<PAGE>
REGISTRATION NO. 333-
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 27, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
STATE STREET BOSTON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2456637
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
(617) 786-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN R. TOWERS, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
STATE STREET BOSTON CORPORATION
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
(617) 786-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
CHAMPE A. FISHER, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 951-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time or at one time after the effectiveness of the Registration Statement.
--------------
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]
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
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(2) OFFERING PRICE(2) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($1.00 par
value)(1).............. 923,072 $67.657 $62,452,283 $18,924.93
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Includes preferred stock purchase rights. Prior to the occurrence of
certain events, these rights will not be exercisable or evidenced
separately from the Common Stock.
(2) Pursuant to Rule 457(c) under the Securities Act of 1933, the registration
fee applicable to the Common Stock is calculated upon the basis of the
average high and low sales price of the Common Stock as reported on the
New York Stock Exchange Composite Tape on November 21, 1996.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UPON SUCH DATE OR
DATES AS MAY BE 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 27, 1996
STATE STREET BOSTON CORPORATION
923,072 SHARES OF COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
The Common Stock of State Street Boston Corporation, a Massachusetts
corporation ("State Street"), par value $1.00 per share (the "Common Stock"),
offered hereby is held by the Selling Stockholders, as defined in this
Prospectus, who may from time to time offer for sale shares of the Common
Stock. See "Selling Stockholders." State Street will not receive any proceeds
from the sale by Selling Stockholders of the Common Stock.
The Selling Stockholders have advised State Street that they propose to offer
the Common Stock offered hereby for sale, from time to time, to purchasers
directly, or through brokers in brokerage transactions on the New York Stock
Exchange, or to underwriters or dealers in negotiated transactions or in a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Brokers, dealers and
underwriters that participate in the distribution of the Common Stock offered
hereby may be deemed to be underwriters under the Securities Act of 1933 as
amended, and together with the rules and regulations thereunder (the
"Securities Act"), and any discounts or commissions received by them from the
Selling Stockholders and any profit on the resale of the Common Stock offered
hereby by them may be deemed to be underwriting discounts and commissions under
the Securities Act. The Selling Stockholders may be deemed to be underwriters
under the Securities Act. The Selling Stockholders will pay all applicable
stock transfer taxes, brokerage commissions, underwriting discounts or
commissions and any fees and disbursements of more than one counsel to the
Selling Stockholders, but State Street will bear all other expenses in
connection with the offering made hereunder. State Street has agreed to
indemnify the Selling Stockholders and underwriters of the Selling Stockholders
against certain liabilities, including certain liabilities under the Securities
Act, in connection with the registration and the offering and sale of the
Common Stock offered hereby. See "Plan of Distribution."
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "STT". The last reported sale price of the Common Stock on the NYSE
Composite Tape on November 26, 1996 was $[price] per share.
If necessary, certain information relating to the Selling Stockholders, the
terms of each sale of Common Stock offered hereby, including the public
offering price, the names of any underwriters or agents, the compensation, if
any, of such underwriters or agents and the other terms in connection with the
sale of the Common Stock, in respect of which this Prospectus is delivered will
be set forth in an accompanying Prospectus Supplement (the "Prospectus
Supplement").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 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 27, 1996.
<PAGE>
STATEMENT OF AVAILABLE INFORMATION
State Street 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
Securities and Exchange Commission (the "Commission"). 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. 20549; and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. 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 shares of State Street's
Common Stock including the associated preferred share purchase rights under
the Rights Agreement, dated as of September 15, 1988, as amended, are listed
on the NYSE. Reports, proxy statements and other information concerning State
Street can also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
State Street has filed with the Commission a Registration Statement under
the Securities Act with respect to the Common Stock to which this Prospectus
relates. This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to State Street and the Common Stock, reference is
made to the Registration Statement, including the exhibits thereto. The
Registration Statement may be inspected by anyone without charge at the
principal office of the Commission in Washington, D.C., and copies of all or
part of it may be obtained from the Commission upon payment of the prescribed
fees. The Commission also maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants which
the public may access at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by State Street
are incorporated in this Prospectus by reference and made a part hereof:
(1) State Street's Annual Report on Form 10-K for the year ended December
31, 1995, filed with the Commission on March 27, 1996, including portions
of State Street's Annual Report to Stockholders for the year ended December
31, 1995, and definitive proxy statement dated March 12, 1996.
(2) State Street's Quarterly Reports on Form 10-Q for the quarter ended
March 31, 1996, filed with the Commission on May 14, 1996, the quarter
ended June 30, 1996, filed with the Commission on August 13, 1996, and the
quarter ended September 30, 1996, filed with the Commission on November 14,
1996.
(3) The description of State Street's Common Stock included in State
Street's effective registration statement report on Form 8-A, as filed with
the Commission on January 18, 1995.
Each document or report subsequently filed by State Street with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date hereof and prior to the termination of the offering of the
Common Stock shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the date of filing of such
document. 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 the Registration
Statement and this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also 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 the Registration Statement or
this Prospectus.
State Street will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Written requests should be directed to:
Marketing Services, State Street Boston Corporation, 225 Franklin Street,
Boston, Massachusetts 02110. Telephone requests may be directed to State
Street at (617) 654-3383.
2
<PAGE>
STATE STREET BOSTON CORPORATION
State Street Boston Corporation ("State Street") is a bank holding company
organized under the laws of The Commonwealth of Massachusetts.
State Street was organized in 1970 and conducts its business principally
through its subsidiary, State Street Bank and Trust Company ("State Street
Bank"), which traces its beginnings to the founding of the Union Bank in 1792.
The charter under which State Street Bank now operates was authorized by a
special act of the Massachusetts Legislature in 1891, and its present name was
adopted in 1960.
State Street is the fourth largest provider of trust services in the United
States as ranked on the basis of 1995 fiduciary compensation. State Street had
more than $2.3 trillion of assets under custody, $283 billion of bonds under
trusteeship, and $226 billion of assets under management at year-end 1995.
Ranked on the basis of total assets as of September 1996, State Street is the
29th largest bank holding company in the United States. State Street's total
assets were $25.8 billion at December 31, 1995, of which $18.6 billion, or
72%, were investment securities and money market assets and $3.9 billion, or
15%, were loans.
Services are provided from offices in the United States, as well as from
offices in Canada, Grand Cayman, Netherland Antilles, the United Kingdom,
France, Belgium, Luxembourg, Denmark, Germany, United Arab Emirates, Hong
Kong, Taiwan, Japan, Australia, and New Zealand. State Street's executive
offices are located at 225 Franklin Street, Boston, Massachusetts 02110
(telephone (617) 786-3000). For information as to foreign activities, refer to
Note T to the Notes to Financial Statements which appear in State Street's
1995 Annual Report to Stockholders. Such information is incorporated by
reference.
RECENT DEVELOPMENTS
On November 19, 1996, State Street completed its acquisition of Princeton
Financial Systems, Inc. ("PFS"), a provider of services and client/server
software products to the insurance and investment management industry.
Pursuant to the terms of an Agreement and Plan of Merger ("Merger Agreement"),
dated as of October 17, 1996, by and among State Street, a wholly-owned
subsidiary of State Street, PFS and the Selling Stockholders, such subsidiary
merged with and into PFS (the "Merger"). In connection with the Merger, the
Selling Stockholders received cash and an aggregate of 923,072 shares of
Common Stock. In addition, each outstanding option to purchase PFS common
stock granted under PFS option plans was assumed by State Street. A portion of
the cash and 124,950 shares of Common Stock are subject to an escrow
arrangement for an eighteen month period following the date of the Merger for
the satisfaction of certain obligations of the Selling Stockholders to State
Street. Shares subject to this escrow arrangement will only be available for
sale if and when they are released to the Selling Stockholders. In accordance
with the terms of a registration rights agreement entered into in connection
with the Merger, State Street agreed to register the total number of shares of
Common Stock issued to the Selling Stockholders in the Merger.
3
<PAGE>
HOLDING COMPANY DIVIDENDS
As a bank holding company, State Street is a legal entity separate and
distinct from State Street Bank (and its other non-bank subsidiaries). State
Street's principal source of funds is dividends from State Street Bank. The
right of State Street to participate as a stockholder in any distribution of
assets of a subsidiary upon its liquidation or reorganization or otherwise is
subject to the prior claims by creditors of the subsidiary, including
obligations for federal funds purchased and securities sold under repurchase
agreements, as well as deposit liabilities. Payment of dividends by State
Street Bank is subject to provisions of the Massachusetts banking law which
provide that dividends may be paid out of net profits provided (i) capital
stock and surplus remain unimpaired, (ii) dividend and retirement fund
requirements of any preferred stock have been met, (iii) surplus equals or
exceeds capital stock, and (iv) there are deducted from net profits any losses
and bad debts, as defined, in excess of reserves specifically established
therefor. Under the Federal Reserve Act, the approval of the Board of
Governors of the Federal Reserve System would be required if dividends
declared by State Street Bank in any year would exceed the total of its net
profits for that year combined with retained net profits for the preceding two
years, less any required transfers to surplus. Under applicable federal and
state law restrictions, at December 31, 1995 State Street Bank could have
declared and paid dividends of $426,266,000 without regulatory approval.
Future dividend payments of State Street Bank cannot be determined at this
time.
ECONOMIC CONDITIONS AND GOVERNMENT POLICIES
Economic policies of the government and its agencies influence the operating
environment of State Street. Monetary policy conducted by the Federal Reserve
Board directly affects the level of interest rates and overall credit
conditions of the economy. Policy instruments utilized by the Federal Reserve
Board include open market operations in U.S. Government securities, changes in
reserve requirements for depository institutions, and changes in the discount
rate and availability of borrowing from the Federal Reserve.
USE OF PROCEEDS
The sale of the Common Stock offered hereby is for the account of the
Selling Stockholders. Accordingly, State Street will not receive any of the
proceeds from the sale by the Selling Stockholders of the Common Stock.
DESCRIPTION OF CAPITAL STOCK
State Street's authorized capital stock consists of 112,000,000 shares of
Common Stock, $1.00 par value per share and 3,500,000 shares of Preferred
Stock. As of October 31, 1996, 80,268,000 shares of Common Stock were issued
and outstanding and each such share is fully paid and non-assessable. There
are 2,424,000 shares of Common Stock being held in treasury. There are no
shares of Preferred Stock outstanding.
COMMON STOCK
Each share of Common Stock is entitled to one vote on all matters voted upon
by the stockholders. Subject to the rights of any Preferred Stock that might
hereafter be issued, holders of Common Stock are entitled to receive dividends
when and if declared by the Board of Directors of State Street from funds
legally available therefor. The principal source of funds for payment of
dividends by State Street is dividends paid by State Street Bank. See "Holding
Company Dividends." In any liquidation, dissolution or winding up of State
Street, holders of Common Stock are entitled to share ratably in State
Street's assets remaining after payment of creditors subject to the rights of
any Preferred Stock that might hereafter be issued. Other than preferred stock
purchase rights (the "Rights"), discussed below, Holders of Common Stock have
no preemptive or other subscription rights, and there are no conversion,
redemption or sinking fund provisions for the Common Stock. State Street Bank
is the Transfer Agent and Registrar for the Common Stock of State Street.
4
<PAGE>
PREFERRED STOCK
The Board of Directors of State Street is authorized, without shareholder
action, to issue Preferred Stock in series and to fix the relative powers,
preferences and rights appertaining thereto, including dividend rates, voting
rights, conversion rights, liquidation preferences and redemption, retirement
or sinking fund provisions.
STOCKHOLDERS' RIGHTS AGREEMENT
In 1988, State Street declared a dividend of one preferred share purchase
right for each outstanding share of Common Stock. Under certain conditions, a
right may be exercised to purchase one two-hundredths share of a series of
participating preferred stock at an exercise price of $75, subject to
adjustment. The rights become exercisable if a party acquires or obtains the
right to acquire 20% or more of State Street's Common Stock or after
commencement or public announcement of an offer for 20% or more of State
Street's Common Stock. When exercisable, under certain conditions, each right
also entitles the holder thereof to purchase shares of Common Stock, of either
State Street or of the acquiror, having a market value of two times the then
current exercise price of that right.
The rights expire in 1998 and may be redeemed at a price of $.005 per right
at any time prior to expiration or the acquisition of 20% of State Street's
Common Stock. Also, under certain circumstances, the rights may be redeemed
after they become exercisable and may be subject to automatic redemption.
5
<PAGE>
SELLING STOCKHOLDERS
The Common Stock offered by this Prospectus was initially issued to the
Selling Stockholders pursuant to the Merger Agreement. See "Recent
Developments." None of the Selling Stockholders has held any position, office
or other material relationship with State Street or any of its predecessors or
affiliates within the past three years except as a result of the Merger
Agreement. Immediately following the closing under the Merger Agreement, the
Selling Stockholders beneficially owned, in the aggregate, 936,464 shares of
Common Stock. The following table sets forth certain information regarding the
beneficial ownership of State Street Common Stock by each Selling Stockholder:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AS OF SHARES REGISTERED
NAME AND ADDRESS OF BENEFICIAL OWNER* NOVEMBER 27, 1996 UNDER THIS PROSPECTUS
- ------------------------------------- ------------------------ ---------------------
<S> <C> <C>
William M. Mayhall.............. 305,741(1) 305,741(1)
c/o Princeton Financial
Systems, Inc.
. 600 College Road East
Princeton, NJ 08540
James V. Mayhall................ 36,464(2) 36,464(2)
c/o Princeton Financial
Systems, Inc.
600 College Road East
Princeton, NJ 08540
Gerald E. Finsen, Jr. .......... 333,450(3) 333,450(3)
c/o Princeton Financial
Systems, Inc.
600 College Road East
Princeton, NJ 08540
S. Scott Marsh, III............. 13,385(4) 5,339(5)
c/o Princeton Financial
Systems, Inc.
600 College Road East
Princeton, NJ 08540
Michael R. Bruce................ 9,261(6) 3,915(7)
c/o Princeton Financial
Systems, Inc.
600 College Road East
Princeton, NJ 08540
Edison Venture Fund II, L.P. ... 199,750(8) 199,750(8)
c/o Edison Ventures
997 Lenox Drive, #3
Lawrenceville, NJ 08648
Edison Venture Fund II-PA, 38,413(9) 38,413(9)
L.P. ..........................
c/o Edison Ventures
997 Lenox Drive, #3
Lawrenceville, NJ 08648
</TABLE>
- -------
* No Selling Stockholder holds more than 1% of the Common Stock of State
Street.
(1) Includes 41,386 shares subject to escrow. See "Recent Developments."
(2) Includes 4,936 shares subject to escrow. See "Recent Developments."
(3) Includes 45,136 shares subject to escrow. See "Recent Developments."
(4) Includes 723 shares subject to escrow and 5,346 shares issuable pursuant
to the exercise of options. See "Recent Developments."
(5) Includes 723 shares subject to escrow. See "Recent Developments."
(6) Includes 530 shares subject to escrow and 5,346 shares issuable pursuant
to the exercise of options. See "Recent Developments."
(7) Includes 530 shares subject to escrow. See "Recent Developments."
(8) Includes 27,039 shares subject to escrow. See "Recent Developments."
(9) Includes 5,200 shares subject to escrow. See "Recent Developments."
The Selling Stockholders or their permitted transferees may, but are not
required to, offer pursuant to this Prospectus an amount up to all of the
Common Stock held by them. As a result, and because the offering may or may
not be an underwritten offering on a firm commitment basis, no estimate can be
given as of the date hereof as to the amount of Common Stock to be offered for
sale by Selling Stockholders or their permitted transferees or as to the
amount of Common Stock that will be held by Selling Stockholders or their
permitted transferees upon termination of such offering. See "Plan of
Distribution."
6
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders have advised State Street that they propose to
offer the Common Stock offered hereby for sale, from time to time, to
purchasers directly, or through brokers in brokerage transactions on the NYSE,
or to underwriters or dealers in negotiated transactions or in a combination
of such methods of sale, at fixed prices which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Common Stock offered hereby may be
sold by the Selling Stockholders or by donees or transferees from time to
time. The Selling Stockholders are not restricted as to the price or prices at
which they may sell the Common Stock.
Brokers, dealers and underwriters that participate in the distribution of
the Common Stock offered hereby may be deemed to be underwriters under the
Securities Act, and any discounts or commissions received by them from the
Selling Stockholders and any profit on the resale of the Common Stock offered
hereby may be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Stockholders may be deemed to be underwriters
under the Securities Act. Those who act as underwriter, broker, dealer or
agent in connection with the sale of the Common Stock offered hereby will be
selected by the Selling Stockholders and may have other business relationships
with State Street and its subsidiaries or affiliates in the ordinary course of
business.
At any time a particular offer of Common Stock offered hereby is made by the
Selling Stockholders, if required, a Prospectus Supplement will be distributed
which will set forth the aggregate amounts of Common Stock being offered and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, any discounts, commissions and other items constituting
compensation from the Selling Stockholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. Such Prospectus
Supplement and, if necessary, a post-effective amendment to the Registration
Statement of which this Prospectus is a part, will be filed with the
Commission to reflect the disclosure of additional information with respect to
the distribution of the Common Stock offered hereby.
The Registration Rights Agreement provides that State Street indemnify the
Selling Stockholders against certain liabilities, including liabilities under
the Securities Act. The Registration Rights Agreement also provides for the
indemnification of State Street by the Selling Stockholders for certain
liabilities, including liabilities under the Securities Act. In addition,
under the Registration Rights Agreement, State Street's obligation to
indemnify extends to those who participate in the distribution of the Common
Stock offered hereby as underwriters for the Selling Stockholders. Also
pursuant to the Registration Rights Agreement, the Selling Stockholders will
pay all applicable stock transfer taxes, brokerage commissions, underwriting
discounts or commissions and any fees and disbursements of more than one
counsel to the Selling Stockholders, but State Street has agreed to pay
substantially all fees and expenses incident to the preparation, filing,
amending and supplementing of the Registration Statement of which this
Prospectus is a part and any registration statements or qualifying documents
filed under any state Blue Sky or securities laws. It is expected that the
Registration Statement will remain effective until December 31, 1998, which
period may, subject to the occurrence of certain events, be extended or
shortened.
VALIDITY OF THE COMMON STOCK
The validity of the Common Stock offered hereby has been passed upon by
Ropes & Gray, Boston, Massachusetts. Truman S. Casner, a director of State
Street, is a partner of Ropes & Gray. Mr. Casner owns beneficially a total of
6,194 shares of Common Stock. In addition, a total of 600 shares of Common
Stock of State Street were owned beneficially by Ropes & Gray attorneys
participating in the preparation of the Registration Statement of which this
Prospectus is a part.
7
<PAGE>
EXPERTS
The consolidated financial statements of State Street at December 31, 1995
and 1994, and for each of the three years in the period ended December 31,
1995, incorporated by reference in State Street's Annual Report on Form 10-K
for the year ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in auditing and accounting.
With respect to the unaudited interim consolidated financial information for
the three month periods ended March 31, 1996, June 30, 1996, and September 30,
1996, incorporated by reference in this Prospectus, Ernst & Young LLP have
reported that they have applied limited procedures in accordance with
professional standards for review of such information. However, their separate
reports, included in State Street's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, and
incorporated herein by reference, state that they did not audit and do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
considering the limited nature of review procedures applied. The independent
auditors are not subject to the liability provisions of Section 11 of the
Securities Act of 1933 (the "Act") for their report on the unaudited interim
financial information because those reports are not "reports" or "parts" of
the Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Securities Act.
8
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND ANY PROSPECTUS
SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OF-
FER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HERE-
UNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF STATE STREET SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS
<S> <C>
Statement of Available Information......................................... 2
Incorporation of Certain Documents by Reference............................ 2
State Street Boston Corporation............................................ 3
Recent Developments........................................................ 3
Holding Company Dividends.................................................. 4
Economic Conditions and Government Policies................................ 4
Use of Proceeds............................................................ 4
Description of Capital Stock............................................... 4
Selling Stockholders....................................................... 6
Plan of Distribution....................................................... 7
Validity of the Common Stock............................................... 7
Experts.................................................................... 8
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STATE STREET BOSTON CORPORATION
923,072 SHARES OF COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
----------------
PROSPECTUS
----------------
NOVEMBER 27, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of the expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered.
