AMENDMENT No. 3 TO THE AGREEMENT TO MERGE
THIS AMENDMENT No. 3 (this "Amendment") to that certain Agreement to
Merge the Businesses of Heine Securities Corporation, a Delaware
corporation ("Heine"), Franklin Mutual Advisers, Inc. (f/k/a Elmore
Securities Corporation), a Delaware corporation ("FMAI"), and Franklin
Resources, Inc., a Delaware corporation ("FRI"), dated as of June 25, 1996,
as amended by Amendment No. 1 thereto, dated as of August 28, 1996, and by
Amendment No. 2 thereto, dated as of October 31, 1996 (the "Agreement"), is
made and entered into as of the 24th day of December, 1997 by and among
FMAI, FRI, and Michael F. Price, individually and as sole distributee of
the assets of Heine pursuant to its dissolution and liquidation ("MFP").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to further amend the Agreement, in
accordance with Section 11.1 thereof, as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties, the undersigned hereby agree as follows:
SECTION 1. Capitalized terms used and not otherwise defined in this
Amendment are used in this Amendment as defined in the Agreement.
SECTION 2. Section 2.6 of the Agreement, and Exhibit A thereto, are
hereby amended and restated in their entirety to read as set forth on Annex
A hereto.
SECTION 3. FRI hereby agrees to pay to Goldman, Sachs & Co. ("GS") or
its designee, concurrently with the final determination of the amount, and
the payment to MFP, of any Additional Consideration pursuant to Section
2.6(c) of the Agreement, an amount in cash, by wire transfer of immediately
available funds to the account designated in writing by GS not less than
three (3) business days prior to the date of such payment, equal to 0.8% of
such payment of Additional Consideration (less any interest thereon
pursuant to Section 2.6(c) of the Agreement), in satisfaction of certain
fees that may become payable by Heine (or assumed by MFP) to GS in
connection with the transactions contemplated by the Agreement. It is
understood that neither FRI nor FMAI shall, by virtue of the foregoing, be
deemed to undertake any liability or obligation to GS other than as set
forth in the preceding sentence.
SECTION 4. FRI hereby waives and releases MFP from his obligation, if
any, pursuant to that certain memorandum from Kenneth Lewis of FRI to MFP,
dated September 4, 1997, to pay or reimburse FRI for certain costs and
expenses incurred in connection with the transactions contemplated by the
Agreement as provided in Section 6.14 of the Agreement.
SECTION 5. The Agreement, as amended by this Amendment, the legal
relations between the parties and the adjudication and the enforcement
thereof, shall be governed by and interpreted and construed exclusively in
accordance with the substantive laws of the State of Delaware, without
regard to applicable choice of law provisions thereof.
SECTION 6. Except as expressly amended hereby, the Agreement shall
survive and continue pursuant to its terms, in full force and effect.
SECTION 7. This Amendment may be executed in multiple counterparts
which, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have, as appropriate, executed
this Amendment or caused this Amendment to be executed by their respective
duly authorized representatives, as of the 24th day of December, 1997.
FRANKLIN RESOURCES, INC.
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By: /s/Leslie M. Kratter
Name: Leslie M. Kratter
Title: Vice President
FRANKLIN MUTUAL ADVISERS, INC.
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By: /s/ Leslie M. Kratter
Name: Leslie M. Kratter
Title: Vice President
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/s/ Michael F. Price
Michael F. Price, individually
and as sole distributee of the
assets of Heine Securities
Corporation pursuant to its
dissolution and liquidation
ANNEX A TO AMENDMENT No. 3
Section 2.6 Additional Consideration. (a) In addition to the Purchase
Price, Buyer or Buyer Parent shall pay to Seller an amount, if any, as
follows:
(i) on April 15, 1998, Buyer or Buyer Parent shall pay to Seller
$64,200,000.
(ii) if the Anniversary Applicable Ratio represents a cumulative
increase of 17.5% or more per year, compounded annually, on any of the
fourth or fifth anniversary of the Closing Date, then Buyer or Buyer Parent
shall pay to Seller (or its designee):
On the Fourth Anniversary $60,800,000
On the Fifth Anniversary $75,000,000
(iii) if the Anniversary Applicable Ratio represents a cumulative
increase of 12.5% per year, compounded annually, on any of the fourth or
fifth anniversary of the Closing Date, then Buyer or Buyer Parent shall pay
to Seller (or its designee):
On the Fourth Anniversary $23,300,000
On the Fifth Anniversary $37,500,000
(iv) if the Anniversary Applicable Ratio represents a cumulative
increase of more than 12.5% per year, but less than 17.5% per year,
compounded annually, on any of the fourth or fifth anniversary of the
Closing Date, then Buyer or Buyer Parent shall pay to Seller (or its
designee) an amount pro rated between the amounts Seller would have
received under clauses (ii) and (iii) above.
