Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
TRAVELERS GROUP INC.
DIAMONDS ACQUISITION CORP.
AND
SALOMON INC
DATED AS OF SEPTEMBER 24, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . 2
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Effective Time . . . . . . . . . . . . . . 2
SECTION 1.4 Effects of the Merger . . . . . . . . . . 3
SECTION 1.5 Certificate of Incorporation and By-laws
of the Surviving Corporation . . . . . . . 3
SECTION 1.6 Directors and Officers . . . . . . . . . . 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock . . . . . . . . . 4
(a) Cancellation of Treasury Stock . . . 4
(b) Conversion of Company Common Stock . 4
(c) Conversion of Company Preferred
Stock . . . . . . . . . . . . . . . . 5
(d) Conversion of Common Stock of Sub . . 7
(e) Assumption of Obligations under
Deposit Agreements . . . . . . . . . 7
SECTION 2.2 Exchange of Certificates . . . . . . . . . 7
(a) Exchange Agent . . . . . . . . . . . 7
(b) Exchange Procedures . . . . . . . . . 8
(c) Distributions with Respect to
Unexchanged Shares . . . . . . . . . 9
(d) No Further Ownership Rights in
Company Common Stock . . . . . . . . 10
(e) No Fractional Shares . . . . . . . . 10
(f) Termination of Exchange Fund . . . . 12
(g) No Liability . . . . . . . . . . . . 13
(h) Investment of Exchange Fund . . . . . 13
(i) Lost Certificates . . . . . . . . . . 13
SECTION 2.3 Certain Adjustments . . . . . . . . . . . 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Disclosure Schedules . . . . . . . . . . . 14
SECTION 3.2 Standard . . . . . . . . . . . . . . . . . 14
SECTION 3.3 Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . 15
(a) Organization, Standing and Corporate
Power . . . . . . . . . . . . . . . . 15
(b) Subsidiaries . . . . . . . . . . . . 16
(c) Capital Structure . . . . . . . . . . 16
(d) Authority; Noncontravention . . . . . 19
(e) SEC Documents; Undisclosed
Liabilities . . . . . . . . . . . . . 20
(f) Information Supplied . . . . . . . . 21
(g) Absence of Certain Changes or
Events . . . . . . . . . . . . . . . 22
(h) Compliance with Applicable Laws;
Litigation . . . . . . . . . . . . . 23
(i) Absence of Changes in Benefit Plans . 24
(j) ERISA Compliance . . . . . . . . . . 25
(k) Taxes . . . . . . . . . . . . . . . . 27
(l) Voting Requirements . . . . . . . . . 28
(m) State Takeover Statutes . . . . . . . 28
(n) Accounting Matters . . . . . . . . . 28
(o) Brokers . . . . . . . . . . . . . . . 28
(p) Ownership of Parent Capital Stock . . 29
(q) Intellectual Property . . . . . . . . 29
(r) Certain Contracts . . . . . . . . . . 29
(s) Rights Agreement . . . . . . . . . . 30
(t) Environmental Liability . . . . . . . 30
(u) Derivative Transactions . . . . . . . 31
(v) Investment Securities and
Commodities . . . . . . . . . . . . . 32
(w) Ineligible Persons . . . . . . . . . 32
SECTION 3.4 Representations and Warranties of Parent . 33
(a) Organization, Standing and Corporate
Power . . . . . . . . . . . . . . . . 33
(b) Subsidiaries . . . . . . . . . . . . 34
(c) Capital Structure . . . . . . . . . . 34
(d) Authority; Noncontravention . . . . . 37
(e) SEC Documents; Undisclosed
Liabilities . . . . . . . . . . . . . 38
(f) Information Supplied . . . . . . . . 39
(g) Absence of Certain Changes or Events 40
(h) Compliance with Applicable Laws;
Litigation . . . . . . . . . . . . . 41
(i) Absence of Changes in Benefit Plans . 41
(j) ERISA Compliance . . . . . . . . . . 42
(k) Taxes . . . . . . . . . . . . . . . . 44
(l) Accounting Matters . . . . . . . . . 44
(m) Brokers . . . . . . . . . . . . . . . 45
(n) Ownership of Company Capital Stock . 45
(o) Voting Requirements . . . . . . . . . 45
(p) Environmental Liability . . . . . . . 45
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business . . . . . . . . . . . 46
(a) Conduct of Business by the Company . 46
(b) Conduct of Business by Parent . . . . 50
(c) Compensation Matters . . . . . . . . 51
(d) Coordination of Dividends . . . . . . 53
(e) Other Actions . . . . . . . . . . . . 53
(f) Advice of Changes . . . . . . . . . . 54
SECTION 4.2 No Solicitation by the Company . . . . . . 54
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Proxy
Statement; Stockholders Meetings . . . . . 57
SECTION 5.2 Letters of the Company's Accountants . . . 58
SECTION 5.3 Letters of Parent's Accountants . . . . . 59
SECTION 5.4 Access to Information; Confidentiality . . 59
SECTION 5.5 Best Efforts . . . . . . . . . . . . . . . 60
SECTION 5.6 Employee Stock Options, Incentive and Benefit
Plans . . . . . . . . . . . . . . . . . . 62
SECTION 5.7 Indemnification, Exculpation and Insurance 64
SECTION 5.8 Fees and Expenses . . . . . . . . . . . . 66
SECTION 5.9 Public Announcements . . . . . . . . . . . 67
SECTION 5.10 Affiliates . . . . . . . . . . . . . . . . 68
SECTION 5.11 Stock Exchange Listing . . . . . . . . . . 69
SECTION 5.12 Stockholder Litigation . . . . . . . . . . 69
SECTION 5.13 Tax Treatment . . . . . . . . . . . . . . 69
SECTION 5.14 Pooling of Interests . . . . . . . . . . . 70
SECTION 5.15 Standstill Agreements; Confidentiality
Agreements . . . . . . . . . . . . . . . . 70
SECTION 5.16 Conveyance Taxes . . . . . . . . . . . . . 70
SECTION 5.17 Company Convertible Notes; Company Series F
Preferred Stock . . . . . . . . . . . . . 71
SECTION 5.18 Compliance with 1940 Act Section 15 . . . 71
SECTION 5.19 Certain Contracts . . . . . . . . . . . . 72
SECTION 5.20 Investment Advisory Agreements. . . . . . 73
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . 73
(a) Stockholder Approval . . . . . . . . 73
(b) HSR Act . . . . . . . . . . . . . . . 73
(c) Governmental and Regulatory
Approvals . . . . . . . . . . . . . . 73
(d) No Injunctions or Restraints . . . . 74
(e) Form S-4 . . . . . . . . . . . . . . 74
(f) NYSE Listing . . . . . . . . . . . . 74
SECTION 6.2 Conditions to Obligations of Parent . . . 74
(a) Representations and Warranties . . . 75
(b) Performance of Obligations of the
Company . . . . . . . . . . . . . . . 75
(c) Tax Opinion . . . . . . . . . . . . . 75
SECTION 6.3 Conditions to Obligations of the Company . 75
(a) Representations and Warranties . . . 75
(b) Performance of Obligations of Parent 76
(c) Tax Opinions . . . . . . . . . . . . 76
SECTION 6.4 Frustration of Closing Conditions . . . . 76
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination . . . . . . . . . . . . . . . 76
SECTION 7.2 Effect of Termination . . . . . . . . . . 78
SECTION 7.3 Amendment . . . . . . . . . . . . . . . . 78
SECTION 7.4 Extension; Waiver . . . . . . . . . . . . 78
SECTION 7.5 Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . . 79
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . . . 79
SECTION 8.2 Notices . . . . . . . . . . . . . . . . . 79
SECTION 8.3 Definitions . . . . . . . . . . . . . . . 80
SECTION 8.4 Interpretation . . . . . . . . . . . . . . 82
SECTION 8.5 Counterparts . . . . . . . . . . . . . . . 83
SECTION 8.6 Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . 83
SECTION 8.7 Governing Law . . . . . . . . . . . . . . 83
SECTION 8.8 Assignment . . . . . . . . . . . . . . . . 83
SECTION 8.9 Consent to Jurisdiction . . . . . . . . . 83
SECTION 8.10 Headings . . . . . . . . . . . . . . . . . 84
SECTION 8.11 Severability . . . . . . . . . . . . . . . 84
AGREEMENT AND PLAN OF MERGER dated as of
September 24, 1997, by and among TRAVELERS GROUP INC., a
Delaware corporation ("Parent"), DIAMONDS ACQUISITION
CORP., a Delaware corporation ("Sub"), and SALOMON INC, a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of
Parent, Sub and the Company have each approved the merger
of Sub with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this
Agreement, whereby (a) each issued and outstanding share
of common stock, par value $1.00 per share, of the
Company ("Company Common Stock"), other than shares owned
by the Company, will be converted into the right to
receive the Merger Consideration (as defined in Section
2.1(b)) and (b) each issued and outstanding share of
Company Preferred Stock (as defined in Section 2.1(c)),
other than shares owned by the Company, will be converted
into the right to receive one share of a corresponding
series of preferred stock of Parent pursuant to Article
II;
WHEREAS, the respective Boards of Directors of
Parent, Sub and the Company have each determined that the
Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective
business strategies and goals and are in the best
interests of their respective stockholders;
WHEREAS, the parties desire to make certain
representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger;
WHEREAS, for federal income tax purposes, it is
intended that the Merger will qualify as a reorganization
under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, for financial accounting purposes, it
is intended that the Merger will be accounted for as a
pooling of interests transaction under United States
generally accepted accounting principles ("GAAP"); and
WHEREAS, concurrently with the execution of
this Agreement, and as an inducement to Parent and Sub to
enter into this Agreement, a stockholder of the Company
has entered into a Voting Agreement, dated as of the date
hereof (the "Voting Agreement"), between Parent and the
stockholder providing, among other things, that such
stockholder will vote, or cause to be voted, at the
Company Stockholders Meeting (as defined in Section
5.1(b)) all of the Company's voting securities owned at
the time of such meeting by such stockholder and its
subsidiaries in favor of the Merger and will grant or
cause to be granted proxies to Parent for that purpose.
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and
subject to the conditions set forth in this Agreement,
and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time (as defined in Section
1.3). Following the Effective Time, the Company shall be
the surviving corporation (the "Surviving Corporation")
and become a wholly owned subsidiary of Parent and shall
succeed to and assume all the rights and obligations of
Sub in accordance with the DGCL.
SECTION 1.2 Closing. Subject to the
satisfaction or waiver of all the conditions to closing
contained in Article VI hereof, the closing of the Merger
(the "Closing") will take place at 10:00 a.m. on a date
to be specified by the parties (the "Closing Date"),
which shall be no later than the second day after
satisfaction or waiver of the conditions set forth in
Article VI, unless another time or date is agreed to by
the parties hereto; provided that in no event shall the
Closing Date be other than a Friday, Saturday or Sunday.
The Closing will be held at such location in the City of
New York as is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the
provisions of this Agreement, as soon as practicable on
the Closing Date, the parties shall cause the Merger to
be consummated by filing a certificate of merger or other
appropriate documents (in any such case, the "Certificate
of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings
or recordings required under the DGCL. The Merger shall
become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of
Delaware, or at such subsequent date or time as Sub and
the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger
shall have the effects set forth in Section 259 of the
DGCL.
SECTION 1.5 Certificate of Incorporation and
By-laws of the Surviving Corporation. The certificate of
incorporation of the Company shall be amended as of the
Effective Time to read in its entirety like the
certificate of incorporation of Sub except that Article
First of such certificate of incorporation shall read in
its entirety as follows: "The name of the Corporation is
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Holdings Inc." and, as amended, such
certificate of incorporation shall be the certificate of
incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by
applicable law. The by-laws of Sub, as in effect
immediately prior to the Effective Time, shall become the
by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable
law.
SECTION 1.6 Directors and Officers. The
directors identified in Section 1.6 of the Parent
Disclosure Schedule (as defined in Section 3.1) and the
officers of Sub shall, from and after the Effective Time,
become the directors and officers, respectively, of the
Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until
their earlier death, resignation or removal in accordance
with the certificate of incorporation and the by-laws of
the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of
the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any shares of
Company Common Stock or Company Preferred Stock
(together, "Company Capital Stock"):
(a) Cancellation of Treasury Stock. Each
share of Company Common Stock and Company Preferred Stock
that is owned directly by the Company shall automatically
be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
provided, however, that any shares of Company Common
Stock or Company Preferred Stock (i) held by the Company
in connection with any market-making or proprietary
trading activity or for the account of another person,
(ii) as to which the Company is or may be required to act
as a fiduciary or in a similar capacity or (iii) the
cancellation of which would violate any legal duties or
obligations of the Company shall not be cancelled but,
instead, shall be treated as set forth in Section 2.1(b)
(in the case of Company Common Stock) or 2.1(c) (in the
case of Company Preferred Stock).
(b) Conversion of Company Common Stock.
Subject to Section 2.2(e), each issued and outstanding
share of Company Common Stock (other than shares to be
cancelled in accordance with Section 2.1(a)), together
with the rights (the "Company Rights") attached thereto
to purchase the Company's Series B Junior Participating
Preferred Stock ("Company Junior Preferred Stock") issued
pursuant to the Rights Agreement, dated as of February 8,
1988, as amended, between the Company and First Chicago
Trust Company of New York, as successor to ▇▇▇▇▇▇
Shareholder Services Trust Company, as Rights Agent (the
"Rights Agreement"), shall be converted into the right to
receive 1.13 (the "Exchange Ratio") validly issued, fully
paid and nonassessable shares of common stock, par value
$.01 per share ("Parent Common Stock"), of Parent. The
consideration to be issued to holders of Company Common
Stock is referred to herein as the "Merger
Consideration." As of the Effective Time, all such
shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares
of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate
in accordance with Section 2.2 and any dividends or
distributions to which such holder is entitled pursuant
to Section 2.2(c), in each case without interest.
(c) Conversion of Company Preferred Stock.
(i) Each issued and outstanding share of Series A
Cumulative Convertible Preferred Stock of the Company
("Company Series A Convertible Preferred Stock), other
than shares to be cancelled in accordance with Section
2.1(a), together with the Rights attached thereto, shall
be converted into the right to receive one validly
issued, fully paid and nonassessable share of Series I
Cumulative Convertible Preferred Stock of Parent ("Parent
Convertible Preferred Stock"). Each share of Parent
Convertible Preferred Stock shall have terms that are
substantially identical to the terms of Company Series A
Convertible Preferred Stock, provided that (A) as a
result of the Merger the issuer thereof shall be Parent
rather than the Company, (B) the number of shares of
Parent Common Stock into which each share of Parent
Convertible Preferred Stock shall be convertible (at the
same times and subject to the same terms and conditions
under which Company Series A Convertible Preferred Stock
is convertible into shares of Company Common Stock
immediately prior to the Effective Time) shall equal
26.31579 (which number shall be subject to adjustment
under the same circumstances, in the same manner and to
the same extent as set forth in the existing Certificate
of Designation relating to the Company Series A
Convertible Preferred Stock) times the Exchange Ratio and
(C) each share of Parent Convertible Preferred Stock,
when voting together with the Parent Common Stock (and
any other shares of capital stock of Parent at the time
entitled to vote) as a single class, shall be entitled to
a number of votes equal to the number of shares of Parent
Common Stock into which one share of Parent Convertible
Preferred Stock will be convertible immediately following
the Merger.
(ii) Each issued and outstanding share of
8.08% Cumulative Preferred Stock, Series D, of the
Company ("Company 8.08% Preferred Stock"), other
than shares to be cancelled in accordance with
Section 2.1(a), shall be converted into the right to
receive one validly issued, fully paid and
nonassessable share of 8.08% Cumulative Preferred
Stock, Series J, of Parent ("Parent 8.08% Preferred
Stock"). Each share of Parent 8.08% Preferred Stock
shall have terms that are substantially identical to
Company 8.08% Preferred Stock, provided that (A) as
a result of the Merger the issuer thereof shall be
Parent rather than the Company and (B) each share of
Parent 8.08% Preferred Stock shall be entitled to
three votes per share, voting together as a class
with the Parent Common Stock (and any other shares
of capital stock of Parent at the time entitled to
vote), on all matters submitted to a vote of
stockholders of Parent, and shall be entitled to one
vote per share on all matters on which the Company
8.08% Preferred Stock is entitled to vote, voting
together as a class with any other shares of
preferred stock of Parent at the time entitled to
vote.