To be borne by State Street:
<TABLE>
<S> <C>
Registration Fee............................................... $18,924.93
Transfer Agent and Registrar Fees.............................. $ 5,000.00
Printing....................................................... $ 5,000.00
Legal Fees and Expenses........................................ $10,000.00
Accounting Fees................................................ $12,000.00
Blue Sky Fees and Expenses..................................... $10,000.00
Miscellaneous.................................................. $10,000.00
----------
Total........................................................ $83.924.93
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of Chapter 156B of the General Laws of Massachusetts provides
that to the extent specified in or authorized by the articles of organization,
a by-law adopted by shareholders or a vote adopted by the holders of the
majority of shares of stock entitled to vote on the election of directors, a
corporation can indemnify directors, officers, employees and other agents of
the corporation (and persons who serve at its request as directors, officers,
employees or other agents of another organization or who serve at its request
in any capacity with respect to any employee benefit plan) except as to any
matter as to which such person shall have been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that his action was
in the best interest of the corporation or to the extent that such matter
relates to service with respect to an employee benefit plan in the best
interests of the participants or beneficiaries of such employee benefit plan.
The Articles of Organization of State Street (Article 6) provide the
following:
The corporation shall to the fullest extent legally permissible indemnify
each person who is or was a director, officer, employee or other agent of
the corporation and each person who is or was serving at the request of the
corporation as a director, trustee, officer, employee or other agent of
another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise or organization against all liabilities,
costs and expenses, including but not limited to amounts paid in
satisfaction of judgments, in settlement or as fines and penalties, and
counsel fees and disbursements, reasonably incurred by him in connection
with the defense or disposition of or otherwise in connection with or
resulting from any action, suit or other proceeding, whether civil,
criminal, administrative or investigative, before any court or
administrative or legislative or investigative body, in which he may be or
may have been involved as a party or otherwise or with which he may be or
may have been threatened, while in office or thereafter, by reason of his
being or having been such a director, officer, employee, agent or trustee,
or by reason of any action taken or not taken in any such capacity, except
with respect to any matter as to which he shall have been finally
adjudicated by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that his action was in the best interests of
the corporation (any person serving another organization in one or more of
the indicated capacities at the request of the corporation who shall not
have been adjudicated in any proceeding not to have acted in good faith in
the reasonable belief that his action was in the best interest of such
other organization shall be deemed so to have acted in good faith with
respect to the corporation) or to the extent that such matter relates to
service with respect to an employee benefit plans in the best interest of
the participants or beneficiaries of such employee benefit plan. Expenses,
including but not limited to counsel fees and disbursements, so incurred by
any such person in defending any such action, suit or proceeding, shall be
paid from time to time by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the person indemnified to
II-1
<PAGE>
repay the amounts so paid if it shall ultimately be determined that
indemnification of such expenses is not authorized hereunder.
If, in an action, suit or proceeding brought by or in the name of the
corporation, a director of the corporation is held not liable for monetary
damages, whether because that director is relieved of personal liability
under the provisions of this Article Six of the Articles of Organization,
or otherwise, that director shall be deemed to have met the standard of
conduct set forth above and to be entitled to indemnification for expenses
reasonably incurred in the defense of such action, suit or proceeding.
As to any matter disposed of by settlement by any such person, pursuant
to a consent decree or otherwise, no such indemnification either for the
amount of such settlement or for any other expenses shall be provided
unless such settlement shall be approved as in the best interests of the
corporation, after notice that it involves such indemnification, (a) by
vote of a majority of the disinterested directors then in office (even
though the disinterested directors be less than a quorum), or (b) by any
disinterested person or persons to whom the question may be referred by
vote of a majority of such disinterested directors, or (c) by vote of the
holders of a majority of the outstanding stock at the time entitled to vote
for directors, voting as a single class, exclusive of any stock owned by
any interested person, or (d) by any disinterested person or persons to
whom the question may be referred by vote of the holders of a majority of
such stock. No such approval shall prevent the recovery from any such
director, officer, employee, agent or trustee of any amounts paid to him or
on his behalf as indemnification in accordance with the preceding sentence
if such person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that
his action was in the best interests of the corporation.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any director, officer, employee, agent or
trustee may be entitled or which may lawfully be granted to him. As used
herein, the terms "director", "officer", "employee", "agent" and "trustee"
include their respective executors, administrators and other legal
representatives, an "interested" person is one against whom the action,
suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or had been pending or
threatened, and a "disinterested" person is a person against whom no such
action, suit or other proceeding is then or had been pending or threatened.
By action of the board of directors, notwithstanding any interest of the
directors in such action, the corporation may purchase and maintain
insurance, in such amounts as the board of directors may from time to time
deem appropriate, on behalf of any person who is or was a director,
officer, employee or other agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee
or other agent of another corporation or of any partnership, joint venture,
trust, employee benefit plan or other enterprise or organization against
any liability incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability.
A director of this corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director notwithstanding any provision of law imposing
such liability, provided, however, that this paragraph of Article Six shall
not eliminate the liability of a director to the extent such liability is
imposed by applicable law (i) for any breach of the director's duty of
loyalty to this corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for any transaction from which the director derived
an improper personal benefit, or (iv) for paying a dividend, approving a
stock repurchase or making loans which are illegal under certain provisions
of Massachusetts law, as the same exists or hereafter may be amended. If
Massachusetts law is hereafter amended to authorize the further limitation
of the legal liability of the directors of this corporation, the liability
of the directors shall then be deemed to be limited to the fullest extent
then permitted by Massachusetts law as so amended. Any repeal or
modification of this paragraph of this Article Six which may hereafter be
effected by the stockholders of this corporation shall be prospective only,
and shall not adversely affect any limitation on the liability of a
director for acts or omissions prior to such repeal or modification.
In addition, State Street maintains a directors' and officers' liability
insurance policy.
II-2
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of October 17, 1996, by and
among State Street Boston Corporation, a wholly-owned subsidiary of
State Street Boston Corporation, Princeton Financial Systems, Inc. and
the Stockholders listed on the signature page thereto
4.1 State Street Boston Corporation's Restated Articles of Organization,
as amended(1)
4.2 State Street Boston Corporation's By-Laws, as amended(2)
4.3 Form of Common Stock Certificate(3)
4.4 Rights Agreement dated as of September 15, 1988 between State Street
Boston Corporation and The First National Bank of Boston, Rights
Agent(4)
4.5 Amendment to Rights Agreement dated as of September 20, 1990 between
State Street Boston Corporation and The First National Bank of Boston,
Rights Agent(5)
4.6 Registration Rights Agreement dated as of November 19, 1996 by and
between State Street Boston Corporation, and the former shareholders
of Princeton Financial Systems, Inc.
5.1 Opinion of Ropes & Gray, as to the legality of the Common Stock being
registered
15.1 Letter of Ernst & Young LLP re: Unaudited Interim Financial
Information
23.1 Consent of Ropes & Gray (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
</TABLE>
- --------
(1) Filed as Exhibit 3.1 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995.
(2) Incorporated by reference to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995.
(3) Filed as Exhibit 4.3 to the Registrant's Registration Statement on Form S-
3 dated June 20, 1995.
(4) Incorporated by reference to Registrant's Current Report on Form 8-K dated
September 30, 1988.
(5) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1990.
ITEM 17. UNDERTAKINGS
(a) Rule 415 Offering.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, unless the information required to be included
in such post-effective amendment is contained in a periodic report
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 and incorporated herein by reference;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement, unless the information required to be included
in such post-effective amendment is contained in a periodic report
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 and incorporated herein by reference;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such 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 of the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's Annual Report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement 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.
(c) Incorporated Annual and Quarterly Reports.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to securityholders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information is required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such financial information.
(d) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 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 Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, STATE STREET
BOSTON CORPORATION 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 BOSTON, COMMONWEALTH OF MASSACHUSETTS, ON THE
27TH DAY OF NOVEMBER, 1996.
State Street Boston Corporation
/s/ Rex S. Schuette
By __________________________________
REX S. SCHUETTE SENIOR VICE
PRESIDENT AND COMPTROLLER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED, ON NOVEMBER 27, 1996.
We, the undersigned directors of State Street Boston Corporation, hereby
severally constitute and appoint Ronald L. O'Kelley, John R. Towers and Rex S.
Schuette, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities as directors, any and all amendments or supplements to the
Registration Statement on Form S-3 of State Street Boston Corporation, and
generally to do all such things in our name and on our behalf in our capacities
as directors to enable State Street Boston Corporation to comply with the
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be required by our said attorneys or any of them, to any
and all said amendments.
SIGNATURE TITLE
/s/ Marshall N. Carter Chairman and Chief Executive Officer
- ------------------------------------- and Director (Principal Executive
MARSHALL N. CARTER Officer)
/s/ Ronald L. O'Kelley Executive Vice President and Chief
- ------------------------------------- Financial Officer (Principal
RONALD L. O'KELLEY Financial Officer)
/s/ Rex S. Schuette Senior Vice President and
- ------------------------------------- Comptroller (Principal Accounting
REX S. SCHUETTE Officer)
/s/ Tenley E. Albright Director
- -------------------------------------
TENLEY E. ALBRIGHT
/s/ Joseph A. Baute Director
- -------------------------------------
JOSEPH A. BAUTE
/s/ I. MacAllister Booth Director
- -------------------------------------
I. MACALLISTER BOOTH
II-5
<PAGE>
SIGNATURE TITLE
/s/ James I. Cash, Jr. Director
- -------------------------------------
JAMES I. CASH, JR.
/s/ Truman S. Casner Director
- -------------------------------------
TRUMAN S. CASNER
/s/ Nader F. Darehshori Director
- -------------------------------------
NADER F. DAREHSHORI
Director
- -------------------------------------
ARTHUR L. GOLDSTEIN
/s/ Charles F. Kaye Director
- -------------------------------------
CHARLES F. KAYE
/s/ John M. Kucharski Director
- -------------------------------------
JOHN M. KUCHARSKI
/s/ Charles R. Lamantia Director
- -------------------------------------
CHARLES R. LAMANTIA
/s/ David B. Perini Director
- -------------------------------------
DAVID B. PERINI
/s/ Dennis J. Picard Director
- -------------------------------------
DENNIS J. PICARD
Director
- -------------------------------------
ALFRED POE
Director
- -------------------------------------
BERNARD W. REZNICEK
/s/ David A. Spina Director
- -------------------------------------
DAVID A. SPINA
Director
- -------------------------------------
ROBERT E. WEISSMAN
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING PAGE NO.
- ------ ----------- ---------------- --------
<S> <C> <C> <C>
2.1 Agreement and Plan of Merger dated as Filed herewith
of October 17, 1996, by and among
State Street Boston Corporation, a
wholly-owned subsidiary of State
Street Boston Corporation, Princeton
Financial Systems, Inc. and the
Stockholders listed on the signature
page thereto.
4.1 State Street Boston Corporation's Previously filed with the Securities
Restated Articles of Organization, as and Exchange Commission as Exhibit 3.1
amended to Registrant's Annual Report on Form
10-K for the year ended December 31,
1995 and incorporated by reference
4.2 State Street Boston Corporation's By- Previously filed with the Securities
Laws, as amended and Exchange Commission as Exhibit 3.2
to Registrant's Annual Report on Form
10-K for the year ended December 31,
1995 and incorporated by reference
4.3 Form of Common Stock Certificate Previously filed with the Securities
and Exchange Commission as Exhibit 4.3
to the Registrant's Registration
Statement on Form S-3 dated June 20,
1995 and incorporated by reference
4.4 Rights Agreement dated as of September Previously filed with the Securities
15, 1988 between State Street Boston and Exchange Commission as Exhibit 4
Corporation and The First National to Registrant's Current Report on Form
Bank of Boston, Rights Agent 8-K dated September 30, 1988 and
incorporated by reference
4.5 Amendment to Rights Agreement dated as Previously filed with the Securities
of September 20, 1990 between State and Exchange Commission as Exhibit 4
Street Boston Corporation and The to Registrant's Quarterly Report on
First National Bank of Boston, Rights Form 10-Q for the quarter ended
Agent September 30, 1990 and incorporated by
reference
4.6 Registration Rights Agreement dated as Filed herewith
of November 19, 1996 by and between
State Street Boston Corporation, and
the former shareholders of Princeton
Financial Systems, Inc.
5.1 Opinion of Ropes & Gray as to the Filed herewith
legality of the Common Stock
15.1 Letter of Ernst & Young LLP re: Filed herewith
Unaudited Interim Financial
Information
23.1 Consent of Ropes & Gray Filed herewith (included in Exhibit
5.1)
23.2 Consent of Ernst & Young LLP Filed herewith
</TABLE>
<PAGE>
Exhibit 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
State Street Boston Corporation
and
SSB Merger Sub, Inc.
and
Princeton Financial Systems, Inc.
and
the Stockholders listed on the signature page hereof
Dated as of October 17, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER............................................................... 2
SECTION 1.1 The Merger........................................... 2
----------
SECTION 1.2 Effective Time....................................... 3
--------------
SECTION 1.3 Effect of the Merger................................. 3
--------------------
SECTION 1.4 Certificate of Incorporation, By-Laws................ 3
-------------------------------------
SECTION 1.5 Directors and Officers............................... 4
----------------------
SECTION 1.6 Effect on Capital Stock.............................. 4
-----------------------
SECTION 1.7 Exchange of Certificates............................. 9
------------------------
SECTION 1.8 Stock Transfer Books................................ 10
--------------------
SECTION 1.9 No Further Ownership Rights in Company Common
---------------------------------------------
Stock.............................................................. 10
-----
SECTION 1.10 Lost, Stolen or Destroyed Certificates.............. 10
--------------------------------------
SECTION 1.11 Tax Consequences.................................... 10
----------------
SECTION 1.12 Taking of Necessary Action; Further Action.......... 11
------------------------------------------
SECTION 1.13 Material Adverse Effect............................. 11
-----------------------
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 11
SECTION 2.1 Organization and Qualification; Subsidiaries........ 11
--------------------------------------------
SECTION 2.2 Certificate of Incorporation; By-Laws and
-----------------------------------------
Corporate Documents................................................ 12
-------------------
SECTION 2.3 Capitalization...................................... 12
--------------
SECTION 2.4 Authority Relative to this Agreement................ 13
------------------------------------
SECTION 2.5 No Conflict, Required Filings and Consents.......... 13
------------------------------------------
SECTION 2.6 Compliance, Permits................................. 16
-------------------
SECTION 2.7 Financial Statements................................ 16
--------------------
SECTION 2.8 Absence of Certain Changes or Events................ 17
------------------------------------
SECTION 2.9 No Undisclosed Liabilities.......................... 17
--------------------------
SECTION 2.10 Absence of Litigation............................... 17
---------------------
SECTION 2.11 Employee Benefit Plans, Employment Agreements....... 18
---------------------------------------------
SECTION 2.12 Labor Matters....................................... 19
-------------
SECTION 2.13 Restrictions on Business Activities................. 20
-----------------------------------
SECTION 2.14 Title to Property................................... 20
-----------------
SECTION 2.15 Taxes............................................... 20
-----
-i-
<PAGE>
SECTION 2.16 Environmental Matters............................... 22
---------------------
SECTION 2.17 Intellectual Property............................... 22
---------------------
SECTION 2.18 Interested Party Transactions....................... 24
-----------------------------
SECTION 2.19 Insurance........................................... 25
---------
SECTION 2.20 Accounts Receivable................................. 25
-------------------
SECTION 2.21 Brokers............................................. 25
-------
SECTION 2.22 Change in Control Payments.......................... 25
--------------------------
SECTION 2.23 Expenses............................................ 25
--------
SECTION 2.24 Full Disclosure..................................... 26
---------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................. 26
SECTION 3.1 Organization and Qualification; Subsidiaries........ 26
--------------------------------------------
SECTION 3.2 Charter and By-Laws................................. 26
-------------------
SECTION 3.3 Capitalization...................................... 26
--------------
SECTION 3.4 Authority Relative to this Agreement................ 27
------------------------------------
SECTION 3.5 No Conflict, Required Filings and Consents.......... 27
------------------------------------------
SECTION 3.6 SEC Filings; Financial Statements................... 28
---------------------------------
SECTION 3.8 No Prior Activities................................. 29
-------------------
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.................................. 29
SECTION 4.1 Conduct of Business by the Company Pending the
----------------------------------------------
Merger............................................................. 29
------
SECTION 4.2 Exclusive Dealing................................... 31
-----------------
SECTION 4.3 Employment Agreements............................... 32
---------------------
SECTION 4.4 Noncompetition Agreements........................... 32
-------------------------
ARTICLE V
ADDITIONAL AGREEMENTS................................................... 32
SECTION 5.1 Registration Statement.............................. 32
----------------------
SECTION 5.3 Consents; Approvals................................. 33
-------------------
SECTION 5.4 Stockholder Agreement and Investment Letter......... 33
-------------------------------------------
SECTION 5.5 Notification of Certain Matters..................... 33
-------------------------------
SECTION 5.6 Further Action/Tax Treatment........................ 34
----------------------------
SECTION 5.7 Public Announcements................................ 34
--------------------
SECTION 5.8 Conveyance Taxes.................................... 34
----------------
SECTION 5.9 Non-Solicitation.................................... 34
----------------
-ii-
<PAGE>
SECTION 5.10 Benefit Plans....................................... 34
-------------
SECTION 5.11 Listing of Parent Common Shares..................... 35
-------------------------------
SECTION 5.12 Waiver of Defaults.................................. 35
------------------
SECTION 5.13 Warrants............................................ 35
--------
ARTICLE VI
CONDITIONS TO THE MERGER................................................ 36
SECTION 6.1 Conditions to Obligation of Each Party to
-----------------------------------------
Effect the Merger.................................................. 36
-----------------
SECTION 6.2 Additional Conditions to Obligations of Parent
----------------------------------------------
and Merger Sub..................................................... 36
--------------
SECTION 6.3 Additional Conditions to Obligation of
--------------------------------------
the Company......................................... 38
-----------
ARTICLE VII
TERMINATION............................................................. 39
SECTION 7.1 Termination......................................... 39
-----------
SECTION 7.2 Effect of Termination............................... 40
---------------------
SECTION 7.3 Fees and Expenses................................... 40
-----------------
ARTICLE VIII
GENERAL PROVISIONS...................................................... 40
SECTION 8.1 Indemnification..................................... 40
---------------
SECTION 8.2 Survival, Etc....................................... 44
--------------
SECTION 8.3 Notices............................................. 44
-------
SECTION 8.4 Certain Definitions................................. 45
-------------------
SECTION 8.5 Amendment........................................... 46
---------
SECTION 8.6 Waiver.............................................. 47
------
SECTION 8.7 Headings............................................ 47
--------
SECTION 8.8 Severability........................................ 47
------------
SECTION 8.9 Entire Agreement.................................... 47
----------------
SECTION 8.10 Assignment, Guarantee of Merger Sub Obligations..... 47
-----------------------------------------------
SECTION 8.11 Parties in Interest................................. 47
-------------------
SECTION 8.12 Failure or Indulgence Not Waiver, Remedies
------------------------------------------
Cumulative......................................................... 47
----------
SECTION 8.13 Governing Law....................................... 48
-------------
SECTION 8.14 Counterparts........................................ 48
------------
-iii-
<PAGE>
TABLE OF EXHIBITS AND SCHEDULES
-------------------------------
EXHIBITS
--------
Consideration Spreadsheet Exhibit 1.6(g)
Employment Agreement Exhibit 4.3
Noncompetition Agreement Exhibit 4.4
Stockholder Agreement and
Investment Letter Exhibit 5.4
Letter of Continuity of Interest Exhibit 6.2(e)
Registration Rights Agreement Exhibit 6.2(f)
Escrow Agreement Exhibit 6.2(g)
Representation Letter Exhibit 6.3(d)
SCHEDULES
- ---------------------
Company Subsidiaries Schedule 2.1
Subscriptions, Warrants and Rights Schedule 2.3
Contracts Schedule 2.5(a)
Breaches Schedule 2.5(b)
Conflicts Schedule 2.5(c)
Compliance with Laws Schedule 2.6(a)
Permits and Licenses Schedule 2.6(b)
Changes or Events Schedule 2.8
Undisclosed Liabilities Schedule 2.9
Absence of Litigation Schedule 2.10
Employee Benefit Plans Schedule 2.11(a)
Retiree Benefits Schedule 2.11(b)
Options Schedule 2.11(c)
Employment Agreements Schedule 2.11(d)
Labor Matters Schedule 2.12
Restrictions on Business Activities Schedule 2.13
Title to Property Schedule 2.14
Taxes Schedule 2.15(b)
Environmental Schedule 2.16
Patents, Trademarks Schedule 2.17(b)
Licenses Schedule 2.17(c)(i)
Source Code Authorizations Schedule 2.17(c)(ii)
Defaults under Licenses Schedule 2.17(c)(iii)
Source Code Agreements Schedule 2.17(c)(iv)
Company Intellectual Property Rights Schedule 2.17(d)
Interested Party Transactions Schedule 2.18
-iv-
<PAGE>
Brokers Schedule 2.21
Change in Control Payments Schedule 2.22
Expenses Schedule 2.23
Parent Conflicts Schedule 3.5(a)
Company Affiliates Schedule 6.2(e)
Terminated Contracts Schedule 6.2(j)
-v-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October ___, 1996 (this
"Agreement"), among State Street Boston Corporation, a Massachusetts corporation
- ----------
("Parent"), SSB Merger Sub, Inc., a Delaware corporation and a wholly owned
------
subsidiary of Parent ("Merger Sub"), Princeton Financial Systems, Inc., a
----------
Delaware corporation (the "Company") and the stockholders of the Company listed
-------
on the signature page hereto (the "Stockholders" and, together with the Company,
------------
the "Sellers").
