<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1997
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BANKERS TRUST NEW YORK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CERTIFICATE)
---------------
NEW YORK 6711 13-61804073
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
---------------
130 LIBERTY STREET, NEW YORK, NY 10006, (212) 250-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
MELVIN A. YELLIN
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
BANKERS TRUST NEW YORK CORPORATION
130 LIBERTY STREET
NEW YORK, NY 10006
(212) 250-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
WITH COPIES TO:
CRAIG M. WASSERMAN, ESQ. DAVID W. HELENIAK, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ SHEARMAN & STERLING
51 WEST 52ND STREET 599 LEXINGTON AVENUE
NEW YORK, NY 10019 NEW YORK, NY 10022
TELEPHONE: (212) 403-1000 TELEPHONE: (212) 848-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the transactions described herein. If the securities being
registered on this Form are being offered in connection with the formation of
a holding company and there is compliance with General Instruction G, check
the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock and
associated Rights to
Purchase Series C
Junior Participating
Preferred Stock...... 25,957,061 $87.76 $2,278,083,896 $690,329
</TABLE>
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(1) This Registration Statement covers the maximum number of shares of the
Registrant's common stock issuable pursuant to the transaction to which
this Registration Statement relates.
(2) The registration fee was computed pursuant to Rule 457(f)(1) and Rule
457(c) under the Securities Act of 1933, as amended, based on the average
of the high ($73.5625) and low ($72.125) sales prices of Alex. Brown
Incorporated common stock on The New York Stock Exchange, Inc. on July 2,
1997, multiplied by the maximum number of shares to be cancelled in the
merger (31,273,567 shares of Alex. Brown Incorporated common stock).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON 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.
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<PAGE>
[BANKERS TRUST NEW YORK CORPORATION LETTERHEAD]
Frank N. Newman, Chairman of the Board
July 10, 1997
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Bankers Trust New York Corporation ("BTNY"). The meeting will be held on
Wednesday, August 13, 1997 at 10:00 a.m., local time, at One Bankers Trust
Plaza (130 Liberty Street), New York, New York. Your Board of Directors and
management look forward to greeting those Stockholders who attend.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the issuance of up to 25,957,061 shares of BTNY common
stock and associated purchase rights pursuant to the merger of Alex. Brown
Incorporated with and into a wholly-owned subsidiary of BTNY.
For the reasons set forth in the accompanying Joint Proxy Statement-
Prospectus, your Board of Directors unanimously recommends a vote FOR the
approval of the issuance of shares of BTNY in connection with the merger with
Alex. Brown Incorporated, as set forth on the enclosed Proxy Card. This matter
is more fully described in the accompanying Notice of Meeting and Joint Proxy
Statement-Prospectus.
BT Wolfensohn, BTNY's financial advisor, has delivered to the Board of
Directors its written opinion that the exchange ratio in the merger is fair to
BTNY.
It is important that your shares be represented at the meeting whether or
not you are able to attend personally. Accordingly, I urge you to sign and
date the enclosed Proxy Card and return it in the enclosed envelope as
promptly as possible.
Thank you for your interest and participation in the affairs of BTNY.
Sincerely,
/s/ Frank N. Newman
Frank N. Newman
<PAGE>
[LOGO] BANKERS TRUST NEW YORK CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
The Special Meeting of Stockholders of Bankers Trust New York Corporation, a
New York corporation, will be held at One Bankers Trust Plaza (130 Liberty
Street), New York, New York, on Wednesday, August 13, 1997, at 10:00 a.m.,
local time, for the purpose of considering and voting upon the following
matters, all as set forth in the accompanying Joint Proxy Statement-
Prospectus:
1. to approve a proposal to issue up to 25,957,061 shares and associated
purchase rights of Common Stock of Bankers Trust New York Corporation
pursuant to the merger of Alex. Brown Incorporated with and into a wholly-
owned subsidiary of Bankers Trust New York Corporation; and
2. to transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on July 7, 1997 as
the time as of which stockholders of record of Bankers Trust New York
Corporation who are entitled to notice of and to vote at such meeting shall be
determined.
By Order of the Board of Directors
/s/ James T. Byrne, Jr.
James T. Byrne, Jr.
SECRETARY
130 Liberty Street
New York, New York
July 10, 1997
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING
IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE SHARES
REGISTERED IN YOUR NAME (AND, IF YOU HAVE A PROPER POWER OF ATTORNEY,
REGISTERED IN A NOMINEE'S NAME) IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
[ALEX. BROWN LETTERHEAD]
July 10, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders of
Alex. Brown Incorporated ("Alex. Brown"), to be held on Wednesday, August 13,
1997 at 4:30 p.m., local time, at One South Street, Baltimore, Maryland 21202.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of
April 6, 1997 (the "Merger Agreement"), by and among Alex. Brown, Bankers
Trust New York Corporation ("BTNY"), and a wholly-owned subsidiary of BTNY,
and the transactions contemplated thereby, pursuant to which Alex. Brown will
be merged with and into a wholly-owned subsidiary of BTNY (the "Merger"). A
copy of the Merger Agreement is attached as Appendix A to this Joint Proxy
Statement-Prospectus.
At the effective time of the Merger, each share of Alex. Brown common stock
will be converted into the right to receive 0.83 shares of BTNY common stock.
This strategic transaction will provide you with the opportunity to
participate as a stockholder in one of the ten largest banking organizations
in the United States. The Merger will create an institution that will be able
to provide a broad array of financial products and services to the customers
it serves more efficiently than either company could provide separately,
creating significant benefits for the customers and stockholders of both
companies.
Alex. Brown & Sons Incorporated, Alex. Brown's financial advisor, has
delivered to the Board of Directors its written opinion that the exchange
ratio in the Merger is fair, from a financial point of view, to Alex. Brown's
stockholders.
Enclosed are a Notice of Special Meeting of Stockholders and a Joint Proxy
Statement-Prospectus, which describes the Merger and the background to the
transaction. You are urged to read all of these materials carefully. The Board
of Directors has fixed the close of business on July 2, 1997 as the record
date for the Special Meeting. Accordingly, only stockholders of record on that
date are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF ALEX. BROWN HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF
APPROVING AND ADOPTING THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
I strongly support the Merger of Alex. Brown with BTNY and join with the
other members of the Board in enthusiastically recommending the Merger to you.
We urge you to vote in favor of approval and adoption of the Merger Agreement
and the transactions contemplated thereby.
Very truly yours,
/s/ A.B. Krongard
A.B. Krongard
Chairman and Chief Executive Officer
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND. ACCORDINGLY, YOU ARE REQUESTED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
<PAGE>
ALEX. BROWN INCORPORATED
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 13, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Alex. Brown
Incorporated, a Maryland corporation ("Alex. Brown"), will be held on
Wednesday, August 13, 1997, at 4:30 p.m., local time, at One South Street,
Baltimore, MD 21202, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of April 6, 1997 (the "Merger
Agreement"), between Alex. Brown, Bankers Trust New York Corporation, a New
York corporation ("BTNY"), and Voyager Merger Corporation, a wholly-owned
subsidiary of BTNY ("BTNY Sub"), and the consummation of the transactions
contemplated thereby, pursuant to which Alex. Brown will be merged (the
"Merger") with and into BTNY Sub upon the terms and subject to the
conditions set forth in the Merger Agreement, as are more fully described
in the enclosed Joint Proxy Statement-Prospectus. A copy of the Merger
Agreement is set forth as Appendix A to the attached Joint Proxy Statement-
Prospectus.
2. To transact such other business as may properly be brought before the
Special Meeting, or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on July 2, 1997 as
the record date for determining stockholders entitled to vote at the Special
Meeting and any adjournments or postponements thereof. Accordingly, only
stockholders of record on such date are entitled to notice of, and to vote at,
the Special Meeting and any adjournments or postponements thereof.
The affirmative vote of the holders of a majority of the outstanding shares
of Alex. Brown common stock is necessary to approve and adopt the Merger
Agreement. An abstention from voting or a broker non-vote will have the same
effect as a vote against approval of the Merger Agreement.
THE BOARD OF DIRECTORS OF ALEX. BROWN UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
By Order of the Board of Directors
/s/ Robert F. Price
Robert F. Price
Secretary
July 10, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE SHARES REGISTERED IN YOUR NAME
(AND, IF YOU HAVE A PROPER POWER OF ATTORNEY, REGISTERED IN A NOMINEE'S NAME)
IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
JOINT PROXY STATEMENT
BANKERS TRUST NEW YORK CORPORATION ALEX. BROWN INCORPORATED
SPECIAL MEETING OF SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD STOCKHOLDERS TO BE HELD
ON AUGUST 13, 1997 ON AUGUST 13, 1997
BANKERS TRUST NEW YORK CORPORATION
PROSPECTUS
This Joint Proxy Statement-Prospectus relates to up to 25,957,061 shares of
common stock, par value $1.00 per share ("BTNY Common Stock"), of Bankers
Trust New York Corporation, a New York corporation ("BTNY"), and associated
rights to purchase Series C Junior Participating Preferred Stock ("BTNY
Rights"), offered hereby to the stockholders of Alex. Brown Incorporated, a
Maryland corporation ("Alex. Brown"), upon consummation of a proposed merger
(the "Merger") of Alex. Brown with and into Voyager Merger Corporation, a
Delaware corporation and a wholly-owned subsidiary of BTNY ("BTNY Sub" or
"Surviving Corporation"), pursuant to an Agreement and Plan of Merger, dated
as of April 6, 1997, by and among BTNY, BTNY Sub and Alex. Brown (the "Merger
Agreement"). This Joint Proxy Statement-Prospectus also serves as the Joint
Proxy Statement of BTNY and Alex. Brown for use in connection with the
solicitation of proxies by the Board of Directors of BTNY (the "BTNY Board")
at the Special Meeting of Stockholders of BTNY (the "BTNY Special Meeting") to
approve the issuance of shares of BTNY Common Stock and associated BTNY Rights
by BTNY in the Merger (the "Share Issuance") and by the Board of Directors of
Alex. Brown (the "Alex. Brown Board") at the Special Meeting of Stockholders
of Alex. Brown (the "Alex. Brown Special Meeting") to approve and adopt the
Merger Agreement and the transactions contemplated thereby, among other
matters. The Merger Agreement is attached as Appendix A to this Joint Proxy
Statement- Prospectus.
Upon consummation of the Merger, each share of Alex. Brown common stock, par
value $.10 per share ("Alex. Brown Common Stock"), will be converted into the
right to receive 0.83 (the "Exchange Ratio") of a share of BTNY Common Stock
plus associated BTNY Rights (with cash in lieu of fractional shares). Each
BTNY Right entitles the registered holder to purchase from BTNY a one one-
hundredth interest in a share of Series C Junior Participating Preferred
Stock, no par value, of BTNY ("Junior Preferred Share"), at a price of $140
per one one-hundredth interest in a Junior Preferred Share, subject to
adjustment in the case of a stock split or stock dividend on the BTNY Common
Stock. See "Description of BTNY Common Stock--BTNY Rights." The Exchange Ratio
will be proportionately adjusted in the event of a recapitalization,
reclassification, stock dividend, stock split or other similar change in
capitalization of BTNY or Alex. Brown. Each option to acquire Alex. Brown
Common Stock that is outstanding and unexercised at the effective time of the
Merger will be converted automatically in the Merger into a stock option to
purchase BTNY Common Stock. See "The Merger--Conversion of Alex. Brown Common
Stock; Treatment of Alex. Brown Stock Options and Debentures."
The Merger is subject to the approval of the holders of a majority of the
outstanding shares of the Alex. Brown Common Stock and to the satisfaction of
certain other conditions, including obtaining certain regulatory approvals.
Under the rules of the New York Stock Exchange, Inc. ("NYSE"), the Share
Issuance requires the approval of a majority of the votes cast on such matter,
provided that the total votes cast represent more than 50% of the outstanding
shares of BTNY Common Stock.
For a more complete description of the Merger Agreement and the Merger, see
"The Merger."
BTNY Common Stock is listed on the NYSE under the symbol "BT." The last
reported sale price of BTNY Common Stock as reported on the NYSE Composite
Transactions List on July 8, 1997 was $92.00 per share, and, on April 4, 1997,
the last trading day preceding public announcement of the proposed Merger, the
last reported sale price of BTNY Common Stock as reported on the NYSE
Composite Transactions List was $82.25 per share. Alex. Brown Common Stock is
listed on the NYSE under the symbol "AB." The last reported sale price of
Alex. Brown Common Stock as reported on the NYSE Composite Transactions List
on July 8, 1997 was $75.375 per share, and, on April 4, 1997, the last
reported sale price of Alex. Brown Common Stock as reported on the NYSE
Composite Transactions List was $53.125 per share. As of May 31, 1997, there
were 77,388,434 shares of BTNY Common Stock and 24,946,907 shares of Alex.
Brown Common Stock outstanding.
THIS JOINT PROXY STATEMENT-PROSPECTUS AND FORMS OF PROXY ARE FIRST BEING
MAILED TO STOCKHOLDERS ON OR ABOUT JULY 14, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF BANKERS TRUST NEW
YORK CORPORATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"), THE BANK INSURANCE FUND OR
ANY OTHER GOVERNMENTAL AGENCY.
The date of this Joint Proxy Statement-Prospectus is July 10, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION.................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 1
SUMMARY.................................................................. 3
General................................................................. 3
The Companies........................................................... 3
BTNY Special Meeting and Vote Required.................................. 4
Alex. Brown Special Meeting and Vote Required........................... 5
Appraisal Rights........................................................ 5
The Merger.............................................................. 5
Recommendations of Boards of Directors.................................. 6
Opinion of BTNY's Financial Advisor..................................... 6
Opinion of Alex. Brown's Financial Advisor.............................. 7
Effective Time of the Merger............................................ 7
Conditions to the Consummation of the Merger............................ 7
Termination of the Merger Agreement..................................... 7
Waiver and Amendment; Expenses.......................................... 8
BTNY and Alex. Brown Stock Option Agreements............................ 8
Support Agreements...................................................... 9
Interests of Certain Persons in the Merger.............................. 9
Certain Federal Income Tax Consequences................................. 10
Accounting Treatment.................................................... 10
Regulatory Approvals.................................................... 10
Material Differences in the Rights of Stockholders...................... 11
Share Information and Market Prices..................................... 11
COMPARATIVE UNAUDITED PER SHARE DATA..................................... 12
SELECTED FINANCIAL DATA.................................................. 13
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BTNY.................. 14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALEX. BROWN........... 16
SELECTED UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA OF BTNY
AND ALEX. BROWN......................................................... 17
BTNY SPECIAL MEETING..................................................... 18
General................................................................. 18
Matters to be Considered................................................ 18
Proxies................................................................. 18
Solicitation of Proxies................................................. 18
Record Date and Voting Rights........................................... 18
Recommendation of BTNY Board............................................ 19
ALEX. BROWN SPECIAL MEETING.............................................. 20
General................................................................. 20
Matters to be Considered................................................ 20
Proxies................................................................. 20
Solicitation of Proxies................................................. 20
Record Date and Voting Rights........................................... 21
Recommendation of Alex. Brown Board..................................... 22
THE MERGER............................................................... 22
General................................................................. 22
Background of the Merger................................................ 22
Reasons for the Merger.................................................. 25
Fairness Opinions of Financial Advisors................................. 28
Structure of the Merger................................................. 37
</TABLE>
i
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<TABLE>
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Conversion of Alex. Brown Common Stock; Treatment of
Alex. Brown Stock Options and Debentures............................... 38
Exchange of Certificates; Fractional Shares............................. 39
Effective Time.......................................................... 40
Representations and Warranties.......................................... 40
Conduct of Business Pending the Merger and Other Agreements............. 40
Conditions to the Consummation of the Merger............................ 43
Regulatory Approvals Required for the Merger............................ 44
Certain Federal Income Tax Consequences................................. 46
Accounting Treatment.................................................... 47
Termination of the Merger Agreement..................................... 48
Waiver and Amendment of the Merger Agreement............................ 49
Employee Benefits and Plans............................................. 50
Stock Exchange Listing.................................................. 51
Expenses................................................................ 51
Dividends............................................................... 51
BTNY and Alex. Brown Stock Option Agreements............................ 51
Support Agreements...................................................... 56
Restrictions on Resales by Affiliates................................... 56
Interests of Certain Persons in the Merger.............................. 57
Management and Operations after the Merger.............................. 60
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................................ 61
Market Prices........................................................... 61
Dividends............................................................... 62
CERTAIN REGULATORY MATTERS............................................... 63
DESCRIPTION OF BTNY COMMON STOCK......................................... 64
Voting Rights........................................................... 64
Dividends............................................................... 64
Liquidation and Merger.................................................. 64
Other Provisions........................................................ 65
BTNY Rights............................................................. 65
COMPARISON OF RIGHTS OF HOLDERS OF ALEX. BROWN COMMON STOCK AND BTNY
COMMON STOCK............................................................ 66
Business Combinations................................................... 66
Appraisal Rights........................................................ 66
State Takeover Legislation.............................................. 67
Stockholder Rights Plans................................................ 68
Amendments to Certificates of Incorporation............................. 69
Amendments to By-laws................................................... 70
Dividend Sources........................................................ 70
Stockholder Action...................................................... 70
Special Stockholder Meetings............................................ 71
Cumulative Voting....................................................... 71
Number and Election of Directors........................................ 71
Removal of Directors.................................................... 71
Vacancies............................................................... 72
Indemnification of Directors............................................ 72
Limitation of Personal Liability of Directors........................... 74
LEGAL MATTERS............................................................ 74
EXPERTS.................................................................. 74
STOCKHOLDER PROPOSALS.................................................... 75
</TABLE>
ii
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<TABLE>
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<S> <C>
OTHER MATTERS.............................................................. 75
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.......................... 76
APPENDIX A -- Merger Agreement
APPENDIX B -- Opinion of BT Wolfensohn
APPENDIX C -- Opinion of Alex. Brown & Sons Incorporated
</TABLE>
iii
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS JOINT PROXY STATEMENT-
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BTNY OR ALEX. BROWN. THIS
JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR
SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES
OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-
PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY
INDICATED. INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS
REGARDING BTNY, AND PRO FORMA INFORMATION, HAS BEEN FURNISHED BY BTNY, AND
INFORMATION IN THIS JOINT PROXY STATEMENT-PROSPECTUS REGARDING ALEX. BROWN HAS
BEEN FURNISHED BY ALEX. BROWN.
AVAILABLE INFORMATION
BTNY has filed with the Commission a Registration Statement (the
"Registration Statement") on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the securities to be issued in
connection with the Merger. For further information pertaining to the
securities of BTNY to which this Joint Proxy Statement-Prospectus relates,
reference is made to the Registration Statement, including the exhibits and
schedules filed as a part thereof. As permitted by the rules and regulations
of the Commission, certain information included in the Registration Statement
is omitted from this Joint Proxy Statement-Prospectus. In addition, BTNY and
Alex. Brown are subject to certain of the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file certain reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference room of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
copies of such materials can be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. The Commission maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding issuers who file electronically with the Commission. The address of
that site is http://www.sec.gov. In addition, copies of such materials are
available for inspection and reproduction at the public reference facilities
of the Commission at its New York Regional Office, 7 World Trade Center, Suite
1300, New York, New York 10048; and at its Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Reports, proxy statements and other information concerning BTNY and Alex.
Brown also may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by BTNY with the Commission are
hereby incorporated by reference in this Joint Proxy Statement-Prospectus: (i)
the BTNY Annual Report on Form 10-K for the year ended December 31, 1996,
filed March 6, 1997; (ii) the BTNY Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, filed May 15, 1997; (iii) the description of the
BTNY Common Stock and the BTNY Rights contained in the BTNY Registration
Statements on Form 8-A, filed January 21, 1974 and February 23, 1988,
respectively, including any amendment or report filed for the purpose of
updating such description; and (iv) the BTNY Current Reports on Form 8-K filed
January 23, March 14, April 7, April 17, May 1, and June 13, 1997 and on Form
8-K/A filed June 18, 1997.
The following documents previously filed by Alex. Brown with the Commission
are hereby incorporated by reference in this Joint Proxy Statement-Prospectus:
(i) the Alex. Brown Annual Report on Form 10-K for the year ended December 31,
1996, filed on March 26, 1997; (ii) the Alex. Brown Quarterly Report on Form
10-Q
<PAGE>
for the quarter ended March 31, 1997, filed May 9, 1997; (iii) the description
of the Alex. Brown Common Stock contained in the Alex. Brown Registration
Statement on Form 8-A, filed February 27, 1986 pursuant to Section 12(g) of
the Exchange Act, including any amendment or report filed for the purpose of
updating such description; and (iv) the Alex. Brown Current Report on Forms 8-
K filed April 7, 1997.
In addition, all documents filed by BTNY and Alex. Brown with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date hereof and prior to the time at which the BTNY Special Meeting and the
Alex. Brown Special Meeting (together, the "Stockholders Meetings") have been
finally adjourned are hereby deemed to be incorporated by reference herein.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement-Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement-Prospectus.
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS
RELATING TO BTNY (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO BANKERS TRUST NEW YORK
CORPORATION, 130 LIBERTY STREET, NEW YORK, NY 10006, ATTENTION: OFFICE OF THE
SECRETARY, TELEPHONE NUMBER (212) 250-2500. THE DOCUMENTS RELATING TO ALEX.
BROWN (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO ALEX. BROWN INCORPORATED, ONE
SOUTH STREET, BALTIMORE, MARYLAND 21202, ATTENTION: INVESTOR RELATIONS,
TELEPHONE NUMBER (410) 727-1700. BTNY OR ALEX. BROWN, AS THE CASE MAY BE, WILL
SEND THE REQUESTED DOCUMENTS BY FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY OF
THE RECEIPT OF THE REQUEST. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 5, 1997.
THIS JOINT PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF BTNY FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING
STATEMENTS RELATING TO THE COST SAVINGS, REVENUE ENHANCEMENTS AND FUNDING
ADVANTAGES THAT ARE EXPECTED TO BE REALIZED FROM THE MERGER AND THE EXPECTED
IMPACT OF THE MERGER ON BTNY'S FINANCIAL PERFORMANCE (SEE "THE MERGER--REASONS
FOR THE MERGER--RECOMMENDATION OF THE BTNY BOARD AND REASONS FOR THE MERGER,"
"--RECOMMENDATION OF THE ALEX. BROWN BOARD AND REASONS FOR THE MERGER" AND "--
MANAGEMENT AND OPERATIONS AFTER THE MERGER"). THESE FORWARD-LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (i) EXPECTED
COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED; (ii) COMPETITIVE
PRESSURE IN THE BANKING, BROKER-DEALER OR FINANCIAL SERVICES INDUSTRIES
INCREASES SIGNIFICANTLY; (iii) COSTS OR DIFFICULTIES RELATED TO THE
INTEGRATION OF THE BUSINESSES OF BTNY AND ALEX. BROWN ARE GREATER THAN
EXPECTED; (iv) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (v)
GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY, REGIONALLY OR OVERSEAS, ARE
LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A
DETERIORATION IN CREDIT QUALITY; (vi) CHANGES OCCUR IN THE REGULATORY
ENVIRONMENT; (vii) CHANGES OCCUR IN BUSINESS CONDITIONS AND INFLATION; AND
(viii) CHANGES OCCUR IN THE SECURITIES MARKETS.
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SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS, THE
ACCOMPANYING APPENDICES AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
GENERAL
This Joint Proxy Statement-Prospectus, notice of the BTNY Special Meeting to
be held on August 13, 1997 and notice of the Alex. Brown Special Meeting to be
held on August 13, 1997, and forms of proxy solicited in connection therewith
are first being mailed to holders of BTNY Common Stock ("BTNY Stockholders")
and to holders of Alex. Brown Common Stock ("Alex. Brown Stockholders") on or
about July 14, 1997.
At the BTNY Special Meeting, BTNY Stockholders will consider and vote on
whether to approve (i) the issuance of up to 25,957,061 shares of BTNY Common
Stock and BTNY Rights in the Merger and (ii) such other matters as may properly
be submitted to a vote at the BTNY Special Meeting.
At the Alex. Brown Special Meeting, Alex. Brown Stockholders will consider
and vote on whether to approve and adopt (i) the Merger Agreement and the
transactions contemplated thereby and (ii) such other matters as may properly
be submitted to a vote at the Alex. Brown Special Meeting.
A copy of the Merger Agreement is attached as Appendix A to this Joint Proxy
Statement-Prospectus.
THE COMPANIES
Bankers Trust New York Corporation. BTNY is a registered bank holding company
which was incorporated in 1965. BTNY delivers a wide range of financial
products and services worldwide principally through eight broad organizational
units. Five units are organized around specific products and services:
Investment Banking, Risk Management Services, Trading & Sales, Investment
Management, and Client Processing Services. Three additional units are
organized to deliver these same types of financial products and services with
the unique local expertise necessary to operate successfully in Australia/New
Zealand, Asia and Latin America.
BTNY's principal banking subsidiary is Bankers Trust Company, which, along
with its subsidiaries ("BTCo"), accounted for 71% of BTNY's consolidated assets
at December 31, 1996. BTCo, founded in 1903, is among the largest commercial
banks in New York City and the United States, based on total assets. BTCo
originates loans and other forms of credit, accepts deposits, arranges
financings and provides numerous other commercial banking and financial
services. BTCo provides a broad range of financial advisory services to its
clients. It also engages in the trading of currencies, securities, derivatives
and commodities.
BT Securities Corporation ("BT Securities"), a wholly-owned subsidiary of
BTNY, accounted for 19% of BTNY's consolidated assets at December 31, 1996. BT
Securities is a primary dealer in U.S. Government securities. It also
structures, underwrites and deals in money market instruments, commercial
paper, and municipal, asset-backed and corporate debt and equity securities. BT
Securities also provides advisory and private placement services and structures
a broad range of derivative transactions for clients. In addition, BT
Securities acts as agent for BTCo in the origination and sale of loans.
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The principal executive office of BTNY is located at 130 Liberty Street, New
York, New York 10006 and its telephone number is (212) 250-2500. All references
herein to BTNY refer to Bankers Trust New York Corporation and its
subsidiaries, unless the context otherwise requires. For additional information
regarding BTNY and the combined company that would result from the Merger, see
"The Merger."
BTNY Sub, a Delaware corporation, was organized in 1997 as a wholly-owned
subsidiary of BTNY. BTNY Sub will be the surviving corporation in the Merger.
The principal office of BTNY Sub is located at 130 Liberty Street, New York,
New York 10006 and its telephone number is (212) 250-2500.
Alex. Brown Incorporated. Alex. Brown, which was incorporated in 1986, is a
holding company that is the successor to the investment banking and securities
brokerage business founded in 1800 by Alexander Brown. The firm began operating
in partnership form in approximately 1805 and continued in that form until 1984
when the firm's investment banking and securities brokerage business was
transferred to Alex. Brown & Sons Incorporated ("AB & Sons"), Alex. Brown's
principal operating subsidiary.
Through AB & Sons, Alex. Brown provides investment services to individual and
institutional investors, and investment banking services to corporate clients.
To support the investment services provided to individual and institutional
investors, Alex. Brown effects transactions in equity and debt securities as
both agent and principal. In addition, Alex. Brown supplies investment advice
to individual and institutional investors regarding corporate securities in
selected industry sectors. Alex. Brown provides investment banking services to
corporate clients primarily in the industry sectors selected for research
coverage.
Alex. Brown's operations are conducted from 22 offices in 13 states and the
District of Columbia and from representative offices in London, England;
Geneva, Switzerland; and Tokyo, Japan. Alex. Brown's principal office is in
Baltimore, with other offices in major cities including New York, San
Francisco, Los Angeles, Boston, Chicago, Dallas, Atlanta, Philadelphia and
Washington, D.C.
AB & Sons is a member of the NYSE, the American Stock Exchange, Inc., the
Chicago Board Options Exchange, Inc., other regional securities exchanges and
the National Association of Securities Dealers, Inc. (the "NASD"). AB & Sons is
also a member of the Securities Investor Protection Corporation ("SIPC"), and
with respect to its representative offices in London, is regulated by the
Securities and Futures Authority Limited (the "SFA").
The address of the principal executive office of Alex. Brown is One South
Street, Baltimore, Maryland 21202, and its telephone number is (410) 727-1700.
For additional information regarding Alex. Brown, see "The Merger."
BTNY SPECIAL MEETING AND VOTE REQUIRED
The BTNY Special Meeting will be held on August 13, 1997 at 3:00 p.m., local
time, at One Bankers Trust Plaza (130 Liberty Street), New York, New York. At
that time, of BTNY Stockholders will be asked to consider and vote upon a
proposal to approve the Share Issuance and upon such other matters as may
properly be submitted to a vote at the BTNY Special Meeting. The record holders
of BTNY Common Stock at the close of business on July 2, 1997 (the "BTNY
Record Date") are entitled to notice of and to vote at the BTNY Special
Meeting. On the BTNY Record Date, there were approximately 21,000 holders of
record of BTNY Common Stock and 77,649,619 shares of BTNY Common Stock
outstanding.
The presence, in person or by proxy, of a majority of the aggregate number of
shares of BTNY Common Stock outstanding and entitled to vote on the BTNY Record
Date is necessary to constitute a quorum at the BTNY Special Meeting. Each
share of BTNY Common Stock entitles its holder to one vote. The Share Issuance
requires the affirmative vote of a majority of the votes cast on such matter,
provided that the total votes cast
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represent more than 50% of the outstanding shares of BTNY Common Stock. As of
the BTNY Record Date, directors and executive officers of BTNY beneficially
owned 1,899,113 shares of BTNY Common Stock, which number includes 1,371,864
options exercisable within 60 days and 6,685 shares held in BTNY's Qualified
Employee Benefit Plan, or 2.4%, of the shares entitled to vote at the BTNY
Special Meeting. It is currently expected that each such director and executive
officer of BTNY will vote the shares of BTNY Common Stock beneficially owned by
him or her for approval of the Share Issuance. In addition, as of the BTNY
Record Date, the directors and executive officers of Alex. Brown beneficially
owned significantly less than 1% of the shares entitled to be voted at the BTNY
Special Meeting. See "BTNY Special Meeting."
ALEX. BROWN SPECIAL MEETING AND VOTE REQUIRED
The Alex. Brown Special Meeting will be held on August 13, 1997 at 4:30 p.m.,
local time, at One South Street, Baltimore, Maryland 21202, at which time the
Alex. Brown Stockholders will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby and upon such other matters as may properly be submitted to a vote at
the Alex. Brown Special Meeting. The record holders of Alex. Brown Common Stock
at the close of business on July 2, 1997 (the "Alex. Brown Record Date") are
entitled to notice of and to vote at the Alex. Brown Special Meeting. Each
share of Alex. Brown Common Stock is entitled to one vote on all matters
submitted to the Alex. Brown Stockholders for a vote. On the Alex. Brown Record
Date, there were approximately 454 holders of record of Alex. Brown Common
Stock and 25,441,287 shares of Alex. Brown Common Stock outstanding.
The presence, in person or by proxy, of shares of Alex. Brown Common Stock
representing a majority of the aggregate number of such shares of Alex. Brown
Common Stock outstanding and entitled to vote on the Alex. Brown Record Date is
necessary to constitute a quorum at the Alex. Brown Special Meeting. The
affirmative vote of the holders of a majority of the outstanding shares of
Alex. Brown Common Stock is required to approve and adopt the Merger Agreement
and the transactions contemplated thereby. As of the Alex. Brown Record Date,
directors and executive officers of Alex. Brown beneficially owned
approximately 3,826,636 shares of Alex. Brown Common Stock, entitling them to
exercise 15.0% of the voting power of the Alex. Brown Common Stock entitled to
vote at the Alex. Brown Special Meeting. All Alex. Brown Common Stock ownership
by directors and executive officers includes employee stock options and
convertible debentures which vest upon stockholder approval at the Special
Meeting of Stockholders. See "The Merger." It is currently expected that each
such director and executive officer of Alex. Brown will vote the shares of
Alex. Brown Common Stock beneficially owned by him or her for approval of the
Merger Agreement and the transactions contemplated thereby. As of the Alex.
Brown Record Date, directors and executive officers of BTNY beneficially owned
no shares of Alex. Brown Common Stock. See "Alex. Brown Special Meeting."
APPRAISAL RIGHTS
Under Maryland law, Alex. Brown Stockholders do not have appraisal rights in
connection with the Merger Agreement and the consummation of the transactions
contemplated thereby. Under New York law, BTNY Stockholders do not have
appraisal rights in connection with the Share Issuance. See "Comparison of
Rights of Holders of Alex. Brown Common Stock and BTNY Common Stock."
THE MERGER
In the Merger, subject to the terms of the Merger Agreement, Alex. Brown will
merge with and into BTNY Sub, which will be the Surviving Corporation in the
Merger, and each outstanding share of Alex. Brown Common Stock will be
converted into 0.83 shares of BTNY Common Stock, with cash to be paid in lieu
of any resulting fractional shares of BTNY Common Stock. Each share of BTNY
capital stock outstanding prior to the Merger will continue to be outstanding
after the effective time of the Merger (the "Effective Time").
Each stock option to acquire Alex. Brown Common Stock granted under Alex.
Brown's stock option plans (collectively, the "Alex. Brown Stock Plans") which
is outstanding and unexercised immediately prior to the
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Effective Time will be converted automatically at the Effective Time into an
option to purchase BTNY Common Stock and will continue to be governed by the
terms of the Alex. Brown Stock Plans which will be assumed by BTNY. Pursuant to
the terms of the Alex Brown Stock Plans, all outstanding Alex. Brown stock
options will vest and become exercisable as of the date that the Merger is
approved at the Alex. Brown Special Meeting. The number of shares of BTNY
Common Stock subject to such options and the exercise price of such options
will be adjusted as provided in the Merger Agreement to give effect to the
Exchange Ratio.
Alex. Brown's 5 3/4% convertible subordinated debentures due 2001 (the
"Public Debentures") outstanding at the Effective Time will remain outstanding
thereafter as an obligation of BTNY and the Surviving Corporation as co-
obligors. From and after the Effective Time, the holders of the Public
Debentures will have the right to convert such Public Debentures into the
number of shares of BTNY Common Stock receivable in the Merger by a holder of
the number of shares of Alex. Brown Common Stock into which such Public
Debentures could have been converted immediately prior to the Merger.
The convertible debentures (the "Executive Debentures") issued to certain key
employees of Alex. Brown and its affiliates pursuant to the Alex. Brown 1991
Equity Incentive Plan and outstanding at the Effective Time will remain
outstanding thereafter as an obligation of BTNY and the Surviving Corporation
as co-obligors. From and after the Effective Time, the holders of the Executive
Debentures will have the right to convert such Executive Debentures into the
number of shares of BTNY Common Stock receivable in the Merger by a holder of
the number of shares of Alex. Brown Common Stock into which such Executive
Debentures could have been converted immediately prior to the Merger (and the
Executive Debentures will otherwise remain subject to the terms of the Alex.
Brown Stock Plans under which they were issued and the agreements evidencing
such instruments).
See "The Merger--Structure of the Merger," "--Conversion of Alex. Brown
Common Stock; Treatment of Alex. Brown Stock Options and Debentures," and "--
Exchange of Certificates; Fractional Shares."
RECOMMENDATIONS OF BOARDS OF DIRECTORS
THE BTNY BOARD AND THE ALEX. BROWN BOARD HAVE UNANIMOUSLY APPROVED AND
ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND, IN
THE CASE OF THE BTNY BOARD, THE SHARE ISSUANCE. THE BTNY BOARD AND THE ALEX.
BROWN BOARD BELIEVE THAT THE MERGER IS IN THE BEST INTERESTS OF BTNY AND ALEX.
BROWN, RESPECTIVELY, AND THEIR RESPECTIVE STOCKHOLDERS AND RECOMMEND THAT SUCH
STOCKHOLDERS VOTE "FOR" THE MATTERS TO BE VOTED UPON BY SUCH STOCKHOLDERS IN
CONNECTION WITH THE MERGER. FOR A DISCUSSION OF THE FACTORS CONSIDERED BY THE
BTNY BOARD AND THE ALEX. BROWN BOARD IN REACHING THEIR RESPECTIVE CONCLUSIONS,
SEE "THE MERGER--BACKGROUND OF THE MERGER," "--REASONS FOR THE MERGER--
RECOMMENDATION OF THE BTNY BOARD AND REASONS FOR THE MERGER" AND "REASONS FOR
THE MERGER--RECOMMENDATION OF THE ALEX. BROWN BOARD AND REASONS FOR THE
MERGER."
OPINION OF BTNY'S FINANCIAL ADVISOR
BT Wolfensohn, a division of BT Securities ("BT Wolfensohn"), which has
served as financial advisor to BTNY in connection with the Merger, rendered its
oral opinion to the BTNY Board at its meeting on April 5, 1997 to the effect
that, as of such date, the Exchange Ratio was fair, from a financial point of
view, to BTNY. BT Wolfensohn subsequently confirmed its oral opinion by
delivery of its written opinion dated as of April 6, 1997. The full text of the
written opinion delivered by BT Wolfensohn which sets forth the assumptions
made, matters considered and limits of the review undertaken by BT Wolfensohn
in rendering its opinion, is attached as Appendix B to this Joint Proxy
Statement-Prospectus and is incorporated herein by reference. Holders of BTNY
Common Stock should read such opinion in its entirety. See "The Merger--
Fairness Opinions of Financial Advisors--Opinion of BT Wolfensohn, Financial
Advisor to BTNY."
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OPINION OF ALEX. BROWN'S FINANCIAL ADVISOR
AB & Sons, which has served as financial advisor to Alex. Brown in connection
with the Merger, has rendered its opinion to the Alex. Brown Board that the
Exchange Ratio was fair, from a financial point of view, to the Alex. Brown
Stockholders. The oral opinion of AB & Sons (which was subsequently confirmed
in writing) was delivered to the Alex. Brown Board at its meeting on April 5,
1997. A copy of the opinion delivered by AB & Sons is attached as Appendix C to
this Joint Proxy Statement-Prospectus and is incorporated herein by reference.
Alex. Brown Stockholders should read such opinion in its entirety with respect
to assumptions made, matters considered and limitations of the review
undertaken by AB & Sons in rendering such opinion. See "The Merger--Fairness
Opinions of Financial Advisors--Opinion of AB & Sons, Financial Advisor to
Alex. Brown."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective on the date (the "Effective Date") and time
as set forth in the certificate of merger which will be filed with the
Secretary of State of Delaware and in the Articles of Merger which will be
filed with the Department of Assessments and Taxation of the State of Maryland.
See "The Merger--Effective Time."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to certain conditions, including the
approval of the Share Issuance by a majority of the votes cast on such matter
(provided that the total votes cast represent more than 50% of the outstanding
shares of BTNY Common Stock) and the approval and adoption of the Merger
Agreement by the affirmative vote of the holders of a majority of the shares of
Alex. Brown Common Stock outstanding and entitled to vote thereon; the
effectiveness of the Registration Statement of which this Joint Proxy
Statement-Prospectus forms a part; the receipt of Requisite Regulatory
Approvals (as defined herein); receipt by BTNY and Alex. Brown of opinions of
counsel as to the tax-free nature of the Merger for federal income tax purposes
(except for cash in lieu of fractional shares); receipt by BTNY and Alex. Brown
of a letter from KPMG Peat Marwick LLP, independent accountants, confirming
their concurrence with BTNY's and Alex. Brown's intent to account for the
Merger as a "pooling of interests"; the listing, subject to notice of issuance,
on the NYSE of the BTNY Common Stock to be issued in the Merger; the Employment
Agreements (as defined herein) are in effect and the Retention Program (as
defined in the Merger Agreement) is to be in place; and certain other customary
closing conditions. See "The Merger--Conditions to the Consummation of the
Merger." As of the date of this Joint Proxy Statement-Prospectus, the requisite
notice has been filed with the Federal Reserve Board, the Employment Agreements
are in effect and the Retention Program is in place.
Under the terms of the Merger Agreement, the conditions to the Merger,
including receipt of the tax opinions, may be waived by any party to the Merger
Agreement, except that, after Alex. Brown Stockholder approval, no waiver may
reduce the amount or change the form of consideration to be delivered to the
Alex. Brown Stockholders under the Merger Agreement without the further
approval of the Alex. Brown Stockholders. As of the date of this Joint Proxy
Statement-Prospectus, neither BTNY nor Alex. Brown intends to waive the
condition as to the receipt of opinions of counsel. In the event of a failure
to obtain tax opinions, and a party's determination to waive such condition to
the consummation of the Merger, both BTNY and Alex. Brown will resolicit the
votes of its respective stockholders to approve the Share Issuance and the
Merger, respectively.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time (i) by the mutual consent of BTNY and Alex. Brown by a majority vote of
the members of each company's entire Board of Directors; (ii) by either BTNY or
Alex. Brown if any governmental entity which must grant a regulatory approval
has denied approval of the Merger and such denial has become final and non-
appealable or any governmental entity
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of competent jurisdiction has issued a final, non-appealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated by the
Merger Agreement; (iii) except if the party seeking termination is in breach of
the Merger Agreement, by either BTNY or Alex. Brown, (a) if the Effective Time
has not occurred by March 31, 1998 or (b) if there is a material breach by the
other party of any representation, warranty, covenant or agreement contained in
the Merger Agreement which is not timely cured; (iv) by either BTNY or Alex.
Brown if the requisite stockholder approvals of either party have not been
obtained; or (v) if the Employment Agreements are not in effect or if the
Retention Program is not in place immediately prior to the Effective Time. The
Employment Agreements are in effect as of the date of this Joint Proxy
Statement-Prospectus and the parties fully expect that the Retention Program
will be in place immediately prior to the Effective Time.
In addition, if the Merger Agreement is terminated as a result of certain
events specified therein, the terminating party may be required to pay
specified termination fees to the non-terminating party. See "The Merger--
Termination of the Merger Agreement" and "--BTNY and Alex. Brown Stock Option
Agreements."
WAIVER AND AMENDMENT; EXPENSES
Prior to the Effective Time, BTNY, BTNY Sub and Alex. Brown, by action taken
or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts required of the other party contained in the Merger
Agreement; (ii) waive any inaccuracies in the representations and warranties of
the other party contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement; or (iii) waive compliance by the other party
of any of its agreements or conditions contained in the Merger Agreement,
except that, after Alex. Brown Stockholder approval, no extension or waiver may
reduce the amount or change the form of consideration to be delivered to Alex.
Brown Stockholders under the Merger Agreement without further approval of Alex.
Brown Stockholders.
Subject to compliance with applicable law, the Merger Agreement may be
amended by BTNY, BTNY Sub and Alex. Brown by action taken or authorized by
their respective Boards of Directors at any time, except that, after Alex.
Brown Stockholder approval, no amendment may change the amount or form of the
consideration to be delivered pursuant to the Merger to Alex. Brown
Stockholders other than as contemplated by the Merger Agreement. See "The
Merger--Waiver and Amendment of the Merger Agreement."
Each party to the Merger Agreement will bear all expenses incurred by it in
connection with the Merger Agreement and the transactions contemplated thereby,
except that printing and mailing expenses and Commission filing and other fees
will be shared equally between Alex. Brown and BTNY. See "The Merger--
Expenses."
BTNY AND ALEX. BROWN STOCK OPTION AGREEMENTS
As an inducement to BTNY to enter into the Merger Agreement, Alex. Brown and
BTNY entered into the Alex. Brown Stock Option Agreement, dated April 6, 1997
(the "Alex. Brown Stock Option Agreement"), pursuant to which Alex. Brown
granted BTNY an option to purchase from Alex. Brown 4,959,101 shares of Alex.
Brown Common Stock (subject to adjustment, but in no event to exceed 19.9% of
the then outstanding Alex. Brown Common Stock), at a price of $68.27 per share
(the "Alex. Brown Option"), which represents the trading price of Alex. Brown
Common Stock on the last trading day preceding public announcement of the
Merger. BTNY may exercise the Alex. Brown Option only upon the occurrence of
certain events (none of which has occurred as of the date hereof). At the
request of the holder of the Alex. Brown Option, under certain circumstances,
Alex. Brown will repurchase, for a formula price, the Alex. Brown Option and
any shares of Alex. Brown Common Stock purchased upon the exercise of the Alex.
Brown Option and beneficially owned by such holder at that time.
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As an inducement to Alex. Brown to enter into the Merger Agreement, BTNY and
Alex. Brown entered into the BTNY Stock Option Agreement, dated April 6, 1997
(the "BTNY Stock Option Agreement" and, together with the Alex. Brown Stock
Option Agreement, the "Option Agreements"), pursuant to which BTNY granted
Alex. Brown an option to purchase from BTNY 7,811,208 shares of BTNY Common
Stock (subject to adjustment, but in no event to exceed 10.0% of the then
outstanding BTNY Common Stock), at a price of $82.25 per share (the "BTNY
Option"), which represents the trading price of BTNY Common Stock on the last
trading day preceding public announcement of the Merger. Alex. Brown may
exercise the BTNY Option only upon the occurrence of certain events (none of
which has occurred as of the date hereof). At the request of the holder of the
BTNY Option, under certain circumstances, BTNY will repurchase, for a formula
price, the BTNY Option and any shares of BTNY Common Stock purchased upon the
exercise of the BTNY Option and beneficially owned by such holder at that time.
The Option Agreements are intended to increase the likelihood that the Merger
will be consummated in accordance with the terms set forth in the Merger
Agreement. Consequently, certain aspects of the Option Agreements may have the
effect of discouraging persons who might now or at any time prior to the
Effective Time be interested in acquiring all of or a significant interest in
Alex. Brown or BTNY from considering or proposing such an acquisition, even if,
in the case of Alex. Brown, such persons were prepared to offer to pay to Alex.
Brown Stockholders consideration which had a higher current market price than
the shares of BTNY Common Stock to be received for each share of Alex. Brown
Common Stock pursuant to the Merger Agreement. See "The Merger--BTNY and Alex.
Brown Stock Option Agreements."
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, certain Alex. Brown
Stockholders (the "Supporting Stockholders"), who are members of its operating
committee and who, as of the Record Date, beneficially owned in the aggregate
approximately 6.6% of the outstanding shares of Alex. Brown Common Stock,
executed separate support agreements with BTNY pursuant to which each
Supporting Stockholder agreed, among other things, that all of the shares of
Alex. Brown Common Stock beneficially owned by such Supporting Stockholder will
be voted by the Supporting Stockholder in favor of the Merger Agreement
("Support Agreement"). Each Support Agreement terminates upon termination of
the Merger Agreement in accordance with its terms. See "The Merger--Support
Agreements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Alex. Brown's management and the Alex. Brown Board may be
deemed to have certain interests in the Merger that are in addition to their
interests as Alex. Brown Stockholders generally. Following the Merger, A.B.
Krongard, currently Chairman of the Board and Chief Executive Officer of Alex.
Brown, will become a director and a vice chairman of BTNY. In addition, up to
two other current, non-management directors of Alex. Brown will be appointed to
the BTNY Board. Mayo A. Shattuck III, currently the President and Chief
Operating Officer of Alex. Brown, will become an executive officer of BTNY.
BTNY also has agreed to indemnify and to maintain directors and officers
insurance covering the Alex. Brown directors and officers following the Merger.
Certain restrictions on benefits payable to the directors and executive
officers of Alex. Brown will lapse and such benefits will vest, in connection
with the Merger. If each of the executive officers were to be terminated as of
August 1, 1997 under circumstances giving rise to an entitlement to severance
benefits under their employment agreements, the aggregate value of the lump sum
cash severance benefits, plus the value of any accelerated vesting or lapse of
restrictions on such executive's equity awards, that would become payable would
be approximately $37.2 million. See "The Merger--Interests of Certain Persons
in the Merger" and "--Management and Operations after the Merger." The Alex.
Brown Board was aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Each party's obligation to effect the Merger is conditioned on delivery of an
opinion to BTNY from Wachtell, Lipton, Rosen & Katz, special counsel to BTNY,
and to Alex. Brown from Shearman & Sterling, special counsel to Alex. Brown,
based upon certain facts, representations and assumptions set forth therein
which are consistent with the state of facts existing at the Effective Time,
substantially to the effect that for federal income tax purposes: (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and BTNY, BTNY Sub
and Alex. Brown will each be a party to the reorganization; (ii) no gain or
loss will be recognized by BTNY or by Alex. Brown as a result of the Merger
(except with respect to items as to which Alex. Brown is required to recognize
gain or loss at the close of each taxable year under a mark-to-market method);
(iii) no gain or loss will be recognized by the Alex. Brown Stockholders who
exchange their Alex. Brown Common Stock solely for BTNY Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a fractional
share interest in BTNY Common Stock); (iv) no gain or loss will be recognized
by the holders of the Public Debentures or the Executive Debentures solely as a
result of the assumption by BTNY at the Effective Time of the Public Debentures
and the Executive Debentures as a co-obligor with BTNY Sub or the change of
conversion rights at the Effective Time as contemplated by the Merger
Agreement; (v) the aggregate tax basis of the BTNY Common Stock received by
Alex. Brown Stockholders who exchange Alex. Brown Common Stock solely for BTNY
Common Stock in the Merger will be the same as the aggregate tax basis of the
Alex. Brown Common Stock surrendered in exchange therefor; and (vi) the holding
period of the BTNY Common Stock received by Alex. Brown Stockholders in the
Merger will include the period during which the shares of Alex. Brown Common
Stock surrendered in exchange therefor were held, provided such Alex. Brown
Common Stock was held as a capital asset by the holder of such Alex. Brown
Common Stock at the Effective Time. In addition, Wachtell, Lipton, Rosen & Katz
and Shearman & Sterling have delivered opinions to BTNY and Alex. Brown,
respectively, dated the date of this Joint Proxy Statement-Prospectus to the
effect that, except as otherwise indicated, the discussion set forth under the
caption "The Merger--Certain Federal Income Tax Consequences" represents such
firms' opinions as to the material federal income tax consequences of the
Merger under currently applicable law.
The federal income tax consequences of the Merger may vary based upon the
particular circumstances of a holder of Alex. Brown Common Stock. Accordingly,
each stockholder should consult such stockholder's own tax advisors as to the
federal income tax consequences of the Merger under such stockholder's
particular circumstances. Moreover, no information has been provided herein as
to foreign, state or local law, and each holder of Alex. Brown Common Stock is
therefore urged to consult such holder's own tax advisors as to the tax
consequences of the Merger under such laws. See "The Merger--Certain Federal
Income Tax Consequences."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a "pooling of
interests" under generally accepted accounting principles ("GAAP"). It is a
condition to consummation of the merger that BTNY and Alex. Brown receive a
letter from KPMG Peat Marwick LLP, independent accountants, confirming their
concurrence with BTNY's and Alex. Brown's intent to account for the Merger as a
"pooling of interests." See "The Merger--Accounting Treatment."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). In addition, the Merger
may be subject to the approval of or notice to the regulatory authorities in
states or other jurisdictions (collectively, the "State Authorities"). The
Merger may not be consummated until expiration of applicable waiting periods.
10
<PAGE>
BTNY and Alex. Brown have filed or will promptly be filing all required
applications for regulatory review and approval or notice with the Federal
Reserve Board and the State Authorities in connection with the Merger. There
can be no assurance that such approvals will be obtained or as to the date of
any such approvals. See "The Merger--Conditions to the Consummation of the
Merger" and "--Regulatory Approvals Required for the Merger."
MATERIAL DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
The rights of Alex. Brown Stockholders are currently governed by the Maryland
General Corporation Law (the "MGCL"), the Alex. Brown Amended Articles of
Incorporation (the "Alex. Brown Articles of Incorporation") and the Alex. Brown
Amended By-laws (the "Alex. Brown By-laws"). Upon consummation of the Merger,
the Alex. Brown Stockholders who receive BTNY Common Stock in the Merger will
become BTNY Stockholders, and their rights will be governed by the New York
Business Corporation Law (the "NYBCL"), the BTNY Restated Certificate of
Incorporation (the "BTNY Certificate of Incorporation") and the BTNY By-laws
(the "BTNY By-laws"). There are certain material differences between the rights
of holders of Alex. Brown Common Stock and BTNY Common Stock which arise from
differences between the governing instruments of BTNY and Alex. Brown and
differences in the MGCL and the NYBCL. For example, there are differences with
respect to such matters as the number of directors, amendments to the
certificate of incorporation and by-laws, and indemnification of directors. In
addition, the business combination provisions of the MGCL and the NYBCL differ.
See "Comparison of Rights of Holders of Alex. Brown Common Stock and BTNY
Common Stock," for a summary of these and other material differences.
SHARE INFORMATION AND MARKET PRICES
BTNY Common Stock is listed on the NYSE under the symbol "BT." As of the BTNY
Record Date, there were 77,649,619 shares of BTNY Common Stock outstanding held
by approximately 21,000 holders of record. The Alex. Brown Common Stock is
listed on the NYSE under the symbol "AB." As of the Alex. Brown Record Date,
there were 25,441,287 Shares of Alex. Brown Common Stock outstanding held by
approximately 454 holders of record.
The following table sets forth the last sale price reported on the NYSE
Composite Transactions List for shares of BTNY Common Stock and Alex. Brown
Common Stock on April 4, 1997, the last trading day preceding public
announcement of the proposed Merger, and on July 8, 1997. The "Alex. Brown
Common Stock Equivalent" represents the last sale price of a share of BTNY
Common Stock on such date multiplied by the Exchange Ratio of 0.83.
<TABLE>
<CAPTION>
ALEX. BROWN
BTNY ALEX. BROWN COMMON
COMMON COMMON STOCK
STOCK STOCK EQUIVALENT
------- ----------- -----------
<S> <C> <C> <C>
April 4, 1997................................... $ 82.25 $ 53.125 $ 68.27
July 8, 1997.................................... $ 92.00 $ 75.375 $ 76.36
</TABLE>
For additional information regarding the market prices of the BTNY Common
Stock and Alex. Brown Common Stock during the previous two years, see "Price
Range of Common Stock and Dividends--Market Prices."
11
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (i) selected comparative per share data for
each of BTNY and Alex. Brown on an historical basis and (ii) selected unaudited
pro forma comparative per share data reflecting the consummation of the Merger.
The unaudited pro forma comparative per share data assumes the Merger had been
consummated at the beginning of the periods presented. The unaudited pro forma
data has been prepared giving effect to the Merger as a "pooling of interests"
under GAAP. See "The Merger--Accounting Treatment." The Alex. Brown pro forma
equivalent amounts are presented with respect to each set of pro forma
information, and have been calculated by multiplying the corresponding pro
forma combined amounts per share of BTNY Common Stock by the Exchange Ratio.
The unaudited pro forma comparative per share data does not reflect any
direct costs, potential expense reductions or revenue enhancements which are
expected to result from the consolidation of operations of BTNY and Alex.
Brown, and, therefore, does not purport to be indicative of the results of
future operations.
The comparative per share data presented herein is based on and derived from,
and should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of BTNY and the historical
consolidated financial statements and the related notes thereto of Alex. Brown,
both of which are incorporated by reference herein. See "Available
Information," "Incorporation of Certain Documents by Reference" and "Unaudited
Pro Forma Combined Financial Statements." Results of BTNY and of Alex. Brown
for less than a full financial year are not necessarily indicative of results
expected for the entire year, nor are pro forma amounts necessarily indicative
of results of operations or the combined financial position that would have
resulted had the Merger been consummated at the beginning of the periods
indicated. All adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of results of interim periods, have been
included.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ---------------
1996 1995 1994 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BTNY COMMON STOCK
Income from continuing operations per
common share:
Primary:
Historical.......................... $ 6.78 $ 2.03 $ 7.17 $ 1.89 $ 1.52
Pro forma........................... 6.93 2.59 6.51 1.81 1.62
Fully Diluted:
Historical.......................... 6.74 2.02 7.17 1.89 1.51
Pro forma........................... 6.71 2.53 6.33 1.76 1.57
Cash dividends declared per common
share:
Historical.......................... 4.00 4.00 3.70 1.00 1.00
Pro forma(1)........................ 4.00 4.00 3.70 1.00 1.00
Book value per common share as of end
of period:
Historical.......................... 53.27 50.58 53.67 53.42 51.06
Pro forma........................... 49.21 45.73 47.74 49.50 46.39
</TABLE>
- --------
(1) Pro forma combined cash dividends declared per common share reflects BTNY's
cash dividends declared in the periods indicated.
12
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ----------------
1996 1995 1994 1997 1996
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
ALEX. BROWN COMMON STOCK
Income from continuing operations
per common share:
Primary:
Historical....................... $ 6.28 $ 4.11 $ 3.06 $ 1.23 $ 1.67
Equivalent pro forma............. 5.75 2.15 5.40 1.50 1.34
Fully Diluted:
Historical....................... 5.51 3.60 2.70 1.10 1.48
Equivalent pro forma............. 5.57 2.10 5.25 1.46 1.30
Cash dividends declared per common
share:
Historical....................... .637 .516 .45 .17 .133
Equivalent pro forma............. 3.32 3.32 3.07 .83 .83
Book value per common share as of
end of period:
Historical....................... 26.79 21.00 17.42 28.19 22.62
Equivalent pro forma............. 40.84 37.96 39.62 41.09 38.50
</TABLE>
SELECTED FINANCIAL DATA
The following tables present (i) summary selected consolidated financial data
for each of BTNY and Alex. Brown on an historical basis and (ii) summary
unaudited pro forma combined consolidated financial data of BTNY and Alex.
Brown reflecting the consummation of the Merger. The unaudited pro forma
selected financial data has been prepared giving effect to the Merger using the
"pooling of interests" method of accounting. See "The Merger--Accounting
Treatment."
The summary unaudited pro forma selected financial data does not reflect any
direct costs, potential expense reductions or revenue enhancements which are
expected to result from the consolidation of operations of BTNY and Alex.
Brown, and, therefore, does not purport to be indicative of the results of
future operations.
