the Offer and Merger. Counsel to
the Company also reviewed with the members of the board of directors their
fiduciary obligations in considering a potential business combination
transaction. The representatives of P.J. Solomon then made a financial
presentation to the board of directors supporting P.J. Solomon's opinion as to
the fairness, from a financial point of view, of the $100.00 per Share cash
consideration to be received in the Offer and the Merger by holders of Shares.
The board of directors then asked senior management and the advisors a number of
questions regarding the terms, conditions and timing of the proposed
transaction. At 5:30 p.m., the board of directors adjourned while final
revisions to the agreement and plan of merger were being made.
<PAGE>
20
The board of directors reconvened at 9:30 p.m. on March 6, 2000 and
reviewed the definitive agreement and plan of merger. After further discussion
of the proposed transaction, the board of directors, by unanimous vote of those
present, approved, among other things, the Merger Agreement and the transactions
contemplated thereby, determined that the Offer and the Merger were fair to and
in the best interests of the Company and its stockholders and resolved to
recommend to the stockholders of the Company that they accept the Offer, tender
their Shares pursuant to the Offer and approve and adopt the Merger Agreement
and the Merger.
The Merger Agreement was then executed late in the evening on March 6,
2000 by Parent, Fimalac-U.S., Purchaser and the Company. On March 7, 2000,
Parent and the Company publicly announced the execution of the Merger Agreement
in a joint press release.
Jonathan Ingham, a member of the board of directors, was unable to
attend the board meeting on March 6, 2000. However, on March 8, 2000, after
discussing the proposed transaction with Mr. McCarthy and the Company's counsel
and having been provided with copies of all relevant documents, Mr. Ingham
ratified and approved the Merger Agreement, the transactions contemplated
thereby and the other actions taken by the board of directors at its March 6,
2000 meeting.
On March 15, 2000, Parent and Purchaser commenced the Offer. On April
12, 2000 Purchaser announced that it had accepted for payment and would promptly
pay for all 4,496,138 Shares validly tendered pursuant to the Offer. Purchaser
has subsequently acquired 4,495,179 such Shares that were delivered.
The Merger Agreement as originally executed provided that, following
the Offer, at the option of Parent, either the Company would be merged with and
into the Purchaser, with the Purchaser being the surviving corporation or the
Purchaser would be merged with and into the Company, with the Company being the
surviving corporation. Upon determination by Parent that the Purchaser should be
merged into the Company, with the Company being the surviving corporation, the
board of directors of the Company unanimously approved Amendment No. 1. on April
12, 2000. Amendment No. 1 was then executed on May 4, 2000 by Parent,
Fimalac-U.S., Purchaser and the Company.
REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARD OF DIRECTORS
On March 6, 2000, the board of directors of the Company unanimously (1)
determined that the Offer, the Merger and the Merger Agreement (as of such date)
are advisable, fair to, and in the best interest of, the Company, (2) approved
the Merger, the Offer, the Merger Agreement (as of such date) and the other
transactions contemplated by the Merger Agreement (as of such date) and declared
their advisability and (3) recommended that its stockholders accept the Offer
and tender their shares pursuant thereto and approve and adopt the Merger
Agreement (as of such date). On April 12, 2000 the board of directors of the
Company unanimously approved Amendment No. 1.
<PAGE>
21
In making the determinations and recommendations set forth above, the
board of directors of the Company considered a number of factors including,
without limitation, the following:
(A) The consideration to be paid in the Merger, and, in
particular, the fact that the $100.00 per Share to be received
by the Company's stockholders in the Merger represents an
approximate 27% premium over the closing stock price per Share
on March 6, 2000, the day the board of directors approved the
Offer and the Merger;
(B) The Company's financial condition, results of operations,
assets, liabilities, liquidity, business and prospects and
industry, economic and market conditions, including the
inherent risks and uncertainties in the Company's business in
each case on a historical, current and prospective basis. The
board of directors determined that in its view, the
acquisition of the Company by Parent presented the best means
of achieving the greatest value for holders of its Shares;
(C) The strategic fit of the Company with Fitch IBCA. Fitch IBCA's
key strengths have been in U.S. securitization markets, global
banking, European rating activities and U.S. public finance.
The Company brings to Fitch IBCA an expanded corporate rating
capability and broader coverage of the insurance sector, in
addition to a strong structured finance group and
international network;
(D) Analysis of the future prospects of the Company on a stand
alone basis;
(E) The historical and recent market prices for the Shares and
potential future share prices;
(F) The opinion of P.J. Solomon, dated March 6, 2000, to the
effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the $100.00 per Share
cash consideration to be received in the Offer and the Merger
by holders of Shares (other than Parent and its affiliates)
was fair, from a financial point of view, to such holders. The
full text of P.J. Solomon's written opinion, dated March 6,
2000, which sets forth the assumptions made, matters
considered and limitations on the review undertaken by P.J.
Solomon, is attached hereto as Exhibit C, which is herein
incorporated by reference. The opinion is directed only to the
fairness, from a financial point of view, of the $100.00 per
Share cash consideration to be received in the Offer and the
Merger by holders of Shares (other than Parent and its
affiliates) and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder
should tender Shares pursuant to the Offer or how any
stockholder should vote on the Merger. HOLDERS OF SHARES ARE
URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY;
(G) The availability of appraisal rights under Section 11.65 of
the Illinois Law;
(H) The terms and conditions of the Merger Agreement, including
provisions that (a) although prohibiting the Company and its
representatives from
<PAGE>
22
soliciting or initiating any inquiries or proposals regarding
an Acquisition Proposal (as defined in "THE MERGER AGREEMENT
-- No Solicitation of Transactions"), permit the Company and
its representatives to furnish information or data (including,
without limitation, confidential information or data) relating
to the Company or its subsidiaries to, and participate in
negotiations with, any third party making an unsolicited bona
fide written Acquisition Proposal, to the extent the board of
directors reasonably believes that such Acquisition Proposal
may constitute a Superior Proposal (as defined in "THE MERGER
AGREEMENT -- No Solicitation of Transactions") and (b) permit
the Company to terminate the Merger Agreement to accept a
Superior Proposal, subject to (i) the Company entering into a
definitive agreement providing for the transactions
contemplated by such Acquisition Proposal immediately
following such termination, (ii) the board of directors having
given Parent at least two business days prior written notice
of its determination to terminate the Merger Agreement and
having afforded Parent a reasonable opportunity within such
two business day period to amend its Offer and (iii) payment
of a termination fee of $16,000,000 plus actual out-of-pocket
expenses of Parent and Purchaser not to exceed $2,000,000;
(I) The proposed structure of the Offer and the Merger involving
an immediate cash tender offer followed by a merger for the
same consideration and the fact that there is no financing or
due diligence contingency to the Offer. In this connection,
the board of directors also considered the likelihood that the
proposed acquisition would be consummated, including the
likelihood of satisfaction of the conditions to the Offer and
the Merger contained in the Merger Agreement, and the risks to
the Company if the acquisition was not consummated; and
(J) The recommendation of the Company's management with respect to
the proposed transaction.
The board of directors evaluated the factors listed above in light of
the directors' knowledge of the business and operations of the Company and in
their business judgment. In view of the variety of factors considered by the
board of directors in connection with its evaluation of the Merger Agreement and
the Offer and the Merger, the board of directors did not find it practicable to
and did not quantify or otherwise assign relative weight to the specific factors
considered in reaching its determination. In addition, individual members of the
board of directors may have given different weights to different factors in
making their individual determinations.
OPINION OF P.J. SOLOMON
In its opinion addressed to the board of directors of the Company dated
March 6, 2000, P.J. Solomon set forth its opinion that, as of such date, and
based upon and subject to the limitations set forth in such opinion, the cash
consideration of $100.00 per Share to be received by the stockholders of the
Company was fair, from a financial point of view, to the stockholders of the
Company.
<PAGE>
23
P.J. Solomon, as part of its investment banking business is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, private placements of equity and debt and negotiated
underwritings. P.J. Solomon was selected by the Company to deliver a fairness
opinion in this transaction based on P.J. Solomon's investment banking
relationship and familiarity with the Company; in December 1997, the Company
retained P.J. Solomon to prepare a confidential information memorandum
describing the Company and to assist the Company in identifying parties that
might be interested in a possible transaction with the Company. P.J. Solomon
believes that its analyses must be considered as a whole and that selecting
portions of its analyses, without considering all factors and analyses, could
create an incomplete view of the processes underlying its analyses and opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analyses or summary description.
Pursuant to the terms of P.J. Solomon's engagement, the Company has
agreed to pay P.J. Solomon the following amounts: (i) a retention fee of
$100,000, (ii) $200,000 for rendering an opinion as to the fairness, from a
financial point of view, of the consideration to be received in the Offer and
the Merger by the holders of Shares and (iii) $700,000 upon consummation of the
Offer and the Merger. The Company also has agreed to reimburse P.J. Solomon for
reasonable out-of-pocket expenses, including the reasonable fees, disbursements
and other charges of its legal counsel, and to indemnify P.J. Solomon and
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of P.J. Solomon's engagement.
P.J. Solomon was retained by the Company solely to render an opinion as
to the fairness from a financial point of view of the consideration to be
received by the holders of Shares in the purchase of the Company by Parent. P.J.
Solomon did not make any recommendation with respect to the amount of such
consideration. P.J. Solomon was not engaged to solicit, and did not solicit,
interest from any party with respect to a merger or other business combination
transaction involving the Company.
P.J. Solomon assumed and relied upon the accuracy and completeness of
the information reviewed by it for the purposes of its opinion and did not
assume any responsibility for independent verification of such information. With
respect to the financial projections, P.J. Solomon assumed that the financial
projections were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. P.J. Solomon did not make an independent evaluation or appraisal of the
assets or liabilities of the Company, nor was it furnished with any such
evaluation or appraisal. Its opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, March 6, 2000.
In arriving at its fairness opinion, P.J. Solomon, among other things:
(i) reviewed the Annual Reports to Stockholders and Annual Reports
on Form 10-K of the Company for the three years ended December
31, 1998, and certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of the Company, and certain
other public communications from the Company to its
stockholders;
<PAGE>
24
(ii) reviewed certain internal financial analyses and forecasts of
the Company prepared by the management of the Company;
(iii) discussed the past and current operations, financial condition
and prospects of the Company with senior management of the
Company;
(iv) reviewed the reported prices and trading activity of the
Shares of the Company;
(v) compared the financial performance and condition of the
Company and the reported prices and trading activity of the
Shares of the Company with that of certain other comparable
publicly traded companies;
(vi) reviewed publicly available information regarding the
financial terms of certain recent business combination
transactions in the financial services industry specifically
and other industries generally which were comparable, in whole
or in part, to the Offer and Merger;
(vii) participated in certain discussions among representatives of
each of the Parent and the Company;
(viii) reviewed the Merger Agreement; and
(ix) performed such other analyses as it deemed appropriate.
The full text of the written P.J. Solomon opinion, dated March 6, 2000,
which sets forth, among other things, assumptions made, procedures followed,
matters considered, and limitations on the scope of review undertaken by P.J.
Solomon in rendering the P.J. Solomon opinion is attached as Exhibit C. P.J.
Solomon has consented to the reproduction in full of its fairness opinion in
this Information Statement. Stockholders are urged to read the P.J. Solomon
opinion carefully in its entirety.
CERTAIN EFFECTS OF THE MERGER
The Merger will become effective at the time the articles of merger and
certificate of merger, respectively, together with any required related
certificate, are filed with the Secretary of State of Illinois and the Secretary
of State of Delaware, in such form as required by, and executed in accordance
with, the relevant provisions of the laws of Illinois and Delaware. At the
Effective Time, pursuant to the Merger Agreement, Purchaser will be merged with
and into the Company. At such Effective Time, each outstanding Share will be
converted into and represent the right to receive the Merger Consideration,
without interest, except for (i) Shares held in the Company's treasury
immediately before the Effective Time, and each Share held by Parent,
Fimalac-U.S., Purchaser, or any of their respective direct or indirect wholly
owned subsidiaries immediately before the Effective Time (all of which will be
canceled) and (ii) Shares with respect to which dissenters' rights are properly
exercised under Illinois Law.
Current stockholders of the Company will not have an opportunity to
continue their equity interest in the Company after the Merger. As a result of
the completion of the Offer, the Shares are no longer quoted on the New York
Stock Exchange and trading
<PAGE>
25
information is no longer available. Parent and Purchaser plan to request that
the registration of the Shares under the Securities Exchange Act of 1934, as
amended, be terminated.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for Shares in the Merger will be a taxable
transaction for United States federal income tax purposes (and may also be a
taxable transaction under applicable state, local or other tax laws). In
general, a stockholder will recognize gain or loss for such purposes equal to
the difference between the amount of cash received and such stockholder's
adjusted tax basis in the Shares. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) converted to cash in the Merger. Such gain or loss will be capital
gain or loss if the Shares are a capital asset in the hands of the stockholder
and will be long term capital gain or loss if the Shares were held for more than
one year on the effective time of the Merger. The receipt of cash for Shares
pursuant to the exercise of dissenters' rights, if any, will generally be taxed
in the same manner as described above.
Payments in connection with the Merger may be subject to "backup
withholding" at a rate of 31%. Backup withholding generally applies if the
stockholder (a) fails to furnish such stockholder's taxpayer identification
number ("TIN"), (b) furnishes an incorrect TIN or (c) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN provided is such stockholder's correct number and that
such stockholder is not subject to backup withholding. Backup withholding is not
an additional tax but merely an advance payment, which may be refunded to the
extent it results in an overpayment of tax. Certain persons generally are
entitled to exemption from backup withholding, including corporations,
non-United States persons and financial institutions, provided they properly
establish their status when required to do so by completing and providing the
appropriate IRS forms. Certain penalties apply for failure to furnish correct
information and for failure to include reportable payments in income. Each
stockholder should consult with his own tax advisor as to such stockholder's
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
The foregoing discussion may not be applicable to a stockholder who
acquired Shares pursuant to the exercise of employee stock options or otherwise
as compensation, to a stockholder who is related to Purchaser for purposes of
Section 302 of the Code or to a stockholder who is not a United States person or
who is otherwise subject to special tax treatment under the Code (for example,
brokers, dealers in securities, banks, insurance companies, tax-exempt
organizations and financial institutions). For these purposes, a United States
person means a person who or which is (i) an individual who is a citizen or
resident of the United States for United States federal income tax purposes,
(ii) a corporation or other entity taxable as a corporation created or organized
under the laws of the United States or any state thereof (including the District
of Columbia), (iii) an estate the income of which is subject to United States
federal income tax regardless of its source or (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. In addition, the
foregoing discussion does not address the tax treatment of holders of options to
acquire Shares.
<PAGE>
26
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL OR NON-UNITED STATES
INCOME AND OTHER TAX LAWS.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger
Agreement that are not otherwise discussed herein. Such summary is qualified in
its entirety by reference to the Merger Agreement. Stockholders are urged to
review the Merger Agreement carefully in its entirety.
Company Stock Options
Each outstanding option (a "Stock Option") to purchase shares of common
stock of the Company ("Common Stock"), granted under the Company's 1994
Long-Term Stock Incentive Plan or pursuant to any other employee stock option
plan or agreement entered into by the Company with any employee of the Company
or any subsidiary thereof (the "Company Stock Option Plan"), became exercisable
on April 12, 2000, the date of which Purchaser purchased Shares pursuant to the
Offer, whether or not then exercisable, subject to the terms of the Company
Stock Option Plan pursuant to which such Stock Option was issued. If and to the
extent that a Stock Option is not exercised at the Effective Time, such Stock
Option will be canceled automatically. Each holder of a canceled Stock Option
will be entitled to receive as soon as practicable after the first date payment
can be made without liability to such person under Section 16(b) of the Exchange
Act from the Company in consideration for such cancellation an amount in cash
(less applicable withholding taxes) equal to the product of (i) the number of
shares of Common Stock previously subject to such Stock Option multiplied by
(ii) the excess, if any, of $100.00 over the exercise price per share of Common
Stock previously subject to such Stock Option upon surrender of such Stock
Option to the Company or an affidavit of loss in the form requested by Parent,
together with such additional documentation as may be reasonably required by
Parent or the Company.
Effective Time
The Merger will become effective at the time the articles of merger and
certificate of merger, together with any required related certificate, are filed
with the Secretary of State of Illinois and the Secretary of State of Delaware,
respectively. The Effective Time is currently expected to occur as soon as
practicable after the Special Meeting, subject to approval of the Merger
Agreement at the Special Meeting and satisfaction or waiver of the terms and
conditions set forth in the Merger Agreement.
Representations and Warranties
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27
Pursuant to the Merger Agreement, the Company has made customary
representations and warranties to Parent and Purchaser with respect to, among
other things: its organization and qualification and subsidiaries; its articles
of incorporation and bylaws; capitalization; authority relative to the Merger
Agreement; material contracts; no conflicts; required filings and consents;
compliance with law; SEC filings; financial statements; absence of certain
changes or events; undisclosed liabilities; litigation; employee benefit plans;
employment and labor matters; Offer documents and proxy statement; restrictions
on business activities; title to property; taxes; environmental matters;
intellectual property; interested party transactions; insurance; opinion of
financial advisor; brokers; the applicability of Sections 7.85 and 11.75 of
Illinois Law; and required votes.
Certain representations and warranties in the Merger Agreement made by
the Company are qualified as to "materiality" or "Material Adverse Effect" on
the Company. For purposes of the Merger Agreement, when used in connection with
the Company or any of its subsidiaries, the term "Material Adverse Effect" means
any change, effect or circumstance that is, or is reasonably likely to be,
materially adverse to the business, assets, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, in each case taken
as a whole, other than any such changes, effects or circumstances (i) expressly
set forth in the Company's disclosure schedules to the Merger Agreement or (ii)
specifically set forth or described in the Company SEC Reports, other than
general risk factors. The following, considered alone without regard to any
other effects, changes, events, circumstances or conditions, do not constitute a
Material Adverse Effect: (i) a change in the trading prices of the Company's
securities between the date of the Merger Agreement and the Effective Time; (ii)
effects, changes, events, circumstances or conditions generally affecting the
industry in which the Company operates or arising from changes in general
business or economic conditions; (iii) any effects, changes, events,
circumstances or conditions resulting from any change in law or generally
accepted accounting principles; (iv) any effects, changes, events, circumstances
or conditions resulting from the announcement or pendency of any of the
transactions contemplated by the Merger Agreement other than a breach of a
representation or warranty pursuant to the Merger Agreement which would occur
except for this clause (iv) or clause (v) of this definition of Material Adverse
Effect; and (v) any effects, changes, events, circumstances or conditions
resulting from actions taken by the Parent or the Company in order to comply
with the terms of the Merger Agreement other than a breach of a representation
or warranty pursuant to the Merger Agreement which would occur except for this
clause (v) or clause (iv) of this definition of Material Adverse Effect.
Pursuant to the Merger Agreement, Parent, Fimalac-U.S. and Purchaser
have made customary representations and warranties to the Company with respect
to, among other things: their organization and qualification; their
subsidiaries; authority relative to the Merger Agreement; no conflicts; required
filings; consents; the Offer documents; the prior activities of Purchaser; the
ability of Parent and Purchaser to finance the transactions contemplated by the
Merger Agreement; and ownership of Shares. Certain representations and
warranties in the Merger Agreement made by the Parent, Fimalac- U.S. and
Purchaser are qualified as to "materiality" or "Material Adverse Effect" on the
Parent.
None of the representations and warranties made by Parent,
Fimalac-U.S., Purchaser or the Company in the Merger Agreement survive the
Effective Time.
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28
No Solicitation of Transactions
In the Merger Agreement, the Company has agreed not to (nor to permit
its subsidiaries, or its or its subsidiaries' officers, directors or
representatives or agents to) (including, without limitation, any investment
banker, financial advisor, attorney or accountant retained by the Company or any
of its subsidiaries), directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate the initiation of any inquiries or proposals
regarding an Acquisition Proposal, (ii) engage in negotiations or discussions
concerning, or provide any nonpublic information to any person relating to, any
Acquisition Proposal, or (iii) agree to approve or recommend any Acquisition
Proposal. The Merger Agreement provides, however, that nothing in the Merger
Agreement prohibits the Company or the board of directors from taking and
disclosing to stockholders a position contemplated by Rule 14e-2 promulgated
under the Exchange Act or from making any disclosure to the Company's
stockholders if, in the good faith reasonable judgment of the board of directors
after consultation with outside legal counsel, the failure to so disclose would
be inconsistent with its fiduciary obligations to stockholders under applicable
law. The Merger Agreement also provides, that, prior to the time at which
Purchaser shall have accepted Shares for payment pursuant to the Offer and to
the extent that the board of directors determines in good faith (after
consultation with outside legal counsel) that not to do so would be inconsistent
with its fiduciary duties to stockholders under applicable law, (x) the board of
directors on behalf of the Company may, in response to an unsolicited bona fide
written Acquisition Proposal, make such inquiries of the Third Party making such
unsolicited bona fide written Acquisition Proposal as may be necessary to inform
itself of the particulars of the Acquisition Proposal and, if the board of
directors reasonably believes that such Acquisition Proposal may constitute a
Superior Proposal, furnish information or data (including, without limitation,
confidential information or data) relating to the Company or its subsidiaries
to, and participate in negotiations with, the Third Party making such
unsolicited bona fide written Acquisition Proposal and (y) following receipt of
a Superior Proposal, the board of directors may withdraw or modify its
recommendation relating to the Offer or the Merger if the board of directors
determines in good faith after consultation with outside legal counsel that
failure to take such action would be inconsistent with its fiduciary duties to
stockholders under applicable law. Subject to the Company's right to terminate
the Merger Agreement, nothing in the Merger Agreement and no action taken by the
board of directors pursuant to the foregoing provision will permit the Company
to enter into any agreement or undertaking providing for any transaction
contemplated by an Acquisition Proposal for so long as the Merger Agreement
remains in effect.