-------
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is advisable and in the best interests of their
respective stockholders for Parent to enter into a business combination with the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors
of Parent, Merger Sub and the Company, and the Stockholders, have each approved
the merger of Merger Sub with and into the Company (the "Merger") in accordance
------
with the applicable provisions of the Delaware General Corporation Law (the
"DGCL") upon the terms and subject to the conditions set forth herein;
- -----
WHEREAS, Parent, Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder;
----
and
WHEREAS, pursuant to the Merger, each outstanding share (a"Share") of
-----
(i) the Company's common stock, $.01 par value (the "Company Common Stock"), and
--------------------
(ii) the Company's Series A Preferred Stock, $.01 par value per share (the
"Company Preferred Stock") shall be converted into the right to receive shares
- ------------------------
("Parent Shares") of the Parent's Common Stock, $1.00 par value (the "Parent
------------- ------
Common Stock") and, in the case of the Company Preferred Stock, cash upon the
- ------------
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
----------
(a) Effective Time. At the Effective Time (as defined in Section 1.2), and
--------------
subject to and upon the terms and conditions of this Agreement and the DCGL,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
---------------------
(b) Closing. Unless this Agreement shall have been terminated and the
-------
transactions herein contemplated shall have been abandoned pursuant to Section
7.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the consummation of the Merger will take place as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VI, at the offices of Ropes &
Gray, One International Place, Boston, Massachusetts 02110, counsel for the
Buyer, unless another date, time or place is agreed to in writing by the parties
hereto.
(c) The Stockholders, by virtue of their approval of the Agreement, will be
deemed to have irrevocably constituted and appointed, effective as of the
Effective Time, Michael Bruce (together with his or its permitted successors,
the "Stockholder Representative"), as their true and lawful agent and attorney-
--------------------------
in-fact to enter into any agreement in connection with the transactions
contemplated by this Agreement and any transactions contemplated by the Escrow
Agreement (as defined herein), to exercise all or any of the powers, authority
and discretion conferred on his or it under any such agreement, to waive any
terms and conditions of any such agreement (other than the Merger
Consideration), to give and receive notices on their behalf and to be their
exclusive representative with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by any such
agreement, including, without limitation, the defense, settlement or compromise
of any claim, action or proceeding for which the Parent or the Merger Sub may be
entitled to indemnification and the Stockholder Representative agrees to act as,
and to undertake the duties and responsibilities of, such agent and attorney-in-
fact. This power of attorney is coupled with an interest and is irrevocable.
The Stockholder Representative shall not be liable for any action taken or not
taken by him or it in connection with his or its obligations under this
Agreement (i) with the consent of stockholders who, as of the date of this
Agreement, owned 66-2/3% of the outstanding shares of Company Common Stock, and
the Company Preferred Stock, voting together as a class on an as converted basis
or (ii) in the absence of his or its own gross negligence or willful misconduct.
If the Stockholder Representative shall be unable or unwilling to serve in such
capacity, his or its successor shall be named by those persons holding 66-2/3%
of the shares of Common Stock outstanding (treating the Company
-2-
<PAGE>
Preferred Stock on an as converted basis) at the Effective Time who shall serve
and exercise the powers of Stockholder Representative hereunder.
(d) At the Closing, the Company shall deliver to Parent a Certificate, in
form and substance satisfactory to Parent and signed by its Chief Executive
Officer and its Chief Financial Officer (the "Company Closing Certificate"),
---------------------------
certifying (i) that all outstanding warrants to purchase Company Preferred Stock
have been exercised for shares of Company Preferred Stock, (ii) the number of
outstanding shares of Company Common Stock, as of the Closing Date and, (iii)
the number of shares of Company Common Stock issuable upon the conversion or
exercise of all options, warrants, Company Preferred Stock and other securities
of the Company convertible into or exercisable for shares of Company Common
Stock that are outstanding on the Closing Date.
SECTION 1.2 Effective Time. As promptly as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a duly executed and
delivered Certificate of Merger in the form attached hereto as Exhibit 1.2 as
contemplated by the DCGL (the "Certificate of Merger"), with the Secretary of
---------------------
State of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DCGL (the time of such filing
being the "Effective Time").
--------------
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect
--------------------
of the Merger shall be as provided in this Agreement, the Certificate of Merger
and the applicable provisions of the DCGL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.4 Certificate of Incorporation, By-Laws:
-------------------------------------
(a) Certificate of Incorporation. Unless otherwise determined by Parent
----------------------------
prior to the Effective Time, at the Effective Time the Certificate of
Incorporation of the Surviving Corporation, as in effect immediately prior to
the Effective Time, shall be amended and restated to read in its entirety as did
the Certificate of Incorporation of the Merger Sub immediately prior to the
Effective Time, except that the name of the Surviving Corporation will remain
unchanged.
(b) By-Laws. Unless otherwise determined by Parent prior to the Effective
-------
Time, the By-Laws of the Surviving Corporation, as in effect immediately prior
to the Effective Time, shall be amended and restated to read as did the By-Laws
of Merger Sub immediately prior to the Effective Time, except that the name of
the Surviving Corporation shall remain unchanged.
-3-
<PAGE>
SECTION 1.5 Directors and Officers. Parent shall be entitled to designate
----------------------
a majority of the directors of the Surviving Corporation, and two of the initial
directors shall be Gerald Finsen, Jr. and William Mayhall, each to hold office
in accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by
-----------------------
virtue of the Merger and without any action on the part of the Parent, Merger
Sub, the Company or the holders of any of the following securities:
(a) Conversion of Securities. At the Effective Time each share of Company
------------------------
Common Stock shall be converted into a number of shares of Parent Common Stock
equal to the Parent Shares for Common Stockholders divided by the number of
shares of Company Common Stock outstanding at the Effective Time. Of this, the
Parent shall deliver to the escrow agent, or any successor escrow agent,
appointed pursuant to the Escrow Agreement (as hereinafter defined) (the "Escrow
------
Agent") a number of shares of Parent Common Stock for each share of Company
- -----
Common Stock converted into Parent Common Stock equal to the Common Escrow
Shares divided by the number of shares of Company Common Stock outstanding at
the Effective Time. The balance of the Parent Common Stock shall be delivered
to the converting Stockholder.
At the Effective Time, each share of Company Preferred Stock shall be
converted into cash equal to the Cash for Preferred Stockholders divided by the
number of shares of Company Preferred Stock outstanding at the Effective Time
and a number of shares of Parent Common Stock equal to the Stock for Preferred
Stockholders divided by the number of shares of Company Preferred Stock
outstanding at the Effective Time. Of this, the Parent shall deliver to the
Escrow Agent (i) a number of shares of Parent Common Stock for each share of
Company Preferred Stock converted into Parent Common Stock equal to the
Preferred Escrow Shares divided by the number of shares of Company Preferred
Stock outstanding at the Effective Time and (ii) cash equal to the Preferred
Escrow Cash divided by the number of shares of Company Preferred Stock
outstanding at the Effective Time. The balance of the Parent Common Stock and
cash shall be delivered to the converting Stockholder.
For purposes of this Agreement the term:
(i) "Aggregate Consideration" means (x) $76,000,000 multiplied by a
fraction the numerator of which is the total number of shares of Company
Preferred Stock and Company Common Stock outstanding at the Effective Time and
the denominator of which is the sum of (x) the total number of shares of Company
Preferred Stock and Company Common Stock outstanding at the Effective Time and
(y) the number of shares of Company Common Stock subject to outstanding Stock
Options at the Effective Time, less (y) the excess of the aggregate
-4-
<PAGE>
fees and expenses paid by the Parent on the Closing Date, in accordance with
Section 7.3 over $750,000 (estimated to be $450,000).
(ii) "Common Stock Consideration" means (x) the Aggregate Consideration
multiplied by a fraction the numerator of which is the number of shares of
Company Common Stock outstanding at the Effective Time and the denominator of
which is the total number of shares of Company Preferred Stock and Company
Common Stock outstanding at the Effective Time, less (y) $157,965.
(iii) "Preferred Stock Consideration" means the Aggregate Consideration
minus the Common Stock Consideration.
(iv) "Parent Shares for Common Stockholders" means a number of shares of
Parent Common Stock equal to the Common Stock Consideration divided by the
Parent Stock Price.
(v) "Parent Stock Price" means the average, rounded to the nearest one-
thousandth of a dollar ($0.001), of the daily high and low prices of Parent
Common Stock as reported on the New York Stock Exchange Composite Tape (as
reported by the eastern edition of the Wall Street Journal or, if not reported
thereby, as reported by another authoritative source as mutually agreed by
Parent and the Company) for the ten consecutive full trading days during the
period ending on and including two (2) business days prior to the Effective
Time; provided, however, that the Parent Stock Price shall in no event be
greater than $60.863 or less than $54.863.
(vi) "Closing Date Parent Stock Price" means the average, rounded to the
nearest one-thousandth of a dollar ($0.001), of the daily high and low prices of
Parent Common Stock as reported on the New York Stock Exchange Composite Tape
(as reported by the eastern edition of the Wall Street Journal or, if not
reported thereby, as reported by another authoritative source as mutually agreed
by Parent and the Company) for the trading day immediately preceding the Closing
Date.
(vii) If the Closing Date Parent Stock Price equals the Parent Stock
Price:
(A) "Cash for Preferred Stockholders" shall mean the product of 17%
and the Aggregate Consideration, and
(B) "Parent Shares for Preferred Stockholders" shall mean a number
of shares of Parent Common Stock equal to the quotient obtained by dividing
(x) the Preferred Stock Consideration minus the Cash for Preferred
Stockholders determined in (vii)(A) above by (y) the Parent Stock Price.
(viii) If the Closing Date Parent Stock Price is less than the Parent
Stock Price:
-5-
<PAGE>
(A) "Cash for Preferred Stockholders" shall mean the Cash for Preferred
Stockholders as determined in Section 1.6(vii)(A) above, reduced by the
"Adjustment Amount" (as defined below), and
(B) "Parent Shares for Preferred Stockholders" shall mean a number of
shares of Parent Common Stock equal to the sum of (x) the Parent Shares for
Preferred Stockholders determined in Section 1.6(vii)(B) above and (y) the
quotient obtained by dividing the Adjustment Amount by the Parent Stock Price.
For purposes of this Section 1.6(viii), the Adjustment Amount shall be
calculated as follows:
Adjustment Amount = [.83 x Cash] - [.17 x Actual Price x (Common + Preferred)]
----------------------------------------------------------
[(.83 x Deal Price + .17 x Actual Price)/Deal Price]
where: "Cash" = Cash for Preferred Stockholders as determined
in (vii)(A)
"Actual Price" = Closing Date Parent Stock Price
"Deal Price" = Parent Stock Price
"Common" = Parent Shares for Common Stockholders
"Preferred" = Parent Shares Stockholders as determined in
(vii)(B)
(ix) If the Closing Date Parent Stock Price exceeds the Parent Stock
Price:
(A) "Cash for Preferred Stockholders" shall mean the lesser of:
(i) 48% of the sum of the Cash for Preferred Stockholders determined
in Section 1.6(vii)(A) above and the product of the Closing Date Parent
Stock Price and the Parent Shares for Preferred Stockholders determined in
Section 1.6(vii)(B) above, or
(ii) 17% of the sum of the Cash for Preferred Stockholders determined
in Section 1.6(vii)(A) above and the product of the Closing Date Parent
Stock Price and the sum of the Parent Shares for Preferred Stockholders
determined in Section 1.6(vii)(B) and the Parent Shares for Common
Stockholders.
(B) "Parent Shares for Preferred Stockholders" shall mean the Parent Shares
for Preferred Stockholders determined under (vii)(B) above reduced by a number
of shares of Parent Common Stock equal to (x) the amount by which the Cash for
-6-
<PAGE>
Preferred Stockholders determined under (ix)(A) above exceeds the Cash for
Preferred Stockholders determined in Section 1.6(vii)(A) above divided by (y)
the Closing Date Parent Stock Price.
(x) "Closing Date Aggregate Consideration" means the sum of (x) the Cash for
Preferred Stockholders and (y) the product of the Closing Date Parent Stock
Price and the sum of the Parent Shares for Common Stockholders and the Parent
Shares for Preferred Stockholders.
(xi) "Common Escrow Shares" means a number of shares of Parent Common Stock
equal to the Shares for Common Stockholders multiplied by a fraction the
numerator of which is $10,000,000 and the denominator of which is the greater of
the Closing Date Aggregate Consideration or the Aggregate Consideration.
(xii) "Preferred Escrow Shares" means a number of shares of Parent Common
Stock equal to the Shares for Preferred Stockholders multiplied by a fraction
the numerator of which is $10,000,000 and the denominator of which is the
greater of the Closing Date Aggregate Consideration or the Aggregate
Consideration.
(xiii) "Preferred Escrow Cash" means an amount of cash equal to the Cash for
Preferred Stockholders multiplied by a fraction the numerator of which is
$10,000,000 and the denominator of which is the greater of the Closing Date
Aggregate Consideration or the Aggregate Consideration.
(b) Cancellation. Each Share held in the treasury of the Company and each
------------
Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) Rollover of Stock Options.
-------------------------
(i) At the Effective Time, each outstanding option to purchase Company
Common Stock (a "Stock Option") granted under the Company's various stock
------------
option plans, all of which are listed on Section 2.11(c) of the Company
Disclosure Schedule ("Company Stock Option Plans"), whether vested or
--------------------------
unvested, shall be deemed assumed by Parent and deemed to constitute an
option to acquire, on terms and conditions not less favorable than those that
were applicable under such Stock Option Plan (and any stock option agreement
applicable to such Stock Option prior to the Effective Time) the number
(rounded down to the nearest whole number) of shares of Parent Common Stock
as the holder of such Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (not taking into account whether or
not such
-7-
<PAGE>
option was in fact exercisable), at an exercise price per share equal to (x)
the aggregate exercise price for Company Common Stock otherwise purchasable
pursuant to such Stock Option prior to the Effective Time divided by (y) the
number of shares of Parent Common Stock which the Stock Option authorizes the
holder to purchase as of the Effective Time. The optionee shall be given full
credit for the vesting period of all Stock Options and such vesting period
shall carryover in the stock options of Parent to be received hereunder.
Nothing contained herein shall prevent any acceleration of a Stock Option
held by an outside director of the Company to the extent that acceleration is
required pursuant to change in control provisions of such Stock Option.
(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto.
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of Parent Shares for delivery pursuant to the
terms set forth in this Section 1.6(c).
(iv) Subject to any applicable limitations under the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "Securities
----------
Act"), Parent shall file a Registration Statement on Form S-8 (or any
---
successor form), effective not later than 20 days after the Effective Time,
with respect to the shares of Parent Common Stock issuable upon exercise of
the outstanding Stock Options, and the Parent shall use all reasonable
efforts to maintain the effectiveness of such registration statement (and
maintain the current status of the prospectus or prospectuses relating
thereto) for so long as such options shall remain outstanding.
(d) Capital Stock of Merger Sub. Each share of common stock, $.01 par value,
---------------------------
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $.01 par value, of the Surviving
Corporation.
(e) Adjustments to Parent Shares for Common Stockholders. The Parent Shares
----------------------------------------------------
for Common Stockholders and the Parent Shares for Preferred Stockholders shall
be adjusted to reflect fully the effect of any stock split, reverse split,
reclassification, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock
occurring after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No certificates or scrip representing less than one
-----------------
Parent Share shall be issued upon the surrender for exchange of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"). In lieu of any such fractional share,
------------
each holder of Shares who would otherwise have been
-8-
<PAGE>
entitled to a fraction of a Parent Share upon surrender of Certificates for
exchange shall be paid upon such surrender cash (without interest) determined by
multiplying (i) the per share closing price on the New York Stock Exchange of
Parent Common Stock on the date of the Effective Time by (ii) the fractional
interest of Parent Common Stock to which such holder would otherwise be
entitled. As soon as practical after determining the amount of cash, if any, to
be paid to former holders of Company Common Stock with respect to any fractional
shares of Parent Common Stock, the Exchange Agent shall promptly pay such
amounts to such holders in accordance with Article I. Parent will make
available to the Exchange Agent the cash necessary for this purpose.
(g) Consideration Spreadsheet. A spreadsheet that illustrates the application
-------------------------
of the consideration provisions contained in this Section 1.6 is attached as
Exhibit 1.6(g) (the "Consideration Spreadsheet").
SECTION 1.7 Exchange of Certificates.
------------------------
(a) Certificates. At or prior to the Effective Time, each Stockholder shall
------------
surrender to the Company for cancellation its Certificates representing all of
the issued and outstanding shares of Company Common Stock and Company Preferred
Stock owned by such Stockholder, duly endorsed in blank, or accompanied by stock
powers, (with all necessary transfer taxes paid by, and stamps affixed acquired
at the expense of, such Stockholder), and signed by the Stockholder exactly as
his or her name appears on the face of the Certificates. Upon surrender of a
Certificate, at the Closing, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) certificates evidencing that number of whole
Parent Shares, and, in the case of Company Preferred Stock, cash which such
holder has the right to receive in respect of the Shares formerly evidenced by
such Certificate and (B) cash in respect of fractional shares as provided in
Section 1.6(h) (the Parent Shares and cash being, collectively, the "Merger
------
Consideration").
- -------------
(b) Transfers of Ownership. If any certificate for Parent Shares is to be
----------------------
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition to the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for Parent Shares in any
name other than that of the registered holder of the certificate surrendered, or
have established to the satisfaction of Parent or any agent designated by it
that such tax has been paid or is not payable.
(c) No Liability. Neither Parent, Merger Sub nor the Company shall be liable
------------
to any holder of Company Common Stock for any Merger Consideration delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law following the passage of time specified therein.
-9-
<PAGE>
(d) Withholding Rights. Parent shall be entitled to deduct and withhold from
------------------
the Merger Consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock such amounts as Parent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by Parent.
(e) The shares of Parent Common Stock to be issued pursuant to this Article 1
shall be characterized as "Restricted Securities" under the federal securities
laws, and under such laws such shares may be resold without registration under
the Securities Act, only in certain limited sets of circumstances. Each
certificate evidencing shares of Parent Common Stock to be issued pursuant to
this Article 1 shall bear the legend set forth in the Registration Rights
Agreement.
SECTION 1.8 Stock Transfer Books. At the Effective Time, the stock transfer
--------------------
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Common Stock or Company Preferred Stock thereafter on
the records of the Company.