(iii) Each issued and outstanding share
of 8.40% Cumulative Preferred Stock, Series E, of
the Company ("Company 8.40% Preferred Stock," and
together with Company Series A Convertible Preferred
Stock and Company 8.08% Preferred Stock, "Company
Preferred Stock"), other than shares to be cancelled
in accordance with Section 2.1(a), shall be
converted into the right to receive one validly
issued, fully paid and nonassessable share of 8.40%
Cumulative Preferred Stock, Series K, of Parent
("Parent 8.40% Preferred Stock," and together with
Parent Convertible Preferred Stock and Parent 8.08%
Preferred Stock, "Parent New Preferred Stock").
Each share of Parent 8.40% Preferred Stock shall
have terms that are substantially identical to
Company 8.40% Preferred Stock, provided that (A) as
a result of the Merger the issuer thereof shall be
Parent rather than the Company and (B) each share of
Parent 8.40% Preferred Stock shall be entitled to
three votes per share, voting together as a class
with the Parent Common Stock (and any other shares
of capital stock of Parent at the time entitled to
vote), on all matters submitted to a vote of
stockholders of Parent, and shall be entitled to one
vote per share on all matters on which the Company
8.40% Preferred Stock is entitled to vote, voting
together as a class with any other shares of
preferred stock of Parent at the time entitled to
vote.
(d) Conversion of Common Stock of Sub. Each
issued and outstanding share of common stock, par value
$.01 per share, of Sub shall be converted into one
validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
(e) Assumption of Obligations under Deposit
Agreements. At the Effective Time, Parent shall assume
the obligations of the Company under the Deposit
Agreement, dated as of February 23, 1993, among the
Company, First Chicago Trust Company of New York, as
Depositary, and the depositary receipt holders (with
respect to Company 8.08% Preferred Stock), and the
Deposit Agreement, dated as of February 13, 1996, among
the Company, First Chicago Trust Company of New York, as
Depositary, and the depositary receipt holders (with
respect to Company 8.40% Preferred Stock). Parent shall
instruct the depositary to treat the shares of Parent
8.08% Preferred Stock and the shares of Parent 8.40%
Preferred Stock received by such depositary in exchange
for and upon conversion of the shares of Company 8.08%
Preferred Stock and Company 8.40% Preferred Stock,
respectively, as new deposited securities under the
applicable deposit agreement. In accordance with the
terms of the relevant deposit agreement, the depositary
receipts then outstanding shall thereafter represent the
shares of Parent 8.08% Preferred Stock and Parent 8.40%
Preferred Stock so received upon conversion and exchange
for the shares of Company 8.08% Preferred Stock and
Company 8.40% Preferred Stock, respectively. Promptly
following the Effective Time, Parent shall request that
the depositary call for the surrender of all outstanding
receipts to be exchanged for new receipts specifically
describing the relevant series of Parent New Preferred
Stock.
SECTION 2.2 Exchange of Certificates. (a)
Exchange Agent. As of the Effective Time, Parent shall
enter into an agreement with such bank or trust company
as may be designated by Parent and reasonably
satisfactory to the Company (the "Exchange Agent"), which
shall provide that Parent shall deposit with the Exchange
Agent as of the Effective Time, for the benefit of the
holders of shares of Company Common Stock and Company
Preferred Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock and Parent
New Preferred Stock (such shares of Parent Common Stock
and Parent New Preferred Stock, together with any
dividends or distributions with respect thereto with a
record date after the Effective Time, any Excess Shares
(as defined in Section 2.2(e)) and any cash (including
cash proceeds from the sale of the Excess Shares) payable
in lieu of any fractional shares of Parent Common Stock
being hereinafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock and Company
Preferred Stock.
(b) Exchange Procedures. As soon as
reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of
Company Common Stock or Company Preferred Stock (the
"Certificates") whose shares were converted into the
right to receive the Merger Consideration or shares of
Parent New Preferred Stock, as applicable, pursuant to
Section 2.1, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as
the Company and Parent may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in
exchange for the Merger Consideration or shares of Parent
New Preferred Stock, as applicable. Upon surrender of a
Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by
the Exchange Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common
Stock or Parent New Preferred Stock which such holder has
the right to receive pursuant to the provisions of this
Article II, certain dividends or other distributions in
accordance with Section 2.2(c) and cash in lieu of any
fractional share of Parent Common Stock in accordance
with Section 2.2(e), and the Certificate so surrendered
shall forthwith be cancelled. In the event of a
surrender of a Certificate representing shares of Company
Common Stock or Company Preferred Stock which are not
registered in the transfer records of the Company under
the name of the person surrendering such Certificate, a
certificate representing the proper number of shares of
Parent Common Stock or Parent New Preferred Stock may be
issued to a person other than the person in whose name
the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such
issuance shall pay any transfer or other taxes required
by reason of the issuance of shares of Parent Common
Stock or Parent New Preferred Stock to a person other
than the registered holder of such Certificate or
establish to the satisfaction of Parent that such tax has
been paid or is not applicable. Until surrendered as
contemplated by this Section 2.2, each Certificate shall
be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender
the Merger Consideration or shares of Parent New
Preferred Stock, as applicable, which the holder thereof
has the right to receive in respect of such Certificate
pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with
Section 2.2(c) and cash in lieu of any fractional share
of Parent Common Stock in accordance with Section 2.2(e).
No interest shall be paid or will accrue on any cash
payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect
to Parent Common Stock or Parent New Preferred Stock with
a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock or Parent New
Preferred Stock issuable hereunder in respect thereof,
and, in the case of Certificates representing Company
Common Stock, no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to
Section 2.2(e), and all such dividends, other
distributions and cash in lieu of fractional shares of
Parent Common Stock shall be paid by Parent to the
Exchange Agent and shall be included in the Exchange
Fund, in each case until the surrender of such
Certificate in accordance with this Article II, subject
to Section 2.2(f). Subject to the effect of applicable
escheat or similar laws, following surrender of any such
Certificate there shall be paid to the holder of the
certificate representing whole shares of Parent Common
Stock or Parent New Preferred Stock issued in exchange
therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common
Stock or Parent New Preferred Stock and, in the case of
Certificates representing Company Common Stock, the
amount of any cash payable in lieu of a fractional share
of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and (ii) at the appropriate
payment date, the amount of dividends or other
distributions with a record date after the Effective Time
and with a payment date subsequent to such surrender
payable with respect to such whole shares of Parent
Common Stock or Parent New Preferred Stock.
(d) No Further Ownership Rights in Company
Common Stock. All shares of Parent Common Stock or
Parent New Preferred Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of
this Article II (including any cash paid pursuant to this
Article II) shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock or Company Preferred
Stock, as applicable, theretofore represented by such
Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any
other distributions with a record date prior to the
Effective Time which may have been declared or made by
the Company on such shares of Company Common Stock or
Company Preferred Stock which remain unpaid at the
Effective Time, and there shall be no further
registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Company Common
Stock or Company Preferred Stock which were outstanding
immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any
reason, they shall be cancelled and exchanged as provided
in this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No
certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution
of Parent shall relate to such fractional share interests
and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder
of Parent.
(ii) As promptly as practicable following
the Effective Time, the Exchange Agent shall
determine the excess of (A) the number of whole
shares of Parent Common Stock delivered to the
Exchange Agent by Parent pursuant to Section 2.2(a)
over (B) the aggregate number of whole shares of
Parent Common Stock to be distributed to former
holders of Company Common Stock pursuant to Section
2.2(b) (such excess being herein called the "Excess
Shares"). Following the Effective Time, the
Exchange Agent shall, on behalf of the former
stockholders of the Company, sell the Excess Shares
at then-prevailing prices on the New York Stock
Exchange, Inc. ("NYSE"), all in the manner provided
in Section 2.2(e)(iii).
(iii) The sale of the Excess Shares by
the Exchange Agent shall be executed on the NYSE
through one or more member firms of the NYSE and
shall be executed in round lots to the extent
practicable. The Exchange Agent shall use
reasonable efforts to complete the sale of the
Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best
execution of such sales in light of prevailing
market conditions. Until the net proceeds of such
sale or sales have been distributed to the holders
of Certificates formerly representing Company Common
Stock, the Exchange Agent shall hold such proceeds
in trust for such holders (the "Common Shares
Trust"). The Surviving Corporation shall pay all
commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and
compensation of the Exchange Agent incurred in
connection with such sale of the Excess Shares. The
Exchange Agent shall determine the portion of the
Common Shares Trust to which each former holder of
Company Common Stock is entitled, if any, by
multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction,
the numerator of which is the amount of the
fractional share interest to which such former
holder of Company Common Stock is entitled (after
taking into account all shares of Company Common
Stock held of record at the Effective Time by such
holder) and the denominator of which is the
aggregate amount of fractional share interests to
which all former holders of Company Common Stock are
entitled.
(iv) Notwithstanding the provisions of
Section 2.2(e)(ii) and (iii), the Surviving
Corporation may elect at its option, exercised prior
to the Effective Time, in lieu of the issuance and
sale of Excess Shares and the making of the payments
hereinabove contemplated, to pay each former holder
of Company Common Stock an amount in cash equal to
the product obtained by multiplying (A) the
fractional share interest to which such former
holder (after taking into account all shares of
Company Common Stock held of record at the Effective
Time by such holder) would otherwise be entitled by
(B) the closing price of the Parent Common Stock as
reported on the NYSE Composite Transaction Tape (as
reported in The Wall Street Journal, or, if not
reported therein, any other authoritative source) on
the Closing Date, and, in such case, all references
herein to the cash proceeds of the sale of the
Excess Shares and similar references shall be deemed
to mean and refer to the payments calculated as set
forth in this Section 2.2(e)(iv).
(v) As soon as practicable after the
determination of the amount of cash, if any, to be
paid to holders of Certificates formerly
representing Company Common Stock with respect to
any fractional share interests, the Exchange Agent
shall make available such amounts to such holders of
Certificates formerly representing Company Common
Stock subject to and in accordance with the terms of
Section 2.2(c).
(f) Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the
holders of the Certificates for six months after the
Effective Time shall be delivered to Parent, upon demand,
and any holders of the Certificates who have not
theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim
for Merger Consideration or shares of Parent New
Preferred Stock, any dividends or distributions with
respect to Parent Common Stock or Parent New Preferred
Stock, as applicable, and any cash in lieu of fractional
shares of Parent Common Stock.
(g) No Liability. None of Parent, Sub, the
Company, the Surviving Corporation or the Exchange Agent
shall be liable to any person in respect of any shares of
Parent Common Stock or Parent New Preferred Stock, any
dividends or distributions with respect thereto, any cash
in lieu of fractional shares of Parent Common Stock or
any cash from the Exchange Fund, in each case delivered
to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange
Fund, as directed by Parent (provided that such cash
shall be invested only in high quality short-term
instruments with low risk of loss of principal), on a
daily basis. Any interest and other income resulting
from such investments shall be paid to Parent.
(i) Lost Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the
posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration or shares
of Parent New Preferred Stock and, if applicable, any
unpaid dividends and distributions on shares of Parent
Common Stock or Parent New Preferred Stock deliverable in
respect thereof and any cash in lieu of fractional shares
of Parent Common Stock, in each case pursuant to this
Agreement.
SECTION 2.3 Certain Adjustments. If after the
date hereof and on or prior to the Closing Date the
outstanding shares of Parent Common Stock shall be
changed into a different number of shares by reason of
any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared
thereon with a record date within such period, or any
similar event shall occur (any such action, an
"Adjustment Event"), the Exchange Ratio shall be adjusted
accordingly to provide to the holders of Company Common
Stock and Company Series A Convertible Preferred Stock
the same economic effect as contemplated by this
Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or
dividend or similar event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Disclosure Schedules. Prior to
the execution of this Agreement, the Company has
delivered to Parent a schedule (the "Company Disclosure
Schedule") and Parent has delivered to the Company a
schedule (the "Parent Disclosure Schedule" and, together,
the "Disclosure Schedules") each setting forth, among
other things, items the disclosure of which is necessary
or appropriate in relation to any or all of their
respective representations and warranties in accordance
with the standard established by Section 3.2; provided,
however, that notwithstanding anything in this Agreement
to the contrary, the mere inclusion of an item in a
Disclosure Schedule shall not be deemed an admission by
the disclosing party that such item represents a material
exception or fact, event or circumstance or that such
item constitutes or is reasonably likely to result in a
material adverse effect or material adverse change (each
as defined in Section 8.3).
SECTION 3.2 Standard. No representation or
warranty of the Company or Parent contained in Sections
3.3 and 3.4, respectively, other than Sections 3.3(a),
3.3(b), 3.3(c), 3.3(d), 3.3(e), 3.3(f), 3.3(g)(i), (ii)
and (iii), 3.3(l), 3.3(m), 3.3(n), 3.3(o), 3.3(s) or
3.3(w) or Sections 3.4(a), 3.4(b), 3.4(c), 3.4(d),
3.4(e), 3.4(f), 3.4(g)(i), (ii) and (iii), 3.4(l) or
3.4(m) (collectively, the "Other Paragraphs"), shall be
deemed untrue or incorrect, and no party hereto shall be
deemed to have breached a representation or warranty, as
a consequence of the existence of any fact, circumstance
or event unless such fact, circumstance or event,
individually or taken together with all other facts,
circumstances or events inconsistent with any paragraph
of Section 3.3 or 3.4, as the case may be, other than the
Other Paragraphs, has had or is reasonably likely to have
a material adverse effect.
SECTION 3.3 Representations and Warranties of
the Company. Subject to Sections 3.1 and 3.2 and except
as disclosed in Company Filed SEC Documents (as defined
in Section 3.3(g)) or as set forth on the Company
Disclosure Schedule and making reference to the
particular subsection of this Agreement to which
exception is being taken (regardless of whether such
subsection refers to the Company Disclosure Schedule),
the Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate
Power. (i) Each of the Company and its subsidiaries (as
defined in Section 8.3) is a corporation or other legal
entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize
such concept) under the laws of the jurisdiction in which
it is organized and has the requisite corporate or other
power, as the case may be, and authority to carry on its
business as now being conducted, except, as to
subsidiaries, for those jurisdictions where the failure
to be duly organized, validly existing and in good
standing individually or in the aggregate would not have
a material adverse effect (as defined in Section 8.3) on
the Company. Each of the Company and its subsidiaries is
duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of
its business or the ownership, leasing or operation of
its properties makes such qualification or licensing
necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good
standing individually or in the aggregate would not have
a material adverse effect on the Company.
(ii) The Company has delivered to Parent
prior to the execution of this Agreement complete
and correct copies of its certificate of
incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute
books of the Company contain accurate records of all
meetings and accurately reflect all other actions
taken by the stockholders, the Board of Directors
and all committees of the Board of Directors of the
Company since January 1, 1994.
(b) Subsidiaries. Exhibit 21 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 includes all the subsidiaries of the
Company which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission
(the "SEC")). All the outstanding shares of capital
stock of, or other equity interests in, each such
Significant Subsidiary have been validly issued and are
fully paid and nonassessable; are owned directly or
indirectly by the Company, free and clear of all pledges,
claims, liens, charges, encumbrances and security
interests securing indebtedness or similar obligations
(collectively, "Liens"); and are free of any other
restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership
interests that would prevent the operation by the
Surviving Corporation of such Significant Subsidiary's
business as currently conducted.