13
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BTNY
The summary of consolidated financial data for BTNY and its subsidiaries
below should be read in conjunction with the financial information included in
BTNY's 1996 Annual Report on Form 10-K for the fiscal year ended December 31,
1996 and its Quarterly Report on Form 10-Q for the quarterly periods ended
March 31, 1997 and 1996. The consolidated statement of income and balance sheet
statistics for the preceding five fiscal years ended December 31, 1996, have
been derived from BTNY's audited consolidated financial statements and notes
thereto. Interim data for the three months ended March 31, 1997 and 1996 are
unaudited, but include, in the opinion of management of BTNY, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the three months ended March 31, 1997
and 1996 are not necessarily indicative of results which may be expected for
any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
AT OR FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATED
STATEMENT OF INCOME:
Net interest revenue... $ 1,147 $ 1,314 $ 1,172 $ 817 $ 966 $ 213 $ 308
Noninterest revenue.... $ 2,331 $ 3,364 $ 2,473 $ 2,423 $ 3,199 $ 750 $ 868
Income before
cumulative effects of
accounting changes.... $ 639 $ 1,070 $ 615 $ 215 $ 612 $ 138 $ 169
Cumulative effects of
accounting changes.... $ 446 $ (75) $ -- $ -- $ -- $ -- $ --
------- ------- ------- -------- -------- -------- --------
Net income............. $ 1,085 $ 995 $ 615 $ 215 $ 612 $ 138 $ 169
------- ------- ------- -------- -------- -------- --------
PER COMMON SHARE DATA:
Primary earnings per
share
Income before
cumulative effects of
accounting changes.... $ 7.23 $ 12.40 $ 7.17 $ 2.03 $ 6.78 $ 1.52 $ 1.89
Cumulative effects of
accounting changes.... $ 5.30 $ (.89) $ -- $ -- $ -- $ -- $ --
------- ------- ------- -------- -------- -------- --------
Net income............. $ 12.53 $ 11.51 $ 7.17 $ 2.03 $ 6.78 $ 1.52 $ 1.89
------- ------- ------- -------- -------- -------- --------
Fully diluted earnings
per share
Income before
cumulative effects of
accounting changes.... $ 7.22 $ 12.29 $ 7.17 $ 2.02 $ 6.74 $ 1.51 $ 1.89
Cumulative effects of
accounting changes.... $ 5.29 $ (.88) $ -- $ -- $ -- $ -- $ --
------- ------- ------- -------- -------- -------- --------
Net income............. $ 12.51 $ 11.41 $ 7.17 $ 2.02 $ 6.74 $ 1.51 $ 1.89
------- ------- ------- -------- -------- -------- --------
Cash dividends declared
per common share...... $ 2.88 $ 3.24 $ 3.70 $ 4.00 $ 4.00 $ 1.00 $ 1.00
--as a percentage of
fully diluted earnings
per share(1).......... 40% 26% 52% 198% 59% 66% 53%
Book value end of peri-
od.................... $ 43.23 $ 51.90 $ 53.67 $ 50.58 $ 53.27 $ 51.06 $ 53.42
PROFITABILITY RATIOS(2):
Return on average
common stockholders'
equity(1)............. 19.5% 26.3% 13.5% 4.0% 12.9% 11.9% 14.3%
Return on average total
assets(1)............. .86% 1.25% .59% .20% .51% .49% .55%
CONSOLIDATED BALANCES,
END OF PERIOD:
Total assets........... $72,886 $92,082 $97,016 $104,002 $120,235 $108,144 $122,978
Long-term debt not in-
cluded in risk-based
capital............... $ 2,286 $ 3,219 $ 4,230 $ 6,934 $ 8,533 $ 7,707 $ 7,955
Long-term debt included
in risk-based capi-
tal................... $ 1,706 $ 2,378 $ 2,225 $ 2,360 $ 2,576 $ 2,418 $ 3,164
Mandatorily redeemable
capital securities of
subsidiary trusts
holding solely junior
subordinated
deferrable interest
debentures included in
risk-based capital.... $ -- $ -- $ -- $ -- $ 730 $ -- $ 1,469
Preferred Stock of Sub-
sidiary............... $ -- $ 250 $ 250 $ 250 $ 250 $ 250 $ --
Preferred Stock
(BTNY)................ $ 500 $ 250 $ 395 $ 865 $ 810 $ 866 $ 704
Common stockholders'
equity................ $ 3,621 $ 4,284 $ 4,309 $ 4,119 $ 4,424 $ 4,189 $ 4,377
Total stockholders' eq-
uity.................. $ 4,121 $ 4,534 $ 4,704 $ 4,984 $ 5,234 $ 5,055 $ 5,081
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
AT OR FOR THE YEAR ENDED DECEMBER ENDED MARCH
31, 31,
-------------------------------------- --------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED CAPITAL
RATIOS, END OF PERIOD:
Common stockholders'
equity to total as-
sets.................. 5.0% 4.7% 4.4% 4.0% 3.7% 3.9% 3.6%
Total stockholders' eq-
uity to total assets.. 5.7% 4.9% 4.8% 4.8% 4.4% 4.7% 4.1%
Risk-based capital
ratios
Tier 1 Capital........ 7.7% 8.5% 9.1% 8.5% 8.7% 8.2% 8.2%(3)
Total Capital.......... 13.6% 14.5% 14.8% 13.9% 13.7% 13.4% 14.8%(3)
Leverage Ratio......... 6.1% 6.3% 5.3% 5.1% 5.5% 5.3% 4.5%(3)
EMPLOYEES, at end of pe-
riod................... 12,917 13,571 14,529 14,069 15,228 14,053 15,134
</TABLE>
- --------
(1) These figures exclude the cumulative effects of accounting changes recorded
in 1993 and 1992.
(2) Profitability ratios for the three months ended March 31, 1996 and 1997
have been annualized.
(3) These ratios reflect the adoption of the Market Risk Amendment to the risk-
based capital guidelines. This amendment changes the calculation of risk-
weighted assets for trading accounts. In addition, it requires that the
capital and risk-adjusted assets of BT Securities be included when
calculating the ratios (including the leverage ratio) for BTNY. Previously,
the assets and capital of the securities subsidiary were excluded. Prior
period ratios have not been restated for the adoption of this amendment.
15
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALEX. BROWN
The summary of consolidated financial data for Alex. Brown and its
subsidiaries below is based on and derived from, and should be read in
conjunction with the financial information included in Alex. Brown's 1996
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 1997
and 1996. The statement of income and balance sheet statistics for the
preceding five fiscal years ended December 31, 1996, have been derived from
Alex. Brown's audited consolidated financial statements and notes thereto.
Interim unaudited data for the three months ended March 31, 1997 and 1996 are
unaudited, but include, in the opinion of management of Alex. Brown, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data. Results for the three months ended March 31,
1997 and 1996 are not necessarily indicative of results which may be expected
for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
AT OR FOR THE YEAR ENDED DECEMBER ENDED MARCH
31, 31,
-------------------------------------- --------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATED STATEMENT OF INCOME:
Net interest revenue....................... $ 25 $ 32 $ 44 $ 67 $ 91 $ 21 $ 24
Noninterest revenue........................ $ 420 $ 581 $ 540 $ 706 $ 918 $ 238 $ 198
Net income................................. $ 59 $ 89 $ 71 $ 96 $ 154 $ 41 $ 31
PER COMMON SHARE DATA:
Primary earnings per share................. $ 2.48 $ 3.74 $ 3.06 $ 4.11 $ 6.28 $ 1.67 $ 1.23
Fully diluted earnings per share........... $ 2.33 $ 3.40 $ 2.70 $ 3.60 $ 5.51 $ 1.48 $ 1.10
Dividends declared per share............... $ .300 $ .383 $ .450 $ .516 $ .637 $ .133 $ .17
--as a percentage of fully diluted earnings
per share................................. 13% 11% 17% 14% 12% 9% 15%
Book value.................................. $12.04 $15.01 $17.42 $21.00 $26.79 $22.62 $28.19
PROFITABILITY RATIOS(1):
Return on average common stockholders'
equity.................................... 23.6% 28.8% 19.7% 22.2% 27.2% 31.5% 18.5%
Return on average total assets............. 6.0% 7.5% 5.4% 5.4% 6.5% 7.1% 4.9%
CONSOLIDATED BALANCES, END OF PERIOD:
Total assets............................... $1,085 $1,283 $1,346 $2,197 $2,543 $2,374 $2,553
Long-term debt not included in risk-based
capital................................... $ 49 $ 77 $ 87 $ 193 $ 199 $ 197 $ 209
Long-term debt included in risk-based
capital................................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Common stockholders' equity................ $ 274 $ 346 $ 373 $ 489 $ 644 $ 546 $ 702
Total stockholders' equity................. $ 274 $ 346 $ 373 $ 489 $ 644 $ 546 $ 702
CONSOLIDATED CAPITAL RATIOS, END OF PERIOD:
Common stockholders' equity to total
assets.................................... 25.3% 26.9% 27.7% 22.3% 25.3% 23.0% 27.5%
Total stockholders' equity to total
assets.................................... 25.3% 26.9% 27.7% 22.3% 25.3% 23.0% 27.5%
EMPLOYEES................................... 1,984 2,181 2,330 2,433 2,708 2,422 2,669
</TABLE>
- --------
(1) Profitability ratios for the three months ended March 31, 1996 and 1997
have been annualized.
16
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA OF BTNY AND
ALEX. BROWN
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATED
STATEMENT OF INCOME:
Net interest revenue... $ 1,172 $ 1,346 $ 1,216 $ 884 $ 1,057 $ 234 $ 332
Noninterest revenue.... $ 2,751 $ 3,945 $ 3,013 $ 3,129 $ 4,117 $ 988 $ 1,066
Income before
cumulative effects of
accounting changes.... $ 698 $ 1,159 $ 686 $ 311 $ 766 $ 179 $ 200
Cumulative effects of
accounting changes.... $ 446 $ (75) $ -- $ -- $ -- $ -- $ --
------- ------- ------- -------- -------- -------- --------
Net income............. $ 1,144 $ 1,084 $ 686 $ 311 $ 766 $ 179 $ 200
------- ------- ------- -------- -------- -------- --------
PER COMMON SHARE DATA:
Primary earnings per
share
Income before
cumulative effects of
accounting changes.... $ 6.43 $ 10.90 $ 6.51 $ 2.59 $ 6.93 $ 1.62 $ 1.81
Cumulative effects of
accounting changes.... $ 4.30 $ (.72) $ -- $ -- $ -- $ -- $ --
------- ------- ------- -------- -------- -------- --------
Net income............. $ 10.73 $ 10.18 $ 6.51 $ 2.59 $ 6.93 $ 1.62 $ 1.81
------- ------- ------- -------- -------- -------- --------
Fully diluted earnings
per share
Income before
cumulative effects of
accounting changes.... $ 6.33 $ 10.60 $ 6.33 $ 2.53 $ 6.71 $ 1.57 $ 1.76
Cumulative effects of
accounting changes.... $ 4.23 $ (.70) $ -- $ -- $ -- $ -- $ --
------- ------- ------- -------- -------- -------- --------
Net income............. $ 10.56 $ 9.90 $ 6.33 $ 2.53 $ 6.71 $ 1.57 $ 1.76
------- ------- ------- -------- -------- -------- --------
Cash dividends
declared(1)........... $ 2.88 $ 3.24 $ 3.70 $ 4.00 $ 4.00 $ 1.00 $ 1.00
--as a percentage of
fully diluted earnings
per
share(2).............. 45% 31% 58% 158% 60% 64% 57%
Book value............. $ 37.94 $ 45.54 $ 47.74 $ 45.73 $ 49.21 $ 46.39 $ 49.50
PROFITABILITY RATIOS(3):
Return on average
common stockholders'
equity(2)............. 19.8% 26.5% 14.0% 5.7% 14.6% 14.1% 14.9%
Return on average total
assets(2)............. .92% 1.34% .65% .28% .63% .62% .64%
CONSOLIDATED BALANCES, END OF
PERIOD:
Total assets........... $73,971 $93,365 $98,362 $106,199 $122,778 $110,518 $125,531
Long-term debt not
included in risk-based
capital............... $ 2,335 $ 3,296 $ 4,317 $ 7,127 $ 8,732 $ 7,904 $ 8,164
Long-term debt included
in risk-based
capital............... $ 1,706 $ 2,378 $ 2,225 $ 2,360 $ 2,576 $ 2,418 $ 3,164
Mandatorily redeemable
capital securities of
subsidiary trust
holding solely junior
subordinated
deferrable interest
debentures included in
risk-based capital.... $ -- $ -- $ -- $ -- $ 730 $ -- $ 1,469
Preferred Stock of
Subsidiary ........... $ -- $ 250 $ 250 $ 250 $ 250 $ 250 $ --
Preferred Stock
(Corporation)......... $ 500 $ 250 $ 395 $ 865 $ 810 $ 866 $ 704
Common stockholders'
equity................ $ 3,895 $ 4,630 $ 4,682 $ 4,608 $ 5,068 $ 4,735 $ 5,079
Total stockholders'
equity................ $ 4,395 $ 4,880 $ 5,077 $ 5,473 $ 5,878 $ 5,601 $ 5,783
CONSOLIDATED CAPITAL RATIOS,
END OF PERIOD:
Common stockholders'
equity to total
assets................ 5.3% 5.0% 4.8% 4.3% 4.1% 4.3% 4.0%
Total stockholders'
equity to total
assets................ 6.0% 5.2% 5.2% 5.2% 4.8% 5.1% 4.6%
Risk-based capital
ratios................
Tier 1 Capital......... 8.1% 8.9% 9.4% 9.0% 9.3% 8.7% 9.3%(4)
Total Capital.......... 13.6% 14.5% 14.8% 13.9% 13.7% 13.4% 15.3%(4)
Leverage Ratio......... 6.3% 6.5% 5.5% 5.4% 5.9% 5.6% 5.1%(4)
EMPLOYEES............... 14,901 15,752 16,859 16,502 17,936 16,475 17,803
</TABLE>
- --------
(1) Pro forma combined cash dividends declared per common share represent
BTNY's historical amounts.
(2) These figures exclude the cumulative effects of accounting changes recorded
in 1993 and 1992.
(3) Profitability ratios for the three months ended March 31, 1996 and 1997
have been annualized.
(4) These ratios reflect the adoption of the Market Risk Amendment to the risk-
based capital guidelines. This amendment changes the calculation of risk-
weighted assets for trading accounts. In addition, it requires that the
capital and risk-adjusted assets of BT Securities and Alex. Brown be
included when calculating the ratios (including the leverage ratio) for
BTNY. Previously, the assets and capital of the securities subsidiaries
were excluded. Prior period ratios have not been restated for the adoption
of this amendment.
17
<PAGE>
BTNY SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed to BTNY
Stockholders on or about July 14, 1997, and is accompanied by the notice of
the BTNY Special Meeting and a form of proxy that is solicited by the BTNY
Board for use at the BTNY Special Meeting to be held on August 13, 1997, at
10:00 a.m., local time, at One Bankers Trust Plaza (130 Liberty Street), New
York, New York, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the BTNY Special Meeting, BTNY Stockholders will be asked to consider and
vote upon (i) the Share Issuance and (ii) such other matters as may properly
be submitted to a vote at the BTNY Special Meeting. The BTNY Stockholders may
also be asked to vote upon a proposal to adjourn or postpone the BTNY Special
Meeting, which adjournment or postponement could be used for the purpose,
among others, of allowing additional time for the soliciting of additional
votes to approve the Share Issuance.
PROXIES
The accompanying form of proxy is for use at the BTNY Special Meeting if a
BTNY Stockholder will be unable to attend in person. The proxy may be revoked
by the BTNY Stockholder at any time before it is exercised, by submitting to
the Secretary of BTNY written notice of revocation, a properly executed proxy
of a later date or by attending the BTNY Special Meeting and electing to vote
in person. Written notices of revocation and other communications with respect
to the revocation of BTNY proxies should be addressed to Bankers Trust New
York Corporation, 130 Liberty Street, New York, New York 10006, Attention:
Office of the Secretary. All shares represented by valid proxies received
pursuant to this solicitation, and not revoked before they are exercised will
be voted in the manner specified therein. If no specification is made, the
proxies will be voted in favor of the Share Issuance. The BTNY Board is
unaware of any other matters that may be presented for action at the BTNY
Special Meeting. If other matters do properly come before the BTNY Special
Meeting, however, it is intended that shares represented by proxies in the
accompanying form will be voted or not voted by the persons named in the
proxies in their discretion provided that no proxy that is voted against the
Share Issuance will be voted in favor of any adjournment or postponement of
the BTNY Special Meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the BTNY Stockholders will be
borne by BTNY; provided, however, that BTNY and Alex. Brown have each agreed
to pay one-half of the printing and mailing costs of this Joint Proxy
Statement-Prospectus and related materials. In addition to the solicitation of
the proxies by mail, BTNY will request banks, brokers and other record holders
to send proxies and proxy material to the beneficial owners of the stock and
secure their voting instructions, if necessary. BTNY will reimburse such
record holders for their reasonable expenses in so doing. BTNY has also made
arrangements with Kissel-Blake Inc. to assist it in soliciting proxies from
banks, brokers and nominees, and has agreed to pay $20,000 plus expenses for
such services. If necessary, BTNY may also use several of its regular
employees, who will not be specially compensated, to solicit proxies from
stockholders, either personally or by telephone, telegram, facsimile, special
delivery letter, express mail or other means of communication.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the NYBCL and the BTNY By-laws, July 2, 1997
has been fixed as the BTNY Record Date for determination of holders of BTNY
Common Stock entitled to notice of and to vote at the BTNY Special Meeting.
Accordingly, only holders of shares of BTNY Common Stock of record at the
close of business on the BTNY Record Date will be entitled to notice of and to
vote at the BTNY Special Meeting.
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The number of outstanding shares of BTNY Common Stock entitled to vote at the
BTNY Special Meeting is 77,649,619. On the BTNY Record Date, there were
approximately 21,000 holders of record of BTNY Common Stock. Shares of BTNY
Common Stock present in person at the BTNY Special Meeting but not voting and
shares of BTNY Common Stock for which BTNY has received proxies but with
respect to which holders of such shares have abstained, will be counted as
present at the BTNY Special Meeting for purposes of determining the presence
or absence of a quorum for the transaction of business. Brokers who hold
shares of BTNY Common Stock in nominee or "street" name for customers who are
the beneficial owners of such shares are prohibited from giving a proxy to
vote shares held for such customers with respect to the matters to be
considered and voted upon at the BTNY Special Meeting without specific
instructions from such customers. Shares represented by proxies returned by a
broker holding such shares in "street" name will be counted for purposes of
determining whether a quorum exists, even if such shares are not voted in
matters where discretionary voting by the broker is not allowed ("broker non-
votes").
Each share of BTNY Common Stock entitles its holder to one vote. The Share
Issuance requires the affirmative vote of a majority of the votes cast on such
matter, provided that the total votes cast represent more than 50% of the
outstanding shares of BTNY Common Stock.
BECAUSE APPROVAL OF THE SHARE ISSUANCE REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTES CAST ON SUCH MATTER (PROVIDED THAT THE TOTAL VOTES CAST
REPRESENT MORE THAN 50% OF THE OUTSTANDING SHARES OF BTNY COMMON STOCK),
ABSTENTIONS WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES BUT BROKER NON-VOTES
WILL NOT BE COUNTED FOR THE PURPOSES OF DETERMINING WHETHER THE SHARE ISSUANCE
HAS BEEN APPROVED (ALTHOUGH THEY WILL COUNT TOWARD DETERMINING WHETHER A
QUORUM IS PRESENT). ACCORDINGLY, THE BTNY BOARD URGES THE HOLDERS OF BTNY
COMMON STOCK TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the BTNY Record Date, directors and executive officers of BTNY
beneficially owned 1,899,113 shares of BTNY Common Stock (which number
includes 1,371,864 options exercisable within 60 days and 6,685 shares held in
BTNY's Qualified Employee Benefit Plan), or 2.4% of the shares entitled to
vote at the BTNY Special Meeting. It is currently expected that each such
director and executive officer of BTNY will vote the shares of BTNY stock
beneficially owned by him or her for approval of the Share Issuance. In
addition, as of the BTNY Record Date, the directors and executive officers of
Alex. Brown beneficially owned significantly less than 1% of the shares
entitled to be voted at the BTNY Special Meeting. As of the BTNY Record Date,
the banking and trust subsidiaries of BTNY, in fiduciary, custodial or similar
capacity, held, with sole or shared voting power, less than 1% of the shares
of BTNY Common Stock entitled to vote at the BTNY Special Meeting.
Additional information with respect to beneficial ownership of BTNY Common
Stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of BTNY Common Stock
by directors and executive officers of BTNY is incorporated by reference to
the 1996 Annual Report on Form 10-K of BTNY. See "Incorporation of Certain
Documents by Reference."
RECOMMENDATION OF BTNY BOARD
The BTNY Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby, including the Share Issuance. The BTNY
Board believes that the Merger and the Share Issuance are in the best
interests of BTNY and the BTNY Stockholders and recommends that the BTNY
Stockholders vote "FOR" the Share Issuance. See "The Merger--Reasons for the
Merger--Recommendation of the BTNY Board and Reasons for the Merger."
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ALEX. BROWN SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed to the Alex.
Brown Stockholders on or about July 14, 1997, and is accompanied by the notice
of the Alex. Brown Special Meeting and a form of proxy that is solicited by
the Alex. Brown Board for use at the Alex. Brown Special Meeting to be held on
August 13, 1997, at 4:30 p.m., local time, at One South Street, Baltimore,
Maryland 21202, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Alex. Brown Special Meeting, Alex. Brown Stockholders will be asked
to consider and vote upon (i) the Merger Agreement and the transactions
contemplated thereby and (ii) such other matters as may properly be submitted
to a vote at the Alex. Brown Special Meeting. The Alex. Brown Stockholders may
also be asked to vote upon a proposal to adjourn or postpone the Alex. Brown
Special Meeting, which adjournment or postponement could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the Merger Agreement.
PROXIES
The accompanying form of proxy is for use at the Alex. Brown Special Meeting
if an Alex. Brown Stockholder will be unable to attend in person. The proxy
may be revoked by the Alex. Brown Stockholder at any time before it is
exercised, by submitting to the Secretary of Alex. Brown written notice of
revocation, a properly executed proxy of a later date or by attending the
Alex. Brown Special Meeting and electing to vote in person. Written notices of
revocation and other communications with respect to the revocation of Alex.
Brown proxies should be addressed to Alex. Brown Incorporated, One South
Street, Baltimore, Maryland 21202, Attention: Secretary. All shares
represented by valid proxies received pursuant to this solicitation and not
revoked before they are exercised will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of
approval of the Merger Agreement and the transactions contemplated thereby.
The Alex. Brown Board is unaware of any other matters that may be presented
for action at the Alex. Brown Special Meeting. If other matters do properly
come before the Alex. Brown Special Meeting, however, it is intended that
shares represented by proxies in the accompanying form will be voted or not
voted by the persons named in the proxies in their discretion, provided that
no proxy that is voted against approval and adoption of the Merger Agreement
will be voted in favor of any adjournment or postponement of the Alex. Brown
Special Meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the Alex. Brown Stockholders
will be borne by Alex. Brown; provided, however, that BTNY and Alex. Brown
have each agreed to pay one-half of the printing and mailing costs of this
Joint Proxy Statement-Prospectus and related materials. In addition to the
solicitation of the proxies by mail, Alex. Brown will request banks, brokers
and other record holders to send proxies and proxy material to the beneficial
owners of the stock and secure their voting instructions, if necessary. Alex.
Brown will reimburse such record holders for their reasonable expenses in so
doing. Alex. Brown has also made arrangements with Corporate Investor
Communication, Inc. to assist it in soliciting proxies from banks, brokers and
nominees and has agreed to pay approximately $5,000 plus expenses for such
services. If necessary, Alex. Brown may also use several of its regular
employees, who will not be specially compensated, to solicit proxies from
stockholders, either personally or by telephone, telegram, facsimile, special
delivery letter, express mail or other means of communication.
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RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the MGCL and the Alex. Brown By-laws, July 2,
1997 has been fixed as the Alex. Brown Record Date for determination of
holders of Alex. Brown Common Stock entitled to notice of and to vote at the
Alex. Brown Special Meeting. Accordingly, only holders of shares of Alex.
Brown Common Stock of record at the close of business on the Alex. Brown
Record Date will be entitled to notice of and to vote at the Alex. Brown
Special Meeting. At the close of business on the Alex. Brown Record Date,
there were 25,441,287 shares of Alex. Brown Common Stock outstanding held by
approximately 454 holders of record. The presence, in person or by proxy, of
shares of Alex. Brown Common Stock representing a majority of the total voting
power of such shares outstanding and entitled to vote on the Alex. Brown
Record Date is necessary to constitute a quorum at the Alex. Brown Special
Meeting. Shares of Alex. Brown Common Stock present in person at the Alex.
Brown Special Meeting but not voting, and shares of Alex. Brown Common Stock
for which Alex. Brown has received proxies but with respect to which holders
of such shares have abstained, will be counted as present at the Alex. Brown
Special Meeting for purposes of determining the presence or absence of a
quorum for the transaction of business. Brokers who hold shares of Alex. Brown
Common Stock in nominee or "street" name for customers who are the beneficial
owners of such shares are prohibited from giving a proxy to vote shares held
for such customers with respect to the matters to be considered and voted upon
at the Alex. Brown Special Meeting without specific instructions from such
customers. Shares represented by proxies returned by a broker holding such
shares in "street" name will be counted for purposes of determining whether a
quorum exists, even if such shares are not voted in matters where
discretionary voting by the broker is not allowed ("broker non-votes").
Each share of Alex. Brown Common Stock entitles its holder to one vote. The
affirmative vote of a majority of the outstanding shares of Alex. Brown Common
Stock is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby.
BECAUSE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
ALEX. BROWN COMMON STOCK, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME
EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE ALEX. BROWN BOARD URGES THE HOLDERS
OF ALEX. BROWN COMMON STOCK TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the Alex. Brown Record Date, directors and executive officers of Alex.
Brown beneficially owned approximately 3,826,636 shares of Alex. Brown Common
Stock, representing 15.0% of the Alex. Brown Common Stock entitled to vote at
the Alex. Brown Special Meeting. It is currently expected that each such
director and executive officer of Alex. Brown will vote the shares of Alex.
Brown Common Stock beneficially owned by him or her for approval of the Merger
Agreement and the transactions contemplated thereby. As of the Alex. Brown
Record Date, directors and executive officers of BTNY beneficially owned no
shares of Alex. Brown Common Stock. In addition, as of the Alex. Brown Record
Date, the banking and trust subsidiaries of BTNY, as fiduciaries, custodians
or agents, held, with sole or shared voting power, less than 1% of the shares
of Alex. Brown Common Stock entitled to vote at the Alex. Brown Special
Meeting.
Additional information with respect to beneficial ownership of Alex. Brown
Common Stock by persons and entities owning more than 5% of such stock and
more detailed information with respect to beneficial ownership of Alex. Brown
Common Stock by directors and executive officers of Alex. Brown is
incorporated by reference to the 1996 Annual Report on Form 10-K of Alex.
Brown. See "Incorporation of Certain Documents by Reference."
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RECOMMENDATION OF ALEX. BROWN BOARD
The Alex. Brown Board has unanimously approved and adopted the Merger
Agreement and the transactions contemplated thereby. The Alex. Brown Board
believes that the Merger Agreement is in the best interests of Alex. Brown and
the Alex. Brown Stockholders and recommends that the Alex. Brown Stockholders
vote "FOR" the approval and adoption of the Merger Agreement. See "The
Merger--Reasons for the Merger--Recommendation of the Alex. Brown Board and
Reasons for the Merger."
THE MERGER
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
THE ALEX. BROWN STOCK OPTION AGREEMENT AND THE BTNY OPTION AGREEMENT. THE
MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS JOINT PROXY STATEMENT-
PROSPECTUS AND THE OPTION AGREEMENTS ARE INCLUDED AS EXHIBITS TO THE
REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY STATEMENT-PROSPECTUS IS A
PART AND ARE INCORPORATED HEREIN BY REFERENCE. SEE "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
GENERAL
The BTNY Board and the Alex. Brown Board each have unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby. With
certain limited exceptions described below, under the terms of the Merger
Agreement, each share of Alex. Brown Common Stock outstanding at the Effective
Time shall be converted into the right to receive a number of shares of BTNY
Common Stock equal to the Exchange Ratio. Shares of BTNY Common Stock and BTNY
preferred stock issued and outstanding immediately prior to the Effective Time
will remain issued and outstanding after the Merger.
Each of the BTNY Board and the Alex. Brown Board believes that the terms of
the Merger Agreement are fair and in the best interest of the parties and
their respective stockholders. The BTNY Board unanimously recommends that the
BTNY Stockholders vote to approve the Share Issuance, and the Alex. Brown
Board unanimously recommends that the Alex. Brown Stockholders vote to approve
and adopt the Merger Agreement and the consummation of the transactions
contemplated thereby.
This section of the Joint Proxy Statement-Prospectus describes certain
aspects of the proposed Merger, including the principal provisions of the
Merger Agreement and the Option Agreements. Certain capitalized terms used
herein without definition shall have the meanings ascribed them in the Merger
Agreement or the Option Agreements.
BACKGROUND OF THE MERGER
BTNY. BTNY has successfully transformed itself over the last 25 years from a
traditional, broad line commercial and retail bank, originally founded in
1903, into a specialized financial services firm serving the most complex and
challenging needs of institutional, corporate and high-net worth individual
clients around the world. BTNY has developed an extensive global presence and
product capability, operating in over 50 countries.
BTNY's strategy is based on specialist skills, a drive for innovation and
providing solutions to clients' most pressing and complex financial problems
by drawing on multiple disciplines and financial products. BTNY was one of the
first banking companies permitted by the Federal Reserve Board to begin
underwriting corporate securities through its BT Securities Section 20
affiliate and, in 1989, BTNY became one of first banking institutions to have
these powers expanded to include the ability to underwrite equity securities.
To build on its strength in corporate finance, in 1996 BTNY acquired
Wolfensohn & Co., which added premier merger, acquisition and corporate
advisory capabilities to BTNY's leading positions in syndicated bank lending,
high-yield bonds and private equity.
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To complement further its corporate finance skills, BTNY's management has
been exploring options to build its equity underwriting, sales, trading and
research capabilities so as to assist clients with all aspects of strategic
financings. BTNY management believes that adding these capabilities will
enable BTNY to win a fair share of its clients' equities business, to attract
new clients and to continue to develop innovative financing techniques.
Alex. Brown. Founded in 1800, Alex. Brown is the oldest investment bank in
America. Alex. Brown has substantial equity financing capabilities,
outstanding research depth, and strong institutional and private client sales
and trading capabilities. The firm has pursued a specialized strategy based on
expertise serving primarily high-growth companies in specific industry
sectors, including technology, healthcare and media/communications. As a
reflection of the strength of its capabilities and solid relationships with
clients, in 1996 Alex. Brown ranked first in the number of lead managed
initial public offerings (IPOs) of common equity, underwriting 51 offerings.
It ranked third in total number of IPOs and secondary equity offerings
combined. Alex. Brown also has an active and substantial merger and
acquisition advisory practice, completing over 70 transactions for its clients
in 1996.
In the early 1990's, Alex. Brown recognized the compelling strategic logic
of being able to offer to its clients debt-financing alternatives --
particularly high-yield and syndicated lending -- as a way to help them
achieve their objectives as they grow or restructure. Alex. Brown also
identified the importance of a worldwide presence and product capability as
its clients expanded and competed internationally. Throughout the 1990's,
Alex. Brown has been building its debt financing capability and has
strengthened its international operations in London, Geneva and Tokyo.
In 1996, Alex. Brown's management concluded that building debt finance
capability similar in caliber to its equity capability would be difficult,
costly and time-consuming. Management also realized that Alex. Brown was
losing business opportunities as its clients turned to other firms to supply
the services that it did not provide. Alex. Brown management considered a
range of possible options for developing the necessary capabilities.
Background to Merger. In early 1996, BTNY management undertook an in depth
analysis and review of its needs and opportunities in the equities business.
This strategic review included a comprehensive screening and analysis of firms
in the equities business around the world. Alex. Brown was identified as a
candidate for acquisition because of its complementary client base, industry
focus, and outstanding capabilities. It was clear, however, that Alex. Brown
or any other sizable broker-dealer could not be merged with BTNY unless and
until the Federal Reserve Board modified the regulatory thresholds applicable
to the underwriting business of banks' Section 20 affiliates.
On December 30, 1996 the Federal Reserve Board announced a change to the
regulations governing the securities affiliates of commercial banks, which
would take effect March 6, 1997. The change increased the percentage of
revenue these affiliates could derive from "ineligible" activities,
essentially equity and debt underwriting. Due to the substantial size of BT
Securities' existing book of business, this meant that the acquisition of a
firm such as Alex. Brown could be effected by BTNY within the regulatory
limits.
In January 1997, after a telephone conversation with A.B. Krongard, Chairman
and Chief Executive Officer of Alex. Brown, Frank N. Newman, Chairman and
Chief Executive Officer of BTNY, met with Mayo A. Shattuck III, President and
Chief Operating Officer of Alex. Brown. Each indicated that their firm's
current plan was to remain independent, but did agree to meet in early
February to consider whether some strategic alliance might be in the best
interests of the two firms and their stockholders.
Merger Discussions. On February 5, 1997, Mr. Newman and Richard H. Daniel,
BTNY's Chief Financial Officer, met in Baltimore with Mr. Krongard, Mr.
Shattuck and Beverly L. Wright, Alex. Brown's Chief Financial Officer. The
purpose of the meeting was to discuss their respective views on the industry,
strategic needs and opportunities at each firm, compatibility of operating
approaches, and similar matters. They also discussed the changes in the
regulations governing banks' securities affiliates and the possibility that a
combination of Alex. Brown with BTNY would be feasible. At this meeting, BTNY
and Alex. Brown
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management agreed that a merger appeared to have compelling strategic and
financial logic and decided to pursue further discussions. BTNY did not
explore potential acquisitions with other investment banking firms and Alex.
Brown did not explore a potential combination with any other acquirors.
Following the February 5th meeting and continuing through late March 1997,
senior executives of BTNY and Alex. Brown met, engaged in telephone
discussions and exchanged financial and operating information on a number of
occasions to discuss the possible business combination of the two companies.
From March 26, 1997 through April 4, 1997, members of senior management of
BTNY, and Alex. Brown, together with their legal, financial and accounting
advisors, conducted due diligence investigations with respect to the other
firm. Representatives of the parties also met in person and by telephone to
negotiate the fundamental terms of the proposed Merger and the proposed merger
agreement and option agreements. The Exchange Ratio and other terms of the
Merger were negotiated directly by Mr. Newman of BTNY and Mr. Krongard of
Alex. Brown. During this period, the companies' legal advisors exchanged
drafts of the merger agreement and related documents.
On April 1, 1997, Mr. Newman and Mr. Krongard met in person at BTNY's
headquarters in New York City to discuss details of the proposed Merger.
On April 2, 1997, the Alex. Brown Board held a special meeting for the
purpose of reviewing the status of the proposed transaction with BTNY. At the
meeting, among other things, Mr. Krongard reviewed the background of the
discussions between Alex. Brown and BTNY and various members of management
discussed the strategic business implications of a combination between Alex.
Brown and BTNY. Alex. Brown's financial advisors made an initial presentation
at the April 2 meeting with respect to a potential business combination with
BTNY. Mr. Newman and Mr. Daniel were invited to, and attended part of, the
April 2 Alex. Brown Board meeting to discuss their view of the strategic
benefits of a combination of the two firms.
On April 3 and 4, 1997, Messrs. Newman, Daniel, Krongard and Shattuck, Ms.
Wright and Alex. Brown's and BTNY's counsel had a number of telephone
conversations to finalize the details of the proposed merger.
On April 5, 1997, the BTNY Board and the Alex. Brown Board each met at their
respective headquarters to consider the proposed Merger. At the meeting of the
BTNY Board, Mr. Newman, Mr. Daniel and other members of BTNY's senior
management presented the terms of the proposed Merger and the BTNY Board
discussed its relative advantages and disadvantages. See "--Reasons for the
Merger--Recommendation of the BTNY Board and Reasons for the Merger."
Representatives from Ernst & Young LLP discussed their firm's financial due
diligence findings. In addition, BT Wolfensohn rendered its opinion that the
Exchange Ratio was fair to BTNY and BTNY's legal advisors reviewed the terms
of the Merger Agreement and the Option Agreements and the relevant legal
issues. After due consideration of these matters, which are more specifically
described under "--Reasons for the Merger--Recommendation of the BTNY Board
and Reasons for the Merger," the BTNY Board determined that the Merger was in
the best interests of BTNY and its stockholders and unanimously approved the
Merger Agreement and the Stock Option Agreements and the transactions
contemplated thereby.
At the meeting of the Alex. Brown Board held on April 5, 1997, Mr. Krongard,
Mr. Shattuck, Ms. Wright and other senior executives of Alex. Brown presented
the terms of the proposed Merger and the Alex. Brown Board discussed its
relative advantages and disadvantages. See "--Reasons for the Merger--
Recommendation of the Alex. Brown Board and Reasons for the Merger." In
addition, AB & Sons rendered its opinion that the Exchange Ratio was fair from
a financial point of view to the holders of Alex. Brown Common Stock and Alex.
Brown's legal advisors reviewed the terms of the Merger Agreement and the
Option Agreements and the relevant legal issues. After due consideration of
these matters, which are more specifically described under "--Recommendation
of the Alex. Brown Board and Reasons for the Merger," the Alex. Brown Board
determined that the Merger was in the best interests of Alex. Brown and its
stockholders and unanimously approved the Merger Agreement and the Option
Agreements and the transactions contemplated thereby.
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On April 6, 1997, the Merger Agreement and the Option Agreements were
executed by BTNY and Alex. Brown. In addition, the Support Agreements and
certain Employment Agreements were executed by BTNY and the respective
stockholders and employees of Alex. Brown, as the case may be. Following the
execution of the Merger Agreement and prior to the commencement of trading on
April 7, 1997, the companies issued press releases announcing the execution of
the Merger Agreement.
REASONS FOR THE MERGER
Recommendation of the BTNY Board and Reasons for the Merger. THE BTNY BOARD
BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, BTNY AND
THE BTNY STOCKHOLDERS. THE BTNY BOARD UNANIMOUSLY RECOMMENDS THAT THE BTNY
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE SHARE ISSUANCE.
The BTNY Board believes that the consummation of the Merger presents an
opportunity to create a specialized global investment banking firm, with the
ability to provide its clients with a full range of financial services
focusing especially on rapidly growing or changing companies.
In reaching its conclusion to approve the Merger Agreement and the Option
Agreements and the transactions contemplated thereby, the BTNY Board consulted
with BTNY management, as well as with its financial and legal advisors, and
considered a variety of factors which favored the Merger Agreement, including
the following:
Full Service Global Investment Bank. The BTNY Board considered the
effectiveness of the Merger in positioning BTNY as a leading global investment
banking franchise. The BTNY Board considered the competitive advantage that
the combined company would have as a result of its ability to offer a full
range of financial products, including both debt financing and equity
underwriting, and mergers and acquisitions advisory services, to clients
around the world.
Complementary Skills and Strengths. The BTNY Board considered the
complementary skills and strengths of the two companies, particularly BTNY's
strength in high yield and other debt security products and Alex. Brown's
expertise in equity underwriting and research. The BTNY Board also considered
the firms' similar client focus and cultural fit. The BTNY Board noted that
the combined firm would have substantially increased distribution capabilities
and an expanded client base because, despite their similar focus, there is
relatively little client overlap. The BTNY Board noted that management had
screened a number of other potential merger candidates but believed that Alex.
Brown offered the most complementary strengths and the best cultural fit.
Industry Trends. The BTNY Board considered the ongoing trend toward
globalization and consolidation in the banking and securities industries which
has increased the importance of being able to provide "one-stop shopping" to
financial services clients. The BTNY Board believed that the combined company
would have a sufficiently broad scope of product offerings and scale of
operations to compete effectively in this global environment.
Cost Savings. The BTNY Board considered the expectation that the Merger
would result in cost synergies for the combined company's operations. The BTNY
Board noted that, although no assurances can be given that any particular
level of costs synergies will be achieved, the managements of BTNY and Alex.
Brown had identified potential synergies in the form of cost savings which may
be achieved in the first 12 months following consummation of the Merger. See
"--Management and Operations Following the Merger."
Opportunities for Revenue Enhancement. The BTNY Board considered the
likelihood that the combined company would generate significant additions to
revenue by providing existing clients of the two firms with an expanded range
of services and as a result of the enhanced ability of the merged firms to
attract new clients. The BTNY Board also noted the enhanced capital strength
of the combined company and the fact that Alex. Brown's established industry
expertise provides strong positioning in key growth sectors.
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Advice of Financial Advisors. The BTNY Board considered the oral opinion of
BT Wolfensohn, later confirmed in writing, to the effect that, as of April 5,
1997, the Exchange Ratio was fair to BTNY from a financial point of view and
the analysis of BT Wolfensohn described under "--Fairness Opinions of
Financial Advisors--Opinion of BT Wolfensohn, Financial Advisor to BTNY."
The BTNY Board also considered a number of factors which disfavored the
Merger Agreement, including the following:
Retention of Key Personnel. The BTNY Board considered the proposed Retention
Plan and Employment Agreements with members of management and other employees
of Alex. Brown, including the cost of such arrangements and their likely
effectiveness in retaining key personnel of Alex. Brown following the Merger.
The BTNY Board also noted that Mr. Krongard and up to two other current non-
management directors of Alex. Brown to be mutually agreed upon by BTNY and
Alex. Brown would join the BTNY Board following the Merger. See "--Management
and Operations after the Merger" and "--Interests of Certain Persons in the
Merger."
Financial Considerations. The BTNY Board considered the structure of the
Merger and the terms of the Merger Agreement and the Option Agreements,
including the fact that the fixed Exchange Ratio provides certainty as to the
number of shares of BTNY Common Stock to be issued in the Merger and that the
Merger is intended to qualify for "pooling of interests" accounting treatment.
The BTNY Board also considered the current high trading price of Alex. Brown
Common Stock compared to historical levels and the approximately 50% premium
that the Exchange Ratio would provide to Alex. Brown Stockholders, based on
the prior week's trading prices.
The BTNY Board also considered a number of factors which neither favored nor
disfavored the Merger Agreement, including the following:
Due Diligence Review. The BTNY Board analyzed the financial condition,
businesses and prospects of each of BTNY and Alex. Brown, including
information with respect to their respective historic stock and earnings
performance. The BTNY Board considered the detailed financial analyses, pro
forma and other information with respect to BTNY and Alex. Brown discussed by
BT Wolfensohn, as well as the BTNY Board's own knowledge of BTNY, Alex. Brown
and their respective businesses. In making its determination, the BTNY Board
took into account the results of BTNY's due diligence review of Alex. Brown's
business and adjusted its pro forma analyses for the outstanding financial
performance of Alex. Brown, from a historical perspective, in fiscal 1996. The
BTNY Board also considered the projection that, while the Merger on a pro
forma basis likely initially would be dilutive to BTNY Stockholders, the
dilutive effects are expected to be eliminated by 1998 and the Merger is
expected to be accretive thereafter.
Regulatory Approvals. The BTNY Board considered the likelihood of the Merger
being approved by the appropriate regulatory authorities, particularly in
light of the recent actions by banking regulators that have the effect of
easing business combinations between commercial banks and investment banks.
See "--Regulatory Approvals Required for the Merger."
The foregoing discussion of the information and factors considered by the
BTNY Board is not intended to be exhaustive, but is believed to include all
material factors considered by the BTNY Board. In reaching its determination
to approve and recommend the Merger, the BTNY Board did not assign any
relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to different factors. The BTNY
Board is unanimous in its recommendation that holders of BTNY Common Stock
vote for approval of the Share Issuance. There is no assurance, however, that
the benefits of the Merger considered by the BTNY Board will be achieved or
received by BTNY.
Recommendation of the Alex. Brown Board and Reasons for the Merger. THE
ALEX. BROWN BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, ALEX. BROWN AND THE ALEX. BROWN STOCKHOLDERS. ACCORDINGLY, THE
ALEX. BROWN BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT
AND RECOMMENDS
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THAT THE ALEX. BROWN STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER.
The Alex. Brown Board believes that by combining Alex. Brown, the oldest
investment banking firm in America, with BTNY, a premier global financial
institution known for innovation, the Merger will create an exceptional
organization ideally positioned to serve their clients. The Merger will
combine Alex. Brown's traditionally strong investment banking, equity
underwriting and retail sales businesses with BTNY's strength in the high-
yield market and strong global asset management capabilities thereby enabling
Alex. Brown to offer a wider array of services to its existing customers and
at the same time expand its customer base to a world wide market.
The Alex. Brown Board believes that although there is no guarantee as to the
results of the Merger, as a strategic matter, the financial services industry
is entering an unprecedented era of competition, defined by globalization,
consolidation and sector convergence. To serve their individual and
institutional clients better than their competitors and to maximize absolute
and relative stockholder value, the Alex. Brown Board believes firms must have
a leading market position in their businesses, balanced earnings streams,
broad-based customer access, size and scale and a global presence among both
providers and users of capital.
In reaching its determination, the Alex. Brown Board consulted with Alex.
Brown's management, as well as its legal counsel and the Alex. Brown team of
financial advisors, and considered a number of factors, including the
following principal factors:
(i) The consideration to be received by Alex. Brown's stockholders in the
Merger. See "--Conversion of Alex. Brown Common Stock; Treatment of Alex.
Brown Stock Options and Debentures" and "Exchange of Certificates;
Fractional Shares."
(ii) The complementary nature of Alex. Brown's and BTNY's respective
businesses (including, without limitation, the range of services provided),
managements, strategic objectives and competitive positions.
(iii) The presentations of AB & Sons delivered to the Alex. Brown Board
on April 2, 1997 and April 5, 1997 including, without limitation, AB &
Sons' oral opinion (subsequently confirmed in writing) that, as of April 5,
1997, from a financial point of view, the Exchange Ratio is fair to Alex.
Brown Stockholders. See "--Fairness Opinions of Financial Advisors--Opinion
of AB & Sons, Financial Advisor to Alex. Brown."
(iv) The analysis and recommendation of the Merger by Alex. Brown's
management, including, without limitation, the complementary nature of the
services and products of Alex. Brown and BTNY and the investment bank
culture already established at BTNY.
(v) The terms and conditions of the Merger Agreement, including the
amount and form of the consideration, the parties' representations,
warranties, covenants and agreements, and the conditions to the respective
obligations set forth in the Merger Agreement.
(vi) The possible strategic growth opportunities that might be available
to Alex. Brown absent the Merger. Based upon their review of such possible
strategic growth opportunities as an independent company, the Alex. Brown
Board believed that the Alex. Brown Stockholders would benefit more from
the potential business combination with BTNY.
(vii) Information provided by Alex. Brown's advisors with respect to the
federal income tax consequences of the Merger to Alex. Brown Stockholders.
The Alex. Brown Board was advised that, for federal income tax purposes,
Alex. Brown Stockholders generally would not recognize taxable gain or
loss. See "--Certain Federal Income Tax Consequences."
(viii) The fact that the Merger would result in an end to Alex. Brown's
nearly 200 year history as an independent investment banking firm.
(ix) The fact that although BTNY already has an investment banking
culture there would be a significant challenge to integrate Alex. Brown's
unique culture with BTNY's culture.
(x) The BTNY financial performance relative to Alex. Brown's financial
performance.
The foregoing discussion of information and factors considered and given
weight by the Alex. Brown Board is not intended to be exhaustive. In view of
the wide variety of factors considered in connection with its
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evaluation of the terms of the Merger, the Alex. Brown Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching their determinations.
In addition, individual members of the Alex. Brown Board may have given
different weights to different factors.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
Opinion of BT Wolfensohn, Financial Advisor to BTNY. BT Wolfensohn has acted
as BTNY's financial advisor in connection with the Merger. On April 5, 1997,
BT Wolfensohn delivered its oral opinion, which was subsequently confirmed in
writing, to the BTNY Board. The opinion of BT Wolfensohn, as investment
banker, states that, as of the date of such opinion, the Exchange Ratio
pursuant to the Merger Agreement was fair from a financial point of view to
BTNY.
THE FULL TEXT OF THE WRITTEN OPINION OF BT WOLFENSOHN TO THE BTNY BOARD
DATED AS OF APRIL 6, 1997, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN BY BT WOLFENSOHN IN CONNECTION
WITH THE OPINION, IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED HEREIN
BY REFERENCE. HOLDERS OF SHARES OF BTNY COMMON STOCK ARE URGED TO, AND SHOULD,
READ SUCH OPINION IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF BT WOLFENSOHN
SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION ATTACHED AS APPENDIX B HERETO.
In connection with rendering its opinion, BT Wolfensohn has, among other
things: (i) reviewed the publicly available consolidated financial statements
of Alex. Brown for recent years and certain other relevant financial and
operating data of Alex. Brown available from public sources or provided to BT
Wolfensohn by Alex. Brown; (ii) reviewed the publicly available consolidated
financial statements of BTNY for recent years and certain other relevant
financial and operating data of BTNY available from public sources or provided
to BT Wolfensohn by BTNY; (iii) reviewed certain internal financial analyses,
projections and operating information relating to BTNY and Alex. Brown,
provided by their respective managements to BT Wolfensohn, including analyses
and forecasts of certain cost savings, operating efficiencies, revenue effects
and financial synergies (collectively, the "Synergies") expected by BTNY and
Alex. Brown to be achieved as a result of the Merger; (iv) discussed the
business, financial condition and prospects of BTNY and Alex. Brown with
certain officers and certain members of management of BTNY and Alex. Brown,
respectively; (v) analyzed the pro forma impact of the Merger on BTNY earnings
per share, consolidated capitalization and financial ratios; (vi) considered
the strategic objectives of BTNY as outlined to BT Wolfensohn by BTNY
management; (vii) reviewed the trading prices and activity for BTNY Common
Stock and Alex. Brown Common Stock; (viii) reviewed the financial and other
terms of the Merger Agreement and the other agreements referred to therein;
(ix) reviewed the financial terms, to the extent publicly available, of
selected transactions in the investment banking industry which BT Wolfensohn
believes to be relevant; (x) reviewed certain public information pertaining to
companies engaged in businesses that BT Wolfensohn believes to be generally
comparable to those of BTNY and Alex. Brown including, without limitation, the
trading prices for the equity securities of such companies; and (xi) performed
such other analyses and examinations and considered such other information,
financial studies, analyses and investigations and financial, economic and
market data as BT Wolfensohn deemed relevant.
BT Wolfensohn relied without independent verification upon the accuracy and
completeness of all the information, whether publicly available or furnished
to it, concerning Alex. Brown and BT, including, without limitation, any
financial information, forecasts or projections considered by BT Wolfensohn in
connection with rendering its opinion. BT Wolfensohn did not conduct a
physical inspection of any of the properties or assets, and has not prepared
or obtained any independent evaluation or appraisal of any of the assets or
liabilities, of Alex. Brown or BTNY. With respect to the financial forecasts
and projections, including the Synergies, made available to BT Wolfensohn and
used in its analysis, BT Wolfensohn has assumed that they have been reasonably
prepared on a basis reflecting the best currently available judgments and
estimates of the management of BTNY or Alex. Brown, as the case may be, and in
rendering its opinion it expresses no view as to the reasonableness of such
forecasts and projections, including the Synergies, or the assumptions on
which they are based.
For purposes of rendering its opinion, BT Wolfensohn made certain material
assumptions, which are set forth in this paragraph and below. BT Wolfensohn
has assumed that, in all respects material to its analysis, the
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representations and warranties of BTNY, BTNY Sub and Alex. Brown contained in
the Merger Agreement are true and correct, that BTNY, BTNY Sub and Alex. Brown
will each perform all of the covenants and agreements to be performed by it
under the Merger Agreement and all conditions to the obligations of each of
BTNY, BTNY Sub and Alex. Brown to consummate the Merger will be satisfied
without any waiver thereof. BT Wolfensohn has also assumed that all material
governmental, regulatory or other approvals and consents required in
connection with the consummation of the transactions contemplated by the
Merger Agreement will be obtained and that in connection with obtaining any
necessary governmental, regulatory or other approvals and consents, or any
amendments, modifications or waivers to any agreements, instruments or orders
to which either BTNY or Alex. Brown is a party or is subject or by which it is
bound, no limitations, restrictions or conditions will be imposed or
amendments, modifications or waivers made that would have a material adverse
effect on BTNY or Alex. Brown or materially reduce the contemplated benefits
of the Merger to BTNY. In addition, BT Wolfensohn has assumed that the Merger
will be tax-free to each of BTNY and Alex. Brown and their respective
stockholders and that the Merger will be accounted for as a pooling of
interests.
Set forth below is a summary of certain financial analyses which were used
by BT Wolfensohn in connection with providing its opinion to the BTNY Board
and were reviewed with the BTNY Board at its meeting on April 5, 1997.
Peer Group Analysis. BT Wolfensohn reviewed and compared certain financial
and stock market information of BTNY and Alex. Brown with that of a group of
large investment banking institutions comprised of The Bear Stearns Companies
Inc., Donaldson, Lufkin & Jenrette, Inc., Lehman Brothers Holdings Inc.,
Merrill Lynch & Co., Inc., Morgan Stanley Group Inc., Paine Webber Group Inc.
and Salomon Inc (collectively, the "Larger Peers"). This analysis indicated
that based upon closing stock prices as of April 3, 1997 and earnings per
share estimates for the Larger Peers from First Call and Institutional Brokers
Estimate System ("IBES") as of April 2, 1997, (i) the price earnings
multiples, based on latest twelve months earnings per share, were
approximately 8.1x for Alex. Brown and 12.3x for BTNY, as compared to a mean
of 8.7x and a median of 8.8x for the Larger Peers (with a range from 7.4x to
11.0x), and (ii) the multiples of market price to book value per share were
approximately 1.7x for Alex. Brown and 1.6x for BTNY, as compared to a mean of
1.5x and median of 1.4x for the Larger Peers (with a range from 0.9x to 2.3x).
BT Wolfensohn also reviewed and compared certain financial and stock market
information of BTNY and Alex. Brown with that of a group of smaller investment
banking institutions comprised of Advest Group, Inc., A.G. Edwards, Inc.,
Hambrecht & Quist Group, Interra Financial Inc., Jeffries Group, Inc., Legg
Mason, Inc., McDonald & Company Investments, Inc., Morgan Keegan, Inc., Piper
Jaffray Companies Inc. and Raymond James Financial, Inc. (collectively, the
"Smaller Peers"). This analysis indicated that based upon closing stock prices
as of April 3, 1997 and earnings per share estimates for the Smaller Peers
from First Call and IBES as of April 2, 1997 (i) mean and median price
earnings multiples, based on latest twelve months earnings per share, were
approximately 11.0x and 10.2x, respectively, for the Smaller Peers (with a
range from 8.5x to 14.9x and with such multiples unavailable for two of the
Smaller Peers) and (ii) the mean and median of multiples of market price to
book value per share of the Smaller Peers were each approximately 1.7x (with a
range from 1.1x to 2.2x).
Contribution Analysis. BT Wolfensohn analyzed and compared the respective
contribution of each of BTNY and Alex. Brown to BTNY following the Merger
based on a comparison of certain stock market and financial information for
each company as a separate entity on a stand-alone basis. This analysis did
not take into account any Synergies and restructuring charges. This analysis
indicated that BTNY would contribute to the combined entity following the
Merger approximately (i) 80% based upon net income for the latest twelve
months, (ii) as of December 31, 1996, 98% based upon total assets and (iii) as
of December 31, 1996, 89% based upon stockholders' equity.
Selected Transactions Analysis. BT Wolfensohn reviewed and analyzed certain
financial, operating and stock market information relating to four selected
merger transactions involving large financial institutions. These transactions
were the acquisitions of Smith New Court PLC by Merrill Lynch & Co., Inc.
(announced on July
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21, 1995), Kleinwort Benson Group plc by Dresdner Bank AG (announced on June
15, 1995), S.G. Warburg Group plc by Swiss Bank Corporation (announced on May
10, 1995) and Morgan Grenfell Group plc by Deutsche Bank AG (announced on
November 27, 1989). This analysis indicated that the exchange ratio received
by stockholders of the target company represented (i) a percentage above
market value ranging from approximately 0.3% to 15.5% based on closing stock
prices one day prior to the public announcement of the transaction,
approximately 2.3% to 19.6% based on closing stock prices one week prior to
the public announcement of the transaction, and approximately 10.2% to 37.5%
based on closing stock prices one month prior to the public announcement of
the transaction, (ii) a multiple of latest twelve months' earnings per share
ranging from approximately 10.3x to 32.4x, and (iii) a multiple of book value
ranging from 1.1x to 2.6x. Based upon currently outstanding shares and the
April 4, 1997 market prices for BTNY Common Stock and Alex. Brown Common
Stock, the Exchange Ratio represents (i) a percentage above the market value
of Alex. Brown Common Stock of approximately 29% based on closing stock price
one trading day prior to the public announcement of the Merger, approximately
50% based on the closing stock price one week prior to the public announcement
of the Merger and approximately 20% based on the closing stock price one month
prior to the public announcement of the Merger, (ii) a multiple to the latest
twelve months' earnings per share of Alex. Brown of approximately 12.4x and
(iii) a multiple to Alex. Brown's book value of approximately 2.5x.
Premiums Paid Analysis. BT Wolfensohn reviewed the premiums paid in 43
announced merger and acquisition transactions in the banking industry from
1996 to 1997 with an equity value in excess of $100 million (the "Bank
Transactions") and 110 announced non-bank transactions (the "Non-bank
Transactions") with an equity value in excess of $500 million from 1996 to
1997. BT Wolfensohn compared the premium paid over market price in the Bank
Transactions and the Non-bank Transactions to the premium paid over market
price in the Merger. BT Wolfensohn noted that the Bank Transactions were
effected at a mean premium to the target's per share market price four weeks
prior to announcement and to the target's per share market price one day prior
to announcement of 32% and 22%, respectively, and that the Non-bank
Transactions were effected at a mean premium to the target's per share market
price four weeks prior to announcement and to the target's per share market
price one day prior to announcement of 43% and 33%, respectively, vis-a-vis
premiums of 20% and 29%, respectively, for the Merger (based on the per share
market price four weeks prior to the announcement of the Merger and one day
prior to the announcement of the Merger, respectively).
Discounted Dividend Analysis. BT Wolfensohn calculated a range of present
values per share for Alex. Brown Common Stock based on estimates of Alex.
