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Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
Registration Statement Under the Securities Act of 1933
U.S. TRUST CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
New York 13-3818952
------------------------------- --------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036
(212) 852-1000
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Maureen Scannell Bateman, Esq.
Senior Vice President and General Counsel
U.S. Trust Corporation
114 West 47th Street
New York, New York 10036
(212) 852-1000
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement, as
determined by market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[ X ]
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If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Each Class of Amount Offering Aggregate Amount of
Securities to to be Price Offering Registration
be Registered Registered Per Unit Price Fee
- -------------------- ---------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Common Shares,
Par value $1
Per Share 192,378 shares $70.50 (1) $13,562,649.00 $4,109.89
Rights to Purchase
Series A
Participating
Cumulative
Preferred Shares 192,378 rights - (2) - -
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, on the basis of
the average of the high and low prices ($71.375 and $69.625) of a Common Share
on November 18, 1996 as quoted on the Nasdaq National Market System.
(2) The Rights to Purchase Series A Participating Cumulative Preferred Shares
(the "Rights") are presently attached to and transferable only with the Common
Shares of the registrant. The value, if any, attributable to the Rights to be
offered hereby is included in the proposed maximum offering price of the Common
Shares to be offered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BY NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
ii
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE> 4
SUBJECT TO COMPLETION DATED NOVEMBER 22, 1996.
PROSPECTUS
U.S. TRUST CORPORATION
192,378 COMMON SHARES
This Prospectus relates to an offering by certain persons (the "Selling
Shareholders") of up to 192,378 Common Shares, par value $1 per share (the
"Shares") of U.S. Trust Corporation, a New York corporation (the "Corporation").
The Corporation will not receive any part of the proceeds from the sale of the
Shares by the Selling Shareholders. This Prospectus also relates to up to
192,378 Rights to Purchase Series A Participating Cumulative Preferred Shares of
the Corporation which are attached to and transferable only with the Shares. See
"The Offering" and "Description of Rights."
The Common Shares of the Corporation are traded in the Nasdaq National
Market System. On November 18, 1996, the closing price of a Common Share was
$71.375.
The Selling Shareholders may sell the Shares from time to time in
ordinary brokers' transactions or otherwise, at then current market prices or at
negotiated prices. The Selling Shareholders may pay commissions to designated
broker-dealers for assisting in the placement of the Shares; any such
commissions will be subject to negotiation. Any such broker or dealer may be
deemed to be an underwriter and any such commissions received by any such broker
or dealer in connection with such sales and any profits received by any such
broker or dealer on the resale of any Shares acquired as principal may be deemed
to be underwriting compensation. See "The Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE;
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1996.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information 2
Incorporation of Certain Documents by Reference 3
The Corporation and the Trust Company 4
The Offering 4
Description of the Rights 6
Legal Matters 7
Experts 7
</TABLE>
AVAILABLE INFORMATION
A Registration Statement on Form S-3 relating to the Shares offered
hereby (the "Registration Statement") has been filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in the
Registration Statement. For further information pertaining to the securities
offered hereby, reference is made to the Registration Statement, including the
exhibits filed as a part thereof.
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. The Registration Statement, as well as such reports, proxy
statements and other information, can be inspected and copied at the public
reference facilities of the Commission, at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. and at the regional offices of the Commission located at 7
World Trade Center, 13th Floor, New York, New York, and Suite 1400, 500 West
Madison Street, Chicago, Illinois. Copies of such material can be obtained from
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a Web
site that contains reports, proxy statements and other information regarding
registrants such as the Corporation that file electronically with the
Commission. The address of such site is http://www.sec.gov.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference into this
Prospectus:
(a) The Corporation's Annual Report on Form 10-K for the year ended December
31, 1995 (Commission File No.0-20469);
(b) The Corporation's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1996, June 30, 1996 and September 30, 1996;
(c) The description of the Common Shares contained in the Corporation's
Registration Statement on Form 10 dated February 9, 1995, for the
registration of the Common Shares pursuant to Section 12(g) of the Exchange
Act, and any amendments or reports hereafter filed for the purpose of
updating such description; and
(d) The description of the Rights contained in the Corporation's Registration
Statement on Form 8-A filed September 5, 1995 for the registration of the
Rights pursuant to Section 12(g) of the Exchange Act, and any amendments or
reports hereafter filed for the purpose of updating such description.
In addition, all reports and documents filed by the Corporation with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering made hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Corporation will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the information incorporated by reference herein (not including
exhibits to such information unless such exhibits are specifically incorporated
by reference into such information). Written requests should be sent to:
Corporate Communications Department, U.S. Trust Corporation, 114 West 47th
Street, New York, New York 10036. Telephone requests may be directed to:
Corporate Communications Department, at 212-852-1000.
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THE CORPORATION AND THE TRUST COMPANY
The Corporation, a New York corporation, is a bank holding company
subject to the federal Bank Holding Company Act of 1956, as amended. The
Corporation's principal executive office is located at 114 West 47th Street, New
York, New York 10036 (telephone 212-852-1000).
The Corporation's principal subsidiary is United States Trust Company
of New York (the "Trust Company"), a state chartered bank and trust company. The
Trust Company provides trust and banking services to individuals and
institutions both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and institutional banking. The Trust Company is a
member bank of the Federal Reserve System and an insured bank of the Federal
Deposit Insurance Corporation and is one of twelve members of the New York
Clearing House Association.
The Corporation's other banking subsidiaries are located in California,
Florida and Texas. Limited-purpose trust company subsidiaries of the Corporation
are located in New Jersey, Connecticut and Oregon.
THE OFFERING
The Shares may be sold from time to time by the Selling Shareholders.
Three of the Selling Shareholders were the sole shareholders of Lilienthal
Associates ("Lilienthal"), a California corporation, and the other Selling
Shareholder is Florence Fearrington, Inc., ("Fearrington"), a New York
corporation.
Upon the closing of a merger agreement between Lilienthal, U.S. Trust
Company of California, N.A., a national banking organization and a wholly owned
subsidiary of the Corporation ("California"), and UST-LA, Inc., a California
corporation and a wholly owned subsidiary of California, Lilienthal was merged
with UST-LA, Inc., and the separate corporate existence of UST-LA, Inc.,
thereupon ceased. Lilienthal was the surviving corporation in the merger and
became a wholly owned subsidiary of California. Upon the closing of this
merger, the Selling Shareholders who were shareholders of Lilienthal received
their Shares in exchange for their Lilienthal shares.
Upon the closing of an asset purchase agreement between Fearrington
and the Trust Company, Fearrington received its Shares in exchange for
substantially all the assets and assumption of substantially all the
liabilities of Fearrington.
The following is a list of the Selling Shareholders (and the position
held by the Selling Shareholders who were shareholders of Lilienthal) and the
number of Shares and related Rights received by each in accordance with the
foregoing, all of which Shares and Rights are offered hereby:
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<TABLE>
<CAPTION>
Number of
Shares (and
related Rights)
------------------
<S> <C> <C>
Selling Shareholders Position with Lilienthal
- -------------------- -------------------------
John G. Lilienthal President 32,360
Bruce J. McGregor Vice President 18,877
Randall B. Matthews Secretary/Treasurer 2,696
------------------
53,933
------------------
Florence Fearrington, Inc. --- 138,445
------------------
192,378
==================
</TABLE>
Subsequent to the closing of the merger agreement between Lilienthal and U.S.
Trust Company of California, N.A., John G. Lilienthal and Bruce J. McGregor
retained their above listed positions with Lilienthal and each became Vice
Presidents of California.
At the date of this Prospectus, to the Corporation's best knowledge, no
Selling Shareholder owns any securities of the Corporation other than the
Shares.
The Selling Shareholders have not advised the Corporation of any
specific plans for the distribution of the Shares. The Shares may be sold from
time to time directly by the Selling Shareholders or by their pledgees, donees,
transferees or other successors in interest, by means of (a) block trades, in
which a broker or dealer will attempt to sell the Shares as agent but may
purchase and resell a portion of the block as principal to facilitate the
transaction, (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus, (c) ordinary
brokers' transactions on the Nasdaq System or on the floors of any securities
exchanges on which the Common Shares may be admitted to trading, (d) "exchange
distributions" and "special offerings" of Shares pursuant to and in accordance
with the rules of such exchanges, and (e) a combination of any such methods of
sale, in each case on the Nasdaq System or otherwise in the over-the-counter
market, on any securities exchanges on which the Common Shares may be admitted
to trading, through negotiated transactions, or otherwise, at market prices
prevailing at the time of resale or at prices otherwise negotiated. In addition,
any Shares which qualify for resale pursuant to Rule 144 under the Securities
Act may be sold under Rule 144 rather than pursuant to this Prospectus. The
Selling Shareholders may also from time to time offer the Shares through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers of Shares for whom they may act as agents.
The Selling Shareholders and any underwriters, dealers or agents that
participate in the distribution of Shares offered hereby may be deemed to be
underwriters, and any profit on the sale of such securities by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
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Upon the Corporation's being notified by a Selling Shareholder that any
material arrangement has been entered into for the sale of Shares through a
block trade, special offering, exchange distribution or underwritten offering, a
supplement to this Prospectus will be distributed herewith, if required, which
will set forth the aggregate amount of Shares being sold and the terms of such
sale.
The Selling Shareholders will pay the commissions and discounts of
underwriters, dealers or agents, if any, incurred in connection with the sale of
the Shares. The Corporation is paying all expenses associated with the
Registration Statement. The Corporation, on the one hand, and the Selling
Shareholders, on the other hand, have agreed to indemnify each other against
certain liabilities in connection with the Registration Statement of which this
Prospectus is a part, including liabilities under the Securities Act.
The Corporation will not realize any proceeds from the sale of the
Shares by the Selling Shareholders.
DESCRIPTION OF THE RIGHTS
On August 29, 1995, the Board of Directors of the Corporation declared
a dividend of one Right for each outstanding Common Share. This distribution was
made to the holders of record of Common Shares outstanding on September 1, 1995,
and is being made with respect to each Common Share issued thereafter until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to Common Shares issued after the Distribution Date. Each Right, when it becomes
exercisable, will entitle the registered holder to purchase from the Corporation
one one-hundredth (1/100th) of a Series A Participating Cumulative Preferred
Share of the Corporation (a "Preferred Share") at a price of $150, subject to
adjustment in certain events. Until the Distribution Date, the Rights (i) will
not be exercisable, (ii) will be evidenced by the certificates for Common Shares
registered in the names of the holders thereof and not by separate Right
Certificates, and (iii) will be transferable with and only with Common Shares,
and one Right will be associated with each Common Share, subject to adjustment
in certain events. The Rights will expire on September 1, 2005, unless earlier
redeemed by the Corporation.
The "Distribution Date" is defined as the date of the earlier to occur
of (i) a Triggering Event, which shall occur if any person (other than the
401(k) Plan and ESOP of United States Trust Company of New York and Affiliated
Companies) or group (including any affiliate or associate of such person or
group) shall acquire, or obtain the rights to acquire, beneficial ownership of
20% or more of the Common Shares then outstanding and (ii) with respect to the
potential acquisition by any person (other than the 401(k) Plan and ESOP of
United States Trust Company of New York and Affiliated Companies) of beneficial
ownership of 25% or more of the outstanding Common Shares, the tenth day after
the date of the earlier to occur of (a) notice of approval under the Bank
Holding Company Act of 1956, as amended (12 U.S.C. Section 1841 et seq.), (b)
notice of nondisapproval under the Change in Bank Control Act (12 U.S.C. Section
1817 (j)), or (c) the expiration, without a notice of disapproval having been
issued, of the prior notification period under the Change in Bank Control Act
with respect to a notification thereunder.
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The Rights may have certain anti-takeover effects. A description of the
Rights and the Preferred Shares is set forth in the Corporation's Registration
Statement on Form 8-A dated September 5, 1995, for the registration of the
Rights pursuant to Section 12(g) of the Exchange Act, which Registration
Statement is incorporated herein by reference.
LEGAL MATTERS
The validity of the Shares and Rights offered hereby has been passed
upon for the Corporation by Ronald A. Schwartz, Esq., Vice President and
Assistant General Counsel of the Corporation.
EXPERTS
The consolidated statements of condition as of December 31, 1995 and
1994 and the consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1995, of the Corporation, incorporated by reference in this Prospectus from the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1995,
have been incorporated herein in reliance on the report thereon of Coopers &
Lybrand LLP, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses in connection with the issuance and distribution of
the securities being registered hereby, other than underwriting compensation, if
any, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $ 4,110
Accounting Fees and Expenses 5,000
Legal Fees and Expenses 25,000
Miscellaneous Fees and Expenses 4,000
---------
Total $ 38,110
=========
</TABLE>
All of such expenses will be paid by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the By-Laws of the Registrant provides as follows:
"The Corporation shall indemnify any person made or threatened to be made
a party to any action or proceeding, whether civil or criminal, and
whether or not by or in the right of the Corporation or of any other
corporation of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise, by reason
of the fact that such person, his testator or intestate, is or was a
director or officer of the Corporation or served any other corporation of
any type or kind, domestic or foreign, or any partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity at the
request of the Corporation, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, actually
and necessarily incurred as a result of such action or proceeding, or any
appeal therein, provided that (a) no indemnification may be made to or on
behalf of any person if a judgment or other final adjudication adverse to
such person establishes that his acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled,
(b) no indemnification shall be required in connection with the settlement
of any pending or threatened action or proceeding, or any other
disposition thereof except a final adjudication, unless the Corporation
has consented to such settlement or other disposition and (c) the
Corporation shall not be obligated to indemnify any person by reason of
the adoption of this Article V if and to the extent such person is
entitled to be indemnified under a policy of insurance as such policy
would apply in the absence of the adoption of this Article V.
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"Reasonable expenses, including attorneys' fees, incurred in defending any
action or proceeding, whether threatened or pending, shall be paid or
reimbursed by the Corporation in advance of the final disposition thereof
upon receipt of an undertaking by or on behalf of the person seeking
indemnification to repay such amount to the Corporation to the extent, if
any, such person is ultimately found not to be entitled to
indemnification.
"Notwithstanding any other provision hereof, no repeal of this Article V,
or amendment hereof or any other corporate action or agreement which
prohibits or otherwise limits the right of any person to indemnification
or advancement or reimbursement of expenses hereunder, shall be effective
as to any person until the 60th day following notice to such person of
such action, and no such repeal or amendment or other corporate action or
agreement shall deprive any person of any right hereunder arising out of
any alleged or actual act or omission occurring prior to such 60th day.
"The Corporation is hereby authorized, but shall not be required, to enter
into agreements with any of its directors, officers or employees providing
for rights to indemnification and advancement and reimbursement of
reasonable expenses, including attorneys' fees, to the extent permitted by
law, but the Corporation's failure to do so shall not in any manner affect
or limit the rights provided for by this Article V or otherwise.
"For purposes of this Article V, the term 'Corporation' shall include any
legal successor to the Corporation, including any corporation which
acquires all or substantially all of the assets of the Corporation in one
or more transactions. For purposes of this Article V, the Corporation
shall be deemed to have requested a person to serve an employee benefit
plan where the performance by such person of his duties to the Corporation
or any subsidiary thereof also imposes duties on, or otherwise involves
services by such person to the plan or participants or beneficiaries of
the plan, and excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered
fines.
"The rights granted pursuant to or provided by the foregoing provisions of
this Article V shall be in addition to and shall not be exclusive of any
other rights to indemnification and expenses to which any person may
otherwise be entitled under any statute, rule, regulation, certificate of
incorporation, bylaw, agreement or otherwise."
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The Registrant, as a New York corporation, is subject to the New York
Business Corporation Law (the "B.C.L"). Section 721 of the B.C.L provides that
no indemnification may be made to or on behalf of any director or officer of a
corporation if "a judgment or other final adjudication adverse to the director
or officer establishes that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that he personally gained in fact a financial profit
or other advantage to which he was not legally entitled." Article V of the
Registrant's By-Laws includes the foregoing statutory language.
The rights granted under Article V of the By-Laws are in addition to,
and are not exclusive of, any other rights to indemnification and expenses to
which any director or officer may otherwise be entitled. Under the B.C.L., a New
York corporation may indemnify any director or officer who is made or threatened
to be made a party to an action by or in the right of such corporation against
"amounts paid in settlement and reasonable expenses, including attorneys' fees,"
actually and necessarily incurred by him in connection with the defense or
settlement of such action, or in connection with an appeal therein, if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in the best interests of the corporation, except that no
indemnification shall be made in respect of (1) a threatened action, or a
pending action which is settled or otherwise disposed of, or (2) any claim,
issue or matter as to which such director or officer shall have been adjudged
liable to the corporation, unless and only to the extent that a court determines
that the director or officer is fairly and reasonably entitled to indemnity
(B.C.L. Section 722(c)). A corporation may also indemnify directors and officers
who are parties to their actions or proceedings (including actions or
proceedings by or in the right of any other corporation or other enterprise
which the director or officer served at the request of the corporation) against
"judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees," actually or necessarily incurred as a result of such actions
or proceedings, or any appeal therein, provided the director or officer acted,
in good faith, for a purpose which he reasonably believed to be in the best
interests of the corporation (or in the case of service to another corporation
or other enterprise at the request of such corporation, not opposed to the best
interests of such corporation) and, in criminal cases, that he also had no
reasonable cause to believe that his conduct was unlawful (B.C.L. Section
722(a)). Any indemnification under Section 722 may be made only if authorized in
the specific case by disinterested directors, or by the board of directors upon
the opinion in writing of independent legal counsel that indemnification is
proper, or by the shareholders (B.C.L. Section 723(b)), but even without such
authorization, a court may order indemnification in certain circumstances
(B.C.L. Section 724). Further, any director or officer who is "successful, on
the merits or otherwise," in the defense of an action or proceeding is entitled
to indemnification as a matter of right (B.C.L. Section 723(a)).
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A New York corporation may generally purchase insurance, consistent
with the limitations of New York insurance law and regulatory supervision, to
indemnify the corporation for any obligation which it incurs as a result of the
indemnification of directors and officers under the provisions of the B.C.L., so
long as no final adjudication has established that the directors' or officers'
acts of active and deliberate dishonesty were material to the cause of action so
adjudicated or that the directors or officers personally gained in fact a
financial profit or other advantage to which they were not legally entitled
(B.C.L. Section 726). The Registrant has purchased insurance covering
expenditures by it and its subsidiaries which might arise in connection with the
lawful indemnification of directors and officers for certain liabilities and
expenses, and insurance insuring directors and officers of the Registrant and
its subsidiaries against certain other liabilities and expenses.
ITEM 16. EXHIBITS.
See Exhibit Index immediately following the signature pages below.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this registration statement as effective;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
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Provided, however, that paragraphs (a) and (b) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this registration
statement.
2. For the purpose of determining any liability under the Securities Act, each
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination date
of the offering.
4. For purposes of determining any liability under the Securities Act, each
filing of the Registrant's annual report pursuant of section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
5. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-5
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on November 22, 1996.
U. S. TRUST CORPORATION
By: Richard E. Brinkmann
----------------------------
Richard E. Brinkmann
Comptroller and Chief
Planning Officer
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes H.
Marshall Schwarz, Jeffrey S. Maurer and Richard E. Brinkmann, and each of them
singly, his true and lawful attorneys-in-fact with full power to execute in the
name of such person, in the capacities stated below, and to file with the
Securities and Exchange Commission, such one or more amendments to this
Registration Statement as the Registrant deems appropriate, and generally to do
all such things in the name and on behalf of such person, in the capacities
stated below, to enable the Registrant to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming the signature of
such person as may be signed by said attorneys-in-fact, or any one of them, to
any and all amendments to this Registration Statement.
II-6
<PAGE> 17
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed on November 22, 1996, by the following persons in the
capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
H. Marshall Schwarz Chairman of the Board
------------------------------- and Director (Principal
H. Marshall Schwarz Executive Officer)
John L. Kirby Treasurer and Chief
- -------------------------------- Financial Officer
John L. Kirby
Richard E. Brinkmann Comptroller and Chief
- -------------------------------- Planning Officer
Richard E. Brinkmann
Director
- --------------------------------
Eleanor Baum
Samuel C. Butler Director
- --------------------------------
Samuel C. Butler
Director
- --------------------------------
Peter O. Crisp
Daniel P. Davison Director
- --------------------------------
Daniel P. Davison
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Paul W. Douglas Director
- --------------------------------
Paul W. Douglas
Director
- --------------------------------
Antonia M. Grumbach
Director
- --------------------------------
Frederic C. Hamilton
Director
- --------------------------------
Peter L. Malkin
Jeffrey S. Maurer President, Chief Operating
- -------------------------------- Officer and Director
Jeffrey S. Maurer
Philippe de Montebello Director
- --------------------------------
Philippe de Montebello
Director
- --------------------------------
Orson D. Munn
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Philip L. Smith Director
- --------------------------------
Philip L. Smith
John Hoyt Stookey Director
- --------------------------------
John Hoyt Stookey
Frederick B. Taylor Vice Chairman of the
- -------------------------------- Board, Chief Investment Officer
Frederick B. Taylor Director
Director
- --------------------------------
Richard F. Tucker
Carroll L. Wainwright, Jr. Director
- --------------------------------
Carroll L. Wainwright, Jr.
Robert N. Wilson Director
- --------------------------------
Robert N. Wilson
Director
- --------------------------------
Ruth A. Wooden
</TABLE>
<PAGE> 20
EXHIBIT INDEX
2.1 Merger Agreement dated October 11, 1996 between Lilienthal
Associates, U.S. Trust Company of California, N.A., UST-LA, Inc., and John
G. Lilienthal, Bruce J. McGregor, and Randall B. Matthews.
2.2 Asset Purchase Agreement dated November 14, 1996 between
Florence Fearrington, Inc., United States Trust Company of New York and
Florence Fearrington.
4.1 Rights Agreement dated as of September 1, 1995, between the
Registrant and First Chicago Trust Company of New York, as Rights Agent,
filed on September 5, 1995 as Exhibit 1 to the Registrant's Registration
Statement on Form 8-A (the "Form 8-A") for the registration under Section
12(g) of the Exchange Act of Rights to Purchase the Registrant's Series A
Participating Cumulative Preferred Shares. (*)
4.2 Form of Right Certificate (attached as Exhibit A to the Rights
Agreement listed at Exhibit 4.1 hereto). (*)
4.3 Description of the preferences, limitations and relative
rights of the Registrant's Series A Participating Cumulative Preferred
Shares, as set forth in Article Fourth, Section 6 of the Registrant's
Restated Certificate of Incorporation, filed as Exhibit 3 to the Form 8-A.
(*)
5 Opinion and consent of Ronald A. Schwartz, Esq.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ronald A. Schwartz, Esq. (included in Exhibit 5).
24 Powers of Attorney (included in signature pages of this
Registration Statement)
(*) Incorporated herein by reference.
<PAGE> 1
EXHIBIT 2.1
<PAGE> 2
MERGER AGREEMENT
Among
LILIENTHAL ASSOCIATES,
and
U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
UST-LA, INC.,
JOHN G. LILIENTHAL,
BRUCE J. MCGREGOR,
and
RANDALL B. MATTHEWS
OCTOBER 11, 1996
<PAGE> 3
TABLE OF CONTENTS
ARTICLE Page
ARTICLE I THE MERGER; CLOSING: DELIVERY ................................. 1
1.1 Merger ........................................ 1
1.2 Closing ....................................... 1
1.3 Articles of Incorporation and By-Laws
of the Surviving Corporation ............... 2
1.4 Officers and Directors of the Surviving
Corporation ................................ 2
1.5 Conversion of Shares in the Merger ............ 2
1.6 Delivery ...................................... 4
ARTICLE II TRANSFER, STAMP AND OTHER TAXES .............................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER .................... 4
3.1 Organization, Good Standing and
Qualification .............................. 4
3.2 Authority ..................................... 4
3.3 Capital Structure ............................. 5
3.4 Financial Statements .......................... 5
3.5 Absence of Specified Changes .................. 5
3.6 Tax Returns and Audits ........................ 7
3.7 Real Property ................................. 7
3.8 Other Tangible Personal Property .............. 7
3.9 Copyrights, Trademarks and Patents ............ 7
3.10 Title to Assets ............................... 8
3.11 Existing Employment Contracts ................. 8
3.12 Insurance Policies ............................ 9
3.13 Other Contracts ............................... 9
3.14 Compliance with Laws .......................... 9
3.15 Litigation .................................... 9
3.16 Assets Sufficient for Conduct of Business ..... 10
3.17 Agreement Will Not Cause Breach or
Violation .................................. 10
3.18 Authority and Consents ........................ 10
3.19 Interest in Customers, Suppliers,
and Competitors ............................ 10
3.20 Corporate Documents ........................... 10
3.21 Personnel Identification and Compensation ..... 10
3.22 Powers of Attorney and Bank Accounts .......... 11
i
<PAGE> 4
Section Page
3.23 Business Addresses ............................ 11
3.24 Absence of Undisclosed Liabilities ............ 11
3.25 Full Disclosure ............................... 11
3.26 Specified Events .............................. 11
3.27 Tangible Book Value ........................... 12
ARTICLE IV BUYER'S AND MERGER SUB'S REPRESENTATIONS
AND WARRANTIES ................................................. 12
4.1 Organization .................................. 12
4.2 Authorization ................................. 12
4.3 Consents and Approvals ........................ 12
ARTICLE V SELLER'S OBLIGATIONS BEFORE THE CLOSING DATE .................. 13
5.1 Buyer's Access to Premises and Information .... 13
5.2 Conduct of Business in Normal Course .......... 13
5.3 Preservation of Business and Relationships .... 13
5.4 Maintenance of Insurance ...................... 13
5.5 Employees and Compensation .................... 13
5.6 Controlled Acts ............................... 14
5.7 Payment of Liabilities and Waiver of Claims ... 15
5.8 Existing Agreements ........................... 15
5.9 Statutory Filings ............................. 15
5.10 Delivery of Tax Returns ....................... 15
5.11 Client Consents ............................... 15
5.12 Termination of Qualified Plans ................ 15
ARTICLE VI BUYER'S OBLIGATIONS BEFORE THE CLOSING DATE .................. 15
6.1 Confidentiality ............................... 15
6.2 Governmental Filings .......................... 16
6.3 Best Efforts .................................. 16
6.4 Consents ...................................... 16
6.5 Contact with Clients .......................... 16
ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S AND
MERGER SUB'S PERFORMANCE ..................................... 16
7.1 Accuracy of Seller's Representations
and Warranties ............................ 16
7.2 Absence of Liens ............................. 16
7.3 Seller's Performance ......................... 17
7.4 Opinion of Seller's Counsel .................. 17
7.5 Consents ..................................... 17
ii
<PAGE> 5
Section Page
7.6 Approval of Documentation .................... 17
7.7 Employment Agreements ........................ 17
7.8 Condition of Assets .......................... 17
7.9 Certificates of the Secretary of the Company . 17
7.10 Pooling of Interests ......................... 17
7.11 Delivery of Client Consents .................. 18
7.12 Certificate of Merger ........................ 18
7.13 No Injunction ................................ 18
7.14 No Government Proceeding or Litigation ....... 18
7.15 No Statute, Rule or Regulation ............... 18
7.16 INTENTIONALLY LEFT BLANK ..................... 18
7.17 Absence of Litigation ........................ 18
7.18 Doctor's Letter .............................. 18
7.19 Termination of Qualified Plans ............... 19
ARTICLE VIII CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE .............. 19
8.1 Accuracy of Buyer's and Merger Sub's
Representations and Warranties ............ 19
8.2 Buyer's and Merger Sub's Performance ......... 19
8.3 Opinion of Buyer's Counsel ................... 19
8.4 Consents ..................................... 19
8.5 Employment Agreements ........................ 19
8.6 Benefit Plans ................................ 19
8.7 Securities Registration ...................... 20
8.8 Certificate of Merger ........................ 20
8.9 No Injunction ................................ 20
8.10 No Government Proceeding or Litigation ....... 20
8.11 No Statute, Rule or Regulation ............... 20
8.12 Absence of Litigation ........................ 20
ARTICLE IX SELLER'S AND BUYER'S OBLIGATIONS AFTER THE CLOSING .......... 20
9.1 Preservation of Goodwill ..................... 21
9.2 Use of Name .................................. 21
9.3 Indemnification .............................. 21
9.4 Right to Cure Defaults ....................... 23
9.5 Sale of Stock ................................ 23
9.6 Qualification of Benefit Plans ............... 23
ARTICLE X COSTS ........................................................ 23
10.1 Finder's or Broker's Fees .................... 24
10.2 Expenses ..................................... 24
iii
<PAGE> 6
Section Page
ARTICLE XI FORM OF AGREEMENT ........................................... 24
11.1 Headings ..................................... 24
11.2 Entire Agreement; Modification; Waiver ....... 24
11.3 Counterparts ................................. 24
ARTICLE XII PARTIES .................................................... 24
12.1 Parties in Interest .......................... 24
12.2 Assignment ................................... 25
ARTICLE XIII TERMINATION ............................................... 25
13.1 Conditions Permitting Termination ............ 25
13.2 Defaults Permitting Termination .............. 25
ARTICLE XIV NOTICES .................................................... 25
ARTICLE XV GOVERNING LAW; VENUE ........................................ 26
ARTICLE XVI REGISTRATION OF THE USTC MERGER
SHARES ...................................................... 26
ARTICLE XVII MISCELLANEOUS ............................................. 28
17.1 Announcements ................................ 28
17.2 References ................................... 28
17.3 Currency ..................................... 28
17.4 Counterparts ................................. 28
iv
<PAGE> 7
MERGER AGREEMENT
This Merger Agreement ("Agreement"), dated October 11, 1996,
among U.S. Trust Company of California, N.A., a national banking organization
chartered by the office of the Comptroller of the Currency ("Buyer"), UST-LA,
Inc., a California corporation ("Merger Sub"), Lilienthal Associates, a
California corporation (the "Company"), John G. Lilienthal, Bruce J. McGregor,
and Randall B. Matthews (collectively the "Seller"), being the only shareholders
of the Company.
WITNESSETH:
WHEREAS, the Seller and Buyer desire that Company merge with
and into the Merger Sub in a merger that will be treated as a tax-free
reorganization by reason of Sections 368 (a )(1)(B) of the Internal Revenue Code
of 1986, as amended, and the Company desires to merge with and into Merger Sub
on such basis;
WHEREAS, all of the issued and outstanding shares of Merger
Sub's capital stock are currently owned beneficially and of record by the Buyer;
and
WHEREAS, all the issued and outstanding shares of the
Company's capital stock (the "Shares") are currently held beneficially and of
record by the Seller.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations, and warranties contained in this Agreement, the
parties agree as follows:
ARTICLE I THE MERGER; CLOSING: DELIVERY.
1.1. Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined), the Company shall be
merged with the Merger Sub and the separate corporate existence of the Merger
Sub shall thereupon cease (the "Merger"). The time on which the Merger shall
become effective shall be termed the "Effective Time". The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"), and shall continue to be governed by the laws of the
State of California. From and after the Effective Time, the Surviving
Corporation shall continue its separate corporate existence under the laws of
the State of California as a wholly-owned subsidiary of the Buyer and shall
possess all of the purposes, objects, rights, privileges, powers and franchises,
and shall assume and be liable for all of the liabilities, obligations and
penalties, of each of Merger Sub and the Company.
1.2. Closing. Subject to the provisions hereof, the closing
of the Merger (the "Closing") shall take place: (i) at the office of the Buyer
at 515 South Flower Street,
1
<PAGE> 8
Suite 2700, Los Angeles, California at 9:00 A.M., local time, on the later of
December 31, 1996 or the fifth (5th) business day after the day on or by which
the last to be fulfilled or waived of the conditions to the Closing hereof shall
be fulfilled or waived; or (ii) at such other time and place and/or on such
later date as the Seller, Buyer, Company and Merger Sub may agree in writing.
The date on which the Closing occurs is hereinafter referred to as the "Closing
Date". If all conditions shall have been fulfilled or waived, the parties hereto
shall cause an Agreement of Merger and Officers' Certificate of the Company and
Merger Sub meeting the statutory requirements of California law to be properly
executed and filed in accordance with applicable law on the Closing Date and
shall take any and all other lawful actions necessary to cause the Merger to
become effective.
1.3. Articles of Incorporation and By-Laws of the Surviving
Corporation. The Articles of Incorporation and By-Laws of the Company in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and By-Laws of the Surviving Corporation, until duly amended in accordance with
their respective terms and applicable law.
1.4. Officers and Directors of the Surviving Corporation. The
officers and directors of the Company as of the date hereof shall resign as of
the Closing Date and the Buyer shall appoint new officers and directors of the
Surviving Corporation.
1.5. Conversion of Shares in the Merger. The manner of
converting shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) It is agreed by the parties that the Company's
revenue base (the "Revenue Base") shall be equal to the sum of: (i), for Current
Clients as defined below who are billed by the Company quarterly, the revenues
billed as of the end of the months of July, August and September of 1996
annualized for a 12 month period; and (ii) for Current Clients who are not
billed quarterly, the total fees billed to such clients for the twelve (12)
months prior to the date of this Agreement. Current Clients are those clients of
the Company who have agreed in writing to remain clients of the Company pursuant
to the form of the letter attached as Exhibit 7.11 (Consent Letter). (Both the
identity of such Current Clients and the annualized revenues therefrom shall be
determined by the parties hereto in an examination of the Company's records. If
the parties cannot agree, the Current Clients and their annualized revenues
shall be determined by Coopers & Lybrand and the cost of such examination shall
be borne equally by the Company and the Buyer.) For the avoidance of doubt, any
client from whom the Company earned revenues during such twelve month period but
who is no longer a client of the Company as of the Closing Date shall not be
considered a Current Client.
(b) At the Effective Time, each share of common stock
of the Company issued shall, by virtue of the Merger and without any action on
the part of any holder thereof, automatically be converted into that number of
shares of Common Stock of the U.S. Trust Corporation ("Common Shares") as is
obtained (i) by dividing (x) $2.4 million (the "Merger Consideration") subject
to adjustment under Section 1.5(c) below by (y) the average
2
<PAGE> 9
of the closing sales prices of the Common Shares as quoted on the National
Association of Securities Dealers Automated Quotation System -- National Market
System for the twenty (20) trading days ending two trading days prior to the
Closing Date (such average being hereinafter referred to as the "Conversion
Price"), provided that if there are no reported sales of Common Shares on any of
the twenty (20) trading days referenced above, such trading day shall be counted
as one of the twenty (20) trading days but the results thereof shall not be
utilized in any manner in computing the average closing prices of the Common
Shares for purposes of computing the exchange ratio, and provided further, that
such average closing price shall not be deemed to be greater than $70 nor less
than $44.50, regardless of the actual average closing price; and (ii) by
dividing the results of (i) by twenty eight hundred (2,800) shares, which shall
be the total number of shares of the Company's common stock issued and
outstanding at the Effective Time. During the aforementioned twenty (20) trading
days, the Buyer will cause its parent, to refrain from purchasing any U.S. Trust
Corporation shares in the open market in a manner to materially influence the
reported market price of such shares. The Common Shares to be issued in the
Merger are sometimes referred to herein as "USTC Merger Shares". At the
Effective Time, all outstanding shares of the Company, by virtue of the Merger
and without any action on the part of the holders thereof, shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall thereafter cease to
have any rights with respect to such shares, except the right to receive Common
Shares (or cash in lieu of fractional Common Shares) for such shares upon the
surrender of such certificate. Each share of the Company held in the Company's
treasury as of the Effective Time shall, by virtue of the Merger, be canceled
without any payment of any consideration therefor.
For purposes of computing the Revenue Base, the annualized
revenues received from clients of the Company which do not indicate in writing
prior to the Closing any intent either to continue or not to continue their
relationship with the Company ("Non-Responding Clients") shall not be included
in the Revenue Base. However, that number of USTC Merger Shares which, according
to the formula set forth above, would be paid in respect of the annualized
revenues of such Non-Responding Clients shall be placed in escrow ("Escrow
Shares") with Buyer for 30 days. At the end of such 30-day escrow period, the
Revenue Base shall be recalculated to include as Current Clients those
Non-Responding Clients who have agreed by such date to remain clients of the
Company. A sufficient number of Escrow Shares shall be released to Seller to
bring the aggregate consideration received by Seller to the final Merger
Consideration, based on such final Revenue Base. The Escrow Shares shall be
valued at the Conversion Price for purposes of calculating the number of Escrow
Shares to be released to Seller. Escrow Shares not released to Seller shall
revert to Buyer. Any escrow established pursuant to this section shall comply in
all respects with Internal Revenue Service Revenue Procedure 84-42, 1984-1 C.B.
521.
(c) The Merger Consideration shall be equal to the
result of multiplying $2.4 million by the result of a fraction, the numerator of
which is the Revenue Base and the denominator of which is $1.1 million.
3
<PAGE> 10
1.6. Delivery.
(a) By Seller. At the Closing, the Seller shall
deliver to Buyer, upon receipt of certificates representing the USTC Merger
Shares, the stock certificates representing the shares of the Company's common
stock owned by them, duly endorsed in blank, with all necessary transfer taxes
paid or provided for, and free and clear of all adverse claims (as defined in
Section 8-302 of the Uniform Commercial Code of the State of California), except
for the rights of the Buyer under this Agreement.
(b) By Buyer and Merger Sub. At the Closing, the
Buyer and Merger Sub shall deliver to Seller stock certificates representing the
number of USTC Merger Shares to be delivered to them in accordance with Section
1.5 hereof. The USTC Merger Shares, when delivered to Seller, shall be duly
authorized, validly issued, fully paid and non-assessable.
ARTICLE II TRANSFER, STAMP AND OTHER TAXES. The Seller shall pay all transfer,
stamp and other taxes, if any, related to the transfer of shares of Company
common stock.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER. Subject to that certain
Disclosure Letter ("DL") dated the date hereof executed by the Seller, a draft
of which was delivered to Buyer ten business days before the execution of this
Agreement and the definitive version of which shall be delivered to Buyer on or
prior to the date hereof, Seller hereby represents and warrants to Buyer (which
representations and warranties constitute the basis upon which Buyer and Merger
Sub have been induced to enter into and perform this Agreement) as follows:
3.1. Organization, Good Standing and Qualification. The
Company is a corporation validly existing and in good standing under the laws of
the State of California, has all necessary corporate powers, licenses and
permits to own its properties and to carry on its business as now owned and
operated by it and is not qualified as a foreign corporation in any other
jurisdiction. Annexed to the DL are true, correct and complete copies of the
Company's Articles of Incorporation and By-laws as in full force and effect on
the date hereof.
3.2. Authority. The Seller has, and at the Closing will have,
full legal right and power and all approvals required by law, to enter into this
Agreement in the manner provided herein and perform all of their obligations
hereunder. This Agreement has been duly executed and delivered by the Seller and
is a legal, valid and binding agreement of the Seller enforceable against the
Seller in accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity,
whether asserted in a proceeding
4
<PAGE> 11
in equity or at law. This Agreement has been duly authorized, executed and
delivered by the Company, and is a valid, legal and binding agreement of the
Company, enforceable against it in accordance with its terms subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of relating
to or affecting creditors' rights generally and to general principles of equity,
whether asserted in a proceeding in equity or at law.
3.3. Capital Structure. The authorized number of capital
shares of the Company is ten thousand (10,000) shares of common stock, of which
twenty-eight hundred (2,800) shares are issued and outstanding and owned of
record and beneficially by the Seller as set forth in the DL. All the shares are
duly authorized, validly issued, fully paid, and non-assessable. There are no
outstanding subscriptions, options, rights, warrants, convertible securities, or
other agreements or commitments obligating the Company to issue or to transfer
from treasury any additional shares and no outstanding options, pledge
agreements or shareholder agreements (other than a "buy-back" agreement dated
3/20/1989 as amended 3/1/1991 and 6/19/1992), or other agreements obligating the
Seller to transfer the shares or granting any person (other than the owner of
record) any right or interest whatsoever in the shares. The Company has no
subsidiaries, direct or indirect, owns no stock for its own account in other
corporations and is not a partner in any partnerships.