"Acquisition Proposal" means a proposal for either (i) a transaction
pursuant to which any person (or group of persons) other than the Parent or its
affiliates (a "Third Party") would acquire 25% or more of the outstanding shares
of the Common Stock of the Company pursuant to a tender offer or exchange offer
or otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party would acquire 25% or more of the outstanding
shares of the Common Stock of the Company or of the entity surviving such merger
or business combination, (iii) any other transaction pursuant to which any Third
Party would acquire control of assets (including for this purpose the
outstanding equity securities of subsidiaries of the Company, and the entity
surviving any merger or business combination including any of them) of the
Company having a fair market value equal to 25% or more of the fair market value
of all the assets of the Company immediately prior to such transaction, (iv) any
public
<PAGE>
29
announcement by a Third Party of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing, (v) a self tender
offer, or (vi) any transaction subject to Rule 13(e)-3 under the Exchange Act.
The Merger Agreement clarifies that no Acquisition Proposal received by the
Company following the date of the Merger Agreement will be deemed to have been
solicited by the Company or any of its officers, directors, employees,
representatives and agents (including, without limitation, any investment
banker, attorney or accountant retained by the Company) in violation of the
non-solicitation provisions of the Merger Agreement solely by virtue of the fact
that the person or entity making such Acquisition Proposal made an Acquisition
Proposal prior to the date of the Merger Agreement or the fact that the Company
or any of its officers, directors, employees, representatives and agents
(including, without limitation, any investment banker or attorney retained by
the Company) solicited such Acquisition Proposal prior to February 29, 2000.
"Superior Proposal" means an Acquisition Proposal that (i) is not
subject to any financing contingencies or is, in the good faith judgment of the
board of directors after consultation with a nationally recognized financial
advisor, reasonably capable of being financed and (ii) the board of directors
determines in good faith, based upon such matters as it deems relevant,
including an opinion of a nationally recognized financial advisor, would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the Offer and the Merger.
The Merger Agreement also provides that the Company shall, prior to
providing any information to or entering into discussions with any person in
connection with an Acquisition Proposal, receive from such person an executed
confidentiality agreement in reasonably customary form, notify Parent orally and
in writing of any Acquisition Proposal (including, without limitation, the
material terms and conditions thereof and the identity of the person making it)
or any inquiries indicating that any person is considering making or wishes to
make an Acquisition Proposal, as promptly as practicable (but in no case later
than 24 hours) after its receipt thereof, and provide Parent with a copy of any
written Acquisition Proposal, and shall thereafter inform Parent on a prompt
basis of (i) any material changes to the terms and conditions of such
Acquisition Proposal, and shall promptly give Parent a copy of any information
provided to such person which has not previously been provided to Parent and
(ii) any request by any person for nonpublic information relating to its or any
of its subsidiaries' properties, books or records.
The Company also agreed in the Merger Agreement to immediately cease
any existing discussions or negotiations with any person (other than Parent and
Purchaser) conducted theretofore with respect to any of the foregoing. The
Company also agreed not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a party.
Directors and Officers of the Company Following the Merger
The Merger Agreement provides that promptly upon the purchase by
Purchaser of Shares pursuant to the Offer and from time to time thereafter,
Parent may designate up to such number of directors, rounded up to the next
whole number on the board of directors that equals the product of (i) the total
number of directors on the board of directors (giving effect to the election of
any additional directors as provided herein) and (ii) the percentage that the
number of Shares owned by Purchaser and its affiliates (including any
<PAGE>
30
Shares purchased pursuant to the Offer) bears to the total number of outstanding
Shares, and the Company will upon request by Parent, promptly either increase
the size of the board of directors (and will, if necessary, amend the Company's
by-laws to permit such an increase) or use its reasonable best efforts to secure
the resignation of such number of directors as is necessary to enable Parent's
designees to be elected to the board of directors and will cause Parent
designees to be so elected. The Merger Agreement also provides, however, that,
at all times prior to the Effective Time, the Company's board of directors will
include at least two members who are not designees of Parent. Promptly upon
request by Parent, the Company will use its reasonable best efforts to cause
persons designated by Parent to constitute the same percentage as the number of
Parent's designees to the board of directors bears to the total number of
directors on the board of directors on (i) each committee of the board of
directors, (ii) each board of directors or similar governing body or bodies of
each subsidiary of the Company designated by Parent and (iii) each committee of
each such board or body. The Company's obligations to appoint Parent's designees
to the board of directors will be subject to Section 14(f) of the Exchange Act,
and Rule 14f-1 promulgated thereunder.
Following the election or appointment of Parent's designees pursuant to
the foregoing paragraph and prior to the Effective Time, any amendment of the
Merger Agreement or any amendment to the articles of incorporation or by-laws of
the Company inconsistent with the Merger Agreement, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or Purchaser,
any waiver of any of the Company's rights under the Merger Agreement or any
other action by the Company under or in connection with the Merger Agreement
that would adversely affect the ability of the stockholders of the Company to
receive the Merger Consideration will require the concurrence of two-thirds of
the directors of the Company then in office who are not designees of Parent.
The executive officers of Purchaser immediately prior to the Effective
Time will be the initial executive officers of the Surviving Corporation.
Indemnification
The Merger Agreement provides that the articles of incorporation and
by-laws of the Surviving Corporation must contain provisions with respect to
indemnification and exculpation at least as protective to any officer or
director as those set forth in the articles of incorporation and by-laws of the
Company, and that those provisions may not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at or prior to
the Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
The Merger Agreement provides that the Company shall, to the fullest
extent permitted under applicable law or under the Company's articles of
incorporation or by- laws and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and that, after the Effective Time,
Fimalac-U.S. and the Surviving Corporation shall, to the fullest extent
permitted under applicable law or under the Surviving Corporation's articles of
incorporation or by-laws, indemnify and hold harmless, each present and former
director, officer or employee of the Company or any of its
<PAGE>
31
subsidiaries against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages and liabilities incurred in connection
with, and amounts paid in settlement of, any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative and
wherever asserted, brought or filed, (x) arising out of or pertaining to the
transactions contemplated by the Merger Agreement or (y) otherwise with respect
to any acts or omissions or alleged acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the respective articles of
incorporation or by-laws of the Company or the subsidiaries or any applicable
contract or agreement as in effect on the date of the Merger Agreement, in each
case for a period of six years after the date of the Merger Agreement. The
indemnity agreements of Fimalac- U.S. and the Surviving Corporation extend, on
the same terms to, and inure to the benefit of and are enforceable by, each
person or entity who controls, or in the past controlled, any present or former
director, officer or employee of the Company or any of its subsidiaries.
Conditions to Consummation of the Merger
The Merger Agreement provides that the respective obligations of the
parties to the Merger Agreement to effect the Merger is subject to the
satisfaction or waiver of the following conditions: (i) Purchaser will have
accepted and purchased Shares pursuant to the Offer, (ii) the waiting period
applicable to the consummation of the Merger under the HSR Act will have expired
or been earlier terminated; (iii) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger will be in effect; and there will not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal;
(iv) there will not be in effect any judgment, decree or order of any
governmental authority, administrative agency or court of competent jurisdiction
prohibiting or limiting Parent from exercising all material rights and
privileges pertaining to its ownership of the Surviving Corporation or the
ownership or operation by Parent or any of its subsidiaries of all or a material
portion of the business or assets of Parent or any of its subsidiaries, or
compelling Parent or any of its subsidiaries to dispose of or hold separate all
or any material portion of the business or assets of Parent or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as a
result of the Merger or the transactions contemplated by the Merger Agreement;
and (v) the Merger will have been approved by the stockholders of the Company,
if and to the extent a vote of the stockholders of the Company is required in
respect of the Merger in accordance with the Illinois Law. In addition, Parent,
Fimalac-U.S. and Purchaser are not required to effect the Merger if the
representations and warranties of the Company set forth in the Merger Agreement
were not true and correct in all material respects when made.
Termination
The Merger Agreement provides that it may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the boards of
directors or any committee thereof of Parent, Fimalac-U.S.,
Purchaser and the Company;
<PAGE>
32
(b) by either Parent or the Company if a court of competent
jurisdiction or governmental authority shall have issued a
nonappealable final order, decree or ruling or taken any other
action having the effect of permanently restraining, enjoining
or otherwise prohibiting the Offer or the Merger (except that
this right to terminate is not available to any party who has
not complied with its obligations set forth in the Merger
Agreement to use reasonable best efforts to take all
appropriate action to do or cause to be done all things
necessary to consummate the Offer and the Merger if such
noncompliance materially contributed to the issuance of any
such order, decree or ruling or the taking of such action);
(c) by either Parent or the Company if (A) as the result of the
failure of any of the Offer Conditions, the Offer shall have
expired or Purchaser shall have terminated the Offer in
accordance with its terms without Purchaser having purchased
any Shares pursuant to the Offer or (B) Purchaser shall have
failed to accept for purchase and pay for Shares pursuant to
the Offer by May 12, 2000 unless such failure by Purchaser is
a result of the receipt by the Company of a bona fide
unsolicited Acquisition Proposal or a request for additional
information under the HSR Act or the failure to obtain any
necessary governmental or regulatory approval, in which case
the date by which Purchaser shall accept for purchase and pay
for Shares shall be extended to June 30, 2000 (except that
this right to terminate is not available to any party whose
breach or failure to fulfill any obligation under the Merger
Agreement has been the cause of or resulted in any of the
circumstances described in clauses (A) and (B) before such
dates);
(d) by Parent, prior to the purchase of Shares pursuant to the
Offer, if the board of directors shall have (i) withdrawn or
modified in a manner adverse to Parent, Fimalac-U.S. or
Purchaser, or publicly taken a position materially
inconsistent with, its approval or recommendation of the
Offer, the Merger or the transactions contemplated by the
Merger Agreement, (ii) approved, endorsed or recommended an
Acquisition Proposal or (iii) publicly disclosed any intention
to do any of the foregoing;
(e) by the Company, prior to the purchase of Shares pursuant to
the Offer, or the Parent, at any time prior to the Effective
Time, (i) if any representation or warranty of the Company or
Parent, respectively, set forth in the Merger Agreement that
are qualified by reference to materiality shall not be true
and correct when made or any representation or warranty of the
Company or Parent, respectively, set forth in the Merger
Agreement that are not qualified by reference to materiality
shall not be true and correct in all material respects when
made, or (ii) upon a breach of or failure to perform in any
material respect any covenant or agreement on the part of the
Company or Parent, respectively, set forth in the Merger
Agreement except, in each of (i) and (ii) above, where the
failure to perform such covenants or agreements or the failure
of such representations and warranties to be so true and
correct would not have a Material Adverse Effect on the
Company, Parent or the Offer (either (i) or (ii) above being a
"Terminating Breach"); provided however, that, if such
Terminating Breach is curable by the Company or Parent, as the
case may be, through the exercise of its reasonable best
efforts and for so long as the Company
<PAGE>
33
or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company,
respectively, may so terminate the Merger Agreement, and
provided further that the right to terminate the Merger
Agreement shall not be available to any party whose breach of
or failure to fulfill its obligations under the Merger
Agreement resulted in the failure of any such condition; or
(f) by the Company, following the receipt by the Company after the
date of the Merger Agreement, under circumstances not
involving any breach of the non-solicitation provisions set
forth in the Merger Agreement, of an unsolicited bona fide
Superior Proposal, if the board of directors, after
consultation with outside legal counsel, shall have determined
in good faith that the failure to terminate the Merger
Agreement would be inconsistent with its fiduciary duties to
the Company's stockholders under applicable law; provided that
(i) the Company has complied with the non-solicitation
provisions of the Merger Agreement, including the notice
provisions therein, (ii) such termination shall only be
effective if the Company enters into a definitive agreement
providing for the transactions contemplated by such
Acquisition Proposal immediately following such termination;
(iii) the board of directors shall have given Parent at least
two business days prior written notice of its determination to
so terminate the Merger Agreement and shall have afforded
Parent a reasonable opportunity within such two business
day-period to amend its Offer; and (iv) the Company pays
Parent the $16 million (plus up to $2 million in expenses)
termination fee in accordance with the provisions of the
Merger Agreement.
Fees and Expenses
Except as otherwise set forth in the Merger Agreement, all fees and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses, whether
or not the Merger is consummated.
OTHER MATTERS
Conduct of the Business of the Company After the Merger
It is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted. The directors of Purchaser
will be the initial directors of the Surviving Corporation, and the executive
officers of the Purchaser will be the initial executive officers of the
Surviving Corporation.
Parent intends to conduct a detailed review of the Company and its
assets, corporate structure, capitalization, operations, policies, management
and personnel. After such review, Parent will determine what actions or changes,
if any, would be desirable in light of the circumstances which then exist,
including steps to integrate the operations of the Surviving Corporation and the
operations of Fitch IBCA. In parallel, Parent plans to give consideration to any
potential avenues that may be open for further strengthening the
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34
Company's marketing and financial position, including through possible
alliances, or partnership or joint venture arrangements with third parties.
As a result of the Offer, the Shares are no longer quoted on the New
York Stock Exchange and trading information is no longer available. Parent and
Purchaser intend to cause the Company to make an application for termination of
registration of the Shares under the Securities Exchange Act of 1934, as
amended, as soon as possible after the Shares are then eligible for such
termination. In such event, there will be no publicly traded Shares outstanding.
Regulatory Matters
GENERAL. Except as described below, based on a review of publicly
available filings by the Company with the SEC and other publicly available
information concerning the Company, Purchaser is not aware of any license or
regulatory permit that appears to be material to the business of the Company and
that might be adversely affected by Parent's acquisition of the Company pursuant
to the Merger, or of any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of the Company by Parent
pursuant to the Merger. Should any such approval or other action be required, it
is presently contemplated that such approval or action would be sought, except
as described below under "State Takeover Laws." There can be no assurance that
any such approval or other action, if required, would be obtained without
substantial conditions or that adverse consequences would not result to the
Company's business or that certain parts of the Company's business would not
have to be disposed of in the event that such approvals were not obtained or
such other actions were not taken in order to obtain any such approval or other
action.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Illinois. In general, Section 11.75 prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the outstanding voting shares of a corporation) from engaging in a
"business combination" (defined to include mergers and certain other actions
with an Illinois corporation) for a period of three years following the date
such person became an interested stockholder unless, among other things, the
"business combination" is approved by the board of directors of such corporation
prior to such date. The board of directors of the Company approved the Merger on
March 6, 2000 and on April 12, 2000. Accordingly, Section 11.75 is inapplicable
to the Merger.
The Company and certain of its subsidiaries conduct business in a
number of states throughout the United States, some of which have adopted laws
and regulations applicable to offers to acquire shares of corporations that are
incorporated or have substantial assets, stockholders and/or a principal place
of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the
United States held that the Illinois Business Takeover Statute, which involved
state securities laws that made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target
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35
corporation without prior approval of the remaining stockholders, provided that
such laws were applicable only under certain conditions, in particular, that the
corporation has a substantial number of stockholders in and is incorporated
under the laws of such state. Subsequently, in TLX ACQUISITION CORP. V. TELEX
CORP., a federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they applied to corporations incorporated
outside Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit.
Neither Parent nor Purchaser has determined whether any other state
takeover laws and regulations will by their terms apply to the Merger, and,
except as set forth above, neither Parent nor Purchaser has presently sought to
comply with any state takeover statute or regulation. Parent and Purchaser
reserve the right to challenge the applicability or validity of any state law or
regulation purporting to apply to the Merger. In the event it is asserted that
one or more state takeover statutes is applicable to the Merger and an
appropriate court does not determine that such statute is inapplicable or
invalid as applied to the Merger, Parent or Purchaser might be required to file
certain information with, or to receive approval from, the relevant state
authorities, and Purchaser might be delayed in consummating the Merger.
ANTITRUST IN THE UNITED STATES. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice and the
FTC and certain waiting period requirements have been satisfied. Because Parent
already owns more than 50% of the voting securities of the Company, the
acquisition of the remaining voting securities of the Company pursuant to the
Merger is exempt from the notification and waiting period of the HSR Act.
Dissenters' Rights
The stockholders of the Company are entitled to dissent and obtain
payment for their shares (also referred to herein as "appraisal rights") under
Section 11.65 of the Illinois Law ("Section 11.65") as to Shares owned by them.
The procedure for asserting such appraisal rights is set forth below and is set
forth in detail in Section 11.70 of the Illinois Law ("Section 11.70"). Sections
11.65 and 11.70 are reprinted in their entirety in Exhibit B. All references in
this summary to a "stockholder" are to the record holder of the Shares as to
which appraisal rights are asserted. A person having a beneficial interest in
Shares that are held of record in the name of another person, such as a broker
or nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect whatever appraisal
rights the beneficial owner may have.
The following summary is not a complete statement of the law relating
to appraisal rights and is qualified in its entirety by reference to Exhibit B.
If you wish to exercise your statutory appraisal rights or wish to preserve the
right to do so, you should carefully
<PAGE>
36
review this summary and Exhibit B because failure to comply strictly with the
procedures set forth in the statute will result in the loss of your appraisal
rights.
Under Section 11.70, a stockholder may assert dissenters' rights only
if he or she sends to the Company before the vote at the special meeting a
written demand for payment for his or her shares and the stockholder does not
vote in favor of the Merger. A vote against the Merger will not, in itself,
satisfy the notice requirements with respect to dissenters' rights. Pursuant to
Section 11.65, a stockholder entitled to dissent and obtain payment for his or
her Shares may not challenge the corporate action creating his or her
entitlement unless such action is fraudulent or constitutes a breach of a
fiduciary duty owed to the stockholder.
In accordance with Section 11.70, the Company is required to mail to
each holder of Shares as of the record date (other than the Purchaser) notice
that such stockholder is entitled to dissenters' rights for their Shares and the
procedure to dissent (the "Notice"). The Notice of Special Meeting of
Stockholders to be held on June 1, 2000 and this Information Statement is
intended to provide the Notice. Prior to or in connection with delivering such
Notice, the Company is required to furnish to the stockholders material
information with respect to the Merger that will objectively enable a
stockholder to determine whether or not to exercise his or her appraisal rights.
This Information Statement is intended to provide that information.
A stockholder may assert its dissenters' rights only if he or she
delivers to the Company before the vote on the Merger Agreement is taken at the
Special Meeting a written demand for payment of his or her shares if the Merger
is consummated (the "Payment Demand").
Within 10 days after the date on which the Merger is effective or 30
days after the stockholder delivers to the Company the Payment Demand, whichever
is later, the Company will send each stockholder who has delivered a Payment
Demand a statement setting forth the opinion of the Company as to the estimated
fair value of the Shares, certain financial statements of the Company and a
commitment by the Company to pay for the Shares at the estimated fair value upon
transmittal to the Company of the certificates representing the Shares. "Fair
value", with respect to a dissenters' shares, means the value of the Shares
immediately before the consummation of the Merger excluding any appreciation or
depreciation in anticipation of the Merger, unless exclusion would be
inequitable. Section 11.70 sets forth the procedures to be followed in the event
that a stockholder does not agree with the opinion of the Company as to the
estimated fair value of the Shares. See Exhibit B.
Financing
Purchaser estimates that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, to consummate the Merger and
to pay all related fees and expenses will be approximately US$531.5 million.
Purchaser and Parent expect to obtain the financing partially from Parent's
internal resources and also from borrowings under the facilities described
below.
<PAGE>
37
Parent has received commitments for financing that will be sufficient
to purchase the tendered Shares, consummate the Merger and pay related costs and
expenses and to refinance certain existing indebtedness of Parent and its
subsidiaries.
Pursuant to a commitment letter, dated March 6, 2000, Credit Agricole
Indosuez and Credit Lyonnais (collectively, the "Arrangers") have severally
committed to provide secured credit facilities (the "Credit Facilities") in the
aggregate amount of e1,155 million, and the Arrangers have agreed to arrange and
syndicate the Credit Facilities to a group of financial institutions.
The Credit Facilities will be comprised of (i) a e265 million
amortizing term loan facility (the "A Term Loan") and (ii) a e585 million
amortizing term loan facility (together with the A Term Loan, the "Term Loans")
and (iii) a e305 million revolving credit facility (the "Revolving Credit
Facility"). The borrowers under the Term Loans are expected to be Parent or
Purchaser in an allocation to be agreed with the Arrangers. Parent will be the
borrower under the Revolving Credit Facility.