Brown's future dividend stream over a ten-year period and estimates of
terminal values per share of Alex. Brown Common Stock at the end of such
period. Estimates of the future dividend stream were based on the assumption
that Alex. Brown would, in general, maintain its current dividend policy.
Estimates of the terminal value per share were calculated using a range of
multiples of projected earnings per share (7.0x to 10.0x) selected based upon
a review of the trading multiples of the Larger Peers and Smaller Peers. Three
scenarios for the financial performance of Alex. Brown for the years 1997
through 2006 were evaluated. Scenario 1 was based on Alex. Brown management's
financial plan, Scenario 2 was based on a discount to Alex. Brown management's
financial plan, and Scenario 3 was based on analyst estimates as reported to
First Call and extrapolated using industry growth rates. BT Wolfensohn
aggregated the dividend stream through 2006 and the range of terminal values
and discounted the combined cash flow stream at a range of discount rates of
12.0% to 14.0%. BT Wolfensohn arrived at such discount rates based on its
judgment of the weighted average cost of capital of Alex. Brown. The analysis
included the present value of the Synergies and resulted in a range of values
for the three scenarios of $51 to $102 per share.
Pro Forma Combination Analysis. BT Wolfensohn analyzed the pro forma impact
of the Merger on the earnings per share of BTNY Common Stock. Based upon First
Call and IBES estimates, assuming the Merger will be accounted for as a
pooling of interests for fiscal 1998 and taking into account the realization
of Synergies, the Merger will be accretive to holders of BTNY Common Stock by
0.2% in 1998 or dilutive after restructuring charges to holders of BTNY Common
Stock by 2.9%, and accretive to holders of BTNY Common Stock by 0.6% to 4.4%
in 1999 and 3.0% to 8.1% in 2000. The pro forma impact on earnings per share
based upon projected earnings was also analyzed.
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BT Wolfensohn also analyzed the pro forma impact of the Merger on key ratios
relating to BTNY based on the new market risk amendment to the risk-based
capital guidelines issued by the Federal Reserve Board (as defined herein) and
the Bank for International Settlements. On a pro forma basis BTNY's Tier 1
ratio would be 8.5%, compared to 8.6% on a stand-alone basis. The total
capital ratio of BTNY on a pro forma basis would be 13.7%, compared to 15.0%
on a stand-alone basis. BTNY's leverage ratio on a pro forma basis would be
4.9% compared to 4.5% on a stand-alone basis.
The foregoing summary does not purport to be a complete description of the
analyses performed by BT Wolfensohn in connection with preparing its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying the opinion of BT Wolfensohn. In arriving at its fairness
determination, BT Wolfensohn considered the result of all such analyses and
did not assign relative weights to any of the analyses.
The analyses were prepared solely for the purpose of enabling BT Wolfensohn
to provide its opinion to the BTNY Board as to the fairness of the Exchange
Ratio to BTNY and does not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold, which are
inherently subject to uncertainty. Any estimates incorporated in the analyses
performed by BT Wolfensohn are not necessarily indicative of actual past or
future values or results, which may be significantly more or less favorable
than any such estimates. No company used in the analyses prepared by BT
Wolfensohn is directly comparable to BTNY or Alex. Brown and none of the
comparable acquisition transactions or other business combinations used as a
comparison is identical to the transactions contemplated by the Merger
Agreement. Accordingly, an analysis of publicly traded comparable companies
and comparable business combinations resulting from the transactions is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies to which they are being compared. In
connection with the analyses, BT Wolfensohn made, and was provided estimates
and forecasts by BTNY and Alex. Brown management based upon numerous
assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
BTNY and Alex. Brown. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses. Because such analyses
are inherently subject to uncertainty, being based upon numerous factors or
events beyond the control of BTNY and Alex. Brown or their respective
advisors, none of BTNY, Alex. Brown or BT Wolfensohn or any other person
assumes responsibility if future results or actual values are materially
different from these forecasts or assumptions. The opinion of BT Wolfensohn
necessarily was based on the economic, market and other conditions as in
effect on, and the information made available to it as of, the date of its
opinion.
The terms of the Merger were determined through negotiations between BTNY
and Alex. Brown and were approved by the BTNY Board. Although BT Wolfensohn
provided advice to BTNY during the course of these negotiations, the decision
to enter into the Merger Agreement and to accept the Exchange Ratio was solely
that of the BTNY Board. As described above, the opinion and presentation of BT
Wolfensohn to the BTNY Board were only one of a number of factors taken into
consideration by the BTNY Board in making its determination to approve the
Merger Agreement. See "--Reasons for Merger." BT Wolfensohn's opinion was
provided to the BTNY Board to assist it in connection with its consideration
of the Merger and does not constitute a recommendation to any holder of BTNY
Common Stock as to how to vote at the BTNY Special Meeting.
BT Wolfensohn is experienced in providing advice in connection with mergers
and acquisitions and related transactions. BT Wolfensohn is a division of BT
Securities, a wholly-owned subsidiary of BTNY. Certain members of management
of BT Wolfensohn are also members of management of BTNY and also may have
interests that are in addition to, and may be different from, the interests of
BTNY Stockholders. The BTNY Board relied on BT Wolfensohn's experience in
providing advice in connection with mergers and acquisitions and related
transactions and did not believe there was a need to retain another advisor in
connection with the Merger. Additionally, the BTNY Board was advised by its
outside counsel, Wachtell, Lipton, Rosen & Katz,
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that the BTNY Board's fiduciary duties did not require it to retain a third
party financial advisor. See "--Interests of Certain Persons in the Merger."
BT Wolfensohn is an internationally recognized investment banking firm that
has substantial experience in transactions similar to the Merger. In the
ordinary course of business of BT Securities and its affiliates (collectively,
"BT Securities Affiliates"), BT Securities Affiliates may actively trade in
the securities of Alex. Brown for their own accounts and for the accounts of
their customers. Accordingly, BT Securities Affiliates may at any time hold a
long or short position in such securities.
Opinion of AB & Sons, Financial Advisor to Alex. Brown. Alex. Brown utilized
the services of AB & Sons, a wholly-owned subsidiary of Alex. Brown, to act as
Alex. Brown's financial advisor in connection with the Merger, including
rendering its opinion to the Alex. Brown Board as to the fairness, from a
financial point of view, of the Exchange Ratio to Alex. Brown's Stockholders.
At the April 5, 1997 meeting of the Alex. Brown Board, representatives of AB
& Sons made a presentation with respect to the Merger and rendered to the
Alex. Brown Board its oral opinion, subsequently confirmed in writing as of
the same date, that, as of such date, and subject to the assumptions made,
matters considered and limitations set forth in such opinion and summarized
below, the Exchange Ratio was fair, from a financial point of view, to Alex.
Brown's Stockholders. No limitations were imposed by the Alex. Brown Board
upon AB & Sons with respect to the investigations made or procedures followed
by it in rendering its opinion.
THE FULL TEXT OF AB & SONS' WRITTEN OPINION DATED APRIL 5, 1997 (THE "AB &
SONS OPINION"), WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED
HERETO AS APPENDIX C AND IS INCORPORATED HEREIN BY REFERENCE. ALEX. BROWN
STOCKHOLDERS ARE URGED TO READ THE AB & SONS OPINION IN ITS ENTIRETY. THE AB &
SONS OPINION IS DIRECTED TO THE ALEX. BROWN BOARD, ADDRESSES ONLY THE FAIRNESS
OF THE EXCHANGE RATIO TO ALEX. BROWN'S STOCKHOLDERS FROM A FINANCIAL POINT OF
VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY ALEX. BROWN STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE ALEX. BROWN SPECIAL MEETING. THE
AB & SONS OPINION WAS RENDERED TO THE ALEX. BROWN BOARD FOR ITS CONSIDERATION
IN DETERMINING WHETHER TO APPROVE THE MERGER AGREEMENT. THE DISCUSSION OF THE
AB & SONS OPINION IN THIS JOINT PROXY-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE AB & SONS OPINION.
In connection with the AB & Sons Opinion, AB & Sons made certain material
assumptions which are set forth in the following paragraphs. AB & Sons
reviewed certain publicly available financial information and other
information concerning Alex. Brown and BTNY and certain internal analyses and
other information furnished to it by Alex. Brown and BTNY. AB & Sons also held
discussions with the members of the senior managements of Alex. Brown and BTNY
regarding the businesses and prospects of their respective companies and the
joint prospects of a combined company. In addition, AB & Sons (i) reviewed the
reported prices and trading activity for the common stock of both Alex. Brown
and BTNY, (ii) compared certain financial and stock market information for
Alex. Brown and BTNY with similar information for certain other companies
whose securities are publicly traded, (iii) reviewed the financial terms of
certain recent business combinations, (iv) reviewed the terms of the Merger
Agreement and certain related documents, and (v) performed such other studies
and analyses and considered such other factors as it deemed appropriate.
In conducting its review and arriving at its opinion, AB & Sons assumed and
relied upon, without independent verification, the accuracy, completeness and
fairness of the information furnished to or otherwise reviewed by or discussed
with it for purposes of rendering its opinion. With respect to the financial
projections of Alex. Brown and BTNY and other information relating to the
prospects of Alex. Brown and BTNY provided to AB & Sons by each company, AB &
Sons assumed that such projections and other information were reasonably
prepared and reflected the best currently available judgments and estimates of
the respective managements of Alex. Brown and BTNY as to the likely future
financial performances of their respective companies and of the combined
entity. The financial projections of Alex. Brown and BTNY that were provided
to AB & Sons were utilized and relied upon by AB & Sons in the Contribution
Analysis, Discounted Dividend Analysis and Pro Forma Combined Earnings
Analysis summarized below. AB & Sons assumed, with the consent of Alex. Brown,
that the Merger will qualify for pooling of interests accounting treatment and
as a tax-free
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transaction for the Alex. Brown Stockholders. AB & Sons did not make and it
was not provided with an independent evaluation or appraisal of the assets of
Alex. Brown and BTNY, nor has AB & Sons been furnished with any such
evaluations or appraisals. The AB & Sons Opinion is based on market, economic
and other conditions as they existed and could be evaluated as of the date of
the opinion letter. In arriving at its opinion, AB & Sons was not authorized
to solicit, and did not solicit, interest from any party with respect to the
acquisition of Alex. Brown or any of its assets.
The following is a summary of the analyses performed and factors considered
by AB & Sons in connection with the rendering of the AB & Sons Opinion.
Historical Financial Position. In rendering its opinion, AB & Sons reviewed
and analyzed the historical and current financial condition of Alex. Brown and
BTNY which included (i) an assessment of their respective recent financial
statements; (ii) an analysis of their respective revenue, growth and operating
performance trends; and (iii) an assessment of their respective capital
structures and dividend policies. AB & Sons noted that Alex. Brown
management's projection of fully-diluted earnings per share ("EPS") for the
first quarter of 1997 of $1.10 was 25.7% lower than the reported fully-diluted
EPS for the first quarter of 1996.
Historical Stock Price Performance. AB & Sons reviewed and analyzed the
daily closing per share market prices and trading volume for Alex. Brown and
BTNY common stock from April 6, 1992 to April 4, 1997. AB & Sons also reviewed
the daily closing per share market prices of the Alex. Brown Common Stock and
BTNY Common Stock and compared the movement of such daily closing prices with
the movement of the S&P 500 composite average over the period from April 6,
1992 through April 4, 1997. AB & Sons noted that, on a relative basis, Alex.
Brown outperformed the S&P 500 composite average and BTNY underperformed the
S&P 500 composite average. AB & Sons also reviewed the daily closing per share
market prices of Alex. Brown Common Stock and compared the movement of such
closing prices with the movement of a securities industry composite average
(consisting of The Bear Stearns Companies Inc., A. G. Edwards, Inc., Interra
Financial Incorporated, Legg Mason, Inc., Merrill Lynch & Co., Inc., Morgan
Stanley Group Inc., Paine Webber Group Inc., Piper Jaffray Companies Inc.,
Raymond James Financial, Inc. and Salomon Inc) over the period from April 6,
1992 through April 4, 1997. On a relative basis, the price of the Alex. Brown
Common Stock outperformed the securities industry composite average. AB & Sons
also reviewed the daily closing per share market prices of BTNY Common Stock
and compared the movement of such closing prices with the movement of two
financial services industry composite averages (the first consisting of The
Bank of New York Company, Inc., The Chase Manhattan Corporation, Citicorp,
First Union Corporation, J.P. Morgan & Co. Incorporated and NationsBank
Corporation (collectively, the "Bank Group"); and the second consisting of
J.P. Morgan & Co. Incorporated, The Bank of New York Company, Inc., The Bear
Stearns Companies Inc., Salomon Inc and Merrill Lynch & Co., Inc.
(collectively, the "Proxy Group")) over the period from April 6, 1992 through
April 4, 1997. On a relative basis the BTNY Common Stock price underperformed
both the Bank Group and the Proxy Group composite averages. This information
was presented to give the Alex. Brown Board background information regarding
the respective stock price performances of Alex. Brown and BTNY over the
periods indicated.
Analysis of Certain Other Publicly Traded Companies--Alex. Brown. This
analysis examines a company's valuation as compared to the valuation in the
public market of other selected publicly traded companies. AB & Sons compared
certain financial information (utilizing the valuation measurements described
below) relating to Alex. Brown to certain corresponding information for a
group of 13 publicly traded companies in the securities industry (consisting
of The Bear Stearns Companies Inc., Donaldson, Lufkin & Jenrette, Inc., A. G.
Edwards, Inc., Hambrecht & Quist Group, Interra Financial Incorporated, Legg
Mason, Inc., Lehman Brothers Holdings, Inc., Merrill Lynch & Co., Inc., Morgan
Stanley & Co. Incorporated, Dean Witter, Discover & Co. (analyzed as pro forma
for the pending merger between Morgan Stanley Group Inc. and Dean Witter,
Discover & Co.), Paine Webber Group Inc., Piper Jaffray Companies Inc.,
Raymond James Financial, Inc. and Salomon Inc (collectively, the "Selected
Securities Firms")). Such financial information included, among other things,
(i) common equity market valuation; (ii) leverage ratios; (iii) operating
performance; and (iv) ratios of common equity price per
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share ("Equity Value") to stated book value per share ("BVPS") and fully-
diluted EPS. In the case of the Selected Securities Firms, Equity Value was
based on closing market prices as of April 4, 1997, and in the case of Alex.
Brown, Equity Value was based on the closing market price of Alex. Brown
Common Stock on April 2, 1997 (the "Unaffected Price"). AB & Sons also
computed ratios of the implied price per share paid in the Merger (the
"Implied Merger Value"), calculated as the product of the Exchange Ratio and
the closing market price of BTNY Common Stock on April 4, 1997, to BVPS and
EPS. The financial information used in connection with the multiples provided
below with respect to Alex. Brown and the Selected Securities Firms was based
on the latest reported 12 month period as derived from publicly available
information and on estimated EPS for calendar years 1997 and 1998 as reported
by IBES. AB & Sons noted that, for Alex. Brown, the multiple of Equity Value
to BVPS was 1.5x and the multiple of Implied Merger Value to BVPS was 2.5x,
compared to a range of multiples of Equity Value to BVPS of 1.0x to 2.3x, with
a mean of 1.7x, for the Selected Securities Firms. AB & Sons also noted that
the multiple of Equity Value to trailing 12 month EPS was 7.5x for Alex. Brown
and the multiple of Implied Merger Value to trailing 12 month EPS was 12.4x
for Alex. Brown, compared to a range of multiples of Equity Value to trailing
12 month EPS of 6.4x to 15.5x, with a mean of 9.5x, for the Selected
Securities Firms; the multiple of Equity Value to calendar year 1997 EPS was
9.5x for Alex. Brown and the multiple of Implied Merger Value to calendar year
1997 EPS was 15.7x for Alex. Brown, compared to a range of multiples of Equity
Value to calendar year 1997 EPS of 7.7x to 20.4x, with a mean of 10.5x, for
the Selected Securities Firms; and the multiple of Equity Value to calendar
year 1998 EPS was 10.2x for Alex. Brown and the multiple of Implied Merger
Value to calendar year 1998 EPS was 16.8x for Alex. Brown, compared to a range
of multiples of Equity Value to calendar year 1998 EPS of 8.4x to 11.9x, with
a mean of 10.0x, for the Selected Securities Firms. AB & Sons noted that the
multiples for Alex. Brown using Equity Value were generally within the range
of the multiples for the Selected Securities Firms and the multiples for Alex.
Brown using the Implied Merger Value were generally within or above the range
of the multiples for the Selected Securities Firms. The IBES fully-diluted EPS
estimates, as of April 2, 1997, for the calendar years 1997 and 1998 for Alex.
Brown were $4.34 and $4.07, respectively.
Analysis of Certain Other Publicly Traded Companies--BTNY. AB & Sons
compared certain financial information (utilizing the valuation measurements
described below) relating to BTNY to certain corresponding information from
two groups of publicly traded companies in the financial services industry,
the Bank Group and the Proxy Group. Such financial information included, among
other things, (i) common equity market valuation; (ii) capitalization ratios;
(iii) operating performance; and (iv) ratios of Equity Value (based on closing
market prices as of April 4, 1997) to BVPS and EPS. The financial information
used in connection with the multiples provided below with respect to BTNY, the
Bank Group and the Proxy Group was based on the latest reported 12 month
period as derived from publicly available information and on estimated EPS for
calendar years 1997 and 1998 as reported by IBES. AB & Sons noted that, on the
basis of the most recently reported financial results, the multiple of Equity
Value to BVPS was 1.5x for BTNY, compared to a range of 1.8x to 2.8x, with a
mean of 2.4x, for the Bank Group and a range of 1.3x to 2.8x, with a mean of
1.9x, for the Proxy Group. AB & Sons also noted that, on a trailing 12 month
basis, the multiple of Equity Value to trailing 12 month EPS was 12.2x for
BTNY, compared to a range of 12.6x to 15.2x, with a mean of 14.1x, for the
Bank Group and a range of 6.7x to 14.9x, with a mean of 10.6x, for the Proxy
Group; the multiple of Equity Value to calendar year 1997 EPS was 11.0x for
BTNY, compared to a range of 11.1x to 13.3x, with a mean of 12.4x, for the
Bank Group and a range of 8.3x to 13.1x, with a mean of 11.1x, for the Proxy
Group; and the multiple of Equity Value to calendar year 1998 EPS was 9.6x for
BTNY, compared to a range of 9.6x to 11.8x, with a mean of 11.0x, for the Bank
Group and a range of 9.6x to 11.9x, with a mean of 11.2x, for the Proxy Group.
AB & Sons noted that the multiples for BTNY were generally below the range of
the multiples for the Bank Group and within the range of the multiples for the
Proxy Group. The IBES fully diluted EPS estimates, as of April 4, 1997, for
the calendar years 1997 and 1998 for BTNY were $7.50 and $8.57, respectively.
Analysis of Selected Mergers and Acquisitions. AB & Sons reviewed the
financial terms, to the extent publicly available, of 20 pending or completed
mergers and acquisitions since 1987 involving domestic targets in the
securities industry (the "Selected Domestic Transactions"), six selected
completed mergers and acquisitions prior to 1987 involving domestic targets in
the securities industry, and 11 pending or completed
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mergers and acquisitions since 1987 involving international targets in the
securities industry (the "Selected International Transactions"). AB & Sons
calculated various financial multiples and the premiums over market price paid
in such transactions based on certain publicly available information for each
of the groups of transactions and compared them to corresponding financial
multiples and the premiums over market paid in the Merger, based on the
Implied Merger Value. AB & Sons noted that the multiple of purchase price per
share to BVPS was 2.5x for the Merger versus a range of 0.4x to 4.1x, with a
mean of 1.8x, for the Selected Domestic Transactions and a range of 0.6x to
4.2x, with a mean of 2.1x for the Selected International Transactions. Alex.
Brown further noted that the multiple of purchase price per share to trailing
12 month EPS was 12.4x for the Merger versus a range of 8.8x to 24.5x, with a
mean of 15.9x, for the Selected Domestic Transactions and a range of 8.8x to
29.2x, with a mean of 17.2x, for the Selected International Transactions.
Alex. Brown also noted that the Selected Domestic Transactions were effected
at a range of premiums to the target's per share market price four weeks prior
to announcement and to the target's per share market price one day prior to
announcement of 6.9% to 65.2%, with a mean of 25.9%, and 7.1% to 52.4%, with a
mean of 21.2%, respectively, versus premiums of 16.0% and 65.0%, respectively,
for the Merger (based on the per share market price four weeks prior to the
April 7, 1997 announcement of the Merger and the Unaffected Price). All
multiples for the Selected Domestic Transactions and the Selected
International Transactions were based on public information available at the
time of announcement of such transaction, without taking into account
differing market and other conditions over the period during which the
transactions occurred.
Premiums Paid Analysis. AB & Sons reviewed the premiums paid in 306
completed merger and acquisition transactions in the financial services
industry from 1992 to 1996 (the "Financial Services Transactions") and 343
completed stock-for-stock merger and acquisition transactions from 1992 to
1996 (the "Stock Transactions"). AB & Sons compared the premium paid over
market price in the Financial Services Transactions and the Stock Transactions
to the premium paid over market price in the Merger. AB & Sons noted that the
Financial Services Transactions were effected at a mean premium to the
target's per share market price four weeks prior to announcement and to the
target's per share market price one day prior to announcement of 38.4% and
30.0%, respectively, and that the Stock Transactions were effected at a mean
premium to the target's per share market price four weeks prior to
announcement and to the target's per share market price one day prior to
announcement of 40.6% and 28.8%, respectively, versus premiums of 16.0% and
65.0%, respectively, for the Merger (based on the per share market price four
weeks prior to the announcement of the Merger and the Unaffected Price,
respectively).
Contribution Analysis. AB & Sons analyzed the relative contributions of
Alex. Brown and BTNY to the pro forma balance sheet of the combined company
and the pro forma income statement of the combined company, based on
historical data, managements' projections for their respective companies and
the IBES mean EPS estimate for BTNY for 1998 and compared such percentage
contributions to Alex. Brown's relative pro forma ownership of approximately
22.3% of the outstanding capital of the combined company. This analysis showed
that on a pro forma basis, based on the two companies' financial positions at
December 31, 1996, Alex. Brown and BTNY would account for approximately 2.1%
and 97.9%, respectively, of the combined company's pro forma total assets;
11.0% and 89.0%, respectively, of the combined company's pro forma total
equity; and 12.7% and 87.3%, respectively, of the combined company's pro forma
common equity. This analysis also showed that on a pro forma combined basis
(excluding (i) the effect of any synergies that may be realized as a result of
the Merger and (ii) non-recurring expenses relating to the Merger), Alex.
Brown and BTNY would account for approximately 10.0% and 90.0% respectively,
of the combined company's pro forma revenue and 20.1% and 79.9%, respectively,
of the combined company's pro forma net income for the twelve-month period
ending December 31, 1996; 14.5% and 85.5%, respectively, of the combined
company's pro forma net income for the projected calendar year 1997; and 14.5%
and 85.5%, respectively, of the combined company's pro forma net income for
the projected calendar year 1998.
Discounted Dividend Analysis. AB & Sons calculated a range of present values
per share for Alex. Brown Common Stock based on estimates of Alex. Brown's
future dividend stream over a five-year period and estimates of terminal
values per share of Alex. Brown Common Stock at the end of such period.
Estimates of the future
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dividend stream were based on the assumption that Alex. Brown would, in
general, maintain its current dividend policy. Estimates of the terminal value
per share were calculated using a range of multiples of projected BVPS (1.8x
to 2.5x) selected based upon a review of the trading multiples of the Selected
Securities Firms and the multiples paid in the Selected Domestic Transactions
and the Selected International Transactions. Three cases of projections for
the financial performance of Alex. Brown for the years 1997 through 2001 were
used in estimating the future dividend stream and the future BVPS. The first
case (the "Base Case") was based on Alex. Brown management's financial plan,
the second case (the "17.7% ROE Case") was based on the assumption that Alex.
Brown would achieve a 17.7% return on average equity ("ROE") over the
projection period (Alex. Brown's average annual ROE from 1987 through 1996),
and the third case (the "20% ROE Case") was based on the assumption that Alex.
Brown would achieve a 20% ROE over the projection period. AB & Sons aggregated
the dividend stream through 2001 and the range of terminal values and
discounted the combined cash flow stream at a range of discount rates of 13.5%
to 16.5%. AB & Sons arrived at such discount rates based on its judgment of
the weighted average cost of capital of Alex. Brown. This analysis indicated a
range of values of $45.10 to $69.71 per share based upon the Base Case, $51.56
to $79.71 per share based upon the 17.7% ROE Case, and $57.45 to $88.73 per
share based upon the 20% ROE Case.
Pro Forma Combined Earnings Analysis. AB & Sons analyzed certain pro forma
effects of the Merger on the projected performance of BTNY. Based on such
analysis, AB & Sons computed the resulting dilution/accretion to the combined
company's fully-diluted EPS estimate for the fiscal years ending 1997, 1998
and 1999, pursuant to the Merger after taking into account potential cost
savings and other synergies that Alex. Brown and BTNY might achieve if the
Merger were consummated and before nonrecurring costs relating to the Merger.
AB & Sons noted that after taking into account such cost savings and
synergies, and before nonrecurring costs relating to the Merger, the Merger
would be approximately 7.3% dilutive to the combined company's EPS for the
fiscal year ending December 31, 1997, 3.5% dilutive to the combined company's
EPS for the fiscal year ending December 31, 1998, and 0.3% accretive to the
combined company's EPS for the fiscal year ending December 31, 1999. AB & Sons
noted that there can be no assurance that the combined company will be able to
realize savings and synergies in the amounts identified, or at all, following
the Merger.
Relevant Market and Economic Factors. In rendering its opinion, AB & Sons
considered, among other factors, the condition of the U.S. stock markets,
particularly in the securities industry sector, and the current level of
economic activity.
No company used in the analysis of other publicly traded companies nor any
transaction used in the analyses of selected mergers and acquisitions
summarized above is identical to Alex. Brown, BTNY or the Merger. Accordingly,
such analyses must take into account differences in the financial and
operating characteristics of the Selected Securities Firms, the Bank Group,
the Proxy Group and the companies in the Selected Domestic Transactions,
Selected International Transactions, Financial Services Transactions and Stock
Transactions and other factors that would affect the public trading value and
acquisition value of the Selected Securities Firms, the Bank Group, the Proxy
Group, and the companies in the Selected Domestic Transactions, Selected
International Transactions, Financial Services Transactions and Stock
Transactions, respectively.
While the foregoing summary describes the analyses and factors that AB &
Sons deemed material in its presentation to the Alex. Brown Board, it is not a
comprehensive description of all of the analyses and factors considered by AB
& Sons. The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the applications of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. AB & Sons believes that its analyses must be considered
as a whole and that selecting portions of its analyses and of the factors
considered by it, without considering all analyses and factors, would create
an incomplete view of the evaluation process underlying the AB & Sons Opinion.
In performing its analyses, AB & Sons considered general economic, market and
financial conditions and other matters, many of which are beyond the control
of Alex. Brown and BTNY. The analyses performed by AB & Sons are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such
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analyses. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. Additionally, analyses relating to the value of a
business do not purport to be appraisals or to reflect the prices at which the
business actually may be sold. Furthermore, no opinion is being expressed as
to the prices at which shares of BTNY Common Stock may trade at any future
time.
Pursuant to a letter agreement dated April 5, 1997 between AB & Sons and
Alex. Brown, Alex. Brown has agreed to indemnify AB & Sons and its directors,
officers, agents, employees and controlling persons, for certain costs,
expenses, losses, claims, damages and liabilities related to or arising out of
its rendering of services under its engagement as financial advisor. AB & Sons
is a wholly-owned subsidiary of Alex. Brown. Certain members of management of
AB & Sons are also members of management of Alex. Brown and have interests in
the Merger that are different from, or in addition to, the interests of
stockholders of Alex. Brown. See "--Interests of Certain Persons in the
Merger."
The Alex. Brown Board retained AB & Sons to act as its advisor based upon AB
& Sons' qualifications, reputation, experience and expertise. AB & Sons is an
internationally recognized investment banking firm and, as customary part of
its investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. Certain members of the management of AB & Sons are also members of
the management of Alex. Brown and also have interests that are different from,
or in addition to, the interests of Alex. Brown Stockholders. The Alex. Brown
Board relied on AB & Sons' experience in providing advice in connection with
mergers and acquisitions and related transactions and did not believe there
was a need to retain another advisor in connection with the Merger. See
"Interests of Certain Persons in the Merger." AB & Sons may actively trade the
equity securities of Alex. Brown and BTNY for its own account and for the
account of its customers. AB & Sons regularly publishes research reports
regarding the financial services industry and the businesses and securities of
publicly traded companies in the financial services industry.
STRUCTURE OF THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the MGCL and the Delaware General Corporation Law (the
"DGCL"), at the Effective Time, Alex. Brown will merge with and into BTNY Sub.
BTNY Sub will be the Surviving Corporation in the Merger and will continue its
corporate existence under the laws of the State of Delaware. At the Effective
Time, the separate corporate existence of Alex. Brown will terminate. BTNY
Sub's articles of incorporation, as in effect immediately prior to the
Effective Time, will be the articles of incorporation of the Surviving
Corporation and BTNY Sub's by-laws, as in effect immediately prior to the
Effective Time, will be the by-laws of the Surviving Corporation.
BTNY and Alex. Brown currently intend to effectuate, or cause to be
effectuated, immediately after the Effective Time the consummation of the
merger (the "Subsidiary Merger") of AB & Sons with and into BT Securities.
Prior to the Effective Time, BTNY currently intends to cause all of the issued
and outstanding shares of capital stock of BT Securities to be contributed to
BTNY Sub. The parties have agreed to cooperate and take all requisite actions,
including, without limitation, executing all requisite documentation, prior to
or following the Effective Time to consummate the Subsidiary Merger. The
parties also have agreed to cooperate and take all requisite additional action
prior to or following the Effective Time to merge or otherwise consolidate
legal entities to the extent desirable for regulatory or other reasons, and
further have agreed that BTNY may at any time change the method of effecting
the Merger, including by merging Alex. Brown with and into BTNY, by merging
Alex. Brown with and into a direct or indirect wholly-owned subsidiary of BTNY
other than BTNY Sub or by merging any such subsidiary with and into Alex.
Brown, and Alex. Brown shall cooperate in such efforts, including by entering
into an appropriate amendment to the Merger Agreement, provided, however, that
any such actions shall not (a) alter or change the amount or kind of the
merger consideration, (b) adversely affect the proposed accounting treatment
for the Merger or the tax treatment to the Alex. Brown Stockholders as a
result of receiving the merger consideration or (c) materially delay receipt
of any Requisite Regulatory Approval or the consummation of the transactions
contemplated by the Merger Agreement.
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CONVERSION OF ALEX. BROWN COMMON STOCK; TREATMENT OF ALEX. BROWN STOCK OPTIONS
AND DEBENTURES
At the Effective Time, each share of Alex. Brown Common Stock outstanding,
other than shares held in Alex. Brown's treasury or held by BTNY or Alex.
Brown or any subsidiary thereof (except, in both cases, for shares held,
directly or indirectly, in trust accounts, managed accounts and the like or
otherwise held in a fiduciary or custodial capacity that are beneficially
owned by third parties ("Trust Account Shares") or in respect of a debt
previously contracted ("DPC Shares")), will be converted into the right to
receive a number of shares of BTNY Common Stock equal to the Exchange Ratio,
0.83, plus the associated BTNY Rights, subject to antidilution adjustments as
provided in the Merger Agreement. Each BTNY Right entitles the registered
holder to purchase from BTNY a one one-hundredth interest in a Junior
Preferred Share, at a price of $140 per one one-hundredth interest in a Junior
Preferred Share, subject to adjustment in the case of a stock split or stock
dividend on the BTNY Common Stock. See "Description of BTNY Common Stock--BTNY
Rights." Because the Exchange Ratio is fixed and because the market price of
BTNY Common Stock is subject to fluctuation, the value of the shares of BTNY
Common Stock that holders of Alex. Brown Common Stock will receive in the
Merger may increase or decrease prior to and following the Merger.
Each outstanding share of Alex. Brown Common Stock owned by BTNY or its
subsidiaries or Alex. Brown or its subsidiaries (other than Trust Account
Shares or DPC Shares) or by Alex. Brown as treasury stock will be cancelled at
the Effective Time and will cease to exist, and no BTNY Common Stock or other
consideration will be delivered in exchange therefor. All shares of BTNY
Common Stock that are owned by Alex. Brown (except for Trust Account Shares or
DPC Shares) will become treasury stock of BTNY. Except for the foregoing,
shares of BTNY Common Stock and any shares of BTNY preferred stock issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding immediately after the Merger.
Each stock option to acquire Alex. Brown Common Stock granted under the
Alex. Brown Stock Plans which is outstanding and unexercised immediately prior
to the Effective Time will be converted automatically at the Effective Time
into, and will become, a stock option to purchase BTNY Common Stock and will
continue to be governed by the terms of the Alex. Brown Stock Plans, which
will be assumed by BTNY. In each case, (i) the number of shares of BTNY Common
Stock subject to the BTNY option will be equal to the product of the number of
shares of Alex. Brown Common Stock subject to the Alex. Brown option and the
Exchange Ratio, rounded down to the nearest whole share, and (ii) the exercise
price per share of BTNY Common Stock subject to the BTNY option will be equal
to the exercise price per share of Alex. Brown Common Stock under the Alex.
Brown option divided by the Exchange Ratio, rounded up to the nearest whole
cent. The duration and other terms of each BTNY option will be substantially
the same as the Alex. Brown option. Pursuant to the Alex. Brown Stock Plans,
each Alex. Brown option, if not already exercisable in full, will become
exercisable in full upon approval of the Merger by the Alex. Brown
Stockholders at the Alex. Brown Special Meeting.
The Public Debentures outstanding at the Effective Time will be assumed by
BTNY and remain outstanding thereafter as an obligation of BTNY and the
Surviving Corporation as co-obligors, and, from and after the Effective Time,
the holders of the Public Debentures will have the right to convert such
Public Debentures into the number of shares of BTNY Common Stock receivable in
the Merger by a holder of the number of shares of Alex. Brown Common Stock
into which such Public Debentures could have been converted immediately prior
to the Merger.
The Executive Debentures issued and outstanding at the Effective Time will
be assumed by BTNY and remain outstanding thereafter as an obligation of BTNY
and the Surviving Corporation as co-obligors, and, from and after the
Effective Time, the holders of the Executive Debentures will have the right to
convert such Executive Debentures into the number of shares of BTNY Common
Stock receivable in the Merger by a holder of the number of shares of Alex.
Brown Common Stock into which such Executive Debentures could have been
converted immediately prior to the Merger (and otherwise will remain subject
to the terms of the Alex. Brown Stock Plans under which they were issued and
the agreements evidencing such instruments). The approval of the Merger at the
Alex. Brown Special Meeting will be a change in control for purposes of the
Executive Debentures and any accrued and unvested loan forgiveness amounts
will vest as of the Effective Time.
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EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the Effective Time, BTNY will deposit, or cause to be
deposited, with a bank or trust company selected by BTNY and reasonably
acceptable to Alex. Brown (the "Exchange Agent"), for the benefit of the
holders of certificates of Alex. Brown Common Stock, certificates representing
the shares of BTNY Common Stock and cash in lieu of any fractional shares to
be issued pursuant to the Merger Agreement in exchange for outstanding shares
of Alex. Brown Common Stock.
As soon as is practicable after the Effective Time, the Exchange Agent will
mail a form of transmittal letter to the holders of Alex. Brown Common Stock.
The form of transmittal letter will contain instructions with respect to the
surrender of certificates representing Alex. Brown Common Stock.
ALEX. BROWN STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED
PROXY AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS AND UNTIL THE
ALEX. BROWN STOCKHOLDER RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE
EFFECTIVE TIME.
Until the certificates representing Alex. Brown Common Stock are surrendered
for exchange after the Effective Time, holders of such certificates or
receipts will accrue but will not be paid dividends or other distributions
declared after the Effective Time with respect to the BTNY Common Stock into
which their shares have been converted. When such certificates or receipts are
surrendered, any unpaid dividends or other distributions will be paid, without
interest. After the Effective Time, there will be no transfers on the stock
transfer books of Alex. Brown of shares of Alex. Brown Common Stock issued and
outstanding immediately prior to the Effective Time. If certificates
representing shares of Alex. Brown Common Stock are presented after the
Effective Time, they will be cancelled and exchanged for the relevant
certificate representing the applicable shares of BTNY Common Stock.
No fractional shares of BTNY Common Stock will be issued to any holder of
Alex. Brown Common Stock upon consummation of the Merger. For each fractional
share that would otherwise be issued, BTNY will pay cash in an amount equal to
such fraction multiplied by the average of the closing sale prices of BTNY
Common Stock on the NYSE as reported by The Wall Street Journal for the five
trading days ending on the second to last trading day prior to the Effective
Time. No interest will be paid or accrued on the cash in lieu of fractional
shares payable to holders of such certificates.
Neither BTNY nor Alex. Brown nor any other person will be liable to any
former holder of Alex. Brown Common Stock for any amount properly delivered to
a public official pursuant to applicable abandoned property, escheat or
similar laws.
If a certificate for Alex. Brown Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the merger consideration upon receipt
of appropriate evidence as to such loss, theft or destruction, appropriate
evidence as to the ownership of such certificate by the claimant, and
appropriate and customary indemnification.
For a description of the differences between the rights of the holders of
BTNY Common Stock and Alex. Brown Common Stock, see "Comparison of Rights of
Holders of Alex. Brown Common Stock and BTNY Common Stock."
Shares of BTNY Common Stock and BTNY preferred stock issued and outstanding
immediately prior to the Effective Time will remain issued and outstanding and
be unaffected by the Merger, and holders of such stock will not be required to
exchange the certificates representing such stock or take any other action by
reason of the consummation of the Merger.
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EFFECTIVE TIME
The Merger will become effective upon the acceptance for record of the
articles of merger by the Department of Assessments and Taxation of the State
of Maryland and by making all other filings required under the MGCL to be made
prior to or concurrent with the effectiveness of the Merger, and as set forth
in the certificate of merger which shall be filed with the Secretary of State
of the State of Delaware. The closing date of the Merger (the "Closing Date")
will occur on a date to be specified by the parties which shall be no later
than three business days after the satisfaction or waiver (subject to
applicable law) of the latest to occur of the conditions precedent to the
Merger unless extended by mutual agreement.
See "--Conditions to the Consummation of the Merger" and "--Regulatory
Approvals Required for the Merger."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of BTNY, BTNY
Sub and Alex. Brown as to, among other things, (i) the corporate organization
and existence of each party and its subsidiaries; (ii) the capitalization of
each of BTNY and Alex. Brown and its subsidiaries; (iii) the corporate power
and authority of each party; (iv) the compliance of the Merger Agreement with
(a) the certificate and by-laws of each party, (b) applicable law, and (c)
certain material agreements; (v) governmental and third-party approvals; (vi)
the timely filing of required regulatory reports; (vii) BTNY's and Alex.
Brown's financial statements and filings with the Commission; (viii) broker's
fees; (ix) the absence of certain changes in BTNY's and Alex. Brown's
businesses since December 31, 1996; (x) the absence of material legal
proceedings; (xi) the filing and accuracy of tax returns; (xii) employee
benefit plans and related matters; (xiii) filings with the Commission;
(xiv) compliance with applicable law; (xv) the absence of material defaults
under certain contracts; (xvi) agreements with regulatory agencies; (xvii) the
validity of investment securities; (xviii) interest rate risk management
instruments; (xix) the absence of undisclosed liabilities; (xx) the absence of
environmental liabilities; (xxi) the inapplicability to the Merger of the
MGCL's takeover provisions or any other applicable state takeover law; (xxii)
the existence for each party of reasonably adequate insurance coverage; and
(xxiii) "pooling of interests" accounting treatment.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Pursuant to the Merger Agreement, prior to the Effective Time, BTNY and
Alex. Brown each has agreed to, and to cause their respective subsidiaries to,
(i) conduct its business in the usual, regular and ordinary course consistent
with past practice, (ii) use reasonable best efforts to maintain and preserve
intact its business organization, employees and advantageous business
relationships, and, in the case of Alex. Brown, retain the services of its
officers and key employees, and (iii) take no action which would adversely
affect or delay in any material respect the ability of either BTNY or Alex.
Brown to obtain the Requisite Regulatory Approvals or to perform its covenants
and agreements under the Merger Agreement or the Option Agreements.
BTNY and Alex. Brown also have agreed to use their reasonable best efforts
to promptly prepare and file all necessary documentation to effect all
applications, notices, petitions and filings, and to obtain and to cooperate
in obtaining permits, consents, approvals and authorizations of all third
parties and governmental entities necessary or advisable to consummate the
transactions contemplated by the Merger Agreement and to comply fully with the
terms and conditions of all such permits, consents, approvals and
authorizations. BTNY and Alex. Brown have agreed to use their reasonable best
efforts to obtain all necessary consents and approvals under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Investment Advisers
Act of 1940, as amended (the "Investment Advisers Act"), and to obtain the
approval of the boards of directors and stockholders of all their respective
subsidiaries regulated under the 1940 Act and the Investment Advisers Act.
BTNY and Alex. Brown have each agreed upon request to furnish to the other
party all information concerning itself and its subsidiaries, directors,
officers and stockholders and such other matters as may be necessary or
advisable in connection with the Merger. BTNY and Alex. Brown have also
agreed, subject to the terms and conditions of the Merger Agreement, to use
their reasonable best efforts to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party or its
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subsidiaries and to consummate the Merger. The parties also have agreed to use
all reasonable best efforts to resolve any objections that may be asserted by
any governmental entity with respect to the Merger, the Merger Agreement or
the transactions contemplated thereby. BTNY also agreed to use its reasonable
best efforts to cause the shares of BTNY Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Time. The parties have agreed that the
required notice to the Federal Reserve Board will be filed within 60 days of
the date of the Merger Agreement.
BTNY and Alex. Brown have further agreed to give the other party access to
all of its properties, books, contracts, commitments and records and to
furnish information concerning its businesses, properties and personnel,
subject to the restrictions set forth in the Merger Agreement.
Prior to the Effective Time, Alex. Brown will use its best efforts to obtain
as promptly as practicable, the approval of the stockholders of each of the
Flag Family of Funds (collectively, the "Funds"), pursuant to the provisions
of Section 15 of the 1940 Act applicable thereto, of a new Investment Company
Advisory Agreement for such Fund identical in all respects to that in effect
immediately prior to the closing of the Merger (the "Closing"), except that
such new Investment Advisory Agreement will be effective immediately after the
Closing Date and will have an initial term of two years. In addition, Alex.
Brown will use its best efforts to assure, prior to the Closing Date, the
satisfaction of the conditions set forth in Section 15(f) of the 1940 Act with
respect to each Fund.
BTNY has agreed to use its best efforts to assure compliance with the
conditions of Section 15(f) of the 1940 Act with respect to the Funds. Without
limiting the foregoing, BTNY has agreed that (i) for a period of not less than
three years after the Closing Date, BTNY will assure that no more than 25% of
the members of the Board of Directors of any Fund will be "interested persons"
(as defined in the 1940 Act) of BTNY (or such other entity which acts as
adviser or subadviser to the Funds) or of the predecessor investment adviser
of the Funds and (ii) neither BTNY nor any affiliate (including any parent
company of BTNY) of BTNY (or any entity which will act as adviser or
subadviser to the Funds), for a period of not less than two years after the
Closing Date, will have any express or implied understanding, arrangement or
intention to impose an unfair burden on any of the Funds as a result of the
transactions contemplated by the Merger Agreement.
In addition, except as expressly contemplated by the Merger Agreement or
specified in a schedule thereto or by the Alex. Brown Stock Option Agreement,
Alex. Brown has agreed that, without the consent of BTNY, it will not, among
other things:
(i) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance existing short-term indebtedness and
indebtedness of Alex. Brown or any of its subsidiaries to Alex. Brown or
any of its subsidiaries and indebtedness under existing lines of credit),
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity, or make any loan or advance;
(ii) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (except for regular quarterly cash dividends
not to exceed $.17 per share on Alex. Brown Common Stock and dividends paid
in the ordinary course of business by any subsidiaries of Alex. Brown) or
make any other distribution on, or, directly or indirectly, redeem (except
as provided in the Merger Agreement) purchase or otherwise acquire, any
shares of its capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock, or grant any
stock appreciation rights; grant any individual, corporation or other
entity any right to acquire any shares of its capital stock; issue any
additional shares of capital stock except pursuant to the conversion of the
Public Debentures or the Executive Debentures or the exercise of stock
options granted pursuant to Alex. Brown Stock Plans; or enter into any
agreement or understanding with respect to the sale or voting of its
capital stock;
(iii) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets, including, without limitation, capital stock in
any subsidiaries of Alex. Brown to any individual, corporation or other
entity other than a direct or indirect wholly-owned subsidiary, or cancel,
release or assign any
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indebtedness to any such entity or any claims held by any such entity,
except in the ordinary course of business consistent with past practice or
pursuant to contracts or agreements in force at the date of the Merger
Agreement;
(iv) except for transactions in the ordinary course of business
consistent with past practice, make any material investment either by
purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or other entity other than a wholly-owned subsidiary of Alex.
Brown;
(v) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any material lease, contract or
agreement, or make any change in any of its material leases, contracts, or
agreements other than renewals of leases, contracts or agreements without
material adverse changes of terms;
(vi) other than in the ordinary course of business consistent with past
practice and, in all events, subject to BTNY's prior written consent (or
prior consultation in the case of new hires who are principals or managing
directors), except as contemplated by the Employment Agreements and the
Retention Program, increase in any manner the compensation or fringe
benefits of any of its employees or pay any pension or retirement allowance
not required by any existing plan or agreement to any such employees or,
except as contemplated by the Merger Agreement, become a party to, amend or
commit itself to any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of any
employee or accelerate the vesting of any stock options or other stock-
based compensation;
(vii) solicit, encourage or authorize any individual, corporation or
other entity to solicit from any third party any inquiries or proposals
relating to the disposition of its business or assets, or the acquisition
of its voting securities, or the merger of it or any of its subsidiaries
with any corporation or other entity other than as provided by the Merger
Agreement (and Alex. Brown will promptly notify BTNY of all of the relevant
details relating to all inquiries and proposals which it may receive
relating to any of such matters) or, unless the failure to provide access
to such information would upon advice of counsel reasonably acceptable to
BTNY cause the Alex. Brown Board to breach their fiduciary duties under
applicable law, provide any information to any such third party;
(viii) settle any material claim, action or proceeding involving money
damages or waive or release any material rights or claims, except in the
ordinary course of business consistent with past practice;
(ix) change its methods of accounting in effect at December 31, 1996,
except as required by changes in GAAP as concurred with by KPMG Peat
Marwick LLP, its independent auditors, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns of Alex.
Brown for the taxable years ending December 31, 1996 and 1995, except as
required by changes in law or regulation or as disclosed by Alex. Brown to
BTNY;
(x) take any action that would prevent or impede the Merger from
qualifying (a) for "pooling of interests" accounting treatment or (b) as a
reorganization within the meaning of Section 368 of the Code;
(xi) adopt or implement any amendment to the Alex. Brown Articles of
Incorporation or any plan of consolidation, merger or reorganization or any
changes to the Alex. Brown By-laws;
(xii) other than in prior consultation with the BTNY, materially
restructure or materially change its investment securities portfolio or its
gap position, through purchases, sales or otherwise, or the manner in which
the portfolio is classified or reported or materially alter the credit or
risk concentrations associated with its underwriting and other investment
banking businesses;
(xiii) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in the Merger
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger not
being satisfied or in a violation of any provision of the Merger Agreement,
except, in every case, as may be required by applicable law;
(xiv) amend, modify, revoke or terminate the stockholders' agreement,
dated as of June 23, 1989, as amended, by and among Alex. Brown and the
persons listed on Exhibit A thereto; or
(xv) agree to, or make any commitment to, take any of the actions listed
above.
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In addition, during the period from the date of the Merger Agreement to the
Effective Time, except as expressly contemplated by the Merger Agreement, BTNY
has agreed that it shall not, and shall not permit any of its subsidiaries to,
without the prior written consent of Alex. Brown, among other things:
(i) take any action that would prevent or impede the Merger from
qualifying (a) for "pooling of interests" accounting treatment or (b) as a
reorganization within the meaning of Section 368 of the Code; provided,
however, that nothing contained herein shall limit the ability of BTNY to
exercise its rights under the Alex. Brown Stock Option Agreement;
(ii) (a) adjust, split, combine or reclassify any capital stock; or (b)
make, declare or pay any dividend (except for (1) regular quarterly cash
dividends at a rate not in excess of $1.00 per share of BTNY Common Stock,
and (2) except for dividends paid in the ordinary course of business by any
subsidiary (whether or not wholly-owned) of BTNY) or make any extraordinary
distribution on any shares of its capital stock;
(iii) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in the Merger
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in the Merger Agreement not being satisfied or in a violation of any
provision of the Merger Agreement, except, in every case, as may be
required by applicable law;
(iv) change its methods of accounting in effect at December 31, 1996,
except as required by changes in GAAP as concurred with by KPMG Peat
Marwick LLP, its independent auditors; or
(v) agree to, or make any commitment to, take any of the actions listed
above.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to the satisfaction
or waiver, where permissible, of the following conditions at or prior to the
Effective Time:
(i) (a) The Merger Agreement and the transactions contemplated thereby
will have been approved and adopted by the requisite affirmative vote of
the holders of Alex. Brown Common Stock and (b) the issuance of BTNY Common
Stock contemplated by the Merger Agreement will have been approved by
requisite affirmative vote of the BTNY Stockholders required pursuant to
the rules of the NYSE;
(ii) The shares of BTNY Common Stock which are to be issued to the Alex.
Brown Stockholders upon consummation of the Merger will have been
authorized for listing on the NYSE, subject to official notice of issuance;
(iii) All regulatory approvals required to consummate the transactions
contemplated by the Merger Agreement (the "Requisite Regulatory Approvals")
will have been obtained and will remain in full force and effect and all
statutory waiting periods with respect to such approvals will have expired
and no such approvals will contain any conditions or restrictions which
would reasonably be expected to result in a material adverse effect on
BTNY, BTNY Sub or Alex. Brown;
(iv) The Registration Statement of which this Joint Proxy Statement-
Prospectus forms a part will have become effective and no stop order
suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose will have been initiated or threatened by the
Commission;
(v) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other material transactions
contemplated by the Merger Agreement will be in effect and no statute,
rule, regulation, order, injunction or decree will have been enacted,
entered, promulgated or enforced by any court, administrative agency or
commission or other governmental authority or instrumentality which
prohibits, materially restricts or makes illegal consummation of the
Merger;
(vi) BTNY shall have received an opinion of Wachtell, Lipton, Rosen &
Katz, special counsel to BTNY, and Alex. Brown shall have received an
opinion of Shearman & Sterling, special counsel to Alex. Brown, in form and
substance reasonably satisfactory to BTNY and Alex. Brown, respectively,
dated as of the Effective Time, in each case, substantially to the effect
that, on the basis of facts, representations and
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assumptions set forth in such opinion which are consistent with the state
of facts existing at the Effective Time: (a) the Merger will constitute a
tax-free reorganization under Section 368(a) of the Code and BTNY, BTNY Sub
and Alex. Brown will each be a party to the reorganization; (b) no gain or
loss will be recognized by BTNY or by Alex. Brown as a result of the Merger
(except with respect to items as to which Alex. Brown is required to
recognize gain or loss at the end of each taxable year under a mark-to-
market method); (c) no gain or loss will be recognized by the Alex. Brown
Stockholders who exchange their Alex. Brown Common Stock solely for BTNY
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in BTNY Common Stock); (d) no gain
or loss will be recognized by the holders of the Public Debentures or the
Executive Debentures solely as a result of the assumption by BTNY at the
Effective Time of the Public Debentures and the Executive Debentures as a
co-obligor with the Surviving Corporation or the change in conversion
rights at the Effective Time as contemplated by the Merger Agreement; (e)
the aggregate tax basis of the BTNY Common Stock received by Alex. Brown
Stockholders who exchange Alex. Brown Common Stock solely for BTNY Common
Stock in the Merger will generally be the same as the aggregate tax basis
of the Alex. Brown Common Stock surrendered in exchange therefor; and (f)
the holding period of the BTNY Common Stock received by Alex. Brown
Stockholders in the Merger will include the period during which the shares
of Alex. Brown Common Stock surrendered in exchange therefor were held,
provided that such Alex. Brown Common Stock was held as a capital asset by
the holder of such Alex. Brown Common Stock at the Effective Time;
(vii) BTNY and Alex. Brown shall have received a letter from KPMG Peat
Marwick LLP, independent accountants, confirming their concurrence with
BTNY's and Alex. Brown's intent to account for the Merger as a "pooling of
interests";
(viii) The representations and warranties of the other party made in the
Merger Agreement will be true and correct in all material respects as of
the Closing Date (except to the extent such representations and warranties
speak as of an earlier date, in which case such representations and
warranties will be true as of such earlier date) as though made on and as
of the Closing Date;
(ix) The other party will have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date; and
(x) The Employment Agreements with 20 named Alex. Brown employees are to
be in effect and the Retention Program is to be in place. The Employment
Agreements are in effect as of the date of this Joint Proxy Statement-
Prospectus and the parties fully expect the Retention Program to be in
place immediately prior to the Effective Time.
No assurance can be provided as to if or when the Requisite Regulatory
Approvals necessary to consummate the Merger will be obtained or whether all
of the other conditions precedent to the Merger will be satisfied or waived by
the party permitted to do so. If the Merger is not effected on or before March
31, 1998, the Merger Agreement may be terminated by either BTNY or Alex.
Brown, unless the failure to effect the Merger by such date is due to the
failure of the party seeking to terminate the Merger Agreement to perform or
observe covenants and agreements of such party set forth therein. As of the
date of this Joint Proxy Statement-Prospectus, the requisite notice has been
filed with the Federal Reserve Board, the Employment Agreements are in effect
and the Retention Program is in place.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
BTNY and Alex. Brown have agreed to use their reasonable best efforts to
obtain the Requisite Regulatory Approvals, which include approval from the
Federal Reserve Board and various State Authorities. The Merger cannot proceed
in the absence of the Requisite Regulatory Approvals. BTNY and Alex. Brown
believe that all Requisite Regulatory Approvals will be granted; however,
there can be no assurance that such Requisite Regulatory Approvals will be
obtained, and, if obtained, there can be no assurance as to the date of any
such approvals or the absence of any litigation challenging such approvals.
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BTNY and Alex. Brown are not aware of any other governmental approvals or
actions that are required prior to the parties' consummation of the Merger
other than those described below. It is presently contemplated that if any
such additional governmental approvals or actions are required, such approvals
or actions will be sought. There can be no assurance, however, that any such
additional approvals or actions will be obtained.
Federal Reserve Board. The Merger is subject to prior approval by the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). With respect to the Merger, BTNY, as an acquiring bank holding
company, is required to file a notice with the Federal Reserve Board which
describes the Merger proposal and the proposed activities of the combined
entity, the effect of the proposal on competition among entities that engage
in such activities, the identity of the parties involved in the transaction,
including subsidiaries of the parties, a description of the public benefits
which may be expected from the proposal, a description of the terms of the
transaction, the sources of funds for the transaction and other financial and
managerial information. The information included in the notice and other
requests for information will allow the Federal Reserve Board, when
considering approval of the Merger, to take into consideration the financial
and managerial resources and prospects of the existing and proposed
institutions and the benefits which may be expected from the Merger. The
Federal Reserve Board will, among other things, evaluate the adequacy of the
capital levels of the acquiring bank holding company both before and following
the proposed transaction.
The Federal Reserve Board may deny a request for approval of an acquisition
by a bank holding company if it determines that the transaction would result
in a monopoly or be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize a given business activity in any part
of the United States, or if its effect in any section of the country would be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anticompetitive effects of a transaction are
clearly outweighed by the probable effects of the transaction in providing
benefits to the public.
Applicable federal law provides for the publication of notice and public
comment on notice applications filed with the Federal Reserve Board. The
Merger may not be consummated until after Federal Reserve Board approval is
obtained.
BTNY's and Alex. Brown's rights to exercise their respective options under
the Option Agreements are also subject to the prior approval of the Federal
Reserve Board, to the extent that the exercise of their respective options
under the Option Agreements would result in BTNY owning more than 5% of the
outstanding shares of Alex. Brown Common Stock or Alex. Brown owning 10% or
more of the outstanding BTNY Common Stock. In considering whether to approve
BTNY's or Alex. Brown's respective right to exercise its option, including
BTNY's right to purchase more than 5% of the outstanding shares of Alex. Brown
Common Stock or Alex. Brown's right to purchase 10% or more of BTNY Common
Stock, the Federal Reserve Board would generally apply the same statutory
criteria it would apply to its consideration of approval of the Merger in the
case of the Alex. Brown Option, and the comprehensive criteria applicable to
the acquisition of control of BTNY under the Change in Bank Control Act in the
case of the BTNY Option.
State Banking Regulators. It is expected that many of the requirements
associated with the applications of the State banking regulators will be
satisfied by providing to such State banking regulators copies of the
applications and notices filed by BTNY with the Federal Reserve Board which
such State banking regulators have indicated they will accept in satisfaction
of many state filing requirements.
Other Requisite Approvals and Consents. Approvals also will be required from
certain regulatory agencies in connection with changes, as a result of the
Merger, in the ownership of certain businesses that are controlled by Alex.
Brown. These agencies include certain state insurance authorities and the
Maryland State Commission of Financial Regulation (the "Maryland Commission").
Approval also is required from the NASD and from the SFA and may be required
from certain other foreign regulatory agencies.
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Alex. Brown is a party to a number of credit facilities, indentures and
other similar agreements. Consummation of the Merger may require the consent
of, or waiver from, the other parties to certain of such agreements and may
constitute a default resulting in termination, cancellation or acceleration
thereunder if such consents of waivers are not obtained. Pursuant to the
Merger Agreement, the parties agreed to use their reasonable best efforts to
promptly prepare and file all necessary documentation to obtain all consents,
approvals and authorizations of all third parties and government entities
which are necessary for the consummation of the Merger.
