FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of a Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month(s) of: o September 1999
NEWCOURT CREDIT GROUP INC.
207 Queens Quay West
Suite 700
Toronto, Ontario Canada
M5J 1A7
[Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.]
Form 20-F |_| Form 40-F |X|
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes |_| No |X|
[If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b)]
82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: o October 15, 1999
NEWCOURT CREDIT GROUP INC.
/s/ Scott J. Moore
---------------------------
By: Scott J. Moore
Executive Vice President
Legal and General Counsel
[LOGO]
NEWCOURT CREDIT GROUP INC.
Newcourt Centre
207 Queens Quay West
Suite 700
Toronto, Ontario M5J 1A7
September 21, 1999
Dear Shareholder:
You are cordially invited to attend the special meeting of shareholders
(the "Newcourt Meeting") of Newcourt Credit Group Inc., to be held at
Metropolitan Ballroom East, Westin Harbour Castle, 1 Harbour Square, Toronto,
Ontario M5J 1A6, on October 26, 1999 at 10:00 a.m. (Toronto time).
At the Newcourt Meeting, you will be asked to approve a proposed
transaction under Ontario law involving the combination of Newcourt and The CIT
Group, Inc. pursuant to an Amended and Restated Agreement and Plan of
Reorganization (the "Reorganization Agreement"), dated as of August 5, 1999,
between Newcourt and CIT. Completion of the transaction is subject to the
satisfaction of various conditions, including the receipt of all necessary
regulatory and shareholder approvals.
The Board of Directors of Newcourt has unanimously approved the terms of
the Reorganization Agreement and the transactions contemplated thereby and
unanimously recommends that you vote in favour of the Arrangement Resolution
described below.
The Board of Directors of CIT also has approved the terms of the
Reorganization Agreement and the transactions contemplated thereby and has
recommended to its stockholders that they approve the issuance of shares of CIT
Common Stock in connection with the transaction.
Pursuant to the Reorganization Agreement, each holder of Newcourt Common
Shares (other than holders who exercise and perfect their dissent rights) will
receive in exchange for each Newcourt Common Share either 0.70 of a share of CIT
Common Stock or, in the case of Canadian resident shareholders who so elect,
0.70 of an Exchangeable Share, in each case subject to potential downward
adjustment pursuant to the Reorganization Agreement.
The Exchangeable Shares, which will be issued by a Canadian subsidiary of
CIT, provide an opportunity for Newcourt Shareholders who are resident in Canada
to achieve Canadian tax deferral for up to five years. The Exchangeable Shares
will be an eligible investment under certain Canadian statutes, as described in
the attached Joint Management Information Circular and Proxy Statement (the
"Joint Proxy Statement"). Holders of Exchangeable Shares will have dividend,
liquidation and voting rights with respect to CIT that are functionally and
economically equivalent to the rights of holders of shares of CIT Common Stock,
and the Exchangeable Shares will be exchangeable at the option of the holder on
a one-for-one basis for shares of CIT Common Stock.
The Joint Proxy Statement accompanying this letter contains or
incorporates by reference a detailed description of the background and mechanics
of the transaction and the businesses and selected historical financial
information of both Newcourt and CIT, as well as certain pro forma financial
information for the combined company. Please read and give careful consideration
to the Joint Proxy Statement and, if you require assistance, consult your
financial, tax or other professional advisors.
At the Newcourt Meeting, you will be asked to vote on a special resolution
to approve the arrangement with CIT (the "Arrangement Resolution"). The
Arrangement Resolution must be approved by not less than 66 2/3% of the votes
cast by shareholders present in person or by proxy at the Newcourt Meeting.
Accordingly, whether or not you plan to attend the Newcourt Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage-paid envelope or by facsimile to ensure that your shares will be
represented at the meeting.
A Letter of Transmittal and Election Form and a Notice of Guaranteed
Delivery are being mailed together with the Joint Proxy Statement to each person
who was a holder of Newcourt Common Shares on the September 20, 1999 record
date. Whether or not you plan to attend the Newcourt Meeting, please complete,
sign and date the enclosed Letter of Transmittal and Election Form and return it
with your Newcourt share certificates in the enclosed postage-paid envelope.
Yours very truly,
/s/ David F. Banks
David F. Banks
Chairman
[LOGO]
NEWCOURT CREDIT GROUP INC.
Newcourt Centre
207 Queens Quay West
Suite 700
Toronto, Ontario
M5J 1A7
-----------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 26, 1999
-----------------------------------------
NOTICE is hereby given that a Special Meeting of the Shareholders (the
"Meeting") of NEWCOURT CREDIT GROUP INC. will be held at Metropolitan Ballroom
East, Westin Harbour Castle, 1 Harbour Square, Toronto, Ontario M5J 1A6, on
October 26, 1999 at 10:00 a.m. (Toronto time) for the following purposes:
1. To consider and, if thought advisable, to pass, with or without
variation, a special resolution (the "Arrangement Resolution"), the full
text of which is set forth in Annex A to the accompanying Joint Management
Information Circular and Proxy Statement of Newcourt and The CIT Group,
Inc. dated as of September 21, 1999 (the "Joint Proxy Statement"),
approving an arrangement pursuant to Section 182 of the Business
Corporations Act (Ontario) (the "OBCA"), all as more particularly
described in the Joint Proxy Statement; and
2. To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Specific details of the matters proposed to be put before the Meeting are
disclosed in the Joint Proxy Statement.
The order of the Superior Court of Justice (Ontario) dated September 20,
1999 (the "Interim Order") grants Newcourt Shareholders the right to dissent in
respect of the Arrangement Resolution. If the arrangement becomes effective, a
Newcourt Shareholder who dissents (a "Dissenting Shareholder") will be entitled
to be paid the fair value of his, her or its Newcourt Common Shares if the
Secretary of Newcourt or the Chairman of the Meeting receives from the
Dissenting Shareholder not later than 5:00 p.m. (Toronto time) on the business
day prior to the Meeting a written objection to the Arrangement Resolution and
the Dissenting Shareholder otherwise strictly complies with the relevant
provisions of Section 185 of the OBCA. The right to dissent is described in the
Joint Proxy Statement. The text of Section 185 of the OBCA, which will be
relevant in any dissent proceeding, is set forth in Annex B to the Joint Proxy
Statement. If you fail to comply strictly with the requirements set forth in
Section 185 of the OBCA, you may lose any right of dissent.
Newcourt Shareholders who are unable to attend the Meeting in person are
requested to date, sign and return the accompanying form of proxy (printed on
yellow paper) for use at the Meeting or any adjournment or postponement thereof.
To be effective, the enclosed proxy must be (i) mailed or delivered so as to
reach or be deposited with the Secretary of the Corporation, c/o Montreal Trust
Company of Canada, 151 Front Street West, Eighth Floor, Toronto, Ontario, M5J
2N1 (if mailed in the postage pre-paid envelope provided) or Montreal Trust
Company of Canada, 151 Front Street West, Eighth Floor, Toronto, Ontario, M5J
2N1 (Attention: Proxy Department) (if delivered), not later than 5:00 p.m.
(Toronto time) two business days preceding the Meeting, or if the Meeting is
adjourned or postponed, not later than 24 hours (excluding Saturdays, Sundays
and holidays) before the time of the Meeting, or (ii) deposited with the
scrutineers of the Meeting, to the attention of the Chairman of the Meeting, at
or immediately prior to the commencement of the Meeting or any adjournment or
postponement thereof.
Dated this 21st day of September, 1999.
By Order of the Board of Directors,
/s/ David F. Banks
David F. Banks
Chairman
September 21, 1999
THE CIT GROUP, INC. NEWCOURT CREDIT GROUP INC.
1211 Avenue of the Americas Newcourt Centre
New York, New York 10036 207 Queens Quay West,
Suite 700
Toronto, Ontario M5J 1A7
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JOINT MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT
- --------------------------------------------------------------------------------
This Joint Management Information Circular and Proxy Statement ("Joint
Proxy Statement") is being furnished to holders of Class A Common Stock, par
value US$0.01 per share ("CIT Common Stock"), of The CIT Group, Inc., a Delaware
corporation, in connection with the solicitation of proxies by the Board of
Directors of CIT for use at the special meeting of CIT stockholders to be held
at the offices of CIT, 650 CIT Drive, Livingston, New Jersey 07039 on October
26, 1999 at 11:00 a.m. (Eastern time), and any adjournment or postponement of
that meeting (the "CIT Stockholders Meeting").
This Joint Proxy Statement is also being furnished to holders of Common
Shares ("Newcourt Common Shares") of Newcourt Credit Group Inc., an Ontario
corporation, in connection with the solicitation of proxies by the management of
Newcourt for use at the special meeting of Newcourt Shareholders to be held at
Metropolitan Ballroom East, Westin Harbour Castle, 1 Harbour Square, Toronto,
Ontario M5J 1A6, on October 26, 1999 at 10:00 a.m. (Toronto time), and any
adjournment or postponement of that meeting (the "Newcourt Shareholders
Meeting").
Pursuant to an Amended and Restated Agreement and Plan of Reorganization,
dated as of August 5, 1999, between CIT and Newcourt (the "Reorganization
Agreement"), CIT and Newcourt have agreed to combine the two companies pursuant
to a plan of arrangement to be completed under the laws of the Province of
Ontario, Canada. Under such arrangement, each Newcourt Shareholder that is a
resident of Canada for purposes of the Income Tax Act (Canada) will have the
right to receive for each Newcourt Common Share held, at such Shareholder's
election, either 0.70 of a share of CIT Common Stock or 0.70 of a share of a
class of securities ("Exchangeable Shares") issued by a newly-formed indirect
Canadian subsidiary of CIT ("Exchangeco"), in each case subject to potential
downward adjustment pursuant to the Reorganization Agreement. See "The
Transaction - The Reorganization Agreement - Exchange Ratio" on page 74. Each
other holder of Newcourt Common Shares (other than Dissenting Shareholders) will
receive 0.70 (subject to adjustment as noted above) of a share of CIT Common
Stock for each Newcourt Common Share held. The Exchangeable Shares provide an
opportunity for Newcourt Shareholders who are resident in Canada and subject to
Canadian tax to achieve Canadian tax deferral for up to five years and will be
an eligible investment under certain Canadian statutes, as described in this
Joint Proxy Statement. Holders of the Exchangeable Shares will have dividend,
liquidation and voting rights with respect to CIT that are functionally and
economically equivalent to the rights of holders of shares of CIT Common Stock,
and the Exchangeable Shares will be exchangeable at the option of the holder on
a one-for-one basis for shares of CIT Common Stock. See "The Transaction
Transaction Mechanics and Description of Exchangeable Shares" on page 84.
Completion of the transaction is subject to various conditions, including
receipt of all requisite regulatory approvals and approval by the shareholders
of each of CIT and Newcourt.
At the CIT Stockholders Meeting, holders of CIT Common Stock will consider
and vote upon, among other matters, the issuance of shares of CIT Common Stock
pursuant to the Reorganization Agreement (the "Stock Issuance Proposal"). At the
Newcourt Shareholders Meeting, holders of Newcourt Common Shares will consider
and vote upon a special resolution (the "Arrangement Resolution") to approve the
plan of arrangement contemplated by the Reorganization Agreement.
The Dai-Ichi Kangyo Bank, Limited, the holder of approximately 44% of the
outstanding shares of CIT Common Stock, has agreed (subject to certain
conditions) to vote its shares in favor of the Stock Issuance Proposal. Hercules
Holdings (UK) Limited, Canadian Imperial Bank of Commerce and certain members of
Newcourt's senior management, the holders in the aggregate of approximately
26.1% of the outstanding Newcourt Common Shares, have agreed to vote their
shares in favor of the Arrangement Resolution. See "The Transaction - Agreements
to Support the Transaction - Voting Agreements" on page 82.
At the CIT Stockholders Meeting, holders of CIT Common Stock also will be
asked to (a) approve an amendment to CIT's Amended and Restated Certificate of
Incorporation, (b) approve CIT's Long-Term Equity Compensation Plan, (c) approve
CIT's Transition Option Plan and (d) approve an amendment to CIT's Employee
Stock Purchase Plan. (See "Additional Matters for Consideration of CIT
Stockholders" on page 125.)
When the transaction is completed, the CIT Board of Directors will be
expanded to 16 directors. Twelve directors will be selected by the CIT Board of
Directors, of whom two will be designated by DKB. The remaining four directors
will be selected by the Newcourt Board of Directors, of whom one may be
designated by CIBC and one will be designated by Hercules. See "The Combined
Company After the Transaction - Management" on page 45.
This Joint Proxy Statement and the accompanying forms of proxy are first
being mailed to stockholders of CIT and shareholders of Newcourt on or about
September 23, 1999.
The holders of CIT Common Stock and Newcourt Common Shares should consider
the information in "Risk Factors," beginning on page 14, before deciding how to
vote on the matters referred to above.
Neither the United States Securities and Exchange Commission nor any state
securities commission has approved the securities to be issued in the
Transaction or determined that this Joint Proxy Statement is accurate or
complete. Any representation to the contrary is a criminal offense.
No securities commission or similar authority in Canada has in any way
passed upon the merits of the securities to be issued in the Transaction or
determined that this Joint Proxy Statement is accurate or complete. Any
representation to the contrary is an offense.
The date of this Joint Proxy Statement is September 21, 1999.
TABLE OF CONTENTS
Page
----
SUMMARY .................................................................. 1
RISK FACTORS ............................................................. 14
Special Note Regarding Forward-Looking Statements ................... 14
Risk Factors Relating to the Transaction ............................ 14
Risk Factors of the Combined Company ................................ 16
REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES ........................... 20
EXCHANGE RATE OF CANADIAN AND U.S. DOLLARS ............................... 20
COMPARATIVE MARKET PRICE DATA AND DIVIDEND HISTORY ....................... 21
SELECTED PRO FORMA CONSOLIDATED COMPARATIVE PER SHARE DATA ............... 22
SELECTED HISTORICAL FINANCIAL DATA ....................................... 23
CIT ................................................................. 23
Newcourt ............................................................ 25
UNAUDITED PRO FORMA FINANCIAL INFORMATION ON A COMBINED BASIS ............ 27
INFORMATION CONCERNING THE MEETINGS ...................................... 39
CIT ................................................................. 39
Newcourt ............................................................ 40
DESCRIPTION OF THE COMPANIES ............................................. 42
Summary of CIT's Business ........................................... 42
Summary of Newcourt's Business ...................................... 43
THE COMBINED COMPANY AFTER THE TRANSACTION ............................... 45
The Transaction -- General .......................................... 45
Management .......................................................... 45
Integration of Operations ........................................... 45
Principal Holders of CIT Common Stock After the Transaction ......... 46
Independent Accountants ............................................. 46
Transfer Agents and Registrars ...................................... 46
THE TRANSACTION .......................................................... 47
Background of the Transaction ....................................... 47
Joint Reasons for the Transaction ................................... 50
CIT's Reasons for the Transaction; Recommendation of the
CIT Board of Directors ............................................ 51
Newcourt's Reasons for the Transaction; Recommendation of the
Newcourt Board of Directors ....................................... 53
Opinions of the Financial Advisors .................................. 55
Interests of Certain Persons in the Transaction ..................... 72
Releases ............................................................ 73
The Reorganization Agreement ........................................ 74
Agreements to Support the Transaction ............................... 82
Transaction Mechanics and Description of Exchangeable Shares ........ 84
Court Approval of the Plan of Arrangement and Completion
of the Transaction ................................................ 91
Procedures for Exchange of Newcourt Share Certificates by
Newcourt Shareholders ............................................. 92
Procedure for Making a Joint Tax Election ........................... 92
i
Page
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Stock Exchange Listings ............................................. 94
Eligibility for Investment in Canada ................................ 94
Regulatory Matters .................................................. 95
Regulation of the Combined Company's Business Operations ............ 98
Accounting Treatment ................................................ 99
Resale of Exchangeable Shares and CIT Common Stock Received
in the Transaction ................................................ 99
Ongoing Canadian Reporting Obligations .............................. 100
Canadian Mutual Funds ............................................... 100
Future Issuances of Authorized Shares ............................... 101
TAX CONSIDERATIONS TO NEWCOURT SHAREHOLDERS .............................. 102
Certain Canadian Federal Income Tax Considerations for
Newcourt Shareholders ............................................. 102
Newcourt Shareholders Resident in Canada ............................ 102
Newcourt Shareholders Not Resident in Canada ........................ 107
Certain United States Federal Income Tax Considerations for
Newcourt Shareholders ............................................. 108
U.S. Holders ........................................................ 108
Non-U.S. Holders .................................................... 109
DESCRIPTION OF CAPITAL STOCK OF CIT, NEWCOURT AND EXCHANGECO ............. 112
CIT Capital Stock ................................................... 112
Newcourt Share Capital .............................................. 114
Exchangeco Share Capital ............................................ 114
COMPARISON OF STOCKHOLDER RIGHTS ......................................... 116
Removal of Directors; Vacancies ..................................... 116
Special Meeting of Stockholders ..................................... 116
Quorum at Stockholder Meeting ....................................... 116
Advance Notice of Stockholder-Proposed Business at Annual
Meetings .......................................................... 117
Vote Required for Extraordinary Transactions ........................ 117
Amendment to Governing Documents .................................... 117
Dissenters' Rights .................................................. 118
Oppression Remedy ................................................... 118
Derivative Action ................................................... 119
Shareholder Consent in Lieu of Meeting .............................. 119
Director Qualifications ............................................. 120
Fiduciary Duties of Directors ....................................... 120
Indemnification of Officers and Directors ........................... 120
Director Liability .................................................. 121
Related Party Transactions .......................................... 121
Enforceability of Civil Liabilities ................................. 121
Corporate Opportunities ............................................. 122
DISSENTING SHAREHOLDERS' RIGHTS .......................................... 123
Newcourt ............................................................ 123
CIT ................................................................. 124
ii
Page
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ADDITIONAL MATTERS FOR CONSIDERATION OF CIT STOCKHOLDERS ................ 125
Proposal 2. Amendment to the Amended and Restated Certificate
of Incorporation of CIT ................................. 125
Proposal 3. Approval of The CIT Group, Inc. Long-Term Equity
Compensation Plan ....................................... 128
Proposal 4. Approval of The CIT Group, Inc. Transition Option Plan .. 133
Proposal 5. Approval of the Amendment to The CIT Group, Inc. ........
Employee Stock Purchase Plan ............................ 136
OTHER BUSINESS ........................................................... 140
STOCKHOLDERS PROPOSALS AND NOMINATIONS FOR THE 2000 ANNUAL MEETING ....... 140
AVAILABLE INFORMATION .................................................... 140
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .......................... 141
CIT ................................................................. 141
Newcourt ............................................................ 141
APPROVAL OF JOINT PROXY STATEMENT BY NEWCOURT BOARD OF DIRECTORS ......... 143
APPENDIX 1 GLOSSARY OF TERMS ............................................ A-1
ANNEXES
ANNEX A FORM OF THE ARRANGEMENT RESOLUTION ........................ Annex A-1
ANNEX B SECTION 185 OF THE BUSINESS CORPORATIONS ACT (ONTARIO) .... Annex B-1
ANNEX C INTERIMORDER .............................................. Annex C-1
ANNEX D NOTICE OF APPLICATION FOR FINAL ORDER ..................... Annex D-1
ANNEX E AMENDED AND RESTATED AGREEMENT AND PLAN
OF REORGANIZATION ........................................ Annex E-1
ANNEX F PLAN OF ARRANGEMENT INCLUDING EXCHANGEABLE SHARE
PROVISIONS ............................................... Annex F-1
ANNEX G EXCHANGEABLE SHARE SUPPORT AGREEMENT ...................... Annex G-1
ANNEX H FORM OF VOTING AND EXCHANGE TRUST AGREEMENT ............... Annex H-1
ANNEX I STOCK OPTION AGREEMENT .................................... Annex I-1
ANNEX J VOTING AGREEMENTS ......................................... Annex J-1
ANNEX K J.P. MORGAN SECURITIES INC. OPINION ....................... Annex K-1
ANNEX L DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
OPINION .................................................. Annex L-1
ANNEX M GOLDMAN, SACHS &CO. OPINION ............................... Annex M-1
ANNEX N CIBC WORLD MARKETS INC. OPINION ........................... Annex N-1
ANNEX O AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE CIT GROUP, INC ...................... Annex O-1
ANNEX P THE CIT GROUP, INC. LONG-TERM EQUITY COMPENSATION PLAN .... Annex P-1
ANNEX Q THE CIT GROUP, INC. TRANSITION OPTION PLAN ................ Annex Q-1
ANNEX R THE CIT GROUP, INC. AMENDED EMPLOYEE STOCK PURCHASE PLAN .. Annex R-1
iii
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SUMMARY
This summary highlights certain information from this document, but may
not contain all of the information that is important to you. The description of
the matters contained in this summary is qualified by reference to the entire
document and documents incorporated by reference. To understand the plan of
arrangement and related transactions (the "Transaction") more fully and for a
more complete description of the legal terms of the Transaction, you should
carefully read this entire document, the documents referred to in the
"Incorporation of Certain Documents by Reference" section in this Joint Proxy
Statement and the Annexes hereto. The summary does not contain a complete
statement of material information relating to the Reorganization Agreement, the
Transaction, or other matters discussed in this document. Several of the
capitalized terms used in this summary are defined in the Glossary of Terms
attached as Appendix 1 to this Joint Proxy Statement. Except as otherwise
indicated, information relating to the Transaction included in this Joint Proxy
Statement has been prepared on the basis of an Exchange Ratio of 0.70, but as
described on page 74, a downward adjustment of the Exchange Ratio is possible.
Unless otherwise stated, all dollar amounts are expressed in U.S. dollars.
Questions and Answers About the Transaction
Q: Why are CIT and Newcourt proposing to combine?
A: CIT and Newcourt believe that the Transaction represents an excellent
opportunity to create a commercial financing company that will enjoy
benefits of increased size and geographic scope, a more diversified asset
base, more diversified funding sources and improved positioning to take
advantage of opportunities for growth. After the Transaction is completed,
the combined company will be the largest publicly held North American
commercial financing company. Through its greater size and financial
strength, the combined company should be able to compete more effectively
for international business and acquisition opportunities than either
company could independently. Newcourt contributes to the combined company
its broad technology-based leasing business, Canadian and overseas
platforms for CIT's other businesses and a source of substantial fee-based
income from corporate finance and structured financing transactions. CIT
provides the combined company with diversified product lines in businesses
in which Newcourt does not engage, as well as a strong financial position
as reflected in CIT's stronger credit ratings, which should result in
lower funding costs for the businesses conducted by Newcourt today.
Q: As a CIT Stockholder, how will the Transaction affect me?
A: The Transaction will not affect your shares of CIT Common Stock. Following
the Transaction, existing CIT Stockholders will own approximately 61% of
the combined company, and the former Newcourt Shareholders will own
approximately 39% of the combined company.
Q. As a Newcourt Shareholder, what will I receive in the Transaction?
A: If you are a Newcourt Shareholder (other than a Dissenting Shareholder)
who is an Eligible Electing Holder, then you may elect to receive either
0.70 of an Exchangeable Share and applicable Ancillary Rights or 0.70 of a
share of CIT Common Stock in exchange for each Newcourt Common Share that
you hold, in each case subject to a potential downward adjustment pursuant
to the Reorganization Agreement. If you are a Newcourt Shareholder (other
than a Dissenting Shareholder) who is not an Eligible Electing Holder or
who is an Eligible Electing Holder who fails to make a valid election for
Exchangeable Shares, then you will receive 0.70 of a share of CIT Common
Stock in exchange for each Newcourt Common Share that you hold, subject to
such potential downward adjustment.
The Exchangeable Shares will be issued by CIT Exchangeco Inc., a newly
formed Canadian subsidiary of CIT. Holders of Exchangeable Shares will
have dividend and liquidation rights with respect to CIT that are
functionally and economically equivalent to the rights of holders of
shares of CIT Common Stock and will be entitled to vote with the CIT
Stockholders on all matters submitted to a vote of CIT Stockholders.
The Exchangeable Shares will be exchangeable at the option of the holder
at any time, on a one-for-one basis, for shares of CIT Common Stock. On
and after November 1, 2004 (or, in some circumstances prior to that date),
any outstanding Exchangeable Shares may be redeemed for shares of CIT
Common Stock on a one-for-one basis on a date selected by the Board of
Directors of Exchangeco.
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1
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Q: What would cause a downward adjustment to the Exchange Ratio?
A: The adjustment provisions are complex. The Exchange Ratio is 0.70 but is
subject to downward adjustment to reflect any reduction in the aggregate
consideration to be paid by CIT in the Transaction in accordance with the
terms of the Reorganization Agreement. Such aggregate consideration will
be reduced on a dollar-for-dollar basis to the extent that Newcourt's
Adjusted Shareholders Equity (as defined below) declines by more than $20
million but by less than $120 million from Newcourt's total shareholders'
equity under Canadian GAAP, less goodwill, as of June 30, 1999 ("June 30th
Equity"). Such aggregate consideration will be further reduced by $1.50
for each dollar by which Newcourt's Adjusted Shareholders Equity declines
by more than $120 million from Newcourt's June 30th Equity. Newcourt's
"Adjusted Shareholders Equity" means Newcourt's total shareholders' equity
under Canadian GAAP as of a specified month-end prior to Closing, adjusted
to exclude goodwill, securitization gains to the extent they exceed $30
million per month ($60 million for December 1999) on a cumulative basis,
and specified charges affecting shareholders' equity. The Reorganization
Agreement does not provide for any upward adjustment in the Exchange
Ratio. See "The Transaction - The Reorganization Agreement - Exchange
Ratio" on page 74. CIT Stockholders and Newcourt Shareholders should read
the provisions of the Reorganization Agreement relating to the potential
adjustment to the Exchange Ratio. The Reorganization Agreement is attached
hereto as Annex E.
Q: What happens to the Exchange Ratio as the market price of CIT Common Stock
fluctuates?
A: The Exchange Ratio is 0.70 but may be adjusted downward only in the manner
described above. Accordingly, the market values of CIT Common Stock and
Newcourt Common Shares will not affect the Exchange Ratio. Since the
market value of CIT Common Stock will fluctuate before and after the
closing of the Transaction, the value of CIT Common Stock (and
Exchangeable Shares) that Newcourt Shareholders will receive in the
Transaction will fluctuate and could increase or decrease. You should
obtain the current market prices of CIT Common Stock and Newcourt Common
Shares. See "Comparative Market Price Data and Dividend History" on page
21.
Q: What are the tax consequences of the Transaction?
A: A Newcourt Shareholder who is a Canadian Resident, who holds Newcourt
Common Shares as capital property and who elects to receive CIT Common
Stock will realize a capital gain (or a capital loss) for Canadian federal
income tax purposes equal to the amount by which the fair market value of
the CIT Common Stock received by such Newcourt Shareholder, net of any
reasonable costs of disposition, exceeds (or is less than) the adjusted
cost base to the Newcourt Shareholder of such shareholder's Newcourt
Common Shares.
Generally, a Newcourt Shareholder who is an Eligible Holder and who elects
to receive Exchangeable Shares will be entitled to file a joint election
with Exchangeco under Section 85 of the Income Tax Act (Canada) to obtain
a tax-deferred rollover for up to five years for Canadian federal income
tax purposes. The eventual exchange (or redemption) of Exchangeable Shares
for shares of CIT Common Stock will be a taxable event.
The exchange by a U.S. holder of Newcourt Common Shares for shares of CIT
Common Stock will be a taxable exchange for United States federal income
tax purposes.
The tax consequences of the Transaction are subject to a number of caveats
and conditions as discussed in "Tax Considerations to Newcourt
Shareholders - Certain Canadian Federal Income Tax Considerations for
Newcourt Shareholders" on page 102 and "- Certain United States Federal
Income Tax Considerations for Newcourt Shareholders" on page 108.
There are no tax consequences of the Transaction to holders of CIT Common
Stock.
You should consult your tax advisor for advice with respect to the tax
consequences of the Transaction to you.
Q: When do you expect the Transaction to be completed?
A: We are working toward completing the Transaction as soon as possible. In
addition to the approvals of the shareholders of both companies, we must
also obtain court and various regulatory approvals, some of which
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2
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may not be obtained until after the CIT and Newcourt shareholders
meetings. We expect to complete the Transaction during the fourth quarter
of 1999.
Q: Where will the CIT Common Stock and Exchangeable Shares be listed?
A: CIT Common Stock is listed on the New York Stock Exchange. The Toronto
Stock Exchange has conditionally approved the listing of the CIT Common
Stock and the Exchangeable Shares, subject to usual conditions.
Q: What shareholder votes are required to complete the Transaction?
A: Approval of the Stock Issuance Proposal requires the affirmative vote of a
majority of the votes cast in person or by proxy at the CIT Stockholders
Meeting. Approval of the Arrangement Resolution requires the affirmative
vote of 66 2/3% of the votes cast in person or by proxy at the Newcourt
Shareholders Meeting.
Q: Are there any risks associated with the Transaction?
A: The Transaction does involve risks. For a discussion of risks that should
be considered in evaluating the Transaction, see "Risk Factors" beginning
on page 14.
Q: How do I exercise my voting rights?
A: After you carefully read this Joint Proxy Statement, indicate on your
proxy card how you want to vote, and sign and mail it in the enclosed
white prepaid return envelope marked "Proxy" as soon as possible and in
any event before 5:00 p.m. on October 25, 1999. CIT Stockholders should
mail or deliver their proxy card to the address shown on the proxy card.
Newcourt Shareholders should mail their proxy card to the Secretary of the
Corporation, c/o Montreal Trust Company of Canada, 151 Front Street West,
Eighth Floor, Toronto, Ontario M5J 2N1 or deliver their proxy card to
Montreal Trust Company of Canada, 151 Front Street West, Eighth Floor,
Toronto, Ontario M5J 2N1 (Attention: Proxy Department). By completing and
mailing your proxy card, your shares of CIT Common Stock or Newcourt
Common Shares will be represented at the CIT Stockholders Meeting or the
Newcourt Shareholders Meeting, as the case may be.
The CIT Board of Directors and the Newcourt Board of Directors each
unanimously recommends that its shareholders vote IN FAVOR OF the
proposals described herein.
If you sign and send in your proxy but don't indicate how you want to
vote, your proxy will be counted as a vote in favor of the proposals set
forth on the proxy card.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares on the proposal relating to the Transaction for me?
A: Your broker will vote your shares with respect to the Transaction only if
you provide instructions on how to vote. You should follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares.
Non-Registered Holders should carefully follow the instructions of their
Intermediaries and their service companies.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at
your shareholders meeting. You can do this in one of three ways. First,
you can send a written notice stating that you would like to revoke your
proxy. Second, you can complete and submit a new proxy card. If you choose
either of these two methods, you must submit your notice of revocation or
your new proxy card to CIT or Newcourt, at any time up to and including
the business day before the meetings, at the addresses referred to above.
Third, you can attend the shareholders meeting for CIT or Newcourt, as the
case may be, and revoke your proxy and vote in person. However, if you
have instructed a broker to vote your shares, you must follow directions
received from your broker to change your vote.
Q: As a Newcourt Shareholder, how and when will I get my CIT Common Stock or
Exchangeable Shares?
A: To receive shares of CIT Common Stock or Exchangeable Shares, you or your
broker should remit your Letter of Transmittal and Election Form (and, if
applicable, a Notice of Guaranteed Delivery) together with your Newcourt
Common Share certificates to Montreal Trust Company of Canada, as
Depositary, at its office located at 151 Front Street West, Eighth Floor,
Toronto, Ontario M5J 2N1, telephone number (800) 663-9097. In order to
receive Exchangeable Shares, your election to receive Exchangeable Shares,
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accompanied by your Newcourt Common Share certificate or certificates,
must be received before 5:00 p.m. (Toronto time) on October 25, 1999.
Certificates representing shares of CIT Common Stock or, if duly elected,
Exchangeable Shares, will be mailed to you by regular mail as soon as
possible after the Effective Date of the Transaction.
Q: As a Newcourt Shareholder, should I send in my Newcourt share certificates
when I return my Letter of Transmittal and Election Form?
A: Yes. A Letter of Transmittal and Election Form will not be effective
unless accompanied by certificates representing the Newcourt Common Shares
or the Notice of Guaranteed Delivery duly completed by a Canadian
chartered bank, a major trust company in Canada or a member firm of a
recognized Medallion Program (STAMP), (SEMP) or (MSP). The Depositary will
hold the certificates on your behalf. If for any reason the Transaction is
not completed, your certificates will be returned to you. See "The
Transaction - Procedures for Exchange of Newcourt Share Certificates by
Newcourt Shareholders" on page 92.
Q: As a Canadian Resident Newcourt Shareholder, can I change my election to
receive CIT Common Stock or Exchangeable Shares after I have mailed my
signed Letter of Transmittal and Election Form?
A: Yes. You can change your election at any time before 5:00 p.m. (Toronto
time) on October 25, 1999 by submitting a written notice of revocation or
a later dated Letter of Transmittal and Election Form to the Depositary.
Q. What should a Canadian Resident Newcourt Shareholder do to take advantage
of the tax deferral on the exchange of Newcourt Common Shares for
Exchangeable Shares in addition to completing and returning the Letter of
Transmittal and Election Form?
A. Such holder must complete, execute and deliver to KPMG LLP tax election
forms under Section 85 of the Income Tax Act (Canada) (and, where
applicable, the corresponding provisions of provincial tax legislation)
and a letter of authorization authorizing KPMG LLP to file such election
on its behalf. Such election and letter must be received by or before the
Tax Election Date. Each holder that elects in the Letter of Transmittal
and Election Form to receive Exchangeable Shares and checks the
appropriate box on the Letter of Transmittal and Election Form will be
forwarded the tax election forms and authorization letter for completion.
A holder that is a corporation, an estate or a trust should seek the
counsel of its tax advisor as to the earlier date (prior to the Tax
Election Date) on which the tax election forms and letter of authorization
may have to be to delivered to KPMG LLP.
Q: What should I do if I have questions?
A: CIT Stockholders should call Jeffrey D. Simon, Senior Vice President -
Investor Relations, at (973) 535-5911. Newcourt Shareholders should call
Georgeson Shareholder Communications, Inc. at (800) 890-1037 (North
America).
The Companies
CIT
The CIT Group, Inc., a Delaware corporation, is a leading diversified
finance organization with US$28.4 billion of owned and managed assets at June
30, 1999. CIT offers secured commercial and consumer financing primarily in the
United States to smaller, middle-market and larger businesses and to individuals
through a nationwide distribution network. CIT's principal executive offices are
located at 1211 Avenue of the Americas, New York, New York 10036, and its
telephone number is (212) 536-1390.
Newcourt
Newcourt Credit Group Inc., an Ontario corporation, is one of the world's
leading sources of asset-based financing, servicing corporate and commercial
markets with owned and managed assets of US$24.6 billion (including US$2.2
billion in assets that have been syndicated) at June 30, 1999 and a global
distribution capability in 26 countries. Newcourt's principal executive offices
are located at Newcourt Centre, 207 Queens Quay West, Suite 700, Toronto,
Ontario M5J 1A7, and its telephone number is (416) 507-2400.
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Upon completion of the Transaction, Newcourt will be an indirect
subsidiary of CIT.
Information Concerning the CIT Stockholders Meeting
Date, Time and Place of Meeting
The CIT Stockholders Meeting will be held at CIT's offices at 650 CIT
Drive, Livingston, New Jersey 07039, on October 26, 1999 at 11:00 a.m. (Eastern
time).
Purpose of the Meeting
The purpose of the CIT Stockholders Meeting is to consider and vote upon
(i) the Stock Issuance Proposal, (ii) an amendment to CIT's Amended and Restated
Certificate of Incorporation, (iii) the CIT Long-Term Equity Compensation Plan,
(iv) the CIT Transition Option Plan, (v) an amendment to the CIT Employee Stock
Purchase Plan and (vi) such other business as may properly come before the
meeting. See "Information Concerning the Meetings - CIT" on page 39.
Record Date
The CIT Record Date for the CIT Stockholders Meeting is September 20,
1999. Only holders of record of CIT Common Stock at the close of business on the
CIT Record Date are entitled to notice of and to vote at the meeting. On the
CIT Record Date, 161,209,826 shares of CIT Common Stock were outstanding and
entitled to vote.
Vote Required
The Stock Issuance Proposal must be approved by a majority of the votes
cast by CIT Stockholders present in person or represented by proxy and entitled
to vote at the CIT Stockholders Meeting. The amendments to the CIT Amended and
Restated Certificate of Incorporation require the approval of the holders of a
majority of the outstanding shares of CIT Common Stock. The other proposals
require the approval of a majority of the shares of CIT Common Stock represented
and entitled to vote at the CIT Stockholders Meeting.
As of the CIT Record Date, CIT believes that its directors and members of
it's senior management beneficially owned an aggregate of approximately 439,085
shares of CIT Common Stock (approximately 0.3% of the shares of CIT Common Stock
then outstanding). All of such directors and officers have indicated an intent
to vote in favor of the Stock Issuance Proposal. As of the CIT Record Date, DKB
beneficially owned an aggregate of 71,000,000 shares of CIT Common Stock
(approximately 44% of the shares of CIT Common Stock then outstanding). DKB has
agreed (subject to certain conditions) to vote its shares of CIT Common Stock in
favor of the Stock Issuance Proposal. See "The Transaction - Agreements to
Support the Transaction" on page 82.
Information Concerning the Newcourt Shareholders Meeting
Date, Time and Place of Meeting
The Newcourt Shareholders Meeting will be held at Metropolitan Ballroom
East, Westin Harbour Castle, 1 Harbour Square, Toronto, Ontario M5J 1A6, on
October 26, 1999 at 10:00 a.m. (Toronto time).
Purpose of the Meeting
The purpose of the Newcourt Shareholders Meeting is to consider and vote
upon: (i) the Arrangement Resolution and (ii) such other business as may
properly come before the Newcourt Shareholders Meeting. See "Information
Concerning the Meetings - Newcourt" on page 40.
Record Date
The Newcourt Record Date for the Newcourt Shareholders Meeting is
September 20, 1999. Only holders of record of Newcourt Common Shares at the
close of business on the Newcourt Record Date are entitled to notice of and to
vote at the Newcourt Shareholders Meeting, unless a person has transferred
shares after such date and the new holder of such shares establishes proper
ownership and makes a request not later than 5:00 p.m. (Toronto
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time) on October 15, 1999 to be included in the list of holders of Newcourt
Common Shares eligible to vote at the Newcourt Shareholders Meeting. On the
Newcourt Record Date, 148,508,329 Newcourt Common Shares were outstanding and
entitled to vote.
Vote Required
Subject to any further order of the Superior Court of Justice (Ontario),
the Arrangement Resolution must be approved by at least 662U3% of the votes
actually cast by the holders of Newcourt Common Shares present either in person
or by proxy at the Newcourt Shareholders Meeting. See "Information Concerning
the Meetings - Newcourt" on page 40.
CIBC, Hercules and certain members of Newcourt's senior management,
representing in the aggregate approximately 26.1% of the outstanding Newcourt
Common Shares, have agreed to vote their shares in favor of the Arrangement
Resolution. See "The Transaction - Agreements to Support the Transaction" on
page 82.
The Transaction
General
The Reorganization Agreement provides for the combination of CIT and
Newcourt. Each Newcourt Shareholder who is an Eligible Electing Holder (other
than a Dissenting Shareholder) may elect to receive 0.70 of a share of CIT
Common Stock or 0.70 of an Exchangeable Share and applicable Ancillary Rights
for each Newcourt Common Share held, in each case subject to potential downward
adjustment pursuant to the Reorganization Agreement. Each Newcourt Shareholder
(other than Dissenting Shareholders) who is not an Eligible Electing Holder or
who is an Eligible Electing Holder but does not make a valid election will
receive 0.70 of a share of CIT Common Stock for each Newcourt Common Share held,
subject to potential downward adjustment. Newcourt Shareholders who are not
Eligible Electing Holders cannot elect to receive Exchangeable Shares.
The Exchange Ratio is 0.70 but is subject to downward adjustment to
reflect any reduction in the aggregate consideration to be paid by CIT in the
Transaction in accordance with the terms of the Reorganization Agreement. Such
aggregate consideration will be reduced on a dollar-for-dollar basis to the
extent that Newcourt's Adjusted Shareholders' Equity declines by more than $20
million but by less than $120 million from Newcourt's June 30th Equity. Such
aggregate consideration will be further reduced by $1.50 for each dollar by
which Newcourt's Adjusted Shareholders' Equity declines by more than $120
million from Newcourt's June 30th Equity. The Reorganization Agreement does not
provide for any upward adjustment in the Exchange Ratio. See "The Transaction -
The Reorganization Agreement - Exchange Ratio" on page 74.
CIT will not issue fractional shares in the Transaction. Instead, each
Newcourt Shareholder otherwise entitled to receive such a fractional share of
CIT Common Stock or a fractional Exchangeable Share will receive a cash payment,
without interest, equal to such holder's pro rata portion of the net proceeds
received upon the sale of whole shares representing the aggregate of all such
fractional share interests in CIT Common Stock or fractional Exchangeable
Shares, as the case may be, that all such Newcourt Shareholders would otherwise
be entitled to receive.
The Exchangeable Shares will be securities of Exchangeco (a newly-formed
indirect subsidiary of CIT incorporated as a company limited by shares under the
laws of the Province of Nova Scotia). Holders of Exchangeable Shares will be
entitled to dividend, liquidation and voting rights with respect to CIT that are
functionally and economically equivalent to the rights of holders of shares of
CIT Common Stock. Holders may, at their option, exchange the Exchangeable Shares
at any time, on a one-for-one basis, for shares of CIT Common Stock. At any time
on or after November 1, 2004 (or earlier in some circumstances), the Board of
Directors of Exchangeco may redeem any outstanding Exchangeable Shares in
exchange for shares of CIT Common Stock on a one-for-one basis.