The Term Loans will bear interest at a rate equal to the aggregate of
the applicable Euro interbank offered rate ("EURIBOR") (in the case of a Term
Loan in Euros) or US dollar London interbank offered rate ("USD LIBOR") (in the
case of a Term Loan in US dollars) for the applicable interest period (such
interest period to be of one, two, three or six months, as selected by the
borrowers) and a margin originally equal to 1.90%. The Revolving Credit Facility
will bear interest at a rate equal to the aggregate of the applicable EURIBOR
(in the case of a revolving loan in Euros) or USD LIBOR (in the case of a
revolving loan in US dollars) for the duration of the revolving loan selected by
the borrower and a margin originally equal to 1.90%. The foregoing margins will
be subject to semi-annual downward adjustments to as low as 0.7%, depending upon
achievement of certain performance criteria by Parent.
Certain fees will be payable by Parent in connection with the Credit
Facilities, including, without limitation, (i) arrangement fees, (ii) agency
fees and (iii) commitment fees.
Expenses of the Transaction
As a result of the proposed acquisition of the Company by Parent, the
Company will incur various costs, currently estimated at approximately
$1,470,000 in connection with consummating the Merger. These costs consist of
approximately $400,000 of legal and accounting fees and costs, approximately
$20,000 for printing costs, filing fees, and expenses associated with the
Special Meeting, and approximately $1,050,000 of advisory fees payable to P.J.
Solomon as financial advisory (inclusive of out-of-pocket expenses). The exact
timing, nature and amount of these costs are subject to change. See "OPINION OF
P.J. SOLOMON" and "FEES PAYABLE TO P.J. SOLOMON" for a description of the fees
to be paid to P.J. Solomon in connection with its engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
<PAGE>
38
The Merger Agreement includes provisions relating to the
indemnification of certain officers and directors and employees of the Company
and its subsidiaries. See "THE MERGER AGREEMENT -- Indemnification".
Certain members of the board of directors or executive officers of the
Company may own Shares of the Company. See "SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY".
In particular, the Merger Agreement provides that, on the date on which
Shares are purchased pursuant to the Offer, each Stock Option will become
exercisable. At the Effective Time, each Stock Option will be converted into the
right to receive the product of (i) the number of Shares subject to such stock
option multiplied by (ii) the excess of the Merger Consideration over the
exercise price per Share of such option.
Members of the board of directors of the Company at the time the Offer
and the Merger were approved on March 6, 2000, will collectively receive in
respect of options to purchase Shares held by them an aggregate of approximately
$11.1 million (of this amount, Mr. McCarthy is entitled to receive approximately
$4.5 million, Mr. Maffei is entitled to receive approximately $1.7 million, Mr.
Meigs is entitled to receive approximately $2.8 million, Mr. Ingham is entitled
to receive approximately $1.9 million and Mr. Westerlund is entitled to receive
approximately $270,000). Executive officers of the Company (including Messrs.
McCarthy and Maffei) will collectively receive in respect of options to purchase
Shares held by them an aggregate of $17.9 million. See "THE MERGER AGREEMENT --
Company Stock Options" and "SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY".
The Company entered into Severance Protection Agreements with each of
the executive officers of the Company in 1994 (1999 in the case of Mr. Paul
Taylor) providing them with severance compensation equal to 2.9 times their
annual salary and bonus in the event their employment is terminated for
specified reasons within 36 months following a change in control of the Company
or in the event the executive officer terminates his employment for any reason
during the 60-day period commencing on the first anniversary of a change in
control of the Company.
FEES PAYABLE TO P.J. SOLOMON
As compensation for its services as financial advisor to the Company,
the Company has agreed to pay P.J. Solomon the following amounts: (i) a
retention fee of $100,000, (ii) $200,000 for rendering an opinion as to the
fairness, from a financial point of view, of the consideration to be received in
the Offer and the Merger by the holders of Shares and (iii) $700,000 upon
consummation of the Offer and Merger. The Company has also agreed to reimburse
P.J. Solomon for reasonable out-of-pocket expenses, including reasonable fees,
disbursements and other charges of its legal counsel, and to indemnify P.J.
Solomon and related parties against certain liabilities, including liabilities
under the federal securities laws, arising out of P.J. Solomon's engagement. See
"OPINION OF P.J. SOLOMON".
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<PAGE>
39
The following table sets forth information as to beneficial ownership of Shares
of each person who has been since the last fiscal year or currently is a
director or executive officer of the Company as of April 14, 2000.
Name of Beneficial Shares Beneficially
Owner Owned (1) Percent of Shares
----- --------- -----------------
Marc Ladreit de 4,495,279 (2) 96.5%
Lacharriere
Veronique Morali 0 /
Robin Monro-Davies 0 /
Stephen Joynt 0 /
Paul J. McCarthy 70,000 *
Philip T. Maffei 34,000 *
Milton L. Meigs 34,192 *
Jonathan Ingham 24,872 *
Robert N. Westerlund 7,116 *
Ernest T. Elsner 75,950 *
Peter J. Stahl 39,200 *
Paul G. Taylor 47,200 *
Current and former 4,827,809 96.8%
directors and executive
officers as a group
* less than 1%
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act. Accordingly, a beneficial owner of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote such
security or the power to dispose of such security, or who has the right to
acquire beneficial ownership of a security through any contract or arrangement,
including the exercise of an option. All Shares beneficially owned by each
director or executive officer of the Company (except for Mr. Ladreit de
Lacharriere) are Shares that could be acquired through the exercise of Stock
Options.
(2) Marc Ladreit de Lacharriere indirectly controls FSA Acquisition Corp. and
Fitch IBCA, Inc., and is therefore deemed to beneficially own the Shares owned
directly by Fitch IBCA, Inc. and FSA Acquisition Corp.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<PAGE>
40
The following table sets forth information as to beneficial ownership of Shares
of all persons known to the Company to beneficially own 5% or more of any class
of voting stock of the Company as of April 14, 2000.
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned (1) Shares
- ---------------- --------- ------
FSA Acquisition Corp., 4,495,179 96.5%
One State Street Plaza
New York, NY 10004, USA
Fitch IBCA, Inc. 4,495,279 (2) 96.5%
One State Street Plaza
New York, NY 10004, USA
Fimalac, Inc. 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac Communication S.A. 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Minerais & Engrais S.A. 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac S.A., 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac et Cie, 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac Participations 4,495,279 (3) 96.5%
c/o Fimalac S.A.
97, rue de Lille
75007 Paris, France
Marc Ladreit de Lacharriere, 4,495,279 (3) 96.5%
c/o Fimalac S.A.
97, rue de Lille
75007 Paris, France
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act. Accordingly, a beneficial owner of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote such
security or the power to dispose of such security.
<PAGE>
41
(2) Fitch IBCA, Inc. directly controls FSA Acquisition Corp. and is therefore,
deemed to beneficially own the Shares owned by FSA Acquisition Corp. Fitch IBCA,
Inc. also directly owns 100 Shares.
(3) Each of Fimalac, Inc., Fimalac Communication S.A., Minerais & Engrais S.A.,
Fimalac S.A., Fimalac et Cie, Fimalac Participations and Marc Ladreit de
Lacharriere are deemed to beneficially own the Shares owned by FSA Acquisition
Corp. and Fitch IBCA, Inc. due to the direct or indirect control of FSA
Acquisition Corp. and Fitch IBCA, Inc. by each of them.
TRANSACTIONS BETWEEN PARENT AND THE COMPANY
There were no negotiations, transactions or material contacts during the past
two years between the Company (including its subsidiaries) and the Parent or its
affiliates other than those disclosed in this Information Statement. There is no
present or proposed material agreement, arrangement, understanding or
relationship between the Purchaser or any of its executive officers, directors,
controlling persons or subsidiaries and the Company or any of its executive
officers, directors, controlling persons or subsidiaries other than those
disclosed in this Information Statement.
ACCOUNTING TREATMENT
The acquisition of the Company by Parent in the Merger will be treated
as a "purchase" under U.S. generally accepted accounting principles.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W. Washington,
D.C. 20549; the SEC's regional offices located at Seven World Trade Center, New
York, New York 10048 and at 500 West Madison Street, Chicago, Illinois 60661.
You can obtain information about the operation of the SEC's Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site
that contains information we file electronically with the SEC, which you can
access over the Internet at http://www.sec.gov. Copies of these materials may
also be obtained by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C., 20549 at prescribed rates.
By order of the board of directors
/s/ Marie Becker
----------------
Marie Becker, Secretary
Dated: May 11, 2000
<PAGE>
42
LIST OF EXHIBITS
Exhibit A Agreement and Plan of Merger, dated as of March 6, 2000, among
the Company, Parent, Fimalac-U.S. and Purchaser, as amended by
Amendment No. 1, dated as of May 4, 2000.
Exhibit B Sections 11.65 and 11.70 of the Illinois Business Corporation
Act of 1983
Exhibit C Opinion of P.J. Solomon dated as of March 6, 2000
Exhibit A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
Fimalac, S.A.
Fimalac, INC.
FSA Acquisition Corp.
and
Duff & Phelps Credit Rating Co.
Dated as of March 6, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE OFFER.............................................................2
Section 1.1 The Offer.................................................2
Section 1.2 Company Action............................................4
Section 1.3 Boards of Directors and Committees; Section 14(f).........5
ARTICLE II
THE MERGER............................................................6
Section 2.1 The Merger................................................6
Section 2.2 Effective Date............................................7
Section 2.3 Effect of the Merger......................................7
Section 2.4 Articles of Incorporation, By-Laws........................7
Section 2.5 Directors and Officers....................................7
Section 2.6 Effect on Capital Stock...................................8
Section 2.7 Exchange of Certificates.................................10
Section 2.8 Stock Transfer Books.....................................11
Section 2.9 No Further Ownership Rights in Common Stock..............11
Section 2.10 Lost, Stolen or Destroyed Certificates..................12
Section 2.11 Taking of Necessary Action; Further Action..............12
Section 2.12 Stockholders' Meeting...................................12
Section 2.13 Material Adverse Effect.................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................14
Section 3.1 Organization and Qualification; Subsidiaries.............14
Section 3.2 Articles of Incorporation and By-Laws....................15
Section 3.3 Capitalization...........................................15
Section 3.4 Authority Relative to this Agreement.....................16
Section 3.5 Material Contracts; No Conflict; Required Filings and
Consents...............................................16
Section 3.6 Compliance, Permits......................................18
Section 3.7 SEC Filings; Financial Statements........................18
Section 3.8 Absence of Certain Changes or Events.....................19
Section 3.9 No Undisclosed Liabilities...............................20
Section 3.10 Absence of Litigation...................................20
Section 3.11 Employee Benefit Plans, Employment Agreements...........21
Section 3.12 Employment and Labor Matters............................23
Section 3.13 Schedule 14D-9; Offer Documents; Proxy Statement........23
i
<PAGE>
Page
----
Section 3.14 Restrictions on Business Activities.....................24
Section 3.15 Title to Property.......................................24
Section 3.16 Taxes...................................................25
Section 3.17 Environmental Matters...................................27
Section 3.18 Intellectual Property...................................28
Section 3.19 Interested Party Transactions...........................29
Section 3.20 Insurance...............................................29
Section 3.21 Opinion of Financial Adviser............................29
Section 3.22 Brokers.................................................29
Section 3.23 Sections 7.85 and 11.75 of Illinois Law Not Applicable..30
Section 3.24 Vote Required...........................................30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT, Fimalac-U.S. AND ACQUISITION SUB.............................30
Section 4.1 Organization and Qualification; Subsidiaries.............30
Section 4.2 Authority Relative to this Agreement.....................31
Section 4.3 No Conflict, Required Filings and Consents...............31
Section 4.4 Offer Documents; Schedule 14D-9; Proxy Statement.........32
Section 4.5 No Prior Activities; Financing...........................32
Section 4.6 Ownership of Shares......................................33
ARTICLE V
CONDUCT OF BUSINESS..................................................33
Section 5.1 Conduct of Business by the Company Pending the Merger....33
Section 5.2 No Solicitation; Acquisition Proposals...................36
ARTICLE VI
ADDITIONAL AGREEMENTS................................................39
Section 6.1 HSR Act..................................................39
Section 6.2 Access to Information; Confidentiality...................39
Section 6.3 Consents; Approvals......................................39
Section 6.4 Indemnification and Insurance............................40
Section 6.5 Notification of Certain Matters..........................42
Section 6.6 Further Action...........................................42
Section 6.7 Public Announcements.....................................42
Section 6.8 Conveyance Taxes.........................................42
Section 6.9 Employee Benefit Plans...................................43
Section 6.10 Delisting of Securities.................................43
Section 6.11 Audited Financial Statements............................43
Section 6.12 State Takeover Laws.....................................43
Section 6.13 Financing Efforts.......................................44
ii
<PAGE>
ARTICLE VII
CONDITIONS TO THE MERGER.............................................44
Section 7.1 Conditions to Obligation of Each Party to Effect the
Merger.................................................44
Section 7.2 Conditions to Obligation of Parent, Fimalac-U.S. and
Acquisition Sub........................................45
ARTICLE VIII
TERMINATION..........................................................45
Section 8.1 Termination..............................................45
Section 8.2 Effect of Termination....................................47
Section 8.3 Fees and Expenses........................................47
ARTICLE IX
GENERAL PROVISIONS...................................................48
Section 9.1 Effectiveness of Representations, Warranties and
Agreements.............................................48
Section 9.2 Notices..................................................48
Section 9.3 Certain Definitions......................................49
Section 9.4 Amendment................................................50
Section 9.5 Waiver...................................................50
Section 9.6 Headings.................................................51
Section 9.7 Severability.............................................51
Section 9.8 Entire Agreement.........................................51
Section 9.9 Assignment; Guarantee of Acquisition Sub Obligations.....51
Section 9.10 Parties in Interest.....................................51
Section 9.11 Failure or Indulgence Not Waiver; Remedies Cumulative...51
Section 9.12 Governing Law...........................................52
Section 9.13 Counterparts............................................52
Section 9.14 Interpretation..........................................52
Annex A - Offer Conditions
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 6, 2000, is
among Duff & Phelps Credit Rating Co., an Illinois corporation (the "Company"),
Fimalac, S.A., a French societe anonyme ("Parent"), Fimalac, Inc., a Delaware
corporation ("Fimalac-U.S."), and FSA Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Fimalac-U.S. ("Acquisition Sub").
WHEREAS, the Boards of Directors of Parent, Fimalac-U.S.,
Acquisition Sub and the Company have each approved the acquisition of the
Company by Parent, by means of a tender offer by Acquisition Sub to acquire all
outstanding shares (the "Shares") of common stock, no par value per share, of
the Company (the "Common Stock") for a cash amount of $100.00 per Share (such
amount, or any greater amount per Share paid pursuant to the tender offer, as
such amount may be adjusted from time to time pursuant to the third paragraph of
Section 1.1(a), being hereinafter referred to as the "Per Share Amount") in
accordance with the terms and subject to the conditions provided for herein,
which shall include any subsequent offering period thereof (the "Offer") and a
merger of Acquisition Sub and the Company (the "Merger") following the Offer,
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company (the "Board") has (i)
determined that the consideration to be paid for each Share in the Offer and the
Merger is fair to and in the best interests of the stockholders of the Company
and (ii) approved this Agreement and the transactions contemplated hereby and
declared the advisability and resolved to recommend acceptance of the Offer,
approval of the Merger and approval and adoption of this Agreement by the
stockholders of the Company in accordance with the Illinois Business Corporation
Act of 1983, as amended (the "Illinois Law"), upon the terms and subject to the
conditions set forth herein; and
WHEREAS the Boards of Directors of Parent, Fimalac-U.S. and
Acquisition Sub have each approved the Offer and the Merger of Acquisition Sub
with and into the Company following the Offer in accordance with the Delaware
General Corporation Law (the "Delaware Law") upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent, Fimalac-U.S. and Acquisition Sub hereby agree as
follows:
<PAGE>
2
I.
THE OFFER
A. The Offer.
1. Commencement. Provided that this Agreement shall not have
been terminated in accordance with Section 8.1, as promptly as practicable
following the public announcement by Parent and the Company of the terms of this
Agreement, Parent shall cause Acquisition Sub to commence the Offer. The
obligation of Acquisition Sub to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to (i) the condition that a number of
Shares representing not less than 51% of the Company's outstanding voting power
(assuming the exercise of all outstanding options, warrants, convertible or
exchangeable securities or other rights to purchase shares of Common Stock which
have an exercise price less than the Per Share Amount and which have not been
canceled as described in Section 2.6(b)) shall have been validly tendered and
not withdrawn prior to the expiration date of the Offer (the "Minimum
Condition"), and (ii) the satisfaction or waiver by Acquisition Sub of all the
other conditions set forth in Annex A hereto. It is agreed that the conditions
set forth in Annex A hereto are for the sole benefit of Acquisition Sub and that
the Minimum Condition and the other conditions set forth in Annex A may be
asserted by Acquisition Sub regardless of the circumstances giving rise to any
such condition unless Parent, Fimalac-U.S., Acquisition Sub or their affiliates
shall have caused the circumstances giving rise to such condition. Acquisition
Sub expressly reserves the right in its sole discretion to waive, in whole or in
part at any time or from time to time, any such condition, to increase the price
per Share payable in the Offer, to extend the Offer or provide for a subsequent
offering period or to make any other changes in the terms and conditions of the
Offer; provided that, unless previously approved by the Company in writing, no
change may be made that decreases the Per Share Amount payable in the Offer,
changes the form of consideration payable in the Offer, reduces the maximum
number of Shares to be purchased in the Offer, imposes conditions to the Offer
in addition to those set forth in this Agreement, including in Annex A hereto,
or waives or decreases below 51% the Minimum Condition.
Subject to the conditions of the Offer set forth in this
Agreement, including in Annex A hereto, Parent shall cause Acquisition Sub to,
and Acquisition Sub shall, accept for payment and pay for Shares which have been
validly tendered and not withdrawn pursuant to the Offer as soon as it is
permitted to do so under applicable law. The initial expiration date of the
Offer shall be 20 business days after the date of its commencement. If all
conditions set forth in Annex A are not satisfied on the initial expiration date
of the Offer, Acquisition Sub may extend (and re-extend) the Offer to provide
additional time to satisfy such conditions. Without limiting the right of
Acquisition Sub to extend the Offer pursuant to the immediately preceding
sentence, in the event that a condition set forth in paragraphs (a) or (g) of
Annex A is not satisfied at the scheduled initial expiration date of the
<PAGE>
3
Offer, Acquisition Sub shall, and Parent shall cause Acquisition Sub to, extend
the expiration date of the Offer for an additional 10 business days. In
addition, Acquisition Sub shall have the right to extend the Offer for a
subsequent offering period of up to an additional 20 business days (the
"Subsequent Offering Period") pursuant to Rule 14d-11 of the Exchange Act (as
defined below).
The Per Share Amount payable in the Offer shall be paid to the
sellers in cash, upon the terms and subject to the conditions of the Offer.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time (as defined below) the outstanding Shares shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Per Share Amount shall be correspondingly adjusted on a
per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
2. Filing Offer Documents. On the date of commencement of the
Offer, Parent, Fimalac-U.S. and Acquisition Sub shall file or cause to be filed
with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement
on Schedule TO with respect to the Offer, which will contain the offer to
purchase and form of the related letter of transmittal and other ancillary offer
documents and instruments pursuant to which the Offer will be made (together
with any supplements or amendments thereto, the "Offer Documents") and which
shall comply as to form in all material respects with the provisions of
applicable U.S. federal securities laws. In addition, Parent, Fimalac-U.S. and
Acquisition Sub shall file or cause to be filed with the SEC under cover of
Schedule TO any pre-commencement press release or other written communications
relating to the Offer no later than the date of communication. The Company will
promptly supply to Parent, Fimalac-U.S. and Acquisition Sub in writing, for
inclusion in the Offer Documents, all information concerning the Company
required under the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"). Parent,
Fimalac-U.S., Acquisition Sub and the Company each agree promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that any such information shall have become false or misleading in any material
respect and Parent, Fimalac-U.S. and Acquisition Sub each further agrees to take
all steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to holders of Shares, in each case as and to
the extent required by applicable U.S. federal securities laws. The Company and
its counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to their filing with the SEC and shall be provided with
any comments Parent, Fimalac-U.S., Acquisition Sub and their counsel may receive
from the SEC or its staff with respect to the Offer Documents promptly after
receipt of such comments.
<PAGE>
4
B. Company Action.
1. Board Approval. The Company hereby approves of and consents
to the Offer and represents and warrants that the Board, at a meeting duly
called and held on March 6, 2000, by unanimous vote of those present, (i)
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to and in the best interests of the
Company, (ii) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, and declared their advisability and (iii)
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to Acquisition Sub and, if required by applicable
law, approve and adopt this Agreement and the Merger; provided, that such
recommendation may be withdrawn or modified in accordance with Section 5.2(a).
The Company further represents and warrants that Peter J. Solomon Company has
delivered to the Board its written opinion that, as of the date hereof, the Per
Share Amount in the Offer is fair, from a financial point of view, to the
Company's stockholders, a copy of which has been provided to Parent. The Company
has been authorized by Peter J. Solomon Company to permit the inclusion of such
opinion in its entirety in the Schedule 14D-9 referred to below and the Proxy
Statement referred to in Section 3.13, so long as such inclusion is in form and
substance reasonably satisfactory to Peter J. Solomon Company and its counsel.