3.4. Financial Statements. Attached to the DL are the
unaudited balance sheets, statements of income and condition of the Company as
of December 31, 1995, (the "Last Fiscal Year End") as well as the balance
sheets, statements of income and condition for the years ended December 31,
1994, 1993, and 1992 (the foregoing financial statements being referred to
herein as the "Financial Statements"). The Financial Statements of the Company
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles consistently followed
by the Company throughout the periods indicated, and fairly present the
financial condition of the Company as of the respective dates of the balance
sheets included in the Financial Statements and the results of its operations
for the respective periods indicated.
3.5. Absence of Specified Changes. Except as expressly
contemplated by this Agreement, since the Last Fiscal Year End there has not
been any:
(a) Transaction by the Company except in the ordinary
course of business as conducted on that date except for this Agreement and the
transactions contemplated hereby;
(b) Capital expenditure by the Company exceeding
$5,000;
(c) Material adverse change in the consolidated
financial condition, liabilities, assets or business of the Company;
5
<PAGE> 12
(d) Destruction, damage to, or loss of any assets of
the Company (whether or not covered by insurance) that materially and adversely
affects the financial condition, liabilities, assets or business of the Company;
(e) Any loss of accounts materially and adversely
affecting the financial condition, liabilities, assets or business of the
Company;
(f) Change in accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) by the Company;
(g) Revaluation by the Company of any of its assets;
(h) Increase of more than 3% in the aggregate
salaries or other compensation payable or to become payable by the Company to
all of the employees of the Company, other than the Seller, or the declaration,
payment, or commitment or obligation of any kind for the payment by the Company
of a bonus or other additional salary or compensation which would result in an
increase of more than 3% in the aggregate compensation payable or to become
payable by the Company to all of the employees of the Company, as a group;
except: (i) salary increases set forth on Exhibit 3.5 (Bonus and Salary
Increases); (ii) contributions by the Company to the qualified plans in
existence on the Last Fiscal Year End; and (iii) bonuses approved by Buyer and
paid prior to Closing;
(i) Sale or transfer of any asset of the Company,
except in the ordinary course of business;
(j) Execution, creation, amendment or termination of
any material contract, agreement, or license to which the Company is a party,
except in the ordinary course of business, except for the termination of all
qualified plans without additional liability to the Company;
(k) Indebtedness incurred or guaranteed by the
Company that would, if outstanding on the Closing Date, be recorded in
accordance with generally accepted accounting principles on its balance sheet;
(l) Waiver or release of any material right or claim
of the Company, except in the ordinary course of business;
(m) Mortgage, pledge, or other encumbrance of any
material asset of the Company except for liens: (i) of mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not overdue
and not in excess of $5,000 in the aggregate; (ii) incurred in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, or other forms of governmental insurance or benefits; (iii) for
taxes, assessments or other governmental charges or levies which are not at the
time delinquent or are
6
<PAGE> 13
subject to an effective extension for the filing of the related tax returns or
reports (if applicable) granted by the appropriate authorities;
(n) Other event or condition of any character that
has a material and adverse effect on the financial condition, business or assets
of the Company; or
(o) Agreement by the Company to do any of the things
described in the preceding clauses (a) through (l).
3.6. Tax Returns and Audits. The Company has duly and timely
filed all federal, state and local tax returns and reports required by law to
have been filed on or prior to the date of this Agreement, and all taxes,
assessments, fees, penalties and other governmental charges in respect of the
Company and upon its properties, assets, income and franchises which are due and
payable have been paid or are adequately provided for in the Financial
Statements or on the books and records of the Company. There is no tax,
withholding deficiency, fee, assessment or governmental deficiency which has
been, or which the Seller reasonably believes will be, asserted against the
Company which would adversely affect the consolidated business or operations of
the Company. There are no present disputes with, or audits by, any governmental
authority as to any taxes, assessments, fees, penalties or other governmental
charges of any nature payable by the Company nor is the Company awaiting the
outcome of any audit. There are no agreements or applications by the Company for
any extension of time for the assessment or payment of any taxes nor has it
executed any document to extend the time in which a tax may be assessed or
collected.
3.7. Real Property. The Company owns no real property. The DL
contains true, correct and complete copies of each lease covering any premises
leased by the Company. All such leases are valid and in full force, and there
does not exist any default or event that with notice or lapse of time, or both,
would permit the landlord to terminate any such lease; provided, however, that
the transaction contemplated by this Agreement may require the consent of the
lessor of the space currently serving as the headquarters of the Company.
3.8. Other Tangible Personal Property. The furniture,
equipment, vehicles and other property described in the DL (collectively, the
"Equipment") constitute all the items of tangible personal property having a
value of $200 or more, owned by, leased by or used by the Company in connection
with their business.
None of the Equipment used by the Company in connection with
its business is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement, is subject to any
lien (other than those described in Section 3.5(m)), or is located other than in
the possession of the Company.
3.9. Copyrights, Trademarks and Patents. The Company owns no
registered copyrights, trademarks or patents. No copyrighted, trademarked or
patented
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material, other than such material that is sold at retail or is otherwise
generally commercially available, is necessary for the operation of the business
of the Company; and the Company is not infringing the copyrights, trademarks or
patents of any other person.
3.10. Title to Assets. The Company has a good and marketable
title to all its assets and interests in assets, whether personal, mixed,
tangible, or intangible (including, without limitation, all the assets reflected
in the Financial Statements). All these assets are free and clear of mortgages,
liens, pledges, charges, encumbrances, equities, claims, easements, rights of
way, covenants, conditions and restrictions whatsoever, except for: (i) those
disclosed in the Financial Statements; (ii) those disclosed in the DL; (iii)
liens of mechanics, materialmen and landlords incurred in the ordinary course of
business for sums not overdue (which sums do not exceed $5,000 in the
aggregate), or incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance, or other forms of governmental
insurance or benefits, or for taxes, assessments or other governmental charges
or levies which are not at the time delinquent or are subject to an effective
extension for the filing of the related tax returns or reports (if applicable)
granted by the appropriate authorities; and (iv) possible minor matters that, in
the aggregate, do not exceed $10,000 and do not materially detract from or
interfere with the present or intended use of any of these assets, nor
materially impair the Company's consolidated business operations (collectively,
the "Permitted Liens"). All tangible personal property of the Company necessary
for the operation of their business is in operating condition and repair,
ordinary wear and tear excepted. The Company is in possession of all premises
leased to it from others. Neither any officer, director or employee of the
Company, nor any spouse, child, parent or sibling of any of these persons, or
any other relative of any of these persons, owns, or has any interest, directly
or indirectly, in any of the real or personal property owned by or leased to the
Company.
3.11. Existing Employment Contracts. The DL sets forth a list
of all written employment contracts and collective bargaining agreements, and
all pension, retirement, disability, bonus, profit-sharing, deferred
compensation, incentive stock option, medical, dental or other health insurance
plans, life insurance or other death benefit plans, severance plans or other
agreements or arrangements or plans providing for employee remuneration or
benefits to which the Company is a party or by which the Company is bound and
under which employees or former employees of the Company are eligible to
participate or derive a benefit (collectively, "Employee Plans"), and copies of
any Employee Plans have been provided to Buyer at least 7 days prior to the
execution of this Agreement. There is no pending or threatened labor dispute,
strike, or work stoppage materially affecting the Company's business. The
Company is not indebted to the Seller or to any director, officer or employee
except for amounts due under the Employee Plans or as normal salaries, expenses
and bonuses for the Company's current fiscal year. The Company has no Employee
Plans other than those listed in the DL and each Employee Plan is in full force
and effect. All Employee Plans may be terminated at any time without additional
liability to any party hereto. The Company is in full compliance with all
applicable laws governing such Employee Plans. There are no
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actions, audits, suits or claims pending (other than routine claims for
benefits) arising out of the Employee Plans.
3.12. Insurance Policies. The DL includes a summary
description of all insurance policies held by the Company. All such policies are
in the respective principal amounts set forth in the DL.
3.13. Other Contracts. Set forth in the DL is a true and
correct list of every contract (other than contracts with current clients) to
which the Company is a party which: (i) will result in annual payments by or to
the Company in excess of $2,500 or cumulative payments in excess of $5,000 and
is not cancelable by the Company upon notice of 30 days or less; or (ii) could
be reasonably expected to result in annual payments by or to the Company in
excess of $25,000 or cumulative payments in excess of $50,000. The Company
heretofore has delivered or made available to the Buyer true and correct copies
of all such contracts. There is no material default or event that with a notice
or lapse of time, or both, would constitute a default by the Company or by any
other party to any of the contracts listed in the DL. Neither the Seller nor the
Company has received notice that any party to any of the agreements listed in
the DL intends to cancel or terminate any of such agreements or to exercise or
not exercise any options under any such agreements.
3.14. Compliance with Laws. The Company has substantially
complied with all, and is not in material violation of any, applicable federal,
state, or local statutes, laws, and regulations affecting its properties, or the
operation or conduct of its business, or the qualification of any employee of
the Company to give investment advice or otherwise to act on behalf of the
Company in accordance with his or her present or past duties.
3.15. Litigation. There is no suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation or
disciplinary investigation pending or threatened against or affecting the
Company, or the business, assets, liabilities or financial condition of the
Company that would, individually or in the aggregate, have a material adverse
effect on the financial condition, operations or business of the Company. The
Seller has furnished or made available to Buyer copies of all relevant court
papers and other documents relating to the matters set forth in the DL. Neither
the Company nor the Seller is in default with respect to any order, writ,
injunction, or decree of any federal, state, local, or foreign court,
department, agency, or instrumentality. The Company is not presently engaged in
any legal action or arbitration proceeding to recover moneys due to it or
damages sustained by it or to obtain other relief. Since January 1, 1992, no
written charges of misconduct have been brought against the Company, its
subsidiaries or against any of its employees in their capacity as employees of
the Company, and the Company has not been the subject of any investigation or
audit by any state or federal authority. No employee of the Company, in his or
her capacity as an employee of the Company, has been the subject of any formal
disciplinary proceeding by any governmental agency.
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3.16. Assets Sufficient for Conduct of Business. The assets
and property presently owned or leased by the Company constitute all of the
assets and property necessary and appropriate by the Company to conduct its
business as it is presently conducted.
3.17. Agreement Will Not Cause Breach or Violation. Except for
the lease of the space currently serving as the headquarters of the Company,
neither the entry into this Agreement nor the consummation of the transactions
contemplated hereby will result in or constitute any of the following: (i) a
default or an event that, with notice or lapse of time or both, would be a
default, breach, or violation of the Articles of Incorporation or By-laws of the
Company or a material default, breach or violation of any shareholders'
agreement, lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other agreement, instrument,
or arrangement to which the Seller, or the Company is a party or by which the
Seller, the Company, or their assets is or are bound; (ii) an event that would
permit any party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of the Company or of the Seller in an amount in
excess of $5,000 individually or in excess of $10,000 in the aggregate; (iii)
the creation or imposition of any material lien, charge, or encumbrance on any
of the assets of the Company; or (iv) the violation of any law, regulation,
ordinance, judgment, order, or decree applicable to or affecting the Company, or
its assets.
3.18. Authority and Consents. Except for the filing and
recordation of appropriate merger documents, ADV forms required by California,
Massachusetts, Oregon, Virginia and federal law, no approvals or consents of or
notices to or filings with any persons, governmental agency or governmental body
are necessary on the part of the Company or the Seller in connection with the
execution, delivery or performance of this Agreement.
3.19. Interest in Customers, Suppliers, and Competitors.
Neither the Company, nor any of its officers or directors nor any spouse,
parent, child or sibling, or any other relative, or any of them, has more than
5% direct or indirect interest in any competitor, supplier, or customer of the
Company or in any person with whom the Company is doing business.
3.20. Corporate Documents. The Seller has made available to
Buyer for its examination all minute books, stock books and stock records for
the Company. The minute books, stock books and stock records of the Company are
complete and accurate in all material respects, and the signatures therein are
the true signatures of the persons purporting to have signed them, and all
material corporate actions taken by the directors and stockholders of the
Company since their organization have been duly authorized or subsequently
ratified as necessary.
3.21. Personnel Identification and Compensation. The DL sets
forth a list of the names and addresses of all current officers, directors,
employees and consultants of the
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<PAGE> 17
Company, stating the rates of compensation payable to each. No other person,
except accountants, auditors, attorneys and investment managers, regularly
performs compensable services for the Company.
3.22. Powers of Attorney and Bank Accounts. The DL lists: (i)
the names and addresses of all persons holding a power of attorney on behalf of
the Company; and (ii) the names and addresses of all banks or other financial
institutions in which the Company has an account, deposit, or safe-deposit box,
with the names of all persons authorized to draw on these accounts or deposits
or who have access to these boxes.
3.23. Business Addresses. The DL lists each current and former
address of the Company for the past five years. During the past five years, the
Company has not conducted business at or from any other address, and has not
engaged in or solicited business in any state other than those designated in the
DL.
3.24. Absence of Undisclosed Liabilities. Except as and to
the extent reflected or reserved against in the Financial Statements and except
as to those liabilities or obligations incurred in the ordinary course of
business, since the date of the most recent Company's balance sheet attached to
the DL, the Company has not incurred any liabilities or obligations, whether due
or to become due, absolute or contingent, accrued or unaccrued, including
without limitation liabilities for taxes or interest or penalties thereon, which
would be required to be reflected in a balance sheet of the Company or the notes
thereto prepared in accordance with generally accepted accounting principles
consistently applied.
3.25. Full Disclosure. None of the representations and
warranties made by the Seller or made in the DL or any certificate furnished or
to be furnished pursuant to the terms of this Agreement by the Seller, or on his
behalf, contains or will contain any untrue statement of a material fact, or
omits to state any material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
3.26. Specified Events.
(a) As of the date of this Agreement, none of the
current clients of the Company has advised the Company or the Seller that it
intends to cease doing business with the Company, or to materially reduce the
amount of the business that such client is presently doing with the Company.
(b) Neither Mr. Lilienthal nor Mr. McGregor currently
have any health problems which would materially impair his abilities to fulfill
his duties under his respective Employment Agreement or have an existing
condition which may progress in a fashion which would materially impair his
ability to fulfill his duties under his Employment Agreement during the
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full term of such Agreement, and each of them agrees to deliver at Closing a
letter from his doctor to such effect.
3.27 Tangible Book Value. The net tangible book value of the
Company's assets as of the Closing, based on generally accepted accounting
principles consistently applied and accruing for the costs for the Company to
contribute to the qualified plans and then terminate such plans, shall not be
less than $50,000. If any receivables transferred hereunder are aged more than
90 days, a reserve for bad debt equal to such receivables shall be recorded.
ARTICLE IV BUYER'S AND MERGER SUB'S REPRESENTATIONS AND WARRANTIES. Buyer hereby
represents and warrants to the Company and the Seller as follows:
4.1. Organization. Buyer is a national bank duly organized,
validly existing, and in good standing under the federal laws applicable to
national banks. Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. The Buyer has
previously delivered true, correct and complete copies of the Buyer's and Merger
Sub's Articles of Incorporation and By-laws as in full force and effect on the
date hereof.
4.2. Authorization. Each of Buyer and Merger Sub has, and at
the Closing will have, full legal right and power to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by
Buyer's and Merger Sub's Boards of Directors, and Merger Sub's shareholder, and
no other corporate proceedings on the part of Buyer or Merger Sub are necessary
to authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Buyer and
Merger Sub and constitutes a valid, legal and binding agreement of each of the
Buyer and Merger Sub, enforceable against each of them in accordance with its
terms except that the enforceability of such agreement is subject to bankruptcy,
insolvency, reorganization, and similar laws of general applicability relating
to or affecting creditors' rights.
4.3. Consents and Approvals. Except for any filing and
recordation of appropriate merger documents required by California law and
except for the filings with the Office of the Comptroller of the Currency, the
California Department of Corporations and the Securities and Exchange
Commission, the execution and delivery of this Agreement by the Buyer and Merger
Sub and the consummation by the Buyer and Merger Sub of the transactions
contemplated hereby will not: (i) violate any provision of the Articles of
Incorporation or By-Laws of the Buyer or Merger Sub; (ii) violate any statute,
rule, regulation, order or decree of any public body or authority by which the
Buyer or Merger Sub or any of their respective properties or assets may be
bound; (iii) require any declaration or filing with, or permit,
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consent, authorization, order, license, certificate or other form of approval
of, any public body or authority or any other person or entity; or (iv) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, franchise, permit, agreement or
other instrument or obligation to which the Buyer or Merger Sub is a party, or
by which any of them or any of their respective properties or assets may be
bound, excluding from the foregoing clauses (ii), (iii) and (iv) violations,
breaches and defaults which, and filings, permits, consents and approvals the
absence of which, either individually or in the aggregate, would not have a
material adverse effect on the business, operations, or financial condition of
the Buyer and Merger Sub taken as a whole.
ARTICLE V SELLER'S OBLIGATIONS BEFORE THE CLOSING DATE.
The Seller covenants that:
5.1. Buyer's Access to Premises and Information. Buyer and
its counsel, accountants, and other representatives shall be entitled to have
full access during normal business hours and upon reasonable notice to all the
Company's properties, books, accounts, records, contracts, and documents. The
Seller shall furnish or cause to be furnished to Buyer and its representatives
all data and information concerning the business, finances, and properties of
the Company that may be reasonably requested, including but not limited to
financial statements, including but not limited to interim financial statements.
5.2. Conduct of Business in Normal Course. The Seller shall
cause the Company to carry on its business and activities diligently and, except
as otherwise permitted herein, in substantially the same manner as they
previously have been carried on, and to not institute any new methods of
purchase, sale, lease, management, accounting or operation that will vary
materially from the methods used by the Company as of the date of this
Agreement.
5.3. Preservation of Business and Relationships. The Seller
shall use his diligent efforts to cause the Company to preserve its business
organization intact and preserve its present relationships with suppliers,
regulating agencies, customers, and others having business relationships with
it.
5.4. Maintenance of Insurance. The Seller shall cause the
Company to continue to carry its existing insurance through the Closing Date. At
the request of Buyer and at Buyer's sole expense, the amount of insurance
against fire and other casualties or losses which, at the date of this
Agreement, the Company carries on any of its properties or in respect of its
operations shall, subject to availability, be increased by such amount or
amounts as Buyer shall specify.
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5.5. Employees and Compensation. The Seller shall not,
without the written consent of Buyer, or except as otherwise permitted herein or
as required under existing written contractual arrangements, permit the Company
to do, or agree to do, any of the following acts: (i) grant any increase in
salaries payable or to become payable to any officer, employee, sales agent, or
representative which would result in an increase of more than 3%, since December
31, 1995, in the aggregate salaries or other compensation payable or to become
payable by the Company to all of the employees of the Company as a group, other
than the Seller; (ii) increase benefits payable to any officer, employee, sales
agent, or representative under any bonus or pension plan or other contract or
commitment except pursuant to the provisions of such plan, contract or
commitment which would result in an increase of more than 3%, since December 31,
1995, in the aggregate salaries or other compensation payable or to become
payable by the Company to all of the employees of the Company as a group, other
than the Seller; or (iii) modify any collective bargaining agreement to which it
is a party or by which it may be bound; provided that (I) salary increases set
forth on Exhibit 3.5 (Bonus and Salary Increases); (ii) contributions by the
Company to the qualified plans in existence on the Last Fiscal Year End; and
(iii) bonuses approved by Buyer and paid prior to Closing shall not be deemed to
be a violation of this section.
5.6. Controlled Acts. Except as otherwise permitted by this
Agreement, the Seller shall not, without the prior written consent of Buyer,
permit the Company to do or agree to do any of the following acts:
(a) Enter into any contract, commitment, or
transaction not in the usual and ordinary course of its business;
(b) Except in the ordinary course of business, make
any capital expenditures in excess of $5,000 for any single item or $10,000 in
the aggregate, or enter into any leases of capital equipment or property under
which the annual lease charge is in excess of $5,000;
(c) Except in the ordinary course of business, sell
or dispose of any capital assets with a net book value in excess of $5,000
individually, or $10,000 in the aggregate;
(d) Declare any dividend, unless after the payment of
the dividend the Company maintains a net tangible book value of at least
$50,000;
(e) Change the name or any trade name of the Company
or change the nature of the business of the Company as currently conducted;
(f) Adopt or modify any employment agreement;
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(g) Authorize the sale or merger of the Company or
the sale of substantially all of its or their assets;
(h) Issue any stock;
(i) Amend its Articles of Incorporation or By-Laws;
or
(j) Take any action or omit to take any action which,
in the opinion of Buyer's independent public accountants, would prevent Buyer
from accounting for the Merger as a "pooling of interests"; provided however,
that the Company is expressly permitted to solicit the consent of Non-Responding
Clients during the 30 day escrow period described in Section 1.5 (b) to secure
the release of Escrow Shares.
5.7. Payment of Liabilities and Waiver of Claims. The Seller
shall not permit the Company to do, or agree to do, any of the following acts:
(i) pay, prior to the due date thereof, any material obligation or liability,
fixed or contingent, other than current liabilities; (ii) waive or compromise
any material right or claim other than in the ordinary course of business; or
(iii) cancel, without full payment, any note, loan, or other material obligation
owing to the Company.
5.8. Existing Agreements. The Seller shall not permit the
Company to modify, amend, cancel, or terminate any of its existing material
contracts or agreements, or agree to do any of those acts, except in the
ordinary course of business.
5.9. Statutory Filings. The Seller shall cooperate fully with
Buyer in preparing and filing all information and documents deemed necessary or
desirable by Buyer, under any statutes or governmental rules or regulations
pertaining to the transactions contemplated by this Agreement.
5.10. Delivery of Tax Returns. As soon as possible after the
execution of this Agreement, the Seller shall deliver to Buyer copies of all tax
returns for all open years relating or pertaining to the Company.
5.11. Client Consents. As soon as practicable after the
execution of this Agreement, the Seller shall cause the Company to, and the
Company shall seek to obtain, consents of Current Clients to the transfer
contemplated by this Agreement, as is further set forth in Section 7.11.
5.12. Termination of Qualified Plans. Prior to the Closing,
Seller shall cause the Company to terminate and distribute all qualified plans
without liability to the Company.
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ARTICLE VI BUYER'S OBLIGATIONS BEFORE THE CLOSING DATE.
6.1. Confidentiality. Prior to the Closing Date, Buyer and
Merger Sub shall preserve the confidentiality of this Agreement, the Schedules,
the DL and any commercial information which is disclosed to Buyer or Merger Sub
or to their representatives by the Seller, the Company or their respective
representatives.
6.2. Governmental Filings. Buyer will make all governmental
filings (including but not limited to filings with the Office of the Comptroller
of the Currency , the California Department of Corporations and the Securities
and Exchange Commission) necessary to consummate this transaction and shall
cooperate fully with the Company and the Seller in preparing and filing all
information and documents deemed necessary by the Company or the Seller under
any statutes or governmental rules or regulations pertaining to the transactions
contemplated by this Agreement.
6.3. Best Efforts. Buyer will use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
6.4. Consents. Buyer shall use its best efforts to obtain all
permits, authorizations, consents and approvals from third parties necessary to
consummate the Agreement and the transactions contemplated hereby.
6.5. Contact with Clients. Unless the prior consent of the
Company has been obtained between the date hereof and the Closing Date, neither
the Buyer, Merger Sub nor any of their respective officers, directors,
employees, agents or representatives shall contact, or communicate with, any of
the clients of the Company.
ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S AND MERGER SUB'S PERFORMANCE
Unless Buyer and Merger Sub provide Seller and the Company a
written waiver of a condition set forth in this Article VII, the obligations of
Buyer and Merger Sub to conclude the Merger under this Agreement are subject to
the satisfaction, at or before the Closing, of all the conditions set out below.
7.1. Accuracy of Seller's Representations and Warranties. All
representations and warranties made by the Seller in this Agreement or in the DL
shall be true in all material respects on and as of the Closing Date as though
made at that time, and the Seller shall have delivered to Buyer a Certificate of
the Seller so certifying to this.
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7.2. Absence of Liens. As of the Closing Date, except for such
liens, claims, charges or encumbrances disclosed in the Financial Statements or
in the DL, there shall be no liens, claims, charges or encumbrances on any
assets of the Company other than liens: (i) of mechanics, materialmen and
landlord incurred in the ordinary course of business for sums not overdue and
not in excess of $1,000 in the aggregate; (ii) incurred in the ordinary course
of business in connection with workers' compensation, unemployment insurance, or
other forms of governmental insurance or benefits; and (iii) for taxes,
assessments or other governmental charges or levies which are not at the time
delinquent or are subject to an effective extension for the filing of the
related tax returns or reports (if applicable) granted by the appropriate
authorities.
7.3. Seller's Performance. The Seller shall have performed,
satisfied, and complied in all material respects with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with by
the Seller on or before the Closing Date.
7.4. Opinion of Seller's Counsel. Buyer shall have received
from counsel for the Seller and the Company opinions dated the Closing Date, in
the forms attached hereto as Exhibit 7.4 (Seller's Opinion of counsel).
7.5. Consents. All necessary notices to, and agreements,
approvals and consents of, any person, entity or governmental body to the
consummation of the transactions contemplated by this Agreement, or otherwise
pertaining to the matters covered by it, shall have been obtained by the Seller
or the Company and delivered to the Buyer, including, without limitation,
Seller's obtaining the consent of the lessor of the assignment of the lease of
the space currently serving as the headquarters of the Company without changing
the tangible net worth of the Company set forth in Section 3.27 and the existing
rent for such space.
7.6. Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered to Buyer
under this Agreement shall be satisfactory in all reasonable respects to Buyer
and its counsel.
7.7. Employment Agreements. Mr. Lilienthal and Mr. McGregor
shall each deliver to Buyer an employment agreement substantially in the forms
attached hereto as Exhibit 7.7 ("Employment Agreement"), duly executed by such
party, and there shall be no default existing on the Closing Date under the
Employment Agreement, and the Employment Agreement shall be in full force and
effect on the Closing Date and each party shall be capable on the Closing Date
of performing his or its obligations under the Employment Agreement.
7.8. Condition of Assets. The property and assets of the
Company shall not have been materially or adversely affected in any way as a
result of any fire, accident, storm or other casualty or labor or civil
disturbance or act of God or the public enemy.
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7.9. Certificates of the Secretary of the Company. Buyer shall
have received from the Secretary of the Company a certificate stating that no
amendments or modifications have been made to the Articles of Incorporation or
the By-laws of the Company since the signing of this Agreement except as
consented to in writing by Buyer or otherwise permitted hereunder.
7.10. Pooling of Interests. Coopers & Lybrand, independent
accountants to the Buyer, shall have rendered its opinion to the Buyer, dated
the Closing Date, that the Merger will qualify as a pooling of interests
transaction; provided, if the transaction does not qualify for pooling of
interests accounting because of the escrow arrangement described in Section
1.5(b) or any other condition within the control of the Buyer, this condition
shall nonetheless be deemed satisfied.
7.11. Delivery of Client Consents. Seller shall have delivered
to Buyer at or prior to the Closing written letters (in the form attached hereto
as Exhibit 7.11 (Consent Letter), which has been mutually agreed by the Seller
and the Buyer) from Current Clients of their intent to continue their
relationship with the Company after the Closing, duly executed in writing by
Current Clients whose business with the Company accounts for at least 75% of the
Company's Revenue Base.
7.12 Certificate of Merger. The Company and the Seller shall
have executed and delivered to the Buyer counterparts of the Agreement of Merger
and Officers' Certificate of the Company to be filed with the Secretary of State
of the State of California in connection with the Merger and such Merger shall
become effective.
7.13. No Injunction. Neither the Seller, Buyer, Merger Sub nor
the Company shall be subject to any order, decree or injunction of a court of
competent jurisdiction within the United States which prevents or materially
delays the consummation of the Merger.
7.14. No Government Proceeding or Litigation. No suit, action
or proceeding before any court or any governmental or regulatory authority shall
be pending or threatened by any state or federal governmental or regulatory
authority, against the Seller or the Buyer, Merger Sub or the Company,
affiliates, officers or directors seeking to restrain, prevent or change in any
material respect the transactions contemplated hereby (including, without
limitation the Employment Agreement) or seeking damages in connection with such
transactions which are material to the Company, taken as a whole.
7.15. No Statute, Rule or Regulation. No statute, rule or
regulation shall have been enacted by the government (or any governmental
agency) of the United States or any state, municipality or other political
subdivision thereof that makes the consummation of the Merger and any other
transaction contemplated hereby (including, without limitation the Employment
Agreement) illegal.
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7.16. INTENTIONALLY LEFT BLANK
7.17. Absence of Litigation. No action, suit, or proceeding
before any court or any governmental body or authority, pertaining to this
Agreement, to the Employment Agreement or to any transaction contemplated hereby
or thereby, shall have been instituted and remain pending or threatened on or
before the Closing Date.
7.18 Doctor's Letter. The Buyer shall have received prior to
Closing the doctor's letters referred to in Section 3.26.
7.19 Termination of Qualified Plans. Seller shall cause the
Company to terminate and distribute all qualified plans without liability to any
party hereto.
ARTICLE VIII CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
Unless the Seller and the Company provide to Buyer and Merger
Sub a written waiver of a condition set forth in this Article VIII, the
obligations of the Seller and the Company to conclude the Merger under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
following conditions:
8.1. Accuracy of Buyer's and Merger Sub's Representations and
Warranties. All representations and warranties made by Buyer and Merger Sub
contained in this Agreement, including any schedule hereto, shall be true in all
material respects on and as of the Closing as though such representations and
warranties were made on and as of that date, and Buyer and Merger Sub shall have
delivered to the Seller a Certificate at Closing so certifying to this.
8.2. Buyer's and Merger Sub's Performance. Buyer and Merger
Sub shall have performed and complied with all covenants and agreements, and
satisfied all conditions that they are required by this Agreement to perform,
comply with, or satisfy, before or at the Closing.
8.3. Opinion of Buyer's Counsel. Buyer shall have furnished
the Seller with an opinion, dated the Closing Date, of Maureen Scannell Bateman,
Esq., General Counsel for Buyer, in the form attached hereto as Exhibit 8.3
(Buyer's Opinion of Counsel).
8.4. Consents. All necessary notices to, and agreements,
approvals and consents of, any person, entity or governmental body, to the
consummation of the transactions contemplated by this Agreement, or otherwise
pertaining to the matters covered by it, shall have been obtained by Buyer and
Merger Sub and delivered to the Seller.
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<PAGE> 26
8.5. Employment Agreements. The Buyer and Merger Sub shall
have caused the Company to deliver to Mr. Lilienthal and Mr. McGregor the
Employment Agreements, duly executed by such party and the Company, and there
shall be no default existing on the Closing Date under their Employment
Agreements, which shall be in full force and effect on the Closing Date and each
party shall be capable on the Closing Date of performing his or its obligations
under the Employment Agreements.
8.6. Benefit Plans. The employee benefit plans of the Buyer
described in the 1996 UST Benefits Portfolio (the "Portfolio") previously
delivered to the Company and selected by the Company with respect to each
employee of the Company who continues in employment with the Company in
accordance with the terms thereof, shall be implemented with respect to each
such employee without any waiting period, medical examination or pre-existing
condition limitation and without any lapse of coverage from the Company's'
Employee Plans, although such coverage may be different depending on the terms
and conditions described in the Portfolio.
8.7. Securities Registration. The Registration Statement shall
have been declared effective under the Securities Act and shall not be subject
to a stop order or any threatened stop order. In addition, an exemption from the
state blue sky registration requirements of California permitting the public
sale of the USTC Merger Shares in the State of California shall be available and
all conditions to obtaining such exemption shall have been satisfied.
8.8. Certificate of Merger. The Buyer and Merger Sub shall
have executed and delivered to the Company and the Seller counterparts of the
Agreement of Merger and Officers' Certificate of Merger Sub to be filed with the
Secretary of State of the State of California in connection with the Merger and
such Merger shall have become effective.
8.9. No Injunction. Neither the Seller, Buyer, Merger Sub nor
the Company shall be subject to any order, decree or injunction of a court of
competent jurisdiction within the United States which prevents or materially
delays the consummation of the Merger.
8.10. No Government Proceeding or Litigation. No suit, action
or proceeding before any court or any governmental or regulatory authority shall
be pending or threatened by any state or federal governmental or regulatory
authority, against the Seller or the Buyer, Merger Sub or the Company, or any of
its affiliates, officers or directors seeking to restrain, prevent or change in
any material respect the transactions contemplated hereby (including, without
limitation, the Employment Agreement) or seeking damages in connection with such
transactions.
8.11. No Statute, Rule or Regulation. No statute, rule or
regulation shall have been enacted by the government (or any governmental
agency) of the United States or
20
<PAGE> 27
any state, municipality or other political subdivision thereof that makes the
consummation of the Merger and any other transaction contemplated hereby
(including, without limitation the Employment Agreement) illegal.
8.12. Absence of Litigation. No action, suit, or proceeding
before any court or any government body or authority, pertaining to this
Agreement, to any Employment Agreement or to any transaction contemplated hereby
or thereby, shall have been instituted and remain pending or threatened on or
before the Closing Date.
ARTICLE IX SELLER'S AND BUYER'S OBLIGATIONS AFTER THE CLOSING.
9.1. Preservation of Goodwill. Each Seller agrees that, for a
period of five years following the Closing, that Seller will not, individually
or through an agent, for himself or on behalf of another, as an employee,
director, owner, partner, sole proprietor, consultant, agent, representative,
shareholder, or in any other manner or capacity whatsoever, other than in his
capacity as an employee of the Company:
(a) except to the extent required by law, disclose to
any person or use for the Seller's own benefit any fee schedules, fee data,
customer lists or similar matters possessed by the Seller relating to the
Company, or its business unless the Seller first obtains written permission from
the Company;
(b) solicit or induce any clients of the Company to
terminate or reduce their respective relationships with the Company; or
(c) solicit for hire the services of any person then
employed by the Company to terminate such employment.
For purposes this section, the term "Company" shall include
any firm or corporation directly or indirectly controlled by Buyer or under
common control with Buyer.
9.2. Use of Name. The Seller agrees that after the Closing
Date he shall not use or employ in any matter, directly or indirectly, the name
Lilienthal Associates, or any variant thereof; provided however that Mr.
Lilienthal may use his own name except in connection with the investment
management business.
9.3. Indemnification.
(a) Indemnification by the Seller. Subject to the
limitations set forth below and excepting Section 9.1 for which each Seller
shall severally but not jointly indemnify the Buyer and the Company as provided
in this Section 9.3, each Seller shall jointly and severally indemnify, hold
harmless and defend the Company and the Buyer, at all times
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<PAGE> 28
after the date of this Agreement, against and in respect of any and all claims,
demands, liabilities, losses, costs, expenses and deficiencies (including
interest, penalties, reasonable attorneys' fees and litigation expenses) (such
claims, demands, liabilities, losses, costs, expenses and deficiencies being
hereinafter referred to singly as a "Buyer Claim" and collectively as the "Buyer
Claims") arising out of or in connection with or based upon (i) the inaccuracy
of any representation or warranty made by the Seller herein or in any
certificate or other document delivered pursuant hereto or (ii) the breach by
the Seller of any agreement or covenant made herein or in any document delivered
pursuant hereto or (iii) the tax qualified status of and the tax deductible and
non tax deductible contributions made to the pension and profit sharing plans
of the Company or the exempt status of the trusts associated with such plans
and the distributions and roll-overs from such plans (the "ERISA Indemnities").
(b) Limitations on Indemnification by the Seller.
(i) The Seller's aggregate liability for
indemnification for all provisions under this Agreement shall under no
circumstances exceed an amount equal to the total consideration received by the
Seller under this Agreement, as measured by the value, based upon the Conversion
Price, of the USTC Merger Shares received by the Seller. Any liability of the
Seller for any Buyer Claim shall be satisfied through the delivery of Common
Shares to the Buyer, such shares to be valued at the Conversion Price.
(ii) A claim for breach of warranty,
representation or covenant may not be made under this Agreement and the Seller
shall not be liable for indemnification under this section, unless notice of the
Buyer Claim on which such claim or right to indemnification is based is given in
writing or through telex or telecopier by the Buyer to the Seller reasonably
promptly after the Buyer shall become aware of the Buyer Claim, but in any event
with respect to a Buyer Claim, within one year after the Closing Date; provided,
however, that notwithstanding the foregoing, a Buyer Claim made under Section
3.6 with respect to an open tax year may be made without any time limitation and
any ERISA Indemnity shall only expire after the applicable statute of
limitations for a claim which would be the subject of such indemnity.
(iii) Subject to the limitations on
indemnification set forth in Sections (a)-(b) above, if the Company is covered
by insurance for any Buyer Claim that is the subject of indemnification, the
Buyer shall only recover an amount equal to its losses net of any insurance
proceeds with regard thereto.
(iv) This indemnification shall not apply to
any claims which the Company has chosen not to pursue if without such claims the
Company can continue to comply with Section 3.27 (Tangible Net Worth).
(c) Procedure for Establishment of Buyer Claim.
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<PAGE> 29
(i) In the event that any claim shall be
asserted by any party against a party hereto entitled to indemnification
hereunder (an "Indemnified Party"), which, if sustained, would result in a Buyer
Claim, (an "Indemnifiable Claim"), Indemnified Party, within a reasonable time
after learning of such claim, shall notify the other party (the "Indemnitor") of
such claim giving the particulars thereof, and shall extend to Indemnitor a
reasonable opportunity to defend against such claim, at Indemnitor's sole
expense and through legal counsel reasonably acceptable to Indemnified Party,
provided that Indemnitor proceeds in good faith, expeditiously and diligently.
No determination shall be made pursuant to subparagraph (b) below while such
defense is still being made until the earlier of: (i) the resolution of said
claim by Indemnitor with the claimant; or (ii) the termination of the defense by
Indemnitor against such claim or the failure of Indemnitor to prosecute such
defense in good faith in an expeditious and diligent manner. Indemnified Party
shall be entitled to rely upon the opinion of its counsel as to the occurrence
of either of said events. Indemnified Party, at its option and expense, shall
have the right to participate in any defense undertaken by Indemnitor with legal
counsel of its own selection. No settlement or compromise of any claim which may
result in an Indemnifiable Claim, as the case may be, may be made by Indemnitor
without the prior written consent of Indemnified Party unless (A) prior to such
settlement or compromise Indemnitor acknowledges in writing its obligation to
pay in full the amount of the settlement or compromise and all associated
expenses and (B) Indemnified Party is furnished with security reasonably
satisfactory to Indemnified Party that Indemnitor will in fact pay such amount
and expenses.
(ii) In the event that an Indemnified Party
asserts the existence of any Indemnifiable Claim, Indemnified Party shall give
written notice to Indemnitor of the nature and amount of the Indemnifiable Claim
asserted. If Indemnitor, within a period of fifteen (15) days after the giving
of Indemnified Party's notice, shall not give written notice to Indemnified
Party announcing its intent to contest such assertion of Indemnified Party (such
notice by Indemnitor being hereinafter called the "contest notice"), such
assertion of Indemnified Party shall be deemed accepted and the amount of the
Indemnifiable Claim shall be deemed established. In the event, however, that a
contest notice is given to Indemnified Party within said fifteen-day period,
then at any time thereafter a party may commence a legal proceeding in
accordance with this Article to resolve the contested assertion of an
Indemnifiable Claim.