Based on an Exchange Ratio of 0.70 and assuming no elections for
Exchangeable Shares, CIT will issue approximately 103,955,830 shares of CIT
Common Stock in exchange for all outstanding Newcourt Common Shares (based on
the Newcourt Common Shares outstanding on September 20, 1999).
As a result of the Transaction, CIT, through Exchangeco, will become the
sole beneficial owner of the outstanding Newcourt Common Shares. See "The
Transaction" starting on page 47, for more information.
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Recommendation of the CIT Board of Directors
The CIT Board of Directors believes that the Transaction is fair to, and
in the best interests of, CIT and the CIT Stockholders. Accordingly, the CIT
Board of Directors approved the Transaction and unanimously recommends that CIT
Stockholders vote to approve the Stock Issuance Proposal. In making this
recommendation, the CIT Board of Directors considered a number of factors as set
forth on page 51.
Recommendation of the Newcourt Board of Directors
The Newcourt Board of Directors believes that the Transaction is fair to,
and in the best interests of, Newcourt and the Newcourt Shareholders.
Accordingly, the Newcourt Board of Directors unanimously approved the
Transaction and recommends that Newcourt Shareholders vote in favour of the
Arrangement Resolution. In making this recommendation, the Newcourt Board of
Directors considered a number of factors as set forth on page 53.
Structure After the Transaction
The following chart shows the structural corporate relationship between
CIT and Newcourt immediately after the Transaction is completed. Common share
ownership interests are 100%, unless otherwise indicated. Following the Closing,
CIT may cause Newcourt to transfer all or some of Newcourt's businesses and
operations to CIT or its other subsidiaries. CIT currently intends to transfer,
following the Effective Date, all of the issued and outstanding common shares of
Newcourt Credit Group USA Inc., through a series of transactions, to CIT so that
Newcourt Credit Group USA Inc. will no longer be a subsidiary of Newcourt. Such
transfer is intended to achieve tax efficiencies for the combined company. See
"The Transaction - The Reorganization Agreement - Agreements Relating to Certain
Additional Transactions" on page 82.
[ORG CHART]
- ----------
Notes: (1) Newco has been incorporated as 3026192 Nova Scotia Company, an
unlimited liability company under the laws of the Province of Nova
Scotia.
(2) Exchangeco has been incorporated as CIT Exchangeco Inc., a company
limited by shares under the laws of the Province of Nova Scotia.
Exchangeco will be the issuer of Exchangeable Shares to Eligible
Electing Holders who duly elect to receive Exchangeable Shares
pursuant to the Transaction. See "Description of Capital Stock of
CIT, Newcourt and Exchangeco-Exchangeco Share Capital" on page 114.
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Opinions of the Financial Advisors
J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, CIT's financial advisors, have rendered separate written opinions,
each dated August 5, 1999, to the CIT Board of Directors stating that, as of
such date and based upon and subject to certain factors, the Exchange Ratio was
fair, from a financial point of view, to CIT. J.P. Morgan and DLJ have confirmed
their August 5, 1999 opinions by delivering their separate written opinions to
the CIT Board of Directors, each dated the date of this Joint Proxy Statement,
to the same effect. The full text of the updated opinions of J.P. Morgan and DLJ
are attached to this Joint Proxy Statement as Annexes K and L, respectively, and
should be read carefully in their entirety to understand the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken by each of J.P. Morgan and DLJ in providing their opinions. The
opinions of J.P. Morgan and DLJ are directed to the CIT Board of Directors and
do not constitute recommendations to any CIT Stockholder as to how such
stockholder should vote with respect to the Transaction or any other matter
relating to the Transaction.
Goldman, Sachs & Co. and CIBC World Markets Inc., Newcourt's financial
advisors, have rendered separate written opinions, each dated August 5, 1999,
the date of the Reorganization Agreement, and confirmed in writing as of the
date of this Joint Proxy Statement to the Newcourt Board of Directors as to the
fairness, from a financial point of view, of the Exchange Ratio to Newcourt
Shareholders. The full text of the written opinions of Goldman Sachs and CIBC
World Markets, dated the date of this Joint Proxy Statement, are attached to
this Joint Proxy Statement as Annexes M and N, respectively. Newcourt
Shareholders should read these opinions carefully in their entirety to
understand the procedures followed, assumptions made, matters considered and
limitations on the review undertaken by each of Goldman Sachs and CIBC World
Markets in providing their opinions. The opinions of Goldman Sachs and CIBC
World Markets are directed to the Newcourt Board of Directors and do not
constitute recommendations to any Newcourt Shareholder as to how a Newcourt
Shareholder should vote in respect of the Transaction, the form of consideration
to be elected by such Newcourt Shareholder in the Transaction or any other
matter relating to the Transaction.
J.P. Morgan and DLJ have agreed to accept payment of their fees in
connection with the Transaction in the form of shares of CIT Common Stock.
See "The Transaction - Opinions of the Financial Advisors" on page 55.
Rights of Holders of Exchangeable Shares
The Exchangeable Shares will be exchangeable at any time at the option of
the holder, on a one-for-one basis, for shares of CIT Common Stock. Each holder
of an Exchangeable Share on the record date for any meeting at which CIT
Stockholders are entitled to vote will be entitled effectively to one vote for
each Exchangeable Share held by such holder.
Holders of Exchangeable Shares will also be entitled to receive, subject
to applicable law, dividends equivalent to all dividends paid on shares of CIT
Common Stock. Cash dividends are payable on the Exchangeable Shares in U.S.
dollars or, at the option of the Exchangeco Board of Directors, the Canadian
Dollar Equivalent. The declaration date, record date and payment date for
dividends on the Exchangeable Shares will be the same as the relevant dates for
the corresponding dividends on shares of CIT Common Stock.
Holders of Exchangeable Shares will also be entitled to participate in any
liquidation of CIT. The Exchangeable Shares will have no voting rights in
Exchangeco, except as described below, subject in each case to the right of
Exchangeco to redeem the Exchangeable Shares at the Redemption Date. See "The
Transaction - Transaction Mechanics and Description of Exchangeable Shares" on
page 84.
Exchange of Exchangeable Shares for CIT Common Stock
Holders of the Exchangeable Shares will be entitled at any time before the
Redemption Date, upon delivery of a certificate representing Exchangeable Shares
and a duly executed Retraction Request, to require Exchangeco to redeem any or
all of their Exchangeable Shares for an equal number of shares of CIT Common
Stock. Exchangeco must deliver all such Retraction Requests to Newco, and Newco
has the overriding right, but not the obligation, to exchange the Exchangeable
Shares that are the subject of the Retraction Request for an equal number of
shares of CIT Common Stock, provided that such Retraction Request is not revoked
by the retracting holder. If Newco does not exercise its exchange right, then
Exchangeco is required to complete the requested redemption, unless such
Retraction Request is withdrawn. Holders executing a Retraction Request will
remain entitled to receive from Exchangeco, on the designated payment date, any
declared but unpaid
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dividends on the related shares provided that, if and to the extent the dividend
is not paid by Exchangeco on the designated payment date, it will be paid by
Newco on such date for and on behalf of Exchangeco if Newco has exercised its
exchange right.
Redemption of Exchangeable Shares for CIT Common Stock
On and after November 1, 2004 (or, in some circumstances prior to that
date), any outstanding Exchangeable Shares may be redeemed for shares of CIT
Common Stock on a one-for-one basis on a date selected by the Board of Directors
of Exchangeco. Newco has the overriding right, but not the obligation, to
acquire on the Redemption Date the outstanding Exchangeable Shares for shares of
CIT Common Stock on a one-for-one basis. If Newco exercises the overriding
purchase right, then Exchangeco's obligation to redeem the Exchangeable Shares
on the Redemption Date will terminate. The redeemed holder will remain entitled
to receive from Exchangeco, on the designated payment date, any declared but
unpaid dividends on the related shares, provided that if and to the extent the
dividend is not paid by Exchangeco on the designated payment date, then it will
be paid by Newco on such date for and on behalf of Exchangeco if Newco has
exercised its purchase right.
Early Redemption
In certain circumstances, Exchangeco has the right to require a redemption
of the Exchangeable Shares prior to November 1, 2004. Exchangeco may require an
early redemption if (i) there are fewer than 1,000,000 Exchangeable Shares
outstanding (other than Exchangeable Shares held by CIT and its subsidiaries or
affiliates); (ii) a CIT Control Transaction occurs; (iii) a proposal is
introduced that constitutes an Exchangeable Share Voting Event; or (iv) an
Exempt Exchangeable Share Voting Event is proposed and the holders of
Exchangeable Shares fail to approve or disapprove such action, as applicable.
The Exchangeco Board of Directors may accelerate the Redemption Date to a
date prior to November 1, 2004 if it determines, in good faith and in its sole
discretion, that it is not reasonably practicable to substantially replicate the
terms and conditions of the Exchangeable Shares in connection with a CIT Control
Transaction and that the redemption of all but not less than all of the
outstanding Exchangeable Shares is necessary to enable the completion of such
CIT Control Transaction in accordance with its terms.
If an Exchangeable Share Voting Event is proposed prior to November 1,
2004, then the Exchangeco Board of Directors must determine, in good faith and
in its sole discretion, that it is not reasonably practicable to accomplish the
business purpose intended by the Exchangeable Share Voting Event in any other
commercially reasonable manner that does not result in an Exchangeable Share
Voting Event. The business purpose intended by the Exchangeable Share Voting
Event must be bona fide and not for the primary purpose of causing the
occurrence of a Redemption Date. If the Exchangeco Board of Directors makes such
a determination, then the Redemption Date will be the Business Day prior to the
record date for any meeting or vote of the holders of the Exchangeable Shares to
consider the Exchangeable Share Voting Event.
If an Exempt Exchangeable Share Voting Event is proposed prior to November
1, 2004 and the holders of the Exchangeable Shares fail to take the necessary
action at a meeting or other vote of holders of Exchangeable Shares to approve
or disapprove, as applicable, the Exempt Exchangeable Share Voting Event, then
the Redemption Date will be the Business Day following the day on which the
holders of the Exchangeable Shares failed to take such action.
See "Tax Considerations to Newcourt Shareholders - Certain Canadian
Federal Income Tax Considerations for Newcourt Shareholders" on page 102 and
"The Transaction - Transaction Mechanics and Description of Exchangeable Shares"
on page 84.
Exchangeco Board of Directors
The Exchangeco Board of Directors will be comprised of individuals
selected by CIT.
Conditions to the Transaction
CIT's and Newcourt's obligations to complete the Transaction are subject
to the satisfaction, or waiver, where permissible, of certain conditions set
forth in the Reorganization Agreement. These conditions include the approval of
the Arrangement Resolution by Newcourt Shareholders and by the Superior Court of
Justice (Ontario), the approval of the Stock Issuance Proposal by the CIT
Stockholders, and the receipt of the
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Primary Approvals. Neither CIT nor Newcourt can give any assurance as to whether
or when any of the conditions to the Transaction will be satisfied (or waived,
where permissible), or that the Transaction will be completed. See "The
Transaction - The Reorganization Agreement - Conditions to Closing" on page 78
and "The Transaction - Regulatory Matters" on page 95.
Termination; Termination Fees
The Reorganization Agreement may be terminated at any time before the
Effective Time by mutual consent of the parties or by either party under certain
circumstances set forth in the Reorganization Agreement. If the Transaction has
not been completed by January 31, 2000, either party can terminate the
Reorganization Agreement, unless the failure to complete the Transaction is due
to a breach of the Reorganization Agreement by such party. See "The Transaction
- - The Reorganization Agreement - Termination" on page 81.
Newcourt must pay CIT a termination fee of US$105 million if:
(i) Newcourt terminates the Reorganization Agreement in order to
accept a Superior Proposal; or
(ii) an Acquisition Proposal with respect to Newcourt or any of its
subsidiaries has been made known to Newcourt or any of its subsidiaries
and has been publicly announced or otherwise become public, or been made
to the Newcourt Shareholders generally, and thereafter all of the
following occur:
(x) the Newcourt Shareholders do not approve the Arrangement
Resolution,
(y) the Reorganization Agreement is terminated by either
Newcourt or CIT, and
(z) within twelve months of such termination Newcourt or any
of its subsidiaries enters into any agreement, letter of intent or
other binding agreement with respect to a Newcourt Takeover Proposal
or consummates a Newcourt Takeover Proposal.
CIT must pay Newcourt a termination fee of US$120 million if an
Acquisition Proposal with respect to CIT or any of its subsidiaries has been
made known to CIT or any of its subsidiaries and has also been publicly
announced or otherwise become public, or has been made to the CIT Stockholders
generally, and thereafter all of the following occur:
(i) the CIT Stockholders do not approve the Stock Issuance Proposal,
(ii) the Reorganization Agreement is terminated by either Newcourt
or CIT, and
(iii) within twelve months of such termination CIT or any of its
subsidiaries enters into any agreement, letter of intent or other binding
agreement with respect to a CIT Takeover Proposal or consummates a CIT
Takeover Proposal.
See "The Transaction - The Reorganization Agreement - Termination Fees" on
page 81.
Conditions Relating to Regulatory Approvals
The obligations of each of CIT and Newcourt to complete the Transaction
are subject to the receipt of all Primary Approvals without the imposition of
any condition or restriction that would materially adversely affect the
contemplated economic or business benefits of the Transaction so as to render
inadvisable, in the reasonable judgment of CIT or Newcourt, the completion of
the Transaction. Also, CIT and Newcourt have agreed not to complete the
Transaction without the consent of DKB if the approval of the Transaction by any
U.S. or Canadian regulatory authority imposes any new condition or restriction
on DKB or its subsidiaries (excluding CIT and Newcourt and their subsidiaries),
or if any Japanese regulatory authority imposes any requirement on DKB with
respect to the Transaction that would reasonably be expected to have a material
adverse effect on the business or financial condition of DKB and its
subsidiaries (excluding CIT and Newcourt and their subsidiaries) taken as a
whole. See "The Transaction - Regulatory Matters" on page 95. Neither CIT nor
Newcourt can give any assurance as to whether or when any of the Primary
Approvals will be obtained, or whether any of the approvals will include any
conditions or restrictions with respect to Newcourt, CIT, the combined company
or DKB.
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Accounting Treatment
The Transaction will be accounted for as a purchase under U.S. GAAP. See
"The Transaction - Accounting Treatment" on page 99.
Effective Time of the Transaction
The Transaction will become effective after the requisite shareholder,
court and regulatory approvals have been obtained and are final and all other
conditions to the Transaction have been satisfied or waived. CIT and Newcourt
expect that the Transaction will become effective as soon as practicable after
the necessary shareholder approvals are obtained. Since, however, the
Transaction is subject to various regulatory approvals beyond the control of CIT
and Newcourt, it is not possible to specify exactly when the Closing will occur.
CIT and Newcourt expect the Transaction to close in the fourth quarter of 1999.
Stock Exchange Listings
The completion of the Transaction is subject to obtaining a listing of the
Exchangeable Shares and the shares of CIT Common Stock on The Toronto Stock
Exchange and obtaining a listing on the New York Stock Exchange of the shares of
CIT Common Stock to be issued in the Transaction, upon the exchange of the
Exchangeable Shares and upon the exercise of the Transition Options. Each of CIT
and Newcourt has agreed to use its reasonable best efforts to achieve this
condition. See "The Transaction - Stock Exchange Listings" on page 94. The CIT
Common Stock is currently traded on the New York Stock Exchange under the symbol
"CIT."
The Toronto Stock Exchange has conditionally approved the listing of both
the Exchangeable Shares and the shares of CIT Common Stock, subject to CIT
fulfilling all the requirements of the Exchange on or before December 31, 1999.
There is no intention to list the Exchangeable Shares on any other stock
exchange in Canada, the United States or any other jurisdiction. Newcourt Common
Shares will be de-listed from The Toronto Stock Exchange, the Montreal Exchange
and the New York Stock Exchange concurrently with Closing.
Eligibility for Investment of Exchangeable Shares
For so long as the Exchangeable Shares are listed on a prescribed stock
exchange in Canada (which includes The Toronto Stock Exchange), the Exchangeable
Shares will be qualified investments under the Income Tax Act (Canada) for
trusts governed by registered retirement savings plans, registered retirement
income funds, registered education savings plans and deferred profit sharing
plans under the Income Tax Act (Canada). CIT Common Stock will be a qualified
investment under the Income Tax Act (Canada) for all such plans so long as such
shares remain listed on the New York Stock Exchange (or are listed on another
prescribed stock exchange, including The Toronto Stock Exchange). For so long as
the Exchangeable Shares are listed on a prescribed stock exchange in Canada
(which includes The Toronto Stock Exchange), the Exchangeable Shares will not be
foreign property under the Income Tax Act (Canada) for trusts governed by
registered pension plans, registered retirement savings plans, registered
retirement income funds, deferred profit sharing plans and for certain other
persons to whom Part XI of the Income Tax Act (Canada) is applicable. CIT Common
Stock is foreign property under the Income Tax Act (Canada). The Ancillary
Rights will not be a qualified investment for such plans and will be foreign
property under the Income Tax Act (Canada). CIBC World Markets is of the view,
however, that the fair market value of the Ancillary Rights is nominal.
Dissent Rights
Pursuant to the Interim Order, each registered holder of Newcourt Common
Shares has the right to dissent in respect of the Arrangement Resolution. If the
Transaction is completed, Newcourt will pay each Dissenting Shareholder the fair
value of such holder's Newcourt Common Shares, upon strict compliance by a
Dissenting Shareholder with the procedures described under "Dissenting
Shareholders' Rights" on page 123. Only a registered owner of Newcourt Common
Shares is entitled to dissent. Persons who are beneficial owners of Newcourt
Common Shares registered in the name of a broker, custodian, nominee or other
intermediary
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11
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and who wish to dissent should contact such broker, custodian, nominee or other
intermediary for instructions on how to dissent. Failure to comply strictly with
the relevant provisions of Ontario law may result in the loss of the right to
dissent.
Each party's obligation to complete the Transaction is subject to the
condition that holders of not more than 10% of the Newcourt Common Shares have
exercised Dissent Rights in respect of the Arrangement Resolution, unless any of
Goldman Sachs, J.P. Morgan or DLJ provides Newcourt and CIT with a letter
stating that in its good faith reasonable judgment, such firm believes it can
place a sufficient amount of permanent equity securities of CIT to fund payment
to Dissenting Shareholders in respect of those shares in excess of 10% of the
Newcourt Common Shares.
Court Approval
The Plan of Arrangement requires court approval under the Business
Corporations Act (Ontario). Prior to mailing this Joint Proxy Statement,
Newcourt obtained the Interim Order from the Superior Court of Justice (Ontario)
providing for the calling and holding of the Newcourt Shareholders Meeting and
other procedural matters. Subject to the Arrangement Resolution being passed by
the required vote of Newcourt Shareholders at the Newcourt Shareholders Meeting,
Newcourt has applied to the Superior Court of Justice (Ontario) for a hearing to
grant the Final Order at 10:00 a.m. (Toronto time) on October 27, 1999 at 393
University Avenue, Toronto, Ontario. In deciding whether to grant the Final
Order, the Superior Court of Justice (Ontario) will conduct a hearing on, among
other things, the fairness of the terms and conditions of the Transaction.
Newcourt Shareholders have the right to appear at such hearing and present
evidence or argument, subject to filing notice of its intention to do so in
accordance with the Interim Order and satisfying other requirements.
Assuming the Final Order is granted and the other conditions to the
Reorganization Agreement are satisfied or waived, the Articles of Arrangement
will be filed with the Director under the Business Corporations Act (Ontario) to
give effect to the Plan of Arrangement and the various other documents necessary
to consummate the Transaction will be executed and delivered.
Agreements in Support of the Transaction
Stock Option Agreement
As an inducement to CIT to enter into the Reorganization Agreement,
Newcourt granted CIT an irrevocable option to purchase from Newcourt up to
22,273,249 Newcourt Common Shares at a price of US$15.6875 per share. CIT may
exercise the option only under the same circumstances which would result in the
termination fee under the Reorganization Agreement becoming payable by Newcourt
to CIT (none of which circumstances, to the knowledge of CIT or Newcourt, has
occurred as of the date of this Joint Proxy Statement). At the request of CIT,
within 30 days following the date on which the option first becomes exercisable,
Newcourt will repurchase the option, in whole but not in part, at a price equal
to US$15 million. Under the terms of the Stock Option Agreement, the maximum
value that CIT may realize through the option is US$15 million.
The parties entered into the Stock Option Agreement to increase the
likelihood that the Transaction would be completed. Certain aspects of the
option may have the effect of discouraging parties who might be interested in
acquiring all of or a significant interest in Newcourt from considering or
proposing such an acquisition. See "The Transaction - Agreements to Support the
Transaction - Stock Option Agreement" on page 83.
Voting Agreements
CIT has entered into Voting Agreements with each of CIBC, Hercules and
certain members of Newcourt's senior management representing in the aggregate
approximately 26.1% of the outstanding Newcourt Common Shares. CIT and Newcourt
have entered into a Voting Agreement with DKB, which holds approximately 44% of
the outstanding CIT Common Stock. Under the Voting Agreements, each of CIBC,
Hercules and certain members of Newcourt's management has agreed to vote in
favor of the Arrangement Resolution, and DKB has agreed (subject to certain
conditions) to vote in favor of the Stock Issuance Proposal. DKB and CIBC also
have agreed to prepare and file all necessary applications and filings required
in order to obtain all consents and approvals of all third parties and
governmental entities which are necessary to complete the Transaction. See "The
Transaction - Agreements to Support the Transaction - Voting Agreements" on page
82.
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12
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Interests of Certain Persons in the Transaction
Certain executive officers of Newcourt may be deemed to have certain
interests in the Transaction which are in addition to their interests as
Newcourt Shareholders generally. Certain executive officers of Newcourt have
entered into employment agreements with CIT pursuant to which they will remain
employed by CIT after the Transaction is completed. Certain other executive
officers of Newcourt have entered into separation agreements with Newcourt
pursuant to which their employment with Newcourt will terminate on or before the
completion of the Transaction. Under these separation agreements, these
executives will be entitled to severance payments and benefits upon such
termination. The aggregate severance payments due to these separating executives
are approximately $16,644,000 without giving effect to any adjustment for excise
taxes that may be payable or reimbursable by Newcourt.
See "The Transaction - Interests of Certain Persons in the Transaction" on
page 72.
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13
RISK FACTORS
You should carefully consider the following risk factors in determining
how to vote. These risk factors relate directly to the Transaction and to the
business and prospects of the combined company following the completion of the
Transaction, and should be considered in conjunction with the other information
included in this Joint Proxy Statement.
Special Note Regarding Forward-Looking Statements
Certain statements contained or incorporated in this Joint Proxy Statement
are forward-looking statements concerning the companies' individual and combined
operations, economic performance and financial condition. Forward-looking
statements are included, for example, in the discussions about:
o strategy;
o regulatory risks;
o liquidity;
o credit and residual risk management;
o integration of businesses, systems, operations and personnel;
o asset/liability risk management;
o operational and legal risks;
o Year 2000 issues; and
o how the combined company may be affected by certain legal
proceedings.
These statements involve risks and uncertainties that may be difficult to
predict. Therefore, actual results may differ materially from those expressed or
implied in these statements. Factors that could cause such differences include,
but are not limited to:
o economic conditions and trends;
o industry cycles and trends;
o competitive conditions and trends;
o failure to achieve anticipated growth;
o failure to realize or delays in realizing anticipated cost savings;
o higher than expected costs of integration;
o unanticipated problems in integrating businesses;
o changes in market interest rates, in the relationship between
short-term and long-term rates, or in the relationship between
different interest rate indices;
o disruptions in the commercial paper or capital markets;
o changes in the market for equipment and other collateral due to
market conditions, over-supply, obsolescence or other factors; and
o changes in laws or regulations.
Risk Factors Relating to the Transaction
Because Newcourt and CIT have previously operated independently and have
different corporate cultures, there may be some difficulties in integrating the
two companies' operations and the anticipated benefits of the Transaction may
not be achieved.
CIT and Newcourt have analyzed their respective businesses and made
certain assumptions concerning the future operations of the companies on a
stand-alone and combined basis. Among the principal assumptions are that
internally generated cash flow of the combined company will be available to fund
business expansion, that the combined company will benefit from the
complementary skills and expertise of both managements and that the combined
company will achieve within two years annual cost savings of approximately
US$150 million, compared to current operating levels. These savings are expected
to be achieved primarily through reduced
14
general and administrative expenses resulting from the consolidation of
corporate overhead, systems, marketing, back office facilities and personnel.
However, it is not certain that the amount of cash flow that will be generated
by the combined company will be sufficient to fund operations or that the other
assumed benefits of the Transaction will be achieved. These anticipated benefits
of the Transaction cannot be achieved unless the two companies are successfully
combined in a timely and efficient manner.
The Transaction involves the integration of two companies that have
different corporate cultures and that have previously operated independently.
The composition of the combined company's management will be new and several
current senior Newcourt executives will not be continuing with the combined
company. The success of the combined company will depend to a significant degree
on the compatibility of key executives and its ability to retain highly-skilled
personnel. It is not certain that the two companies will be able to integrate
operations without encountering difficulties, including incompatibility of key
executives, the loss of key employees and customers, the disruption of ongoing
businesses or possible inconsistencies in systems, standards, controls,
procedures and policies.
Completion of the Transaction and the subsequent integration of Newcourt
into CIT will require a substantial amount of management's time. Diversion of
management's attention from the existing businesses, as well as problems that
may arise in connection with the integration of the operations, may have a
material adverse impact on revenues and results of operations of each company
prior to the completion of the Transaction and on the revenues and results of
operations of the combined company after completion of the Transaction.
Integration may result in additional expenses, which could negatively affect the
revenues and results of operations of the combined company. See "The Combined
Company After the Transaction - Integration of Operations" on page 45.
Because the Exchange Ratio is fixed, at the time of the shareholders
meetings, CIT Stockholders and Newcourt Shareholders may not know the exact
value of the CIT Common Stock that Newcourt Shareholders will receive when the
Transaction is completed.
Upon completion of the Transaction, each Newcourt Common Share will be
exchanged for either 0.70 of an Exchangeable Share (and applicable Ancillary
Rights) or 0.70 of a share of CIT Common Stock. The Exchange Ratio may be
subject to downward adjustment as described on page 74, but will not be adjusted
for any increase or decrease in the market price of either CIT Common Stock or
Newcourt Common Shares. The prices of CIT Common Stock and Newcourt Common
Shares when the Transaction becomes effective may vary from their prices at the
date of this Joint Proxy Statement or at the date of the shareholders meetings
of CIT and Newcourt. See "Comparative Market Price Data and Dividend History" on
page 21 for recent price ranges. Variations prior to the completion of the
Transaction may result from changes in the business, operations or prospects of
CIT, Newcourt or the combined company, market assessments of the likelihood that
the Transaction will be completed, the timing of the Transaction, regulatory
considerations, general market and economic conditions and other factors. At the
time of their shareholders meetings, CIT Common Stockholders and Newcourt Common
Shareholders may not know the exact Exchange Ratio or the exact value of the CIT
Common Stock that Newcourt Common Shareholders will receive when the Transaction
is completed. CIT Common Stockholders and Newcourt Common Shareholders are urged
to obtain current market quotations for CIT Common Stock and Newcourt Common
Shares.
There can be no assurance that an active trading market in the
Exchangeable Shares will develop or be sustained.
There can be no assurance that an active trading market in the
Exchangeable Shares will develop or be sustained or that the Exchangeable Shares
will continue to meet the listing requirements of The Toronto Stock Exchange.
Although CIT and Newcourt expect that the economic value of the Exchangeable
Shares will be closely linked to the trading value of shares of CIT Common Stock
due to the functional and economical equivalence of the voting, dividend and
liquidation rights of CIT Stockholders and those of the holders of Exchangeable
Shares, there can be no assurance that the Exchangeable Shares will trade at a
value comparable to the trading value of the CIT Common Stock.
15
Risk Factors of the Combined Company
The estimated residual values of the combined company's leasing portfolio
may not be realized.
The two companies lease various types of equipment to customers under
various types of leases, including capital leases and operating leases. A
capital lease differs from an operating lease in that the term of a capital
lease typically extends over a significant portion of the leased equipment's
useful economic life. The realization of unrecovered equipment values (or
residual values) at the end of the term of a capital lease is an important
element in the leasing business. An operating lease, however, is substantially
shorter in duration relative to the leased equipment's useful economic life, and
carries greater risks with respect to the leased equipment. These risks include
the remarketing of the leased equipment over its useful economic life, as well
as the realization of equipment carrying values. The combined company will
conduct substantial levels of operating lease business.
Realization of capital lease residual values and operating lease equipment
carrying values depends on many factors that are not within the combined
company's control, including general market conditions when the lease expires,
whether there has been unusual wear and tear on, or use of, the equipment, the
cost of comparable new equipment, the extent, if any, to which the equipment has
become technologically or economically obsolete during the contract term and the
effects of any additional or amended government regulations.
The combined company will record residual values for capital lease
transactions based upon its estimates of future value of the equipment at the
expected disposition date. The combined company will derive these estimates
from, among other things, historical experience, market information on sales of
used equipment, appraisals, and projected obsolescence trends. The combined
company will also record periodic depreciation expense on equipment purchased
for operating lease transactions based upon estimates of the equipment's useful
life and the estimated future value of the equipment at the end of its useful
life. These estimates involve uncertainties and, accordingly, may prove to be
incorrect. If these remaining equipment values are not realized, either from the
existing leases, from subsequent leases of the same equipment and/or from the
sale of the equipment, then the financial results of the combined company could
suffer materially.
The combined company's results of operations may be materially adversely
effected if there are changes in the volume of its assets securitized or
decreases in the value of its retained interests in securitizations due to
changes in market interest rates or higher than expected credit losses or
prepayments.
Financial institutions use securitizations for a variety of purposes.
Securitizations provide an additional source of liquidity, remove assets from
balance sheets (thus increasing returns and decreasing on-balance sheet
leverage), and generate gains on the sale of the securitized assets. However,
there are risks associated with engaging in securitization activities resulting
from market volatility and from potentially incorrect assumptions about the
future performance of assets (such as prepayment rates and credit losses).
The execution of and the gains recognized on securitization transactions
are affected by market volatility and by changes in market interest rates.
Market volatility can result from a downturn of economic conditions, either
domestically or internationally, from political turmoil, either domestic or
foreign, or from other causes. This volatility could decrease the attractiveness
of securitized debt to investors as they seek safer investments, thus reducing
securitization as a source of liquidity, or compelling companies that rely on
securitization transactions for funding to offer higher rates of return in order
to attract sufficient demand from investors. If the combined company is
compelled to offer higher rates of return in order to attract sufficient demand
from investors, then the cost of this funding source to the combined company
will increase and the gain recognized on the sale of the securitized assets will
be reduced.
In a securitization transaction, a gain on sale and a related retained
interest in the securitized pool are recognized when the assets being
securitized are sold. The value of the retained interest recognized in a
securitization transaction is dependent upon certain assumptions regarding
future performance of the securitized portfolio, including the level of credit
losses and the rate of prepayments. If actual credit losses or prepayment rates
differ from the original assumptions, the value of the retained interest in the
securitized pool may increase or decrease materially. The value of the retained
interest in the securitized pool may also increase or decrease materially with
changes in market interest rates. Also, if assets being securitized are not
properly hedged, the gain on sale recorded in a securitization transaction may
be affected by changes in market interest rates between the time the assets
being securitized are originated and the time the assets are sold to the
securitization entity.
16
Changes in the volume of assets securitized or decreases in the value of
retained interests in securitizations due to changes in market interest rates or
higher than expected credit losses on prepayments could have a material adverse
effect on the combined company's results of operations.
The combined company's plan to provide for a significant reduction in the
levels of securitization of receivables will likely reduce near-term future
earnings of the combined company compared to the pro forma combined earnings of
CIT and Newcourt on a historical basis.
In planning for the funding of the combined company's operations, CIT and
Newcourt have provided for a significant reduction in Newcourt's historical
level of securitizations of receivables to fund Newcourt's operations. For the
six months ended June 30, 1999 and for the year ended December 31, 1998,
securitization gains (net of tax) constituted approximately 73.0% and 96.9%,
respectively, of Newcourt's net income as compared to 1.8% and 2.4%,
respectively, of CIT's. On a pro forma basis, securitization gains (net of tax)
would have constituted approximately 21.0% and 31.1% of the combined company's
net income for the six months ended June 30, 1999 and for the year ended
December 31, 1998, respectively. The goal of the combined company is to reduce
securitization gains (net of tax) over the next several years to approximately
15% or less of the combined company's net income. In the near term, such
reduction in securitization gains will likely reduce future combined earnings
compared to the pro forma combined earnings of CIT and Newcourt on an historical
basis.
The combined company will be dependent on its ability to obtain funding,
the cost of which could be adversely affected by factors that are beyond the
control of the company.
The combined company's primary sources of funds will be cash flow from
operations, commercial paper borrowings, medium-term notes, other term debt
securities and asset-backed securitizations. At June 30, 1999, pro forma
combined commercial paper borrowings were US$7.3 billion and amounts due on term
debt within one year were US$10.0 billion.
The ability of the combined company to obtain funds and the cost of such
funds will be dependent on its credit ratings, its access to the various capital
markets, its financial condition, general economic conditions and business
prospects. A deterioration in these factors could have a material adverse impact
on the combined company's ability to obtain financing on attractive terms and
therefore could have a material adverse impact on the results of operations and
financial condition of the combined company.
CIT and Newcourt cannot be certain that the combined company's reserve for
credit losses maintained on finance receivables will be adequate to protect
against credit losses inherent in the combined company's finance receivables
portfolio.
CIT and Newcourt each maintain a reserve for credit losses on finance
receivables in an amount that it believes will provide adequate protection
against credit losses inherent in the portfolio, considering, among other
things:
o the nature and financial characteristics of its obligors;
o economic conditions and trends;
o past charge-off experience;
o delinquencies;
o the value of underlying collateral; and
o the existence and reliability of guarantees or recourse to dealers,
manufacturers and vendors.
CIT and Newcourt cannot be certain that the combined reserve for credit
losses will be adequate to cover credit losses inherent in the combined
portfolio. The combined consolidated reserve for credit losses could prove to be
inadequate because of unanticipated adverse changes in the economy or events
adversely affecting specific customers, industries or markets. An inadequate
reserve for credit losses could have a material adverse effect on the results of
operations of the combined company.
Changes in market interest rates could adversely affect the combined
company's results of operations.
Changes in market interest rates or in the relationships between
short-term and long-term market interest rates or between different interest
rate indices (i.e., basis risk) could affect the interest rates that the
combined company can charge differently than they affect the interest rates that
the combined company will pay. Such changes could result in an increase in the
interest expense relative to finance income. An increase in market
17
interest rates also could materially impair the ability of floating-rate
borrowers to meet higher payment obligations, which could result in an increase
in defaults (creating non-performing assets) and in net credit losses.
Currency exchange rate fluctuations could adversely affect the combined
company's results of operations.
Approximately 13.9% of the companies' pro forma combined finance income
for the six months ended June 30, 1999 was derived from operations outside the
United States. The combined company's results of operations could be
significantly affected by factors associated with international operations, such
as changes in foreign currency exchange rates and uncertainties relative to
regional economic or political circumstances, as well as by other risks
sometimes associated with international operations. Since the revenue and
expenses of the combined company's foreign operations will be generally
denominated in local currencies, exchange rate fluctuations between such local
currencies and the US dollar will subject the combined company to currency
translation risk with respect to the reported results of the combined company's
foreign operations. Also, the combined company may be subject to foreign
currency translation risks when its transactions are denominated in a currency
other than the currency in which it incurs expenses related to such
transactions. There can be no assurance that the combined company will not
experience fluctuations in financial results from its operations outside the
United States, and there can be no assurance that the combined company will be
able to contractually or otherwise reduce the currency translation risk
associated with its operations.
The business of the combined company will be subject to and may be limited
by various governmental regulations and supervision.
The business of the combined company will be subject to various
governmental regulations and supervision. Such regulation and supervision are
designed primarily to benefit and protect customers, rather than investors. For
example, various jurisdictions may establish maximum allowable finance charges
for certain consumer and commercial loans. If the combined company does not
comply with applicable law, it could have its license to do business revoked or
suspended or could be subject to other penalties. The combined company could
also be adversely affected by the adoption of new laws or regulations or by
changes to existing laws and regulations or their interpretation. See "The
Transaction - Regulation of the Combined Company's Business Operations" on page
98.
Significant Year 2000 failures in the information technology systems of
CIT, Newcourt, or the combined company or of third parties on whom they depend,
could have a material adverse effect on the combined company.
Year 2000 compliance issues arise out of the inability of computers,
software and other equipment using microprocessors to recognize and properly
process date fields containing a two digit year. Both CIT and Newcourt are
dependent upon the proper functioning of their information technology ("IT")
systems. CIT believes that its Year 2000 compliance program for its higher and
medium priority IT systems has been successfully completed and that CIT's
overall Year 2000 compliance program is 99% complete. Newcourt believes that its
Year 2000 compliance program will be substantially completed on or before
September 30, 1999. In order to avoid distracting IT systems management from the
Year 2000 compliance programs of the combined company and avoid potential
infection of Year 2000 compliant IT systems with non-compliant IT systems, CIT
has determined to defer integration of CIT's and Newcourt's IT systems until
next year.
Significant Year 2000 failures in the IT systems of CIT, Newcourt or the
combined company or significant Year 2000 failures in the IT systems of third
parties on whom they depend could have a material adverse effect on the combined
company's financial condition and results of operations. Failure of any of these
IT systems could also cause an inability to originate transactions, process
invoices or collect payments. Year 2000 failures in third party IT systems could
also cause CIT, Newcourt or the combined company to experience substantial
increases in credit losses and liquidity stress.
Because DKB will continue to be CIT's largest stockholder, the activities
of the combined company will be subject to regulation and regulatory supervision
in various jurisdictions and may be restricted by existing agreements with DKB.
Following completion of the Transaction, DKB will beneficially own
approximately 27% of the outstanding CIT Common Stock and Exchangeable Shares,
taken together, and will continue to be CIT's largest stockholder. As a result
of CIT's relationship with DKB, the activities of the combined company may be
subject to regulation and regulatory supervision in various jurisdictions in
which the combined company
18
conducts business. Such regulation or supervision may restrict the ability of
the combined company to engage in new activities or to make new acquisitions.
See "The Transaction Regulation of the Combined Company's Business Operations"
on page 98. In addition, CIT has agreed with DKB not to engage in any activities
or enter into any transactions which would require prior approval of, notice to,
or filing with the Federal Reserve and/or the Ministry of Finance of Japan
without obtaining approval from DKB, and from the Federal Reserve and/or the
Ministry of Finance of Japan, as applicable.
Pursuant to the DKB Voting Agreement, following the Closing, DKB will be
entitled to two seats on the CIT Board of Directors so long as it beneficially
owns more than 10% of the outstanding CIT Common Stock and Exchangeable Shares,
taken together, and one seat so long as it beneficially owns more than 3% of the
outstanding CIT Common Stock and Exchangeable Shares, taken together. Ownership
interests of directors or officers of CIT in the common stock of DKB or service
as a director or officer or other employee of both CIT and DKB could create or
appear to create potential conflicts of interest. CIT's Amended and Restated
Certificate of Incorporation includes certain provisions relating to the
allocation of business opportunities that may be suitable either for DKB or for
CIT. See "Comparison of Stockholder Rights - Corporate Opportunities" on page
122.
Because DKB will beneficially own approximately 27% of the outstanding CIT
Common Stock and the Exchangeable Shares, considered as one class, sales of
substantial amounts of the shares of CIT Common Stock by DKB could adversely
affect the prevailing market price of both the Exchangeable Shares and CIT
Common Stock and could impair the combined company's ability to raise capital by
issuing equity securities.
DKB owns 71,000,000 shares of CIT Common Stock. After the Transaction, DKB
will beneficially own approximately 27% of the outstanding CIT Common Stock and
Exchangeable Shares, taken together. All of the CIT Common Stock owned by DKB
will be eligible for sale in the U.S. public market pursuant to Rule 144 under
the Securities Act.
In addition, all of such shares could be sold by DKB in the public market
through the exercise of up to five "demand" registrations and an unlimited
number of "piggyback" registrations with respect to common equity offerings by
CIT.
Sales of substantial amounts of the shares of CIT Common Stock by DKB
could adversely affect the prevailing market price of both the Exchangeable
Shares and CIT Common Stock and impair the combined company's ability to raise
capital by issuing equity securities. DKB is under no obligation to retain any
of its remaining interest in CIT Common Stock. See "The Transaction - Agreements
to Support the Transaction - Voting Agreements" on page 82.
19
REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES
The historical consolidated financial statements of CIT and the pro forma
financial statements and the summaries of this historical and pro forma
financial information contained or incorporated by reference in this Joint Proxy
Statement are reported in U.S. dollars. The historical consolidated financial
statements of CIT have been prepared in accordance with U.S. GAAP. The
consolidated financial statements of Newcourt incorporated by reference in this
Joint Proxy Statement for any period through December 31, 1998 are reported in
Canadian dollars and have been prepared in accordance with Canadian GAAP. The
consolidated financial statements of Newcourt incorporated by reference in this
Joint Proxy Statement for any period subsequent to December 31, 1998 have been
reported in U.S. dollars and prepared in accordance with Canadian GAAP. The
summaries of historical financial information of Newcourt contained in this
Joint Proxy Statement relating to periods prior to January 1, 1999 have been
converted to U.S. dollars using the exchange rates as set forth in the footnotes
to the Selected Historical Financial Data on pages 25 and 26. Unless otherwise
noted, the summaries of historical financial information of Newcourt contained
in this Joint Proxy Statement have been prepared in accordance with U.S. GAAP.