(v) if, on the fourth anniversary of the Closing Date, the Anniversary
Applicable Ratio does not represent a cumulative increase of 17.5% or more
per year, compounded annually, and Seller achieves an increase of at least
12.5% per year, compounded annually, with respect to which no Additional
Consideration has been paid on the fifth anniversary of the Closing Date,
then Buyer or Buyer Parent shall pay to Seller (or its designee) with
respect to the fifth anniversary such additional amount of consideration
that Seller would have been paid with respect to the fourth anniversary had
Seller achieved such increases on the fourth anniversary. Examples of these
computations are described in Exhibit A attached hereto.
(b) The additional consideration payable pursuant to Section 2.6(a)
(the "Additional Consideration"), other than the amount of Additional
Consideration set forth in clause (i) of Section 2.6(a), shall be
calculated by Buyer or Buyer Parent, and the amount of such Additional
Consideration shall be certified to Seller not later than the fifteenth
(15th) business day after the applicable anniversary of the Closing Date.
If Seller disputes such calculation then, within five (5) days after
receipt of the certificate, Seller shall notify Buyer and Buyer Parent, and
all of the parties hereto shall use their best efforts to resolve such
dispute. If such dispute is not resolved within ten (10) days after Seller
has notified Buyer and Buyer Parent of the dispute, then such dispute shall
be referred to an Independent Accounting Firm selected by Seller and Buyer.
Each of Seller and Buyer shall bear one-half of the fees and expenses of
the Independent Accounting Firm.
(c) The Additional Consideration shall be paid by Buyer or Buyer
Parent to Seller (or its designee) in U.S. dollars by wire transfer of
immediately available funds to one or more accounts, such accounts to be
specified in writing by Seller (or its designee) to Buyer and Buyer Parent
not less than three (3) business days prior to the payment of such
Additional Consideration. Ninety (90%) of the estimated Additional
Consideration pursuant to clauses (ii) through (v) of Section 2.6(a), if
any, shall be paid within one (1) business day after the applicable
anniversary of the Closing Date, and the balance, if any, shall be paid
within five (5) business days after the applicable anniversary of the
Closing Date. Any payments to be made to Seller (or its designee) pursuant
to this Section shall be made together with interest at the base rate (as
announced publicly by Citibank, N.A., from time to time, as its base rate)
from the date of the applicable anniversary to the date immediately
preceding the date of payment. If the amount of any estimated Additional
Consideration paid pursuant to clauses (ii) through (v) of Section 2.6(a)
exceeds the finally calculated Additional Consideration with respect
thereto, then Buyer shall notify Seller (or its designee) of such excess
payment, and Seller (or its designee) shall repay such excess amount to
Buyer within two (2) business days after such notice, together with
interest thereon at the base rate from the date Seller (or its designee)
received such excess amount to the date immediately preceding the date of
repayment. If the amount of any finally calculated Additional Consideration
payable pursuant to clauses (ii) through (v) of Section 2.6(a) exceeds the
amount of the estimated Additional Consideration paid to Seller (or its
designee) with respect thereto, then Buyer or Buyer Parent shall pay such
excess amount within five (5) business days after such Additional
Consideration has been finally calculated.
(d) The amount of the Additional Consideration that may be payable to
Seller with respect to the fifth anniversary of the Closing Date shall be
reduced by one-half of the aggregate amount paid to the Key Employees
pursuant to the Performance Award Pool under Section 3.2(d) of the
employment agreements between Seller and the Key Employees (which reduction
shall not exceed $7,500,000).
Exhibit A to the Agreement to Merge, as amended
Additional Consideration Examples
With respect to Section 2.6(a)(v), assume that:
1. On the fourth anniversary of the Closing Date, the Anniversary
Applicable Ratio is 1 and on the fifth anniversary of the Closing Date, the
Anniversary Applicable Ratio represents a cumulative increase of 17.5% per
year, compounded annually, since the Closing Date. Seller would receive
$135,800,000 as Additional Consideration on the fifth anniversary (subject
to Section 2.6 (d)).
2. On the fourth anniversary of the Closing Date, the Anniversary
Applicable Ratio is 1 and on the fifth anniversary of the Closing Date, the
Anniversary Applicable Ratio represents a cumulative increase of 15% per
year, compounded annually, since the Closing Date. Seller would receive
$98,300,000 as Additional Consideration on the fifth anniversary (subject
to Section 2.6 (d)).