(iii) Indemnified Party and Indemnitor may
agree in writing, at any time, as to the existence and amount of an
Indemnifiable Claim, and, upon the execution of such agreement, such
Indemnifiable Claim shall be deemed established.
9.4. Right to Cure Defaults. If Buyer becomes aware of any
breach of a representation or warranty or non-fulfillment of any covenant or
obligation of the other party hereunder, the Buyer becoming so aware shall
promptly notify the other party of such breach or non-fulfillment and afford
such other party a reasonable opportunity to cure such breach or
non-fulfillment.
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<PAGE> 30
9.5. Sale of Stock. The Seller agrees: (i) not to sell any
USTC Merger Shares or otherwise hedge or offset the risk of its investment in
USTC Merger Shares until the publication of financial statements reflecting 30
days of combined operations of U.S. Trust Corporation and the Surviving
Corporation; (ii) not to engage in any dividend or compensation payment which
would prevent the Merger from being treated as a "pooling of interests"; and
(iii) not to take any other actions which would prevent the Merger from being
treated as a "pooling of interests."
9.6. Qualification of Benefit Plans. Immediately after the
Termination Date, all employees of the Company may participate in the Buyer's
medical and dental plans on the same terms and conditions as similarly situated
employees of the Buyer.
ARTICLE X COSTS
10.1. Finder's or Broker's Fees. Each of the parties
represents and warrants that, except for the Buyer's engagement of Berkshire
Capital Corporation, Buyer and Seller have not engaged or dealt with any broker
or finder in connection with any of the transactions contemplated by this
Agreement, and, insofar as Buyer or Seller knows, no broker or other person is
entitled to any commission or finder's fee in connection with any of these
transactions. Each of the parties agrees to pay all reasonable fees and other
amounts which may be or become owing to any broker or finder engaged or dealt
with by such party in connection with this Agreement or the transactions
contemplated hereby, and in particular, the Buyer agrees to pay the reasonable
fees of Berkshire Capital Corporation.
10.2. Expenses. Each of the parties shall pay all costs and
expenses incurred or to be incurred by him or it in negotiating and preparing
this Agreement and in closing and carrying out the transactions contemplated by
this Agreement.
ARTICLE XI FORM OF AGREEMENT
11.1. Headings. The subject headings of the Articles and
Sections of this Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
11.2. Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
all the parties to be bound hereby. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
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<PAGE> 31
delay or failure of any party to exercise any of its, or his rights hereunder
shall be construed as a waiver of such right. No waiver shall be binding unless
made expressly and executed in writing by the party making the waiver.
11.3. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE XII PARTIES
12.1. Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
12.2. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the parties to it and their respective heirs, legal
representatives, successors, and permitted assigns; provided, that the Seller
shall have no right to assign any or all of his rights hereunder without the
prior written consent of Buyer.
ARTICLE XIII TERMINATION.
13.1. Conditions Permitting Termination. Any party may
terminate this Agreement by written notice to the other, without liability to
the other, if: (i) any bona fide legal action or proceeding shall be pending
against any party that could result in an unfavorable judgment, decree, or order
that would prevent or make unlawful the carrying out of this Agreement; or (ii)
if Closing shall not have occurred by March 1, 1997, unless all of the parties
hereto mutually agree in writing to extend such date.
13.2. Defaults Permitting Termination. In addition to the
respective parties' rights not to proceed with the Closing because of failure of
any of the conditions contained herein, if Buyer or the Seller materially
defaults in the due and timely performance of any of its, or his warranties,
covenants, or agreements under this Agreement, the non-defaulting party or
parties may give notice of termination of this Agreement, in the manner provided
herein. The notice shall specify with particularity the default or defaults on
which the notice is based. The termination shall be effective ten business days
after receipt, unless the specified default or defaults have been cured on or
before such effective date for termination.
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<PAGE> 32
ARTICLE XIV NOTICES.
All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom such notice,
request, demand or other communication is to be given, or on the fifth day after
mailing if mailed to the party to whom such communication is to be given, by
first class mail registered or certified, postage prepaid, and properly
addressed as follows:
To Seller as follows:
John G. Lilienthal
Lilienthal Associates
235 Montgomery street, Suite 843
San Francisco, CA 94104
With a copy to:
McCutchen, Doyle, Brown & Enersen, LLP
Three Embarcadero Center
San Francisco, CA 94111-4067
Attn: Thomas G. Reddy
To Buyer and Merger Sub at:
U.S. Trust Corporation
114 West 47th Street
New York, NY 10036-1532
Attn: Maureen Scannell Bateman
Managing Director and General Counsel
Any party may change its address for purposes of this Article by giving the
other party written notice of the new address in the manner set forth above.
ARTICLE XV GOVERNING LAW; VENUE.
This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the State of California, excepting its
choice of law provisions. Any litigation arising out of or relating to this
Agreement shall be conducted solely and exclusively
26
<PAGE> 33
in any federal or state court located in California having jurisdiction over the
subject matter hereof, and to the extent permitted by law all parties hereto
consent to such jurisdiction and venue.
ARTICLE XVI REGISTRATION OF THE USTC MERGER SHARES.
(a) Subject in all respects to subsection (b) below,
the Seller hereby acknowledges and agrees that: (i) the USTC Merger Shares (if
ever issued) will not have been registered for sale by Buyer to Seller under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on the
exemption contained in Section 4(2) of the Securities Act; and (ii) such shares
may not be transferred or sold by them unless registered under the Securities
Act (as contemplated by subsection (b) below) or transferred or sold pursuant to
an applicable exemption from registration under the Securities Act.
(b) As soon as practicable after the date hereof,
Buyer shall use its best efforts to cause to be prepared and filed with the SEC
a Registration Statement under the Securities Act to permit the offer and sale
of the USTC Merger Shares (which term, for the purposes of this Article, shall
include any securities into which or for which the USTC Merger Shares
subsequently may be converted or exchanged) by the Seller from time to time
hereof through the facilities of the National Association of Securities Dealers
Automated Quotation System National Market System at market prices current at
the time of sale or in other transactions at negotiated prices. Buyer shall use
its best efforts to cause such Registration Statement to become effective prior
to or at the Closing Date and to remain effective as provided herein. If the SEC
does not make the Registration Statement for the USTC Merger Shares effective
prior to the Closing Date and all of the Sellers give the Buyer and the Merger
Sub a waiver of the condition in Section 8.7 (Securities Registration), Buyer
shall continue to use its best efforts to obtain an effective Registration
Statement for the USTC Merger Shares after the Closing Date. Buyer shall use its
best efforts to cause to be promptly prepared and filed with the SEC such
amendments and supplements to the Registration Statement and the related
Prospectus (the "Prospectus") as may be necessary to permit the sale thereunder
of the USTC Merger Shares in the manner contemplated above until the first to
occur of: (i) the earliest date on which all of such shares shall have been sold
or may be sold without regard to volume limitations and holding period
limitations under the provisions of Rule 144 under the Securities Act or any
successor or similar rule hereafter adopted; and (ii) the sixth anniversary of
the Closing Date; provided, however, that if at any time prior to the sixth
anniversary of the Closing Date, Rule 144 or any successor or similar rule
hereafter adopted shall cease to be available without regard to volume
limitations and holding period limitations for sales of the USTC Merger Shares
by the Seller other than by reason of his actions, the obligations of Buyer to
register such shares as provided herein shall be reinstated and shall continue
until the first to occur thereafter of (i) and (ii) above. Buyer shall furnish
to Seller such number of copies of the Prospectus, as amended from time to time,
and supplements thereto as the Seller may reasonably request. The Buyer shall
use its best efforts to register or qualify the USTC
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<PAGE> 34
Merger Shares under such other securities or blue sky laws of the States of New
York and California and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Seller to consummate the
disposition in the States of California of the USTC Merger Shares owned by the
Seller; provided, however, that this obligation shall cease at the time that
Buyers' obligation under this Article 16(b) with respect to the Securities Act
shall terminate. Buyer shall cause the USTC Merger Shares to be listed on such
securities exchange or quoted on such automated quotation system on which the
Common Shares are then listed or quoted.
(c) All expenses incident to the obligations of Buyer
under Article 16(b) (including, without limitation, registration fees, blue sky
filing fees, printing or document reproduction expense, messenger and delivery
expenses (including printing of the prospectus, if any) and fees and expenses of
its counsel and accountants) shall be borne by Buyer and all other expenses
incident to the disposition by the Seller of the USTC Merger Shares held by him
(including, without limitation, fees and expenses of his counsel and all
brokerage and similar fees) shall be borne by the Seller.
(d) The Seller shall: (i) furnish to Buyer such
information as Buyer may from time to time reasonably request in connection with
the Registration Statement and Prospectus and any amendment or supplement
thereto; (ii) from and after the Closing Date and for so long as the
Registration Statement remains effective, promptly after the sale or any other
disposition by him of USTC Merger Shares, give Buyer written notification of
same; (iii) promptly notify Buyer of any event which comes to his attention
which would necessitate an amendment or supplement to the Registration Statement
or Prospectus; and (iv) suspend sales of USTC Merger Shares under the
Registration Statement promptly upon receipt of notice from Buyer that such
sales may not be made until the Registration Statement and Prospectus are
amended or supplemented as necessary.
ARTICLE XVII MISCELLANEOUS.
17.1. Announcements. The Company and the Seller, on the one
hand, and the Buyer, on the other hand, will not make any announcements to the
public concerning this Agreement or the transactions contemplated hereby without
the prior approval of the other party (except as otherwise required under
applicable law).
17.2. References. Unless otherwise specified, references to
Sections or Articles are to Sections or Articles in this Agreement.
17.3. Currency. All dollar amounts set forth herein are
expressed in terms of United States dollars.
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17.4 Counterparts. The parties may execute this Agreement in
any number of counterparts and, as so executed, the counterparts shall
constitute one and the same Agreement. The parties agree that each such
counterpart is an original and shall be binding upon all the parties, even
though all of the parties are not signatories to the same counterpart.
IN WITNESS THEREOF, the parties to this Agreement have duly
executed it as of the day and year first above written.
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By:
-----------------------------------------
Its:
----------------------------------------
LILIENTHAL ASSOCIATES
By: /s/ John G. Lilienthal
----------------------------------------
Its: President
---------------------------------------
UST-LA, INC.
By:
----------------------------------------
Its:
---------------------------------------
/s/ John G. Lilienthal
- --------------------------------------------
John G. Lilienthal
/s/ Bruce J. McGregor
- --------------------------------------------
Bruce J. McGregor
/s/ Randall B. Matthews
- --------------------------------------------
Randall B. Matthews
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<PAGE> 36
CONFIRMATION STATEMENT OF SPOUSE
I acknowledge that I have read the foregoing Merger Agreement
dated as of October 11, 1996 (the "Agreement) and that I know the contents of
such Agreement. I am aware that on the occurrence of certain conditions, my
spouse agrees to sell all the Shares held in the name of my spouse in Lilienthal
Associates, a California corporation (the "Company), including any community
interest I may have in these Shares. I hereby consent to the sale of such
Shares, approve of the provisions of the Agreement, agree that those Shares and
any current or future interest I may have in such Shares are subject to the
provisions of the Agreement, and confirm that I will take no action at any time
to hinder operation of the Agreement on those Shares or my interest in them.
Dated: October 11, 1996 /s/ June R. Lilienthal
--------------------------
June R. Lilienthal
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<PAGE> 37
ACKNOWLEDGEMENT AND WAIVER OF SPOUSE
I am the spouse of Randall B. Mathews. I acknowledge that the shares of
Lilienthal Associates, a California corporation, held by Randall B. Matthews
are his separate property. I have no objection to disposition of such shares in
accordance with the terms of the Merger Agreement among U.S. Trust Company of
California, N.A., Lilienthal Associates and the shareholders of Lilienthal
Associates. I waive and release any claim I have or may have in the future
against U.S. Trust Company of California, N.A., and all of its affiliates,
officers, directors, employees and agents with respect to such shares and the
consideration paid or received for such shares.
I have read the entire Section of California Civil Code Section 1542
described below and, upon advice of legal counsel, I expressly waive any and
all rights and benefits available to me by Section 1542 of the California Civil
Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR.
I agree that this release is voluntarily and knowingly given with the
express intention of effecting the legal consequences provided in Section 1541
of the California Civil Code, which provides:
AN OBLIGATION IS EXTINGUISHED BY A RELEASE THEREFROM GIVEN TO THE
DEBTOR BY THE CREDITOR, UPON A NEW CONSIDERATION, OR IN WRITING,
WITH OR WITHOUT NEW CONSIDERATION.
Dated: October 16, 1996 ANN MANNHEIMER
----------------------------------
Ann Mannheimer Matthews
----------------------------------
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<PAGE> 38
ACKNOWLEDGEMENT AND WAIVER OF SPOUSE
I am the spouse of Bruce J. McGregor. I acknowledge that the shares of
Lilienthal Associates, a California corporation, held by Bruce J. McGregor are
his separate property. I have no objection to disposition of such shares in
accordance with the terms of the Merger Agreement among U.S. Trust Company of
California, N.A., Lilienthal Associates and the shareholders of Lilienthal
Associates. I waive and release any claim I have or may have in the future
against U.S. Trust Company of California, N.A., and all of its affiliates,
officers, directors, employees and agents with respect to such shares and the
consideration paid or received for such shares.
I have read the entire Section of California Civil Code Section 1542
described below and, upon advice of legal counsel, I expressly waive any and
all rights and benefits available to me by Section 1542 of the California Civil
Code, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
I agree that this release is voluntarily and knowingly given with the
express intention of effecting the legal consequences provided in Section 1541
of the California Civil Code, which provides:
AN OBLIGATION IS EXTINGUISHED BY A RELEASE THEREFROM GIVEN TO
THE DEBTOR BY THE CREDITOR, UPON A NEW CONSIDERATION, OR IN
WRITING, WITH OR WITHOUT NEW CONSIDERATION.
Dated: October 16, 1996 /s/ SUZANNE McGREGOR
---------------------------------
Suzanne McGregor
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<PAGE> 39
Exhibit 3.5
Bonus and Salary Increases
33
<PAGE> 40
LA Bonus Calculations - 1995
12/20/95
<TABLE>
<CAPTION>
JGL BJM RBM MJB PAM Total
--- --- --- --- --- -----
<S> <C> <C> <C> <C> <C> <C>
1995 Salary ($M) 264.0 190.8 101.8 56.0 28.1 640.7
(excludes 3M (includes
bonus 1/95) OT)
of total (%) 41.20 29.78 15.89 8.74 4.39 100.00
Melon ($M) 100.5 72.6 38.7 21.3 10.8 243.9
=====
Actual 1995 pay 264.0 190.8 101.8 59.0 28.1 643.7
Pension e 10% 15.0 15.0 11.3 6.4 3.1 50.8
Profit share 15% 15.0 15.0 16.8 9.7 4.7 61.2
Bonus 70.5 42.6 10.6 5.2 3.0 131.9
-----
243.9
=====
Pay + Bonus 334.5 233.4 112.4 64.2 31.1
Melon
1995F profit per $217.81h
Debbie G
Pension payte +36.1
Target PT income -10.0
------
243.9
</TABLE>
34
<PAGE> 41
LA 1996 SALARIES
JANUARY 23, 1996
<TABLE>
<CAPTION>
1995-Annual 1996
rate 12/95 Change Raise Annual Per Month
---------- ------ ----- ------ ---------
<S> <C> <C> <C> <C> <C>
JGL $265M +10% 26.5 290 $24,167
BJM 183 +10 18.3 201 16,750
RBM 110 +10 11.0 121 10,083
MJB 56 +15 8.4 65 5,417
PAM 27 +10 2.7 30 2,500
---- ---- ---
641 66.9 707
</TABLE>
35
<PAGE> 42
Exhibit 7.4
Opinion of Seller's Counsel
36
<PAGE> 43
[For McCutchen Stationery)
December 31, 1996
U.S. Trust Company of California, N.A
UST-LA, Inc.
515 South Flower Street, Suite 2700
Los Angeles, CA 90071
Gentlemen:
We have acted as counsel to Lilienthal Associates, a
California corporation (the "Company"), John G. Lilienthal, Bruce J. McGregor
and Randall A. Matthews (individually as "Seller" and collectively as "Sellers")
in connection with the execution and delivery of the Merger Agreement dated
October __, 1996 (the "Merger Agreement"), among the Company, the Sellers U.S.
Trust Company of California, N.A.("Buyer") and UST-LA, Inc. ("Merger Sub"), and
in connection with the Closing being held today pursuant to Section 1.2 of the
Merger Agreement. This opinion is being delivered to you pursuant to Section 7.4
of the Merger Agreement, and unless the context indicates otherwise, terms
defined in the Merger Agreement and not otherwise defined herein, are used
herein with the meanings so defined.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of the Merger
Agreement and the Employment Agreements dated the date hereof between the
Company and each of the Sellers (the "Employment Agreements").
With respect to certain factual matters, we have relied upon
the representations and warranties made by the Sellers in the Merger Agreement,
and upon certificates of the Sellers and of the officers of the Company
delivered thereunder. We have also examined and relied upon originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements and other documents and instruments, and certificates of
public officials, and have made such inquiries of the officers of the Company,
and have relied upon such statements made to us by such officers, and considered
such questions of law, as we have deemed relevant and necessary for purposes of
rendering the opinions expressed below.
For purposes of this opinion, we have assumed the genuineness
of all signatures on original and certified documents and the conformity to
original documents of all documents submitted to us as conformed, photostat or
other copies thereof, and we have assumed the legal capacity of all natural
persons executing such documents, instruments and other papers. We have also
assumed that each entity that has executed such documents, instruments and other
papers, other than the Company, has the power to enter into and perform all of
such entity's obligations thereunder, that such documents, instruments and other
papers have been
1
<PAGE> 44
duly authorized, executed and delivered by each entity other than the Company,
and that such documents, instruments and other papers are binding on each party
thereto other than the Company.
Statements made herein "to the best of our knowledge" or with
respect to matters "known to us" are based solely on information actually known
to those attorneys currently practicing with this firm and engaged in
representing the Company in connection with the transactions contemplated by the
Merger Agreement. Except as otherwise expressly indicated, we have not
undertaken any independent investigation of factual matters.
Based upon the foregoing, and subject to the qualifications
stated herein, it is our opinion that:
(a) The Company is a corporation duly organized and
validly existing under the laws of the State of
California, and has the corporate power necessary to
own, lease and operate and to carry on its business
as now conducted.
(b) The Company has all requisite corporate power and
authority to enter into the Merger Agreement and to
carry out its obligations thereunder.
(c) The execution, delivery and performance of the Merger
Agreement and all other documents required to be
delivered by the Company thereunder have been duly
and validly authorized and no other corporate
proceedings on the part of the Company are necessary
to authorize the Merger Agreement or the transaction
or the transactions contemplated thereby.
(d) The Employment Agreements are valid and binding
agreements of the Company and the Employees,
enforceable against the Company and the Employees in
accordance with their terms.
(e) No consent, approval or authorization of or filing
with any California or federal governmental authority
is required to be made by the Company in connection
with the execution and delivery by the Company of the
Merger Agreement or the Employment Agreements or the
consummation by the Company of the transactions
contemplated thereby, except for such consents,
approvals, authorizations or filings which have been
obtained or made.
(f) The execution and delivery of the Merger Agreement
and the Employment Agreements do not, and the
consummation of the transactions contemplated therein
will not, result in or constitute a breach of or
default under any agreement or other instrument known
to
2
<PAGE> 45
us to which the Company is a party or violate the
Articles of Incorporation or Bylaws of the Company or
any California or federal law or regulation, or any
judgment, writ, injunction, decree, order or ruling
known to us of any court or governmental authority
binding on the Company.
(g) The Merger has been duly authorized and has been
consummated in accordance with the Merger Agreement,
the Agreement of Merger, the Officers' Certificate of
the Company and the Officers' Certificate of the
Merger Sub and, upon the acceptance by the California
Secretary of the Agreement of Merger, the Officers'
Certificate of the Company and the Officers'
Certificate of the Merger Sub, will become effective
under the laws of the State of California.
Furthermore, we advise you that, to the best of our knowledge,
there are no disputes, claims, actions, suits or proceedings, arbitrations or
investigations, either administrative or judicial, pending or threatened against
or affecting the Company, at law or in equity or otherwise, before or by any
court or governmental agency or body, domestic of foreign, or before an
arbitrator of any kind, except as disclosed in the Disclosure Letter.
The opinions set forth are subject to the following
qualifications and limitations:
(i) We express no opinion as to the effect of the
application of equitable principles (whether
considered in a proceeding at law or in equity) or of
bankruptcy, insolvency, reorganization, moratorium
and other laws now or hereafter in effect affecting
the enforcement of creditors' rights and remedies
including those relating to fraudulent conveyances
and transfer;
(ii) Insofar as the opinions expressed above relate to, or
are based upon, the effectiveness of the Merger, they
are subject to the power of the courts to order
rescission of the consummated transactions in such
cases as violations of federal or state securities
laws or for failure to satisfy basic equitable
requirements of good faith and fair treatment; and
(iii) We express no opinion concerning the laws of any
jurisdiction other than the law of the State of
California and the federal law of the United States
of America.
This opinion is provided to you as a legal opinion only, and
not as a guarantee or warranty of the matters discussed herein. This opinion has
been rendered as of the date hereof, and we disclaim any obligation to advise
you of any changes in the circumstances, laws or events that you may occur
subsequent to the date hereof, or otherwise to update this opinion.
3
<PAGE> 46
This letter is furnished to you by us, as counsel to the
Company, and is solely for your benefit in connection with the transactions
contemplated by the Merger Agreement. This opinion may not be relied upon by any
other party, except to the extent that we may expressly and in writing authorize
reliance by other persons.
Very truly yours,
4
<PAGE> 47
Exhibit 7.7
Employment Agreements of Lilienthal and McGregor
<PAGE> 48
EMPLOYMENT AGREEMENT
Between
Lilienthal Associates.
and
John G. Lilienthal
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. Employment and Term.......................................................................1
1.1. Employment..........................................................................1
1.2. Conflicts of Interest...............................................................1
1.3. Term................................................................................2
1.4. Key Man Insurance...................................................................2
ARTICLE 2. Salary....................................................................................2
ARTICLE 3. Incentive Calculation.....................................................................2
3.1. Long Term Incentive Compensation....................................................2
3.1. Special Incentive Compensation......................................................2
ARTICLE 4. Other Benefits............................................................................2
4.1. Health Insurance and Other Benefits.................................................2
4.2. Reasonable Business Expenses........................................................3
4.3. Vacation............................................................................3
4.4. Payments to Representatives.........................................................3
ARTICLE 5. Termination of Employment.................................................................3
5.1. Termination........................................................................3
5.2. Death or Permanent Disability of Employee..........................................4
5.3. Termination Without Cause..........................................................4
5.4. Compensation Upon Voluntary Resignation, Death, Disability or
Termination for Cause..............................................................4
5.5. Compensation for Termination without Cause.........................................4
ARTICLE 6. Confidential Information.................................................................4
ARTICLE 7. Agreement Not to Solicit or Compete......................................................5
7.1. Non-Solicitation and Non-Competition...............................................5
7.2. Exceptions to Non-Solicitation and Non-Competition.................................5
ARTICLE 8. Severability.............................................................................6
ARTICLE 9. Set off..................................................................................6
ARTICLE 10. Injunctive Relief .......................................................................6
</TABLE>
i
<PAGE> 50
<TABLE>
<S> <C> <C>
ARTICLE 11. Entire Agreement.........................................................................6
ARTICLE 12. Notices..................................................................................6
ARTICLE 13. Assignment...............................................................................7
ARTICLE 14. Amendment; Waiver........................................................................7
ARTICLE 15. Construction.............................................................................8
</TABLE>
ii
<PAGE> 51
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of , 1996 by and between Lilienthal Associates, a California
corporation (the "Company") and John G. Lilienthal (the "Employee").
Recitals
A. The Company is being acquired by U.S. Trust Company
of California ("UST") pursuant to a certain Merger Agreement dated October 11,
1996 among UST, UST-LA, Inc, the Company, and the Employee, among others (the
"Merger Agreement").
B. As part of the transaction referred to above,
Employee agrees to and is entering into this Employment Agreement with the
Company as of October 11, 1996 (the "Prior Agreement").
C. Capitalized terms used but not otherwise defined
herein shall have the same meaning as set forth in the Merger Agreement.
Accordingly, the parties agree as follows:
1. Employment and Term.
1.1 Employment. Subject to the terms and conditions of
this Agreement, the Company hereby employs Employee during the term of
employment set forth in Section 1.3. Employee shall have such powers and perform
such duties as may be assigned or delegated to him from time to time by the
Board of Directors of the Company (the "Board of Directors") or their designee.
Employee hereby accepts such employment and agrees to perform all such services
faithfully and diligently, and to discharge the responsibilities thereof to the
best of his ability. Employee shall devote all of his business time and
attention and energies to the duties of his employment: The Company may require
that Employee travel on the business of the Company to an extent substantially
consistent with the present business travel obligations and business of the
Company. Except when engaged in travel on behalf of the Company, the Employee's
place of employment shall be within a twenty-five mile radius of San Francisco,
CA.
1.2 Conflicts of Interest. Employee has reviewed with the
President or his designee Employee's ownership positions in non publicly traded
companies, the present directorship and other positions held by Employee in all
of the business organizations of Employee, whether or not competitive or in
conflict with the Company, and agrees to review these with the President or his
designee whenever requested by the President or his designee. Employee is
precluded from owning an interest in a non publicly traded company or serving as
a director or member of a company until such interest is presented to the
President or his
1
<PAGE> 52
designee and the President or his designee determines that such interest is not
in a business competitive with the Business Of The Company and would not
represent a conflict of interest for Employee. A business is competitive with
the Business Of The Company if the business involves the investment management
business. Non-business activities such as service on the board of directors of,
or for the benefit of, recognized educational, religious or other similar
institutions need not be reviewed with the Board.
1.3 Term. The term of employment of Employee under this
Agreement shall begin on the date of this Agreement and end five (5) years from
the date hereof, unless otherwise terminated in accordance with the provisions
set forth in Section 5 below (the "Employment Period").
1.4 Key Man Insurance. Employee agrees to cooperate with
the Company in applying for key man insurance with respect to Employee, if the
Company in its sole discretion determines that such insurance is advisable.
2. Salary. In consideration for the services to be
rendered hereunder, and subject to the terms and conditions of this Agreement,
the Company hereby agrees to pay Employee, in accordance with its normal
practices, an annual base salary of $190,000 for each year terminating on the
anniversary date hereof (the "Annual Base Salary").
3. Incentive Calculation.
3.1. Long Term Incentive Compensation. One of the
principal responsibilities of the Employee is the successful maintenance and
development of new and existing accounts, consequently Employee is eligible for
the Annual Incentive Payment Plan and the Sales Compensation Plan of UST.
3.2 Special Incentive Compensation. In the event that the
revenues of the Company derived from fees charged to clients for the calendar
year ending December 31, 1997 are at least $1.1 million, a special incentive
compensation of $40,000 shall be awarded to Employee.
4. Other Benefits.
4.1 Health Insurance and Other Benefits. During the
Employment Period, and except as provided in the Merger Agreement, Employee
shall be allowed to participate in any medical, dental and life insurance plans
or policies and any pension and retirement plans and any disability plans that
are available from time to time to other similarly situated employees of
subsidiaries of United States Trust Company of New York. A description of the
benefits currently available to similarly situated employees of affiliates of
UST is set forth in the 1996 UST Benefits Portfolio, which is incorporated
herein by reference.
2
<PAGE> 53
4.2 Reasonable Business Expenses. During the Employment
Period, Employee shall be reimbursed for ordinary, necessary and reasonable
business and entertainment expenses in connection with the performance of his
duties hereunder; provided, that Employee shall be required to present receipts
in accordance with UST's Travel and Entertainment policy as in force from time
to time in order to obtain reimbursement for such expense.
4.3 Vacation. Employee shall be entitled to annual
vacation (without deduction of salary or other compensation) in accordance with
the Company's vacation policy for executives similarly situated in effect from
time to time, but in no event less than four (4) weeks, such vacation to be
taken at such time or times during such year as may reasonably be mutually
agreed upon between the Employee and the Company.
4.4 Payments to Representatives. In the event of
Employee's death or other inability to receive payments under this Agreement,
payments shall be made to Employee's estate, heirs or other representative as
may be legally appropriate.
5. Termination of Employment.
5.1 Termination. This employment contract may be
terminated at any time by the Company, either with or without cause. The term
"cause" shall include any of the following events:
(a) misappropriation by Employee of funds or
property of the Company or any affiliate of the Company; intentional dishonesty;
disloyalty to the Company or its affiliates; intentional breach of any provision
of Section 6 or Section 7; any attempt by Employee to secure any personal profit
related to the business of the Company or any affiliate of the Company and not
fairly disclosed to and approved in writing by the Board of Directors;
Employee's actions bringing public discredit on the Company, or providing
information to the Company which Employee knows, or has reason to know, is not
true; or a felony conviction or plea of nolo contendere of Employee or
conviction or plea of nolo contendere of an offense involving moral turpitude.
Termination for any of the reasons listed above shall not be subject to any cure
provisions, and
(b) Employee's extended absence from duty
(other than on account of illness, medical condition, or permitted vacation);
refusal to carry out any direction of the Company's Board of Directors with
respect to the duties to be performed by Employee hereunder; or any
unintentional material breach by Employee of any of his duties or obligations
under any section of this Agreement other than Section 6 or Section 7 which
material breach is not specified in Section 5.1(a); provided, however that for
the first instance of any act contained in this Section 5.1(b), the Employee
shall be given written notice by the Company and a ten (10) day period to cure,
and if the Employee cures the action to the reasonable satisfaction of the
Company within such time period, the action contained in the
3
<PAGE> 54
notice shall not constitute "cause" hereunder. Notwithstanding
the foregoing, nothing contained herein shall require the Company to give more
than one notice and opportunity to cure under this Section 5.1(b).
5.2. Death or Permanent Disability of Employee. Employee's
employment hereunder shall terminate upon his death. In addition, the Company
shall have the right to terminate Employee's employment hereunder if and when
Employee becomes permanently disabled within the meaning of any permanent
disability insurance policy which may be maintained by the Company for the
benefit of Employee and under which the Employee is entitled to benefits subject
to Section 5.4 below.
5.3. Termination Without Cause. The Company, by written
notice to Employee, at any time after authorization by the Board of Directors,
shall also have the right to terminate Employee's employment without cause for
any reason, subject to Section 5.5 hereof.
5.4. Compensation Upon Voluntary Resignation, Death,
Disability or Termination for Cause. In the event of (i) termination of
Employee's employment for cause as described in Section 5.1 above, (ii)
termination upon death or disability of the Employee as described in Section 5.2
above, or (iii) the voluntary resignation of the Employee from the employment by
the Company, the Company shall pay the Employee (i) the unpaid salary and
vacation earned by him before the date of termination as provided for in this
Agreement, computed pro rata up to and including such date, in lieu of any and
all other compensation, benefits and claims of any kind, excepting only such
additional amounts as may be provided for under the express terms of any
applicable benefit plans or as may be required by law to be paid.
5.5. Compensation for Termination without Cause. In the
event that Employee's employment with the Company is terminated by the Company
without cause (as set forth in Section 5.3), the Company shall pay to Employee,
(i) all unpaid salary and vacation earned by him up to and including the date of
termination; (ii) one additional year's salary; and (iii) such additional
amounts as may be provided for under the express terms of any applicable benefit
plans. Such payments shall be in lieu of any and all compensation, benefits and
claims of any kind, excepting only such additional amounts as may be required by
law to be paid.
6. Confidential Information. During the term of
employment under this Agreement, Employee will have access to and become
acquainted with confidential proprietary information of the Company, including
without limitation, client or supplier identities and relationships,
compilations of information, records, and specifications owned by the Company
(collectively, "Confidential Information"). Employee shall not disclose any of
the Company's Confidential Information (including without limitation any client
lists or other confidential information relating to the Company's business),
directly or indirectly, or use them in any
4
<PAGE> 55
way, either during the term of this Agreement or at any time thereafter, except
as required in the course of his employment by the Company. All files, records,
documents, drawings, specifications, equipment and similar items relating to the
business of the Company, whether prepared by Employee or otherwise coming into
his possession, shall remain the exclusive property of the Company, and if
removed from the premises of the Company shall be immediately returned to the
Company upon any termination of his employment. In this Section 6, the term (a)
"the Company" shall include any firm or corporation directly or indirectly
controlling or controlled by UST or under common control with UST; and (b)
"Confidential Information" shall not include information which (i) is already in
Employee's possession other than through his employment with the Company; (ii)
becomes or has been generally available to the public other than as a result of
Employee's disclosure; (iii) was available to Employee on a non-confidential
basis prior to its disclosure by the Company; or (iv) is independently developed
or becomes available to Employee on a non-confidential basis from a source other
than the Company.
7. Agreement Not to Solicit or Compete.
7.1 Non-Solicitation and Non-Competition. Employee will
not, individually or through an agent, for himself or on behalf of another, as
an employee, director, owner, partner, sole proprietor, consultant, agent,
representative, shareholder, or in any other manner or capacity whatsoever,
either during the Employment Period or at any time during the three-year period
immediately thereafter, (a) solicit or induce any clients of the Company with
whom he has dealt during his term of employment hereunder, to terminate or
reduce their respective relationships with the Company, (b) accept any business
from any clients of the Company with whom he has dealt during his term of
employment hereunder, or enter into a business relationship with any such
clients, if any, unless (i) Employee continues to be employed by the Company
during such three-year period; and (ii) all compensation from such clients
during such three-year period shall accrue to the Company in accordance with the
UST's Business Ethics Policy; (c) solicit or induce any person then employed by
the Company with whom he has dealt during his term of employment hereunder to
terminate such employment, (d) advance or lend funds to, or acquire an interest
in excess of three percent (3%) in, any corporation, partnership, joint venture,
trust, sole proprietorship or individual which is or may be competitive with the
Company or which might place Employee in a position competitive with the
Company; or (e) use, permit the use of, display, or license the use of the name
Lilienthal in connection with any business or business activity which is or may
be competitive with the Business Of The Company or which might place Employee in
a position competitive with the Business Of The Company. Any written notice or
oral presentation made jointly by the Company and the Employee during such
three-year period shall not be deemed to violate any provision of this Section
7.1. In this Section 7.1 the term "the Company" shall include any firm or
corporation directly or indirectly controlling or controlled by UST or under
common control with UST.
7.2 Exception to Non-Solicitation and Non-Competition.
The restrictions set
5
<PAGE> 56
forth in Section 7.1 shall not apply to the ownership of a less than 5% interest
in any corporation or partnership whose securities are publicly traded.
8. Severability. In the event that any of the
provisions of this Agreement shall be deemed by any court of competent
jurisdiction to be in violation of applicable law for any reason whatsoever,
then any such provision shall not be deemed to be void, but shall be deemed to
be automatically amended so as to comply with applicable law. In the event that
any of the provisions of this Agreement shall be deemed by any court of
competent jurisdiction to be wholly or partially invalid, such determination
shall not affect the binding effect of the other provisions of this Agreement.
9. Set off. Employee grants to the Company the right,
at any time and from time to time, to set off from any and all amounts owed to
Employee, dollar for dollar, the amounts owed to the Company resulting from
damages to the Company for the breach by Employee of the confidentiality or
covenant not to compete provisions of this Agreement, but only to the extent
that the liability of Employee and the amount of liability of Employee are not
reasonably subject to dispute.
10. Injunctive Relief. Employee acknowledges that the
damage to the Company resulting from a breach of the obligations of trust and
confidence set forth in Sections 6 and 7 hereof may cause irreparable injury to
the Company, and Employee hereby agrees and consents to the entry of an
injunction by any court of competent jurisdiction, enjoining him from violating
any term or terms of this Agreement, and such injunctive relief may be granted
without the necessity of proving actual damages. In addition, the Employee
waives any right to require a bond to be posted by the Company as a condition of
receiving any equitable relief. Such injunctive relief, however, shall be in
addition to any other remedies provided by law, in equity or otherwise, to the
Company.
11. Entire Agreement. This Agreement, and the employee
benefit plans referred to herein, contain the entire understanding of the
Company and the Employee with respect to Employee's employment with the Company
and his compensation therefore. Specifically, Employee acknowledges that no
commitment has been made by the Company to him with respect to any employment
beyond the term of this Agreement (whether ending by lapse of time or earlier
termination pursuant to its terms) or with respect to any benefits not expressly
set forth in this Agreement or incorporated herein by reference.
12. Notices. All notices under this Agreement shall be in
writing and shall be deemed effective when delivered in person (in the Company's
case, to its respective Secretary) or upon receipt after deposit thereof in the
U.S. mails, postage prepaid, addressed to Employee or the Company as follows, or
to such other address as the party to be notified may specify by notice to the
other party in the manner provided in this Section:
6
<PAGE> 57
If to Employee: John G. Lilienthal
235 Montgomery Street, Suite 843
San Francisco, CA 94104
With a copy to: McCutchen, Doyle, Brown & Enersen, LLP
3 Embarcadero Center
San Francisco, CA 94111
Attn: Thomas G. Reddy
If to the Company: Lilienthal Associates
235 Montgomery Street, Suite 843
San Francisco, CA 94104
With a copy to: U.S. Trust Corporation
114 West 47th Street
New York, N.Y. 10036-1532
Attn: Maureen Scannell Bateman
13. Assignment. Neither this Agreement nor any rights or
obligations hereunder may be assigned by one party without the consent of the
other, except that (i) this Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company, whether by merger,
consolidation, sale of assets or otherwise, and reference herein to the Company
shall be deemed to include any such successor or successors, and (ii) this
Agreement is freely assignable by the Company to any corporation or entity
controlling, controlled by, or under common control with, the Company.
14. Amendment; Waiver. This Agreement may be amended and
any right or claim hereunder waived, only by a written instrument signed by
Employee and the Company. Nothing in this Agreement, express or implied, is
intended to confer upon any third person any rights or remedies under or by
reason of this Agreement. No amendment or waiver of this Agreement requires the
consent of any individual, partnership, corporation or other entity not a party
to this Agreement.
7
<PAGE> 58
15. Construction. This Agreement shall be construed
under and governed by the laws of the State of California. The section headings
are for convenience only and shall not be considered a part of the terms and
provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement.
Lilienthal Associates, a California corporation.
By:
----------------------------
Title:
/s/ John G. Lilienthal
-------------------------------
John G. Lilienthal
8
<PAGE> 59
EMPLOYMENT AGREEMENT
Between
Lilienthal Associates.
and
Bruce J. McGregor
<PAGE> 60
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE 1. Employment and Term......................................................1
1.1. Employment.........................................................1
1.2. Conflicts of Interest..............................................1
1.3. Term...............................................................2
1.4. Key Man InsuranceTerm..............................................2
ARTICLE 2. Salary...................................................................2
ARTICLE 3. Long-Term Incentive Calculation..........................................2
ARTICLE 4. Other Benefits...........................................................2
4.1. Health Insurance and Other Benefits................................2
4.2. Reasonable Business Expenses.......................................2
4.3. Vacation...........................................................3
4.4. Payments to Representatives........................................3
ARTICLE 5. Termination of Employment................................................3
5.1. Termination........................................................3
5.2. Death or Permanent Disability of Employee..........................3
5.3. Termination Without Cause..........................................4
5.4. Compensation Upon Voluntary Resignation, Death, Disability or
Termination for Cause..............................................4
5.5. Compensation Upon Termination without Cause........................4
ARTICLE 6. Confidential Information.................................................4
ARTICLE 7. Agreement Not to Solicit or Compete......................................5
7.1. Non-Solicitation and Non-Competition...............................5
7.2. Exceptions to Non-Solicitation and Non-Competition.................5
ARTICLE 8. Severability.............................................................5
ARTICLE 9. Set Off..................................................................6
ARTICLE 10.Injunctive Relief........................................................6
ARTICLE 11 Entire Agreement.........................................................6
ARTICLE 12 Notices..................................................................6
ARTICLE 13.Assignment...............................................................7
</TABLE>
ix
<PAGE> 61
<TABLE>
<S> <C>
ARTICLE 14.Amendment; Waiver........................................................7
ARTICLE 15.Construction.............................................................7
</TABLE>
x
<PAGE> 62
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of , 1996 by and between Lilienthal Associates, a California
corporation (the "Company") and Bruce J. McGregor (the "Employee").