SECTION 1.9 No Further Ownership Rights in Company Common Stock. The Merger
---------------------------------------------------
Consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen of destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such Parent Shares as
may be required pursuant to Section 1.6 as well as the other Merger
Consideration as provided in this Article; provided, however, that Parent may,
in its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver an agreement
of indemnification in form satisfactory to Parent, or a bond in such sum as it
may reasonably direct, as indemnity against any claim that may be made against
Parent or the Exchange Agent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
SECTION 1.11 Tax Consequences. It is intended by the parties hereto
----------------
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. The
-10-
<PAGE>
parties hereto hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
SECTION 1.12 Taking of Necessary Action; Further Action. Each of
------------------------------------------
Parent, Merger Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
SECTION 1.13 Material Adverse Effect. When used in connection with
-----------------------
the Company or any of its subsidiaries, or Parent or any of its subsidiaries, as
the case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other such
changes, effects or circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, (a) is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), prospects, financial condition or results of operations of
the Company and its subsidiaries or Parent and its subsidiaries, as the case may
be, in each case taken as a whole, or (b) is or is reasonably likely to delay or
prevent the consummation of the transactions contemplated hereby; provided,
however, that a Material Adverse Effect shall not include any change or effect
in respect of the Company and its subsidiaries resulting from (i) conditions
affecting the financial services industry generally or general economic
conditions or (ii) any adverse effect on the operations, revenues or business of
the Company (or the direct consequences thereof) following the date of this
Agreement which is attributable to a delay of or reduction in product orders by
prospects of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule delivered on or prior to
the date hereof by the Company to Parent that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II (the "Company Disclosure Schedule") and the disclosure in any paragraph of
---------------------------
the Disclosure Schedule shall qualify only the corresponding paragraph in this
Article II:
SECTION 2.1 Organization and Qualification; Subsidiaries. The Company and
--------------------------------------------
each of its subsidiaries is a corporation duly organized, validly existing and
in good standing
-11-
<PAGE>
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted. The Company and each of its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that could not reasonably be expected to have a
Material Adverse Effect. A true and complete list of all of the Company's
subsidiaries, together with the jurisdiction of incorporation of each
subsidiary, the authorized capitalization of each subsidiary, and the percentage
of each subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 2.1 of the Company Disclosure Schedule.
Except as set forth in Section 2.1 of the Company Disclosure Schedule, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity, excluding securities in any publicly traded
company held for investment by the Company and comprising less than five percent
of the outstanding stock of such company.
SECTION 2.2 Certificate of Incorporation; By-Laws and Corporate Documents.
-------------------------------------------------------------
The Company has delivered to Parent copies of the Certificate of Incorporation
and Bylaws, each as amended, for itself and each subsidiary, and minutes of all
meetings of the directors and stockholders of the Company and each subsidiary,
including meetings of committees thereof, and actions by written consent of such
directors and stockholders, and committees thereof, and the stock records of the
Company and the subsidiaries. There have been no meetings or other proceedings
of the stockholders of the Company or any subsidiary, the Board of Directors of
the Company or any subsidiary or any committee of the Board of Directors of the
Company or any subsidiary intended to cause, authorize or approve action by the
Company or any subsidiary, that are not fully reflected in such minutes or other
records. There has not been any violation of any of the provisions of the
Company's Certificate of Incorporation or Bylaws or of any resolution adopted by
the stockholders of the Company or any subsidiary, the Board of Directors of the
Company or any subsidiary or any committee of the Board of Directors of the
Company or any subsidiary. The books of account, stock records, minute books
and other records of the Company and each subsidiary are accurate, up-to-date
and complete, and have been maintained in accordance with sound and prudent
business practices in all material respects.
SECTION 2.3 Capitalization. The authorized capital stock of the Company
--------------
consists of (i) 1,800,000 shares of Company Common Stock and (ii) 555,500 shares
of the Company Preferred Stock. The Stockholders own directly all of the
outstanding capital stock of the Company. Section 2.3 of the Company Disclosure
Schedule sets forth the names of each of the record holders of the outstanding
shares of capital stock of the Company, the number of shares of capital stock
owned by each such holder and sets forth the percentage interest of such shares
owned of record by each Stockholder. As of the Closing, the Company
-12-
<PAGE>
Closing Certificate is accurate. All shares of issued and outstanding capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, and no shares are held in treasury, and all such shares are owned
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in the Company's voting rights, charges or other encumbrances of any
nature whatsoever (collectively "Liens"). No shares of Company Common Stock are
-----
held by subsidiaries of the Company, and 718,000 shares of Company Common Stock
are reserved for future issuance pursuant to outstanding stock options granted
under the Company Stock Option Plans and for conversion of the Preferred Stock.
All of the outstanding securities of the Company were issued in compliance with
applicable Federal and state securities laws in all material respects. Except
as set forth in Section 2.3 or Section 2.11 of the Company Disclosure Schedule,
there are no subscriptions, options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, the Company or any of its subsidiaries. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in Section 2.3 of the Company Disclosure
Schedule, there are no obligations, contingent or otherwise, of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or the capital stock of any subsidiary or to provide funds
to or make any investment (in the form of a loan, capital contribution, guaranty
or otherwise) in any such subsidiary or any other entity. Except as set forth
in Sections 2.1 and 2.3 of the Company Disclosure Schedule, all of the
outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by the Company or another subsidiary of the Company free and
clear of all Liens.
SECTION 2.4 Authority Relative to this Agreement. The Company has all
------------------------------------
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors and all
of the stockholders of the Company, and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, as applicable, constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
SECTION 2.5 No Conflict, Required Filings and Consents.
------------------------------------------
(a) Except as set forth in Section 2.5(a) of the Company Disclosure Schedule,
neither the Company nor any subsidiary is a party to or otherwise bound by any
written or oral
-13-
<PAGE>
contract or instrument or other restriction which could have a Material Adverse
Effect on the Company. Section 2.5(a) of the Company Disclosure Schedule sets
forth a list of all Company clients by product with annual revenues derived from
contracts with such customers. Except as set forth in Section 2.5(a) of the
Company Disclosure Schedule, neither the Company nor any subsidiary is a party
to or otherwise bound by any written or oral :
(i) marketing or sales agency contract or agreement which is not
terminable on less than ninety (90) days' notice without cost or other
liability to the Company (except for contracts which, in the aggregate, are
not material to the business of the Company);
(ii) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of its
employees);
(iii) contract or other commitment with any supplier containing any
provision permitting any party other than the Company to renegotiate the
price or other terms, or containing any pay-back or other similar provision,
upon the occurrence of a failure by the Company to meet its obligations under
the contract when due or the occurrence of any other event;
(iv) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(v) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company;
(vi) guaranty of any obligation for borrowed money or otherwise;
(vii) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights agreement
relating to any securities of the Company to which the Company is party or of
which the Company has knowledge;
(viii) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company has advanced or
agreed to advance money or has agreed to lease any property as lessee or
lessor other than travel and business-related advances of money to employees
of an amount, in any case, greater than $5,000;
(ix) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
-14-
<PAGE>
(x) agreement under which it has granted any person any
registration rights;
(xi) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(xii) leases pursuant to which the Company or any of its
subsidiaries lease from others real property;
(xiii) other contract, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the
Securities and Exchange Commission (the "Commission") as an exhibit to a
----------
registration statement if the Company were registering securities
under the Securities Act.
(b) Except as disclosed in Section 2.5(b) of the Company Disclosure
Schedule, (i) neither the Company nor any of its subsidiaries has breached, is
in default under, or has received written notice of any breach of or default
under, any of the agreements, contracts or other instruments referred to in
clauses (i) through (xiii) of Section 2.5(a), (ii) to the best knowledge of the
Company, no other party to any of the agreements, contracts or other instrument
referred to in clauses (i) through (xiii) of Section 2.5(a) has breached or is
in default of any of its obligations thereunder, and (3) each of the agreements,
contracts and other instruments referred to in Section 2.5(a) is in full force
and effect and is valid and binding upon the Company and, to the best knowledge
of the Company or subsidiary, are binding on the other parties thereto.
(c) Except as set forth in Section 2.5(c) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not, (i) in any material respect, conflict
with or violate the Certificate of Incorporation or By-Laws of the Company, (ii)
in any material respect, conflict with or violate any federal, foreign, state or
provincial law, rule, regulation, order, judgment or decree (collectively,
"Laws") applicable to the Company or any of its subsidiaries or by which its or
----
any of their respective properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default under), or impair the Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any right to obtain source code of the Company's products, any
right to prior notice of the consummation of the transactions contemplated
hereby, or result in the creation of a Lien on any of the properties or assets
of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected.
-15-
<PAGE>
(d) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any federal, foreign, state or provincial governmental or regulatory
authority except (i) for applicable requirements, if any, of the Securities Act,
the Exchange Act, state securities laws ("Blue Sky Laws"), any required United
-------------
States or foreign antitrust or similar filings, and the filing and recordation
of appropriate merger or other documents as required by the DCGL, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent or delay the Company from performing its
obligations under this Agreement, or would not otherwise have a Material Adverse
Effect.
SECTION 2.6 Compliance, Permits.
-------------------
(a) Except as disclosed in Section 2.6(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any Law applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations which could not
reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.6(b) of the Company Disclosure
Schedule, the Company and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business of the Company and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Company Permits"). Except as disclosed in Section
---------------
2.6(b) of the Company Disclosure Schedule, the Company and its subsidiaries are
in compliance with the terms of the Company Permits, except where the failure to
so comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 2.7 Financial Statements.
--------------------
(a) Attached to the Company Disclosure Schedule are (i) the audited
balance sheets of the Company as of December 31, 1994 and 1995, together with
the related statements of income and cash flows for the periods then ended, all
certified by KPMG Peat Marwick, LLP, the Company's independent public accounts
(the "Audited Financial Statements"), and (ii) the unaudited balance sheets of
----------------------------
the Company as of March 31, June 30 and September 30, 1996 and the related
statements of income and cash flows for the three, six and nine month
-16-
<PAGE>
periods, respectively, then ended (the "Unaudited Financial Statements", and
------------------------------
together with the Audited Financial Statements, collectively the "Financial
---------
Statements").
- ----------
(b) Each of the Financial Statements (including, in each case, any
related notes thereto) was prepared in accordance with generally accepted
accounting principles ("GAAP"), applied on a consistent basis throughout the
----
periods involved (except as may be indicated in the notes thereto), and each
fairly presents in all material respects the financial position of the Company
and its subsidiaries as at the respective dates thereof and the results of its
operations and cash flows and stockholder equity for the periods indicated,
except that the Unaudited Financial Statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount and do not contain complete footnotes required by generally accepted
accounting principles.
SECTION 2.8 Absence of Certain Changes or Events. Except as set forth
------------------------------------
in Section 2.8 of the Company Disclosure Schedule, since December 31, 1995, the
Company has conducted its business in the ordinary course, and there has not
occurred: (a) any Material Adverse Effect; (b) any amendments or changes in the
Certificate of Incorporation or Bylaws of the Company; (c) any damage to,
destruction or loss of any asset of the Company (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse Effect;
(d) any material change by the Company in its accounting methods, principles or
practices; (e) any material revaluation by the Company of any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of business;
(f) any other action or event that would have required the consent of Parent
pursuant to Section 4.1 had such action or event occurred after the date of this
Agreement; (g) any sale of the property or assets or any of its subsidiaries,
except in the ordinary course of business; or (h) through the date hereof, any
termination of a licensing or service agreement which could reasonably be
expected to produce annual revenues for the Company in excess of $20,000 or
receipt of notice of cancellation or termination thereof.
SECTION 2.9 No Undisclosed Liabilities. Except as is disclosed in
--------------------------
Section 2.9 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) in the aggregate adequately provided for on
the face of the Company's audited balance sheet (or adequately described in any
related notes thereto) for the fiscal year ended December 31, 1995 (the "1995
----
Company Balance Sheet") or (b) incurred since December 31, 1995 in the ordinary
- ---------------------
course of business consistent with past practice.
SECTION 2.10 Absence of Litigation. Except as set forth in Section
---------------------
2.10 of the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings, governmental inquiries, arbitration proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries, or any properties or rights of the Company or any of
its subsidiaries, before any federal, foreign, state or
-17-
<PAGE>
provincial court, arbitrator or administrative, governmental or regulatory
authority or body which could reasonably be expected to have a Material Adverse
Effect.
SECTION 2.11 Employee Benefit Plans, Employment Agreements.
---------------------------------------------
(a) Section 2.11(a) of the Company Disclosure Schedule lists all
employee pension plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee welfare plans
-----
(as defined in Section 3(1) of ERISA), and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other fringe or employee benefit plans, programs or arrangements, and any
current employment, executive compensation, consulting or severance agreements,
written or otherwise, for the benefit of, or relating to, any present or former
employee (including any beneficiary of any such employee) of, or any present or
former consultant (including any beneficiary of any such consultant) to the
Company, any trade or business (whether or not incorporated) which is a member
of a controlled group including the Company or which is under common control
with the Company (an "ERISA Affiliate") within the meaning of Section 414 of the
---------------
Code, or any other subsidiary of the Company (all such plans, practices and
programs are referred to as the "Company Employee Plans"). There have been made
----------------------
available to Parent copies of (i) each of the Company Employee Plans that has
been reduced to writing and a written description setting forth accurately and
completely the material terms of each Company Employee Plan that has not been
reduced to writing, (ii) the most recent annual report on Form 5500, with
accompanying schedules and attachments, filed with respect to each of the
Company Employee Plans for which such a report is or was required to be filed,
and (iii) the most recent Internal Revenue Service determination letter with
respect to each Company Employee Plan intended to be qualified under Section
401(a) of the Code.
(b) (i) Except in each case as set forth in Section 2.11(b) of the
Company Disclosure Schedule, none of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, and
neither the Company nor any ERISA Affiliate has ever maintained, contributed to,
or been required to contribute to, any plan that is or was a "multi-employer
plan" as such term is defined in Section 3(37) of ERISA, a pension plan subject
to Title IV of ERISA or a plan subject to Part 3 of Title I of ERISA; (ii) there
has been no "prohibited transaction" as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Company Employee Plan;
(iii) all Company Employee Plans are in compliance in all material respects with
the requirements prescribed by any and all Laws (including ERISA and the Code),
currently in effect with respect thereto (including all applicable requirements
for notification to participants or the Department of Labor, Internal Revenue
Service (the "IRS") or Secretary of the Treasury), and the Company and each of
---
its subsidiaries have performed all material obligations required to be
performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any default or violation by any other
party to, any of the Company Employee Plans where such default or violation
could reasonably be expected to result in a Material Adverse Effect;
-18-
<PAGE>
(iv) each Company Employee Plan intended to qualify under Section 401(a) of the
Code or Section 408(k) of the Code so qualifies and each related trust or
account intended to be exempt under Section 5.01(a) or Section 408(e) of the
Code is exempt; and (v) there are no lawsuits or other claims (other than claims
for benefits in the ordinary course) pending or, to the best knowledge of the
Company, threatened with respect to any Company Employee Plan where such
lawsuits or claims could reasonably be expected to result in a Material Adverse
Effect.
(c) Without limiting the generality of Section 2.11(a), Section 2.11(c)
of the Company Disclosure Schedule sets forth a true and complete list of each
current employee, officer or director of the Company or any of its subsidiaries
who holds (i) any option to purchase Company Common Stock as of the date hereof,
together with the number of shares of Company Common Stock subject to such
option, the option price of such option, whether such option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code ("ISO"), and the expiration date of such option; (ii) any other right,
---
directly or indirectly, to acquire Company Common Stock, together with the
number of shares of Company Common Stock subject to such right. Section 2.11(c)
of the Company Disclosure Schedule also sets forth the total number of such
ISOs, such nonqualified options and such other rights. Section 2.11(c) of the
Company Disclosure Schedule sets forth true and correct copies of the Company
Stock Option Plans.
(d) Without limiting the generality of Section 2.11(a), Section 2.11(d)
of the Company Disclosure Schedule sets forth a true and complete list of: (i)
all employment agreements with officers of the Company or any of its
subsidiaries; (ii) all agreements with consultants who are individuals
obligating the Company or any of its subsidiaries to make annual cash payments
in an amount exceeding $50,000; (iii) all employees of, or consultants to, the
Company or any of its subsidiaries who have executed a noncompetition agreement
with the Company or any of its subsidiaries; (iv) all severance agreements,
programs and policies of the Company or any of its subsidiaries with or relating
to its employees, in each case with outstanding commitments exceeding $50,000,
excluding programs and policies required to be maintained by law; and (v) all
plans, programs, agreements and other arrangements of the Company or any of its
subsidiaries with or relating to its employees which contain change in control
provisions.
SECTION 2.12 Labor Matters. Except as set forth in Section 2.12 of
-------------
the Company Disclosure Schedule: (i) there are no controversies pending or, to
the knowledge of the Company or any of its subsidiaries, threatened, between the
Company or any of its subsidiaries and any of their respective employees which
could reasonably be expected to result in a Material Adverse Effect; (ii)
neither the Company nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or its subsidiaries, nor does the Company or any of its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) neither the Company nor any of its
subsidiaries has any knowledge of any
-19-
<PAGE>
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its subsidiaries.
SECTION 2.13 Restrictions on Business Activities. Except for this
-----------------------------------
Agreement or as set forth in Section 2.13 of the Company Disclosure Schedule,
there is no judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or impairing any business practice of the Company or any
of its subsidiaries, any acquisition of property by the Company or any of its
subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted or as proposed to be conducted by the
Company.
SECTION 2.14 Title to Property. Except as set forth in Section 2.14
-----------------
of the Company Disclosure Schedule, the Company and each of its subsidiaries
have good and marketable title to all of their properties and assets, free and
clear of all Liens, except Liens for taxes not yet due and payable and such
liens or other imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use of the property affected thereby
or which could not reasonably be expected to have a Material Adverse Effect;
and, to the knowledge of the Company, all leases pursuant to which the Company
or any of its subsidiaries lease from others material amounts of real or
personal property, are in good standing, valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
material default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default), except where the lack of
such good standing, validity and effectiveness or the existence of such default
or event of default could not reasonably be expected to have a Material Adverse
Effect. The Company does not own any real property.
SECTION 2.15 Taxes.
-----
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
--- -----
fees, levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without limitation) (i)
income, franchise, profits, gross receipts, ad valorem, net worth, value added,
sales, use, service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social security (or similar),
workers' compensation, unemployment compensation, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes,
including interest, penalties, additional taxes and additions to tax imposed
with respect thereto; "Tax Returns" shall mean returns, reports, declarations,
-----------
forms and information returns or statements relating to Taxes including any
schedule or attachment thereto required to be filed with the IRS or any other
federal, foreign, state or provincial taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns
and "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
-20-
<PAGE>
(b) Other than as disclosed in Section 2.15(b) of the Company Disclosure
Schedule, (i) the Company and its subsidiaries have filed all Tax Returns
required to be filed by them and all such Tax Returns were true, correct and
complete in all material respects, (ii) the Company and its subsidiaries have
paid and discharged all Taxes due in connection with or with respect to the
periods or transactions covered by such Tax Returns and have paid all other
Taxes as are due, except such as are being contested in good faith by
appropriate proceedings (to the extent that any such proceedings are required)
and with respect to which the Company is maintaining adequate reserves, (iii) no
Tax Return referred to in clause (i) has been the subject of examination by the
Internal Revenue Service ("IRS") or the appropriate state, local or foreign
---
taxing authority of which written notice was received; (iv) no deficiencies have
been asserted or assessments made as a result of any examinations of the Tax
Returns referred to in clause (i) by the IRS or the appropriate state, local or
foreign taxing authority; (v) no action, suit, proceeding, audit, claim,
deficiency or assessment has been claimed or raised or is pending with respect
to any Taxes of the Company or any of its subsidiaries; (vi) there are no other
Taxes that would be due if asserted by a taxing authority, except with respect
to which the Company or its subsidiaries maintain reserves to the extent
currently required; (vii) there are no tax liens, other than for current taxes
not yet due and payable, on any assets of the Company or any subsidiary thereof;
(viii) neither the Company nor any of its subsidiaries has granted any waiver of
any statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax, (ix) the Company and its subsidiaries have withheld and
paid over all Taxes required to have been withheld and paid over in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, (x) the Company and its subsidiaries have made
no payments, are not obligated to make any payments, and are not a party to any
agreement which under any circumstance could obligate any of them to make any
payments that would not be deductible under section 280G of the Code or would be
subject to excise Tax under section 4999 of the Code, (xi) neither the Company
nor any of its subsidiaries has filed a consent under section 341(f) of the
Code, (xii) neither Company nor any of its subsidiaries is a party to any Tax
allocation or sharing agreement, (xiii) neither the Company nor any of its
subsidiaries is, or ever has been, a member of an affiliated group filing a
consolidated federal income Tax Return other than the affiliated group of which
the Company is now common parent and (xiv) the Company and its subsidiaries have
no liability for the taxes of any other person by contract, as transferee or
successor, or otherwise except for their liability under section 1.1502-6 of the
Treasury regulations for the consolidated federal income tax liability of other
members of the affiliated group of which the Company is now common parent.