EXCHANGE RATE OF CANADIAN AND U.S. DOLLARS
In this Joint Proxy Statement, dollar amounts are expressed either in U.S.
dollars ("US$") or Canadian dollars ("C$"). Unless otherwise stated, all dollar
amounts are expressed in U.S. dollars. For each period indicated, the following
table shows the high and low exchange rates for one Canadian dollar expressed in
U.S. dollars, the average of such exchange rates on the last day of each month
during such period, and the exchange rate at the end of such period, based upon
the closing exchange rate as reported by Bloomberg L.P.:
Six Months Years Ended December 31,
Ended ----------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
High ............... 0.6514 0.6321 0.6947 0.7219 0.7021 0.7110
Low ................ 0.6910 0.7105 0.7483 0.7524 0.7517 0.7628
Average ............ 0.6702 0.6740 0.7221 0.7335 0.7289 0.7320
Period End ......... 0.6835 0.6501 0.6995 0.7297 0.7329 0.7133
On September 17, 1999, the exchange rate for one Canadian dollar expressed
in U.S. dollars based on the closing exchange rate as reported by Bloomberg L.P.
was US$0.6798.
For each period indicated, the following table shows the high and low
exchange rates for one U.S. dollar expressed in Canadian dollars, the average of
such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based upon the closing exchange rate as
reported by Bloomberg L.P.:
Six Months Years Ended December 31,
Ended ----------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
High ............... 1.5352 1.5820 1.4395 1.3852 1.4243 1.4065
Low ................ 1.4472 1.4074 1.3364 1.3290 1.3303 1.3109
Average ............ 1.4920 1.4836 1.3848 1.3634 1.3720 1.3662
Period End ......... 1.4631 1.5382 1.4296 1.3705 1.3645 1.4019
On September 17, 1999, the exchange rate for one U.S. dollar expressed in
Canadian dollars was C$1.4711, based on the closing exchange rate as reported by
Bloomberg L.P.
20
COMPARATIVE MARKET PRICE DATA AND DIVIDEND HISTORY
Newcourt Common Shares are traded under the symbol "NCT" on The Toronto
Stock Exchange, the Montreal Exchange and the New York Stock Exchange. Shares of
CIT Common Stock are traded under the symbol "CIT" on the New York Stock
Exchange. The following table sets forth the high and low last reported sale
prices of CIT Common Stock on the New York Stock Exchange and Newcourt Common
Shares on the New York and Toronto Stock Exchanges for the periods indicated.
The quotations are as reported in published financial sources. New York Stock
Exchange quotations are expressed in US$, and The Toronto Stock Exchange
quotations are expressed in C$. On September 9, 1999 there were 161,269,826
shares of CIT Common Stock outstanding held by approximately 19,479
stockholders, including both record holders and individual participants holding
through a registered clearing agency. On September 20, 1999 there were
148,508,329 Newcourt Common Shares outstanding held by 1,439 registered
shareholders.
New York
Stock Exchange CIT Newcourt
- -------------- ------------------------------------------------------------ ---------------------------------
U.S. Dollars 1999 1998 1997(1) 1999 1998
Common Stock/ --------------- --------------- --------------- ------------ --------------
Share Prices High Low High Low High Low High Low High Low
------------ ---- --- ---- --- ---- --- ---- --- ---- ---
First Quarter ... $33 7/16 $27 5/8 $33 $29 7/16 -- -- $37 $23 1/2 $54 1/4 $31 1/8
Second Quarter .. $33 13/16 $27 9/16 $37 1/2 $31 1/4 -- -- $29 5/8 $11 3/16 $50 3/4 $45 1/16
Third Quarter ... -- -- $36 1/4 $25 3/8 -- -- -- -- $52 3/8 $26 1/8
Fourth Quarter .. -- -- $31 13/16 $19 1/8 $32 5/8 $29 3/4 -- -- $37 7/8 $20
New York
Stock Exchange Newcourt
- -------------- ---------------
U.S. Dollars 1997
Common Stock/ ---------------
Share Prices High Low
------------ ---- ---
First Quarter ... -- --
Second Quarter .. $27 $18 1/2
Third Quarter ... $39 1/8 $26 1/16
Fourth Quarter .. $39 15/16 $31 1/2
- ----------
(1) Newcourt Common Shares began trading on the New York Stock Exchange in
April 1997, and CIT Common Stock began trading on the New York Stock Exchange in
November 1997.
The Toronto Newcourt
Stock Exchange ----------------------------------------------------------------------
- ------------------- 1999 1998 1997
Canadian Dollars --------------------- --------------------- ----------------------
Common Share Prices High Low High Low High Low
- -------------------- --------- --------- --------- --------- ----------- ---------
First Quarter ........... $ 54.90 $ 35.65 $ 76.50 $ 44.80 $ 27.725 $ 23.05
Second Quarter .......... $ 43.65 $ 16.50 $ 72.75 $ 65.25 $ 37.50 $ 25.00
Third Quarter ........... -- -- $ 78.00 $ 39.50 $ 54.60 $ 35.85
Fourth Quarter .......... -- -- $ 58.75 $ 30.75 $ 54.95 $ 44.00
The following table sets forth the last reported sale prices of shares of
CIT Common Stock and Newcourt Common Shares on the New York Stock Exchange (and,
in the case of Newcourt, in Canadian dollars on The Toronto Stock Exchange) on
August 4, 1999, the last trading day before the announcement of the
Reorganization Agreement, and on September 17, 1999:
CIT Newcourt
NYSE NYSE TSE
---- ---- ---
August 4, 1999 ................. US$26.06 US$15.69 C$23.40
September 17, 1999 ............. US$22.06 US$13.50 C$19.60
You are urged to obtain current market quotations for shares of CIT Common
Stock and Newcourt Common Shares.
The following table describes the quarterly dividend history of CIT and
Newcourt for 1999, 1998 and 1997. The declaration, payment and amount of future
dividends will be subject to the discretion of the Board of Directors of the
combined company and will depend on the combined company's future earnings,
capital requirements, financial condition and other relevant factors. CIT and
Newcourt have agreed to coordinate the declaration and payment of any dividends
in respect of the CIT Common Stock and the Newcourt Common Shares and the record
dates and payment dates relating thereto, so that holders of Newcourt Common
Shares will not receive more than one dividend or fail to receive one dividend
for any single calendar quarter with respect to such holder's Newcourt Common
Shares and/or any shares of CIT Common Stock or Exchangeable Shares received
pursuant to the Transaction.
CIT Newcourt
--------------------------------------------------- ------------------------------------------------
1999 1998 1997(2) 1999 1998 1997
Dividends Paid (per share) (per share) (in millions) (per share) (per share) (per share)
----------------------- ------------- ------------------------------------- ------------------------------------------------
First Quarter US$0.10 (1) US$21.0 C$0.06 C$0.04 C$0.035
Second Quarter 0.10 US$0.10 27.6 0.06 0.04 0.035
Third Quarter 0.10 0.10 23.2 0.06 0.04 0.035
Fourth Quarter -- 0.10 7.5 -- 0.06 0.04
------------ -------------- -------------- ---------- -------------- --------------
Year US$0.30 US$0.30 US$79.3 C$0.12 C$0.18 C$0.145
============ ============== ============== ========== ============== ==============
- ----------
(1) No dividends were paid to stockholders.
(2) Prior to its initial public offering of CIT Class A Common Stock ("IPO"),
CIT operated under a policy requiring the payment of dividends equal to
and not exceeding 30% of net operating earnings on a quarterly basis to
its two principal shareholders, based upon their respective stock
ownership. By agreement with those shareholders, the final cash dividend
under that dividend policy was paid for the fourth quarter of 1997 (based
upon net operating earnings through October 31, 1997) prior to the
completion of the IPO. That dividend policy was terminated in connection
with CIT's IPO in November 1997.
21
SELECTED PRO FORMA CONSOLIDATED COMPARATIVE PER SHARE DATA
The following table sets forth at or for the six months ended June 30,
1999 and at or for the year ended December 31, 1998 (i) selected comparative per
share data for each of CIT and Newcourt, (ii) CIT pro forma per share data, and
(iii) CIT pro forma per share data per equivalent Newcourt Common Share. The pro
forma and pro forma equivalent per share information was prepared assuming that
the Transaction had occurred on June 30, 1999 and December 31, 1998, in the case
of the book value data presented as of June 30, 1999 and December 31, 1998,
respectively, and assuming that the Transaction had occurred on January 1, 1998,
in the case of earnings per share and cash dividends declared data presented for
the six months ended June 30, 1999 and for the year ended December 31, 1998. The
pro forma data in the tables reflects that the Transaction will be accounted for
using the purchase method of accounting in accordance with U.S. GAAP. See "The
Transaction - Accounting Treatment" on page 99. The information presented below
was derived from the historical financial statements, including the notes
thereto, of CIT and Newcourt incorporated by reference in this Joint Proxy
Statement and the pro forma financial information, including the notes thereto,
appearing elsewhere in this Joint Proxy Statement, and should be read in
conjunction with those financial statements and financial information. See
"Incorporation of Certain Documents by Reference" on page 141 and "Unaudited Pro
Forma Financial Information on a Combined Basis" on page 27. The pro forma and
pro forma equivalent per share data in the following tables are presented for
comparative purposes only and are not necessarily indicative of what the
combined financial position or results of operations would have been had the
Transaction been completed during the period or as of the date for which such
pro forma data are presented.
At or for the
Six Months At or for the
Ended Year Ended
Comparative Per Share Data: June 30, 1999 December 31, 1998
------------- -----------------
Cash dividends per common share:
CIT .................................................... US$ 0.20 US$ 0.30
Newcourt(1) ............................................ 0.08 0.12
CIT pro forma(2) ....................................... 0.20 0.30
Per equivalent Newcourt Common Share(3) ................ 0.14 0.21
Book value per common share:
CIT .................................................... US$17.60 US$16.66
Newcourt(1) ............................................ 20.61 20.30
CIT pro forma(4) ....................................... 20.36 25.12
Per equivalent Newcourt Common Share(3) ................ 14.25 17.58
Tangible book value per common share:
CIT .................................................... US$15.45 US$15.32
Newcourt(1) ............................................ 12.18 11.67
CIT pro forma(4) ....................................... 13.86 18.83
Per equivalent Newcourt Common Share(3) ................ 9.70 13.18
Basic earnings per common share:
CIT .................................................... US$ 1.17 US$ 2.09
Newcourt(1)(6) ......................................... 0.47 1.11
CIT pro forma(5)(6) .................................... 1.02 1.98
Per equivalent Newcourt Common Share(3)(6) ............. 0.71 1.39
Diluted earnings per common share:
CIT .................................................... US$ 1.16 US$ 2.08
Newcourt(1)(6) ......................................... 0.47 1.09
CIT pro forma(5)(6) .................................... 1.01 1.96
Per equivalent Newcourt Common Share(3)(6) ............. 0.71 1.37
- ---------------
(1) Presented in accordance with U.S. GAAP and in U.S. dollars.
(2) CIT pro forma cash dividends per common share represent the historical
cash dividends declared by CIT and assumes no changes in cash dividends as
a result of the Transaction.
(3) "Per equivalent Newcourt Common Share" amounts are computed by multiplying
the CIT pro forma amounts by the Exchange Ratio of 0.70 so that the per
share amounts are equated to the respective values for one Newcourt Common
Share.
(4) CIT pro forma book value per common share and tangible book value per
common share amounts are based on the pro forma total stockholders' equity
of the combined company divided by the total pro forma common shares of
the combined company assuming conversion of 100% of the outstanding
Newcourt Common Shares into shares of CIT Common Stock at the Exchange
Ratio of 0.70. See Note 2(a) in the Notes to the Unaudited Pro Forma
Financial Information on a Combined Basis on page 31.
(5) Basic earnings per common share is calculated by dividing the net income
by the weighted average number of common shares outstanding. Diluted
earnings per common share is calculated using the same method as basic
earnings per share, except that it includes potential dilution of common
stock equivalents. Newcourt Common Shares are adjusted to the equivalent
number of shares of CIT Common Stock based upon the Exchange Ratio of
0.70.
(6) The calculation of basic and diluted earnings per Newcourt Common Share
for the year ended December 31, 1998 excludes a non-recurring premium of
$29.9 million on the redemption of preferred securities. If such premium
is included in the calculation of basic and diluted earnings per common
share, then basic earnings per Newcourt Common Share and diluted earnings
per Newcourt Common Share were $0.90 and $0.88, respectively. For purposes
of pro forma per share data, CIT pro forma basic earnings per common share
and diluted earnings per common share would have been $1.87 and $1.85,
respectively. Basic and diluted earnings per equivalent Newcourt Common
Share would have been $1.31 and $1.29, respectively.
22
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected consolidated financial data for
CIT and Newcourt at or for each year in the five year period ended December 31,
1998 and at and for the six months ended June 30, 1999 and 1998.
CIT
The results of operations and balance sheet data presented below for CIT
has been derived from CIT's consolidated financial statements and were prepared
in accordance with U.S. GAAP. The results of operations and balance sheet data
at and for the five years ended December 31, 1998 were audited by KPMG LLP,
independent accountants. CIT believes that the results of operations and balance
sheet data at and for the six months ended June 30, 1999 and 1998 contain all
adjustments (all of which are normally occurring accruals) necessary for a fair
statement of financial position and results of operations for those periods;
however, results for such periods are subject to year-end audit adjustments.
Results for such periods are not necessarily indicative of results for a full
year.
Selected Summary Financial Information of CIT
(in millions of U.S. dollars except per share data)
For the six
months ended
June 30, For the years ended December 31,
------------------ ---------------------------------------------------------
(unaudited)
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
Results of Operations
Net finance income ......................... $541.8 $468.4 $ 974.3 $ 887.5 $ 797.9 $697.7 $649.8
Operating revenue .......................... 681.3 595.5 1,229.7 1,193.3(1) 1,042.0 882.4 824.2
Salaries and general operating
expenses ................................. 222.0 205.7 417.8 428.4 393.1 345.7 337.9
Provision for credit losses ................ 45.7 44.4 99.4 113.7 111.4 91.9 96.9
Net income ................................. 188.2 165.4 338.8 310.1 260.1 225.3 201.1
Net income per diluted share ............... 1.16 1.01 2.08 1.95 1.64 1.43 1.28
At
June 30,
1999 At December 31
----------- ----------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Balance Sheet Data
Finance receivables:
Commercial ....................... $16,721.2 $15,589.1 $14,054.9 $13,757.6 $13,451.5 $12,821.2
Consumer ......................... 4,176.4 4,266.9 3,664.8 3,239.0 2,344.0 1,973.2
--------- --------- --------- --------- --------- ---------
Total finance receivables ...... $20,897.6 $19,856.0 $17,719.7 $16,996.6 $15,795.5 $14,794.4
Reserve for credit losses ............. 276.8 263.7 235.6 220.8 206.0 192.4
Operating lease
equipment, net ...................... 3,433.2 2,774.1 1,905.6 1,402.1 1,113.0 867.9
Total assets ................... 26,144.3 24,303.1 20,464.1 18,932.5 17,420.3 15,959.7
Commercial paper ...................... 5,674.3 6,144.1 5,559.6 5,827.0 6,105.6 5,660.2
Variable rate senior notes ............ 5,349.7 4,275.0 2,861.5 3,717.5 3,827.5 3,812.5
Fixed rate senior notes ............... 8,611.3 8,032.3 6,593.8 4,761.2 3,337.0 2,619.4
Subordinated fixed rate notes ......... 200.0 200.0 300.0 300.0 300.0 300.0
Company-obligated mandatorily
redeemable preferred
securities of subsidiary trust
holding solely debentures
of the Company ...................... 250.0 250.0 250.0 -- -- --
Stockholders' equity .................. 2,846.4 2,701.6 2,432.9 2,075.4 1,914.2 1,793.0
- --------------
(1) Includes a 1997 gain of US$58.0 million on the sale of an equity interest
acquired in connection with a loan workout.
23
At and for the
six months ended
Selected Data and Ratios June 30, At or for the years ended December 31,
----------------- --------------------------------------------------------
(unaudited)
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
Profitability
Net interest margin as a
percentage of average
earning assets ("AEA")(1) .............. 4.73% 4.79% 4.75% 4.87% 4.82% 4.54% 4.77%
Return on average stockholders'
equity ................................. 13.6% 13.2% 13.2% 14.0%(4) 13.0% 12.1% 11.5%
Return on AEA(1) ......................... 1.64% 1.69% 1.65% 1.70%(4) 1.57% 1.46% 1.48%
Ratio of earnings to fixed charges ....... 1.51x 1.50x 1.49x 1.51x 1.49x 1.44x 1.52x
Salaries and general operating
expenses as a percentage of
average managed assets
("AMA")(2) ............................. 1.73% 1.88% 1.82% 2.16%(4) 2.22% 2.16% 2.44%
Efficiency ratio(3) ...................... 39.9% 40.6% 40.1% 41.6%(4) 42.7% 43.1% 44.5%
Credit Quality
60+ days contractual delinquency
as a percentage of finance
receivables ............................ 1.64% 1.83% 1.75% 1.67% 1.72% 1.67% 1.20%
Net credit losses as a percentage
of average finance receivables ......... 0.41% 0.41% 0.42% 0.59% 0.62% 0.50% 0.61%
Reserve for credit losses as a
percentage of finance
receivables ............................ 1.32% 1.34% 1.33% 1.33% 1.30% 1.30% 1.30%
Ratio of reserve for credit losses
to trailing 12 months net
credit losses .......................... 3.27x 3.00x 3.35x 2.33x 2.18x 2.67x 2.29x
Leverage
Total debt to stockholders' equity
and Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
debentures of the Company .............. 6.41x 5.89x 6.32x 5.71x 7.04x 7.09x 6.91x
Total debt to stockholders' equity(5) .... 7.06x 6.56x 7.00x 6.40x 7.04x 7.09x 6.91x
Other
Total managed assets
(in millions)(6) ....................... $28,395.5 $23,919.9 $26,216.3 $22,344.9 $20,005.4 $17,978.6 $16,072.1
Employees ................................ 3,200 3,150 3,230 3,025 2,950 2,750 2,700
- -----------
(1) "AEA" means the average of finance receivables, operating lease equipment,
consumer finance receivables held for sale and certain investments, less
credit balances of factoring clients.
(2) "AMA" means AEA plus the average of consumer finance receivables
previously securitized and currently managed by CIT.
(3) Efficiency ratio reflects the ratio of salaries and general operating
expenses to the sum of operating revenue less depreciation of operating
lease equipment and minority interest in subsidiary trust holding solely
debentures of the Company.
(4) Excluding the gain of US$58.0 million on the sale of an equity interest
acquired in a loan workout and certain nonrecurring expenses, (i) the
return on average stockholders' equity would have been 13.1% for the year
ended December 31, 1997, (ii) the return on AEA would have been 1.58% for
the year ended December 31, 1997, (iii) the efficiency ratio would have
been 42.0% for the year ended December 31, 1997 and (iv) salaries and
general operating expenses as a percentage of AMA would have been 2.06%
for the year ended December 31, 1997.
(5) Total debt includes, and stockholders' equity excludes, US$250.0 million
of Company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely debentures of the Company issued in
February 1997.
(6) "Managed assets" include (i) financing and leasing assets and (ii)
off-balance sheet consumer finance receivables previously securitized and
currently managed by CIT.
24
Newcourt
The income statement data and the balance sheet data presented below for
Newcourt have been derived from Newcourt's consolidated financial statements.
This data was prepared in accordance with U.S. GAAP (unless otherwise noted) and
is expressed in U.S. dollars. Newcourt's consolidated financial statements for
each of the five years ended December 31, 1998 were audited by Ernst & Young,
LLP. Certain amounts have been reclassified to conform to the presentation
adopted in the current year. Newcourt believes that the results of operations
and balance sheet data at and for the six months ended June 30, 1999 and 1998
contain all adjustments (all of which are normally occurring accruals) necessary
for a fair statement of financial position and results of operations for those
periods; however, results for such periods are subject to year-end audit
adjustments. Results for such periods are not necessarily indicative of results
for a full year.
Selected Summary Financial Information of Newcourt Under U.S. GAAP
(in millions of U.S. dollars except per share data)
For the six
months ended
June 30, For the years ended December 31,
----------------------- --------------------------------------------------------------
1999 998(7)(10) 1998(7)(10) 1997(10) 1996(10) 1995(10) 1994(10)(12)
------- ---------- ----------- -------- -------- -------- ------------
Income Statement Data
Net finance and rental income(1) ....... $206.9 $260.8(9) $549.2(9) $60.9 $38.4 $21.6 $11.7
Securitizations gains .................. 84.2 114.2 241.5 108.3 36.9 15.6 13.5
Syndication fees ....................... 69.9 17.4 46.0 35.2 26.8 13.4 11.6
Management fees and other income ....... 166.8(8) 72.9 155.3 32.6 23.3 13.3 6.4
------- ------- ------- ------ ------ ------ ------
Total asset finance income ............. 527.8 465.3 992.0 237.0 125.4 63.9 43.2
Operating expenses ..................... 376.1 319.4 663.8 139.8 73.8 40.2 23.4
Amortization and depreciation .......... 36.3 40.8 78.9 14.8 4.2 2.7 1.8
Operating income before
restructuring charges and taxes ...... 115.4 105.1 249.3 82.4 47.4 21.0 18.0
Restructuring charges(6) ............... -- _ -- 49.4 -- -- --
Operating income ....................... 115.4 105.1 249.3 33.0 47.4 21.0 18.0
Net income ............................. 69.3 64.1 157.8 37.8 37.3 17.5 13.7
Earnings per Common Share and
Special Share(2)(4)(5) ............... 0.47 0.47 0.90(11) 0.54 0.70 0.45 0.44
Diluted earnings per Common Share
and Special Share(3)(5) .............. 0.47 0.46 0.88(11) 0.53 0.70 0.45 0.44
At
June 30,
1999 At December 31,
--------- ----------------------------------------------------------------------
1998(7)(10) 1997(10) 1996(10) 1995(10) 1994(10)(12)
----------- -------- -------- -------- ------------
Balance Sheet Data
Finance assets held for investment ..... $9,418.6 $8,611.7 $1,624.4 $859.6 $831.4 $340.3
Equipment under operating leases ....... 2,161.3 2,173.5 192.9 78.6 0.0 0.0
Finance assets held for sale ........... 1,563.9 1,542.8 763.4 564.8 250.5 96.0
Goodwill ............................... 1,252.3 1,280.0 299.7 39.6 0.9 0.0
Other .................................. 1,193.4 1,738.0 1,562.6 225.8 233.8 87.2
-------- -------- ------- ------- ------- ------
Total Assets ........................... 15,589.5 15,346.0 4,443.0 1,768.4 1,316.6 523.5
-------- -------- ------- ------- ------- ------
Debt ................................... 11,846.4 11,607.2 2,068.2 1,331.6 1,105.5 368.7
Shareholders' equity(4)(5) ............. 3,060.7 3,011.4 2,143.0 365.7 168.6 114.8
- -----------
(1) Net finance and rental income including finance and rental income net of
interest expense, depreciation expense on operating leases and provision
for credit losses.
(2) Based on the weighted average number of Common Shares and Special Shares
outstanding during the period.
(3) Based on the weighted average number of Common Shares and Special Shares
outstanding during the period after giving effect to the exercise of all
outstanding dilutive options to acquire common shares and any other
dilutive items.
(4) On November 30, 1995, 1,611,000 Special Shares were converted into
1,611,000 Common Shares. On December 27, 1995, 1,411,675 Special Shares
were converted into 1,411,675 Common Shares. On July 2, 1996, the
remaining 199,325 Special Shares were converted into 199,325 Common
Shares. On December 11, 1995, Newcourt redeemed and cancelled all issued
and outstanding Preference Shares.
(5) Effective April 14, 1997, Newcourt subdivided on a two-for-one basis all
of Newcourt's issued and outstanding Common Shares and all of Newcourt's
Common Shares reserved for issuance. The Selected Summary Financial
Information set out in the above table has been adjusted to reflect the
stock split retroactively.
(6) Restructuring charges reflect $49.4 million recorded in connection with
costs expected to be incurred relating to the acquisition of Commcorp
Financial Services Inc. and to consolidate certain of Newcourt's other
businesses in Canada and the United States.
(7) Increase in amounts reflect the inclusion of AT&T Capital Corporation,
which was acquired by Newcourt in 1998.
(8) Includes $34.3 million gain on sale of automobile fleet leasing businesses
and $56.6 million gain on extinguishment of derivative financial
instruments.
(9) Includes $12.4 million related to Newcourt's divestiture of its 50% joint
interest venture with American Express.
(10) Newcourt adopted the U.S. dollar as its reporting currency effective
January 1, 1999. Accordingly, Newcourt's historical financial information
has been converted to U.S. dollars using the following rates for Balance
Sheet Data as at December 31, 1998, 1997, 1996, 1995 and 1994,
respectively: 0.6443, 0.6995, 0.7297, 0.7329 and 0.7133. The following
exchange rates were used to convert the Income Statement Data for the six
months ended June 30, 1998 and years ended December 31, 1998, 1997, 1996,
1995 and 1994, respectively: 0.6957, 0.6733, 0.7221, 0.7335, 0.7289 and
0.7320.
(11) Calculation includes a non-recurring premium of $29.9 million on the
redemption of preferred securities.
(12) Newcourt was not required to file a Canadian GAAP to U.S. GAAP
reconciliation with the SEC as of and for the year ended December 31,
1994. Accordingly, this reconciliation was not prepared, and such
information, which may result in material adjustments, is not available.
As a result, balances are presented in accordance with Canadian GAAP.
25
At or for the
six months ended
June 30, At or for the years ended December 31,
------------------ ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994(10)
---- ---- ------ ---- ---- ---- --------
Selected Data and Ratios
Profitability
Net finance and rental income as a
percentage of average earning
assets(1) .............................. 3.21% 4.72% 4.93% 4.45% 4.14% 3.27% 3.15%
Return on tangible average
shareholders' equity before
restructuring charge(2) ................... 10.5% 11.5% 12.7% 16.2% 16.5% 12.4% 19.8%
Return on average earning assets
before restructuring charge(3) ......... 1.08% 1.16% 1.42% 5.75% 4.01% 2.65% 3.70%
Operating expenses as a percentage
of average owned and managed
assets(4) .............................. 3.20% 2.91% 3.09% 1.95% 1.90% 1.62% 1.38%
Credit quality
90 day delinquency as a percentage
of finance receivables(5) .............. 1.49% 1.04% 1.33% 0.52% 0.49% 0.10% 0.06%
Net credit losses as a percentage of
finance receivables .................... 0.74% 0.65% 0.64% 0.34% 0.24% 0.17% 0.31%
Reserve for credit losses as a
percentage of finance receivables ...... 1.72% 1.77% 1.70% 1.48% 1.28% 0.45% 0.97%
Ratio of reserve for credit losses to
trailing 12 months net credit
losses . ............................... 2.46x 2.35x 2.65x 4.31x 5.28x 2.66x 3.12x
Leverage
Total debt to tangible shareholders'
equity(6) .............................. 6.38x 5.10x 5.93x 1.12x(8) 4.04x 6.59x 3.21x
Other
Total owned and managed
assets(7)(9) ......................... $24,571.8 $23,165.7 $23,336.5 $7,943.5 $4,835.0 $3,167.6 $2,109.2
Employees ................................. 5,240 4,553 4,884 1,742 950 458 284
- -----------
(1) Average earning assets includes finance assets held for investment,
equipment under operating lease and finance assets held for sale.
(2) Net income before restructuring charges and goodwill amortization, net of
taxes, divided by average tangible shareholders' equity (total
shareholders' equity less goodwill).
(3) Net income before restructuring charges, net of taxes, divided by average
earning assets.
(4) Average owned and managed assets includes on-balance sheet earning assets
and off-balance sheet managed assets, inclusive of those syndicated (see
Note 7 below). Operating expenses excludes goodwill amortization.
(5) Reflects the net investment for which a portion is in arrears 90 days or
longer. Investment assets includes finance assets held for investment and
equipment under operating lease.
(6) Represents total debt, net of cash, divided by total shareholders' equity
less goodwill.
(7) Includes syndicated assets of $2,183.7 million, $3,171.0 million, $1,812.5
million, $1,400.9 million, $1,376.3 million, $1,317.9 and $911.1 million
as of June 30, 1999 and 1998, and December 31, 1998, 1997, 1996, 1995 and
1994, respectively.
(8) Reflects a $1,238.8 million offering of subscription rights relating to
the financing of the AT&T Capital Corporation acquisition in January 1998.
(9) Newcourt adopted the U.S. dollar as its reporting currency effective
January 1, 1999. Accordingly, Newcourt's historical financial information
has been converted to U.S. dollars using the following rates for balance
sheet information as at June 30, 1998 and December 31, 1998, 1997, 1996,
1995 and 1994, respectively: 0.6823, 0.6443, 0.6995, 0.7297, 0.7329 and
0.7133.
(10) Newcourt was not required to file a Canadian GAAP to U.S. GAAP
reconciliation with the SEC as of and for the year ended December 31,
1994. Accordingly, this reconciliation was not prepared, and such
information, which may result in material adjustments, is not available.
As a result, data and ratios are presented in accordance with Canadian
GAAP.
26
UNAUDITED PRO FORMA FINANCIAL INFORMATION ON A COMBINED BASIS
The following unaudited pro forma condensed consolidated balance sheet and
statements of income of CIT and its subsidiaries are based on the historical
consolidated financial statements of CIT and Newcourt as of June 30, 1999 and
for the six months then ended and for the year ended December 31, 1998. The
unaudited pro forma condensed consolidated balance sheet has been prepared
assuming that the Transaction had occurred on June 30, 1999. The unaudited pro
forma condensed consolidated statements of income for the six months ended June
30, 1999 and for the year ended December 31, 1998 have been prepared assuming
the Transaction had occurred on January 1, 1998.
The unaudited pro forma condensed consolidated financial statements
reflect pro forma estimated adjustments to Newcourt's assets and liabilities to
reflect their respective fair values under the purchase method of accounting.
The excess of the purchase price over the estimated fair value of the net assets
acquired has been allocated to goodwill. Allocation of the purchase price to the
fair value of the net assets acquired and goodwill is subject to change, and
will be finalized at the Closing of the Transaction.
The following unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the following: (i) the
accompanying notes thereto, (ii) the unaudited condensed consolidated financial
statements included in CIT's Quarterly Report on Form 10-Q as of and for the six
months ended June 30, 1999, and the audited consolidated financial statements
included in CIT's Annual Report on Form 10-K as of and for the year ended
December 31, 1998, and (iii) the unaudited consolidated financial statements of
Newcourt as of and for the six months ended June 30, 1999 as filed on Form 6-K
with the SEC, and the audited consolidated financial statements of Newcourt as
of and for the year ended December 31, 1998 as filed on Form 6-K with the SEC.
The unaudited pro forma condensed consolidated financial statements have been
prepared based upon currently available information and assumptions deemed
appropriate by management of CIT. These pro forma financial statements are not
necessarily indicative of either the financial position or the results of
operations that would have been achieved had the Transaction actually occurred
on the dates referred to above, nor is it necessarily indicative of the results
of future operations, because such unaudited pro forma condensed consolidated
financial statements are based on estimates of financial effects that may prove
to be inaccurate over time. The information furnished in the statements does not
reflect, among other things, management's plans to reduce the level of
securitization activity, the cost savings or the revenue enhancements that may
be achieved as a result of the Transaction, or the post acquisition legal and
tax structure.
27
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(in millions of U.S. dollars)
CIT
Pro Forma Pro Forma
CIT Newcourt (a) Adjustments Note Consolidated
---------- ------------ ------------ ----- -----------
Assets
Financing and leasing assets
Loans
Commercial ..................................... $12,482.2 $ 4,969.0 $ (200.0) 3a $17,251.2
Consumer ....................................... 4,176.4 -- -- 4,176.4
Lease receivables ................................... 4,239.0 3,956.0 (175.0) 3a 8,020.0
--------- --------- --------- ---------
Finance receivables ............................ 20,897.6 8,925.0 (375.0) 29,447.6
Reserve for credit losses ........................... (276.8) (199.3) -- (476.1)
--------- --------- --------- ---------
Net finance receivables ........................ 20,620.8 8,725.7 (375.0) 28,971.5
Operating lease equipment, net ...................... 3,433.2 2,103.5 -- 5,536.7
Consumer finance receivables held for sale .......... 864.4 -- -- 864.4
Commercial finance receivables held for sale ........ -- 1,563.9 -- 1,563.9
Goodwill ............................................ 348.4 1,252.3 126.5 3c 1,727.2
Cash and cash equivalents ........................... 92.9 310.8 -- 403.7
Other assets ........................................ 784.6 1,427.3 (100.0) 3a 2,111.9
--------- --------- --------- ---------
Total assets ................................... $26,144.3 $15,383.5 $ (348.5) $41,179.3
========= ========= ========= =========
Liabilities and Stockholders' Equity
Debt
Commercial paper .................................... $ 5,674.3 $ 1,659.2 -- $ 7,333.5
Variable rate senior notes .......................... 5,349.7 1,156.8 -- 6,506.5
Fixed rate senior notes ............................. 8,611.3 9,030.4 $ 250.0 3a 17,891.7
Subordinated fixed rate notes ....................... 200.0 -- -- 200.0
--------- --------- --------- ---------
Total debt ..................................... 19,835.3 11,846.4 250.0 31,931.7
Credit balances of factoring clients ................ 1,761.6 -- -- 1,761.6
Accrued liabilities and payables .................... 675.9 682.4 200.0 2d 1,558.3
Deferred federal income taxes ....................... 775.1 (206.0) (300.0) 3a 269.1
--------- --------- --------- ---------
Total liabilities .............................. 23,047.9 12,322.8 150.0 35,520.7
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely debentures of the Company ....... 250.0 -- -- 250.0
Stockholders' equity:
Common stock ........................................ 1.7 -- 1.0 2a 2.7
Paid-in capital ..................................... 957.2 -- 2,561.2 2a 3,518.4
Share capital ....................................... -- 2,791.6 (2,791.6) 3b --
Retained earnings ................................... 1,928.5 269.1 (269.1) 3b 1,928.5
Treasury stock at cost .............................. (41.0) -- -- (41.0)
--------- --------- --------- ---------
Total stockholders' equity ..................... 2,846.4 3,060.7 (498.5) 5,408.6
--------- --------- --------- ---------
Total liabilities and stockholders' equity ..... $26,144.3 $15,383.5 $ (348.5) $41,179.3
========= ========= ========= =========
- -------------
(a) Presented in accordance with U.S. GAAP-- See Note 1-- Basis of
Presentation and Note 6-- Newcourt Credit Group Inc.-- Pro Forma
Reclassifications and Conversions.
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
28
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Six Months Ended June 30, 1999
(in millions of U.S. dollars, except per share data)
CIT
Pro Forma Pro Forma
CIT Newcourt (a) Adjustments Note Consolidated
---------- ------------ ---------- ----- -----------
Finance income .................................. $ 1,095.9 $ 1,031.3 $(17.0) 3e $ 2,110.2
Interest expense ................................ 554.1 407.5 (43.8) 3e 917.8
----------- ----------- ---------- -----------
Net finance income ......................... 541.8 623.8 26.8 1,192.4
Fees and other income ........................... 139.5 268.2 -- 407.7
Gain on sale of automobile fleet leasing
businesses ................................. -- 34.3 -- 34.3
Gain on extinguishment of derivative
financial instruments ...................... -- 56.6 -- 56.6
----------- ----------- ---------- -----------
Operating revenue .......................... 681.3 982.9 26.8 1,691.0
----------- ----------- ---------- -----------
Salaries and general operating expenses ......... 213.8 389.2 -- 603.0
Provision for credit losses ..................... 45.7 58.4 -- 104.1
Depreciation on operating lease equipment ....... 115.3 396.7 -- 512.0
Goodwill amortization ........................... 8.2 23.2 4.4 3d 35.8
Minority interest in subsidiary trust holding
solely debentures of the Company ........... 9.6 -- -- 9.6
----------- ----------- ---------- -----------
Operating expenses ......................... 392.6 867.5 4.4 1,264.5
----------- ----------- ---------- -----------
Income before provision for income taxes ... 288.7 115.4 22.4 426.5
Provision for income taxes ...................... 100.5 46.1 10.2 3f 156.8
----------- ----------- ---------- -----------
Net income ................................. $ 188.2 $ 69.3 $ 12.2 $ 269.7
=========== =========== ========== ===========
Basic earnings per share ................... $ 1.17 $ 0.47 4 $ 1.02
Weighted average common shares
outstanding .............................. 161,021,757 148,356,885 264,871,577
Diluted earnings per share ................. $ 1.16 $ 0.47 4 $ 1.01
Weighted average common shares
outstanding .............................. 162,267,941 148,822,829 266,443,921
- -----------
(a) Presented in accordance with U.S. GAAP-- See Note 1-- Basis of
Presentation and Note 6-- Newcourt Credit Group Inc.-- Pro Forma
Reclassifications and Conversions.
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
29
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1998
(in millions of U.S. dollars, except per share data)
CIT
Pro Forma Pro Forma
CIT Newcourt (a) Adjustments Note Consolidated
---------- ------------ ----------- ----- ------------
Finance income .................................... $ 2,015.1 $ 1,888.4 $ (34.0) 3e $ 3,869.5
Interest expense .................................. 1,040.8 657.9 (87.5) 3e 1,611.2
------------ ------------ ------- ------------
Net finance income ........................... 974.3 1,230.5 53.5 2,258.3
Fees and other income ............................. 255.4 548.7 -- 804.1
------------ ------------ ------- ------------
Operating revenue ............................ 1,229.7 1,779.2 53.5 3,062.4
------------ ------------ ------- ------------
Salaries and general operating expenses ........... 407.7 698.3 -- 1,106.0
Provision for credit losses ....................... 99.4 100.5 -- 199.9
Depreciation on operating lease equipment ......... 169.5 686.7 -- 856.2
Goodwill amortization ............................. 10.1 44.4 10.8 3d 65.3
Minority interest in subsidiary trust holding
solely debentures of the Company ............. 19.2 -- -- 19.2
------------ ------------ ------- ------------
Operating expenses ........................... 705.9 1,529.9 10.8 2,246.6
------------ ------------ ------- ------------
Income before provision for income taxes ..... 523.8 249.3 42.7 815.8
Provision for income taxes ........................ 185.0 91.5 20.3 3f 296.8
------------ ------------ ------- ------------
Net income ................................... $ 338.8 $ 157.8 $ 22.4 $ 519.0
============ ============ ======= ============
Basic earnings per share .......................... $ 2.09 $ 1.11 4 $ 1.98
Weighted average common shares
outstanding .................................. 161,987,897 142,741,776 261,907,140
Diluted earnings per share $ 2.08 $ 1.09 4 $ 1.96
Weighted average common shares
outstanding .................................. 163,188,739 144,859,067 264,590,086
- -------------
(a) Presented in US$ and in accordance with U.S. GAAP - See Note 1 - Basis of
Presentation and Note 6 - Newcourt Credit Group Inc. - Pro Forma
Reclassifications and Conversions.
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
30
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of June 30, 1999
was prepared as if the Transaction had been consummated on that date. The
unaudited pro forma condensed consolidated statements of income for the six
months ended June 30, 1999 and for the year ended December 31, 1998 were
prepared as if the Transaction had been consummated on January 1, 1998. The
unaudited pro forma condensed consolidated financial statements have been
prepared using the following information:
(a) Unaudited condensed consolidated financial statements of CIT as of
and for the six months ended June 30, 1999, which are included in
CIT's Quarterly Report on Form 10-Q filed with the SEC, and audited
consolidated financial statements of CIT as of and for the year
ended December 31, 1998, which are included in CIT's Annual Report
on Form 10-K filed with the SEC;
(b) Unaudited consolidated financial statements of Newcourt as of and
for the six months ended June 30, 1999, as filed on Form 6-K with
the SEC, and audited consolidated financial statements of Newcourt
as of and for the year ended December 31, 1998, as filed on Form 6-K
with the SEC, both prepared in accordance with Canadian GAAP. The
financial statements of Newcourt prior to January 1, 1999 were
reported in Canadian dollars. On January 1, 1999, Newcourt changed
its reporting currency to U.S. dollars. For purposes of these
unaudited pro forma condensed consolidated financial statements,
Newcourt's balance sheet and income statement information has been:
(1) adjusted to conform to U.S. GAAP, (2) reclassified as to certain
financial statement line items to conform to CIT's presentation
under U.S. GAAP -- See Note 6 -- Newcourt Credit Group Inc. -- Pro
Forma Reclassifications and Conversions and (3) with respect to the
unaudited pro forma condensed consolidated statement of income for
the year ended December 31, 1998, converted to a presentation in
U.S. dollars using an exchange rate of .6733 Canadian dollar to each
U.S. dollar.
2. Pro Forma Assumptions
(a) The value of CIT Common Stock issued to acquire Newcourt Common
Shares is $2,562.2 million, based upon 148,488,329 outstanding
Newcourt Common Shares per the Reorganization Agreement at a price
per Newcourt Common Share of $17.26. The price per share was
determined by multiplying 0.70 (the Exchange Ratio) by the average
closing price of CIT Common Stock for the two day period both before
and after August 5, 1999, the date of the announcement of the
Transaction.
(b) The acquisition of Newcourt has been accounted for using the
purchase method. The difference between the total purchase price and
the fair value of the net assets acquired has been allocated to
goodwill.
(c) Estimated fair values for commercial loans, lease receivables, other
assets, fixed rate senior notes and debt-related hedges were
estimated through the application of cash flow discounting
methodologies considering such factors as current market interest
rates, current market equipment values and credit risks, as
applicable. The resulting net premium/discount on commercial loans,
fixed rate senior notes and debt-related hedges for the purposes of
these unaudited pro forma condensed consolidated statements is
assumed to be amortized/accreted into interest income/expense to
produce a constant yield to maturity. No fair value adjustment has
been made to operating lease equipment, and any such adjustment is
not expected to be material to the unaudited pro forma condensed
consolidated financial statements -- See Note 5 -- Estimated Effect
of Pro Forma Amortization and Accretion of Purchase Accounting
Adjustments.