Recitals
A. The Company is being acquired by U.S. Trust Company
of California ("UST") pursuant to a certain Merger Agreement dated October 11,
1996 among UST, UST-LA, Inc, the Company, and the Employee, among others (the
"Merger Agreement").
B. As part of the transaction referred to above,
Employee agrees to and is entering into this Employment Agreement with the
Company as of October 11, 1996 (the "Prior Agreement").
C. Capitalized terms used but not otherwise defined
herein shall have the same meaning as set forth in the Merger Agreement.
Accordingly, the parties agree as follows:
1. Employment and Term.
1.1 Employment. Subject to the terms and conditions of
this Agreement, the Company hereby employs Employee during the term of
employment set forth in Section 1.3. Employee shall have such powers and perform
such duties as may be assigned or delegated to him from time to time by the
Board of Directors of the Company (the "Board of Directors") or their designee.
Employee hereby accepts such employment and agrees to perform all such services
faithfully and diligently, and to discharge the responsibilities thereof to the
best of his ability. Employee shall devote at least four days a week to the
duties of his employment: The Company may require that Employee travel on the
business of the Company to an extent substantially consistent with the present
business travel obligations and business of the Company. Except when engaged in
travel on behalf of the Company, the Employee's place of employment shall be
within a twenty-five mile radius of San Francisco, CA.
1.2 Conflicts Of Interest. Employee has reviewed with the
President or his designee Employee's ownership positions in non publicly traded
companies, the present directorship and other positions held by Employee in all
of the business organizations of Employee, whether or not competitive or in
conflict with the Company, and agrees to review these with the President or his
designee whenever requested by the President or his designee. Employee is
precluded from owning an interest in a non publicly traded company or serving as
a director or member of a company until such interest is presented to the
President or his designee and the President or his designee determines that such
interest is not in a business
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<PAGE> 63
competitive with the Business Of The Company and would not represent a conflict
of interest for Employee. A business is competitive with the Business Of The
Company if the business involves the investment management business.
Non-business activities such as service on the board of directors of, or for the
benefit of, recognized educational, religious or other similar institutions need
not be reviewed with the Board.
1.3 Term. The term of employment of Employee under this
Agreement shall begin on the date of this Agreement and end May 30, 1998, unless
otherwise terminated in accordance with the provisions set forth in Section 5
below (the "Employment Period").
1.4 Key Man Insurance. Employee agrees to cooperate with
the Company in applying for key man insurance with respect to Employee, if the
Company in its sole discretion determines that such insurance is advisable.
2. Salary. In consideration for the services to be
rendered hereunder, and subject to the terms and conditions of this Agreement,
the Company hereby agrees to pay Employee, in accordance with its normal
practices, an annual base salary of $140,000 for each year terminating on the
anniversary date hereof (the "Annual Base Salary").
3. Incentive Calculation.
3.1. Long Term Incentive Compensation. One of the
principal responsibilities of the Employee is the successful maintenance and
development of new and existing accounts, consequently Employee is eligible for
the Annual Incentive Payment Plan and the Sales Compensation Plan of UST.
3.2 Special Incentive Compensation. In the event that the
revenues of the Company derived from fees charged to clients for the calendar
year ending December 31, 1997 are at least $1.1 million, a special incentive
compensation of $30,000 shall be awarded to Employee.
4. Other Benefits.
4.1 Health Insurance and Other Benefits. During the
Employment Period, and except as provided in the Merger Agreement, Employee
shall be allowed to participate in any medical, dental and life insurance plans
or policies and any pension and retirement plans and any disability plans that
are available from time to time to other similarly situated employees of
subsidiaries of United States Trust Company of New York. A description of the
benefits currently available to similarly situated employees of affiliates of
UST is set forth in the 1996 UST Benefits Portfolio, which is incorporated
herein by reference.
4.2 Reasonable Business Expenses. During the Employment
Period, Employee shall be reimbursed for ordinary, necessary and reasonable
business and
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<PAGE> 64
entertainment expenses in connection with the performance of his duties
hereunder; provided, that Employee shall be required to present receipts in
accordance with UST's Travel and Entertainment policy as in force from time to
time in order to obtain reimbursement for such expense.
4.3 Vacation. Employee shall be entitled to annual
vacation (without deduction of salary or other compensation) in accordance with
the Company's vacation policy for executives similarly situated in effect from
time to time, but in no event less than four (4) weeks, such vacation to be
taken at such time or times during such year as may reasonably be mutually
agreed upon between the Employee and the Company.
4.4 Payments to Representatives. In the event of
Employee's death or other inability to receive payments under this Agreement,
payments shall be made to Employee's estate, heirs or other representative as
may be legally appropriate.
5. Termination of Employment.
5.1 Termination. This employment contract may be
terminated at any time by the Company, either with or without cause. The term
"cause" shall include any of the following events:
(a) misappropriation by Employee of funds or
property of the Company or any affiliate of the Company; intentional dishonesty;
disloyalty to the Company or its affiliates; intentional breach of any provision
of Section 6 or Section 7; any attempt by Employee to secure any personal profit
related to the business of the Company or any affiliate of the Company and not
fairly disclosed to and approved in writing by the Board of Directors;
Employee's actions bringing public discredit on the Company, or providing
information to the Company which Employee knows, or has reason to know, is not
true; or a felony conviction or plea of nolo contendere of Employee or
conviction or plea of nolo contendere of an offense involving moral turpitude.
Termination for any of the reasons listed above shall not be subject to any cure
provisions, and
(b) Employee's extended absence from duty
(other than on account of illness, medical condition, or permitted vacation);
refusal to carry out any direction of the Company's Board of Directors with
respect to the duties to be performed by Employee hereunder; or any
unintentional material breach by Employee of any of his duties or obligations
under any section of this Agreement other than Section 6 or Section 7 which
material breach is not specified in Section 5.1(a); provided, however that for
the first instance of any act contained in this Section 5.1(b), the Employee
shall be given written notice by the Company and a ten (10) day period to cure,
and if the Employee cures the action to the reasonable satisfaction of the
Company within such time period, the action contained in the notice shall not
constitute "cause" hereunder. Notwithstanding the foregoing, nothing contained
herein shall require the Company to give more than one notice and opportunity to
cure under this Section 5.1(b).
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<PAGE> 65
5.2. Death or Permanent Disability of Employee. Employee's
employment hereunder shall terminate upon his death. In addition, the Company
shall have the right to terminate Employee's employment hereunder if and when
Employee becomes permanently disabled within the meaning of any permanent
disability insurance policy which may be maintained by the Company for the
benefit of Employee and under which the Employee is entitled to benefits subject
to Section 5.4 below.
5.3. Termination Without Cause. The Company, by written
notice to Employee, at any time after authorization by the Board of Directors,
shall also have the right to terminate Employee's employment without cause for
any reason, subject to Section 5.5 hereof.
5.4. Compensation Upon Voluntary Resignation, Death,
Disability or Termination for Cause. In the event of (i) termination of
Employee's employment for cause as described in Section 5.1 above, (ii)
termination upon death or disability of the Employee as described in Section 5.2
above, or (iii) the voluntary resignation of the Employee from the employment by
the Company, the Company shall pay the Employee (i) the unpaid salary and
vacation earned by him before the date of termination as provided for in this
Agreement, computed pro rata up to and including such date, in lieu of any and
all other compensation, benefits and claims of any kind, excepting only such
additional amounts as may be provided for under the express terms of any
applicable benefit plans or as may be required by law to be paid.
5.5. Compensation for Termination without Cause. In the
event that Employee's employment with the Company is terminated by the Company
without cause (as set forth in Section 5.3), the Company shall pay to Employee,
(i) all unpaid salary and vacation earned by him up to and including the date of
termination; (ii) one additional year's salary; and (iii) such additional
amounts as may be provided for under the express terms of any applicable benefit
plans. Such payments shall be in lieu of any and all compensation, benefits and
claims of any kind, excepting only such additional amounts as may be required by
law to be paid.
6. Confidential Information. During the term of
employment under this Agreement, Employee will have access to and become
acquainted with confidential proprietary information of the Company, including
without limitation, client or supplier identities and relationships,
compilations of information, records, and specifications owned by the Company
(collectively, "Confidential Information"). Employee shall not disclose any of
the Company's Confidential Information (including without limitation any client
lists or other confidential information relating to the Company's business),
directly or indirectly, or use them in any way, either during the term of this
Agreement or at any time thereafter, except as required in the course of his
employment by the Company. All files, records, documents, drawings,
specifications, equipment and similar items relating to the business of the
Company, whether prepared by Employee or otherwise coming into his possession,
shall remain the exclusive property of the Company, and if removed from the
premises of the Company shall be
4
<PAGE> 66
immediately returned to the Company upon any termination of his employment. In
this Section 6, the term (a) "the Company" shall include any firm or corporation
directly or indirectly controlling or controlled by UST or under common control
with UST; and (b) "Confidential Information" shall not include information which
(i) is already in Employee's possession other than through his employment with
the Company; (ii) becomes or has been generally available to the public other
than as a result of Employee's disclosure; (iii) was available to Employee on a
non-confidential basis prior to its disclosure by the Company; or (iv) is
independently developed or becomes available to Employee on a non-confidential
basis from a source other than the Company.
7. Agreement Not to Solicit or Compete.
7.1 Non-Solicitation and Non-Competition. Employee will
not, individually or through an agent, for himself or on behalf of another, as
an employee, director, owner, partner, sole proprietor, consultant, agent,
representative, shareholder, or in any other manner or capacity whatsoever,
either during the Employment Period or at any time during the three-year period
immediately thereafter, (a) solicit or induce any clients of the Company with
whom he has dealt during his term of employment hereunder, to terminate or
reduce their respective relationships with the Company, (b) accept any business
from any clients of the Company with whom he has dealt during his term of
employment hereunder, or enter into a business relationship with any such
clients, if any, unless (i) Employee continues to be employed by the Company
during such three-year period; and (ii) all compensation from such clients
during such three-year period shall accrue to the Company in accordance with the
UST's Business Ethics Policy; (c) solicit or induce any person then employed by
the Company with whom he has dealt during his term of employment hereunder to
terminate such employment, (d) advance or lend funds to, or acquire an interest
in excess of three percent (3%) in, any corporation, partnership, joint venture,
trust, sole proprietorship or individual which is or may be competitive with the
Company or which might place Employee in a position competitive with the
Company; or (e) use, permit the use of, display, or license the use of the name
Lilienthal in connection with any business or business activity which is or may
be competitive with the Business Of The Company or which might place Employee in
a position competitive with the Business Of The Company. Any written notice or
oral presentation made jointly by the Company and the Employee during such
three-year period shall not be deemed to violate any provision of this Section
7.1. In this Section 7.1 the term "the Company" shall include any firm or
corporation directly or indirectly controlling or controlled by UST or under
common control with UST.
7.2 Exception to Non-Solicitation and Non-Competition.
The restrictions set forth in Section 7.1 shall not apply to the ownership of a
less than 5% interest in any corporation or partnership whose securities are
publicly traded.
8. Severability. In the event that any of the provisions
of this Agreement shall be deemed by any court of competent jurisdiction to be
in violation of applicable law for any reason whatsoever, then any such
provision shall not be deemed to be void, but shall be
5
<PAGE> 67
deemed to be automatically amended so as to comply with applicable law. In the
event that any of the provisions of this Agreement shall be deemed by any court
of competent jurisdiction to be wholly or partially invalid, such determination
shall not affect the binding effect of the other provisions of this Agreement.
9. Set off Employee grants to the Company the right, at
any time and from time to time, to set off from any and all amounts owed to
Employee, dollar for dollar, the amounts owed to the Company resulting from
damages to the Company for the breach by Employee of the confidentiality or
covenant not to compete provisions of this Agreement, but only to the extent
that the liability of Employee and the amount of liability of Employee are not
reasonably subject to dispute.
10 Injunctive Relief. Employee acknowledges that the
damage to the Company resulting from a breach of the obligations of trust and
confidence set forth in Sections 6 and 7 hereof may cause irreparable injury to
the Company, and Employee hereby agrees and consents to the entry of an
injunction by any court of competent jurisdiction, enjoining him from violating
any term or terms of this Agreement, and such injunctive relief may be granted
without the necessity of proving actual damages. In addition, the Employee
waives any right to require a bond to be posted by the Company as a condition of
receiving any equitable relief. Such injunctive relief, however, shall be in
addition to any other remedies provided by law, in equity or otherwise, to the
Company.
11. Entire Agreement. This Agreement, and the employee
benefit plans referred to herein, contain the entire understanding of the
Company and the Employee with respect to Employee's employment with the Company
and his compensation therefore. Specifically, Employee acknowledges that no
commitment has been made by the Company to him with respect to any employment
beyond the term of this Agreement (whether ending by lapse of time or earlier
termination pursuant to its terms) or with respect to any benefits not expressly
set forth in this Agreement or incorporated herein by reference.
12. Notices. All notices under this Agreement shall be in
writing and shall be deemed effective when delivered in person (in the Company's
case, to its respective Secretary) or upon receipt after deposit thereof in the
U.S. mails, postage prepaid, addressed to Employee or the Company as follows, or
to such other address as the party to be notified may specify by notice to the
other party in the manner provided in this Section:
If to Employee: Bruce J. McGregor
235 Montgomery Street, Suite 843
San Francisco, CA 94104
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<PAGE> 68
With a copy to: McCutchen, Doyle, Brown & Enersen, LLP
3 Embarcadero Center
San Francisco, CA 94111
Attn: Thomas G. Reddy
If to the Company: Lilienthal Associates
235 Montgomery Street, Suite 843
San Francisco, CA 94104
With a copy to: U.S. Trust Corporation
114 West 47th Street
New York, N.Y. 10036-1532
Attn: Maureen Scannell Bateman
10. Assignment. Neither this Agreement nor any rights or
obligations hereunder may be assigned by one party without the consent of the
other, except that (i) this Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company, whether by merger,
consolidation, sale of assets or otherwise, and reference herein to the Company
shall be deemed to include any such successor or successors, and (ii) this
Agreement is freely assignable by the Company to any corporation or entity
controlling, controlled by, or under common control with, the Company.
11. Amendment; Waiver. This Agreement may be amended and
any right or claim hereunder waived, only by a written instrument signed by
Employee and the Company. Nothing in this Agreement, express or implied, is
intended to confer upon any third person any rights or remedies under or by
reason of this Agreement. No amendment or waiver of this Agreement requires the
consent of any individual, partnership, corporation or other entity not a party
to this Agreement.
12. Construction. This Agreement shall be construed
under and governed by the laws of the State of California. The section headings
are for convenience only and shall not be considered a part of the terms and
provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement.
Lilienthal Associates, a California corporation.
By:
-----------------------------
Title:
--------------------------------
Bruce J. McGregor
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<PAGE> 69
Exhibit 7.11
Consent Letter to Lilienthal Clients
------------------------------------
36
<PAGE> 70
[LILIENTHAL LETTERHEAD]
October ___, 1996
Dear _______________:
As we discussed before, our firm will become the San Francisco subsidiary of
U.S. Trust Corporation subject to regulatory approval.
U.S. Trust has been in business since 1853, concentrating on providing
investment management for individuals, trusts and charitable institutions. It
manages assets in excess of $35 billion through 14 offices nationwide.
Most importantly, the Company's investment philosophy matches our own. The
availability of 15 equity and fixed income security analysts in New York and Los
Angeles significantly strengthens Lilienthal Associates' capability. And their
banking and custodianship facilities provide additional services. So that you
may know more about U.S. Trust, we're enclosing a copy of a brochure describing
their operations.
Once the transaction is complete, we envision relatively minor changes in the
manner in which we'll be working with you. Our investment counsel agreement with
you will remain unchanged and we will continue to bill you at the same annual
rate of _____________ (the" Investment Counsel Agreement"). Bruce, Randy,
Marilyn, Pam and I will be right here as always and available to you as usual.
We'll be reporting to you four times [or once] a year as we have in the past.
We'll meet with you at your convenience. However, appraisals and cash statements
for your accounts will be produced monthly in New York.
While we are becoming a subsidiary of U.S. Trust Corporation and your Investment
Counsel Agreement with us remains unchanged, the Investment Advisors Act of 1940
considers this process an assignment of the Investment Counsel Agreement
requiring that you consent to the assignment before we can continue to work with
you. Therefore, please sign, date and return the copy of this letter in the
envelope provided.
<PAGE> 71
[LILIENTHAL LETTERHEAD]
October ___, 1996
Dear _______________:
As we discussed before, our firm will become the San Francisco subsidiary of
U.S. Trust Corporation subject to regulatory approval.
U.S. Trust has been in business since 1853, concentrating on providing
investment management for individuals, trusts and charitable institutions. It
manages assets in excess of $35 billion through 14 offices nationwide.
Most importantly, the Company's investment philosophy matches our own. The
availability of 15 equity and fixed income security analysts in New York and Los
Angeles significantly strengthens Lilienthal Associates' capability. And their
banking and custodianship facilities provide additional services. So that you
may know more about U.S. Trust, we're enclosing a copy of a brochure describing
their operations.
Once the transaction is complete, we envision relatively minor changes in the
manner in which we'll be working with you. Our investment counsel agreement with
you will remain unchanged and we will continue to bill you at the same annual
rate of _____________ (the" Investment Counsel Agreement"). Bruce, Randy,
Marilyn, Pam and I will be right here as always and available to you as usual.
We'll be reporting to you four times [or once] a year as we have in the past.
We'll meet with you at your convenience. However, appraisals and cash statements
for your accounts will be produced monthly in New York.
While we are becoming a subsidiary of U.S. Trust Corporation and your Investment
Counsel Agreement with us remains unchanged, the Investment Advisors Act of 1940
considers this process an assignment of the Investment Counsel Agreement
requiring that you consent to the assignment before we can continue to work with
you. Therefore, please sign, date and return the copy of this letter in the
envelope provided.
<PAGE> 72
Let us know if you'd like to discuss any of these matters further or have any
questions we have not covered before.
Sincerely,
LILIENTHAL ASSOCIATES
John G. Lilienthal
Agree to Assignment of Investment
Counsel Agreement:
------------------------------------
(type name)
------------------------------------
Date
<PAGE> 73
Exhibit 8.3
Opinion of Buyer's Counsel
<PAGE> 74
[For U.S. Trust Company of California Stationery)
December 31, 1996
John G. Lilienthal
Bruce J McGregor
Randall B. Matthews
Lilienthal Associates
235 Montgomery street, Suite 843
San Francisco, CA 94104
Gentlemen:
I am Senior Vice-President and General Counsel of U.S. Trust Company of
California, N.A. (the"Buyer") and UST-LA, Inc., a California corporation
(the"Merger Sub"). I have acted as counsel for Buyer and Merger Sub in
connection with the execution and delivery of the Merger Agreement dated October
__, 1996 (the "Merger Agreement"), among Lilienthal Associates, a California
corporation (the "Company"), John G. Lilienthal, Bruce J. McGregor and Randall
A. Matthews (individually as "Seller" and collectively as "Sellers") and in
connection with the Closing being held today pursuant to Section 1.2 of the
Merger Agreement. This opinion is being delivered to you pursuant to Section 8.3
of the Merger Agreement, and unless the context indicates otherwise, terms
defined in the Merger Agreement and not otherwise defined herein, are used
herein with the meanings so defined.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of the Merger Agreement
and the Employment Agreements dated the date hereof between the Company and each
of the Sellers (the "Employment Agreements").
With respect to certain factual matters, I have relied upon the
representations and warranties made by the parties in the Merger Agreement and
by the officers and representatives of the Buyer delivered thereunder, and upon
statements made to me in discussion with Buyer's management. I have also
examined and relied upon originals or copies, certified or otherwise identified
to my satisfaction, of such corporate records, agreements and other documents
and instruments, and certificates of public officials, and have made such
inquiries of the officers of the Buyer and Merger Sub, and have relied upon such
statements made to me by such officers, and considered such questions of law, as
I have deemed relevant and necessary for purposes of rendering the opinions
expressed below.
For purposes of this opinion, I have assumed the genuineness of all
signatures on original and certified documents and the conformity to original
documents of all documents submitted to me as conformed, photostat or other
copies thereof, and I have assumed the legal capacity of all natural persons
executing such documents, instruments and other papers. I have also assumed that
each entity that has executed such documents, instruments and other papers,
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<PAGE> 75
other than the Buyer and Merger Sub, has the power to enter into and perform all
of such entity's obligations thereunder, that such documents, instruments and
other papers have been duly authorized, executed and delivered by each entity
other than the Buyer and Merger Sub, and that such documents, instruments and
other papers are binding on each party thereto, other than the Buyer and Merger
Sub.
Statements made herein "to the best of my knowledge" or with respect to
matters "known to me" are based solely on information actually known to me and
to those attorneys currently employed with the Buyer and Merger Sub and engaged
in representing the Buyer and Merger Sub in connection with the transactions
contemplated by the Merger Agreement. Except as otherwise expressly indicated, I
have not undertaken any independent investigation of factual matters.
Based upon the foregoing, and subject to the qualifications stated
herein, it is my opinion that:
(a) Buyer is a national banking organization chartered by the
office of the Comptroller of the Currency duly organized,
validly existing and in good standing under the laws of the
State of California, and Merger Sub is a corporation duly
organized, validly existing and in good standing under the
laws of the State of California.
(b) Buyer and Merger Sub have all requisite corporate power and
authority to execute, deliver and perform the Merger Agreement
and all other documents required to be delivered to Sellers at
closing (the "Closing Documents") and the performance by Buyer
and Merger Sub of their respective obligations thereunder,
have been duly and validly authorized and no other corporate
proceedings on the part of Buyer or Merger Sub are necessary
to authorize the Merger Agreement.
(c) The Merger Agreement and the Closing Documents have been duly
executed and delivered by Buyer and Merger Sub, as the case
may be, and constitute the legal, valid and binding
obligations of Buyer and Merger Sub, as the case may be,
enforceable against Buyer and Merger Sub, as the case may be,
in accordance with their respective terms, except as limited
by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally.
(d) The execution and delivery by Buyer and Merger Sub of the
Merger Agreement and the Closing Documents, and the
performance by Buyer and Merger Sub of the transactions
contemplated thereunder, do not and will not conflict with, or
constitute a breach of or a default or permit acceleration of
any obligation under, or create a lien or other encumbrance on
any assets of Buyer or Merger Sub under, (i) any law,
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<PAGE> 76
regulation, rule, judgment, order, writ, injunction or decree
applicable to Buyer or Merger Sub, or (ii) any agreement,
lease, indenture, instrument or contract to which Buyer or
Merger Sub is a party or by which Buyer or Merger Sub is
bound.
(e) No consent, approval or authorization of or filing with any
New York, California or federal governmental authority is
required in connection with the execution and delivery of the
Merger Agreement by Buyer or Merger Sub or for the
consummation by Buyer or Merger Sub of the transactions
contemplated thereby, except for such consents, approvals,
authorizations or filings which have been obtained or made.
(f) The USTC Merger Shares have been duly authorized and, upon
delivery to the Sellers in accordance with the terms of the
Merger Agreement, have been validly issued, fully paid and
nonassessable and free of preemptive rights.
(g) The Registration Statement of US Trust Corporation on Form
S-3, as amended, Registration No. _____________ (as amended,
the "Registration Statement"), has become effective under the
Securities Act of 1933, as amended (the "Act"), and to the
best of my knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are threatened under the Act, and the Registration Statement
and the prospectus contained therein and any amendments or
supplements thereto, as of their respective effective dates,
comply as to form and all material respects with the Act, and
nothing has come to my attention which leads me to believe
that the Registration Statement at the time it became
effective contained, or on the date hereof contains, an untrue
statement of a material fact or omitted or omits a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading.
(h) If the offer and sale are made pursuant to the Registration
Statement, the offer and sale will be duly registered under
the Act.
(i) The offer and sale of the USTC Merger Shares by the Sellers
will be exempt from registration or qualification under the
state securities laws of the State of New York and California,
and all conditions for obtaining such exemptions have been
satisfied.
Furthermore, to the best of my knowledge, there is no pending or
threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental
3
<PAGE> 77
inquiry or investigation, questioning the validity of the Merger Agreement, or
any of the Closing Documents, or any of the transactions contemplated thereby.
The opinions set forth are subject to the following qualifications and
limitations:
(i) I express no opinion as to the effect of the application of
equitable principles (whether considered in a proceeding at
law or in equity) or of bankruptcy, insolvency,
reorganization, moratorium and other laws now or hereafter in
effect affecting the enforcement of creditors' rights and
remedies including those relating to fraudulent conveyances
and transfer;
(ii) Insofar as the opinions expressed above relate to, or are
based upon, the effectiveness of the Merger, they are subject
to the power of the courts to order rescission of the
consummated transactions in such cases as violations of
federal or state securities laws or for failure to satisfy
basic equitable requirements of good faith and fair treatment;
and
(iii) I express no opinion concerning the laws of any jurisdiction
other than the law of the State of New York and California and
the federal law of the United States of America.
This opinion is provided to you as a legal opinion only, and not as a
guarantee or warranty of the matters discussed herein. This opinion has been
rendered as of the date hereof, and I disclaim any obligation to advise you of
any changes in the circumstances, laws or events that you may occur subsequent
to the date hereof, or otherwise to update this opinion.
This letter is furnished to you by me, as counsel to the Buyer and
Merger Sub, and is solely for your benefit in connection with the transactions
contemplated by the Merger Agreement. This opinion may not be relied upon by any
other party, except to the extent that we may expressly and in writing authorize
reliance by other persons.
Very truly yours,
Maureen Scannell Bateman,
Senior Vice President and General Counsel
4
<PAGE> 1
ASSET ACQUISTION AGREEMENT
EXHIBIT 2.2
<PAGE> 2
ASSET ACQUISITION AGREEMENT
Among
FLORENCE FEARRINGTON, INC.,
UNITED STATES TRUST COMPANY OF NEW YORK
and
FLORENCE FEARRINGTON
November 14, 1996
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE ASSET ACQUISITION; CLOSING: DELIVERY................................... 1
1.1. Asset Acquisition................................................................. 1
1.2. Excluded Assets................................................................... 2
1.3. Assumption of Liabilities......................................................... 2
1.4. Acquisition Price................................................................. 3
1.5. Closing........................................................................... 5
1.6. Delivery.......................................................................... 5
(a) By the Buyer........................................................... 5
(b) By the Seller.......................................................... 5
1.7. Assignment of Contracts, Etc...................................................... 6
ARTICLE II
TRANSFER, STAMP AND OTHER TAXES....................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND FEARRINGTON......................... 7
3.1. Organization, Good Standing and Qualification..................................... 7
3.2. Authority......................................................................... 7
3.3. Financial Statements.............................................................. 7
3.4. Absence of Specified Changes...................................................... 8
3.5. Tax Returns and Audits............................................................ 9
3.6. Real Property..................................................................... 9
3.7. Other Tangible Personal Property.................................................. 9
3.8. Copyrights, Trademarks and Patents................................................ 10
3.9. Title to Assets................................................................... 10
3.10. Existing Employment Contracts..................................................... 10
3.11. Insurance Policies................................................................ 11
3.12. Other Contracts................................................................... 11
3.13. Compliance with Laws.............................................................. 11
3.14. Litigation........................................................................ 11
3.15. Assets Sufficient for Conduct of Business......................................... 12
3.16. Agreement Will Not Cause Breach or Violation...................................... 12
3.17. Authority and Consents............................................................ 12
3.18. Interest in Customers, Suppliers, and Competitors................................. 12
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3.19. Corporate Documents............................................................... 13
3.20. Personnel Identification and Compensation......................................... 13
3.21. Powers of Attorney and Bank Accounts.............................................. 13
3.22. Business Addresses................................................................ 13
3.23. Absence of Undisclosed Liabilities................................................ 13
3.24. Full Disclosure................................................................... 13
3.25. Specified Events.................................................................. 14
3.26. Tangible Book Value............................................................... 14
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES.................................... 15
4.1. Organization...................................................................... 15
4.2. Authorization..................................................................... 15
4.3. Consents and Approvals............................................................ 15
4.4. Consideration for the Transferred Assets.......................................... 16
4.5. Reports and Financial Statements.................................................. 16
4.6. Absence of Material Adverse Change................................................ 16
4.7. Employee Benefits................................................................. 16
4.8. Full Disclosure................................................................... 17
ARTICLE V
SELLER'S AND FEARRINGTON'S OBLIGATIONS BEFORE THE CLOSING DATE....................... 17
5.1. Buyer's Access to Premises and Information........................................ 17
5.2. Conduct of Business in Normal Course.............................................. 17
5.3. Preservation of Business and Relationships........................................ 17
5.4. Maintenance of Insurance.......................................................... 17
5.5. Employees and Compensation........................................................ 18
5.6. Controlled Acts................................................................... 18
5.7. Payment of Liabilities and Waiver of Claims....................................... 19
5.8. Existing Agreements............................................................... 19
5.9. Statutory Filings................................................................. 19
5.10. Delivery of Tax Returns........................................................... 19
5.11. Client Consents................................................................... 19
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ARTICLE VI
BUYER'S OBLIGATIONS BEFORE THE CLOSING DATE................................. 20
6.1. Confidentiality................................................................... 20
6.2. Governmental Filings.............................................................. 20
6.3. Best Efforts; Agreement With U.S. Trust........................................... 20
6.4. Consents.......................................................................... 20
6.5. Contact with Clients.............................................................. 20
6.6. Tax-Free Reorganization........................................................... 20
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE................................. 21
7.1. Delivery of Instruments of Transfer............................................... 21
7.2. Accuracy of Seller's and Fearrington's Representations
and Warranties.................................................................... 21
7.3. Absence of Liens.................................................................. 21
7.4. Seller's and Fearrington's Performance............................................ 21
7.5. Opinion of Seller's and Fearrington's Counsel..................................... 21
7.6. Consents.......................................................................... 21
7.7. Approval of Documentation......................................................... 22
7.8. Employment Agreements............................................................. 22
7.9. Condition of Assets............................................................... 22
7.10. Certificates of the Secretary of Seller........................................... 22
7.11. Delivery of Client Consents....................................................... 22
7.12. No Injunction..................................................................... 22
7.13. No Government Proceeding or Litigation............................................ 22
7.14. No Statute, Rule or Regulation.................................................... 22
7.15. Absence of Litigation............................................................. 23
7.16. Doctor's Letter................................................................... 23
7.17. Tangible Net Worth................................................................ 23
7.18. Escrow Agreement.................................................................. 23
7.19. Letter Agreement of Fearrington's Spouse.......................................... 23
7.20. Best Efforts to Obtain Certain Consents........................................... 23
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ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S
AND FEARRINGTON'S PERFORMANCE........................................ 24
8.1. Delivery of Acquisition Price and Instruments of
Assumption........................................................................ 24
8.2. Accuracy of Buyer's Representations and Warranties................................ 24
8.3. Buyer's Performance............................................................... 24
8.4. Agreement to Deliver and Register Shares.......................................... 24
8.5. Escrow Agreement.................................................................. 24
8.6. Opinion of Counsel Regarding Tax-Free Treatment................................... 24
8.7. Opinion of Buyer's Counsel........................................................ 24
8.8. Consents.......................................................................... 25
8.9. Employment Agreement.............................................................. 25
8.10. Benefit Plans..................................................................... 25
8.11. No Injunction..................................................................... 25
8.12. No Government Proceeding or Litigation............................................ 25
8.13. No Statute, Rule or Regulation.................................................... 25
8.14. Absence of Litigation............................................................. 25
8.15. Delivery of Client Consents....................................................... 26
ARTICLE IX
SELLER'S, FEARRINGTON'S AND BUYER'S OBLIGATIONS AFTER THE CLOSING.................... 26
9.1. Preservation of Goodwill.......................................................... 26
9.2. Use of Name....................................................................... 27
9.3. Indemnification................................................................... 27
(a) Indemnification by Fearrington......................................... 27
(b) Limitations on Indemnification by the Seller
and Fearrington........................................................ 27
(c) Indemnification by Buyer............................................... 28
(d) Limitations on Indemnification by Buyer................................ 28
(e) Procedure for Establishment of Indemnifiable
Claim.................................................................. 29
(i) Matters Involving Third Parties. ................................ 29
(ii) Non-Third Party Claims........................................... 30
9.4. Right to Cure Defaults............................................................ 30
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9.5. Availability of Benefit Plans..................................................... 31
9.6. Preservation of Tax-Free Reorganization........................................... 31
9.7. Payment of Certain Indebtedness................................................... 31
9.8. Returns for Periods Prior to Closing.............................................. 31
9.9. Access to Books and Records....................................................... 32
9.10. Agreement to Deliver and Register Shares.......................................... 32
9.11. Adjustments to Closing Date Balance Sheet......................................... 32
ARTICLE X
COSTS.................................................... 33
10.1. Finder's or Broker's Fees......................................................... 33
10.2. Expenses.......................................................................... 33
ARTICLE XI
FORM OF AGREEMENT.............................................. 34
11.1. Headings.......................................................................... 34
11.2. Entire Agreement; Modification; Waiver............................................ 34
11.3. Counterparts...................................................................... 34
ARTICLE XII
PARTIES................................................... 34
12.1. Parties in Interest............................................................... 34
12.2. Assignment........................................................................ 34
ARTICLE XIII
TERMINATION................................................. 34
13.1. Conditions Permitting Termination................................................. 35
13.2. Defaults Permitting Termination................................................... 35
ARTICLE XIV
NOTICES................................................... 35
ARTICLE XV
GOVERNING LAW; VENUE............................................. 36
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ARTICLE XVI
MISCELLANEOUS................................................ 36
16.1. Announcements..................................................................... 36
16.2. References........................................................................ 36
16.3. Currency.......................................................................... 36
EXHIBITS
Exhibit 1.4(b) Escrow Agreement
Exhibit 1.6(a) Assignment and Assumption Agreement
Exhibit 1.6(b) Bill of Sale
Exhibit 7.5 Opinion of Richards & O'Neil, LLP
Exhibit 7.8 Employment Agreement
Exhibit 7.11 Form of Client Consent Letter
Exhibit 7.19 Letter Agreement of Fearrington's Spouse
Exhibit 8.4 Agreement to Deliver and Register Shares
Exhibit 8.7 Opinion of Managing Director and General Counsel of
Buyer
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<PAGE> 9
ASSET ACQUISITION AGREEMENT
This Asset Acquisition Agreement ("Agreement"), dated November
14, 1996, among United States Trust Company of New York, a banking institution
possessing banking and trust powers chartered under the laws of New York (the
"Buyer"), Florence Fearrington, Inc., a New York corporation (the "Seller") and
Florence Fearrington ("Fearrington"), being the only shareholder of the Seller.
W I T N E S S E T H :
WHEREAS, the Seller desires to transfer, sell, convey, assign
and deliver to the Buyer, and the Buyer desires to acquire from the Seller
substantially all of the assets, properties and business and substantially all
of the liabilities of the Seller, upon the terms hereinafter set forth (the
"Asset Acquisition");
WHEREAS, the parties intend the Asset Acquisition to qualify
as a tax-free reorganization within the meaning of Section 368 (a)(1)(C) of the
Internal Revenue Code of 1986, as amended, and Fearrington and the Seller desire
to consummate the Asset Acquisition and the other transactions contemplated
hereby on such basis;
WHEREAS, all the issued and outstanding shares of the Buyer's
capital stock are currently held beneficially and of record by U.S. Trust
Corporation, a New York corporation ("U.S. Trust");
WHEREAS, all the issued and outstanding shares of the Seller's
capital stock are currently held beneficially and of record by Fearrington.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations, and warranties contained in this Agreement, the
parties agree as follows:
ARTICLE I
THE ASSET ACQUISITION; CLOSING: DELIVERY
1.1. Asset Acquisition. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined) the Seller shall sell,
assign, convey and deliver to the Buyer, and the Buyer shall acquire and accept
from the Seller, all of the Seller's right, title and interest in and to all of
the Transferred Assets (as hereinafter defined). "Transferred Assets" shall mean
all of the properties and rights of Seller, wherever located and whether or not
reflected on the books and records of Seller, other than Excluded Assets (as
hereinafter defined) including, without limitation or duplication, the
following:
<PAGE> 10
(a) cash or cash equivalents (including marketable securities)
of the Seller on hand or in bank accounts and all certificates of deposit of the
Seller on and as of the Closing Date (as hereinafter defined);
(b) the accounts receivable of the Seller;
(c) all of the Seller's right, title and interest in and to
the leaseholds and other real property, plant and equipment owned, held, leased
or otherwise used by the Seller;
(d) all of the Seller's right, title and interest in and to
all contracts and all other agreements, including investment advisory
agreements;
(e) all fixtures, equipment and other personal property;
(f) all books, records and any confidential information which
has been reduced to writing relating to the Seller's business;
(g) computer hardware, computer software, computer software
documentation, including source code, and systems documentation used by the
Seller in its business;
(h) all prepaid expenses, advances and deposits; and
(i) all goodwill associated with the Seller's business.
1.2. Excluded Assets. Notwithstanding anything to the contrary
contained herein, including Section 1.1 above, the Seller shall retain all of
its right, title and interest in and to, and shall not transfer to the Buyer,
any asset of the Seller set forth below (collectively, the "Excluded Assets"):
(a) any proceeds paid or payable in connection with this
Agreement, including the USTC Shares (as hereinafter defined);
(b) the Seller's minute books, general ledger and books of
original entry, stock transfer books and tax returns (together with books and
records pertaining to any tax returns heretofore or hereafter filed or required
to be filed by the Seller); and
(c) all of the Seller's federal and state registrations and
licenses under which the Seller is registered and authorized to act as an
investment advisor.
1.3. Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, on and as of the Closing Date, the Buyer shall
assume and agree to pay, perform,
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discharge and satisfy when due all of the Seller's debts, liabilities,
commitments or obligations of any kind, character or nature whatsoever, whether
known or unknown, secured or unsecured, accrued, fixed, absolute, contingent or
otherwise, whether due or to become due and whether or not reflected on the
books, records or Financial Statements (as hereinafter defined) of the Seller
(collectively, the "Liabilities") including, without limitation or duplication,
the following (collectively, the "Assumed Liabilities"):
(a) all Liabilities of the Seller under all leases of real or
personal property and all Liabilities and obligations secured by, or liens with
respect to, all real property, personal property and other assets of the Seller;
(b) all Liabilities of any kind or nature with respect to the
employees of the Seller;
(c) all Liabilities of the Seller, whether for payment,
performance or otherwise, under all contracts and other agreements, including
investment advisory agreements;
(d) all Liabilities of the Seller, including reasonable
attorneys' fees and expenses, arising with respect to any suits, claims,
proceedings or actions on any account whatsoever, made or commenced prior to, on
or after the Closing Date (including those instituted by any federal, state or
local governmental agency or authority) relating to the conduct of Seller's
business prior to the Closing Date;
(e) all Liabilities of the Seller (but not of Fearrington) for
unpaid federal, state or local income, franchise or other taxes (including any
interest, penalties, additions, assessments or deferred liability with respect
thereto, whether disputed or not) with respect to periods ending on or prior to
the Closing Date; and
(f) any liability, obligation, debt, expense or commitment of
the Seller arising out of or in connection with the negotiation and preparation
of this Agreement and the consummation and performance of the transactions
contemplated hereby, including, without limitation, any income, transfer, sales,
use, stamp or other tax liability.