Status of Regulatory Approvals and Other Information. The Merger is
conditioned upon the receipt of all Requisite Regulatory Approvals, including
the approvals of the Federal Reserve Board and the State Authorities. There
can be no assurance that any governmental agency will approve or take any
other required action with respect to the Merger, and, if approvals are
received or action is taken, there can be no assurance as to the date of such
approvals or action, that such approvals or action will not be conditioned
upon matters that would cause the parties to abandon the Merger or that no
action will be brought challenging such approvals or action or, if such a
challenge is made, the result thereof. To date, applications or notifications
have been filed with the Federal Reserve Board, the NASD, the SFA and the
Maryland Commission. Copies of the notice application filed with the Federal
Reserve Board have been filed with the United States Department of Justice.
All of the foregoing applications are pending at this time.
BTNY and Alex. Brown are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as described
above. Should any other approval or action be required, BTNY and Alex. Brown
currently contemplate that such approval or action would be sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF ANY SUCH REQUISITE REGULATORY APPROVALS. THERE
ALSO CAN BE NO ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR
REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT OR THAT WOULD CAUSE THE PARTIES TO TERMINATE THE
MERGER AGREEMENT. SEE "--CONDITIONS TO THE CONSUMMATION OF THE MERGER."
See "--The Effective Time," "--Conditions to the Consummation of the Merger"
and "--Termination of the Merger Agreement."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary of the material federal income tax
consequences of the Merger to holders of Alex. Brown Common Stock who hold
such stock as a capital asset. This summary is not a complete description of
all of the consequences of the Merger and, in particular, may not address
federal income tax considerations that may affect the treatment of a
stockholder which, at the Effective Time, already owns some BTNY Common Stock,
is not a U.S. person, is a tax-exempt entity or an individual who acquired
Alex. Brown Common Stock pursuant to an employee stock option or otherwise as
compensation, or exercises some form of control over Alex. Brown. Accordingly,
Alex. Brown Stockholders are urged to consult with their tax advisors
regarding the federal income tax consequences of the Merger under their
particular circumstances. In addition, no information is provided herein with
respect to the tax consequences of the Merger under applicable foreign, state
or local laws, and Alex. Brown Stockholders are therefore urged to consult
their tax advisors regarding the tax consequences of the Merger under such
laws. The following discussion is based on the Code, Treasury Regulations
thereunder, and administrative rulings and court decisions, as in effect on
the date of this Joint Proxy Statement-Prospectus, without consideration of
the particular facts or circumstances of any holder of Alex. Brown Common
Stock.
The Merger. Each party's obligation to effect the Merger is conditioned on
delivery of an opinion to BTNY from Wachtell, Lipton, Rosen & Katz, its
special counsel, and an opinion to Alex. Brown from Shearman
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& Sterling, its special counsel, based upon certain facts, representations and
assumptions set forth therein which are consistent with the state of facts
existing at the Effective Time, substantially to the effect that for federal
income tax purposes: (i) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code and BTNY, BTNY Sub and Alex. Brown
will each be a party to the reorganization; (ii) no gain or loss will be
recognized by BTNY or by Alex. Brown as a result of the Merger (except with
respect to items as to which Alex. Brown is required to recognize gain or loss
at the close of each taxable year under a mark-to-market method); (iii) no
gain or loss will be recognized by the Alex. Brown Stockholders who exchange
their Alex. Brown Common Stock solely for BTNY Common Stock pursuant to the
Merger (except with respect to cash received in lieu of a fractional share
interest in BTNY Common Stock); (iv) no gain or loss will be recognized by the
holders of the Public Debentures or the Executive Debentures solely as a
result of the assumption by BTNY at the Effective Time of the Public
Debentures and the Executive Debentures as a co-obligor with BTNY Sub or the
change in conversion rights at the Effective Time as contemplated by the
Merger Agreement; (v) the aggregate tax basis of the BTNY Common Stock
received by Alex. Brown Stockholders who exchange Alex. Brown Common Stock
solely for BTNY Common Stock in the Merger will be the same as the aggregate
tax basis of the Alex. Brown Common Stock surrendered in exchange therefor;
and (vi) the holding period of the BTNY Common Stock received by Alex. Brown
Stockholders in the Merger will include the period during which the shares of
Alex. Brown Common Stock surrendered in exchange therefor were held, provided
that such Alex. Brown Common Stock was held as a capital asset by the holder
of such Alex. Brown Common Stock at the Effective Time. In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers and certain stockholders of BTNY, Alex. Brown and
others. In addition, Wachtell, Lipton, Rosen & Katz and Shearman & Sterling
have delivered opinions to BTNY and Alex. Brown, respectively, dated the date
of this Joint Proxy Statement-Prospectus, to the effect that, except as
otherwise indicated, the discussion set forth under the caption "The Merger--
Certain Federal Income Tax Consequences" represents such firms' opinions as to
the material federal income tax consequences of the Merger under currently
applicable law. Copies of such opinions are included as exhibits to the
Registration Statement.
In the opinion of Wachtell, Lipton, Rosen & Katz and Shearman & Sterling,
the material federal income tax consequences of the Merger to Alex. Brown
Stockholders under currently applicable law will be:
(i) No gain or loss will be recognized by BTNY or Alex. Brown as a result
of the Merger (except with respect to items as to which Alex. Brown is
required to recognize gain or loss at the close of each taxable year under
a mark-to-market method);
(ii) No gain or loss will be recognized by the Alex. Brown Stockholders
who exchange their Alex. Brown Common Stock solely for BTNY Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in BTNY Common Stock);
(iii) The aggregate tax basis of the BTNY Common Stock received by each
Alex. Brown Stockholder who exchanges Alex. Brown Common Stock solely for
BTNY Common Stock in the Merger will be the same as the aggregate tax basis
of the Alex. Brown Common Stock surrendered in exchange therefor; and
(iv) The holding period of the BTNY Common Stock received by each Alex.
Brown Stockholder in the Merger will include the period during which the
shares of Alex. Brown Common Stock surrendered in exchange therefor were
held; provided, such Alex. Brown Common Stock was held as a capital asset
by the holder of such Alex. Brown Common Stock at the Effective Time.
Information Reporting and Backup Withholding. Payments in respect of Alex.
Brown Common Stock may be subject to information reporting to the Internal
Revenue Service and to a 31% backup withholding tax. Backup withholding
generally will not apply, however, to a payment to an Alex. Brown Stockholder
or other payee if such Alex. Brown Stockholder or payee completes and signs
the substitute Form W-9 that will be included as part of the transmittal
letter or otherwise proves to BTNY and the Exchange Agent that it is exempt
from backup withholding.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "pooling of
interests" transaction under GAAP. Under such method of accounting, holders of
Alex. Brown Common Stock will be deemed to have combined
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their existing voting common stock interest with that of holders of BTNY
Common Stock by exchanging their shares for shares of BTNY Common Stock.
Accordingly, the book value of the assets, liabilities and stockholders'
equity of Alex. Brown, as reported on its consolidated balance sheet, will be
carried over to the consolidated balance sheet of BTNY and no goodwill will be
created. BTNY will be able to include in its consolidated income the
consolidated income of Alex. Brown for the entire fiscal year in which the
Merger occurs; however, certain expenses incurred to effect the Merger must be
treated by BTNY as current charges against income rather than adjustments to
its balance sheet. In order for the Merger to qualify for "pooling of
interests" accounting treatment, among other criteria, substantially all (90%
or more) of the outstanding Alex. Brown Common Stock must be exchanged for
BTNY Common Stock.
BTNY and Alex. Brown's respective obligations to consummate the Merger are
conditioned upon the receipt by BTNY and Alex. Brown of a letter from KPMG
Peat Marwick LLP, independent accountants, confirming their concurrence with
BTNY's and Alex. Brown's intent to account for the Merger as a "pooling of
interests."
The unaudited pro forma financial information contained in this Joint Proxy
Statement-Prospectus has been prepared using the "pooling of interests"
accounting method to account for the Merger. See "Selected Pro Forma Financial
Data" and "Unaudited Pro Forma Combined Financial Information."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement provides that the Merger may be terminated at any time
prior to the Effective Time, whether before or after BTNY Stockholder approval
of the Share Issuance or Alex. Brown Stockholder approval and adoption of the
Merger Agreement and the transactions contemplated thereby:
(i) by mutual consent of BTNY and Alex. Brown in a written instrument if
the BTNY Board and the Alex. Brown Board each so determines by a vote of a
majority of the members of its entire Board;
(ii) by either the BTNY Board or the Alex. Brown Board if any
governmental entity which must grant a Requisite Regulatory Approval has
denied approval of the Merger and such denial has become final and non-
appealable or any governmental entity of competent jurisdiction shall have
issued a final non-appealable injunction permanently enjoining or otherwise
prohibiting the consummation of the transactions contemplated by the Merger
Agreement;
(iii) by either the BTNY Board or the Alex. Brown Board if the Merger
shall not have been consummated on or before March 31, 1998, unless the
failure of the Closing to occur by such date shall be due to the failure of
the party seeking to terminate the Merger Agreement to perform or observe
the covenants and agreements of such party set forth therein;
(iv) by either the BTNY Board or the Alex. Brown Board (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained therein) if there shall
have been a material breach of any of the covenants or agreements or any of
the representations or warranties set forth in the Merger Agreement on the
part of the other party, which breach is not cured within 45 days following
written notice to the party committing such breach, or which breach, by its
nature or timing, cannot be cured prior to the Closing;
(v) by either BTNY or Alex. Brown if the requisite BTNY Stockholder or
Alex. Brown Stockholder approval has not been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders
or any adjournment or postponement thereof; or
(vi) by BTNY if the Employment Agreements with 20 named Alex. Brown
employees are not in effect and by Alex. Brown if the Retention Program has
not been established immediately prior to the Effective Time. The
Employment Agreements are in effect as of the date of this Joint Proxy
Statement-Prospectus and the parties fully anticipate that the Retention
Program will be in place immediately prior to the Effective Time.
If the Merger Agreement is terminated at a time when Alex. Brown is not
otherwise in material breach of any of its representations, warranties or
other agreements under the Merger Agreement (determined as of the
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date of such termination) and no Initial Triggering Event (as defined in the
BTNY Stock Option Agreement) has occurred, and subject to the BTNY Option
Agreement Maximum (as defined herein), as a result of (i) a denial of a
Requisite Regulatory Approval of BTNY and other than as a result of an adverse
condition primarily attributable to Alex. Brown, or (ii) the failure of the
BTNY Stockholders to provide the requisite approval, then BTNY shall pay to
Alex. Brown a termination fee in an amount equal to $25 million. If the Merger
Agreement is terminated as a result of a material breach of any
representation, warranty or other agreement contained in the Merger Agreement
by BTNY, then BTNY shall pay Alex. Brown a termination fee of $75 million. Any
amount payable to Alex. Brown pursuant to this paragraph is referred to as the
"Alex. Brown Termination Fee." See "BTNY and Alex. Brown Stock Option
Agreements."
If the Merger Agreement is terminated at a time when BTNY is not otherwise
in material breach of any of its representations, warranties or other
agreements under the Merger Agreement (determined as of the date of such
termination) and no Initial Triggering Event (as defined in the Alex. Brown
Stock Option Agreement) has occurred, and subject to the Alex. Brown Option
Agreement Maximum (as defined herein), as a result of the failure of the Alex.
Brown Stockholders to provide the requisite approval, then Alex. Brown shall
pay to BTNY a termination fee in an amount equal to $25 million. If the Merger
Agreement is terminated as a result of a material breach of any
representation, warranty or other agreement contained in the Merger Agreement
by Alex. Brown, then Alex. Brown shall pay BTNY a termination fee of $75
million. Any amount payable to BTNY pursuant to this paragraph is referred to
as the "BTNY Termination Fee." See "BTNY and Alex. Brown Stock Option
Agreements."
Notwithstanding the preceding two paragraphs, if the Merger Agreement is
terminated and such termination does not result in (1) an Exercise Termination
Event (as defined in the Alex. Brown Stock Option Agreement), then, in the
event of a Subsequent Triggering Event (as defined in the Alex. Brown Stock
Option Agreement), Alex. Brown shall pay BTNY $75 million less any amount
payable in respect of the BTNY Termination Fee described above and (2) an
Exercise Termination Event (as defined in the BTNY Stock Option Agreement),
then, in the event of a Subsequent Triggering Event (as defined in the BTNY
Stock Option Agreement), BTNY shall pay Alex. Brown $75 million less any
amount payable in respect of the Alex. Brown Termination Fee described above.
See "--BTNY and Alex. Brown Stock Option Agreements."
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Waiver. At any time prior to the Effective Time, BTNY, BTNY Sub and Alex.
Brown, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other party; (ii) waive any
inaccuracies in the representations and warranties of the other party
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement; and (iii) waive compliance by the other party of any of its
agreements or conditions contained in the Merger Agreement, except that, after
Alex. Brown Stockholder approval, no extension or waiver may reduce the amount
or change the form of consideration to be delivered to each Alex. Brown
Stockholder under the Merger Agreement without further approval of Alex. Brown
Stockholders.
Under the terms of the Merger Agreement, the conditions to the Merger,
including receipt of the tax opinions described under the caption "The
Merger--Conditions to the Consummation of the Merger," may be waived by any
party to the Merger Agreement, except that, after Alex. Brown Stockholder
approval, no waiver may reduce the amount or change the form of consideration
to be delivered to the Alex. Brown Stockholders under the Merger Agreement
without the further approval of the Alex. Brown Stockholders. As of the date
of this Joint Proxy Statement-Prospectus, neither BTNY nor Alex. Brown intends
to waive the condition as to the receipt of opinions of counsel. In the event
of a failure to obtain the tax opinions described under the caption "The
Merger--Conditions to the Consummation of the Merger," and a determination by
the parties to waive such condition to the consummation of the Merger, both
BTNY and Alex. Brown will resolicit the votes of its respective stockholders
to approve the Share Issuance and the Merger, respectively.
Amendment. Subject to compliance with applicable law, the Merger Agreement
may be amended by BTNY, BTNY Sub and Alex. Brown by action taken or authorized
by their respective Boards of Directors, at
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any time, except that after Alex. Brown Stockholder approval, no amendment may
change the amount or the form of the consideration to be delivered to Alex.
Brown Stockholders under the Merger Agreement without further approval of
Alex. Brown Stockholders, other than as contemplated by the Merger Agreement.
In addition, the DGCL prohibits any change in any of the terms and conditions
of the Merger Agreement subsequent to stockholder approval if such change or
alteration would, among other things, adversely affect any stockholder of a
constituent corporation.
EMPLOYEE BENEFITS AND PLANS
Prior to the Effective Time, BTNY will take all corporate action necessary
for the assumption of the Executive Debentures and of all options to purchase
shares of Alex. Brown Common Stock outstanding under the Alex. Brown Stock
Plans immediately prior to the Effective Time. In addition, BTNY and Alex.
Brown will take all necessary action so that, at the Effective Time, each
account balance under the Alex. Brown Equity Compensation Plan and the Private
Client Deferred Compensation Plan that is deemed invested in Alex. Brown
Common Stock is adjusted and converted into an account balance which will be
denominated in BTNY Common Stock and which will entitle the holder thereof to
receive, and will represent an obligation of BTNY to deliver to such holder,
upon the same terms and conditions as those applicable to such accounts
immediately prior to the Effective Time, a number of shares of BTNY Common
Stock equal to the product of (x) the number of shares of Alex. Brown Common
Stock attributable to such account immediately prior to the Effective Time and
(y) the Exchange Ratio. The obligations of BTNY include the reservation,
issuance and listing on the NYSE of BTNY Common Stock in a number at least
equal to the number of shares of BTNY Common Stock subject to such Executive
Debentures, options under the Alex. Brown Stock Plans, and account balances
under the Alex. Brown Equity Compensation Plan and the Private Client Deferred
Compensation Plan, in each case as adjusted as contemplated by the Merger
Agreement.
BTNY and Alex. Brown have agreed that the approval and adoption of the
Merger Agreement by the Alex. Brown Stockholders will constitute a "change in
control" of Alex. Brown for purposes of each Alex. Brown benefit plan with
respect to which such concept is applicable. BTNY and Alex. Brown also have
agreed that, effective as of the date of such stockholder approval, (i) each
option to purchase Alex. Brown Common Stock outstanding under any Alex. Brown
Stock Plan will become fully vested and exercisable in accordance with its
terms, (ii) each Executive Debenture will become fully convertible in
accordance with its terms and (iii) all loan forgiveness relating to the
purchase of Executive Debentures earned prior to the date of such stockholder
approval but not vested shall, in accordance with the terms of the applicable
purchase and loan agreement, be considered vested to the extent consistent
with qualification of the Merger as a "pooling of interests" for accounting
purposes, in each case, in accordance with the terms of the respective
instruments relating to such options or debentures.
BTNY and Alex. Brown also have agreed that account balances under the Alex.
Brown Equity Compensation Plan and the Private Client Deferred Compensation
Plan that are deemed invested in investment vehicles other than Alex. Brown
Common Stock shall not be affected by the transactions contemplated by the
Merger Agreement. Following the Effective Time, with respect to account
balances accrued as of the Effective Time, such plans shall be operated in a
manner that is no less favorable to participants than as in effect immediately
preceding the Effective Time (including with respect to the rights of
participants to change investment elections).
For purposes of their participation in the BTNY benefit plans, BTNY will
credit each Alex. Brown employee with full credit for all service credited
under the Alex. Brown benefit plans (including service with Alex. Brown prior
to the Effective Time and, where applicable, service with prior or predecessor
employers to the extent credit is given for such service under the Alex. Brown
benefit plans) for purposes of eligibility to participate and receive benefits
and for purposes of vesting, but not for purposes of benefit accruals. With
respect to BTNY's welfare benefit plans, BTNY will cause any such plan to
waive any pre-existing condition exclusions and actively-at-work requirements
thereunder with respect to the Alex. Brown employees and their eligible
dependents and will ensure that any covered expenses incurred on or before the
Effective Time shall be taken
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into account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Effective Time to the extent that
such expenses are taken into account for the benefit of similarly situated
employees of BTNY. Following the Effective Time, executives of Alex. Brown
will be eligible to participate in and receive benefits under all change in
control protection plans and arrangements of BTNY to the extent applicable to
other peer executives of BTNY and its affiliates.
Except as otherwise provided in the Merger Agreement, the Surviving
Corporation may amend, modify or terminate any BTNY benefit plans, Alex. Brown
benefit plans, or other employee benefit plans, contracts, arrangements,
commitments or understandings, in accordance with their terms and applicable
law; provided, however, that for at least two years following the Effective
Time, Alex. Brown employees will be provided with a level of benefits that is
no less favorable in the aggregate than that provided under the Alex. Brown
benefit plans as in effect immediately prior to the Effective Time.
Alex. Brown and BTNY have further agreed that following the Effective Time,
the Surviving Corporation will honor all of Alex. Brown obligations with
respect to current participants in the Alex. Brown Directors' Charitable Award
Program and will continue to pay all premiums on any life insurance policies
used to fund such obligations.
STOCK EXCHANGE LISTING
BTNY has agreed to use its reasonable best efforts to cause the shares of
BTNY Common Stock to be issued in the Merger to be approved for listing on the
NYSE. It is a condition to the consummation of the Merger that such shares of
BTNY Common Stock be authorized for listing on the NYSE, subject to official
notice of issuance.
EXPENSES
The Merger Agreement provides that BTNY and Alex. Brown will each pay its
own expenses in connection with the Merger and the transactions contemplated
thereby, provided that BTNY and Alex. Brown will divide equally all printing
and mailing costs, filing and other fees paid to the Commission in connection
with the Merger, the Registration Statement and this Joint Proxy Statement-
Prospectus.
DIVIDENDS
The parties have agreed that after the date of the Merger Agreement, they
will coordinate with each other in the declaration of any dividends in respect
of BTNY Common Stock and Alex. Brown Common Stock and the record dates and
payment dates relating thereto. The intention of the parties is that holders
of BTNY Common Stock or Alex. Brown Common Stock will not receive two
dividends, or fail to receive one dividend, for any quarter with respect to
their shares of BTNY Common Stock and/or Alex. Brown Common Stock and any
shares of BTNY Common Stock any such holder receives in exchange therefor in
the Merger.
BTNY AND ALEX. BROWN STOCK OPTION AGREEMENTS
Immediately after the execution of the Merger Agreement, BTNY executed and
delivered the BTNY Stock Option Agreement, pursuant to which BTNY granted to
Alex. Brown the BTNY Option. At the same time, Alex. Brown executed and
delivered the Alex. Brown Stock Option Agreement, pursuant to which Alex.
Brown granted to BTNY the Alex. Brown Option. BTNY and Alex. Brown approved
and entered into the Option Agreements to induce each other to enter into the
Merger Agreement.
Except as otherwise noted below, the terms and conditions of the BTNY Stock
Option Agreement and the Alex. Brown Stock Option Agreement are identical in
all material respects. For purposes of this section, except as otherwise
noted, (i) the BTNY Stock Option Agreement or the Alex. Brown Stock Option
Agreement, as the case may be, is sometimes referred to as the "Issuer Option
Agreement," (ii) BTNY, as issuer of the BTNY Common Stock, and Alex. Brown, as
issuer of the Alex. Brown Common Stock, upon the exercise of the BTNY
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Stock Option and the Alex. Brown Stock Option, respectively, are sometimes
individually referred to as the "Issuer," (iii) BTNY and Alex. Brown, as the
holder of the Alex. Brown Stock Option and the BTNY Stock Option,
respectively, are sometimes individually referred to as the "Optionee," (iv)
the BTNY Option or the Alex. Brown Option, as the case may be, is sometimes
referred to as the "Issuer Option" and (v) the BTNY Common Stock and the Alex.
Brown Common Stock is referred to as "Issuer Common Stock."
The Option Agreements are intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Option Agreements may have the
effect of discouraging persons who might now or at any other time prior to the
Effective Time be interested in acquiring all of or a significant interest in
BTNY or Alex. Brown from considering or proposing such an acquisition, even
if, in the case of Alex. Brown, such persons were prepared to offer to pay
consideration to the Alex. Brown Stockholders which had a higher current
market price than the shares of BTNY Common Stock to be received per share of
Alex. Brown Common Stock pursuant to the Merger Agreement. The acquisition of
BTNY or Alex. Brown could cause the BTNY Option or the Alex. Brown Option, as
the case may be, to become exercisable. The existence of the Issuer Options
could significantly increase the cost to a potential acquiror of acquiring
either Issuer compared to its cost had the Option Agreements and the Merger
Agreement not been entered into. Such increased cost might discourage a
potential acquiror from considering or proposing an acquisition or might
result in a potential acquiror proposing to pay a lower per share price to
acquire such Issuer than it might otherwise have proposed to pay. Moreover,
following consultation with their respective independent accountants, BTNY and
Alex. Brown believe that the exercise of either of the Issuer Options is
likely to prohibit any acquiror of an Issuer from accounting for any
acquisition of such Issuer using the pooling of interests accounting method
for a period of two years.
The BTNY Stock Option Agreement provides for the purchase by Alex. Brown of
7,811,208 shares, subject to adjustment as described below (the "BTNY Option
Shares" or the "Issuer Option Shares") of BTNY Common Stock at an exercise
price of $82.25 per share, which represents the trading price on the last
trading day prior to public announcement of the Merger. The BTNY Option
Shares, if issued pursuant to the BTNY Stock Option Agreement, will in no
event exceed 10.0% of the BTNY Common Stock issued and outstanding without
giving effect to the issuance of any BTNY Common Stock subject to the BTNY
Option.
The number of shares of BTNY Common Stock subject to the BTNY Option will be
increased or decreased, as appropriate, to the extent that additional shares
of BTNY Common Stock are either (i) issued or otherwise become outstanding
(other than pursuant to an exercise of a BTNY Option or as permitted under the
Merger Agreement) or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after April 6, 1997, such that, after such issuance, the number
of BTNY Option Shares will continue to equal 10.0% of the BTNY Common Stock
then issued and outstanding without giving effect to the issuance of any BTNY
Common Stock subject to such BTNY Option. In the event of any change in, or
distributions in respect of, the shares of BTNY Common Stock by reason of a
stock dividend, split-up, merger, recapitalization, combination, subdivision,
conversion, exchange of shares, distribution on or in respect of such BTNY
Common Stock, or similar transaction, the type and number of BTNY Option
Shares purchasable upon exercise of the BTNY Option, and the applicable option
price, will also be adjusted in such a manner as will fully preserve the
economic benefits of the Option.
The Alex. Brown Stock Option Agreement provides for the purchase by BTNY of
4,959,101 shares, subject to adjustment as described below (the "Alex. Brown
Option Shares" or the "Issuer Option Shares") of Alex. Brown Common Stock at
an exercise price of $68.27 per share, which represents the trading price on
the last trading day prior to public announcement of the Merger. The Alex.
Brown Option Shares, if issued pursuant to the Alex. Brown Stock Option
Agreement, will in no event exceed 19.9% of the Alex. Brown Common Stock
issued and outstanding without giving effect to the issuance of any Alex.
Brown Common Stock subject to the Alex. Brown Option.
The number of shares of Alex. Brown Common Stock subject to the Alex. Brown
Option will be increased or decreased, as appropriate, to the extent that
additional shares of Alex. Brown Common Stock are either (i)
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issued or otherwise become outstanding (other than pursuant to an exercise of
an Alex. Brown Option or as permitted under the Merger Agreement) or (ii)
redeemed, repurchased, retired or otherwise cease to be outstanding after
April 6, 1997, such that, after such issuance, the number of Alex. Brown
Option Shares will continue to equal 19.9% of the Alex. Brown Common Stock
then issued and outstanding without giving effect to the issuance of any Alex.
Brown Common Stock subject to such Alex. Brown Option. In the event of any
change in, or distributions in respect of, the shares of Alex. Brown Common
Stock by reason of a stock dividend, split-up, merger, recapitalization,
combination, subdivision, conversion, exchange of shares, distribution on or
in respect of such Alex. Brown Common Stock, or similar transaction, the type
and number of Alex. Brown Option Shares purchasable upon exercise of the Alex.
Brown Option, and the applicable option price, will also be adjusted in such a
manner as will fully preserve the economic benefits of the Option.
Each Option Agreement provides that the Optionee or any other holder or
holders of the Issuer Option (as used in this section, collectively, the
"Holder") may exercise the Issuer Option, in whole or in part, subject to
regulatory approval, if both an Initial Triggering Event and a Subsequent
Triggering Event has occurred prior to the occurrence of an Exercise
Termination Event; provided that the Holder has sent to the Issuer written
notice of such exercise within 90 days following such Subsequent Triggering
Event (subject to extension as provided in each Issuer Option Agreement). The
terms Initial Triggering Event and Subsequent Triggering Event generally
relate to attempts by one or more third parties to acquire a significant
interest in the Issuer. Any exercise of the Issuer Option will be deemed to
occur on the date such notice is sent.
For purposes of each Issuer Option Agreement:
(i) The term "Initial Triggering Event" means the occurrence of any of
the following events or transactions after April 6, 1997: (a) the Issuer or
any subsidiary of the Issuer, without the Optionee's prior written consent,
enters into an agreement to engage in, or Issuer's Board of Directors
accepts, or recommends stockholder approval of, an Acquisition Transaction
(as defined below) with any person or group (other than as contemplated by
the Merger Agreement); (b) the Issuer's Board of Directors publicly
withdraws or modifies, or publicly announces its intention to withdraw or
modify, in any manner adverse to the Optionee, its recommendation that its
stockholders approve the Merger Agreement, in the case of Alex. Brown, or
the Share Issuance, in the case of BTNY, in anticipation of engaging in an
Acquisition Transaction; (c) any person, other than the Optionee or any
subsidiary of the Optionee acting in a fiduciary capacity in the ordinary
course of business acquires beneficial ownership, or the right to acquire
beneficial ownership, of 10% or more of the outstanding shares of the
Issuer's Common Stock; (d) any person other than the Optionee or any
subsidiary of the Optionee makes a bona fide proposal to the Issuer or its
stockholders by public announcement or written communication that becomes
the subject of public disclosure to engage in an Acquisition Transaction;
(e) the Issuer breaches any covenant or obligation in the Merger Agreement
after any person, other than the Optionee or any subsidiaries of the
Optionee, has proposed an Acquisition Transaction, and such breach (1)
would entitle the Optionee to terminate the Merger Agreement and (2) is not
remedied prior to the date of the Optionee's notice to the Issuer of the
exercise of the Option; or (f) any person other than the Optionee or any
subsidiary of the Optionee, other than in connection with a transaction to
which the Optionee has given its prior written consent, files an
application or notice with the Federal Reserve Board, or other federal or
state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction.
(ii) For purposes of each Issuer Option Agreement, the term "Acquisition
Transaction" means (a) a merger or consolidation, or any similar
transaction with the Issuer or any of its Significant Subsidiaries (as
defined in Rule 1-02 of Regulation S-X of the Commission); (b) a purchase,
lease or other acquisition or assumption of all or substantially all of the
assets or deposits of the Issuer or any of its Significant Subsidiaries;
(c) a purchase or other acquisition of securities representing 10% or more
of the voting power of the Issuer; or (d) any substantially similar
transaction, provided, however, that in no event will (i) any merger,
consolidation or similar transaction involving BTNY or any Significant
Subsidiary of BTNY in which the voting securities of BTNY outstanding
immediately prior thereto continue to represent (by either
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remaining outstanding or being converted into the voting securities of the
surviving entity of any such transaction) at least 65% of the combined
voting power of the voting securities of BTNY or the surviving entity
outstanding immediately after the consummation of such merger,
consolidation, or similar transaction, so long as, in the case of a merger,
consolidation or similar transaction involving BTNY, there is not a change
in the majority of the BTNY Board as a result of such transaction or (ii)
any merger, consolidation, purchase or similar transaction involving only
the Issuer and one or more of its subsidiaries or involving only any two or
more of such subsidiaries, be deemed to be an Acquisition Transaction,
provided that any such transaction is not entered into in violation of the
terms of the Merger Agreement.
(iii) The term "Subsequent Triggering Event" means the occurrence of
either of the following events or transactions after April 6, 1997: (a) the
acquisition by any person of beneficial ownership of 20% or more of the
then outstanding shares of Issuer Common Stock; or (b) the occurrence of
the Initial Triggering Event described above in clause (i)(a), except that
the percentage referred to in clause (ii)(c) of the definition of
"Acquisition Transaction" set forth above will be 20%.
Each Issuer Option will expire upon the occurrence of an "Exercise
Termination Event," which includes: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof
if such termination occurs prior to the occurrence of an Initial Triggering
Event, except in the case of the termination of the Merger Agreement by the
Optionee as a result of an uncured material breach by the Issuer of any of its
representations, warranties, covenants or agreements unless the breach by the
Issuer is non-volitional; or (iii) the date that is 12 months after the
termination of the Merger Agreement if such termination occurs after the
occurrence of an Initial Triggering Event or is a termination by the Optionee
due to a material, volitional breach by the Issuer of the Merger Agreement
(provided that, if an Initial Triggering Event continues or occurs beyond such
termination of the Merger Agreement and prior to the passage of such 12-month
period, the Issuer Option will terminate 12 months from the expiration of the
last Initial Triggering Event to expire, but in no event more than 18 months
after such termination of the Merger Agreement).
As of the date of this Joint Proxy Statement-Prospectus, to the best
knowledge of BTNY and Alex. Brown, no Initial Triggering Event or Subsequent
Triggering Event has occurred.
Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of a Holder, delivered prior to an Exercise
Termination Event, the Issuer (or any successor thereto) will repurchase the
Issuer Option from the Holder at a price (the "Issuer Option Repurchase
Price") equal to the amount by which (a) the market/offer price (as defined
below) exceeds (b) the option price, multiplied by the number of shares for
which the Issuer Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered within 90
days of such occurrence (or such later period as provided in Section 10 of
each of the Option Agreements), the Issuer will repurchase such number of the
Option Shares from the Owner as the Owner will designate at a price (the
"Issuer Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. In no event shall the
aggregate of the Issuer Option Repurchase Price, the Issuer Option Share
Repurchase Price, the Substitute Option Repurchase Price (as defined in each
of the Option Agreements), the Substitute Share Repurchase Price (as defined
in each of the Option Agreements), and any amount payable by the applicable
Issuer under the termination provisions of the Merger Agreement (see "The
Merger--Termination of the Merger Agreement") exceed $100 million (provided
that this limitation will not restrict the value that the Optionee may obtain
through the sale of the Issuer Option or Option Shares to any third party
other than the Issuer) (the "BTNY Stock Option Agreement Maximum" or the
"Alex. Brown Stock Option Agreement Maximum", as the case may be).
The term "market/offer price" means the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Issuer Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of the Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or
a substantial portion of the Issuer's assets, the sum of the
54
<PAGE>
price paid in such sale for such assets and the current market value of the
remaining assets of the Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, divided by the number of shares of Issuer Common Stock outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash will be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be.
However, if the Issuer at any time after delivery of a notice of repurchase as
described in this paragraph is prohibited under applicable law or regulation
from delivering to the Holder and/or the Owner, as appropriate, the Issuer
Option Repurchase Price and the Issuer Option Share Repurchase Price,
respectively, in full, the Holder or Owner may revoke its notice of repurchase
of the Issuer Option or the Issuer Option Shares, either in whole or to the
extent of the prohibition, whereupon, in the latter case, the Issuer will
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Issuer Option Repurchase Price or the Issuer Option Share
Repurchase Price that the Issuer is not prohibited from delivering and (ii)
deliver, as appropriate, (a) to the Holder, a new Issuer Option Agreement
evidencing the right of the Holder to purchase that number of shares of the
Issuer Common Stock obtained by multiplying the number of shares of the Issuer
Common Stock for which the surrendered Issuer Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the
numerator of which is the Issuer Option Repurchase Price less the portion
thereof theretofore delivered to the Holder and the denominator of which is
the Issuer Option Repurchase Price, and (b) to the Owner, a certificate for
the Issuer Option Shares it is then so prohibited from repurchasing. A
"Repurchase Event" is deemed to have occurred (i) upon the consummation of an
Acquisition Transaction or (ii) upon the acquisition by any person of the
beneficial ownership of 50% or more of the then outstanding Issuer Common
Stock, provided that a Subsequent Triggering Event has occurred prior to an
Exercise Termination Event.
In the event that, prior to an Exercise Termination Event, the Issuer enters
into any agreement (i) to consolidate with or merge into any person, other
than the Optionee or one of its subsidiaries, such that Issuer is not the
continuing or surviving corporation of such consolidation or merger; (ii) to
permit any person, other than the Optionee or one of its subsidiaries, to
merge into the Issuer and the Issuer is the continuing or surviving
corporation, but, in connection with such consolidation or merger, the
outstanding shares of the Issuer Common Stock are changed into or exchanged
for stock or other securities of any other person or cash or any other
property, or the then outstanding shares of Issuer Common Stock after such
merger will represent less than 50% of the outstanding voting shares and
voting share equivalents of the merged corporation; or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than the Optionee or any of its subsidiaries, then, and in each such case, the
agreement governing such transaction must provide that, upon consummation of
such transaction and upon terms and conditions set forth in the Issuer Option
Agreement, the Option will be converted into, or exchanged for, an option
having substantially the same terms as the Option (the "Substitute Option") to
purchase securities, at the election of the Holder, of either the acquiring
person or any person that controls the acquiring person. At the request of the
Holder of the Substitute Option, the issuer of the Substitute Option will
repurchase it at a price, and subject to such other terms and conditions, as
set forth in the Issuer Option Agreement.
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Date (subject to extension as provided
in the Issuer Option Agreement), the Optionee may request the Issuer to
prepare, file and keep current with respect to the Option Shares, a
registration statement with the Commission. The Issuer is required to use its
reasonable best efforts to cause such registration statement to become
effective and then to remain effective for 180 days or such shorter time as
may be reasonably necessary to effect such sales or other disposition of
Option Shares. The Optionee has the right to demand two such registrations.
Neither the Issuer nor the Optionee may assign any of its rights and
obligations under the Issuer Option Agreements or the Issuer Option to any
other person without the express written consent of the other party, except
that, if a Subsequent Triggering Event occurs prior to an Exercise Termination
Event, the Optionee, subject to the terms of the Issuer Option Agreement, may
assign, in whole or in part, its rights and obligations thereunder, within 90
days (subject to extension as provided in the Issuer Option Agreement) of such
Subsequent
55
<PAGE>
Triggering Event; provided that, until 15 days after the date on which the
Federal Reserve Board approves an application by the Optionee to acquire the
Issuer Option Shares, the Optionee may not assign its rights under the Issuer
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of the Issuer, (iii) an assignment to a single party for
the purpose of conducting a widely dispersed public distribution on the
Optionee's behalf or (iv) any other manner approved by the Federal Reserve
Board.
Certain rights and obligations of the Optionee and the Issuer under the
Option Agreement are subject to receipt of required regulatory approvals. The
approval of the Federal Reserve Board is required for the acquisition by BTNY
of more than 5% of the outstanding shares of Alex. Brown Common Stock and for
the acquisition by Alex. Brown of 10% or more of the outstanding shares of
BTNY Common Stock. Accordingly, BTNY and Alex. Brown have included or will
include in the application to the Federal Reserve Board a request for approval
of their respective rights as Optionee under the Option Agreements. See "--
Regulatory Approvals Required for the Merger."
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, the Supporting
Stockholders, who, as of the Alex. Brown Record Date, beneficially owned in
the aggregate approximately 6.6% of the outstanding shares of Alex. Brown
Common Stock, executed separate Support Agreements with BTNY pursuant to which
each Supporting Stockholder agreed, among other things, that all of the shares
of Alex. Brown Common Stock beneficially owned by such Supporting Stockholder
will be voted by the Supporting Stockholder to approve the Merger Agreement.
Each Support Agreement terminates upon termination of the Merger Agreement in
accordance with its terms.
Each Supporting Stockholder and the approximate number of shares of Alex.
Brown Common Stock beneficially owned by such Supporting Stockholder over
which he or she has voting power or control as of the Alex. Brown Record Date
are as follows: Bruce H. Brandaleone (230,608 shares); Denis J. Callahan
(161,801 shares); J. Michael Connelly (154,241 shares); Benjamin H. Griswold
IV (652,820 shares); Donald R. Heacock (111,110 shares); David L. Hopkins, Jr.
(90,272 shares); A.B. Krongard (864,727 shares); Robert F. Price (135,823
shares); W. Gar Richlin (204,048 shares); Thomas Schweitzer, Jr. (324,465
shares); Mayo A. Shattuck III (470,218 shares); and Beverly L. Wright (266,354
shares).
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of BTNY Common Stock to be issued to Alex. Brown Stockholders in
the Merger will have been registered under the Securities Act. Such shares
will be tradeable freely and without restriction by those stockholders not
deemed to be "affiliates" of Alex. Brown as that term is defined under the
Securities Act. An affiliate of Alex. Brown, as defined by the rules
promulgated pursuant to the Securities Act, is a person who directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with Alex. Brown. Any subsequent transfer of such
shares, however, by any person who is an affiliate of Alex. Brown at the time
the Merger is submitted for vote of the Alex. Brown Stockholders will, under
existing law, require either (i) the further registration under the Securities
Act of the shares of BTNY Common Stock to be transferred, (ii) compliance with
Rule 145 promulgated under the Securities Act (permitting limited sales under
certain circumstances) or (iii) the availability of another exemption from
registration. The foregoing restrictions are expected to apply to the
directors, executive officers and the holders of 10% or more of the Alex.
Brown Common Stock (and to certain relatives or the spouse of any such person
and any trusts, estates, corporations, or other entities in which any such
person has a 10% or greater beneficial or equity interest). Stop transfer
instructions will be given by BTNY to the transfer agent with respect to the
BTNY Common Stock to be received by persons subject to the restrictions
described above, and the certificates for such stock will be appropriately
legended.
56
<PAGE>
Commission guidelines regarding qualifying for the "pooling of interests"
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Commission
guidelines indicate further that the "pooling of interests" method of
accounting will generally not be challenged on the basis of sales by
affiliates of the acquiring or acquired company if such affiliates do not
dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a merger during the period
beginning 30 days before the merger and ending when financial results covering
at least 30 days of post-merger operations of the combined entity have been
published.
Each of BTNY and Alex. Brown has agreed in the Merger Agreement to use its
reasonable best efforts to cause each person who is an affiliate (for purposes
of Rule 145 and for purposes of qualifying the Merger for "pooling of
interests" accounting treatment) of such party to deliver to the other party a
written agreement intended to ensure compliance with the Securities Act and
preserve the ability to treat the Merger as a "pooling of interests."
BTNY has agreed in the Merger Agreement to use its reasonable best efforts
to publish, not later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations, combined sales and net income figures as contemplated by and in
accordance with the terms of the Commission's Accounting Series Release No.
135.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Alex. Brown's management have interests in the Merger in
addition to their interests solely as Alex. Brown Stockholders, as described
below.
BTNY Board of Directors. The Merger Agreement provides that BTNY is to take
all necessary actions so that, at the Effective Time, Mr. Krongard and up to
two other current non-management directors of Alex. Brown, to be mutually
agreed upon by BTNY and Alex. Brown, are to be appointed to the BTNY Board.
Equity Incentive Plans. The Merger Agreement provides that all options to
acquire Alex. Brown Common Stock outstanding at the Effective Time under the
Alex. Brown Stock Plans, including those held by directors and management,
will be assumed by BTNY. Each stock option will thereafter constitute an
option to acquire shares of BTNY Common Stock. See "--Conversion of Alex.
Brown Common Stock; Treatment of Alex. Brown Stock Options and Debentures."
Pursuant to the Alex. Brown Stock Plans, "a change of control" will occur upon
stockholder approval of the Merger at the Alex. Brown Special Meeting and all
outstanding Alex. Brown stock options will vest and become exercisable as of
such date.
The aggregate value of accelerated vesting of employee stock options
(determined in accordance with the proposed regulations under Section 280G of
the Code) held by the executive officers of Alex. Brown, assuming that the
Merger is approved by the Alex. Brown Stockholders at the Alex. Brown Special
Meeting on August 13, 1997 is approximately $14,375.
Executive Debentures. Certain of Alex. Brown's employees, including
management, have as part of Alex. Brown's compensation programs been given the
opportunity to purchase Executive Debentures issued by Alex. Brown and to
borrow the funds necessary to purchase such Executive Debentures from Alex.
Brown. The terms of certain of such loans provide that if certain performance
goals are achieved a specified portion of such loan is to be forgiven;
provided that during the first three years that any such loan is outstanding
such right of forgiveness will accrue but not vest until the end of such third
year unless certain events, including a change of control, occur in which
event such accrued amount will thereupon be forgiven. Stockholder approval of
the Merger at the Alex. Brown Special Meeting will be a "change of control"
for such purpose and any accrued and unvested loan forgiveness amounts will
vest as of such date. In addition, each Executive Debenture will become fully
convertible in accordance with its terms as of such date. See "Conversion of
Alex. Brown Stock; Treatment of Alex. Brown Stock Options and Debentures." The
aggregate value of the loan forgiveness and accelerated convertibility of the
Executive Debentures (determined in accordance with the proposed regulations
under Section 280G of the Code) for the executive officers is $15.4 million.
57
<PAGE>
Warrant Pools. Employees involved in private capital transactions, including
Messrs. Krongard and Shattuck and Ms. Wright, participate in an annual warrant
pool pursuant to which an interest in certain warrants received by Alex. Brown
during the year are allocated to participating employees. In the event of a
termination of employment (other than for cause) following a change in
control, a participant's right to receive distributions from the pool will not
be forfeited as it would upon a termination of employment prior to a change in
control. The aggregate value of this nonforfeitability of the executive of the
executive officers' participation in the warrant pool (determined in
accordance with the proposed regulations under Section 280G of the Code),
assuming that the Merger is approved by the shareholders at the Alex. Brown
Special Meeting is approximately $30,000.
Merchant Banking Units. Certain employees of Alex. Brown, including Messrs.
Krongard and Shattuck, purchased profit interests in an Alex. Brown-sponsored
merchant banking fund, which interests vest over a three year period. In the
event of a termination of employment (other than for cause) following a change
in control, all of the purchased interests will become 100% vested. The
aggregate value of the accelerated vesting of these interests (determined in
accordance with the proposed regulations under Section 280G of the Code) to
the executive officers of Alex. Brown, assuming that the Merger is approved by
the shareholders at the Alex. Brown Special Meeting is approximately $10,500.
Indemnification and Insurance. The Merger Agreement provides that all rights
of indemnification as provided in Alex. Brown's Articles of Incorporation and
the Alex. Brown By-laws will be assumed by the Surviving Corporation and that
for a period of six years following the Effective Time such provisions will
not be amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of the persons who at any time prior to
the Effective Time were identified as prospective indemnities thereunder. The
Merger Agreement provides that BTNY will, and will cause the Surviving
Corporation to, indemnify, defend and hold harmless, to the fullest extent
permitted by law, the present and former officers, directors, employees and
agents of Alex. Brown or any of its subsidiaries in their capacities as such,
after the Effective Time against all losses, expenses, claims, damages of
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time. The Merger Agreement also provides that BTNY will use its
reasonable best efforts for six years after the Effective Time, to cause the
persons serving as officers and directors of Alex. Brown immediately prior to
the Effective Time to be covered by the directors' and officers' liability
insurance policy maintained by Alex. Brown, or a substitute therefor with at
least the same coverage, with respect to acts or omissions occurring prior to
the Effective Time; provided that in no event is BTNY required to expend more
than 200% of the current amount expended by Alex. Brown to maintain such
insurance and that if BTNY is unable to maintain or obtain such insurance it
will use its reasonable best efforts to obtain as much comparable insurance as
available for such 200% amount.
Employment Agreements. BTNY has entered into employment agreements (the
"Employment Agreements") with approximately 20 of Alex. Brown's employees in
connection with the Merger Agreement, including three of its executive
officers (each, an "Executive"), which Employment Agreements are to become
effective at the Effective Time. The Employment Agreements with the Executives
are substantially similar and are described collectively herein, except to the
extent that their terms materially differ. The term of the Employment
Agreements with each Executive runs from the Effective Time through December
31, 1999 (the "Employment Period"). The Employment Agreements are in effect as
of the date of this Joint Proxy Statement-Prospectus.
Pursuant to their Employment Agreements, Mr. Krongard and Mr. Shattuck will
serve as a Vice Chairman of the Board of BTNY and a Vice Chairman of BTNY and
its co-head of investment banking, respectively. Each of Mr. Shattuck and Mr.
Krongard will receive an annual base salary of $350,000 during the Employment
Period and a cash bonus in respect of the 1997 year on a basis consistent with
Alex. Brown's past practices. In addition, each of Mr. Krongard and Mr.
Shattuck will be awarded in respect of calendar years 1998 and 1999 an annual
bonus of no less than $3.5 million, payable in the same ratio of cash and
equity as other BTNY peer executives. On commencement of the Employment
Period, Mr. Krongard will receive a grant of 60,000 options to purchase
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<PAGE>
BTNY Common Stock, and Mr. Shattuck will receive a grant of 80,000 options to
purchase BTNY Common Stock, each such grant vesting as to one-third of the
number of options granted on each of the first three anniversaries of the
grant date. In addition, Messrs. Krongard and Shattuck will receive additional
grants of 60,000 stock options in calendar years 1998 and 1999, which will
vest and become exercisable on the first anniversary of the date of grant. The
exercise price of all of the options granted under the employment agreements
will be equal to the average closing price of BTNY Common Stock for the five
trading days prior to the date of grant. Messrs. Krongard and Shattuck will
also be granted 75,000 units in the Bankers Trust Partnership Equity Plan in
each of calendar years 1998 and 1999.
Pursuant to her Employment Agreement, Ms. Wright will serve as a Managing
Director of BTNY. She will receive an annual base salary of $200,000 and a
cash bonus in respect of the 1997 year on a basis consistent with Alex.
Brown's past practices. Until such time as the long-term incentives awarded to
Ms. Wright (as described below) are fully vested, she will receive an annual
cash bonus which is consistent with BTNY's practice and policy with respect to
the investment banking division; however, in no event will her bonus in
respect of years 1998 and 1999 be less than $1,080,000. At the commencement of
the Employment Period, she will receive a grant of 21,884 options to purchase
BTNY Common Stock, and a number of restricted shares of BTNY Common Stock
having a fair market value of $1,050,000, which options and restricted shares
will vest and become exercisable as to one-third on the second, third and
fourth anniversaries of the grant date.
During the Employment Period, each of the Executives will be eligible to
participate in all savings, retirement, welfare and fringe benefit plans of
BTNY on the same basis as similarly situated executives of BTNY, and each of
the Executives will receive full credit for service with Alex. Brown for
purposes for eligibility to participate and receive benefits and vesting (but
not for purposes of benefit accruals).
In the event that an Executive's employment is terminated during the
Employment Period by BTNY other than for "Cause" (including on account of his
or her death or disability), or if the Executive terminates his or her
employment for "Good Reason," BTNY will make a lump sum payment to the
Executive in cash within 30 days of the date of termination in an amount equal
to the aggregate of the Executive's accrued but unpaid salary, pro rata bonus
and accrued deferred compensation. In addition, the Executive will receive an
amount equal to the product of (1) the number of years (including fractions
thereof) remaining from the date of termination until December 31, 1999 and
(2) the sum of (x) the Executive's annual base salary and (y) the Executive's
guaranteed minimum bonus, which product will be discounted to its present
value at the applicable federal rate. In addition, the Executive's stock
options and restricted stock will become immediately vested.
In the event that the Executive's employment is terminated by BTNY for Cause
or by the Executive without Good Reason during the Employment Period, the
Employment Agreement will be terminated without further obligation to the
Executive, other than to pay any accrued and unpaid salary, accrued deferred
compensation and any other benefits provided under BTNY's employee plans.
Each Executive agrees in his or her Employment Agreement to respect all
confidential information of BTNY and further agrees that, through December 31,
1999, he or she will not compete with the investment banking, corporate
finance, corporate advisory or mergers and acquisitions business of Alex.
Brown or BTNY or any of their affiliates. In addition, each Executive agrees
not to solicit any employees of BTNY or its affiliates during the Executives'
employment and for one year after such employment is terminated.
The Employment Agreements provide for a gross-up payment to be made to the
Executives, if necessary, to eliminate the effects of the imposition of the
excise tax under Section 4999 of the Code on the payments made thereunder.
If each of the executive officers were to be terminated as of August 1, 1997
under circumstances giving rise to an entitlement to severance benefits under
their employment agreements, the aggregate value of the lump sum cash
severance benefits so payable would be approximately $21.7 million.
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<PAGE>
Retention Program. Alex. Brown and BTNY have agreed in the Merger Agreement
to establish a key employee Retention Program involving up to $100 million in
cash and $134 million in restricted shares of BTNY Common Stock and options to
acquire BT Common Stock may be awarded to employees of Alex. Brown. These
maximum amounts are to be reduced by any guaranteed minimum bonuses and equity
incentives that are provided to Alex. Brown employees pursuant to the terms of
their Employment Agreements, other than the agreements with Messrs. Krongard
and Shattuck. The executive officers of Alex. Brown will be eligible to
receive awards under this program; however, no such awards have been made to
date. The Retention Program is in place as of the date of this Joint Proxy
Statement-Prospectus.
The Alex. Brown Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The Merger Agreement provides that BTNY is to take all necessary actions so
that, at the Effective Time, Mr. Krongard and up to two other current non-
management directors of Alex. Brown, to be mutually agreed upon by BTNY and
Alex. Brown, are to be appointed to the BTNY Board. Mr. Krongard's Employment
Agreement provides that Mr. Krongard will serve as a Vice Chairman of the
Board of BTNY. See "--Interests of Certain Persons in the Merger."
Following the Merger, BTNY intends to combine the operations of and, subject
to required regulatory approvals, to merge AB & Sons and BT Securities and to
consolidate the operations of other subsidiaries of BTNY and Alex. Brown that
provide similar services. Receipt of such regulatory approvals is not a
condition to the Merger. As of the date of this Joint Proxy Statement-
Prospectus, no final determination with respect to such matters has been made.
While no assurance can be given, BTNY and Alex. Brown have estimated, based
on information available at this time, annualized pre-tax expense savings at
the level of $80 million will be achieved by the end of the first 12 months
following completion of the Merger. Cost savings are expected to be realized
primarily through the consolidation of certain redundant front and back office
functions as well as in administrative areas. The extent to which such expense
savings will be achieved is dependent upon various factors, a number of which
are beyond the control of BTNY and Alex. Brown, including the regulatory
environment, economic conditions, unanticipated changes in business
conditions, and inflation, and no assurances can be given with respect to the
ultimate level and composition of expense savings to be realized, or that such
savings will be realized in the time frame currently anticipated. These
amounts have not been included in any of the unaudited pro forma financial
information included in this Joint Proxy Statement-Prospectus.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
BTNY Common Stock is, and the shares offered hereby will be, listed on the
NYSE and traded under the symbol "BT." The following table sets forth, for the
periods indicated, the high and low reported closing sale prices per share of
BTNY Common Stock on the NYSE Composite Transactions List.
Alex. Brown Common Stock is listed on the NYSE and traded under the symbol
"AB." The following tables set forth, for the periods indicated, the high and
low reported closing sale prices per share of Alex. Brown Common Stock on the
NYSE Composite Transactions List. The stock price information has been
adjusted to reflect the 3-for-2 stock split, paid on January 15, 1997.
<TABLE>
<CAPTION>
BTNY
SALES PRICES
-------------
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter................................................... 64 7/8 49 3/4
Second Quarter.................................................. 64 3/4 52
Third Quarter................................................... 72 60 3/4
Fourth Quarter.................................................. 71 60 1/4
YEAR ENDED DECEMBER 31, 1996:
First Quarter................................................... 72 3/8 61
Second Quarter.................................................. 77 7/8 65 1/2
Third Quarter................................................... 83 1/2 68 1/4
Fourth Quarter.................................................. 90 7/8 78
YEAR ENDED DECEMBER 31, 1997:
First Quarter................................................... 96 3/8 81 1/4
Second Quarter.................................................. 91 1/4 75
Third Quarter (through July 8, 1997)............................ 92 1/2 87 7/8
</TABLE>
<TABLE>
<CAPTION>
ALEX. BROWN
SALES PRICES
-----------------
HIGH LOW
-------- --------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter............................................... 26 19 3/4
Second Quarter.............................................. 31 3/4 25 27/64
Third Quarter............................................... 40 27/64 28 5/64
Fourth Quarter.............................................. 38 53/64 26 43/64
YEAR ENDED DECEMBER 31, 1996:
First Quarter............................................... 35 3/4 26 21/64
Second Quarter.............................................. 39 59/64 31 1/4
Third Quarter............................................... 39 27/64 28 21/64
Fourth Quarter.............................................. 48 27/64 37 37/64
YEAR ENDED DECEMBER 31, 1997:
First Quarter............................................... 64 42 1/2
Second Quarter.............................................. 73 3/8 41 3/8
Third Quarter (through July 8, 1997)........................ 75 9/16 71 13/16
</TABLE>
61
<PAGE>
DIVIDENDS
The following tables set forth dividends declared per share of BTNY Common
Stock and Alex. Brown Common Stock, respectively, for the periods indicated.
The dividend information has been adjusted to reflect the 3-for-2 stock split,
paid on January 15, 1997. The ability of either BTNY or Alex. Brown to pay
dividends to its stockholders is subject to certain restrictions. See "Certain
Regulatory Matters."
<TABLE>
<CAPTION>
BTNY
DIVIDENDS
---------
<S> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter....................................................... $1.00
Second Quarter...................................................... 1.00
Third Quarter....................................................... 1.00
Fourth Quarter...................................................... 1.00
YEAR ENDED DECEMBER 31, 1996:
First Quarter....................................................... 1.00
Second Quarter...................................................... 1.00
Third Quarter....................................................... 1.00
Fourth Quarter...................................................... 1.00
YEAR ENDED DECEMBER 31, 1997:
First Quarter....................................................... 1.00
Second Quarter...................................................... 1.00
</TABLE>
<TABLE>
<CAPTION>
ALEX. BROWN
DIVIDENDS
-----------
<S> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter..................................................... $0.117
Second Quarter.................................................... 0.133
Third Quarter..................................................... 0.133
Fourth Quarter.................................................... 0.133
YEAR ENDED DECEMBER 31, 1996:
First Quarter..................................................... 0.133
Second Quarter.................................................... 0.167
Third Quarter..................................................... 0.167
Fourth Quarter.................................................... 0.170
YEAR ENDED DECEMBER 31, 1997:
First Quarter..................................................... 0.170
</TABLE>
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<PAGE>
CERTAIN REGULATORY MATTERS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to bank holding companies and their
subsidiaries and provides certain specific information relevant to BTNY. For
further discussion of this regulatory framework, see pages 109-111 of BTNY's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 which
is incorporated herein by reference. See "Incorporation of Certain Documents
by Reference." This regulatory framework is intended primarily for the
protection of depositors and the federal deposit insurance funds and not for
the protection of security holders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to those provisions. A change in the statutes,
regulations or regulatory policies applicable to BTNY or its subsidiaries may
have a material effect on the business of BTNY.
General. As a bank holding company, BTNY is subject to regulation under the
BHCA, and to inspection, examination and supervision by the Federal Reserve
Board. Under the BHCA, bank holding companies generally may not acquire the
ownership or control of more than 5% of the voting shares or substantially all
the assets of any company, including a bank, without the Federal Reserve
Board's prior approval. In addition, bank holding companies generally may
engage, directly or indirectly, only in banking and such other activities as
are determined by the Federal Reserve Board to be closely related to banking.
Capital Requirements. BTNY is subject to capital ratios, requirements and
guidelines imposed by the Federal Reserve Board, which are substantially
similar to the ratios, requirements and guidelines imposed by the Federal
Reserve Board, the OCC and the FDIC on the banks within their respective
jurisdictions. These capital requirements establish higher capital standards
for banks and bank holding companies that assume greater risks. For this
purpose, a bank's or holding company's assets and certain specified off-
balance sheet items are assigned to four risk categories, each weighted
differently based on the level of credit risk that is ascribed to such items.
A bank's or holding company's capital, in turn, is divided into two tiers:
core ("Tier 1") capital, which includes common equity, qualifying perpetual
preferred stock and related surplus (excluding auction rate issues), and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill, certain identifiable intangible assets and certain other assets; and
supplementary ("Tier 2") capital, which includes, among other items, perpetual
preferred stock not meeting the Tier 1 definition, mandatory convertible
securities, subordinated debt and allowances for credit losses, subject to
certain limitations, less certain required deductions.