The actual fair value of net assets acquired will be determined as
of the Closing of the Transaction and is subject to revision as
additional information becomes available.
31
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements-- (Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
(d) A preliminary estimate of $200.0 million has been made for costs
associated with the Transaction, including, without limitation,
financial advisory, legal and accounting fees and disbursements,
severance payments, and operational redundancies ("Restructuring
Charge"). This Restructuring Charge is based upon information
currently available to management and is subject to change in
conjunction with the integration project that is undertaken in
connection with the acquisition.
CIT will record the Restructuring Charge and disclose its components
in accordance with the requirements of EITF 94-3: "Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)" and EITF 95-3: "Recognition of Liabilities in
Connection with a Purchase Business Combination." CIT expects the
Restructuring Charge will consist principally of cash payments, and
will fund such amounts from operations. The actual restructuring
charge is not expected to be materially different from the estimate
provided herein, or to materially affect the financial condition or
results of operations of the combined entity.
3. Pro Forma Adjustments -- The allocation of the purchase price has
not been finalized and the portion of the purchase price allocated
to fair value adjustments and goodwill is subject to change, because
the fair value of net assets acquired will be determined as of
Closing and is subject to revision as additional information becomes
available.
(a) Estimated pro forma purchase accounting adjustments for the Newcourt
Acquisition were as follows (dollars in millions):
Newcourt net tangible assets -- historical
at June 30, 1999 .. $1,808.4
Fair Value Adjustments:
Commercial loans ....................... (200.0)(i)
Lease receivables ...................... (175.0)(ii)
Other assets ........................... (100.0)(iii)
Fixed rate senior notes ................ (250.0)(iv)
--------
Subtotal-- net fair value adjustments ......... (725.0)
Restructuring Charge .......................... (200.0)(v)
Tax effects of adjustments @ 38% .............. 300.0
--------
Total net adjustments to net assets acquired .. (625.0)
--------
Net tangible assets acquired .................. $1,183.4
========
i. Adjustment reflects the estimated decrease in carrying
value required in connection with the acquisition to
conform Newcourt credit policies and practices,
including charge-offs and loss reserves, to CIT
standards and practices, as well as post-acquisition
strategies for problem loan resolution. Adjustment also
includes a mark-to-market to increase the value of the
portfolio based upon current market interest rates.
ii. Adjustment to reflect the future realizability of
estimated lease residuals.
iii. Adjustment to estimated fair value of other assets,
including retained interests in securitizations.
iv. Mark-to-market of fixed rate debt and debt-related
hedges based upon current market interest rates.
v. Preliminary estimate for costs associated with the
Transaction, including, without limitation, financial
advisory, legal and accounting fees and disbursements,
severance payments, and operational redundancies. This
Restructuring Charge is based upon information currently
available to management and is subject to change.
Certain components of this charge may not be deductible
for tax purposes.
32
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements-- (Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
(b) Purchase accounting adjustments were made to eliminate Newcourt's
stockholders' equity accounts and to reflect the issuance of shares
of CIT Common Stock to purchase Newcourt Common Shares at the
Exchange Ratio of 0.70.
(c) Goodwill for the Transaction was calculated as follows (dollars in
millions):
Purchase price ........................................... $2,562.2
Net tangible assets acquired, as above ................... 1,183.4
-------
Goodwill .......................................... 1,378.8
Goodwill recorded by Newcourt at June 30, 1999 ........... 1,252.3
-------
Incremental goodwill created by the Transaction .......... $ 126.5
=======
(d) The goodwill related to the Transaction is amortized on a
straight-line basis over a period of twenty-five years.
(e) Pro forma adjustments to finance income and interest expense were
estimated for the Transaction as follows (dollars in millions):
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
Amortization of premium on commercial loans ............ $(17.0) $(34.0)
Accretion of discount on fixed rate senior notes and
debt related hedges .................................. 43.8 87.5
------- -------
Total net adjustment to net finance income ............. $ 26.8 $53.5
======= =======
(f) Income tax expense was calculated at a 38% tax rate, representing
the expected tax rate of the temporary differences which are
expected to be realized. Goodwill amortization is assumed to be
non-deductible for tax purposes.
4. Earnings Per Share
Basic earnings per common share was calculated by dividing the net income by the
weighted average number of common shares outstanding for the six months ended
June 30, 1999 and for the year ended December 31, 1998, for both CIT and
Newcourt. For the unaudited pro forma condensed consolidated financial
statements, Newcourt Common Shares were adjusted to the equivalent shares of CIT
Common Stock based upon the Exchange Ratio.
Diluted earnings per common share was calculated using the same method as basic
earnings per share, and includes potential dilution of common stock equivalents.
The calculation of basic and diluted earnings per Newcourt Common Share for the
year ended December 31, 1998 excludes a non-recurring premium of $29.9 million
on the redemption of preferred securities. Including such premium in the
calculation of basic and diluted earnings per common share, basic earnings per
Newcourt Common Share and diluted earnings per Newcourt Common Share were $0.90
and $0.88, respectively. For purposes of these unaudited pro forma condensed
consolidated financial statements, pro forma consolidated basic earnings per
common share and diluted earnings per common share would have been $1.87 and
$1.85, respectively.
33
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements-- (Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
5. Estimated Effect of Pro Forma Amortization and Accretion of Purchase
Accounting Adjustments
The following table summarizes the prospective estimated impact of the
amortization and accretion of the purchase accounting adjustments made in
connection with the Transaction on CIT's results of operations for the years
indicated (dollars in millions):
Effect on
For the year ended Goodwill Loan Debt Pretax Income
December 31, Amortization Amortization Accretion (Loss)
----------------- ------------ ------------ --------- ---------
1999 ...................... $ (55.2) $ (34.0) $ 87.5 $ (1.7)
2000 ...................... (55.2) (24.0) 60.0 (19.2)
2001 ...................... (55.2) (15.0) 32.5 (37.7)
2002 ...................... (55.2) (11.0) 7.5 (58.7)
2003 ...................... (55.2) (8.0) 12.5 (50.7)
2004 and thereafter ....... (1,102.8) (8.0) 50.0 (1,060.8)
-------- ------- ------ ---------
Totals ...................... $(1,378.8) $(100.0) $250.0 $(1,228.8)
========= ======= ====== =========
34
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements--(Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
6. Newcourt Credit Group Inc. -- Pro Forma Reclassifications and Conversions
The following consolidated balance sheet and income statement schedules and
related footnotes set forth the conversion of Newcourt's historical financial
statements to U.S. dollars, as applicable, and to U.S. GAAP and the pro forma
reclassifications necessary to conform the financial statements to a reporting
basis consistent with CIT.
As of June 30, 1999 Newcourt
(in millions of U.S. dollars) Presented
- ----------------------------- ---------
Newcourt Pro Forma on CIT's
Balance Sheet Category Presentation(l) Reclassifications Note Reporting Basis
- ---------------------- ---------------- ----------------- ---- ---------------
Assets:
Financing and leasing assets
Loans
Commercial ......................................... -- $ 4,969.0 (a) $ 4,969.0
Lease receivables ....................................... -- 3,898.2 (a) 3,956.0
57.8 (b) --
--------- ---------- ---------
Finance receivables ................................ -- 8,925.0 8,925.0
Reserve for credit losses ............................... -- (199.3) (a) (199.3)
--------- ---------- ---------
Net finance receivables ............................ -- 8,725.7 8,725.7
Operating lease equipment, net .......................... $ 2,161.3 (57.8) (b) 2,103.5
Commercial Finance receivables held for sale ............ 1,563.9 -- 1,563.9
Goodwill ................................................ 1,252.3 -- 1,252.3
Cash and cash equivalents ............................... 310.8 -- 310.8
Other assets ............................................ -- 676.6 Sum of (c) 1,427.3
750.7 (a)
Finance assets held for investment ...................... 9,418.6 (9,418.6) Sum of (a) --
Investment in affiliated companies ...................... 253.4 (253.4) (c) --
Accounts receivable, prepaids and other ................. 302.4 (302.4) (c) --
Property and equipment, net ............................. 120.8 (120.8) (c) --
Future income tax asset ................................. 206.0 (206.0) (d) --
--------- ---------- ---------
Total Assets ....................................... $15,589.5 $ (206.0) $15,383.5
========= ========== =========
Liabilities and Stockholders' Equity:
Commercial paper ........................................ -- $ 1,659.2 (e) $ 1,659.2
Variable rate senior notes .............................. -- 1,156.8 (e) 1,156.8
Fixed rate senior notes ................................. -- 9,030.4 (e) 9,030.4
--------- ---------- ---------
Total debt 11,846.4 11,846.4
Accrued liabilities and payables ........................ $ 682.4 -- 682.4
Deferred federal income taxes ........................... -- (206.0) (d) (206.0)
Debt .................................................... 11,846.4 (11,846.4) Sum of (e) --
--------- ---------- ---------
Total Liabilities .................................. 12,528.8 (206.0) 12,322.8
--------- ---------- ---------
Share capital ........................................... 2,791.6 -- 2,791.6
Retained earnings ....................................... 269.1 -- 269.1
--------- ---------- ---------
Total stockholders' equity ......................... 3,060.7 -- 3,060.7
--------- ---------- ---------
Total liabilities and stockholders' equity ......... $15,589.5 $ (206.0) $15,383.5
========= ========== =========
35
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements--(Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
For the six months ended
June 30, 1999
(in millions of U.S. dollars) Newcourt
- ----------------------------- Presented
Newcourt Pro Forma on CIT's
Income Statement Category Presentation(l) Reclassifications Note Reporting Basis
- ------------------------- ---------------- ----------------- ---- ---------------
Finance income .......................................... -- 1,031.3 (f) 1,031.3
Interest expense ........................................ -- 407.5 (f) 407.5
Net finance and rental income ........................... $206.9 (206.9) Sum of (f) --
------ ------- --------
Net finance income ................................. 206.9 416.9 623.8
Securitization gains .................................... 84.2 (84.2) (i) --
Syndication fees ........................................ 69.9 (69.9) (i)
Fees and other income ................................... 166.8 38.2 (f) 268.2
154.1 Sum of (i)
(90.9) Sum of (k)
Gain on sale of automobile fleet leasing
businesses ......................................... 34.3 (k) 34.3
Gain on extinguishment of derivative
financial instruments .............................. 56.6 (k) 56.6
------ ------- --------
Operating revenues ................................. 527.8 455.1 982.9
------ ------- --------
Salaries and general operating expenses ................. -- 13.1 (h) 389.2
376.1 Sum of (g)
Provision for credit losses ............................. -- 58.4 (f) 58.4
Depreciation on operating lease equipment ............... -- 396.7 (f) 396.7
Goodwill amortization ................................... -- 23.2 (h) 23.2
Operating and administrative ............................ 193.9 (193.9) (g) --
Salaries and wages ...................................... 182.2 (182.2) (g) --
Goodwill amortization, depreciation
and other expenses ................................. 36.3 (36.3) Sum of (h) --
------ ------- --------
Operating expenses ................................. 412.4 $ 455.1 867.5
------ ------- --------
Income before provision for income taxes ........... 115.4 -- 115.4
Provision for income taxes .............................. 46.1 -- 46.1
------ ------- --------
Net income ......................................... $ 69.3 -- $ 69.3
====== ======= ========
36
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements--(Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
For the year ended
December 31, 1998
(in millions of U.S. dollars) Newcourt
- ----------------------------- Pro Presented
Newcourt Forma on CIT's
Income Statement Category Presentation(l) Reclassifications Note Reporting Basis
- -------------------------- --------------- --------------- ------- -----------------
Finance income .................................... -- $1,888.4 (f) $1,888.4
Interest expense .................................. -- 657.9 (f) 657.9
Net finance and rental income ..................... $549.2 (549.2) Sum of (f) --
------ -------- --------
Net finance income ........................... 549.2 681.3 1,230.5
Gain on sale of finance assets .................... 287.5 (287.5) (j) --
Fees and other income ............................. 155.3 287.5 (j) 548.7
105.9 (f)
------ -------- --------
Operating revenues ............................... 992.0 787.2 1,779.2
------ -------- --------
Salaries and general operating expenses ........... -- 34.5 (h) 698.3
663.8 Sum of (g)
Provision for credit losses ....................... -- 100.5 (f) 100.5
Depreciation on operating lease equipment ......... -- 686.7 (f) 686.7
Goodwill amortization ............................. -- 44.4 (h) 44.4
Operating and administrative ...................... 365.2 (365.2) (g) --
Salaries and wages ................................ 298.6 (298.6) (g) --
Goodwill amortization, depreciation
and other expenses ........................... 78.9 (78.9) Sum of (h) --
------ -------- --------
Operating expenses ........................... 742.7 $ 787.2 1,529.9
------ -------- --------
Income before provision for income taxes ..... 249.3 -- 249.3
Provision for income taxes ........................ 91.5 -- 91.5
------ -------- --------
Net income ................................... $157.8 -- $ 157.8
====== ======== ========
- ----------
(a) Finance assets held for investment has been reclassified to the line items
Commercial loans, Lease receivables, Reserve for credit losses and Other
assets (relating to interests in securitized receivables).
(b) Rental receivables, net, has been reclassified to the line item Lease
receivables.
(c) Investment in affiliated companies, Accounts receivable, prepaids and
other, and Property and equipment, net have been reclassified to the line
item Other assets.
(d) Future income tax asset has been reclassified to the line item Deferred
federal income taxes.
(e) Debt has been reclassified to the line items Commercial paper, Variable
rate senior notes and Fixed rate senior notes.
(f) Net finance and rental income has been reclassified to the line items
Finance income, Interest expense, Fees and other income, Provision for
credit losses, and Depreciation on operating lease equipment.
(g) Operating and administrative and Salaries and wages have been reclassified
to the line item Salaries and general operating expenses.
(h) Goodwill amortization, depreciation and other expenses have been
reclassified to the line items Salaries and general operating expenses
(relating to depreciation on property and equipment and the amortization
of other intangibles) and Goodwill amortization.
(i) Securitization gains and Syndication fees have been reclassified to the
line item Fees and other income.
(j) Gain on sale of finance assets has been reclassified to Fees and other
income.
(k) Fees and other income has been reclassified to the line items Gain on sale
of automobile fleet leasing businesses and Gain on extinguishment of
derivative financial instruments.
37
THE CIT GROUP, INC.
AND NEWCOURT CREDIT GROUP INC.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements--(Continued)
As of and for the Six Months Ended June 30, 1999 and
For the Year Ended December 31, 1998
(l) The unaudited consolidated financial statements of Newcourt as of and for
the six months ended June 30, 1999 and the audited consolidated statement
of income for the year ended December 31, 1998, were prepared in
accordance with Canadian GAAP. Financial statements for Newcourt prior to
January 1, 1999 were reported in Canadian dollars. On January 1, 1999,
Newcourt changed its reporting currency to U.S. dollars. The primary
differences between Canadian and U.S. GAAP, as they relate to Newcourt's
financial statements, are the accounting treatment of securitizations and
restructuring charges. For the purposes of these unaudited pro forma
condensed consolidated financial statements (presented in U.S. dollars as
described in Note 1(b)), adjustments have been made to the balance sheet
and income statements of Newcourt as of and for the six months ended June
30, 1999 and for the year ended December 31, 1998 to conform them to U.S.
GAAP. The 1998 adjustments are presented in Note 21 to the audited
consolidated financial statements included in Newcourt's Form 6-K for the
year ended December 31, 1998. The adjustments for the six months ended
June 30, 1999 have been provided by Newcourt management. The adjustments
are summarized in the following table.
For the Six Months For the Year
Income Statement: Ended June 30, 1999 Ended December 31, 1998
- ---------------- ------------------- -----------------------
(in millions of U.S. dollars)
- -----------------------------
Net income as reported under Canadian GAAP .................. $ 97.7 $198.2
Differences in accounting for securitization
transactions (net of income taxes of $1.1 for the six
months ended June 30, 1999 and $7.1 for the year
ended December 31, 1998) .................................. (4.0) (9.8)
Differences in accounting for Restructuring Charge
(net of income taxes of $11.3 for the six months
ended June 30, 1999 and $19.5 for the year ended
December 31, 1998) ........................................ (14.8) (25.6)
Other (net of income taxes of $6.7 for the six months
ended June 30, 1999 and $1.6 for the year ended
December 31, 1998) ........................................ (9.6) (5.0)
------ ------
Net income, as reported under U.S. GAAP ..................... $ 69.3 $157.8
====== ======
At June 30, 1999 the cumulative effect of the difference between Canadian and
U.S. GAAP resulted in a decrease in Retained earnings of $42.0 million, which
was recorded as a decrease of $76.3 million to Accounts receivable, prepaids and
other and an increase to the Future income tax asset of $34.3 million.
38
INFORMATION CONCERNING THE MEETINGS
CIT
CIT is mailing this Joint Proxy Statement and the CIT proxy card to CIT
Stockholders on or about September 23, 1999. They are furnished in connection
with the solicitation of proxies by the CIT Board of Directors for use at the
CIT Stockholders Meeting. In addition, CIT may also solicit proxies by
telephone, telegram or personal interview by its regular employees. CIT has
retained D. F. King & Company, Inc. on customary terms and at a fee estimated
not to exceed US$1,500, plus reasonable expenses, to assist in soliciting
proxies. The cost of such solicitation shall be borne by CIT. CIT will also
reimburse brokers or other persons holding stock in their names or in the names
of their nominees for their reasonable expenses in forwarding proxy material to
beneficial owners of stock, in accordance with SEC and New York Stock Exchange
rules.
All duly executed proxies received prior to the meeting will be voted in
accordance with the choices specified. If no choice has been specified in a duly
executed proxy as to any matter or any other business that may properly come
before the meeting, the proxy will be voted in favor of such matter in the
discretion of the persons named in the proxy. A CIT Stockholder giving a proxy
may revoke a proxy at any time before it is voted at the meeting by filing an
instrument revoking the proxy with the Corporate Secretary of CIT, at CIT's
address shown, by delivering a duly executed proxy bearing a later date or by
appearing at the CIT Stockholders Meeting and voting in person. However, if you
instructed a broker on how to vote your shares, you must follow directions
received from your broker to change your vote.
As of the CIT Record Date, there were 161,209,826 shares of CIT Common
Stock outstanding and entitled to vote. Each holder of record of CIT Common
Stock is entitled to one vote per share on each matter presented for a vote of
stockholders. A quorum for transaction of business at the CIT Stockholders
Meeting is a majority of the outstanding shares of CIT Common Stock, present in
person or by proxy. Shares represented by proxies that reflect abstentions and
shares referred to as "broker non-votes" (i.e., shares held by brokers or
nominees for which instructions have not been received from the beneficial
owners or persons entitled to vote that the broker or nominee does not have
discretionary power to vote on a particular matter) are included in the
computation of a quorum.
With respect to amendments to CIT's Certificate of Incorporation, broker
non-votes and abstentions will have the same effect as votes cast against such
proposal. With respect to the Stock Issuance Proposal and the proposals to
approve the Long-Term Equity Compensation Plan, the Transition Option Plan and
an amendment to the Employee Stock Purchase Plan, abstentions will have the same
effect as a vote cast against the proposal, and broker non-votes will have no
effect on the outcome of the vote.
DKB, which owns approximately 44% of the outstanding CIT Common Stock, has
agreed, subject to certain conditions, to vote its shares of CIT Common Stock in
favor of the Stock Issuance Proposal in accordance with the terms of the Voting
Agreement entered into between DKB, CIT and Newcourt. See "The Transaction -
Agreements to Support the Transaction - Voting Agreements" on page 82.
The following table indicates the votes required to approve each of the
proposals to be presented at the CIT Stockholders Meeting:
Proposal Approval Required
-------- ----------------
Stock Issuance Proposal .................................a majority of the shares present in person or by proxy
at the CIT Stockholders Meeting
Amendments to Certificate of Incorporation ..............a majority of outstanding shares of CIT Common Stock
Long-Term Equity Compensation Plan ......................a majority of the votes cast at the CIT Stockholders Meeting
Transition Option Plan ..................................a majority of the votes cast at the CIT Stockholders Meeting
Amendment to the Employee Stock Purchase
Plan ..................................................a majority of the votes cast at the CIT Stockholders Meeting
39
Newcourt
This Joint Proxy Statement accompanies the Notice of the Newcourt
Shareholders Meeting to be held on October 26, 1999, and is furnished in
connection with the solicitation by the management of Newcourt of proxies for
use at the Newcourt Shareholders Meeting. The solicitation will be primarily by
mail, but proxies may also be solicited by regular employees of Newcourt. In
addition, Newcourt has retained Georgeson Shareholder Communications, Inc. on
customary terms and at a fee estimated not to exceed C$70,000, plus
out-of-pocket expenses, to assist in soliciting proxies in Canada and the United
States. The cost of such solicitation will be borne by Newcourt. Newcourt will
provide proxy materials to brokers, custodians, nominees and fiduciaries and
request that such materials be promptly forwarded to the beneficial owners of
Newcourt Common Shares registered in the names of such brokers, custodians,
nominees and fiduciaries.
Newcourt Shareholders should fill in, date, sign and return the
accompanying form of proxy for use at the Newcourt Shareholders Meeting, whether
or not they are able to attend personally. The form of proxy will not be valid
unless it is completed and either mailed to the Secretary of the Corporation c/o
Montreal Trust Company of Canada, 151 Front Street West, Eighth Floor, Toronto,
Ontario M5J 5N1, or delivered to Montreal Trust Company of Canada, 151 Front
Street West, Eighth Floor, Toronto, Ontario M5J 5N1 (Attention: Proxy
Department), in either case, at any time up to 5:00 p.m. (Toronto time) on
October 25, 1999 or, if the Newcourt Meeting is adjourned or postponed, on the
business day prior to the time of such adjourned or postponed Newcourt
Shareholders Meeting, deposited with the scrutineers of the Newcourt
Shareholders Meeting (to the attention of the Chairman of the Meeting), prior to
the commencement of the Newcourt Shareholders Meeting on the day of the meeting,
or on the day of the adjournment or postponement of such meeting. Failure to so
deposit or present a proxy may result in its invalidation. Facsimile delivery to
Montreal Trust Company of Canada at (416) 981-9800 is acceptable. Newcourt, in
its discretion and without notice, may waive the time limit for depositing
proxies prior to the Newcourt Shareholders Meeting. In the absence of any
instructions on the proxy, such shares will be voted at the Newcourt
Shareholders Meeting in favor of the Arrangement Resolution.
The Newcourt form of proxy confers discretionary authority with respect to
amendments or variations to the matters identified in the Notice of the Newcourt
Shareholders Meeting and other matters that may properly come before the
Newcourt Shareholders Meeting.
A Newcourt Shareholder who has submitted a proxy may revoke it at any time
prior to the exercise thereof. If a person who has given a proxy attends the
Newcourt Shareholders Meeting in person, that person may revoke the proxy and
vote in person. In addition to revocation in any other manner permitted by law,
a proxy may be revoked by an instrument in writing executed by the shareholder
or his, her or its attorney authorized in writing or, if the shareholder is a
corporation, under its corporate seal or by an officer or attorney thereof duly
authorized, and deposited either to the attention of the Corporate Secretary at
the registered office of Newcourt at any time up to and including the last
business day before the Newcourt Shareholders Meeting at which the proxy is to
be used, or with the Chairman of the Newcourt Shareholders Meeting on the day of
such Meeting prior to the start of such Meeting. A Newcourt Shareholder who has
instructed a broker to vote their shares must follow the directions received
from the broker in order to revoke their proxy.
At the Newcourt Record Date there were 148,508,329 outstanding Newcourt
Common Shares entitled to be voted at the Newcourt Shareholders Meeting. Each
shareholder is entitled to one vote on all matters to come before the Newcourt
Shareholders Meeting for each Newcourt Common Share registered in the
shareholder's name in the list of holders of Newcourt Common Shares prepared as
of the Newcourt Record Date, unless a person has transferred shares after such
date and the new holder of such shares establishes proper ownership and makes a
request not later than 5:00 p.m. (Toronto time) on October 15, 1999 to the
Corporate Secretary of Newcourt to be included in the list of holders of
Newcourt Common Shares eligible to vote at the Newcourt Shareholders Meeting.
The quorum required at the Newcourt Shareholders Meeting shall be at least
two persons present in person or by proxy and holding or representing at least
51% of the Newcourt Common Shares.
40
To the knowledge of Newcourt, at September 20, 1999, the following
persons, owned beneficially, either directly or indirectly, or exercised control
or direction over, Newcourt Common Shares carrying more than 10% of the
aggregate votes attached to the Newcourt Common Shares:
Number of % of Total Issued and
Newcourt Outstanding Newcourt
Shareholder Common Shares Common Shares
----------- -------------- ---------------------
Alliance Capital Management and its affiliates ...... 26,767,585 18.03%
Hercules Holdings (UK) Limited ...................... 17,633,857 11.88%
AIC Group of Funds .................................. 16,712,180 11.25%
Additionally, as of September 20, 1999, CIBC owned 14,067,962 Newcourt
Common Shares, representing 9.47% of the Newcourt Common Shares outstanding as
of September 20, 1999.
The directors and senior executive officers of Newcourt as a group
beneficially owned in the aggregate, directly or indirectly, 8,191,810 Newcourt
Common Shares, representing 5.5% of the Newcourt Common Shares outstanding as of
September 20, 1999.
Subject to any further order of the Superior Court of Justice (Ontario),
the Arrangement Resolution must be approved by the affirmative vote of at least
66 2/3% of the votes actually cast thereon by the holders of Newcourt Common
Shares present either in person or by proxy at the Newcourt Shareholders
Meeting.
CIBC, Hercules and certain members of Newcourt's senior management have
agreed to vote their Newcourt Common Shares in favor of the Arrangement
Resolution, subject to and in accordance with the terms of the Voting Agreements
entered into between such persons and CIT. See "The Transaction - Agreements to
Support the Transaction - Voting Agreements" on page 82.
41
DESCRIPTION OF THE COMPANIES
Summary of CIT's Business
CIT is a leading diversified finance company offering commercial and
consumer financing secured by various types of collateral. CIT operates almost
exclusively in the United States and markets its products and services to
smaller, middle-market and larger businesses and to individuals through a
nationwide distribution network. CIT has been in business since 1908 and is
recognized as a leader in many of the markets it serves. CIT believes that its
strong credit risk management expertise and long-standing commitment to its
markets and customers provide CIT with a competitive advantage.
CIT operates through three business segments: equipment financing and
leasing, commercial finance and consumer. Each segment operates through
strategic business units described below:
Business Unit Products
- ------------- ---------------
Equipment Financing and Leasing
Equipment Financing Secured loans, leases, revolving lines
of credit, operating leases, sale and
leaseback arrangements, vendor financing
and specialized wholesale and retail
financing for distributors and
manufacturers.
Capital Finance Customized leasing and secured
financing, including operating leases,
single investor leases, equity portions
of leveraged leases, sale and leaseback
arrangements, as well as loans secured
by equipment relating primarily to
end-users of commercial aircraft and
railcars.
Commercial Finance
Commercial Services Domestic and international customized
credit protection, lending and
outsourcing services that include
working capital and term loans,
factoring, receivable management
outsourcing, bulk purchases of accounts
receivable, import and export financing
and letter of credit programs.
Business Credit Senior revolving and term loans secured
by accounts receivable, inventories and
fixed assets to middle-market and
larger-sized companies, primarily for
growth, expansion, acquisitions,
refinancings and debtor-in-possession
and turnaround financings.
Credit Finance Revolving and term loans to
smaller-sized and middle-market
companies secured by accounts
receivable, inventories and fixed
assets, for working capital,
refinancings, acquisitions, leveraged
buyouts, reorganizations,
restructurings, turnarounds and Chapter
11 financing and confirmation plans.
Consumer
Consumer Finance Fixed and variable rate closed-end loans
and variable rate lines of credit,
secured by first or second liens on
detached, single family residential
properties.
Sales Financing Nationwide retail financing for the
purchase of new and used recreation
vehicles, manufactured housing,
recreational boats, and wholesale
inventory financing directly to
manufactured housing, recreational boat
and recreation vehicle dealers.
42
Other
Equity Investments Equity and convertible debt investments
in merger and acquisition transactions
and private equity and equity-related
securities, particularly in the life
sciences, information technology,
communications, and consumer products
industries.
See CIT's Annual Report on Form 10-K incorporated by reference in this
Joint Proxy Statement to learn more about CIT.
Summary of Newcourt's Business
Newcourt is one of the world's largest independent, non-bank financial
services companies. Newcourt originates, sells, co-invests in and manages
asset-based financings. Newcourt originates the financing of a broad range of
equipment and capital assets by way of secured loans, conditional sales
contracts and financial leases.
Newcourt has organized its activities and operations around three core
businesses: (1) Newcourt Financial; (2) Newcourt Capital; and (3) Newcourt
Services. Newcourt Financial, the commercial finance business, provides
asset-based financing for a variety of equipment to vendors and customers.
Newcourt Capital, the corporate finance business, provides structured corporate
finance to a growing number of international clients, including major
corporations, governments and agencies. Newcourt Services, the administrative
unit, is responsible for managing the capital structure of the company and for
providing control and support services to Newcourt Financial and Newcourt
Capital.
Newcourt Financial offers its asset-based sales and inventory financing
services through select strategic relationships with equipment manufacturers,
dealers and distributors and certain professional associations and
organizations. Newcourt Financial's strategy focuses on the creation,
maintenance and enhancement of vendor programs ensuring its position as a
premier provider of global asset-based financial products. Newcourt Financial
focuses on the following sectors:
o Transportation and Industrial Finance -- provides inventory and term
financing in North America in the transportation, construction and
industrial leasing marketplaces;
o Technology Finance -- provides direct and vendor financing in North
America to manufacturers, distributors and resellers of information
technology hardware and software and to their customers;
o Telecommunications Finance -- provides vendor financing in North
America to the telecommunications industry under an exclusive
international vendor program with Lucent Technologies, Inc.;
o Business Finance -- provides asset-based sales and inventory
financing to vendors and customers in the commercial, industrial,
health care and retail finance markets in North America;
o Specialty Finance -- provides a variety of financial products to the
small business and health care markets in North America through
micro-balance leasing, government supported (SBA and SBLA) programs
and intermediary financial services; and
o International/Joint Ventures and Operations -- provides specialized
support in Europe, Asia/Pacific and Latin America for Newcourt's
established vendor programs and develops and manages dedicated joint
venture structures.
Newcourt Capital is the corporate finance business which provides
asset-based financing for high value assets and related advisory services to
equipment manufacturers, corporate clients, governments and public sector
agencies. Newcourt Capital focuses on the following sectors:
o Aerospace Finance -- provides financial services in Canada, the
United States and Europe to both the commercial aviation market,
with an emphasis on the regional airline industry, and the general
aviation market, with an emphasis on the corporate aircraft and
helicopter market segments;
o Rail Finance -- provides financing and advisory services to
railroads and industrial rail shippers in Canada and the United
States;
43
o Public Sector Finance -- provides financing and advisory services in
Canada, the United Kingdom and internationally to governments,
public sector agencies and corporate clients in the infrastructure
and institutional health care sectors;
o Project Finance -- provides limited or non-recourse project-specific
financing for institutional and corporate clients in North America
and the United Kingdom;
o Structured Finance -- provides structured financing services in
Canada, the United States and Europe, including cross-border leases,
single investor leases, synthetic leases and off-balance sheet
financings;
o Media and Communications Finance -- provides debt financing services
to the communications market and various media sectors in North
America; and
o Principal Finance -- provides financing in North America for
acquisitions, buy-outs and recapitalizations which are done in
conjunction with existing management teams and/or established
financial buyers of companies.
If you want to learn more about Newcourt, see Newcourt's Renewal Annual
Information Form dated May 14, 1999 included in Newcourt's Annual Report on Form
40-F for the year ended December 31, 1998, Newcourt's audited consolidated
financial statements at and for the year ended December 31, 1998, filed on Form
6-K with the SEC, and Newcourt's unaudited consolidated financial statements at
and for the six months ended June 30, 1999, filed on Form 6-K with the SEC, each
of which is incorporated by reference in this Joint Proxy Statement. The Renewal
Annual Information Form and such consolidated financial statements are also
available through the SEDAR website (at www.SEDAR.com) maintained by the
Canadian securities regulatory authorities.
44
THE COMBINED COMPANY AFTER THE TRANSACTION
The Transaction -- General
Upon completion of the Transaction, CIT will continue to be a corporation
organized under the Delaware General Corporation Law, and its principal
executive office will continue to be located at 1211 Avenue of the Americas, New
York, New York 10036 (telephone number (212) 536-1390). After the completion of
the Transaction, CIT (through Newco and Exchangeco) will own all of the voting
securities of Newcourt, which will continue to be a corporation governed by the
Business Corporations Act (Ontario). Newcourt's registered office will continue
to be located at Newcourt Centre, 207 Queens Quay West, Suite 700, P.O. Box 827,
Toronto, Ontario, M5J 1A7 (telephone number (416) 507-2400).
Following the Closing, CIT may cause Newcourt to transfer all or some of
Newcourt's businesses and operations to CIT or its other subsidiaries. CIT
currently intends to transfer, following the Effective Date, all of the issued
and outstanding common shares of Newcourt Credit Group USA Inc., through a
series of transactions, to CIT so that Newcourt Credit Group USA Inc. will no
longer be a subsidiary of Newcourt. Such transfer is intended to achieve tax
efficiencies for the combined company. See "The Transaction - The Reorganization
Agreement - Agreements Relating to Certain Additional Transactions" on page 82.
Management
Directors
Upon completion of the Transaction, the CIT Board of Directors will be
increased to 16 members. Twelve directors will be selected by the CIT Board of
Directors, of whom two will be designated by DKB. The remaining four directors
will be selected by the Newcourt Board of Directors, of whom one may be
designated by CIBC and one will be designated by Hercules. CIT has designated
Messrs. Albert R. Gamper, Jr., Daniel P. Amos, Anthea Disney, William M.
O'Grady, Joseph A. Pollicino, Paul N. Roth, Peter J. Tobin and Alan F. White to
remain as directors of CIT after the Transaction. DKB has designated Messrs.
Hisao Kobayashi and Keiji Torii to remain as directors of CIT after the
Transaction. Newcourt has designated David F. Banks, Newcourt's current
Chairman, to become a director of CIT after the Transaction. If within two years
after the Transaction, any Newcourt designee ceases to serve as a director, or
either or both of CIBC or Hercules ceases to have the right to designate a
director, then the remaining Newcourt designees then serving on the CIT Board of
Directors will designate a successor director, subject to the concurrence of
CIT.
For information concerning the persons currently serving on the CIT Board
of Directors or the Newcourt Board of Directors see "Incorporation of Certain
Documents by Reference" on page 141.
Officers
Upon completion of the Transaction, Albert R. Gamper, Jr., currently the
President and Chief Executive Officer of CIT, will remain the President and
Chief Executive Officer of the combined company and David F. Banks, currently
Chairman of Newcourt, will become non-executive Vice-Chairman of CIT. Messrs.
Bradley Nullmeyer, David McKerroll and David Sharpless, each of whom are
executive officers of Newcourt, have entered into employment agreements with
CIT. The new CIT Board of Directors will designate the officers of CIT following
the completion of the Transaction.
Integration of Operations
CIT and Newcourt believe that the Transaction represents an excellent
opportunity to create a commercial financing company that will enjoy benefits of
increased size and geographic scope, a more diversified asset base, more
diversified funding sources and improved positioning to take advantage of
opportunities for growth.
CIT and Newcourt have created a joint transition team whose goals include
the smooth integration of the two companies. The principal benefits of the
transaction are related to increased size, increased diversification of assets
and greater financial strength. Within two years after the Transaction, CIT and
Newcourt also expect to achieve annual cost savings of US$150 million compared
to current operating levels. These savings are expected to be achieved primarily
through reduced general and administrative expenses resulting from the
consolidation of corporate overhead, systems, marketing, back-office facilities
and personnel. There is no assurance that all of the anticipated cost savings
are achievable or that the cost savings that are realized will not be offset by
increases in other costs.
45
A preliminary Restructuring Charge estimate of US$200 million has been
made for costs related to the completion of the Transaction, including
transaction costs, severance and operational redundancies. The size of the
Restructuring Charge is based upon currently available information and is
subject to change. See "Unaudited Pro Forma Financial Information on a Combined
Basis" on page 27.
Principal Holders of CIT Common Stock After the Transaction
Based on DKB's ownership of 71,000,000 shares of CIT Common Stock as of
the date of this Joint Proxy Statement, DKB will be the beneficial owner of
approximately 27% of the aggregate outstanding shares of CIT Common Stock and
the Exchangeable Shares (considered as one class) following the completion of
the Transaction.
On August 20, 1999, DKB, The Fuji Bank, Limited ("Fuji") and The
Industrial Bank of Japan, Limited ("IBJ") announced an agreement to consolidate
the three banks' operations under a holding company to be established. Such
consolidation is subject to regulatory and shareholder approvals. The President
and Chief Executive Officer of each of IBJ and Fuji will serve as Chairmen and
Co-Chief Executive Officers of such holding company and the President and Chief
Executive Officer of DKB will be the President and Co-Chief Executive Officer of
such holding company. The specific details of the consolidation have not yet
been determined.
Newcourt's principal holders own, as of the date of this Joint Proxy
Statement, the following number of Newcourt Common Shares and, assuming they own
no other shares of CIT Common Stock, will be the beneficial owners of the
following percentage of the aggregate outstanding shares of CIT Common Stock and
Exchangeable Shares (considered as one class) following the completion of the
Transaction:
Number of Number of Shares of % of CIT
Newcourt CIT Common Stock Common Stock
Shareholder Common Shares and Exchangeable Shares and Exchangeable Shares
- ----------- ------------- ----------------------- -----------------------
Alliance ...... 26,767,585 18,737,309 7.05%
Hercules ...... 17,633,857 12,343,700 4.65%
AIC ........... 16,712,180 11,698,526 4.40%
CIBC .......... 14,067,962 9,847,573 3.71%
To the knowledge of CIT and its directors and officers, there are no CIT
Stockholders other than DKB who, had the Transaction occurred on September 20,
1999, would beneficially own in excess of 5% of the outstanding shares of CIT
Common Stock and the Exchangeable Shares (considered as one class). To the
knowledge of Newcourt and its directors and officers, there are no Newcourt
Shareholders other than Alliance who, had the Transaction occurred on September
20, 1999, would beneficially own, directly or indirectly, in excess of 5% of the
outstanding shares of CIT Common Stock and the Exchangeable Shares (considered
as one class) following the completion of the Transaction.
Independent Accountants
KPMG LLP is currently the independent accountants of CIT and will be the
independent accountants of CIT and its subsidiaries, including Newcourt, after
completion of the Transaction.
Transfer Agents and Registrars
Montreal Trust Company of Canada, at its principal offices in Toronto,
Montreal and Vancouver, will be the transfer agent and registrar for the
Exchangeable Shares. The Bank of New York, at its office in New York, New York,
will be the transfer agent and registrar for the CIT Common Stock, and Montreal
Trust Company of Canada, at its principal offices in Toronto, Montreal and
Vancouver, will be the Canadian transfer agent and registrar for the CIT Common
Stock.
46
THE TRANSACTION
Background of the Transaction
The acquisition by Newcourt of AT&T Capital Corporation in January 1998
markedly increased Newcourt's customer base, product line and geographic reach,
and provided an expanded platform for Newcourt's future growth. Recognizing the
need to ensure Newcourt's continuing ability to meet its intensified growth
requirements and related funding needs, and with a view to further diversifying
its revenue sources and geographic base, Newcourt's management, with the support
of the Newcourt Board of Directors, commenced an initiative in the summer of
1998 to identify and evaluate various long-term strategic alternatives to meet
these goals. Newcourt's management identified a range of alternatives aimed at
these goals as well as increasing Newcourt's credit rating, reducing its funding
costs and expanding its business scale and scope. The alternatives considered by
management included undertaking a significant public equity issuance,
instituting extensive cost reduction initiatives and acquiring an interest in,
selling an interest in Newcourt to, or otherwise combining with, a strategic
partner. In late summer of 1998, the global credit markets were adversely
affected by the Russian debt default and the Brazilian economic crisis. These
events resulted in increased funding costs for Newcourt and temporary
disruptions to Newcourt's access to funding in certain debt markets. As a
result, management and the Newcourt Board of Directors decided to accelerate the
evaluation and development of a proposal to achieve the foregoing goals.
From time to time subsequent to Newcourt's acquisition of AT&T Capital
Corporation, Albert R. Gamper, Jr., CIT's President and Chief Executive Officer,
and Steven K. Hudson, Newcourt's Chief Executive Officer, had discussions on
matters of common interest, including the possibility of establishing a
relationship between CIT and Newcourt, although no proposals were made.
In October 1998, the Newcourt Board of Directors established a Special
Committee of the Newcourt Board of Directors (the "Special Committee") to review
and consider any strategic alternative involving a business combination
transaction proposed by Newcourt's management. The Special Committee was
comprised of all of the independent members of the Newcourt Board of Directors.
The Special Committee was advised on legal matters by Blake, Cassels & Graydon,
acting in its capacity as counsel to the Special Committee. Blake, Cassels &
Graydon also acted as Canadian counsel to Newcourt in connection with the
Transaction.
Newcourt subsequently engaged McKinsey & Company, Inc. as a consultant and
Goldman Sachs and CIBC Wood Gundy (now known as CIBC World Markets) as financial
advisors to assist Newcourt's management in connection with its review of
strategic alternatives. After reviewing various strategic objectives and
alternatives, Newcourt's management determined that the strategic combination
alternative would provide Newcourt with the higher credit rating, reduced
funding costs and increased business opportunities that Newcourt was seeking.