Section 2.15(b) of the Company Disclosure Schedule contains a list of all
jurisdictions in which the Company and each subsidiary is subject to Tax, and
the nature of each such Tax. The accruals and reserves for Taxes (including
deferred taxes) reflected in the Financial Statements are in all material
respects adequate to cover all Taxes required to be accrued through the date
thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles.
-21-
<PAGE>
(c) Neither the Company nor any of its subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. Neither the Company nor any of its subsidiaries owns any property
of a character, the indirect transfer of which, pursuant to this Agreement,
would give rise to any documentary, stamp or other transfer tax.
SECTION 2.16 Environmental Matters. Except as set forth in Section
---------------------
2.16 of the Company Disclosure Schedule, and except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect, the Company and each of its subsidiaries: (i) have obtained all
Approvals which are required to be obtained under all applicable federal, state,
foreign or local laws or any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or, approved thereunder
relating to pollution or protection to the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes (collectively "Hazardous
Materials") into ambient air, surface water, ground water, or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Materials or wastes by the Company
or its subsidiaries or their respective agents ("Environmental Laws"); (ii) are
------------------
and have been in compliance with all terms and conditions of such required
Approvals, and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; (iii) as of the date
hereof, are not aware of nor have received notice of any past or present
violations of Environmental Laws or any event, condition, circumstance, activity
(including any off-site disposal of any Hazardous Materials), practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with or which would give rise to any common law or
statutory liability, or otherwise form the basis of any claim, action, suit or
proceeding, against the Company or any of its subsidiaries based on or resulting
from the manufacture, processing, distribution, use, treatment, storage,
disposal, arrangement for disposal, transport or handling, or the emission,
discharge or release into the environment, of any pollutant, contaminant or
Hazardous Material; (iv) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by the Company or its subsidiaries (or any of their respective
agents) thereunder, (v) to the Company's knowledge, do not own, operate or lease
any real property at which there has been any release or threat of release of
any Hazardous Material that could create any liability under applicable
Environmental Laws and (vi) have complied with any Environmental Laws requiring
disclosure or notice to or permission from any governmental authority in order
to consummate these transactions, including without limitation the New Jersey
Industrial Site Recovery Act.
SECTION 2.17 Intellectual Property.
---------------------
(a) The Company, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks,
-22-
<PAGE>
copyrights, and any applications therefor, mask works, net lists, schematics,
technology, trade secrets, research and development, know-how, technical data,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material (excluding
Commercial Software as defined in paragraph (e) below) that are material to the
business of the Company and its subsidiaries as currently conducted or as
proposed to be conducted by the Company or its subsidiaries (the "Company
-------
Intellectual Property Rights"). All of the Company's employees that have
- ----------------------------
participated in the development of the Company Intellectual Property have
entered into agreements with the Company assigning all right, title and interest
in the Company Intellectual Property therein to the Company.
(b) Section 2.17(b) of the Company Disclosure Schedule sets forth a
complete list of all patents, trademarks, copyrights, trade names and service
marks, and any applications therefor, included in the Company Intellectual
Property Rights, and specifies, where applicable, the jurisdictions in which
each such Company Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration has been filed,
including the respective registration or application numbers and the names of
all registered owners. The Company has made available to Parent correct and
complete copies of all such patents, trademarks, copyrights, applications, trade
names and service names, registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to Parent correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item.
(c) Section 2.17(c)(i) of the Company Disclosure Schedule sets forth a
complete list of all material licenses, sublicenses and other agreements as to
which the Company or any of its subsidiaries is a party and pursuant to which
the Company, any of its subsidiaries or any other person is authorized to use
any Company Intellectual Property Right (excluding object code end-user licenses
granted to end-users in the ordinary course of business that permit use of
software products without a right to modify, distribute or sublicense the same
("End-User Licenses")) or other trade secret material to the Company or any of
-----------------
its subsidiaries, and includes the identity of all parties thereto. None of the
Company or any of its subsidiaries is in violation of any license, sublicense or
agreement described on such list except such violations as do not materially
impair the Company's or such subsidiary's rights under such license, sublicense
or agreement. Section 2.17(c)(ii) of the Company Disclosure Schedule sets forth
a complete list of any agreement pursuant to which the Company or any of its
subsidiaries has authorized or may authorize any other person to obtain the
source code associated with any Company Intellectual Property Rights. The
execution and delivery of this Agreement by the Company, and the consummation of
the transactions contemplated hereby, will neither cause the Company or any of
its subsidiaries to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, except as set forth on Section 2.17(c)(iii) of the Company Disclosure
Schedule. Other than pursuant to the Master Source Code Escrow Agreements, all
of which are attached as Attachment
-23-
<PAGE>
2.17(c)(iv) to the Company Disclosure Schedule, and except as set forth in
Section 2.17(c)(v) of the Company Disclosure Schedule, the Company has not sold
or provided the source code to Company Intellectual Property Rights to any other
person.
(d) Except as disclosed in the Company Disclosure Schedule, either the
Company or one of its subsidiaries is the owner or licensee of, with all right,
title and interest in and to (free and clear of any liens or encumbrances) the
Company Intellectual Property Rights, and has sole and exclusive rights (and is
not contractually obligated to pay compensation or royalties to any third party
in respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect of which the Company
Intellectual Property Rights are being used. Except as disclosed in Section
2.17(d) of the Company Disclosure Schedule, none of the Company and its
subsidiaries has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any intellectual property rights of third parties.
Except as set forth in the Company Disclosure Schedule, none of the Company and
its subsidiaries and the directors and officers (and employees with
responsibility for Company Intellectual Property Rights matters) of the Company
has ever received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including any
claim that the Company must license or refrain from using any intellectual
property rights of any third party). Except as disclosed in the Company
Disclosure Schedule, to the knowledge of any of the Company and its subsidiaries
and the directors and officers (and employees with responsibility for Company
Intellectual Property Rights matters) of the Company and the subsidiaries, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Company Intellectual Property Rights. All
registered trademarks, service marks and copyrights held by the Company are
valid and subsisting. No Company Intellectual Property Right or product of the
Company or any of its subsidiaries is subject to any outstanding decree, order,
judgment, or stipulation restricting in any manner the licensing thereof by the
Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has entered into any agreement under which the Company or its
subsidiaries is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market. The Company and its
subsidiaries have a policy requiring each employee to execute a confidentiality
agreement substantially in the form previously delivered to Parent.
(e) "Commercial Software" means packaged commercially available software
programs generally available to the public through retail dealers in computer
software which have been licensed to the Company or any of its subsidiaries
pursuant to end-user licenses and which are used in the Company's or its
subsidiaries' business but are in no way a component of or incorporated in or
specifically required to develop or support any of the Company's or its
subsidiaries' products and related trademarks, technology and know how.
SECTION 2.18 Interested Party Transactions. Except as set forth in
-----------------------------
Section 2.18 of the Company Disclosure Schedule, since December 31, 1995, no
event has occurred that
-24-
<PAGE>
would be required to be disclosed in a registration statement as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
(promulgated by the SEC) if the Company were registering securities under the
Securities Act; provided, however, that for purposes of this Agreement, any
-------- -------
transaction in which the amount involved exceeds $20,000 and which would
otherwise have to be disclosed (pursuant to Item 404 of Regulation S-K) if the
amount involved exceeded $60,000, will be deemed required to be disclosed
pursuant to Item 404 of Regulation S-K.
SECTION 2.19 Insurance. All material fire and casualty, general
---------
liability, business interruption, product liability, professional liability and
damage insurance policies maintained by the Company or any of its subsidiaries
are in character and amount at least equivalent to that carried by persons
engaged in similar businesses of similar size and scope and subject to the same
or similar perils or hazards, and all such policies provide full and adequate
coverage for all normal risks incident to the business of the Company and its
subsidiaries and their respective properties and assets.
SECTION 2.20 Accounts Receivable. The accounts receivable of the
-------------------
Company and its subsidiaries as reflected in the most recent Financial
Statements, to the extent uncollected on the date hereof and the accounts
receivable reflected on the books of the Company and its subsidiaries are valid
and existing and represent monies due, are current and collectible and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for receivables not collectible in the ordinary course of
business as reflected on the face of the September 30, 1996 Balance Sheet as
adjusted for time through the Closing Date in accordance with past practice and
custom, and (subject to the aforesaid reserves) are subject to no refunds or
other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof.
SECTION 2.21 Brokers. Except as set forth in Section 2.21 of the
-------
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or its subsidiaries or affiliates.
SECTION 2.22 Change in Control Payments. Except as set forth in
--------------------------
Section 2.11(d) or Section 2.22 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries have any plans, programs or agreements to
which they are parties, or to which they are subject, pursuant to which payments
may be required or acceleration of benefits may be required upon a change of
control of the Company (as, for example, the acceleration of stock options upon
the Merger).
SECTION 2.23 Expenses. Section 2.23 of the Company Disclosure
--------
Schedule attached hereto sets forth a description of the estimated expenses of
the Company and its subsidiaries which the Company expects to incur, or has
incurred, in connection with the transactions contemplated by this Agreement.
-25-
<PAGE>
SECTION 2.24 Full Disclosure. No representation or warranty made by
---------------
the Company contained in this Agreement and no statement contained in any
certificate or schedule furnished or to be furnished by the Company or its
subsidiaries to Parent or Merger Sub in, or pursuant to the provisions of, this
Agreement, including the Company Disclosure Schedules, contains or shall contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in the light of the circumstances under which it was
made and based upon the facts and circumstances existing at the time it was
made, in order to make statements herein or therein not misleading in any
material respect. Projections contained in any materials provided by the
Company to Parent were based upon reasonable assumptions made by the Company in
the exercise of its reasonable business judgment. Such projections may be
subject to change based upon economic conditions and customer buying patterns
and other factors outside of the Company's control. Except as set forth in
Section 8.1(h) hereof, the Company shall have no liability whatsoever with
respect to such projections.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that, except as set forth in the written disclosure
schedule deliver on or prior to the date hereof by Parent to the Company that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III (the "Parent Disclosure Schedule"):
--------------------------
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of
--------------------------------------------
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority necessary to own, lease and operate
the properties it purports to own, operate or lease and to carry on its business
as it is now being conducted. Each of Parent and each of its subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failure to be so duly
qualified or licensed and in good standing that could not reasonably be expected
to have a Material Adverse Effect.
SECTION 3.2 Charter and By-Laws. Parent has heretofore furnished to
-------------------
the Company a complete and correct copy of its Articles of Incorporation and By-
Laws, as amended to date. Such Articles of Organization and By-Laws are in full
force and effect.
SECTION 3.3 Capitalization. As of September 30, 1996, the authorized
--------------
capital stock of Parent consisted of (i) 112,000,000 shares of Parent Common
Stock of which 82,892,633 shares were issued and outstanding, all of which are
validly issued, fully paid and
-26-
<PAGE>
nonassessable, 2,555,709 of which were held in treasury, 3,048,626 shares were
reserved for future issuance under Parent's equity incentive plans and (ii)
3,500,000 shares of preferred, stock, $.01 par value per share, none of which
was issued and outstanding. No material change in such capitalization has
occurred between September 30, 1996 and the date hereof. The authorized capital
stock of Merger Sub consists of 3,000 shares of common stock, $.01 par value, of
which 100 shares are issued and outstanding, all of which are owned by Parent.
SECTION 3.4 Authority Relative to this Agreement. Each of Parent and
------------------------------------
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligations of Parent and Merger Sub enforceable against each of them in
accordance with its terms.
SECTION 3.5 No Conflict, Required Filings and Consents.
------------------------------------------
(a) Except as set forth in Section 3.5(a) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Articles of Incorporation or By-Laws of Parent
or Merger Sub, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its subsidiaries or by which
its or their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or impair Parent's or any of their
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent or any, of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties are bound or affected, except in any such
case for any such conflicts, violations, breaches, defaults or other occurrences
that could not reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the performance of this Agreement by Parent and Merger Sub
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable
-27-
<PAGE>
requirements, if any, of the Bank Holding Company Act of 1956, as amended, the
Securities Act, the Exchange Act, the Blue Sky Laws, any United States or
foreign antitrust or similar filings, and the filing and recordation of
appropriate merger or other documents as required by the DCGL, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay, consummation of
the Merger, or otherwise prevent Parent or Merger Sub from performing their
respective obligations under this Agreement, and would not have a Material
Adverse Effect.
SECTION 3.6 SEC Filings; Financial Statements.
---------------------------------
(a) Parent has filed all forms, reports and documents required to be
filed with the SEC and has heretofore delivered to the Company, in the form
filed with the SEC, (i) its Annual Reports on Form 10K for the fiscal years
ended December 31, 1995 and December 31, 1994, (ii) its Reports on Form 10-Q for
the quarters ended March 31 and June 30, 1996, (iii) all proxy statements
relating to Parent's meetings of stockholders (whether annual or special) since
January 1, 1995, (iv) all other reports or registration statements (other than
Reports on Form 10Q) filed by Parent with the SEC since January 1, 1996, and (v)
all amendments and supplements to all such reports and registration statements
filed by parent with the SEC (collectively, the "Parent SEC Reports"). The
------------------
Parent SEC Reports (i) were prepared in all material respects in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and each fairly presents in all material respects the
consolidated financial position of Parent and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments,
which were not or are not expected to be material in amount.
SECTION 3.7 Form S-3 Registration Statement. The Form S-3
-------------------------------
registration statement (the "Registration Statement") pursuant to which the
Parent Common Stock to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein, in light of the circumstances
under
-28-
<PAGE>
which they were made, not misleading. Notwithstanding the foregoing, Parent and
Merger Sub make no representation or warranty with respect to any information
supplied by the Company which is contained in the Registration Statement. The
Registration Statement shall comply in all material respects as to form with the
requirements of the Securities Act and the rules and regulations thereunder.
Notwithstanding the foregoing, Parent makes no representation or warranty with
respect to any information supplied by the Company or its stockholders which is
contained in, or furnished in connection with the preparation of, the
Registration Statement.
SECTION 3.8 No Prior Activities. As of the date hereof and the
-------------------
Effective Time, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Merger Sub has not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the Merger. The
-----------------------------------------------------
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Parent, acting through its Chief Financial Officer
and any successor thereto, shall otherwise agree in writing, the Company shall
conduct its business and shall cause the businesses of its subsidiaries to be
conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice other than actions taken by the Company or its subsidiaries
in contemplation of the Merger and in accordance with the operations budget as
of the date hereof; and the Company shall use all reasonable commercial efforts
to preserve substantially intact the business organization of the Company and
its subsidiaries, to keep available the services of the present officers,
employees and consultants of the Company and its subsidiaries and to preserve
the present relationships of the Company and its subsidiaries with customers,
suppliers and other persons with which the Company or any of its subsidiaries
has significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, neither the Company nor any of its
subsidiaries shall, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent:
-29-
<PAGE>
(a) take any action, or fail to take any actions, itself or through any
controlled affiliates, which would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
(b) amend or otherwise change the Charter or By-Laws of the Company or
any of its subsidiaries which would impair the transactions contemplated by this
Agreement;
(c) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company, any of its subsidiaries or affiliates (except for the issuance of
shares of Company Common Stock issuable pursuant to Stock Options which were
granted under either the Company Stock Option Plans and are outstanding on the
date hereof or in connection with the conversion of the Company Preferred Stock
into shares of Company Common Stock);
(d) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary course
of business and in a manner consistent with past practice, (ii) dispositions of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $25,000 in the aggregate);
(e) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned subsidiary of
the Company may declare and pay a dividend to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock (except for the issuance of shares of Company
Common Stock issuable pursuant to Stock Options which were granted under either
the Company Stock Option Plan and are outstanding on the date hereof or in
connection with the Conversion or other conversion of the Company Preferred
Stock into shares of Company Common Stock), or (iii) amend the terms or change
the period of exercisability of, purchase, repurchase, redeem or otherwise
acquire, or permit any subsidiary to purchase, repurchase, redeem or otherwise
acquire, any of its securities or any securities of its subsidiaries, including,
without limitation, shares of Company Common Stock or any option, warrant or
right, directly or indirectly, to acquire shares of Company Common Stock, or
propose to do any of the foregoing;
(f) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money calling for aggregate
payments in excess of $1,000,000 or issue any debt securities or assume,
guarantee or endorse or otherwise as an accommodation become responsible for,
the obligations of any person or, except in the ordinary course of business
consistent with past practice, make any loans or advances; (iii) enter into or
amend any material contract or agreement; (iv) authorize any capital
expenditures, purchase of fixed
-30-
<PAGE>
assets or lease of property or equipment which are, in the aggregate, in excess
of $25,000, for the Company and its subsidiaries taken as a whole; or (v) enter
into or amend any contract, agreement, commitment or arrangement to effect any
of the matters prohibited by this Section 4.1(f);
(g) increase the compensation payable or to become payable to its
officers or employees, or grant any severance or termination pay to, or enter
into any employment or severance agreement with any director, officer or other
employee of the Company or any of its subsidiaries, or establish, adopt, enter
into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current or former
directors, officers or employees, except, in each case, as may be required by
law; provided, however, the Company may increase wages in the ordinary course of
-------- -------
business consistent with the Company's past practice and timing but not more
than 10% for any individual employee;
(h) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable);
(i) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the Financial Statements or incurred in the ordinary course of business and
consistent with past practice; or
(k) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (j) above, that would prevent the Company
from performing or cause the Company not to perform its covenants hereunder.
SECTION 4.2 Exclusive Dealing.
-----------------
(a) During the period from the date of this Agreement to the earlier of
the Closing Date or termination of this Agreement, the Company shall not and
shall cause its officers, directors, employees, agents or advisors or other
representatives or consultants not to, directly or indirectly, encourage,
solicit, initiate, participate in or otherwise be a party to any discussions or
negotiations with any person or entity concerning (A) any merger or
consolidation of the Company with any person other than Parent or Merger Sub,
(B) any sale of assets of the Company, except the sale of inventory in the
ordinary course of business to
-31-
<PAGE>
any person other than Parent or Merger Sub, (C) any equity or debt investment in
the Company or any subsidiary by any person, or (D) any purchase of outstanding
securities of the Company by any person.
(b) The Company shall ensure that the officers, directors and employees
of the Company and its subsidiaries and any investment banker or other advisor
or representative retained by the Company are aware of the restrictions
described in this Section.
SECTION 4.3 Employment Agreements. At or prior to the Closing,
---------------------
each of Gerald Finsen, Jr. William Mayhall and James Mayhall (the "Management
----------
Stockholders") will execute and deliver to Parent an employment agreement
- ------------
substantially in the form of Exhibit 4.3 (the "Employment Agreements").
---------------------
SECTION 4.4 Noncompetition Agreements. At or prior to the Closing,
-------------------------
each of the Management Stockholders will execute and deliver to Parent a
noncompetition agreement substantially in the form of Exhibit 4.4 (the
"Noncompetition Agreements").
- --------------------------
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Registration Statement. If the Effective Time occurs on or
----------------------
before November 15, 1996, then within ten (10) days after November 15, 1996, or
if the Effective Time occurs after November 15, 1996, then within ten (10)
business days after the Effective Time, in accordance with the Registration
Rights Agreement (as defined herein) Parent shall prepare and file with the SEC
the Registration Statement of the Parent with respect to the Parent Common Stock
to be issued in connection with the Merger and shall use all reasonable efforts
to cause the Registration Statement to become effective as soon as practicable.