1.4. Acquisition Price.
(a) The acquisition price for the Asset Acquisition shall be
that number of shares of common stock of U.S. Trust ("Common Shares") that is
the quotient of (i) 1.75 x Annualized Revenues (as hereinafter defined) (the
"Asset Acquisition Consideration"), divided by (ii) an amount equal to the
Average Closing Price (as hereinafter defined). The U.S. Trust Common Shares to
be so issued are sometimes referred to herein as "USTC Shares."
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For purposes of this Agreement, (x) "Annualized Revenues"
means, for all client accounts of the Seller, the product of (I) assets under
management for each such account on the Measurement Date (as hereinafter
defined) and (II) the annual advisory fee for such account (expressed as a
percentage of assets under management in such account) on the Measurement Date;
(y) "Measurement Date" means five days prior to the Closing Date or such other
date as the parties may agree; and (z) "Average Closing Price" means the average
of the closing sales price for U.S. Trust's Common Shares as quoted on the
Nasdaq National Market ("NMS") for the ten NMS trading days ending two trading
days prior to the Closing Date; provided, however, that solely for purposes of
this Section 1.4, if the Average Closing Price is less then $45, it shall be
deemed to be $45 and if the Average Closing Price is greater than $70, it shall
be deemed to be $70. (If on any of the ten NMS trading days ending two days
prior to the Closing Date there are no reported sales of U.S. Trust's Common
Shares, then such trading days shall be counted as one of the ten trading days
but the Average Closing Price shall be calculated without regard to any price
with respect to such trading day.) For purposes of this Section 1.4 both the
identity of clients and the Annualized Revenues attributable to their accounts
shall be determined by the parties based upon an examination of the Seller's
records. If the parties cannot agree on such determination, the identity of
clients and the Annualized Revenues attributable to their accounts shall be
determined (i) jointly by two accounting firms, one selected by the Seller and
one selected by the Buyer, or, (ii) if the two accounting firms cannot agree on
such determination, by a third accounting firm selected by the original two
accounting firms, whose determination shall be final and binding upon the
parties. The cost of such accounting firms shall be borne by the Buyer unless
the final determination made pursuant to clause (i) or (ii), as the case may be,
reveals that the Seller's determination of Annualized Revenues with which the
Buyer did not agree is more than one percent in error, in which event the cost
of the accounting firms shall be shared equally by the Buyer and the Seller.
(b) If on or prior to the Closing Date, clients of the Seller
whose advisory agreements provide for the payment of annual advisory fees
constituting all of Annualized Revenues shall have delivered a written consent
to the assignment of their advisory agreements to the Buyer (a "Consent"), then
all of the USTC Shares shall be delivered by the Buyer to the Seller (or if the
Seller so designates, to Fearrington) on the Closing Date. If on or prior to the
Closing Date, clients of the Seller whose advisory agreements provide for the
payment of annual advisory fees constituting at least 75%, but less than all of
Annualized Revenues shall have delivered Consents, then on the Closing Date the
Buyer shall deliver to the Seller (or if the Seller so designates, to
Fearrington) a percentage of the USTC Shares which equals to the percentage of
the dollar amount of Annualized Revenues represented by clients who have so
delivered Consents, and the remaining USTC Shares (the "Escrow Shares") shall be
delivered to U.S. Trust, as Escrow Agent (the "Escrow Agent") to be held in
accordance with the Escrow Agreement substantially in the form of Exhibit 1.4(b)
attached hereto.
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(c) On the 90th day after the Closing Date, the Escrow Shares
shall be delivered by the Escrow Agent as follows: (i) there shall be delivered
to the Seller a percentage of the Escrow Shares equal to the quotient, expressed
as a percentage, of (A) the Annualized Revenues represented by advisory
agreements of clients of the Seller who have given their Consents after the
Closing Date and on or prior to 2:00 p.m. on the 90th day after the Closing
Date, divided by (B) the Annualized Revenues represented by advisory agreements
of clients of the Seller who had not given their Consents on or prior to the
Closing Date; and (ii) the balance of the Escrow Shares shall be delivered to
U.S. Trust.
1.5. Closing. Subject to the provisions hereof, the closing of
the Asset Acquisition (the "Closing") shall take place (i) at the office of the
Buyer at 114 West 47th Street, New York, New York at 9:00 A.M., local time, on
the earlier of March 1, 1997, or on the fifth business day following the day on
which the last to be fulfilled or waived of the conditions to the Closing hereof
shall be fulfilled or waived, or (ii) at such other time and place and/or on
such later date as the parties may agree in writing. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date." If all
conditions shall have been fulfilled or waived, the parties hereto shall take
any and all other lawful actions necessary to cause the Asset Acquisition to
become effective consistent with the terms of this Agreement.
1.6. Delivery.
(a) By the Buyer. At the Closing, the Buyer shall deliver (i)
to the Seller a stock certificate representing that number of USTC Shares
calculated in accordance with Section 1.4(b); (ii) to the Escrow Agent a stock
certificate representing the number of Escrow Shares (the USTC Shares, when
delivered to the Seller or Escrow Agent, as the case may be, pursuant to clause
(i) or (ii), shall be duly authorized, validly issued, fully paid and
non-assessable and at the time of issuance shall be free and clear of all liens,
claims, encumbrances, security interests and rights of redemption (collectively,
"Liens")); (iii) to the Seller such agreements, undertakings and other good and
sufficient instruments of assumption (including, without limitation, an
Assignment and Assumption Agreement, substantially in the form attached hereto
as Exhibit 1.6(a)) and other good and sufficient agreements, undertakings
instruments of assumption, in form and substance reasonably satisfactory to the
Seller, Fearrington and its or her counsel, as shall be effective to cause the
Assumed Liabilities to be binding upon the Buyer; and (iv) such other documents,
instruments and certificates as may be reasonably requested by the Seller,
Fearrington, or its or her counsel to effectuate the transactions contemplated
by this Agreement. The Buyer shall not be relieved of its obligations under this
Section 1.6 by reason of the failure or inability of U.S. Trust to issue or
deliver the USTC Shares to the Seller, the Buyer or the Escrow Agent.
(b) By the Seller. At the Closing, the Seller shall deliver to
the Buyer (i) such bills of sale, assignments (including, without limitation, a
Bill of Sale substantially in the
-5-
<PAGE> 14
form attached hereto as Exhibit 1.6(b) and an Assignment and Assumption
Agreement substantially in the form attached hereto as Exhibit 1.6(a)) and other
good and sufficient instruments of transfer, in form and substance reasonably
satisfactory to the Buyer and its counsel, as shall be effective to vest in the
Buyer all of the Seller's right, title and interest in, to and under the
Transferred Assets; and (ii) such other documents, instruments and certificates
as may be reasonably requested by the Buyer or its counsel to effectuate the
transactions contemplated by this Agreement.
1.7. Assignment of Contracts, Etc. Anything contained herein
to the contrary notwithstanding, this Agreement shall not constitute an
agreement to transfer or assign any claim, contract, lease, instrument, order or
any claim or right, or any benefit arising thereunder or resulting therefrom
(collectively, "Restricted Contracts"), if an attempted transfer or assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof. If such consent is not obtained, the Seller will cooperate with the
Buyer in any reasonable arrangement designed to provide for the Buyer the
benefits under any such Restricted Contract, including without limitation
enforcement for the benefit of the Buyer of any and all rights of the Seller
against a third party thereto arising out of the breach or cancellation by such
third party; provided, however, that no such arrangement shall obligate the
Seller to incur any material cost or liability in connection with the making of
any such arrangement or under any Restricted Contract with respect to which such
an arrangement is made. Any transfer or assignment to the Buyer of any property
or property rights or any contract or agreement which shall require the consent
or approval of any third party shall be made subject to such consent or approval
being obtained. Notwithstanding the failure of a third party to consent to the
transfer or assignment of any Restricted Contract to the Buyer, if the Buyer
receives any payment, use of property or other benefit under any Restricted
Contract, the Buyer shall assume and discharge any and all liabilities and
obligations of the Seller under such Restricted Contract.
ARTICLE II
TRANSFER, STAMP AND OTHER TAXES
The Buyer shall pay all transfer, stamp and other taxes, if
any, related to the transfer of the Transferred Assets hereunder and the
issuance and delivery of the USTC Shares. The amount of any such taxes shall not
be considered a liability of the Seller for purposes of the Closing Date Balance
Sheet (as defined in Section 7.17 hereof) and the Final Closing Date Balance
Sheet (as defined in Section 9.11 hereof).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND FEARRINGTON
Subject to that certain Disclosure Letter ("DL") dated the
date hereof executed by the Seller and Fearrington, the Seller and Fearrington
hereby, jointly and severally, represent and warrant to the Buyer (which
representations and warranties constitute the basis upon which the Buyer has
been induced to enter into and perform this Agreement) as follows:
3.1. Organization, Good Standing and Qualification. The Seller
is a corporation validly existing and in good standing under the laws of the
State of New York, has all necessary corporate powers, licenses and permits to
own its properties and to carry on its business as now owned and operated by it
and is not qualified as a foreign corporation in any other jurisdiction. Annexed
to the DL are true, correct and complete copies of the Seller's Certificate of
Incorporation and By-laws as in full force and effect on the date hereof.
3.2. Authority. The Seller has, and at the Closing will have,
full corporate power and authority to enter into this Agreement and to perform
all of its obligations hereunder. Fearrington has, and at the Closing will have,
full legal capacity, to enter into this Agreement in the manner provided herein
and to perform all of her obligations hereunder. This Agreement has been duly
executed and delivered by Fearrington and is a legal, valid and binding
agreement of Fearrington enforceable against her in accordance with its terms
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights generally
and to general principles of equity, whether asserted in a proceeding in equity
or at law. This Agreement has been duly authorized, executed and delivered by
the Seller, and is a valid, legal and binding agreement of the Seller,
enforceable against it in accordance with its terms subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of relating to or
affecting creditors' rights generally and to general principles of equity,
whether asserted in a proceeding in equity or at law.
3.3. Financial Statements. Attached to the DL are the balance
sheets, statements of operations and retained earnings (deficit) and statements
of cash flows of the Seller as of March 31, 1996, (the "Last Fiscal Year End")
as well as the balance sheets, statements of operations and retained earnings
(deficit) and statements of cash flows of the Seller for the years ended March
31, 1995, 1994, 1993, and 1992 (the foregoing financial statements being
referred to herein as the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently followed by the Seller throughout the periods indicated, and fairly
present the financial condition of the Seller as of the respective dates of the
balance sheets included in the Financial Statements and the results of its
operations for the respective periods indicated.
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3.4. Absence of Specified Changes. Except as expressly
contemplated by this Agreement, since the Last Fiscal Year End there has not
been any:
(a) Transaction by the Seller except in the ordinary course of
business as conducted on that date except for this Agreement and the
transactions contemplated hereby;
(b) Capital expenditure by the Seller exceeding $10,000;
(c) Material adverse change in the financial condition,
liabilities, assets or business of the Seller;
(d) Destruction, damage to, or loss of any assets of the
Seller (whether or not covered by insurance) that materially and adversely
affects the financial condition, liabilities, assets or business of the Seller;
(e) Any loss of accounts materially and adversely affecting
the financial condition, liabilities, assets or business of the Seller;
(f) Change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) by the Seller;
(g) Revaluation by the Seller of any of its assets;
(h) Increase of more than 5% in the aggregate salaries or
other compensation payable or to become payable by the Seller to all of the
employees of the Seller as a group, other than Fearrington, or the declaration,
payment, or commitment or obligation of any kind for the payment by the Seller
of a bonus or other additional salary or compensation which would result in an
increase of more than 5% in the aggregate compensation payable or to become
payable by the Seller to all of the employees of the Seller, other than
Fearrington, as a group;
(i) Sale or transfer of any asset of the Seller, except in the
ordinary course of business;
(j) Execution, creation, amendment or termination of any
material contract, agreement, or license to which the Seller is a party, except
in the ordinary course of business;
(k) Indebtedness incurred or guaranteed by the Seller that
would, if outstanding on the Closing Date, be recorded in accordance with
generally accepted accounting principles on its balance sheet;
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<PAGE> 17
(l) Waiver or release of any material right or claim of the
Seller, except in the ordinary course of business;
(m) Mortgage, pledge, or other encumbrance of any material
asset of the Seller except for liens (i) of mechanics, materialmen and landlords
incurred in the ordinary course of business for sums not overdue and not in
excess of $5,000 in the aggregate; (ii) incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance, or
other forms of governmental insurance or benefits; (iii) for taxes, assessments
or other governmental charges or levies which are not at the time delinquent or
are subject to an effective extension for the filing of the related tax returns
or reports (if applicable) granted by the appropriate authorities;
(n) Other event or condition of any character that has a
material and adverse effect on the financial condition, business or assets of
the Seller; or
(o) Agreement by the Seller to do any of the things described
in the preceding clauses (a) through (n).
3.5. Tax Returns and Audits. The Seller has duly and timely
filed all federal, state and local tax returns and reports required by law to
have been filed on or prior to the date of this Agreement, and all taxes,
assessments, fees, penalties and other governmental charges in respect of the
Seller and upon its properties, assets, income and franchises which are due and
payable have been paid or are adequately provided for in the Financial
Statements or on the books and records of the Seller. There is no tax,
withholding deficiency, fee, assessment or governmental deficiency which has
been, or which the Seller or Fearrington reasonably believes will be, asserted
against the Seller. There are no present disputes with, or audits by, any
governmental authority as to any taxes, assessments, fees, penalties or other
governmental charges of any nature payable by the Seller nor is the Seller
awaiting the outcome of any audit. There are no agreements or applications by
the Seller for any extension of time for the assessment or payment of any taxes
nor has it executed any document to extend the time in which a tax may be
assessed or collected.
3.6. Real Property. The Seller owns no real property. The DL
contains true, correct and complete copies of each lease covering any premises
leased by the Seller. All such leases are valid and in full force, and there
does not exist any default or event that with notice or lapse of time, or both,
would permit the landlord to terminate any such lease.
3.7. Other Tangible Personal Property. The furniture,
equipment, vehicles and other property described in the DL (collectively, the
"Equipment") constitute all the items of tangible personal property having a
book value of $700 or more, owned by, leased by or used by the Seller in
connection with its business.
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None of the Equipment used by the Seller in connection with
its business is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement, is subject to any
lien (other than those described in Section 3.4(m)), or is located other than in
the possession of the Seller.
3.8. Copyrights, Trademarks and Patents. The Seller owns no
registered copyrights, trademarks or patents. To the best knowledge of
Fearrington, (i) no copyrighted, trademarked or patented material, other than
such material that is sold at retail or is otherwise generally commercially
available, is necessary for the operation of the business of the Seller; and
(ii) the Seller is not infringing the copyrights, trademarks or patents of any
other person.
3.9. Title to Assets. The Seller has a good and marketable
title to all of the Transferred Assets (including, without limitation, all the
assets reflected in the Financial Statements). All of the Transferred Assets are
free and clear of mortgages, liens, pledges, charges, encumbrances, equities,
claims, easements, rights of way, covenants, conditions and restrictions
whatsoever, except for (i) those disclosed in the Financial Statements; (ii)
those disclosed in the DL; (iii) liens of mechanics, materialmen and landlords
incurred in the ordinary course of business for sums not overdue (which sums do
not exceed $5,000 in the aggregate), or incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance, or
other forms of governmental insurance or benefits, or for taxes, assessments or
other governmental charges or levies which are not at the time delinquent or are
subject to an effective extension for the filing of the related tax returns or
reports (if applicable) granted by the appropriate authorities and (iv) possible
minor matters that, in the aggregate, do not exceed $10,000 and do not
materially detract from or interfere with the present or intended use of any of
these assets, nor materially impair the Seller's business operations
(collectively, the "Permitted Liens"). All tangible personal property of the
Seller necessary for the operation of its business is in operating condition and
repair, ordinary wear and tear excepted. The Seller is in possession of all
premises leased to it from others. Neither any officer, director or employee of
the Seller, nor any spouse, child, parent or sibling of any of these persons, or
any other relative of any of these persons, owns, or has any interest, directly
or indirectly, in any of the real or personal property owned by or leased to the
Seller.
3.10. Existing Employment Contracts. The DL sets forth a list
of all written employment contracts and collective bargaining agreements, and
all pension, retirement, disability, bonus, profit-sharing, deferred
compensation, incentive stock option, medical, dental or other health insurance
plans, life insurance or other death benefit plans, severance plans or other
agreements or arrangements or plans providing for employee remuneration or
benefits to which the Seller is a party or by which the Seller is bound and
under which employees or former employees of the Seller are eligible to
participate or derive a benefit (collectively, "Employee Plans"), and copies of
any Employee Plans have been provided to the Buyer at least 7 days prior to the
execution of this Agreement. There is no pending or threatened labor
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dispute, strike, or work stoppage materially affecting the Seller's business.
The Seller is not indebted to Fearrington or to any director, officer or
employee except for amounts due under the Employee Plans or as salaries,
expenses and bonuses for the Seller's current fiscal year. The Seller has no
Employee Plans other than those listed in the DL and each Employee Plan is in
full force and effect. All Employee Plans may be terminated upon 60 days prior
written notice to participants without any additional liability to any party
hereto. The Seller is in compliance in all material respects with all applicable
laws governing such Employee Plans. There are no actions, audits, suits or
claims pending (other than routine claims for benefits) arising out of the
Employee Plans.
3.11. Insurance Policies. The DL includes a summary
description of all insurance policies held by the Seller. All such policies are
in the respective principal amounts set forth in the DL.
3.12. Other Contracts. Set forth in the DL is a true and
correct list of every contract (other than contracts with current clients) to
which the Seller is a party which (i) is reasonably expected to result in annual
payments by or to the Seller in excess of $2,500 or cumulative payments in
excess of $5,000 and is not cancelable by the Seller upon notice of 30 days or
less; or (ii) could be reasonably expected to result in annual payments by or to
the Seller in excess of $25,000 or cumulative payments in excess of $50,000. The
Seller heretofore has delivered or made available to the Buyer true and correct
copies of all such contracts. There is no material default or event that with a
notice or lapse of time, or both, would constitute a default by the Seller or,
to the best knowledge of Fearrington, by any other party to any of the contracts
listed in the DL. Neither Fearrington nor the Seller has received notice that
any party to any of the agreements listed in the DL intends to cancel or
terminate any of such agreements or to exercise or not exercise any options
under any such agreements.
3.13. Compliance with Laws. The Seller has complied with all,
and is not in violation of any, applicable federal, state, or local statutes,
laws, and regulations affecting its properties, or the operation or conduct of
its business, or the qualification of any employee of the Seller to give
investment advice or otherwise to act on behalf of the Seller in accordance with
his or her present or past duties, the noncompliance or violation of which would
have a material adverse effect on the Seller.
3.14. Litigation. There is no suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation or
disciplinary investigation pending or, to the knowledge of Fearrington,
threatened against or affecting the Seller, or the business, assets, liabilities
or financial condition of the Seller that would, individually or in the
aggregate, have a material adverse effect on the financial condition, operations
or business of the Seller. Fearrington has furnished or made available to the
Buyer copies of all relevant court papers and other documents relating to the
matters set forth in the DL as pertains to this
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Section 3.14. Neither the Seller nor Fearrington is in default with respect to
any order, writ, injunction, or decree of any federal, state, local, or foreign
court, department, agency, or instrumentality. The Seller is not presently
engaged in any legal action or arbitration proceeding to recover moneys due to
it or damages sustained by it or to obtain other relief. Since January 1, 1992,
no written charges of misconduct have been brought against the Seller or against
any of its employees in their capacity as employees of the Seller, and the
Seller has not been informed that it is the subject of any investigation or
audit by any state or federal authority. No current employee or, to the best
knowledge of Fearrington, former employee of the Seller, in his or her capacity
as an employee of the Seller, has been the subject of any formal disciplinary
proceeding by any governmental agency.
3.15. Assets Sufficient for Conduct of Business. The assets
and property presently owned, leased or used by the Seller and to be transferred
to the Buyer hereunder constitute all of the assets and property necessary for
the Seller to conduct its business as presently conducted.
3.16. Agreement Will Not Cause Breach or Violation. Neither
the entry into this Agreement nor the consummation of the transactions
contemplated hereby will result in or constitute any of the following: (i) a
default or an event that, with notice or lapse of time or both, would be a
default, breach, or violation of the certificate of incorporation or bylaws of
the Seller or a material default, breach or violation of any shareholders'
agreement, lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other agreement, instrument,
or arrangement to which Fearrington, or the Seller is a party or by which
Fearrington, the Seller, or her or its assets is or are bound; (ii) an event
that would permit any party to terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of the Seller or of Fearrington
in an amount in excess of $5,000 individually or in excess of $10,000 in the
aggregate; (iii) the creation or imposition of any material lien, charge, or
encumbrance on any of the assets of the Seller; or (iv) the violation of any
law, regulation, ordinance, judgment, order, or decree applicable to or
affecting the Seller, or its assets which violation would have a material
adverse effect on the Seller.
3.17. Authority and Consents. Except for the consents of
clients contemplated by Section 7.11 hereof, no approvals or consents of or
notices to or filings with any persons, governmental agency or governmental body
are necessary on the part of the Seller or Fearrington in connection with the
execution, delivery or performance of this Agreement.
3.18. Interest in Customers, Suppliers, and Competitors.
Neither the Seller, nor any of its officers or directors nor any spouse, parent,
child or sibling, or to the best knowledge of Fearrington, any other relative,
of any of them, has more than 5% direct or
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indirect interest in any competitor, supplier, or customer of the Seller or in
any person with whom the Seller is doing business.
3.19. Corporate Documents. Fearrington has made available to
the Buyer for its examination its minute books, stock books and stock records
for the Seller. The minute books, stock books and stock records of the Seller
are complete and accurate in all material respects, and the signatures therein
are the true signatures of the persons purporting to have signed them, and all
material corporate actions taken by the directors and stockholders of the Seller
since its organization have been duly authorized or subsequently ratified as
necessary.
3.20. Personnel Identification and Compensation. The DL sets
forth a list of the names and addresses of all current officers, directors,
employees and consultants of the Seller, stating the rates of compensation
payable to each. No other person, except accountants, auditors, attorneys and
investment managers, regularly performs compensable services for the Seller.
3.21. Powers of Attorney and Bank Accounts. The DL lists (i)
the names and addresses of all persons holding a power of attorney on behalf of
the Seller; and (ii) the names and addresses of all banks or other financial
institutions in which the Seller has an account, deposit, or safe-deposit box,
with the names of all persons authorized to draw on these accounts or deposits
or who have access to these boxes.
3.22. Business Addresses. The DL lists each current and former
address of the Seller for the past five years. During the past five years, the
Seller has not conducted business at or from any other address, and has not
engaged in or solicited business in any state other than those designated in the
DL.
3.23. Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against in the Financial Statements and except as
to those liabilities or obligations incurred in the ordinary course of business,
since the date of the most recent Seller's balance sheet attached to the DL, the
Seller has not incurred any liabilities or obligations, whether due or to become
due, absolute or contingent, accrued or unaccrued, including without limitation
liabilities for taxes or interest or penalties thereon, which would be required
to be reflected in a balance sheet of the Seller or the notes thereto prepared
in accordance with generally accepted accounting principles consistently
applied.
3.24. Full Disclosure. None of the representations and
warranties made by the Seller or Fearrington or made in the DL or any
certificate furnished or to be furnished pursuant to the terms of this Agreement
by the Seller or Fearrington, or on their or each of their behalf, contains or
will contain any untrue statement of a material fact, or omits to state any
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
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<PAGE> 22
3.25. Specified Events.
(a) None of the current clients of the Seller has advised the
Seller or Fearrington that it intends to cease doing business with the Seller,
or to materially reduce the amount of the business that such client is presently
doing with the Seller.
(b) To the best knowledge of Fearrington, Fearrington has no
health problems which would materially impair her abilities to fulfill her
duties under her Employment Agreement, or to complete the full three-year term
of such Agreement, and agrees to deliver at Closing a letter from her doctor to
such effect.
3.26. Tangible Book Value. The tangible net worth of the
Seller as of the Closing, based on generally accepted accounting principles
consistently applied, shall not be less than $50,000.
Notwithstanding anything contained in this Article III to the
contrary, from time to time prior to the Closing, the Seller and Fearrington may
furnish the Buyer information supplementing or amending the representations,
warranties and/or disclosures in this Agreement (including, without limitation,
the DL) in order to make the information set forth therein timely, complete and
accurate ("Additional Information") by delivering such Additional Information to
Mr. Richard E. Brinkmann, Senior Vice President and Comptroller of the Buyer,
and Mr. Ronald A. Schwartz, Vice President of the Buyer. If the Seller and
Fearrington deliver to the Buyer Additional Information and such Additional
Information indicates a material adverse change in the Seller's financial
condition, the Seller's business or prospects, the Buyer may terminate this
Agreement if the Seller and Fearrington receive prior written notice from the
Buyer within ten (10) business days after the Buyer's receipt of the Additional
Information. If the Buyer does not so terminate this Agreement, the
representation or warranty of the Seller or Fearrington which is affected by
such Additional Information shall be deemed to have been amended accordingly. If
a document or matter is disclosed in a representation or warranty made herein by
the Seller or Fearrington or is listed in the DL delivered on behalf of the
Seller and Fearrington, such disclosure or listing shall suffice, without
specific repetition and with or without cross reference, as a disclosure for
purposes of any other representations and warranties made herein by the Seller
and Fearrington. If, as of the Closing, any disclosures listed in the DL have
been supplemented or amended by Additional Information, then the Seller or
Fearrington shall deliver to the Buyer at the Closing a final version of the DL
incorporating all such Additional Information.
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ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer hereby represents and warrants to the Seller and
Fearrington as follows:
4.1. Organization. U.S. Trust is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York.
The Buyer is a banking institution possessing banking and trust powers duly
organized, validly existing and in good standing under the laws of the State of
New York. Both U.S. Trust and the Buyer have all requisite corporate (or, in the
case of the Buyer, banking) power and authority to own, lease and operate their
properties and to carry on their respective business as it is now being
conducted. The Buyer has previously delivered true, correct and complete copies
of the Buyer's Certificate of Incorporation and By-Laws and U.S. Trust's charter
and By-Laws as in full force and effect on the date hereof. The Buyer and U.S.
Trust are duly qualified to do business and are in good standing in each
jurisdiction where the character of property owned or leased by it or the nature
of its activities makes such qualification necessary, except those jurisdictions
where failure to be so qualified would not individually or in the aggregate have
a material adverse effect on the Buyer's or U.S. Trust's business.
4.2. Authorization. The Buyer has, and at the Closing will
have, full legal right and power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by the Buyer's Board of Directors
and no other corporate proceedings on the part of the Buyer is necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Buyer and constitutes a
valid, legal and binding agreement of the Buyer, enforceable against it in
accordance with its terms except that the enforceability of such agreement is
subject to bankruptcy, insolvency, reorganization, and similar laws of general
applicability relating to or affecting creditors' rights.
4.3. Consents and Approvals. The execution and delivery of
this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not: (i) violate any provision of the
Certificate of Incorporation or By-Laws of the Buyer; (ii) violate or conflict
with any statute, rule, regulation, ordinance, writ, injunction, order or decree
of any public body or authority by which the Buyer or any of its respective
properties or assets may be bound; (iii) require any declaration or filing with,
or permit, consent, authorization, order, license, certificate or other form of
approval of, any public body or authority or any other person or entity; or (iv)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of
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<PAGE> 24
any mortgage, lease, note, bond, mortgage, indenture, guarantee, license,
franchise, permit, agreement or other instrument or obligation to which the
Buyer is a party, or by which it or any of its respective properties or assets
may be bound, excluding from the foregoing clauses (ii), (iii) and (iv)
violations, breaches and defaults which, and filings, permits, consents and
approvals the absence of which, either individually or in the aggregate, would
not have a material adverse effect on the business, operations, or financial
condition of the Buyer.
4.4. Consideration for the Transferred Assets. The USTC Shares
to be issued in connection with the Asset Acquisition will be duly authorized,
validly issued, fully paid and nonassessable and free and clear of all Liens and
preemptive rights. The certificates representing such shares will be in due and
proper form.
4.5. Reports and Financial Statements. The Buyer has
previously furnished to the Seller true and complete copies of U.S. Trust's (i)
Annual Reports on Form 10-K for each of the two fiscal years ended December 31,
1995 and 1994 as filed with the SEC, (ii) proxy statements relating to all
meetings of its shareholders (whether annual or special) since 1994 and (iii)
all other reports or registration statements filed by U.S. Trust with the SEC
since January 1, 1994. As of their respective dates, U.S. Trust's Annual Reports
on Form 10-K for the fiscal years referred to in clause (i) above, proxy
statements for U.S. Trust's meetings of shareholders (whether annual or special)
referred to in clause (ii) above, and all other reports filed with the SEC
referred to in clause (iii) above did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements included in such reports
or other filings have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated financial
position of U.S. Trust and its subsidiaries as of the dates thereof and the
consolidated results of operations and changes in cash flow of U.S. Trust and
its subsidiaries for each of the periods then ended, subject, in the case of
unaudited interim financial statements, to normal year-end adjustments.
4.6. Absence of Material Adverse Change. Since December 31,
1995, there has not been (i) any material adverse change in the business,
operations, properties, assets, liabilities or condition (financial or
otherwise) of U.S. Trust and its subsidiaries taken as a whole; (ii) damages,
destruction or loss, whether covered by insurance or not, materially or
adversely affecting the business, properties or financial condition of U.S.
Trust and its subsidiaries taken as a whole; or (iii) agreement, whether in
writing or otherwise, to take any action which would result in a condition
described in this Section 4.6.
4.7. Employee Benefits. The 1996 UST Benefits Portfolio (the
"UST Benefits Portfolio"), which has been delivered to the Seller, sets forth
all of U.S. Trust's
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employee benefits, including, without limitation, pension, retirement,
disability, bonus, profit-sharing, deferred compensation, stock option, medical,
dental or other health insurance plans, life insurance or other death benefit
plans, severance plans or other agreements or arrangements or plans providing
for employee remuneration or benefits which will be available to employees of
the Seller who are hired by the Buyer immediately after the Closing, subject to
any limitations or waiting periods set forth in the UST Benefits Portfolio.
4.8. Full Disclosure. None of the representations and
warranties made by the Buyer or made in any schedule or certificate furnished or
to be furnished pursuant to the terms of this Agreement by the Buyer, or on its
behalf, contains or will contain any untrue statement of a material fact, or
omits to state any material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE V
SELLER'S AND FEARRINGTON'S OBLIGATIONS BEFORE THE CLOSING DATE
The Seller and Fearrington covenant that:
5.1. Buyer's Access to Premises and Information. Subject to
the confidentiality obligations set forth in Section 6.1, the Buyer and its
counsel, accountants, and other representatives shall be entitled to have
reasonable access during normal business hours and upon reasonable notice to all
the Seller's properties, books, accounts, records, contracts, and documents.
Subject to the confidentiality obligations set forth in Section 6.1, the Seller
shall furnish or cause to be furnished to the Buyer and its representatives all
data and information concerning the business, finances, and properties of the
Seller that may be reasonably requested, including but not limited to the
Financial Statements.
5.2. Conduct of Business in Normal Course. Fearrington shall
cause the Seller to carry on its business and activities diligently and, except
as otherwise permitted herein, in substantially the same manner as they
previously have been carried on, and to not institute any new methods of
purchase, sale, lease, management, accounting or operation that will vary
materially from the methods used by the Seller as of the date of this Agreement.
5.3. Preservation of Business and Relationships. Fearrington
shall use her diligent efforts to cause the Seller to preserve its business
organization intact and preserve its present relationships with suppliers,
regulating agencies, customers, and others having business relationships with
it.
5.4. Maintenance of Insurance. Fearrington shall cause the
Seller to continue to carry its existing insurance through the Closing Date,
subject to variations in
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<PAGE> 26
amounts required by the ordinary operation of its business. At the request of
the Buyer and at the Buyer's sole expense, the amount of insurance against fire
and other casualties or losses which, at the date of this Agreement, the Seller
carries on any of its properties or in respect of its operations shall, subject
to availability, be increased by such amount or amounts as the Buyer shall
specify.
5.5. Employees and Compensation. Subject to the limitations
set forth in the last paragraph of Section 5.6, Fearrington shall not, without
the written consent of the Buyer, or except as otherwise permitted herein or as
required under existing written contractual arrangements, permit the Seller to
do, or agree to do, any of the following acts: (i) grant any increase in
salaries payable or to become payable to any officer, employee, sales agent, or
representative which would result in an increase of more than 5%, since December
31, 1995, in the aggregate salaries or other compensation payable or to become
payable by the Seller to all of the employees of the Seller as a group, other
than Fearrington; (ii) increase benefits payable to any officer, employee, sales
agent, or representative under any bonus or pension plan or other contract or
commitment except pursuant to the provisions of such plan, contract or
commitment which would result in an increase of more than 5%, since December 31,
1995, in the aggregate salaries or other compensation payable or to become
payable by the Seller to all of the employees of the Seller as a group, other
than Fearrington; or (iii) modify any collective bargaining agreement to which
it is a party or by which it may be bound.
5.6. Controlled Acts. Except as otherwise permitted by this
Agreement, Fearrington shall not, without the prior written consent of the
Buyer, permit the Seller to do or agree to do any of the following acts:
(a) Enter into any contract, commitment, or transaction not in
the usual and ordinary course of its business;
(b) Except in the ordinary course of business, make any
capital expenditures in excess of $10,000 for any single item or $20,000 in the
aggregate, or enter into any leases of capital equipment or property under which
the annual lease charge is in excess of $10,000;
(c) Except in the ordinary course of business, sell or dispose
of any capital assets with a net book value in excess of $10,000 individually,
or $20,000 in the aggregate;
(d) Declare any dividend other than is necessary to pay legal
or accounting expenses of the Seller associated with the Asset Acquisition, or
estimated federal and state income taxes of the Seller;
(e) Change the name or any trade name of the Seller or change
the nature of the business of the Seller as currently conducted;
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<PAGE> 27
(f) Adopt or modify any employment agreement;
(g) Authorize the sale or merger of the Seller or the sale of
substantially all of its or their assets;
(h) Issue any stock; or
(i) Amend its Certificate of Incorporation or By-Laws.
Notwithstanding anything contained in this Agreement to the
contrary, between the date hereof and the Closing Date, the Seller may borrow
funds, pay all obligations to shareholders, and pay or accrue dividends,
salaries, bonuses, severance payments, employee benefits, professional fees and
other expenses, so long as such actions do not cause the Seller to have a
tangible net worth of less than $50,000 on the Closing Date.
5.7. Payment of Liabilities and Waiver of Claims. Fearrington
shall not permit the Seller to do, or agree to do, any of the following acts:
(i) pay, prior to the due date thereof, any material obligation or liability,
fixed or contingent, other than current liabilities; (ii) waive or compromise
any material right or claim other than in the ordinary course of business; or
(iii) cancel, without full payment, any note, loan, or other material obligation
owing to the Seller.
5.8. Existing Agreements. Fearrington shall not permit the
Seller to modify, amend, cancel, or terminate any of its existing material
contracts or agreements, or agree to do any of those acts, except in the
ordinary course of business.
5.9. Statutory Filings. Fearrington shall cooperate fully with
the Buyer in preparing and filing all information and documents deemed necessary
or desirable by the Buyer under any statutes or governmental rules or
regulations pertaining to the transactions contemplated by this Agreement.
5.10. Delivery of Tax Returns. As soon as practicable,
Fearrington shall deliver to the Buyer copies of all open tax returns relating
or pertaining to the Seller.
5.11. Client Consents. As soon as practicable after the
execution of this Agreement, Fearrington shall cause the Seller to, and the
Seller shall seek to obtain, consents of clients of the Seller to the transfer
contemplated by this Agreement, as is further set forth in Section 7.11.
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ARTICLE VI
BUYER'S OBLIGATIONS BEFORE THE CLOSING DATE
6.1. Confidentiality. Prior to the Closing Date, the Buyer
shall preserve the confidentiality of this Agreement, the Schedules, the DL and
any and all information and data of a proprietary or confidential nature with
respect to Fearrington or the Seller in its possession or the possession of its
agents or representatives or which is received by any of them in connection with
this Agreement and the transactions contemplated hereby. To the extent
disclosure of any such information or data is required by applicable law, order,
rule or regulation (including, without limitation, applicable federal and state
securities laws), the Buyer or its agents or representatives, as the case may
be, shall give prior notice to Fearrington and the Seller and shall use
reasonable efforts to obtain confidential treatment therefor. In the event of
the termination of this Agreement, each party shall return on demand all
documents (including copies thereof and all related notes) obtained by such
party in connection with this Agreement and the transactions contemplated
hereby.
6.2. Governmental Filings. The Buyer will make or use its best
efforts to make and process all governmental filings necessary to consummate
this transaction and shall cooperate fully with the Seller and Fearrington in
preparing and filing all information and documents deemed necessary by the
Seller or Fearrington under any statutes or governmental rules or regulations
pertaining to the transactions contemplated by this Agreement.
6.3. Best Efforts; Agreement With U.S. Trust. Except as set
forth in the DL, the Buyer will use its best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement. The Buyer will cause U.S. Trust to execute and deliver to the
Seller on the Closing Date the Agreement to Deliver and Register Shares annexed
hereto as Exhibit 8.4.
6.4. Consents. Except as set forth in the DL, the Buyer shall
use its best efforts to obtain all permits, authorizations, consents and
approvals from third parties necessary to consummate the Agreement and the
transactions contemplated hereby.
6.5. Contact with Clients. Unless the prior consent of the
Seller has been obtained between the date hereof and the Closing Date, neither
the Buyer nor any of its officers, directors, employees, agents or
representatives shall contact, or communicate with, any of the clients of the
Seller.
6.6. Tax-Free Reorganization. The Buyer will not take any
action or omit to take any action, or permit U.S. Trust to take any action or
omit to take any action, which would prevent the Asset Acquisition from being
treated as a tax-free reorganization.
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ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligations of the Buyer to conclude the Asset Acquisition
under this Agreement are subject to the satisfaction, at or before the Closing,
of all the conditions set out below.
7.1. Delivery of Instruments of Transfer. The Seller shall
have delivered to the Buyer at or prior to the Closing the instruments of
transfer referred to in Section 1.6(b) hereof.
7.2. Accuracy of Seller's and Fearrington's Representations
and Warranties. All representations and warranties made by the Seller and
Fearrington in this Agreement or in the DL shall be true in all material
respects on and as of the Closing Date as though made at that time, and the
Seller and Fearrington, respectively, shall have delivered to the Buyer a
Certificate of the Seller or Fearrington, as the case may be, so certifying to
this.
7.3. Absence of Liens. As of the Closing Date, except for such
liens, claims, charges or encumbrances disclosed in the Financial Statements or
in the DL, there shall be no liens, claims, charges or encumbrances on any
assets of the Seller other than liens (i) of mechanics, materialmen and landlord
incurred in the ordinary course of business for sums not overdue and not in
excess of $5,000 in the aggregate; (ii) incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance, or
other forms of governmental insurance or benefits; (iii) for taxes, assessments
or other governmental charges or levies which are not at the time delinquent or
are subject to an effective extension for the filing of the related tax returns
or reports (if applicable) granted by the appropriate authorities.
7.4. Seller's and Fearrington's Performance. The Seller and
Fearrington shall have performed, satisfied, and complied in all material
respects with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by the Seller or Fearrington, as the
case may be, on or before the Closing Date.