(c) Capital Structure. The authorized capital
stock of the Company consists of 250,000,000 shares of
Company Common Stock and 5,000,000 shares of preferred
stock, without par value, of the Company ("Company
Authorized Preferred Stock"), of which 700,000 shares
have been designated as Company Series A Convertible
Preferred Stock, 2,500,000 shares have been designated as
Series B Junior Participating Preferred Stock, 244,375
shares have been designated as 9.50% Cumulative Preferred
Stock, Series C ("Company Series C Preferred Stock"),
400,000 shares have been designated as Company 8.08%
Preferred Stock, 500,000 shares have been designated as
Company 8.40% Preferred Stock, 690,000 shares have been
designated as 9.50% Cumulative Preferred Stock, Series F,
of the Company ("Company Series F Preferred Stock") and
893,000 shares have been designated as $4.25 Convertible
Preferred Stock ("Company $4.25 Preferred Stock"). At
the close of business on September 19, 1997: (i)
107,460,248 shares of Company Common Stock were issued
and outstanding; (ii) 51,891,428 shares of Company Common
Stock were held by the Company in its treasury; (iii)
2,500,000 shares of Company Junior Preferred Stock were
reserved for issuance pursuant to the Rights Agreement;
(iv) 420,000 shares of Company Series A Convertible
Preferred Stock were issued and outstanding; (v) no
shares of Company Series C Preferred Stock were issued
and outstanding; (vi) 400,000 shares of Company 8.08%
Preferred Stock were issued and outstanding (evidenced by
8,000,000 depositary shares, each of which represents a
one-twentieth interest in a share of Company 8.08%
Preferred Stock); (vii) 500,000 shares of Company 8.40%
Preferred Stock were issued and outstanding (evidenced by
10,000,000 depositary shares, each of which represents a
one-twentieth interest in a share of Company 8.40%
Preferred Stock); (viii) 690,000 shares of Company Series
F Preferred Stock were reserved for issuance upon
exercise of purchase contracts comprising a part of the
13,800,000 9-1/2% Trust Preferred Stock (TRUPS) Units of
SI Financing Trust I; (ix) no shares of Company $4.25
Preferred Stock were issued and outstanding; (x) except
as set forth on the Company Disclosure Schedule, no
shares of Company Preferred Stock were held by the
Company in its treasury, other than shares held for
purposes of market making, proprietary trading or
otherwise on behalf of customers; (xi) 4,741,602 shares
of Company Common Stock were reserved for issuance
pursuant to the Company Non-Qualified Stock Option Plan
of 1984, the Company Stock Incentive Plan and the Company
Employee Stock Purchase Plan (such plans, collectively,
the "Company Stock Plans"), of which 1,660,100 shares are
subject to outstanding employee stock options or other
rights to purchase or receive Company Common Stock
granted under the Company Stock Plans (collectively,
"Company Employee Stock Options"); (xii) 14,736,843
shares of Company Common Stock were reserved for issuance
upon conversion of Company Series A Convertible Preferred
Stock; (xiii) 394,429 shares of Company Common Stock were
reserved for issuance upon conversion of the Company's
Amended and Restated 5.5% Restricted Convertible
Subordinated Note Due 1997 and the Company's Amended and
Restated 1.25% Restricted Convertible Subordinated Note
Due 2000 (collectively with Company Series A Convertible
Preferred Stock, "Company Convertible Securities"); and
(xiv) other than as set forth above, no other shares of
Company Authorized Preferred Stock have been designated
or issued. All outstanding shares of capital stock of
the Company are, and all shares thereof which may be
issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section
3.3(c) and except for changes since September 19, 1997
resulting from the issuance of shares of Company Common
Stock pursuant to Company Employee Stock Options, Company
Convertible Securities and other rights referred to above
in this Section 3.3(c) or as permitted by Section
4.1(a)(ii), (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock
or other voting securities of the Company, (B) any
securities of the Company or any Company subsidiary
convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of the
Company, (C) any warrants, calls, options or other rights
to acquire from the Company or any Company subsidiary,
and any obligation of the Company or any Company
subsidiary to issue, any capital stock, voting securities
or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of the
Company, and (y) there are no outstanding obligations of
the Company or any Company subsidiary to repurchase,
redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. There are no outstanding
(A) securities of the Company or any Company subsidiary
convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities in any
Company subsidiary, (B) warrants, calls, options or other
rights to acquire from the Company or any Company
subsidiary, and any obligation of the Company or any
Company subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any
securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or
ownership interests in, any Company subsidiary or (C)
obligations of the Company or any Company subsidiary to
repurchase, redeem or otherwise acquire any such
outstanding securities of Company subsidiaries or to
issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. To the Company's
knowledge, neither the Company nor any Company subsidiary
is a party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or
granting any preemptive or, except as provided by the
terms of Company Employee Stock Options and Company
Convertible Securities, antidilutive rights with respect
to, any securities of the type referred to in the two
preceding sentences. The Company has delivered to Parent
prior to the execution of this Agreement a complete and
correct copy of the Rights Agreement.
(d) Authority; Noncontravention. The Company
has all requisite corporate power and authority to enter
into this Agreement and, subject, in the case of the
Merger, to the Company Stockholder Approval (as defined
in Section 3.3(1)) to consummate the transactions
contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the
consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of the
Company, subject, in the case of the Merger, to the
Company Stockholder Approval. This Agreement has been
duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent
and Sub, constitutes the legal, valid and binding
obligation of the Company, enforceable against the
Company in accordance with its terms. Except as set
forth in Section 3.3(d) of the Company Disclosure
Schedule, the execution and delivery of this Agreement do
not, and the consummation of the transactions
contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, or result in
the creation of any Lien upon any of the properties or
assets of the Company or any of its subsidiaries under,
(i) the certificate of incorporation or by-laws of the
Company or the comparable organizational documents of any
of its Significant Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to
the Company or any of its subsidiaries or their
respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the
Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on
the Company or (y) reasonably be expected to impair the
ability of the Company to perform its obligations under
this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or
registration, declaration or filing with, any federal,
state, local or foreign government, any court,
administrative, regulatory or other governmental agency,
commission or authority or any nongovernmental self-
regulatory agency, commission or authority (a
"Governmental Entity") is required by or with respect to
the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement by the
Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for
(1) the filing of a pre-merger notification and report
form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"); (2)
the filing with the SEC of (A) a proxy statement relating
to the Company Stockholders Meeting (as defined in
Section 5.1(b)) (such proxy statement, as amended or
supplemented from time to time, the "Proxy Statement"),
and (B) such reports under Section 13(a), 13(d), 15(d) or
16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection
with this Agreement and the transactions contemplated by
this Agreement; (3) the filing of the Certificate of
Merger with the Secretary of State of Delaware and such
filings with Governmental Entities to satisfy the
applicable requirements of the laws of states in which
the Company and its subsidiaries are qualified or
licensed to do business or state securities or "blue sky"
laws; (4) the consents, approvals and notices required
under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the Investment Advisers
Act of 1940, as amended (the "Investment Advisers Act");
(5) filings in respect of, and approvals and
authorizations of, any Governmental Entity having
jurisdiction over the securities, commodities, banking,
insurance, or other financial services businesses; and
(6) such consents, approvals, orders or authorizations
the failure of which to be made or obtained individually
or in the aggregate would not (x) have a material adverse
effect on the Company or (y) reasonably be expected to
impair the ability of the Company to perform its
obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities.
Since January 1, 1995, the Company has filed all required
reports, schedules, forms, statements and other documents
(including exhibits and all other information
incorporated therein) with the SEC ("Company SEC
Documents"). As of their respective dates, the Company
SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC
Documents, and no Company SEC Document when filed (as
amended and restated and as supplemented by subsequently
filed Company SEC Documents) contained any untrue
statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The financial statements of the Company included in
Company SEC Documents complied as to form, as of their
respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present
the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit
adjustments). Except (i) as reflected in such financial
statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or
the transactions contemplated hereby, neither the Company
nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the
aggregate, would have a material adverse effect on the
Company.
(f) Information Supplied. None of the
information supplied or to be supplied by the Company
specifically for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed
with the SEC by Parent in connection with the issuance of
Parent Common Stock and Parent New Preferred Stock in the
Merger (the "Form S-4") will, at the time the Form S-4
becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading or (ii) the
Proxy Statement will, at the date it is first mailed to
the Company's stockholders or at the time of the Company
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or
warranty is made by the Company with respect to
statements made or incorporated by reference therein
based on information supplied by Parent specifically for
inclusion or incorporation by reference in the Proxy
Statement.
(g) Absence of Certain Changes or Events.
Except for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby and
except as permitted by Section 4.1(a), since January 1,
1997, the Company and its subsidiaries have conducted
their business only in the ordinary course or as
disclosed in any Company SEC Document filed since such
date and prior to the date hereof (as amended to the date
hereof, "Company Filed SEC Documents"), and there has not
been (i) any material adverse change in the Company,
including, but not limited to, any material adverse
change arising from or relating to fraudulent or
unauthorized activity, (ii) any declaration, setting
aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any
of the Company's capital stock, other than regular
quarterly cash dividends on the Company Common Stock and
dividends payable on the Company Preferred Stock in
accordance with their terms, (iii) any split, combination
or reclassification of any of the Company's capital stock
or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in
substitution for shares of the Company's capital stock,
except for issuances of Company Common Stock upon
conversion of Company Convertible Securities or upon the
exercise of Company Employee Stock Options, in each case
awarded prior to the date hereof in accordance with their
present terms, (iv) prior to the date hereof (A) any
granting by the Company or any of its subsidiaries to any
current or former director, executive officer or other
key employee of the Company or its subsidiaries of any
increase in compensation, bonus or other benefits, except
for increases in the ordinary course of business, (B) any
granting by the Company or any of its subsidiaries to any
such current or former director, executive officer or key
employee of any increase in severance or termination pay,
or (C) any entry by the Company or any of its
subsidiaries into, or any amendment of, any employment,
deferred compensation, consulting, severance, termination
or indemnification agreement with any such current or
former director, executive officer or key employee, (v)
except insofar as may have been disclosed in Company
Filed SEC Documents or required by a change in GAAP, any
change in accounting methods, principles or practices by
the Company affecting its assets, liabilities or
business, or (vi) except insofar as may have been
disclosed in Company Filed SEC Documents, any tax
election by the Company or its subsidiaries or any
settlement or compromise of any income tax liability by
the Company or its subsidiaries.
(h) Compliance with Applicable Laws;
Litigation. (i) The Company, its subsidiaries and
employees hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of all
Governmental Entities which are required for the
operation of the businesses of the Company and its
subsidiaries (the "Company Permits"). The Company and
its subsidiaries are in compliance with the terms of the
Company Permits and all applicable statutes, laws,
ordinances, rules and regulations. As of the date of
this Agreement, except as disclosed in the Company SEC
Documents or set forth in Section 3.3(h) of the Company
Disclosure Schedule, no action, demand, requirement or
investigation by any Governmental Entity and no suit,
action or proceeding by any person, in each case with
respect to the Company or any of its subsidiaries or any
of their respective properties is pending or, to the
knowledge (as defined in Section 8.3) of the Company,
threatened, other than, in each case, those the outcome
of which individually or in the aggregate would not
reasonably be expected to impair the ability of the
Company to perform its obligations under this Agreement
or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
(ii) Neither the Company nor any of its
subsidiaries is subject to any outstanding order,
injunction or decree 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
resolutions at the request of any Governmental
Entity that restricts the conduct of its business or
that in any manner relates to its capital adequacy,
its credit policies, its management or its business
(each, a "Regulatory Agreement"), nor has the
Company or any of its subsidiaries or affiliates (as
defined in Section 8.3) (A) been advised since
January 1, 1996 by any Governmental Entity that it
is considering issuing or requesting any such
Regulatory Agreement or (B) have knowledge of any
pending or threatened regulatory investigation.
After the date of this Agreement, no matters
referred to in this Section 3.3(h) shall have
arisen.
(i) Absence of Changes in Benefit Plans. The
Company has provided to Parent a true and complete list
of (i) all severance and employment agreements of the
Company with directors or executive officers or key
employees, (ii) all severance programs, policies and
practices of each of the Company and each of its
Significant Subsidiaries, and (iii) all plans or
arrangements of the Company and each of its Significant
Subsidiaries relating to its current or former employees,
officers or directors which contain change in control
provisions. Since January 1, 1997 there has not been any
adoption or amendment in any respect by the Company or
any of its subsidiaries of any equity-based Company
Benefit Plan. For purposes of this Agreement, "Company
Benefit Plan" shall mean collective bargaining agreement,
employment agreement, consulting agreement, severance
agreement or any material bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any
current or former employee, officer or director of the
Company or any of its wholly owned subsidiaries. Since
January 1, 1997, there has not been any change in any
actuarial or other assumptions used to calculate funding
obligations with respect to any Company pension plans or
post-retirement benefit plans, or any change in the
manner in which contributions to any Company pension
plans or post-retirement benefit plans are made or the
basis on which such contributions are determined which,
individually or in the aggregate, would result in an
increase of the Company's or its subsidiaries'
liabilities thereunder.
(j) ERISA Compliance. (i) With respect to
Company Benefit Plans, no event has occurred and, to the
knowledge of the Company, there exists no condition or
set of circumstances, in connection with which the
Company or any of its subsidiaries could be subject to
any liability that individually or in the aggregate would
have an adverse effect on the Company under the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), the Code or any other applicable law.
(ii) Each Company Benefit Plan has been
administered in accordance with its terms. The
Company, its subsidiaries and all the Company
Benefit Plans have been operated, and are in
compliance with the applicable provisions of ERISA,
the Code and all other applicable laws and the terms
of all applicable collective bargaining agreements.
(iii) Neither the Company nor any trade
or business, whether or not incorporated (an "ERISA
Affiliate"), which together with the Company would
be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, has incurred any
unsatisfied liability under Title IV of ERISA in
connection with any Company Benefit Plan and no
condition exists that presents a risk to the Company
or any ERISA Affiliate of incurring any such
liability (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the
ordinary course). No Company Benefit Plan has
incurred an "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412
of the Code) whether or not waived.
(iv) No Company Benefit Plan is subject
to Title IV of ERISA. No Company Benefit Plan is a
"multiemployer plan" within the meaning of Section
3(37) of ERISA.
(v) Except as set forth in Section 3.3(j)
of the Company Disclosure Schedule and except for
the Company's Post-Retirement Medical Benefit Plan,
no Company Benefit Plan provides medical benefits
(whether or not insured), with respect to current or
former employees after retirement or other
termination of service (other than coverage mandated
by applicable law or benefits, the full cost of
which is borne by the current or former employee).
(vi) Except for the Company's Post-
Retirement Medical Benefit Plan, each Company
Benefit Plan which is a welfare benefit plan as
defined in Section 3(1) of ERISA (including any such
plan covering former employees of the Company or any
subsidiary of the Company) may be amended or
terminated by the Company and Parent on or at any
time after the Closing Date.
(vii) As of the date of this Agreement,
neither the Company nor any of its subsidiaries is a
party to any collective bargaining or other labor
union contract applicable to persons employed by the
Company or any of its subsidiaries and no collective
bargaining agreement is being negotiated by the
Company or any of its subsidiaries. As of the date
of this Agreement, there is no labor dispute, strike
or work stoppage against the Company or any of its
subsidiaries pending or, to the knowledge of the
Company, threatened which may interfere with the
respective business activities of the Company or any
of its subsidiaries.
(viii) No amounts payable under Company
Benefit Plans will fail to be deductible for federal
income tax purposes by virtue of section 280G of the
Code. The consummation of the transactions
contemplated by this Agreement will not, either
alone or in combination with another event
undertaken by the Company or any of its subsidiaries
prior to the date hereof, (A) entitle any current or
former employee or officer of the Company or any
ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as
expressly provided in this Agreement, (B) accelerate
the time of payment or vesting, or increase the
amount of compensation due any such employee or
officer or (C) constitute a "change in control"
under any Company Benefit Plan, and the Company and
its board of directors have taken all required
actions to effect the foregoing.
(k) Taxes. (i) Each of the Company and its
subsidiaries has filed all tax returns and reports
required to be filed by it and all such returns and
reports are complete and correct in all respects, or
requests for extensions to file such returns or reports
have been timely filed, granted and have not expired.
The Company and each of its subsidiaries has paid (or the
Company has paid on its behalf) all taxes (as defined
herein) shown as due on such returns, and the most recent
financial statements contained in Company Filed SEC
Documents reflect an adequate reserve in accordance with
GAAP for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have
been proposed, asserted or assessed against the
Company or any of its subsidiaries that are not
adequately reserved for. The federal income tax
returns of the Company and each of its subsidiaries
consolidated in such returns for tax years through
1986 have closed by virtue of the applicable statute
of limitations.
(iii) Neither the Company nor any of its
subsidiaries has taken any action or knows of any
fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(iv) As used in this Agreement, "taxes"
shall include all (x) federal, state, local or
foreign income, property, sales, excise and other
taxes or similar governmental charges, including any
interest, penalties or additions with respect
thereto, (y) liability for the payment of any
amounts of the type described in (x) as a result of
being a member of an affiliated, consolidated,
combined or unitary group, and (z) liability for the
payment of any amounts as a result of being party to
any tax sharing agreement or as a result of any
express or implied obligation to indemnify any other
person with respect to the payment of any amounts of
the type described in clause (x) or (y).
(l) Voting Requirements. The affirmative vote
at the Company Stockholders Meeting (the "Company
Stockholder Approval") of a (i) majority of the voting
power of all outstanding shares of Company Common Stock
and Company Series A Convertible Preferred Stock, voting
together as a single class, and (ii) two-thirds of the
number of outstanding shares of Company Preferred Stock
(with all series voting together as a single class) to
adopt this Agreement are the only votes of the holders of
any class or series of the Company's capital stock
necessary to approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger.
(m) State Takeover Statutes. The Board of
Directors of the Company has approved this Agreement and
the Voting Agreement and the transactions contemplated
hereby and thereby and, assuming the accuracy of Parent's
representation and warranty contained in Section 3.4(n),
such approval constitutes approval of the Merger and the
Voting Agreement and the other transactions contemplated
hereby and thereby by the Company Board of Directors
under the provisions of Section 203 of the DGCL such that
Section 203 of the DGCL does not apply to this Agreement
and the Voting Agreement and the transactions
contemplated hereby and thereby. To the knowledge of the
Company, no other state takeover statute is applicable to
the Merger or the Voting Agreement or the other
transactions contemplated hereby or thereby.