SECTION 5.2 Access to Information; Confidentiality. Upon reasonable
--------------------------------------
notice and subject to restrictions contained in confidentiality agreements, none
of which is material to the Company, to which such party is subject (from which
such party shall use reasonable efforts to be released), the Company and Parent
shall each (and shall cause each of their subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, reasonable access, during the period to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
the Company and Parent each shall (and shall cause each of their subsidiaries
to) furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request, and each
shall make available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the other's
business, properties and personnel as either Parent or the Company may
reasonably request. In performing this review, Parent agrees that prior to
contacting any employee or customer of the Company, Parent and the Company will
reasonably concur on a process and procedure in
-32-
<PAGE>
order to preserve ongoing customer and employee relations. Each party shall
keep such information confidential in accordance with the terms of any prior
Confidentiality Agreement executed between Parent and the Company.
SECTION 5.3 Consents; Approvals. The Company and Parent shall each
-------------------
use their reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitations, all United States and
foreign governmental and regulatory rulings and approvals), and the Company and
Parent shall make all filings (including, without limitation all filings with
United States and foreign governmental or regulatory agencies) required in
connection with the authorization, execution and delivery of this Agreement by
the Company and Parent and the consummation by them of the transactions
contemplated hereby, in each case as promptly as practicable. The Company and
Parent shall furnish promptly all information required to be included in any
application or other filing to be made pursuant to the rules and regulations of
any United States or foreign governmental body in connection with the
transactions contemplated by this Agreement. If either party receives a request
for additional information or documentary material from any governmental
authority with respect to the transactions contemplated hereby, then such party
shall take all reasonable efforts to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request. The parties will
cooperate in connection with reaching any understandings, undertakings or
agreements (oral or written) involving any governmental authority in connection
with the transactions contemplated hereby.
SECTION 5.4 Stockholder Agreement and Investment Letter. Each
-------------------------------------------
Stockholder agrees to execute a Stockholder Agreement and Investment Letter in
the form of Exhibit 5.4 (a "Stockholder Agreement") concurrently with execution
of this Agreement or as promptly as practicable after (a) the date of this
Agreement (with respect to Stockholders as of the date of this Agreement) or (b)
the date such persons become Stockholders.
SECTION 5.5 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent (for purposes of this Section 5.5, notice to or by the
Chief Financial Officer of Parent shall constitute notice to or by Parent), and
Parent shall give prompt notice to the Company, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this Agreement to
become materially untrue or inaccurate, (ii) the termination of a licensing or
service agreement which could reasonably be expected to produce annual revenues
for the Company in excess of $20,000 or receipt of notice of cancellation or
termination thereof, or (iii) any failure of the Company, Parent, or Merger Sub,
as the case may be, materially to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
--------
however, that the delivery of any notice pursuant to this Section shall not
- -------
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; and provided, further, that failure to give such notice
-------- -------
shall not be treated as a breach of
-33-
<PAGE>
covenant for the purposes of Sections 6.2(a) or 6.3(a) unless the failure to
give such notice results in material prejudice to the other party.
SECTION 5.6 Further Action/Tax Treatment. Upon the terms and subject to
----------------------------
the conditions hereof each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. The foregoing covenant shall not include any obligation
by Parent to agree to divest, abandon, license or take similar action with
respect to any assets (tangible or intangible) of Parent or the Company. Each
of Parent, Merger Sub and the Company shall use its best efforts to cause the
Merger to qualify, and will not (both before and after consummation of the
Merger) take any actions which to its knowledge could reasonably be expected to
prevent the Merger from qualifying as a reorganization under the provisions of
Section 368 of the Code.
SECTION 5.7 Public Announcements. Except as may be required by law or the
--------------------
New York Stock Exchange, Parent and Company shall consult with each other before
issuing any press release with respect to the Merger or this Agreement and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which shall not be unreasonably withheld. The
parties shall issue a press release and make a public announcement of the
signing of this Agreement and the transactions contemplated hereby within two
business days of the execution of this Agreement.
SECTION 5.8 Conveyance Taxes. Parent and the Company shall cooperate in
----------------
the preparation, execution and filing of all returns, questionnaires,
applications, of other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed at or before the Effective Time.
SECTION 5.9 Non-Solicitation. If the transactions contemplated by this
----------------
Agreement are not consummated, Parent and its affiliates shall not, for a period
of one year from the date of this Agreement, directly or indirectly solicit any
employee of the Company or any of its subsidiaries to terminate such employee's
employment with the Company or any of its subsidiaries.
SECTION 5.10 Benefit Plans. To the extent not otherwise required by
-------------
law, for a period of one year after the Effective Time Parent intends to keep in
place Company welfare plans and fringe benefit plans on terms not materially
less favorable to employees of the Company as were in effect as of the date of
this Agreement. Parent may include Company employees in Parent's welfare plans
(within the meaning of Section 3(1) of ERISA) and fringe
-34-
<PAGE>
benefit plans on the same basis and terms as Parent employees and, in any event,
with respect to particular welfare plans of Parent, upon the termination of the
equivalent Company welfare plans; and until such time of inclusion, Parent
intends to cause the Surviving Corporation to maintain in effect, on terms not
materially less favorable to employees of the Company as were in effect at the
date of this Agreement, all existing employee plans of the Company. All welfare
benefit plans of Parent or the Surviving Corporation in which the Company's
employees participate after the Effective Time shall (i) recognize expenses and
claims that were incurred by the Company's employees in the year in which the
Effective Time occurs and entitle Company employees to applicable copayments and
deductibles, if any, at a rate not higher than that in effect under the
corresponding welfare benefit plan of the Company in effect at the Effective
Time, and (ii) provide coverage for preexisting health conditions to the extent
covered under the applicable plans or programs of the Company as of the
Effective Time. In addition, for eligibility purposes under plans of the
Surviving Corporation or the Parent, service by an Employee for the Company
prior to the Effective Time shall be taken into account to the same extent as
service for the Parent; provided, that nothing hereby shall require the
--------
inclusion any such Employee in any such plan prior to the Effective Time, and
further provided, that in determining the amount of vacation pay owed to any
- ------- --------
such Employee from and after the Effective Time under the applicable terms of
the vacation pay plan of the Surviving Corporation or the Parent (which terms
need not be comparable to the terms of the vacation plan or policy of the
Company), credit shall be given for such Employee's service for the Company
prior to the Effective Time. Employees of the Company as of the Effective Time
shall be permitted to participate in Parent's Employee Stock Purchase Plan (if
any) commencing on the first enrollment date following the Effective Time,
subject to compliance with the eligibility provisions of such plan (with
employees receiving credit, for purposes of such eligibility provisions, for
service with the Company).
SECTION 5.11 Listing of Parent Common Shares. Parent shall cause the
-------------------------------
Parent Common Shares to be issued in the Merger to be approved for listing on
The New York Stock Exchange (or the principal exchange on which Parent's Common
Shares are then trading) upon effectiveness of the Registration Statement.
SECTION 5.12 Waiver of Defaults. The Company shall use its reasonable
------------------
best efforts, as directed by Parent, until the Effective Time from the date
hereof to obtain a waiver of any breach or default listed in Section 2.5(c) of
the Company Disclosure Schedule (the "Breached Contracts") with respect to the
------------------
representation set forth in Section 2.5(c)(iii); provided, however, that if the
-------- -------
Company has been using its reasonable best efforts to obtain a waiver of any
Breached Contract, the failure of the Company to obtain such waiver shall not
result in any termination of this Agreement.
SECTION 5.13 Warrants. Each Stockholder shall exercise, immediately
--------
before Closing, all Series A Preferred Stock Warrants held by such Stockholder
(the "Warrants") by paying the entire exercise price of the Warrants in cash.
--------
-35-
<PAGE>
SECTION 5.14 Conversion. Each Stockholder who holds Company
----------
Preferred Stock agrees that he or it will not convert such Company Preferred
Stock into Company Common Stock at any time.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the Merger.
-----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Bank Holding Company Act of 1956. The notice periods applicable to
--------------------------------
the Merger shall have terminated and any approvals required under the Bank
Holding Company Act of 1956, as amended to consummate the Merger shall have been
obtained.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
and there shall not be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Merger, which makes
the consummation of the Merger illegal; and
(c) Governmental Actions. There shall not have been instituted, pending
--------------------
or threatened any action or proceeding (or any investigation or other inquiry
that might result in such an action or proceeding) by any governmental authority
or administrative agency before any governmental authority, administrative
agency or court of competent jurisdiction, nor shall there be in effect any
judgment, decree or order of any governmental authority, administrative agency
or court of competent jurisdiction in either case, seeking to prohibit or limit
Parent from exercising all material rights and privileges pertaining to its
ownership of the Surviving Corporation or the ownership or operation by Parent
or any of its subsidiaries of all or a material portion of the business or
assets of Parent or any of its subsidiaries, or seeking to compel Parent or any
of its subsidiaries to dispose of or hold separate all or any material portion
of the business or assets of Parent or any of its subsidiaries (including the
Surviving Corporation and its subsidiaries), as a result of the Merger or the
transactions contemplated by this Agreement.
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger
---------------------------------------------------------
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
- ---
subject to the following conditions:
-36-
<PAGE>
(a) Representations and Warranties. The representations and warranties of
------------------------------
the Company contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of such
time, except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date, subject to clause
(iii)), and (iii) where the failure to be true and correct could not reasonably
be expected to have a Material Adverse Effect, with the same force and effect as
if made at and as of the Effective Time, and Parent and Merger Sub shall have
received a certificate to such effect signed by the President of the Company;
(b) Agreements and Covenants. The Company shall have performed or complied
------------------------
with in all material respects all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Effective
Time and Parent and Merger Sub shall have received a certificate to such effect
signed on behalf of the Company by the President and the Chief Financial Officer
of the Company;
(c) Consents Obtained. All consents, waivers, approvals, authorizations or
-----------------
orders required to be obtained, and all filings required to be made, by the
Company which are material to be conduct of the business of the Company (taken
as a whole) or for the due authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company except as set forth on Section
2.5 of the Company Disclosure Schedule;
(d) Opinion of Counsel to the Company. Parent shall have received an
---------------------------------
opinion of Testa, Hurwitz & Thibeault, LLP, counsel to the Company in form and
substance reasonably satisfactory to Parent;
(e) Letter of Continuity of Interest. Parent shall have received from each
--------------------------------
person who is identified in Schedule 6.2(e) as an "affiliate" of the Company, a
letter substantially in the form of Exhibit 6.2(e) hereto (the "Letter of
---------
Continuity of Interest");
- ----------------------
(f) Registration Rights Agreement. The Registration Rights Agreement
-----------------------------
substantially in the form of Exhibit 6.2(f) (the "Registration Rights
-------------------
Agreement") shall have been executed and delivered by Parent and the Company's
stockholders;
(g) Escrow Agreement. Each of Escrow Agent, the Company and the
----------------
Stockholder Representative shall have executed and delivered to Parent an Escrow
Agreement substantially in the form of Exhibit 6.2(g) (the "Escrow Agreement");
----------------
and
(h) Employment Agreements. Each of the Employment Agreements shall have
---------------------
been executed and delivered to the Parent.
-37-
<PAGE>
(i) Noncompetition Agreements. Each of the Noncompetition Agreements shall
-------------------------
have been executed and delivered to Parent.
(j) Termination of Contracts. Except as set forth in Schedule 6.2(j), all
------------------------
contracts between the Company and any affiliate of the Company shall have been
terminated and satisfactory evidence thereof shall have been provided to Parent
at the Effective Time.
(k) Stock Powers. Each of the Stockholders shall have delivered to the
------------
Escrow Agent, stock powers duly executed in blank with respect to the Parent
Common Stock placed in the Escrow Account.
SECTION 6.3 Additional Conditions to Obligation of the Company. The
--------------------------------------------------
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
------------------------------
Parent and Merger Sub contained in this Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations and warranties which
address matters only as of a particular date (which shall have been true and
correct as of such date, subject to clause (iii)), and (iii) where the failure
to be true and correct could not reasonably be expected to have a Material
Adverse Effect, with the same force and effect as if made on and as of the
Effective Time, and the Company shall have received a certificate to such effect
signed by an executive officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have performed
------------------------
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Effective, and the Company shall have received a certificate to such effect
signed by the Chairman and the Chief Financial Officer of Parent;
(c) Consents Obtained. All material consents, waivers, approvals,
-----------------
authorizations or orders required to be obtained, and all filings required to by
made, by Parent and Merger Sub or the authorization, execution and delivery of
this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Merger Sub;
(d) Letter of Continuity of Interest. Company shall have received from
--------------------------------
each person who is identified in Schedule 6.2(e) as an "affiliate" of the
Company, a Letter of Continuity of Interest and from Parent and Merger Sub a
Representation Letter in the form attached as Exhibit 6.3(d) (the
"Representation Letter");
---------------------
(e) Opinion of Counsel to Parent. The Company shall have received an
----------------------------
opinion of counsel to Parent, in form and substance reasonably satisfactory to
the Company; and
-38-
<PAGE>
(f) Registration Rights Agreement. The Registration Rights Agreement shall
-----------------------------
have been executed and delivered by Parent and the Stockholders.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company or Parent;
(a) by mutual written consent duly authorized by either the Chairman or the
President of each of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by December 6, 1996 (provided that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger (provided that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party who has not complied with its
obligations under Section 5.7 and such noncompliance materially contributed to
the issuance of any such order, decree or ruling or the taking of such action);
or
(d) by Parent if (i) there has been a material breach by the Company of any
material covenant, representation or warranty when made contained in this
Agreement, (ii) Parent has notified the Company in writing of the existence of
such breach, and (iii) the Company has failed to cure such breach within 10 days
after receiving such notice (or if such breach is not capable of being cured
within such 10 day period, but is capable of being cured within 30 days, the
breaching party shall have commenced good faith steps to promptly cure such
breach);
(e) by the Company if (i) there has been a material breach by Parent of a
material covenant, representation or warranty contained in this Agreement, (ii)
the Company has notified Parent in writing of the existence of such breach, and
(iii) Parent has failed to cure such breach within 10 days after receiving such
notice (or if such breach is not capable of being cured within such 10 day
period, but is capable of being cured within 30 days, the breaching party shall
have commenced good faith steps to promptly cure such breach);
-39-
<PAGE>
SECTION 7.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except (i) as set forth in
Section 7.3 and Section 8.1 hereof, and (ii) nothing shall relieve any party
from liability for any breach hereof.
SECTION 7.3 Fees and Expenses. All fees and expenses incurred in
-----------------
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that the Parent
shall pay the fees and expenses, incurred in connection with the preparation,
filing printing of the Registration Statement (including any preliminary
materials related thereto and including any registration fees payable to the
SEC) and any amendments or supplements thereto and, in the event the Merger is
consummated, the Parent shall be responsible for the legal, investment banking,
financial advisory, accounting and other fees and expenses of the Company
presented by the Company for payment one day prior to the Closing Date with
respect to the transactions contemplated by this Agreement (including any
governmental filings) and the Stockholders shall be responsible for any such
fees and expenses submitted to the Company thereafter (the "Excess Fees").
-----------
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Indemnification.
---------------
(a) Charters and By-Laws.
--------------------
(i) Parent agrees that all rights to indemnification or exculpation
now existing in favor of the employees, agents, directors or officers of the
Company (the "Company Indemnified Parties") as provided in its charter or By-
---------------------------
Laws shall continue in full force and effect for a period of not less than
six years from the Closing Date; provided, however, that, in the event any
claim or claims are asserted or made within such six-year period, all rights
to indemnification in respect of any such claim or claims shall continue
until disposition of any and all such claims. Any determination required to
be made with respect to whether a Company Indemnified Party's conduct
complies with the standards set forth in the charter or By-Laws of the
Company or otherwise shall be made by independent counsel selected by the
Company Indemnified Party reasonably satisfactory to the Surviving
Corporation (whose fees and expenses shall be paid by the Surviving
Corporation). From and after the Effective Time, the Parent shall guarantee
the obligations of the Surviving Corporation under this Section 8.1(a).
(ii) The Company shall, to the fullest extent permitted under
applicable law or under the Company's Certificate of Incorporation, By-laws
or any applicable
-40-
<PAGE>
indemnification agreements and regardless of whether the Merger becomes
effective, indemnify, defend and hold harmless, and, after the Effective
Time, the Parent shall, and shall cause the Surviving Corporation, to the
fullest extent permitted under applicable law, to indemnify, defend and hold
harmless, each present and former director, officer or employee of the
Company or any of its subsidiaries (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, (x) arising out of or
pertaining to the transactions contemplated by this Agreement or (y)
otherwise with respect to any acts or omissions occurring at or prior to the
Effective Time. Any determination required to made with respect to whether an
Indemnified Party's conduct complied with the standards set forth under
Delaware law, the Company's Certificate of Incorporation, By-laws or
indemnification agreements, as the case may be, shall be made by independent
counsel mutually acceptable to Parent and the Indemnified Party.
(iii) Parent shall and shall cause the Surviving Corporation to honor
and fulfill in all respects the obligations of the Company pursuant to
indemnification agreements with the Company's directors and officers existing
at or before the Effective Time.
(iv) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns
of the Surviving Corporation and shall be enforceable by the Company
Indemnified Parties.
(b) Survival of Representations and Warranties.
------------------------------------------
(i) The representations and warranties of the Company made in this
Agreement and in the documents and certificates delivered in connection
herewith, shall survive the Merger from the Closing Date and shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any other party hereto, any person controlling any such
party or any of their officers or directors, whether prior to or after the
execution of this Agreement until eighteen (18) months after the Closing Date
(the "Cutoff Date").
-----------
(ii) No claim for indemnification under this Section 8.1 for breach of
a representation or warranty may be commenced after the Cutoff Date;
provided, however, that claims made within the applicable time period shall
survive to the extent of such claim until such claims is finally determined,
settled or resolved and, if applicable, paid.
(c) General Indemnification of the Parent and Merger Sub. The Sellers
----------------------------------------------------
hereby agree that from and after the Closing they will indemnify, defend,
protect, and hold harmless
-41-
<PAGE>
each of Parent, Merger Sub, the Surviving Corporation and each of their
respective subsidiaries and affiliates (each in its capacity as an indemnified
party, an "Indemnitee") at all times from and after the Closing from and against
----------
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) (collectively
"Damages") incurred by such Indemnitee as a result of or incident to (i) any
-------
breach of any representation or warranty of the Company set forth herein or in
any certificate or other document delivered in connection herewith (as such
representation or warranty would read if all qualifications as to materiality
were deleted from it) with respect to which a claim for indemnification is
brought by an Indemnitee within the applicable survival period, if any,
described in Section 8.1(b), (ii) any breach or nonfulfillment, in any material
respect, by the Company, or any noncompliance by the Company with, any covenant,
agreement, or obligation contained herein or in any certificate or other
document delivered in connection herewith expect to the event waived by Parent,
(iii) any claim by a stockholder or former stockholder of the Company or any
other person, firm, corporation or entity, seeking to assert, or based upon:
(A) ownership or rights of ownership to any shares of capital stock of the
Company; (B) any rights of the stockholder (other than the right to receive the
Merger Consideration pursuant to this Agreement or appraisal rights under the
applicable provisions of the DGCL), including any option, preemptive rights, or
rights to notice or to vote; (C) any rights under the charter or bylaws of the
Company; or (D) any claim that his, here or its shares were wrongfully
repurchased by the Company, regardless of whether an action, suit or preceding
can or has been made against the Company and (iv) any Excess Fees.
(d) Specific Indemnification. To the extent that indemnification is
------------------------
unavailable under Section 8.1(c) because there are no funds in the Escrow
Account, the Management Stockholders covenant and agree that from and after the
Closing they will indemnify, defend, protect and hold harmless each Indemnitee
from and against all Damages not to exceed $10,000,000 in the aggregate incurred
by any of them in connection with any breach of any representation or warranty
of the Company set forth in Sections 2.1, 2.3 and 2.17 with respect to which a
claim for indemnification is brought by an Indemnitee within the applicable
survival period described in Section 8.1(b). The procedures set forth in
Section 3 of the Escrow Agreement shall serve as the basis for the procedures
with respect to the notification and settlement of indemnification claims made
pursuant to this Section 8.1(d).