7.5. Opinion of Seller's and Fearrington's Counsel. The Buyer
shall have received from Richards & O'Neil, LLP, counsel for Fearrington and the
Seller, an opinion dated the Closing Date, in the form attached hereto as
Exhibit 7.5.
7.6. Consents. All necessary notices to, and agreements,
approvals and consents of, any governmental body to the consummation of the
transactions contemplated by this Agreement, or otherwise pertaining to the
matters covered by it, shall have been obtained by Fearrington or the Seller and
delivered to the Buyer.
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7.7. Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered to the Buyer
under this Agreement shall be satisfactory in all reasonable respects to the
Buyer and its counsel.
7.8. Employment Agreements. Fearrington shall deliver to the
Buyer an employment agreement substantially in the form attached hereto as
Exhibit 7.8 (the "Employment Agreement"), duly executed by Fearrington and the
Buyer, and there shall be no default existing on the Closing Date under the
Employment Agreement, and the Employment Agreement shall be in full force and
effect on the Closing Date and each party shall be capable on the Closing Date
of performing her or its obligations under the Employment Agreement.
7.9. Condition of Assets. The property and assets of the
Seller shall not have been materially or adversely affected in any way as a
result of any fire, accident, storm or other casualty or labor or civil
disturbance or act of God or the public enemy.
7.10. Certificates of the Secretary of Seller. The Buyer shall
have received from the Secretary of the Seller a certificate stating that no
amendments or modifications have been made to the Certificate of Incorporation
or the By-laws of the Seller since the signing of this Agreement except as
consented to in writing by the Buyer or otherwise permitted hereunder.
7.11. Delivery of Client Consents. The Seller or Fearrington
shall have delivered to the Buyer at or prior to the Closing written letters (in
substantially the form attached hereto as Exhibit 7.11) from clients of the
Seller whose accounts, in the aggregate, represent at least 75% of Annualized
Revenues (as defined in Section 1.4).
7.12. No Injunction. Neither Fearrington, the Buyer, U.S.
Trust nor the Seller shall be subject to any order, decree or injunction of a
court of competent jurisdiction within the United States which prevents or
materially delays the consummation of the Asset Acquisition.
7.13. No Government Proceeding or Litigation. No suit, action
or proceeding before any court or any governmental or regulatory authority shall
be pending or threatened by any state or federal governmental or regulatory
authority, against Fearrington, the Buyer, U.S. Trust, the Seller or any of
their respective affiliates, officers or directors seeking to restrain, prevent
or change in any material respect the transactions contemplated hereby
(including, without limitation, the Employment Agreement) or seeking damages in
connection with such transactions which are material to the Seller, taken as a
whole.
7.14. No Statute, Rule or Regulation. No statute, rule or
regulation shall have been enacted by the government (or any governmental
agency) of the United States or any
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state, municipality or other political subdivision thereof that makes the
consummation of the Asset Acquisition and any other transaction contemplated
hereby (including, without limitation, the Employment Agreement) illegal.
7.15. Absence of Litigation. No action, suit, or proceeding
before any court or any governmental body or authority, pertaining to this
Agreement, to the Employment Agreement or to any transaction contemplated hereby
or thereby, shall have been instituted and remain pending or threatened on or
before the Closing Date.
7.16. Doctor's Letter. The Buyer shall have received prior to
Closing the doctor's letter referred to in Section 3.25(b).
7.17. Tangible Net Worth. The Seller or Fearrington shall have
delivered to the Buyer (i) at the Closing, the Seller's unaudited balance sheet
dated as of the Closing Date (the "Closing Date Balance Sheet") indicating a
tangible net worth of the Seller of at least $50,000 and (ii) at least ten days
prior to the Closing Date, a draft of the Closing Date Balance Sheet. The
Closing Date Balance Sheet shall be prepared in accordance with generally
accepted accounting principles consistently applied with prior periods, subject
to normal year-end adjustments and to adjustments arising from the Closing Date
occurring on a date other than the last day of a month.
7.18. Escrow Agreement. The Seller and Fearrington shall have
delivered to the Buyer the Escrow Agreement annexed hereto as Exhibit 1.4(b),
duly executed by the Seller and Fearrington.
7.19. Letter Agreement of Fearrington's Spouse. Fearrington's
spouse shall have delivered to the Buyer, at or prior to the Closing, the Letter
Agreement annexed hereto as Exhibit 7.19, duly executed by such spouse.
7.20. Best Efforts to Obtain Certain Consents. The Seller
shall have used its best efforts (which shall not require it to incur any
expense) to obtain the consent of Tishman Speyer 520 Venture, Credit Du Nord and
Cramer Rosenthal McGlynn, Inc. to an assignment from the Seller to the Buyer of
the Sub-Sublease Agreement dated October 14, 1993, as amended, between Cramer
Rosenthal McGlynn, Inc. and the Seller. The Seller shall keep the Buyer apprised
of its progress in obtaining such consents and, at the Buyer's direction, shall
incur expenses in order to obtain any such consents, provided that such expenses
shall be liabilities of, and payable by, the Buyer.
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ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S AND FEARRINGTON'S PERFORMANCE
The obligations of the Seller and Fearrington to conclude the
Asset Acquisition under this Agreement and the other transactions contemplated
herein are subject to the satisfaction, at or before the Closing, of all the
following conditions:
8.1. Delivery of Acquisition Price and Instruments of
Assumption. The Buyer shall have delivered (i) to the Seller, at or prior to the
Closing, a stock certificate representing that number of USTC Shares calculated
in accordance with Sections 1.4(a) and (b) and the instruments effecting
assumption of the Assumed Liabilities referred to in Section 1.6(b), (ii) to the
Escrow Agent, at the Closing, a stock certificate representing the Escrowed
Shares calculated in accordance with Section 1.4(b), all delivered in accordance
with Sections 1.6(a).
8.2. Accuracy of Buyer's Representations and Warranties. All
representations and warranties made by the Buyer contained in this Agreement,
including any schedule hereto, shall be true in all material respects on and as
of the Closing as though such representations and warranties were made on and as
of that date, and the Buyer shall have delivered to the Seller and Fearrington a
Certificate at Closing so certifying as to this and the matters set forth in
Section 8.3.
8.3. Buyer's Performance. The Buyer shall have performed and
complied with all covenants and agreements, and satisfied all conditions that it
is required by this Agreement to perform, comply with, or satisfy, before or at
the Closing.
8.4. Agreement to Deliver and Register Shares. The Buyer shall
have delivered to Fearrington and the Seller the Agreement to Deliver and
Register Shares annexed hereto as Exhibit 8.4, duly executed by U.S. Trust.
8.5. Escrow Agreement. The Buyer shall have delivered to
Fearrington and the Seller the Escrow Agreement attached as Exhibit 1.4(b)
hereto, duly executed by the Buyer.
8.6. Opinion of Counsel Regarding Tax-Free Treatment. Richards
& O'Neil, LLP. counsel for the Seller and Fearrington, shall have rendered its
opinion to the Seller and Fearrington, dated the Closing Date, that the Asset
Acquisition will be treated as a tax-free reorganization by reason of Section
368(a)(1)(C) of the Internal Revenue Code, as amended.
8.7. Opinion of Buyer's Counsel. The Buyer shall have
furnished the Seller and Fearrington with an opinion, dated the Closing Date, of
Maureen Scannell Bateman, Esq.,
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Managing Director and General Counsel for the Buyer, in the form attached hereto
as Exhibit 8.7.
8.8. Consents. All necessary notices to, and agreements,
approvals and consents of, any person, entity or governmental body, to the
consummation of the transactions contemplated by this Agreement, or otherwise
pertaining to the matters covered by it, shall have been obtained by the Buyer
and delivered to the Seller and Fearrington.
8.9. Employment Agreement. The Buyer shall have delivered to
Fearrington the Employment Agreement, duly executed by the Buyer, and there
shall be no default existing on the Closing Date under the Employment Agreement,
which shall be in full force and effect on the Closing Date and each party shall
be capable on the Closing Date of performing her or its obligations under the
Employment Agreement.
8.10. Benefit Plans. All of the employee benefit plans of the
Buyer described in the UST Benefits Portfolio previously delivered to the Seller
and selected by the Seller with respect to each employee of the Seller who
becomes an employee of the Buyer after the Closing in accordance with the terms
thereof, shall be implemented with respect to each such employee, subject to any
limitations or waiting periods set forth in the UST Benefits Portfolio.
8.11. No Injunction. Neither Fearrington, the Buyer, U.S.
Trust nor the Seller shall be subject to any order, decree or injunction of a
court of competent jurisdiction within the United States which prevents or
materially delays the consummation of the Asset Acquisition.
8.12. No Government Proceeding or Litigation. No suit, action
or proceeding before any court or any governmental or regulatory authority shall
be pending or threatened by any state or federal governmental or regulatory
authority, against Fearrington, the Buyer, U.S. Trust, the Seller or any of
their respective affiliates, officers or directors seeking to restrain, prevent
or change in any material respect the transactions contemplated hereby
(including, without limitation, the Employment Agreement) or seeking damages in
connection with such transactions.
8.13. No Statute, Rule or Regulation. No statute, rule or
regulation shall have been enacted by the government (or any governmental
agency) of the United States or any state, municipality or other political
subdivision thereof that makes the consummation of the Asset Acquisition and any
other transaction contemplated hereby (including, without limitation the
Employment Agreement) illegal.
8.14. Absence of Litigation. No action, suit, or proceeding
before any court or any government body or authority, pertaining to this
Agreement, to the Employment
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Agreement or to any transaction contemplated hereby or thereby, shall have been
instituted and remain pending or threatened on or before the Closing Date.
8.15. Delivery of Client Consents. The Seller or Fearrington
shall have received prior to the Closing Date written letters (in the form
attached hereto as Exhibit 7.11) from clients of the Seller whose accounts, in
the aggregate, represent at least 75% of Annualized Revenues (as defined in
Section 1.4).
ARTICLE IX
SELLER'S, FEARRINGTON'S AND
BUYER'S OBLIGATIONS AFTER THE CLOSING
9.1. Preservation of Goodwill. Fearrington agrees that, unless
(i) Fearrington's employment under the Employment Agreement is terminated
without cause or by Fearrington with good reason (as defined in the Employment
Agreement) either during the term of the Employment Agreement or after the
expiration thereof, (ii) the Buyer breaches any of its obligations under Section
3 or 4 of the Employment Agreement or (iii) Fearrington's employment is
terminated under Section 5.2 of the Employment Agreement due to a disability and
Fearrington petitions the Buyer for reinstatement upon the same terms and
conditions as her earlier employment (which petition is accompanied by a
doctor's letter stating that Fearrington is no longer permanently disabled
within the meaning of any permanent disability insurance policy which may be
maintained by the Buyer for the benefit of Fearrington and under which
Fearrington is entitled to benefits, delivered within three months of
Fearrington becoming permanently disabled) and is refused such reinstatement by
the Buyer, for a period of two years following the Closing, Fearrington will
not, individually or through an agent, for herself or on behalf of another, as
an employee, director, owner, partner, sole proprietor, consultant, agent,
representative, shareholder, or in any other manner or capacity whatsoever,
other than in her capacity as an employee of the Buyer:
(a) except to the extent required by law, disclose to any
person or use for Fearrington's own benefit any fee schedules, fee data,
customer lists or similar matters possessed by Fearrington relating to the
Seller or the Buyer, or the business of either unless Fearrington first obtains
written permission from the Buyer;
(b) solicit or induce any clients of the Seller immediately
prior to the Closing to terminate or reduce their respective relationships with
the Buyer; or
(c) solicit for hire any person then employed by the Buyer or
induce any such person to terminate such employment.
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For purposes of section 9.1(a), the term "Buyer" shall include
any firm or corporation directly or indirectly controlled by the Buyer or under
common control with the Buyer; provided, however, the restrictions set forth in
9.1(b) and (c) shall not apply, after termination of Fearrington's employment by
the Buyer, to the solicitation or inducement of any clients, or the solicitation
for hire of any person, with whom Fearrington did not have dealings as clients
or employees of the Buyer during the term of her employment with the Buyer.
9.2. Use of Name. Seller and Fearrington agree that for a
period of three years after the Closing Date neither of them shall use or
employ, directly or indirectly, the name Florence Fearrington, Inc., or any
variant thereof, in the conduct of any investment advisory business.
9.3. Indemnification.
(a) Indemnification by Fearrington. Subject to the limitations
set forth below, the Seller and Fearrington, jointly and severally, shall
indemnify, hold harmless and defend the Buyer, at all times after the date of
this Agreement, against and in respect of any and all claims, demands,
liabilities, losses, costs, expenses and deficiencies (including interest,
penalties, reasonable attorneys' fees and litigation expenses) (such claims,
demands, liabilities, losses, costs, expenses and deficiencies being hereinafter
referred to singly as a "Buyer Loss" and collectively as the "Buyer Losses")
arising out of or in connection with or based upon the inaccuracy of any
representation or warranty made by the Seller or Fearrington herein or in any
certificate or other document delivered pursuant hereto or the breach by
Fearrington or the Seller of any agreement or covenant made herein or in any
document delivered pursuant hereto.
(b) Limitations on Indemnification by the Seller and
Fearrington.
(i) Neither Fearrington nor the Seller shall be
obligated to indemnify the Buyer for Buyer Losses arising from the inaccuracy of
any representation or warranty made by the Seller or Fearrington herein or in
any certificate or other document delivered pursuant hereto unless and until the
aggregate amount of such Buyer Losses exceeds $25,000, in which case Fearrington
and the Seller, jointly and severally, shall be obligated to indemnify the Buyer
for the amount of such Buyer Losses aggregating in excess of $25,000.
(ii) Fearrington's and the Seller's aggregate
liability for indemnification for all provisions under this Agreement shall
under no circumstances exceed the Asset Acquisition Consideration received by
Fearrington under this Agreement, valued as of the Measurement Date. Any
liability of Fearrington and Seller for any Buyer Loss shall be satisfied
through the delivery of Common Shares to the Buyer, such shares to be valued at
the Average Closing Price.
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(iii) A claim for breach of warranty, representation
or covenant may not be made under this Agreement and neither the Seller nor
Fearrington shall be liable for indemnification under this section, unless
notice of the Buyer Loss on which such claim or right to indemnification is
based is given in writing or through telex or telecopier by the Buyer to
Fearrington reasonably promptly after the Buyer shall become aware of the Buyer
Loss, but in any event with respect to a Buyer Loss, within one year after the
Closing Date; provided, however, that notwithstanding the foregoing, a claim for
indemnification made under Section 3.5 with respect to an open tax year may be
made without any time limitation.
(iv) Subject to the limitations on indemnification
set forth in Sections (i)-(iii) above, if any event shall occur which would
otherwise entitle the Buyer to assert a claim for indemnification hereunder, no
Buyer Losses shall be deemed to have been sustained by the Buyer to the extent
of (i) any tax savings realized by the Buyer with respect thereto (or any
affiliate with which the Buyer files a consolidated return for federal income
tax purposes or a combined return for state income tax purposes) or (ii) any net
proceeds received by the Buyer, its subsidiaries or affiliates from any
insurance policy with respect thereto, to which policies the Buyer shall resort
prior to asserting a claim for indemnification hereunder.
(c) Indemnification by Buyer. Subject to the limitations set
forth below, the Buyer shall indemnify, hold harmless and defend the Seller and
Fearrington , at all times after the date of this Agreement, against and in
respect of any and all claims, demands, liabilities, losses, costs, expenses and
deficiencies (including interest, penalties, reasonable attorneys' fees and
litigation expenses) (such claims, demands, liabilities, losses, costs, expenses
and deficiencies being hereinafter referred to singly as a "Seller Loss" and
collectively as the "Seller Losses") arising out of or in connection with or
based upon (i) the inaccuracy of any representation or warranty made by the
Buyer herein or in any certificate or other document delivered pursuant hereto;
(ii) the breach by the Buyer of any agreement or covenant made herein or in any
document delivered pursuant hereto; or (iii) any of the Assumed Liabilities.
(d) Limitations on Indemnification by Buyer.
(i) The Buyer shall not be obligated to indemnify the
Seller and Fearrington for Seller Losses arising from the inaccuracy of any
representation or warranty made by the Buyer herein or in any certificate or
other document delivered pursuant hereto unless and until the aggregate amount
of such Seller Losses exceeds $25,000, in which case the Buyer shall be
obligated to indemnify the Seller and Fearrington for the amount of such Seller
Losses aggregating in excess of $25,000; provided, however, the limitations of
this clause (i) shall not apply to claims for indemnification arising out of or
in connection with or based upon the inaccuracy or breach of the Buyer's
representations set forth in Section 4.4.
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(ii) The Buyer's aggregate liability for
indemnification for all provisions under this Agreement shall under no
circumstances exceed the Asset Acquisition Consideration received by Fearrington
under this Agreement, valued as of the Measurement Date.
(iii) A claim for breach of warranty, representation
or covenant may not be made under this Agreement and the Buyer shall not be
liable for indemnification under this section, unless notice of the Seller Loss
on which such claim or right to indemnification is based is given in writing or
through telex or telecopier by the Seller or Fearrington to the Buyer reasonably
promptly after the Seller or Fearrington, as the case may be, shall become aware
of the Seller Loss, but in any event, with respect to claims of Seller Loss
arising under Sections 9.3(c)(i) and (ii), within one year after the Closing
Date.
(iv) Subject to the limitations on indemnification
set forth in Sections (i)-(iii) above, if any event shall occur which would
otherwise entitle the Seller and Fearrington to assert a claim for
indemnification hereunder, no Seller Losses shall be deemed to have been
sustained by the Seller or Fearrington, as the case may be, to the extent of (i)
any tax savings realized by the Seller or Fearrington with respect thereto or
(ii) any net proceeds received by the Seller or Fearrington from any insurance
policy with respect thereto, to which policies the Seller and Fearrington shall
resort prior to asserting a claim for indemnification hereunder.
(e) Procedure for Establishment of Indemnifiable Claim.
(i) Matters Involving Third Parties. In the event
that any claim shall be asserted or action commenced by any third party against
a party hereto entitled to indemnification hereunder (an "Indemnified Party"),
which, if sustained, would result in a claim for indemnification hereunder, (an
"Indemnifiable Claim"), Indemnified Party, within a reasonable time after
learning of such claim, but in no event more than twenty-five days thereafter,
shall give written notice to the other party (the "Indemnitor") of such claim
giving the particulars thereof, and shall extend to Indemnitor a reasonable
opportunity to defend against such claim, at Indemnitor's sole expense and
through legal counsel reasonably acceptable to Indemnified Party, provided that
Indemnitor proceeds in good faith, expeditiously and diligently; provided,
however, the right of Indemnified Party to indemnification shall be reduced in
the event of its failure to give timely notice hereunder only to the extent
Indemnitor is prejudiced thereby. No determination shall be made with respect to
an Indemnifiable Claim hereunder while such defense is still being made until
the earlier of (i) the resolution of said claim by Indemnitor with the third
party claimant, or (ii) the termination of the defense by Indemnitor against
such claim or the failure of Indemnitor to prosecute such defense in good faith
in an expeditious and diligent manner. Indemnified Party shall be entitled to
rely upon the opinion of its counsel as to the occurrence of either of said
events. Indemnified Party, at its option and expense, shall have the right to
participate in
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any defense undertaken by Indemnitor with legal counsel of its own selection;
provided, however, Indemnitor shall have the right to conduct the defense of
and, subject to this subparagraph (i), settle such third party claim. No
settlement or compromise of any claim which may result in an Indemnifiable
Claim, as the case may be, may be made by Indemnitor without the prior written
consent of Indemnified Party unless (A) prior to such settlement or compromise
Indemnitor acknowledges in writing its obligation to pay in full the amount of
the settlement or compromise and all associated expenses and Indemnified Party
is furnished with security reasonably satisfactory to Indemnified Party that
Indemnitor will in fact pay such amount and expenses or (B) such settlement
includes as a term thereof a general release of Indemnified Party from such
claim. Notwithstanding any other provision of this Section 9.3, if Indemnified
Party withholds its consent to a settlement or elects to continue the defense of
any claim, where but for such action the Indemnitor could have settled such
claim, the Indemnitor shall be required to indemnify Indemnified Party only up
to the amount of the bona fide settlement offer for which the Indemnitor could
have settled such claim.
(ii) Non-Third Party Claims. In the event that an
Indemnified Party asserts the existence of any Indemnifiable Claim, Indemnified
Party shall give written notice to Indemnitor of the nature and amount of the
Indemnifiable Claim asserted within a reasonable time after becoming aware of
such Indemnifiable Claim (but in any event no later than twenty-five days
thereafter), and shall provide to Indemnitor as soon as practicable thereafter
all information and documentation necessary to support and verify the existence
of, any Buyer Losses or Seller Losses, as the case may be, that Indemnified
Party shall have determined have given rise to, or could reasonably be expected
to give rise to, an Indemnifiable Claim. If Indemnitor, within a period of
twenty-five days after receipt of Indemnified Party's notice, shall not give
written notice to Indemnified Party announcing its intent to contest such
assertion of Indemnified Party (such notice by Indemnitor being hereinafter
called the "contest notice"), such assertion of Indemnified Party shall be
deemed accepted and the amount of the Indemnifiable Claim shall be deemed
established. In the event, however, that a contest notice is given to
Indemnified Party within said twenty-five day period, then at any time
thereafter a party may commence a legal proceeding in accordance with this
Article to resolve the contested assertion of an Indemnifiable Claim.
(iii) Indemnified Party and Indemnitor may agree in
writing, at any time, as to the existence and amount of an Indemnifiable Claim,
and, upon the execution of such agreement, such Indemnifiable Claim shall be
deemed established.
(iv) The sole remedy of the parties hereto for a
misrepresentation, breach of warranty, covenant or agreement contained in this
Agreement shall be a claim for indemnification under this Section 9.3.
9.4. Right to Cure Defaults. If a party becomes aware of any
breach of a representation or warranty or non-fulfillment of any covenant or
obligation of the other party
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hereunder, the party becoming so aware shall promptly notify the other party of
such breach or non-fulfillment and afford such other party a reasonable
opportunity to cure such breach or non-fulfillment.
9.5. Availability of Benefit Plans. Immediately after the
Closing, all persons who were employees of the Seller as of the Closing and who,
immediately after the Closing, are employees of the Buyer, shall participate in
all plans and benefits described in the UST Benefits Portfolio on the same terms
and conditions as similarly situated employees of the Buyer.
9.6. Preservation of Tax-Free Reorganization. The Buyer will
not take any action which would cause the Asset Acquisition to not be treated as
a tax-free reorganization.
9.7. Payment of Certain Indebtedness. On the Closing Date, the
Buyer shall pay all Assumed Liabilities consisting of amounts then owing to
Berkshire Capital Corporation. On the later of (i) the Closing Date and (ii)
January 2, 1997, the Buyer shall pay all Assumed Liabilities consisting of
amounts then owing to Fearrington and Richards & O'Neil, LLP.
9.8. Returns for Periods Prior to Closing. Required Tax
Returns which are due after Closing with respect to Taxes for the Seller will be
prepared by Seller and timely filed, including extensions. The Buyer shall be
responsible for any Taxes for the period ending on the Closing Date and Seller
shall be responsible for Taxes for the period thereafter. For purposes of
determining the Taxes for a taxable period or periods that begin before and end
after the Closing Date, the determination shall be made by assuming that the
Seller has a taxable year which ended at the close of business on the Closing
Date. The Tax Returns prepared and filed or to be prepared and filed by or for
the Seller are or will be true and correct, and will be prepared on a basis
which is consistent with the basis upon which similar returns for prior periods
have been prepared and filed.
The Seller shall notify the Buyer promptly upon receipt of any
notice of any pending or threatened audit, litigation or other contest (a
"Contest") that could affect the amount of Taxes payable by the Buyer. The Buyer
shall have the sole right to control any Contest that could affect the amount of
Taxes payable by the Buyer and to employ counsel of its choice at its expense;
provided, however, that the Seller shall have the right to participate in any
such Contest at its own expense. The Seller (i) shall execute and deliver to the
Buyer or its designated counsel or other representatives such powers of attorney
and other documents as may be reasonably necessary to permit the Buyer to so
control any such Contest, (ii) shall provide such books and records and other
documents, certificates, information, testimony and assistance as may be
reasonably requested by the Buyer in connection with any such Contest and (iii)
except as authorized by the Buyer, shall not take any action (including the
execution of extensions of statutes of limitations) in relation to, or at the
request of, any taxing authority
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with respect to any such Contest. The Buyer shall not agree to the payment of
any Taxes if such agreement could affect any tax liability of the Seller without
the Seller's consent.
For purposes of this Section 9.8, "Taxes" shall mean any
domestic or foreign net income, gross income, gross receipts, sales, use,
excise, occupation, franchise, transfer, payroll, stamp, gains, capital,
premium, property or windfall profits tax, alternative, add-on or other minimum
tax, value added, or other tax, fee, levy, imposition, charge or assessment,
including taxes imposed on Fearrington as a result of her ownership of all of
the common stock of the Seller, together with any interest and any penalty,
addition to tax or additional amount imposed by any taxing authority, whether
any such tax is imposed directly or through withholding. "Tax Returns" shall
mean all tax returns, reports and forms (including withholding tax returns) for
a taxable period required to be filed by applicable Federal, State, local or
foreign tax laws or government entities.
9.9. Access to Books and Records. The Seller and Fearrington
will provide to the Buyer reasonable access, upon reasonable notice, to such
books and records of the Seller retained by them after the Closing regarding the
operation of the Seller's business prior to the Closing as the Buyer may
reasonably request.
9.10. Agreement to Deliver and Register Shares. The Buyer
shall cause U.S. Trust to perform all of its obligations under the Agreement to
Deliver and Register Shares annexed as Exhibit 8.4 hereto.
9.11. Adjustments to Closing Date Balance Sheet. The parties
acknowledge that the Closing Date Balance Sheet (as defined in Section 7.17) may
reflect reasonable estimates of certain assets and liabilities which may not be
entirely accurate. As soon as practicable and in any event within ten business
days after the Closing Date, the Buyer shall cause to be prepared and deliver to
Seller (or, at Seller's direction, Fearrington) an updated Closing Date Balance
Sheet which shall correct the amounts of any estimates utilized in preparing the
Closing Date Balance Sheet and correct any bookkeeping errors or omissions
discovered after the Closing that affect the Closing Date Balance Sheet. The
Closing Date Balance Sheet, as so adjusted, shall be deemed the "Final Closing
Date Balance Sheet", subject to the dispute resolution mechanism described
below. The Buyer or Seller (or, at Seller's election, Fearrington), as the case
may be, shall (except to the extent the dispute mechanism described below is
utilized), not later than the 30th day after the Closing Date, pay to the other
an amount equal to the net adjustment, if any, required to be made to reflect
the difference between the tangible net worth of the Seller as reflected on the
Closing Date Balance Sheet and the tangible net worth of the Seller as reflected
on the Final Closing Date Balance Sheet. Such payment shall be made through
delivery of Common Shares valued at the Average Closing Price. By delivery of
such Common Shares by (i) the Seller (or Fearrington, as the case may be), the
Seller (or Fearrington, as the case may be) represents to the Buyer that such
Common Shares are free and clear of all Liens and (ii) the Buyer, the
- 32 -
<PAGE> 41
Buyer represents to Fearrington that such Common Shares are validly issued,
fully paid, non-assessable and free and clear of all Liens and covenants that
Buyer will cause such Common Shares to be treated as USTC Shares for purposes of
the Agreement to Deliver and Register Shares of even date among U.S. Trust, the
Seller and Fearrington.
If, within ten business days after receipt of the Final
Closing Date Balance Sheet, the Seller or Fearrington notifies the Buyer that it
or she disputes the Final Closing Date Balance Sheet or the amount of tangible
net worth derived therefrom, then the parties shall, in good faith, seek to
resolve their differences. If, despite such good faith efforts, the parties are
unable to resolve their differences within ten business days after delivery of
the notice of dispute by the Seller or Fearrington to the Buyer, then the Final
Closing Balance Sheet, and the tangible net worth derived therefrom, shall be
determined (i) jointly by two accounting firms, one selected by Fearrington or
the Seller and one selected by the Buyer, or (ii) if the two accounting firms
cannot agree on such determination, by a third accounting firm selected by the
original two accounting firms, whose determination shall be final and binding
upon the parties. The cost of such accounting firms shall be shared equally by
the Buyer and the Seller.
ARTICLE X
COSTS
10.1. Finder's or Broker's Fees. Each of the parties
represents and warrants that, except for the Seller's engagement of Berkshire
Capital Corporation, it or she has engaged or dealt with no broker or finder in
connection with any of the transactions contemplated by this Agreement, and,
insofar as it or she knows, no broker or other person is entitled to any
commission or finder's fee in connection with any of these transactions. Each of
the parties agrees to pay all reasonable fees and other amounts which may be or
become owing to any broker or finder engaged or dealt with by such party in
connection with this Agreement or the transactions contemplated hereby;
provided, however, if not paid by the Seller prior to the Closing, the fees of
Berkshire Capital Corporation accrued on the books of the Seller as of the
Closing will become an Assumed Liability.
10.2. Expenses. Each of the parties shall pay all costs and
expenses incurred or to be incurred by him, her or it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement; provided, however, if not paid by the Seller
prior to the Closing, all fees and expenses of Richards & O'Neil, LLP and
Berkshire Capital Corporation accrued on the books of the Seller as of the
Closing will become Assumed Liabilities.
- 33 -
<PAGE> 42
ARTICLE XI
FORM OF AGREEMENT
11.1. Headings. The subject headings of the Articles and
Sections of this Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
11.2. Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
all the parties to be bound hereby. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
delay or failure of any party to exercise any of its, his or her rights
hereunder shall be construed as a waiver of such right. No waiver shall be
binding unless made expressly and executed in writing by the party making the
waiver.
11.3. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE XII
PARTIES
12.1. Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, personal representatives, successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any right of subrogation or action over or
against any party to this Agreement.
12.2. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the parties to it and their respective heirs, legal
representatives, successors, and permitted assigns; provided, that neither the
Seller nor Fearrington shall have the right to assign any or all of its or her
rights hereunder without the prior written consent of the Buyer.
ARTICLE XIII
TERMINATION
- 34 -
<PAGE> 43
13.1. Conditions Permitting Termination. Any party may
terminate this Agreement immediately by written notice to the others, without
liability to the other parties, if (i) any bona fide legal action or proceeding
shall be pending against any party that could result in an unfavorable judgment,
decree, or order that would prevent or make unlawful the carrying out of this
Agreement; or (ii) if Closing shall not have occurred by April 30, 1997.
13.2. Defaults Permitting Termination. In addition to the
parties' respective rights not to proceed with the Closing because of failure of
any of the conditions contained herein, if the Buyer, the Seller or Fearrington
materially defaults in the due and timely performance of any of its, or her
respective warranties, covenants, or agreements under this Agreement, the
non-defaulting party or parties may give notice of termination of this
Agreement, in the manner provided in Article XIV. The notice shall specify with
particularity the default or defaults on which the notice is based. Subject to
Section 13.1, the termination shall be effective ten business days after
receipt, unless the specified default or defaults have been cured on or before
such effective date for termination. Notwithstanding any such termination, the
provisions of Sections 6.1 and 9.3 will continue to apply and a party shall not
be relieved from liability for breach of its representations, warranties,
covenants, or agreements contained in this Agreement.
ARTICLE XIV
NOTICES
All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom such notice,
request, demand or other communication is to be given, or on the date of receipt
if mailed to the party to whom such communication is to be given, by first class
mail registered or certified, postage prepaid, and properly addressed as
follows:
To the Seller and Fearrington as follows:
Ms. Florence Fearrington
150 East 69th Street
New York, NY 10021
With a copy to:
Floyd I. Wittlin, Esq.
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
- 35 -
<PAGE> 44
To Buyer at:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attn: Maureen Scannell Bateman
Managing Director and General Counsel
Any party may change its address for purposes of this Article by giving the
other party written notice of the new address in the manner set forth above.
ARTICLE XV
GOVERNING LAW; VENUE
This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the State of New York, excepting its
choice of law provisions. Any litigation arising out of or relating to this
Agreement shall be conducted solely and exclusively in any federal or state
court located in the City of New York having jurisdiction over the subject
matter hereof, and to the extent permitted by law all parties hereto consent to
such jurisdiction and venue.
ARTICLE XVI
MISCELLANEOUS
16.1. Announcements. The Seller and Fearrington, on the one
hand, and the Buyer, on the other, will not make any announcements to the public
concerning this Agreement or the transactions contemplated hereby without the
prior approval of the other party (except as otherwise required under applicable
law).
16.2. References. Unless otherwise specified, references to
Sections or Articles are to Sections or Articles in this Agreement.
16.3. Currency. All dollar amounts set forth herein are
expressed in terms of United States dollars.
- 36 -
<PAGE> 45
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed it as of the day and year first above written.
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ JOHN C. HOVER
-----------------------------------
Its: Executive Vice President
-----------------------------
FLORENCE FEARRINGTON, INC.
By: /s/ Florence Fearrington
-----------------------------------
Its: President
-----------------------------
/s/ Florence Fearrington
---------------------------------------
Florence Fearrington
-37-
<PAGE> 46
Exhibit 1.4(b)
ESCROW AGREEMENT
<PAGE> 47
Exhibit 1.4(b)
ESCROW AGREEMENT
ESCROW AGREEMENT made and entered into this ___ day of
___________, 1996, by and among Florence Fearrington, Inc., a New York
corporation (the "Seller"), Florence Fearrington ("Fearrington"), the sole
shareholder of the Seller, United States Trust Company of New York, a banking
institution possessing banking and trust powers chartered under the laws of New
York (the "Buyer") and U.S. Trust Corporation, a New York corporation, as escrow
agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to Section 1.4(b) of the Asset Acquisition
Agreement dated November 14, 1996, among the Seller, Fearrington and the Buyer,
the Buyer has agreed to deliver to the Escrow Agent a stock certificate
representing the number of common shares of U.S. Trust Corporation, a New York
corporation ("U.S. Trust"), that are Escrow Shares (as defined in the Asset
Acquisition Agreement) calculated in accordance with Section 1.4(b) of the Asset
Acquisition Agreement, to be held by the Escrow Agent in accordance with the
terms of this Agreement; and
WHEREAS, the parties desire to define the manner in which the
Escrow Agent is to perform its duties;
NOW, THEREFORE, in consideration of the premises and the
covenants herein contained, the parties do hereby agree as follows:
FIRST: Capitalized terms used but not defined herein shall
have the meanings set forth in the Asset Acquisition Agreement.
<PAGE> 48
SECOND: Concurrently with the execution of this Agreement, the
Buyer is depositing certificates representing _______ Escrow Shares.
During the term of this Agreement, the Seller shall retain all
voting and similar rights with respect to the Escrow Shares, and the Escrow
Agent promptly shall forward to the Seller (or Fearrington, if Seller so
designates) all notices of meetings, proxy statements and cards and other
materials which the Escrow Agent may receive in respect of the Escrow Shares.
THIRD: The Escrow Shares shall include the Escrow Shares
initially deposited by the Buyer, together with all property into, or for, which
the Escrow Shares are converted, exchanged, reclassified or subdivided.
FOURTH:
(a) In accordance with Section 1.4(c) of the Asset Acquisition
Agreement, on the 90th day after the Closing Date, the Escrow Shares shall be
delivered by the Escrow Agent as follows:
(i) There shall be delivered to the Seller (or
Fearrington, if the Seller so designates) a
percentage of the Escrow Shares (together
with all dividends, distributions and rights
earned on such Escrow Shares; collectively,
the "Distributions") equal to the quotient,
expressed as a percentage, of (A) the
Annualized Revenues represented by advisory
agreements of clients of the Seller who have
given their Consents after the Closing Date
and on or prior to 2:00 p.m. on the 90th day
after the Closing Date, divided by (B) the
Annualized Revenues represented by the
- 2 -
<PAGE> 49
advisory agreements of clients of the Seller
who had not given their Consents on or prior
to the Closing Date; and
(ii) The balance of the Escrow Shares and the
Distributions shall be delivered to U.S.
Trust.
(b) Notwithstanding any provision to the contrary contained in
this Section FOURTH, the Escrow Shares and the Distributions shall be
distributed by the Escrow Agent prior to the 90th day after the Closing Date as
follows:
(i) Following receipt by the Escrow Agent of
joint written instructions of the Seller and
the Buyer, the Escrow Agent shall release
the Escrow Shares and the Distributions to
the Seller (or Fearrington, if the Seller so
designates) and/or the Buyer at such time
and in such amounts as directed by such
instructions; or
(ii) Following receipt by the Escrow Agent of
joint written instructions of the Seller and
the Buyer, the Escrow Agent shall deliver
the Escrow Shares and the Distributions at
such time and to such successor Escrow Agent
named in such instructions.
FIFTH: The duties and responsibilities of the Escrow Agent
shall be limited to those expressly set forth in this Agreement and the Escrow
Agent shall not be subject to, nor obliged to recognize, any other agreement
(other than the Asset Acquisition Agreement) between, or direction or
instructions of, or notice from any or all of the parties hereto except as
contemplated by this Agreement; provided, however, that this Agreement may be
amended at any time or times by an instrument in writing as provided in Section
EIGHTEENTH.
- 3 -
<PAGE> 50
Upon delivery by the Escrow Agent pursuant to the terms hereof
of all the Escrow Shares and the Distributions, this Agreement shall terminate
and the Escrow Agent shall be discharged from all further obligation or
responsibility hereunder.
SIXTH: If any property subject hereto is at any time attached,
garnished or levied upon under any court order, or in the case payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case an order, judgment or decree
shall be made or entered by any court affecting such property, or any part
thereof, then and in any of such events, the Escrow Agent is authorized, in its
reasonable discretion, to rely upon and comply (and simultaneously give written
notice to all interested parties hereto) with any such order, writ, judgment or
decree, which it reasonably believes to be binding upon it, and if the Escrow
Agent complies with any such order, writ, judgment or decree it shall not be
liable to any of the parties hereto or to any other person, firm or corporation
by reason of such compliance even though such order, writ, judgment or decree
may be subsequently reversed, modified, annulled, set aside or vacated.
SEVENTH: The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or any endorsement
thereof, or for any lack of endorsement thereof, or for any description therein,
nor shall it be responsible or liable in any respect on account of the identity,
authority, or rights of the persons executing or delivering or purporting to
execute or deliver any such document, security or endorsement under this
Agreement.
EIGHTH: The Escrow Agent may rely and shall be protected in
acting upon any paper or other document which may be submitted to it in
connection with its duties hereunder and which is reasonably believed by it to
be genuine and to have been signed or
- 4 -
<PAGE> 51
presented by the proper party or parties and shall have no liability or
responsibility with respect to the form, execution or validity thereof.
NINTH: The Seller hereby acknowledges that the Escrow Agent is
the parent of the Buyer, and waives any objection to such relationship.
TENTH: The Escrow Agent shall not be required to institute or
defend any action or legal process involving any matter referred to herein which
in any manner affects it or its duties or liabilities hereunder unless and until
it has received full indemnity in an amount, and of such character, as it shall
in its sole discretion require, against any and all claims, liabilities,
judgments, attorneys' fees and other costs and expenses of any and every kind in
relation thereto and for the payment thereof a first lien is hereby imposed in
the Escrow Agent's favor upon the property deposited or to be deposited
hereunder or the proceeds therefrom, in priority to the rights of any other
party thereto or of any other party interested therein.