(n) Accounting Matters. The Company has
disclosed to its independent public accountants all
actions taken by it or its subsidiaries that would impact
the accounting of the business combination to be effected
by the Merger as a pooling of interests. As of the date
hereof, the Company, based on advice from its independent
public accountants, believes that the Merger will qualify
for "pooling of interests" accounting. In connection
with the foregoing, the Company has received a letter
from the Company's independent accountants stating that
accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if
the Merger is closed and consummated as contemplated by
this Agreement.
(o) Brokers. No broker, investment banker,
financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
(p) Ownership of Parent Capital Stock. Except
for shares owned by Company Benefit Plans or shares held
or managed for the account of another person or as to
which the Company is required to act as a fiduciary or in
a similar capacity or as otherwise disclosed in the
Company SEC Documents, as of the date hereof, neither the
Company nor, to its knowledge without independent
investigation, any of its affiliates, (i) beneficially
owns (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, or (ii) except as set forth in
Section 3.3(p) of the Company Disclosure Schedule, is
party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing
of, in each case, shares of capital stock of Parent,
other, in each case, than the shares of Parent capital
stock held, directly or indirectly, in trust accounts,
managed accounts or the like or held for the account of
another person.
(q) Intellectual Property. (i) The Company
and its subsidiaries own or have a valid license to use
all trademarks, service marks and trade names (including
any registrations or applications for registration of any
of the foregoing) (collectively, the "Company
Intellectual Property") necessary to carry on its
business substantially as currently conducted and the
consummation of the Merger and the other transactions
contemplated hereby will not result in the loss of any
such rights.
(ii) The consummation of the Merger and the
other transactions contemplated hereby will not
result in the loss of any rights to use computer and
telecommunication software including source and
object code and documentation and any other media
(including, without limitation, manuals, journals
and reference books) necessary to carry on its
business substantially as currently conducted.
(r) Certain Contracts. Except as set forth in
the Company SEC Documents filed prior to the date hereof
or as permitted pursuant to Section 4.1(a), neither the
Company nor any of its subsidiaries is a party to or
bound by (i) any agreement relating to the incurring of
indebtedness (including sale and leaseback and
capitalized lease transactions and other similar
financing transactions) providing for payment or
repayment in excess of $1 billion, other than such
agreements relating to indebtedness incurred in the
ordinary course of business of the Company's subsidiaries
to finance their securities and commodity portfolio
positions, (ii) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC),
or (iii) any non-competition agreement or any other
agreement or obligation which purports to limit in any
respect the manner in which, or the localities in which,
all or any substantial portion of the business of the
Company and its subsidiaries, taken as a whole, is or
would be conducted (the agreements, contracts and
obligations specified in clauses (ii) and (iii) above,
collectively the "Company Material Contracts").
(s) Rights Agreement. The Company has taken
all action (including, if required, amending or
terminating the Rights Agreement) so that the entering
into of this Agreement and the Voting Agreement and the
consummation of the transactions contemplated hereby and
thereby do not and will not enable or require the Company
Rights to be exercised or distributed.
(t) Environmental Liability. Except as set
forth in the Company SEC Documents or the Company
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 on the Company or any of its
subsidiaries, or that reasonably could be excepted to
result in the imposition on the Company or any of its
subsidiaries of, any liability or obligation arising
under applicable common law standards relating to
pollution or protection of the environment, human health
or safety, or under any local, state or federal
environmental statute, regulation, ordinance, decree,
judgment or order relating to pollution or protection of
the environment including, without limitation, the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (collectively, the
"Environmental Laws"), pending or, to the knowledge of
the Company, threatened, against the Company or any of
its subsidiaries. To the knowledge of the Company, each
of the Company and each of its subsidiaries is, and each
former subsidiary of the Company was, for so long as such
subsidiary was a subsidiary of the Company, in compliance
with all Environmental Laws and has or at such time had
all permits required under Environmental Laws and there
is no reasonable basis for any proceeding, claim, action
or governmental investigation under any Environmental Law
that would impose any liability or obligation on the
Company or its subsidiaries based on any failure to have,
obtain or comply with such permits. Except as set forth
in the Company SEC Documents or the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries
is subject to any agreement (including any
indemnification agreement), order, judgment, decree,
letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any
material liability or obligation pursuant to or under any
Environmental Law.
(u) Derivative Transactions. (i) All
Derivative Transactions (as defined below) entered into
by the Company or any of its subsidiaries were entered
into in accordance with applicable rules, regulations and
policies of any regulatory authority, and in accordance
with the Policies, Practices and Procedures (as defined
in Section 3.3(v)), and were entered into with
counterparties believed at the time to be financially
responsible and able to understand (either alone or in
consultation with their advisers) and to bear the risks
of such Derivative Transactions.
(ii) For purposes of this Section
3.3(u), "Derivative Transactions" means any swap
transaction, option, warrant, forward purchase or
sale transaction, futures transaction, cap
transaction, floor transaction or collar transaction
relating to one or more currencies, commodities,
bonds, equity securities, loans, interest rates,
credit-related events or conditions or any indexes,
or any other similar transaction (including any
option with respect to any of these transactions) or
combination of any of these transactions, including
collateralized mortgage obligations or other similar
instruments or any debt or equity instruments
evidencing or embedding any such types of
transactions, and any related credit support,
collateral or other similar arrangements related to
such transactions.
(v) Investment Securities and Commodities.
(i) Each of the Company and its subsidiaries has good
title to all securities and commodities owned by it
(except those sold under repurchase agreements or held in
any fiduciary or agency capacity), free and clear of any
Lien, except to the extent such securities or commodities
are pledged in the ordinary course of business to secure
obligations of the Company or its subsidiaries. Such
securities and commodities are valued on the books of the
Company in accordance with GAAP.
(ii) The Company and its subsidiaries
and their respective businesses employ investment,
securities, commodities, risk management and other
policies, practices and procedures (the "Policies,
Practices and Procedures") which the Company
believes are prudent and reasonable in the context
of such businesses. Prior to the date hereof, the
Company has identified to Parent in writing, in the
form previously agreed between the parties, those
material Policies, Practices and Procedures which
are capable of identification as of the date hereof
and, as soon as reasonably practicable after the
date hereof, the Company and its subsidiaries will
have disclosed to Parent or its representatives
those material Policies, Practices and Procedures
with respect to which Parent or its representatives
reasonably request disclosure, including the
previously-agreed information, that are not capable
of identification as of the date hereof, it being
understood by Parent that many of the Policies,
Practices and Procedures are not in writing and that
such disclosure of such requested non-written
Policies, Practices and Procedures will be made
orally and reduced to writing. Parent agrees to
keep all such disclosure confidential in accordance
with the terms of the Confidentiality Agreements (as
defined in Section 5.4).
(w) Ineligible Persons. Neither the Company,
nor, to the knowledge of the Company, any "affiliated
person" (as defined in the Investment Company Act) of the
Company, is ineligible pursuant to Section 9(a) or 9(b)
of the Investment Company Act to serve as an investment
advisor (or in any other capacity contemplated by the
Investment Company Act) to a registered investment
company. Neither the Company nor, to the knowledge of
the Company, any "person associated with an investment
adviser" (as defined in the Investment Advisers Act) of
the Company, is ineligible pursuant to Section 203 of the
Investment Advisers Act to serve as an investment advisor
or as an associated person to a registered investment
adviser. To the knowledge of the Company, neither the
Company nor any "associated person of a broker or dealer"
(as defined in the Exchange Act) of the Company, is
ineligible pursuant to Section 15(b) of the Exchange Act
to serve as a broker-dealer or as an associated person to
a registered broker-dealer.
SECTION 3.4 Representations and Warranties of
Parent. Subject to Sections 3.1 and 3.2 and except as
disclosed in the Parent Filed SEC Documents (as defined
in Section 3.4(g)) or as set forth on the Parent
Disclosure Schedule and making reference to the
particular subsection of this Agreement to which
exception is being taken (regardless of whether such
subsection refers to the Parent Disclosure Schedule),
Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate
Power. (i) Each of Parent and its subsidiaries
(including Sub) is a corporation or other legal entity
duly organized, validly existing and in good standing
(with respect to jurisdictions which recognize such
concept) under the laws of the jurisdiction in which it
is organized and has the requisite corporate or other
power, as the case may be, and authority to carry on its
business as now being conducted, except, as to
subsidiaries, for those jurisdictions where the failure
to be duly organized, validly existing and in good
standing individually or in the aggregate would not have
a material adverse effect on Parent. Each of Parent and
its subsidiaries is duly qualified or licensed to do
business and is in good standing (with respect to
jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes
such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified
or licensed or to be in good standing individually or in
the aggregate would not have a material adverse effect on
Parent.
(ii) Parent has delivered to the Company
prior to the execution of this Agreement complete
and correct copies of its certificate of
incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute
books of Parent contain accurate records of all
meetings and accurately reflect all other actions
taken by the stockholders, the Board of Directors
and all committees of the Board of Directors of
Parent since January 1, 1994.
(b) Subsidiaries. Exhibit 21 to Parent's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 includes all the Significant
Subsidiaries of Parent as of the date of this Agreement.
Except as set forth in Section 3.4(b) of the Parent
Disclosure Schedule, all the outstanding shares of
capital stock of, or other equity interests in, each such
Significant Subsidiary have been validly issued and are
fully paid and nonassessable; are owned directly or
indirectly by Parent, free and clear of all Liens; and
are free of any other restriction on the right to vote,
sell or otherwise dispose of such capital stock or other
ownership interests that would prevent the operation by
the Surviving Corporation of such Significant
Subsidiary's business as currently conducted.
(c) Capital Structure. The authorized capital
stock of Parent consists of 1,500,000,000 shares of
Parent Common Stock and 30,000,000 shares of preferred
stock, par value $1.00 per share, of Parent ("Parent
Authorized Preferred Stock"), of which 1,200,000 shares
have been designated as 8.125% Cumulative Preferred
Stock, Series A ("Parent Series A Preferred Stock"),
2,500,000 shares have been designated as 5.50%
Convertible Preferred Stock, Series B ("Parent Series B
Preferred Stock"), 8,000,000 shares have been designated
as $4.53 ESOP Convertible Preferred Stock, Series C
("Parent Series C Preferred Stock"), 7,500,000 shares
have been designated as 9.25% Preferred Stock, Series D
("Parent Series D Preferred Stock"), 1,600,000 shares
have been designated as 6.365% Cumulative Preferred
Stock, Series F ("Parent Series F Preferred Stock"),
800,000 shares have been designated as 6.213% Cumulative
Preferred Stock, Series G ("Parent Series G Preferred
Stock"), 800,000 shares have been designated as 6.231%
Cumulative Preferred Stock, Series H ("Parent Series H
Preferred Stock"), 5,000 shares have been designated as
Cumulative Adjustable Rate Preferred Stock, Series Y
("Parent Series Y Preferred Stock") and 4,444 shares have
been designated as $45,000 Cumulative Redeemable
Preferred Stock, Series Z ("Parent Series Z Preferred
Stock"). At the close of business on August 31, 1997:
(i) 640,258,150 shares of Parent Common Stock were issued
and outstanding; (ii) 111,848,134 shares of Parent Common
Stock were held by Parent in its treasury or by
subsidiaries of Parent; (iii) no shares of Parent Series
A Preferred Stock were issued and outstanding; (iv) no
shares of Parent Series B Preferred Stock were issued and
outstanding; (v) 2,925,921 shares of Parent Series C
Preferred Stock were issued and outstanding; (vi) no
shares of Parent Series D Preferred Stock were issued and
outstanding; (vii) 1,600,000 shares of Parent Series F
Preferred Stock were issued and outstanding (evidenced by
8,000,000 depositary shares, each of which represents a
one-fifth interest in a share of Parent Series F
Preferred Stock); (viii) 800,000 shares of Parent Series
G Preferred Stock were issued and outstanding (evidenced
by 4,000,000 depositary shares, each of which represents
a one-fifth interest in a share of Parent Series G
Preferred Stock); (ix) 800,000 shares of Parent Series H
Preferred Stock were issued and outstanding (evidenced by
4,000,000 depositary shares, each of which represents a
one-fifth interest in a share of Parent Series H
Preferred Stock); (x) 2,262 shares of Parent Series Y
Preferred Stock were issued and outstanding; (xi) no
shares of Parent Series Z Preferred Stock were issued and
outstanding; (xii) 6,959,368 shares of Parent Common
Stock were reserved for issuance pursuant to outstanding
warrants to purchase shares of Parent Common Stock at an
exercise price of $19.50 per share, which warrants are
exercisable until July 31, 1998 (collectively with the
Parent Series C Preferred Stock, the "Parent Convertible
Securities"); (xiii) 4,724,222 shares were reserved for
issuance upon conversion of the Parent Series C Preferred
Stock; (xiv) shares of Parent Common Stock reserved for
issuance pursuant to the stock-based plans identified in
Section 3.4(c) of the Parent Disclosure Schedule (such
plans, collectively, the "Parent Stock Plans"), of which
42,057,074 shares are subject to outstanding employee
stock options or other rights to purchase or receive
Parent Common Stock granted under the Parent Stock Plans
(collectively, "Parent Employee Stock Options"); and (xv)
other than as set forth above, no other shares of Parent
Authorized Preferred Stock have been designated or
issued. All outstanding shares of capital stock of
Parent are, and all shares thereof which may be issued
pursuant to this Agreement or otherwise will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
Except as set forth in this Section 3.4(c) and except for
changes since August 31, 1997 resulting from the issuance
of shares of Parent Common Stock pursuant to the Parent
Stock Plans, Parent Employee Stock Options or Parent
Convertible Securities and other rights referred to in
this Section 3.4(c), as of the date hereof, (x) there are
not issued, reserved for issuance or outstanding (A) any
shares of capital stock or other voting securities of
Parent, (B) any securities of Parent or any Parent
subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting
securities of Parent, (C) any warrants, calls, options or
other rights to acquire from Parent or any Parent
subsidiary, and any obligation of Parent or any Parent
subsidiary to issue, any capital stock, voting securities
or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of
Parent, and (y) there are no outstanding obligations of
Parent or any Parent subsidiary to repurchase, redeem or
otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or
sold, any such securities. As of the date hereof, except
with respect to Travelers Property Casualty Corp., there
are no outstanding (A) securities of Parent or any Parent
subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or other voting
securities in any Parent subsidiary, (B) warrants, calls,
options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any
Parent subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any
securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or
ownership interests in, any Parent subsidiary or (C)
obligations of Parent or any Parent subsidiary to
repurchase, redeem or otherwise acquire any such
outstanding securities of Parent subsidiaries or to
issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. To Parent's knowledge,
except as set forth in Section 3.4(c) of the Parent
Disclosure Schedule, neither Parent nor any Parent
subsidiary is a party to any agreement restricting the
transfer of, relating to the voting of, requiring
registration of, or granting any preemptive or, except as
provided by the terms of Parent Stock Plans, Parent
Employee Stock Options and Parent Convertible Securities,
antidilutive rights with respect to, any securities of
the type referred to in the two preceding sentences.
(d) Authority; Noncontravention. Parent and
Sub each has all requisite corporate power and authority
to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The
execution and delivery of this Agreement by each of
Parent and Sub and the consummation by each of Parent and
Sub of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate
action on the part of Parent and Sub. This Agreement has
been duly executed and delivered by each of Parent and
Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes the legal, valid and
binding obligation of each of Parent and Sub, enforceable
against each of Parent and Sub in accordance with its
terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions
contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, or result in
the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries (including
Sub) under, (i) the certificate of incorporation or by-
laws of Parent or the comparable organizational documents
of any of its Significant Subsidiaries (including Sub),
(ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization
applicable to Parent or any of its subsidiaries
(including Sub) or their respective properties or assets
or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its
subsidiaries (including Sub) or their respective
properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on
Parent or (y) reasonably be expected to impair the
ability of Parent to perform its obligations under this
Agreement. No consent, approval, order or authorization
of, action by, or in respect of, or registration,
declaration or filing with, any Governmental Entity is
required by or with respect to Parent or any of its
subsidiaries (including Sub) in connection with the
execution and delivery of this Agreement by each of
Parent or Sub or the consummation by Parent and Sub of
the transactions contemplated by this Agreement, except
for (1) the filing of a pre-merger notification and
report form by Parent under the HSR Act; (2) the filing
with the SEC of (A) the Form S-4 and (B) such reports
under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this
Agreement; (3) the filing of the Certificate of Merger
with the Secretary of State of Delaware and such filings
with Governmental Entities to satisfy the applicable
requirements of the laws of states in which Parent and
its subsidiaries are qualified or licensed to do business
or state securities or "blue sky" laws; (4) such filings
with and approvals of the NYSE and the Pacific Stock
Exchange (the "PSE") to permit the shares of Parent
Common Stock to be issued in the Merger and under the
Company Stock Plans to be listed on the NYSE and the PSE
and to permit the depositary shares representing the
Parent New Preferred Stock that are to be issued in the
Merger to be listed on the NYSE (to the extent the
corresponding depositary shares representing Company
Preferred Stock were listed on the NYSE immediately prior
to the Effective Time); (5) filings in respect of, and
approvals and authorizations of, any Governmental Entity
having jurisdiction over the securities, commodities,
banking, insurance, or other financial services
businesses; and (6) such consents, approvals, orders or
authorizations the failure of which to be made or
obtained individually or in the aggregate would not (x)
have a material adverse effect on Parent or (y)
reasonably be expected to impair the ability of Parent to
perform its obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities.