Subject to the fiduciary duties of the Board under applicable law as determined
and exercised in good faith by the Board in a manner consistent with Section
5.2, the Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Board described in this Section 1.2(a).
2. Schedule 14D-9. Simultaneously with the filing by Parent,
Fimalac-U.S. and Acquisition Sub of the Offer Documents, the Company shall file
with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 and other
ancillary documents and instruments required to be filed pursuant thereto
(together with any amendments or supplements thereto, the "Schedule 14D-9") and
shall mail the Schedule 14D-9 to the stockholders of the Company promptly after
the commencement of the Offer. The Schedule 14D-9 shall, subject to the
fiduciary duties of the Board under applicable law as determined and exercised
in good faith by the Board in a manner consistent with Section 5.2, at all times
contain the determination, approvals and recommendations described in Section
1.2(a). Parent, Fimalac-U.S. and Acquisition Sub each agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that any such information shall have become false or misleading in any
material respect and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable U.S. federal securities laws. Parent, Fimalac-U.S., Acquisition Sub
and their counsel shall be given a reasonable opportunity to review and comment
on the Schedule 14D-9 prior to its filing with the SEC and shall be provided
with any comments the Company and its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after receipt of such
comments.
<PAGE>
5
3. Dissemination of the Offer. In connection with the Offer,
the Company will promptly furnish Parent with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and shall
furnish Parent with such additional information and assistance (including,
without limitation, updated lists of stockholders, mailing labels and lists of
securities positions) as Parent or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Fimalac-U.S., Acquisition Sub, and their
affiliates and associates shall hold in confidence the information contained in
any such labels, listings and files, will use such information only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated, will deliver to the Company all copies of such information then in
their possession and not use such information for any purpose whatsoever.
C. Boards of Directors and Committees; Section 14(f).
1. Board Representation. Promptly upon the purchase by
Acquisition Sub of Shares pursuant to the Offer and from time to time
thereafter, Parent shall be entitled to designate up to such number of
directors, rounded up to the next whole number on the Board that equals the
product of (i) the total number of directors on the Board (giving effect to the
election of any additional directors pursuant to this Section) and (ii) the
percentage that the number of Shares owned by Acquisition Sub and its affiliates
(including any Shares purchased pursuant to the Offer) bears to the total number
of outstanding Shares, and the Company shall upon request by Parent, subject to
the provisions of Section 1.3(b), promptly either increase the size of the Board
(and shall, if necessary, amend the Company's by-laws to permit such an
increase) or use its reasonable best efforts to secure the resignation of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board and shall cause Parent designees to be so elected; provided, that,
at all times prior to the Effective Time, the Company's Board shall include at
least two members who are not designees of Parent. Promptly upon request by
Parent, the Company will, subject to the provisions of Section 1.3(b), use its
reasonable best efforts to cause persons designated by Parent to constitute the
same percentage as the number of Parent's designees to the Board bears to the
total number of directors on the Board on (i) each committee of the Board, (ii)
each board of directors or similar governing body or bodies of each subsidiary
of the Company designated by Parent and (iii) each committee of each such board
or body.
2. Compliance with Section 14(f). The Company's obligations to
appoint Parent's designees to the Board shall be subject to Section 14(f) of the
Exchange Act, and Rule 14f-1 promulgated thereunder. The Company shall promptly
take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 1.3 and shall include in the Schedule
14D-9 or a separate Rule 14f-1 Statement provided to shareholders such
information with
<PAGE>
6
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1. Parent or Acquisition Sub will supply to the
Company in writing and be solely responsible for any information with respect to
either of them and their nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
3. Action by Disinterested Directors. Following the election
or appointment of Parent's designees pursuant to this Section 1.3 and prior to
the Effective Time (as defined below), any amendment of this Agreement or any
amendment to the articles of incorporation or by-laws of the Company
inconsistent with this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Acquisition Sub, any waiver of any of
the Company's rights hereunder or any other action by the Company under or in
connection with this Agreement that would adversely affect the ability of the
stockholders of the Company to receive the Merger Consideration will require the
concurrence of two-thirds of the directors of the Company then in office who are
not designees of Parent.
II.
THE MERGER
A. The Merger.
1. Effective Time. At the Effective Time (as defined below),
and subject to and upon the terms and conditions of this Agreement, pursuant to
and in accordance with the requirements of the Illinois Law and the Delaware
Law, at the option of the Parent, either (i) Acquisition Sub shall be merged
with and into the Company; the separate corporate existence of Acquisition Sub
shall cease and the Company shall continue as the surviving corporation or (ii)
the Company shall be merged with and into Acquisition Sub, the separate
corporate existence of the Company shall cease and the Acquisition Sub shall
continue as the surviving corporation. In either case, the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
2. Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the consummation of the Merger will take place as promptly
as practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VII, at the principal offices of
Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York,
New York 10019, unless another date and time or place is agreed to in writing by
the parties hereto.
<PAGE>
7
B. Effective Date. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Article VII (and in any event within
two business days thereafter), the parties hereto shall cause the Merger to be
consummated by (i) filing a certificate of merger as contemplated by the
Delaware Law (the "Delaware Certificate of Merger"), together with any required
related certificate, with the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with, the relevant
provisions of the Delaware Law and (ii) filing a certificate of merger as
contemplated by the Illinois Law (the "Illinois Certificate of Merger"),
together with any required related certificate, with the Secretary of State of
the State of Illinois, in such form as required by, and executed in accordance
with, the relevant provisions of the Illinois Law (the time at which both such
filings shall have been made being the "Effective Time").
C. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Delaware Certificate of
Merger, the Illinois Certificate of Merger, and the applicable provisions of the
Delaware Law and the Illinois Law. Without limiting the generality of the
foregoing and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Acquisition Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
D. Articles of Incorporation, By-Laws.
1. Articles of Incorporation. Unless otherwise determined by
Parent prior to the Effective Time, at the Effective Time the articles of
incorporation of the Acquisition Sub, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such articles of
incorporation.
2. By-Laws. Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time the by-laws of the Acquisition Sub, as in
effect immediately prior to the Effective Time, shall be the by-laws of the
Surviving Corporation until thereafter amended as provided by law, the articles
of incorporation of the Surviving Corporation and such by-laws.
E. Directors and Officers. At the Effective Time, the directors of
Acquisition Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the articles of incorporation and by-laws of the Surviving Corporation, and the
executive officers of Acquisition Sub immediately prior to the Effective Time
shall be the initial executive officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
<PAGE>
8
F. Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Parent, Fimalac-U.S.,
Acquisition Sub, the Company, or the holders of any of the following securities:
1. Conversion of Securities. Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares to be canceled
pursuant to Section 2.6(b) and any Dissenting Shares (as defined in Section
2.6(e)) shall immediately cease to be outstanding and shall automatically be
canceled and retired and shall cease to exist and be converted into the right to
receive the Per Share Amount, without any interest thereon (the "Merger
Consideration"), in accordance with Section 2.7 and each holder of any such
Share shall cease to have any rights with respect thereto arising therefrom
(including without limitation the right to vote), except for the right to
receive the Merger Consideration in accordance with Section 2.7. Notwithstanding
the foregoing, if between the date of this Agreement and the Effective Time the
outstanding Shares shall have been changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Merger Consideration shall be correspondingly adjusted on a per-share basis
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, unless such adjustment shall already
have been made pursuant to the third paragraph of Section 1.1(a).
2. Cancellation. Each Share held in the treasury of the
Company and each Share owned by the Parent, Fimalac-U.S., Acquisition Sub or any
direct or indirect wholly owned subsidiary of the Company or Parent immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, and be
canceled and retired without payment of any consideration therefor and cease to
exist.
3. Stock Options. On the date Acquisition Sub purchases Shares
pursuant to the Offer, each outstanding option to purchase Common Stock (a
"Stock Option") granted under the Company's 1994 Long-Term Stock Incentive Plan
or pursuant to any other employee stock option plan or agreement entered into by
the Company with any employee of the Company or any subsidiary thereof and
listed on Section 3.3 of the Company Disclosure Schedule (the "Company Stock
Option Plan"), whether or not then exercisable, shall become exercisable,
subject to the terms of the Company Stock Option Plan pursuant to which such
Stock Option was issued. If and to the extent that a Stock Option shall not have
been exercised at the Effective Time, such Stock Option shall be automatically
canceled. Each holder of a canceled Stock Option shall be entitled to receive as
soon as practicable after the first date payment can be made without liability
to such person under Section 16(b) of the Exchange Act from the Company in
consideration for such cancellation an amount in cash (less applicable
withholding taxes) equal to the product of (i) the number of shares of Common
Stock previously subject to such Stock Option multiplied by (ii) the excess, if
any, of the Per Share Amount over the exercise price per share of Common Stock
previously subject to such Stock Option (the "Option
<PAGE>
9
Consideration") upon surrender of such Stock Option to the Company or an
affidavit of loss in the form requested by Parent, together with such additional
documentation as may be reasonably required by Parent or the Company. The
surrender of a Stock Option in exchange for the Option Consideration in
accordance with the terms of this Section 2.6(c) shall be deemed a release of
any and all rights the holder had or may have had in respect of such Stock
Option. Prior to the purchase by Acquisition Sub of Shares pursuant to the
Offer, the Company shall use its reasonable best efforts to obtain all necessary
consents or releases from holders of Stock Options under the Company Stock
Option Plan and take all such other lawful action as may be necessary to give
effect to the transactions contemplated by this Section 2.6(c). Except as
otherwise agreed to by the parties, the Company shall use its reasonable best
efforts to assure that following the purchase by Acquisition Sub of Shares
pursuant to the Offer no participant in the Company Stock Option Plan or other
plans, programs or arrangements shall have any right thereunder to acquire any
equity securities of the Company, the Surviving Corporation or any subsidiary
thereof and to terminate all such plans.
4. Capital Stock of Acquisition Sub. At the Effective Time, if
Acquisition Sub is merged into the Company, each share of common stock, par
value $0.01 per share, of Acquisition Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of the common stock, no par
value, of the Surviving Corporation.
5. Dissenting Shares.Notwithstanding anything in this
Agreement to the contrary, Shares issued and outstanding immediately prior to
the Effective Time held by any person (a "Dissenting Shareholder") who objects
to the Merger and complies with all of the provisions of the Illinois Law
concerning the right of holders of Shares to dissent from the Merger and obtain
payment for their Shares (the "Dissenting Shares") shall not be converted into
the right to receive the Merger Consideration, but shall be converted into the
right to receive such consideration as may be determined to be due to such
Dissenting Shareholder pursuant to the Illinois Law. If, after the Effective
Time, such Dissenting Shareholder withdraws his demand for payment or fails to
perfect or otherwise loses his right of payment in accordance with Illinois Law,
the Dissenting Shares shall be deemed to be converted as of the Effective Time
into the right to receive the Merger Consideration. The Company shall give
prompt notice to Parent of any demands received by the Company for payment and
Parent shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
<PAGE>
10
G. Exchange of Certificates.
1. Exchange Agent and Procedures. Within 21 calendar days
following the date of this Agreement, Parent shall, with the Company's prior
approval, which approval shall not be unreasonably withheld or delayed, appoint
a paying agent (the "Paying Agent") to receive, hold and distribute, for the
benefit of the holders of Shares, all funds deposited pursuant to Section 2.7(b)
hereof (such cash being referred to as the "Exchange Fund"). Promptly after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
record holder, as of the Effective Time, of a certificate or certificates (the
"Certificates") that, prior to the Effective Time, represented Shares (i) a form
of letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent, and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates for payment
of the Merger Consideration therefor. Upon the surrender of each such
Certificate formerly representing Shares, together with such letter of
transmittal and any additional documents as may reasonably be required by Parent
or the Paying Agent, in each case duly completed and validly executed in
accordance with the instructions thereto, the Paying Agent shall pay the holder
of such Certificate the Merger Consideration multiplied by the number of Shares
formerly represented by such Certificate, in exchange therefor, and such
Certificate shall forthwith be canceled. Until so surrendered and exchanged,
each such Certificate (other than Shares held by Parent, Fimalac-U.S.,
Acquisition Sub or the Company, or any direct or indirect subsidiary thereof)
shall represent solely the right to receive the Merger Consideration. No
interest shall be paid or accrue on the Merger Consideration. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than to the person in whose name the Certificate formerly representing Shares
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment of the Merger Consideration to a person other than the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such tax has been paid or is not
applicable.
2. Consideration. Prior to the Effective Time, Parent or
Acquisition Sub shall deposit or cause to be deposited in trust with the Paying
Agent the aggregate Merger Consideration to which holders of Shares shall be
entitled at the Effective Time pursuant to Section 2.6(a) hereof.
3. Investment of Merger Consideration. The Merger
Consideration shall be invested by the Paying Agent, as directed by Parent,
provided that such investments shall be limited to (i) direct obligations of the
United States of America, (ii) obligations for which the full faith and credit
of the United States of America is pledged to provide for the payment of
principal and interest, (iii)
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11
commercial paper rated of the highest quality by a nationally recognized (in the
United States) rating service, or (iv) certificates of deposit issued by a
commercial bank having at least $1,000,000,000 in assets.
4. Termination of Duties. Promptly following the date which is
six months after the Effective Time, Parent will cause the Paying Agent to
deliver to the Surviving Corporation all cash and documents in its possession
relating to the transactions described in this Agreement and the Paying Agent's
duties shall terminate thereafter. Thereafter each holder of a Certificate
formerly representing a Share may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration, without any
interest thereon.
5. No Liability. None of Parent, Fimalac-U.S., Acquisition Sub
or the Company shall be liable to any holder of Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
6. Withholding Rights. Parent or the Paying Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of Common Stock such amounts as Parent
or the Paying Agent is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent or the Paying Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by Parent or the Paying Agent.
H. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of the Common Stock thereafter on the records of the Company.
I. No Further Ownership Rights in Common Stock. The Merger
Consideration delivered in exchange for the Shares in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares, and there shall be no further registration of
transfers on the records of the Surviving Corporation of Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
J. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Paying Agent shall
deliver in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger
Consideration as may be
<PAGE>
12
required pursuant to Section 2.6; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Paying Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
K. Taking of Necessary Action; Further Action. Each of Parent,
Fimalac-U.S., Acquisition Sub and the Company will use its best efforts to take
all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger in accordance with this Agreement as promptly as
possible. If at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and
Acquisition Sub, the officers and directors of the Company and Acquisition Sub
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
L. Stockholders' Meeting.
1. If approval by the Company's stockholders is required by
applicable law to consummate the Merger, the Company, acting through the Board,
shall, in accordance with applicable law and, subject to the fiduciary duties of
the Board under applicable law as determined and exercised in good faith by the
Board in a manner consistent with Section 5.2 and in consultation with Parent,
as soon as practicable following the consummation of the Offer:
(a) duly call, give notice of, convene and hold an
annual or special meeting of its stockholders (the "Stockholders'
Meeting") for the purpose of considering and taking action upon this
Agreement;
(b) prepare and file with the SEC a proxy statement or
information statement (together with any supplement or amendment thereto,
the "Proxy Statement") relating to the Stockholders' Meeting in accordance
with the Exchange Act and include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in favor
of the approval and adoption of this Agreement and the transactions
contemplated hereby; and
(c) use its reasonable best efforts (A) to obtain and
furnish the information required to be included by it in the Proxy
Statement and, after consultation with Parent, respond promptly to any
comments made by the SEC with respect the Proxy Statement and any
preliminary version thereof and cause the Proxy Statement to be mailed to
its stockholders at the earliest practicable time following the
consummation of the Offer in accordance with SEC rules and regulations and
(B) to obtain the necessary
<PAGE>
13
approvals by its stockholders of this Agreement and the transactions
contemplated hereby.
At such meeting, Parent and Acquisition Sub will vote all Shares owned by them
to approve this Agreement and the transactions contemplated hereby.
2. Notwithstanding the foregoing clause (a), in the event that
Acquisition Sub or any other wholly owned subsidiary of Parent shall acquire at
least 90% of the outstanding shares of Common Stock in or following the Offer,
the parties hereto shall, at the request of Acquisition Sub, take all necessary
actions to cause the Merger to become effective as soon as practicable after the
expiration of the Offer, without a meeting of stockholders of the Company, in
accordance with Section 11.30 of the Illinois Law.
M. Material Adverse Effect.
1. When used in connection with the Company or any of its
subsidiaries, or Parent or any of its subsidiaries, as the case may be, the term
"Material Adverse Effect" means any change, effect or circumstance that is, or
is reasonably likely to be, materially adverse to the business, assets,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries, or Parent and its subsidiaries, as the case may be, in each
case taken as a whole, other than any such changes, effects or circumstances (i)
expressly set forth in Section 2.13 of the Company Disclosure Schedule or the
Parent Disclosure Schedule (each as hereinafter defined), as the case may be, or
(ii) specifically set forth or described in the Company SEC Reports (each as
hereinafter defined), other than general risk factors. The following, considered
alone without regard to any other effects, changes, events, circumstances or
conditions, shall not constitute a Material Adverse Effect: (i) a change in the
trading prices of either of the Parent's or the Company's securities between the
date hereof and the Effective Time; (ii) effects, changes, events, circumstances
or conditions generally affecting the industry in which either the Parent or the
Company operate or arising from changes in general business or economic
conditions; (iii) any effects, changes, events, circumstances or conditions
resulting from any change in law or generally accepted accounting principles;
(iv) any effects, changes, events, circumstances or conditions resulting from
the announcement or pendency of any of the transactions contemplated by this
Agreement other than a breach of a representation or warranty pursuant to this
Agreement which would occur except for this clause (iv) or clause (v) of this
definition of Material Adverse Effect; and (v) any effects, changes, events,
circumstances or conditions resulting from actions taken by the Parent or the
Company in order to comply with the terms of this Agreement other than a breach
of a representation or warranty pursuant to this Agreement which would occur
except for this clause (v) or clause (iv) of this definition of Material Adverse
Effect.
2. For purposes of this Agreement, a "Material Adverse Effect
on the Offer" means any event, action, state, circumstance, occurrence or
<PAGE>
14
development that would prevent, materially delay, or render materially more
onerous to Parent or Acquisition Sub the consummation of the Offer and the other
transactions contemplated by this Agreement.
III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Sub that on the date hereof, except as set forth in the section of the written
disclosure schedule delivered on or prior to the date hereof by the Company to
Parent (the "Company Disclosure Schedule") corresponding to each representation
and warranty made hereunder by the Company (or except as set forth in another
section of the Company Disclosure Schedule if the applicability and relevance of
the disclosure under such other section to such representation and warranty is
apparent on its face):
A. Organization and Qualification; Subsidiaries. The Company and
each of its subsidiaries are corporations duly organized, validly existing and
in good standing under the respective laws of the jurisdictions of their
incorporation. The Company and each of its subsidiaries have the requisite
corporate power and authority and are in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders (the "Approvals") necessary to own, lease and operate the properties
they purport to own, lease or operate and to carry on their business as they are
now being conducted, except where the failure to be so organized, existing and
in good standing or to have such power, authority and Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or its subsidiaries. The Company and each of its subsidiaries are duly qualified
or licensed as a foreign corporation to do business, and are in good standing in
each jurisdiction where the character of its properties owned, leased or
operated by them or the nature of their activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, individually or in the aggregate,
have a Material Adverse Effect. A true and complete list of all of the Company's
subsidiaries, together with the jurisdiction of incorporation of each subsidiary
and the percentage of each subsidiary's outstanding capital stock owned by the
Company or another subsidiary, is set forth in Section 3.1-1 of the Company
Disclosure Schedule. Except as set forth on Section 3.1-2 of the Company
Disclosure Schedule, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any other person.
B. Articles of Incorporation and By-Laws. The Company has heretofore
furnished to Parent a true, complete and correct copy of its articles of
incorporation and by-laws, each as amended to date, and has furnished or made
available to Parent the articles of incorporation and by-laws (or equivalent
organizational documents) of each of its subsidiaries (the "Subsidiary
Documents").
<PAGE>
15
Such articles of incorporation, by-laws and Subsidiary Documents are in full
force and effect. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of its articles of incorporation or by-laws
or Subsidiary Documents.
C. Capitalization. The authorized capital stock of the Company
consists of (i) 15,000,000 shares of Common Stock and (ii) 3,000,000 shares of
preferred stock, no par value per share, none of which is issued and outstanding
and none of which is held in treasury. As of March 3, 2000, (i) 4,644,121 shares
of Common Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable, and none of which were held in treasury, (ii) no
shares of Common Stock were held by subsidiaries of the Company and (iii)
1,055,705 shares of Common Stock were reserved for future issuance pursuant to
outstanding Stock Options granted under the Company Stock Option Plan and
agreements listed in Section 3.3 of the Company Disclosure Schedule. No material
change in such capitalization has occurred between March 3, 2000 and the date
hereof. Section 3.3 of the Company Disclosure Schedule sets forth a true and
complete list of all outstanding options, warrants and other rights for the
purchase of, or conversion into or exchange for Common Stock, the name of each
holder thereof, the number of shares purchasable thereunder or upon conversion
or exchange thereof and the per share exercise or conversion price or exchange
rate of each option, warrant and other right. There are no options, warrants or
other similar rights, agreements, arrangements, commitments or understanding,
whether or not in writing, of any character relating to the issued or unissued
capital stock or other securities of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue (whether upon
conversion, exchange or otherwise) or sell any share of capital stock of, or
other equity interests in or other securities of, the Company or any of its
subsidiaries other than those listed in Section 3.3 of the Company Disclosure
Schedule. All securities subject to issuance as aforesaid upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable shall be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth on Section 3.3 of the Company Disclosure Schedule, there are
no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Common
Stock or capital stock of any subsidiary or any other securities of the Company
or any of its subsidiaries or to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such subsidiary or any
other entity. Except as set forth on Section 3.3 of the Company Disclosure
Schedule, all of the outstanding shares of capital stock of each of the
Company's subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
subsidiary of the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations in the Company's voting rights, charges
or other encumbrances of any nature whatsoever (collectively, "Liens"), other
than Liens created by this Agreement.
D. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to
<PAGE>
16
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Company, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than, if required in accordance with Illinois Law,
the adoption of this Agreement by the holders of a majority of the outstanding
shares of Common Stock entitled to vote in accordance with the Illinois Law and
the Company's articles of incorporation and by-laws (the "Requisite Company
Vote"). The Board has determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger upon the terms and
subject to the conditions of this Agreement, are fair to, advisable and in the
best interests of, the Company and its stockholders. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Acquisition Sub, as
applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
E. Material Contracts; No Conflict; Required Filings and
Consents.
1. Section 3.5(a) of the Company Disclosure Schedule includes
a list of all contracts, agreements, arrangements or understanding, whether or
not in writing, to which the Company or any of its subsidiaries is a party or by
which any of them is bound as of the date hereof, (i) which are required to be
filed as "material contracts" with the SEC pursuant to the requirements of the
Exchange Act; (ii) under which the consequences of a default, nonrenewal or
termination could have a Material Adverse Effect; (iii) pursuant to which
payments or acceleration of benefits may be required in excess of $100,000 in
the aggregate upon a "change of control" of the Company or its subsidiaries;
(iv) which require the consent or waiver of a third party prior to the Company
(or its subsidiary, if applicable) consummating the transactions contemplated by
this Agreement, except where the failure to obtain such consent or waiver would
not, individually or in the aggregate, have a Material Adverse Effect; (v) whose
terms would have a Material Adverse Effect on the Offer; (vi) which pertain to
the rental by the Company or its subsidiaries of accommodations and involve
consideration in excess of $200,000 over the term of the Agreement or have a
term that will expire more than six months from the date hereof; (vii) which
constitute contracts, agreements, arrangements or understandings between the
Company or its subsidiaries and any person for the rental by such person of
accommodations and represent individually in excess of $200,000 in annual
revenue to the Company or its subsidiaries, as applicable; or (viii) the
termination of which would require or result in individual payments by the
Company, Acquisition Sub, Fimalac-U.S., Parent or any of their subsidiaries or
affiliates in excess of $100,000 (the contracts, agreements, arrangements or
understandings referred to in clauses (i) through (viii) above are referred to
collectively herein as the "Material Contracts") and, except as set forth in
Section 3.5(a) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is currently negotiating, in discussion
<PAGE>
17
with any person with respect to, or a party to any non-binding agreement or
understanding with respect to, any Material Contract.
2. The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the articles of incorporation or by-laws of the Company
or any Subsidiary Document, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (iii) except as set forth in Section 3.5(b) of the Company
Disclosure Schedule, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or result in a modification of any right or benefit under, or impair the
Company's or any of its subsidiaries' rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration, repayment or repurchase, or result in increased
payments or cancellation under, or result in the creation of a Lien on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except in the case of (ii) or (iii) only for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
3. Except as set forth in Section 3.5(c) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not require
any consent, approval, authorization or permit of, or filing with or
notification to, any national, federal, state, provincial or local governmental
regulatory or administrative authority, agency, commission, court, tribunal,
arbitral body or self-regulated entity, domestic or foreign (collectively, the
"Governmental Authorities"), except for applicable requirements, if any, of the
Securities Act, the Exchange Act, the Investment Advisors Act of 1940, as
amended, state securities laws ("Blue Sky Laws"), the premerger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the filing and recordation of appropriate merger or
other documents as required by the Delaware Law or the Illinois Law.
F. Compliance, Permits.
1. Neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties is bound or affected or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or
<PAGE>
18
by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not have a
Material Adverse Effect.
2. The Company and its subsidiaries hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from Governmental Authorities that are necessary to the operation of
the business of the Company and its subsidiaries taken as a whole as it is now
being conducted (collectively, the "Company Permits"), except when the failure
to have such Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect. The Company and its subsidiaries are in compliance with
the terms of the Company Permits, and neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of any applicable
laws or regulations except, in each case, where the failure to so comply would
not, individually or in the aggregate, have a Material Adverse Effect.
G. SEC Filings; Financial Statements.
1. The Company has filed all forms, reports and documents
required to be filed with the SEC since January 1, 1997, including (i) its
Annual Reports on Form 10-K for the fiscal years ended December 31, 1997 and
1998, respectively, (ii) its Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999, June 30, 1999 and September 30, 1999, (iii) all proxy
statements relating to the Company's meetings of stockholders (whether annual or
special) held since January 1, 1999, (iv) all other reports or registration
statements filed by the Company with the SEC since January 1, 1999 and (v) all
amendments and supplements to all such reports and registration statements filed
by the Company with the SEC since January 1, 1999 (collectively, the "Company
SEC Reports"). The Company SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except as set forth on Schedule 3.7(a) of
the Company Disclosure Schedule, none of the Company's subsidiaries is required
to file any forms, reports or other documents with the SEC or any national
securities exchange or quotation service or comparable Governmental Authority.
2. The consolidated financial statements (including, in each
case, any related notes and schedules thereto) contained in the Company SEC
Reports were prepared in accordance with U.S. generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto), and fairly present in all material
respects the consolidated financial position of the Company and its subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and cash flows for the
<PAGE>
19
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
3. The unaudited consolidated financial statements of the
Company as of and for the period ending December 31, 1999 (including the related
notes and schedules thereto) delivered to the Parent prior to the date hereof
(the "1999 Financial Statements") were prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto), and fairly present in all material respects the consolidated financial
position of the Company and its subsidiaries as at December 31, 1999 and the
consolidated results of their operations and cash flows for the year then ended.
H. Absence of Certain Changes or Events. Except as set forth in the
Company SEC Reports or in Section 3.8 of the Company Disclosure Schedule, since
September 30, 1999, the Company and its subsidiaries have conducted their
business in the ordinary course and there has not occurred: (i) any Material
Adverse Effect; (ii) any amendments or changes in the articles of incorporation
or By-laws of the Company; (iii) any damage to, or destruction or loss of, any
asset of the Company or its subsidiaries (whether or not covered by insurance)
that would have a Material Adverse Effect; (iv) any material change by the
Company or its subsidiaries in their accounting methods, principles or
practices; (v) any material revaluation by the Company or its subsidiaries of
any of their assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business; (vi) any sale of a material amount of property of the
Company or any of its subsidiaries, except in the ordinary course of business;
(vii) any declaration, setting aside or payment of any dividend or distribution
in respect of Shares or any redemption, purchase or other acquisition of any of
the Company's securities (except as contemplated by this Agreement); (viii) any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of the
Company or any subsidiary, in each case except in the ordinary course of
business consistent with past practice or except as required by applicable law;
(ix) any creation or assumption by the Company or any of its subsidiaries of any
Lien on any material asset of the Company or any of its subsidiaries, other than
in the ordinary course of business, consistent with past practice; (x) any
making of any loan, advance or capital contribution to or investment in any
person by the Company or any of its subsidiaries, other than advances to
employees to cover travel and other ordinary business-related expenses in the
ordinary course of business consistent with past practice; (xi) any incurrence
or assumption by the Company or any of its subsidiaries of any indebtedness for
borrowed money or any guarantee, endorsement or other incurrence or assumption
of a material liability (whether directly, contingently or
<PAGE>
20
otherwise) by the Company or any of its subsidiaries for the obligations of any
other person (other than any wholly owned subsidiary of the Company), in each
case other than in the ordinary course of business consistent with past
practice; or (xii) any modification, amendment, assignment or termination of or
relinquishment by the Company or any of its subsidiaries of any rights under any
Material Contract that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
I. No Undisclosed Liabilities. Except as set forth in Section 3.9 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) except
liabilities (a) in the aggregate adequately provided for in the Company's
unaudited balance sheet (including any related notes thereto) included in the
1999 Financial Statements, (b) incurred in the ordinary course of business and
not required under U.S. generally accepted accounting principles to be reflected
on the 1999 Financial Statements, (c) incurred since December 31, 1999 in the
ordinary course of business consistent with past practice, (d) incurred in
connection with this Agreement, (e) disclosed in the Company SEC Reports or (f)
which would not have a Material Adverse Effect.
J. Absence of Litigation. Except as set forth in Section 3.10 of the
Company Disclosure Schedule, there are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
Company or any of its subsidiaries, before any Governmental Authority or body,
domestic or foreign, nor are there, to the Company's knowledge, any
investigations or reviews by any Governmental Authority pending or threatened
against, relating to or affecting, the Company or any of its subsidiaries that,
if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries is
subject to any outstanding order, writ, injunction or decree of any court or
Governmental Authority which, individually or in the aggregate, has resulted or
would reasonably be expected to result in a Material Adverse Effect.
K. Employee Benefit Plans, Employment Agreements.
1. Section 3.11(a) of the Company Disclosure Schedule lists
all employee pension plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended; ("ERISA")), all employee
welfare plans (as defined in Section 3(1) of ERISA) and all other bonus, stock
option, stock purchase, incentive or deferred compensation, supplemental
retirement, severance and other fringe or employee benefit plans, programs, or
arrangements, and any current or, to the extent the Company or any subsidiary
thereof may have any continuing liability thereunder, former employment,
executive compensation, stay, change in control, consulting, noncompetition or
severance agreements, programs or policies, written or otherwise, for the
benefit of, or relating to, any employee of or consultant to, and which is
maintained or contributed to, by the Company, any trade or business
<PAGE>
21
(whether or not incorporated) which is a member of a controlled group including
the Company or which is under common control with the Company (an "ERISA
Affiliate") within the meaning of Section 414 of the Code, or any subsidiary of
the Company (collectively the "Company Employee Plans"). There have been made
available to Parent copies of (i) each such written Company Employee Plan and
(ii) the three most recent annual reports on Form 5500, with accompanying
schedules and attachments, filed with respect to each Company Employee Plan
required to make such a filing.
2. (i) Except as set forth on Section 3.11(b) of the Company
Disclosure Schedule, none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person (other than
post-employment benefits provided in accordance with the health care
continuation provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, or comparable state law).
(ii) None of the Company Employee Plans is (A) a
"multiemployer plan" as such term is defined in Section 3(37) of ERISA or (B) a
plan subject to Title IV of ERISA.
(iii) Except as set forth on Section 3.11(b) of the Company
Disclosure Statement, (A) there has been no "prohibited transaction," as such
term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Company Employee Plan, which could result in any material
liability of the Company or any of its subsidiaries; (B) all Company Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, the Internal Revenue Service (the "IRS") or Secretary of
the Treasury), and the Company and each of its subsidiaries have performed all
material obligations required to be performed by them as of and through the date
hereof under, are not in any material respect in default under or violation of,
and have no knowledge of any default or violation by any other party to, any of
the Company Employee Plans; (C) each Company Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination letter
from the IRS, and nothing has occurred which may reasonably be expected to
impair such determination; (D) there is no pending or, to the knowledge of the
Company, threatened litigation, administrative action or proceeding relating to
any Company Employee Plan (other than claims for benefits in the ordinary course
of business); (E) there has been no announcement or commitment by the Company or
any of its subsidiaries to create an additional Company Employee Plan or to
amend a Company Employee Plan except for amendments required by applicable law
or changes in the ordinary course, in each case which do not materially increase
the cost of such Company Employee Plan; and (F) the Company has no liability,
whether absolute or contingent, direct or indirect, including any obligations
under any Company Employee
<PAGE>
22
Plan, with respect to any misclassification of a person as an independent
contractor rather than as an employee, or with respect to any employee leased
from another employer.
(iv) Except as specifically identified in Section 3.11(b) of
the Company Disclosure Schedule, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not (a)
increase the amount of, accelerate the time of payment of, or the vesting of
compensation payable to any employee of the Company or an ERISA Affiliate or (b)
result in any liability to any present or former employee established or
maintained in or under a non-U.S. jurisdiction, including but not limited to, as
a result of the Worker Adjustment Retraining and Notification Act. Neither the
Company nor any ERISA Affiliate maintains or contributes to any Employee Plan
established or maintained in or under a non-U.S. jurisdiction.
3. Section 3.11(c) of the Company Disclosure Schedule sets forth a
true and complete list of each current or former employee, officer or director
of the Company or any of its subsidiaries who holds (i) any Stock Option as of
the date hereof, together with the number of shares of Common Stock subject to
such Stock Option, the exercise price of such Stock Option (to the extent
determined as of the date hereof), whether such Stock Option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code (an "ISO") and the expiration date of such option; and (ii) any other right
granted by the Company to acquire, directly or indirectly, Common Stock,
together with the number of shares of Common Stock subject to such right.
Section 3.11(c) of the Company Disclosure Schedule also sets forth the total
number of such ISOs, such nonqualified options and such other rights. Upon the
purchase by Acquisition Sub of Shares pursuant to the Offer (i) the provisions
in the Company Stock Option Plan with respect to the right or obligation to
issue or grant additional options or rights to acquire Common Stock shall be
terminated and (ii) the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary thereof shall be cancelled.
L. Employment and Labor Matters.
1. Except as set forth in Section 3.12(a) of the Company
Disclosure Schedule, there are no controversies pending or, to the knowledge of
the Company, threatened, between the Company or any of its subsidiaries and any
of their respective employees, which controversies have had or could have,
individually or in the aggregate, a Material Adverse Effect. Neither the Company
nor any of its subsidiaries is a party to, any collective bargaining agreement
or other labor union contract applicable to persons employed by the Company or
its subsidiaries, nor does the Company know of any activities or proceedings of
any labor union to organize any such employees. The Company has no knowledge of
any strikes or lockouts, or
<PAGE>
23
any material slowdowns, work stoppages, or threats thereof, by or with respect
to any employees of the Company or any of its subsidiaries.
2. Neither the Company nor any of its subsidiaries has
violated, in a manner that could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, any provision of federal or state
law or any rule, regulation, order, ruling, decree, judgment or arbitration
award of any Governmental Authority regarding the terms and conditions of
employment of employees, former employees, or prospective employees or other
labor related matters, including without limitation, laws, rules, regulations,
orders, rulings, decrees, judgments and awards relating to discrimination, fair
labor standards and occupational health and safety, wrongful discharge or
violation of the personal rights of employees, former employees or prospective
employees.
M. Schedule 14D-9; Offer Documents; Proxy Statement. Neither the
Schedule 14D-9, nor any of the information provided by the Company or its
auditors, legal counsel, financial advisors or other consultants or advisors
specifically for use in the Offer Documents, shall, on the respective dates the
Schedule 14D-9 or the Offer Documents are filed with the SEC or on the date
first published, sent or given to the Company's stockholders, as the case may
be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Proxy Statement or similar materials distributed to the
Company's stockholders in connection with the Merger, including any amendments
or supplements thereto, shall not, at the time filed with the SEC, at the time
mailed to the Company's stockholders, at the time of the Stockholders' Meeting
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any information provided by
Parent, Fimalac-U.S., Acquisition Sub or by their auditors, legal counsel,
financial advisors or other consultants or advisors specifically for use in the
Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9 and the Proxy
Statement will comply in all material respects with the provisions of the
Exchange Act and any other applicable law.
N. Restrictions on Business Activities.
1. Except for this Agreement and except as set forth on
Section 3.14(a) of the Company Disclosure Schedule, to the Company's knowledge,
there is no material agreement, judgment, injunction, order or decree binding
upon the Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or impairing any material business
practice of the Company or any of its subsidiaries, any acquisition of property
by the Company or any of its subsidiaries or the conduct of business by the
Company or any of its
<PAGE>
24
subsidiaries as currently conducted or as proposed to be conducted by the
Company, in any location in the world, except for any prohibition or impairment
as would not, individually or in the aggregate, have a Material Adverse Effect.
2. To the Company's knowledge, none of the Company's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with the Company, restricts in any material respect the
Company or any of its subsidiaries from, directly or indirectly, engaging in any
of the businesses described in paragraph (a) above.
O. Title to Property. Except as set forth in Section 3.15 of the
Company Disclosure Schedule, the Company and each of its subsidiaries have good
and marketable title to all of their properties and assets, free and clear of
all Liens, except Liens for taxes not yet due and payable and such Liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which would not, individually or in the aggregate, have a Material Adverse
Effect. Section 3.15(a) of the Company Disclosure Schedule is a schedule of all
leases of real property ("Real Property Leases") (i) pursuant to which the
Company or any of its subsidiaries lease from others or (ii) pursuant to which
third parties lease from the Company or any of its subsidiaries. The Real
Property Leases and all leases of personal property by the Company or its
subsidiaries from others are in good standing, valid and effective in accordance
with their respective terms and there is not, to the knowledge of the Company,
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default), except
where the lack of such good standing, validity and effectiveness or the
existence of such default would not, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries owns
any real property.
P. Taxes.
1. For purposes of this Agreement, "Audit" shall mean any
audit, assessment, action, suit, claim or other examination relating to Taxes by
any tax authority or any judicial or administrative proceedings related to
Taxes; "Tax" or "Taxes" shall mean taxes, fees, levies, duties, tariffs,
imposts, and governmental impositions or charges of any kind in the nature of
(or similar to) taxes, payable to any federal, state, local or foreign taxing
authority, including (without limitation) (i) income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto;
and "Tax Returns" shall mean returns, reports, and information statements with
respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
<PAGE>
25
2. Except as set forth in Section 3.16(b) of the Company
Disclosure Schedule, the Company and its subsidiaries (for such periods as each
subsidiary was owned, directly or indirectly, by the Company) have filed all
income Tax Returns and all other material Tax Returns required to be filed by
them and all such Tax Returns are true and correct in all material respects, and
the Company and its subsidiaries have paid and discharged all Taxes due in
connection with or with respect to the periods or transactions covered by such
Tax Returns and have paid all other taxes as are due, except such as are being
contested in good faith by appropriate proceedings (to the extent that any such
proceedings are required) and except as may be determined to be owed upon
completion of any tax return not yet filed based upon an extension of time to
file, and there are no other taxes that would be due if asserted by a taxing
authority, except with respect to which the Company is maintaining reserves to
the extent currently required and except to the extent the failure to do so
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth on Section 3.16(b) of the Company Disclosure Schedule:
(a) there are no tax liens on any assets of the Company
or any subsidiary thereof, except to the extent that such a lien would not have
a Material Adverse Effect upon the Company or any of its subsidiaries;
(b) neither the Company nor any of its subsidiaries has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax that is currently in
effect;
(c) as of the date hereof, no Federal, state, local or
foreign Audits are pending (A) with regard to any Taxes or Tax Returns of the
Company or its subsidiaries and (B) for which the Company or any of its
subsidiaries has received written notice. Neither the Company nor any of its
subsidiaries has received written notification that such an Audit may be
commenced, and, to the best knowledge of the Company and its subsidiaries, no
such Audit is threatened;
(d) the United States Federal income Tax Returns of the
Company and its subsidiaries have been examined by the applicable tax
authorities or closed without audit by applicable statutes of limitations for
all periods through and including December 31, 1995, and as of the date hereof
no material adjustments have been asserted as a result of such examinations
which have not been (x) resolved and fully paid or (y) reserved on the 1999
Financial Statements in accordance with U.S. generally accepted accounting
principles;
(e) neither the Company nor any of its subsidiaries is a
party to any agreement providing for the allocation, indemnification or sharing
of Taxes with any person other than the Company and its subsidiaries, and the
Company has provided Parent with copies of any such agreement that the Company
or any of its subsidiaries has entered into with any other subsidiary of the
Company;
<PAGE>
26
(f) neither the Company nor any of its subsidiaries has
been a member of any "affiliated group" (as defined in section 1504(a) of the
Code) other than the affiliated group of which the Company is the "parent" and,
except with respect to any group of which only the Company and/or its
subsidiaries are members, is not subject to Treas. Reg. 1.1502-6 (or any similar
provision under foreign, state or local law) for any period;
(g) neither the Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement or (ii) in a distribution which
otherwise constitutes part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger;
(h) proper and materially accurate amounts have been
duly and timely (x) withheld by the Company and its subsidiaries from their
employees in compliance with the tax withholding provisions of applicable U.S.
federal, state and local laws and (y) paid over to appropriate taxing
authorities;
(i) neither the Company nor any of its subsidiaries has
been required to include in income any adjustment pursuant to Section 481 of the
Code (or any similar provision of state, local or foreign tax law) by reason of
a voluntary change in accounting method initiated by the Company or any of its
subsidiaries, and the IRS has not notified the Company in writing that it has
initiated or proposed any such adjustment or change in accounting method;
(j) no closing agreement that could affect the Taxes of
the Company or any of its subsidiaries for periods ending after the Effective
Time pursuant to Section 7121 of the Code (or any predecessor provision) or any
similar provision of any state, local or foreign law has been entered into by or
with respect to the Company or any of its subsidiaries;
(k) there is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Company or any of its
subsidiaries by reason of Section 162(m) or Section 280G of the Code and neither
the Company nor any of its subsidiaries has made any such payments;
(xii) neither the Company nor any of its subsidiaries
is, or has been, a United States real property holding corporation (as defined
in Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code; and
(xiii) no material tax elections have been made or filed
by or with respect to the Company or any of its subsidiaries.