ELEVENTH: The Buyer agrees to and hereby does indemnify and
save the Escrow Agent, its officers, agents and employees, harmless from any
claims, liabilities, judgments, attorneys' fees and other costs and expenses of
any and every kind and nature which may be incurred by any of them by reason of
the Escrow Agent's acceptance of, and its performance under, this Agreement,
except claims which are based on the Escrow Agent's bad faith or gross
negligence. Seller and Fearrington, jointly and severally, agree to and hereby
do indemnify and save the Escrow Agent, its officers, agents and employees,
harmless from any attorneys' fees, costs and expenses of every kind and nature
which may be incurred by them by reason of any action, claim or proceeding
commenced by Seller and/or Fearrington against the Escrow Agent, its officers,
agents or employees with respect to the performance by the Escrow Agent of its
duties under this Agreement unless a decision
- 5 -
<PAGE> 52
is rendered by a court of competent jurisdiction finding that the Escrow Agent
acted (which shall be deemed to include a failure to act) in bad faith or
grossly negligent.
TWELFTH: The Escrow Agent shall not be responsible for any act
or failure to act on its part except in the case of its own bad faith or gross
negligence.
THIRTEENTH: The Escrow Agent shall have no responsibility
whatever with respect to the recitals contained in this Agreement and shall have
no right, obligation or responsibility to vote or take any other corporate
action with respect to any securities deposited hereunder.
FOURTEENTH: Notwithstanding anything contained in this
Agreement to the contrary, in the event that the Escrow Agent acts (which shall
be deemed to include a failure to act) under this Agreement in a manner that
deprives the Seller (or Fearrington, if the Seller so designates) of its rights
to receive the Escrow Shares or the Distributions as contemplated by Section
FOURTH hereof, then the Buyer shall indemnify and hold harmless the Seller (or
Fearrington, if the Seller so designates) from and against any and all losses,
claims, liabilities, judgments, attorneys' fees and other costs and expenses of
any and every kind and nature arising therefrom, regardless of whether the
Escrow Agent's conduct constitutes mistake, negligence, gross negligence or
willful misconduct.
FIFTEENTH: Any notice or other communication given pursuant to
the provisions of this Agreement shall be in writing and (except as otherwise
specifically provided in this Agreement) shall be delivered personally, or shall
be mailed, postage prepaid, by registered or certified mail, return receipt
requested, and addressed to the respective parties hereto at the addresses set
forth below, or to such other addresses as to which any party hereto may give
notice to the others in accordance with the provisions of this Section
FIFTEENTH. All such notices shall be deemed given when received. Copies
- 6 -
<PAGE> 53
of all notices from one party to another under this Agreement shall be sent to
all other parties.
To the Buyer: United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attn: Maureen Scannell Bateman
Managing Director and General Counsel
To Escrow Agent: U.S. Trust Corporation
114 West 47th Street
New York, NY 10036-1532
Attn: Maureen S. Bateman
Managing Director and General Counsel
To the Seller or Ms. Florence Fearrington
Fearrington: 150 East 69th Street
New York, NY 10021
With a copy to: Floyd I. Wittlin, Esq.
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
SIXTEENTH: The Buyer and the Seller jointly may, at any time
and from time to time, in their sole and absolute discretion, upon notice in
writing to the Escrow Agent, and shall, upon thirty (30) days' written request
from the Escrow Agent, designate any other person or persons to act as the
Escrow Agent under this Agreement in the place of the Escrow Agent. Upon
acceptance of such designation, by signing a copy of this Agreement and mailing
copies thereof to all the interested parties, such other person or persons shall
acquire and assume all of the rights and obligations of the Escrow Agent with
the same force and effect as if he or they had been a party to this Agreement in
the place of the Escrow Agent. Upon receipt of such notice and a copy of such
agreement and acceptance, the Escrow Agent shall deliver to such other person or
persons the Escrow
- 7 -
<PAGE> 54
Shares and the Distributions, if any. In the event the Buyer and the Seller have
not, within thirty (30) days after the making of such request by the Escrow
Agent, designated a new Escrow Agent and the parties have not entered into an
escrow agreement with such new Escrow Agent, the Escrow Agent may, in its sole
discretion, deposit the property then held by it pursuant to this Agreement with
any bank or trust company reasonably selected by it, to be held by such bank or
trust company pursuant to the provisions of this Agreement, or with any court of
competent jurisdiction in which event the Escrow Agent shall be released from
all further obligations and responsibilities hereunder.
SEVENTEENTH: This Agreement and its validity, construction and
performance shall be governed by the laws of the State of New York.
EIGHTEENTH: This Agreement may be amended by an agreement in
writing between the Escrow Agent, the Buyer, the Seller and Fearrington.
- 8 -
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
UNITED STATES TRUST COMPANY OF NEW YORK
By:____________________________________
FLORENCE FEARRINGTON, INC.
By:____________________________________
U.S. TRUST CORPORATION
By:____________________________________
-------------------------------------
FLORENCE FEARRINGTON
- 9 -
<PAGE> 56
Exhibit 1.6(a)
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE> 57
Exhibit 1.6(a)
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT made this ____ day of
__________, 1996 between United States Trust Company of New York, a banking
institution possessing banking and trust powers chartered under the laws of New
York (the "PURCHASER"), and Florence Fearrington, Inc., a New York corporation
(the "SELLER").
W I T N E S S E T H:
WHEREAS, pursuant to the Asset Acquisition Agreement dated
November 14, 1996 (the "ASSET ACQUISITION AGREEMENT"), among the Purchaser, the
Seller and Florence Fearrington, the sole shareholder of the Seller, the Seller
agreed to transfer, sell, convey, assign and deliver to the Purchaser, and the
Purchaser agreed to acquire and accept as of the Closing Date, the Transferred
Assets; and
WHEREAS, the Asset Acquisition Agreement provides for the
Seller's assignment of certain contracts, agreements and commitments to the
Purchaser; and
WHEREAS, the Asset Acquisition Agreement provides for the
Purchaser's assumption of the Assumed Liabilities.
NOW THEREFORE, in consideration of the premises and in
accordance with the provisions of the Asset Acquisition Agreement, and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions
1.1. Unless otherwise herein defined all terms used herein
shall have the respective meanings ascribed to them in the Asset Acquisition
Agreement.
1.2. Words importing singular number shall include the plural
number and vice versa. The words "herein," "herewith," "hereby," "hereof" and
words of similar import shall refer to this Agreement.
Section 2. Assignment and Assumption of Contracts and
Commitments
2.1. The Seller hereby sells, assigns, transfers, conveys and
sets over to the Purchaser, all of the Seller's right, title and interest in and
to all contracts, agreements, commitments, grants, arrangements and
undertakings, whether oral or written, included in
<PAGE> 58
the Transferred Assets (the "ASSIGNED CONTRACTS"). Such sale, assignment,
transfer, conveyance and set over shall be effective as of the date hereof.
2.2. The Purchaser hereby absolutely and irrevocably accepts
and hereby agrees to assume, be solely and exclusively liable with respect to,
and pay, perform, discharge and satisfy, when due, all Assumed Liabilities,
subject to the terms and conditions of the Asset Acquisition Agreement. Such
acceptance, assumption and covenant shall be effective as of the date hereof.
Section 3. Separate Agreement
Notwithstanding any other provisions of this agreement to the
contrary, nothing contained herein shall in any way supersede, modify, replace,
amend, change, rescind, waive, exceed, expand, enlarge or in any way affect the
provisions, including the warranties, covenants, agreements, conditions,
representations or, in general any of the rights and remedies, and any of the
obligations and indemnifications of the Seller or the Buyer set forth in the
Asset Acquisition Agreement nor shall this agreement expand or enlarge any
remedies under the Asset Acquisition Agreement including without limitation any
limits on indemnification specified therein. This agreement is intended only to
effect the assignment of certain contracts and commitments and the assumption of
certain liabilities pursuant to the Asset Acquisition Agreement and shall be
governed entirely in accordance with the terms and conditions of the Asset
Acquisition Agreement.
Section 4. Non-Merger; Miscellaneous
4.1. The agreements, obligations, assumptions and covenants of
the Purchaser under the Asset Acquisition Agreement are not merged into this
agreement and shall, to the extent provided in the Asset Acquisition Agreement,
survive the execution and delivery of this agreement, and the performance of the
consummation of all transactions provided for in the Asset Acquisition
Agreement.
4.2. This Assignment and Assumption Agreement shall be binding
upon and enforceable against the Purchaser, its assigns and successors.
4.3. This Assignment and Assumption Agreement shall be
construed in accordance with and governed under the laws of the State of New
York.
4.4. This Assignment and Assumption Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
and all of which shall constitute one and the same document.
2
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on this ___ day of ____________, 1996.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
--------------------------------
Name:
Title:
FLORENCE FEARRINGTON, INC.
By:
--------------------------------
Name:
Title:
3
<PAGE> 60
Exhibit 1.6(b)
BILL OF SALE
<PAGE> 61
Exhibit 1.6(b)
BILL OF SALE
KNOW ALL PEOPLE BY THESE PRESENTS that Florence Fearrington,
Inc., a New York corporation ("SELLER"), in consideration of the acquisition
price set forth in Section 1.4(a) of the Asset Acquisition Agreement, dated
November 14, 1996 (the "ASSET ACQUISITION AGREEMENT"), among United States Trust
Company of New York, a banking institution possessing banking and trust powers
chartered under the laws of New York ("PURCHASER"), the Seller and Florence
Fearrington, the sole shareholder of the Seller, the receipt of which is hereby
acknowledged by Seller, does hereby, effective from and after the Closing (such
term and, except as defined herein, all other capitalized terms used herein
having the same meanings ascribed to them in the Asset Acquisition Agreement),
sell, transfer, assign, set over, convey and deliver to the Purchaser, its
successors and assigns in accordance with the terms and provisions of the Asset
Acquisition Agreement the following:
All of the right, title and interest of Seller in and to the
Transferred Assets;
TO HAVE AND TO HOLD unto the Purchaser, its successors and
assigns, FOREVER.
Notwithstanding any other provisions of this Bill of Sale to
the contrary, nothing contained in this Bill of Sale shall in any way supersede,
modify, replace, amend, change, rescind, waive, exceed, expand, enlarge or in
any way affect the provisions, including the warranties, covenants, agreements,
conditions, representations or, in general, any of the rights and remedies, and
any of the obligations and indemnifications of Seller or Purchaser set forth in
the Asset Acquisition Agreement nor shall this Bill of Sale expand or enlarge
any remedies under the Asset Acquisition Agreement including without limitation
any limits on indemnification specified therein. This Bill of Sale is intended
only to effect the transfer of certain property to be transferred pursuant to
the Asset Acquisition Agreement and shall be governed entirely in accordance
with the terms and conditions of the Asset Acquisition Agreement.
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale
this _____ day of ____________, 1996.
FLORENCE FEARRINGTON, INC.
By:
--------------------------------
Name: Florence Fearrington
Title: President
<PAGE> 62
EXHIBIT 7.5
OPINION RICHARDS & O'NEIL, LLP
<PAGE> 63
EXHIBIT 7.5
[LETTERHEAD OF RICHARDS & O'NEIL, LLP]
____________, 1996
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Gentlemen:
We have acted as special counsel to Florence Fearrington,
Inc., a New York corporation (the "Seller"), and Florence Fearrington
("Fearrington"), the sole shareholder of the Seller, in connection with the
execution and delivery of the Asset Acquisition Agreement (the "Asset
Acquisition Agreement") dated November 14, 1996, among United States Trust
Company of New York, a banking institution possessing banking and trust powers
chartered under the laws of New York (the "Buyer"), the Seller and Fearrington.
All capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to them in the Asset Acquisition
Agreement. This opinion is delivered to you pursuant to Section 7.5 of the Asset
Acquisition Agreement.
In connection with this opinion, we have examined originals,
counterparts or copies of the following documents:
(a) the Asset Acquisition Agreement;
(b) the Bill of Sale;
(c) the Assignment and Assumption Agreement;
(d) the Escrow Agreement;
(e) the Employment Agreement dated the date hereof,
between the Buyer and Fearrington (the "Employment
Agreement");
(f) the Agreement to Deliver and Register Shares dated
the date hereof, among U.S. Trust Corporation, a New
York corporation ("U.S. Trust"),
<PAGE> 64
the Seller and Fearrington (the "Agreement to Deliver
and Register Shares"); and
(g) the letter agreement dated November 14, 1996, between
the Buyer and Fearrington with respect to additional
payments to Fearrington from life and disability
policies in the event of her death or disability.
The documents enumerated in Paragraphs (a) through (g) above
are hereinafter referred to collectively as the "Acquisition Documents."
In connection with the opinions expressed herein, we also have
examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records of the Seller, certificates of public
officials and officers and other representatives of the Seller and Fearrington,
and such other documents, agreements and instruments, and have made such other
investigations, as we have deemed necessary or appropriate.
As to various questions of fact material to this opinion, we
have relied upon, without any independent investigation or verification of any
kind, the representations and warranties made by the Seller and Fearrington in
the Acquisition Documents and the other documents executed and delivered in
connection therewith and upon certificates and other documents of officers or
representatives of the Seller and Fearrington and of public officials and have
made such other inquiries and investigations as we have deemed necessary or
appropriate. In our examination of the documents referred to above, we have
assumed (i) the genuineness of all signatures of, and the incumbency, authority
and legal right and power under all applicable laws, statutes, rules and
regulations of, the officers and other persons signing the Acquisition Documents
and the other documents executed and delivered in connection therewith on behalf
of the parties thereto other than the Seller and Fearrington, (ii) the
authenticity and completeness of all documents submitted to us as original or
certified documents, (iii) the conformity to authentic original documents of all
documents submitted to us as certified, conformed or photostatic copies and (iv)
that the certificates of public officials dated earlier than the date of this
opinion remain accurate from such earlier date through and including the date of
this opinion.
The opinions set forth below that are rendered "to the best of
our knowledge" or with similar qualification have been rendered based upon the
present, actual knowledge of the lawyers currently in our employ who have
devoted substantive attention to the legal affairs of the Seller and Fearrington
within the past 12 months.
We have investigated such questions of law for the purpose of
rendering this opinion as we have deemed necessary. We do not purport to be
experts in, or to express any opinion herein concerning, the laws, statutes,
rules or regulations of any jurisdiction other than the State of New York and
the United States of America. We do not opine on, and we
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assume no responsibility as to, the applicability to or the effect on any of the
matters covered herein of, the laws of any other jurisdiction.
To the extent that the obligations of each of the Seller and
Fearrington may be dependent upon such matters, we have assumed, for purposes of
this opinion: (i) that U.S. Trust is a corporation duly organized, validly
existing and in good standing under the laws of New York; (ii) that the Buyer is
a banking institution possessing banking and trust powers, duly organized,
validly existing and in good standing under the laws of New York; (iii) that the
Buyer has the requisite banking and trust power and authority, and U.S. Trust
has the requisite corporate power and authority, to execute, deliver and perform
their respective obligations under each Acquisition Document to which they are a
party and each of the other documents executed by them in connection therewith;
(iii) that each Acquisition Document has been duly authorized, executed and
delivered by the Buyer or U.S. Trust, as applicable; and (iv) that each
Acquisition Document constitutes the legal, valid and binding obligation of the
Buyer or U.S. Trust, as applicable, enforceable against it in accordance with
its terms.
The opinions set forth below are subject to the following
additional limitations, qualifications and exceptions:
A. the legality, validity, binding effect and enforceability
of the Acquisition Documents may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, marshalling or
other similar laws now or hereafter in effect affecting creditors' rights and
remedies generally;
B. the legality, validity, binding effect and enforceability
of the Acquisition Documents may be subject to (i) general principles of equity
(regardless of whether considered in a proceeding in equity or at law) and
(ii) the discretion of the court before which any proceeding may be brought;
C. no opinion is expressed with respect to the enforceability
of provisions which purport to establish consent to the jurisdiction of any
court;
D. no opinion is expressed with respect to the enforceability
of provisions regarding indemnification against liabilities where such
indemnification is contrary to public policy; and
E. no opinion is expressed with respect to any covenant not to
compete or solicit contained in the Asset Acquisition Agreement or the
Employment Agreement.
The opinions expressed below with respect to compliance with
certain laws, statutes, rules and regulations are based upon a review of those
statutes, laws, rules and
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<PAGE> 66
regulations that, in our experience, are normally applicable to transactions of
the type contemplated by the Acquisition Documents.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Seller is a corporation validly existing under the laws
of the State of New York and has the corporate power and authority to own, lease
and operate its assets, properties and business and to carry on its business as
now conducted.
2. The Seller has all requisite corporate power and authority
to execute, deliver and perform each of the Acquisition Documents to which it is
a party, to consummate the transactions contemplated thereby and to perform
fully its obligations thereunder. The execution, delivery and performance by the
Seller of each of the Acquisition Documents to which it is a party have been
duly authorized by all necessary corporate action on the part of the Seller.
3. Each of the Acquisition Documents to which the Seller is a
party have been duly executed and delivered by the Seller and constitutes the
legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms.
4. Fearrington has full legal capacity to execute, deliver and
perform each of the Acquisition Documents to which she is a party, to consummate
the transactions contemplated thereby and to perform fully her obligations
thereunder. Each of the Acquisition Documents to which Fearrington is a party
has been duly executed and delivered by Fearrington and is a legal, valid and
binding agreement of Fearrington enforceable against her in accordance with its
terms.
5. Except as set forth in the DL, to the best of our
knowledge, no approval or consent of or any filing with or notice to, any
foreign, federal, state, county, local or other governmental or regulatory body,
and no approval or consent of, or any filing with or notice to any other person
(other than those contemplated by the Acquisition Documents, all of which have
been received or made, except as otherwise set forth in the DL) is required in
connection with the execution and delivery by each of the Seller and Fearrington
of the Acquisition Documents to which it or she is a party, and the consummation
and performance by the Seller or Fearrington, as applicable, of the transactions
contemplated thereby.
6. Neither the execution and delivery by each of the Seller
and Fearrington of the Acquisition Documents to which it or she is a party, the
performance by each of the Seller or Fearrington of its or her respective
obligations thereunder nor the consummation of the transactions contemplated
thereby will violate, conflict with or result in a breach of or require consent
(other than those that have been obtained or given) under or constitute (or with
notice or lapse of time or both would constitute) a default under (i) any
provision of the
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Seller's certificate of incorporation or by-laws, as amended; (ii) any provision
of any applicable law, as in effect and binding upon the Seller or Fearrington;
(iii) to the best of our knowledge, any term of any material agreement or
instrument to which the Seller or Fearrington is a party or by which it or her
properties or assets are bound, which violation or conflict would have a
material adverse effect on the business, results of operations, property or
financial condition of the Seller; or (iv) to the best of our knowledge, any
order, judgment, injunction, writ, award or decree of any court, arbitrator or
governmental or regulatory authority or agency binding upon either of the Seller
or Fearrington or their respective properties or assets.
7. To the best of our knowledge, there is no pending or
threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation, questioning the validity of
any of the Acquisition Documents or any of the transactions contemplated
thereby.
The opinions set forth herein are as of the date of this
letter and we do not render any opinion as to the effect of any matter which may
occur or be effective subsequent to the date hereof.
This opinion is rendered only to you, is solely for your
benefit in connection with the transactions contemplated by the Asset
Acquisition Agreement and is not to be quoted, circulated, referred or delivered
to, or relied upon or otherwise used by, any other person or entity whatsoever
for any purpose without our prior express written consent.
Very truly yours,
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<PAGE> 68
EXHIBIT 7.8
EMPLOYMENT AGREEMENT
<PAGE> 69
EMPLOYMENT AGREEMENT
Between
UNITED STATES TRUST COMPANY OF NEW YORK
and
FLORENCE FEARRINGTON
Dated ________________, 1996
<PAGE> 70
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <C>
1. Employment and Term........................................................................... 1
1.1. Employment........................................................................... 1
1.2. Term................................................................................. 2
1.3. Key Man Insurance; Place of Employment............................................... 2
2. Salary........................................................................................ 2
3. Incentive Compensation........................................................................ 2
3.1. Incentive Compensation Definitions................................................... 2
3.2. Incentive Compensation; Calculation.................................................. 3
3.3. Limitation on Incentive Compensation................................................. 4
4. Other Benefits................................................................................ 4
4.1. Health Insurance and Other Benefits.................................................. 4
4.2. Incentive Compensation for New Business.............................................. 4
4.3. Reasonable Business Expenses......................................................... 6
4.4. Vacation............................................................................. 6
4.5. Payments to Representatives.......................................................... 6
4.6. Changes To Fees...................................................................... 6
5. Termination of Employment..................................................................... 7
5.1. Termination with Cause............................................................... 7
5.2. Death or Permanent Disability of Employee............................................ 7
5.3. Termination Without Cause Or Voluntary Resignation................................... 8
5.3A. Termination for Good Reason................................................. 8
5.4. Compensation Upon Termination for Cause.............................................. 8
5.5. Compensation Upon Death or Disability................................................ 8
5.6. Compensation Upon Voluntary Resignation.............................................. 9
5.7. Compensation for Termination without Cause........................................... 9
6. Confidential Information...................................................................... 9
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
Page
----
<C> <C>
7. Agreement Not to Solicit or Compete........................................................... 10
7.1. Nonsolicitation and Noncompetition................................................... 10
7.2. Exception to Nonsolicitation and Noncompetition...................................... 11
7.3. Severability......................................................................... 11
7.4. Injunctive Relief.................................................................... 11
8. Entire Agreement.............................................................................. 11
9. Notices....................................................................................... 11
10. Assignment.................................................................................... 12
11. Indemnification and Directors and Officers Liability Insurance................................ 12
12. Amendment; Waiver............................................................................. 12
13. Construction.................................................................................. 13
</TABLE>
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<PAGE> 72
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of ____________, 1996 by and between United States Trust Company of New York,
a banking institution possessing banking and trust powers chartered under the
laws of New York (the "Company") and Florence Fearrington (the "Employee").
RECITALS
A. The Company acquired substantially all of the assets,
subject to substantially all of the liabilities of Florence Fearrington, Inc.,
the former employer of the Employee, pursuant to a certain Asset Acquisition
Agreement dated November 14, 1996 among the Company, Florence Fearrington, Inc.
and Employee (the "Asset Acquisition Agreement").
B. As part of the transaction referred to above (the "Asset
Acquisition"), Employee agrees to and is entering into this Employment Agreement
with the Company.
C. Capitalized terms used but not otherwise defined herein
shall have the same meaning as set forth in the Asset Acquisition Agreement.
Accordingly, the parties agree as follows:
1. Employment and Term.
1.1. Employment. Subject to the terms and conditions
of this Agreement, the Company hereby employs Employee during the term of
employment set forth in Section 1.2. Employee shall be responsible for
relationship management with Current Client Accounts and Extended Family Client
Accounts (both as defined below) and shall have such powers and perform such
additional duties as may be assigned or delegated to her from time to time by
the executive officers of the Company consistent with such responsibilities.
Employee hereby accepts such employment and agrees to perform all such services
faithfully and diligently, and to discharge the responsibilities thereof to the
best of her ability. Employee shall devote all of her business time and
attention and energies to the duties of her employment; provided, however, that
nothing contained in this Agreement shall prohibit Employee from (i) making
passive investments or attending board meetings of other entities of which
Employee is a director, provided such directorships were entered into prior to
the date of this Agreement or were entered into with the written approval of the
Company or (ii) managing assets of members of the immediate family of Employee
or Employee's husband for no fee or other compensation, provided in either
event, such activities do not impair Employee's ability to perform her duties
hereunder.
<PAGE> 73
1.2. Term. The term of employment of Employee under
this Agreement shall begin on the date of this Agreement and end on
_____________, 1999, unless otherwise terminated in accordance with the
provisions set forth in Section 5 below (the "Employment Period").
1.3. Key Man Insurance; Place of Employment. Employee
agrees to cooperate with the Company in applying for key man insurance with
respect to Employee, if the Company in its sole discretion determines that such
insurance is advisable. Except when engaged in travel on behalf of the Company,
Employee's place of employment shall be within a twenty-five mile radius of New
York, NY.
2. Salary. In consideration for the services to be rendered
hereunder, and subject to the terms and conditions of this Agreement, the
Company hereby agrees to pay Employee, in accordance with its normal practices,
an annual base salary of $150,000 for each year terminating on the anniversary
date hereof (the "Annual Base Salary").
3. Incentive Compensation.
3.1. Incentive Compensation Definitions.
(a) "Annual Advisory Fee" shall mean, with respect to
each advisory client account, the annual advisory fee for such account
(expressed as a percentage of assets under management in such account);
provided, however, that Annual Advisory Fee shall mean with respect to each
Current Client Account (as defined below) and Extended Family Client Account (as
defined below), the annual advisory fee in effect as of the Incentive
Compensation Calculation Date (as defined below);
(b) "Annualized Fee Revenues" shall mean the amount
equal to (i) the assets under management, valued as of the Incentive
Compensation Calculation Date, of each Current Client Account and each Extended
Family Client Account, multiplied by (ii) the Annual Advisory Fee applicable to
each such account.
(c) "Current Client Account" shall mean each advisory
client account of the Seller (as defined in the Asset Acquisition Agreement) as
of the Closing Date (as defined in the Asset Acquisition Agreement) that (i) on
or before the 90th day after the Closing Date has affirmatively consented in
writing to the assignment of its advisory contract(s) to the Company in
connection with the Asset Acquisition and (ii) is an advisory client account of
the Company as of the Incentive Compensation Calculation Date.
(d) "Extended Family Client Account" shall mean the
advisory client account of any (i) spouse, parent, child, cousin or sibling, by
blood or marriage, of a client who maintains a Current Client Account, (ii)
trust for the benefit of, or of which a trustee is,
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<PAGE> 74
any person referred to in clause (i) or any client who maintains a Current
Client Account, or the estate of any person referred to in clause (i) or the
estate of any client who maintains a Current Client Account, (iii) IRA,
foundation, limited liability company, corporation, partnership or other entity
controlled by any client who maintains a Current Client Account or any person,
trust or estate listed in clause (i) or (ii), or (iv) any advisory client
account of the Company for which the decision to enter into an advisory
agreement with the Company is made by Nelson Luria, Harvey Brecher, Peter
Bienstock or Michael deHavenon that, in the case of clauses (i), (ii), (iii) and
(iv) becomes an advisory client account of the Company after the Closing Date
and is an advisory client account of the Company as of the Incentive
Compensation Calculation Date. As used in this definition of Extended Family
Client Account, the term Current Client Account shall exclude clause (ii) of the
definition thereof and "control" shall mean the ability to direct the management
and affairs of an entity or the ownership of 50% or more of an entity's equity
interests.
(e) "Incentive Compensation Calculation Date" shall
mean the earliest to occur of (i) the third anniversary of the Closing Date;
(ii) the last business day of the month preceding the date of termination of the
Employee's employment pursuant to Section 5.1; (iii) the last business day of
the month preceding the termination of the Employee's employment pursuant to
Section 5.2 if such employment is terminated by reason of the death of Employee;
(iv) the last business day of the 18th month after the Closing Date if the
Employee's employment is terminated pursuant to Section 5.2 by reason of the
Employee's permanent disability within the first 18 months after the Closing
Date; (v) the last business day of the month preceding the date of termination
of the Employee's employment pursuant to Section 5.2 if such employment is
terminated by reason of the permanent disability of the Employee more than 18
months after the Closing Date; (vi) the last business day of the month preceding
the date of termination of the Employee's employment pursuant to Section 5.3
without cause; and (vii) the last business day of the month preceding the date
of termination of the Employee's employment pursuant to Section 5.3A.
(f) "Incentive Compensation Payment Date" shall mean
a date which is 60 days after the Incentive Compensation Calculation Date.
3.2. Incentive Compensation; Calculation. In
consideration of the Employee's execution, delivery and performance of this
Agreement, on the Incentive Compensation Payment Date (a) if the Incentive
Compensation Calculation Date occurs on a date referred to in clause (i), (iv)
(v), (vi) or (vii) of Section 3.1(e), the Company shall pay to the Employee an
amount in cash equal to (i) the Annualized Fee Revenues multiplied by 2.75, less
(ii) the Asset Acquisition Consideration (as defined in the Asset Acquisition
Agreement) valued as of the Measurement Date (as defined in the Asset
Acquisition Agreement; such amount being hereinafter referred to as the "Full
Term Incentive Compensation"); and (b) if the Incentive Compensation Calculation
Date occurs on a date referred to in clause (ii) or (iii) of Section 3.1(e), the
Company shall pay to the Employee or the Employee's estate, as
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<PAGE> 75
applicable, an amount in cash equal to (i) the Full Term Incentive Compensation,
multiplied by (ii) a fraction, the numerator of which is the number of days in
the period commencing on the Closing Date and ending on the date of termination
of the Employee's employment with the Company and the denominator of which is
1095.
3.3. Limitation on Incentive Compensation.
(a) There is no upward limitation on Incentive
Compensation.
(b) Notwithstanding any other section of this
Agreement, no Incentive Compensation shall be paid under this Section 3 in the
event that the Annualized Fee Revenues as of the Incentive Compensation
Calculation Date are not equal to 75% or more of the Annualized Revenues (as
defined in the Asset Acquisition Agreement).
4. Other Benefits.
4.1. Health Insurance and Other Benefits. During the
Employment Period, Employee shall be allowed to participate in any medical,
dental and life insurance plans or policies and any pension and retirement plans
and any disability plans that are available from time to time to other similarly
situated employees of the Company. A description of the benefits currently
available to similarly situated employees of the Company is set forth in the
1996 Benefits Portfolio of U.S. Trust Corporation, a New York corporation ("U.S.
Trust"), the beneficial and record owner of all of the Company's Common Stock,
which is incorporated herein by reference.
4.2. Incentive Compensation for New Business. The
Employee shall receive incentives for new business that is not either a Current
Client Account or an Extended Family Client Account in accordance with the
following schedule.
(a) For each new asset management account with assets
(after giving effect to the initial funding of such account) of between $250,000
and $2,000,000, an incentive equal to 25% of the first year's anticipated
annualized revenue, payable on or before the first "New Business Incentive
Payment Date" (as hereinafter defined) which occurs after the initial funding of
such account;
(b) For each new asset management account with assets
(after giving effect to the initial funding of such account) of between
$2,000,000 and $5,000,000, an incentive equal to 50% of the first year's
anticipated annualized revenue, payable on or before the first New Business
Incentive Payment Date which occurs after the initial funding of such account;
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<PAGE> 76
(c) For new asset management accounts with assets of
over $5,000,000, an incentive equal to 100% of the first year's revenue, payable
50% of anticipated annualized revenue on or before the first New Business
Incentive Payment Date which occurs after the initial funding of the account and
the balance of actual first year's revenue payable on or before the first New
Business Incentive Payment Date which occurs after the first anniversary of the
initial funding of the account, provided that the account remains open until the
first anniversary of the opening of the account with assets greater than
$5,000,000 on the first anniversary.
(d) For each addition to an account for which an
incentive payment has been made or is payable under Section 4.2(a), (b) or (c),
the Employee shall receive an additional incentive payment equal to (i) for an
addition made to an account described in Section 4.2(a), 25% of the anticipated
annualized revenue attributable to such addition for the twelve months after
such addition is made (the "Additional Payment Calculation Period"), payable on
or before the first New Business Incentive Payment Date which occurs after the
addition is made; (ii) for an addition made to an account described in Section
4.2(b), 50% of the anticipated annualized revenue attributable to such addition
for the Additional Payment Calculation Period, payable on or before the first
New Business Incentive Payment Date which occurs after the addition is made; and
(iii) for an addition made to an account described in Section 4.2(c), 100% of
the revenue attributable to such addition for the Additional Payment Calculation
Period, payable 50% of the anticipated annualized revenue attributable to such
addition on or before the first New Business Incentive Payment Date which occurs
after such addition is made, and the balance of the actual revenue attributable
to such addition for the Additional Payment Calculation Period payable on or
before the first New Business Incentive Payment Date which occurs after the
first anniversary of such addition, provided that the account remains open
throughout the Additional Payment Calculation Period with assets greater than
$5,000,000 at the end of the Additional Payment Calculation Period.
Notwithstanding anything contained in this Section 4.2 to the contrary, the
Company shall not be obligated to make any incentive payment of less than
twenty-five ($25) dollars.
(e) In the event the Employee receives an incentive
payment under Section 4.2(a), (b) or (c) with respect to a new asset management
account which subsequently is closed within the first twelve months after it was
opened, then, upon notice thereof by the Company to the Employee, the Company
may charge against future incentive payments otherwise payable under this
Section 4 the full amount of the incentive payment previously paid to the
Employee with respect to such closed account.
(f) The Employee will receive an incentive for all
other new business she brings in, in accordance with the Company's annual sales
incentive plan.
(g) Except as set forth above, all payments will be
made in accordance with the Company's normal practices and document
requirements.
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<PAGE> 77
For purposes of this Section 4.2: (i) new asset management
accounts initially funded within 60 days of one another with the same person or
persons either directing the decision to open such accounts or having a
beneficial interest in such accounts shall be considered a single new asset
management account with total assets at inception equal to the sum of the total
assets at inception of all such accounts, (ii) anticipated annualized revenue
shall equal the product of (A) assets under management for each new asset
management account and (B) the annual advisory fee for such account (expressed
as a percentage of assets under management in such account) at inception, or, in
the case of additions under Section 4.2(d), at the date of the applicable
addition, and (iii) "New Business Incentive Payment Date" shall mean a date
which is 45 days after the three month period ended March 31, June 30, September
30 and December 31, as the case may be, in which the initial funding of an
account (in the case of payments under Sections 4.2(a) and (b) and the first
payment under Section 4.2(c)), the addition to an account (in the case of
Section 4.2(d)) and the first anniversary of the initial funding or addition to
an account (in the case of the second payment under Section 4.2(c) or the
payment under Section 4.2(d)(iii)), as applicable, occurs; provided, however, if
the initial funding of an account, the addition to an account, the first
anniversary of the funding of an account or the addition to an account, as
applicable, occurs within the last five days of a three month period ended March
31, June 30, September 30 or December 31, as the case may be, then the New
Business Incentive Payment Date shall be deferred until 45 days after the end of
the next three month period. Employee shall promptly notify the Comptroller's
Office of the Company upon becoming aware of the opening of any new asset
management account with respect to which clause (i) of this Section 4.2 is
applicable.
4.3. Reasonable Business Expenses. During the
Employment Period, Employee shall be reimbursed for ordinary and reasonable
business and entertainment expenses in connection with the performance of her
duties hereunder; provided, that Employee shall be required to present receipts
in accordance with the Company's Travel and Entertainment policy as in force
from time to time in order to obtain reimbursement for such expense.
4.4. Vacation. Employee shall be entitled to annual
vacation (without deduction of salary or other compensation) in accordance with
the Company's vacation policy for executives similarly situated in effect from
time to time, but in no event less than four (4) weeks, such vacation to be
taken at such time or times during such year as may reasonably be mutually
agreed upon between the Employee and the Company.
4.5. Payments to Representatives. In the event of
Employee's death or other inability to receive payments under this Agreement,
payments shall be made to Employee's estate, heirs or other representative as
may be legally appropriate.
4.6. Changes To Fees. The Employee shall be consulted
before the fees of any Current Client are changed during the term of this
Agreement. The Employee's
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approval shall not be necessary prior to the Company's making any such change;
provided, however, that no change to the fees of any Current Client shall be
made without the consent of Employee unless (i) the client has initiated the
discussions with respect to changes in the fees to be charged to it and (ii) the
Company believes, in good faith, that without such change in the fees the
Current Client would withdraw all or substantially all of its assets under
management by the Company.
5. Termination of Employment.
5.1. Termination with Cause. This employment contract
may be terminated at any time by the Company with cause, by written notice to
the Employee specifying in reasonable detail the reasons therefor. The term
"cause" shall include any of the following events:
(a) misappropriation by Employee of funds or property
of the Company or any affiliate of the Company; intentional dishonesty;
disloyalty; intentional material breach of any provision of Section 6 or Section
7; any attempt by Employee to secure any personal profit related to the business
of the Company or any affiliate of the Company and not fairly disclosed to and
approved in writing by the Board of Directors of the Company ("Board of
Directors"); Employee's actions bringing public discredit on the Company; or a
felony conviction or plea of nolo contendere of Employee or conviction or plea
of nolo contendere of an offense involving moral turpitude. Termination for any
of the reasons listed above shall not be subject to any cure provisions, and
(b) Employee's extended absence from duty (other than
on account of illness, medical condition, or permitted vacation); refusal to
carry out any direction of the Company's officers with respect to the duties to
be performed by Employee hereunder, provided that such direction is consistent
with the description of the Employee's duties set forth in Section 1.1 hereof;
or any unintentional material breach by Employee of any of her duties or
obligations under any section of this Agreement other than Section 6 or Section
7 which material breach is not specified in Section 5.1(a); provided, however
that for the first instance of any act contained in this Section 5.1(b),
Employee shall be given written notice by the Company and a 15 day period to
cure, and if Employee cures the action to the reasonable satisfaction of the
Company within such time period, the action contained in the notice shall not
constitute "cause" hereunder. Notwithstanding the foregoing, nothing contained
herein shall require the Company to give more than one notice and opportunity to
cure under this Section 5.1(b).
5.2. Death or Permanent Disability of Employee.
Employee's employment hereunder shall terminate upon her death. In addition, the
Company shall have the right to terminate Employee's employment hereunder upon
15 days' written notice if and when Employee becomes permanently disabled within
the meaning of any permanent
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<PAGE> 79
disability insurance policy which may be maintained by the Company for the
benefit of Employee and under which the Employee is entitled to benefits.
5.3. Termination Without Cause Or Voluntary
Resignation. The Company, by written notice to Employee, at any time after
authorization by an executive officer of the Company, shall also have the right
to terminate Employee's employment without cause for any reason, subject to
Section 5.7 hereof. The Company agrees that the Employee has the right to resign
voluntarily at any time and that such resignation shall not constitute a breach
of this Agreement.
5.3A. Termination for Good Reason. The Employee may
terminate her employment for "good reason" under this Agreement and such
termination shall not constitute a breach of this Agreement provided that (i)
the Employee has given the Company thirty (30) days' prior written notice of
termination, stating the action or actions constituting "good reason", and (ii)
the Company has not remedied all such actions within such thirty (30) day
period. For purposes of this Agreement "good reason" shall mean (i) a breach by
the Company of the last sentence of Section 1.3, Section 3 or Section 4.6 of
this Agreement or (ii) the assignment or delegation to Employee of duties which
are inconsistent with the responsibilities and duties of the Employee described
in Section 1.1 of this Agreement or (iii) the elimination of any of Employee's
duties or responsibilities, without her consent, which materially impair her
ability to maintain the relationship between the Company and any Current Client
Account or Extended Family Client Account.
5.4. Compensation Upon Termination for Cause. In the
event of termination of Employee's employment for cause as described in Section
5.1, the Company shall pay the Employee (i) within 15 days after such
termination, the unpaid salary and vacation earned by her before the date of
termination as provided for in this Agreement, computed pro rata up to and
including such date of termination; (ii) within 60 days after such termination,
amounts payable pursuant to Section 4.2; and (iii) 25% of the Employee's portion
of the Incentive Compensation calculated and paid in accordance with Section 3
above, in lieu of any and all other compensation, benefits and claims of any
kind, excepting only such additional amounts as may be provided for under the
express terms of any applicable benefit plans or as may be required by law to be
paid.
5.5. Compensation Upon Death or Disability. In the
event of termination of Employee's employment pursuant to Section 5.2,
Employee's salary set forth in Section 2 above shall cease as of the date of
termination, but the Company shall pay to Employee or Employee's estate, as
applicable (i) any Incentive Compensation calculated and paid in accordance with
Section 3 above, (ii) within 15 days after such death or disability, salary and
vacation earned by Employee up to and including the date of termination; (iii)
within 60 days of such death or disability, amounts payable under Section 4.2
and (iv) within 60 days of such death or disability, such additional amounts as
may be provided for under the
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<PAGE> 80
express terms of any applicable benefit plans or as may be required by law to be
paid, such payments to be in lieu of any and all compensation benefits and
claims of any kind, excepting only such additional amounts as may be provided
for under any applicable benefit plans or may be required by law to be paid.