Since January 1, 1995, Parent has filed all required
reports, schedules, forms, statements and other documents
(including exhibits and all other information
incorporated therein) with the SEC (the "Parent SEC
Documents"). As of their respective dates, the Parent
SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents when
filed (as amended and restated and as supplemented by
subsequently filed Parent SEC Documents) contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The financial statements of Parent included in the Parent
SEC Documents complied as to form, as of their respective
dates of filing with the SEC, in all material respects
with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP (except, in
the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial
position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of
their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except (i) as
reflected in such financial statements or in the notes
thereto or (ii) for liabilities incurred in connection
with this Agreement or the transactions contemplated
hereby, neither Parent nor any of its subsidiaries has
any liabilities or obligations of any nature which,
individually or in the aggregate, would have a material
adverse effect on Parent.
(f) Information Supplied. None of the
information supplied or to be supplied by Parent
specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4
becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading or (ii) the
Proxy Statement will, at the date it is first mailed to
the Company's stockholders or at the time of the Company
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading. The Form S-4 and
the Proxy Statement will comply as to form in all
material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is
made by Parent with respect to statements made or
incorporated by reference therein based on information
supplied by the Company specifically for inclusion or
incorporation by reference in the Form S-4 or the Proxy
Statement.
(g) Absence of Certain Changes or Events.
Except for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby, and
except as permitted by Section 4.1(b), since January 1,
1997, Parent and its subsidiaries have conducted their
business only in the ordinary course or as disclosed in
any Parent SEC Document filed since such date and prior
to the date hereof (as amended to the date hereof, the
"Parent Filed SEC Documents"), and there has not been (i)
any material adverse change in Parent, including, but not
limited to, any material adverse change arising from or
relating to fraudulent or unauthorized activity, (ii) any
declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property)
with respect to any of Parent's capital stock, other than
regular quarterly cash dividends on the Parent Common
Stock and dividends payable on Parent's preferred stock
in accordance with their terms, (iii) any split,
combination or reclassification of any of Parent's
capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu
of or in substitution for shares of Parent's capital
stock, except for issuances of Parent Common Stock upon
exercise of Parent Employee Stock Options, upon
conversion of Parent Convertible Securities or in
accordance with the terms of the Parent Stock Plans, (iv)
except insofar as may have been disclosed in Parent Filed
SEC Documents or required by a change in GAAP, any change
in accounting methods, principles or practices by Parent
affecting its assets, liabilities or business or (v)
except insofar as may have been disclosed in the Parent
Filed SEC Documents, any tax election by Parent or its
subsidiaries or any settlement or compromise of any
income tax liability by Parent or its subsidiaries.
(h) Compliance with Applicable Laws;
Litigation. (i) Parent, its subsidiaries and employees
hold all permits, licenses, variances, exemptions,
orders, registrations and approvals of all Governmental
Entities which are required for the operation of the
businesses of Parent and its subsidiaries (the "Parent
Permits"). Parent and its subsidiaries are in compliance
with the terms of the Parent Permits and all applicable
statutes, laws, ordinances, rules and regulations. As of
the date of this Agreement, except as disclosed in Parent
SEC Documents or set forth in Section 3.4(h) of the
Parent Disclosure Schedule, no action, demand,
requirement or investigation by any Governmental Entity
and no suit, action or proceeding by any person, in each
case with respect to Parent or any of its subsidiaries or
any of their respective properties, is pending or, to the
knowledge of Parent, threatened, other than, in each
case, those the outcome of which individually or in the
aggregate would not reasonably be expected to impair the
ability of Parent to perform its obligations under this
Agreement or prevent or materially delay the consummation
of any of the transactions contemplated by this
Agreement.
(ii) Neither Parent nor any of its
subsidiaries is subject to any outstanding order,
injunction or decree or is a party to any Regulatory
Agreement, nor has Parent or any of its subsidiaries
or affiliates (A) been advised since January 1, 1996
by any Governmental Entity that it is considering
issuing or requesting any such Regulatory Agreement
or (B) have knowledge of any pending or threatened
regulatory investigation. After the date of this
Agreement, no matters referred to in this Section
3.4(h) shall have arisen.
(i) Absence of Changes in Benefit Plans.
Except as set forth in Section 3.4(i) of the Parent
Disclosure Schedule, since January 1, 1997 there has not
been any adoption or amendment in any respect by Parent
or any of its subsidiaries of any equity-based Parent
Benefit Plan. For purposes of this Agreement, "Parent
Benefit Plan" shall mean collective bargaining agreement,
employment agreement, consulting agreement, severance
agreement or any material bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any
current or former employee, officer or director of the
Parent or any of its wholly owned subsidiaries. Since
January 1, 1997, there has not been any change in any
actuarial or other assumptions used to calculate funding
obligations with respect to any Parent pension plans or
post-retirement benefit plans, or any change in the
manner in which contributions to any Parent pension plans
or post-retirement benefit plans are made or the basis on
which such contributions are determined which,
individually or in the aggregate, would result in an
increase of the Parent's or its subsidiaries' liabilities
thereunder.
(j) ERISA Compliance. (i) With respect to
Parent Benefit Plans, no event has occurred and, to the
knowledge of Parent, there exists no condition or set of
circumstances, in connection with which Parent or any of
its subsidiaries could be subject to any liability that
individually or in the aggregate would have an adverse
effect on Parent under ERISA, the Code or any other
applicable law.
(ii) Each Parent Benefit Plan has been
administered in accordance with its terms. Parent,
its subsidiaries and all the Parent Benefit Plans
have been operated, and are in compliance with the
applicable provisions of ERISA, the Code and all
other applicable laws and the terms of all
applicable collective bargaining agreements.
(iii) Neither Parent nor any trade or
business, whether or not incorporated (an "ERISA
Affiliate"), which together with Parent would be
deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, has incurred any
unsatisfied liability under Title IV of ERISA in
connection with any Parent Benefit Plan and no
condition exists that presents a risk to Parent or
any ERISA Affiliate of incurring any such liability
(other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary
course). No Parent Benefit Plan has incurred an
"accumulated funding deficiency" (within the meaning
of Section 302 of ERISA or Section 412 of the Code)
whether or not waived.
(iv) Except as set forth in Section
3.4(j) of the Parent Disclosure Schedule, no Parent
Benefit Plan is subject to Title IV of ERISA. No
Parent Benefit Plan is a "multiemployer plan" within
the meaning of Section 3(37) of ERISA.
(v) Except as set forth in Section 3.4(j)
of the Parent Disclosure Schedule, no Parent Benefit
Plan provides medical benefits (whether or not
insured), with respect to current or former
employees after retirement or other termination of
service (other than coverage mandated by applicable
law or benefits, the full cost of which is borne by
the current or former employee).
(vi) Each Parent Benefit Plan which is a
welfare benefit plan as defined in Section 3(1) of
ERISA (including any such plan covering former
employees of Parent or any subsidiary of the Parent)
may be amended or terminated by Parent or any
subsidiary of Parent on or at any time after the
Closing Date.
(vii) As of the date of this Agreement,
neither Parent nor any of its subsidiaries is a
party to any collective bargaining or other labor
union contract applicable to persons employed by
Parent or any of its subsidiaries and no collective
bargaining agreement is being negotiated by Parent
or any of its subsidiaries. As of the date of this
Agreement, there is no labor dispute, strike or work
stoppage against Parent or any of its subsidiaries
pending or, to the knowledge of Parent, threatened
which may interfere with the respective business
activities of Parent or any of its subsidiaries.
(viii) No amounts payable under Parent
Benefit Plans will fail to be deductible for federal
income tax purposes by virtue of section 280G of the
Code. The consummation of the transactions
contemplated by this Agreement will not, either
alone or in combination with another event, (A)
entitle any current or former employee or officer of
Parent or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment,
except as expressly provided in this Agreement, (B)
accelerate the time of payment or vesting, or
increase the amount of compensation due any such
employee or officer or (C) constitute a "change in
control" under any Parent Benefit Plan, and Parent
and its board of directors have taken all required
actions to effect the foregoing.
(k) Taxes. (i) Each of Parent and its
subsidiaries has filed all tax returns and reports
required to be filed by it and all such returns and
reports are complete and correct in all respects, or
requests for extensions to file such returns or reports
have been timely filed, granted and have not expired.
Parent and each of its subsidiaries has paid (or Parent
has paid on its behalf) all taxes shown as due on such
returns, and the most recent financial statements
contained in the Parent Filed SEC Documents reflect an
adequate reserve in accordance with GAAP for all taxes
payable by Parent and its subsidiaries for all taxable
periods and portions thereof accrued through the date of
such financial statements.
(ii) No deficiencies for any taxes have
been proposed, asserted or assessed against Parent
or any of its subsidiaries that are not adequately
reserved for. The federal income tax returns of
Parent and each of its subsidiaries consolidated in
such returns for tax years through 1988 have closed
by virtue of the applicable statute of limitations,
except as set forth on Schedule 3.4(k).
(iii) Neither Parent nor any of its
subsidiaries has taken any action or knows of any
fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(l) Accounting Matters. Parent has disclosed
to its independent public accountants all actions taken
by it or its subsidiaries that would impact the
accounting of the business combination to be effected by
the Merger as a pooling of interests. Parent, based on
advice from its independent public accountants, believes
that the Merger will qualify for "pooling of interest"
accounting. In connection with the foregoing, Parent has
received a letter from Parent's independent accountants
stating that accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations is
appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
(m) Brokers. No broker, investment banker,
financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
(n) Ownership of Company Capital Stock.
Except for shares owned by Parent Benefit Plans or shares
held or managed for the account of another person or as
to which Parent is required to act as a fiduciary or in a
similar capacity or as otherwise disclosed in the Parent
SEC Documents, as of the date hereof, except for the
Voting Agreement, neither Parent nor, to its knowledge
without independent investigation, any of its affiliates,
(i) beneficially owns (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of the Company, other,
in each case, than the shares of the Company's capital
stock held directly or indirectly, in trust accounts,
managed accounts or the like or held for the account of
another person.
(o) Voting Requirements. Assuming the
accuracy of the Company's representation and warranty
contained in Section 3.3(c), no vote of the holders of
Parent Common Stock or Parent's preferred stock is
necessary to authorize the issuance of Parent Common
Stock or Parent New Preferred Stock pursuant to the
Merger or otherwise in connection with the transactions
contemplated by this Agreement, including the stock
exchange listings contemplated by Section 5.11 (except as
contemplated by Section 5.6(c)).
(p) Environmental Liability. Except as set
forth in the Parent SEC Documents or the Company
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 on Parent or any of its
subsidiaries, or that reasonably could be expected to
result in the imposition on Parent or any of its
subsidiaries of, any liability or obligation arising
under applicable Environmental Laws, pending or, to the
knowledge of Parent, threatened, against Parent or any of
its subsidiaries. To the knowledge of Parent, each of
Parent and each of its subsidiaries is, and each former
subsidiary of Parent was, for so long as such subsidiary
was a subsidiary of Parent, in compliance with all
Environmental Laws and has or at such time had all
permits required under Environmental Laws and there is no
reasonable basis for any proceeding, claim, action or
governmental investigation under any Environmental Law
that would impose any liability or obligation on Parent
or its subsidiaries based on any failure to have, obtain
or comply with such permits. Except as set forth in the
Parent SEC Documents, the Parent Disclosure Schedule or
the reports, schedules, forms, statements and other
documents (including exhibits and all other information
incorporated therein) filed by Travelers Property
Casualty Corp. with the SEC since January 1, 1995,
neither Parent nor any of its subsidiaries is subject to
any agreement (including any indemnification agreement),
order, judgment, decree, letter or memorandum by or with
any court, governmental authority, regulatory agency or
third party imposing any material liability or obligation
pursuant to or under any Environmental Law.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business. (a) Conduct
of Business by the Company. Except as set forth in
Section 4.1(a) of the Company Disclosure Schedule, as
otherwise expressly contemplated by this Agreement or as
consented to by Parent in writing, such consent not to be
unreasonably withheld or delayed, during the period from
the date of this Agreement to the Effective Time, the
Company shall, and shall cause its subsidiaries to, carry
on their respective businesses in the ordinary course
consistent with past practice and in compliance in all
material respects with all applicable laws and
regulations and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current
business organizations, use all reasonable efforts to
keep available the services of their current officers and
other key employees and preserve their relationships with
those persons having business dealings with them to the
end that their goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the
generality of the foregoing, senior officers of Parent
and the Company shall meet on a regular basis to review
the financial and operational affairs of the Company and
its subsidiaries. Such review shall be conducted in
accordance with applicable law and shall not cover
current or future pricing of specific products, marketing
or strategic plans, specific breakdowns of sales by
customers, or plans to introduce new competitive
products. Without limiting the generality of the
foregoing (but subject to the above exceptions), during
the period from the date of this Agreement to the
Effective Time, the Company shall not, and shall not
permit any of its subsidiaries to:
(i) other than dividends and
distributions by a direct or indirect wholly owned
subsidiary of the Company to its parent, or by a
subsidiary that is partially owned by the Company or
any of its subsidiaries, provided that the Company
or any such subsidiary receives or is to receive its
proportionate share thereof, (x) declare, set aside
or pay any dividends on, make any other
distributions in respect of, or enter into any
agreement with respect to the voting of, any of its
capital stock (except (A) for regular quarterly cash
dividends on Company Common Stock at a rate not in
excess of $.16 per share (which amount per share may
be increased in accordance with Section 4.1(d)) and
(B) for regular quarterly cash dividends on Company
Preferred Stock in accordance with their present
terms), (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, except
for issuances of Company Common Stock upon
conversion of Company Convertible Securities or upon
the exercise of Company Employee Stock Options that
are, in each case, outstanding as of the date hereof
in accordance with their present terms, or (z)
purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its
subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such
shares or other securities other than pursuant to
the terms of the Company Series A Convertible
Preferred Stock;
(ii) issue, deliver, sell, pledge or
otherwise encumber or subject to any Lien any shares
of its capital stock, any other voting securities or
any securities convertible into, or any rights,
warrants or options to acquire, any such shares,
voting securities or convertible securities (other
than (w) the issuance of Company Common Stock upon
conversion of Company Convertible Securities in
accordance with their present terms at the option of
the holders thereof, (x) the issuance of Company
Common Stock upon the exercise of Company Employee
Stock Options that are, in each case, outstanding as
of the date hereof in accordance with their present
terms, (y) the issuance of Company Common Stock
pursuant to the Company's Employee Stock Purchase
Plan, in accordance with the present terms of such
plan) and (z) pursuant to the Rights Agreement;
(iii) amend its certificate of
incorporation, by-laws or other comparable
organizational documents;
(iv) acquire or agree to acquire by
merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any
other manner, any business or any person;
(v) sell, lease, license, mortgage or
otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets
that is material in relation to the Company and its
subsidiaries, taken as a whole (including
securitizations), other than in the ordinary course
of business;
(vi) except for borrowings under existing
credit facilities or lines of credit, incur any
indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or
otherwise become responsible for the obligations of
any person, or make any loans, advances or capital
contributions to, or investments in, any person
other than its wholly owned subsidiaries, except in
the ordinary course of business consistent with past
practice or except as attributable to the execution
of this Agreement and the transactions contemplated
hereby;
(vii) change its methods of accounting (or
underlying assumptions) in effect at December 31,
1996, except as required by changes in GAAP, 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 the Company for the taxable
years ending December 31, 1996, except as required
by changes in law or regulation;
(viii) change the investment and risk
management and other policies of the Company and the
other Policies, Practices and Procedures without
Parent's prior written consent;
(ix) with respect to the business
conducted by Phibro Inc. and its subsidiaries, (A)
manage its net risk position other than in a manner
consistent with that employed during the last six
months, which the Company represents to be a net
risk position substantially below the Company's
current nominal risk limits or (B) permit its
targeted annualized value at risk, computed in
accordance with the Company's prior practices, to
exceed the number specified in Section 4.1(a)(ix) of
the Company Disclosure Schedule;
(x) create, renew, amend, terminate or
cancel, or take any other action that may result in
the creation, renewal, amendment, termination or
cancellation of any Company Material Contract except
in the ordinary course of business;
(xi) except (A) pursuant to agreements or
arrangements in effect on the date hereof, (B) for
dividends paid in accordance with Section 4.1(a) and
(C) in accordance with Section 4.1(c), pay, loan or
advance any amount to, or sell, transfer or lease
any properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any
agreement or arrangement with, any of its officers
or directors or any affiliate or the immediate
family members or associates of any of its officers
or directors other than compensation in the ordinary
course of business consistent with past practice; or
(xii) authorize, or commit or agree to
take, any of the foregoing actions;
provided that the limitations set forth in this Section
4.1(a) (other than clause (iii)) shall not apply to any
transaction between the Company and any wholly owned
subsidiary or between any wholly owned subsidiaries of
the Company.