(e) Third Person Claims. Promptly after an Indemnitee has received notice
-------------------
of or has knowledge of any claim by a person not a party to this Agreement
("Third Person") or the commencement of any action or proceeding by a Third
------------
Person, the Indemnitee shall, as a condition precedent to a claim with respect
thereto being made against the Escrow Agreement, give the Stockholders'
Representative written notice of such claim or the commencement of such action
or proceeding; provided, however, that the failure to give such notice will not
effect the Indemnities' right to indemnification hereunder with respect to such
claim, action or proceeding, except to the extent that the Stockholders'
Representative has, or the stockholders have, been actually prejudiced as a
result of such failure. If the Stockholder Representative
-42-
<PAGE>
notifies the Indemnitee within 30 days from the receipt of the foregoing notice
that he wishes to defend against the claim by the Third Person and if the
estimated amount of the claim, together with all other claims made against the
Escrow Funds that have not been settled, is less than the remaining balance of
the Escrow Funds, then the Stockholder Representative shall have the right to
assume and control the defense of the claim by appropriate proceedings with
counsel reasonably acceptable to Indemnitee, and the Stockholder Representative
shall be entitled to reimbursement out of the Escrow Funds for such defense.
The Indemnitee may participate in the defense, at its sole expense of any such
claim for which the Stockholder Representative shall have assumed the defense
pursuant to the preceding sentence, provided that counsel for the Stockholder
Representative shall act as lead counsel in all matters pertaining to the
defense or settlement of such claims, suit or proceedings; provided, however,
that Indemnitee shall control the defense of any claim or proceeding that in
Indemnitee's reasonable judgment could have a material and adverse effect on
Indemnitee's business apart from the payment of money damages. The Indemnitee
shall be entitled to indemnification for the reasonable fees and expenses of its
counsel for any period during which the Stockholder Representative shall have
assumed the defense of any claim, neither the Indemnitee nor the Stockholder
Representative shall make any settlement with respect to any such claim, suit or
proceeding without the prior consent of the other, which consent shall not be
unreasonably withheld or delayed. It is understood and agreed that in
situations where failure to settle a claim expeditiously could have an adverse
effect on the party wishing to settle, the failure of the party controlling the
defense to act upon a request for consent to such settlement within five
business days of receipt of notice thereof shall be deemed to constitute consent
to such settlement for purposes of this Section 8.1
(f) Limitations on Indemnification. No Indemnified Party shall be entitled
------------------------------
to indemnification under this Section 8.1 for Damages relating to breaches of
representations and warranties set forth herein or in any certificate or
document delivered in connection herewith as provided in this Section 8.1, until
the aggregate amount of Damages incurred by such Person or Persons exceeds
$250,000, in which event such Persons shall be entitled to indemnification for
all Damages; provided, however, that no Indemnified Party shall be entitled to
-------- -------
indemnification under this Section 8.1 for Damages in respect of a breach of a
representation or warranty qualified as to materiality unless such Damages,
individually or as part of a series of claims arising from the breach of such
representation or warranty, equal or exceed $50,000, in which event such
Indemnified Party shall be entitled to indemnification for all Damages in
respect of the breach of such representation or warranty without regard to the
qualification as to materiality. Notwithstanding any provision in this
Agreement to the contrary, all Damages shall be net of any insurance proceeds
actually received that are attributable to such Damages.
(g) Method of Payment. The aggregate liability of the Stockholders with
-----------------
respect to the matters set forth in Section 8.1 (other than with respect to
matters set forth in Section 8.1(d)) shall not exceed the aggregate amount
available in the Escrow Account and all claims for indemnification (other than
with respect to matters set forth in Section 8.1(d)) shall be paid
-43-
<PAGE>
solely from the Escrow Account. The Escrow Account shall be the sole and
exclusive remedy for the Parent and Surviving Corporation with respect to any
Damages (except for Damages indemnifiable pursuant to Section 8.1(d) or based on
a claim of fraud). To the extent that Parent, Merger Sub, or the Surviving
Corporation makes a claim against the Escrow Account pursuant to the Escrow
Agreement, and such claim is paid in shares of Parent Common Stock, then for
purposes of such payment, the shares of Parent Common Stock shall be valued at
the Parent Stock Price.
(h) Fraud. Notwithstanding any provision in this Agreement to the
-----
contrary, the liability of a Stockholder for fraud, intentional
misrepresentation or, in the case of a violation of the prohibitions contained
in Section 4.2 hereof, willful misconduct by such Stockholder shall not be
limited as set forth above, and any claim with respect to such liability need
not be presented within the Indemnity Period. The obligations of a Stockholder
with respect to this Section 8.1(h) shall be several and shall apply only with
respect to the particular Stockholder alleged to have committed such fraud,
intentional misrepresentation or willful misconduct.
SECTION 8.2 Survival, Etc.
-------------
(a) The agreements set forth in Section 8.1 shall survive independently and
Article I and Section 5.7 shall survive the Effective Time indefinitely and
those set forth in Section 7.3(a) shall survive such termination indefinitely.
(b) Any disclosure made with reference to one or more sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to all Disclosure Schedules.
SECTION 8.3 Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
-44-
<PAGE>
(a) If to Parent or Merger Sub:
State Street Boston Corporation
225 Franklin Street
Boston, MA 02110-2804
Telecopier No.:
Telephone No.: (617) 786-3000
Attention: David A. Spina
President and
John R. Towers
General Counsel
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7000
Attention: Mark V. Nuccio
(b) If to the Company:
Princeton Financial Systems, Inc.
600 College Road East
Princeton, NJ 08540
Telecopier No.: (609) 987-2400
Telephone No.: (609) 987-9620
Attention: President
(c) If to any Stockholder, to the address and telephone numbers set forth
opposite such Stockholder's name on the signature page hereof.
SECTION 8.4 Certain Definitions. For purposes of this Agreement, the
-------------------
term:
(a) "affiliates" means a person that directly or indirectly, through one or
----------
more intermediaries, controls, is controlled by, or is under common control
with, the first
-45-
<PAGE>
mentioned person; including, without limitation, any partnership or joint
venture in which the first mentioned person (either alone, or through or
together with any other subsidiary) has, directly or indirectly, an interest of
10% or more;
(b) "beneficial owner" with respect to any shares of Company Common Stock
----------------
means a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares;
(c) "business day" means any day other than a Saturday or Sunday or any day
------------
on which banks in State of New Jersey or The Commonwealth of Massachusetts are
required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
-------
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership, association,
------
trust, unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of the Company, Parent or any other
---------- ------------
person means any corporation, partnership, joint venture or other legal entity
of which the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors of other governing body of such corporation or other
legal entity.
SECTION 8.5 Amendment. This Agreement may be amended by the parties
---------
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
-46-
<PAGE>
SECTION 8.6 Waiver. At any time prior to the Effective Time, any party
------
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
SECTION 8.7 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.8 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiated in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 8.9 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
SECTION 8.10 Assignment, Guarantee of Merger Sub Obligations. This
-----------------------------------------------
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Merger Sub may assign all or any of their rights hereunder to any
affiliate thereof provided that no such assignment shall relieve the assigning
party of its obligations hereunder. Parent guarantees the full and punctual
performance by Merger Sub of all the obligations hereunder of Merger Sub or any
such assignees.
SECTION 8.11 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation other than
Section 8.1(a) (which is intended to be for the benefit of the Indemnified
Parties and may be enforced by such Indemnified Parties).
SECTION 8.12 Failure or Indulgence Not Waiver, Remedies Cumulative. No
-----------------------------------------------------
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of acquiescence
in, any breach of any representation, warranty or agreement herein, nor shall
any single or parties exercise of any such right preclude any other or further
exercise thereof or of any other right. All rights and
-47-
<PAGE>
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 8.13 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
SECTION 8.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[This space is intentionally left blank.]
-48-
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PRINCETON FINANCIAL SYSTEMS, INC.
/s/
By: _________________________________
Name: ___________________________
Title: __________________________
Attest:
/s/
By: ____________________________
Secretary
STATE STREET BOSTON CORPORATION
/s/
By: _________________________________
Name: _______________________________
Title: ______________________________
Attest:
/s/
By: ____________________________
Clerk
SSB MERGER SUB, INC.
/s/
By: _________________________________
Name: _______________________________
Title: ______________________________
Attest:
/s/
By: ____________________________
Secretary
-49-
<PAGE>
STOCKHOLDERS
Edison Venture Fund II, L.P.
/s/
By: _________________________________
A General Partner
Name: _______________________________
Title: ______________________________
Attest:
/s/
By: ____________________________
Edison Venture Fund II-PA, L.P.
/s/
By: _________________________________
A General Partner
Name: _______________________________
Title: ______________________________
Attest:
/s/
By: ____________________________
/s/ Michael Bruce
___________________________________
Michael Bruce
Attest:
/s/
By: ____________________________
/s/ S. Scott Marsh, III
___________________________________
S. Scott Marsh, III
-50-
<PAGE>
Attest:
/s/
By: ____________________________
/s/ Gerald Finsen, Jr.
___________________________________
Gerald Finsen, Jr.
Attest:
/s/
By: ____________________________
/s/ William Mayhall
___________________________________
William Mayhall
Attest:
/s/
By: ____________________________
/s/ James Mayhall
___________________________________
James Mayhall
Attest:
/s/
By: ____________________________
-51-
<PAGE>
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
---------
entered into as of November 19, 1996 by and among State Street Boston
Corporation, a Massachusetts corporation ("Buyer" or the "Company"), and the
----- -------
former shareholders of Princeton Financial Systems, Inc. ("PFS"), a corporation
---
organized under the laws of the State of Delaware (collectively the
"Shareholders" and individually a "Shareholder").
- ------------- -----------
RECITALS
A. Buyer and PFS are parties to a certain Agreement and Plan of
Merger dated as of October 17, 1996 (the "Merger Agreement") pursuant to which
----------------
Buyer will acquire through a merger by one of its wholly-owned subsidiaries with
PFS all of the outstanding stock of the Company in exchange for cash
consideration and the issuance by Buyer of shares of Buyer's Common Stock, $1.00
par value per share (the "Buyer Common Stock"), as set forth in the Merger
------------------
Agreement.
B. The execution and delivery of this Registration Rights Agreement
by the parties hereto is a condition precedent to the obligations of the parties
to consummate the transactions under the Merger Agreement because the
Shareholders desire registration of the Buyer Common Stock under the federal
securities laws.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions
For the purposes of this Agreement, the following terms have the meanings
indicated below:
1933 Act. The Securities Act of 1933, as amended, and the rules and
--------
regulations promulgated thereunder, as in effect from time to time.
1934 Act. The Securities Exchange Act of 1934, as amended, and the
--------
rules and regulations promulgated thereunder, as in effect from time to time.
<PAGE>
Business Day. Each Monday, Tuesday, Wednesday, Thursday and Friday
------------
that is not a day on which banking institutions in New York City are authorized
or obligated by law or executive order to close.
Closing Date. The closing date specified in the Merger Agreement.
------------
Commission. The United States Securities and Exchange Commission.
----------
Holder. Any person owning Registrable Securities who is a party to
------
this Agreement, and any transferee thereof in accordance with Section 11 of this
Agreement.
Prospectus. The prospectus included in any Registration Statement,
----------
as amended or supplemented by any prospectus supplement (including, without
limitation, any prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by such Registration
Statement), and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Register, registration and registered. A registration effected by
-------------------------------------
preparing and filing a registration statement or similar document with the
Commission in compliance with the 1933 Act, and the declaration or ordering of
effectiveness of such registration statement or document.
Registrable Securities. The shares of Buyer Common Stock issued to
----------------------
and received by the Shareholders pursuant to the Merger Agreement and held
continuously from the Closing Date by the Shareholders and any securities that
may be issued by the Company or any successor to the Company from time to time
with respect to, in exchange for, or in replacement of such shares of Buyer
Common Stock, including, without limitation, securities issued as a stock
dividend on or pursuant to a stock split or similar recapitalization of such
shares of Buyer Common Stock; provided, however, that those shares as to which
-------- -------
the following apply shall cease to be Registrable Securities if: (a) a
Registration Statement with respect to the sale of such Registrable Securities
shall have become effective under the 1933 Act and such Registrable Securities
shall have been disposed of under such Registration Statement; (b) such
Registrable Securities shall have become transferable, and have been so
transferred, in accordance with the resale provisions of Rule 144 or any
successor rule or provision, under the 1933 Act; (c) such Registrable Securities
shall have been transferred in a transaction in which the Shareholder's rights
and obligations under this Agreement were not properly assigned in accordance
with this Agreement; (d) such Registrable Securities shall have ceased to be
outstanding; or (e) the shares of Buyer Common Stock have previously been sold
in accordance with the terms of this Agreement.
Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with Sections 2 and 3 hereof, including, without
limitation, all registration and
-2-
<PAGE>
filing fees (including filing fees with respect to the Commission and to the
National Association of Securities Dealers, Inc. and listing fees of the New
York Stock Exchange), all fees and expenses of complying with state securities
or "blue sky" laws (including fees and disbursements of underwriters' counsel in
connection with any "blue sky" memorandum or survey, but excluding any fees and
expenses for foreign qualification in such jurisdictions), all printing
expenses, all registrars' and transfer agents' fees and all fees and
disbursements of the Company's counsel and independent public accountants;
provided, however, that Registration Expenses shall not include the fees and
- -------- -------
expenses of more than one counsel to the holders of Registrable Securities, or
underwriters' discounts or commissions associated with the sale of the
Registrable Securities.
Registration Period. The period commencing on the date hereof and
-------------------
continuing through December 31, 1998.
Registration Statement. A registration statement prepared and filed
----------------------
with the Commission in compliance with the 1933 Act.
Seller. Any person, including any Holder, participating in an
------
offering of any Registrable Securities of the Company pursuant to the Agreement.
Selling Expenses. All applicable transfer taxes and any fees and
----------------
disbursements of more than one counsel for the holders of the Registrable
Securities, accountants or other advisors for any Seller of the Registrable
Securities being registered.
Shelf Registration. A registration effected pursuant to a shelf
------------------
Registration Statement of the Buyer, on an appropriate form under Rule 415 under
the 1933 Act, or any similar rule that may be adopted by the Commission, all
amendments and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference therein. A
Registration Statement relating to a Shelf Registration shall be referred to
herein as the "Shelf Registration Statement". The Shelf Registration Statement
----------------------------
shall be effected on Form S-3 or any successor form prescribed by the
Commission.
2. "Piggy-Back" Registration Rights
Until the expiration of the Registration Period, if (but without any
obligation to do so) Buyer shall determine to register, including for this
purpose a registration effected by Buyer for its own account or for the account
of shareholders of Buyer other than the Shareholders, any of its Common Stock
under the 1933 Act in a public offering solely for cash, it shall send to the
Shareholders written notice of such determination and, if within 15 calendar
days after receipt of such notice, any Shareholder shall so request in writing,
Buyer shall use its reasonable efforts to include in such Registration Statement
all or any part of the Registrable Securities the Shareholder requests to be
registered. This right shall not apply to a registration
-3-
<PAGE>
of shares of Buyer Common Stock on Form S-8 or Form S-4 (or their then
equivalents or successor forms) relating to shares of Buyer Common Stock to be
issued by Buyer in connection with any acquisition of any entity or business, or
shares of Buyer Common Stock issuable in connection with any stock option, stock
purchase plan or other employee benefit plan.
If, in connection with any offering involving an underwriting of Buyer
Common Stock to be issued for the account of the Company or selling
securityholders, the managing underwriter shall impose a limitation on the
number of shares of such Buyer Common Stock which may be included in any such
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution of the Buyer Common Stock and to maintain
a stable market for the securities of the Company, then the Company shall be
obligated to include in such Registration Statement (a) first, the shares of
Buyer Common Stock, being registered on behalf of the Company or on behalf of
the selling securityholders (other than the Holders) requesting such
registration, (b) second, the Registrable Securities being registered on behalf
of the Holders apportioned on a pro rata basis among the Holders in accordance
with the number of shares of Registrable Securities requested by the Holders to
be included in such registration, and (c) third, any other securities to be
included in such registration.
3. Shelf Registration
3.1 Shelf Registration Rights
Subject to the limitations set forth elsewhere in this Section 3, if
the Effective Time (as defined in the Merger Agreement) occurs on or before
November 15, 1996, then within ten (10) days after November 15, 1996, or if the
Effective Time occurs after November 15, 1996, then within ten (10) business
days after the Effective Time, Buyer shall use its reasonable efforts to
promptly effect qualification and registration of the Registrable Securities
under the Securities Act on a Form S-3 Registration Statement (or any other
shelf registration statement form for which it is then eligible or which Buyer
may have available for the registration of equity securities) as a Shelf
Registration. Buyer shall not be required to effect more than one registration
on Form S-3 pursuant to the provisions of this Section 3. Buyer and the
Shareholders shall use reasonable efforts to coordinate sales of the Registrable
Securities pursuant to a Form S-3 Registration Statement in a manner to ensure
stability in the trading price of Buyer Common Stock. Buyer may affect
qualification and registration of the Registrable Securities pursuant to this
Section 3.1 pursuant to an existing Shelf Registration Statement.
-4-
<PAGE>
3.2 Limitation on Shelf Registration Obligation
Notwithstanding the provisions of Section 3.1, and subject to the
limitations described below in this Section 3 and Section 4, (a) the Company
shall not be obligated to effect the filing of a Registration Statement pursuant
to this Section 3 during the 120 days following the effective date of a
Registration Statement pertaining to the underwritten public offering of any
Buyer Common Stock (as long as the Company has given any notice required by
Section 2 hereof and the Holders are able to include in such registration at
least 50% of the Registrable Securities requested to be so registered), or (b)
if the Company shall furnish to the Holders requesting a Registration Statement
pursuant to this Section 3 a certificate signed by a Vice President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would not be in the best interests of the Company and its
stockholders for such Registration Statement to be filed, the Company shall,
subject to the limitations set forth in Section 3.3(d) hereof, have the right to
defer such filing or effectiveness, for a period of not more than 90 days;
provided, however, that the Company may not utilize the right set forth in this
- -------- -------
Section 3.2 more than once. The Company shall use its reasonable best efforts
to keep a Registration Statement filed pursuant to this Section 3 effective
until December 31, 1998. If the Company utilizes the right set forth in this
Section 3, the Registration Period shall be extended for the number of days for
which any filing was deferred as specified in the notice; provided, however,
-------- -------
that the Registration Period need not be extended pursuant to this subsection by
a period of longer than six months.
3.3 Selling Procedures; Suspension
Each Holder of Registrable Securities agrees to give written notice to
the General Counsel of the Company at least two (2) Business Days prior to any
intended sale or distribution of Registrable Securities under the Shelf
Registration Statement referred to in Section 3.1, which notice shall specify
the date on which such Holder intends to begin such sale or distribution. As
soon as practicable after the date such notice is received by the Company, and
in any event within two (2) Business Days after such date, the Company shall
comply with either paragraph (a) or (b) below.
(a) Except in the event that paragraph (b) below applies, the
Company shall (i) if deemed necessary by the Company, prepare and file with the
Commission a post-effective amendment to the Shelf Registration Statement or a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not 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, and so that, as
thereafter delivered to purchasers of the Registrable Securities being sold
thereunder, such Prospectus will not 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, in light of the circumstances under which they
were made, not misleading; (ii) provide the Holders of the Registrable
Securities who gave such
-5-
<PAGE>
notice copies of any documents filed pursuant to Section 3.3(a)(i); and (iii)
inform each such Holder that the Company has complied with its obligations in
Section 3.3(a)(i) (or that, if the Company has filed a post-effective amendment
to the Shelf Registration Statement which has not yet been declared effective,
the Company will notify each such Holder to that effect, will use its reasonable
efforts to secure the effectiveness of such post-effective amendment and will
immediately notify each such Holder pursuant to Section 3.3(a)(i) hereof when
the amendment has become effective). Each Holder who has given notice of
intention to distribute such Holder's Registrable Securities in accordance with
Section 3.3 hereof (a "Notice Holder") shall sell all or any of such Registrable
-------------
Securities pursuant to the Shelf Registration Statement and related Prospectus
only during the 90-day period commencing with the date on which the Company
gives notice, pursuant to Section 3.3(a)(iii), that the Registration Statement
and Prospectus may be used for such purpose (such 90-day period is referred to
as a "Selling Period"). The Notice Holders will not sell any Registrable
--------------
Securities pursuant to such Registration Statement or Prospectus after such
Selling Period without giving a new notice of intention to sell pursuant to
Section 3.3 hereof and receiving a further notice from the Company pursuant to
Section 3.3(a)(iii) hereof or paragraph (b) below.