Accordingly, Newcourt's management, with the assistance of its advisors,
compiled a list of potential candidates for a strategic combination on the basis
of various criteria, including the credit ratings of the candidate, the
strategic and cultural fit between Newcourt and the candidate, the candidate's
ability to finance a transaction and the likelihood of completing a transaction
with the candidate.
Commencing in late October, Newcourt began contacting candidates to
determine their interest in making an investment in, or participating in a
strategic combination with, Newcourt. As a result of those contacts, Newcourt
discussed the possibility of such a transaction with various candidates
throughout the end of 1998 and the beginning of 1999. During this period,
Newcourt continued to analyze other alternatives for meeting its strategic
objectives, most particularly a substantial public equity issuance combined with
an extensive cost reduction program. Periodically during this time,
representatives of Newcourt's management updated and advised the Special
Committee regarding the status of management's review of strategic alternatives
and its discussions with the various candidates for a strategic combination.
Following reports in the press that discussions between Newcourt and a
potential strategic investor had occurred, Mr. Gamper contacted Mr. Hudson to
again explore the possibility of a transaction between the two companies. On
February 11, 1999, Mr. Gamper and Mr. Hudson met to discuss the possibility of a
combination. On February 19, 1999, members of senior management of Newcourt and
CIT commenced discussions regarding such a combination. Shortly thereafter,
members of senior management of Newcourt and CIT and their respective legal and
financial advisors held a series of discussions regarding the terms of a
definitive agreement, and representatives of each company conducted a due
diligence examination of the other company. During this
47
same period, counsel for Newcourt and counsel for CIT held several discussions
concerning the terms of an Agreement and Plan of Reorganization (the "March
Agreement"), which would provide for a fixed exchange ratio of 0.92 (the
"Initial Exchange Ratio"), as well as related agreements.
On March 3, 1999, the CIT Board of Directors met to discuss and review,
with the assistance of CIT's legal and financial advisors and accountants, the
potential transaction with Newcourt. Each of the directors had previously been
made aware of the potential transaction and had discussed the transaction
informally with Mr. Gamper and other members of CIT's management. At the March
3rd meeting, the CIT Board of Directors reviewed Newcourt's business, history,
management and other characteristics, as well as the terms of the proposed
transaction. Representatives of J.P. Morgan, CIT's financial advisor, reviewed
financial information regarding CIT, Newcourt and the proposed transaction with
the CIT Board of Directors. CIT's legal advisors reviewed with the CIT Board of
Directors the terms of the draft March Agreement and related documents, and
discussed with the CIT Board of Directors various legal and regulatory matters
relevant to the transaction. After discussion, the CIT Board of Directors
authorized CIT's management to continue negotiation of the transaction, subject
to final board approval.
At a meeting of the Special Committee held on March 3, 1999, senior
management of Newcourt, together with the Special Committee's legal advisors and
Newcourt's legal and financial advisors, reviewed with the Special Committee the
discussions and contacts with CIT to date, the proposed financial and other
terms of the transaction with CIT and the expected benefits of the proposed
combination to Newcourt and its shareholders.
On March 7, 1999, the CIT Board of Directors met again to consider the
Newcourt transaction. Members of CIT's management discussed all material aspects
of the transaction with the CIT Board of Directors. CIT's legal advisors
reviewed the updated form of the March Agreement and related documents, and
advised the Board as to the course of negotiations and as to related legal
matters. Representatives of J.P. Morgan reviewed financial information
concerning CIT, Newcourt and the proposed transaction, and delivered its opinion
that, as of such date, and based upon and subject to the procedures followed,
assumptions made, matters considered and limitations on the analysis undertaken,
the Initial Exchange Ratio was fair to CIT from a financial point of view. Based
upon the CIT Board of Directors' review of the definitive terms of the
transaction, the opinion of J.P. Morgan and other relevant factors, the CIT
Board of Directors, by unanimous vote, authorized and approved the execution and
delivery of the March Agreement and related documents.
On March 7, 1999, the Special Committee and the Newcourt Board of
Directors each held meetings to discuss and review, with the assistance of their
legal and financial advisors, the proposed terms of the March Agreement and
related agreements. Newcourt's management confirmed to the Special Committee and
the Newcourt Board of Directors that the results of its due diligence review of
CIT were satisfactory. Representatives of each of Goldman Sachs and CIBC World
Markets reviewed financial information concerning CIT, Newcourt and the proposed
transaction. Each financial advisor rendered to the Special Committee and the
Newcourt Board of Directors its opinion to the effect that, as of such date and
based upon and subject to the matters stated in their respective opinions, the
Initial Exchange Ratio was fair, from a financial point of view, to Newcourt
Shareholders. After full discussion following the unanimous recommendation of
the Special Committee, the Newcourt Board of Directors, by unanimous vote,
authorized and approved the execution and delivery of the March Agreement and
related agreements.
Following the conclusion of the meetings of the CIT Board of Directors and
Newcourt Board of Directors, the parties entered into the March Agreement, dated
as of March 7, 1999.
On May 5, 1999, Newcourt announced its financial results for the first
quarter of 1999. Those results reflected first quarter earnings that were lower
than had been anticipated by CIT and Newcourt and were below analysts' consensus
expectations. On June 15, 1999, CIT and Newcourt announced that, as a result of
such lower than expected earnings, CIT and Newcourt had initiated discussions to
reassess Newcourt's earnings expectations. CIT and Newcourt also indicated in
the June 15th announcement that the Initial Exchange Ratio could be reduced as a
result of such discussions. Concurrently with the announcement, CIT and Newcourt
amended the March Agreement to permit Newcourt to solicit alternative
acquisition proposals during the reassessment period.
During the reassessment period, CIT, assisted by CIT's financial advisors,
engaged in a detailed financial and operating review of Newcourt with Newcourt's
management and representatives of Newcourt's Board of Directors, including
on-site due diligence of Newcourt. CIT re-examined Newcourt margins,
securitizations,
48
credit, lease residuals, core profitability and the outlook for Newcourt on both
a business unit basis and on a consolidated basis.
Also during the reassessment period, the CIT Board of Directors authorized
retention of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") as an
additional financial advisor to CIT for the purposes of evaluating the
historical performance and the future prospects of Newcourt and its operations,
advising CIT with respect to the terms of CIT's proposed combination with
Newcourt and evaluating the fairness to CIT of the financial terms of any new or
revised agreement that may be reached between CIT and Newcourt.
As a result of that reassessment, CIT was of the view that Newcourt's 1999
and 2000 earnings would be below CIT's and analysts' consensus expectations
prior to the entry into the March Agreement. CIT also concluded that Newcourt's
origination platform remained strong, that Newcourt had excellent client
relationships and vendor programs, that Newcourt's new business origination
teams were capable and experienced and that Newcourt's business continued to
generate strong fees.
Following its completion of the reassessment, CIT advised Newcourt of
CIT's view that it was not obligated to proceed with the transaction under the
March Agreement in light of Newcourt's 1999 first quarter results and the
results of the reassessment. However, CIT advised Newcourt that CIT continued to
be interested in pursuing the acquisition of Newcourt at a fair price noting
that Newcourt's business components fit well into CIT and that significant
savings could be achieved through the integration of the two companies.
Newcourt responded to CIT stating Newcourt's view that CIT was obligated
to proceed in accordance with the terms of the March Agreement. However, in
light of the risks and uncertainties associated with Newcourt's implementation
of a stand-alone strategy and the prospect of protracted litigation between the
parties concerning the March Agreement, and the other factors described under
"Newcourt's Reasons for the Transaction" on page 53, in July 1999 the Newcourt
Board of Directors directed its representatives to discuss with CIT's
representatives revisions to the terms of the March Agreement.
CIT management and representatives of the Newcourt Board of Directors,
assisted by their respective financial and legal advisors, conducted several
meetings and telephonic conferences in July 1999 to discuss potential revisions
to the March Agreement. In particular, the parties discussed amending the
Initial Exchange Ratio and modifying the conditions to closing the Transaction.
Prior to and during the course of these discussions, the CIT Board of Directors,
individually and at formal meetings, was periodically advised by CIT management,
J.P. Morgan, DLJ and CIT's counsel as to the status of CIT's reassessment of
Newcourt, the status of the discussions with representatives of the Newcourt
Board of Directors and related matters. Also during the course of these
discussions, representatives of the Newcourt Board of Directors who were
participating in the discussions, together with Newcourt's legal and financial
advisors, periodically advised the other members of the Newcourt Board of
Directors, both individually and at meetings of the Board, with respect to the
status of the discussions with management of CIT and its financial advisors and
related matters.
On July 22, 1999, the CIT Board of Directors met to discuss and review,
with the assistance of CIT's legal and financial advisors, a proposed revised
transaction with Newcourt. At the meeting, the CIT Board of Directors reviewed
Newcourt's financial condition and earnings potential based upon CIT's
reassessment. Representatives of J.P. Morgan and DLJ reviewed the financial
information regarding CIT, Newcourt and the proposed revised transaction with
the CIT Board of Directors. CIT's legal advisors reviewed with the CIT Board of
Directors the terms of a draft Reorganization Agreement and related documents,
analyzed the differences between such draft Reorganization Agreement and related
documents and the March Agreement and related documents and discussed various
legal and regulatory matters relevant to the transaction. Upon conclusion of
that discussion, the CIT Board of Directors authorized CIT's management to
continue negotiation of the proposed revised Transaction, subject to final Board
approval.
Prior to finalizing the terms of the Reorganization Agreement, members of
the management of each of CIT and Newcourt met and reviewed the proposed
combination with rating analysts from each of Standard & Poor's, Moody's and
Duff & Phelps' in order to confirm the indicative ratings that would be assigned
by each such entity to the debt of the combined company. Prior to the
announcement of the Transaction, Newcourt's long-term, unsecured debt was rated
BBB by Standard & Poor's, Baa3 by Moody's, A- by Duff & Phelps' and BBB+ by
Fitch IBCA, Inc., and CIT's long-term, unsecured debt was rated A+ by Standard &
Poor's, Aa3 by Moody's and AA- by Duff & Phelp's. Each of Standard & Poor's and
Duff & Phelp's indicated that, assuming that the transaction was completed on
the terms presented, the combined company's long-term debt rating would be the
49
same as CIT's existing rating, and Moody's indicated that such long-term rating
would likely be A1 or A2, representing a one-level or two-level downgrade from
CIT's then current long-term credit rating.
On August 3, 1999, the Special Committee and the Newcourt Board of
Directors held meetings to discuss and review the proposed terms of the
Reorganization Agreement, the Stock Option Agreement, the DKB Voting Agreement
and related matters, including mutual releases between CIT and Newcourt and
their respective directors, officers and significant shareholders and separation
agreements between Newcourt and certain members of senior management of
Newcourt. Newcourt's legal advisors reviewed the proposed terms of such
agreements with the Special Committee and the Newcourt Board of Directors.
Representatives of each of Goldman Sachs and CIBC World Markets reviewed
financial information concerning CIT, Newcourt and the proposed revised
transaction. Each of Goldman Sachs and CIBC World Markets indicated to the
Newcourt Board of Directors that it was prepared to deliver its opinion, at the
time of execution of the Reorganization Agreement, to the effect that as of the
date of such opinion and based upon and subject to the matters stated therein,
the Exchange Ratio is fair, from a financial point of view, to Newcourt
Shareholders. After full discussion and following the unanimous recommendation
of the Special Committee, the Newcourt Board of Directors, by unanimous vote,
authorized and approved the execution and delivery of the Reorganization
Agreement, the Stock Option Agreement, the DKB Voting Agreement and the related
agreements, and determined to recommend that the Newcourt Shareholders vote in
favor of the Arrangement Resolution.
On August 4, 1999, the CIT Board of Directors met again to consider the
revised Newcourt transaction. Members of CIT's management reviewed the
transaction with the CIT Board of Directors. CIT's legal advisors reviewed the
Reorganization Agreement and related documents, and advised the CIT Board of
Directors as to the course of negotiations and as to related legal matters.
Representatives of J.P. Morgan and DLJ reviewed financial information concerning
CIT, Newcourt and the proposed transaction and delivered their respective
opinions that, as of such time, and based upon and subject to the procedures
followed, assumptions made, matters considered and limitations on the analysis
undertaken, the Exchange Ratio was fair to CIT from a financial point of view.
Based upon the CIT Board of Directors' review of the definitive terms of the
transaction, the findings of CIT Management as to the reassessment of Newcourt,
the foregoing opinions and other relevant factors, the CIT Board of Directors
authorized and approved the execution of the Reorganization Agreement and
related documents and determined to recommend that CIT Stockholders vote in
favor of the Stock Issuance Proposal.
Following the conclusion of the meetings of the CIT Board of Directors
and Newcourt's Board of Directors, the parties entered into the Reorganization
Agreement, the Stock Option Agreement and the Voting Agreements. CIT also
entered into employment agreements with Messrs. McKerroll, Nullmeyer and
Sharpless and obtained mutual releases with respect to employment agreements
entered into with Messrs. McKerroll, Nullmeyer, Sharpless, Hudson and Moore in
March 1999 in connection with the March Agreement. Each of CIT and Newcourt
executed a full and unconditional release of all claims relating to the March
Agreement.
Joint Reasons for the Transaction
CIT and Newcourt believe that the Transaction represents an excellent
opportunity to create a commercial financing company that will enjoy benefits of
increased size and geographic scope, a more diversified asset base, more
diversified funding sources and improved positioning to take advantage of
opportunities for growth. The CIT Board of Directors and the Newcourt Board of
Directors identified a number of potential benefits of the Transaction that they
believe could contribute to the success of the combined company, including the
following:
Scale. After the Transaction is completed, the combined company will be
the largest publicly held North American commercial financing company. Through
its greater size and financial strength, the combined company should be able to
compete more effectively for international business and acquisition
opportunities than either company could independently. Through the consolidation
of corporate overhead, systems, marketing, back office facilities, and
personnel, the combined company expects to achieve certain efficiencies. See
"The Combined Company After the Transaction Integration of Operations" on p. 45.
Diversification. Newcourt contributes to the combined company its broad
technology-based leasing business as well as its Canadian and overseas platforms
for CIT's other businesses. CIT provides the combined
50
company with diversified product lines in which Newcourt does not currently
engage. The combined company will have a more diversified asset base and is
expected to utilize each company's respective strengths more effectively. The
extensive management experience, credit discipline, and origination platforms of
the combined company will enable it to deliver a broader array of services to
its existing and potential customers, with origination strength in the equipment
and vendor finance, commercial finance and consumer finance markets.
Funding Strength. The combined company is expected to benefit from more
diversified liquidity sources, including broader access to the commercial paper,
medium term note, securitization and syndication markets, as well as increased
capitalization and liquidity of its common stock. The funding advantage due to
CIT's higher debt ratings are anticipated to improve net margins.
CIT's Reasons for the Transaction; Recommendation of the CIT Board of Directors
In deciding to approve and adopt the Reorganization Agreement, the CIT
Board of Directors considered the factors described above under "Joint Reasons
for the Transaction," as well as the opportunity for CIT Stockholders to
participate in the potential growth of the combined company after the
Transaction. The following are the material factors considered by the CIT Board
of Directors:
(1) the CIT Board of Directors' familiarity with and review of CIT's
own business, operations, financial condition and earnings on an
historical and prospective basis;
(2) the current and prospective economic and competitive environment
facing the financial services industry generally, including the rapid
consolidation of the financial services industry. By increasing in size
and scale, CIT will be able to compete more effectively, with leadership
positions in key markets;
(3) the belief that the Transaction is consistent with CIT's long
term strategy to selectively acquire businesses that complement its
existing core product base and that could not be replicated without
significant time and expense. Newcourt's fast growing vendor finance
business, which further diversifies CIT's product mix, creates
cross-selling opportunities for CIT products to Newcourt's vendor finance
customers and vice versa, provides an international platform for CIT
product lines, and provides new opportunities resulting from existing
strong vendor relationships, particularly in the computer technology and
telecommunications sectors;
(4) Newcourt's entrepreneurial culture and its development of an
advanced origination platform that could be adapted to serve some of CIT's
traditional business segments;
(5) the opportunity to leverage CIT's existing infrastructure to
create further operating efficiencies and to achieve an estimated annual
pretax cost savings of US$150 million through, among other things, the
elimination of duplicate efforts and redundancies in corporate overhead,
IT systems and back office facilities;
(6) the terms of the Reorganization Agreement and the Transaction,
including the Exchange Ratio and the provision for a downward adjustment
in the event that the Adjusted Shareholders Equity of Newcourt declines
subsequent to June 30, 1999 as specified in the Reorganization Agreement;
(7) the credit ratings of Newcourt and CIT and the indicative credit
ratings of the combined company provided by certain credit rating
agencies, and the anticipated effect of such credit ratings on CIT's and
the combined company's access to, and cost of, funds;
(8) the expectation that the Transaction will be accretive to
earnings in the fourth quarter of 2000. Consideration was given to the
potential impact of the Transaction on the financial position of CIT,
including the dilutive impact on the earnings per common share in fiscal
1999 and 2000 as well as the expected capital generation to support
projected growth. The CIT Board of Directors also considered that the
combined company's ability to achieve such financial results is subject to
various factors, including economic and business conditions, the ability
to integrate the cultures and operations of both entities and to realize
cost savings from the elimination of redundant functions, and the
regulatory environment. As a result, there can be no assurance that the
combined company can attain such financial results;
(9) the fact that the CIT Board of Directors would consist of 16
members at the Effective Time. Twelve directors will be selected by the
CIT Board of Directors, of whom two will be designated by DKB,
51
and four directors will be selected by the Newcourt Board of Directors, of
whom one may be designated by CIBC and one will be designated by Hercules;
(10) the entry by Messrs. Nullmeyer, McKerroll and Sharpless into
employment agreements with CIT to be effective as of the Effective Time
(see "- Interests of Certain Persons in the Transaction" on page 72);
(11) the releases to be obtained by CIT from employment agreements
with certain members of senior management of Newcourt that were entered
into in connection with the March Agreement;
(12) the releases by Newcourt and certain related parties releasing
CIT, DKB and certain related parties from liabilities arising in
connection with the March Agreement;
(13) the CIT Board of Directors' review, based in part on
presentations by its financial advisors and CIT's management, of the
business, operations, financial condition and earnings of Newcourt on an
historical and prospective basis and of the combined company on a pro
forma basis and the historical stock price performance of the Newcourt
Common Shares, the resulting relative interest of CIT Stockholders and
Newcourt Shareholders in the common equity of the combined company, and
the potential impact of the Transaction on the market value of CIT Common
Stock. In addition, the CIT Board of Directors was advised that the
Transaction would be accounted for as a purchase and would result in a
significant amount of goodwill;
(14) the results of the due diligence investigation of Newcourt
conducted by CIT's management;
(15) the presentations of J.P. Morgan and DLJ to the CIT Board of
Directors on August 4, 1999, the financial information reviewed by J.P.
Morgan and DLJ on August 4, 1999, and the respective oral opinions of J.P.
Morgan and DLJ rendered on August 4, 1999 and subsequently confirmed in
writing, that, as of such date and based upon and subject to the
procedures followed, assumptions made, matters considered and limitations
on the analysis undertaken, the Exchange Ratio was fair to CIT from a
financial point of view (see "- Opinions of Financial Advisors Opinions of
CIT's Financial Advisors" on page 55);
(16) the CIT Board of Directors' assessment, with the assistance of
counsel, concerning the likelihood that CIT and Newcourt would obtain the
Primary Approvals required for the Transaction without the imposition of
materially adverse terms or conditions and within the time frame required
by the Reorganization Agreement. In this regard, the CIT Board of
Directors noted that the completion of the Transaction is conditioned upon
(x) DKB not objecting, in its sole reasonable judgment, to any new
conditions or restrictions imposed on DKB or its subsidiaries (other than
CIT, Newcourt and their subsidiaries) under the terms of any U.S. or
Canadian regulatory approval and (y) no Japanese regulatory authority
imposing any requirement on DKB with respect to the Transaction that would
reasonably be expected to have a material adverse effect on the business
or financial condition of DKB and its subsidiaries (other than CIT,
Newcourt and their subsidiaries), taken as a whole (see "- The
Reorganization Agreement - Conditions to Closing" on page 78);
(17) the likelihood that Newcourt would obtain the requisite
approval of its shareholders for the Transaction, particularly in light of
the Voting Agreements, which obligate CIBC, Hercules and certain members
of Newcourt management to vote in favor of the Transaction at the Newcourt
Special Meeting, subject to the conditions contained therein (see "-
Agreements to Support the Transaction - Voting Agreements" on page 82);
(18) the fact that, if Newcourt terminates the Reorganization
Agreement under certain circumstances, Newcourt could be required to pay
the termination fee of US$105 million to CIT and that the option granted
pursuant to the Stock Option Agreement would become exercisable and that
CIT would have the right to require Newcourt to repurchase such option for
US$15 million; and
(19) the terms of the Stock Option Agreement and the termination fee
provisions of the Reorganization Agreement, including the possibility that
the Stock Option Agreement and termination fee might discourage third
parties from offering to acquire Newcourt by increasing the cost of such
an acquisition (see "- Agreements to Support the Transaction - Stock
Option Agreement" on page 83 and "- The Reorganization Agreement -
Termination Fees" on page 81).
The foregoing discussion of the information and factors considered by the
CIT Board of Directors is not intended to be exhaustive but includes all of the
material factors considered by the CIT Board of Directors. In reaching its
determination to approve and recommend the Transaction, the CIT Board of
Directors did not
52
assign any relative or specific weights to the factors considered in reaching
such determination, and individual directors may have given differing weights to
different factors.
The CIT Board of Directors believes that the Transaction is in the best
interests of CIT and its Stockholders. Accordingly, the CIT Board of Directors
approved the Transaction and unanimously recommends that CIT Stockholders vote
IN FAVOR OF the Stock Issuance Proposal.
Newcourt's Reasons for the Transaction; Recommendation of the Newcourt Board of
Directors
In deciding to approve and adopt the Reorganization Agreement, the
Newcourt Board of Directors consulted with Newcourt's management and its legal
and financial advisors and considered a number of factors. In addition to the
factors described above under "Joint Reasons for the Transaction," the following
include all of the material factors considered by the Newcourt Board of
Directors in its decision to approve the Reorganization Agreement and the
related agreements:
(1) the Newcourt Board of Directors' familiarity with and review of
Newcourt's own business, operations, financial condition and earnings on
an historical and prospective basis;
(2) the Newcourt Board of Directors' review of the business,
operations, financial condition and earnings of CIT on an historical and a
prospective basis and of the combined company on a pro forma basis, the
historical stock price performance of the CIT Common Stock, the resulting
relative interest of Newcourt Shareholders and CIT Stockholders in the
common equity of the combined company, and the potential impact of the
Transaction on the market value of CIT Common Stock. In this regard, the
Newcourt Board of Directors was advised that the Transaction would be
accounted for as a purchase and would result in a significant amount of
goodwill;
(3) the process conducted by Newcourt's management, with the
assistance of its advisors, in exploring strategic alternatives available
to Newcourt (see "- Background of the Transaction" on page 47);
(4) the Newcourt Board of Directors' review of the strategic
alternatives reasonably available to Newcourt, the range of possible
values to Newcourt's shareholders obtainable through implementation of
such alternatives, and the timing and likelihood of actually achieving
such values, and the Newcourt Board of Directors' belief, based upon such
review, that such alternatives ultimately were not likely to result in
greater value for Newcourt's shareholders than the value to be realized in
the Transaction. In this regard, the Newcourt Board of Directors
considered, among other things, the risks and uncertainties associated
with Newcourt's implementation of a stand-alone strategy, including
uncertainties relating to Newcourt's ability to continue to generate and
fund acceptable revenue growth, improved profitability and superior
shareholder returns. In addition, the Newcourt Board of Directors believed
that the realization of the potential benefits of other alternatives,
particularly a substantial public equity issuance combined with an
extensive cost reduction program, were less certain and would take longer
to realize than the potential benefits of a strategic combination;
(5) the risks and uncertainties associated with the costs, timing
and outcome of any potential litigation with CIT concerning the March
Agreement, and the comparative degree of certainty associated with the
revised terms of the Transaction as set forth in the Reorganization
Agreement;
(6) the credit ratings of Newcourt and CIT and the indicative credit
ratings of the combined company provided by certain credit rating
agencies, and the anticipated effect of such credit ratings on Newcourt's
and the combined company's access to, and cost of, funds;
(7) the terms of the Reorganization Agreement and the Transaction,
including (i) the removal of certain conditions precedent to closing
contained in the March Agreement and (ii) the Exchange Ratio and the
provision for a downward adjustment in the event that the Adjusted
Shareholders' Equity of Newcourt declines subsequent to June 30, 1999 as
specified in the Reorganization Agreement;
(8) the fact that the CIT Board of Directors would consist of 16
members at the Effective Time. Twelve directors will be selected by the
CIT Board of Directors, of whom two will be designated by DKB, and four
directors will be selected by the Newcourt Board of Directors, of whom one
may be designated by CIBC and one will be designated by Hercules;
53
(9) the entry by Messrs. Nullmeyer, McKerroll and Sharpless into
employment agreements with CIT to be effective as of the Effective Time
(see "- Interests of Certain Persons in the Transaction" on page 72);
(10) the current and prospective economic and competitive
environment facing the financial services industry generally, and Newcourt
in particular;
(11) the anticipated cost savings and operating efficiencies
available to the combined company from the Transaction, and the relative
likelihood of the foregoing being achieved following completion of the
Transaction (see "The Combined Company After the Transaction - Integration
of Operations" on page 45);
(12) the anticipated benefits available to the combined company from
the Transaction, including the availability and diversity of funding
sources and the diversification of product lines and relationships, client
and vendor bases and industries;
(13) the results of the due diligence investigation of CIT conducted
by Newcourt's management;
(14) the presentation of Goldman Sachs and CIBC World Markets to the
Newcourt Board of Directors on August 3, 1999, including the written
opinions of each of Goldman Sachs and CIBC World Markets, each dated as of
August 5, 1999, as to the fairness, from a financial point of view, as of
such date, of the Exchange Ratio to Newcourt Shareholders (see "- Opinions
of the Financial Advisors - Opinions of Newcourt's Financial Advisors" on
page 64);
(15) the releases by CIT, DKB and certain related parties releasing
Newcourt and certain related parties from liabilities arising in
connection with the March Agreement;
(16) the general impact that the Transaction may have on the
constituencies served by Newcourt, including its customers, employees and
communities;
(17) the expectation that the Transaction would be tax deferred to
Eligible Holders who elect to receive Exchangeable Shares in the
Transaction. The Newcourt Board of Directors was advised that the
Transaction would be taxable to U.S. holders of Newcourt Common Shares;
(18) the Newcourt Board of Directors' assessment, with the
assistance of counsel, concerning the likelihood that CIT and Newcourt
would obtain the Primary Approvals required for the Transaction without
the imposition of materially adverse terms or conditions and within the
time frame required by the Reorganization Agreement. In this regard, the
Newcourt Board of Directors considered that the completion of the
Transaction is conditioned upon (x) DKB not objecting, in its sole
reasonable judgment, to any new conditions or restrictions imposed on DKB
or its subsidiaries (other than CIT, Newcourt and their subsidiaries)
under the terms of any U.S. or Canadian regulatory approval and (y) no
Japanese regulatory authority imposing any requirement on DKB with respect
to the Transaction that would reasonably be expected to have a material
adverse effect on the business or financial condition of DKB and its
subsidiaries (other than CIT, Newcourt and their subsidiaries), taken as a
whole (see "- The Reorganization Agreement - Conditions to Closing" on
page 78);
(19) the likelihood that CIT would obtain the requisite stockholder
approval of the Stock Issuance Proposal, particularly in light of the DKB
Voting Agreement, which obligates DKB to vote in favor of the Stock
Issuance Proposal at the CIT Stockholders Meeting, subject to certain
conditions contained therein (see "- Agreements to Support the Transaction
- Voting Agreements" on page 82);
(20) the fact that Newcourt has the right to terminate the
Reorganization Agreement in the event that it enters into an agreement
with a third party relating to the acquisition of Newcourt, provided that
certain conditions are satisfied (see "- The Reorganization Agreement -
Termination" on page 81). In this regard, the Newcourt Board of Directors
noted that upon such termination, Newcourt would be required to pay the
termination fee of US$105 million to CIT and that the Option granted
pursuant to the Stock Option Agreement would become exercisable and that
CIT would have the right to require Newcourt to repurchase such Option for
US$15 million; and
(21) the terms of the Stock Option Agreement and the termination fee
provisions of the Reorganization Agreement, including the risk that the
Stock Option Agreement and termination fee might discourage third parties
from offering to acquire Newcourt by increasing the cost of such an
acquisition, and recognizing that the execution of the Stock Option
Agreement and inclusion of the termination fee
54
provisions in the Reorganization Agreement was a condition to CIT's
willingness to enter into the Reorganization Agreement (see "- Agreements
to Support the Transaction - Stock Option Agreement" on page 83 and "- The
Reorganization Agreement - Termination Fees" on page 81).
The above discussion of the information and factors considered by the
Newcourt Board of Directors is not intended to be exhaustive, but includes all
of the material factors considered by the Newcourt Board of Directors. In
deciding to approve and recommend the Transaction, the Newcourt Board of
Directors did not assign any relative or specific weights to the factors
considered in such decision, and individual directors may have given differing
weights to different factors.
The Newcourt Board of Directors believes the Transaction is fair to, and
in the best interests of, Newcourt and the Newcourt Shareholders. The Newcourt
Board of Directors unanimously recommends that the Newcourt Shareholders vote IN
FAVOR OF the Arrangement Resolution.
Opinions of the Financial Advisors
Opinions of CIT's Financial Advisors
J.P. Morgan. At the August 4, 1999 meeting of the CIT Board of Directors,
J.P. Morgan gave its oral opinion to the CIT Board of Directors that, as of such
date and based upon and subject to the various considerations set forth in its
opinion, the exchange ratio pursuant to the Reorganization Agreement was fair
from a financial point of view to CIT. J.P. Morgan confirmed its oral opinion in
a written opinion, dated August 5, 1999, to the same effect. J.P. Morgan has
updated its August 5, 1999 opinion by delivering its written opinion to the CIT
Board of Directors, dated the date of this Joint Proxy Statement, to the same
effect. No limitations were imposed by the CIT Board of Directors upon J.P.
Morgan with respect to the investigations made or procedures followed by it in
rendering its opinions.
The full text of the updated opinion of J.P. Morgan, which sets forth
among other things the assumptions made, matters considered and limits on the
review undertaken by J.P. Morgan, is attached as Annex K to this document. This
opinion should be read carefully and in its entirety. J.P. Morgan's written
opinion is addressed to the CIT Board of Directors, is directed only to the
Exchange Ratio pursuant to the Reorganization Agreement and does not constitute
a recommendation to any CIT Stockholder as to how to vote with respect to the
Transaction. The summary of the opinion of J.P. Morgan set forth in this
document is qualified in its entirety by reference to the full text of such
opinion.
In rendering its updated opinion, J.P. Morgan reviewed, among other
things:
o the Reorganization Agreement;
o a draft of this Joint Proxy Statement;
o the audited financial statements of CIT and Newcourt for the fiscal
year ended December 31, 1998, and the unaudited financial statements
of CIT and Newcourt for the period ended June 30, 1999;
o current and historical market prices of the CIT Common Stock and the
Newcourt Common Shares;
o various publicly available information concerning the business of
Newcourt and CIT and of various other companies engaged in
businesses comparable to those of Newcourt and CIT, and the reported
market prices of various other companies' securities deemed
comparable;
o publicly available terms of various transactions involving companies
comparable to Newcourt and CIT and the consideration received for
such companies;
o the terms of other business combinations deemed relevant by J.P.
Morgan;
o relative comparisons of CIT and Newcourt on a variety of financial
and market measures; and
o various internal financial analyses and forecasts prepared by CIT
and Newcourt and their respective managements.
In addition, J.P. Morgan participated in discussions with certain members
of the management of CIT and Newcourt with respect to various aspects of the
Transaction, the past and current business operations of CIT and Newcourt, the
financial condition and future prospects and operations of CIT and Newcourt, the
effects of
55
the Transaction on the financial condition and future prospects of CIT and
Newcourt, and various other matters J.P. Morgan believed necessary or
appropriate to its inquiry. J.P. Morgan reviewed such other financial studies
and analyses and considered such other information as it deemed appropriate for
the purposes of its opinion.
In giving its opinion, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or that was furnished to it by CIT and Newcourt or
otherwise reviewed by J.P. Morgan, and J.P. Morgan has not assumed any
responsibility or liability therefor. J.P. Morgan has not conducted any
valuation or appraisal of any assets or liabilities, nor have any such
valuations or appraisals been provided to J.P. Morgan. In relying on financial
analyses and forecasts provided to it, J.P. Morgan has assumed that they have
been reasonably prepared based on assumptions reflecting the best currently
available estimates and judgments by management of CIT and Newcourt as to the
expected future results of operations and financial condition of CIT and
Newcourt. J.P. Morgan has also assumed that the Transaction will have the tax
consequences described in this Joint Proxy Statement and in discussions with,
and materials furnished to J.P. Morgan by, CIT, and the transactions
contemplated by the Reorganization Agreement will be consummated as described in
the Reorganization Agreement and this Joint Proxy Statement. J.P. Morgan relied
as to all legal matters relevant to rendering its opinion upon the advice of
counsel.
The projections furnished to J.P. Morgan for CIT and Newcourt were
prepared by the respective managements of each company. Neither CIT nor Newcourt
publicly discloses internal management projections of the type provided to J.P.
Morgan in connection with J.P. Morgan's analysis of the Transaction, and such
projections were not prepared with a view toward public disclosure. These
projections were based on numerous variables and assumptions that are inherently
uncertain and may be beyond the control of management, including, without
limitation, factors related to general economic and competitive conditions and
prevailing interest rates. Accordingly, actual results could vary significantly
from those set forth in such projections.
J.P. Morgan's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to J.P. Morgan as
of, the date of such opinion. Subsequent developments may affect its opinion,
and J.P. Morgan does not have any obligation to update, revise, or reaffirm such
opinion. J.P. Morgan expressed no opinion as to the price at which CIT Common
Stock will trade at any future time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion.
CIT Pro Forma Transaction Analysis. J.P. Morgan analyzed the pro forma CIT
earnings per share forecasts for 2000 and 2001 based upon CIT's future
expectations for CIT's and Newcourt's business. The analysis showed, assuming
transaction synergies phased in over two years, on an equivalent share basis,
that the Transaction would be accretive to CIT's cash earnings per share in 2000
and to CIT's GAAP and cash earnings per share in 2001.
Offer Valuation. J.P. Morgan reviewed the terms of the proposed
Transaction, including the relationship between CIT's and Newcourt's stock
prices and the aggregate transaction value. J.P. Morgan also reviewed the value
of the consideration offered based upon CIT's closing price of $26.00 on August
3, 1999. This analysis indicated that the implied value of CIT's proposal was
approximately $18.20 per share of Newcourt common stock. J.P. Morgan calculated
that, based on CIT's proposal, Newcourt Shareholders would receive a premium of
19.3% to Newcourt's closing price of $15.25 on August 3, 1999, and a premium of
6.1% to Newcourt's managed assets as of June 30, 1999. J.P. Morgan further
calculated the following multiples for CIT's proposal:
Newcourt basis Multiples Denominator
- -------------- ------- -----------
1999 GAAP estimated earnings per share (CIT adjusted) ... 16.9x $ 1.08
2000 GAAP estimated earnings per share (CIT adjusted) ... 15.0x $ 1.21
2000 Cash estimated earnings per share (CIT adjusted) ... 12.0x $ 1.51
Book value (June 30, 1999) .............................. 0.87x $20.92
Tangible book value (June 30, 1999) ..................... 1.46x $12.48
56
Newcourt's GAAP and cash earnings estimates for this analysis were based
upon CIT's expectations for Newcourt's business.
Finally, J.P. Morgan determined that CIT Stockholders would own
approximately 61% of the combined company immediately following the Transaction.
Contribution Analysis. J.P. Morgan reviewed and analyzed the relative
contributions of both CIT and Newcourt to the combined entity.
The following table illustrates the relative financial contribution by CIT
to a combined CIT/Newcourt entity:
CIT basis Contribution
- --------- ------------
Managed finance assets (June 30, 1999) ........................... 56%
Owned finance receivables (June 30, 1999) ........................ 65%
Common equity (June 30, 1999) .................................... 48%
Tangible equity (June 30, 1999) .................................. 57%
1998 GAAP net income ............................................. 63%
1999 GAAP net income (CIT adjusted) .............................. 70%
2000 GAAP net income (CIT adjusted) .............................. 70%
1998 Cash net income ............................................. 60%
1999 Cash net income (CIT adjusted) .............................. 66%
2000 Cash net income (CIT adjusted) .............................. 66%
J.P. Morgan also reviewed the market value contributed by CIT and Newcourt
to the pro forma entity for various time periods, including August 3, 1999. This
analysis indicated that CIT contributed market value between 53% and 68% of the
combined entities over the periods examined. J.P. Morgan compared the relative
financial contribution by CIT and this range to the approximately 61% continuing
ownership stake that CIT's stockholders would have in the combined company
following the Transaction.
Selected Transaction Analysis. J.P. Morgan examined recent transactions
since 1997 which involved commercial and consumer finance companies. J.P. Morgan
reviewed the following commercial finance transactions:
Acquiror Target
-------- ------
Heller Financial, Inc. HealthCare Financial Partners, Inc.
Bay View Capital Corporation Franchise Mortgage Acceptance Company
Rabobank Nederland Tokai Financial Services Inc.
The Finova Group Inc. Sirrom Capital Corporation
Fleet Financial Group Sanwa Business Credit Corporation
Newcourt Credit Group Inc. AT&T Capital Corporation
TCF Financial Corporation Winthrop Resources Corporation
Associates First Capital Corporation Avco Financial Services Inc.
J.P. Morgan also reviewed the following consumer finance transactions:
Acquiror Target
-------- ------
Washington Mutual Inc. Long Beach Financial Corporation
Greenpoint Financial Corp. Headlands Mortgage Co.
Household International, Inc. Beneficial Corporation
Conseco, Inc. Green Tree Financial Corporation
First Union Corporation The Money Store Inc.
Barnett Banks, Inc. Oxford Resources Corp.
J.P. Morgan calculated the median multiples paid in these transactions and
compared them to the terms offered by CIT for Newcourt:
57
Commercial Consumer
finance finance CIT/Newcourt
transactions transactions transaction
----------- ------------ ----------
Price to:
--------
Book value .................... 2.11x 3.85x 0.87x
Tangible book value ........... 1.92x 3.85x 1.46x
Last 12 months' net income .... 21.6x 19.5x 16.0x
Forward 12 months' net income . 17.9x 17.7x 15.7x
Premium to:
----------
Total managed assets ........... 15.8% 21.6% 6.1%
Market price ................... 56.7% 35.9% 19.3%
The basis for Newcourt's multiples reflects certain adjustments proposed
to be made by CIT.
Public Trading Multiples. Using publicly available information, J.P.
Morgan compared selected financial data of Newcourt with similar data for
selected publicly traded companies engaged in businesses which J.P. Morgan
judged to be analogous to Newcourt. The companies selected by J.P. Morgan
included three groups of comparable companies:
Large cap commercial Mid cap commercial
finance companies finance companies
- ------------------- ------------------
Associates First Capital Corporation XTRA Corporation
The CIT Group, Inc. First Sierra Financial, Inc.
The Finova Group Inc. DVI, Inc.
GATX Corporation Financial Federal Corporation
Comdisco, Inc. Unicapital Corporation
Heller Financial, Inc.
Other financial
services companies
- ----------------
American Express Company
Capital One Financial Corporation
Conseco, Inc.
Greenpoint Financial Corp.
Household International, Inc.
MBNA Corporation
Metris Companies Inc.
These companies, in particular the large cap commercial finance
companies, were selected, among other reasons, because of their operating,
organizational and overall business similarities with Newcourt. Based upon a
review of such information, J.P. Morgan determined the following:
Large cap Mid cap Other
commercial commercial financial
finance finance services
Price as a multiple of: companies companies companies Newcourt
------------------- --------- ---------- ---------- ---------
Book value ............................. 2.11x 1.85x 5.55x 0.73x
Tangible book value .................... 2.61x 1.85x 6.46x 1.22x
1999 GAAP earnings per share ........... 12.5x 12.2x 18.0x 14.1x
2000 GAAP earnings per share ........... 11.0x 9.5x 14.4x 12.6x
Forward 12 month earnings per share .... 11.7x 10.4x 16.0x 13.3x
1999, 2000 and forward 12 month GAAP earnings per shares for the peer
companies were provided by I/B/E/S. I/B/E/S is a data service that monitors and
publishes compilations of earnings estimates by selected research analysts. The
1999, 2000 and forward 12 month GAAP earnings estimates used for CIT were
I/B/E/S estimates reported prior to the announcement of the March Agreement. The
basis for Newcourt's multiples reflects certain adjustments made by CIT.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash
flow analysis for the purpose of determining the equity value for Newcourt's
Common Shares. J.P. Morgan calculated the free cash flows that Newcourt is
expected to generate during fiscal years 1999 through 2004, based upon CIT
adjusted financial projections. J.P. Morgan also calculated a range of terminal
asset values of Newcourt at the end of the five-year period ending 2004 by
applying a multiple of forward net income ranging from 10x to 14x to the
estimate of Newcourt's 2005 net income. The free cash flows and the range of
terminal asset values were then discounted to present values using a range of
discount rates from 10% to 14%, which were chosen by J.P. Morgan based
58
upon an analysis of market discount rates applicable to companies in the
commercial finance sector. Based on management projections, a terminal forward
net income multiple of 12x and a discount rate in a range from 10% to 14%, the
analysis indicated a range of equity values of between $2.8 billion and $3.6
billion for 100% of Newcourt's common stock on a stand-alone basis. J.P. Morgan
compared this range of equity values to the $2.7 billion transaction value
implied by the exchange ratio offered by CIT for Newcourt.