(b) Conduct of Business by Parent. Except as
set forth in Section 4.1(b) of the Parent Disclosure
Schedule, as otherwise expressly contemplated by this
Agreement or as consented to by the Company in writing,
such consent not to be unreasonably withheld or delayed,
during the period from the date of this Agreement to the
Effective Time, Parent shall, and shall cause its
subsidiaries to, carry on their respective businesses in
the ordinary course consistent with past practice and in
compliance in all material respects with all applicable
laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact
their current business organizations, use reasonable
efforts to keep available the services of their current
officers and other key employees and preserve their
relationships with those persons having business dealings
with them to the end that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from
the date of this Agreement to the Effective Time, Parent
shall not, and shall not permit any of its subsidiaries
to:
(i) other than pursuant to Adjustment
Events and other than dividends and distributions by
a direct or indirect wholly owned subsidiary of
Parent to its parent, or by a subsidiary that is
partially owned by Parent or any of its
subsidiaries, provided that Parent or any such
subsidiary receives or is to receive its
proportionate share thereof, declare, set aside or
pay any dividends on or make any other distributions
in respect of any of its capital stock (except (A)
for regular quarterly cash dividends (which may be
increased by Parent) on the Parent Common Stock and
(B) for regular quarterly cash dividends on the
Parent Authorized Preferred Stock); provided,
however, that this Section 4.1(b)(i) shall not apply
to Travelers Property Casualty Corp. and its wholly
owned subsidiaries;
(ii) except as contemplated hereby, amend
its certificate of incorporation (other than in
connection with the issuance of a new class or
series of Parent Authorized Preferred Stock);
provided, however, that this Section 4.1(b)(ii)
shall not apply to Parent's subsidiaries other than
Sub;
(iii) enter into any agreement to acquire
all or substantially all of the capital stock or
assets of any other person or business unless upon
advice of counsel such transaction would not
reasonably be expected to materially delay or impede
the consummation of the Merger;
(iv) authorize, or commit or agree to take,
any of the foregoing actions;
provided that the limitations set forth in this Section
4.1(b) shall not apply to any transaction between Parent
and any wholly owned subsidiary or between any wholly
owned subsidiaries of Parent.
(c) Compensation Matters. (i) Notwithstanding
anything in this Agreement to the contrary, until the
Effective Time, the senior officers of the Company
referred to below, after consultation with Parent, shall
recommend to the Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee")
incentive compensation for employees of the Company and
its subsidiaries for the 1997 compensation year. Such
Committee shall, after considering such recommendation
and any other input separately provided by Parent,
determine such incentive compensation for such employees
(provided that it makes its determination in a manner
that is consistent with past practice). Such aggregate
incentive compensation, together with aggregate 1997 base
compensation, shall not exceed the aggregate incentive
compensation accruals (including the accruals for the
quarter ended September 30, 1997, and an accrual for 1997
set forth in Section 4.1(c) of the Company Disclosure
Schedule based upon the representations set forth
therein), plus accruals in respect of 1997 base
compensation. The Compensation Committee may make such
determinations at an earlier time in the calendar year
(after the date hereof) than is the usual practice of the
Company. Incentive compensation for the 1997
compensation year shall be paid not earlier than December
29, 1997. For purposes of the foregoing, recommendations
to the Compensation Committee regarding incentive
compensation for the 1997 compensation year shall be made
(i) by the individual who is the Chairman and Chief
Executive Officer of Salomon Brothers Inc and an
Executive Vice President of the Company, in the case of
employees of subsidiaries of the Company (other than
Phibro Inc., Phibro Resources Corp., Philipp Brothers,
Inc., Phibro Energy Production, Inc. and their
subsidiaries (collectively, "Phibro")) who are not also
officers of the Company, (ii) by the Chairman and Chief
Executive Officer of the Company, in the case of
employees of Phibro and officers of the Company (other
than such Chief Executive Officer) who are not employees
of subsidiaries of the Company and (iii) jointly by the
executive officers referred to in clauses (i) and (ii),
in the case of officers of the Company (other than its
Chief Executive Officer) who are also employees of
subsidiaries of the Company (other than Phibro).
Notwithstanding the foregoing, the 1997 incentive
compensation of the Chief Executive Officer of the
Company shall be determined by the Compensation Committee
in its sole discretion, subject to the limit on aggregate
compensation for the 1997 compensation year referred to
above. Parent and the Surviving Corporation shall
implement all incentive compensation decisions made in
accordance with the terms of this Section 4.1(c)
following the Effective Time if such decisions were not
implemented prior to the Effective Time. Until the
Effective Time, the Company shall not, without the prior
written consent of Parent, amend any of the Company's or
its subsidiaries' employee plans or take action under
such plans inconsistent with the Company's or its
subsidiaries' ordinary course of conduct prior to the
date hereof. Until the Effective Time, the Company and
its subsidiaries shall not approve any severance or
similar payments outside the ordinary course of conduct
consistent with prior practice, including, without
limitation, for employees whose employment is expected to
terminate, or who have indicated an interest in
terminating their employment, as a result of the Merger.
(d) Coordination of Dividends. The Company shall
change its customary quarterly dividend record dates for the
Company Common Stock to occur on the customary quarterly
dividend record dates for the Parent Common Stock commencing
with the dividend record date expected to be November 3,
1997. The first dividend to be paid by the Company on the
Company Common Stock following such record date change
shall be an amount equal to (x) the product of (i) the
amount of the quarterly dividend on the Parent Common
Stock (as it may have been increased) and (ii) the
Exchange Ratio, multiplied by (y) a fraction, the
numerator is the number of days elapsed since the
Company's last dividend record date on the Company Common
Stock and the denominator is 90. Notwithstanding anything
in Section 4.1(a)(i) to the contrary, in the event that Parent
increases the dividend rate on the Parent Common Stock
(assuming that no Adjustment Event has occurred) and any
such dividend has a record date prior to the Effective
Time, the Company shall be entitled to increase the
quarterly dividend on the Company Common Stock (subject,
if applicable, to pro ration as described in the
immediately preceding sentence) to an amount equal to the
product of (i) the amount of the quarterly dividend on
the Parent Common Stock (as so increased) and (ii) the
Exchange Ratio. Parent will notify the Company promptly
following approval by the Parent Board of Directors of
any increase in Parent's dividend rate. It is the intent
of the parties that all actions taken pursuant to this
Agreement shall be consistent with their intention that
the Merger will be accounted for as a pooling of interests.
In furtherance of the foregoing, the parties agree to
cooperate with each other regarding these matters in an
attempt to carry out such intention to the fullest extent.
(e) Other Actions. Except as required by law,
the Company and Parent shall not, and shall not permit
any of their respective subsidiaries to, voluntarily take
any action that would, or that could reasonably be
expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that
are qualified as to materiality (including as a result of
the provisions of Section 3.2) becoming untrue at the
Effective Time, (ii) any of such representations and
warranties that are not so qualified becoming untrue in
any material respect at the Effective Time, or (iii) any
of the conditions to the Merger set forth in Article VI
not being satisfied.
(f) Advice of Changes. The Company and Parent
shall promptly advise the other party orally and in
writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this
Agreement that is qualified as to materiality (including
as a result of the provisions of Section 3.2) becoming
untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect,
(ii) the failure by it to comply in any material respect
with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied
by it under this Agreement and (iii) any change or event
having, or which, insofar as can reasonably be foreseen,
could reasonably be expected to have a material adverse
effect on such party or on the truth of their respective
representations and warranties or the ability of the
conditions set forth in Article VI to be satisfied;
provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements
of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this
Agreement.
SECTION 4.2 No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of
its subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries
to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of
furnishing information), or take any other action
designed to facilitate, any inquiries or the making of
any proposal which constitutes a Company Takeover
Proposal (as defined below) or (ii) participate in any
discussions or negotiations regarding any Company
Takeover Proposal; provided, however, that if the Board
of Directors of the Company determines in good faith,
after consultation with outside counsel, that it is
necessary to do so in order to act in a manner consistent
with its fiduciary duties to the Company's stockholders
under applicable law, the Company may, in response to any
Company Takeover Proposal which was not solicited by it
and which did not otherwise result from a breach of this
Section 4.2(a), and subject to providing prior written
notice of its decision to take such action to Parent and
compliance with Section 4.2(c), (x) furnish information
with respect to the Company and its subsidiaries to any
person making a Company Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by the
Company based on the advice of its outside counsel) and
(y) participate in discussions or negotiations regarding
such Company Takeover Proposal. For purposes of this
Agreement, "Company Takeover Proposal" means any inquiry,
proposal or offer from any person relating to any direct
or indirect acquisition or purchase of a business that
constitutes 30% or more of the net revenues, net income
or assets of the Company and its subsidiaries, taken as a
whole, or 30% or more of any class of equity securities
of the Company, any tender offer or exchange offer that
if consummated would result in any person beneficially
owning 30% or more of any class of any equity securities
of the Company, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company (or any
Company subsidiary whose business constitutes 30% or more
of the net revenues, net income or assets of the Company
and its subsidiaries, taken as a whole), other than the
transactions contemplated by this Agreement.
(b) Except as expressly permitted by this
Section 4.2, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation
by such Board of Directors or such committee of the
Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Company
Takeover Proposal, or (iii) cause the Company to enter
into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, a
"Company Acquisition Agreement") related to any Company
Takeover Proposal. Notwithstanding the foregoing, the
Board of Directors of the Company, to the extent that it
determines in good faith, after consultation with outside
counsel, that in light of a Company Superior Proposal it
is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's
stockholders under applicable law, may terminate this
Agreement solely in order to concurrently enter into a
Company Acquisition Agreement with respect to any Company
Superior Proposal, but only at a time that is after the
second business day following Parent's receipt of written
notice advising Parent that the Board of Directors of the
Company is prepared to accept a Company Superior
Proposal, specifying the material terms and conditions of
such Company Superior Proposal and identifying the person
making such Company Superior Proposal, all of which
information will be kept confidential by Parent in
accordance with the terms of the Confidentiality
Agreements. For purposes of this Agreement, a "Company
Superior Proposal" means any proposal made by a third
party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more
than 50% of the combined voting power of the shares of
the Company's capital stock then outstanding or all or
substantially all the assets of the Company and otherwise
on terms which the Board of Directors of the Company
determines in its good faith judgment to be more
favorable to the Company's stockholders than the Merger
and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the
Board of Directors of the Company, is reasonably capable
of being obtained by such third party.
(c) In addition to the obligations of the
Company set forth in paragraphs (a) and (b) of this
Section 4.2, the Company shall immediately advise Parent
orally and in writing of any request for information or
of any Company Takeover Proposal, the material terms and
conditions of such request or Company Takeover Proposal
and the identity of the person making such request or
Company Takeover Proposal. The Company will keep Parent
reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or
Company Takeover Proposal.
(d) Nothing contained in this Section 4.2
shall prohibit the Company from taking and disclosing to
its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good
faith judgment of the Board of Directors of the Company,
after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under
applicable law; provided, however, that, neither the
Company nor its Board of Directors nor any committee
thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this
Agreement or the Merger or approve or recommend, or
propose publicly to approve or recommend, a Company
Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and
the Proxy Statement; Stockholders Meetings. (a) As soon
as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC
the Proxy Statement and Parent shall prepare and file
with the SEC the Form S-4, in which the Proxy Statement
will be included as a prospectus. Each of the Company
and Parent shall use best efforts to have the Form S-4
declared effective under the Securities Act as promptly
as practicable after such filing. The Company will use
all best efforts to cause the Proxy Statement to be
mailed to the holders of Company Common Stock and Company
Preferred Stock as promptly as practicable after the Form
S-4 is declared effective under the Securities Act.
Parent shall also take any action (other than qualifying
to do business in any jurisdiction in which it is not now
so qualified or to file a general consent to service of
process) required to be taken under any applicable state
securities laws in connection with the issuance of the
Parent Common Stock and the Parent New Preferred Stock in
the Merger and the Company shall furnish all information
concerning the Company and the holders of Company Common
Stock as may be reasonably requested in connection with
any such action. No filing of, or amendment or
supplement to, the Form S-4 or the Proxy Statement will
be made by Parent or the Company without providing the
other with the opportunity to review and comment thereon.
Parent will advise the Company, promptly after it
receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Common
Stock and the Parent New Preferred Stock issuable in
connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of
the Proxy Statement or the Form S-4 or comments thereon
and responses thereto or requests by the SEC for
additional information. If at any time prior to the
Effective Time any information relating to the Company or
Parent, or any of their respective affiliates, officers
or directors, should be discovered by the Company or
Parent which should be set forth in an amendment or
supplement to any of the Form S-4 or the Proxy Statement,
so that any of such documents would not include any
misstatement of a material fact or omit to state any
material fact necessary to make the statements therein,
in light of the circumstances under which they were made,
not misleading, the party which discovers such
information shall promptly notify the other parties
hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with
the SEC and, to the extent required by law, disseminated
to the stockholders of the Company and Parent.
(b) The Company shall, as promptly as
practicable after the Form S-4 is declared effective
under the Securities Act, duly call, give notice of,
convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") in accordance with the
DGCL for the purpose of obtaining the Company Stockholder
Approval and, subject to its rights to terminate this
Agreement pursuant to Section 4.2(b), shall, through its
Board of Directors, recommend to its stockholders the
approval and adoption of this Agreement, the Merger and
the other transactions contemplated hereby. Without
limiting the generality of the foregoing but subject to
its rights to terminate this Agreement pursuant to
Section 4.2(b), the Company agrees that its obligations
pursuant to the first sentence of this Section 5.1(b)
shall not be affected by the commencement, public
proposal, public disclosure or communication to the
Company of any Company Takeover Proposal.
SECTION 5.2 Letters of the Company's
Accountants. (a) The Company shall use best efforts to
cause to be delivered to Parent two letters from the
Company's independent accountants, one dated a date
within two business days before the date on which the
Form S-4 shall become effective and one dated a date
within two business days before the Closing Date, each
addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and
substance for comfort letters delivered by independent
public accountants in connection with registration
statements similar to the Form S-4.
(b) The Company shall use best efforts to
cause to be delivered to Parent and Parent's independent
accountants two letters from the Company's independent
accountants addressed to Parent and the Company, one
dated as of the date the Form S-4 is declared effective
and one dated as of the Closing Date, in each case
stating that accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations is
appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
SECTION 5.3 Letters of Parent's Accountants.
(a) Parent shall use best efforts to cause to be
delivered to the Company two letters from Parent's
independent accountants, one dated a date within two
business days before the date on which the Form S-4 shall
become effective and one dated a date within two business
days before the Closing Date, each addressed to the
Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for
comfort letters delivered by independent public
accountants in connection with registration statements
similar to the Form S-4.
(b) Parent shall use best efforts to cause to
be delivered to the Company and the Company's independent
accountants two letters from Parent's independent
accountants addressed to the Company and Parent, one
dated as of the date the Form S-4 is declared effective
and one dated as of the Closing Date, in each case
stating that accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations is
appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
SECTION 5.4 Access to Information;
Confidentiality. Subject to the two Confidentiality
Agreements, each dated September 9, 1997, between Parent
and the Company (the "Confidentiality Agreements"), and
subject to the restrictions contained in confidentiality
agreements to which such party is subject (which such
party will use its best efforts to have waived) and
applicable law, each of the Company and Parent shall, and
shall cause each of its respective subsidiaries to,
afford to the other party and to the officers, employees,
accountants, counsel, financial advisors and other
representatives of such other party, reasonable access
during normal business hours during the period prior to
the Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and,
during such period, each of the Company and Parent shall,
and shall cause each of its respective subsidiaries to,
furnish promptly to the other party (a) a copy of each
report, schedule, registration statement and other
document filed by it during such period pursuant to the
requirements of federal or state securities laws and (b)
all other information concerning its business, properties
and personnel as such other party may reasonably request.