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27
Q. Environmental Matters. Except in all cases as, in the aggregate,
have not had and would not, individually or in the aggregate, have a Material
Adverse Effect, the Company and each of its subsidiaries (i) to the Company's
knowledge have obtained all applicable permits, licenses and other
authorizations (collectively, the "Environmental Permits") which are required to
be obtained under all applicable U.S. federal, state or local laws or any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes ("Environmental Laws") by the Company or
its subsidiaries (or their respective agents) which Environmental Permits are in
full force and effect; (ii) to the Company's knowledge are in compliance in all
material respects with all terms and conditions of such Environmental Permits;
(iii) are in compliance in all material respects with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (iv) as of
the date hereof, are not aware of nor have received notice of any past or
present violations of Environmental Laws or Environmental Permits or any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance with
Environmental Permits or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding,
against the Company or any of its subsidiaries based on or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous toxic material or waste;
and (v) to the Company's knowledge, have taken all actions necessary under
applicable Environmental Laws to register any products or materials required to
be registered by the Company or its subsidiaries (or any of their respective
agents) thereunder.
R. Intellectual Property.
1. Section 3.18(a) of the Company Disclosure Schedule sets
forth a true and complete list of all Intellectual Property (as defined below)
owned or used by the Company or its subsidiaries, excluding over-the-counter
shrink-wrapped software. The Company and each of its subsidiaries owns free and
clear of all Liens, or is licensed or otherwise possesses legally enforceable
right to use all patents, trademarks, trade names, service marks, and any
applications therefor, and computer software programs or applications (the
"Intellectual Property") that are used in its respective business as currently
conducted, and such rights constitute all the rights necessary for the Company
and its subsidiaries to conduct their business as currently conducted except, in
each case, as would not, individually or in the aggregate, have a Material
Adverse Effect.
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28
2. Except as would not, individually or in the aggregate, have
a Material Adverse Effect, the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements as to
which the Company is a party and pursuant to which the Company is authorized to
use any third-party Intellectual Property ("Third Party Intellectual Property
Rights"). After the completion of the transactions contemplated by this
Agreement, the Company will continue to own all right, title and interest in,
and to have a license to use all Intellectual Property material to its or any of
its subsidiaries' business and operations on terms and conditions identical in
all material respects to those enjoyed by the Company immediately prior to such
transactions. No claims with respect to the Intellectual Property owned by the
Company or any of its subsidiaries (the "Company Intellectual Property Rights"),
any trade secret material to the Company, or Third Party Intellectual Property
Rights to the extent arising out of any use, reproduction or distribution of
such Third Party Intellectual Property Rights by or through the Company or any
of its subsidiaries, are currently pending or, to the knowledge of the Company,
are threatened by any person, except claims that would not have a Material
Adverse Effect. The Company does not know of any valid grounds for any bona fide
claims (i) against the use by the Company or any of its subsidiaries of any
Intellectual Property used in the business of the Company or any of its
subsidiaries as currently conducted or as proposed to be conducted; (ii)
challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights or other trade secret material to the Company or
its subsidiaries; or (iii) challenging the license or legally enforceable right
to use of the Third Party Property Rights by the Company or any of its
subsidiaries, except claims that would not have a Material Adverse Effect.
3. To the Company's knowledge, all Company Intellectual
Property Rights are valid and subsisting, except as would not have a Material
Adverse Effect. To the Company's knowledge, there is no material unauthorized
use, infringement or misappropriation of any of the Company Intellectual
Property by any third party, including any employee or former employee of the
Company or any of its subsidiaries, except any use, infringement or
misappropriation that would not have a Material Adverse Effect.
4. All software, hardware, databases, and embedded control
systems (collectively, the "Systems") used by the Company and its subsidiaries
are Year 2000 Compliant (as defined below), except for failures to be Year 2000
Compliant that, individually or in the aggregate, have not resulted in a
Material Adverse Effect. For purposes of this Agreement, "Year 2000 Compliant"
means that the Systems (i) accurately process date and time data (including
calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, the years 1999 and 2000, and leap year calculations
and (ii) operate accurately with other software and hardware that use standard
date format (4 digits) for representation of the year.
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29
S. Interested Party Transactions. Except as set forth in the Company
SEC Reports, since January 1, 1999, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction, pursuant to
Item 404 of Regulation S-K promulgated by the SEC.
T. Insurance. All material fire and casualty, general liability,
business interruption, and sprinkler and water damage insurance policies
maintained by the Company or any of its subsidiaries are with reputable
insurance carriers, provide, to the Company's knowledge, full and adequate
coverage for all normal risks incident to the business of the Company and its
subsidiaries and their respective properties and assets and are, to the
Company's knowledge, in character and amount at least equivalent to that carried
by entities engaged in similar businesses and subject to the same or similar
perils or hazards, except as would not, individually or in the aggregate, have a
Material Adverse Effect.
U. Opinion of Financial Adviser. The Board has received the written
opinion of the Company's financial advisor, Peter J. Solomon Company, to the
effect that, as of the date of this Agreement, the Per Share Amount is fair to
the Company's stockholders from a financial point of view and the Company has
delivered or will, promptly after receipt of such written opinion, deliver a
signed copy of that opinion to Parent.
V. Brokers. No broker, finder or investment banker (other than Peter
J. Solomon Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
The Company has heretofore furnished to Parent a complete and correct copy of
all agreements between the Company and Peter J. Solomon Company pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
W. Sections 7.85 and 11.75 of Illinois Law Not Applicable. The Board
has taken all actions so that the restrictions contained in Sections 7.85 and
11.75 of the Illinois Law applicable to a "business combination" (as defined in
such Section 11.75) will not apply to the execution, delivery or performance of
this Agreement or the consummation of the Offer or the Merger or the other
transactions contemplated by this Agreement.
X. Vote Required. The Requisite Company Vote is the only vote of the
holders of any class or series of the Company's capital stock necessary (under
the charter documents of the Company, the Illinois Law, other applicable law or
otherwise) to approve this Agreement, the Offer, the Merger or the other
transactions contemplated by this Agreement.
<PAGE>
30
IV.
REPRESENTATIONS AND WARRANTIES OF
PARENT, Fimalac-U.S. AND ACQUISITION SUB
Parent, Fimalac-U.S. and Acquisition Sub hereby, jointly and
severally, represent and warrant to the Company that, except as set forth in the
section of the written disclosure schedule delivered on or prior to the date
hereof, by Parent to the Company (the "Parent Disclosure Schedule")
corresponding to each representation and warranty made hereunder by Parent,
Fimalac-U.S. and Acquisition Sub:
A. Organization and Qualification; Subsidiaries. Each of Parent,
Fimalac-U.S. and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Parent, Fimalac-U.S. and Acquisition Sub has the
requisite corporate power and authority and is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority and Approvals would not, individually or in the aggregate, have
a Material Adverse Effect on Parent, Fimalac-U.S. or Acquisition Sub. Each of
Parent, Fimalac-U.S. and Acquisition Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, individually or in the aggregate, have a Material
Adverse Effect. Fimalac-U.S. is a wholly-owned subsidiary of Parent and
Acquisition Sub is a wholly-owned subsidiary of Fimalac- U.S.
B. Authority Relative to this Agreement. Each of Parent, Fimalac-
U.S. and Acquisition Sub has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by each of Parent, Fimalac-U.S. and Acquisition Sub and the
consummation by each of Parent, Fimalac-U.S. and Acquisition Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent, Fimalac-U.S. and Acquisition
Sub, and no other corporate proceedings on the part of Parent, Fimalac-U.S. or
Acquisition Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent, Fimalac-U.S. and Acquisition Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Parent, Fimalac-U.S. and
Acquisition Sub enforceable against each of them in accordance with its terms.
<PAGE>
31
C. No Conflict, Required Filings and Consents.
1. The execution and delivery of this Agreement by Parent,
Fimalac-U.S. and Acquisition Sub do not, and the performance of this Agreement
by Parent, Fimalac-U.S. and Acquisition Sub will not, (i) conflict with or
violate the certificate of incorporation (or equivalent organizational
documents) or by-laws of Parent, Fimalac-U.S. or Acquisition Sub, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Parent or any of its subsidiaries or by which its or their respective
properties are bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or modification in a manner materially adverse to Parent or its
subsidiaries of any right or benefit under, or impair Parent's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration,
repayment or repurchase, increased payments or cancellation under, or result in
the creation of a Lien on any of the properties or assets of Parent or any of
its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries or its or any of their respective
properties are bound or affected, except in the case of (ii) or (iii) only, for
any such conflicts, violations, breaches, defaults or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent or its subsidiaries.
2. The execution and delivery of this Agreement by each of
Parent, Fimalac-U.S. and Acquisition Sub does not, and the performance of this
Agreement by each of Parent, Fimalac-U.S. and Acquisition Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for applicable requirements,
if any, of the Securities Act, the Exchange Act, the Blue Sky Laws, the
pre-merger notification requirements of the HSR Act, and the filing and
recordation of appropriate merger or other documents as required by the Delaware
Law or the Illinois Law.
D. Offer Documents; Schedule 14D-9; Proxy Statement. Neither the
Offer Documents, nor any of the information provided by Parent, Fimalac-U.S. or
Acquisition Sub or by their auditors, legal counsel, financial advisors or other
consultants or advisors specifically for use in the Schedule 14D-9 shall, on the
respective dates the Offer Documents or the Schedule 14D-9 are filed with the
SEC or on the date first published, sent or given to the Company's stockholders,
as the case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, neither Parent,
Fimalac-U.S. nor Acquisition Sub makes any representation or warranty with
respect to any information provided by the Company or by its auditors, legal
counsel, financial advisors, or other consultants or advisors specifically for
use in the Offer Documents. None of the information provided by Parent,
Fimalac-U.S. or Acquisition Sub or by their auditors, legal
<PAGE>
32
counsel, financial advisors or other consultants or advisors specifically for
use in the Proxy Statement shall, at the time filed with the SEC, at the time
mailed to the Company's stockholders, at the time of the Stockholders' Meeting
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Offer Documents will comply in all material
respects with the provisions of the Exchange Act and any other applicable law.
E. No Prior Activities; Financing.
1. Acquisition Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement. As of the date
hereof, except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Acquisition Sub has not and will not have
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
2. Parent has available to it funding necessary to satisfy
Acquisition Sub's obligations hereunder including, without limitation, the
obligation to pay the aggregate Per Share Amount pursuant to the Offer and the
aggregate Merger Consideration pursuant to the Merger and to pay all related
fees and expenses in connection with the Offer and the Merger. Parent shall make
available (i) to Acquisition Sub sufficient cash to purchase Shares to be
purchased pursuant to the Offer prior to such purchase and (ii) to Acquisition
Sub, for deposit in the Exchange Fund, sufficient cash to pay the aggregate
Merger Consideration pursuant to the Merger prior to the Effective Time.
F. Ownership of Shares. As of the date hereof, neither Parent nor
any of its affiliates beneficially owns any Shares (except that a subsidiary of
Fimalac- U.S. owns 100 Shares) or is an "Interested Shareholder" as defined in
Section 7.85 or Section 11.75 of the Illinois Law.
V.
CONDUCT OF BUSINESS
A. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the time Parent's designees are elected as directors of the Company pursuant
to Section 1.3, unless Parent shall otherwise agree in writing, which agreement
shall not be unreasonably withheld, delayed, or conditioned, the Company shall,
unless expressly
<PAGE>
33
authorized to do otherwise pursuant to paragraphs (a) through (o) below, in all
material respects conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in the ordinary course of business consistent
with past practice, and the Company shall use reasonable commercial efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has a
significant business relations. Without limiting the foregoing, except as
contemplated by this Agreement or as set forth on Section 5.1 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries shall,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the time Parent's designees are
elected as directors of the Company pursuant to Section 1.3, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of Parent, which consent shall not be unreasonably withheld or delayed:
1. amend or otherwise change the articles of incorporation or
by-laws of the Company or any of the Subsidiary Documents;
2. issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities,
exchangeable securities or other rights of any kind to acquire any shares of
capital stock of any class, or any other ownership interest (including, without
limitation, any phantom interest) in the Company or any of its subsidiaries or
affiliates (except for (i) the issuance of shares of Common Stock issuable
pursuant to the Stock Options or agreements listed on Section 3.3 of the Company
Disclosure Schedule and (ii) the issuance of shares of Company Common Stock
required to be issued to participants in the Company's Employee Plans pursuant
to the terms thereof);
3. sell, pledge, dispose or encumber any assets of the Company
or any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
disposition of obsolete or worthless assets and (iii) sales of immaterial assets
not in excess of $100,000);
4. (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except for the payment of the Company's
regular quarterly cash dividend of $0.03 per share declared prior to the date
hereof except that a wholly owned subsidiary of the Company may declare and pay
a dividend or make advances to its parent or the Company, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (iii) amend the terms or change the period
of exercisability of, purchase, repurchase, redeem or
<PAGE>
34
otherwise acquire, or permit any subsidiary to purchase, repurchase, redeem or
otherwise acquire, any of its securities or any securities of its subsidiaries,
including, without limitation, shares of Common Stock or any option, warrant,
convertible or exchangeable securities or other right, directly or indirectly,
to acquire shares of Common Stock, or propose to do any of the foregoing, except
for the acceleration or termination of Stock Options pursuant to the terms of
the Company Stock Option Plan and the exercise of such Stock Options or the
termination of any other arrangement providing for the issuance of shares
thereunder;
5. (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any material property or assets, make any investment in, or
make any capital contributions to, any corporation, partnership or other
business organization or division thereof; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or endorse or
otherwise as an accommodation become responsible for, the obligations of any
person or, except in the ordinary course of business consistent with past
practice or in connection with purchases of equipment or capital improvements,
make any loans or advances (other than loans or advances to or from direct or
indirect wholly owned subsidiaries), (iii) enter into, terminate or amend any
Material Contract or agreement other than in the ordinary course of business or
where such contract, termination or amendment would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or its subsidiaries;
(iv) authorize any capital expenditures or purchases of fixed assets which are,
in the aggregate, in excess of $300,000; or (v) enter into or amend any
contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 5.1(e);
6. (i) increase the compensation or fringe benefits payable or
to become payable to its directors, officers or employees, except for increases
in salary or wages of employees of the Company or its subsidiaries in accordance
with past practice and in amounts that are in the aggregate reflected in the
budgets previously provided to Parent, (ii) except pursuant to the existing
agreements set forth on Section 3.11(a) of the Company Disclosure Schedule,
grant any severance or termination pay to, or enter into any severance agreement
or other agreement providing for severance payments with, any director, officer
or other employee of the Company or any of its subsidiaries, (iii) establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any current or
former directors, officers or employees, (iv) enter into any employment or
consulting agreement except with respect to new hires of employees who are not
executive officers or senior management personnel in the ordinary course of
business or (v) accelerate the payment, right to payment or vesting of any
bonus, severance, profit sharing, retirement, deferred compensation, stock
option, insurance or other compensation or benefits except as required under the
Company Employee Plans; except in each of (i) through (v), as may be required by
law;
<PAGE>
35
7. take any action to change material accounting policies or
procedures (including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts receivable)
except as required by U.S. generally accepted accounting principles;
8. make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or foreign
tax liability or agree to an extension of a statute of limitations, except to
the extent the amount of any such settlement has been reserved for in the 1999
Financial Statements;
9. pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in the 1999 Financial Statements or incurred in the ordinary
course of business and consistent with past practice;
10. enter into any compromise or settlement of, or take any
material action with respect to, any litigation, action, suit, claim, proceeding
or investigation other than the prosecution, defense and settlement of routine
litigation, actions, suits, claims, proceedings or investigations in the
ordinary course of business;
11. adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization or any agreement relating to an Acquisition
Proposal (as defined in Section 5.2 of this Agreement);
12. enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's ability to compete with or conduct
any business or line of business;
13. plan, announce, implement or effect any reduction in
force, lay-off, early retirement program, severance program or other program or
effort concerning the termination of employment of employees of the Company or
its subsidiaries, except, only with respect to employees who do not exercise the
functions of general manager, the equivalent or higher, in the ordinary course
of business consistent with past practice;
14. enter into any new agreement to acquire or rent
accommodations (x) involving aggregate rental payments in an amount in excess of
$100,000 or which will remain in effect for longer than six months from the date
hereof or (y) on other than ordinary course of business terms; or
15. take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (n) above, or any action which
would make any of the representations or warranties of the Company contained in
this
<PAGE>
36
Agreement untrue or incorrect in any material respect or prevent the Company
from performing or cause the Company not to perform its covenants hereunder.
B. No Solicitation; Acquisition Proposals.
(a) The Company shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
representative or agent of the Company or any of its subsidiaries (including,
without limitation, any investment banker, financial advisor, attorney or
accountant retained by the Company or any of its subsidiaries) to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing information or assistance), or take any other action to facilitate
the initiation of any inquiries or proposals regarding an Acquisition Proposal
(as hereinafter defined), (ii) engage in negotiations or discussions concerning,
or provide any nonpublic information to any person relating to, any Acquisition
Proposal, or (iii) agree to approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Section 5.2 shall prohibit the
Company or the Board from taking and disclosing to stockholders a position
contemplated by Rule 14e-2 promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith reasonable
judgment of the Board after consultation with outside legal counsel, the failure
to so disclose would be inconsistent with its fiduciary obligations to
stockholders under applicable law; and provided, further, that, prior to the
time at which Acquisition Sub shall have accepted Shares for payment pursuant to
the Offer and to the extent that the Board determines in good faith (after
consultation with outside legal counsel) that not to do so would be inconsistent
with its fiduciary duties to stockholders under applicable law, (y) the Board on
behalf of the Company may, in response to an unsolicited bona fide written
Acquisition Proposal (as hereinafter defined), make such inquiries of the Third
Party (as hereinafter defined) making such unsolicited bona fide written
Acquisition Proposal as may be necessary to inform itself of the particulars of
the Acquisition Proposal and, if the Board reasonably believes that such
Acquisition Proposal may constitute a Superior Proposal (as hereinafter
defined), furnish information or data (including, without limitation,
confidential information or data) relating to the Company or its subsidiaries
to, and participate in negotiations with, the Third Party (as hereinafter
defined) making such unsolicited bona fide written Acquisition Proposal and (z)
following receipt of a Superior Proposal (as hereinafter defined), the Board may
withdraw or modify its recommendation relating to the Offer or the Merger if the
Board determines in good faith after consultation with outside legal counsel
that failure to take such action would be inconsistent with its fiduciary duties
to stockholders under applicable law. Subject to the Company's right to
terminate this Agreement pursuant to Section 8.1(f), nothing in this Agreement
and no action taken by the Board pursuant to this Section 5.2 will permit the
Company to enter into any agreement or undertaking providing for any transaction
contemplated by an Acquisition Proposal for so long as this Agreement remains in
effect.
As used in this Agreement, "Acquisition Proposal" means a proposal
for either (i) a transaction pursuant to which any person (or group of persons)
other than the Parent or its affiliates (a "Third Party") would acquire 25% or
more of the outstanding
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37
shares of the Common Stock of the Company pursuant to a tender offer or exchange
offer or otherwise, (ii) a merger or other business combination involving the
Company pursuant to which any Third Party would acquire 25% or more of the
outstanding shares of the Common Stock of the Company or of the entity surviving
such merger or business combination, (iii) any other transaction pursuant to
which any Third Party would acquire control of assets (including for this
purpose the outstanding equity securities of subsidiaries of the Company, and
the entity surviving any merger or business combination including any of them)
of the Company having a fair market value equal to 25% or more of the fair
market value of all the assets of the Company immediately prior to such
transaction, (iv) any public announcement by a Third Party of a proposal, plan
or intention to do any of the foregoing or any agreement to engage in any of the
foregoing, (v) a self tender offer, or (vi) any transaction subject to Rule
13(e)-3 under the Exchange Act. No Acquisition Proposal received by the Company
following the date of this Agreement shall be deemed to have been solicited by
the Company or any of its officers, directors, employees, representatives and
agents (including, without limitation, any investment banker, attorney or
accountant retained by the Company) in violation of Section 5.2 solely by virtue
of the fact that the person or entity making such Acquisition Proposal made an
Acquisition Proposal prior to the date of this Agreement or the fact that the
Company or any of its officers, directors, employees, representatives and agents
(including, without limitation, any investment banker or attorney retained by
the Company) solicited such Acquisition Proposal prior to February 29, 2000.
As used in this Agreement, "Superior Proposal" means an Acquisition
Proposal that (i) is not subject to any financing contingencies or is, in the
good faith judgment of the Board after consultation with a nationally recognized
financial advisor, reasonably capable of being financed and (ii) the Board
determines in good faith, based upon such matters as it deems relevant,
including an opinion of a nationally recognized financial advisor, would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the Offer and the Merger.