In 1996, the Federal Reserve Board and the other U.S. federal bank
regulatory agencies jointly issued an amendment to the risk-based capital
guidelines, incorporating a measure for market risk ("the market risk
amendment"). Essentially, the market risk amendment changes the calculation of
risk-weighted assets for trading accounts, and incorporates a new category for
capital called "Tier 3 Capital". This capital category, which is eligible as
support for trading activity only, includes subordinated debt that has an
original maturity of at least two years, has a "lock in" clause precluding
payment of either interest or principal (even at maturity) if payment would
cause the issuing organization to fall or remain below the minimum risk-based
capital ratio requirements, and meets certain other criteria. In addition, the
market risk amendment requires that the capital and risk-adjusted assets of
any securities subsidiaries be included when calculating the capital and
leverage ratios for the bank holding company. Prior to the market risk
amendment, the assets and capital of the securities subsidiaries were
excluded.
Compliance with the market risk amendment is mandatory by January 1, 1998
for those banking organizations that meet certain thresholds with regard to
their trading activity. Banking organizations may choose to adopt early during
1997, with prior approval from their primary federal regulator. BTNY and BTCo
adopted the new market risk amendment as of March 31, 1997.
BTNY, like other bank holding companies, currently is required to maintain
Tier 1 and Total Capital (the sum of Tier 1, Tier 2 and Tier 3 capital) equal
to at least 4% and 8% of its total risk-weighted assets, respectively. At
March 31, 1997 BTNY met both requirements, with Tier 1 and total capital equal
to 8.2% and 14.8% of its total risk-weighted assets, respectively.
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The Federal Reserve Board also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted quarterly average total
assets) of 3%, if the holding company has the highest regulatory rating and
meets certain other requirements, or of 3% plus an additional cushion of at
least 100 to 200 basis points if the holding company does not meet these
requirements. At March 31, 1997 BTNY's leverage ratio was 4.5%.
The Federal Reserve Board may set capital requirements higher than the
minimums noted above for holding companies whose circumstances warrant it. For
example, holding companies experiencing or anticipating significant growth may
be expected to maintain capital ratios well above the minimum levels. The
Federal Reserve Board has not, however, imposed any such special capital
requirement on BTNY.
Dividend Restrictions and Transfers of Funds. Limitations exist on the
availability of BTCo's undistributed earnings for payment of dividends to BTNY
without prior approval of the bank regulatory authorities. In this regard,
BTCo can declare dividends in 1997 without approval of the regulatory
authority of $361 million of its retained earnings at March 31, 1997, plus an
additional amount equal to net profits, as defined, for 1997 up to the date of
any such dividend declaration. The Federal Reserve Board may prohibit the
payment of dividends if it determines that circumstances relating to the
financial condition of a bank are such that the payment of dividends would be
an unsafe and unsound practice.
Certain other subsidiaries are subject to various regulatory and other
restrictions which may limit cash dividends and advances to BTNY.
DESCRIPTION OF BTNY COMMON STOCK
As of the BTNY Record Date, BTNY was authorized to issue 300,000,000 shares
of BTNY Common Stock and there were 77,649,619 such shares outstanding.
The following summary of certain provisions of the BTNY Certificate of
Incorporation, the BTNY By-laws and the NYBCL, does not purport to be complete
and is qualified by reference to the BTNY Certificate of Incorporation and the
BTNY By-laws, copies of which are on file with the Commission, and to the
provisions of the NYBCL. For further information on the rights of holders of
BTNY Common Stock, see "Comparison of Rights of Holders of Alex. Brown Common
Stock and BTNY Common Stock."
VOTING RIGHTS
The holders of BTNY Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, including
the election of directors.
DIVIDENDS
The holders of shares of BTNY Common Stock have rights to receive dividends
when, as and if declared by the BTNY Board out of funds legally available
therefor.
LIQUIDATION AND MERGER
In the event of a liquidation, dissolution or winding up of BTNY, holders of
BTNY Common Stock are entitled to share with each other on a ratable basis as
a single class in the assets, if any, available for distribution after payment
of all creditors and payments due in respect of any other outstanding senior
securities of BTNY, which could include shares of BTNY preferred stock. Upon
the merger or consolidation of BTNY, holders of each share of BTNY Common
Stock are required to receive equal per share payments or distributions.
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OTHER PROVISIONS
Holders of BTNY Common Stock have no preemptive rights in general to
subscribe for any additional securities that BTNY may issue. There are no
redemption or sinking fund provisions applicable to BTNY Common Stock, nor is
it subject to calls or assessments by BTNY. All outstanding shares of BTNY
Common Stock are legally issued, fully paid and nonassessable. Holders of BTNY
Common Stock do not have preference, conversion or exchange rights.
BTNY RIGHTS
Each BTNY Right entitles the record holder to purchase from BTNY a one-
hundredth interest in a share of a Junior Participating Share at an exercise
price of $140, subject to certain adjustments. The BTNY Rights will not be
exercisable or transferable apart from the BTNY Common Stock until the 10th
day after either a public announcement that a person or group (an "Acquiring
Person") has acquired beneficial ownership of 20 percent or more of the BTNY
Common Stock, or the announcement or commencement of a tender offer for 20
percent or more of the BTNY Common Stock. If BTNY is acquired or 50 percent or
more of its consolidated assets or earning power are sold, each holder of a
BTNY Right will have the right to receive, upon the exercise at the then
current exercise price of the BTNY Right, that number of shares of BTNY Common
Stock of the acquiring company which have a market value of two times the
exercise price of the BTNY Right. If any person becomes an Acquiring Person
(unless such person first acquires 20 percent or more of the outstanding
shares of BTNY Common Stock by a purchase pursuant to a tender offer for all
of the shares of BTNY Common Stock for cash, which purchase increases such
person's beneficial ownership to 80 percent or more of the outstanding shares
of BTNY Common Stock), each holder of a BTNY Right other than BTNY Rights
beneficially owned by the Acquiring Person (which will be void), will have the
right to receive upon exercise that number of shares of BTNY Common Stock
having a market value of two times the exercise price of the BTNY Right.
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COMPARISON OF RIGHTS OF HOLDERS OF
ALEX. BROWN COMMON STOCK AND BTNY COMMON STOCK
Upon the consummation of the Merger, stockholders of Alex. Brown, a Maryland
corporation, will become stockholders of BTNY, a New York corporation.
Differences between the laws of Maryland and those of New York, and between
the BTNY Certificate of Incorporation and the BTNY By-laws and the Alex. Brown
Articles of Incorporation, and the Alex. Brown By-laws, and the existence of
certain other documents setting forth additional stockholders' rights, will
result in several changes in the rights of stockholders of Alex. Brown's when
the Merger is effected. A summary of the more significant changes is set forth
below. While the summary is a complete statement in all material respects of
the comparative rights of the holders of BTNY Common Stock and Alex. Brown
Common Stock, it does not purport to be a complete description of the specific
provisions referred to herein. The identification of specific differences is
not meant to indicate that other differences do not exist. This summary is
qualified in its entirety by reference to the BTNY Certificate of
Incorporation and the BTNY By-laws, the Alex. Brown Articles of Incorporation
and the Alex. Brown By-laws, Maryland law and New York law, to which Alex.
Brown Stockholders are referred.
BUSINESS COMBINATIONS
Generally, under the MGCL, the approval by the affirmative vote of two-
thirds of all the votes entitled to be cast on the matter is required for
mergers, consolidations, share exchanges, and (with certain exceptions) any
transfers of all or substantially all of the assets of a corporation.
However, the Alex. Brown Articles of Incorporation (as permitted by the
MGCL) provides that, notwithstanding any provision of law permitting or
requiring any action to be taken or authorized by the vote of holders entitled
to cast a greater number of votes, such action shall be valid if taken or
authorized by the affirmative vote of holders entitled to cast a majority of
all the votes entitled to be cast on the matter.
Under the NYBCL, the vote of the holders of two-thirds of all outstanding
shares of stock of a New York corporation entitled to vote thereon is required
for mergers and consolidations, and for sales, leases, exchanges or other
dispositions of all or substantially all the assets of a corporation, if not
made in the usual or regular course of the business actually conducted by such
corporation. If a plan of merger or consolidation contains any provision
which, if contained in an amendment to the certificate of incorporation, would
entitle the holders of shares of a class to vote as a class thereon, the
merger or consolidation will also require authorization by a vote of the
holders of a majority of all outstanding shares of each such class.
The BTNY Certificate of Incorporation does not contain any provisions
relating to business combinations.
APPRAISAL RIGHTS
Under the MGCL, except as otherwise provided by the MGCL, stockholders have
the right to demand and receive payment of the fair value of their stock in
the event of (i) a merger or consolidation, (ii) a share exchange, (iii) a
transfer of all or substantially all assets requiring a stockholder vote, (iv)
an amendment to the articles of incorporation which alters the contract
rights, as expressly set forth in the articles of incorporation, of any
outstanding stock and substantially adversely affects the stockholder's
rights, unless the right to do so is reserved by the articles of incorporation
or (v) certain business combinations. However, except as otherwise provided by
the MGCL, stockholders do not have appraisal rights if, among other things,
(a) the stock is listed on a national securities exchange (i) with respect to
a merger of a 90% or more owned subsidiary into its parent, on the date notice
of such merger is given or waived or (ii) with respect to any other
transaction, on the record date for determining stockholders entitled to vote
on the transaction or (b) the stock is that of the successor in a merger,
unless (i) the merger alters the contract rights of the stock as expressly set
forth in the certificate and the certificate does not reserve the right to do
so or (ii) the stock is to be changed or converted into something other than
stock in the successor or cash or other interests arising out of the treatment
of fractional shares of stock in the successor.
Alex. Brown Stockholders do not have the appraisal rights described in the
immediately preceding paragraph in connection with the Merger Agreement and
consummation of the transactions contemplated thereby.
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Stockholders of a New York corporation have the right to dissent and receive
payment of the fair value of their shares, except as otherwise provided by the
NYBCL, in the event of certain mergers or consolidations, certain sales,
leases, exchanges or other dispositions of all or substantially all of the
corporation's assets and certain share exchanges.
BTNY Stockholders do not have the appraisal rights described in the
immediately preceding paragraph in connection with the Share Issuance.
STATE TAKEOVER LEGISLATION
Maryland Business Combination Law. Subtitle 6 of Title 3 of the MGCL (the
"Maryland Business Combination Law") prohibits any business combination
(defined to include a variety of transactions, including merger,
consolidations, share exchanges, certain sales or disposition of assets,
certain issuances of stock, liquidations, certain reclassifications and the
receipt of certain benefits from the corporation, including certain losses or
guarantees) between a Maryland corporation and any "interested stockholder"
(defined generally as any person who, directly or indirectly, beneficially
owns 10% or more of the outstanding voting stock of the corporation or an
affiliate of the corporation who, at any time within the two-year period prior
to the date in question, was the beneficial owner of 10% or more of the voting
power of the then-outstanding voting stock of the corporation) or any
affiliate of an interested stockholder for a period of five years after the
date on which the interested stockholder became an interested stockholder.
After such five-year period, a business combination between a Maryland
corporation and such interested stockholder or any affiliate of an interested
stockholder is prohibited unless either certain "fair price" provisions are
complied with or the business combination is recommended by the corporation's
board of directors and approved by certain supermajority stockholder votes.
The supermajority vote requirements of the Maryland Business Combination Law
do not apply to a business combination with an interested stockholder if such
business combination is approved or exempted from the Maryland Business
Combination Law by a resolution of the board of directors of the corporation
adopted prior to the date on which the interested stockholder became such.
Maryland Control Share Act. Subtitle 7 of Title 3 of the MGCL (the "Maryland
Control Share Act") generally provides that control shares (as defined herein)
of a Maryland corporation acquired in a control share acquisition (as defined
herein) have no voting rights, unless voting rights for such shares shall have
been approved at a meeting of the stockholders of the corporation by the
affirmative vote of two-thirds of all votes entitled to be cast on the matter
(other than interested shares, as defined herein) or, among other exceptions,
such acquisition of shares is made pursuant to a merger agreement with the
corporation or, prior to the acquiring person's acquisition thereof, the
corporation's certificate or bylaws permit the acquisition of such shares. If
the acquiring person so requests, the corporation is required to hold a
stockholders' meeting to consider the authorization of voting rights to
control shares within 50 days after a demand is made by the acquiring person,
provided that, among other things, such acquiring person has delivered to the
corporation an acquiring person statement setting forth, among other things,
the terms of proposed control share acquisition and representations regarding
financing of the control share acquisition that is not provided by the
acquiring person and has agreed to pay the corporation's expenses of the
meeting.
"Control shares" generally means voting shares of stock which, if aggregated
with all other such shares of stock previously acquired by the acquiring
person or in respect of which the acquiring person is able to exercise or
direct the exercise of voting power (except solely by virtue of a revocable
proxy), would entitle the acquiring person to exercise or direct the exercise
of voting power in electing directors within one of the following ranges of
voting power; (i) one-fifth or more but less than one-third, (ii) one-third or
more but less than a majority or (iii) a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. "Control
share acquisition" generally means the acquisition of ownership of, or the
power to direct the exercise of voting power with respect to, issued and
outstanding control shares, but does not include the acquisition of shares in
a merger, consolidation or share exchange to which the corporation is a party.
"Interested shares" generally means shares of a corporation in respect of
which an acquiring person, an officer of the corporation or an employee of the
corporation who is also a director of the corporation is entitled to exercise
voting power in the election of directors.
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If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement within the time period required
by Maryland law, then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares (except those for
which voting rights have previously been approved) for fair value determined,
without regard to the absence of voting rights for the control shares, as of
the date of the last control share acquisition by the acquiring person or of
any meeting of stockholders at which the voting rights of such shares are
considered and not approved. If voting rights for control shares are approved
at a stockholders meeting and the acquiring person becomes entitled to vote a
majority of the shares entitled to vote, all other stockholders may exercise
appraisal rights. The fair value of the shares as determined for purposes of
such appraisal rights may not be less than the highest price per share paid by
the acquiring person in the control share acquisition.
New York Business Combination Law. Section 912 of the NYBCL prohibits any
business combination (defined to include a variety of transactions, including
mergers, sales or disposition of assets, issuances of stock, liquidation,
reclassifications and benefits from the corporation, including loans or
guarantees) with, involving or proposed by any "interested stockholder"
(defined generally as any person who, directly or indirectly, beneficially
owns 20% or more of the outstanding voting stock of a resident domestic New
York corporation) for a period of five years after the date on which the
interested stockholder became an interested stockholder. After such five-year
period a business combination between a resident domestic New York corporation
and such interested stockholder is prohibited unless either certain "fair
price" provision are complied with or the business combination is approved by
a majority of the outstanding voting stock not beneficially owned by such
interested stockholder or its affiliates. The New York Business Combination
Law exempts from its prohibitions any business combination with an interested
stockholder if such business combination, or the purchase of stock by the
interested stockholder that caused such stockholder to become such, is
approved by the board of directors of the resident domestic New York
corporation prior to the date on which the interested stockholder becomes
such.
A resident domestic New York corporation may adopt an amendment to its by-
laws, approved by the affirmative vote of the holders, other than interested
stockholders and their affiliates and associates, of a majority of the
outstanding voting stock, excluding the voting stock of interested
stockholders and their affiliates and associates, expressly electing not to be
governed by the New York Business Combination Law. However, such amendment
will not be effective until 18 months after such stockholder vote and will not
apply to any business combination with an interested stockholder who was such
on or prior to the effective date of such amendment. BTNY has not amended the
BTNY By-laws to elect not to be governed by the New York Business Combination
Law.
STOCKHOLDER RIGHTS PLANS
BTNY has entered into a Rights Agreement (the "Rights Agreement"), dated as
of February 22, 1988, with Morgan Stockholder Services Trust Company, as
rights agent (the "Rights Agent"). The Rights Agreement evidences a rights
plan adopted by the BTNY Board in February 1988.
Entitlement/Exercise. Under the Rights Agreement, the BTNY Rights have been
distributed to BTNY stockholders (and will be distributed until the earliest
of the Distribution Date (as defined herein), February 26, 1998 and the time
at which the BTNY Rights are released) as a dividend at the rate of one right
for each outstanding share of BTNY Common Stock. Until the Distribution Date,
the BTNY Rights are evidenced by the certificates for shares of BTNY Common
Stock registered in the names of the holders thereof. After the Distribution
Date, separate certificates evidencing the BTNY Rights will be sent to holders
of BTNY Common Stock.
The BTNY Rights become exercisable on the earlier of (i) ten days following
the public announcement by BTNY or an Acquiring Person (as defined herein)
that an Acquiring Person has become such and (ii) the tenth day after any
person commences, or publicly announces its intention to commence, a tender or
exchange offer that would result in it acquiring 20% or more of the
outstanding BTNY Common Stock (such earlier date, the "Distribution Date").
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"Acquiring Person" generally means any person who is the beneficial owner of
20% or more of the outstanding BTNY Common Stock.
When exercised, each BTNY Right entitles the holder, subject to certain
adjustments, to purchase at a price of $140.00 (i) one one-hundredth of a
share of BTNY Series C Junior Participating Preferred Stock ("BTNY C Preferred
Stock") or (ii) shares of BTNY Common Stock having a market price equal to
twice the exercise price.
Invalidation. Once a person becomes an Acquiring Person, any Rights
beneficially owned by any Acquiring Person (and any affiliate or associate of
any Acquiring Person and certain transferees of such persons) are void.
Merger. If BTNY is acquired in a merger or consolidation or BTNY sells or
transfers assets for earning power aggregating 50% or more of the assets or
earning power of BTNY and its subsidiaries, taken as a whole, BTNY Rights
holders will be entitled to purchase, subject to certain adjustments, shares
of common stock of the other entity party to such transaction (the "principal
party") having a market value equal to twice the exercise price of the BTNY
Rights. BTNY is prohibited from consummating such a transaction unless the
principal party has agreed that the provisions of the Rights Agreement will
apply to shares of its stock deliverable upon exercise of the BTNY Rights.
In the event that any person becomes an Acquiring Person (unless such person
first acquires 20% or more of the outstanding BTNY Common Stock by a purchase
pursuant to a tender offer for all of the BTNY Common Stock for cash, which
purchase increases such person's beneficial ownership to 80% or more of the
outstanding BTNY Common Stock), proper provision shall be made so that each
holder of a BTNY Right, other than BTNY Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the
right to receive upon exercise that number of BTNY Common Stock having a
market value of two times the exercise price of the BTNY Right.
Redemption/Exchange. BTNY may redeem the BTNY Rights at a redemption price
of $.01 per BTNY Right at any time before a person or group first becomes an
Acquiring Person. At any time after a person first becomes an Acquiring Person
(but before such person becomes the beneficial owner of 50% or more of the
BTNY Common Stock), the BTNY Board may exchange each BTNY Right for a share of
BTNY Common Stock or one one-hundredth of a share of BTNY C Preferred Stock.
Amendment. BTNY may amend the Rights Agreement at any time the BTNY Rights
are redeemable, without the approval of BTNY Rights holders, including
reducing the threshold at which one becomes an Acquiring Person from 20% to
not less than the greater of (i) the largest percentage of the outstanding
BTNY Common Stock then known by BTNY to be beneficially owned by any person
and (ii) 10%. However, after one becomes an Acquiring Person, the Rights
Agreement may not be amended in a manner which would adversely affect the
interests of the BTNY Rights holders.
Alex. Brown does not have a stockholder rights plan.
AMENDMENTS TO CERTIFICATES OF INCORPORATION
Under the MGCL, unless otherwise provided in the certificate, a proposed
certificate amendment requires the affirmative vote of two-thirds of all the
votes entitled to be cast on the matter. The Alex. Brown Articles of
Incorporation requires the affirmative vote of holders of a majority of the
total number of shares entitled to vote thereon to amend the Alex. Brown
Articles of Incorporation.
Under the NYBCL, amendments to the certificate of incorporation may be
authorized by vote of the board of directors followed by vote of the holders
of a majority of all outstanding shares entitled to vote thereon at a meeting
of stockholders. If any such amendment would adversely affect the rights of
any holders of shares of a class or series of stock, the vote of the holders
of a majority of all outstanding shares of the class or series, voting as a
class, is also necessary to authorize such amendment. The BTNY Certificate of
Incorporation
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generally provides that the voted holders of two-thirds of all outstanding
shares of its classes and series of preferred stock are required to approve an
amendment adversely affecting the rights of such class or series.
AMENDMENTS TO BY-LAWS
Under the MGCL, the power to adopt, alter, and repeal the by-laws is vested
in the stockholders, except to the extent that the certificate or the by-laws
vest it in the board of directors.
The Alex. Brown By-laws provide that with certain exceptions, the Alex.
Brown By-laws may by amended by the majority vote of the Board of Directors or
the affirmative vote of the holders of a majority of the outstanding shares of
Alex. Brown entitled to vote.
Under the NYBCL, except as otherwise provided in the certificate of
incorporation, by-laws may be amended, repealed or adopted by vote of the
holders of the shares at the time entitled to vote in the election of any
directors. When so provided in the certificate of incorporation or a by-law
adopted by the stockholders, by-laws may be amended, repealed or adopted by
the board by such vote as may be therein specified, which may be greater than
the vote otherwise prescribed by law, but any by-law adopted by the board may
be amended or repealed by the stockholders entitled to vote thereon as
provided by the NYBCL.
The BTNY By-laws may be amended by the majority vote of the BTNY Board or by
the affirmative vote of the holders of a majority of the outstanding shares of
BTNY entitled to vote.
DIVIDEND SOURCES
Under the MGCL, a board of directors may authorize a corporation to make
distributions to its stockholders, subject to any restrictions in its articles
of incorporation and as provided under the MGCL. Under the MGCL, no
distribution is permitted, however, if, after giving effect to the
distribution, the corporation would not be able to pay its indebtedness as the
indebtedness becomes due in the usual course of business or the corporation's
total assets would be less than the sum of its total liabilities plus, unless
the articles of incorporation permits otherwise, the amount needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of stockholders whose preferential
rights on dissolution are superior to those receiving a distribution.
Under the NYBCL, except as otherwise provided in the NYBCL, dividends may be
declared or paid and other distributions may be made out of surplus only, so
that the net assets of the corporation remaining after such declaration,
payment or distribution must at least equal the amount of its stated capital.
A corporation may not declare or pay dividends or make other distributions
when the corporation is insolvent or would thereby be made insolvent, or when
the declaration, payment or distribution would be contrary to any restrictions
contained in the corporation's certificate of incorporation. The BTNY
Certificate of Incorporation does not contain any such restrictions.
STOCKHOLDER ACTION
Under the MGCL, any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting if the following are filed with
the records of stockholders' meetings: (i) unanimous written consent setting
forth the actions and signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote at it.
Under the NYBCL, any action required or permitted to be taken by vote may be
taken without a meeting by written consent, setting forth the action so taken,
signed by the holders of all outstanding shares entitled to vote thereon,
provided that the certificate of incorporation may contain a provision
requiring the written consent of the holders of less than all outstanding
shares. The BTNY Certificate of Incorporation does not contain such a
provision.
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SPECIAL STOCKHOLDER MEETINGS
The MGCL provides that a special meeting of stockholders may be called by
the president, the board of directors or any person specified in the
certificate of incorporation or by-laws. In addition, under the MGCL, a
special meeting of stockholders generally must be called on the written
request of stockholders entitled to cast at least 25% of all the votes
entitled to be cast at the meeting. The Alex. Brown By-laws provide that
special meetings of stockholders may be called by the Chairman of the Board,
the President or the Alex. Brown Board.
The BTNY By-laws provide that special meetings of the stockholders may be
called, except as otherwise regulated by statute only by the BTNY Board and
any other person or committee expressly so authorized by the BTNY Board. In
addition, the NYBCL provides that if, for a period of one month after the date
fixed by or under the by-laws for the annual meeting of stockholders, or if no
date has been so fixed, for a period of 13 months after the last annual
meeting, there is a failure to elect a sufficient number of directors to
conduct the business of the corporation, the board shall call a special
meeting for the election of directors. If such special meeting is not called
by the board within two weeks after the expiration of such period or if it is
called but there is a failure to elect such directors for a period of two
months after the expiration of such period, holders of 10% of the shares
entitled to vote in an election of directors may, in writing, demand the call
of a special meeting for the election of directors.
CUMULATIVE VOTING
The MGCL permits the articles of incorporation of a Maryland corporation to
provide for cumulative voting for the election of directors. The Alex. Brown
Articles of Incorporation does not contain such a provision.
The NYBCL permits the certificate of incorporation of a New York corporation
to provide that in all elections of directors each stockholder is entitled to
cumulate such stockholder's votes. The BTNY Certificate of Incorporation does
not contain such a provision.
NUMBER AND ELECTION OF DIRECTORS
The MGCL permits the articles of incorporation or by-laws to contain
provisions dividing the directors into classes and specifying the term of
office of each class, except that the term of office may not be longer than
five years and the term of office of at least one class must expire each year.
Alex. Brown does not have a classified board. The Alex. Brown Articles of
Incorporation provides that the number of directors will be 12, which number
may be increased or decreased by the Alex. Brown By-laws.
The NYBCL permits the certificate of incorporation or the specific
provisions of a by-law adopted by the stockholders to provide that directors
be divided into either two, three or four classes. All classes must be as
nearly equal in number as possible, and no class may include less than three
directors. The terms of office of one class of directors shall expire each
year with the terms of office of no two classes expiring in the same year.
BTNY does not have a classified board of directors. The BTNY By-laws provide
that the number of directors shall be not less than five nor more than 25,
with the exact number of directors within such minimum and maximum limits to
be fixed and determined by the vote of a majority of the entire BTNY Board.
REMOVAL OF DIRECTORS
Under the MGCL, except as otherwise provided in the articles of
incorporation, the stockholders may remove any director, with or without
cause, by the affirmative vote of a majority of all the votes entitled to be
cast for the election of the directors.
The Alex. Brown Articles of Incorporation provides that the stockholders may
remove any director with or without cause by the affirmative vote of a
majority of all votes entitled to be cast for the election of directors.
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The NYBCL provides that any or all of the directors may be removed for cause
by vote of the stockholders and, if the certificate of incorporation or the
specific provisions of a by-law adopted by the stockholders provide, directors
may be removed by action of the board of directors. If the certificate of
incorporation or the by-laws so provide, any or all of the directors may be
removed without cause by vote of the stockholders. An action to procure a
judgment removing a director for cause may be brought by the attorney-general
or by the holders of 10% of the outstanding shares, whether or not entitled to
vote.
Neither the BTNY Certificate of Incorporation nor the BTNY By-laws provide
that directors may be removed without cause by action of the stockholders.
VACANCIES
Under the MGCL and the Alex. Brown By-laws, the stockholders may elect a
successor to fill a vacancy on the board of directors which results from the
removal of a director. In addition, unless the articles of incorporation or
by-laws provide otherwise, (i) a majority of the remaining directors, whether
or not sufficient to constitute a quorum, may fill a vacancy on the board of
directors which results from any cause except an increase in the number of
directors and (ii) a majority of the entire board of directors may fill a
vacancy which results from an increase in the number of directors. Under the
MGCL and the Alex. Brown By-laws, a director elected by the board of directors
to fill a vacancy serves until the next annual meeting of stockholders and
until his or her successor is elected and qualifies, while a director elected
by the stockholders to fill a vacancy which results from the removal of a
director serves for the balance of the term of the removed director.
Under the NYBCL, newly created directorships resulting from an increase in
the number of directors and vacancies occurring in the board for any reason
except the removal of directors without cause may be filled by vote of the
board. However, the certificate of incorporation or bylaws may provide that
such newly created directorships or vacancies are to be filled by vote of
stockholders. Unless the certificate of incorporation or the specific
provisions of a by-law adopted by the stockholders provide that the board may
fill vacancies occurring in the board by reason of the removal of directors
without cause, such vacancies may be filled only by vote of the stockholders.
A director elected to fill a vacancy, unless elected by the stockholders, will
hold office until the next meeting of stockholders at which the election of
directors is in the regular order of business and until his or her successor
has been elected and qualified.
The BTNY Certificate of Incorporation does not provide for the removal of
directors without cause. The BTNY By-laws provide that any vacancy in the BTNY
Board may be filled by a majority vote of the remaining directors.
INDEMNIFICATION OF DIRECTORS
The MGCL requires a corporation (unless its articles of incorporation
provide otherwise, which the Alex. Brown Articles of Incorporation does not)
to indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she is made party
by reason of his or her own service in that capacity. Under MGCL, a
corporation may indemnify any present or former director or officer made a
party to any proceeding for judgments, penalties, fines, settlements and
reasonable expenses actually incurred unless it is established that (i) the
director's or officer's act or omission was material to the matter giving rise
to the proceeding and was committed in bad faith or resulted from active and
deliberate dishonesty, (ii) the director or officer actually received an
improper benefit in money, property or services, or (iii) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
the act or omission was unlawful.
The MGCL states that a determination must be made that a director or officer
has met the required standard of conduct before the director or officer may be
indemnified. The determination may be made by a majority vote of disinterested
directors, by special legal counsel (selected by the disinterested directors)
or by the stockholders.
72
<PAGE>
Under the MGCL, in a stockholder derivative suit, a corporation may not
indemnify a director or officer if he or she is adjudged liable to the
corporation. Moreover, a corporation may not indemnify a director or officer
who is adjudged to be liable, in any proceeding, for a personal benefit that
was improperly received. A director or officer who is successful, on the
merits or otherwise, in any proceeding must be indemnified by the corporation
for reasonable expenses (including attorneys' fees).
The MGCL provides for an advance of reasonable expenses to directors or
officers upon the director's or officer's written affirmation of his or her
good faith belief that he or she has met the required standard of conduct and
after undertaking to repay the corporation if it is determined that the
standard has not been met.
The Alex. Brown Articles of Incorporation provide that Alex. Brown shall
indemnify (a) its directors to the full extent provided by Maryland law in
effect from time to time, including the advance of expenses, (b) its officers
to the same extent it indemnifies its directors and (c) its officers who are
not directors to such further extent as is authorized by the Alex. Brown Board
and consistent with law. Moreover, the Alex. Brown Articles of Incorporation
provide that the foregoing does not limit Alex. Brown's ability to indemnify
other employees and agents consistent with law.
Under the NYBCL, a corporation may indemnify its directors and officers
made, or threatened to be made, a party to any action or proceeding, except
for stockholder derivative suits, if such director or officer acted in good
faith, for a purpose which he or she reasonably believed to be in the best
interests of the corporation, and, in criminal proceedings, in addition, had
no reasonable cause to believe his or her conduct was unlawful. In the case of
stockholder derivative suits, the corporation may indemnify a director or
officer if he or she acted in good faith for a purpose which he or she
reasonably believed to be in the best interests of the corporation, except
that no indemnification may be made in respect of (i) a threatened action, or
a pending action which is settled or otherwise disposed of, or (ii) any claim,
issue or matter as to which such person has been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
was brought, or, if no action was brought, any court of competent
jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or by-laws, or, when
authorized by such certificate of incorporation or by-laws, in (i) a
resolution of stockholders, (ii) a resolution of directors or (iii) an
agreement providing for such indemnification; provided that no indemnification
may be made to or on behalf of any director or officer if a judgment or other
final adjudication adverse to the director or officer establishes that his or
her acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.
Any person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered
by a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant
to the above paragraphs may be made only if authorized in the specific case
and after a finding that the director or officer met the requisite standard of
conduct (i) by the disinterested directors if a quorum is available, (ii) by
the board upon the written opinion of independent legal counsel, or (iii) by
the stockholders.
The BTNY By-laws provide that BTNY shall indemnify any person made, or
threatened to be made, a party to an action or proceeding (including a
stockholder derivative suit), whether civil or criminal, by reason of the fact
that he or she is a director of officer of BTNY, against judgments, fines,
settlement amounts and costs, charges and expenses incurred as a result of
such action or proceeding, unless (i) his or her acts were committed in bad
faith or were the result of his or her active and deliberate dishonesty and
were material to such action or proceeding or (ii) he or she personally gained
a financial profit or other advantage to which he or she was not legally
entitled.
73
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling BTNY or Alex.
Brown pursuant to the foregoing provisions, BTNY and Alex. Brown have been
informed that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The MGCL provides that a corporation's articles of incorporation may include
a provision expanding or limiting the personal liability of a director or
officer to the corporation or its stockholders for money damages except (i) to
the extent that it is proved that the person actually received an improper
benefit or profit in money, property, or services, for the amount of the
benefit or profit in money, property, or services actually received or (ii) to
the extent that a court finds that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. The Alex. Brown Articles of
Incorporation provide that, to the fullest extent Maryland law permits
limitation of liability of directors and officers, no director or officer of
the corporation shall be liable to the corporation or its stockholders for
money damages.
The NYBCL provides that a corporation's certificate of incorporation may
contain a provision eliminating or limiting the personal liability of
directors to the corporation or its stockholders for damages for any breach of
duty in such capacity. However, no such provision can eliminate or limit (i)
the liability of any director if a judgment or other final adjudication
adverse to such director establishes that such director's acts or omissions
were in bad faith, or involved intentional misconduct or a knowing violation
of law, or that the director personally gained in fact a financial profit or
other advantage to which such director was not legally entitled or that the
director's acts violated certain provisions of the NYBCL or (ii) the liability
of any director for any act or omission prior to the adoption of such a
provision in the certificate of incorporation.
The BTNY Certificate of Incorporation provides that no director shall be
personally liable to BTNY or any of its stockholders for damages for any
breach of duty as a director, provided, however, that the foregoing provision
shall not eliminate or limit (i) the liability of a director if a judgment or
other final adjudication adverse to him or her establishes that his or her
acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that he or she personally gained in fact financial
profit or other advantage to which he or she was not legally entitled or that
his or her acts violated Section 719 of the NYBCL (which includes declaration
of dividends, purchase of capital stock, distribution of assets to
stockholders after dissolution of the corporation and loans to directors to
the extent contrary to New York law) or (ii) the liability of a director for
any act or omission prior to the adoption of this provision by the BTNY
Stockholders.
LEGAL MATTERS
The validity of the BTNY Common Stock to be issued in connection with the
Merger will be passed upon by Melvin A. Yellin, Executive Vice President and
General Counsel of BTNY. As of the date of this Joint Proxy Statement-
Prospectus, Mr. Yellin beneficially owns shares of BTNY Common Stock and
options to purchase additional shares of BTNY Common Stock, which in the
aggregate constitute less than 0.2% of the BTNY Common Stock outstanding.
EXPERTS
The consolidated financial statements of BTNY and subsidiaries included in
BTNY's Annual Report on Form 10-K for the year ended December 31, 1996, and
incorporated by reference into this Joint Proxy Statement-Prospectus, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
auditing and accounting. For the year beginning January 1, 1997, KPMG Peat
Marwick LLP will serve as independent accountants to BTNY.
74
<PAGE>
The consolidated financial statements of Alex. Brown included in Alex.
Brown's Annual Report on Form 10-K for the year ended December 31, 1996 have
been audited by KPMG Peat Marwick LLP, independent accountants, as set forth
in its report thereon and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
Any financial statements and schedules hereinafter incorporated by reference
in the Registration Statement of which this Joint Proxy Statement-Prospectus
forms a part that have been audited and are the subject of a report by
independent accountants will be so incorporated by reference to extent covered
by consents in reliance upon such reports and upon the authority of such firms
as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
Stockholders of BTNY may submit proposals to be considered for stockholder
action at the 1998 Annual Meeting of stockholders of BTNY if they do so in
accordance with applicable regulations of the Commission. Any such proposals
must be submitted to the Secretary of BTNY no later than November 11, 1997 in
order to be considered for inclusion in BTNY's 1998 proxy materials.
Alex. Brown will hold a 1998 Annual Meeting of stockholders only if the
Merger is not consummated before the time of such meeting. In the event that
such a meeting is held, any proposals of stockholders intended to be presented
at the 1998 Annual Meeting must have been received by the Secretary of Alex.
Brown no later than November 20, 1997 in order to be considered for inclusion
in the Alex. Brown 1998 proxy materials.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the BTNY Board and
the Alex. Brown Board know of no matters that will be presented for
consideration at the Stockholders Meetings other than as described in this
Joint Proxy Statement-Prospectus. If any other matters shall properly come
before either Stockholders Meeting or any adjournments or postponements
thereof and be voted upon, the enclosed proxies will be deemed to confer
discretionary authority on the individuals named as proxies therein to vote
the shares represented by such proxies as to any such matters. The persons
named as proxies intend to vote or not to vote in accordance with the
recommendation of the respective managements of BTNY and Alex. Brown.
75
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following Unaudited Pro Forma Combined Statements of Income for the
three months ended March 31, 1997 and 1996, and for each of the three years
ended December 31, 1996 and the Unaudited Pro Forma Combined Balance Sheet as
of March 31, 1997 give effect to the Merger accounted for as a pooling of
interests as if the Merger had occurred on the dates indicated. The pro forma
information is based on the historical consolidated financial statements of
BTNY and Alex. Brown and their subsidiaries after giving effect to the pro
forma adjustments described in the Notes to the Pro Forma Combined Financial
Statements.
This information should be read in conjunction with the historical
consolidated financial statements of Alex. Brown and the historical
consolidated financial statements of BTNY. The effect of up to $80 million
(pre-tax) of merger and related restructuring charges and other associated
costs expected to be taken in connection with the Merger has not been
reflected in the pro forma combined financial statements as efforts by BTNY
and Alex. Brown to refine the actual amount of such charges are ongoing (see
Notes to Unaudited Pro Forma Combined Financial Statements). The pro forma
financial data do not give effect to the anticipated cost savings and revenue
enhancement opportunities that could result from the Merger. The pro forma
financial data are not necessarily indicative of the results that actually
would have occurred had the Merger been consummated on the dates indicated or
that may be obtained in the future.
76
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
----------------------------------------------------
BTNY AB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS(A, D) COMBINED
---------- ------------- ----------------- ---------
<S> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue...... $1,645 $ 36 $-- $1,681
Interest expense...... 1,337 12 -- 1,349
------ ------ ---- -------
NET INTEREST REVENUE.... 308 24 -- 332
Provision for credit
losses............... -- -- -- --
------ ------ ---- -------
NET INTEREST REVENUE AF-
TER
PROVISION FOR CREDIT
LOSSES................. 308 24 -- 332
------ ------ ---- -------
NONINTEREST REVENUE
Trading............... 279 32 -- 311
Fiduciary and funds
management........... 208 23 -- 231
Corporate finance
fees................. 140 75 -- 215
Other fees and commis-
sions................ 79 60 -- 139
Net revenue from eq-
uity investment
transactions......... 44 3 -- 47
Securities available
for sale gains....... 14 -- -- 14
Insurance premiums.... 63 -- -- 63
Other................. 41 5 -- 46
------ ------ ---- -------
Total noninterest
revenue............ 868 198 -- 1,066
------ ------ ---- -------
NONINTEREST EXPENSES
Salaries and commis-
sions................ 237 68 -- 305
Incentive compensation
and employee bene-
fits................. 322 54 -- 376
Agency and other pro-
fessional service
fees................. 87 3 -- 90
Communication and data
services............. 45 6 -- 51
Occupancy, net........ 37 6 -- 43
Furniture and equip-
ment................. 50 4 -- 54
Travel and entertain-
ment................. 25 5 -- 30
Provision for policy-
holder benefits...... 68 -- -- 68
Other................. 64 25 -- 89
------ ------ ---- -------
Total noninterest
expenses........... 935 171 -- 1,106
------ ------ ---- -------
Income before income
taxes.................. 241 51 -- 292
Income taxes............ 72 20 -- 92
------ ------ ---- -------
NET INCOME.............. $ 169 $ 31 $-- $ 200
====== ====== ==== =======
NET INCOME APPLICABLE TO
COMMON STOCK........... $ 156 $ 31 $-- $ 187
====== ====== ==== =======
EARNINGS PER COMMON
SHARE:
PRIMARY............... $ 1.89 $ 1.23 -- $1.81(c)
FULLY DILUTED......... $ 1.89 $ 1.10 -- $1.76(c)
Cash dividends declared
per common share....... $ 1.00 $ .170 -- $1.00(c)
Average common and com-
mon equivalent shares
outstanding--primary... 82.784 25.294 -- 103.778(c)
Average common and com-
mon equivalent shares
outstanding assuming
full dilution......... 82.898 29.079 -- 107.034(c)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
77
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------
BTNY AB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL (A) ADJUSTMENTS (A, D) COMBINED
---------- -------------- ------------------- ---------
<S> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue...... $1,590 $ 33 $-- $ 1,623
Interest expense...... 1,377 12 -- 1,389
------ ------ ---- -------
NET INTEREST REVENUE.... 213 21 -- 234
Provision for credit
losses................. 5 -- -- 5
------ ------ ---- -------
NET INTEREST REVENUE
AFTER
PROVISION FOR CREDIT
LOSSES................. 208 21 -- 229
------ ------ ---- -------
NONINTEREST REVENUE
Trading............... 247 53 -- 300
Fiduciary and funds
management........... 183 17 -- 200
Corporate finance
fees................. 86 102 -- 188
Other fees and commis-
sions................ 87 53 -- 140
Net revenue from eq-
uity investment
transactions......... 21 6 -- 27
Securities available
for sale gains....... 15 -- -- 15
Insurance premiums.... 62 -- -- 62
Other................. 49 7 -- 56
------ ------ ---- -------
Total noninterest
revenue............ 750 238 -- 988
------ ------ ---- -------
NONINTEREST EXPENSES
Salaries and commis-
sions................ 201 66 -- 267
Incentive compensation
and employee bene-
fits................. 227 80 -- 307
Agency and other pro-
fessional service
fees................. 60 3 -- 63
Communication and data
services............. 46 5 -- 51
Occupancy, net........ 37 5 -- 42
Furniture and equip-
ment................. 41 4 -- 45
Travel and entertain-
ment................. 18 4 -- 22
Provision for policy-
holder benefits...... 72 -- -- 72
Other................. 59 25 -- 84
------ ------ ---- -------
Total noninterest
expenses........... 761 192 -- 953
------ ------ ---- -------
Income before income
taxes.................. 197 67 -- 264
Income taxes............ 59 26 -- 85
------ ------ ---- -------
NET INCOME.............. $ 138 $ 41 $-- $ 179
====== ====== ==== =======
NET INCOME APPLICABLE TO
COMMON STOCK........... $ 123 $ 41 -- $ 164
====== ====== ==== =======
EARNINGS PER COMMON
SHARE:
PRIMARY............... $ 1.52 $ 1.67 -- $ 1.62(c)
FULLY DILUTED......... $ 1.51 $ 1.48 -- $ 1.57(c)
Cash dividends declared
per common share....... $ 1.00 $ .133 -- $ 1.00(c)
Average common and
common equivalent
shares outstanding--
primary................ 80.896 24.316 -- 101.078(c)
Average common and
common equivalent
shares outstanding
assuming full
dilution............... 81.560 28.009 -- 104.808(c)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
78
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------
BTNY AB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS(A, D) COMBINED
---------- ------------- ----------------- ---------
<S> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue...... $6,366 $ 142 $-- $ 6,508
Interest expense...... 5,400 51 -- 5,451
------ ------ ---- -------
NET INTEREST REVENUE.... 966 91 -- 1,057
------ ------ ---- -------
Provision for credit
losses................. 5 -- -- 5
------ ------ ---- -------
NET INTEREST REVENUE AF-
TER
PROVISION FOR CREDIT
LOSSES................ 961 91 -- 1,052
------ ------ ---- -------
NONINTEREST REVENUE
Trading............... 846 168 -- 1,014
Fiduciary and funds
management........... 783 78 -- 861
Corporate finance
fees................. 507 415 -- 922
Other fees and commis-
sions................ 343 206 -- 549
Net revenue from eq-
uity investment
transactions......... 211 19 -- 230
Securities available
for sale gains....... 75 -- -- 75
Insurance premiums.... 230 -- -- 230
Other................. 204 32 -- 236
------ ------ ---- -------
Total noninterest
revenue............ 3,199 918 -- 4,117
------ ------ ---- -------
NONINTEREST EXPENSES
Salaries and commis-
sions................ 867 288 -- 1,155
Incentive compensation
and employee bene-
fits................. 951 264 -- 1,215
Agency and other pro-
fessional service
fees................. 311 19 -- 330
Communication and data
services............. 193 21 -- 214
Occupancy, net........ 150 22 -- 172
Furniture and equip-
ment................. 171 16 -- 187
Travel and entertain-
ment................. 97 19 -- 116
Provision for policy-
holder benefits...... 280 -- -- 280
Other................. 268 101 -- 369
------ ------ ---- -------
Total noninterest
expenses........... 3,288 750 -- 4,038
------ ------ ---- -------
Income before income
taxes.................. 872 259 -- 1,131
Income taxes............ 260 105 -- 365
------ ------ ---- -------
NET INCOME.............. $ 612 $ 154 $-- $ 766
====== ====== ==== =======
NET INCOME APPLICABLE TO
COMMON STOCK........... $ 561 $ 154 $-- $ 715
====== ====== ==== =======
EARNINGS PER COMMON
SHARE:
PRIMARY................ $ 6.78 $ 6.28 -- $ 6.93(c)
FULLY DILUTED.......... $ 6.74 $ 5.51 -- $ 6.71(c)
Cash dividends declared
per common share....... $ 4.00 $ .637 -- $ 4.00(c)
Average common and
common equivalent
shares outstanding--
primary................ 82.766 24.563 -- 103.153(c)
Average common and
common equivalent
shares outstanding
assuming full
dilution............... 83.259 28.470 -- 106.889(c)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
79
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------
BTNY AB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS(A, D) COMBINED
---------- ------------- ----------------- ---------
<S> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue...... $5,886 $ 103 $-- $ 5,989
Interest expense...... 5,069 36 -- 5,105
------ ------ ---- -------
NET INTEREST REVENUE.... 817 67 -- 884
Provision for credit
losses............... 31 -- -- 31
------ ------ ---- -------
NET INTEREST REVENUE AF-
TER
PROVISION FOR CREDIT
LOSSES................. 786 67 -- 853
------ ------ ---- -------
NONINTEREST REVENUE
Trading............... 341 140 -- 481
Fiduciary and funds
management........... 697 55 -- 752
Corporate finance
fees................. 398 293 -- 691
Other fees and commis-
sions................ 314 177 -- 491
Net revenue from eq-
uity investment
transactions......... 146 7 -- 153
Securities available
for sale gains....... 180 -- -- 180
Insurance premiums.... 234 -- -- 234
Other................. 113 34 -- 147
------ ------ ---- -------
Total noninterest
revenue............ 2,423 706 -- 3,129
------ ------ ---- -------
NONINTEREST EXPENSES
Salaries and commis-
sions................ 804 241 -- 1,045
Incentive compensation
and employee bene-
fits................. 640 192 -- 832
Agency and other pro-
fessional service
fees................. 318 17 -- 335
Communication and data
services............. 184 20 -- 204
Occupancy, net........ 152 25 -- 177
Furniture and equip-
ment................. 162 15 -- 177
Travel and entertain-
ment................. 88 16 -- 104
Provision for policy-
holder benefits...... 271 -- -- 271
Other................. 229 89 -- 318
Provision for sever-
ance-related costs... 50 -- -- 50
------ ------ ---- -------
Total noninterest
expenses........... 2,898 615 -- 3,513
------ ------ ---- -------
Income before income
taxes.................. 311 158 -- 469
Income taxes............ 96 62 -- 158
------ ------ ---- -------
NET INCOME.............. $ 215 $ 96 $-- $ 311
====== ====== ==== =======
NET INCOME APPLICABLE TO
COMMON STOCK........... $ 164 $ 96 $-- $ 260
====== ====== ==== =======
EARNINGS PER COMMON
SHARE:
PRIMARY............... $ 2.03 $ 4.11 -- $ 2.59(c)
FULLY DILUTED......... $ 2.02 $ 3.60 -- $ 2.53(c)
Cash dividends declared
per common share....... $ 4.00 $ .516 -- $ 4.00(c)
Average common and
common equivalent
shares outstanding--
primary................ 80.923 23.267 -- 100.135(c)
Average common and
common equivalent
shares outstanding
assuming full
dilution............... 81.095 27.192 -- 103.664(c)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
80
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------
BTNY AB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS(A, D) COMBINED
---------- ------------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue...... $5,030 $ 66 $-- $5,096
Interest expense...... 3,858 22 -- 3,880
------ ------ ---- -------
NET INTEREST REVENUE.... 1,172 44 -- 1,216
Provision for credit
losses................ 25 -- -- 25
------ ------ ---- -------
NET INTEREST REVENUE
AFTER
PROVISION FOR CREDIT
LOSSES................. 1,147 44 -- 1,191
------ ------ ---- -------
NONINTEREST REVENUE
Trading............... 465 121 -- 586
Fiduciary and funds
management........... 740 43 -- 783
Corporate finance
fees................. 431 197 -- 628
Other fees and commis-
sions................ 325 143 -- 468
Net revenue from eq-
uity investment
transactions......... 109 19 -- 128
Securities available
for sale gains....... 72 -- -- 72
Insurance premiums.... 183 -- -- 183
Other................. 148 17 -- 165
------ ------ ---- -------
Total noninterest
revenue............ 2,473 540 -- 3,013
------ ------ ---- -------
NONINTEREST EXPENSES
Salaries and commis-
sions................ 774 196 -- 970
Incentive compensation
and employee bene-
fits................. 724 132 -- 856
Agency and other pro-
fessional service
fees................. 268 8 -- 276
Communication and data
services............. 176 18 -- 194
Occupancy, net........ 146 20 -- 166
Furniture and equip-
ment................. 163 12 -- 175
Travel and entertain-
ment................. 109 14 -- 123
Provision for policy-
holder benefits...... 205 -- -- 205
Other................. 186 66 -- 252
------ ------ ---- -------
Total noninterest
expenses........... 2,751 466 -- 3,217
------ ------ ---- -------
Income before income
taxes.................. 869 118 -- 987
Income taxes............ 254 47 -- 301
------ ------ ---- -------
NET INCOME.............. $ 615 $ 71 $-- $ 686
====== ====== ==== =======
NET INCOME APPLICABLE TO
COMMON STOCK........... $ 587 $ 71 $-- $ 658
====== ====== ==== ======= ===
EARNINGS PER COMMON
SHARE:
PRIMARY............... $ 7.17 $3.06 -- $ 6.51(c)
FULLY DILUTED......... $ 7.17 $2.70 -- $ 6.33(c)
Cash dividends declared
per common share....... $ 3.70 $.450 -- $ 3.70(c)
Average common and
common equivalent
shares outstanding--
primary................ 81.825 23.124 -- 101.018(c)
Average common and
common equivalent
shares outstanding
assuming full
dilution............... 81.865 26.982 -- 104.260(c)
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
81
<PAGE>
BTNY AND ALEX. BROWN
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
AT MARCH 31, 1997
----------------------------------------------------
BTNY AB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS(A)(D) COMBINED
---------- ------------- ----------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.. $ 1,607 $ 72 $ -- $ 1,679
Interest-bearing deposits
in banks................ 2,581 -- -- 2,581
Federal funds sold....... 1,195 -- -- 1,195
Securities purchased un-
der resale agreements... 22,273 43 -- 22,316
Securities borrowed...... 13,963 282 -- 14,245
Trading assets:
Government securities... 11,686 135 -- 11,821
Corporate debt securi-
ties................... 8,460 48 -- 8,508
Equity securities....... 7,021 40 -- 7,061
Swaps, options & other
derivatives............ 11,222 -- -- 11,222
Other trading assets.... 9,072 8 -- 9,080
-------- ------ ----- --------
Total trading assets.. 47,461 231 -- 47,692
Securities available for
sale.................... 7,986 -- -- 7,986
Loans, net of allowance
for credit losses of
$758.................... 17,221 61 -- 17,282
Customer receivables..... 80 1,502 -- 1,582
Accounts receivable & ac-
crued interest.......... 3,147 115 -- 3,262
Other assets............. 5,464 247 -- 5,711
-------- ------ ----- --------
Total................. $122,978 $2,553 $ -- $125,531
======== ====== ===== ========
LIABILITIES
Noninterest-bearing de-
posits
Domestic offices........ $ 2,803 $ -- $ -- $ 2,803
Foreign offices......... 1,052 -- -- 1,052
Interest-bearing deposits
Domestic offices........ 12,365 -- -- 12,365
Foreign offices......... 19,369 -- -- 19,369
-------- ------ ----- --------
Total deposits........... 35,589 -- -- 35,589
Trading liabilities:
Securities sold, not yet
purchased
Government securities... 3,943 43 -- 3,986
Equity securities....... 4,935 15 -- 4,950
Other trading liabili-
ties................... 431 12 -- 443
Swaps, options & other
derivatives............ 11,177 -- -- 11,177
-------- ------ ----- --------
Total trading liabili-
ties................. 20,486 70 -- 20,556
Securities loaned and se-
curities sold under re-
purchase agreements..... 21,995 581 -- 22,576
Other short-term
borrowings.............. 20,224 96 -- 20,320
Accounts payable and ac-
crued expenses.......... 3,836 259 -- 4,095
Other liabilities, in-
cluding allowance for
credit losses of $200... 3,179 636 -- 3,815
Long-term debt not in-
cluded in risk-based
capital................. 7,955 209 -- 8,164
Long-term debt included
in risk-based capital... 3,164 -- -- 3,164
Mandatorily redeemable
capital securities of
subsidiary trusts hold-
ing solely junior subor-
dinated deferrable in-
terest debentures in-
cluded in risk-based
capital................. 1,469 -- -- 1,469
-------- ------ ----- --------
Total liabilities..... 117,897 1,851 -- 119,748
-------- ------ ----- --------
STOCKHOLDERS' EQUITY
Preferred stock.......... 704 -- -- 704
Common stock............. 84 2 19 (c) 105
Capital surplus.......... 1,349 147 (19)(c) 1,477
Retained earnings........ 3,512 553 -- 4,065
Common stock in treasury,
at cost................. (527) -- -- (527)
Other stockholders' equi-
ty...................... (41) -- -- (41)
-------- ------ ----- --------
Total stockholders'
equity............... 5,081 702 -- 5,783
-------- ------ ----- --------
Total................. $122,978 $2,553 $ -- $125,531
======== ====== ===== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
82
<PAGE>
BTNY AND ALEX. BROWN
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Alex. Brown's and BTNY's historical financial statements have been
reclassified to conform to the current presentation.
(b) In connection with the Merger, it is estimated that nonrecurring merger
and restructuring charges will be recognized upon consummation of the
Merger. These charges are expected to result from severance expenses to be
incurred in connection with anticipated staff reductions, other merger-
related expenses, such as costs to eliminate redundant back office and
other operations of BTNY and Alex. Brown, and direct costs of the Merger.
The effect of these proposed nonrecurring charges, as well as other
associated costs expected to be taken in connection with the Merger, has not
been reflected in the pro forma combined financial statements, as efforts by
BTNY and Alex. Brown to refine the actual amount of such charges are
ongoing. The effect of these nonrecurring charges and other associated costs
is not expected to be material in relation to the combined stockholders'
equity of BTNY and Alex. Brown.
The pro forma combined financial statements do not reflect expected cost
savings, nor do they reflect any estimates of revenue enhancements that
could be realized as a result of the Merger.
(c) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis and the related pro forma adjustments to the
common stock and capital surplus accounts at March 31, 1997 reflect an
exchange of approximately 21 million shares of BTNY Common Stock (using
the Exchange Ratio of .83) for approximately 25 million outstanding shares
of Alex. Brown Common Stock at March 31, 1997.
Pro forma combined cash dividends declared per common share represents
BTNY's historical amounts.
For the earnings per common share calculations, the pro forma combined
average common and common equivalent shares outstanding (primary and
assuming full dilution) reflects the exchange of BTNY Common Stock (using
the Exchange Ratio of .83) for the outstanding shares of Alex. Brown Common
Stock.
(d) Transactions between BTNY and Alex. Brown are not material in relation to
the pro forma combined financial statements and, therefore, intercompany
balances have not been eliminated from the pro forma combined amounts.