5.6. Compensation Upon Voluntary Resignation. In the
event Employee voluntarily resigns from employment with the Company, the Company
shall pay to Employee, (i) within 15 days of such resignation, all unpaid salary
and vacation earned by Employee up to and including the date of resignation,
(ii) within 60 days of such resignation, amounts payable under Section 4.2 and
(iii) within 60 days of such resignation, such additional amounts as may be
provided for under the express terms of any applicable benefit plans or as may
be required by law to be paid, such payments to be in lieu of any and all
compensation benefits and claims of any kind, excepting only such additional
amounts as may be provided for under any applicable benefit plans or may be
required by law to be paid. Notwithstanding any other section of this Agreement,
in the event of voluntary resignation, the Employee shall forfeit all the
Incentive Compensation under Section 3 hereof. The amounts set forth above shall
be in lieu of any and all other compensation, benefits and claims of any kind,
excepting only such additional amounts as may be provided for under any
applicable benefit plans or as may be required by law to be paid.
5.7. Compensation for Termination without Cause. In
the event that Employee's employment with the Company is terminated by the
Company without cause (as set forth in Section 5.3) or by the Employee for good
reason (as defined in Section 5.3A, the Company shall pay to Employee (i) within
15 days of such termination, all unpaid salary and vacation earned by her up to
and including the date of termination; (ii) the Incentive Compensation
calculated and paid in accordance with Section 3 above; (iii) within 60 days of
such termination, amounts payable under Section 4.2; and (iv) within 60 days of
such termination, such additional amounts as may be provided for under the
express terms of any applicable benefit plans. Such payments shall be in lieu of
any and all compensation, benefits and claims of any kind, excepting only such
additional amounts as may be required by law to be paid. Notwithstanding any
other provision of this Section 5.7, the termination of the Employee within six
months after a change in control (as defined in the 1993 Company Benefits
Portfolio) of the Company shall be deemed termination without cause and the
Employee shall be entitled to the payments described in this Section 5.7 in the
event of termination following such a change in control.
6. Confidential Information. During the term of employment
under this Agreement, Employee will have access to and become acquainted with
confidential proprietary information of the Company, including without
limitation, client or supplier identities and relationships, compilations of
information, records, and specifications owned by the Company (collectively,
"Confidential Information"). Employee shall not disclose any of the Company's
Confidential Information (including without limitation any client lists or other
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<PAGE> 81
confidential information relating to the Company's business), directly or
indirectly, or use them in any way, either during the term of this Agreement or
at any time thereafter, except as required in the course of her employment by
the Company. All files, records, documents, drawings, specifications, equipment
and similar items relating to the business of the Company, whether prepared by
Employee or otherwise coming into her possession, shall remain the exclusive
property of the Company, and if removed from the premises of the Company shall
be immediately returned to the Company upon any termination of her employment.
In this Section 6, the term (a) "the Company" shall include any firm or
corporation directly or indirectly controlling or controlled by the Company or
under common control with the Company; and (b) "Confidential Information" shall
not include information which (i) is already in Employee's possession other than
through her employment with the Company; (ii) becomes or has been generally
available to the public other than as a result of Employee's disclosure; (iii)
was available to Employee on a non-confidential basis prior to its disclosure by
the Company; or (iv) is independently developed or becomes available to Employee
on a non-confidential basis from a source other than the Company.
Notwithstanding anything contained in this Section 6 to the contrary, Employee
may disclose Confidential Information to her current spouse or employees of
Florence Fearrington, Inc. as of the Closing Date who did not become employees
of the Company if such spouse or employees, as the case may be, have agreed in
writing to be bound by the provisions of this Section 6 and such disclosure is
for the sole purpose of assisting Employee in performing her duties hereunder.
7. Agreement Not to Solicit or Compete.
7.1. Nonsolicitation and Noncompetition. Employee
will not, individually or through an agent, for herself or on behalf of another,
as an employee, director, owner, partner, sole proprietor, consultant, agent,
representative, shareholder, or in any other manner or capacity whatsoever,
either during the Employment Period or at any time during the two-year period
immediately thereafter, (a) solicit or induce any clients of the Company with
whom she has dealt during her term of employment hereunder, to terminate or
reduce their respective relationships with the Company, (b) accept any business
from any clients of the Company with whom she has dealt during her term of
employment hereunder, or enter into a business relationship with any such
clients, if any, unless (i) Employee continues to be employed by the Company
during such two-year period; and (ii) all compensation from such clients during
such two-year period shall accrue to the Company in accordance with the
Company's Business Ethics Policy; or (c) solicit or induce any person then
employed by the Company with whom she has dealt during her term of employment
hereunder to terminate such employment. Any written notice or oral presentation
made jointly by the Company and Employee during such two-year period shall not
be deemed to violate any provision of this Section 7.1. In this Section 7.1 the
term "the Company" shall include any firm or corporation directly or indirectly
controlling or controlled by the Company or under common control with the
Company.
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<PAGE> 82
7.2. Exception to Nonsolicitation and Noncompetition.
The restrictions set forth in Section 7.1 shall not apply (a) if Employee's
employment hereunder is terminated by the Company without cause (as described in
Section 5.3) or by the Employee for good reason (as defined in Section 5.3A),
either during the term of this Agreement or after the expiration hereof; (b) if
the Company breaches any of its obligations under Sections 3 or 4; (c) if
Employee's employment is terminated under Section 5.2 due to a disability and
Employee petitions the Company for reinstatement upon the same terms and
conditions as her earlier employment (which petition is accompanied by a
doctor's letter stating that Employee is no longer permanently disabled within
the meaning of any permanent disability insurance policy maintained by the
Company for the benefit of Employee and under which Employee is entitled to
benefits, delivered within three months of Employee becoming so permanently
disabled) and is refused such reinstatement by the Company; or (d) to the
ownership of a less than 5% interest in any corporation or partnership whose
securities are publicly traded.
7.3. Severability. In the event that any of the
subsections of this Section 7 shall be deemed by any court of competent
jurisdiction to be in violation of applicable law for any reason whatsoever,
then any such subsection or subsections shall not be deemed to be void, but
shall be deemed to be automatically amended so as to comply with applicable law.
In the event that any of the subsections of this Section 7 shall be deemed by
any court of competent jurisdiction to be wholly or partially invalid, such
determination shall not affect the binding effect of the other subsections of
this Section 7 or of any of the other provisions of this Agreement.
7.4. Injunctive Relief. Employee acknowledges that
the damage to the Company resulting from a breach of the obligations of trust
and confidence set forth in Sections 6 and 7 hereof may cause irreparable injury
to the Company, and Employee hereby agrees and consents to the entry of an
injunction by any court of competent jurisdiction, enjoining her from violating
any term or terms of this Agreement, and such injunctive relief may be granted
without the necessity of proving actual damages. Such injunctive relief,
however, shall be in addition to any other remedies provided by law, in equity
or otherwise, to the Company.
8. Entire Agreement. This Agreement, and the employee benefit
plans referred to herein, contain the entire understanding of the Company and
Employee with respect to Employee's employment with the Company and her
compensation therefor. Specifically, Employee acknowledges that no commitment
has been made by the Company to her with respect to any employment beyond the
term of this Agreement (whether ending by lapse of time or earlier termination
pursuant to its terms) or with respect to any benefits not expressly set forth
in this Agreement or incorporated herein by reference.
9. Notices. All notices under this Agreement shall be in
writing and shall be deemed effective when delivered in person (in the Company's
case, to its respective
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<PAGE> 83
Secretary) or upon receipt after deposit thereof in the U.S. mails, postage
prepaid, addressed to Employee or the Company as follows, or to such other
address as the party to be notified may specify by notice to the other party in
the manner provided in this Section :
If to Employee: Florence Fearrington
150 East 69th Street
New York, NY 10021
With a copy to: Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
Attn: Floyd I. Wittlin, Esq.
If to the Company: United States Trust Company of New York
114 West 47th Street
New York, N.Y. 10036-1532
Attn: Maureen Scannell Bateman
10. Assignment. Neither this Agreement nor any rights or
obligations hereunder may be assigned by one party without the consent of the
other, except that (i) this Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company, whether by merger,
consolidation, sale of assets or otherwise, and reference herein to the Company
shall be deemed to include any such successor or successors, and (ii) this
Agreement is freely assignable by the Company to any corporation or entity
controlling, controlled by, or under common control with, the Company.
11. Indemnification and Directors and Officers Liability
Insurance. The Company shall indemnify Employee and advance expenses with
respect to any indemnifiable matter to Employee to the fullest extent permitted
by applicable law. To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company, Employee shall be covered by such policy
or policies in accordance with their terms to the maximum extent of the coverage
available for any such director, officer, employee, agent or fiduciary under any
such policy or policies.
12. Amendment; Waiver. This Agreement may be amended and any
right or claim hereunder waived, only by a written instrument signed by Employee
and the Company. Nothing in this Agreement, express or implied, is intended to
confer upon any third person any rights or remedies under or by reason of this
Agreement. No amendment or waiver of this Agreement requires the consent of any
individual, partnership, corporation or other entity not a party to this
Agreement.
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<PAGE> 84
13. Construction. This Agreement shall be construed under and
governed by the laws of the State of New York. The section headings are for
convenience only and shall not be considered a part of the terms and provisions
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:_________________________
Title:
____________________________
Florence Fearrington
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<PAGE> 85
EXHIBIT 7.11
FORM OF CLIENT CONSENT LETTER
<PAGE> 86
November , 1996
[Name and Address of Client]
Dear [Name of Client Contact]:
I called this morning to tell you of my plans for Florence Fearrington,
Inc. and as I promised I am following up with details.
First, you and each of our other clients have sustained us for many
years and Jim and I feel a deep responsibility to you. We have talked at length
about the problem which will arise if either of us "turns up his toes". In
order to assure that our firm, Florence Fearrington, Inc., will be able to
continue to meet your investment management needs, we have undertaken a
deliberate and thorough search for an established partner whose investment
policies, practice and management style and commitment to client service are
consistent with ours. We believe it would be irresponsible on our part not to
provide an arrangement in which our clients can have a high degree of
confidence that their interests will continue to be well served.
We have found such a partner, the United States Trust Company of New
York. This month I signed an agreement by which I and our key employees will be
joining forces with U.S. Trust.
<PAGE> 87
There is no reason to expect disruption. The Florence Fearrington, Inc.
practice will continue as it has, but under a new roof. In this new arrangement
I will continue to be the principal contact person on your investment account
(a), and its portfolio manager. I will have access to the same research sources
and advisors I have relied upon in the past augmented by U.S. Trust's greater
range of resources. I expect no change in investment policy, since the
principles Florence Fearrington, Inc. has followed are compatible with those of
U.S. Trust.
While effective investment management is, of course, the primary
consideration, clients will also see other benefits from this combination.
Transaction commissions should be lower, because of U.S. Trust's much larger
trading volume, and we will have access to greater research resources.(b) In
addition, U.S. Trust provides free custody to investment clients.(c)
The combination with U.S. Trust will not result in any reduction in my
commitment to our clients. On the contrary, I have entered into an employment
contract with U.S. Trust which provides that I will continue to have principal
responsibility for the management of your account. My commitment to the firm's
clients is underscored by a provision in my employment agreement which makes a
major portion of my compensation dependent upon the continuation of current
account relationships.
Established in 1853, U.S. Trust is the oldest trust and asset
management company in the country. It was founded to serve the investment and
financial needs of affluent individuals and families, as well as charitable,
educational
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<PAGE> 88
and other institutions. This continues to be U.S. Trust's primary focus. As a
result, U.S. Trust is well into its second century of providing highly
sophisticated, specifically tailored private banking, trust, estate, tax and
other financial planning services to its clients (d). It offers investment
expertise in a number of professionally managed investment disciplines. We
believe their well known fine capabilities in fixed income management might be
of particular value to you as a complement to the equity services we currently
provide (e).
U.S. Trust is distinguished not only by its longevity, but also by the
fact that it has long focused upon investment management, and is not engaged
in the myriad of other activities common to commercial banks. Indeed, its
commercial banking activities are largely limited to serving the needs of its
investment clients. It manages discretionary assets of $38 billion, of which
80% is for individuals and 20% for institutions, a breakdown similar to our own
business.
As is always the case in a regulated industry, there is paperwork to be
done. Under prevailing regulations, the transaction with the United States
Trust Company of New York will be deemed an assignment of your investment
advisory agreement to United States Trust Company of New York. Your investment
advisory agreement with us provides that such an assignment may only be
accomplished if you give your written consent. Accordingly, we request that you
indicate your consent to this assignment (f) by countersigning the enclosed
copy of this letter and returning it to us.
I should note also that your acceptance of our new affiliation requires
no long term commitment on your part.
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<PAGE> 89
If you lose confidence in us or otherwise become dissatisfied with our
performance you can fire us on the spot by sending us written notice, which has
always been the case.
We are enthusiastic about our new relationship with U.S. Trust. By
affiliating with U.S. Trust, we believe that we have found a partner who
provides leadership and continuity that will extend our relationship with you
far beyond what it could be if we were to remain just the way we are. We look
forward to receiving your consent and moving ahead.
Sincerely,
Consent is given for the following account(s):
- --------------------------------------
- --------------------------------------
- --------------------------------------
Signature
- --------------------------------------
Date
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<PAGE> 90
In attempting to be sensitive to each client's situation variations in the
letter will be used. I have tried to anticipate most variances and cover each
in the notes below which refer to the text:
Notes:
(a) accounts(s) or the Foundation's investment account, etc.
(b) For several clients the broker is rather a family retainer. In those
cases more favorable commissions will not be stated in the letter. The sentence
will be shortened to ..."Because of U.S. Trust's size, we will have access to
its research resources."
(c) Free custody will not be stated in the letter where the current bank
custodian is also a trustee or where there is a strong bank relationship. In
addition, three clients' portfolios (four accounts) are at Chase in custody and
because of the relationship between U.S. Trust and Chase, after the transaction
these clients will get their custody for free. The last sentence for these
clients will end..."investment clients, thus as you are using their custody
service your total expenses will be reduced".
(d) Will be omitted where client has a battery of financial experts (who
may be threatened) on board or will be tailored to the situation e.g.
non-individual client.
(e) Sentence to be used where appropriate.
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<PAGE> 91
(f) Where the contract does not state a 1% fee (five accounts) or the
client is paying 1-1/2% fee (three accounts) which is not covered in the
contract, the following will be added here "...and your confirmation that your
annual investment management fee is and will continue to be %."
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<PAGE> 92
EXHIBIT 7.19
LETTER AGREEMENT OF FEARRINGTON'S SPOUSE
<PAGE> 93
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036-1532
November 14, 1996
Mr. James Needham
150 East 69th Street
New York, New York 10021
Dear Jim:
Reference is hereby made to the Asset Acquisition Agreement of
even date among the United States Trust Company of New York (the "Company"),
Florence Fearrington, Inc. and Florence Fearrington (the "Asset Acquisition
Agreement") and the Employment Agreement annexed as Exhibit 7.8 thereto between
the Company and Florence Fearrington (the "Employment Agreement"). Capitalized
terms used but not defined herein shall have the same meanings as set forth in
the Employment Agreement.
Under Section 6 of the Employment Agreement, Florence will be
permitted to disclose Confidential Information to you (as her spouse) if you
agree in writing to be bound by the confidentiality provisions of Section 6 and
such disclosure is for the sole purpose of assisting Florence in performing her
duties under the Employment Agreement. The Company's agreement to permit
Florence to disclose Confidential Information to you also is conditioned upon
your agreement to be bound, to the same extent as Florence, by the
non-competition and non-solicitation provisions contained in Section 7 of the
Employment Agreement (other than Sections 7.1(a) and 7.1(b) and the
non-competition provisions set forth in Sections 9.1 and 9.2 of the Asset
Acquisition Agreement.
By signing this letter, you agree to be bound by, and subject
to (i) Section 6 of the Employment Agreement (Confidential Information); (ii)
Section 7 of the Employment Agreement (Agreement Not to Solicit or Compete),
other than Sections 7.1(a) and (b); (iii) Section 9.1 of the Asset Acquisition
Agreement (Preservation of Goodwill); and (iv) Section 9.2 of the Asset
Acquisition Agreement (Use of Name), as if you were entering into the Employment
Agreement and Asset Acquisition Agreement as "Employee" and "Fearrington",
respectively. In addition to the foregoing, for so long as Florence is bound by
Section 7 of the Employment Agreement, you will not, individually or through an
agent, for yourself or
<PAGE> 94
Mr. James Needham
November 14, 1996
Page 2
on behalf of another, as an employee, director, owner, partner, sole proprietor,
consultant, agent, representative, shareholder, or in any other manner or
capacity whatsoever, (a) solicit or induce any Current Client Account or
Extended Family Account to terminate or reduce their respective relationships
with the Company or (b) perform any investment advisory or investment management
services for any Current Client Account or Extended Family Client Account.
Nothing contained herein shall cause you to be considered an employee of the
Company or any entity controlling or controlled by the Company or under common
control with the Company.
If the foregoing correctly sets forth our understanding,
please so indicate by signing the enclosed duplicate copy of this letter on the
appropriate line below whereupon this letter agreement will become a binding
agreement between us.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:________________________________
Title:
AGREED:
________________________________
James Needham
<PAGE> 95
EXHIBIT 8.4
AGREEMENT TO DELIVER AND REGISTER SHARES
<PAGE> 96
AGREEMENT TO DELIVER AND REGISTER SHARES
This AGREEMENT TO DELIVER AND REGISTER SHARES (the
"Agreement") is made and entered into as of November 14, 1996, by and among U.S.
Trust Corporation, a New York corporation ("U.S. Trust"), Florence Fearrington,
Inc., a New York corporation (the "Seller"), and Florence Fearrington
("Fearrington"), being the only shareholder of the Seller.
W I T N E S S E T H :
WHEREAS, pursuant to the Asset Acquisition Agreement dated as
of even date among United States Trust Company of New York, a banking
institution possessing banking and trust powers chartered under the laws of New
York (the "Buyer"), the Seller and Fearrington (the "Asset Acquisition
Agreement"), the Buyer will deliver shares of U.S. Trust Common Stock (the "USTC
Shares") to the Seller (or to Fearrington, if the Seller so designates) and the
Escrow Agent (as defined in the Asset Acquisition Agreement);
WHEREAS, all of the issued and outstanding shares of the
Buyer's capital stock are currently held beneficially and of record by U.S.
Trust; and
WHEREAS, the parties to the Asset Acquisition Agreement desire
that U.S. Trust register the USTC Shares under the Securities Act of 1933, as
amended (the "Securities Act"), and the Seller and Fearrington have entered into
the Asset Acquisition Agreement on such basis.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties agree as follows:
1. Defined Terms. All capitalized terms used but not defined
herein shall have the same meanings as set forth in the Asset Acquisition
Agreement.
2. Delivery of the USTC Shares. On or before the Closing Date,
U.S. Trust shall deliver to the Buyer certificates representing that number of
USTC Shares calculated in accordance with Sections 1.4(a) and (b) of the Asset
Acquisition Agreement so as to enable the Buyer to deliver such USTC Shares to
the Seller (or to Fearrington, if the Seller so designates) and, if required,
the Escrow Agent pursuant to the Asset Acquisition Agreement.
<PAGE> 97
3. Representation and Warranties of U.S. Trust. U.S. Trust
hereby represents and warrants to the Seller and Fearrington as follows:
(a) Authorization. U.S. Trust has, and at the Closing
will have, full legal right and power to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized and approved by U.S. Trust's Board of
Directors and no other corporate proceedings on the part of U.S. Trust are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by U.S. Trust
and constitutes a valid, legal and binding agreement of U.S. Trust, enforceable
against it in accordance with its terms except that the enforceability of such
agreement is subject to bankruptcy, insolvency, reorganization, and similar laws
of general applicability relating to or affecting creditors' rights.
(b) USTC Shares. The USTC Shares to be delivered by
U.S. Trust to the Buyer hereunder and by the Buyer to the Seller (or to
Fearrington, if the Seller so designates) and, if required, the Escrow Agent
pursuant to the Asset Acquisition Agreement will be duly authorized, validly
issued, fully paid and non-assessable and at the time of issuance, free and
clear of all liens, claims, encumbrances, security interests and rights of
redemption and preemptive rights. The certificates representing such shares will
be in due and proper form.
4. Registration of the USTC Shares.
(a) Subject in all respects to subsection (b) below,
Seller and Fearrington hereby acknowledge and agree that: (i) the USTC Shares
(if ever issued) will not have been registered for sale by U.S. Trust to Seller
or Fearrington, as the case may be, under the Securities Act in reliance on the
exemption contained in Section 4(2) of the Securities Act; and (ii) such shares
may not be transferred or sold by the Seller or Fearrington unless registered
under the Securities Act (as contemplated by subsection (b) below) or
transferred or sold pursuant to an applicable exemption from registration under
the Securities Act.
(b) As soon as practicable after the Closing Date but
in any event within fifteen (15) days thereafter, U.S. Trust shall prepare and
file with the Securities and Exchange Commission (the "SEC") a registration
statement on Form S-3 pursuant to Rule 145 (or similar rule that may be adopted
by the SEC) under the Securities Act (the "Registration Statement"), to permit
the offer and sale of the USTC Shares (which term, for the purposes of this
section, shall include any securities into which or for which the USTC Shares
subsequently may be converted or exchanged) by the Seller or Fearrington from
time to time hereof through the facilities of the NMS at market prices current
at the time of sale or in other transactions at negotiated prices. U.S. Trust
represents that as of the date hereof and the
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<PAGE> 98
Closing Date, it meets the conditions set forth in Item I.A. of the General
Instructions to Form S-3 that are required to be met to use such Form in
connection with the filing of the Registration Statement as contemplated
hereunder. U.S. Trust shall use its best efforts to cause such Registration
Statement to become effective as promptly as possible and to remain continuously
effective as provided herein. U.S. Trust shall promptly prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
related Prospectus (the "Prospectus") as may be necessary to permit the sale
thereunder of the USTC Shares in the manner contemplated above until the first
to occur of: (i) the earliest date on which all of such shares shall have been
sold or may be sold without regard to volume limitations under the provisions of
Rule 144 under the Securities Act or any successor or similar rule hereafter
adopted; and (ii) the sixth anniversary of the Closing Date, provided, however,
that if at any time prior to the sixth anniversary of the Closing Date, Rule 144
or any successor or similar rule hereafter adopted shall cease to be available
without regard to volume limitations for sales of the USTC Shares by Fearrington
other than by reason of her actions, the obligations of U.S. Trust to register
such shares as provided herein shall be reinstated and shall continue until the
first to occur thereafter of (i) and (ii) above. U.S. Trust shall furnish to
Fearrington such number of copies of the Prospectus, as amended from time to
time, and supplements thereto as Fearrington may reasonably request, but in no
event fewer than the number of copies as may be required to comply with the
provisions of the Securities Act applicable to the disposition of the USTC
Shares. U.S. Trust shall use its best efforts, to the extent required by the
securities or blue sky laws of the States of New York, to notify the appropriate
authority in such state, pay any requisite fees and do any and all other acts
and things which may be reasonably necessary or advisable to enable Fearrington
to consummate the disposition of the USTC Shares owned by Fearrington; provided,
however, that this obligation shall cease at the time that U.S. Trust's
obligation under this Section 4(b) with respect to the Securities Act shall
terminate. U.S. Trust shall cause the USTC Shares to be listed on such
securities exchange or quoted on such automated quotation system on which U.S.
Trust's common shares are then listed or quoted. U.S. Trust shall immediately
notify Fearrington of any stop order or similar proceeding pertaining to the
Registration Statement initiated by state or federal regulatory bodies, and use
its best efforts to take all necessary steps to remove such stop order or
similar proceeding.
(c) All expenses incident to the obligations of U.S.
Trust under subparagraph (b) of this Section 4 (including, without limitation,
all expenses in connection with the preparation and filing of any Registration
Statement under subparagraph (b) of this Section 4, any expenses under blue sky
laws in connection with an offering under such Registration Statement, any
filing fee of the National Association of Securities Dealers, Inc. relating to
such offering, printing or document reproduction expenses, messenger and
delivery expenses and fees and expenses of its counsel and accountants) shall be
borne by U.S. Trust and all other expenses incident to the disposition by
Fearrington of the USTC Shares held by her (including, without limitation, fees
and expenses of her counsel and all brokerage and similar fees) shall be borne
by Fearrington.
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<PAGE> 99
(d) Fearrington shall: (i) furnish to U.S. Trust such
information as U.S. Trust may from time to time reasonably request in connection
with the Registration Statement and Prospectus and any amendment or supplement
thereto; (ii) from and after the Closing Date and for so long as the
Registration Statement remains effective, promptly after the sale or any other
disposition by her of USTC Shares, give U.S. Trust written notification of same;
(iii) promptly notify U.S. Trust of any event which comes to her attention which
would necessitate an amendment or supplement to the Registration Statement or
Prospectus; and (iv) suspend sales of USTC Shares under the Registration
Statement promptly upon receipt of notice from U.S. Trust that such sales may
not be made until the Registration Statement and Prospectus are amended or
supplemented as necessary.
(e) U.S. Trust covenants that none of the information
supplied by U.S. Trust for inclusion or incorporation by reference in the
Registration Statement at the time the Registration Statement is filed with the
SEC and the time such document becomes effective under the Securities Act, will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
(f) During the period for which U.S. Trust is
required to file and keep effective a Registration Statement pursuant to
subparagraph (b) of this Section 4, U.S. Trust shall:
(i) supplement or make amendments to the
Registration Statement if required by the rules, regulations or instructions
applicable to Form S-3 or by the rules and regulations under the Securities Act
and file all reports required to be filed by it under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the SEC
thereunder; and
(ii) notify Fearrington during the period
such Registration Statement is required to remain effective of the occurrence of
any event as a result of which the Registration Statement or the Prospectus
contained in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. U.S.
Trust agrees to take all necessary steps as soon as practicable after the
occurrence of such event and delivery of such notice to amend or supplement the
Registration Statement or Prospectus and to take such other actions as may be
necessary or appropriate so that the Registration Statement and Prospectus shall
not include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
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<PAGE> 100
(g) All of the obligations and covenants under this
Section 4 shall survive the Closing.
(h) The parties respective indemnification
obligations with respect to the registration of the USTC Shares are as follows:
(i) U.S. Trust shall indemnify and hold
harmless Fearrington against all losses, claims, damages or liabilities
including, without limitation, legal fees and expenses incurred by Fearrington
arising from the failure of U.S. Trust to perform its obligations under this
Section 4 on a timely basis. In connection with any registration of securities
pursuant to this Agreement, to the extent permitted by law, U.S. Trust shall
indemnify Fearrington against all losses, claims, damages or liabilities, joint
or several, to which Fearrington may become subject under the Securities Act
insofar as such losses, claims, damages or liabilities (or action in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading and U.S. Trust shall reimburse Fearrington for any legal
or other expenses in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that U.S. Trust shall not
be required to indemnify and hold harmless or reimburse Fearrington to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission in any document made in reliance upon and in conformity with
written information furnished to U.S. Trust by or on behalf of Fearrington with
respect to the USTC Shares for use in the preparation of such documents.
(ii) Fearrington shall indemnify and hold
harmless U.S. Trust, each of its directors and officers, and each person, if
any, who controls U.S. Trust within the meaning of the Securities Act, against
all losses, claims, damages or liabilities to which U.S. Trust or any such
director or officer or controlling person may become subject, under the
Securities Act insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
was made in reliance upon and in conformity with written information furnished
to U.S. Trust by or on behalf of Fearrington with respect to Fearrington's USTC
Shares, for use in preparation thereof, and Fearrington shall reimburse U.S.
Trust for any legal or other expenses reasonably incurred by U.S. Trust or any
such director or officer or controlling person in any such loss, claim, damage,
liability or action.
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<PAGE> 101
5. Form of Agreement.
(a) Headings. The subject headings of the sections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
(b) Entire Agreement; Modification; Waiver. This
Agreement constitutes the entire agreement between the parties pertaining to the
subject matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and understandings of the parties. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by all the parties to be bound hereby. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No delay or failure of any party to exercise any of its, his
or her rights hereunder shall be construed as a waiver of such right. No waiver
shall be binding unless made expressly and executed in writing by the party
making the waiver.
(c) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6. Parties.
(a) Parties in Interest. Nothing in this Agreement,
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective heirs, personal representatives, successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any right of subrogation or action over or
against any party to this Agreement.
(b) Assignment. This Agreement shall be binding on
and shall inure to the benefit of the parties to it and their respective heirs,
legal representatives, successors, and permitted assigns.
7. Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom such notice, request, demand or other communication is to be given, or on
the date of receipt if mailed to the party to whom such communication is to be
given, by first class mail registered or certified, postage prepaid, and
properly addressed as follows:
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<PAGE> 102
To the Seller and Fearrington as follows:
Ms. Florence Fearrington
150 East 69th Street
New York, NY 10021
With a copy to:
Floyd I. Wittlin, Esq.
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
To U.S. Trust at:
U.S. Trust Corporation
114 West 47th Street
New York, NY 10036-1532
Attn: Maureen Scannell Bateman
Managing Director and General Counsel
Any party may change its address for purposes of this section by giving the
other party written notice of the new address in the manner set forth above.
8. Governing Law; Venue. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of New
York, excepting its choice of law provisions. Any litigation arising out of or
relating to this Agreement shall be conducted solely and exclusively in any
federal or state court located in the City of New York having jurisdiction over
the subject matter hereof, and to the extent permitted by law all parties hereto
consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed it as of the day and year first above written.
U.S. TRUST CORPORATION
By:_______________________________
Its:___________________________
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<PAGE> 103
FLORENCE FEARRINGTON, INC.
By:_______________________________
Its:___________________________
__________________________________
Florence Fearrington
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<PAGE> 104
EXHIBIT 8.7
OPINION OF MANAGING DIRECTOR
AND GENERAL COUNSEL OF BUYER
<PAGE> 105
(Letterhead of United States Trust Company of New York)
_______ , 1996
Florence Fearrington, Inc.
520 Madison Avenue
New York, NY 10022
Florence Fearrington
150 East 69th Street
New York, NY 10021
Ladies and Gentlemen:
I am Managing Director and General Counsel for United States
Trust Company of New York, a banking institution possessing banking and trust
powers chartered under the laws of New York (the "Buyer"), and counsel to U.S.
Trust Corporation, a New York corporation ("U.S. Trust"), and am acting in such
capacities in connection with the execution and delivery of the Asset
Acquisition Agreement (the "Asset Acquisition Agreement") dated November 14,
1996, among the Buyer, Florence Fearrington, Inc., a New York corporation (the
"Seller") and Florence Fearrington ("Fearrington"), the sole shareholder of the
Seller.
All capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to them in the Asset Acquisition
Agreement. This opinion is delivered to you pursuant to Section 8.7 of the Asset
Acquisition Agreement.
I have examined and considered the original or copies,
certified or otherwise identified to my satisfaction, of the following
documents:
(a) the Asset Acquisition Agreement;
(b) the Bill of Sale;
(c) the Assignment and Assumption Agreement;
(d) the Escrow Agreement;
(e) the Employment Agreement dated the date hereof, between
the Buyer and Fearrington (the "Employment Agreement");
<PAGE> 106
(f) the Agreement to Deliver and Register Shares dated the
date hereof among U.S. Trust, the Seller and Fearrington
(the "Agreement to Deliver and Register Shares"); and
(g) the letter agreement dated November 14, 1996, between
the Buyer and Fearrington with respect to additional
payments to Fearrington from life and disability
policies in the event of her death or disability.
The documents enumerated in Paragraphs (a) through (g) above
are hereinafter referred to collectively as the "Acquisition Documents."
In addition to the Acquisition Documents, I or an attorney
designated by me have examined such corporate records and other documents and
instruments, and Certificates of Incorporation or comparable documents of public
officials and of officers of the Buyer and U.S. Trust, as applicable, and have
made such inquiries of such officers, and considered such questions of law, as I
have deemed relevant and necessary for purposes of rendering the opinions
expressed below.
In all cases, I have assumed the genuineness of all signatures
on original and certified documents and of all copies submitted to me as
conformed, photostat or other copies, and I have assumed the legal capacity of
all natural persons executing such documents, instruments and other papers. I
have also assumed that each entity that has executed such documents, instruments
and other papers, other than the Buyer and U.S. Trust, has the power to enter
into and perform all of such entity's obligations thereunder, that such
documents, instruments and other papers have been duly authorized, executed and
delivered by each entity other than the Buyer and U.S. Trust, and that such
documents, instruments and other papers are binding on each party thereto other
than the Buyer and U.S. Trust.
As to certain questions of fact material to this opinion, I
have relied upon the accuracy of the representations and warranties made by U.S.
Trust and the Buyer in the Acquisition Documents and the other documents
executed and delivered in connection therewith and of the officers and
representatives of the Buyer or U.S. Trust, as applicable, delivered thereunder,
and upon statements made to me in discussions with the Buyer's and U.S. Trust's
management. Statements made herein "to the best of my knowledge" or with respect
to matters "known to me" are based solely on information actually known to me
and to those attorneys currently employed with the Buyer and U.S. Trust and
engaged in representing the Buyer and U.S. Trust in connection with the
transactions contemplated by the Acquisition Documents. Except as otherwise
expressly indicated, I have not undertaken any independent investigation of
factual matters.
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<PAGE> 107
Based upon the foregoing, and subject to the qualifications
stated herein, it is my opinion that:
1. U.S. Trust is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
2. The Buyer is a banking institution possessing banking and
trust powers duly organized, validly existing and in good standing under the
laws of the State of New York.
3. Each of the Buyer and U.S. Trust has all requisite
corporate power and authority to execute, deliver and perform all of the
Acquisition Documents to which it is a party, to consummate the transactions
contemplated thereby and to perform fully its obligations thereunder. The
execution and delivery by each of the Buyer and U.S. Trust of the Acquisition
Documents to which it is a party and the consummation of the transactions
contemplated thereby have been duly and validly authorized and approved by the
Buyer's and U.S. Trust's respective Boards of Directors and no other corporate
proceedings on the part of either the Buyer or U.S. Trust is necessary to
authorize the Acquisition Documents or the transactions contemplated thereby.
4. Each of the Acquisition Documents has been duly executed
and delivered by the Buyer or U.S. Trust, as applicable, and constitutes the
legal, valid and binding obligations of Buyer or U.S. Trust, as applicable, in
accordance with their respective terms.
5. No consent, approval or authorization of or filing with or
notice to any foreign, federal, state, county, city, local or other governmental
or regulatory authority or body, and no approval or consent of or any filing
with or notice to any other person (other than those contemplated by the
Acquisition Documents, all of which have been received or made) is required in
connection with the execution and delivery by each of the Buyer and U.S. Trust
of the Acquisition Documents to which it is a party and the consummation and
performance by the Buyer or U.S. Trust, as applicable, of the transactions
contemplated thereby.
6. Neither the execution and delivery by each of the Buyer and
U.S. Trust of the Acquisition Documents to which it is a party, the performance
by the Buyer and U.S. Trust of their respective obligations thereunder nor the
consummation of the transactions contemplated thereby will violate, conflict
with or result in a breach of or require consent (other than those that have
been obtained or given) under or constitute (or with notice or lapse of time or
both would constitute) a default under (i) any provision of their respective
certificates of incorporation (or charter) or by-laws, as amended; (ii) any
provision of any applicable law, as in effect and binding upon either of them;
(iii) to the best of my
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<PAGE> 108
knowledge, any term of any material agreement or instrument to which either of
them is a party or by which either of them or their properties or assets are
bound, which violation or conflict would have a material adverse affect on the
business, results of operations, property or financial condition of the Buyer or
U.S. Trust; or (iv) to the best of our knowledge, any order, judgment,
injunction, writ, award or decree of any court, arbitrator or governmental or
regulatory authority or agency binding upon either of them or their respective
properties or assets.
7. To the best of my knowledge, there is no pending or
threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation, questioning the validity of
any of the Acquisition Documents or any of the transactions contemplated
thereby.
8. The USTC Shares have been duly authorized and, upon
delivery to the Seller (or Fearrington, if the Seller so designates) in
accordance with the terms of the Asset Acquisition Agreement, will be duly
authorized, validly issued, fully paid and nonassessable by either the Buyer or
U.S. Trust, free and clear of all liens and preemptive rights and the
certificates representing such shares are in due and proper form.
The opinions set forth are subject to the following
qualifications and limitations:
(i) I express no opinion as to the effect of the
application of equitable principles (whether
considered in a proceeding at law or in equity) or of
bankruptcy, insolvency, reorganization, moratorium
and other laws now or hereafter in effect affecting
the enforcement of creditors' rights and remedies
including those relating to fraudulent conveyances
and transfer;
(ii) I express no opinion as to the enforceability of any
choice of law or non-competition provision in the
Asset Acquisition Agreement or in any agreement
required to be delivered thereunder;
(iii) Insofar as the opinions expressed above relate to, or
are based upon, the effectiveness of the Asset
Acquisition, they are subject to the power of the
courts to order rescission of the consummated
transactions in such cases as violations of federal
or state securities laws or for failure to satisfy
basic equitable requirements of good faith and fair
treatment; and
(iv) I express no opinion concerning the laws of any
jurisdiction other than the law of the State of New
York and the federal law of the United States of
America.
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<PAGE> 109
This letter is furnished to you by counsel to the Buyer and
U.S. Trust, and is solely for your benefit, and may not be relied upon by any
other party, except to the extent that I may expressly and in writing authorize
reliance by other persons.
Very truly yours,
_____________________________
Maureen Scannell Bateman
Managing Director
and General Counsel
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<PAGE> 1
EXHIBIT 5
<PAGE> 2
Exhibit 5
November 22, 1996
U.S. Trust Corporation
114 West 47th Street
New York, NY 10036
Ladies and Gentlemen:
In my capacity as Assistant General Counsel of U.S. Trust Corporation, a New
York corporation (the "Company"), I have acted as counsel to the Company in
connection with the Registration Statement on Form S-3 (the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, relating to an aggregate of up to
192,378 common shares, par value $1 per share, of the Company (the "Shares"),
and related rights to purchase Series A Participating Cumulative Preferred
Shares of the Company (the "Rights") proposed to be sold from time-to time by
certain Selling Shareholders, as described in the Prospectus constituting a part
of the Registration Statement (the "Prospectus").
I have examined the Certificate of Incorporation, as amended, of the Company,
the By-Laws of the Company, minutes of meetings of the Board of Directors of the
Company and such other corporate records and documents as I have deemed relevant
to form the basis for the opinion herein expressed.
Based upon the foregoing, and having due regard to legal considerations which I
deem relevant, I advise you that in my opinion the Shares and Rights have been
duly and validly authorized for issuance by the Company and, when issued in
accordance with the terms of the aforementioned merger agreement and asset
purchase agreement, will be legally issued, fully paid and non-assessable.
I consent to the filing of the opinion as an Exhibit to the Registration
Statement and further consent to the reference to me under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
Ronald A. Schwartz
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference, in this
Registration Statement on Form S-3 of U.S. Trust Corporation relating to the
resale of up to 192,378 of its Common Shares, par value $1 per share, (and
related Rights) (the "Registration Statement"), of our report dated January 18,
1996, on our audits of the consolidated financial statements of U.S. Trust
Corporation and Subsidiaries as of December 31, 1995 and 1994 and, for each of
the three years in the period ended December 31, 1995, which report is included
in the Annual Report on Form 10-K of U.S. Trust Corporation for the year ended
December 31, 1995. We also consent to the reference to our firm appearing under
the caption "Experts" in the Prospectus constituting a part of this
Registration Statement.
Coopers & Lybrand L.L.P.
New York, New York
November 22, 1996