(b) Prior to providing any information to or entering into
discussions with any person in connection with an Acquisition Proposal by a
person as set forth in Section 5.2(a), the Company shall receive from such
person an executed confidentiality agreement in reasonably customary form and
shall notify Parent orally and in writing of any Acquisition Proposal
(including, without limitation, the material terms and conditions thereof and
the identity of the person making it) or any inquiries indicating that any
person is considering making or wishes to make an Acquisition Proposal, as
promptly as practicable (but in no case later than 24 hours) after its receipt
thereof, and shall provide Parent with a copy of any written Acquisition
Proposal, and shall thereafter inform Parent on a prompt basis of (i) any
material changes to the terms and conditions of such Acquisition Proposal, and
shall promptly give Parent a copy of any information provided to such person
which has not previously been provided to Parent and (ii) any request by any
person for nonpublic information relating to its or any of its subsidiaries'
properties, books or records.
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38
(c) Subject to the foregoing provisions of this Section 5.2,
the Company shall immediately cease any existing discussions or negotiations
with any person (other than Parent and Acquisition Sub) conducted heretofore
with respect to any of the foregoing. The Company agrees not to release any
third party from the confidentiality provisions of any confidentiality agreement
to which the Company is a party.
(d) The Company shall ensure that the officers and directors
of the Company and its subsidiaries and any investment banker, financial
advisor, attorney, accountant or other advisor or representative retained by the
Company are aware of the restrictions described in this Section 5.2.
VI.
ADDITIONAL AGREEMENTS
A. HSR Act. As promptly as practicable after the date of this
Agreement, the Company and Parent shall file notifications under the HSR Act in
connection with the Offer, the Merger and the transactions contemplated hereby
and shall respond as promptly as practicable to any inquiries and requests
received from the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") for additional
information or documentation and from any State Attorney General or other
Governmental Authority in connection with antitrust matters.
B. Access to Information; Confidentiality. Upon reasonable notice
and subject to (i) restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use reasonable efforts to be
released), and (ii) the Company's written consent (which consent shall not be
unreasonably withheld) with respect to current or future prices of products and
services or information relating to specific customers or other competitively
sensitive information, the Company shall, and shall cause each of its
subsidiaries to afford, to the officers, employees, accountants, counsel,
financial advisors and other representatives of Parent, Fimalac-U.S.,
Acquisition Sub or the financing sources of Parent or Acquisition Sub reasonable
access during normal business hours, during the period prior to the earlier of
the termination of this Agreement and the Effective Time, to all its properties,
books, contracts, commitments and records and, during such period, the Company
shall (and shall cause each of its subsidiaries to) furnish promptly to Parent,
Fimalac-U.S. or Acquisition Sub all information concerning its business,
properties and personnel as Parent, Fimalac-U.S. or Acquisition Sub may
reasonably request, and each shall make available to Parent, Fimalac-U.S. and
Acquisition Sub the appropriate individuals (including attorneys, accountants,
and other professionals) for discussion of the Company's business, properties
and personnel as Parent, Fimalac-U.S. or Acquisition Sub may reasonably request.
Any such investigation by Parent, Fimalac-U.S. or Acquisition Sub shall not
affect the representations or
<PAGE>
39
warranties of the Company contained in this Agreement. Parent, Fimalac-U.S. and
Acquisition Sub shall keep such information confidential in accordance with the
terms of the confidentiality letter dated January 25, 2000 (the "Confidentiality
Letter"), between Parent and the Company, which Confidentiality Letter shall
survive termination of this Agreement. Upon any termination of this Agreement,
Parent shall, upon written request of the Company, destroy or collect and
deliver to the Company all documents obtained by it or any of its
representatives pursuant to this Section 6.2 then in their possession and any
copies thereof.
C. Consents; Approvals. Subject to Section 5.2, the Company, Parent,
Fimalac-U.S. and Acquisition Sub shall each use their reasonable best efforts to
take all appropriate action to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate the
Offer, the Merger and the other transactions contemplated by this Agreement,
including, without limitation, using their best efforts to obtain all consents,
waivers, approvals, authorizations or orders of Governmental Authorities and
parties to contracts with the Company or any of its subsidiaries, and the
Company, Parent, Fimalac-U.S. and Acquisition Sub shall make all filings
including, without limitation, all filings with Governmental Authorities
required in connection with the authorization, execution and delivery of this
Agreement by the Company, Parent, Fimalac-U.S. and Acquisition Sub, the
consummation by them of the transactions contemplated hereby and to fulfill the
conditions to the Offer and the Merger. The Company and Parent shall furnish all
information required to be included in the Proxy Statement, or for any
application or other filing to be made pursuant to the rules and regulations of
any United States or foreign governmental body in connection with the
transactions contemplated by this Agreement.
D. Indemnification and Insurance.
1. The articles of incorporation and by-laws of the Surviving
Corporation shall contain provisions with respect to indemnification and
exculpation at least as protective to any officer or director as those set forth
in the articles of incorporation and by-laws of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at or prior to the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law.
2. The Company shall, to the fullest extent permitted under
applicable law or under the Company's articles of incorporation or by-laws and
regardless of whether the Merger becomes effective, indemnify and hold harmless,
and, after the Effective Time, Fimalac-U.S. and the Surviving Corporation shall,
to the fullest extent permitted under applicable law or under the Surviving
Corporation's articles of incorporation or by-laws, indemnify and hold harmless,
each present and former director, officer or employee of the Company or any of
its subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including
<PAGE>
40
attorneys' fees), judgments, fines, losses, claims, damages and liabilities
incurred in connection with, and amounts paid in settlement of, any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative and wherever asserted, brought or filed, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions or alleged acts or
omissions occurring at or prior to the Effective Time, to the same extent as
provided in the respective articles of incorporation or by-laws of the Company
or the subsidiaries or any applicable contract or agreement as in effect on the
date hereof, in each case for a period of six years after the date hereof. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time) in which there exists no conflict
between the interests of the indemnifying party and the Indemnified Party, the
indemnifying party shall have a right to assume and direct all aspects of the
defense thereof, including settlement, and the Indemnified Party shall cooperate
in the defense of any such matter. The Indemnified Party shall have a right to
participate in (but not control) the defense of any such matter with its own
counsel and at its own expense. The indemnifying party shall not settle any such
matter unless (i) the Indemnified Party gives prior written consent, which shall
not be unreasonably withheld, or (ii) the terms of the settlement provide that
the Indemnified Party shall have no responsibility for the discharge of any
settlement amount and impose no other obligations or duties on the Indemnified
Party and the settlement provides the Indemnified Party with a full release and
discharges all rights against the Indemnified Party with respect to such matter.
In no event shall the indemnifying party be liable for any settlement effected
without its prior written consent; provided that if such indemnifying party
elected not to assume and direct the defense of such action, such indemnifying
party's consent to such settlement shall not be unreasonably withheld or
delayed. Any Indemnified Party wishing to claim indemnification under this
Section 6.4(b), upon learning of any such claim, action, suit, proceeding or
investigation, shall notify Fimalac-U.S. and the Surviving Corporation (but the
failure so to notify shall not relieve the indemnifying party from any liability
which it may have under this Section 6.4(b) except to the extent of any damages
caused by such failure to the indemnifying party), and shall deliver to
Fimalac-U.S. and the Surviving Corporation the undertaking contemplated by
Section 8.75(e) of the Illinois Law. If the indemnifying party does not assume
the defense of any such action, the Indemnified Parties as a group may retain
only one law firm in each jurisdiction to represent them with respect to any
single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. The indemnity agreements of Fimalac-U.S. and the
Surviving Corporation in this Section 6.4(b) shall extend, on the same terms to,
and shall inure to the benefit of and shall be enforceable by, each person or
entity who controls, or in the past controlled, any present or former director,
officer or employee of the Company or any of its subsidiaries.
3. This Section shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
<PAGE>
41
assigns of Fimalac-U.S. and the Surviving Corporation and shall be enforceable
by the Indemnified Parties. In the event that Fimalac-U.S. or Surviving
Corporation or any of their successors or assigns (i) consolidates or merges
into any other person or entity and shall not be the continuing or surviving
corporation or entity in such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person or entity, then and
in such case, proper provisions shall be made so that the successors and assigns
of Fimalac-U.S. or the Surviving Corporation (as the case may be) assume the
obligations of Fimalac-U.S. and the Surviving Corporation set forth in this
Section.
E. Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Acquisition Sub, as the case may be, materially to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
F. Further Action. Upon the terms and subject to the conditions
hereof (including, without limitation, Section 5.2), each of the parties shall
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement. Parent and Fimalac-U.S. shall
take all action necessary to cause Acquisition Sub to perform its obligations
under this Agreement and to make the Offer and purchase Shares and to consummate
the Merger on the terms and subject to the conditions set forth in this
Agreement.
G. Public Announcements. Parent and the Company shall consult with
each other before issuing any press release with respect to the Offer, the
Merger or this Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party, which shall
not be unreasonably withheld, delayed or conditioned; provided, however, that a
party may, without the prior consent of the other part, issue such press release
or make such public statement as may upon the advice of counsel be required by
law or the rules and regulations of the New York Stock Exchange or the Paris
Bourse, if it has used all reasonable efforts to consult with the other party.
H. Conveyance Taxes. Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or
<PAGE>
42
other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time.
I. Employee Benefit Plans. Parent agrees that the employees of the
Company will continue to be provided with benefits under employee benefit plans
(other than plans involving the potential issuance of or investment in
securities of the Company or similar performance-based incentive plans) that in
the aggregate are substantially comparable to those currently provided by the
Company to such employees. Following the Effective Time, Parent shall cause
service by employees of the Company to be taken into account for purpose of
eligibility to participate and vesting under any benefit plans of Parent or its
subsidiaries (including the Surviving Corporation) which cover such employees,
to the same extent such service was counted under a similar plan of the Company.
From and after the Effective Time, Parent shall (i) cause to be waived any
pre-existing condition limitations and evidence of insurability requirements
under benefit plans of Parent or its subsidiaries in which employees of the
Company participate, and (ii) cause to be credited any deductibles and
out-of-pocket expenses incurred by such employees and their beneficiaries and
dependents under the Company's benefit plans during the portion of the calendar
year prior to their participation in the benefit plans provided by Parent and
its subsidiaries. Parent shall cause the Surviving Corporation to honor all
employee benefit obligations to current and former employees under the Company
Employee Plans accrued as of the Effective Time and all employee severance plans
and all employment or severance agreements set forth in Section 3.11(a) of the
Company Disclosure Schedule. Notwithstanding any of the foregoing to the
contrary, none of the provisions contained herein shall operate to duplicate any
benefit provided to any employee of the Company or the funding of any such
benefit or obligate Parent or any affiliate of Parent to (i) make any particular
benefit plan or benefit available to any employee, (ii) continue any particular
benefit plan or benefit or (iii) refrain from terminating or amending any
particular benefit plan or benefit.
J. Delisting of Securities. As soon as practicable following the
Effective Time, the parties hereto shall take all action necessary to cause the
Company's Common Stock to be de-listed from the New York Stock Exchange and
de-registered under the Exchange Act.
Section 6.11 Audited Financial Statements. As soon as practicable
but in any case five (5) business days prior to the initial expiration date of
the Offer, the Company shall provide to Parent and Acquisition Sub copies of the
fully audited consolidated financial statements of the Company and its
consolidated subsidiaries for the Company's fiscal year ended December 31, 1999.
Section 6.12 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
<PAGE>
43
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective boards of directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby and thereby.
Section 6.13 Financing Efforts. If an event of the type listed in
clause (f) of Annex A hereto shall have occurred and, as a consequence thereof,
the Parent's and the Acquisition Sub's financing for the Offer is withdrawn or
otherwise unavailable, and if the other conditions to the Offer have otherwise
been satisfied, the Parent will use reasonable best efforts to arrange
alternative financing for the Offer (provided that the terms thereof are not
materially worse than those available to it previously).
VII.
CONDITIONS TO THE MERGER
A. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall
be subject to the satisfaction or waiver to the extent permissible under law at
or prior to the Effective Time of all the following conditions:
1. Purchase of Shares. Acquisition Sub shall have accepted and
purchased Shares pursuant to the Offer.
2. HSR Act. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been earlier terminated.
3. No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; and there shall
not be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal; provided, however, that prior to invoking
this condition, the party so invoking this condition shall have complied with
its obligations under Section 6.3.
4. Governmental Actions. There shall not be in effect any
judgment, decree or order of any Governmental Authority, administrative agency
or court of competent jurisdiction prohibiting or limiting Parent from
exercising all material rights and privileges pertaining to its ownership of the
Surviving Corporation
<PAGE>
44
or the ownership or operation by Parent or any of its subsidiaries of all or a
material portion of the business or assets of Parent or any of its subsidiaries,
or compelling Parent or any of its subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of Parent or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as a
result of the Merger or the transactions contemplated by this Agreement.
5. Stockholders' Approval. The Merger shall have been approved
by the shareholders of the Company, if and to the extent a vote of the
stockholders of the Company shall be required in respect of the Merger in
accordance with Illinois Law.
B. Conditions to Obligation of Parent, Fimalac-U.S. and Acquisition
Sub. The respective obligations of Parent, Fimalac-U.S. and Acquisition Sub to
effect the Merger shall be subject to the satisfaction or waiver to the extent
permissible under law at or prior to the Effective Time of the following
condition:
1. Representations and Warranties True. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects when made.
VIII.
TERMINATION
A. Termination. This Agreement may be terminated at any time prior
to the Effective Time, notwithstanding approval thereof by the stockholders of
the Company:
1. by mutual written consent duly authorized by the boards of
directors or any committee thereof of Parent, Fimalac-U.S., Acquisition Sub and
the Company, subject to compliance with Section 1.3(c);
2. by either Parent or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a nonappealable final
order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Offer or the
Merger (provided that the right to terminate this Agreement under this Section
8.1(b) shall not be available to any party who has not complied with its
obligations under Sections 6.3 and 6.6 and such noncompliance materially
contributed to the issuance of any such order, decree or ruling or the taking of
such action);
3. by either Parent or the Company if (A) as the result of the
failure of any of the conditions set forth in Annex A to this Agreement, the
Offer shall have expired or Acquisition Sub shall have terminated the Offer in
accordance
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45
with its terms without Acquisition Sub having purchased any Shares pursuant to
the Offer or (B) Acquisition Sub shall have failed to accept for purchase and
pay for Shares pursuant to the Offer by May 12, 2000 unless such failure by
Acquisition Sub is a result of the receipt by the Company of a bona fide
unsolicited Acquisition Proposal or a request for additional information under
the HSR Act or the failure to obtain any necessary governmental or regulatory
approval, in which case the date by which Acquisition Sub shall accept for
purchase and pay for Shares shall be extended to June 30, 2000 (provided that
the right to terminate this Agreement under this Section 8.1(c) shall not be
available to any party whose breach or failure to fulfill any obligation under
this Agreement has been the cause of or resulted in any of the circumstances
described in clauses (A) and (B) before such dates);
4. by Parent, prior to the purchase of Shares pursuant to the
Offer, if the Board shall have (i) withdrawn or modified in a manner adverse to
Parent, Fimalac-U.S. or Acquisition Sub, or publicly taken a position materially
inconsistent with, its approval or recommendation of the Offer, the Merger or
the transactions contemplated by this Agreement, (ii) approved, endorsed or
recommended an Acquisition Proposal, or (iii) publicly disclosed any intention
to do any of the foregoing;
5. by the Company, prior to the purchase of Shares pursuant to
the Offer, or the Parent, at any time prior to the Effective Time, (i) if any
representation or warranty of the Company or Parent, respectively, set forth in
this Agreement that are qualified by reference to materiality shall not be true
and correct when made or any representation or warranty of the Company or
Parent, respectively, set forth in this Agreement that are not qualified by
reference to materiality shall not be true and correct in all material respects
when made, or (ii) upon a breach of or failure to perform in any material
respect any covenant or agreement on the part of the Company or Parent,
respectively, set forth in this Agreement except, in each of (i) and (ii) above,
where the failure to perform such covenants or agreements or the failure of such
representations and warranties to be so true and correct would not have a
Material Adverse Effect on the Company, Parent or the Offer (either (i) or (ii)
above being a "Terminating Breach"); provided however, that, if such Terminating
Breach is curable by the Company or Parent, as the case may be, through the
exercise of its reasonable best efforts and for so long as the Company or
Parent, as the case may be, continues to exercise such reasonable best efforts,
neither Parent nor the Company, respectively, may terminate this Agreement under
this Section 8.1(e), and provided further that the right to terminate this
Agreement pursuant to this Section 8.1(e) shall not be available to any party
whose breach of or failure to fulfill its obligations under this Agreement
resulted in the failure of any such condition; or
6. by the Company, following the receipt by the Company after
the date hereof, under circumstances not involving any breach of the provisions
of Section 5.2, of an unsolicited bona fide Superior Proposal, if the Board,
after consultation with outside legal counsel, shall have determined in good
faith that the failure to terminate this Agreement would be inconsistent with
its fiduciary duties to
<PAGE>
46
the Company's stockholders under applicable law; provided that (i) the Company
has complied with all provisions of Section 5.2, including the notice provisions
therein, (ii) such termination shall only be effective if the Company enters
into a definitive agreement providing for the transactions contemplated by such
Acquisition Proposal immediately following such termination; (iii) the Board
shall have given Parent at least two business days prior written notice of its
determination to terminate this Agreement pursuant to this Section 8.1(f) and
shall have afforded Parent a reasonable opportunity within such two business
day-period to amend its Offer; and (iv) the Company pays Parent the Termination
Fee (as defined below) in accordance with provisions of Section 8.3.
B. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, there shall be no liability on the part of
any party hereto or any of its affiliates, directors, officers, employees or
stockholders except as set forth in Sections 3.22, 6.2, 6.7, 8.1 and 8.3 and
Article IX and this Agreement shall otherwise forthwith become void. Except as
otherwise provided in Section 8.3, nothing herein shall relieve any party from
liability for any willful breach of any of its representations and warranties or
the breach of any of its covenants or agreements set forth in this Agreement.
C. Fees and Expenses.
1. Except as otherwise set forth in this Agreement, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated.
2. The Company shall pay Parent a fee of $16,000,000 (the
"Termination Fee") plus the amount of the actual out-of-pocket expenses (not to
exceed $2 million) incurred by Parent, Fimalac-U.S. and Acquisition Sub in
connection with this Agreement and the transactions contemplated hereby if this
Agreement is terminated (x) by Parent pursuant to Section 8.1(d), or (y) by the
Company pursuant to Section 8.1(f), or (z) by the Company or Parent pursuant to
Section 8.1(c) if, at the time of such termination pursuant to Section 8.1(c),
the Minimum Condition had not been satisfied and an Acquisition Proposal had
been publicly announced and, within twelve months of such termination pursuant
to Section 8.1(c), any person or entity (other than Parent) has acquired, by
purchase, merger, consolidation, sale, assignment, lease, transfer or otherwise,
in one transaction or any related series of transactions, a majority of the
voting power of the outstanding securities of the Company or a majority of the
assets of the Company. The Termination Fee payable pursuant to this Section
8.3(b) shall be paid by wire transfer in immediately available funds immediately
upon termination of this Agreement as set forth above, except in the case of a
termination pursuant to Section 8.1(c), in which case it shall be paid
immediately upon satisfaction of the conditions to payment set forth in clause
(z) of the preceding sentence. The out-of-pocket expenses shall be paid
promptly upon receipt of reasonable documentation of
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47
such expenses. Except as provided in this Section 8.3(b), upon termination of
this Agreement pursuant to Sections 8.1(d) or 8.1(f), or upon termination of
this Agreement pursuant to Section 8.1(c) under circumstances in which a
Termination Fee is payable hereunder, none of the parties hereto shall have any
liability hereunder.
IX.
GENERAL PROVISIONS
A. Effectiveness of Representations, Warranties and Agreements.
Except as otherwise provided in this Section 9.1, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties, covenants and agreements in this
Agreement shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 8.l, as the case may be, except that this Section
9.1 shall not limit any covenant or any agreement of the parties which by its
terms contemplates performance after the Effective Time and which shall survive
in accordance with its respective terms. The Confidentiality Letter shall
survive termination of this Agreement as provided therein.
B. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
1. If to Parent, Fimalac-U.S. or Acquisition Sub:
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Telecopier No.: (212) 480-4439
Telephone No.: (212) 908-0500
Attention: Stephen W. Joynt
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6014
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48
Telecopier No.: (212) 357-3990
Telephone No.: (212) 373-3000
Attention: David K. Lakhdhir, Esq.
2. If to the Company:
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Telecopier No.: (212) 908-7648
Telephone No.: (212) 908-0202
Attention: President
With a copy to:
Katten Muchin Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
USA
Telecopier No.: (312) 902-1061
Telephone No.: (312) 902-5200
Attention: Kurt W. Florian, Jr., Esq.