J.P. Morgan also performed a discounted cash flow analysis for the purpose
of determining the present value of expected transaction synergies. These
synergies were estimated by CIT to include cost savings and funding benefits.
Based upon a discount rate of 12%, the present value of transaction synergies
was estimated to be valued in excess of $1.5 billion.
The summary set forth above is not a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that the summary set forth above and
their analyses must be considered as a whole and that selecting portions
thereof, without considering all of its analyses, could create an incomplete
view of the processes underlying its analyses and opinion. J.P. Morgan based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and industry-specific
factors. The other principal assumptions upon which J.P. Morgan based its
analyses are set forth above under the description of each such analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that might be achieved, which values may be higher or lower than
those indicated. Moreover, J.P. Morgan's analyses are not and do not purport to
be appraisals or otherwise reflective of the prices at which businesses actually
could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to advise CIT and deliver
a fairness opinion with respect to the Transaction on the basis of such
experience and its familiarity with CIT.
For services rendered in connection with the Transaction and the delivery
of its opinion, CIT has agreed to pay J.P. Morgan a fee of US$13.0 million,
which J.P. Morgan has agreed to accept in the form of shares of CIT Common
Stock. In addition, CIT has agreed to reimburse J.P. Morgan for its expenses
incurred in connection with its services, including the fees and disbursements
of counsel, and will indemnify J.P. Morgan against certain liabilities,
including liabilities existing under the federal securities laws.
J.P. Morgan and its affiliates maintain banking and other business
relationships with CIT and Newcourt, for which it receives customary fees. In
the ordinary course of their businesses, J.P. Morgan and its affiliates may
actively trade the debt and equity securities of CIT or Newcourt for their own
accounts or for the accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
Donaldson, Lufkin & Jenrette Securities Corporation. At the August 4, 1999
meeting of the CIT Board of Directors, DLJ delivered its oral opinion,
subsequently confirmed in a written opinion dated August 5, 1999 to the CIT
Board of Directors, to the effect that, as of such date and based on and subject
to the assumptions, limitations and qualifications set forth in such opinion,
the Exchange Ratio was fair to CIT from a financial point of view. DLJ has
confirmed its August 5, 1999 opinion by delivering its written opinion dated the
date of this Joint Proxy Statement (the "DLJ Opinion") to the CIT Board of
Directors to the same effect.
The full text of the DLJ Opinion is attached hereto as Annex L. The
summary of the DLJ Opinion set forth in this Joint Proxy Statement is qualified
in its entirety by reference to the full text of the DLJ Opinion. Holders of CIT
Common Stock are urged to read the DLJ Opinion carefully and in its entirety for
the procedures followed, assumptions made, other matters considered and limits
of the review by DLJ in connection with such opinion.
The DLJ Opinion was prepared for the CIT Board of Directors and was
directed only to the fairness from a financial point of view, as of the date
thereof, of the Exchange Ratio. The DLJ Opinion does not address the relative
merits of the Transaction or any other business strategies being considered by
the CIT Board of
59
Directors, nor does it address the CIT Board of Directors' decision to proceed
with the Transaction. The DLJ Opinion did not express an opinion as to the
prices at which CIT Common Stock would actually trade at any time. The DLJ
Opinion does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed Transaction.
CIT selected DLJ as its financial advisor because DLJ is an
internationally recognized investment banking firm that has substantial
experience in the financial services industry and in providing strategic
advisory services. DLJ was not retained as an advisor or agent to the
stockholders of CIT or any person other than CIT. As part of its investment
banking business, DLJ is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
In arriving at the DLJ Opinion, DLJ reviewed the Reorganization Agreement
and reviewed financial and other information that was publicly available or
furnished to DLJ by CIT and Newcourt including information provided during
discussions with their respective managements. Included in the information
provided during discussions with management were certain financial projections
of Newcourt for the period beginning January 1, 1999 and ending on December 31,
2003 prepared by the management of Newcourt and adjusted by the management of
CIT and certain financial projections of CIT for the period beginning January 1,
1999 and ending December 31, 2003 prepared by the management of CIT. From these
financial projections, DLJ extrapolated projections for the one-year period
ending December 31, 2004, which extrapolations were reviewed by management of
CIT. In addition, DLJ compared certain financial and securities data of CIT and
Newcourt with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the common
stock of Newcourt and CIT, reviewed prices and premiums paid in certain other
business combinations and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of the DLJ Opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
DLJ from public sources, that was provided to DLJ by CIT or Newcourt, or that
was otherwise reviewed by DLJ. In particular, DLJ relied upon the estimates of
the management of CIT as to the amount and timing of the operating synergies
achievable as a result of the Transaction and upon DLJ's discussion of such
synergies and the timing thereof with the management of CIT. With respect to the
financial projections supplied to DLJ, DLJ relied on representations that they
had been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of CIT and Newcourt as to
the future operating and financial performance of CIT and Newcourt. With respect
to the projections for the one-year period ending December 31, 2004, DLJ has
assumed that the bases on which they were prepared do not materially differ from
the best available estimates and judgments of the management of CIT for such
period. DLJ did not assume any responsibility for making any independent
evaluation of any assets or liabilities of CIT or Newcourt or for making any
independent verification of any of the information reviewed by DLJ. DLJ relied
as to certain legal matters on advice of counsel to CIT. In connection with the
rendering of the DLJ Opinion, DLJ had the opportunity to conduct only limited
due diligence on Newcourt.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. The DLJ Opinion states that, although
subsequent developments may affect the DLJ Opinion, DLJ does not have any
obligation to update, revise or reaffirm its opinion.
Included in the textual discussion below are summaries of certain
statistical information presented in a tabular format. While these tables are
presented for the purpose of clarity and ease of reference, they are not
substitutes for, and must be read along with, all of the textual information
appearing below.
Summary of Financial Analyses Performed by DLJ.
The following is a summary of the material financial analyses presented by
DLJ to the CIT Board of Directors on August 4, 1999 in connection with the
delivery of its opinion dated August 5, 1999. Unless otherwise indicated, all
analyses discussed below assume a per share CIT Common Stock price of $26.75.
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow
analysis on Newcourt to evaluate the Exchange Ratio, with and without
considering the effects of any synergies related to the Transaction. In
60
performing its analysis, DLJ relied on certain assumptions, financial forecasts
and other information provided by the managements of Newcourt and CIT. DLJ
calculated the estimated free cash flow based on earnings projections, capital
requirements and projected dividends from 1999 through 2004 and terminal values
based on a range of multiples of projected 2005 net income of 10.0x to 14.0x.
The free cash flows and terminal values were then discounted to the present
using a range of discount rates of 11.58% to 15.58%. The analysis indicated an
implied range of adjusted equity values (defined as total equity required in the
business given the total intangible asset profile, less expensed restructuring
charges) of approximately $2.21 billion to $3.61 billion (without synergies) and
of approximately $3.87 billion to $6.06 billion (with synergies, as estimated by
management) as compared to an adjusted equity value of $2.78 billion in the
Transaction.
Comparable Multiples Analysis. DLJ compared selected financial and
operating information for Newcourt with similar information for selected
large-cap publicly-traded commercial finance companies that DLJ deemed
reasonably comparable to Newcourt and for selected mergers and acquisitions
announced since 1997 involving commercial finance companies.
Comparable Public Companies Analysis. The comparable large-cap commercial
finance companies selected by DLJ consisted of:
o Associates First Capital Corporation
o Comdisco, Inc.
o The Finova Group Inc.
o Heller Financial, Inc.
In examining these comparable companies, DLJ analyzed the closing share
prices as of August 2, 1999 for each of the companies as a multiple of its
respective estimated 1999 and 2000 earnings, book value and tangible book value
at March 31, 1999 and as a premium to managed receivables at March 31, 1999.
Financial data of comparable companies were based on financial statements of
such companies as of March 31, 1999, other industry research reports and
analysts estimates provided by I/B/E/S.
Comparable Transactions Analysis. DLJ selected the following merger and
acquisition transactions announced since 1997 involving commercial finance
companies:
o General Motors Acceptance Corporation's acquisition of BNY Financial
Corporation
o Heller Financial, Inc.'s acquisition of HealthCare Financial
Partners, Inc.
o Bay View Capital Corporation's acquisition of Franchise Mortgage
Acceptance Company
o Cooperative Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank
Nederland"'s acquisition of Tokai Financial Services Inc.
o The Finova Group Inc.'s acquisition of Sirrom Capital Corporation
o Fleet Financial Group Inc.'s acquisition of Sanwa Business Credit
Corporation
o Heller Financial, Inc.'s acquisition of Dana Commercial Credit
Corporation
o GE Capital Corporation's acquisition of MetLife Capital Corporation
o Firstar Corporation's acquisition of Cargill Leasing Corp.
o Newcourt Credit Group's acquisition of AT&T Capital Corporation
o KeyCorp's acquisition of Leasetec Corporation
o TCF Financial Corporation's acquisition of Winthrop Resources
Corporation
In examining these selected comparable mergers and acquisitions, DLJ
analyzed the consideration paid in each such transaction as a multiple of the
respective target's latest twelve months ("LTM") earnings prior to the
announcement of the transaction, the respective combined entity's estimated next
twelve months ("NTM") earnings after the announcement of the transaction (based
upon I/B/E/S estimates), tangible book value and as a premium to managed
receivables at the time of announcement.
For the comparable public companies analysis, DLJ calculated the median
closing stock price multiples and for the comparable transactions analysis, DLJ
calculated the median purchase price multiples. In each case, DLJ analyzed the
closing price of the Newcourt Common Shares as of August 2, 1999 as a multiple
of Newcourt's (i) estimated earnings for fiscal year 1999 as provided by
Newcourt's management,
61
which earnings were normalized to eliminate certain pre-tax gains and to provide
for other pre-tax adjustments, (ii) projected earnings for fiscal year 2000 as
provided by Newcourt's management and (iii) projected tangible book value (with
and without adjustments to eliminate goodwill expected from the Transaction) and
projected book value as of December 31, 1999. DLJ also analyzed the August 2,
1999 closing price of the Newcourt Common Shares as a premium to Newcourt's
projected managed receivables at December 31, 1999 (with after-tax purchase
accounting adjustments).The results of the analyses were:
Summary of Multiples Analyses
Comparable
Public Comparable
Transaction Companies Transactions
Multiple Multiple Multiple
----------- --------- -----------
Estimated 1999
Earnings/LTM Earnings ................. 17.9x 15.8x 20.2x
Estimated 2000
Earnings/NTM Earnings ................. 13.4x 13.7x 14.9x
Equity Value
Tangible Book Value ............... 1.4x 2.6x 2.5x
Adjusted Tangible Book Value ...... 2.1x 2.6x 2.5x
Book Value ........................ 0.9x 2.5x --
Premium to Managed Receivables ........ 5.6% 18.3% 14.0%
No company or transaction used in the analyses is directly comparable to
CIT or Newcourt or the contemplated Transaction. In addition, mathematical
analysis such as determining the mean or median is not in itself a meaningful
method of using selected company or transaction data. The analyses performed by
DLJ are not necessarily indicative of actual values or future results, which may
be significantly more or less favorable than suggested by such analyses.
Exchange Ratio Analysis. DLJ reviewed the daily closing prices of CIT
Common Stock and Newcourt Common Shares to determine an implied exchange ratio
based upon the relative market capitalization of CIT and Newcourt for various
time periods ending on August 2, 1999.
Summary of Exchange Ratio Analysis
Time Frame Relative Contribution
- ---------- --------------------- Implied
CIT Newcourt Exchange Ratio
----- -------- --------------
August 2, 1999 ............ 64.9% 35.1% 0.5915
July 26, 1999 ............. 68.5% 31.5% 0.5033
May 5, 1999 ............... 59.1% 40.9% 0.7578
15-Day Average ............ 67.1% 32.9% 0.5364
30-Day Average ............ 68.1% 31.9% 0.5131
90-Day Average ............ 67.0% 33.0% 0.5390
180-Day Average ........... 60.2% 39.8% 0.7228
360-Day Average ........... 53.7% 46.3% 0.9446
Contribution Analysis. DLJ analyzed the pro forma relative
contributions of CIT and Newcourt to certain balance sheet items of the combined
company as of March 31, 1999 and actual net income for fiscal year 1998 and
projected net income for fiscal years 1999, 2000 and 2001 of the combined entity
based upon I/B/E/S estimates and earnings forecasts from CIT management
(including a normalized forecast for fiscal year 1999 to eliminate certain
pre-tax gains from Newcourt's estimated earnings and synergy-adjusted earnings
estimates for fiscal years 2000 and 2001). Taking the median percentages of the
balance sheet items of managed assets, common equity and tangible equity as of
March 31, 1999, the analysis indicated that CIT would have contributed 54.0% and
Newcourt would have contributed 46.0% of the total amount of such balance sheet
items, implying an exchange ratio of 0.9315 shares of CIT Common Stock per
Newcourt Common Share. Similarly, the analysis indicated a median net income
earnings contribution of 62.8% by CIT and 37.2% by Newcourt with an implied
exchange ratio of 0.6481 shares of CIT Common Stock per Newcourt Common Share.
Using the
62
results from the balance sheet contribution analysis and the net income earnings
contribution analysis, DLJ determined an overall median contribution to such
items of 61.5% by CIT and 38.5% by Newcourt implying an exchange ratio of
0.6839. DLJ then compared this ratio to the Exchange Ratio of 0.70 pursuant to
the Transaction.
Pro Forma Financial Impact. DLJ reviewed certain pro forma effects
resulting from the Transaction, including the effect on earnings per share for
CIT. The review indicated that the Transaction is anticipated to be dilutive in
fiscal year 2000 to CIT's earnings per share and accretive to CIT's earnings per
share in each of the fiscal years 2001 through 2004, in each case as compared to
CIT's earnings per share for each such year were CIT to remain as a stand-alone
company. The results of the pro forma analysis are based upon the assumptions
and projections supplied by the management of CIT, and are not necessarily
indicative of future operating results or financial position. The results of
this review were as follows:
Year Accretion/(Dilution)
---- -------------------
2000 ............................. (2.5)%
2001 ............................. 6.2%
2002 ............................. 8.8%
2003 ............................. 7.8%
2004 ............................. 6.7%
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ but describes, in summary form, the material
elements of the presentation made by DLJ to the CIT Board of Directors on August
4, 1999. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Each of the
analyses conducted by DLJ was carried out in order to provide a different
perspective on the Transaction and to add to the total mix of information
available. DLJ's conclusions also involved significant elements of judgment and
qualitative analysis. DLJ did not form a conclusion as to whether any individual
analysis, considered in isolation, supported or failed to support an opinion as
to fairness from a financial point of view. Rather, in reaching its conclusion,
DLJ considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses undertaken as a whole.
DLJ did not place particular reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole, supported its
determination. Accordingly, notwithstanding the separate factors summarized
above, DLJ has indicated to CIT that it believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion.
Engagement
For services rendered in connection with the Transaction and the delivery
of its opinion, CIT has agreed to pay DLJ a fee of US$4.0 million, which DLJ has
agreed to accept in the form of shares of CIT Common Stock. In addition, CIT has
agreed to reimburse DLJ, upon request by DLJ from time to time, for all
out-of-pocket expenses (including the reasonable fees and expenses of counsel)
incurred by DLJ in connection with its engagement thereunder, whether or not the
Transaction is consummated, and to indemnify DLJ and certain related persons
against certain liabilities in connection with the engagement, including
liabilities under U.S. federal securities laws. DLJ and CIT negotiated the terms
of the fee arrangement, and the CIT Board of Directors was aware of such
arrangement.
Other Relationships
In the ordinary course of business, DLJ and its affiliates may own or
actively trade the securities of CIT and Newcourt for their own accounts and for
the accounts of their customers and, accordingly, may at any time hold a long or
short position in CIT or Newcourt securities. DLJ has performed investment
banking and other services for CIT in the past, including mergers and
acquisitions advisory and debt underwriting, and has been compensated for such
services. In addition, affiliates of DLJ hold, on behalf of the investment
accounts of their customers, an interest in Newcourt representing approximately
18.0% of the outstanding Newcourt Common Shares. These affiliates have voting
and dispositive powers over a significant portion of such Newcourt Common
Shares.
63
Opinions of Newcourt's Financial Advisors
Goldman Sachs. At the August 3, 1999 meeting of the Newcourt Board of
Directors, Goldman Sachs presented the analyses it had performed in connection
with the preparation of its fairness opinion, and subsequently delivered a
written opinion dated August 5, 1999 that, as of such date and based upon and
subject to the considerations set forth in the opinion, the Exchange Ratio was
fair, from a financial point of view, to Newcourt Shareholders. Goldman Sachs
expressed no opinion as to the prices at which the CIT Common Stock or
Exchangeable Shares may trade if and when they are issued or as to the election
between CIT Common Stock and the Exchangeable Shares.
Goldman Sachs has confirmed its earlier opinion by delivery of a written
opinion dated the date of this Joint Proxy Statement. In connection with its
opinion dated the date of this Joint Proxy Statement, Goldman Sachs updated
certain of the analyses performed in connection with its earlier opinion and
reviewed the assumptions on which such analyses were based and the factors
considered in connection with its earlier opinion.
The full text of the opinion of Goldman Sachs dated the date of this Joint
Proxy Statement, which sets forth assumptions made, procedures followed and
matters considered, and the limitations on the review undertaken, in connection
with its opinion, is attached as Annex M. The summary of the opinion set forth
below is qualified in its entirety by reference to the full text of the opinion
and Newcourt Shareholders are urged to, and should, read the opinion in its
entirety. Goldman Sachs' advisory services and its opinion were provided for the
information and assistance of the Newcourt Board of Directors in connection with
its consideration of the Transaction and the opinion does not constitute a
recommendation as to how Newcourt Shareholders should vote with respect to the
Arrangement Resolution or as to the form of consideration to be elected by any
Newcourt Shareholder.
In connection with its opinion, Goldman Sachs reviewed, among other
things:
o the Reorganization Agreement;
o Annual Reports to Stockholders and Annual Reports on Form 10-K of
CIT for the five years ended December 31, 1998;
o Annual Reports to Shareholders of Newcourt for the five years ended
December 31, 1998;
o Annual Reports to Stockholders and Annual Reports on Form 10-K of
AT&T Capital Corporation for the four years ended December 31, 1997;
o interim reports to stockholders and Quarterly Reports on Form 10-Q
of AT&T Capital Corporation (through June 30, 1998) and CIT;
o interim reports to shareholders and Quarterly Reports on Form 6-K of
Newcourt;
o other communications from Newcourt and CIT to their respective
shareholders;
o internal financial analyses and forecasts for Newcourt, as revised,
on a stand-alone basis under alternative scenarios prepared by
management of Newcourt;
o internal financial analyses and forecasts for CIT prepared by the
management of CIT; and
o operating cost savings and funding benefits projected by the
managements of Newcourt and CIT to result from the Transaction.
Goldman Sachs also held discussions with members of the senior management
of CIT and Newcourt regarding the strategic rationale for, and the potential
benefits of, the Transaction and the past and current business operations,
financial condition and future prospects of their respective companies. In
addition, Goldman Sachs reviewed the reported price and trading activity for
Newcourt Common Shares and CIT Common Stock, compared certain financial, stock
market and fixed income market information for Newcourt and CIT with similar
information for other companies the securities of which are publicly traded,
reviewed the financial terms of recent business combinations in the finance
industry specifically and in other industries generally and performed such other
studies and analyses as Goldman Sachs considered appropriate.
64
Newcourt's financial forecasts, as revised, reflect modifications in
projected financial results from Newcourt management's projections previously
furnished to, and utilized by, Goldman Sachs in connection with Goldman Sachs'
prior opinion, dated March 7, 1999, relating to the March Agreement. In
rendering its opinion, Goldman Sachs took into account, with Newcourt
management's consent, the views of the management of Newcourt as to the risks
and uncertainties associated with operating Newcourt on a stand-alone basis.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed, with the consent of the Newcourt Board of Directors, that the
internal financial forecasts, including, without limitation, the operating cost
savings and funding benefits, prepared by the managements of Newcourt and CIT
were reasonably prepared on a basis reflecting the best currently available
judgments and estimates of Newcourt and CIT and that the operating cost savings
and funding benefits will be realized in the amounts and at the times
contemplated. Goldman Sachs is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto and has assumed, with the consent of the Newcourt Board of
Directors, that the allowances for each of Newcourt and CIT are in the aggregate
adequate to cover all such losses. In addition, Goldman Sachs did not review
individual credit files or make an independent evaluation or appraisal of the
assets and liabilities of Newcourt, CIT or any of their subsidiaries, and
Goldman Sachs was not furnished with any evaluation or appraisal. Goldman Sachs
also assumed that all material governmental, regulatory or other consents and
approvals necessary for the completion of the Transaction will be obtained
without any adverse effect on Newcourt, CIT or the combined company or on the
contemplated benefits of the Transaction.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Newcourt, having provided investment banking services to Newcourt
from time to time, including having acted as:
o financial advisor in connection with the acquisition of AT&T Capital
Corporation;
o co-manager of an offering of Subscription Rights for Newcourt Common
Shares in November 1997;
o lead or co-manager of offerings of selected debt securities and
medium-term notes of Newcourt and AT&T Capital Corporation with
varying maturities and coupons;
o dealer of Newcourt's commercial paper; and
o financial advisor in connection with, and having participated in
negotiations leading to, the March Agreement and the Reorganization
Agreement.
Goldman Sachs has also provided investment banking services to CIT from
time to time, including having acted as:
o joint lead manager in the initial public offering of CIT Common
Stock in November 1997; and
o lead or co-manager of offerings of selected senior debt securities
and medium-term notes with varying maturities and coupons.
In addition, Goldman Sachs may provide investment banking services to
CIT in the future. Goldman Sachs provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of Newcourt or CIT for its own account and for the accounts of its
customers.
Pursuant to a letter agreement dated November 9, 1998, as subsequently
amended on November 9, 1998 March 7, 1999 and July 6, 1999 (collectively, the
"Newcourt Engagement Letter"), Newcourt engaged Goldman Sachs to act as
financial advisor in connection with the Transaction. Pursuant to the terms of
the Newcourt Engagement Letter, Newcourt has agreed to pay Goldman Sachs
US$585,000 in financial advisory fees plus, upon successful completion of the
Transaction, a success fee equal to 0.2925 of 1% of the value obtained for
Newcourt's equity. The "value obtained" will be determined in accordance with a
formula set forth in the Newcourt Engagement Letter and will be based upon,
among other things, the average daily closing price of the Newcourt Common
Shares over the 20 trading days immediately prior to the close of the
Transaction. The total financial advisory fees and success fees payable to
Goldman Sachs will not be more than US$17.55 million, nor less than US$8.78
million. In addition to the financial advisory fees and success fees, and in
consideration of
65
additional advisory services performed by Goldman Sachs in connection with the
Reorganization Agreement, Newcourt has agreed to pay Goldman Sachs an additional
fee, based on the value obtained for Newcourt's equity, ranging from US$2
million to US$5.5 million. Newcourt has also agreed to reimburse Goldman Sachs
for certain reasonable out-of-pocket expenses incurred in connection with its
services and to indemnify Goldman Sachs and each of its affiliates, partners,
directors, agents, employees and controlling persons against certain liabilities
and expenses, including liabilities under the United States federal securities
laws, arising in connection with its engagement.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth below, without considering
the analyses as a whole, could create an incomplete view of the process
underlying Goldman Sachs' opinion. In arriving at its fairness determinations,
Goldman Sachs considered the results of each of these analyses in their
totality. No company or transaction used in the analyses below as a comparison
is directly comparable to Newcourt, CIT or the Transaction. The analyses were
prepared solely for the purpose of providing Goldman Sachs' opinion to the
Newcourt Board of Directors as to the fairness from a financial point of view of
the Exchange Ratio and do not purport to be appraisals or necessarily reflect
the prices at which businesses or securities actually may be sold. Analyses
based upon forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by those analyses. Because these analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Newcourt, CIT, Goldman Sachs or any other
person assumes responsibility if future results are materially different from
those forecast. As described above, Goldman Sachs' opinion to the Newcourt Board
of Directors was one of many factors taken into consideration by the Newcourt
Board of Directors in making its determination to approve the Transaction. The
summary below is not a complete description of the analysis performed by Goldman
Sachs. You should read the entire opinion of Goldman Sachs attached as Annex M.
CIBC World Markets. At a meeting of the Newcourt Board of Directors on
August 3, 1999 held to evaluate the proposed Transaction, CIBC World Markets
presented the financial analyses that it had performed in connection with its
evaluation of the Exchange Ratio and delivered a written opinion, dated August
5, 1999, the date of the execution of the Reorganization Agreement, to the
effect that, as of August 5, 1999 and based upon and subject to the matters
stated in the opinion, the Exchange Ratio was fair, from a financial point of
view, to Newcourt Shareholders. CIBC World Markets has confirmed its earlier
opinion by delivery of a written opinion dated the date of this Joint Proxy
Statement. In connection with its opinion dated the date of this Joint Proxy
Statement, CIBC World Markets updated certain of the analyses performed in
connection with its earlier opinion and reviewed the assumptions on which such
analyses were based and the factors considered in connection with its earlier
opinion.
The full text of CIBC World Markets' written opinion dated the date of
this Joint Proxy Statement, which describes the assumptions made, procedures
followed, matters considered and limitations on the review undertaken, is
attached as Annex N to this Joint Proxy Statement. CIBC World Markets' opinion
is addressed to and was provided for the information of and assistance to the
Newcourt Board of Directors and relates only to the fairness of the Exchange
Ratio from a financial point of view. CIBC World Markets' opinion does not
address any other aspect of the proposed Transaction or any related transaction
and does not constitute a recommendation to any Newcourt Shareholder as to how
such Newcourt Shareholder should vote in respect of the Transaction, the form of
consideration to be elected by such Newcourt Shareholder in the Transaction or
any other matter relating to the Transaction. The description of CIBC World
Markets' opinion included in this Joint Proxy Statement is qualified in its
entirety by the full text of CIBC World Markets' opinion attached as Annex N.
Newcourt Shareholders are urged to read the opinion carefully in its entirety.
CIBC World Markets, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. CIBC World
Markets provides a full range of financial advisory and securities services and,
in the course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities of Newcourt or
CIT for its own account and for the accounts of customers.
66
CIBC World Markets is generally familiar with Newcourt, having acted as
its financial advisor in connection with the Transaction and having participated
in discussions leading to the Reorganization Agreement. CIBC World Markets also
has provided investment banking services to Newcourt from time to time unrelated
to the Transaction, including having acted as financial advisor and lead
underwriter in August 1997 regarding Newcourt's acquisition of Commcorp
Financial Services Inc. and the related C$279.5 million equity offering as well
as Newcourt's November 1997 C$1.771 billion equity offering related to the
acquisition of AT&T Capital Corporation in January 1998. CIBC, the parent
company to CIBC World Markets, provides a range of credit-related products and
services including employee loans to Newcourt on an on-going basis. CIBC World
Markets has acted as lead arranger for Newcourt of a C$1.0 billion revolving
credit facility and co-arranger of two revolving credit facilities totaling
US$2.25 billion over the past two years. CIBC is also the lead arranger of C$2.4
billion of asset securitization vehicles in support of Newcourt's on-going
origination activities. In addition to the corporate and investment banking
services rendered, CIBC holds a direct interest in Newcourt representing
approximately 9.47% of the outstanding Newcourt Common Shares and has exercised
its right, pursuant to a shareholders' agreement with other institutional
shareholders and members of management, to nominate two representatives for
election to the Newcourt Board of Directors. Pursuant to the Voting Agreement,
CIBC will have the right to nominate one member to the Board of Directors of the
combined company for so long as CIBC owns at least 3% of the outstanding shares
of voting stock of CIT. CIBC has also participated in selected CIT credit
facilities with varying terms and maturities.
In connection with its opinion, CIBC World Markets reviewed, among other
things:
o the Reorganization Agreement;
o annual reports to stockholders and annual reports on Form 10-K of
CIT for the five years ended December 31, 1998;
o annual reports to shareholders of Newcourt for the five years ended
December 31, 1998;
o the annual report on Form 40-F of Newcourt for the two years ended
December 31, 1998 and 1997;
o annual reports to stockholders and annual reports on Form 10-K of
AT&T Capital Corporation for the four years ended December 31, 1997;
o interim reports to shareholders and quarterly reports on Form 6-K
for Newcourt;
o interim reports to stockholders and quarterly reports on Form 10-Q
for AT&T Capital Corporation (through June 30, 1998);
o interim reports to stockholders and quarterly reports on Form 10-Q
for CIT;
o other communications from Newcourt and CIT to their respective
stockholders;
o internal financial analyses and forecasts for Newcourt, as revised,
on a stand-alone basis under alternative scenarios prepared by
management of Newcourt;
o internal financial analyses and forecasts for CIT prepared by the
management of CIT; and
o operating cost savings and funding benefits projected by the
managements of Newcourt and CIT to result from the Transaction.
CIBC World Markets also held discussions with members of the senior
management of Newcourt and CIT regarding the strategic rationale for, and the
potential benefits of, the Transaction and the past and current business
operations, regulatory relationships, financial condition, and future prospects
of their respective companies. In addition, CIBC World Markets reviewed the
reported price and trading activity for the Newcourt Common Shares and CIT
Common Stock, compared financial, stock market and fixed income market
information for Newcourt and CIT with similar information for other companies
the securities of which are publicly traded and reviewed the financial terms of
recent business combinations in the finance industry specifically and in other
industries generally and performed other studies and analyses as CIBC World
Markets considered appropriate.
In rendering its opinion, CIBC World Markets relied upon and assumed
without independent verification, the accuracy and completeness of all of the
financial and other information provided to or discussed with it. In that
regard, CIBC World Markets assumed, with Newcourt's consent, that the financial
forecasts, including the synergies expected to be achieved as a result of the
Transaction, had been reasonably prepared on a basis reflecting the best
currently available judgments, information and estimates of Newcourt and CIT and
that the
67
forecasts and synergies will be realized in the amounts and at the times
contemplated. Newcourt's financial forecasts, as revised, reflect modifications
in projected financial results from Newcourt management projections furnished
to, and utilized by, CIBC World Markets in connection with its prior opinion,
dated March 7, 1999, in connection with the March Agreement.
CIBC World Markets is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances for losses
and assumed, with Newcourt's consent, that the allowances for each of Newcourt
and CIT are in the aggregate adequate to cover all losses. In addition, CIBC
World Markets was not requested to, and it did not, review individual credit
files or make an independent evaluation or appraisal of the assets or
liabilities of Newcourt or CIT or any of their subsidiaries, nor was CIBC World
Markets furnished with any evaluation or appraisal. CIBC World Markets was not
requested to, and did not, prepare a formal valuation of Newcourt or CIT within
the meaning of applicable Canadian securities regulatory policy. CIBC World
Markets' opinion was necessarily based upon information available to, and
financial, economic, market and other conditions as they existed and could be
evaluated by, CIBC World Markets on the date of its opinion. CIBC World Markets
did not express an opinion as to the underlying valuation, future performance or
long-term viability of Newcourt or CIT or the prices at which the CIT Common
Stock or the Exchangeable Shares may trade at any time in the future. In
addition, CIBC World Markets' opinion did not address the relative merits of the
Transaction as compared to any alternative business transactions that might be
available to Newcourt.
CIBC World Markets assumed, with Newcourt's consent, that the Transaction
would be accounted for as a purchase under U.S. GAAP and that obtaining any
necessary governmental, regulatory or other consents and approvals necessary for
the consummation of the Transaction or otherwise would not have a material
adverse effect on Newcourt, CIT or the combined company or in the contemplated
benefits of the Transaction.
In preparing its opinion to the Newcourt Board of Directors, CIBC World
Markets performed a variety of financial and comparative analyses, including
those described below and performed by CIBC World Markets in connection with its
opinion dated August 5, 1999. The summary of CIBC World Markets analyses below
is not a complete description of the analyses underlying CIBC World Markets'
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
summary description. In arriving at its opinion, CIBC World Markets made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, CIBC World Markets believes that its
analyses and factors must be considered as a whole and that selecting portions
of its analyses and factors or focusing on information presented in tabular
format, without considering all analyses and factors or the narrative
description of the analyses, could create a misleading or incomplete view of the
process underlying its analyses and opinion.
In its analyses and in preparing its opinion, CIBC World Markets made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters as they existed and could be evaluated by
CIBC World Markets as of the date of its opinion, many of which are beyond the
control of CIBC World Markets or any other party to the Transaction. No company,
transaction or business used in CIBC World Markets' analyses as a comparison is
identical to Newcourt or CIT or the proposed Transaction, nor is an evaluation
of the results of the analyses entirely mathematical; rather, the analyses
involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in CIBC World Markets' analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by its analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, CIBC World Markets' analyses and
estimates are inherently subject to substantial uncertainty.
CIBC World Markets' opinion and financial analyses were only one of many
factors considered by the Newcourt Board of Directors in its evaluation of the
proposed Transaction and should not be viewed as determinative of the views of
the Newcourt Board of Directors or management with respect to the Transaction or
the Exchange Ratio.
68
Pursuant to the terms of CIBC World Markets' engagement, Newcourt has
agreed to pay CIBC World Markets US$415,000 in financial advisory fees, plus
upon successful completion of the Transaction, a success fee equal to 0.2075 of
1% of the value obtained for Newcourt's equity. The total financial advisory
fees and success fee payable to CIBC World Markets will not be more than
US$12.45 million, nor less than US$6.22 million. In addition, Newcourt has
agreed to reimburse CIBC World Markets for reasonable out-of-pocket expenses
incurred in connection with its services and to indemnify and hold harmless CIBC
World Markets and related parties, to the full extent lawful, against
liabilities and expenses, including liabilities under the federal securities
laws of the United States, arising out of its engagement.
Financial Analyses. The following is a summary of the material financial
analyses jointly presented by Goldman Sachs and CIBC World Markets to the
Newcourt Board of Directors on August 3, 1999 in connection with their
respective opinions dated August 5, 1999. The financial analyses summarized
below include information presented in tabular format. In order to fully
understand the financial analyses of Goldman Sachs and CIBC World Markets, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses. Considering the
data set forth in the tables below without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses of Goldman Sachs and CIBC World Markets.
Historical Exchange Ratio Analysis. Goldman Sachs and CIBC World Markets
compared the average daily closing share prices for Newcourt Common Shares and
CIT Common Stock at August 2, 1999 and for the periods set forth below preceding
August 2, 1999. This analysis indicated the following implied average historical
exchange ratios:
Implied
Average Closing Share Price of Average
-------------------------------------- Exchange
Period Newcourt CIT Ratio
------ Common Shares Common Stock --------
------------- -------------
August 2, 1999 ....... US$15.75 US$26.63 0.59x
5 days ............... 15.54 27.64 0.56x
10 days .............. 14.86 27.78 0.53x
1 month .............. 14.46 28.33 0.51x
Premium and Multiple Analysis. Based upon the closing share prices of
Newcourt Common Shares and CIT Common Stock on August 2, 1999, the Exchange
Ratio in the Transaction and estimates provided by the management of Newcourt,
Goldman Sachs and CIBC World Markets analyzed (1) the premium implied by the
Transaction to Newcourt's closing share price as of August 2, 1999 and owned and
managed receivables and (2) the multiple implied by the Transaction of estimated
1999 and 2000 earnings per share, estimated book value per share, and estimated
tangible book value per share. This analysis indicated the following:
Premium Analysis
Percentage
----------
Premium to Market Price
Newcourt Common Share price on August 2, 1999 (US$15.75) ........ 18.3%
Premium to Receivables
Owned receivables ........................................... 7.3%
Owned and managed receivables ............................... 3.8%
Multiple Analysis
Multiple
--------
Multiple of earnings per share
Estimated calendar year 1999 ................................. 12.2x
Estimated calendar year 2000 ................................. 13.3x
Multiple of book value per share ................................. 0.9x
Multiple of tangible book value per share ........................ 1.5x
69
Contribution Analysis. Goldman Sachs and CIBC World Markets analyzed the
relative contributions of Newcourt and CIT to the combined company based upon
estimated financial information provided by the managements of Newcourt and CIT.
This analysis indicated the following approximate contributions for each of
Newcourt and CIT:
Newcourt CIT
-------- ----
Market Capitalization as of August 2, 1999 ......... 35% 65%
Common Equity
Stated .......................................... 52% 48%
Tangible ........................................ 39 61
Total assets ....................................... 39% 61%
Receivables
Owned ........................................... 36% 64%
Owned and managed ............................... 48 52
Net Income
Calendar year 1998 .............................. 37% 63%
Estimated calendar year 1999 .................... 37 63
Estimated calendar year 2000 .................... 32 68
Pro forma ownership at 0.70 Exchange Ratio ......... 39% 61%
Comparable Companies Analysis. Goldman Sachs and CIBC World Markets
compared financial and operating information for Newcourt with corresponding
information for the following commercial finance companies:
o The Finova Group Inc.
o Heller Financial, Inc.
o GATX Corporation
o XTRA Corporation
o First Sierra Financial, Inc.
o Financial Federal Corporation
o UniCapital Corporation
o DVI, Inc.
Goldman Sachs and CIBC World Markets compared equity values as multiples
and, where appropriate, ratios of the operational measures set forth in the
table below. The table distinguishes between selected companies with market
capitalizations of $1 billion or greater and selected companies with market
capitalizations of less than $1 billion. Financial data for Newcourt and CIT
were based on estimates of the managements of Newcourt and CIT, respectively.
Financial data for the selected companies were based on I/B/E/S estimates,
except that where I/B/E/S price to earnings estimates were unavailable for
calender year 2000, such price to earnings estimates were based on the long-term
growth rate applied to 1999 estimates. All multiples and ratios of Newcourt and
CIT were based upon closing share prices of Newcourt Common Shares and CIT
Common Stock on August 2, 1999.
Median of Median of
Selected Selected
Companies Companies
($1 billion (less than
or greater $1 billion
market market
Operational Measure Newcourt CIT capitalization) capitalization)
------------------- -------- --- --------------- --------------
Estimated calendar year 1999 price to earnings ...... 10.3x 11.3x 12.5x 12.3x
Estimated calendar year 2000 price to earnings ...... 11.3x 10.0x 11.3x 9.9x
I/B/E/S long-term growth ............................ 40.0% 13.0% 16.0% 19.0%
Estimated calendar year 1999 price to earnings to
long-term growth ................................ 0.3x 0.9x 0.8x 0.8x
Price to book value ................................. 0.8x 1.6x 1.8x 1.9x
Price to tangible book value ........................ 1.3x 1.6x 2.2x 1.9x
Premium to owned and managed receivables ............ 2.2% 5.7% 9.8% 25.6%
70
Selected Transactions Analysis. Based upon publicly available information,
Goldman Sachs and CIBC World Markets analyzed, among other things, the
consideration paid or proposed to be paid in 11 completed and two pending
selected merger and acquisition transactions in the commercial finance industry
as a premium to owned and managed receivables and as a multiple of latest 12
months net income and common equity.
This analysis indicated that the mean consideration proposed to be paid
represented:
o a premium to owned and managed receivables of approximately 20.8%;
o a multiple of latest 12 months net income of 20.4x; and
o a multiple of common equity of 2.3x.
In addition, the analysis indicated that the median of the consideration
paid represented:
o a premium to owned and managed receivables of approximately 14%;
o a multiple of latest 12 months net income of 16.6x; and
o a multiple of common equity of 2.2x.
Pro Forma Transaction Analysis. Based on estimates provided by the
managements of Newcourt and CIT, Goldman Sachs and CIBC World Markets compared
the estimated stand-alone earnings per share for each of Newcourt and CIT for
calendar years 1999 through 2001 to the potential pro forma effect of the
Transaction on the earnings per share of the combined company. Based on the
Exchange Ratio, this analysis indicated that the Transaction would be dilutive
in 1999 and 2000, and accretive in 2001, to CIT's earnings per share, and would
be accretive in 1999 through 2001 to Newcourt's earnings per share.
Discounted Cash Flow Analysis.
Pro Forma Basis. Using Newcourt management's estimates and the
ranges of terminal value multiples and discount rates described below,
Goldman Sachs and CIBC World Markets estimated the present value of the
free cash flows that Newcourt could produce on a pro forma basis for the
period 1999 through 2003 assuming consummation of the Transaction and the
realization of funding and cost synergies. Ranges of terminal values were
estimated using multiples of 2003 earnings per share ranging from 7.0x to
13.0x. The free cash flows and estimated terminal values were then
discounted to present value using discount rates ranging from 13.0% to
17.0%. This analysis indicated an equity reference range for Newcourt on a
pro forma basis of approximately US$12.00 to US$24.00 per share.
Newcourt Earnings Contribution to Combined Company. Using Newcourt
management's estimates and the ranges of terminal value multiples and
discount rates described below, Goldman Sachs and CIBC World Markets then
estimated the present value of Newcourt's estimated earnings contribution
to the combined company for the period 1999 through 2003 assuming no
funding or cost synergies. Ranges of terminal values were estimated using
multiples of 2003 earnings per share ranging from 7.0x to 13.0x. The free
cash flows and estimated terminal values were then discounted to present
value using discount rates ranging from 13.0% to 35.0%. This analysis
indicated an equity reference range for the estimated earnings
contribution of Newcourt of approximately US$7.00 to US$26.00.
Other Factors. In addition to the financial analyses summarized above,
Goldman Sachs and CIBC World Markets considered and jointly discussed with the
Newcourt Board of Directors a number of possible issues that Newcourt would
encounter if the Transaction were not consummated and Newcourt continued on a
stand-alone basis. These issues included the potential costs and feasibility of
meeting Newcourt's short-term and medium-term funding requirements; its ability
to access public and private equity markets; difficulties that might be involved
in a divestiture program for some of its businesses, if such a divestiture
program were initiated; external factors such as the potential for litigation;
and the challenges associated with implementing a complex business plan.