(b) In the event of (i) any request by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the Shelf Registration Statement for amendments or supplements to a Shelf
Registration Statement or related Prospectus or for additional information; (ii)
the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Shelf Registration
Statement or the written threat or initiation of any proceedings for that
purpose; (iii) the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) any event or circumstance
which necessitates the making of any changes in the Shelf Registration Statement
or Prospectus, or any document incorporated or deemed to be incorporated therein
by reference, so that, in the case of the Shelf Registration Statement, it will
not contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; (v) that the Company is in possession of material information that
it deems advisable not to disclose in a Registration Statement or (vi) that, in
the good faith judgment of the Company's Board of Directors, in accordance with
the provision of Section 3.2, it is advisable to suspend use of the Prospectus
for a discrete period of time due to pending corporate developments, public
filings with the Commission or similar events; then, subject to paragraph (d)
below, the Company shall deliver a certificate in writing to the Notice Holders
(the "Suspension Notice") to the effect of the foregoing and, upon receipt of
-----------------
such Suspension Notice, each such Notice Holder's Selling Period will not
commence (a "Suspension") until such Notice Holder's receipt of copies of the
----------
supplemented or amended Prospectus provided for in Section 3.3(a)(i) hereof, or
until it is
-6-
<PAGE>
advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus.
(c) In the event any of the events or circumstances listed in the
foregoing paragraph (b) occur or exist after a Selling Period has commenced,
subject to paragraph (d) below, the Company shall have the same right to suspend
such Selling Period by delivery of a Suspension Notice as the Company would have
had if the Selling Period had not yet commenced, and any such suspension of a
Selling Period shall be deemed included within the meaning of the term
"Suspension" for all purposes under this Agreement.
(d) In the event of any Suspension, or any delay in effecting the
Shelf Registration under Section 3.2 above, the Company will use its reasonable
efforts to ensure that the use of the Prospectus so suspended or delayed may be
commenced or resumed, as the case may be, and that any Selling Period so
suspended will commence or resume, as the case may be, as soon as practicable
and, in the case of a pending development, filing or event referred to in
Section 3.3(b)(iv) or (v) hereof, as soon, in the judgment of the Company's
Board of Directors (in accordance with the provisions of Section 3.2), as
disclosure of the material relating to such pending development, filing or event
would not have an adverse effect on the Company's ability to consummate the
transaction, if any, to which such development, filing or event relates.
Notwithstanding any other provision of this Agreement, the Company shall have
the right to cause a maximum of two (2) Suspensions, neither of which may be
within 30 days of the other, as provided above (including for this purpose a
delay in effecting the Shelf Registration pursuant to Section 3.2 above) during
any 12-month period after the initial effective date of the Shelf Registration
Statement, and the total number of days in any 12-month period during which a
Suspension or Suspensions (including for this purpose a delay in effecting the
Shelf Registration Statement pursuant to Section 3.2 above) may be in effect
shall not exceed 90 days.
(e) Subject to the provisions of Section 3.2, the Company will use
its best efforts to maintain the effectiveness for (i) up to 180 days, or such
shorter period of time as the underwriters need to complete the distribution of
the registered offering in any Company primary or secondary offering, in the
case of a "piggyback" registration pursuant to Section 2, or (ii) until December
31, 1998 in the case of a Shelf Registration Statement on Form S-3 pursuant to
Section 3.1, of any Registration Statement pursuant to which any of the
Registrable Securities are being offered. The Company from time to time will
amend or supplement such Registration Statement and the Prospectus contained
therein to the extent necessary to comply with the 1933 Act and any applicable
state securities statute or regulation. The Company will also provide each
holder of Registrable Securities with as many copies of the Prospectus contained
in any such Registration Statement as it may reasonably request.
-7-
<PAGE>
3.4 Underwriting Agreement
If, in connection with any proposed distribution by the Shareholders
under the "piggyback" registration referred to in Section 2, the Company in its
sole discretion shall determine that it is in the best interests of the Company
to effect distribution by means of an underwriting, the Company shall promptly
notify the Shareholders of such determination. In such event, the right of any
Shareholder to participate in such distribution shall be conditioned upon such
Shareholder's participation in the underwriting arrangements required by this
Section 3.4, including without limitation, the requirement that the Shareholder
enter into, and perform its obligations under, an underwriting agreement in
customary form with the managing underwriter selected for the underwriting by
the Company.
4. Restrictions on Transfer of Shares
The Holders agree and understand that the issuance of the Registrable
Securities to the Holders has not been, and, except as contemplated in this
Agreement, the sale or other disposition thereof by the Holders will not be,
registered under the 1933 Act or the securities laws of any state and that such
shares may be sold or disposed of only in one or more transactions registered
under the 1933 Act and, where applicable, such state laws or as to which an
exemption from the registration requirements of the Securities Act and, where
applicable, such state laws is available. The Holders acknowledge that, except
as expressly set forth in this Agreement, the Holders have no right to require
the Company to cause the registration of any Registrable Securities. The
Holders understand and agree that each certificate representing any Registrable
Securities (each, a "Certificate") shall be subject to stop transfer
instructions and shall bear the following legend:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH STATE LAWS."
The Company hereby agrees that it will, upon the request of the Holders,
eliminate any stop transfer instructions and any restrictive legend on any
certificates representing the Registrable Securities if (i) in the opinion of
counsel, including in-house counsel with demonstrated expertise in matters
relating to federal securities laws, which counsel and opinion (in form, scope
and substance) shall be reasonably satisfactory to the Company, the Holders are
entitled to sell or dispose of the Registrable Securities represented by such
Certificate without registration or (ii) such shares are being disposed of by
the Holders under a
-8-
<PAGE>
Registration Statement pursuant to Section 2 or 3 herein and in compliance with
the 1933 Act and applicable state and securities laws.
5. Expenses
The Company will pay all Registration Expenses in connection with the
registration of Registrable Securities effected by the Company pursuant to
Sections 2 and 3. Holders of Registrable Securities registered pursuant to this
Agreement shall pay all Selling Expenses associated with such registration, with
each Holder bearing a pro rata portion of the Selling Expenses based upon the
number of Registrable Securities registered by each Holder.
6. Expiration of Registration Rights
The obligations of the Company under Section 2 and 3 of this Agreement to
register the Registrable Securities shall expire and terminate at such time as
the Shareholders shall be entitled or eligible to sell all such securities in
the United States or to a U.S. Person without restriction and without a need for
the filing of a registration statement under the 1933 Act. The determination as
to whether the Shareholder is entitled or eligible to sell all Registrable
Securities without the need for registration under the Securities Act shall be
based on a written opinion of counsel that registration of the Registrable
Securities is not required under the Securities Act, sufficient to permit the
transfer agent to transfer such securities upon a sale by the Shareholder. The
obligations of the Company under Sections 2 and 3 of this Agreement shall expire
on December 31, 1998 (provided no stop transfer orders are in place with the
transfer agent).
7. Registration Procedures
In connection with the registration of Registrable Securities under this
Agreement, and subject to the other provisions of this Agreement, the Company
shall:
(a) use its reasonable efforts to cause the Registration Statement
filed in accordance with Section 2 or Section 3 to become effective as soon as
practicable after the date
of filing thereof;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective for the shorter of (i) the duration of its registration obligations
pursuant to Section 2 and 3 hereof, or (ii) until there are no Registrable
Securities outstanding, and to comply with the provisions of the 1933 Act with
respect to the disposition of the Registrable Securities;
-9-
<PAGE>
(c) furnish to each Seller of such Registrable Securities such
number of copies of the Prospectus included in such Registration Statement as
such Seller may reasonably request in order to facilitate the sale or
disposition of such Registrable Securities;
(d) use its reasonable efforts to register or qualify all
securities covered by such Registration Statement under such other securities or
"blue sky" laws of such jurisdictions as each Seller shall reasonably request,
and do any and all other acts and things as may be reasonably necessary to
enable such Seller to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such Registration Statement, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in respect of doing business in any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(e) notify each Seller of Registrable Securities covered by such
Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the Prospectus included 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 in light of the circumstances then existing or if it is
necessary to amend or supplement such Prospectus to comply with the law, and at
the request of any such Seller, prepare and furnish to such Seller a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such Prospectus, as amended or supplemented, will
comply with the law;
(f) use its best efforts to comply with all applicable rules and
regulations of the Commission;
(g) use its best efforts to qualify such securities for listing on
The New York Stock Exchange, and provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such Registration
Statement; and
(h) issue to any person to which any Holder of Registrable
Securities may sell such Registrable Securities in connection with such
registration certificates evidencing such Registrable Securities without any
legend restricting the transferability of the Registrable Securities.
From time to time, the Company will amend or supplement such Registration
Statement and the Prospectus contained therein to the extent necessary to comply
with the 1933 Act and any applicable state securities statute or regulation.
The Company will also provide the Holder of Registrable Securities with as many
copies of the Prospectus contained in any such Registration Statement as it may
reasonably request.
-10-
<PAGE>
8. 1934 Act Registration
The Company shall timely file with the Commission such information as the
Commission may require under Section 13 or 15(d) of the 1934 Act; and in such
event, the Company shall use its best efforts to take all action pursuant to
Rule 144(c) as may be required as a condition to the availability of Rule 144
under the 1933 Act (or any successor exemptive rule hereinafter in effect) with
respect to such Common Stock. The Company shall furnish to any holder of
Registrable Securities forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144(c),
(ii) a copy of the most recent annual or quarterly report of the Company as
filed with the Commission, and (iii) such other publicly-filed reports and
documents as a holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a holder to sell any such Registrable
Securities without registration.
9. Shareholder Information
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that all Shareholders of Registrable
Securities shall furnish to the Company such information regarding themselves,
the Registrable Securities held by them and the intended method of disposition
of such Registrable Securities as shall be reasonably required to effect the
registration of their Registrable Securities and to execute such documents in
connection with such registration as the Company may reasonably request.
10. Indemnification and Contribution
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) The Company will indemnify and hold harmless each Seller, the
officers, directors, partners, agents and employees of each Seller, any
underwriter (as defined in the 1933 Act) for such Seller and each person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages or liabilities joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
---------
fact contained in such Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto; (ii) the omission or alleged omission to state therein 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; or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law; and
-11-
<PAGE>
the Company will reimburse each such Seller, officer, director, partner, agent,
employee, underwriter or controlling person for any reasonable legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 10 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld or delayed), nor shall the Company be liable
in any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Seller, underwriter or
controlling person.
(b) Each Seller will indemnify and hold harmless the Company, each
of its officers, directors, partners, agents or employees, each person, if any,
who controls the Company within the meaning of the 1933 Act, any underwriter and
any other Seller or any of its directors, officers, partners, agents or
employees or any person who controls such Seller, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, partner, agent, employee, controlling person or underwriter,
or other such Seller or director, officer, partner, agent, employee or
controlling person may become subject, under the 1933 Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Seller expressly for use in connection with such registration; and each such
Seller will reimburse any reasonable legal or other expenses reasonably incurred
by the Company or any such director, officer, partner, agent, employee,
controlling person or underwriter, other Seller, officer, director, partner,
agent, employee or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything contained in this Agreement to the contrary, the indemnity agreement
contained in this Section 10(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Seller, which consent shall not be unreasonably
withheld, conditioned or delayed; provided further, that the aggregate liability
of each Seller in connection with any sale of Registrable Securities pursuant to
a Registration Statement in which a Violation occurred shall be limited to the
net proceeds from such sale.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the
-12-
<PAGE>
parties; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing or conflicting interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, to the extent prejudicial to its ability to
defend such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 10 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 10.
(d) If recovery is not available under the foregoing
indemnification provisions of this Section 10, for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution to liabilities and expenses in such proportion
as is appropriate to reflect the relative fault of the indemnifying parties and
the indemnified parties, except to the extent that contribution is not permitted
under Section 11(f) of the 1933 Act. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances, including, without limitation, whether any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Holder of Registrable Securities, on the
other hand. The Company and the Shareholders of the Registrable Securities
covered by such Registration Statement agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation. No seller of Registrable Securities covered by such Registration
Statement or person controlling such Seller shall be obligated to make any
contribution hereunder which in the aggregate exceeds the net proceeds of the
securities sold by such seller, less the aggregate amount of any damages which
such seller and its controlling persons have otherwise been required to pay in
respect of the same claim or any substantially similar claim. The obligations of
such Shareholders to contribute are several in proportion to their respective
ownership of the Registrable Securities covered by such Registration Statement
and not joint.
11. Non-Assignability of Registration Rights
The rights to cause the Company, or its successors or assigns to register
Registrable Securities pursuant to this Agreement are reserved solely for the
use and benefit of the Holders and may not be assigned or transferred by the
Holders to any other person; provided, however, that any Holder who is a natural
-------- -------
person may transfer Registrable Securities to any member of the immediate family
of a Holder who is a natural person, or any trust or other fiduciary arrangement
for the benefit of such family member. A merger or consolidation of or
-13-
<PAGE>
transfer of all or substantially all the assets of a Holder (a "Fundamental
Transaction") shall not be deemed an assignment for purposes of this Section 11
and the Registrable Securities held by a Holder immediately prior to the
consummation of a Fundamental Transaction shall remain Registrable Securities
subsequent to such Fundamental Transaction.
12. Miscellaneous
12.1 Amendments and Waivers
Any provision of this Agreement may be amended and the observance thereof
may only be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the
Holders of a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each Holder of Registrable Securities at the time outstanding, each future
Holder of Registrable Securities, and the Company.
12.2 Notices
Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed given at the opening of business on the first
Business Day following the time (a) delivery is made, if by hand delivery, (b)
the facsimile is successfully transmitted, if by telecopier or facsimile
machine, or (c) the Business Day after such notice is deposited with a reputable
overnight courier service, postage prepaid, for next-day delivery, addressed as
respectively set forth below or to such other address as any party shall have
previously designated by such a notice:
To the Company at:
State Street Boston Corporation
225 Franklin Street
Boston, Massachusetts 02110
Attn: John R. Towers, Esq.
Facsimile No.: (617) 654-4006
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: Mark V. Nuccio, Esq.
Facsimile No.: (617) 951-7050
-14-
<PAGE>
To Shareholders:
SEE ATTACHED SCHEDULE A
12.3 Governing Law
This Agreement shall for all purposes be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts with
respect to the enforceability of contracts and in accordance with the United
States securities laws with respect to matters involving securities laws
regarding the registration of the Registrable Shares, both without regard to
conflicts-of-laws principles. The parties hereto agree to submit to the
jurisdiction of the federal and state courts of The Commonwealth of
Massachusetts with respect to the breach or interpretation of this Agreement or
the enforcement of any and all rights, duties, liabilities, obligations, powers
and other relations between parties arising under this Agreement.
12.4 Severability
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be deemed to be excised from this
Agreement, and the remainder of this Agreement shall be interpreted as if such
provision were so excised and shall be enforceable in accordance with its
remaining terms.
12.5 Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
STATE STREET BOSTON CORPORATION
By: /s/
---------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
By: /s/
----------------------------------
Clerk
-16-
<PAGE>
STOCKHOLDERS
Edison Venture Fund II, L.P.
By: /s/
------------------------------
General Partner
Name:
----------------------------
Title:
---------------------------
Attest:
By: /s/
----------------------------
Edison Venture Fund II-PA, L.P.
By: /s/
-----------------------------
General Partner
Name:
---------------------------
Title:
--------------------------
Attest:
By: /s/
----------------------------
/s/ Michael Bruce
-----------------------------------
Michael Bruce
Attest:
By: /s/
----------------------------
-17-
<PAGE>
/s/ S. Scott Marsh, III
----------------------------------
S. Scott Marsh, III
Attest:
By: /s/
----------------------------
/s/ Gerald Finsen, Jr.
----------------------------------
Gerald Finsen, Jr.
Attest:
By: /s/
-----------------------------
/s/ William Mayhall
-----------------------------------
William Mayhall
Attest:
By: /s/
-----------------------------
/s/ James Mayhall
-----------------------------------
James Mayhall
Attest:
By: /s/
----------------------------
-18-
<PAGE>
SCHEDULE A
REGISTRABLE
HOLDERS SECURITIES
------- ----------
S. Scott Marsh, III
Glen Alpine Road
Morristown, NJ 01960
(201) 267-6610
Michael R. Bruce
300 Mountain Road
Offipee, NH 03864
(603) 539-6793
Edison Venture Fund, II, L.P.
Attn: Gustav H. Koven
997 Lenox Drive, #3
Lawrenceville, NJ 08648
(609) 896-1900
Edison Venture Fund II-PA, L.P.
Attn: Gustav H. Koven
997 Lenox Drive, #3
Lawrenceville, NJ 08648
(609) 896-1900
Gerald E. Finsen, Jr.
3 Nottingham Way
Eastampton, NJ 08060
(609) 261-2589
William M. Mayhall
176 Rolling Hill Road
Skillman, NJ 08558
(609) 466-3324
James Mayhall
243 Ravine Forest Drive
Lake Bluff, IL 60044
(708) 234-8280
-19-
<PAGE>
Exhibit 5.1
November 27, 1996
State Street Boston Corporation
225 Franklin Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, for the registration of 923,072 shares of Common Stock, $1.00 par value
(the "Shares"), and 923,072 preferred share purchase rights attached thereto
(the "Rights") of State Street Boston Corporation, a Massachusetts corporation
(the "Company"). The Shares and the Rights are to be sold by William M. Mayhall,
James V. Mayhall, Gerald E. Finsen, Jr., Michael R. Bruce, S. Scott Marsh III,
Edison Venture Fund II, L.P. and Edison Venture Fund II - PA, L.P.
(collectively, the "Selling Stockholders") pursuant to the related prospectus
contained in the Registration Statement.
We have acted as counsel for the Company in connection with the issue and
sale of the Shares and the Rights by the Company to the Selling Stockholders,
and the sale of the Shares and the Rights by the Selling Stockholders. For
purposes of our opinion, we have examined and relied upon such documents,
records, certificates and other instruments as we have deemed necessary.
We express no opinion as to the applicability of, compliance with or effect
of federal law or the law of any jurisdiction other than The Commonwealth of
Massachusetts.
Based upon the foregoing, we are of the opinion that, (i) the Shares being
sold by the Selling Stockholders have been duly authorized, validly issued and
are fully paid and nonassessable and (ii) the Rights being sold by the Selling
Stockholders have been duly authorized and validly issued.
<PAGE>
State Street Boston Corporation November 27, 1996
We hereby consent to the filing of this opinion as part of the Registration
Statement and to the use of our name therein and in the related prospectus under
the caption "Validity of the Common Stock."
This opinion is to be used only in connection with the offer and sale of
the Shares and the Rights while the Registration Statement is in effect.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
EXHIBIT 15.1
The Stockholders and Board of Directors
State Street Boston Corporation
We are aware of the incorporation by reference in the Registration Statement
on Form S-3 of State Street Boston Corporation for the registration of 923,072
shares of its common stock of our reports dated April 12, 1996, July 12, 1996
and October 11, 1996 relating to the unaudited consolidated interim financial
statements of State Street Boston Corporation that are included in its Forms
10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30,
1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
Boston, Massachusetts
November 26, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 to be filed on November 27, 1996, and
related prospectus of State Street Boston Corporation for the registration of
923,072 shares of its common stock and to the incorporation by reference
therein of our report dated January 10, 1996, with respect to the consolidated
financial statements of State Street Boston Corporation incorporated by
reference in its Annual Report (Form 10-K) for the year ended December 31,
1995, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Boston, Massachusetts
November 26, 1996