83
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BANKERS TRUST NEW YORK CORPORATION,
VOYAGER MERGER CORPORATION
AND
ALEX. BROWN INCORPORATED
DATED AS OF APRIL 6, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
AGREEMENT AND PLAN OF MERGER
ARTICLE I
THE MERGER
<C> <S> <C>
1.1 The Merger.......................................................... A-1
1.2 Effective Time...................................................... A-1
1.3 Effects of the Merger............................................... A-1
1.4 Conversion of AB Common Stock....................................... A-2
1.5 BT Common Stock..................................................... A-3
1.6 Options; Other Stock Based Plans.................................... A-3
1.7 Certificate of Incorporation........................................ A-3
1.8 Bylaws.............................................................. A-3
1.9 Directors and Officers of Surviving Corporation..................... A-3
1.10 Tax Consequences.................................................... A-4
1.11 Integration of Legal Entities....................................... A-4
1.12 Representation on the BT Board of Directors......................... A-4
ARTICLE II
EXCHANGE OF SHARES
2.1 BT to Make Shares Available......................................... A-4
2.2 Exchange of Shares.................................................. A-4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AB
3.1 Corporate Organization.............................................. A-6
3.2 Capitalization...................................................... A-7
3.3 Authority; No Violation............................................. A-8
3.4 Consents and Approvals.............................................. A-8
3.5 Reports............................................................. A-9
3.6 Financial Statements................................................ A-9
3.7 Broker's Fees....................................................... A-10
3.8 Absence of Certain Changes or Events................................ A-10
3.9 Legal Proceedings................................................... A-10
3.10 Taxes and Tax Returns............................................... A-10
3.11 Employees........................................................... A-11
3.12 SEC Reports......................................................... A-12
3.13 Licenses; Compliance with Applicable Law............................ A-12
3.14 Certain Contracts................................................... A-13
3.15 Agreements with Regulatory Agencies................................. A-13
3.16 Investment Securities............................................... A-13
3.17 Interest Rate Risk Management Instruments........................... A-13
3.18 Undisclosed Liabilities............................................. A-14
3.19 Environmental Liability............................................. A-14
3.20 State Takeover Laws................................................. A-14
3.21 Insurance........................................................... A-14
3.22 Pooling of Interests................................................ A-14
</TABLE>
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BT AND BT SUB
<TABLE>
<C> <S> <C>
4.1 Corporate Organization.............................................. A-14
4.2 Capitalization...................................................... A-15
4.3 Authority; No Violation............................................. A-16
4.4 Consents and Approvals.............................................. A-17
4.5 Reports............................................................. A-17
4.6 Financial Statements................................................ A-17
4.7 Broker's Fees....................................................... A-18
4.8 Absence of Certain Changes or Events................................ A-18
4.9 Legal Proceedings................................................... A-18
4.10 Taxes and Tax Returns............................................... A-18
4.11 SEC Reports......................................................... A-19
4.12 Licenses; Compliance with Applicable Law............................ A-19
4.13 Agreements with Regulatory Agencies................................. A-19
4.14 Interest Rate Risk Management Instruments........................... A-20
4.15 Undisclosed Liabilities............................................. A-20
4.16 Environmental Liability............................................. A-20
4.17 Insurance........................................................... A-20
4.18 Pooling of Interests................................................ A-20
4.19 Employees........................................................... A-20
4.20 State Takeover Laws................................................. A-21
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time................... A-21
5.2 Forbearances of AB.................................................. A-22
5.3 Forbearances of BT.................................................. A-23
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.................................................. A-24
6.2 Access to Information............................................... A-24
6.3 Stockholders' Approvals............................................. A-25
6.4 Legal Conditions to Merger.......................................... A-25
6.5 Affiliates; Publication of Combined Financial Results............... A-25
6.6 Stock Exchange Listing.............................................. A-26
6.7 Employee Benefits................................................... A-26
6.8 Indemnification; Directors' and Officers' Insurance................. A-27
6.9 Additional Agreements............................................... A-28
6.10 Advice of Changes................................................... A-28
6.11 Dividends........................................................... A-28
6.12 Employment Matters.................................................. A-28
6.13 Employee Retention Plan............................................. A-28
6.14 State Takeover Statutes............................................. A-28
6.15 Section 15 of the Investment Company Act............................ A-28
6.16 AB Name............................................................. A-29
</TABLE>
ii
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT
<TABLE>
<C> <S> <C>
7.1 Conditions to Each Party's Obligation To Effect the Merger.......... A-29
7.2 Conditions to Obligations of BT..................................... A-30
7.3 Conditions to Obligations of AB..................................... A-30
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination......................................................... A-31
8.2 Effect of Termination............................................... A-31
8.3 Amendment........................................................... A-32
8.4 Extension; Waiver................................................... A-32
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing............................................................. A-32
9.2 Nonsurvival of Representations, Warranties and Agreements........... A-32
9.3 Expenses............................................................ A-33
9.4 Notices............................................................. A-33
9.5 Interpretation...................................................... A-33
9.6 Counterparts........................................................ A-33
9.7 Entire Agreement.................................................... A-34
9.8 Governing Law....................................................... A-34
9.9 Severability........................................................ A-34
9.10 Publicity........................................................... A-34
9.11 Assignment; Third Party Beneficiaries............................... A-34
</TABLE>
Exhibit 6.5(a)(1)--Form of Affiliate Letter Addressed to AB
Exhibit 6.5(a)(2)--Form of Affiliate Letter Addressed to BT
Exhibit A AB Stock Option Agreement*
Exhibit B BT Stock Option Agreement*
Exhibit C Support Agreement
- --------
* Not included in this Appendix A.
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 6, 1997, by and among
BANKERS TRUST NEW YORK CORPORATION, a New York corporation ("BT"), VOYAGER
MERGER CORPORATION, a Delaware corporation and a wholly owned subsidiary of BT
("BT Sub"), and ALEX. BROWN INCORPORATED, a Maryland corporation ("AB").
WHEREAS, the Boards of Directors of BT and AB have determined that it is in
the best interests of their respective companies and stockholders to
consummate the business combination transaction provided for herein in which
AB will, subject to the terms and conditions set forth herein, merge (the
"Merger") with and into BT Sub so that BT Sub is the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") in the Merger;
WHEREAS, as a condition to, and immediately after the execution of this
Agreement, BT and AB will enter into a stock option agreement (the "AB Option
Agreement") attached hereto as Exhibit A and a Stock Option Agreement (the "BT
Option Agreement") attached hereto as Exhibit B;
WHEREAS, as a condition to, and immediately prior to the execution of this
Agreement, certain directors and the members of the operating committee of AB
executed and delivered to BT the Support Agreement (the "Support Agreement")
attached hereto as Exhibit C;
WHEREAS, certain employees of AB and its subsidiaries entered into the
employment agreements as described in Section 6.12 and AB has agreed to
establish the Retention Program as described in Section 6.13; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Maryland General Corporation Law (the "MGCL") and the
Delaware General Corporation Law (the "DGCL"), at the Effective Time (as
defined in Section 1.2), AB shall merge with and into BT Sub. BT Sub shall be
the Surviving Corporation in the Merger, and shall continue its corporate
existence under the laws of the State of Delaware. Upon consummation of the
Merger, the separate corporate existence of AB shall terminate.
1.2 Effective Time. The Merger shall become effective upon the acceptance
for record of the articles of merger (the "Maryland Articles of Merger") by
the Department of Assessments and Taxation of the State of Maryland (the
"Maryland Department") and by making all other filings required under the
General Corporation Law of Maryland to be made prior to or concurrent with the
effectiveness of the Merger, and as set forth in the certificate of merger
(the "Delaware Certificate of Merger") which shall be filed with the Secretary
of State of the State of Delaware (the "Delaware Secretary") on the Closing
Date (as defined in Section 9.1). The term "Effective Time" shall be the date
and time when the Merger becomes effective, in each case as set forth in the
Maryland Articles of Merger and the Delaware Certificate of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Sections 259, 260 and 261 of the DGCL and
Section 3-114 of the MGCL.
A-1
<PAGE>
1.4 Conversion of AB Common Stock. At the Effective Time, in each case,
subject to Section 2.2(e), by virtue of the Merger and without any action on
the part of BT, AB or the holder of any of the following securities:
(a) Each share of the common stock, par value $.10 per share, of AB (the "AB
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than shares of AB Common Stock held (i) in AB's treasury or (ii)
directly or indirectly by BT or AB or any of their respective wholly owned
Subsidiaries (as defined in Section 3.1) (except for Trust Account Shares and
DPC Shares, as such terms are defined in Section 1.4(c) and as set forth in
the AB Disclosure Schedule as defined in Section 3.1(b)) shall be converted
into the right to receive 0.83 shares (the "Exchange Ratio") of the common
stock, par value $1.00 per share, of BT (the "BT Common Stock"), including
associated rights to purchase Series C Junior Participating Preferred Stock
(the "Series C Preferred Stock") pursuant to the rights agreement (the "Rights
Agreement") dated as of February 22, 1988, by and between BT and First Chicago
Trust Company of New York, as successor to Morgan Shareholder Services Trust
Company, as Rights Agent.
(b) All of the shares of AB Common Stock converted into BT Common Stock
pursuant to this Article I shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the Effective Time,
and each certificate (each a "Common Certificate") previously representing any
such shares of AB Common Stock shall thereafter represent the right to receive
(i) a certificate representing the number of whole shares of BT Common Stock
and (ii) cash in lieu of fractional shares into which the shares of AB Common
Stock represented by such Common Certificate have been converted pursuant to
this Section 1.4 and Section 2.2(e). Common Certificates previously
representing shares of AB Common Stock shall be exchanged for certificates
representing whole shares of BT Common Stock and cash in lieu of fractional
shares issued in consideration therefor upon the surrender of such Common
Certificates in accordance with Section 2.2, without any interest thereon. If,
prior to the Effective Time, the outstanding shares of BT Common Stock or AB
Common Stock shall have been increased, decreased, changed into or exchanged
for a different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar change in capitalization, then an
appropriate and proportionate adjustment shall be made to the Exchange Ratio.
(c) At the Effective Time, all shares of AB Common Stock that are owned by
AB as treasury stock and all shares of AB Common Stock that are owned,
directly or indirectly, by BT or AB or any of their respective wholly owned
Subsidiaries (other than shares of AB Common Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise held
in a fiduciary or custodial capacity that are beneficially owned by third
parties (any such shares, and shares of BT Common Stock which are similarly
held, whether held directly or indirectly by BT or AB, as the case may be,
being referred to herein as "Trust Account Shares") and other than any shares
of AB Common Stock held by BT or AB or any of their respective Subsidiaries in
respect of a debt previously contracted (any such shares of AB Common Stock,
and shares of BT Common Stock which are similarly held, whether held directly
or indirectly by BT or AB or any of their respective Subsidiaries, being
referred to herein as "DPC Shares") and in each case, with respect to AB or
any of its Subsidiaries, as set forth in the AB Disclosure Schedule) shall be
cancelled and shall cease to exist and no stock of BT or other consideration
shall be delivered in exchange therefor. All shares of BT Common Stock that
are owned by AB or any of its wholly owned Subsidiaries (other than Trust
Account Shares and DPC Shares) shall become treasury stock of BT.
(d) AB's 5 3/4% convertible subordinated debentures due 2001 (the "Public
Debentures") outstanding at the Effective Time shall be assumed by BT and
remain outstanding thereafter as an obligation of BT and the Surviving
Corporation as co-obligors, and, from and after the Effective Time, the
holders of the Public Debentures shall have the right to convert such Public
Debentures into the number of shares of BT Common Stock receivable in the
Merger by a holder of the number of shares of AB Common Stock into which such
Public Debentures could have been converted immediately prior to the Merger.
BT shall enter into a supplemental indenture with respect to such obligations
in accordance with the terms of the indenture pursuant to which the Public
Debentures were issued.
A-2
<PAGE>
(e) The convertible debentures (the "Executive Debentures") issued to
certain key employees of AB and its affiliates pursuant to the AB 1991 Equity
Incentive Plan and outstanding at the Effective Time shall be assumed by BT
and remain outstanding thereafter as an obligation of BT and the Surviving
Corporation as co-obligors, and, from and after the Effective Time, the
holders of the Executive Debentures shall have the right to convert such
Executive Debentures into the number of shares of BT Common Stock receivable
in the Merger by a holder of the number of shares of AB Common Stock into
which such Executive Debentures could have been converted immediately prior to
the Merger (and otherwise shall remain subject to the terms of the AB Stock
Plans (as defined in Section 1.6(a)) under which they were issued and the
agreements evidencing such instruments).
1.5 BT Common Stock. At and after the Effective Time, each share of BT
Common Stock and each share of BT Preferred Stock (as defined in Section 4.2)
issued and outstanding immediately prior to the Closing Date shall remain an
issued and outstanding share of common stock or preferred stock, as the case
may be, of BT and shall not be affected by the Merger.
1.6 Options. (a) At the Effective Time, each option granted by AB to
purchase shares of AB Common Stock which is outstanding and unexercised
immediately prior thereto shall be assumed by BT. Such options shall cease to
represent a right to acquire shares of AB Common Stock and shall be converted
automatically into an option to purchase shares of BT Common Stock in an
amount and at an exercise price determined as provided below (and otherwise
subject to the terms of the AB 1991 Equity Incentive Plan, with respect to
options granted thereunder, or the AB 1991 Non-Employee Director Plan, with
respect to options granted thereunder, (collectively, the "AB Stock Plans")
and the agreements evidencing grants thereunder)):
(i) The number of shares of BT Common Stock to be subject to the new
option shall be equal to the product of the number of shares of AB Common
Stock subject to the original option and the Exchange Ratio, provided that
any fractional shares of BT Common Stock resulting from such multiplication
shall be rounded down to the nearest whole share; and
(ii) The exercise price per share of BT Common Stock under the new option
shall be equal to the exercise price per share of AB Common Stock under the
original option divided by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code. The duration
and other terms of the new option shall be the same as the original option
except that all references to AB shall be deemed to be references to BT.
(c) As soon as practicable after the Effective Time, BT shall deliver to the
holders of options to purchase AB Common Stock appropriate notices setting
forth such holders' rights pursuant to the respective AB Stock Plans and the
agreements pursuant to which such options were issued, and the agreements
evidencing the grant of such options shall be assumed by BT and shall continue
in effect on the same terms and conditions (subject to the adjustments
required by this Section 1.6 after giving effect to the Merger).
1.7 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Certificate of Incorporation of BT
Sub shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with applicable law.
1.8 Bylaws. Subject to the terms and conditions of this Agreement, at the
Effective Time, the Bylaws of BT Sub shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 Directors and Officers of Surviving Corporation. At the Effective Time,
the directors and officers of BT Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving
A-3
<PAGE>
Corporation following the Merger; such directors and officers shall hold
office in accordance with the Surviving Corporation's bylaws and applicable
law.
1.10 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Sections 354 and 361 of the Code.
1.11 Integration of Legal Entities. The parties currently intend to
effectuate, or cause to be effectuated, immediately after the Effective Time
the consummation of the merger (the "Subsidiary Merger") of Alex. Brown & Sons
Incorporated, a Maryland corporation and a wholly owned subsidiary of AB, with
and into BT Securities Corporation, a Delaware corporation and a wholly owned
subsidiary of BT ("BT Securities"). Prior to the Effective Time, BT currently
intends to cause all of the issued and outstanding shares of capital stock of
BT Securities to be contributed to BT Sub. The parties shall cooperate and
take all requisite actions, including, without limitation, executing all
requisite documentation, prior to or following the Effective Time to
consummate the Subsidiary Merger. The parties also agree to cooperate and take
all requisite additional action prior to or following the Effective Time to
merge or otherwise consolidate legal entities to the extent desirable for
regulatory or other reasons, and further agree that BT may at any time change
the method of effecting the Merger, including by merging AB with and into BT,
by merging AB with and into a direct or indirect wholly owned subsidiary of BT
other than BT Sub or by merging any such subsidiary with and into AB, and AB
shall cooperate in such efforts, including by entering into an appropriate
amendment to this Agreement, provided, however, that any such actions shall
not (a) alter or change the amount or kind of consideration to be issued to
holders of AB Common Stock as provided for in this Agreement (the "Merger
Consideration"), (b) adversely affect the proposed accounting treatment for
the Merger or the tax treatment to AB's stockholders as a result of receiving
the Merger Consideration, or (c) materially delay receipt of any approval
referred to in Section 7.1(c) or the consummation of the transactions
contemplated by this Agreement.
1.12 Representation on the BT Board of Directors. BT shall take all
necessary actions so that, at the Effective Time, A.B. Krongard and two other
current non-management directors of AB to be mutually agreed upon by BT and AB
shall be appointed to Board of Directors of BT.
ARTICLE II
EXCHANGE OF SHARES
2.1 BT to Make Shares Available. At or prior to the Effective Time, BT shall
deposit, or shall cause to be deposited, with a bank or trust company selected
by BT and reasonably acceptable to AB which may be a subsidiary of BT (the
"Exchange Agent"), for the benefit of the holders of Common Certificates, for
exchange in accordance with this Article II, certificates representing the
shares of BT Common Stock and cash in lieu of any fractional shares (such cash
and certificates for shares of BT Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to
Section 2.2(a) in exchange for outstanding shares of AB Common Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of one or more Common
Certificates a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Common Certificates shall pass,
only upon delivery of the Common Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Common Certificates in
exchange for certificates representing the shares of BT Common Stock and any
cash in lieu of fractional shares into which the shares of AB Common Stock
represented by such Common Certificate or Common Certificates shall have been
converted pursuant to this Agreement. Upon proper surrender of a Common
Certificate for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of
such Common Certificate shall be entitled to receive in exchange therefor, as
applicable, (i) a certificate representing that number of whole shares of BT
Common
A-4
<PAGE>
Stock to which such holder of AB Common Stock shall have become entitled
pursuant to the provisions of Article I and (ii) a check representing the
amount of any cash in lieu of fractional shares of BT Common Stock which such
holder has the right to receive in respect of the Common Certificate
surrendered pursuant to the provisions of this Article II, and the Common
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on any cash in lieu of fractional shares or on any unpaid
dividends and distributions payable to holders of Common Certificates.
(b) No dividends or other distributions declared after the Effective Time
with respect to BT Common Stock shall be paid to the holder of any
unsurrendered Common Certificate until the holder thereof shall surrender such
Common Certificate in accordance with this Article II. After the surrender of
a Common Certificate in accordance with this Article II, the record holder
thereof shall be entitled to receive any such dividends or other distributions
without any interest thereon, which theretofore had become payable with
respect to shares of BT Common Stock represented by such Common Certificate.
(c) If any certificate representing shares of BT Common Stock is to be
issued in a name other than that in which the Common Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Common Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and otherwise in
proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of BT Common Stock
in any name other than that of the registered holder of the Common Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of AB of the shares of AB Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Common Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of BT Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of BT Common Stock shall
be issued upon the surrender for exchange of Common Certificates, no dividend
or distribution with respect to BT Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
AB. In lieu of the issuance of any such fractional share, BT shall pay to each
former stockholder of AB who otherwise would be entitled to receive such
fractional share an amount in cash determined by multiplying (i) the average
of the closing-sale prices of BT Common Stock on the New York Stock Exchange,
Inc. (the "NYSE") as reported by The Wall Street Journal for the five trading
days ending on the second to last trading day prior to the Effective Time by
(ii) the fraction of a share (rounded to the nearest thousandth of a share) of
BT Common Stock to which such holder would otherwise be entitled to receive
pursuant to Section 1.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of AB for 12 months after the Effective Time shall be paid to BT.
Any stockholders of AB who have not theretofore complied with this Article II
shall thereafter look only to BT for payment of the shares of BT Common Stock
or cash in lieu of any fractional shares and any unpaid dividends and
distributions on the BT Common Stock deliverable in respect of each share of
AB Common Stock such stockholder holds as determined pursuant to this
Agreement without any interest thereon. Notwithstanding the foregoing, none of
AB, BT, the Exchange Agent or any other person shall be liable to any former
holder of shares of AB Common Stock for any amount delivered in good faith to
a public official pursuant to applicable abandoned property, escheat or
similar laws.
(g) In the event any Common Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Common Certificate to be lost, stolen or destroyed and, if reasonably
required by BT, the posting by such person of a bond in such amount as BT may
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Common
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Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Common Certificate the shares of BT Common Stock and any cash in
lieu of fractional shares deliverable in respect thereof pursuant to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AB
AB hereby represents and warrants to BT as follows:
3.1 Corporate Organization. (a) AB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. AB has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on AB. As used in this Agreement, the term
"Material Adverse Effect" means, with respect to BT or AB as the case may be,
a material adverse effect on the business, operations, financial condition or
results of operations of such party and its Subsidiaries taken as a whole and
other than any change, effect, event or occurrence relating to (i) the United
States economy or securities markets in general, (ii) this Agreement or the
transactions contemplated hereby or the announcement thereof, or (iii) to the
financial services industry in general, and not specifically relating to BT or
AB or their respective subsidiaries. Subject to the following sentence, as
used in this Agreement, the word "Subsidiary" when used with respect to any
party means any bank, corporation, partnership, limited liability company or
other organization, whether an incorporated or unincoporated organization (a
"Corporate Entity"), which is consolidated with such party for financial
reporting purposes or which otherwise would be deemed to be a subsidiary of
such person within the meaning of the Bank Holding Company Act of 1956, as
amended (the "BHCA"). For purposes of this Article III and Article IV hereof,
"Subsidiary" shall mean, with respect to any party, a Corporate Entity, which
is consolidated with such party for financial reporting purposes. True and
complete copies of the Certificate of Incorporation and Bylaws of AB, as in
effect as of the date of this agreement, have previously been made available
by AB to BT.
(b) of the AB disclosure schedule delivered to BT concurrently herewith (the
"AB Disclosure Schedule") sets forth a complete and correct list of all of
AB's Subsidiaries (each a "AB Subsidiary" and collectively the "AB
Subsidiaries"), all outstanding capital stock or other equity securities of
each such Subsidiary, options, warrants, stock appreciation rights, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of any capital
stock or other equity securities of such Subsidiary, or contracts,
commitments, understandings or arrangements by which such Subsidiary may
become bound to issue additional shares of its capital stock or other equity
securities, or options, warrants, scrip on rights to purchase, acquire,
subscribe to, calls on or commitments for any shares of its capital stock or
other equity securities and the identity of the parties to any such agreements
or arrangements. All of the outstanding shares of capital stock or other
securities evidencing ownership of the AB Subsidiaries are validly issued,
fully paid and nonassessable and, except as otherwise disclosed in Section
3.1(b) of the AB Disclosure Schedule, such shares or other securities are
owned by AB or its wholly owned Subsidiaries free and clear of any material
lien, claim, charge, option, encumbrance, mortgage, pledge or security
interest (a "Lien") with respect thereto. Each AB Subsidiary (i) is a duly
organized and validly existing corporation, partnership or limited liability
company or other legal entity under the laws of its jurisdiction of
organization, (ii) is duly qualified to do business and in good standing in
all jurisdictions (whether federal, state, local or foreign) where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified (except for jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect on AB), and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted. Within 20 business days
of the date hereof, AB shall provide to BT a list of all Corporate Entities of
which AB or any AB Subsidiary holds or beneficially owns 5% or more of the
outstanding
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shares of any class of voting securities, holds a general partnership or other
controlling interest, holds or beneficially owns more than 24.9% of the
outstanding capital stock and subordinated debt (whether voting or nonvoting)
or is otherwise deemed to be a subsidiary within the meaning of the BHCA.
Within 5 business days of the date hereof, AB shall provide to BT a true and
complete description of all principal, joint venture and similar investments
held by AB or any AB Subsidiary, including, without limitation, all such
investments in which any AB employee or affiliate serves as a director. AB has
provided or made available to BT a true and complete copy of all partnership,
joint venture or similar agreements to which AB or any AB Subsidiary is a
party. Other than its outstanding capital commitment of $43.1 million to ABS
Capital Partners II, L.P., a Delaware limited partnership, AB does not have
outstanding any capital commitments with respect to the principal, joint
venture and similar investments of AB or any AB Subsidiary which exceeds $4.1
million individually or $8.8 million to the aggregate. Within five business
days of the date hereof, AB shall provide to BT true and complete list of all
outstanding capital commitments with respect to the principal, joint venture
and similar investments of AB and any AB Subsidiary.
(c) The minute books of AB accurately reflect in all material respects all
material corporate actions held or taken since January 1, 1995 of its
stockholders and Board of Directors (including committees of the Board of
Directors of AB).
3.2 Capitalization. (a) The authorized capital stock of AB consists of
50,000,000 shares of AB Common Stock, of which, as of March 31, 1997,
24,920,106 shares were issued and outstanding and no shares were held in
treasury. All of the issued and outstanding shares of AB Common Stock have
been duly authorized and validly issued and are fully paid, non-assessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except for the AB Option
Agreement and except as provided below, AB does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, stock appreciation
rights, commitments or agreements of any character calling for the purchase or
issuance of any shares of AB Common Stock or any other equity securities of AB
or any securities representing the right to purchase or otherwise receive any
shares of AB Common Stock. Section 3.2 of the AB Disclosure Schedule sets
forth, in each case as of March 31, 1997, (i) the number of shares of AB
Common Stock that were reserved for issuance upon the exercise of stock
options pursuant to the AB Stock Plans and the number of shares of AB Common
Stock purchasable under such options, (ii) the number of shares of AB Common
Stock reserved for issuance upon the conversion of the Executive Debentures
and the number of shares of AB Common Stock into which such Executive
Debentures were convertible, and (iii) the number of shares of AB Common Stock
reserved for issuance upon the conversion of the Public Debentures and the
number of shares of AB Common Stock into which such Public Debentures were
convertible. Except as set forth in Section 3.2 of the AB Disclosure Schedule,
no other shares of AB Common Stock were reserved for issuance. AB has
previously provided BT with a list, as of March 31, 1997, of the option
holders, the date of each option to purchase AB Common Stock granted, the
number of shares subject to each such option, the expiration date of each such
option, the vesting schedule of each such option and the price at which each
such option may be exercised under the applicable AB Stock Plan. AB has
previously provided BT with a list, as of March 31, 1997, of the holders of
Executive Debentures, the date of each Executive Debenture granted, the number
of shares of AB Common Stock into which each Executive Debenture is
convertible, the date each such Executive Debenture is due, the vesting
schedule of each Executive Debenture, the terms of the related note agreements
and the price at which each such Executive Debenture may be converted. Except
as set forth in Section 3.2 of the AB Disclosure Schedule (but without giving
effect to shares reserved but not then subject to outstanding options or
debentures as identified in such Section of the AB Disclosure Schedule), since
March 31, 1997, AB has not (i) issued any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital
stock, other than shares of AB Common Stock issued upon the exercise or
conversion of options or debentures outstanding as of March 31, 1997 as
described in the immediately preceding sentence or (ii) taken any actions
which would cause an antidilution adjustment under any outstanding options or
convertible securities of AB. Except as set forth on Section 3.2 of the AB
Disclosure Schedule, there are no outstanding contractual obligations of AB or
any of its Subsidiaries to repurchase, redeem or otherwise acquire, or to
register for sale, any shares of capital stock of AB or any of its
Subsidiaries. Except as set forth on Section 3.2 of the AB Disclosure
Schedule,
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there are no outstanding contractual obligations of AB or any of its
Subsidiaries to vote or to dispose of any shares of the capital stock of any
of its Subsidiaries.
(b) AB has delivered to BT a true and complete copy of the First Amended and
Restated Stockholders' Agreement (the "Stockholders' Agreement"), dated as of
June 23, 1989, as amended, by and among AB and the persons and entities listed
on Exhibit A thereto. The shares of AB Common Stock subject to the
Stockholders' Agreement represent as of March 31, 1997 approximately 24.0% of
the shares of AB Common Stock outstanding as of the date of this Agreement. To
the knowledge of AB, there are no other stockholders agreements, voting trusts
or similar agreements relating to the AB Common Stock to which AB, or any of
its employees is a party (other than the Support Agreements contemplated by
this Agreement).
3.3 Authority; No Violation. (a) AB has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of AB. The Board of Directors of AB
has directed that this Agreement and the transactions contemplated hereby be
submitted to AB's stockholders for approval at a meeting of such stockholders
and, except for the adoption of this Agreement by the affirmative vote of the
holders of a majority of the votes of the outstanding shares of AB Common
Stock entitled to vote thereon, no other corporate proceedings on the part of
AB and no other stockholder votes are necessary to approve this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by AB and (assuming due authorization,
execution and delivery by BT and BT Sub) constitutes a valid and binding
obligation of AB, enforceable against AB in accordance with its terms.
(b) Except as set forth in Section 3.3(b) of the AB Disclosure Schedule,
neither the execution and delivery of this Agreement by AB nor the
consummation by AB of the transactions contemplated hereby, nor compliance by
AB with any of the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws of AB or any AB Subsidiary or
(ii) assuming that the consents and approvals referred to in Section 3.4 are
duly obtained, violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to AB or any of its
Subsidiaries or any of their respective properties or assets, or violate,
conflict with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by or rights or obligations under, or result in the creation of any
Lien upon any of the respective properties or assets of AB or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement, contract,
or other instrument or obligation to which AB or any of its Subsidiaries is a
party, or by which they or any of their respective properties, assets or
business activities may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, are not reasonably likely to result in a
Material Adverse Effect on AB.
3.4 Consents and Approvals. Except for (i) the requisite filings with,
notices to and approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHCA, (ii) the filing of any
required applications or notices with the Federal Reserve Bank of New York,
the New York State Banking Department and other applicable federal, state or
foreign governmental agencies or authorities as set forth in Schedule 3.4 of
the AB Disclosure Schedule and approval of such applications and notices (the
"Additional Regulatory Approvals"), (iii) the filing with the Securities and
Exchange Commission (the "SEC") of a joint proxy statement in definitive form
relating to the meetings of AB's and BT's stockholders to be held in
connection with this Agreement and the transactions contemplated hereby (the
"Proxy Statement") and the registration statement on Form S-4 (the "S-4") in
which the Proxy Statement will be included as a prospectus, (iv) the filing of
the Maryland Articles of Merger with the Maryland Department pursuant to the
MGCL and the Delaware Certificate of Merger with the Delaware Secretary
pursuant to the DGCL, (v) any consent, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable provisions of
federal, state and foreign laws (including, without limitation, securities and
insurance laws) relating to the
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regulation of broker-dealers, investment advisers and insurance agencies and
any applicable domestic or foreign industry self-regulatory organization
("SRO"), and the rules of the NYSE, (vi) the expiration of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (vii) the consents, approvals and notices required
under the Investment Company Act of 1940, as amended (the "1940 Act") and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), (viii) the
approval of this Agreement by the requisite vote of the stockholders of AB and
the approval of the issuance of shares of BT Common Stock pursuant to this
Agreement by the requisite BT stockholder vote pursuant to the rules of the
NYSE, (ix) such additional consents and approvals (the failure of which to
obtain would result in a Material Adverse Effect on AB) set forth in Section
3.4 of the AB Disclosure Schedule, and (x) consents, approvals, findings and
registrations the failure of which to obtain would not, individually or in the
aggregate, be reasonably likely to result in a Material Adverse Effect on AB
or prevent consummation of the transactions contemplated by this Agreement, no
consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental or regulatory
authority or instrumentality (each a "Governmental Entity") or, of or with any
third party, are necessary in connection with (A) the execution and delivery
by AB of this Agreement and (B) the consummation by AB of the Merger and the
other transactions contemplated hereby. Except as set forth in Section 3.4 of
the AB Disclosure Schedule, AB has no reason to believe that any Requisite
Regulatory Approvals (as defined below) will not be obtained.
3.5 Reports. (a) AB and each of its Subsidiaries have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 1994
with (i) the SEC, (ii) any SRO and (iii) any other federal, state or foreign
governmental or regulatory agency or authority (collectively with the SEC and
the SROs, "Regulatory Agencies"), and all other reports and statements
required to be filed by them since January 1, 1994, including, without
limitation, any report or statement required to be filed pursuant to the laws,
rules or regulations of the United States, any state, or any Regulatory Agency
and have paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement or to pay such fees and assessments, either individually or in the
aggregate, is not reasonably likely to result in a Material Adverse Effect on
AB. Except as disclosed in Section 3.5 of the AB Disclosure Schedule and for
normal examinations conducted by a Regulatory Agency in the regular course of
the business of AB and its Subsidiaries, no Regulatory Agency has initiated
any proceeding or, to the knowledge of AB, investigation into the business or
operations of AB or any of its Subsidiaries since January 1, 1994, except
where any such proceedings or investigations are not, individually or in the
aggregate, reasonably likely to result in a Material Adverse Effect on AB.
Except as set forth in Section 3.5 of the AB Disclosure Schedule, there is no
material unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
AB or any of its Subsidiaries.
3.6 Financial Statements. AB has previously made available to BT copies of
(a) the consolidated balance sheets of AB and its Subsidiaries as of December
31, for the fiscal years 1995 and 1996, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1994 through 1996, inclusive, as reported in AB's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 (the "AB 1996 Form
10-K") filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in each case accompanied by the audit report of
KPMG Peat Marwick LLP, independent public accountants with respect to AB. The
December 31, 1996 consolidated balance sheet of AB (including the related
notes, where applicable) fairly presents in all material respects the
consolidated financial position of AB and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 3.6,
and any financial statements filed by AB with the SEC under the Exchange Act
after the date of this Agreement (including the related notes, where
applicable) will fairly present in all material respects (including the
related notes, where applicable) (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount) the
results of the consolidated operations and changes in stockholders' equity and
consolidated financial position of AB and its Subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth; each of such
statements (including the related notes, where applicable) comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of
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the SEC with respect thereto; and each of such statements (including the
related notes, where applicable) has been prepared in all material respects in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except, in each case, as indicated in
such statements or in the notes thereto. The books and records of AB and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting
requirements.
3.7 Broker's Fees. Neither AB nor any AB Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement or the AB Option Agreement.
3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in AB Reports (as defined in Section 3.12) filed prior to the date of this
Agreement, since December 31, 1996, no event has occurred which has had, or is
reasonably likely to result in, individually or in the aggregate, a Material
Adverse Effect on AB.
(b) As of the date of this Agreement, except (x) as publicly disclosed in AB
Reports filed prior to the date hereof, or (y) as set forth in Section 3.8(b)
of the AB Disclosure Schedule, since December 31, 1996, AB and its
Subsidiaries have, in all material respects, carried on their respective
businesses in the ordinary and usual course consistent with their past
practices.
(c) Since December 31, 1996, neither AB nor any of its Subsidiaries has (i)
except for such actions as are in the ordinary course of business consistent
with past practice (including job reductions in connection with acquisitions),
except as required by applicable law, except as provided for in, or
contemplated by, this Agreement (A) increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable to any
executive officer, employee, or director from the amount thereof in effect as
of December 31, 1996, or (B) granted any severance or termination pay, entered
into any contract to make or grant any severance or termination pay, or paid
any bonus other than customary year-end bonuses for fiscal 1996, or (ii)
suffered any strike, work stoppage, slowdown, or other material labor
disturbance.
3.9 Legal Proceedings. (a) As of the date of this Agreement, except as set
forth in Section 3.9(a) of the AB Disclosure Schedule, neither AB nor any of
its Subsidiaries is a party to any, and there are no pending or, to the
knowledge of AB, threatened, material legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of
any nature against AB or any of its Subsidiaries or challenging the validity
or propriety of the transactions contemplated by this Agreement or the AB
Option Agreement which are reasonably likely, individually or in the
aggregate, to result in a Material Adverse Effect on AB.
(b) Except as set forth in Section 3.9(b) of the AB Disclosure Schedule,
there is no injunction, order, judgment or decree imposed upon AB, any of its
Subsidiaries or the assets of AB or any of its Subsidiaries which has resulted
in, or is reasonably likely to result in, a Material Adverse Effect on AB.
3.10 Taxes and Tax Returns. Except as provided in Section 3.10 of the AB
Disclosure Schedule, (a) each of AB and its Subsidiaries has duly filed all
material federal, state, county, foreign and, to the knowledge of AB, material
local information returns and tax returns required to be filed by it on or
prior to the date of this Agreement (all such returns being accurate and
complete in all material respects) and has duly paid or made provision for (in
accordance with GAAP) the payment of all material Taxes (as defined in Section
3.10(b)) and other governmental charges which have been incurred or are due or
claimed to be due from it by federal, state, county, foreign or local taxing
authorities on or prior to the date of this Agreement (including, without
limitation, if and to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than Taxes which (i) are not yet delinquent or (ii)
are being contested in good faith, have not been finally determined and are
adequately reserved against (in accordance with GAAP). The consolidated
federal income tax returns of AB and its Subsidiaries for each taxable year
through March 31, 1993 have been examined by the Internal Revenue Service (the
"IRS"), and either no material deficiencies were asserted as a result of such
examination for which AB does not have adequate reserves (in
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accordance with GAAP) or all such deficiencies were satisfied. To the
knowledge of AB, there are no material disputes pending, or claims asserted in
writing for, Taxes or assessments upon AB or any of its Subsidiaries, nor has
AB or any of its Subsidiaries been requested in writing to give any currently
effective waivers extending the statutory period of limitation applicable to
any federal, state, county or local income tax return for any period. In
addition, (i) proper and accurate amounts have been withheld by AB and its
Subsidiaries from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state and local laws, except where failure to do so is not reasonably likely
to result in a Material Adverse Effect on AB, (ii) federal, state, county and
local returns which are accurate and complete in all material respects have
been filed by AB and its Subsidiaries for all periods for which returns were
due with respect to income tax withholding, Social Security and unemployment
taxes, except where failure to do so is not reasonably likely to result in a
Material Adverse Effect on AB, (iii) the amounts shown on such federal, state,
local or county returns to be due and payable have been paid in full or
adequate provision therefor (in accordance with GAAP) has been included by AB
in its consolidated financial statements as of December 31, 1996, except where
failure to do so is not reasonably likely to result in a Material Adverse
Effect on AB and (iv) there are no Tax liens upon any property or assets of AB
or its Subsidiaries except liens for current taxes not yet due. Neither AB nor
any of its Subsidiaries has been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by AB or any of its Subsidiaries, and the IRS has
not initiated or proposed any such adjustment or change in accounting method,
in either case which has had or is reasonably likely to result in a Material
Adverse Effect on AB. Except as set forth in Section 3.10 of the AB Disclosure
Schedule, neither AB nor any of its Subsidiaries (other than Subsidiaries that
are not currently members of the affiliated group (within the meaning of
Section 1504(a)(1) of the Code) of which AB is a common parent) (i) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was AB), (ii) is a party to a
Tax allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is AB) or (iii) has any
liability for the Taxes of any person (other than any of AB or its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise. Except as set forth in the financial statements
described in Section 3.6, neither AB nor any of its Subsidiaries has entered
into a transaction which is being accounted for under the installment method
of Section 453 of the Code, which is reasonably likely to have a Material
Adverse Effect on AB.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, county, local, and foreign income, excise, gross receipts, gross
income, ad valorem, profits, gains, property, capital, sales, transfer, use,
value-added, stamp, documentation, payroll, employment, severance,
withholding, duties, intangibles, franchise, backup withholding, and other
taxes, charges, levies or like assessments together with all penalties and
additions to tax and interest thereon.
3.11 Employees. (a) The AB Disclosure Schedule sets forth a true and
complete list as of the date hereof of each material employee benefit plan,
arrangement or agreement that is maintained as of the date of this Agreement,
including all such plans, arrangements or agreements relating to directors,
executive officers, key employees and material consultants of AB and its
material Subsidiaries (the "AB Benefit Plans") by AB or any of its
Subsidiaries or by any trade or business, whether or not incorporated (a "AB
ERISA Affiliate"), all of which together with AB would be deemed a "single
employer" within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Schedule 3.11(a) of the AB
Disclosure Schedule sets forth a list of all outstanding loans to any
director, executive officer, key employee or material consultant, other than
margin loans entered into in the ordinary course of AB's business.
(b) AB has heretofore delivered to BT true and complete copies of each of
the AB Benefit Plans and certain related documents, including, but not limited
to, (i) the actuarial report for such AB Benefit Plan (if applicable) for each
of the last two years, and (ii) the most recent determination letter from the
IRS (if applicable) for such Plan.
(c) (i) Except as set forth in Section 3.11(c)(i) of the AB Disclosure
Schedule, each of the AB Benefit Plans has been operated and administered in
accordance with applicable laws, including, but not limited to, ERISA
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and the Code, except where such operation or administration is not,
individually or in the aggregate, reasonably likely to result in a Material
Adverse Effect on AB, (ii) except as set forth in Section 3.11(c)(ii) of the
AB Disclosure Schedule, each of the AB Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service, and AB is
not aware of any circumstances that are reasonably likely to result in the
revocation of such favorable determination letter, (iii) none of the AB
Benefit Plans is subject to Title IV of ERISA, (iv) except as set forth in
Section 3.11(c)(iv) of the AB Disclosure Schedule, no material AB Benefit Plan
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of AB,
its Subsidiaries or any AB ERISA Affiliate beyond their retirement or other
termination of service, other than (A) coverage mandated by applicable law,
(B) death benefits or retirement benefits under any "employee pension plan"
(as such term is defined in Section 3(2) of ERISA), (C) deferred compensation
benefits accrued as liabilities on the books of AB, its Subsidiaries or the AB
ERISA Affiliates or (D) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) no material liability
under Title IV of ERISA has been incurred by AB, its Subsidiaries or any AB
ERISA Affiliate that has not been satisfied in full, and, to the knowledge of
AB, no condition exists that presents a material risk to AB, its Subsidiaries
or any AB ERISA Affiliate of incurring a material liability thereunder, (vi)
no AB Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions or other amounts payable
by AB or its Subsidiaries as of the Effective Time with respect to each AB
Benefit Plan in respect of current or prior plan years have been paid or
accrued in accordance with GAAP and Section 412 of the Code, (viii) neither
AB, its Subsidiaries nor any AB ERISA Affiliate has engaged in a transaction
in connection with which AB, its Subsidiaries or any AB ERISA Affiliate
reasonably could be expected to become subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code, and (ix) except as set
forth in Section 3.11(c)(ix) of the AB Disclosure Schedule, to the knowledge
of AB there are no pending, threatened in writing or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the AB
Benefit Plans or any trusts related thereto.
(d) Except as set forth in Section 3.11(d) of the AB Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation, golden
parachute, forgiveness of indebtedness or otherwise) becoming due to any
director or any employee of AB or any of its affiliates from AB or any of its
affiliates under any AB Benefit Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any AB Benefit Plan or (iii) result in
any acceleration of the time of payment or vesting of any such benefits to any
material extent.
3.12 SEC Reports. AB has made available to BT an accurate and complete copy
of each (a) final registration statement, prospectus, report, schedule and
definitive proxy statement filed since January 1, 1994 by AB with the SEC
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (the "AB
Reports"), and (b) communication mailed by AB to its stockholders since
January 1, 1994. As of the date of filing or mailing, as the case may be, no
such registration statement, prospectus, report, schedule, proxy statement or
communication contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading. Since January 1, 1994, AB and each AB Subsidiary has
timely filed all reports and other documents required to be filed by it under
the Securities Act and the Exchange Act, and, as of their respective dates,
all such reports complied in all material respects with the published rules
and regulations of the SEC with respect thereto.
3.13 Licenses; Compliance with Applicable Law. AB and each of its
Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in
any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to AB
or any of its Subsidiaries, except in each case where the failure to hold such
license, franchise, permit or
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authorization or such noncompliance or default is not, individually or in the
aggregate, reasonably likely to result in a Material Adverse Effect on AB, and
neither AB nor any of its Subsidiaries knows of, or has received notice of,
any material violations of any of the above, except for such material
violations which are not, individually or in the aggregate, reasonably likely
to result in a Material Adverse Effect on AB.
3.14 Certain Contracts. Except as set forth in Section 3.14 of the AB
Disclosure Schedule, neither AB nor any of its Subsidiaries is a party to or
bound by any contract, arrangement, commitment or understanding (i) as of the
date hereof, with respect to the employment of any directors, executive
officers, key employees or material consultants, (ii) as of the date hereof,
which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) that has not been filed or incorporated by
reference in the AB Reports, (iii) which contains any material non-compete or
exclusivity provisions with respect to any business or geographic area in
which business is conducted with respect to AB or any of its Subsidiaries or
which restricts the conduct of any business by AB or any of its Subsidiaries
or any geographic area in which AB or any of its Subsidiaries may conduct
business or requires exclusive referrals of any business, in each case in any
material respect, (iv) with or to a labor union or guild (including any
collective bargaining agreement), (v) except as set forth in Section 3.11(d)
of the AB Disclosure Schedule (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan) any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement or (vi) which would prohibit or materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement. Except as set forth in Section 3.14 of the AB Disclosure Schedule,
AB has previously made available to BT true and correct copies of all
employment and deferred compensation agreements with executive officers, key
employees or material consultants which are in writing and to which AB or any
of its Subsidiaries is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14(a), whether or not
set forth in Section 3.14(a) of the AB Disclosure Schedule, is referred to
herein as a "AB Contract", and neither AB nor any of its Subsidiaries knows
of, or has received notice of, any violation of the above by any of the other
parties thereto (except for violations which, individually or in the
aggregate, are not reasonably likely to result in a Material Adverse Effect on
AB).
3.15 Agreements with Regulatory Agencies. As of the date of this Agreement,
except as set forth in Section 3.15 of the AB Disclosure Schedule, neither AB
nor any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any board resolutions
at the request of any Regulatory Agency or other Governmental Entity that
materially restricts the conduct of its business or that in any material
manner relates to its capital adequacy, its credit policies, its management or
its business (each, whether or not set forth in the AB Disclosure Schedule, a
"AB Regulatory Agreement"), nor has AB or any of its Subsidiaries (i) been
advised since January 1, 1994 by any Regulatory Agency or other Governmental
Entity that it is considering issuing or requesting any such AB Regulatory
Agreement or (ii) have knowledge of any pending or threatened regulatory
investigation. After the date of this Agreement no matters referred to in this
Section 3.15 shall have arisen except matters which, individually or in the
aggregate, would not have a Material Adverse Effect on AB.
3.16 Investment Securities. Each of AB and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent business practices to
secure obligations of AB or any of its Subsidiaries. Such securities are
valued on the books of AB in accordance with GAAP.
3.17 Interest Rate Risk Management Instruments. Any interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of AB or for the account of
a customer of AB or one of its Subsidiaries, were entered into in the ordinary
course of business and, to AB's knowledge, in accordance, in all material
respects, with prudent business practice and
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applicable rules, regulations and policies of any Regulatory Authority and
with counterparties believed to be financially responsible at the time and are
legal, valid and binding obligations of AB or one of its Subsidiaries
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. AB and each of its Subsidiaries have duly
performed in all material respects all of their material obligations
thereunder to the extent that such obligations to perform have accrued, and,
to AB's knowledge, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
3.18 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of AB included
in the AB 1996 Form 10-K (or disclosed in the notes thereto), for liabilities
identified in Section 3.18 of the AB Disclosure Schedule and for liabilities
incurred in the ordinary course of business consistent with past practice,
since December 31, 1996, neither AB nor any of its Subsidiaries has incurred
any liability of any nature whatsoever (whether absolute, accrued, contingent
or otherwise and whether due or to become due) except for liabilities which,
individually or in the aggregate, have not resulted in and are not reasonably
likely to result in a Material Adverse Effect on AB.
3.19 Environmental Liability. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition,
on AB or any of its Subsidiaries, of any liability or obligation arising under
common law or under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), pending or threatened against AB or any of its Subsidiaries, which
liability or obligation is reasonably likely to result in a Material Adverse
Effect on AB. To the knowledge of AB, there is no reasonable basis for any
such proceeding, claim, action or governmental investigation that would impose
any material liability or obligation that is reasonably likely to result in a
Material Adverse Effect on AB.
3.20 State Takeover Laws. The Board of Directors of AB has approved the
transactions contemplated by this Agreement and the AB Option Agreement such
that the provisions of Section 3-602 and Subtitle 7 of Title 3 of the MGCL or
any other applicable state takeover laws will not apply to this Agreement or
the AB Option Agreement or any of the transactions contemplated hereby or
thereby.
3.21 Insurance. AB has in effect insurance coverage with reputable insurers,
summaries of which have previously been provided by AB to BT.
3.22 Pooling of Interests. Neither AB nor, to AB's knowledge, any of its
affiliates has taken or agreed to take any action that would prevent BT from
accounting for the transactions to be effected pursuant to this Agreement as a
"pooling of interests" in accordance with GAAP and applicable SEC regulations.
As of the date of this Agreement, AB has no reason to believe that the Merger
will not qualify as a "pooling of interests" for accounting purposes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BT AND BT SUB
BT and, with respect to Sections 4.1(a) and 4.3, BT Sub hereby represent and
warrant to AB as follows:
4.1 Corporate Organization. (a) BT is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. BT Sub
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. BT is duly registered as a bank holding
company under the BHCA. Each of BT and BT Sub has the corporate power and
authority to own or lease all of its
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properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on BT. True and
complete copies of the Articles of Incorporation and Bylaws of BT and BT Sub,
as in effect as of the date of this Agreement, have previously been made
available by BT to AB.
(b) Each BT Subsidiary (i) is duly organized and validly existing as a bank,
savings and loan, corporation, partnership or limited liability company under
the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified (except for jurisdictions in which
the failure to be so qualified would not have a Material Adverse Effect on
BT), and (iii) has all requisite corporate power and authority to own or lease
its properties and assets and to carry on its business as now conducted.
(c) The minute books of BT accurately reflect in all material respects all
corporate actions held or taken since January 1, 1995 of its stockholders and
Board of Directors (including committees of the Board of Directors of BT).
4.2 Capitalization. The authorized capital stock of BT consists of
300,000,000 shares of BT Common Stock, of which, as of February 28, 1997,
78,112,085 were issued and outstanding, and 10,000,000 shares of Preferred
Stock, no par value (the "BT Preferred Stock"), of which, as of February 28,
1997, the following shares were designated issued and outstanding and no
shares were issued and outstanding as Series C Preferred Stock, $1,847,275
principal amount of the 6 1/8% Convertible Capital Securities which convert
into 7,389 shares of 7 5/8% Cumulative Preferred Stock, Series O ($250
Liquidation Preference), $1,082,925 principal amount of the 6.00% Convertible
Capital Securities which convert into 1,083 shares of 7.50% Cumulative
Preferred Stock, Series P ($1000 Liquidation Preference), $1,847,275 principal
amount of the 6 1/8% Convertible Capital Securities which convert into 73,891
Depositary Shares representing a one-tenth interest in a share of 7 5/8%
Cumulative Preferred Stock, Series O ($250 Liquidation Preference), $1,082,925
principal amount of the 6.00% Convertible Capital Securities which convert
into 43,317 Depositary Shares representing a one-fortieth interest in a share
of 7.50% Cumulative Preferred Stock, Series P ($1000 Liquidation Preference),
447,225 shares were designated and issued and outstanding as Fixed/Adjustable
Rate Cumulative Preferred Stock, Series J ($100 Liquidation Preference),
1,000,000 shares were designated and issued and outstanding as 8.55%
Cumulative Preferred Stock, Series I (the Series I Preferred Stock was
redeemed on March 1, 1997), 591,741 were designated and issued and outstanding
as 7 5/8% Cumulative Preferred Stock, Series O ($250 Liquidation Preference),
98,917 were designated and issued and outstanding as 7.50% Cumulative
Preferred Stock, Series P ($1000 Liquidation Preference), 98,917 were
designated and issued and outstanding as Adjustable Rate Cumulative Preferred
Stock, Series Q ($2500 Liquidation Preference), 64,618 were designated and
issued and outstanding as Adjustable Rate Cumulative Preferred Stock, Series
R, 52,220 were designated and issued and outstanding as 7 3/4% Cumulative
Preferred Stock, Series S ($2500 Liquidation Preference), 4,000,000 were
designated and issued and outstanding as Depositary Shares representing a one-
fourth interest in a share of 8.55% Cumulative Preferred Stock, Series I ($100
Liquidation Preference) (the Series I Preferred Stock was redeemed on March 1,
1997), 5,917,409 were designated and issued and outstanding as Depositary
Shares representing a one-tenth interest in a share of 7 5/8% Cumulative
Preferred Stock, Series O ($250 Liquidation Preference), 3,956,683 were
designated and issued and outstanding as Depositary Shares representing a one-
fortieth interest in a share of 7.50% Cumulative Preferred Stock, Series P
($1000 Liquidation Preference), 6,461,839 were designated and issued and
outstanding as Depositary Shares representing a one-hundredth interest in a
share of Adjustable Rate Cumulative Preferred Stock, Series Q ($2500
Liquidation Preference), 5,222,001 were designated and issued and outstanding
as Depositary Shares representing a one-hundredth interest in a share of
Adjustable Rate Cumulative Preferred Stock, Series R ($2500 Liquidation
Preference), 5,000,000 were designated and issued and outstanding as
Depositary Shares representing a one-hundredth interest in a share of 7 3/4%
Cumulative Preferred Stock, Series S ($2500 Liquidation Preference). As of
February 28, 1997, 5,552,210 shares of BT Common Stock were held in BT's
treasury. On February 28, 1997, no shares of BT Common Stock or BT Preferred
Stock were reserved for
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issuance, except for 21,302,000 shares of BT Common Stock reserved for
issuance in connection with BT's PartnerShare, 1994 Stock Option and Stock
Award Plan, 1991 Stock Option and Stock Award Plan, 1985 Stock Option and
Stock Award Plan, and Dividend Reinvestment and Common Stock Purchase Plan
(collectively and together with the Rights Plan, the "BT Stock Plans") and
1,008,472 shares of BT Preferred Stock in connection with the Rights Plan and
the Convertible Capital Securities. All of the issued and outstanding shares
of BT Common Stock and BT Preferred Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. As of
the date of this Agreement, except for the BT Stock Plans, BT does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
stock appreciation rights, commitments or agreements of any character calling
for the purchase or issuance of any shares of BT Common Stock or BT Preferred
Stock or any other equity securities of BT or any securities representing the
right to purchase or otherwise receive any shares of BT Common Stock or BT
Preferred Stock. The shares of BT Common Stock to be issued in the Merger will
be duly authorized and validly issued, and at the Effective Time, all such
shares will be fully paid, nonassessable and free of preemptive rights. Since
February 28, 1997, through the date hereof, BT has not issued any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock, other than pursuant to the BT Stock Plans. Except
as set forth in Section 4.2 of the BT Disclosure Schedule and except for the
BT Stock Plans, as of the date hereof, there are no outstanding contractual
obligations of BT or any of its Subsidiaries to repurchase, redeem or
otherwise acquire, or to register for sale, any shares of capital stock of BT
or any of its Subsidiaries. Except as set forth in Section 4.2 of the BT
Disclosure Schedule, as of the date hereof, there are no outstanding
contractual obligations of BT or any of its Subsidiaries to vote or dispose of
any shares of the capital stock of any of its Subsidiaries. The BT Capital
Stock and the BT Preferred Stock shall be referred to collectively as the "BT
Capital Stock."
4.3 Authority; No Violation. (a) Except as set forth in Section 4.3 of the
BT Disclosure Schedule, each of BT and BT Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of each of BT and BT Sub.
Except as set forth in Section 4.3 of the BT Disclosure Schedule, the Board of
Directors of BT has directed that the issuance of shares of BT Common Stock
pursuant to this Agreement be submitted to BT's stockholders for approval at a
meeting of such stockholders and, except for the requisite BT stockholder
approval of such issuance pursuant to the rules of the NYSE, no other
corporate proceedings on the part of BT and no other stockholder votes are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by BT and (assuming due authorization, execution and delivery by AB)
constitutes a valid and binding obligation of BT, enforceable against BT in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement by BT nor BT Sub,
nor the consummation by BT or BT Sub of the transactions contemplated hereby,
nor compliance by BT or BT Sub with any of the terms or provisions hereof,
will (i) violate any provision of the Articles of Incorporation or Bylaws of
BT or BT Sub, as applicable, or (ii) assuming that the consents and approvals
referred to in Section 4.4 are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to BT or any of its Subsidiaries or any of their respective
properties or assets, or violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or assets of BT or
any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement,
contract or other instrument or obligation to which BT or any of its
Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches or defaults which either
individually or in the aggregate are not reasonably likely to result in a
Material Adverse Effect on BT.
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4.4 Consents and Approvals. Except for (i) the requisite filings with,
notices to and approval of the Federal Reserve Board under the BHCA, (ii) the
Additional Regulatory Approvals, (iii) the filing with the SEC of the Proxy
Statement and the S-4, (iv) the filing of the Maryland Articles of Merger with
the Maryland Secretary pursuant to the MGCL and the Delaware Certificate of
Merger with the Delaware Secretary pursuant to the DGCL, (v) any consent,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of federal and state securities laws relating
to the regulation of broker-dealers and of any applicable SRO, and the rules
of the NYSE, or which are required under consumer finance, mortgage banking
and other similar laws, (vi) such filings and approvals as are required to be
made and maintained under the securities or "Blue Sky" laws of various states
in connection with the issuance of the shares of BT Common Stock pursuant to
this Agreement, (vii) the expiration of any applicable waiting period under
the HSR Act, (viii) the consents, approvals and notices required under the
1940 Act and the Advisers Act, and (ix) the approval of this Agreement by the
requisite vote of the stockholders of AB and the approval of the issuance of
shares of BT Common Stock pursuant to this Agreement by the requisite BT
stockholder vote pursuant to the rules of the NYSE, (x) the consents and
approvals (the failure of which to obtain would have a Material Adverse Effect
on BT) set forth in Schedule 4.4 of the BT Disclosure Schedule, and (xi)
consents, approvals, filings and registrations the failure of which to obtain
would not, individually or in the aggregate, be reasonably likely to result in
a Material Adverse effect on BT or prevent consummation of the transactions
contemplated by this Agreement, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary in connection with (A) the execution and delivery by BT of this
Agreement and (B) the consummation by BT of the Merger and the other
transactions contemplated hereby. BT has no reason to believe that any
Requisite Regulatory Approvals will not be obtained.
4.5 Reports. BT and each of its Subsidiaries have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 1994
with the Regulatory Agencies, and all other reports and statements required to
be filed by them since January 1, 1994, including, without limitation, any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any Regulatory Agency and have
paid all fees and assessments due and payable in connection therewith, except
where the failure to file such report, registration or statement or to pay
such fees and assessments, either individually or in the aggregate, is not
reasonably likely to result in a Material Adverse Effect on BT. Except as
disclosed in Section 4.5 of the BT Disclosure Schedule and for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of BT and its Subsidiaries, no Regulatory Agency has initiated any
proceeding or, to the knowledge of BT, investigation into the business or
operations of BT or any of its Subsidiaries since January 1, 1994, except
where such proceedings or investigations, either individually or in the
aggregate, are not reasonably likely to result in a Material Adverse Effect on
BT or its ability to consummate the transactions contemplated hereby. There is
no material unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
BT or any of its Subsidiaries.
4.6 Financial Statements. BT has previously made available to AB copies of
(a) the consolidated balance sheets of BT and its Subsidiaries as of December
31, for the fiscal years 1995 and 1996, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1994 through 1996, inclusive, as reported in BT's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 filed with the SEC
under the Exchange Act, in each case accompanied by the audit report of Ernst
& Young LLP, independent public accountants with respect to BT. The December
31, 1996 consolidated balance sheet of BT (including the related notes, where
applicable) fairly presents in all material respects the consolidated
financial position of BT and its Subsidiaries as of the date thereof, and the
other financial statements referred to in this Section 4.6, and any financial
statements filed by BT with the SEC under the Exchange Act after the date of
this Agreement (including, the related notes where applicable) will fairly
present in all material respects (including the related notes, where
applicable) (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount) the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of BT and its Subsidiaries for the respective fiscal periods or as of
the respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply
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in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been
prepared in all material respects in accordance with GAAP consistently applied
during the periods involved, except in each case as indicated in such
statements or in the notes thereto. The books and records of BT and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting
requirements.
4.7 Broker's Fees. Neither BT nor any BT Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement.
4.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in BT Reports (as defined in Section 4.11) filed prior to the date of this
Agreement, since December 31, 1996, no event has occurred which has had, or is
reasonably likely to result in, individually or in the aggregate, a Material
Adverse Effect on BT.