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Interests of Certain Persons in the Transaction
Certain members of Newcourt's management and the Newcourt Board of
Directors may be deemed to have certain interests in the Transaction that are in
addition to their interests as Newcourt Shareholders generally. The Newcourt
Board of Directors was aware of these interests and considered them, among other
matters, in approving the Reorganization Agreement and the transactions
contemplated thereby and in reaching the conclusion to recommend that Newcourt
Shareholders vote in favor of the Arrangement Resolution.
Also, on March 7, 1999, concurrently with the approval of the March
Agreement, the CIT Board of Directors and, after discussion by the CIT Board of
Directors, the CIT Compensation Committee granted an aggregate of approximately
1.6 million options to acquire shares of CIT Common Stock to various CIT
officers, including each of the CIT executive officers.
Employment Agreements with Certain Officers of Newcourt
In connection with the Reorganization Agreement, each of Messrs. Bradley
Nullmeyer, David McKerroll and David Sharpless (together, the "Newcourt
Executives") entered into three-year employment agreements with CIT, effective
as of the Effective Time. During the term of the employment agreements, each
Newcourt Executive will receive an annual base salary as set forth in their
respective employment agreements, and shall participate in the bonus and
incentive programs appropriate to such executive's position. Each employment
agreement further provides that each Newcourt Executive shall receive total
annual compensation of not less than specified minimum amounts for the duration
of the contracts.
Each Newcourt Executive will be entitled to certain payments and benefits
if the executive's employment is terminated during the term of the agreement,
either by CIT without "cause" or by the executive for "good reason" (as each
such term is defined in the employment agreements). These payments and benefits
include a specified cash payment, all previously earned and accrued entitlements
and benefits from CIT, the continuation of welfare benefits for two years
following termination, outplacement services, awards due under any long-term
equity compensation plans and the vesting of certain unvested stock options.
Each Newcourt Executive will also be entitled to receive an additional payment
of the amount necessary to make such executive whole in the event that an excess
parachute excise tax is imposed on any payments to the executive from CIT.
Separation Agreements and General Releases with Certain Officers of Newcourt
In connection with the Reorganization Agreement, each of Messrs. Steven
Hudson, Paul Currie, Scott Moore, Borden Rosiak and David Banks (the "Separated
Newcourt Executives") entered into separation agreements with Newcourt. The
Separated Newcourt Executives' (other than David Banks') service to Newcourt
will cease on or prior to the Effective Time. Prior to the separation date, the
separation agreements will not otherwise have any effect on the terms of the
ongoing employment with Newcourt of the Separated Newcourt Executives.
On the separation date, each Separated Newcourt Executive will be entitled
to certain payments and benefits under their respective separation agreements.
These payments and benefits include certain cash payments, continuation of
welfare benefits, certain additional benefits set forth in each separation
agreement, outplacement counseling services, vesting of all unvested stock
options and stock awards and reimbursement of all expenses, obligations and
liabilities incurred prior to the separation date in accordance with Newcourt's
policies. Each Separated Newcourt Executive will also be entitled to receive an
additional payment of the amount necessary to make such executive whole in the
event that an excess parachute excise tax is imposed on any payments to the
executive. Pursuant to their agreements, the Separated Newcourt Executives will
receive in the aggregate severance payments of US$16,644,000. Newcourt has also
agreed to release each Separated Newcourt Executive from certain debts,
liabilities, obligations, claims, complaints, demands, judgments, actions or
causes of action with respect to or arising out of, or in connection with, any
act or omission by the separated executive. In addition, each Separated Newcourt
Executive will be entitled to receive a pro rated bonus from Newcourt for 1999.
In exchange for the foregoing benefits, each Separated Newcourt Executive
has agreed not to make disparaging statements regarding Newcourt or its
executives, officers or directors; to maintain the confidentiality of any
information acquired during the course of employment; not to compete with any
businesses in the United
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States or Canada conducted by Newcourt or its subsidiaries as of the separation
date for a specified period following the separation date; not to solicit
individuals employed by Newcourt, its subsidiaries or affiliates, or any
entities doing business with Newcourt as of the separation date for a specified
period following the separation date; to return all property of Newcourt; and to
release Newcourt and its affiliates, directors, officers, executives and agents
of and from certain debts, liabilities, obligations, claims, complaints,
demands, judgments, actions or causes of action. In addition, as described
below, the Separated Newcourt Executives forfeited certain stock options
previously granted to such executives.
Stock Options
On March 7, 1999, the Newcourt Board of Directors authorized a grant of
750,000 options to the following persons: Mr. Hudson, 195,000 options; Mr.
Nullmeyer, 165,000 options; Mr. McKerroll, 125,000 options; Mr. Jauernig,
100,000 options; Mr. Currie, 55,000 options; Mr. Moore, 55,000 options; and Mr.
Sharpless, 55,000 options. On July 28, 1999, the Newcourt Board of Directors
canceled the 405,000 options previously allocated to Messrs. Hudson, Jauernig,
Currie and Moore and authorized an additional 405,000 options which were
allocated as follows: 45,000 options to Mr. Sharpless; 85,000 options to Mr.
McKerroll; 75,000 options to Mr. Nullmeyer; and the remaining 200,000 options to
be allocated at the discretion of, and as determined by, Newcourt's Chairman.
These options (along with the other options to acquire Newcourt Common Shares
held by the Newcourt Executives) will be replaced with options to acquire CIT
Common Stock pursuant to the CIT Transition Option Plan.
Options to acquire Newcourt Common Shares granted to Messrs. Nullmeyer,
McKerroll and Sharpless prior to March 1, 1999 will vest upon the completion of
the Transaction. Options held by Messrs. Hudson, Currie, Moore, Jauernig, Rosiak
and Banks will vest upon the earlier of their termination of employment or the
consummation of the Transaction. All other unvested Newcourt options remain
subject to their existing terms and will be converted to Transition Options
under the CIT Transition Option Plan.
Indemnification of Newcourt Officers and Directors
CIT has agreed to indemnify and hold harmless from liability for acts or
omissions occurring prior to the Effective Time the present and former officers
and directors of Newcourt and its subsidiaries. See "- The Reorganization
Agreement - Covenants Regarding Indemnification" on page 77.
Releases
Newcourt Release
Newcourt and certain of its stockholders, officers and directors, have
released and discharged CIT and Newcourt and their respective affiliates,
employees, officers, directors and others from all actions, causes of actions,
suits, debts, claims, liabilities, obligations, promises, covenants, agreements,
contracts and judgments of any kind or nature relating to financial results and
public disclosures of Newcourt, the March Agreement and any oral or written
statements relating to the foregoing, other than, in the case of individual
releasors, claims for indemnification or reimbursement from Newcourt and CIT .
CIT Release
CIT and certain of its stockholders, officers and directors have released
and discharged Newcourt and its respective affiliates, employees, officers,
directors and others from all actions, causes of actions, suits, debts, claims,
liabilities, obligations, promises, covenants, agreements, contracts and
judgments of any kind or nature relating to financial results and public
disclosures of Newcourt (except, in the case of CIT's release of Newcourt, to
the extent covered by any representation or warranty in the Reorganization
Agreement), the March Agreement and any oral or written statements relating to
the foregoing.
Newcourt Employee Releases
Messrs. Hudson, Sharpless, McKerroll, Nullmeyer and Moore, each of whom is
an officer of Newcourt, executed mutual releases with CIT with respect to any
obligation arising from employment agreements entered into between CIT and each
of the individual releasors in conjunction with the March Agreement.
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The Reorganization Agreement
The following is a summary of the material provisions of the
Reorganization Agreement, a copy of which is attached as Annex E to this Joint
Proxy Statement. The summary is not complete and may not contain all the
information that is important to you. You should read the Reorganization
Agreement before you decide how to vote.
General
The Reorganization Agreement provides for the combination of CIT and
Newcourt. Each Newcourt Shareholder (other than a Dissenting Shareholder) who is
an Eligible Electing Holder may elect to receive 0.70 of a share of CIT Common
Stock or 0.70 of an Exchangeable Share (and applicable Ancillary Rights) for
each Newcourt Common Share held, in each case subject to potential downward
adjustment pursuant to the Reorganization Agreement. Each Newcourt Shareholder
(other than a Dissenting Shareholder) who is not an Eligible Electing Holder or
who is an Eligible Electing Holder but does not make a valid election will,
subject to potential downward adjustment, receive 0.70 of a share of CIT Common
Stock for each Newcourt Common Share held. Newcourt Shareholders who are not
Eligible Electing Holders cannot elect to receive Exchangeable Shares.
Exchange Ratio
The Exchange Ratio is 0.70 but is subject to downward adjustment to
reflect any reduction in the aggregate consideration to be paid by CIT in the
Transaction in accordance with the terms of the Reorganization Agreement. Such
aggregate consideration will be reduced on a dollar-for-dollar basis to the
extent that Newcourt's Adjusted Shareholders' Equity declines by more than $20
million but by less than $120 million from Newcourt's June 30th Equity. Such
aggregate consideration will be further reduced by $1.50 for each dollar by
which Newcourt's Adjusted Shareholders' Equity declines by more than $120
million from Newcourt's June 30th Equity. The Reorganization Agreement does not
provide for any upward adjustment in the Exchange Ratio. The calculation of the
Exchange Ratio is set forth in detail in the Reorganization Agreement, which is
attached as Annex E to this Joint Proxy Statement.
CIT will not issue fractional shares in the Transaction. Instead, each
Newcourt Shareholder otherwise entitled to receive such a fractional share of
CIT Common Stock or a fractional Exchangeable Share will receive a cash payment,
without interest, equal to such holder's pro rata portion of the net proceeds
received upon the sale of whole shares representing the aggregate of all such
fractional share interests in CIT Common Stock or fractional Exchangeable
Shares, as the case may be, that all such Newcourt Shareholders would otherwise
be entitled to receive.
Covenants
Each of CIT and Newcourt have agreed that until the earlier of the
termination of the Reorganization Agreement or the Effective Time, except as
expressly contemplated by the Reorganization Agreement or with the prior written
consent of the other party, each of CIT and Newcourt and their respective
subsidiaries:
(i) will carry on its business in the ordinary course
consistent with past practice, and will use reasonable efforts to
maintain and preserve intact its business organization and advantageous
business relationships and retain the services of its officers and key
employees;
(ii) will not declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock, other than
quarterly dividends not in excess of (i) in the case of Newcourt,
C$0.06 or US$0.04 per Newcourt Common Share and (ii) in the case of
CIT, US$0.10 per share of CIT Common Stock;
(iii) will not (a) repurchase, redeem or otherwise acquire any
shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, (b) split, combine or
reclassify any shares of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital
74
stock, or (c) issue, deliver, allocate, sell or pledge, or authorize
or propose the issuance, delivery, allocation, sale or pledge of,
any shares of its capital stock or any stock appreciation rights or
securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, except in the case
of (b) and (c) for (x) the issuance of common shares upon the
exercise or fulfillment of rights or options issued or existing
pursuant to employee benefit plans, programs or arrangements, all to
the extent outstanding and in existence on the date of the
Reorganization Agreement and in accordance with their then present
terms, (y) in the case of Newcourt, the distribution or sale of
outstanding Newcourt Common Shares currently held for Newcourt's
employees pursuant to Newcourt's employee share loan program and (z)
in the case of CIT, the grant of additional stock options to its
directors and employees, in the ordinary course consistent with past
practice as to both the timing of such grants and the amount of such
grants, pursuant to CIT's stock option and stock incentive plans for
employees and directors;
(iv) will not amend its charter, by-laws or other similar
governing documents;
(v) will not make any capital expenditures in excess of the
US$50 million budgeted for calendar year 1999;
(vi) will not enter into any new line of business or, other
than in the ordinary course of its business, enter into any material
transaction, provided, however, that these negative covenants apply to
CIT and its subsidiaries only to the extent that any of the actions
contemplated would, or would reasonably be expected to, delay or
inhibit the receipt of any regulatory approvals required for the
consummation of the Transaction;
(vii) subject to certain exceptions, will not acquire or agree
to acquire, by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire any assets, other than (a) in connection
with foreclosures, settlements in lieu of foreclosure or troubled loan
or debt restructurings in the ordinary course of business consistent
with past practices and (b) partnerships, joint ventures, virtual joint
ventures, investment funds and other similar arrangements as part of
ordinary course business activities, provided, however, that these
negative covenants apply to CIT and its subsidiaries only to the extent
that any of the actions contemplated would, or would reasonably be
expected to, delay or inhibit the receipt of any regulatory approvals
required for the consummation of the Transaction;
(viii) will not take any action that is intended or may
reasonably be expected to result in any of its representations and
warranties set forth in the Reorganization Agreement being or becoming
untrue, or in any of the conditions set forth in Article VIII of the
Reorganization Agreement not being satisfied;
(ix) will not change its methods of accounting in effect at
December 31, 1998, except as required by changes in (x) Canadian GAAP
or U.S. GAAP as concurred to by Newcourt's independent auditors, in the
case of Newcourt or (y) U.S. GAAP as concurred to by CIT's independent
auditors, in the case of CIT;
(x) will not, solely in the case of Newcourt and its
subsidiaries and except as disclosed or in the ordinary course of
business consistent with past practice or as required by applicable
law, (a) adopt, amend, or terminate any employee benefit plan or any
agreement, arrangement, plan or policy or any collective bargaining,
bonus, profit sharing, compensation, stock option, pension, retirement,
employee stock ownership, deferred compensation, employment
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees or
(b) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any
employee benefit plan or agreement as in effect as of the date of the
Reorganization Agreement, except for (a) Newcourt paying 1998 bonuses
which have been earned and accrued on its books and (b) Newcourt paying
aggregate cash compensation for fiscal year 1999 (exclusive of the
aggregate amount of any severance payments and any retention or stay
bonuses paid to any of such officers) to the top nine members of
Newcourt's senior management not in excess of the aggregate amount of
cash compensation paid to those persons for fiscal year 1998;
(xi) will not, solely in the case of Newcourt and its
subsidiaries, other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or
otherwise dispose of, or
75
agree to sell, lease, encumber, assign or otherwise dispose of, any
of its material assets, properties or other rights or agreements,
except that Newcourt and its subsidiaries may not sell or otherwise
dispose of any line of business, any material portion of any line of
business or any of Newcourt's remaining investment in KMC Telecom;
(xii) will not, other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any unrelated individual,
corporation or other entity;
(xiii) will not, other than in the ordinary course of business,
create, renew, amend or terminate or give notice of a proposed renewal,
amendment or termination of, any material contract, agreement or lease
(as lessee) for goods, services or office space to which their
respective properties is bound, other than any amendment or renewal
which does not materially reduce the benefits of any such contract,
agreement or lease;
(xiv) will not, solely in the case of Newcourt and its
subsidiaries, enter into any new joint ventures without the consent of
CIT, which shall not be unreasonably withheld, provided that the
withholding of such consent would be reasonable if the entering into
such joint venture would, in the good faith reasonable judgment of CIT,
reasonably be expected to jeopardize or delay the receipt of (or result
in the imposition of any conditions in connection with) any Primary
Approval;
(xv) will not, solely in the case of Newcourt and its
subsidiaries, engage in any interest rate risk management or other
derivative transactions or arrangements other than for hedging
purposes; and
(xvi) will not, solely in the case of Newcourt and its
subsidiaries, enter into any financing program agreements or
arrangements containing any exclusivity or non-competition provisions
without the consent of CIT, which consent shall not be unreasonably
withheld.
In addition, Newcourt agreed that it will take such necessary actions
so that, as of the end of each month between the date of the Reorganization
Agreement and the Effective Time, Newcourt's allowance for credit losses
reflected on its consolidated balance sheet for such month equals or exceeds
1.7% of the aggregate net book value of Newcourt's "Finance Assets Held for
Investment" and "Equipment Under Operating Lease" reflected on its consolidated
balance sheet for such month.
Covenants Regarding Regulatory Matters
CIT agreed to use its reasonable best efforts to prepare and file with
the SEC a Registration Statement and to take all actions necessary to maintain
such Registration Statement current and effective for as long as required to
enable the holders of Exchangeable Shares to sell the shares of CIT Common Stock
received upon exercise of their exchange rights. CIT has also agreed to use its
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the Transaction. Each of
Newcourt and CIT has also agreed to use all reasonable efforts to obtain all
orders required from the applicable Canadian securities authorities to permit
the issuance and first resale of (i) the Exchangeable Shares and the shares of
CIT Common Stock to be issued pursuant to the Transaction, (ii) the shares of
CIT Common Stock to be issued upon exchange of the Exchangeable Shares from time
to time and (iii) the shares of CIT Common Stock to be issued from time to time
upon the exercise of the Replacement Options.
Both CIT and Newcourt agreed to cooperate with each other and use their
reasonable best efforts to prepare and file all necessary documentation, to make
all applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable (i) to
complete the Transaction, (ii) for Newcourt and CIT and their subsidiaries to
conduct their respective businesses after the date of Closing in substantially
the same manner as conducted currently, or (iii) which are required in order to
maintain in effect any governmental authorizations, licenses or approvals
pursuant to which either Newcourt or CIT or their subsidiaries carries on its
business as currently conducted. In addition, each of Newcourt and CIT agreed to
use its reasonable best efforts (i) to take or cause to be taken all actions
necessary, proper or advisable to comply promptly with all legal arrangements
which may be imposed on such party or its subsidiaries with respect to the
Arrangement, (ii) to obtain any consent, authorization, order or approval of or
exemption by, any Governmental Entity and any other third party which is
required to be obtained by Newcourt or CIT or any of their respective
subsidiaries in connection with the Plan of Arrangement and the other
transactions contemplated by the Reorganization Agreement, and to comply with
the terms and conditions of such consent, authorization, order or approval and
(iii)
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in the case of CIT, to execute and deliver (and cause Newco and Exchangeco
to execute and deliver) the Plan of Arrangement and related documents. In the
event that either party fails or expects to fail to obtain any consent or
approval of any governmental entity because of the type or nature of any of its
assets or business activities, such party shall use its reasonable best efforts
to take all actions necessary to either obtain such consent or approval or
obviate the need therefor, including, if necessary, discontinuing or disposing
of such business or assets or restructuring the conduct of such business,
provided, however, that neither CIT nor Newcourt is required to take any such
action if doing so would reasonably be expected to have a Material Adverse
Effect on the combined company.
Covenants Regarding Stock Exchange Listing and Tax Status
Each of CIT and Newcourt have agreed to use all reasonable efforts to
(i) cause the Exchangeable Shares and the shares of CIT Common Stock to be
listed and posted for trading on The Toronto Stock Exchange by the Effective
Time and, with respect to the Exchangeable Shares, to maintain the listing as
long as any Exchangeable Shares are outstanding; (ii) cause the shares of CIT
Common Stock to be issued in the Transaction or upon exchange of the
Exchangeable Shares and upon exercise of the Transition Options from time to
time to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance, as of the Effective Time; and (iii) ensure that
Exchangeco remains a "public corporation" (within the meaning of the Income Tax
Act (Canada)) until the earlier of (a) such time as there are no Exchangeable
Shares outstanding and (b) five years after the Effective Time.
Covenants Regarding Employee Benefit Plans and Existing Agreements
CIT and Newcourt have agreed that from and after the Effective Time,
the employees of Newcourt and its subsidiaries as of the Effective Time will
continue to participate in Newcourt's employee benefit and compensation plans in
which they currently participate or, at CIT's discretion, in CIT's employee
benefit and compensation plans or a combination. Without the consent of both
Messrs. Albert R. Gamper, Jr. and David F. Banks, prior to December 31, 2000,
CIT will not, and will not permit any of its subsidiaries to, modify or amend
the benefit programs applicable to the employees of Newcourt or its subsidiaries
in any manner which would cause the benefits provided to such employees under
such plans, in the aggregate, to be less favorable than those provided under
such plans immediately prior to the Effective Time.
Covenants Regarding Indemnification
CIT has agreed to maintain, or cause to be maintained, for each present
and former officer and director of Newcourt or any Newcourt subsidiaries all
rights to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to Effective Time to the fullest extent that such persons
are permitted to be indemnified under the articles of incorporation or bylaws or
similar governing documents effective at the Effective Time. CIT has also agreed
to cause the persons serving as officers and directors of Newcourt immediately
prior to the Effective Time to be covered for a period of six years from the
Effective Time by the directors' and officers' liability insurance policy
maintained by Newcourt (provided that CIT may substitute policies of at least
the same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time which were committed by such officers and directors in
their capacity as such. Notwithstanding the preceding sentence, in no event will
CIT be required to expend on any annual basis more than 150% of the current
amount expended by Newcourt to maintain or procure insurance coverage.
In addition to the foregoing, in the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of the Reorganization Agreement, or who becomes prior to
the Effective Time, a director, officer or employee of Newcourt or any of its
subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer or employee of
Newcourt, any of its subsidiaries or any of their respective predecessors or
affiliates or (ii) the Reorganization Agreement, the March Agreement or any of
the transactions contemplated thereby, whether in any case asserted or arising
before or after the Effective Time, CIT and Newcourt agree to cooperate and use
their best efforts to defend against and respond thereto. After the Effective
Time, CIT has agreed to indemnify and hold harmless each such Indemnified Party
against any losses, claims, damages, liabilities, costs,
77
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim, action,
suit, proceeding or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with CIT.
Covenants Regarding Non-Solicitation by Newcourt
Newcourt has agreed with respect to itself and its subsidiaries that
none of them will authorize or permit any of its officers, directors, employees
or agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, an Acquisition
Proposal, or participate in any discussions or negotiations, or provide third
parties with any nonpublic information, relating to any such inquiry or proposal
or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal.
Newcourt may, in response to an Acquisition Proposal that the Newcourt
Board of Directors determines in good faith to be more favorable to its
shareholders than the Transaction, and for which financing is committed or in
the good faith judgment of the Newcourt Board of Directors is reasonably capable
of being obtained by such third party and subject to providing prior written
notice of such Superior Proposal to CIT, participate in any discussions or
negotiations regarding, or provide the party making such Superior Proposal with
any nonpublic information (pursuant to a customary confidentiality agreement and
provided Newcourt provides CIT with such information concurrently with or prior
to providing it to such party) in connection with, such Superior Proposal, or
otherwise facilitate any effort or attempt to implement such Superior Proposal,
if the Newcourt Board of Directors determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to Newcourt and to Newcourt's shareholders under applicable
law.
Newcourt may also communicate information about any Acquisition
Proposal to its shareholders if, in the judgment of the Newcourt Board of
Directors, based upon the advice of outside counsel, such communication is
required under applicable law. Nothing contained in the Reorganization Agreement
will prevent Newcourt or its Board of Directors from complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
However, except in connection with a Superior Proposal, neither the Newcourt
Board of Directors nor any committee thereof may withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the Transaction, or
approve or recommend, or propose publicly to approve or recommend, an
Acquisition Proposal. Newcourt is required to cease any existing activities,
discussions or negotiations previously conducted with any parties other than CIT
with respect to any of the foregoing and Newcourt agreed to inform the
appropriate individuals or entities. Newcourt is required to (A) notify CIT
immediately if any such inquiries or Acquisition Proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, Newcourt and (B) promptly inform CIT
in writing of all of the relevant details and status with respect to the
foregoing.
Conditions to Closing
The respective obligations of each of CIT and Newcourt to complete the
Transaction are subject to the satisfaction at or prior to the Effective Time of
a number of conditions, including the following:
(i) the Arrangement Resolution shall have been approved and
adopted by the required vote of the Newcourt Shareholders;
(ii) the Stock Issuance Proposal shall have been approved by
the required vote of the CIT Stockholders;
(iii) the Interim Order and the Final Order shall have been
obtained in form and on terms satisfactory to each of Newcourt and CIT,
acting reasonably, and shall not have been set aside or modified in a
manner unacceptable to either party;
(iv) the Primary Approvals shall have been obtained and shall
remain in full force and effect;
(v) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings
for that purpose shall have been initiated or threatened by the SEC;
78
(vi) no order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or
prohibition preventing the completion of the Transaction shall be in
effect;
(vii) Newcourt shall not have received from holders of more
than 10% of the Newcourt Common Shares the written objection to the
Arrangement Resolution referred to in the Dissent Procedures, unless
either Goldman Sachs, J.P. Morgan or DLJ provides Newcourt and CIT with
a letter stating that in the good faith reasonable judgment of such
firm, such firm believes that it can place a sufficient amount of
permanent equity securities of CIT to fund the payment required to be
made in respect of those shares in excess of 10% of the Newcourt Common
Shares for which written objection has been received; and
(viii) the Exchangeable Shares and the shares of CIT Common
Stock shall have been conditionally approved for listing on The Toronto
Stock Exchange, subject to the usual conditions, and the shares of CIT
Common Stock issuable pursuant to the Stock Issuance Proposal shall
have been authorized for listing on the New York Stock Exchange,
subject to notice of issuance.
The obligation of Newcourt to complete the Transaction is subject to
the satisfaction or the waiver by Newcourt at or prior to the Effective Time of
the following additional conditions:
(i) the representations and warranties of CIT contained in the
Reorganization Agreement relating to capitalization, authorization of
the Transaction and certain other matters shall be true and correct in
all material respects as of the date of the Reorganization Agreement
and as of the date of Closing, and all other representations and
warranties of CIT contained in the Reorganization Agreement shall be
true and correct as of the date of the Reorganization Agreement and as
of the date of Closing except where the failure of such other
representations and warranties to be so true and correct has not had
and is not reasonably expected to have a Material Adverse Effect on
CIT;
(ii) CIT shall have performed in all material respects all
obligations required to be performed by it under the Reorganization
Agreement at or prior to the date of Closing;
(iii) no proceeding initiated by any Governmental Entity
preventing the completion of the Transaction shall be pending;
(iv) CIT shall have taken all such actions as shall be
necessary so that at the Effective Time, the composition of CIT's Board
of Directors complies with the requirements set out in the
Reorganization Agreement;
(v) the consent, approval or waiver of each Person whose
consent to or approval of the Transaction is required under any note,
bond, mortgage, indenture, deed of trust, license, lease, loan or
credit agreement or other agreement or other instrument or obligation
to which CIT or any of its subsidiaries is a party, or by which they or
any of their respective properties may be bound or affected shall have
been obtained and shall remain in full force and effect, except where
the failure to have obtained such consent, waiver or approval would
not, individually or in the aggregate, have a Material Adverse Effect
on CIT;
(vi) as of the date of Closing, except as disclosed, neither
CIT nor any of its subsidiaries shall be a party to any legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations against CIT or any of its
subsidiaries which has had or is reasonably expected to have a Material
Adverse Effect on CIT; and
(vii) no Primary Approval will have imposed any condition or
restriction that would so materially adversely affect the economic or
business benefits of the Transaction so as to render inadvisable, in
the reasonable good faith judgment of Newcourt, the consummation of the
Transaction.
The obligation of CIT to complete the Transaction is subject to the
satisfaction or the waiver by CIT at or prior to the Effective Time of
the following additional conditions:
(i) the representations and warranties of Newcourt contained in
the Reorganization Agreement relating to capitalization, authorization
of the Transaction and certain other matters shall be true and correct
in all material respects as of the date of the Reorganization Agreement
and as of the date of Closing, and all other representations and
warranties of Newcourt contained in the Reorganization Agreement shall
be true and correct as of the date of the Reorganization Agreement and
as of the date of Closing except where the failure of such other
representatives and warranties to be so true and correct has not had
and is not reasonably expected to have a Material Adverse Effect on
Newcourt;
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(ii) Newcourt shall have performed in all material respects
all obligations required to be performed by it under the Reorganization
Agreement at or prior to the Effective Date;
(iii) no proceeding initiated by any Governmental Entity
preventing the completion of the Transaction shall be pending;
(iv) the consent, approval or waiver of each Person whose
consent to or approval of the Transaction is required under any note,
bond, mortgage, indenture, deed of trust, license, lease, loan or
credit agreement or other agreement or other instrument or obligation
to which Newcourt or any of its subsidiaries is a party, or by which
they or any of their respective properties may be bound or affected
(other than the Dell Contract and the Lucent Contract) shall have been
obtained and shall remain in full force and effect, except where the
failure to have obtained such consent, waiver or approval would not,
individually or in the aggregate, have a Material Adverse Effect on
Newcourt;
(v) any consent, approval or waiver which may be required in
order for the Dell Contract and the Lucent Contract to remain in full
force and effect immediately after consummation of the Transaction
(and, in the case of the Lucent Contract, certain additional
transactions to be completed in conjunction with the Reorganization
Agreement prior to or after the consummation of the Transaction) shall
have been obtained and the Dell Contract and the Lucent Contract shall
remain in full force and effect, without any amendment or modification
from the terms thereof as in effect on the date of the Reorganization
Agreement other than any such amendment or modification which does not
materially reduce the economic benefits of such agreement to Newcourt;
(vi) Messrs. McKerroll and Nullmeyer shall be serving as
executive officers of Newcourt immediately prior to the Effective Time;
(vii) Ernst & Young LLP shall have delivered to CIT a comfort
letter with respect to the calculation of Newcourt's Adjusted
Shareholders' Equity for purposes of determining the Exchange Ratio;
(viii) as of the Closing Date, other than as disclosed, neither
Newcourt nor any of its subsidiaries shall be a party to any legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations against Newcourt or any of
its subsidiaries which has had or is reasonably expected to have a
Material Adverse Effect on Newcourt; and
(ix) no Primary Approval shall have imposed any condition or
restriction that would so materially adversely affect the economic or
business benefits of the Transaction so as to render inadvisable, in
the reasonable good faith judgment of CIT, the consummation of the
Transaction.
In addition to the other conditions set forth above, the following
additional conditions related to DKB must be satisfied or waived by DKB at or
prior to the Effective Time:
(i) if any approval of the Federal Reserve Board, the
Superintendent of Financial Institutions of Canada, the Minister of
Finance of Canada or the Governor in Council of Canada required to
complete the Transaction shall have imposed any condition or
restriction on DKB or any of its subsidiaries, other than (x) any
conditions or restrictions that relate to the business, activities or
investments of CIT or Newcourt or any of their respective subsidiaries
but do not relate to the business, activities or investments of DKB or
any of its subsidiaries (other than Newcourt, CIT or their respective
subsidiaries), and (y) any existing requirement, restriction or
condition imposed by any such regulatory authority with respect to DKB
or any of its subsidiaries on or prior to the date of the
Reorganization Agreement, then CIT and Newcourt will not complete the
Transaction unless such condition or restriction is satisfactory to DKB
in its sole reasonable judgment;
(ii) if the Ministry of Finance of Japan, the Financial
Supervisory Agency of Japan or any other Japanese regulatory authority
shall have imposed any requirement on DKB with respect to the
Transaction that would reasonably be expected to have a material
adverse effect on the business or financial condition of DKB and its
subsidiaries (other than CIT and its subsidiaries), taken as a whole,
CIT and Newcourt will not complete the Transaction without the prior
written consent of DKB; and
(iii) the Reorganization Agreement shall not have been amended
or modified without DKB's approval in any manner that would (i)
increase the Exchange Ratio or alter the form of the consideration
payable to
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the Newcourt Shareholders, (ii) extend the date on or prior
to which the Transaction must be completed, or terminated, beyond
January 31, 2000, (iii) result in a change in the structure of the
Transaction, or (iv) alter or amend certain sections of the
Reorganization Agreement or otherwise enter into agreements affecting
the composition of the Board of Directors or the Chief Executive
Officer of the combined company following the Effective Time, unless
such amendment or modification is satisfactory to DKB.
Termination
The Reorganization Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Arrangement Resolution
by the Newcourt Shareholders or the approval of the Stock Issuance Proposal by
the CIT Stockholders:
(i) by mutual written consent of CIT and Newcourt;
(ii) by either CIT or Newcourt, if the Transaction has not
occurred on or before January 31, 2000, so long as the terminating
party did not fail to fulfill any obligation under the Reorganization
Agreement resulting in the failure of the Transaction to occur on or
before such date;
(iii) by either CIT or Newcourt, on or after December 31, 1999
and (i) 30 days after the date on which any request or application for
a Primary Approval as required to complete the Transaction shall have
been denied or withdrawn, unless a petition for rehearing or an amended
application has been filed, except that the Reorganization Agreement
will not terminate if the party seeking to terminate the Reorganization
Agreement has failed to perform the obligations set forth in the
Agreement or (ii) if any Governmental Entity shall have issued a final
nonappealable order enjoining or prohibiting the Transaction;
(iv) by either CIT or Newcourt, if there has been a material
breach by the other of any of its (i) representations or warranties
contained in the Reorganization Agreement, or (ii) covenants or
agreements contained in the Reorganization Agreement, and such breach
shall not have been cured within 30 days after written notice thereof
shall have been received by the party alleged to be in breach;
(v) by either CIT or Newcourt, if the required approvals of the
Newcourt Shareholders or CIT Stockholders have not been obtained at a
duly held stockholders' meeting, including any adjournments or
postponements;
(vi) by Newcourt, without any further action, if Newcourt
shall have entered into an Acquisition Agreement with any party other
than CIT as permitted by the Reorganization Agreement;
(vii) by CIT, if either the Dell Contract or the Lucent
Contract shall have been terminated, or either of the conditions
contained in the Reorganization Agreement related to the Dell Contract
or the Lucent Contract shall have otherwise become incapable of being
satisfied; or
(viii) by CIT, if at any time Messrs. McKerroll or Nullmeyer
shall not be serving as an officer of Newcourt.
If the Reorganization Agreement is terminated as provided above, the
Reorganization Agreement will immediately become void and have no effect, except
that such termination will not limit liability for a willful breach of the
Reorganization Agreement.
Expenses
Except as set forth below, all fees and expenses incurred in connection
with the Reorganization Agreement and the Transaction will be paid by the party
incurring such expenses, except that CIT and Newcourt will each bear and pay 50%
of the costs and expenses incurred in filing, printing and mailing the
Registration Statement and the Joint Proxy Statement, including SEC filing fees.
Termination Fees
The Reorganization Agreement provides that Newcourt must pay CIT a
termination fee of US$105 million if:
(i) Newcourt terminates the Reorganization Agreement because
the Newcourt Board of Directors exercised its termination rights
relating to the acceptance of a Superior Proposal; or
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(ii) an Acquisition Proposal with respect to Newcourt or any
of its subsidiaries has been made known to Newcourt or any of its
subsidiaries and has been publicly announced or otherwise become
public, or has been made to the shareholders of Newcourt generally, and
thereafter (x) the Reorganization Agreement is terminated by either CIT
or Newcourt as a result of Newcourt Shareholders failing to approve the
Arrangement Resolution and (y) within twelve months of such termination
Newcourt or any of its subsidiaries enters into any agreement, letter
of intent or other binding agreement or completes a Newcourt Takeover
Proposal.
If an Acquisition Proposal with respect to CIT or any of its
subsidiaries has been made known to CIT or any of its subsidiaries and has been
publicly announced or otherwise become public, or has been made to the
stockholders of CIT generally, and thereafter (x) the Reorganization Agreement
is terminated by either CIT or Newcourt as a result of CIT Stockholders failing
to approve the Stock Issuance Proposal and (y) within twelve months of such
termination CIT or any of its subsidiaries enters into any agreement, letter of
intent or other binding agreement or completes a CIT Takeover Proposal, then
upon the first occurrence of any of the events contemplated by clause (y) CIT
must pay Newcourt a termination fee equal to US$120 million by wire transfer of
same day funds.
If one party fails to promptly pay the other any termination fee due,
the defaulting party must pay the costs and expenses (including legal fees and
expenses) in connection with any action taken to collect payment, together with
interest on the amount of the unpaid termination fee.
Agreements Relating to Certain Additional Transactions
CIT and Newcourt have agreed to use their reasonable best efforts to
cause certain transactions to occur as soon as practicable prior to and
following the Effective Time. These transactions are intended to accomplish the
realignment of certain subsidiaries of CIT following consummation of the
Transaction and create a more economically efficient international corporate
structure. In connection with such transactions, each of CIT and Newcourt has
agreed to take necessary actions including preparing and filing of all necessary
documentation, effecting all applications, notices, petitions and filings and
obtaining as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the post-Transaction realignment, or which
are required in order to maintain in effect any governmental authorizations,
licenses or approvals pursuant to which any of CIT, Newcourt or any of their
subsidiaries carry on their respective businesses as conducted as of the date of
the Reorganization Agreement. None of CIT, Newcourt or their respective
subsidiaries will be obligated to take any action with respect to the
realignment to the extent that doing so would jeopardize or delay the
consummation of the Transaction or the satisfaction of the conditions precedent
to its consummation.
Agreements to Support the Transaction
Voting Agreements
CIT has entered into Voting Agreements with CIBC, Hercules and certain
members of Newcourt's senior management representing in the aggregate
approximately 26.1.% of the outstanding Newcourt Common Shares. CIT and Newcourt
have entered into a Voting Agreement with DKB, which holds approximately 44% of
the outstanding CIT Common Stock. Copies of the Voting Agreements are attached
as Annex J. Under these Voting Agreements, each Supporting Shareholder has
agreed that, so long as the Reorganization Agreement has not been amended to
change the Exchange Ratio, alter the form of consideration payable to Newcourt
Shareholders or otherwise materially alter its commercial terms in a manner
adverse to the Supporting Shareholder, such Supporting Shareholder will, at any
duly noticed meeting of shareholders or at any adjournment or postponement
thereof or in any other circumstances upon which the vote, consent or other
approval is sought, vote such Supporting Shareholders' shares (a) in favor of
the Arrangement Resolution and (b) against any Alternative Proposal. In the case
of DKB, subject to (i) Newcourt's compliance with the terms of the DKB Voting
Agreement, (ii) compliance with certain conditions to closing in DKB's favor
contained in the Reorganization Agreement, (iii) the absence (at the time of a
vote contemplated by clause (a) or clause (b) below) of the imposition by
specified Governmental Entities of certain conditions, requirements or orders
and (iv) the continuing recommendation by the CIT Board of Directors of the
Transaction, DKB will, at any duly
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noticed meeting of shareholders or at any adjournment or postponement thereof or
in any other circumstances upon which the vote, consent or other approval is
sought, vote DKB's shares (a) in favor of the Stock Issuance Proposal and (b)
against any Alternative Proposal. Each of DKB and CIBC have agreed to prepare
and file all necessary applications, notices, petitions and filings required in
order to obtain all permits, consents, approval and authorizations of all third
parties and Governmental Entities which are necessary to consummate the
Transaction. Each Supporting Shareholder and DKB have also agreed not to
transfer, pledge or otherwise dispose of any of the subject shares prior to the
Effective Time.
Pursuant to their respective Voting Agreements, each of CIBC and
Hercules (i) will have the right, from and after the Effective Time and for so
long as it owns at least 3% of the outstanding voting capital stock of CIT, to
nominate one person for election to the CIT Board of Directors, and (ii) has
acknowledged that certain existing agreements pursuant to which Newcourt has
provided it with registration, inspection and other rights will terminate at the
Effective Time.
Pursuant to the DKB Voting Agreement, DKB will have the right to, from
after the Effective Time, (i) for so long as DKB owns at least 10% of the
outstanding voting capital stock of CIT, nominate two persons for election to
the CIT Board of Directors and (ii) for so long as DKB owns at least 3% of the
outstanding voting capital stock of CIT, nominate one person for election to the
CIT Board of Directors.
The Voting Agreements provide that they will be terminated upon the
earlier of (i) the Effective Time or (ii) the date of the termination of the
Reorganization Agreement pursuant to the termination provisions under the
Reorganization Agreement.
Stock Option Agreement
The following is a summary of the Stock Option Agreement, a copy of
which is attached as Annex I. This summary may not contain all of the
information that is important to you. You should read the entire Stock Option
Agreement before you decide how to vote.
Under the Stock Option Agreement, Newcourt granted to CIT an
unconditional, irrevocable Option to purchase up to 22,273,249 fully paid and
nonassessable Newcourt Common Shares at a price of US$15.6875 per share (the
closing price of Newcourt's Common Shares on the New York Stock Exchange on
August 4, 1999, the last trading day prior to the execution of the
Reorganization Agreement), provided however, that in no event will the number of
Newcourt Common Shares for which the Option is exercisable exceed 15% of the
issued and outstanding Newcourt Common Shares.
Exercise. Upon proper notice to Newcourt, CIT may exercise the Option
in whole or in part from time to time following the occurrence of both an
Initial Triggering Event (as defined below) and a Subsequent Triggering Event
(as defined below) prior to the Exercise Termination Event (as defined below).
An "Initial Triggering Event" occurs if, at any time after the date of
the Stock Option Agreement, (i) Newcourt receives an Acquisition Proposal with
respect to itself or any of its subsidiaries that has been publicly announced or
otherwise become public or has been made known to the shareholders of Newcourt
generally or (ii) Newcourt enters into an agreement, letter of intent or other
binding agreement concurrently with termination of the Reorganization Agreement.
A "Subsequent Triggering Event" occurs if, at any time after the date
of the Stock Option Agreement, Newcourt or any of its subsidiaries enters into
an agreement, letter of intent or other binding agreement or consummates a
Newcourt Takeover Proposal, other than an agreement, letter of intent or other
binding agreement entered into by Newcourt concurrently with its termination of
the Reorganization Agreement.
Termination. The right to exercise the Option will terminate at the
earliest occurrence of an Exercise Termination Event. An "Exercise Termination
Event" shall occur upon any of the following: (i) the Effective Time; (ii)
termination of the Reorganization Agreement, other than a termination by either
Newcourt or CIT as a result of failure of the Newcourt Shareholders to approve
the Arrangement Resolution if such termination follows the occurrence of an
Initial Triggering Event; or (iii) the passage of 12 months after the
termination of the Reorganization Agreement by either Newcourt or CIT as a
result of failure of the Newcourt Shareholders to approve the Arrangement
Resolution, if such termination follows the occurrence of an Initial Triggering
Event.