In addition, the Company will deliver, or cause to be
delivered, to Parent the internal or external reports
reasonably required by Parent promptly after such reports
are made available to the Company's personnel. No review
pursuant to this Section 5.4 shall affect any
representation or warranty given by the other party
hereto. Each of the Company and Parent will hold, and
will cause its respective officers, employees,
accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic
information in accordance with the terms of the
Confidentiality Agreements.
SECTION 5.5 Best Efforts. (a) Upon the terms
and subject to the conditions set forth in this
Agreement, each of the parties agrees to use best efforts
to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations
and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental
Entity, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this
Agreement or the consummation of the transactions
contemplated by this Agreement, including seeking to have
any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed,
and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of,
this Agreement. Nothing set forth in this Section 5.5(a)
will limit or affect actions permitted to be taken
pursuant to Section 4.2.
(b) In connection with and without limiting
the foregoing, the Company and Parent shall (i) take all
action necessary to ensure that no state takeover statute
or similar statute or regulation is or becomes applicable
to this Agreement or the Voting Agreement or the Merger
or any of the other transactions contemplated hereby or
thereby and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to this
Agreement or the Voting Agreement or the Merger or any
other transaction contemplated hereby or thereby, take
all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement and the
Voting Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement
or the Voting Agreement and otherwise to minimize the
effect of such statute or regulation on the Merger and
the other transactions contemplated by this Agreement or
the Voting Agreement.
(c) Each of the Company and Parent shall
cooperate with each other in obtaining opinions of
Cravath, Swaine & ▇▇▇▇▇, counsel to the Company, and
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to
Parent, dated as of the Effective Time, to the effect
that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code. In connection
therewith, each of Parent, Sub and the Company shall
deliver to Cravath, Swaine & ▇▇▇▇▇ and Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP customary representation
letters in form and substance reasonably satisfactory to
such counsel and the Company shall use its best efforts
to obtain any representation letters from appropriate
stockholders and shall deliver any such letters obtained
to Cravath, Swaine & ▇▇▇▇▇ and Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP (the representation letters referred
to in this sentence are collectively referred to as the
"Tax Certificates").
(d) Each of Parent and Sub shall use its best
efforts to assist the Company in the preparation and
filing, on the earliest practicable date after the date
of this Agreement, of a Current Report on Form 8-K for
the Company containing the information required by Item
512(a)(1)(ii) of Regulation S-K of the SEC, including the
historical financial statements of Parent and Sub
required by Rule 3-05 of Regulation S-X of the SEC and
the pro forma financial information with respect to the
business combination contemplated by this Agreement
required by Article 11 of Regulation S-X of the SEC, and
each of Parent and Sub shall take all other action
necessary to allow the Company to issue and sell
securities, subject to Section 4.1(a) hereof, on a
continuous or delayed basis in one or more public
offerings registered under the Securities Act.
(e) The Company shall use its best efforts to
assist Parent and certain of its subsidiaries that are
subject to the reporting requirements of the Exchange Act
(the "Reporting Subs") in the preparation and filing, on
the earliest practicable date after the date of this
Agreement, of Current Reports on Form 8-K for each of
Parent and the Reporting Subs containing the information
required by Item 512(a)(1)(ii) of Regulation S-K of the
SEC, including the historical financial statements of the
Company required by Rule 3-05 of Regulation S-X of the
SEC and the pro forma financial information with respect
to the business combination contemplated by this
Agreement required by Article 11 of Regulation S-X of the
SEC, and the Company shall take all other action
necessary to allow Parent and the Reporting Subs to issue
and sell securities on a continuous or delayed basis in
one or more public offerings registered under the
Securities Act.
SECTION 5.6 Employee Stock Options, Incentive
and Benefit Plans. (a) As of the Effective Time, (i)
each outstanding Company Employee Stock Option shall be
converted into an option (an "Adjusted Option") to
purchase the number of shares of Parent Common Stock
equal to the number of shares of Company Common Stock
subject to such Company Employee Stock Option immediately
prior to the Effective Time multiplied by the Exchange
Ratio, at an exercise price per share equal to the
exercise price for each such share of Company Common
Stock subject to such option divided by the Exchange
Ratio, and all references in each such option to the
Company shall be deemed to refer to Parent, where
appropriate, and (ii) Parent shall assume the obligations
of the Company under the Company Stock Plans. The other
terms of each such option, and the plans under which they
were issued, shall continue to apply in accordance with
their terms.
(b) As of the Effective Time, (i) each
outstanding award (including restricted stock, deferred
stock, phantom stock, stock equivalents and stock units)
(each a "Company Award") under any Company Stock Plan
shall be converted into the same instrument of Parent, in
each case with such adjustments (and no other
adjustments) to the terms of such Company Awards as are
necessary to preserve the value inherent in such Company
Awards with no detrimental effects on the holder thereof
and (ii) Parent shall assume the obligations of the
Company under the Company Awards. The other terms of
each Company Award, and the plans or agreements under
which they were issued, shall continue to apply in
accordance with their terms.
(c) The Company and Parent agree that each of
the Company Stock Plans and Parent Stock Plans shall be
amended, to the extent necessary, to reflect the
transactions contemplated by this Agreement, including,
but not limited to the conversion of shares of Company
Common Stock held or to be awarded or paid pursuant to
such benefit plans, programs or arrangements into shares
of Parent Common Stock on a basis consistent with the
transactions contemplated by this Agreement. The Company
and Parent agree to submit the amendments to the Parent
Stock Plans or the Company Stock Plans to their
respective stockholders, if such submission is determined
to be necessary by counsel to the Company or Parent after
consultation with one another; provided, however, that
such approval shall not be a condition to the
consummation of the Merger.
(d) Parent shall (i) reserve for issuance the
number of shares of Parent Common Stock that will become
subject to the benefit plans, programs and arrangements
referred to in this Section 5.6 and (ii) issue or cause
to be issued the appropriate number of shares of Parent
Common Stock pursuant to applicable plans, programs and
arrangements, upon the exercise or maturation of rights
existing thereunder on the Effective Time or thereafter
granted or awarded. No later than the Effective Time,
Parent shall prepare and file with the SEC a registration
statement on Form S-8 (or other appropriate form)
registering a number of shares of Parent Common Stock
necessary to fulfill Parent's obligations under this
Section 5.6. Such registration statement shall be kept
effective (and the current status of the prospectus
required thereby shall be maintained) for at least as
long as Adjusted Options or Company Awards remain
outstanding.
(e) As soon as practicable after the Effective
Time, Parent shall deliver to the holders of Company
Employee Stock Options and Company Awards appropriate
notices setting forth such holders' rights pursuant to
the respective Company Stock Plans and the agreements
evidencing the grants of such Company Employee Stock
Options and Company Awards and that such Company Employee
Stock Options and Company Awards and the related
agreements shall be assumed by Parent and shall continue
in effect on the same terms and conditions (subject to
the adjustments required by this Section after giving
effect to the Merger).
(f) To the extent that any compensation paid
to a current or former employee of the Company or any of
its subsidiaries would, if paid, fail to be deductible by
the Company, Parent or any of their respective
subsidiaries under Section 162(m) of the Code, such
payment shall, consistent with the Company's existing
policy regarding the deferral of compensation in order to
preserve the tax deductibility thereof (as described in
the Company's Proxy Statement for the Company's 1997
Annual Meeting of Stockholders), be made in the first
taxable year in which it will be deductible by the
Company, Parent or their subsidiaries.
SECTION 5.7 Indemnification, Exculpation and
Insurance. (a) Parent and Sub agree that all rights to
indemnification and exculpation from liabilities for acts
or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors
or officers of the Company and its subsidiaries as
provided in their respective certificates of
incorporation or by-laws (or comparable organizational
documents) and any indemnification agreements or
arrangements of the Company shall survive the Merger and
shall continue in full force and effect in accordance
with their terms. The Surviving Corporation shall pay
any expenses of any indemnified person under this Section
5.7 in advance of the final disposition of any action,
proceeding or claim relating to any such act or omission
to the fullest extent permitted under the DGCL upon
receipt from the applicable indemnified person to whom
advances are to be advanced of any undertaking to repay
such advances required under the DGCL. The Surviving
Corporation shall cooperate in the defense of any such
matter. In addition, from and after the Effective Time,
directors or officers of the Company who become directors
or officers of Parent will be entitled to the same
indemnity rights and protections as are afforded to other
directors and officers of Parent.
(b) In the event that either of the Surviving
Corporation or Parent or any of its successors or assigns
(i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and
assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns
of Parent or the Surviving Corporation, as applicable,
will assume the obligations thereof set forth in this
Section 5.7.
(c) The provisions of this Section 5.7 (i) are
intended to be for the benefit of, and will be
enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition
to, and not in substitution for, any other rights to
indemnification or contribution that any such person may
have by contract or otherwise.
(d) For six years after the Effective Time,
Parent or the Surviving Corporation shall maintain in
effect the Company's current directors' and officers'
liability insurance covering acts or omissions occurring
prior to the Effective Time with respect to those persons
who are currently covered by the Company's directors' and
officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to
the Company's directors and officers currently covered by
such insurance than those of such policy in effect on the
date hereof; provided that Parent may substitute therefor
policies of Parent or its subsidiaries containing terms
with respect to coverage and amount no less favorable to
such directors or officers; provided, further, that in no
event shall Parent or the Surviving Corporation be
required to pay aggregate premiums for insurance under
this Section 5.7(d) in excess of 200% of the aggregate
premiums paid by the Company in 1997 on an annualized
basis for such purpose.
(e) Parent shall cause the Surviving
Corporation or any successor thereto to comply with its
obligations under this Section 5.7.
SECTION 5.8 Fees and Expenses. (a) Except as
provided in this Section 5.8, all fees and expenses
incurred in connection with the Merger, this Agreement,
and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.
(b)(i) In the event that this Agreement is
terminated by the Company pursuant to Section 7.1(e) or,
after the date hereof but prior to any termination of
this Agreement, the Company or its Board of Directors
shall have taken any action to make the Rights Agreement
inapplicable (through termination or otherwise) to any
person other than Parent, Sub or another wholly owned
subsidiary of Parent, then, concurrently with any such
termination, the Company shall pay Parent a fee equal to
$300 million by wire transfer of same day funds.
(ii) In the event that (A) a Pre-Termination
Takeover Proposal Event (as defined below) shall occur
and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 7.1(b)(i) and
(B) prior to the date that is 18 months after the date of
such termination the Company enters into a Company
Acquisition Agreement, then the Company shall (1)
promptly, but in no event later than two business days
after the date such Company Acquisition Agreement is
entered into, pay Parent a fee equal to $100 million by
wire transfer of same day funds, and (2) promptly, but in
no event later than two business days after the date the
transactions set forth in such Company Acquisition
Agreement are consummated, pay Parent an additional fee
equal to $200 million by wire transfer of same day funds.
(iii) In the event that (A) a Pre-Termination
Takeover Proposal Event shall occur and thereafter this
Agreement is terminated by either Parent or the Company
pursuant to Section 7.1(b)(ii) and (B) prior to the date
that is 18 months after the date of such termination the
Company enters into a Company Acquisition Agreement, then
the Company shall (1) promptly, but in no event later
than two business days after the date such Company
Acquisition Agreement is entered into, pay Parent a fee
equal to $100 million by wire transfer of same day funds,
and (2) promptly, but in no event later than two business
days after the date the transactions set forth in such
Company Acquisition Agreement are consummated, pay Parent
an additional fee equal to $200 million by wire transfer
of same day funds.
(iv) For purposes of this Section 5.8(b), a
"Pre-Termination Takeover Proposal Event" shall be deemed
to occur if a Company Takeover Proposal shall have been
made known to the Company or any of its subsidiaries or
has been made directly to its stockholders generally or
any person shall have publicly announced an intention
(whether or not conditional) to make a Company Takeover
Proposal. The Company acknowledges that the agreements
contained in this Section 5.8(b) are an integral part of
the transactions contemplated by this Agreement, and
that, without these agreements, Parent would not enter
into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section
5.8(b), and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the
Company for the fee set forth in this Section 5.8(b), the
Company shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of
the fee at the rate on six-month U.S. Treasury
obligations plus 300 basis points in effect on the date
such payment was required to be made.
SECTION 5.9 Public Announcements. Parent and
the Company will consult with each other before issuing,
and provide each other the opportunity to review, comment
upon and concur with and use reasonable efforts to agree
on, any press release or other public statements with
respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any
such press release or make any such public statement
prior to such consultation, except as either party may
determine is required by applicable law or court process
or by obligations pursuant to any listing agreement with
any national securities exchange. The parties agree that
the initial press release to be issued with respect to
the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.
SECTION 5.10 Affiliates. (a) Concurrently
with the execution of this Agreement (or with respect to
relevant persons who are not available on the date
hereof, as soon as practicable after the date hereof),
the Company shall deliver to Parent a written agreement
substantially in the form attached as Exhibit A hereto of
all of the persons who are "affiliates" of the Company
(other than Berkshire Hathaway Inc. or any person in
which it directly or indirectly holds securities) for
purposes of Rule 145 under the Securities Act or for
purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and
regulations, all of whom are, as of the date of this
Agreement, identified in Section 5.10 of the Company
Disclosure Schedule. Section 5.10 of the Company
Disclosure Schedule shall be updated by the Company as
necessary to reflect changes from the date hereof and the
Company shall use best efforts to cause each person added
to such schedule after the date hereof to deliver a
similar agreement. Parent shall cause all persons who
are affiliates of Parent for purposes of qualifying the
Merger for pooling of interests accounting treatment
under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations to comply with the
fourth paragraph of Exhibit A hereto.
(b) Parent shall publish no later than 30 days
after, and shall use its best efforts to publish on the
earliest possible date 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 (the time such results are published, the
"Permitted Sales Time"). This Section 5.10(b) is
intended to be for the benefit of affiliates of the
Company. Notwithstanding anything in this Section
5.10(b) to the contrary, if the Closing occurs after
November 30, 1997, Parent's obligations under this
Section 5.10(b) shall only require Parent to publish such
financial information no later than 30 days after the end
of the first fiscal quarter ending after the Closing in
which there was at least 30 days of post-Merger combined
operations.
(c) Following the consummation of the Merger,
Parent shall file a registration statement under the
Securities Act with respect to any shares of Parent
Common Stock or Parent New Preferred Stock received in
the Merger by those "affiliates" of the Company (for
purposes of Rule 145 under the Securities Act) that would
be limited in their ability to resell such shares due to
the volume limitations of paragraph (e) of Rule 144 under
the Securities Act, allowing for sales of such shares on
a delayed or continuous basis, and Parent shall use its
best efforts to cause such registration statement to
become effective prior to the Permitted Sales Time.
SECTION 5.11 Stock Exchange Listing. Parent
shall use best efforts to cause (a) the Parent Common
Stock issuable (i) under Article II, (ii) upon exercise
of the former Company Employee Stock Options pursuant to
Section 5.6 and (iii) upon the conversion of Company
Convertible Securities to be approved for issuance on the
NYSE and (b) the depositary shares representing shares of
Parent New Preferred Stock (to the extent that the
corresponding depositary shares representing shares of
Company Preferred Stock were listed on the NYSE
immediately prior to the Effective Time) to be approved
for listing on the NYSE, in each case subject to official
notice of issuance, as promptly as practicable after the
date hereof, and in any event prior to the Closing Date.
SECTION 5.12 Stockholder Litigation. Each of
the Company and Parent shall give the other the
reasonable opportunity to participate in the defense of
any stockholder litigation against the Company or Parent,
as applicable, and its directors relating to the
transactions contemplated by this Agreement.
SECTION 5.13 Tax Treatment. Each of Parent
and the Company shall use best efforts to cause the
Merger to qualify as a reorganization under the
provisions of Section 368 of the Code and to obtain the
opinions of counsel referred to in Sections 6.2(c) and
6.3(c).
SECTION 5.14 Pooling of Interests. Each of
the Company and Parent shall use best efforts to cause
the transactions contemplated by this Agreement,
including the Merger, to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations, and such
accounting treatment to be accepted by the SEC, and each
of the Company and Parent agrees that it shall take no
action that would cause such accounting treatment not to
be obtained.
SECTION 5.15 Standstill Agreements;
Confidentiality Agreements. During the period from the
date of this Agreement through the Effective Time, the
Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement
to which it or any of its respective subsidiaries is a
party. During such period, the Company shall enforce, to
the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining
injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions
thereof in any court of the United States of America or
of any state having jurisdiction.