C. Certain Definitions. For purposes of this Agreement, the
term:
1. affiliate means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
2. beneficial owner with respect to any shares of Common Stock
means a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares;
<PAGE>
49
3. business day means any day other than a day on which banks
in New York or Paris are required or authorized to be closed;
4. control (including the terms controlled by, and under
common control with) means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
5. knowledge means, with respect to any matter in question,
actual knowledge of any executive officer of the entity in question with respect
to such matter after making reasonable inquiry of officers and other employees
charged with senior administrative or operational responsibility of such
matters;
6. person means an individual, corporation, partnership,
limited liability company, association, joint venture, trust, unincorporated
organization, other entity or group (as defined in Section 13(d)(3) of the
Exchange Act); and
7. subsidiary or subsidiaries of the Company, the Surviving
Corporation, Parent or any other person means any person or other legal entity
of which the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
D. Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time, subject to compliance with Section 1.3(c);
provided, however, that, after approval of the Merger by the stockholders of the
Company, no amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
E. Waiver. At any time prior to the Effective Time, any party hereto
may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
F. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
50
G. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
H. Entire Agreement. This Agreement constitutes the entire agreement
and supersedes all prior agreements and undertakings (other than the
Confidentiality Letter), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein.
I. Assignment; Guarantee of Acquisition Sub Obligations. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent, Fimalac-U.S. and Acquisition Sub may assign all or any of their rights
hereunder to any affiliate provided that no such assignment shall relieve the
assigning party of its obligations hereunder.
J. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 6.4 (which is intended to be for the benefit of the Indemnified Parties
and may be enforced by such Indemnified Parties).
K. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
L. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York, without regard to any
conflict of laws principles thereof that might indicate the applicability of the
law of any other jurisdiction.
M. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of
<PAGE>
51
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
N. Interpretation. The parties hereto acknowledge that certain
matters set forth in the Company Disclosure Schedule and certain matters set
forth in the Parent Disclosure Schedule are included for informational purposes
only, notwithstanding the fact that, because they do not rise above applicable
materiality thresholds or otherwise, they would not be required to be set forth
therein by the terms of this Agreement. The parties agree that disclosure of
such matters shall not be taken as an admission by the Company or Parent, as the
case may be, that such disclosure is required to be made under the terms of any
provision of this Agreement and in no event shall the disclosure of such matters
be deemed or interpreted to broaden or otherwise amplify the representations and
warranties contained in this Agreement or to imply that such matters are or are
not material and neither party shall use, in any dispute between the parties,
the fact of any such disclosure as evidence of what is or is not material for
purposes of this Agreement.
<PAGE>
52
IN WITNESS WHEREOF, Parent, Fimalac-U.S., Frank Acquisition Sub and
the Company have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
Fimalac, S.A.
By: /s/ Veronique Morali
------------------------
Name: Veronique Morali
Title: Directeur General
Fimalac, Inc.
By: /s/ Veronique Morali
------------------------
Name: Veronique Morali
Title: Chairman
FSA Acquisition Corp.
By: /s/ Stephen Joynt
---------------------
Name: Stephen W. Joynt
Title: President
Duff & Phelps Credit Rating Co.
By: /s/ Paul J. McCarthy
------------------------
Name: Paul J. McCarthy
Title: Chairman and Chief
Executive Officer
<PAGE>
53
ANNEX A
-------
OFFER CONDITIONS
The capitalized terms used in this Annex A have the meanings set
forth in the attached Agreement and Plan of Merger among Duff & Phelps Credit
Rating Co., Fimalac, S.A., Fimalac, Inc. and FSA Acquisition Corp. except that
the term "Merger Agreement" shall be deemed to refer to the attached Agreement
and Plan of Merger and the term "Commission" shall be deemed to refer to the
SEC.
Notwithstanding any other provision of the Offer, Acquisition Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, including, without limitation, Rule 14e-1(c)
under the Exchange Act, pay for any Shares tendered pursuant to the Offer, and
may postpone the acceptance for payment or, subject to the restriction referred
to above, payment for any Shares tendered pursuant to the Offer, and may
terminate or amend the Offer (whether or not any Shares have theretofore been
purchased or paid for pursuant to the Offer) and not accept for payment any
Shares, if (i) the Minimum Condition shall not have been satisfied, or (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated; or (iii) Acquisition Sub shall not have been reasonably satisfied
that the provisions of Sections 7.85 and 11.75 of the Illinois Law are
inapplicable to the Offer and Merger, or (iv) at any time on or after the
announcement and prior to the acceptance for payment of Shares pursuant to the
Merger Agreement, or payment for, the Shares, any of the following conditions
occurs:
1. there shall have been any action or proceeding brought or
threatened by any Governmental Authority or any other Person (other than any
action or proceeding brought or threatened by a Person other than a Governmental
Authority that would not reasonably be expected to have a Material Adverse
Effect) or any statute, regulation, legislation, judgment, decree or order,
enacted, entered, enforced, promulgated, amended, issued or deemed applicable to
the Offer or the Merger by any Governmental Authority that would have the effect
of: (i) making illegal, or otherwise directly or indirectly restraining or
prohibiting or imposing material penalties or fines or requiring the payment of
material damages in connection with the making of, the Offer, the acceptance for
payment of, the payment for, or the ownership, directly or indirectly, of, some
or all of the Shares by Parent or Acquisition Sub or the consummation of the
Offer or the Merger; (ii) prohibiting or materially limiting, the direct or
indirect ownership or operation by the Company or by Parent of all or any
material portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or compelling Parent to dispose of or hold separate all or any
material portion of the business or assets of the Company or Parent or their
respective subsidiaries, taken as a whole, as a result of the transactions
contemplated by this Agreement; (iii) imposing or confirming material
limitations on the ability of Parent effectively to hold or to exercise full
rights of ownership of Shares, including,
<PAGE>
54
without limitation, the right to vote any Shares on all matters properly
presented to the stockholders of the Company, including, without limitation, the
approval and adoption of the Agreement and the transactions contemplated
thereby; (iv) requiring divestiture by Parent, Fimalac-U.S. or Acquisition Sub,
directly or indirectly, of any Shares; or (v) which would reasonably be likely
to result in a Material Adverse Effect;
2. the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger Agreement
or any of the representations and warranties of the Company set forth in the
Merger Agreement that are qualified by reference to materiality shall not be
true and correct or any of the representations and warranties of the Company set
forth in the Merger Agreement that are not so qualified by reference to
materiality shall not be true and correct in all material respects, in each
case, when made and as of the date of consummation of the Offer (except to the
extent such representations and warranties of the Company address matters only
as of a particular date, in which case as of such date), except where the
failure to perform such covenants or agreements or the failure of such
representations and warranties to be so true and correct would not have a
Material Adverse Effect;
3. the Merger Agreement shall have been terminated in
accordance with its terms;
4. there shall have occurred any Material Adverse Effect, or
any development that is reasonably likely to result in a Material Adverse
Effect, on the Company or the Offer;
5. the Board shall have (i) withdrawn or modified in a manner
adverse to Parent, Fimalac-U.S. or Acquisition Sub, or publicly taken a position
materially inconsistent with, its approval or recommendation of the Offer, the
Merger or the transactions contemplated by this Merger Agreement, (ii) approved,
endorsed or recommended an Acquisition Proposal, or (iii) publicly disclosed any
intention to do any of the foregoing;
6. there shall have occurred (i) any general suspension of, or
limitation on prices (other than suspensions or limitations triggered by price
fluctuations on a trading day) for, trading in securities on any national
securities exchange in the United States, France, the United Kingdom or Germany
that lasts for more than one trading day, (ii) the declaration of a banking
moratorium or any limitation or suspension of payments in respect of the
extension of credit by banks or other lending institutions in the United States,
France, the United Kingdom, Germany or any other member country of the European
Monetary Union where such moratorium or limitation in such other member country
has a significant adverse effect on the functionality of the banking markets in
the United States, the United Kingdom, Germany or France, (iii) any commencement
of war, armed hostilities or other international or national calamity directly
involving the United States, France or
<PAGE>
55
any member countries of the European Union, having a significant adverse effect
on the functionality (which shall not be deemed to include market average) of
financial markets in the United States, France, the United Kingdom or Germany,
(iv) any catastrophic decline in (A) the Dow Jones Industrial Average or the
Standard & Poor's Index of 500 Industrial Companies and (B) the Nasdaq Stock
Market, in each case by an amount in excess of 25% measured from the close of
business on the date of the Merger Agreement to any date after March 20, 2000;
provided that such decline, as so measured, is sustained for a period of 5
consecutive trading days or exists as of the date of acceptance for payment of
the Shares or (v) in the case of any of the foregoing (other than clause (iv))
existing at time of the commencement of the Offer, a material acceleration or
worsening thereof; provided, that the foregoing conditions set forth in this
clause (f) shall only be a condition if the consequence of the failure of such
condition to be satisfied is to cause Parent's and the Acquisition Sub's
financing for the Offer to be withdrawn or otherwise unavailable; or
7. all consents and approvals necessary to the consummation of
the Offer, including without limitation consents from parties to loans, leases
and other agreements and consents from any Governmental Authority shall not have
been obtained other than consents and approvals the failure to obtain which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Offer or on the Company or on Parent;
which, in the absolute discretion of Acquisition Sub in any such case, and
regardless of the circumstances (including any action or omission by Acquisition
Sub not inconsistent with the Merger Agreement) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for payment or
payment of Shares.
The foregoing conditions are for the sole benefit of Acquisition Sub
and its affiliates (except for the Minimum Condition, which is also for the
benefit of the Company) and may be asserted by Acquisition Sub regardless of the
circumstances giving rise to any such condition or may be waived by Acquisition
Sub in whole or in part at any time or from time to time in its sole discretion
(except for the Minimum Condition, which cannot be waived without the Company's
consent). The failure by Acquisition Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each such
right shall be deemed an ongoing right that may be asserted at any time or from
time to time.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1
THIS AMENDMENT NO. 1, dated as of May 4, 2000, to the AGREEMENT AND
PLAN OF MERGER (the "Merger Agreement"), dated as of March 6, 2000, among Duff &
Phelps Credit Rating Co., an Illinois corporation (the "Company"), Fimalac,
S.A., a French societe anonyme ("Parent"), Fimalac, Inc., a Delaware corporation
("Fimalac-U.S."), and FSA Acquisition Corp., a Delaware corporation and an
indirect wholly owned subsidiary of Fimalac-U.S. ("Acquisition Sub").
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings ascribed to them in the Merger Agreement.
WHEREAS, the Merger Agreement provides that, at the Effective Time, at
the option of Parent, either Acquisition Sub will merge with and into the
Company, with the Company surviving as an indirect subsidiary of Parent, or the
Company will merge with and into Acquisition Sub, with Acquisition Sub surviving
as an indirect subsidiary of Parent;
WHEREAS, Parent desires that, at the Effective Time, Acquisition Sub
merge with and into the Company, with the Company surviving as an indirect
subsidiary of Parent;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and in the Merger Agreement, and
intending to be legally bound hereby, the Company, Parent, Fimalac-U.S. and
Acquisition Sub hereby agree as follows:
1. Section 2.1 of the Merger Agreement is hereby amended to read in its
entirety:
"At the Effective Time (as defined below), and subject to and upon the
terms and conditions of this Agreement, pursuant to and in accordance with the
requirements of the Illinois Law and the Delaware law, Acquisition Sub shall be
merged with and into the Company; the separate corporate existence of
Acquisition Sub shall cease and the Company shall continue as the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation")."
2. Section 2.6(d) of the Merger Agreement is hereby amended by deleting
the clause "if Acquisition Sub is merged into the Company."
3. The provisions set forth in Article IX of the Merger Agreement shall
apply to this Amendment No. 1.
<PAGE>
IN WITNESS WHEREOF, Parent, Fimalac-U.S., Acquisition Sub and the
Company have caused this Amendment No. 1 to be executed as of the date first
written above by their respective officers thereunto duly authorized.
Fimalac S.A.
By: /s/ Veronique Morali
--------------------
Name: Veronique Morali
Title: Attorney-in-Fact
Fimalac, Inc.
By: /s/ Veronique Morali
--------------------
Name: Veronique Morali
Title: President
FSA Acquisition Corp.
By: /s/ Stephen W. Joynt
--------------------
Name: Stephen W. Joynt
Title: President
Duff & Phelps Credit Rating Co.
By: /s/ Stephen W. Joynt
--------------------
Name: Stephen W. Joynt
Title: President
Exhibit B
CHARTER 805. BUSINESS ORGANIZATIONS
CORPORATIONS
ACT 5. BUSINESS CORPORATION ACT OF 1983
ARTICLE 11. MERGER AND CONSOLIDATION--DISSENTERS' RIGHTS
11.65. Right to dissent
ss. 11.65. Right to dissent. (a) A shareholder of a corporation is
entitled to dissent from, and obtain payment for his or her shares in the event
of any of the following corporate actions:
1. consummation of a plan of merger or consolidation or a plan of
share exchange to which the corporation is a party if (i) shareholder
authorization is required for the merger or consolidation or the share exchange
by Section 11.20 or the articles of incorporation or (ii) the corporation is a
subsidiary that is merged with its parent or another subsidiary under Section
11.30;
2. consummation of a sale, lease or exchange of all, or
substantially all, of the property and assets of the corporation other than in
the usual and regular course of business;
3. an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of such shares;
(iii) in the case of a corporation incorporated prior to
January 1, 1982, limits or eliminates cumulative voting rights with respect to
such shares; or
4. any other corporate action taken pursuant to a shareholder vote
if the articles of incorporation, by-laws, or a resolution of the board of
directors provide that shareholders are entitled to dissent and obtain payment
for their shares in accordance with the procedures set forth in Section 11.70 or
as may be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for
his or her shares under this Section may not challenge the corporate action
creating his or her entitlement unless the action is fraudulent with respect to
the shareholder or the corporation or constitutes a breach of a fiduciary duty
owed to the shareholder,
<PAGE>
2
(c) A record owner of shares may assert dissenters' rights as
to fewer than all the shares recorded in such person's name only if such person
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf the record owner asserts dissenters' rights. The rights of a
partial dissenter are determined as if the shares as to which dissent is made
and the other shares were recorded in the names of different shareholders. A
beneficial owner of shares who is not the record owner may assert dissenters'
rights as to shares held on such person's behalf only if the beneficial owner
submits to the corporation the record owner's written consent to the dissent
before or at the same time the beneficial owner asserts dissenters' rights.
<PAGE>
3
CHARTER 805. BUSINESS ORGANIZATIONS
CORPORATIONS
ARTICLE 11. MERGER AND CONSOLIDATION--DISSENTERS' RIGHTS
11.70. Procedure to dissent
ss. 11.70. Procedure to Dissent. (a) If the corporate action giving
rise to the right to dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to dissent and
the procedure to dissent. If, prior to the meeting, the corporation furnishes to
the shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to
dissent is not to be approved at a meeting of shareholders, the notice to
shareholders describing the action taken under Section 11.30 or Section 7.10
shall inform the shareholders of their right to dissent and the procedure to
dissent. If, prior to or concurrently with the notice, the corporation furnishes
to the shareholders material information with respect to the transaction that
will objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate
action giving rise to the right to dissent is effective or 30 days after the
shareholder delivers to the corporation the written demand for payment,
whichever is later, the corporation shall send each shareholder who has
delivered a written demand for payment a statement setting forth the opinion of
the corporation as to the estimated fair value of the shares, the corporation's
latest balance sheet as of the end of a fiscal year ending not earlier than 16
months before the delivery of the statement, together with the statement of
income for that year and the latest available interim financial statements, and
either a commitment to pay for the shares of the dissenting shareholder at the
estimated fair value thereof upon transmittal to the corporation of the
certificate or certificates, or other evidence of ownership, with respect to the
shares, or instructions to the dissenting shareholder to sell his or her shares
within 10 days after delivery of the corporation's statement to the shareholder.
The corporation may instruct the shareholder to sell only if there is a public
market for the shares at which the shares may be readily sold. If the
shareholder does not sell within that 10 day period after being so instructed by
the corporation for purposes of this Section the shareholder shall be deemed to
have sold his or her shares at the average closing price of the shares, if
listed on a national exchange, or the average of the bid and asked price with
respect to the shares quoted by a principal market maker, if not listed on a
national exchange, during that 10 day period.
<PAGE>
4
(d) A shareholder who makes written demand for payment under
this Section retains all other rights of a shareholder until those rights are
cancelled or modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days from the delivery of the
corporation's statement of value, shall notify the corporation in writing of the
shareholder's estimated fair value and amount of interest due and demand payment
for the difference between the shareholder's estimate of fair value and interest
due and the amount of the payment by the corporation or the proceeds of sale by
the shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and interest
due, the corporation and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, the corporation shall either
pay the difference in value demanded by the shareholder, with interest, or file
a petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is
commenced under subsection (f) by a corporation is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the power
described in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled
to judgment for the amount, if any, by which the court finds that the fair value
of his or her shares, plus interest, exceeds the amount paid by the corporation
or the proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f),
shall determine all costs of the proceeding, including the reasonable
<PAGE>
5
compensation and expenses of the appraisers, if any, appointed by the court
under subsection (g), but shall exclude the fees and expenses of counsel and
experts for the respective parties. If the fair value of the shares as
determined by the court materially exceeds the amount which the corporation
estimated to be the fair value of the shares or if no estimate was made in
accordance with subsection (c), then all or any part of the costs may be
assessed against the corporation. If the amount which any dissenter estimated to
be the fair value of the shares materially exceeds the fair value of the shares
as determined by the court, then all or any part of the costs may be assessed
against that dissenter. The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the court finds
equitable, as follows:
1. Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
2. Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated and that the
fees for those services should not be assessed against the corporation, the
court may award to that counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who are benefited. Except as otherwise provided in
this Section, the practice, procedure, judgment and costs shall be governed by
the Code of Civil Procedure.
(j) As used in this Section:
1. "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the consummation of the corporate action
to which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
2. "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
Exhibit C
March 6, 2000
The Board of Directors
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, IL 60603
Ladies and Gentlemen:
You have asked us to advise you as to the fairness from a financial
point of view to the holders of Common Stock, no par value ("Company Common
Stock") of Duff & Phelps Credit Rating Co. (the "Company") of the consideration
of $100 per share of Company Common Stock proposed to be paid by Fimalac, S.A.,
a French Societe Anonyme ("Parent") pursuant to the terms of the Agreement and
Plan of Merger, dated as of March 6, 2000 (the "Agreement"), between Parent,
Fimalac, Inc. ("Frank-U.S."), a wholly owned subsidiary of Parent, FSA
Acquisition Corp. ("Acquisition Sub"), a wholly owned subsidiary of Frank-U.S.,
and the Company. The Agreement provides for a tender offer (the "Offer") by
Acquisition Sub to acquire all outstanding shares of the Company Common Stock
pursuant to which Acquisition Sub will pay $100 for each share of Company Common
Stock accepted for payment in the Offer. The Agreement further provides that
following completion of the Offer, Acquisition Sub will be merged (the "Merger"
and, together with the Offer, the "Acquisition") with and into the Company and
each outstanding share of Company Common Stock will be converted in the Merger
into the right to receive $100 in cash.
For purposes of the opinion set forth herein, we have:
(i) reviewed the Annual Reports to Stockholders and Annual Reports
on Form 10- K of the Company for the three years ended
December 31, 1998, and certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of the Company, and certain
other public communications from the Company to its
stockholders;
(ii) reviewed certain internal financial analyses and forecasts of
the Company prepared by the management of the Company;
(iii) discussed the past and current operations, financial condition
and prospects of the Company with senior management of the
Company;
(iv) reviewed the reported prices and trading activity of the
Company Common Stock;
(v) compared the financial performance and condition of the
Company and the reported prices and trading activity of the
Company Common Stock with that of certain other comparable
publicly traded companies;
(vi) reviewed publicly available information regarding the
financial terms of certain recent business combination
transactions in the financial services industry specifically
and other industries generally which were comparable, in whole
or in part, to the Acquisition;
(vii) participated in certain discussions among representatives of
each of the Parent and the Company;
(viii) reviewed the Agreement; and
<PAGE>
(ix) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
information reviewed by us for the purposes of this opinion and we have not
assumed any responsibility for independent verification of such information.
With respect to the financial projections, we have assumed that the financial
projections were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made an independent evaluation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
evaluation or appraisal. Our opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
We were retained by the Company solely to render an opinion as to the
fairness from a financial point of view of the consideration to be received by
the holders of Company Common Stock from Parent in the Acquisition. We were not
engaged to solicit, and did not solicit, interest from any party with respect to
a merger or other business combination transaction involving the Company. We
will receive a fee for our services, a portion of which is payable upon the
delivery of this opinion. In the past, we have provided other financial advisory
services to the Company and have received fees for rendering these services.
This letter is for the information of the Board of Directors of the
Company in connection with its consideration of the Acquisition and does not
constitute a recommendation to any holder of Company Common Stock as to whether
or not such holder should tender any shares of Company Common Stock in the Offer
or how any such holder should vote on the Merger. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent, except that this letter may be
attached in its entirety as an exhibit to the Company's Schedule 14D-9 relating
to the Offer and to the Company's information statement relating to the Merger.
Based on, and subject to, the foregoing and other matters as we
consider relevant, we are of the opinion that on the date hereof, the
consideration to be received by the holders of Company Common Stock in
connection with the Acquisition is fair from a financial point of view to the
holders of Company Common Stock.
Very truly yours,
PETER J. SOLOMON COMPANY LIMITED