(b) As of the date of this Agreement, except (x) as publicly disclosed in BT
Reports filed prior to the date hereof or (y) as set forth in Section 4.8(b)
of the BT Disclosure Schedule, since December 31, 1996, BT and its
Subsidiaries have, in all material respects, carried on their respective
businesses in the ordinary and usual course consistent with their past
practices.
4.9 Legal Proceedings. (a) Except as set forth in Section 4.9 of the BT
Disclosure Schedule, neither BT nor any of its Subsidiaries is a party to any
and there are no pending or, to the knowledge of BT, threatened, material
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against BT or any of
its Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement which are reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on BT.
(b) There is no injunction, order, judgment or decree imposed upon BT, any
of its Subsidiaries or the assets of BT or any of its Subsidiaries which has
resulted in, or is reasonably likely to result in, a Material Adverse Effect
on BT.
4.10 Taxes and Tax Returns. Each of BT and its Subsidiaries has duly filed
all material federal, state, county, foreign and, to the best of BT's
knowledge, material local information returns and tax returns required to be
filed by it on or prior to the date of this Agreement (all such returns being
accurate and complete in all material respects) and has duly paid or made
provision for (in accordance with GAAP) the payment of all material Taxes and
other governmental charges which have been incurred or are due or claimed to
be due from it by federal, state, county, foreign or local taxing authorities
on or prior to the date of this Agreement (including, without limitation, if
and to the extent applicable, those due in respect of its properties, income,
business, capital stock, deposits, franchises, licenses, sales and payrolls)
other than Taxes which (i) are not yet delinquent or (ii) are being contested
in good faith, have not been finally determined and are adequately reserved
against (in accordance with GAAP). The consolidated federal income tax returns
of BT and its Subsidiaries for each taxable year through December 31, 1990
have been examined by the IRS through, and either no material deficiencies
were asserted as a result of such examination for which BT does not have
adequate reserves (in accordance with GAAP) or all such deficiencies were
satisfied. To the knowledge of BT, except as set forth in Section 4.10 of the
BT Disclosure Schedule, there are no material disputes pending, or claims
asserted in writing for, Taxes or assessments in writing upon BT or any of its
Subsidiaries, nor has BT or any of its Subsidiaries been requested to give any
currently effective waivers extending the statutory period of limitation
applicable to any federal, state, county or local income tax return for any
period. In addition, (i) proper and accurate amounts have been withheld by BT
and its Subsidiaries from their employees for all prior periods in compliance
in all material respects with the tax withholding provisions of applicable
federal, state and local laws, except where failure to do so is not reasonably
likely to result in a Material Adverse Effect on BT, (ii) federal, state,
county and local returns which are accurate and complete in all material
respects have been filed by BT and its Subsidiaries for all periods for which
returns were due with respect to income tax withholding, Social Security and
unemployment taxes, except
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where failure to do so is not reasonably likely to result in a Material
Adverse Effect on BT, (iii) the amounts shown on such federal, state, local or
county returns to be due and payable have been paid in full or adequate
provision therefor (in accordance with GAAP) has been included by BT in its
consolidated financial statements as of December 31, 1996, except where
failure to do so is not reasonably likely to result in a Material Adverse
Effect on BT and (iv) there are no Tax liens upon any property or assets of BT
or its Subsidiaries except liens for current taxes not yet due or liens which,
individually or in the aggregate, are not reasonably likely to result in a
Material Adverse Effect on BT. Neither BT nor any of its Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the
Code by reason of a voluntary change in accounting method initiated by BT or
any of its Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method, in either case, which has resulted
in or is reasonably likely to result in a Material Adverse Effect on BT.
Neither BT nor any of its Subsidiaries (other than Subsidiaries that are not
currently members of the affiliated group (within the meaning of Section
1504(a)(1) of the Code) of which BT is the common parent) (i) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was BT), (ii) is a party to a
Tax allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is BT) or (iii) has any
liability for the Taxes of any person (other than any of BT or its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise. Neither BT nor any of its Subsidiaries has entered
into a transaction which is being accounted for under the installment method
of Section 453 of the Code, which is reasonably likely to result in a Material
Adverse Effect on BT.
4.11 SEC Reports. BT has made available to AB an accurate and complete copy
of each (a) final registration statement, prospectus, report, schedule and
definitive proxy statement filed since January 1, 1994 by BT with the SEC
pursuant to the Securities Act or the Exchange Act (the "BT Reports") and (b)
communication mailed by BT to its stockholders since January 1, 1994. As of
the date of filing or mailing, as the case may be, no such registration
statement, prospectus, report, schedule, proxy statement or communication
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Since January 1, 1994, BT has timely filed all reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act, and, as of their respective dates, all such reports complied in all
material respects with the published rules and regulations of the SEC with
respect thereto.
4.12 Licenses; Compliance with Applicable Law. BT and each of its
Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied in all material respects with and
are not in default in any material respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to BT or any of its Subsidiaries, except in such case where the
failure to hold such license, franchise, permit or authorization or such
noncompliance or default is not, individually or in the aggregate, reasonably
likely to result in a Material Adverse Effect on BT, and neither BT nor any of
its Subsidiaries knows of, or has received notice of, any material violations
of any of the above, except for such material violations which are not,
individually or in the aggregate, reasonably likely to result in a Material
Adverse Effect on BT.
4.13 Agreements with Regulatory Agencies. Except as disclosed in Section
4.13 of the BT Disclosure Schedule, neither BT nor any of its Subsidiaries is
subject to any cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or
is a party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, is a recipient of any supervisory letter from or
has adopted any board resolutions at the request of any Regulatory Agency or
other Governmental Entity that materially restricts the conduct of its
business or that in any material manner relates to its capital adequacy, its
credit policies, its management or its business (each, whether or not set
forth in the BT disclosure schedule delivered to AB concurrently herewith, a
"BT Regulatory Agreement"), nor has BT or any of its Subsidiaries (i) been
advised since January 1, 1994, by any Regulatory Agency or (ii) other
Governmental Entity that it is considering issuing or requesting any such BT
Regulatory Agreement or have knowledge of any
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pending or threatened regulatory investigation. After the date of this
Agreement, no matters referred to in this Section 4.13 shall have arisen
except matters which, individually or in the aggregate, are not reasonably
likely to result in a Material Adverse Effect on BT.
4.14 Interest Rate Risk Management Instruments. Any interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of BT or for the account of
a customer of BT or one of its Subsidiaries, were entered into in the ordinary
course of business and, to BT's knowledge, in accordance, in all material
respects, with prudent business practice and applicable rules, regulations and
policies of any Regulatory Authority and with counterparties believed to be
financially responsible at the time and are legal, valid and binding
obligations of BT or one of its Subsidiaries enforceable in accordance with
their terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
the availability of equitable remedies), and are in full force and effect. BT
and each of its Subsidiaries have duly performed in all material respects all
of their material obligations thereunder to the extent that such obligations
to perform have accrued, and, to BT's knowledge, there are no material
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
4.15 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of BT included
in the BT December 31, 1996 Form 10-K (or discussed in the notes thereto) and
for liabilities incurred in the ordinary course of business consistent with
past practice, since December 31, 1996, neither BT nor any of its Subsidiaries
has incurred any liability of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become due) except for
liabilities which, individually or in the aggregate, have not resulted in and
are not reasonably likely to have a Material Adverse Effect on BT.
4.16 Environmental Liability. Except as set forth in Section 4.15 of the BT
Disclosure Schedule, there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could result in the imposition,
on BT or any of its Subsidiaries of any liability or obligation arising under
common law or under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, CERCLA, pending or
threatened against BT or any of its Subsidiaries, which liability or
obligation is reasonably likely to result in a Material Adverse Effect on BT.
To the knowledge of BT, there is no reasonable basis for any such proceeding,
claim, action or governmental investigation that would impose any material
liability or obligation that is reasonably likely to result in a Material
Adverse Effect on BT.
4.17 Insurance. BT has in effect insurance coverage with reputable insurers
which in respect of amounts, premiums, types and risks insured, constitutes
reasonably adequate coverage against all risks customarily insured against by
companies comparable in size and operation to BT.
4.18 Pooling of Interests. Neither BT nor, to BT's best knowledge, any of
its affiliates has taken or agreed to take any action that would prevent BT
from accounting for the transactions to be effected pursuant to this Agreement
as a "pooling of interests" in accordance with GAAP and applicable SEC
regulations. As of the date of this Agreement, BT has no reason to believe
that the Merger will not qualify as a "pooling of interests" for accounting
purposes.
4.19 Employees. (a) The BT Disclosure Schedule sets forth a true and
complete list of each material domestic and British employee benefit plan,
arrangement or agreement that is maintained as of the date of this Agreement
(the "BT Benefit Plans") by BT or any of its Subsidiaries or by any trade or
business, whether or not incorporated (a "BT ERISA Affiliate"), all of which
together with BT would be deemed a "single employer" within the meaning of
Section 4001 of ERISA.
(b) (i) Each of the BT Benefit Plans has been operated and administered in
accordance with applicable laws, including, but not limited to, ERISA and the
Code, except where operation or administration is not,
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individually or in the aggregate, reasonably likely to result in a Material
Adverse Effect on BT, (ii) each of the BT Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service, and BT is
not aware of any circumstances that are reasonably likely to result in the
revocation of such favorable determination letter, (iii) with respect to each
Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) except as set forth in the BT Reports (as defined in
Section 4.11), no material BT Benefit Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of BT, its Subsidiaries or any BT ERISA
Affiliate beyond their retirement or other termination of service, other than
(A) coverage mandated by applicable law, (B) death benefits or retirement
benefits under any "employee pension plan" (as such term is defined in Section
3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on
the books of BT, its Subsidiaries or the BT ERISA Affiliates or (D) benefits
the full cost of which is borne by the current or former employee (or the
beneficiary), (v) no material liability under Title IV of ERISA has been
incurred by BT, its Subsidiaries or any BT ERISA Affiliate that has not been
satisfied in full, and, to the knowledge of BT, no condition exists that
presents a material risk to BT, its Subsidiaries or any BT ERISA Affiliate of
incurring a material liability thereunder, (vi) no BT Benefit Plan is a
"multiemployer pension plan" (as such term is defined in Section 3(37) of
ERISA), (vii) all contributions or other amounts payable by BT or its
Subsidiaries as of the Effective Time with respect to each BT Benefit Plan in
respect of current or prior plan years have been paid or accrued in accordance
with GAAP and Section 412 of the Code, (viii) neither BT, its Subsidiaries nor
any BT ERISA Affiliate has engaged in a transaction in connection with which
BT, its Subsidiaries or any BT ERISA Affiliate reasonably could be expected to
become subject to either a material civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or
4976 of the Code, and (ix) to the best knowledge of BT, there are no pending,
threatened in writing or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the BT Benefit Plan or any trust
related thereto.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute, forgiveness of indebtedness or otherwise)
becoming due to any director or any employee of BT or any of its affiliates
from BT or any of its affiliates under any BT Benefit Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any BT Benefit Plan
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits to any material extent.
4.20 State Takeover Laws. The Board of Directors of BT has approved the
transactions contemplated by this Agreement and the BT Option Agreement as
required under any applicable state takeover laws so that any such state
takeover laws will not apply to this Agreement or the BT Option Agreement or
any of the transactions contemplated hereby or thereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement or the AB Option Agreement, each
of BT and AB shall, and shall cause each of their respective Subsidiaries to,
(a) conduct its business in the usual, regular and ordinary course consistent
with past practice, (b) use reasonable best efforts to maintain and preserve
intact its business organization, employees and advantageous business
relationships and, in the case of AB, retain the services of its key officers
and key employees and (c) take no action which would adversely affect or delay
in any material respect the ability of either BT or AB to obtain any necessary
approvals of any Regulatory Agency or other governmental authority required
for the transactions contemplated hereby or to perform its covenants and
agreements under this Agreement or the AB Option Agreement.
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5.2 Forbearances of AB. During the period from the date of this Agreement to
the Effective Time, except as set forth in the AB Disclosure Schedule and,
except as expressly contemplated or permitted by this Agreement or the AB
Option Agreement, AB shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of BT:
(a) other than in the ordinary course of business consistent with past
practice, incur (i) any indebtedness for borrowed money (other than short-
term indebtedness incurred to refinance existing short-term indebtedness,
and indebtedness of AB or any of its Subsidiaries to AB or any of its
Subsidiaries, and indebtedness under existing lines of credit), assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other individual, corporation or other entity, or
make any loan or advance or (ii) any capital expenditures, obligations or
liabilities;
(b) (i) adjust, split, combine or reclassify any capital stock; (ii)
make, declare or pay any dividend (except, (A) for regular quarterly cash
dividends at a rate not in excess of $.17 per share of AB Common Stock and
(B) for dividends paid in the ordinary course of business by any
Subsidiaries (whether or not wholly owned) of AB) or make any other
distribution on, or directly or indirectly redeem (except as provided in
Section 6.11), purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock; (iii) other than in the ordinary course of
business consistent with past practice and, in all events, subject to BT's
prior written consent, grant any stock appreciation rights or grant any
individual, corporation or other entity any right to acquire any shares of
its capital stock, (iv) issue any additional shares of capital stock, other
than with respect to conversion of Public Debentures or Executive
Debentures or exercise of stock options granted pursuant to the AB Stock
Plans; or (v) enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets, including, without limitation, capital stock in any
Subsidiaries of AB, to any individual, corporation or other entity other
than a direct or indirect wholly owned Subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims held by any such
person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of
this Agreement.
(d) except for transactions in the ordinary course of business consistent
with past practice, make any material investment either by purchase of
stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual, corporation,
limited partnership or other entity other than a wholly owned Subsidiary of
AB;
(e) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any material lease, contract or
agreement, or make any change in any of its material leases, contracts or
agreements, other than renewals of leases, contracts or agreements without
material changes of terms;
(f) other than in the ordinary course of business consistent with past
practice and, in all events, subject to BT's prior written consent (or
prior consultation in the case of new hires who are principals or managing
directors), except as contemplated by the Employment Agreements and the
Retention Program, increase in any manner the compensation or fringe
benefits of any of its employees or pay any pension or retirement allowance
not required by any existing plan or agreement to any such employees or,
except as contemplated in Sections 6.12 and 6.13, become a party to, amend
or commit itself to any pension, retirement, profit-sharing or welfare
benefit plan or agreement or employment agreement with or for the benefit
of any employee or accelerate the vesting of any stock options or other
stock-based compensation;
(g) solicit, encourage or authorize any individual, corporation or other
entity to solicit from any third party any inquiries or proposals relating
to the disposition of its business or assets, or the acquisition of its
voting securities, or the merger of it or any of its Subsidiaries with any
corporation or other entity other than as provided by this Agreement (and
AB shall promptly notify BT of all of the relevant details relating to all
inquiries and proposal which it may receive relating to any of such
matters) or, unless the failure to provide access to such information would
upon advice of counsel reasonably acceptable to BT cause the
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AB board of directors to breach their fiduciary duties under applicable
law, provide any information to any such third party;
(h) settle any material claim, action or proceeding involving money
damages or waive or release any material rights or claims, except in the
ordinary course of business consistent with past practice;
(i) change its methods of accounting in effect at December 31, 1996,
except as required by changes in GAAP as concurred in with KPMG Peat
Marwick, LLP, its independent auditors, or change any of its methods of
reporting income and deductions for Federal income tax purposes from those
employed in the preparation of the Federal income tax returns of BT for the
taxable years ending December 31, 1996 and 1995, except as required by
changes in law or regulation or as set forth in Section 5.2 of the AB
Disclosure Schedule;
(j) take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code;
(k) adopt or implement any amendment to its certificate of incorporation
or any plan of consolidation, merger or reorganization or any changes to
its bylaws;
(l) other than in prior consultation with BT, materially restructure or
materially change its investment securities portfolio or its gap position,
through purchases, sales or otherwise, or the manner in which the portfolio
is classified or reported or materially alter the credit or risk
concentrations associated with its underwriting and other investment
banking businesses;
(m) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law;
(n) amend, modify, revoke or terminate the Stockholders' Agreement; or
(o) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.2.
5.3 Forbearances of BT. During the period from the date of this Agreement to
the Effective Time, except as expressly contemplated by this Agreement, BT
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of AB:
(a) take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; provided,
however, that nothing contained herein shall limit the ability of BT to
exercise its rights under the AB Option Agreement;
(b) (i) adjust, split, combine or reclassify any capital stock; or (ii)
make, declare or pay any dividend (except, (A) for regular quarterly cash
dividends at a rate not in excess of $1.00 per share of BT Common Stock,
and (B) except for dividends paid in the ordinary course of business by any
subsidiary (whether or not wholly owned) of BT) or make any extraordinary
distribution on any shares of its capital stock;
(c) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law;
(d) change its methods of accounting in effect at December 31, 1996,
except as required by changes in GAAP as concurred in with KPMG Peat
Marwick, LLP, its independent auditors; or
(e) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.3.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters. (a) BT and AB shall promptly prepare and file with
the SEC the Proxy Statement and BT shall promptly prepare and file with the
SEC the S-4, in which the Proxy Statement will be included as a prospectus.
Each of BT and AB shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such
filing, and BT and AB shall thereafter mail or deliver the Proxy Statement to
their respective stockholders. BT shall promptly prepare and file all
requisite notices and applications with respect to the Merger with the Federal
Reserve Board no later than 60 days after the date of this Agreement. BT shall
also use all reasonable efforts to obtain all necessary state securities law
or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and AB shall furnish all information
concerning AB and the holders of AB Common Stock as may be reasonably
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger), and to comply fully
with the terms and conditions of all such permits, consents, approvals and
authorizations of all such Governmental Entities. The parties hereto shall use
their reasonable best efforts to obtain all necessary consents and approvals
under the 1940 Act and the Advisers Act and to obtain the approval of the
boards of directors and stockholders of all of their respective Subsidiaries
regulated under the 1940 Act and the Advisers Act. BT and AB shall have the
right to review in advance, and, to the extent practicable, each will consult
the other on, in each case subject to applicable laws relating to the exchange
of information, all the information relating to AB or BT, as the case may be,
and any of their respective Subsidiaries, which appear in any filing made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein. Each
of BT and AB shall use all reasonable best efforts to resolve any objections
that may be asserted by any Governmental Entity with respect to this
Agreement, the Merger or the transactions contemplated hereby.
(c) BT and AB shall, upon request, furnish each other with all information
concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of BT, AB or any
of their respective Subsidiaries to any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement.
(d) BT and AB shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any Requisite Regulatory Approval (as defined in Section 7.1(c)) will not be
obtained or that the receipt of any such approval will be materially delayed.
6.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of BT and AB
shall, and shall cause each of their respective Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of the
other party, access, during normal business hours during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, each of BT and AB shall, and shall cause
their respective Subsidiaries to, make available to the other party (i) a copy
of each report, schedule, registration statement and
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other document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking laws
(other than reports or documents which BT or AB, as the case may be, is not
permitted to disclose under applicable law) and (ii) all other information
concerning its business, properties and personnel as such party may reasonably
request. Neither BT nor AB nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of BT's or AB's, as the case
may be, customers, jeopardize the attorney-client privilege of the institution
in possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, or binding agreement entered into prior
to the date of this Agreement. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Each of BT and AB shall hold all information furnished by or on behalf
of the other party or any of such party's Subsidiaries or representatives
pursuant to Section 6.2(a) in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement, dated March
21, 1997, between BT and AB (the "Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other
set forth herein.
6.3 Stockholders' Approvals. Each of BT and AB shall call a meeting of its
stockholders to be held as soon as reasonably practicable for the purpose of
(i) in the case of AB, voting upon the requisite stockholder approvals
required in connection with this Agreement and the Merger and (ii) in the case
of BT, voting upon the stockholder approval required by the rules of the NYSE
in connection with the issuance of BT Common Stock contemplated hereby. Each
of BT and AB shall use its reasonable best efforts to cause such meetings to
occur on the same date and to obtain the requisite stockholder approvals of
(i) in the case of AB, the Merger, this Agreement and the transactions
contemplated hereby and (ii) in the case of BT, the issuance of BT Common
Stock contemplated hereby, including, in each case, by recommending, subject
to the proper exercise of the fiduciary duties of the applicable Board of
Directors that the stockholders of AB and BT provide their respective
requisite approvals of such matters.
6.4 Legal Conditions to Merger. Each of BT and AB shall, and shall cause its
Subsidiaries to, use their reasonable best efforts (a) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (b)
to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by AB or BT
or any of their respective Subsidiaries in connection with the Merger and the
other transactions contemplated by this Agreement.
6.5 Affiliates; Publication of Combined Financial Results. (a) Each of BT
and AB shall use its reasonable best efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act and for purposes of qualifying the Merger for "pooling of
interests" accounting treatment) of such party to deliver to the other party
hereto, as soon as practicable after the date of this Agreement, and prior to
the date of the stockholders meetings called by BT and AB to, in the case of
AB, approve this Agreement and, in the case of BT, approve the issuance of the
BT Common Stock contemplated hereby, a written agreement, in the form of
Exhibit 6.5(a)(1) or (2), as applicable, hereto, providing that such person
will not sell, pledge, transfer or otherwise dispose of any shares of BT
Capital Stock or AB Common Stock held by such "affiliate" and, in the case of
the "affiliates" of AB, the shares of BT Common Stock to be received by such
"affiliate" in the Merger: (i) in the case of shares of BT Common Stock to be
received by "affiliates" of AB in the Merger, except in compliance with the
applicable provisions of the Securities Act and the rules and regulations
thereunder; and (ii) except to the extent and under the conditions permitted
therein, during the period commencing 30 days prior to the Merger and ending
at the time of the publication of financial results covering at least 30 days
of combined operations of BT and AB.
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(b) BT shall use its reasonable best efforts to publish no later than 90
days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be
the month in which the Effective Time occurs), combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
6.6 Stock Exchange Listing. BT shall use its reasonable best efforts to
cause the shares of BT Common Stock to be issued in the Merger to be approved
for listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time.
6.7 Employee Benefits. (a) Prior to the Effective Time, BT shall take all
corporate action necessary for the assumption of the Executive Debentures and
of all options to purchase shares of AB Common Stock outstanding under the AB
Stock Plans immediately prior to the Effective Time, as adjusted pursuant to
Sections 1.4(e) and 1.6(a) of this Agreement, respectively. In addition, AB
and BT shall take all necessary action so that, at the Effective Time, each
account balance under the AB Equity Compensation Plan and the AB Deferred
Compensation Plan that is deemed invested in AB Common Stock shall be adjusted
and converted into an account balance which will be denominated in BT Common
Stock and which will entitle the holder thereof to receive, and will represent
an obligation of BT to deliver to such holder, upon the same terms and
conditions as those applicable to such accounts immediately prior to the
Effective Time, a number of shares of BT Common Stock equal to the product of
(x) the number of shares of AB Common Stock attributable to such account
immediately prior to the Effective Time and (y) the Exchange Ratio. The
obligations of BT hereunder shall include the reservation, issuance and
listing on the NYSE of BT Common Stock in a number at least equal to the
number of shares of BT Common Stock subject to such Executive Debentures,
options under the AB Stock Plans, and account balances under the AB Equity
Compensation Plan and the AB Deferred Compensation Plan, in each case as
adjusted as contemplated by this Agreement. No later than the Effective Time,
BT shall prepare and file with the SEC a registration statement on Form S-8
(or any successor or other appropriate form) registering a number of shares of
BT Common Stock determined in accordance with the preceding sentence and shall
use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus and prospectuses contained therein) for so long as any Executive
Debentures or options remain outstanding or any such account balance remains
unpaid.
(b) AB and BT agree that the approval of this Agreement by the stockholders
of AB will constitute a "change in control" of AB for purposes of each AB
Benefit Plan with respect to which such concept is applicable. Without
limiting the generality of the preceding sentence, AB and BT agree that,
effective as of the date of such stockholder approval, (i) each option to
purchase AB Common Stock outstanding under any AB Stock Plan will become fully
vested and exercisable in accordance with its terms, (ii) each Executive
Debenture will become fully convertible in accordance with its terms and (iii)
all loan forgiveness relating to the purchase of Executive Debentures earned
prior to the date of such stockholder approval but not vested shall, in
accordance with the terms of the applicable purchase and loan agreement, be
considered vested to the extent consistent with qualification of the Merger as
a "pooling of interests" for accounting purposes, in each case, in accordance
with the terms of the respective instruments relating to such options or
debentures.
(c) AB and BT agree that account balances under the AB Equity Compensation
Plan and the AB Deferred Compensation Plan that are deemed invested in
investment vehicles other than AB Common Stock shall not be affected by the
transactions contemplated hereby. Following the Effective Time, with respect
to account balances accrued as of the Effective Time, such plans shall be
operated in a manner that is no less favorable to participants than as in
effect immediately preceding the Effective Time (including with respect to the
rights of participants to change investment elections).
(d) For purposes of their participation in the BT Benefit Plans, BT shall
credit each AB employee with full credit for all service credited under the AB
Benefit Plans (including service with AB prior to the Effective Time and,
where applicable, service with prior or predecessor employers to the extent
credit is given for such service under the AB Benefit Plans) for purposes of
eligibility to participate and receive benefits and for purposes of vesting,
but not for purposes of benefit accruals. With respect to BT's welfare benefit
plans, BT shall cause any
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such plan to waive any pre-existing condition exclusions and actively-at-work
requirements thereunder with respect to the AB employees and their eligible
dependents and shall ensure that any covered expenses incurred on or before
the Effective Time shall be taken into account for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions after
the Effective Time to the extent that such expenses are taken into account for
the benefit of similarly situated employees of BT. Following the Effective
Time, executives of AB shall be eligible to participate in and receive
benefits under all change in control protection plans and arrangements of BT
to the extent applicable to other peer executives of BT and its affiliates.
(e) Except as otherwise provided in this Agreement, nothing in this Section
6.7 shall be interpreted as preventing the Surviving Corporation from
amending, modifying or terminating any BT Benefit Plans, AB Benefit Plans, or
other employee benefit plans, contracts, arrangements, commitments or
understandings, in accordance with their terms and applicable law; provided,
however, that for at least two years following the Effective Time, AB
employees shall be provided with a level of benefits that is no less favorable
in the aggregate than that provided under the AB Benefit Plans as in effect
immediately prior to the Effective Time.
(f) AB shall take all actions necessary to amend the terms of the AB Stock
Plans or the stock option agreements pursuant thereto to effect the
adjustments to AB stock options provided for in Section 1.6 thereof.
(g) AB and BT agree that following the Effective Time, the Surviving
Corporation will honor all of AB's obligations with respect to current
participants in the AB Directors' Charitable Award Program and will continue
to pay all premiums on any life insurance policies used to fund such
obligations.
6.8 Indemnification; Directors' and Officers' Insurance. (a) The Certificate
of Incorporation and Bylaws of the Surviving Corporation shall contain, to the
extent permitted by law, the provisions with respect to indemnification set
forth in the Certificate of Incorporation and Bylaws of AB on the date hereof,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of the persons who at any time prior to
the Effective Time were identified as prospective indemnitees under the
Certificate of Incorporation or Bylaws of AB in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated hereby), unless such modification is
required by law; provided, that the Certificate of Incorporation and Bylaws of
the Surviving Corporation shall not be required to contain such provisions if
BT otherwise provides the same level of indemnification for such individuals
as contained in the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(b) BT shall, and shall cause the Surviving Corporation to, indemnify,
defend and hold harmless, to the fullest extent permitted by law, the present
and former officers, directors, employees and agents of AB or any of AB's
Subsidiaries in their capacities as such (each an "Indemnified Party") after
the Effective Time against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time.
(c) BT shall use its reasonable best efforts to cause the persons serving as
officers and directors of AB immediately prior to the Effective Time to be
covered for a period of six years from the Effective Time by the directors'
and officers' liability insurance policy maintained by AB (provided that BT
may substitute therefore policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such; provided, however, that in no event shall BT be required to expend more
than 200% of the current amount expended by AB (the "Insurance Amount") to
maintain or procure insurance coverage pursuant hereto and further provided,
that if BT is unable to maintain or obtain the insurance called for by this
Section 6.8(c), BT shall use its reasonable best efforts to obtain as much
comparable insurance as available for the Insurance Amount.
(d) In the event BT or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers
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or conveys all or substantially all of its properties and assets to any
person, then, and in each such case, to the extent necessary, proper provision
shall be made so that the successors and assigns of BT assume the obligations
set forth in this section.
(e) The provisions of this Section 6.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
6.9 Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, the Subsidiary Merger and any other
merger between a Subsidiary of AB and a Subsidiary of BT) or to vest the
Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and their
respective Subsidiaries shall take all such necessary action as may be
reasonably requested by, and at the sole expense of, BT.
6.10 Advice of Changes. BT and AB shall promptly advise the other party of
any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained
herein.
6.11 Dividends. After the date of this Agreement, each of BT and AB shall
coordinate with the other the declaration of any dividends in respect of BT
Common Stock and AB Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties hereto that holders of
BT Common Stock or AB Common Stock shall not receive two dividends, or fail to
receive one dividend, for any quarter with respect to their shares of BT
Common Stock and/or AB Common Stock and any shares of BT Common Stock any such
holder receives in exchange therefor in the Merger.
6.12 Employment Matters. AB agrees to use its best efforts to enter into
employment agreements in substantially the form set forth in Schedule 6.12
attached hereto with each of the individuals identified in Section 6.12 of the
AB Disclosure Schedule (collectively, the "Employment Agreements") on the
terms and conditions and in the time periods specified in Section 6.12 of the
AB Disclosure Schedule.
6.13 Employee Retention Plan. Prior to the Effective Time, BT and AB agree
to establish a key employee retention program in accordance with the terms
outlined in Section 6.12 of the AB Disclosure Schedule to provide retention
incentives for the individuals/categories of employees identified in Section
6.12 of the AB Disclosure Schedule (collectively, the "Retention Program").
6.14 State Takeover Statutes. Each party will take all steps necessary to
exempt (or continue the exemption of) the Merger and the transactions
contemplated hereby from, and challenge the validity of, any applicable state
takeover law, as now or hereafter in effect.
6.15 Section 15 of the Investment Company Act. (a) AB will use its best
efforts to obtain as promptly as practicable, the approval of the stockholders
of each of the Flag Family of Funds (collectively, the "Funds"), pursuant to
the provisions of Section 15 of the 1940 Act applicable thereto, of a new
Investment Company Advisory Agreement for such Fund identical in all respects
to that in effect immediately prior to the Closing, except that such new
Investment Advisory Agreement shall be effective immediately after the Closing
and shall have an initial term of two years, and, in the case of the Funds set
forth in Schedule 6.15(a), of the respective transactions set forth in
Schedule 6.15(a).
(b) AB shall use its best efforts to assure, prior to the Closing Date, the
satisfaction of the conditions set forth in Section 15(f) of the 1940 Act with
respect to each Fund.
(c) BT agrees to use its best efforts to assure compliance with the
conditions of Section 15(f) of the 1940 Act with respect to the Funds. Without
limiting the foregoing, BT agrees that (i) for a period of not less than three
years after the Closing Date, BT shall assure that no more than 25% of the
members of the Board of Directors of any Fund shall be "interested persons"
(as defined in the 1940 Act) of BT (or such other entity
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which acts as adviser or subadviser to the Funds) or of the predecessor
investment adviser of the Funds and (ii) neither BT nor any affiliate
(including any parent company of BT) of BT (or any entity which will act as
adviser to the Funds), for a period of not less than two years after the
Closing Date, shall have any express or implied understanding, arrangement or
intention to impose an unfair burden on any of the Funds as a result of the
transactions contemplated hereby.
6.16 AB Name. BT acknowledges that the name "Alex. Brown" has a great
heritage and integrity and has significant value. BT recognizes the value to
AB's business of preserving such heritage and integrity. BT agrees that from
and after the Effective Time, BT shall, and shall cause its subsidiaries to,
continue the use of the name "Alex. Brown" as it considers appropriate in
connection with AB's ongoing business activities and shall maintain AB's
standard of business integrity and quality related thereto.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation 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) Stockholder Approval. (i) This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
affirmative vote of the holders of AB Common Stock entitled to vote thereon
and (ii) the issuance of BT Common Stock contemplated hereby shall have
been approved by the BT stockholder vote required pursuant to the rules of
the NYSE.
(b) Stock Exchange Listing. The shares of BT Common Stock which shall be
issued to the stockholders of AB upon consummation of the Merger shall have
been authorized for listing on the NYSE, subject to official notice of
issuance.
(c) Other Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods shall have
expired and no such approvals shall contain any conditions or restrictions
which would reasonably be expected to result in a Material Adverse Effect
on BT, BT Sub or AB (all such approvals and the expiration of all such
waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other material transactions
contemplated by this Agreement shall be in effect. No statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits,
materially restricts or makes illegal consummation of the Merger.
(f) Federal Tax Opinion. BT shall have received an opinion of Wachtell,
Lipton, Rosen & Katz, counsel to BT, and AB shall have received an opinion
of Shearman & Sterling, counsel to AB, in form and substance reasonably
satisfactory to BT and AB, respectively, dated as of the Effective Time, in
each case substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time:
(i) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and BT, BT Sub and AB will each be a party
to the reorganization;
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(ii) No gain or loss will be recognized by BT or AB as a result of
the Merger (except with respect to items as to which AB is required to
recognize gain or loss at the close of each taxable year under a mark-
to-market method);
(iii) No gain or loss will be recognized by the stockholders of AB
who exchange their AB Common Stock solely for BT Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a
fractional share interest in BT Common Stock);
(iv) No gain or loss will be recognized by the holders of the Public
Debentures or the Executive Debentures solely as a result of the
assumption by BT at the Effective Time of the Public Debentures and the
Executive Debentures as a co-obligor with the Surviving Corporation or
the change in conversion rights contemplated by Sections 1.4(d) and
1.4(e) of this Agreement;
(v) The aggregate tax basis of the BT Common Stock received by
stockholders of AB who exchange AB Common Stock solely for BT Common
Stock in the Merger will be the same as the aggregate tax basis of the
AB Common Stock surrendered in exchange therefor; and
(vi) The holding period of the BT Common Stock received by
stockholders of AB in the Merger will include the period during which
the shares of AB Common Stock surrendered in exchange therefor were
held; provided, such AB Common Stock was held as a capital asset by the
holder of such AB Common Stock at the Effective Time.
In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers and certain
stockholders of BT, AB and others.
(g) Pooling of Interests. BT and AB shall have received a letter from
KPMG Peat Marwick, LLP to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
7.2 Conditions to Obligations of BT. The obligation of BT to effect the
Merger is also subject to the satisfaction or waiver by BT at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
AB set forth in this Agreement shall be true and correct in all material
respects as of the Closing Date (except to the extent such representations
and warranties speak as of an earlier date, in which case such
representations and warranties shall be true as of such earlier date) as
though made on and as of the Closing Date and BT shall have received a
certificate signed on behalf of AB by its Chief Executive Officer and Chief
Financial Officer to the foregoing effect.
(b) Performance of Obligations of AB. AB shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and BT shall have received a
certificate signed on behalf of AB by its Chief Executive Officer and Chief
Financial Officer to such effect.
7.3 Conditions to Obligations of AB. The obligation of AB to effect the
Merger is also subject to the satisfaction or waiver by AB at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
BT and BT Sub set forth in this Agreement shall be true and correct in all
material respects as of the Closing Date (except to the extent such
representations and warranties speak as of an earlier date, in which case
such representations and warranties shall be true as of such earlier date)
as though made on and as of the Closing Date and AB shall have received a
certificate signed on behalf of BT and BT Sub by BT's Chairman, President
or Executive Vice President and by BT's Secretary or Assistant Secretary to
the foregoing effect.
(b) Performance of Obligations of BT. BT shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and AB shall have received a
certificate signed on behalf of BT and BT Sub by BT's Chairman, President
or an Executive Vice President and by BT's Secretary or Assistant Secretary
to such effect.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of AB of
the matters presented in connection with the Merger and by the stockholders of
BT of the issuance of BT Common Stock contemplated hereby:
(a) by mutual consent of BT and AB in a written instrument, if the Board
of Directors of each so determines by a vote of a majority of the members
of its entire Board or as set forth in Section 8.1 of the BT Disclosure
Schedule;
(b) by either the Board of Directors of BT or the Board of Directors of
AB if any Governmental Entity which must grant a Requisite Regulatory
Approval has denied approval of the Merger and such denial has become final
and nonappealable or any Governmental Entity of competent jurisdiction
shall have issued a final nonappealable Injunction permanently enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either the Board of Directors of BT or the Board of Directors of
AB if the Merger shall not have been consummated on or before March 31,
1998, unless the failure of the Closing (as defined in Section 9.1) to
occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either the Board of Directors of BT or the Board of Directors of
AB (provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein)
if there shall have been a material breach of any of the covenants or
agreements or any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
45 days following written notice to the party committing such breach, or
which breach, by its nature or timing, cannot be cured prior to the
Closing; and
(e) by either BT or AB if any approval of the stockholders of BT or AB
required for the consummation of the Merger and the transactions
contemplated hereby shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of stockholders or at
any adjournment or postponement thereof.
8.2 Effect of Termination. In the event of termination of this Agreement by
either BT or AB as provided in Section 8.1, this Agreement shall forthwith
become void and have no effect, and none of BT, AB, any of their respective
Subsidiaries or any of the officers or directors of any of them shall have any
liability of any nature whatsoever hereunder, or in connection with the
transactions contemplated hereby, except that (i) Sections 6.2(b), 8.2, 9.2
and 9.3, shall survive any termination of this Agreement, and (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
BT nor AB shall be relieved or released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement; and
provided, further, that if this Agreement is terminated:
(A) at a time when AB is not otherwise in material breach of any of its
representations, warranties, covenants or other agreements under this
Agreement (determined as of the date of such termination) and no Initial
Triggering Event (as defined in the BT Option Agreement) has occurred, and
subject to the last sentence of Section 7(a) of the BT Option Agreement (x)
(i) pursuant to clause (b) of Section 8.1 as a result of a denial of a
Requisite Regulatory Approval of BT and other than as a result of an
adverse condition primarily attributable to AB, or (ii) pursuant to clause
(e) of Section 8.1 as a result of the failure of the BT stockholders to
provide such requisite approval, then BT shall pay to AB a termination fee
in an amount equal to $25 million or (y) pursuant to clause (d) of Section
8.1 as a result of a material breach of any representation, warranty,
covenant or other agreement contained herein by BT, then BT shall pay AB a
termination fee of $75 million; and
(B) at a time when BT is not otherwise in material breach of any of its
representations, warranties, covenants or other agreements under this
Agreement (determined as of the date of such termination) and no
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Initial Triggering Event (as defined in the AB Option Agreement) has
occurred, and subject to the last sentence of Section 7(a) of the AB Option
Agreement (x) pursuant to clause (e) of Section 8.1 as a result of the
failure of the AB stockholders to provide such requisite approval, then AB
shall pay to BT a termination fee in an amount equal to $25 million or (y)
pursuant to clause (d) of Section 8.1 as a result of a material breach of
any representation, warranty, covenant or other agreement contained herein
by AB, then AB shall pay BT a termination fee of $75 million;
provided, further, that if this Agreement is terminated and such termination
does not result in (1) an Exercise Termination Event (as defined in the AB
Stock Option Agreement), then, in the event of a Subsequent Triggering Event
(as defined in the AB Stock Option Agreement), AB shall pay BT $75 million
less any amount payable pursuant to subparagraph (B) of this Section 8.2 and
(2) an Exercise Termination Event (as defined in the BT Stock Option
Agreement), then, in the event of a Subsequent Triggering Event (as defined in
the BT Stock Option Agreement), BT shall pay AB $75 million less any amount
payable pursuant to subparagraph (A) of this Section 8.2.
8.3 Amendment. Subject to compliance with applicable law, this Agreement may
be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of AB;
provided, however, that after any approval of the transactions contemplated by
this Agreement by the stockholders of AB, there may not be, without further
approval of such stockholders, any amendment of this Agreement which changes
the amount or the form of the consideration to be delivered to the holders of
AB Common Stock hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein; provided, however, that after
any approval of the transactions contemplated by this Agreement by the
stockholders of AB, there may not be, without further approval of such
stockholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the holders of AB Common Stock hereunder other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing. Subject to the terms and conditions of this Agreement and the
AB Option Agreement, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date and at a place to be specified by the parties, which
shall be no later than three business days after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set forth
in Article VII hereof, unless extended by mutual agreement of the parties (the
"Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than pursuant to
the AB Option Agreement, which shall terminate in accordance with its terms)
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
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9.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Proxy Statement, and all filing and other fees paid
to the SEC in connection with the Merger, shall be borne equally by BT and AB.
9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to BT, to:
Bankers Trust New York Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attn: General Counsel
Fax: (212) 250-0734
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Craig M. Wasserman, Esq.
Fax: (212) 403-2000
and
(b) if to AB, to:
Alex. Brown Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Attn: General Counsel
Fax: (410) 895-3656
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attn: David W. Heleniak, Esq.
Fax: (212) 848-7179
9.5 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require AB,
BT or any of their respective Subsidiaries or affiliates to take any action
which would violate any applicable law, rule or regulation.
9.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
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<PAGE>
9.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof other than the AB
Option Agreement and the Confidentiality Agreement.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.
9.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
9.10 Publicity. Except as otherwise required by applicable law or the rules
of the NYSE, neither BT nor AB shall, nor shall either permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably withheld.
9.11 Assignment; Third Party Beneficiaries. Neither this Agreement nor any
of the rights, interests or obligations shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.8 and, with respect to the individuals
listed in Section 6.12 of the AB Disclosure Schedule, Section 6.12, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
IN WITNESS WHEREOF, BT, BT Sub and AB have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
BANKERS TRUST NEW YORK CORPORATION ALEX. BROWN INCORPORATED
/s/ Melvin A. Yellin /s/ A.B. Krongard
By: _________________________________ By: _________________________________
Name:Melvin A. Yellin Name:A.B. Krongard
Title:Executive Vice President Title:Chairman and Chief Executive
Officer
VOYAGER MERGER CORPORATION
/s/ Melvin A. Yellin
By: _________________________________
Name:Melvin A. Yellin
Title:Executive Vice President
A-34
<PAGE>
EXHIBIT 6.5(A)(1)
FORM OF AFFILIATE LETTER ADDRESSED TO AB
Alex. Brown Incorporated
135 East Baltimore Street
Baltimore, MD 21202
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Bankers Trust New York Corporation, a New York corporation
("BT"), as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act") and/or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. I have been further advised that pursuant to the terms of the
Agreement and Plan of Merger dated as of April 6, 1997 (the "Merger
Agreement") among BT, Alex. Brown Incorporated, a Maryland corporation ("AB"),
and Voyager Merger Corporation, a wholly owned subsidiary of BT ("Merger
Sub"), AB will be merged with and into Merger Sub (the "Merger").
I represent to and covenant with AB that from the date that is 30 days prior
to the Effective Time (as defined in the Agreement) I will not sell, transfer
or otherwise dispose of shares of AB Common Stock (as defined in the Merger
Agreement) held by me and that I will not sell, transfer or otherwise dispose
of any shares of BT Common Stock (as defined in the Merger Agreement) until
after such time as results covering at least 30 days of combined operations of
BT and AB have been published by BT, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q, or 8-K, or any other public
filing or announcement which includes the results of at least 30 days of
combined operations; provided, however, that this paragraph shall not prevent
me from selling, transferring or disposing of such number of shares of AB
Common Stock or BT Common Stock as will not, in the reasonable judgment of
accountants to BT, interfere with or prevent the Merger being accounted for as
a "pooling of interests," taking into account the nature, extent and timing of
such sale, transfer or disposition and of similar sales, transfers or
dispositions by all other affiliates of AB and all affiliates of BT.
Very truly yours,
By: _________________________________
Name:
Accepted this day of
, 1997 by
ALEX. BROWN INCORPORATED
By: _________________________________
Name:
Title:
A-35
<PAGE>
EXHIBIT 6.5(A)(2)
FORM OF AFFILIATE LETTER ADDRESSED TO BT
Bankers Trust New York Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Alex. Brown Incorporated, a Maryland corporation ("AB"), as the
term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 of the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), and/or (ii) used in and for purposes of
Accounting Series, Releases 130 and 135, as amended, of the Commission. I have
been further advised that pursuant to the terms of the Agreement and Plan of
Merger dated as of April 6, 1997 (the "Merger Agreement"), among Bankers Trust
New York Corporation, a New York corporation ("BT"), AB and Voyager Merger
Corporation, a wholly owned subsidiary of BT ("Merger Sub"), AB will be merged
with and into Merger Sub (the "Merger") and that as a result of the Merger, I
may receive shares of BT Common Stock (as defined in the Merger Agreement), in
exchange for shares of AB Common Stock (as defined in the Merger Agreement),
owned by me.
I represent, warrant and covenant to BT that in the event I receive any BT
Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the BT
Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed its
requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of BT Common Stock to the extent I believed
necessary with my counsel or counsel for AB.
C. I have been advised that the issuance of BT Common Stock to me
pursuant to the Merger will be registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised
that, since at the time the Merger will be submitted for a vote of the
stockholders of BT, I may be deemed to have been an affiliate of AB and the
distribution by me of the BT Common Stock has not been registered under the
Act, and that I may not sell, transfer or otherwise dispose of BT Common
Stock issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or
other disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act, or
(iii) in the opinion of counsel reasonably acceptable to BT, such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that BT is under no obligation to register the sale,
transfer or other disposition of the BT Common Stock by me or on my behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given to
BT's transfer agents with respect to the BT Common Stock and that there
will be placed on the certificates for the BT Common Stock issued to me, or
any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate have been issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933 applies and may only be sold or otherwise transferred in
compliance with the requirements of Rule 145 or pursuant to a
registration statement under said act or an exemption from such
registration."
A-36
<PAGE>
F. I also understand that unless the transfer by me of my BT Common
Capital Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, BT reserves the right to put
the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares have been acquired
by the holder not with a view to, or for resale in connection with, any
distribution thereof within the meaning of Securities Act of 1933 and
may not be sold, pledged or otherwise transferred except in accordance
with an exemption from the registration requirements of the Securities
Act of 1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to BT a copy of a letter from
the staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to BT, to the effect that such legend is not required
for purposes of the Act.
I further represent to and covenant with BT that from the date that is 30
days prior to the Effective Time (as defined in the Merger Agreement) I will
not sell, transfer or otherwise dispose of shares of AB Common Stock held by
me and that I will not sell, transfer or otherwise dispose of any shares of BT
Common Stock received by me in the Merger or other shares of BT Common Stock
until after such time as results covering at least 30 days of combined
operations of BT and AB have been published by BT, in the form of a quarterly
earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10-Q, or 8-K, or any
other public filing or announcement which incudes the results of at least 30
days of combined operations; provided, however, that this paragraph shall not
prevent me from selling, transferring or disposing of such number of shares of
AB Common Stock or BT Common Stock as will not, in the reasonable judgment of
accountants to BT, interfere with or prevent the Merger being accounted for as
a "pooling of interests," taking into account the nature, extent and timing of
such sale, transfer or disposition and of similar sales, transfers or
dispositions by all other affiliates of AB and all affiliates of BT.
I understand that pursuant to the Merger Agreement, no certificate for BT
Common Stock shall be delivered to me in exchange for certificates
representing AB Common Stock until I have executed and delivered this
agreement.
Very truly yours,
By: _________________________________
Name:
Accepted this day of
, 1997 by
BANKERS TRUST NEW YORK CORPORATION
By: _________________________________
Name:
Title:
A-37
<PAGE>
EXHIBIT C
FORM OF SUPPORT AGREEMENT
[BT NEW YORK CORPORATION LETTERHEAD]
[Stockholder]
[Address]
Dear :
As you know, Bankers Trust New York Corporation, a New York corporation
("BT"), and AB, a Maryland corporation ("AB"), are concurrently entering into
an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which AB
will merge (the "Merger") with and into Voyager Merger Corporation, a wholly
owned subsidiary of BT, with Voyager Merger Corporation as the surviving
corporation in the Merger.
As a AB shareholder, you believe it is in the best interests of AB and all
AB shareholders for the Merger to be consummated on the terms set forth in the
Merger Agreement. As a condition and inducement to BT's willingness to enter
into the Merger Agreement:
1. You represent that you have sole voting and dispositive power over
shares of common stock, par value $.10 per share, of AB (the "AB Common
Stock") and that you beneficially own such shares free and clear of all
liens, charges and encumbrances, agreements and commitments of every kind;
provided, however, that of such shares are held subject to the First
Amended and Restated Stockholders' Agreement (the "Stockholders'
Agreement"), dated as of June 23, 1989, by and among AB and the persons and
entities listed on Exhibit A thereto and provided, further, that of
such shares are pledged pursuant to the Equity Partnership Plan.
2. You agree that any additional shares of AB Common Stock acquired by
you, whether pursuant to existing stock option agreements, warrants or
otherwise, between the date hereof and the effective time of the Merger,
and whether or not held pursuant to the terms of the Stockholders'
Agreement, shall be subject to the provisions of this Agreement.
3. At such time as AB conducts a meeting of or otherwise seeks a vote of
its shareholders for the purpose of approving and adopting the Merger
Agreement and the Merger (the "AB Meeting"), you agree to vote all AB
Common Stock then held or controlled by you in favor of the Merger
Agreement and the Merger subject, in the case of shares of AB Common Stock
held pursuant to the Stockholders' Agreement, to the terms of such
Agreement. You agree that at any such time that a Preliminary Vote (as
defined in the Stockholders' Agreement) of the stockholders of AB party to
the Stockholders' Agreement is taken pursuant to the terms of the
Stockholders' Agreement, you shall vote all AB Common Stock then held by
you which is subject to the terms of the Stockholders' Agreement in favor
of the Merger Agreement and the Merger.
4. You will use all reasonable efforts to cooperate with BT in connection
with the Merger, promptly take such actions as are necessary or appropriate
to consummate the Merger, and provide any information reasonably requested
by BT for any regulatory application or filing made or approval sought for
the transactions contemplated by the Merger Agreement.
5. This Agreement shall terminate upon the termination of the Merger
Agreement in accordance with its terms.
6. This Agreement shall not affect your obligations, to the extent you
serve in such capacity, as a director of AB.
7. This Agreement shall bind and benefit the successors, assigns,
executors, trustees and heirs of the parties hereto. You agree that damages
are inadequate for breach by you of any term of this Agreement and that BT
shall be entitled to preliminary and permanent injunctive relief to enforce
this Agreement. This Agreement shall be governed by and construed under the
laws of the State of Delaware (without giving effect to the choice of law
provisions thereof) except to the extent that mandatory provisions of
Federal law
A-38
<PAGE>
or the corporation law of another jurisdiction are applicable. Any term
hereof which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without affecting the remaining terms or their validity or
enforceability in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
If made necessary as a result of entering into this Support Agreement, BT
shall file a registration statement with the Securities and Exchange
Commission to effect registration of the shares of common stock, par value
$1.00 per share, of BT ("BT Common Stock") received by you pursuant to the
Merger Agreement, to permit resale of such shares under the Securities Act of
1933, as amended, and will cause such registration statement to become
effective and take all reasonable action to maintain such effectiveness.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of such counterparts together shall
constitute one and the same instrument.
Please confirm that the foregoing correctly states the understanding between
us by signing and returning to BT a counterpart hereof.
Very truly yours,
BANKERS TRUST NEW YORK
CORPORATION
By: _________________________________
Name:
Title:
Accepted and agreed as
of the date first above written:
_____________________________________
Name:
A-39
<PAGE>
APPENDIX B
[BT WOLFENSOHN LETTERHEAD]
As of April 6, 1997
Board of Directors
Bankers Trust New York Corporation
One Bankers Trust Plaza
New York, NY 10006
Dear Gentlemen and Madame:
BT Wolfensohn, a division of BT Securities Corporation ("BT Wolfensohn"),
has acted as financial advisor to Bankers Trust New York Corporation ("Bankers
Trust") in connection with the proposed merger of Bankers Trust and Alex.
Brown Incorporated ("Alex. Brown") pursuant to the Agreement and Plan of
Merger, dated as of April 6, 1997, among Alex. Brown, Bankers Trust and
Bankers Trust Sub (the "Merger Agreement"), which provides, among other
things, for the merger of Alex. Brown with and into Bankers Trust Sub (the
"Transaction"), as a result of which Alex. Brown will become a wholly-owned
subsidiary of Bankers Trust. As set forth more fully in the Merger Agreement,
as a result of the Transaction (a) each share of Common Stock, par value $0.10
per share, of Alex. Brown ("Alex. Brown Common Stock") not owned directly or
indirectly by Alex. Brown or Bankers Trust will be converted into the right to
receive 0.83 shares (the "Exchange Ratio") of Common Stock, par value of $1.00
per share, of Bankers Trust ("Bankers Trust Common Stock"), (b) each of Alex.
Brown's Public Debentures and Executive Debentures (in each case, as defined
in the Merger Agreement) will be assumed by Bankers Trust and thereafter be
convertible into the number of shares of Bankers Trust Common Stock as
determined pursuant to the Merger Agreement based on the Exchange Ratio, and
(c) each outstanding and unexercised option to purchase Alex. Brown Common
Stock shall be converted into an option to purchase a number of shares of
Bankers Trust Common Stock and at an exercise price as determined pursuant to
the Merger Agreement based on the Exchange Ratio. The terms and conditions of
the Transaction are more fully set forth in the Merger Agreement.
You have requested BT Wolfensohn's opinion, as investment bankers, as to the
fairness, from a financial point of view, to Bankers Trust of the Exchange
Ratio in connection with the Transaction.
In connection with BT Wolfensohn's role as financial advisor to Bankers
Trust, and in arriving at its opinion, BT Wolfensohn has, among other things:
(i) reviewed the publicly available consolidated financial statements of
Alex. Brown for recent years and certain other relevant financial and
operating data of Alex. Brown available from public sources or provided
to BT Wolfensohn by Alex. Brown;
(ii) reviewed the publicly available consolidated financial statements of
Bankers Trust for recent years and certain other relevant financial
and operating data of Bankers Trust available from public sources or
provided to BT Wolfensohn by Bankers Trust;
(iii) reviewed certain internal financial analyses, projections and
operating information relating to Bankers Trust and Alex. Brown,
provided by their respective managements to BT Wolfensohn, including
analyses and forecasts of certain cost savings, operating
efficiencies, revenue effects and financial synergies (collectively,
the "Synergies") expected by Bankers Trust and Alex. Brown to be
achieved as a result of the Transaction;
(iv) discussed the business, financial condition and prospects of Bankers
Trust and Alex. Brown with certain officers and certain members of
management of each organization;
(v) analyzed the pro forma impact of the Transaction on Bankers Trust
earnings per share, consolidated capitalization and financial ratios;
B-1
<PAGE>
The Board of Directors
Bankers Trust
As of April 6, 1997
Page 2
(vi) considered the strategic objectives of Bankers Trust as outlined to BT
Wolfensohn by Bankers Trust management;
(vii) reviewed the trading prices and activity for the Bankers Trust Common
Stock and the Alex. Brown Common Stock;
(viii) reviewed the financial and other terms of the Merger Agreement and
the other agreements referred to therein entered into in connection
with the Transaction (the "Ancillary Agreements");
(ix) reviewed the financial terms, to the extent publicly available, of
selected transactions in the investment banking industry which BT
Wolfensohn believes to be relevant;
(x) reviewed certain public information pertaining to companies engaged in
businesses that BT Wolfensohn believes to be generally comparable to
those of Alex. Brown and Bankers Trust, including, without limitation,
the trading prices for the equity securities of such companies; and
(xi) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and
financial, economic and market data as BT Wolfensohn deemed relevant.
BT Wolfensohn has not assumed responsibility for independent verification of
any information, whether publicly available or furnished to it, concerning
Alex. Brown or Bankers Trust, including, without limitation, any financial
information, forecasts or projections, considered in connection with the
rendering of its opinion. Accordingly, for purposes of its opinion, BT
Wolfensohn has assumed and relied upon the accuracy and completeness of all
such information and BT Wolfensohn has not conducted a physical inspection of
any of the properties or assets, and has not prepared or obtained any
independent evaluation or appraisal of any of the assets or liabilities, of
Alex. Brown or Bankers Trust. With respect to the financial forecasts and
projections, including the Synergies, made available to BT Wolfensohn and used
in its analysis, BT Wolfensohn has assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of Alex. Brown or Bankers Trust, as the case may
be, as to the matters covered thereby and in rendering its opinion BT
Wolfensohn expresses no view as to the reasonableness of such forecasts and
projections, including the Synergies, or the assumptions on which they are
based. BT Wolfensohn's opinion is necessarily based upon economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
For purposes of rendering its opinion, BT Wolfensohn has assumed that, in
all respects material to its analysis, the representations and warranties of
Bankers Trust, Bankers Trust Sub and Alex. Brown contained in the Merger
Agreement are true and correct, that Bankers Trust, Bankers Trust Sub and
Alex. Brown will each perform all of the covenants and agreements to be
performed by it under the Merger Agreement and all conditions to the
obligation of each of Bankers Trust, Bankers Trust Sub and Alex. Brown to
consummate the Transaction will be satisfied without any waiver thereof. BT
Wolfensohn has also assumed that all material governmental, regulatory or
other approvals and consents required in connection with the consummation of
the Transaction will be obtained and that in connection with obtaining any
necessary governmental, regulatory or other approvals and consents, or any
amendments, modifications or waivers to any agreements, instruments or orders
to which either Bankers Trust or Alex. Brown is a party or is subject or by
which it is bound, no limitations, restrictions or conditions will be imposed
or amendments, modifications or waivers made that would have a material
adverse effect on Bankers Trust or Alex. Brown or materially reduce the
contemplated benefits of the Transaction to Bankers Trust. In addition, you
have informed BT Wolfensohn, and accordingly for
B-2
<PAGE>
The Board of Directors
Bankers Trust
As of April 6, 1997
Page 3
purposes of rendering its opinion BT Wolfensohn has assumed, that the
Transaction will be tax-free to each of Bankers Trust and Alex. Brown and
their respective stockholders and that the Transaction will be accounted for
as a pooling of interests.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Bankers Trust and is not a recommendation to the stockholders of
Bankers Trust to approve the issuance of shares of Bankers Trust Common Stock
in the Transaction. This opinion is limited to the fairness, from a financial
point of view, to Bankers Trust of the Exchange Ratio in connection with the
Transaction and BT Wolfensohn expresses no opinion as to the merits of the
underlying decision by Bankers Trust to engage in the Transaction. This
opinion may be included in any disclosure document filed by Bankers Trust with
the Securities and Exchange Commission with respect to the Transaction,
provided that it is reproduced in full (including all attachments thereto),
and that any description of or reference to BT Wolfensohn or summary of the
opinion in the disclosure documents is in a form reasonably acceptable to BT
Wolfensohn and its counsel; except as provided herein, any such opinion will
not be reproduced, summarized or referred to in any public document or given
to any other person without the prior written consent of BT Wolfensohn.