SECTION 5.16 Conveyance Taxes. Parent and the
Company shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications or
other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration
and other fees or any similar taxes which become payable
in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on
or before the Effective Time. Parent shall pay, and the
Company shall pay, without deduction or withholding from
any amount payable to the holders of Company Common
Stock, any such taxes or fees imposed by any Governmental
Entity, which become payable in connection with the
transactions contemplated by this Agreement, on behalf of
their respective stockholders.
SECTION 5.17 Company Convertible Notes;
Company Series F Preferred Stock. (a) From and after
the date hereof and prior to the Effective Time, each of
Parent or the Company, as applicable, shall take such
actions (including entering into supplemental indentures)
with respect to the Company's Amended and Restated 5.5%
Restricted Convertible Subordinated Note Due 1997 and the
Company's Amended and Restated 1.25% Restricted
Convertible Subordinated Note Due 2000, which provide
that such notes shall be convertible at the option of the
holders in accordance with the terms thereof into shares
of Parent Common Stock and not Company Common Stock from
and after the Effective Time.
(b) Parent shall cause the Surviving
Corporation to elect, pursuant to the terms of the
purchase contracts providing for purchase of the Company
Series F Preferred Stock, that the preferred stock
delivered thereunder shall be Parent's preferred stock
having terms that are substantially identical to the
Company Series F Preferred Stock, provided that (A) as a
result of the Merger the issuer thereof shall be Parent
rather than the Company and (B) each share of such Parent
preferred stock shall be entitled to three votes per
share, voting together as a class with the Parent Common
Stock (and any other shares of capital stock of Parent at
the time entitled to vote), on all matters submitted to a
vote of stockholders of Parent, and shall be entitled to
one vote per share on all matters on which the Company
Series F Preferred Stock would have been entitled to
vote, voting together as a class with any other shares of
preferred stock of Parent at the time entitled to vote.
SECTION 5.18 Compliance with 1940 Act Section
15. (a) Parent and the Company acknowledge that each of
Parent and the Company has entered into this Agreement in
reliance upon the benefits and protections provided by
Section 15(f) of the Investment Company Act. Each of
Parent and the Company shall not take, and each of them
shall cause its affiliates not to take, any action not
contemplated by this Agreement that would have the
effect, directly or indirectly, of causing the
requirements of any of the provisions of Section 15(f) of
the Investment Company Act not to be met in respect of
this Agreement and the transactions contemplated hereby,
and each of them shall not fail to take, and each of them
shall cause its subsidiaries not to fail to take, and,
after the Closing Date, Parent shall cause the Surviving
Corporation not to fail to take, any action, if the
failure to take such action would have the effect,
directly or indirectly, of causing the requirements of
any of the provisions of Section 15(f) of the Investment
Company Act not to be met in respect of this Agreement
and the transactions contemplated hereby. In that
regard, Parent shall conduct its business and shall,
subject to applicable fiduciary duties, use its
reasonable best efforts to cause each of its affiliates
to conduct its business so as to assure that, insofar as
within the control of Parent and the Company or their
respective affiliates:
(i) for a period of three years after the
Closing Date, at least 75% of the members of the
Board of Directors or trustees of each Company Fund
registered under the Investment Company Act, and
that continues after the Closing Date its existing
or a replacement investment advisory contract with
any of Parent and the Company or any affiliate of
Parent and the Company, are not (A) "interested
persons" of the investment manager of such Company
Fund after the Closing Date, or (B) "interested
persons" of the present investment manager of such
Company Fund;
(ii) for a period of two years after the
Closing Date, there shall not be imposed on any of
the Company Funds that is registered under the
Investment Company Act an "unfair burden" as a
result of the transactions contemplated by this
Agreement, or any terms, conditions or
understandings applicable thereto.
(b) Certain Terms. The terms in quotations in
this Section 5.18 shall have the meanings set forth in
Section 15(f) or Section 2(a)(19) of the Investment
Company Act.
SECTION 5.19 Certain Contracts. Parent shall,
and shall cause the Surviving Corporation to, expressly
assume the obligations of the Company or any subsidiary
thereof under contracts, indentures, guarantees,
securities, leases and other instruments thereof in
accordance with their respective terms, as and to the
extent necessary to avoid any breach, penalty,
termination, default, payment or prepayment that would
otherwise result from the execution of this Agreement or
the consummation of the transactions contemplated hereby.
SECTION 5.20 Investment Advisory Agreements.
Each of the Company, its subsidiaries and its affiliates
shall as promptly as practicable after the date hereof,
use their best efforts, including giving all required
notices, to facilitate, in accordance with Section 15 of
the Investment Company Act, (i) the due consideration and
due approval by the board of directors or trustees of
each Company Fund (as defined below) of a new investment
advisory agreement or a new underwriting, distribution or
dealer contract and (ii) to the extent such board of
directors or trustees approvals are obtained, the
consideration and due approval by such Company Fund's
securityholders of new investment advisory agreement upon
terms no less favorable to Parent than the terms of the
existing investment advisory agreements with such Funds.
For purposes of this Agreement, "Company Fund" means any
investment company registered under the Investment
Company Act as to which the Company, its subsidiaries or
its affiliates act as investment advisor or principal
underwriter.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's
Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger is subject
to the satisfaction or waiver by each of Parent and the
Company on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Company
Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any
extension thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have expired.
(c) Governmental and Regulatory Approvals.
Other than the filing provided for under Section 1.3 and
filings pursuant to the HSR Act (which are addressed in
Section 6.1(b)), all consents, approvals and actions of,
filings with and notices to any Governmental Entity
required of the Company, Parent or any of their
subsidiaries to consummate the Merger and the other
transactions contemplated hereby, the failure of which to
be obtained or taken is reasonably expected to have a
material adverse effect on the Surviving Corporation and
its prospective subsidiaries, taken as a whole.
(d) No Injunctions or Restraints. No
judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or
issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") shall be in
effect (i) preventing the consummation of the Merger, or
(ii) which otherwise is reasonably likely to have a
material adverse effect on the Company or Parent, as
applicable; provided, however, that each of the parties
shall have used its best efforts to prevent the entry of
any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have become
effective under the Securities Act prior to the mailing
of the Proxy Statement by the Company to its stockholders
and no stop order or proceedings seeking a stop order
shall have been entered or be pending by the SEC.
(f) NYSE Listing. The shares of (i) Parent
Common Stock issuable to the Company's stockholders (A)
as contemplated by Article II, (B) upon exercise of the
former Company Employee Stock Options pursuant to Section
5.6 or (C) upon the conversion of Company Convertible
Securities and (ii) the depositary shares representing
shares of Parent New Preferred Stock (to the extent that
the corresponding depositary shares representing shares
of Company Preferred Stock, as the case may be, were
listed on the NYSE immediately prior to the Effective
Time) shall have been approved for listing on the NYSE,
subject to official notice of issuance.
SECTION 6.2 Conditions to Obligations of
Parent. The obligation of Parent to effect the Merger is
further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The
representations and warranties of the Company set forth
herein shall be true and correct both when made and at
and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an
earlier date, in which case as of such date), except
where the failure of such representations and warranties
to be so true and correct (without giving effect to any
limitation as to "materiality", "material adverse effect"
or "material adverse change" set forth therein or
applicable thereto by reason of the provisions of Section
3.2) does not have, and is not likely to have,
individually or in the aggregate, a material adverse
effect on the Company.
(b) Performance of Obligations of the Company.
The Company shall have performed all obligations required
to be performed by it under this Agreement at or prior to
the Closing Date, except where the failure of such
obligations to have been so performed does not have, and
is not likely to have, individually or in the aggregate,
a material adverse effect on the Company.
(c) Tax Opinion. Parent shall have received
from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to
Parent, an opinion dated as of such date, to the effect
that the Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Code, and Parent,
Sub and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, counsel for Parent
may require delivery of and rely upon the Tax
Certificates and may assume that the Company Common Stock
and Company Preferred Stock constitute the only
outstanding equity of the Company at the Effective Time
for federal income tax purposes.
SECTION 6.3 Conditions to Obligations of the
Company. The obligation of the Company to effect the
Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The
representations and warranties of Parent set forth herein
shall be true and correct both when made and at and as of
the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier
date, in which case as of such date), except where the
failure of such representations and warranties to be so
true and correct (without giving effect to any limitation
as to "materiality", "material adverse effect" or
"material adverse change" set forth therein or applicable
thereto by reason of the provisions of Section 3.2) does
not have, and is not likely to have, individually or in
the aggregate, a material adverse effect on Parent.
(b) Performance of Obligations of Parent.
Parent shall have performed all obligations required to
be performed by it under this Agreement at or prior to
the Closing Date, except where the failure of such
obligations to have been so performed does not have, and
is not likely to have, individually or in the aggregate,
a material adverse effect on Parent.
(c) Tax Opinions. The Company shall have
received from Cravath, Swaine & ▇▇▇▇▇, counsel to the
Company, an opinion as of such date, to the effect that
the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and Parent, Sub
and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, counsel for the
Company may require delivery of and rely on the Tax
Certificates.
SECTION 6.4 Frustration of Closing Conditions.
Neither Parent nor the Company may rely on the failure of
any condition set forth in Section 6.1, 6.2 or 6.3, as
the case may be, to be satisfied if such failure was
caused by such party's failure to use best efforts to
consummate the Merger and the other transactions
contemplated by this Agreement, as required by and
subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may
be terminated at any time prior to the Effective Time,
and whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and
the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been
consummated by March 31, 1998, provided, however,
that the right to terminate this Agreement pursuant
to this Section 7.1(b)(i) shall not be available to
any party whose failure to perform any of its
obligations under this Agreement results in the
failure of the Merger to be consummated by such
time; provided, however, that this Agreement may be
extended not more than 20 days by either party by
written notice to the other party if the Merger
shall not have been consummated as a direct result
of the condition set forth in Section 6.1(c) failing
to have been satisfied and the extending party
reasonably believes that the relevant approvals will
be obtained during such extension period;
(ii) if the Company Stockholder Approval
shall not have been obtained at the Company
Stockholders Meeting duly convened therefor or at
any adjournment or postponement thereof; or
(iii) if any Restraint having any of the
effects set forth in Section 6.1(d) shall be in
effect and shall have become final and
nonappealable; provided, that the party seeking to
terminate this Agreement pursuant to this Section
7.1(b)(iv) shall have used best efforts to prevent
the entry of and to remove such Restraint;
(c) by Parent, if the Company shall have
breached or failed to perform in any material respect any
of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.2(a) or (b), and (B)
is incapable of being cured by the Company or is not
cured within 45 days of written notice thereof;
(d) by the Company, if Parent shall have
breached or failed to perform in any material respect any
of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.3(a) or (b), and (B)
is incapable of being cured by Parent or is not cured
within 45 days of written notice thereof; or
(e) by the Company in accordance with Section
4.2(b); provided that, in order for the termination of
this Agreement pursuant to this paragraph (e) to be
deemed effective, the Company shall have complied with
all provisions of Section 4.2, including the notice
provisions therein, and with applicable requirements,
including the payment of the fee referred to in paragraph
(b)(i) of Section 5.8.
SECTION 7.2 Effect of Termination. In the
event of termination of this Agreement by either the
Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent
or the Company, other than the provisions of Section
3.3(o), Section 3.4(m), the last sentence of Section 5.4,
Section 5.8, this Section 7.2 and Article VIII, which
provisions survive such termination, and except to the
extent that such termination results from the willful and
material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 Amendment. This Agreement may be
amended by the parties at any time before or after the
Company Stockholder Approval or the Parent Stockholder
Approval; provided, however, that after any such
approval, there shall not be made any amendment that by
law requires further approval by the stockholders of the
Company or Parent without the further approval of such
stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of all of
the parties.
SECTION 7.4 Extension; Waiver. At any time
prior to the Effective Time, a party may (a) extend the
time for the performance of any of the obligations or
other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the
other parties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.3, waive compliance
by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall
be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of
such rights.
SECTION 7.5 Procedure for Termination,
Amendment, Extension or Waiver. A termination of this
Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or
waiver pursuant to Section 7.4 shall, in order to be
effective, require, in the case of Parent, Sub or the
Company, action by its Board of Directors or, with
respect to any amendment to this Agreement, the duly
authorized committee of its Board of Directors to the
extent permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and
Warranties. None of the representations and warranties
in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance
after the Effective Time.
SECTION 8.2 Notices. All notices, requests,
claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed)
or sent by overnight courier (providing proof of
delivery) 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 Parent or Sub, to
Travelers Group Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) if to the Company, to
Salomon Inc.
Seven ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SECTION 8.3 Definitions. For purposes of this
Agreement:
(a) except as otherwise provided for in this
Agreement, an "affiliate" of any person means another
person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person, where "control"
means the possession, directly or indirectly, of the
power to direct or cause the direction of the management
policies of a person, whether through the ownership of
voting securities, by contract, as trustee or executor,
or otherwise; provided, however, that in no event shall
Berkshire Hathaway Inc. or any person in which it
directly or indirectly holds securities be deemed to be
an affiliate of the Company or its subsidiaries;
provided, further, that (x) any investment account
advised or managed by such person or one of its
subsidiaries or affiliates on behalf of third parties, or
(y) any partnership, limited liability company, or other
similar investment vehicle or entity engaged in the
business of making investments of which such person acts
as the general partner, managing member, manager,
investment advisor, principal underwriter or the
equivalent shall not be deemed an affiliate of such
person;
(b) "material adverse change" or "material
adverse effect" means, when used in connection with the
Company or Parent, any change, effect, event, occurrence
or state of facts that is, or would reasonably be
expected to be, materially adverse to the business,
financial condition or results of operations of such
party and its subsidiaries taken as a whole, other than
any change, effect, event or occurrence constituting or
relating to any of the following:
(i) the United States economy or securities
markets in general;
(ii) this Agreement or the transactions
contemplated hereby or the announcement thereof;
(iii) the financial services industry in
general, and not specifically relating to Parent or
the Company or their respective subsidiaries;
(iv) the resignation of officers or employees
of the Company or Parent or their respective
subsidiaries; and
(v) changes in balance sheet items of the
Company and its subsidiaries relating to changes in
the manner by which they finance their operations as
a result of restrictions on their access to the
public debt markets in connection with the
transactions contemplated hereby.
The terms "material" and "materially" have correlative
meanings;
(c) "person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other
entity;
(d) a "subsidiary" of any person means another
person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no
such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by
such first person; provided, however, that (x) any
investment account advised or managed by such person or
one of its subsidiaries or affiliates on behalf of third
parties, or (y) any partnership, limited liability
company, or other similar investment vehicle or entity
engaged in the business of making investments of which
such person acts as the general partner, managing member,
manager, investment advisor, principal underwriter or the
equivalent shall not be deemed a subsidiary of such
person; and
(e) "knowledge" of any person which is not an
individual means the knowledge of such person's executive
officers.
SECTION 8.4 Interpretation. When a reference
is made in this Agreement to an Article, Section or
Exhibit, such reference shall be to an Article or Section
of, or an Exhibit 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". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this
Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and
references to all attachments thereto and instruments
incorporated therein. References to a person are also to
its permitted successors and assigns.
SECTION 8.5 Counterparts. This Agreement may
be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall
become effective when one or more counterparts have been
signed by each of the parties and delivered to the other
parties.
SECTION 8.6 Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents
and instruments referred to herein) and the
Confidentiality Agreements (a) constitute the entire
agreement, and supersede all prior agreements and
understandings, both written and oral, between the
parties with respect to the subject matter of this
Agreement and (b) except for the provisions of Article
II, Sections 5.6, 5.7, 5.10(b), 5.10(c) and 5.17, are not
intended to confer upon any person other than the parties
any rights or remedies.
SECTION 8.7 Governing Law. This Agreement
shall be governed by, and construed in accordance with,
the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this
Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the
parties hereto without the prior written consent of the
other parties; provided, however, that Sub may assign its
rights and obligations, in whole or in part, under this
Agreement to any other wholly owned subsidiary of Parent.
Any assignment in violation of the preceding sentence
shall be void. Subject to the preceding two sentences,
this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of
the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the
State of Delaware or any Delaware state court in the
event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for
leave from any such court, and (c) agrees that it will
not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any
court other than a federal court sitting in the State of
Delaware or a Delaware state court.
SECTION 8.10 Headings. The headings contained
in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation
of this Agreement.
SECTION 8.11 Severability. If any term or
other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and
effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to
the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of
the date first written above.
TRAVELERS GROUP INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Chairman of the Board and
Chief Executive Officer
DIAMONDS ACQUISITION CORP.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
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Title: Executive Vice President
SALOMON INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: Chairman and Chief
Executive Officer