In the ordinary course of the business of BT Securities Corporation and its
affiliates (collectively, "BT Affiliates"), BT Affiliates may actively trade
in the securities of Alex. Brown for their own accounts and for the accounts
of their customers. As you know, BT Wolfensohn is a division of BT Securities
Corporation, a wholly-owned subsidiary of Bankers Trust. In addition, certain
employees of BT Wolfensohn beneficially own shares of Bankers Trust Common
Stock and other Bankers Trust securities.
Based upon and subject to the foregoing, it is BT Wolfensohn's opinion as
investment bankers that the Exchange Ratio in connection with the Transaction
is fair, from a financial point of view, to Bankers Trust.
Very truly yours,
/s/ BT Wolfensohn
-------------------------------------
BT WOLFENSOHN
A Division of BT Securities
Corporation
B-3
<PAGE>
APPENDIX C
[Alex. Brown & Sons Incorporated Letterhead]
April 5, 1997
Board of Directors
Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Dear Sirs:
Alex. Brown Incorporated ("Company"), Bankers Trust New York Corporation
("Buyer") and Voyager Merger Corporation, a New York corporation and a wholly-
owned subsidiary of Buyer (the "Merger Sub"), have entered into an Agreement
and Plan of Merger dated as of April 6, 1997 (the "Agreement"). Pursuant to
the Agreement, the implementation of which is contingent on stockholder
approval by the holders of common stock, par value $0.10, of the Company (the
"Company Stockholders") and Buyer's stockholders, Company shall merge with and
into Merger Sub (the "Merger"), and each share of Company common stock issued
and outstanding immediately prior to the effective time of the Merger will be
converted into 0.83 shares (the "Exchange Ratio") of common stock of Buyer. We
have assumed, with your consent, that the Merger will qualify for pooling-of-
interests accounting treatment and as a tax free transaction for the Company
Stockholders. You have requested our opinion as to whether the Exchange Ratio
is fair, from a financial point of view, to the Company Stockholders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors
of Company in connection with the transaction described above. Alex. Brown is
a wholly owned subsidiary of Company and certain employees of Alex. Brown are
stockholders of Company.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning Company and Buyer and
certain internal analyses and other information furnished to us by Company and
Buyer. We have also held discussions with members of the senior managements of
Company and Buyer regarding the businesses and prospects of their respective
companies and the joint prospects of a combined company. In addition, we have
(i) reviewed the reported prices and trading activity for the common stock of
both Company and Buyer, (ii) compared certain financial and stock market
information for Company and Buyer with similar information for certain other
companies whose securities are publicly traded, (iii) reviewed the financial
terms of certain recent business combinations which we deemed comparable in
whole or in part, (iv) reviewed the terms of the Agreement, and (v) performed
such other studies and analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of Company
and Buyer, we have assumed that such information reflects the best currently
available judgments and estimates of the managements of Company and Buyer as
to the likely future financial performances of their respective companies and
of the combined entity. In addition, we have not made nor been provided with
an independent evaluation or appraisal of the assets of Company and Buyer, nor
have we been furnished with any such evaluations or appraisals. Our opinion is
based on market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the
Company or any of its assets.
C-1
<PAGE>
Our advisory services and the opinion expressed herein were prepared for the
use of the Board of Directors of Company and do not constitute a
recommendation to the Company Stockholders as to how they should vote at the
stockholders' meeting in connection with the Merger. We hereby consent,
however, to the inclusion of this opinion as an exhibit to any proxy or
registration statement distributed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of
view, to the Company Stockholders.
Very truly yours,
Alex. Brown & Sons Incorporated
/s/ Steven J. Bottum
By: _________________________________
Steven J. Bottum Managing Director
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
I. Indemnification of Directors and Officers
Article V of the By-Laws of Bankers Trust New York Corporation provides as
follows:
Section 5.01 The corporation shall, to the fullest extent permitted by
Section 721 of the New York Business Corporation Law, indemnify any person
who is or was made, or threatened to be made, a party to an action or
proceeding, whether civil or criminal, whether involving any actual or
alleged breach of duty, neglect or error, any accountability, or any actual
or alleged misstatement, misleading statement or other act or omission and
whether brought or threatened in any court or administrative or legislative
body or agency, including an action by or in the right of the corporation
to procure a judgment in its favor and an action by or in the right of any
other corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the corporation is serving or
served in any capacity at the request of the corporation by reason of the
fact that he, his testator or intestate, is or was a director or officer of
the corporation, or is serving or served such other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, amounts paid in
settlement, and costs, charges and expenses, including attorneys' fees, or
any appeal therein; provided, however, that no indemnification shall be
provided to any such person if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were
committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or
other advantage to which he was not legally entitled.
Section 5.02 The corporation may indemnify any other person to whom the
corporation is permitted to provide indemnification or the advancement of
expenses by applicable law, whether pursuant to rights granted pursuant to,
or provided by, the New York Business Corporation Law or other rights
created by (i) a resolution of stockholders, (ii) a resolution of
directors, or (iii) an agreement providing for such indemnification, it
being expressly intended that these By-Laws authorize the creation of other
rights in any such manner.
Section 5.03 The corporation shall, from time to time, reimburse or
advance to any person referred to in Section 5.01 the funds necessary for
payment of expenses, including attorneys' fees, incurred in connection with
any action or proceeding referred to in Section 5.01, upon receipt of a
written undertaking by or on behalf of such person to repay such amount(s)
if a judgment or other final adjudication adverse to the director or
officer establishes that (i) his acts were committed in bad faith or were
the result of active and deliberate dishonesty and, in either case, were
material to the cause of action so adjudicated, or (ii) he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled.
Section 5.04 Any director or officer of the corporation serving (i)
another corporation, of which a majority of the shares entitled to vote in
the election of its directors is held by the corporation, or (ii) any
employee benefit plan of the corporation or any corporation referred to in
clause (i), in any capacity shall be deemed to be doing so at the request
of the corporation. In all other cases, the provisions of this Article V
will apply (i) only if the person serving another corporation or any
partnership, joint venture, trust, employee benefit plan or other
enterprise so served at the specific request of the corporation, evidenced
by a written communication signed by the Chairman of the Board, the Chief
Executive Officer, the President, the Senior Vice Chairman or any Vice
Chairman, and (ii) only if and to the extent that, after making such
efforts as the Chairman of the Board, the Chief Executive Officer, or the
President shall deem adequate in the circumstances, such person shall be
unable to obtain indemnification from such other enterprise or its insurer.
Section 5.05 Any person entitled to be indemnified or to the
reimbursement or advancement of expenses as a matter of right pursuant to
this Article V may elect to have the right to indemnification (or
advancement of expenses) interpreted on the basis of the applicable law in
effect at the time of the
II-1
<PAGE>
occurrence of the event or events giving rise to the action or proceeding,
to the extent permitted by law, or on the basis of the applicable law in
effect at the time indemnification is sought.
Section 5.06 The right to be indemnified or to the reimbursement or
advancement of expenses pursuant to this Article V (i) is a contract right
pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
corporation and the director or officer, (ii) is intended to be retroactive
and shall be available with respect to events occurring prior to the
adoption hereof, and (iii) shall continue to exist after the rescission or
restrictive modification hereof with respect to events occurring prior
thereto.
Section 5.07 If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the
corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled also to be
paid the expenses of prosecuting such claim. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement
of such action that indemnification of or reimbursement or advancement of
expenses to the claimant is proper in the circumstances, nor an actual
determination by the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant is not
entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
Section 5.08 A person who has been successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding of
the character described in Section 5.01 shall be entitled to
indemnification only as provided in Sections 5.01 and 5.03, notwithstanding
any provision of the New York Business Corporation Law to the contrary.
With certain limitations, Sections 721 through 726 of the New York Business
Corporation Law permit a corporation to indemnify a director or officer made a
party to an action (i) by a corporation or in its right in order to procure a
judgment in its favor unless he shall have breached his duties, or (ii) other
than an action by or in the right of the corporation in order to procure a
judgment in its favor if such director or officer acted in good faith and in a
manner he reasonably believed to be in or, in certain cases, not opposed to
such corporation's best interests, and additionally, in criminal actions, has
no reasonable cause to believe his conduct was unlawful.
In addition, a Directors and Officer Liability and Corporation Reimbursement
Policy is maintained covering the Corporation and its directors and officers
for amounts, subject to policy limits, that the Corporation might be required
to pay by way of indemnification to its directors or officers under its By-
laws or otherwise and for the protection of individual directors and officers
from loss for which they might not be indemnified by the Corporation.
II. Exhibits and Financial Statement Schedules
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. Not Applicable.
III. Undertakings
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such
II-2
<PAGE>
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.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 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. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
D. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
E. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
F. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
G. The undersigned Registrant hereby undertakes:
1. To file during any period in which offers and sales are being made, a
post-effective amendment to this Registration Statement:
a. To include any prospectus required by Section 10(a)(3) of the Act;
b. To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
c. 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.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON JULY 10, 1997.
Bankers Trust New York Corporation
/s/ James T. Byrne, Jr.
By: _________________________________
JAMES T. BYRNE, JR.
SENIOR VICE PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
SIGNATURE TITLE DATE
*Frank N. Newman Chairman of the July 10, 1997
- ------------------------------------- Board, Chief
FRANK N. NEWMAN Executive Officer
and President
(Principal
Executive Officer)
*Richard H. Daniel Vice Chairman, Chief July 10, 1997
- ------------------------------------- Financial Officer
RICHARD H. DANIEL and Controller
(Principal
Financial Officer)
*George B. Beitzel Director July 10, 1997
- -------------------------------------
GEORGE B. BEITZEL
II-5
<PAGE>
SIGNATURE TITLE DATE
Director
- -------------------------------------
PHILLIP A. GRIFFITHS
*William R. Howell Director July 10, 1997
- -------------------------------------
WILLIAM R. HOWELL
*Vernon E. Jordan, Jr. Director July 10, 1997
- -------------------------------------
VERNON E. JORDAN, JR.
*Hamish Maxwel Director July 10, 1997
- -------------------------------------
HAMISH MAXWEL
*N.J. Nicholas, Jr. Director July 10, 1997
- -------------------------------------
N.J. NICHOLAS, JR.
*Russell E. Palmer Director July 10, 1997
- -------------------------------------
RUSSELL E. PALMER
*Donald L. Staheli Director July 10, 1997
- -------------------------------------
DONALD L. STAHELI
*Patricia Carry Stewart Director July 10, 1997
- -------------------------------------
PATRICIA CARRY STEWART
*George J. Vojta Director July 10, 1997
- -------------------------------------
GEORGE J. VOJTA
*Paul A. Volcker Director July 10, 1997
- -------------------------------------
PAUL A. VOLCKER
/s/ James T. Byrne, Jr.
*By: ________________________________
JAMES T. BYRNE, JR., ATTORNEY-IN-
FACT
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2 Agreement and Plan of Merger, by and among Bankers Trust New York
Corporation, Voyager Merger Corporation and Alex. Brown Incorporated,
dated as of April 6, 1997, included as Appendix A to the accompanying
Joint Proxy Statement-Prospectus.
3.1 Articles of Incorporation, as amended
Restated Certificate of Incorporation of the Registrant filed with the
State of New York on June 9, 1988.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on August 30,
1989.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on June 14,
1990.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on March 20,
1992.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on October 27,
1992.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on January 21,
1993.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on June 1,
1993.(1)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on August 18,
1993.(2)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on March 25,
1994.(3)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on August 22,
1994.(4)
Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant filed with the State of New York on June 29,
1995.(5)
3.2 By-laws as in effect January 21, 1997.(6)
4 Long-Term Debt Indentures.(6)
5 Opinion of Melvin A. Yellin (re: validity of shares of Common Stock to
be issued).
8.1 Opinion of Shearman & Sterling (re: tax consequences).
8.2 Opinion of Wachtell, Lipton, Rosen & Katz (re: tax consequences).
10.1 Lease Agreement relating to the seven stories of a 37-story building
located at 14-16 Wall Street.(7)
10.2 Lease Agreement relating to the eight-story building located in Jersey
City, New Jersey.(8)
10.3 Lease Agreement relating to the eight-story building located in
London, England.(9)
10.4 Lease Agreement relating to the three-story building in Nashville,
Tennessee.(10)
10.5 Synopsis of the Agreement for Sub-Lease and the Sub-Lease relating to
the 42-story building located in Sydney, Australia.(11)
10.6 Employment Contract for Richard H. Daniel.(12)
10.7 Partnership for One-hundred Plan--Plan Document, as amended.(6)
10.8 Severance Agreement with Timothy T. Yates.(13)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.9 Severance Agreement with Charles S. Sanford, Jr.(13)
10.10 Employment Agreement for David Marshall.(14)
10.11 Consulting Agreement with Paul Volcker.(14)
10.12 BT Investments (Australia) Limited Group Notional Equity Participation
Plan, as amended.(14)
10.13 Employment Contract for Frank N. Newman.(21)
10.14 Severance agreement with Eugene B. Shanks.(21)
10.15 Severance agreement with B.J. Kingdon.(23)
10.16 1994 Stock Option and Stock Award Plan.(15)
10.17 1991 Stock Option and Stock Award Plan.(16)
10.18 1985 Stock Option and Stock Award Plan(17) and
January 1989 amendments thereto.(11)
10.19 Additional Capital Accumulation Plan.(18)
10.20 The Supplemental Executive Retirement Plan.(9)
10.21 Deferred Compensation Plan for Directors(22) and January 1989
amendments to the Deferred Compensation Plan for Directors and The
Supplemental Executive Retirement Plan.(15)
10.22 Partnership for One-hundred Plan II--Plan Document.
12.1 Computation of Consolidated Ratios of Earnings to Fixed Charges.(23)
12.2 Computation of Consolidated Ratios of Earnings to Combined Fixed
Charges and Preferred Stock Dividends Requirements.(23)
21 Subsidiaries of the Registrant.(6)
23.1 Consent of Alex. Brown & Sons Incorporated.
23.2 Consent of BT Wolfensohn.
23.3 Consent of Melvin Yellin, included in Exhibit 5.1 to this Registration
Statement.
23.4 Consent of Shearman & Sterling, included in Exhibit 8.1 to this
Registration Statement.
23.5 Consent of Wachtell, Lipton, Rosen & Katz, included in Exhibit 8.2 to
this Registration Statement.
23.6 Consent of Ernst & Young LLP.
23.7 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney, included on signature page hereof.
99.1 Stock Option Agreement between Bankers Trust New York Corporation and
Alex. Brown Incorporated, dated as of April 6, 1997.
99.2 Stock Option Agreement between Alex. Brown Incorporated and Bankers
Trust New York Corporation, dated as of April 6, 1997.
99.3 Consent of A.B. Krongard as a Person about to Become a Director.
99.4 Form of Employment Agreement between Bankers Trust New York
Corporation and certain employees of Alex. Brown Incorporated.
99.5 Rights Agreement dated as of February 22, 1988 describing the terms of
the Preferred Share Purchase Rights.(9)
99.6 Written Agreement dated December 4, 1994, among Bankers Trust New York
Corporation, Bankers Trust Company, BT Securities Corporation and the
Federal Reserve Bank of New York.(20)
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
99.7 Offer of Settlement of BT Securities Corporation before the Securities
and Exchange Commission, dated December 21, 1994.(19)
99.8 Offer of Settlement of Respondent BT Securities Corporation before the
Commodity Futures Trading Commission, dated December 21, 1994.(19)
99.9 Order Instituting Proceedings Pursuant to Section 8A of the Securities
Act of 1933 and Section 15(b) and 21c of the Securities Act of 1934,
and Findings and Order Imposing Remedial Sanctions. In re BT
Securities Corporation, Securities Act of 1933 Release No. 7124 (Dec.
22, 1994).(19)
99.10 Complaint Pursuant to Section 6(c) and 6(d) of the Commodity Exchange
Act and Opinion and Order Accepting Offer of Settlement, Making
Findings and Imposing Remedial Sanctions, in re BT Securities
Corporation, CFTC Docket No. 95-2 (Dec. 22, 1994).(19)
99.11 Form of Alex. Brown Incorporated Proxy Card
99.12 Form of Bankers Trust New York Corporation Proxy Card
</TABLE>
(NOTE: FOOTNOTE REFERENCES FOR THIS INDEX APPEAR ON THE NEXT PAGE.)
II-9
<PAGE>
FOOTNOTE REFERENCES
(1) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated September 24, 1993, file number 1-5920.
(2) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated August 6, 1993, file number 1-5920.
(3) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated March 21, 1994, file number 1-5920.
(4) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated August 12, 1994, file number 1-5920.
(5) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated June 29, 1995, file number 1-5920.
(6) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1996, file number
1-5920.
(7) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1986, file number
1-5920.
(8) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1983, file number
1-5920.
(9) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1987, file number
1-5920.
(10) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1992, file number
1-5920.
(11) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1993, file number
1-5920.
(12) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-Q dated May 15, 1996, file number 1-5920.
(13) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-Q dated August 14, 1996, file number 1-5920.
(14) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-Q dated November 14, 1996, file number 1-5920.
(15) This document is incorporated by reference from Bankers Trust New York
Corporation's Registration Statement on Form S-8 (No. 33-54971) as filed
on August 9, 1994.
(16) This document is incorporated by reference from Bankers Trust New York
Corporation's Registration Statement on Form (No. 33-41014) as filed on
June 10, 1991.
(17) This document is incorporated by reference from Bankers Trust New York
Corporation's Proxy Statement dated as of March 21, 1988, file number 1-
5920.
(18) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1989, file number
1-5920.
(19) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated December 22, 1994, file number 1-5920.
(20) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1994, file number
1-5920.
(21) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-K for the year ended December 31, 1995, file number
1-5920.
(22) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 8-K dated November 10, 1995, file number 1-5920.
(23) This document is incorporated by reference from Bankers Trust New York
Corporation's Form 10-Q dated May 15, 1997, file number 1-5920.
II-10
<PAGE>
Exhibit 5
[LETTERHEAD OF BANKERS TRUST NEW YORK CORPORATION]
JULY 9, 1997
Board of Directors
Bankers Trust New York Corporation
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of up to 25,957,061 shares of common stock (collectively, the
"Shares") of Bankers Trust New York Corporation, a New York corporation (the
"Company"), which are to be issued by the Company upon consummation of the
merger (the "Merger") of Alex. Brown Incorporated, a Maryland corporation, with
and into Voyager Merger Sub, a Delaware corporation and a wholly owned
subsidiary of the Company, I have examined such corporate records and other
documents, including the Registration Statement on Form S-4 relating to the
Shares (together with the Proxy Statement/Prospectus contained in such
Registration Statement, and any amendments or supplements thereto, the
"Registration Statement") and have reviewed such matters of law as I have deemed
necessary or appropriate for this opinion. Based on such examination and
review, it is my opinion that, when issued upon consummation of the Merger as
contemplated by the Registration Statement, the Shares will be duly authorized,
validly issued, fully paid and nonassessable.
I consent to be named in the Registration Statement as the attorney who
passed upon the validity of the Shares, and to the filing of a copy of this
opinion as an exhibit to the Registration Statement.
Sincerely,
/s/Melvin A. Yellin
Melvin A. Yellin
<PAGE>
EXHIBIT 8.1
[Letterhead of Shearman & Sterling]
July 10, 1997
Alex. Brown Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
We have acted as special counsel to Alex. Brown Incorporated, a Maryland
corporation ("Alex. Brown"), in connection with the proposed merger (the
"Merger") of Alex. Brown with and into Voyager Merger Corporation ("BTNY Sub"),
a Delaware corporation and a wholly-owned subsidiary of Bankers Trust New York
Corporation, a New York corporation ("BTNY"), upon the terms and conditions set
forth in the Agreement and Plan of Merger dated as of April 6, 1997, by and
among BTNY, BTNY Sub and Alex. Brown (the "Agreement"). At your request, in
connection with the filing of the Registration Statement on Form S-4 filed with
the Securities Exchange Commission in connection with the Merger (the
"Registration Statement"), we are rendering our opinion concerning certain
federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Alex. Brown and the consent of BTNY, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Alex. Brown and BTNY
(copies of which are attached hereto and which are incorporated herein by
reference), and have assumed that such certificates will be complete and
accurate as of the Effective Time. We have also relied upon the accuracy of the
Registration Statement and the Joint Proxy Statement-Prospectus included therein
(together, the "Proxy Statement"). Any capitalized term used and not defined
herein has the meaning given to it in the Proxy Statement or the appendices
thereto (including the Agreement).
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance therewith and as described in the Proxy
Statement and that the Merger will qualify as a statutory merger under the
applicable laws of the States of Maryland and Delaware.
<PAGE>
2
Based upon and subject to the foregoing, the discussion contained in the
Proxy Statement under the caption "THE MERGER -- Certain Federal Income Tax
Consequences", except as otherwise indicated, represents our opinion as to the
material federal income tax consequences of the Merger under currently
applicable law.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "SUMMARY -- Certain Federal Income Tax
Consequences", under the caption "THE MERGER -- Certain Federal Income Tax
Consequences" and elsewhere in the Proxy Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Shearman & Sterling
Attachments
<PAGE>
EXHIBIT 8.2
[Letterhead of Wachtell, Lipton, Rosen & Katz]
July 10, 1997
Bankers Trust New York Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies/Gentlemen:
We have acted as special counsel to Bankers Trust New York Corporation,
a New York corporation ("BTNY"), in connection with the proposed merger (the
"Merger") of Alex. Brown Incorporated, a Maryland corporation ("Alex. Brown"),
with and into Voyager Merger Corporation, a Delaware corporation and a
wholly-owned subsidiary of BTNY ("BTNY Sub"), upon the terms and conditions set
forth in the Agreement and Plan of Merger dated as of April 6, 1997, by and
among BTNY, BTNY Sub and Alex. Brown (the "Agreement"). At your request, in
connection with the filing of the Registration Statement on Form S-4 filed with
the Securities Exchange Commission in connection with the Merger (the
"Registration Statement"), we are rendering our opinion concerning certain
federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of BTNY and the consent of Alex. Brown, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of BTNY and Alex. Brown
(copies of which are attached hereto and which are incorporated herein by
reference), and have assumed that
<PAGE>
Bankers Trust New York Corporation
July 10, 1997
Page 2
such certificates will be complete and accurate as of the Effective Time. We
have also relied upon the accuracy of the Registration Statement and the Joint
Proxy Statement - Prospectus included therein (together, the "Proxy Statement").
Any capitalized term used and not defined herein has the meaning given to it in
the Proxy Statement or the appendices thereto (including the Agreement).
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement and that the Merger will qualify as a statutory merger under the
applicable laws of the States of Maryland and Delaware.
Based upon the subject to the foregoing, the discussion contained in the
Proxy Statement under the caption "THE MERGER -- Certain Federal Income Tax
Consequences", except as otherwise indicated, represents our opinion as to the
material federal income tax consequences of the Merger under currently
applicable law.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "SUMMARY -- Certain Federal Income Tax
Consequences", under the caption "THE MERGER -- Certain Federal Income Tax
Consequences" and elsewhere in the Proxy Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE>
EXHIBIT 10.22
Partnership for One-hundred Plan II
The following is the plan text for the Partnership for One-hundred Plan II (the
"1997 Plan"). The purpose of the 1997 Plan is to renew potential cash incentive
benefits that were terminated when the original Partnership for One-hundred Plan
(the "1995 Plan") was amended in December 1996. As noted in Bankers Trust New
York Corporation's (the "Corporation") definitive Proxy Statement issued in
connection with the 1997 Annual Meeting of Stockholders, the 1995 Plan was
amended to reduce the fluctuations in the Corporation's earnings as a result of
variable compensation accounting treatment accorded the 1995 Plan. In the
succeeding six months various alternatives to the 1995 Plan were studied
resulting in the 1997 Plan.
The 1995 Plan provided an opportunity for participants to receive up to $100 per
plan unit upon the Corporation's common stock reaching a $100 trading price. At
the time the 1995 Plan was adopted, the stock was trading in the mid-$60's
range. Upon amendment, the cash payout of each unit of the 1995 Plan was fixed
at $41.25. The 1997 Plan provides an opportunity for participants to receive,
when combined with the $41.25 of the 1995 Plan, up to a maximum potential
benefit of $100 per unit as initially designed in December 1995.
There have been 1,735,000 units granted under the 1997 Plan. The Corporation
does not intend to grant any additional units under the 1997 Plan. In accordance
with the vesting requirements of the 1997 Plan, compensation expense associated
with the 1997 Plan will be recognized over the next four years. The Corporation
has entered into hedging transactions with the objective of offsetting a portion
of the after tax expense which would result from an increase in the
Corporation's common stock price in the period.
BANKERS TRUST NEW YORK CORPORATION
PARTNERSHIP FOR ONE-HUNDRED PLAN II
PLAN DOCUMENT
I. Purpose of the Plan
The purpose of the Partnership for One hundred Plan II (the "Plan") is to
provide key employees of Bankers Trust New York Corporation and its subsidiaries
(the "Corporation") an incentive to exert their efforts to increase the price of
Bankers Trust New York Corporation common stock (the "Stock").
II. Administration of the Plan
The Plan is to be administered by the Human Resources Committee of the
Corporation's Board of Directors (the "Committee"). The Committee also shall
interpret the provisions of the Plan.
III. Eligible Employees
Participants in the Plan will include approximately 35 senior executives of the
Corporation as selected by the Committee.
IV. Unit Awards of the Plan
Under the Plan, participants are to receive Unit Awards whose values, subject to
Section VI, will be based on the value of the Stock at the end of the
performance period. For the purpose of this Section, the value of the Stock is
the average of the mean high and low trading prices of the Stock, as reported on
the New York Stock Exchange Composite tape for each business day during the
three month period ending December 31, 2000 ("Stock Value").
Each Unit is first valued at $6.53 when Stock Value is $92 and increases by
$6.53 for each $1 increase in Stock Value over $92 until units reach their
maximum value of $58.75 each, at a Stock Value of $100. Fractional share prices
will be valued proportionately.
V. Vesting and Distribution Provisions
Subject to Sections VIII and IX, Units vest one-third per year each on December
31st of 1998, 1999 and 2000. Subject to Sections VI, VIII and X, the cash
value of Unit Awards will be distributed on or about December 31, 2000.
<PAGE>
VI. Special Incentive
In the event the Stock trades at $100 on three consecutive days or five days in
total, as reported on the New York Stock Exchange Composite tape during the
period January 1, 1998 and December 31, 2000, inclusive, the value of each unit
will be fixed ("Lock-In") at $58.75. In addition, within five days following
Lock-In, participants will receive the value of their Unit Awards in cash to the
extent vested. The balance of each participant's Unit Award will be distributed
proportionately as it subsequently vests.
VII. Transferability Restrictions
Unit Awards may not be assigned, pledged or otherwise transferred.
VIII. Change of Control
In the event of a Change of Control (as defined in the Corporation's 1997 Stock
Option and Stock Award Plan), the value of all Unit Awards, will be immediately
paid to the respective participants. For the purpose of this Section, the value
of Unit Awards will be based on the average of the reported New York Stock
Exchange Composite tape's high and low trading prices of the Stock on the date
the Change of Control occurs.
IX. Termination Provisions
a) Retirement, Death and Total Disability - Units vest in full on the off-
payroll date. Unless otherwise determined by the Committee, with respect to
Executive Officers of the Corporation or otherwise determined by the CEO,
with respect to non-Executive Officers, Unit Awards will be valued and
distributed according to Sections IV and VI.
b) Resignation - Unvested Units are forfeited upon the off-payroll date. The
value of the vested Units will correspond to the lower of the Stock Value on
the resignation date or the end of the five year period and will be
distributed on or about December 31, 2000. For the purpose of determining
the Stock Value under this Subsection, the off-payroll date is substituted
for December 31, 2000.
c) Termination for Disciplinary Reasons ("Cause") as defined in the
Corporation's Policies section of the Employee Handbook - All Units, vested
and unvested, are forfeited.
d) Other Terminations - Units will be valued based on Stock Value and paid out
on the off-payroll date. For the purpose of determining the Stock Value
under this Subsection, the off-payroll date is substituted for December 31,
2000.
X. Employee Taxes
All distributions from the Plan are subjects to all tax withholding as required.
<PAGE>
XI. Plan Amendments, Termination
The Committee reserves the right to rescind the Plan and replace it with a
different plan that is determined by the Committee to be of equal value (not
necessarily based on stock price) if deemed by the Committee to be in the best
interests of the Corporation.
XII. Effective Date
The plan is to be effective upon approval by the Committee.
<PAGE>
EXHIBIT 23.1
[ALEX. BROWN LETTERHEAD]
CONSENT OF ALEX. BROWN & SONS INCORPORATED
We hereby consent to the use of our opinion letter dated April 5, 1997
to the Board of Directors of Alex. Brown Incorporated, included as Appendix C to
the Joint Proxy Statement/Prospectus of June 10, 1997 which forms part of the
Registration Statement dated as of the date hereof on Form S-4 relating to the
proposed merger of Alex. Brown Incorporated, and Voyager Merger Corporation a
wholly-owned subsidiary of Bankers Trust New York Corporation, and to the
references to such opinion therein.
In giving such consent, we do not admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we hereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended or the rules and
regulations of the Securities and Exchange Commission thereunder.
ALEX. BROWN & SONS INCORPORATED
by: /s/ Steven J. Bottom
--------------------------------
Steven J. Bottom
Managing Director
<PAGE>
EXHIBIT 23.2
BT Wolfensohn
130 Liberty Street
NEW YORK, NEW YORK 10006
PHONE: (212) 250-6000
FAX: (212) 250-6440
July 8, 1997
Bankers Trust New York Corporation
130 Liberty Street
New York, NY 10006
Re: Joint Proxy Statement of Bankers Trust New York
Corporation and Alex. Brown Incorporated and
Registration Statement on Form S-4 of Bankers Trust New
York Corporation
Gentlemen and Madame:
We hereby consent to the use of our opinion letter dated April
6, 1997 to the Board of Directors of Bankers Trust New York Corporation as
Appendix B to the Joint Proxy Statement referred to above included in the above
mentioned Registration Statement and to the references therein to our opinion.
In giving this consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
BT WOLFENSOHN
By: /s/ Nami Park
---------------------------------
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement / Prospectus of Bankers Trust New York Corporation and Alex.
Brown Incorporated which is made part of the Registration Statement on Form S-4
for the registration of securities of Bankers Trust New York Corporation and to
the incorporation by reference therein of our report dated January 23, 1997
except for Note 28, as to which the date is March 6, 1997, with respect to the
consolidated financial statements of Bankers Trust New York Corporation and
Subsidiaries included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
June 10, 1997
<PAGE>
EXHIBIT 23.7
The Board of Directors
Alex. Brown Incorporated:
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Bankers Trust New York Corporation, of our report dated January 20,
1997 relating to the consolidated financial condition of Alex. Brown
Incorporated and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996, which report
appears in the December 31, 1996 annual report on Form 10-K of Alex. Brown
Incorporated. We also consent to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Baltimore Maryland
July 9, 1997
<PAGE>
EXHIBIT 24
BANKERS TRUST NEW YORK CORPORATION
----------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and officers of Bankers Trust New York Corporation (the "Corporation"), a New
York corporation, hereby appoints each of Frank N. Newman, George J. Vojta,
Richard H. Daniel, R. Kelly Doherty, Duncan P. Hennes and James T. Byrne, Jr.
his true and lawful attorney and agent, in the name and on behalf of the
undersigned, to do any and all acts and things and execute any and all
instruments which the said attorney and agent may deem necessary or advisable to
enable the Corporation to comply with the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended (collectively, the "Acts")
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Acts of common stock of the Corporation to be used in connection with the
acquisition of Alex. Brown Incorporated, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign the
name of the undersigned in his capacity as a Director and/or Officer of the
Corporation to a Registration Statement to be filed with the Securities and
Exchange Commission to any and all amendments, including pre-and post-effective
amendments, to the said Registration Statement and to any and all instruments
and documents filed as a part of or in connection with the said Registration
Statement or amendments thereto; HEREBY RATIFYING AND CONFIRMING all that the
said attorneys and agents, or any of them, has done, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these
presents.
June 17, 1997 Bankers Trust New York Corporation
By /s/ Frank N. Newman
--------------------------------
Frank N. Newman
Chairman of the Board
/s/ Frank N. Newman
- -------------------------------
Frank N. Newman
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive Officer)
/s/ Richard H. Daniel
- --------------------------------
Richard H. Daniel
Vice Chairman, Chief Financial
Officer and Controller
(Principal Financial Officer)
<PAGE>
/s/ George B. Beitzel
- --------------------------- Director
George B. Beitzel
- --------------------------- Director
Phillip A. Griffiths
/s/ William R. Howell
- --------------------------- Director
William R. Howell
/s/ Vernon E. Jordan, Jr.
- --------------------------- Director
Vernon E. Jordan, Jr.
/s/ Hamish Maxwell
- --------------------------- Director
Hamish Maxwell
/s/ N.J. Nicholas Jr.
- --------------------------- Director
N.J. Nicholas Jr.
/s/ Russell E. Palmer
- --------------------------- Director
Russell E. Palmer
/s/ Donald L. Staheli
- --------------------------- Director
Donald L. Staheli
/s/ Patricia C. Stewart
- --------------------------- Director
Patricia C. Stewart
/s/ George J. Vojta
- --------------------------- Director
George J. Vojta
/s/ Paul A. Volcker
- --------------------------- Director
Paul A. Volcker
<PAGE>
EXHIBIT 99.1
STOCK OPTION AGREEMENT
----------------------
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 6, 1997, between Bankers Trust New
York Corporation, a New York corporation ("Issuer"), and Alex. Brown
Incorporated, a Maryland corporation ("Grantee").
W I T N E S S E T H:
--------------------
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 7,811,208 fully paid and nonassessable shares of Issuer's Common Stock, par
value $1.00 per share ("Common Stock"), at a price of $82.25 per share (the
"Option Price"); provided; however that in the event Issuer issues or agrees to
--------- -------
issue any shares of Common Stock (other than as permitted under the Merger
Agreement) at a price less than the Option Price (as adjusted pursuant to
Section 5), the Option Price shall be equal to such lesser price; provided,
--------
further, that in no event shall the number of shares of Common Stock for which
- -------
this Option is exercisable exceed 10.0% of the Issuer's issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding
<PAGE>
after the date of this Agreement (other than pursuant to this Agreement), the
number of shares of Common Stock subject to the Option shall be increased so
that, after such issuance, such number equals 10.0% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section 1(b)
or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the Holder
--------
shall have sent the written notice of such exercise (as provided in subsection
(e) of this Section 2) within 90 days following such Subsequent Triggering
Event. Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 8.1(d) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of termination
is non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(d) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional) (provided that if an Initial Triggering Event
continues or occurs beyond such termination and prior to the passage of such 12-
month period, the Exercise Termination Event shall be 12 months from the
expiration of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean the last
Initial Triggering Event to expire. The term "Holder" shall mean the holder or
holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
-2-
<PAGE>
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
the Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean (w) a
merger or consolidation, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of all or
a substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer, or (z)
any substantially similar transaction; provided, however, that in no event
-------- -------
shall any (i) merger, consolidation or similar transaction involving Issuer
or any Significant Subsidiary in which the voting securities of Issuer
outstanding immediately prior thereto continue to represent (by either
remaining outstanding or being converted into the voting securities of the
surviving entity of any such transaction) at least 65% of the combined
voting power of the voting securities of the Issuer or the surviving entity
outstanding immediately after the consummation of such merger,
consolidation, or similar transaction, so long as, in the case of a merger,
consolidation or similar transaction involving Issuer, there is not a
change in the majority of the board of directors of Issuer as a result of
such transaction or (ii) any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of its Subsidiaries
or involving only any two or more of such Subsidiaries, be deemed to be an
Acquisition
-3-
<PAGE>
Transaction, provided that any such transaction is not entered into in
violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its interest to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions contemplated by
the Merger Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its
business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have breached
any covenant or obligation contained in the Merger Agreement and such breach (x)
would entitle Grantee to terminate the Merger Agreement and (y) shall not have
been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with any federal or
-4-
<PAGE>
state regulatory or governmental authority for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
20% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which it has notice (together, a "Triggering Event"), it being understood that
the giving of such notice by Issuer shall not be a condition to the right of the
Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days from the Notice
Date for the closing of such purchase (the "Closing Date"); provided that if
--------
prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased
-5-
<PAGE>
pursuant to the exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that failure or
--------
refusal of Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and
-6-
<PAGE>
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board, to the Office of Thrift Supervision or to any state regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board
-7-
<PAGE>
or such state regulatory authority as they may require) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits
-8-
<PAGE>
provided hereunder and proper provision shall be made in any agreement governing
any such transaction to provide for such proper adjustment and the full
satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
--------- -------
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
-------- -------
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no
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<PAGE>
reduction shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event
(as defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
(x) the amount by which (A) the Market/Offer Price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this Option
may then be exercised plus (y) Grantee's reasonable out-of-pocket expenses (to
the extent not previously reimbursed) and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to (x) the
Market/Offer Price multiplied by the number of Option Shares so designated plus
(y) Grantee's reasonable out-of-pocket expenses (to the extent not previously
reimbursed). The term "Market/Offer Price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period im-
-10-
<PAGE>
mediately preceding the date the Holder gives notice of the required repurchase
of this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm mutually
selected by the Holder or the Owner, as the case may be, on the one hand, and
the Issuer, on the other, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the Market/Offer
Price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm mutually selected by the Holder or
Owner, as the case may be, on the one hand, and the Issuer, on the other.
Notwithstanding anything contained in this Section 7 or in Section 9 hereof, in
no event shall the aggregate of the Option Repurchase Price, the Option Share
Repurchase Price, the Surrender Price, the Substitute Option Repurchase Price,
the Substitute Share Repurchase Price, and any amount payable by Issuer under
Section 8.2 of the Merger Agreement exceed $100 million (provided that this
limitation shall not restrict the value that Grantee may obtain through the sale
of the Option or Option Shares to any third party other than the Issuer).
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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<PAGE>
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
-------- -------
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other than
any such transaction which would not constitute an Acquisition Transaction
pursuant to the provisos to
-12-
<PAGE>
Section 2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial
ownership of 50% or more of the then outstanding shares of Common Stock,
provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or
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<PAGE>
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
--------
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
- --------
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
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<PAGE>
paragraphs, shall the Substitute Option be exercisable for more than 10.0% of
the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 10.0% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised plus (y) Grantee's reasonable out-of-pocket expenses (to
the extent not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute
Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at
a price (the "Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so designated plus
(y) Grantee's reasonable out-of-pocket expenses (to the extent not previously
reimbursed). The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required re-
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<PAGE>
purchase of the Substitute Option or the Substitute Share Owner gives notice of
the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
---------
however, that if the Substitute Option Issuer is at any time after delivery of a
- --------
notice of repurchase pursuant to subsection (b) of this Section 9 pro-
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<PAGE>
hibited under applicable law or regulation from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use its best efforts to receive
all required regulatory and legal approvals as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections
2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
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<PAGE>
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necesssary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including, if required, amending the
Issuer's Rights Agreement) so that entering into this Stock Option Agreement,
the acquisition of shares of Common Stock hereunder and the other transactions
contemplated hereby do not and will not result in the grant of any right to any
person under such Rights Agreement or enable or require the Rights to be
exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred
-18-
<PAGE>
or otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
--------- -------
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
----
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restric-
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<PAGE>
tion contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the
full number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall
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<PAGE>
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
BANKERS TRUST NEW YORK
CORPORATION
/s/ Melvin A. Yellin
By:____________________________
Name: Melvin A. Yellin
Title: Executive Vice-
President
ALEX. BROWN INCORPORATED
/s/ A.B. Krongard
By:____________________________
Name: A.B. Krongard
Title: Chairman &
Chief Executive
Officer
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<PAGE>
EXHIBIT 99.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 6, 1997, between Alex. Brown
Incorporated, a Maryland corporation ("Issuer"), and Bankers Trust New York
Corporation, a New York corporation ("Grantee").
W I T N E S S E T H:
--------------------
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 4,959,101 fully paid and nonassessable shares of Issuer's Common Stock, par
value $.10 per share ("Common Stock"), at a price of $68.27 per share (the
"Option Price"); provided; however, that in the event Issuer issues or agrees to
--------- --------
issue any shares of Common Stock (other than as permitted under the Merger
Agreement) at a price less than the Option Price (as adjusted pursuant to
Section 5), the Option Price shall be equal to such lesser price; provided,
--------
further, that in no event shall the number of shares of Common Stock for which
- -------
this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, such number
equals 19.9%
<PAGE>
of the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the Holder
--------
shall have sent the written notice of such exercise (as provided in subsection
(e) of this Section 2) within 90 days following such Subsequent Triggering
Event. Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 8.1(d) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of termination
is non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 8.1(d) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional) (provided that if an Initial Triggering Event
continues or occurs beyond such termination and prior to the passage of such 12-
month period, the Exercise Termination Event shall be 12 months from the
expiration of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean the last
Initial Triggering Event to expire. The term "Holder" shall mean the holder or
holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sec-
-2-
<PAGE>
tions 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
the Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean (w) a
merger or consolidation, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of all or
a substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer, or (z)
any substantially similar transaction; provided, however, that in no event
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shall any merger, consolidation, purchase or similar transaction involving
only the Issuer and one or more of its Subsidiaries or involving only any
two or more of such Subsidiaries, be deemed to be an Acquisition
Transaction, provided that any such transaction is not entered into in
violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its interest to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions contemplated by
the Merger Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of its business shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned
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<PAGE>
thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the subject
of public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which Grantee
has given its prior written consent, shall have filed an application or
notice with any federal or state regulatory or governmental authority for
approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20%
or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which it has notice (together, a "Triggering Event"), it being understood that
the giving of such notice by Issuer shall not be a condition to the right of the
Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice
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<PAGE>
(the date of which being herein referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve
- --------
Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
- --------
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such
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<PAGE>
agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of
a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any
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<PAGE>
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA") or any state banking law, prior
approval of or notice to the Federal Reserve Board, to the Office of Thrift
Supervision or to any state regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
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<PAGE>
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that
--------- --------
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<PAGE>
after any such required reduction the number of Option Shares to be included in
such offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event
(as defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
(x) the amount by which (A) the Market/Offer Price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this Option
may then be exercised plus (y) Grantee's reasonable out-of-pocket expenses (to
the extent not previously reimbursed) and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to (x) the
Market/Offer Price multiplied by the number of Option Shares so designated plus
(y) Grantee's reasonable out-of-pocket expenses (to the extent not previously
reimbursed). The term "Market/Offer Price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
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<PAGE>
therefor has been made, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or a substantial portion
of Issuer's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm mutually selected by the Holder or
the Owner, as the case may be, on the one hand, and the Issuer, on the other,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm mutually selected by the Holder or Owner, as the case
may be, on the one hand, and the Issuer, on the other. Notwithstanding anything
contained in this Section 7 or in Section 9 hereof, in no event shall the
aggregate of the Option Repurchase Price, the Option Share Repurchase Price, the
Surrender Price, the Substitute Option Repurchase Price, the Substitute Share
Repurchase Price, and any amount payable by Issuer under Section 8.2 of the
Merger Agreement exceed $100 million (provided that this limitation shall not
restrict the value that Grantee may obtain through the sale of the Option or
Option Shares to any third party other than the Issuer).
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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<PAGE>
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/ or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
--------- --------
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other than
any such transaction which would not constitute an Acquisition Transaction
pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then outstanding
shares of Common Stock, provided that no
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such event shall constitute a Repurchase Event unless a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event. The parties
hereto agree that Issuer's obligations to repurchase the Option or Option Shares
under this Section 7 shall not terminate upon the occurrence of an Exercise
Termination Event unless no Subsequent Triggering Event shall have occurred
prior to the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
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(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
--------
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
- ---------
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause
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(e) over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's reasonable out-of-
pocket expenses (to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
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case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
---------
however, that if the Substitute Option Issuer is at any time after delivery of a
- --------
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to
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<PAGE>
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under Sections
2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer
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<PAGE>
that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
--------- --------
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
---
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and applying to the
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<PAGE>
Federal Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and
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<PAGE>
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
BANKERS TRUST NEW YORK
CORPORATION
/s/ Melvin A. Yellin
By:______________________
Name: Melvin A. Yellin
Title: Executive Vice-
President
ALEX. BROWN INCORPORATED
/s/ A.B. Krongard
By:______________________
Name: A.B. Krongard
Title: Chairman &
Chief Executive
Officer
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<PAGE>
EXHIBIT 99.3
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, A.B. Krongard, hereby consent to be named as a person about to
become a director of Bankers Trust New York Corporation in the Registration
Statement on Form S-4 of Bankers Trust New York Corporation dated June 10, 1997.
/s/ A.B. Krongard
Dated: June 9, 1997 -----------------------
A.B. Krongard
<PAGE>
EXHIBIT 99.4
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Bankers Trust New York Corporation, a New York
corporation (the "Company") and _____________ (the "Executive"), dated as of the
______ day of __________, 1997.
1. Employment Period. Subject to the consummation of the
------------------
transactions contemplated by the Plan and Agreement of Merger among the Company,
Merger Sub and Alex. Brown Incorporated, a Maryland corporation ("Pathfinder")
dated as of April 6, 1997 (the "Merger Agreement"), the Company hereby agrees to
employ the Executive, and the Executive hereby agrees to remain in the employ of
the Company subject to the terms and conditions of this Agreement, for the
period commencing on the closing date of the transactions contemplated by the
Merger Agreement (the "Commencement Date") and ending on December 31, 199- (the
"Employment Period").
2. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, the Executive shall serve as a Managing Director of the
Company with the duties and responsibilities set forth on Exhibit A hereto.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote full attention and time during normal business hours to the business
and affairs of the Company and to use the Executive's reasonable best efforts to
perform such responsibilities in a professional manner. It shall not be a
violation of this Agreement for the executive to (A) serve on corporate, civic
or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Commencement Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Commencement Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) General. Until such time as the long-term
------------ -------
incentives described in Section 2(b)(ii) below are fully vested, the Executive
will be compensated in
<PAGE>
a manner consistent with practice prior to the Commencement Date.
(ii) Long-Term Incentives. Upon commencement of the Employment
--------------------
Period, the Executive shall receive a grant of stock options as set forth on
Exhibit A hereto (the "Stock Options") and shares of restricted stock with a
Fair Market Value of the amount set forth on Exhibit A hereto (the "Restricted
Stock"). The Stock Options and Restricted Stock shall vest and become
exercisable one-third on the second anniversary of the date of grant, an
additional one-third on the third anniversary of the date of grant and a final
one-third on the fourth anniversary of the date of grant. For purposes this
Section 2(b)(ii), the "Fair Market Value" of the Company's common stock shall be
the average closing price of the Company's common stock on the New York Stock
Exchange for the five trading days prior to the date of grant. The Executive
shall be eligible to participate in the incentive compensation plans of the
Company available to peer executives of the Company, provided that in
determining the Executive's level of participation, the Company may take into
account the provisions of this Agreement. The Stock Options and Restricted
Stock grants shall provide that if the Company shall terminate the Executive's
employment other than for Cause during or after the Employment Period, including
by reason of the Executive's death or Disability, or the Executive shall
terminate employment for Good Reason during or after the Employment Period, such
Stock Options and Restricted Stock shall become immediately vested.
(iii) Savings and Retirement Plans. During the Employment
----------------------------
Period, the Executive shall be eligible to participate in all savings and
retirement plans, practices, policies and programs to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
provided that the Executive's participation in the Company's qualified
retirement plan may be delayed until the effectiveness of the Company's cash
balance pension plan. For purposes of all such plans, the Company shall credit
the Executive with full credit for all service credited under the Pathfinder
Retirement Savings Plan (including service with Pathfinder prior to the
Commencement Date) for purposes of eligibility to participate and receive
benefits and vesting but not for benefit accruals in any Company retirement
plan.
(iv) Welfare and Other Benefit Plans. During the Employment
-------------------------------
Period, the Executive and/or the
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<PAGE>
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare, fringe, change of control
protection, vacation and other similar benefit plans, practices, policies and
programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other peer executives of the Company and
its affiliated companies. For purposes of all such plans, the Company shall
credit the Executive with full credit for all service credited under the
corresponding Pathfinder benefit plans for purposes of eligibility to
participate and receive benefits but not for purposes of vesting benefit
accruals. With respect to the Company's welfare benefit plans, the Company shall
cause any such plan to waive any pre-existing condition exclusions and actively-
at-work requirements thereunder with respect to the Executive and the
Executive's eligible dependents and shall ensure that any covered expenses
incurred on or before the Commencement Date shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum out-of-
pocket provisions after the Commencement Date to the extent that such expenses
are taken into account for the benefit of peer executives of the Company.
(v) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable business expenses
incurred by the Executive, in accordance with the policies of the Company.
(vi) Indemnity. The Executive shall be indemnified by the
---------
Company against claims arising in connection with the Executive's status as an
employee, officer, director or agent of the Company in accordance with the
Company's indemnity policies for its senior executives, subject to applicable
law.
3. Termination of Employment. (a) Death or Disability. The
-------------------------
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such
-3-
<PAGE>
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall have the meaning set forth in the Company's Long-Term
Disability Plan.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) intentional gross misconduct by the Executive damaging in a
material way to the Company, or
(ii) a material breach of this Agreement, after the Company has
given the Executive notice thereof and a reasonable opportunity to cure.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean a material breach by the Company of this Agreement after the Executive has
given the Company notice of the breach and a reasonable opportunity to cure.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the
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<PAGE>
Company for Cause, or by the Executive for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
4. Obligations of the Company upon Termination. (a) Good Reason;
--------------------------------------------------------------
Other Than for Cause. If, during the Employment Period, the Company shall
- --------------------
terminate the Executive's employment other than for Cause, including by reason
of the Executive's death or Disability, or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) to the extent not theretofore paid (the
"Accrued Obligations");
(ii) the Stock Options and Restricted Stock shall become
immediately vested; and
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is entitled
to receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies, excluding any
severance plan or policy except to the extent that such plan or policy
provides, in accordance with its terms, benefits with a value in excess of
the benefits payable to the Executive under this Section 4 (such other
amounts and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Cause; Other than for Good Reason. If the Executive's
---------------------------------
employment shall be terminated for Cause or the Executive terminates employment
without Good Reason during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (x) Accrued Obligations, and (y) Other Benefits, in each case to
the extent theretofore unpaid.
-5-
<PAGE>
5. Arbitration. The Company and the Executive agree that any
-----------
disputes with respect to this Agreement shall be subject to binding arbitration
in New York City in accordance with the rules of the American Arbitration
Association. The proceedings and the results of such arbitration shall be
treated as confidential information subject to Section 6(a) hereof. The Company
agrees to pay for the costs of arbitration and shall reimburse the Executive for
the Executive's reasonable attorney's fees provided that the Executive prevails
on at least one material issue in the arbitration.
6. Confidential Information/Noncompetition. (a) The Executive shall
---------------------------------------
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process
(provided the Company has been given notice of and opportunity to challenge or
limit the scope of disclosure purportedly so required), communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it.
(b) While employed by the Company, the Executive shall comply with the
rules and policies of the Company, including without limitation the Company's
Rules for Business Conduct and compliance policies. After termination of the
Executive's employment with the Company, the Executive shall comply with those
aspects of such rules and policies which apply to conduct after termination of
employment.
(c) Until December 31, 1999, the Executive will not directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director or otherwise with, or have any financial interest in, any
business which is in competition with the investment banking, corporate finance,
corporate advisory, asset management or M&A business conducted by Pathfinder or
the Company or any of its affiliates in any geographic area where such business
is being conducted during such period.
-6-
<PAGE>
Ownership, for personal investment purposes only, of not to exceed 2% of the
voting stock of any publicly held corporation shall not constitute a violation
hereof.
(d) While employed by the Company or any of its affiliates or
Pathfinder and for one year after the Executive's termination of employment, the
Executive will not, directly or indirectly, solicit for employment by other than
the Company any person employed by the Company or its affiliates or Pathfinder
at the effective time of the Merger (as defined in the Merger Agreement) (the
"Merger"), nor will the Executive, directly or indirectly, solicit for
employment by other than the Company any person known by the Executive to be
employed at the time by Pathfinder or the Company or its affiliates.
(e) The provisions of Section 6(c) and (d) shall remain in full force
and effect until the expiration of the period specified herein notwithstanding
the earlier termination of the Executive's employment hereunder.
7. Specific Performance. The Executive acknowledges that a violation
--------------------
on the Executive's part of any of the covenants contained in Section 6 hereof
would cause immeasurable and irreparable damage to the Company. Accordingly,
the Executive agrees that the Company shall be entitled to injunctive relief in
any court of competent jurisdiction for any actual or threatened violation of
any such covenant in addition to any other remedies it may have. The Executive
agrees that in the event that any arbitrator or court of competent jurisdiction
shall finally hold that any provision of Section 6 hereof is void or constitutes
an unreasonable restriction against the Executive, the provisions of such
Section 6 shall not be rendered void but shall apply to such extent as such
arbitrator or court may determine constitutes a reasonable restriction under the
circumstances.
8. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
-7-
<PAGE>
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive whether pursuant to this Agreement or
otherwise, and determined without regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting
-8-
<PAGE>
Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and
-9-
<PAGE>
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 9(c), the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to
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<PAGE>
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
--------------------
c/o Alex. Brown Incorporated
135 E. Baltimore
Baltimore, Maryland 21202
If to the Company:
------------------
One Bankers Trust Plaza
135 Liberty Street
New York, New York 10006
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others, other than
claims for a breach of Section 6 of this Agreement. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and such amounts shall not be reduced whether or
not the Executive obtains other employment.
-11-
<PAGE>
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(f) On and after the Commencement Date, this Agreement shall
supersede any other agreement between the parties or between Pathfinder and the
Executive with respect to the subject matter hereof.
-12-
<PAGE>
EXHIBIT 99.12
[LOGO]
Bankers Trust
New York Corporation
Proxy Solicited by the Board of Directors for the Special Meeting of
Stockholders--August 13, 1997.
FRANK N. NEWMAN and GEORGE J. VOJTA (collectively, the "Proxies"), or either
of them, with full power of substitution, are hereby appointed proxies to vote
all shares of stock of Bankers Trust New York Corporation (the "Corporation")
that the undersigned is entitled to vote at the Special Meeting of
Stockholders of the Corporation to be held at One Bankers Trust Plaza (130
Liberty Street), New York, New York, August 13, 1997, at 3:00 P.M., or
adjournments thereof, with all powers the undersigned would possess if
personally present, for the election of directors, and on each of the other
matters described in the Proxy Statement, hereby revoking any proxy heretofore
given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR ITEM 1.
In their discretion, the Proxies, or either of them, are authorized to vote
upon such other business as may come properly before the meeting.
Please mark and date the proxy and sign your name on the reverse side.
(Continued, and to be dated and signed, on the reverse side)
<PAGE>
BANKERS TRUST NEW YORK CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER
USING DARK INK ONLY
This proxy, when properly executed, will be voted in the manner described
herein. If no direction is made, this proxy will be voted FOR item 1.
The Board of Directors Recommends a Vote FOR item 1.
1. Approval of the issuance of up to 25,957,061 shares of the Corporation's
Common Stock pursuant to the Merger of Alex. Brown Incorporated with and
into a wholly-owned subsidiary of the Corporation.
FOR AGAINST ABSTAIN
[_] [_] [_]
SIGNATURE(S) SHOULD CONFORM EXACTLY WITH NAME(S) SHOWN ABOVE. IF SIGNING FOR
ESTATE, TRUST, CORPORATION OR PARTNERSHIP, TITLE OR CAPACITY SHOULD BE STATED.
IF SHARES ARE HELD JOINTLY EACH JOINT HOLDER SHOULD SIGN.
-------------------------------------
SIGNATURE
-------------------------------------
SIGNATURE
-------------------------------------
DATE
- -------------------------------------------------------------------------------
DETACH HERE
IMPORTANT
THIS IS YOUR
PROXY CARD
PLEASE SIGN AND RETURN YOUR PROXY CARD PROMPTLY.
[LOGO] Bankers Trust
New York Corporation
<PAGE>
EXHIBIT 99.11
ALEX. BROWN INCORPORATED
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
and Proxy Statement relating to the Special Meeting of Stockholders of Alex.
Brown Incorporated, called to convene on August 13, 1997, and hereby
constitutes and appoints A. B. KRONGARD and MAYO A. SHATTUCK III, and either
of them, the true and lawful attorneys and Proxies of the undersigned with
full power of substitution to each, to vote all the shares of Common Stock of
the corporation which the undersigned is entitled to vote at the meeting and
at any adjournment thereof, in their discretion on any matter which may
properly come before the meeting and as follows:
(caret) FOLD AND DETACH HERE (caret)
<PAGE>
The shares represented by this proxy are to be voted in Please mark
accordance with the specific instructions below and, if your votes as [X]
no choice is indicated, are to be voted FOR the indicated in
proposal to approve and adopt the Agreement and Plan of this example
Merger by and among Bankers Trust New York Corporation,
a wholly owned subsidiary of Bankers Trust New York
Corporation and Alex. Brown Incorporated.
PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER BY AND AMONG
BANKERS TRUST NEW YORK CORPORATION, VOYAGER MERGER CORPORATION AND ALEX. BROWN
INCORPORATED.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please sign, date and return this
proxy promptly in the enclosed
envelope which requires no postage
if mailed in the United States.
SIGNATURE(S) OF STOCKHOLDER(S)
(Signature(s) should conform with
the name(s) printed hereon. If stock
is held in joint names, all should
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by President
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.)
Date: _________________________, 1997
PLEASE DO NOT FOLD, STAPLE OR DAMAGE
(caret) FOLD AND DETACH HERE (caret)