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Limitation on Profit. The terms of the Stock Option Agreement limit
the aggregate value which CIT may realize through the Option to US$15 million.
Repurchase Right. At any time within the 30-day period immediately
following the time the Option becomes exercisable and prior to any exercise of
the Option, CIT may exercise its right, with notice, to require Newcourt to
repurchase the Option from CIT, in whole but not in part, at a price equal to
US$15 million.
Substitute Option. If prior to an Exercise Termination Event, Newcourt
enters into an agreement (i) to amalgamate or consolidate with or merge into any
person, other than CIT or one of its subsidiaries, and in case of a merger or
consolidation, Newcourt is not the continuing or surviving corporation; (ii) to
permit any person, other than CIT or one of its subsidiaries, to amalgamate with
or merge into Newcourt and Newcourt is the continuing or surviving corporation,
but the then outstanding Newcourt Common Shares are changed or exchanged for
shares or other securities of any other person or cash or any other property or
the outstanding Newcourt Common Shares represents less than 50% of the
outstanding voting shares of the merged company, or (iii) to sell or otherwise
transfer all or a substantial portion of its assets to any person, other than
CIT or one of its subsidiaries, then in each such case, the agreement governing
such transaction will make proper provisions so that the Options will be
converted or exchanged for a substitute option at the completion of the
transaction, at the election of the holder of the Option, of either (x) the
successor entity or (y) any person that controls the successor entity.
Registration Statement. At any time after an Initial and a Subsequent
Triggering Event occurs and prior to an Exercise Termination Event, Newcourt
will, if requested by CIT, prepare and file a registration statement under the
Securities Act covering any or all Newcourt Common Shares issued and issuable
pursuant to the Option. Newcourt will also file a prospectus with the Ontario
Securities Commission and other applicable Canadian provincial securities
commission, as required by such entities. CIT may make two such demands.
The Stock Option Agreement is intended to increase the likelihood that
the Transaction will be completed in accordance with the terms of the
Reorganization Agreement. Consequently, certain aspects of the Stock Option
Agreement may discourage persons who might, prior to the Effective Time, be
interested in acquiring all of or a significant interest in Newcourt from
considering or proposing such an acquisition. Such an acquisition of Newcourt
could cause the Option to become exercisable. The Option could significantly
increase the cost to a potential acquiror of acquiring Newcourt compared to its
cost had the Option not been granted. Such increased cost might discourage a
potential acquiror from considering or proposing an acquisition or might result
in a potential acquiror proposing to pay a lower per share price to acquire
Newcourt than it might otherwise have proposed to pay.
Transaction Mechanics and Description of Exchangeable Shares
The Plan of Arrangement
Pursuant to the terms of the Plan of Arrangement, commencing at the
Effective Time, the following events will occur and be deemed to occur in the
following order:
(a) each outstanding Newcourt Common Share held by an Eligible
Electing Holder who has made an effective election (other than Newcourt
Common Shares held by Dissenting Shareholders) will be transferred to
Exchangeco by the holder, without any act or formality on its part, in
exchange for, at such holder's election, (i) that number of fully paid
and non-assessable Exchangeable Shares equal to the Exchange Ratio,
together with applicable Ancillary Rights, or; (ii) that number of
fully paid and non-assessable shares of CIT Common Stock equal to the
Exchange Ratio;
(b) each outstanding Newcourt Common Share held by any other
Newcourt Shareholder (including any Eligible Electing Holder who has
not made an effective election to exchange Newcourt Common Shares for
Exchangeable Shares, but excluding Dissenting Shareholders) will be
transferred by the holder thereof, without any act or formality on its
part, to Exchangeco in exchange for that number of fully paid and
non-assessable shares of CIT Common Stock equal to the Exchange Ratio;
(c) each Newcourt Option shall be exchanged for a Transition
Option under the Transition Option Plan; and
(d) CIT will issue and deposit with the Trustee the Special
Voting Share.
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All of Newcourt's outstanding Common Shares will, immediately after the
Effective Time, be held by Exchangeco. The former holders of Newcourt Common
Shares are expected to hold an aggregate of approximately 103,955,830
Exchangeable Shares and shares of CIT Common Stock, based on an Exchange Ratio
of 0.70. Assuming all Newcourt Common Shares are exchanged for shares of CIT
Common Stock, based upon the number of shares of CIT Common Stock outstanding as
of September 20, 1999 and an Exchange Ratio of 0.70, existing Newcourt
Shareholders will hold approximately 39% of the outstanding CIT Common Stock
immediately after the Effective Time.
Fractional Shares
No fractional Exchangeable Shares or fractional shares of CIT Common
Stock will be delivered in exchange for Newcourt Common Shares pursuant to the
Plan of Arrangement. In lieu of any such fractional securities:
(i) each Newcourt Shareholder otherwise entitled to a
fractional interest in a share of CIT Common Stock will receive a cash
payment equal to such Newcourt Shareholder's pro rata portion of the
net proceeds after expenses received by the Depositary upon the sale of
whole shares representing an accumulation of all fractional interests
in CIT Common Stock to which all such Newcourt Shareholders would
otherwise be entitled. The Depositary will sell such CIT Common Stock
on the New York Stock Exchange or The Toronto Stock Exchange within 15
Business Days following the Effective Date for those Newcourt Common
Shares received by the Depositary prior to the Newcourt Shareholders
Meeting. For those Newcourt Common Shares received by the Depositary
after the Newcourt Shareholders Meeting, the Depositary will sell such
CIT Common Stock on the New York Stock Exchange or The Toronto Stock
Exchange as soon as reasonably practicable thereafter. The aggregate
net proceeds after expenses of such sale will be distributed by the
Depositary, pro rata in relation to the respective fractions, among the
Newcourt Shareholders otherwise entitled to receive fractional
interests in CIT Common Stock; and
(ii) each Newcourt Shareholder otherwise entitled to a
fractional interest in an Exchangeable Share will receive a cash
payment equal to such Newcourt Shareholder's pro rata portion of the
net proceeds after expenses received by the Depositary upon the private
sale of whole shares representing an accumulation of all fractional
interests in Exchangeable Shares to which all such Newcourt
Shareholders would otherwise be entitled including by way of sale
through the facilities of any stock exchange upon which the
Exchangeable Shares are then listed within 15 Business Days following
the Effective Date. The aggregate net proceeds after expenses of such
sale will be distributed by the Depositary, pro rata in relation to the
respective fractions, among the Newcourt Shareholders otherwise
entitled to receive fractional interests in Exchangeable Shares.
See "- Procedures for Exchange of Newcourt Share Certificates by
Newcourt Shareholders" on page 92, for procedures to be followed in order to
obtain certificates representing the Exchangeable Shares and the CIT Common
Stock issuable under the Plan of Arrangement.
Retraction, Redemption and Call Rights
Retraction of Exchangeable Shares. Holders of the Exchangeable Shares
will be entitled at any time following the Effective Time to retract (i.e.,
require Exchangeco to redeem) any or all of the Exchangeable Shares held by such
holder for a retraction price per share equal to the Retraction Price. Holders
of the Exchangeable Shares may effect such retraction by presenting a
certificate or certificates to Exchangeco or at any office of the Transfer Agent
as may be specified by Exchangeco by notice to the holders of Exchangeable
Shares, representing the number of Exchangeable Shares the holder desires to
retract together with a duly executed Retraction Request indicating the number
of Exchangeable Shares the holder desires to retract and the Retraction Date
upon which the holder desires to receive the CIT Common Stock, and such other
documents as may be required to effect the retraction.
When a holder requests Exchangeco to redeem Retracted Shares, Newco
will have an overriding Retraction Call Right to purchase on the Retraction Date
all but not less than all of the Retracted Shares, at a purchase price per share
equal to the Retraction Price. Upon receipt of a Retraction Request, Exchangeco
will immediately notify Newco. Newco must then advise Exchangeco within five
Business Days as to whether the Retraction Call Right will be exercised. If
Newco does not so advise Exchangeco, then Exchangeco will notify the holder as
soon as possible thereafter that Newco will not exercise the Retraction Call
Right. If Newco
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advises Exchangeco that Newco will exercise the Retraction Call Right within
such five Business Days and if the Retraction Request is not duly revoked by the
holder, then the Retraction Request shall be considered only to be an offer by
the holder to sell the Retracted Shares to Newco in accordance with the
Retraction Call Right.
A holder may withdraw its Retraction Request, in writing, at any time
prior to the close of business on the Business Day preceding the Retraction
Date, in which case the Retracted Shares will neither be purchased by Newco nor
be redeemed by Exchangeco. If the holder does not revoke its Retraction Request,
then on the Retraction Date, the Retracted Shares will be either purchased by
Newco or redeemed by Exchangeco as the case may be, in each case as set out
above. Either Exchangeco or Newco will deliver the aggregate Retraction Price to
the holder by mailing the same to the holder at the address of the holder
recorded in the securities register or at the address specified in the holder's
Retraction Request or by holding the same for pick-up by the holder at the
registered office of Exchangeco or the office of the transfer agent as specified
by Exchangeco, in each case, less any amounts withheld on account of tax
required to be deducted and withheld therefrom.
If, as a result of solvency requirements or applicable law, Exchangeco
is not permitted to redeem all Retracted Shares tendered by a retracting holder,
then Exchangeco will only be required to redeem the maximum number of Retracted
Shares tendered by the holder (rounded down to a whole number of shares) as
would not be contrary to such provisions of applicable law. The Trustee, on
behalf of the holder of any Retracted Shares not so redeemed by Exchangeco, will
require CIT to purchase the Retracted Shares not redeemed on the Retraction
Date, pursuant to the Exchange Right.
Holders of Exchangeable Shares executing a Retraction Request will
continue to be entitled to receive from Exchangeco, on the designated payment
date, any declared but unpaid dividends on the related shares, provided that if
and to the extent the dividend is not paid by Exchangeco on the designated
payment date, then any such dividend in respect of shares purchased by Newco
(under the Retraction Call Right) or CIT (under the Exchange Right) will be paid
on such date by Newco or CIT, as the case may be, for and on behalf of
Exchangeco.
Redemption of Exchangeable Shares. Subject to applicable law and the
Redemption Call Right, on the Redemption Date, Exchangeco may redeem all but not
less than all of the then outstanding Exchangeable Shares for a redemption price
per share equal to the Redemption Price. Exchangeco will, at least 60 days prior
to the relevant Redemption Date, or such number of days as the Board of
Directors of Exchangeco may determine to be reasonably practicable if a
Redemption Date arises in connection with a CIT Control Transaction, an
Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event,
give to the registered holders of the Exchangeable Shares written notice of the
proposed redemption of the Exchangeable Shares by Exchangeco or the purchase of
the Exchangeable Shares by Newco pursuant to the Redemption Call Right described
below.
On or after the Redemption Date, upon the holder's presentation and
surrender of the certificates representing the Exchangeable Shares and such
other documents as may be required at the office of the transfer agent or the
registered office of Exchangeco, Exchangeco will deliver the Redemption Price to
the holder by mailing the same to the holder at the address of the holder
recorded in the securities register or by holding the same for pick-up by the
holder at the registered office of Exchangeco or the office of the transfer
agent as specified in the written notice of redemption, in each case less any
amounts withheld on account of tax required to be deducted and withheld
therefrom.
Newco will have an overriding Redemption Call Right to purchase on the
Redemption Date all but not less than all of the Exchangeable Shares then
outstanding (other than Exchangeable Shares held by CIT and its subsidiaries)
for a purchase price per share equal to the Redemption Price. Upon the exercise
of the Redemption Call Right, holders will be obligated to sell their
Exchangeable Shares to Newco. If Newco exercises the Redemption Call Right,
Exchangeco's right and obligation to redeem the Exchangeable Shares on such
Redemption Date will terminate.
On the Redemption Date, holders of Exchangeable Shares will continue to
be entitled to receive from Exchangeco, on the designated payment date, any
declared but unpaid dividends on the related shares, provided that if and to the
extent the dividend is not paid by Exchangeco on the designated payment date,
then any such dividend in respect of shares purchased by Newco (under the
Redemption Call Right) will be paid on such date by Newco for and on behalf of
Exchangeco.
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Early Redemption. In certain circumstances, Exchangeco has the right to
require a redemption of the Exchangeable Shares prior to November 1, 2004. An
early redemption may occur upon (i) there being fewer than 1,000,000
Exchangeable Shares outstanding (other than Exchangeable Shares held by CIT and
its affiliates); (ii) the occurrence of a CIT Control Transaction; (iii) a
proposal for an Exchangeable Share Voting Event; or (iv) the failure to approve
or disapprove, as applicable, an Exempt Exchangeable Share Voting Event.
A "CIT Control Transaction" means any merger, amalgamation, tender
offer, material sale of shares or rights or interests therein or thereto or
similar transactions involving CIT, or any proposal to do so. If, prior to
November 1, 2004, a CIT Control Transaction occurs, and the Board of Directors
of Exchangeco determines, in good faith and in its sole discretion, that it is
not reasonably practicable to substantially replicate the terms and conditions
of the Exchangeable Shares in connection with such CIT Control Transaction and
if the redemption of all but not less than all of the outstanding Exchangeable
Shares is necessary to enable the completion of such CIT Control Transaction in
accordance with its terms, then the Board of Directors of Exchangeco may
accelerate the Redemption Date to such date prior to November 1, 2004 as the
Board of Directors of Exchangeco may determine. Notice of the new Redemption
Date shall be given upon such number of days' prior written notice to the
registered holders of the Exchangeable Shares as the Board of Directors of
Exchangeco may determine to be reasonably practicable in such circumstances.
An "Exchangeable Share Voting Event" means any matter in respect of
which holders of Exchangeable Shares are entitled to vote as shareholders of
Exchangeco (for example to approve an amalgamation involving Exchangeco where
the amalgamation is not with a wholly-owned subsidiary of Exchangeco) other than
an Exempt Exchangeable Share Voting Event, and, for greater certainty, excludes
any matter in respect of which holders of Exchangeable Shares are entitled to
vote (or instruct the Trustee to vote) in their capacity as Beneficiaries under
(as that term is defined in) the Voting and Exchange Trust Agreement. If, prior
to November 1, 2004, an Exchangeable Share Voting Event is proposed, and if the
Board of Directors of Exchangeco has determined, in good faith and in its sole
discretion, that it is not reasonably practicable to accomplish the business
purpose intended by the Exchangeable Share Voting Event in any other
commercially reasonable manner that does not result in an Exchangeable Share
Voting Event, then the Redemption Date shall be the Business Day prior to the
record date for any meeting or vote of the holders of the Exchangeable Shares to
consider the Exchangeable Share Voting Event. The business purpose for such
Exchangeable Share Voting Event must be bona fide and not for the primary
purpose of causing the occurrence of a Redemption Date. The Board of Directors
of Exchangeco shall give such number of days' prior written notice of such
redemption to the registered holders of the Exchangeable Shares as it may
determine to be reasonably practicable in such circumstances.
An "Exempt Exchangeable Share Voting Event" means any matter in respect
of which holders of Exchangeable Shares are entitled to vote as shareholders of
Exchangeco in order to approve or disapprove, as applicable, any change to or in
the rights of the holders of the Exchangeable Shares, where the approval or
disapproval, as applicable, of such change would be required to maintain the
equivalence of the Exchangeable Shares and the CIT Common Stock. If, prior to
November 1, 2004, an Exempt Exchangeable Share Voting Event is proposed and the
holders of the Exchangeable Shares fail to take the necessary action at a
meeting or other vote of holders of Exchangeable Shares to approve or
disapprove, as applicable, the Exempt Exchangeable Share Voting Event, then the
Redemption Date shall be the Business Day following the day on which the holders
of the Exchangeable Shares failed to take such action. The Board of Directors of
Exchangeco shall give such number of days' prior written notice of such
redemption to the registered holders of the Exchangeable Shares as the board of
directors of Exchangeco may determine to be reasonably practicable in such
circumstances.
In the event that Newco acquires Exchangeable Shares pursuant to the
Retraction Call Right or the Redemption Call Right, Newco will be entitled to
exchange such Exchangeable Shares for common shares of Exchangeco on terms
approved by Exchangeco's board of directors.
See "Tax Considerations to Newcourt Shareholders - Certain Canadian
Federal Income Tax Considerations for Newcourt Shareholders" on page 102.
Voting, Dividend and Liquidation Rights of Holders of Exchangeable Shares
On the Effective Date, CIT, Exchangeco and the Trustee will enter into
the Voting and Exchange Trust Agreement in substantially the form attached
hereto as Annex H.
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Voting Rights with Respect to Exchangeco. The holders of Exchangeable
Shares are not entitled as such to receive notice of or attend any meeting of
shareholders of Exchangeco or to vote at any such meeting, except as required by
law or under the Exchangeable Share Support Agreement, the terms of the
Exchangeable Share Provisions with respect to the amendment thereof or the
Voting and Exchange Trust Agreement, subject, in each case, to the right of
Exchangeco to redeem the Exchangeable Shares in the event of a Redemption Date.
Voting Rights with Respect to CIT. Pursuant to the Voting and Exchange
Trust Agreement, CIT will issue the Special Voting Share to the Trustee for the
benefit of the holders of the Exchangeable Shares (other than CIT and its
affiliates). The Special Voting Share will have a number of votes, which may be
cast at any meeting at which CIT Stockholders are entitled to vote, equal to the
number of then outstanding Exchangeable Shares (other than Exchangeable Shares
held by CIT and its subsidiaries) at any time.
Each holder of an Exchangeable Share on the record date for any meeting
at which CIT Stockholders are entitled to vote will be entitled to instruct the
Trustee to exercise one of the votes attached to the Special Voting Share for
each Exchangeable Share held by such holder. The Trustee will exercise each vote
attached to the Special Voting Share only as directed by the relevant holder
and, in the absence of instructions from a holder as to voting, will not
exercise such votes. A holder may, upon instructing the Trustee, obtain a proxy
from the Trustee entitling the holder to vote directly at the relevant meeting
the votes attached to the Special Voting Share to which the holder is entitled.
In connection with each meeting, to the extent that the Trustee has not, upon
such instructions, signed and delivered to holders proxies as aforesaid, the
Trustee shall exercise its voting rights either by proxy or in person.
The Trustee will send to the holders of the Exchangeable Shares the
notice of any meeting at which the CIT Stockholders are entitled to vote,
together with the related meeting materials and a statement as to how the holder
may instruct the Trustee to exercise the votes attaching to the Special Voting
Share, commencing on the same day as CIT sends such notice and materials to the
CIT Stockholders. The Trustee will also send to the holders copies of all
information statements, interim and annual financial statements, reports and
other materials sent by CIT to the CIT Stockholders at the same time as such
materials are sent to the CIT stockholders. To the extent such materials are
provided to the Trustee by CIT, the Trustee will also send to the holders all
materials sent by third parties to CIT stockholders, including dissident proxy
circulars and tender and exchange offer circulars, as soon as possible after
such materials are delivered to the Trustee.
All rights of a holder of Exchangeable Shares to exercise votes
attached to the Special Voting Share will cease upon the exchange (whether by
redemption, retraction or liquidation, or through the exercise of the related
Call Rights) of all of such holder's Exchangeable Shares for CIT Common Stock.
Dividend Rights. Holders of Exchangeable Shares will be entitled to
receive, subject to applicable law and the prior rights of the Class B
Preference Shares of Exchangeco, dividends (i) in the case of a cash dividend
declared on the CIT Common Stock, in an amount in cash for each Exchangeable
Share equal to the cash dividend declared on each share of CIT Common Stock,
(ii) in the case of a stock dividend declared on the CIT Common Stock to be paid
in CIT Common Stock, in such number of Exchangeable Shares for each Exchangeable
Share as is equal to the number of shares of CIT Common Stock to be paid on each
share of CIT Common Stock or (iii) in the case of a dividend declared on the CIT
Common Stock in property other than cash or CIT Common Stock, in such type and
amount of property as is the same as, or economically equivalent to the type and
amount of property declared as a dividend on each share of CIT Common Stock.
Cash dividends on the Exchangeable Shares are payable in U.S. dollars or, at the
option of Exchangeco, the Canadian Dollar Equivalent thereof. The declaration
date, record date and payment date for dividends on the Exchangeable Shares will
be the same as the relevant date for the corresponding dividends on the CIT
Common Stock.
Liquidation Rights with Respect to Exchangeco. In the event of the
liquidation, dissolution or winding-up of Exchangeco or any other proposed
distribution of the assets of Exchangeco among its shareholders for the purpose
of winding-up its affairs, holders of the Exchangeable Shares will have, subject
to applicable law and the prior rights of the Class A Preference Shares and
Class B Preference Shares of Exchangeco, preferential rights to receive from
Exchangeco the Exchangeco Liquidation Amount for each Exchangeable Share held.
Upon the occurrence of such liquidation, dissolution or winding-up, Newco will
have an overriding Liquidation Call Right to purchase all of the outstanding
Exchangeable Shares (other than Exchangeable Shares held by CIT and its
affiliates) from the holders thereof on the effective date of such liquidation,
dissolution or winding-up for a purchase price per share equal to the Exchangeco
Liquidation Amount.
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If an Exchangeco Insolvency Event occurs and is continuing, a holder of
Exchangeable Shares will be entitled to instruct the Trustee to exercise the
Exchange Right for any or all of the Exchangeable Shares held by such holder.
Such exercise will require CIT to purchase such Exchangeable Shares. As soon as
practicable following the occurrence of an Exchangeco Insolvency Event or any
event which may, with the passage of time and/or the giving of notice, become an
Exchangeco Insolvency Event, Exchangeco and CIT will give written notice thereof
to the Trustee. As soon as practicable thereafter, the Trustee will then notify
each holder of Exchangeable Shares of such event or potential event and will
advise the holder of its rights with respect to the Exchange Right. The purchase
price payable by CIT for each Exchangeable Share purchased under the Exchange
Right will be satisfied by issuance of one share of CIT Common Stock.
Upon the occurrence of the liquidation, dissolution or winding-up of
Exchangeco or an Exchangeco Insolvency Event, holders of Exchangeable Shares
will continue to be entitled to receive from Exchangeco, on the designated
payment date, any declared but unpaid dividends on the related shares, provided
that if and to the extent the dividend is not paid by Exchangeco on the
designated payment date, then any such dividend in respect of shares purchased
by Newco (under the Liquidation Call Right) or by CIT (under the Exchange Right)
will be paid on such date by Newco or CIT, as the case may be, for and on behalf
of Exchangeco.
Liquidation Rights with Respect to CIT. In order for the holders of the
Exchangeable Shares to participate on a pro rata basis with the holders of CIT
Common Stock, on the fifth Business Day prior to the effective date of a CIT
Liquidation Event, each Exchangeable Share will, pursuant to the Automatic
Exchange Right, automatically be exchanged for an equivalent number of shares of
CIT Common Stock. Upon a holder's request and surrender of Exchangeable Share
certificates, duly endorsed in blank and accompanied by such instruments of
transfer as CIT may reasonably require, CIT will deliver to such holder
certificates representing an equivalent number of shares of CIT Common Stock
pursuant to the Automatic Exchange Right. For a description of certain CIT
obligations with respect to the dividend and liquidation rights of the holders
of Exchangeable Shares, see "- CIT Support Obligation" below.
Upon the occurrence of the Automatic Exchange Right, holders of
Exchangeable Shares will continue to be entitled to receive from Exchangeco, on
the designated payment date, any declared but unpaid dividends on the related
shares, provided that if and to the extent the dividend is not paid by
Exchangeco on the designated payment date, then any such dividend in respect of
shares purchased by CIT (under the Automatic Exchange Right) will be paid on
such date by CIT for and on behalf of Exchangeco.
Capitalization and Ranking
Immediately after the Effective Time, Exchangeco will have outstanding
common shares, all of which will be held by Newco, Class A Preference Shares,
all of which will be held by Newco, Class B Preference Shares, having a value of
approximately 2% of the value of Newcourt on August 5, 1999 and of which
approximately 79% will be held by Newco and 21% of which will be held by third
parties, and the Exchangeable Shares, all of which will have been issued to
former Newcourt Shareholders pursuant to the Transaction. The Exchangeable
Shares will rank junior to the Class A Preference Shares and Class B Preference
Shares with respect to the distribution of assets in the event of a liquidation,
dissolution or winding-up of Exchangeco, whether voluntary or involuntary and
with respect to amounts that would be required to be paid the holders of shares
that have a right to be paid on redemption but will be entitled to a preference
over the common shares of Exchangeco with respect to the distribution of assets
in the event of a liquidation, dissolution or winding-up of Exchangeco, whether
voluntary or involuntary. With respect to the payment of dividends, the
Exchangeable Shares will rank junior to the Class B Preference Shares and will
be entitled to a preference over the Class A Preference Shares and Common Shares
of Exchangeco.
Certain Restrictions
Exchangeco will not without the approval of the holders of the
Exchangeable Shares as set forth below under "- Amendment and Approval":
(a) pay any dividends on the Exchangeco common shares, Class A
Preference Shares or any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends,
other than stock dividends payable in common shares or any
such other shares ranking junior to the Exchangeable Shares,
as the case may be;
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(b) redeem, purchase or make any capital distribution in respect
of common shares of Exchangeco, or any other shares ranking
junior to the Exchangeable Shares with respect to the
distribution of assets in the event of a liquidation,
dissolution or winding-up of Exchangeco, whether voluntary or
involuntary, or any other distribution of assets of Exchangeco
among its shareholders for the purpose of winding-up its
affairs;
(c) redeem or purchase any other shares of Exchangeco ranking
equally with the Exchangeable Shares with respect to any
liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of
Exchangeco ranking equally with, or superior to, the
Exchangeable Shares other than by way of stock dividends to
the holders of such Exchangeable Shares.
The restrictions in clauses (a), (b), (c) and (d) above will not apply
at any time when dividends on the outstanding Exchangeable Shares corresponding
to dividends declared and paid on the CIT Common Stock have been paid in full
when due.
Amendment and Approval
The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed only with the approval
of the holders thereof. Any such approval or any other approval or consent to be
given by the holders of the Exchangeable Shares must be given in accordance with
applicable law and must be evidenced by a resolution passed by not less than
two-thirds of the votes cast on such resolution at a meeting of the holders of
Exchangeable Shares at which a quorum is present or represented by proxy. If no
quorum is present at such meeting within one-half hour after the time appointed
therefor, then the meeting will be adjourned to the same day, in the next week,
at the same time and place. At such adjourned meeting, if a quorum is not
present within one-half hour from the time appointed for the meeting, the
holders of Exchangeable Shares present or represented by proxy may transact the
business for which the meeting was originally called and a resolution passed at
such meeting by the affirmative vote of not less than two-thirds of the votes
cast on such resolution will constitute the approval or consent of the holders
of the Exchangeable Shares.
CIT Support Obligation
Pursuant to the Exchangeable Share Support Agreement, CIT will agree,
for so long as any Exchangeable Shares (other than Exchangeable Shares owned by
CIT or its affiliates) remain outstanding that:
(i) CIT will not declare or pay dividends on the CIT Common Stock
unless Exchangeco is able to declare and pay and
simultaneously declares or pays, as the case may be, an
equivalent dividend on the Exchangeable Shares;
(ii) CIT will advise Exchangeco in advance of the declaration of
any dividend on the CIT Common Stock and ensure that the
declaration date, record date and payment date for dividends
on the Exchangeable Shares are the same as that for the
corresponding dividend on the CIT Common Stock;
(iii) CIT will ensure that the record date for any dividend declared
on the CIT Common Stock is not less than ten Business Days
after the declaration date of such dividend;
(iv) CIT will take all actions and do all things reasonably
necessary or desirable to enable and permit Exchangeco, in
accordance with applicable law, to pay to the holders of the
Exchangeable Shares all dividends declared on the Exchangeable
Shares and the applicable Exchangeco Liquidation Amount,
Redemption Price and Retraction Price in the event of a
liquidation, dissolution or winding-up of Exchangeco, a
Retraction Request by a holder of Exchangeable Shares or a
redemption of Exchangeable Shares by Exchangeco; and
(v) CIT will take all actions and do all things reasonably
necessary or desirable to enable and permit Newco, in
accordance with applicable law, to perform its obligations
arising upon the exercise by it of the Call Rights, including
the delivery of CIT Common Stock in accordance with the
provisions of the applicable Call Right.
The Exchangeable Share Support Agreement and the Exchangeable Share
Provisions provide that, without the prior approval of Exchangeco and the
holders of the Exchangeable Shares as set forth above under "- Amendment and
Approval," CIT will not issue or distribute additional shares of CIT Common
Stock, securities
90
exchangeable for or convertible into or carrying rights to acquire CIT Common
Stock or rights to subscribe therefor or other assets to all or substantially
all holders of CIT Common Stock, nor change the CIT Common Stock, unless the
same or an economically equivalent distribution on or change to the Exchangeable
Shares (or in the rights of the holders thereof) is made simultaneously. The
Exchangeco Board of Directors is empowered to conclusively determine in good
faith and in its sole discretion whether any corresponding distribution on or
change to the Exchangeable Shares is the same as or economically equivalent to
any proposed distribution on or change to the CIT Common Stock.
In the event of any proposed tender offer, share exchange offer, issuer
bid, take-over bid or similar transaction with respect to CIT Common Stock, the
acceptance of which is recommended by the CIT Board of Directors and in
connection with which the Exchangeable Shares are not redeemed by Exchangeco or
purchased by Newco pursuant to the Redemption Call Right, CIT will use
reasonable efforts to take all actions necessary or desirable to enable holders
of Exchangeable Shares to participate in such transaction to the same extent and
on an economically equivalent basis as the CIT Stockholders.
Exchangeco is required to notify CIT and Newco of the occurrence of
certain events, such as the liquidation, dissolution or winding-up of
Exchangeco, Exchangeco's receipt of a Retraction Request from a holder of
Exchangeable Shares and the issuance of a notice of redemption by Exchangeco.
Under the Exchangeable Share Support Agreement, CIT has agreed not to
exercise any voting rights attached to the Exchangeable Shares owned by it or
any of its affiliates on any matter considered at meetings of holders of
Exchangeable Shares. CIT has also agreed to use its reasonable efforts to enable
Exchangeco to maintain a listing for the Exchangeable Shares on The Toronto
Stock Exchange.
With the exception of administrative changes for the purpose of adding
covenants for the protection of the holders of the Exchangeable Shares, making
certain necessary amendments or curing ambiguities or clerical errors (in each
case provided that the Board of Directors of each of CIT, Exchangeco and Newco
are of the opinion that such amendments are not prejudicial to the interests of
the holders of the Exchangeable Shares), the Exchangeable Share Support
Agreement may not be amended or modified without the approval of the holders of
the Exchangeable Shares as set forth above under "- Transaction Mechanics and
Description of Exchangeable Shares - Amendment and Approval" on page 90.
Newcourt Options
At the Effective Time, each Newcourt Option will be exchanged for a
Transition Option to purchase a number of shares of CIT Common Stock equal to
the product of the Exchange Ratio multiplied by the number of Newcourt Common
Shares subject to such Newcourt Option (rounded down to a whole number of
shares). The Transition Option will provide for an exercise price per share of
CIT Common Stock equal to the exercise price per Newcourt Common Share of such
Newcourt Option immediately prior to the Effective Time divided by the Exchange
Ratio (rounded up to the nearest cent).
Court Approval of the Plan of Arrangement and Completion of the Transaction
Under the Business Corporations Act (Ontario), the Plan of Arrangement
requires approval by the Superior Court of Justice (Ontario). Prior to the
mailing of this Joint Proxy Statement, Newcourt obtained the Interim Order
providing for the calling and holding of the Newcourt Shareholders Meeting and
other procedural matters. A copy of the Interim Order is attached hereto in
Annex C. The Notice of Application for the Final Order also appears in Annex D.
Subject to the approval of the Arrangement Resolution by the Newcourt
Shareholders at the Newcourt Shareholders Meeting, the hearing in respect of the
Final Order is scheduled to take place on October 27, 1999 at 10:00 a.m.
(Toronto time) in the Superior Court of Justice (Ontario) at 393 University
Ave., Toronto, Ontario. In deciding whether to grant the Final Order, the
Superior Court of Justice (Ontario) will conduct a hearing on, among other
things, the fairness of the terms and conditions of the Transaction. Newcourt
Shareholders who wish to appear or be represented and to present evidence or
arguments must serve and file a notice of appearance as set out in the Notice of
Application for the Final Order and satisfy any other requirements of the
Superior Court of Justice (Ontario). The Superior Court of Justice (Ontario)
will consider, among other things, the fairness and reasonableness of the Plan
of Arrangement. The Superior Court of Justice (Ontario) may
91
approve the Plan of Arrangement in any manner it may direct, subject to
compliance with such terms and conditions, if any, as it deems fit.
Assuming the Final Order is granted and the other conditions to closing
contained in the Reorganization Agreement are satisfied or waived, it is
anticipated that the following will occur simultaneously at closing: Articles of
Arrangement for Newcourt will be filed with the Director under the Business
Corporations Act (Ontario) to give effect to the Plan of Arrangement; the Voting
and Exchange Trust Agreement and Exchangeable Share Support Agreement will be
executed and delivered; and the various other documents necessary to complete
the transactions contemplated under the Reorganization Agreement will be
executed and delivered.
Since the Transaction is subject to various regulatory approvals beyond
the control of the parties to the Transaction, it is not possible to specify
exactly when the Closing will occur. See "The Transaction - Regulatory Matters"
on page 95. However, CIT and Newcourt currently anticipate that the date of
Closing will occur in the fourth quarter of 1999.
Procedures for Exchange of Newcourt Share Certificates by Newcourt Shareholders
Enclosed with this Joint Proxy Statement is a Letter of Transmittal and
Election Form which is being delivered to the registered Newcourt Shareholders.
The Letter of Transmittal and Election Form, when properly completed and duly
executed and returned together with a certificate or certificates for Newcourt
Common Shares and all other required documents, will enable each Newcourt
Shareholder that is an Eligible Electing Holder to obtain, at its election, a
certificate for that number of such Exchangeable Shares or shares of CIT Common
Stock equal to the number of such Newcourt Common Shares held by such Newcourt
Shareholder multiplied by the Exchange Ratio (subject to adjustment for
fractional shares, as discussed above). Newcourt Shareholders who are not
Eligible Electing Holders or who are Eligible Electing Holders who have not made
a valid election pursuant to the Letter of Transmittal and Election Form to
receive Exchangeable Shares (other than CIT and its subsidiaries and affiliates
and Dissenting Shareholders who are ultimately entitled to be paid the fair
value of their Newcourt Common Shares) will receive certificates for that number
of shares of CIT Common Stock equal to the number of their Newcourt Common
Shares multiplied by the Exchange Ratio (subject to adjustment for fractional
shares). See "- Transaction Mechanics and Description of Exchangeable Shares" on
page 84.
Any use of the mail to transmit a certificate for Newcourt Common
Shares and a related Letter of Transmittal and Election Form is at the risk of
the Newcourt Shareholder. If these documents are mailed, we recommend that
registered mail, with return receipt requested, properly insured, be used.
Certificates representing the appropriate number of Exchangeable Shares
and/or shares of CIT Common Stock issuable to a former holder of Newcourt Common
Shares who has complied with the procedures set out above, together with a check
in the amount, if any, payable instead of fractional Exchangeable Shares and/or
shares of CIT Common Stock will, within 15 Business Days after the Effective
Date (i) be forwarded to the holder at the address specified in the Letter of
Transmittal and Election Form by insured first class mail, or (ii) be made
available at the offices of Montreal Trust Company at 151 Front Street West,
Eighth Floor, Toronto, Ontario M5J 2N1 for pick-up by the holder as requested by
the holder in the Letter of Transmittal and Election Form.
Where a certificate for Newcourt Common Shares has been destroyed, lost
or mislaid, the registered holder of that certificate should immediately contact
Montreal Trust Company of Canada at (416) 931-9596 in the Toronto area, or toll
free at (800) 663-9097, regarding the issuance of a replacement certificate upon
the holder satisfying such requirements as may be imposed by Newcourt in
connection with issuance of the replacement certificate.
Procedure for Making a Joint Tax Election
As discussed below under "Tax Considerations to Newcourt Shareholders -
Newcourt Shareholders Resident in Canada" on page 102, an Eligible Holder who
exchanges Newcourt Common Share for Exchangeable Shares and Ancillary Rights may
make a joint election with Exchangeco pursuant to Section 85 of the Income Tax
Act (Canada).
For this purpose, a Tax Election Filing Package may be obtained from
the Depositary by checking the appropriate box on the Letter of Transmittal and
Election Form. The election forms may also be obtained directly from Revenue
Canada and (if applicable) the appropriate provincial election forms may be
obtained from the relevant provincial income tax authorities. An Eligible Holder
interested in obtaining a Tax Election
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Filing Package should so indicate on the Letter of Transmittal and Election Form
accompanying this Joint Proxy Statement in the space provided therein.
In order to make a joint tax election, a duly completed Tax Election
Filing Package together with any required supporting schedules must be signed
and forwarded by the Eligible Holder to KPMG LLP, Chartered Accountants, at its
address at the attention of Mr. Michael Stewart, KPMG LLP, P.O. Box 31, STN
Commerce Court, Toronto, Ontario M5L 1B2 on or before the Tax Election Date.
Exchangeco will not execute any tax election received by KPMG after the Tax
Election Date. The Tax Election Filing Package consists of:
(a) two (2) copies of Revenue Canada form T2057 or, if the Eligible
Holder is a partnership as indicated on the Letter of
Transmittal and Election Form, two (2) copies of Revenue Canada
form T2058;
(b) if the Eligible Holder is required to file in Quebec as
indicated by the Eligible Holder on the Letter of Transmittal
and Election Form, then two (2) copies of the Quebec Tax
Election Form TP-518V or, if the Eligible Holder is a
partnership as indicated on the Letter of Transmittal and
Election Form, three (3) copies of Quebec Tax Election Form
TP-529V; and
(c) a tax election filing authorization letter (in duplicate if the
Eligible Holder is required to file in Quebec as indicated on
the Letter of Transmittal and Election Form).
Where Newcourt Common Shares are held in joint ownership and two or
more of the co-owners wish to elect, one of the co-owners designated for such
purpose should file the designation and a copy of the Revenue Canada form T2057
(and, where applicable, the corresponding provincial form) for each co-owner
along with a list of all co-owners electing, which list should contain the
address and social insurance number or tax account number of each co-owner.
Where the Newcourt Common Shares are held as partnership property, a partner
designated by the partnership must file one copy of Revenue Canada form T2058 on
behalf of all members of the partnership (and, where applicable, the
corresponding form in duplicate with the provincial taxation authorities). Such
Revenue Canada formT2058 (and provincial form, if applicable) must be
accompanied by a list containing the name and social insurance number or account
number of each partner and must be signed by each partner or be accompanied by a
copy of the document authorizing the designated partner to complete, execute and
file the form on behalf of the other partners.
Exchangeco will make a joint tax election under subsection 85(1) or (2)
of the Income tax Act (Canada) and the corresponding provisions of any
applicable provincial tax legislation only with an Eligible Holder, and at the
amount(s) determined by the Eligible Holder subject to the limitations set out
in subsections 85(1) and (2) of the Income Tax Act (Canada) and any applicable
provincial tax statute. Exchangeco agrees only to execute any joint tax election
and to forward such tax election by mail (within 30 days after the receipt
thereof by KPMG) to the appropriate tax authorities with a copy to the Eligible
Holder. With the exception of execution and filing of the election by
Exchangeco, compliance with the requirements to ensure the validity of a joint
tax election will be the sole responsibility of the Eligible Holder making the
election. Exchangeco and KPMG will not be responsible for the proper completion
of any joint tax election, and the Eligible Holder will be solely responsible
for the payment of any late filing penalty that does not result from a failure
on the part of Exchangeco. Accordingly, Exchangeco and KPMG will not be
responsible or liable for taxes, interest, penalties, damages or expenses
resulting from the failure by anyone to properly complete any joint tax election
form or to properly file such form within the time prescribed and in the form
prescribed under the Income Tax Act (Canada) or the corresponding provisions of
any applicable provincial legislation.
In order for Revenue Canada (or, in respect of a provincial election,
the provincial tax authority) to accept the joint tax election without a late
filing penalty being payable by an Eligible Holder, the joint tax election, duly
completed and executed by both the Eligible Holder and Exchangeco, must be
received by Revenue Canada (or applicable provincial tax authority) on or before
the day that is the earliest of the days on or before which either Exchangeco or
the Eligible Holder is required to file an income tax return for the taxation
year in which the disposition occurs (the deadline may be later in the case of a
Quebec election). Exchangeco has advised counsel that its taxation year is
scheduled to end on December 31 of each year. Exchangeco will be required to
file an income tax return for each taxation year on or before June 30 of the
following year. In general, the joint tax elections of Eligible Holders who are
individuals (other than trusts) must be filed for each year by April 30 of the
following year. Accordingly, if the Effective Date is in 1999, the relevant
income tax
93
return would have to be filed by Exchangeco on or before June 30, 2000 and, in
the case of Eligible Holders who are individuals (other than trusts), the joint
tax election would have to be filed before April 30, 2000. However, regardless
of such deadline, the Tax Election Filing Packages of Eligible Holders must be
received by KPMG no later than the Tax Election Date (i.e., the later of March
1, 2000 and 75 days after the Effective Date). Certain Eligible Holders may be
required to forward their Tax Election Filing Package to KPMG before that date
to avoid late filing penalties. If, for whatever reason, the current taxation
year of Exchangeco were to terminate before December 31 of the year in which the
Effective Date occurs, the joint tax elections might have to be filed earlier to
avoid late filing penalties. In such event, Exchangeco has agreed to notify
forthwith, through the Depositary, every Newcourt Shareholder who received
Exchangeable Shares under the Plan of Arrangement of such change. Eligible
Holders are urged to consult their own advisors as soon as possible regarding
the deadlines appropriate to their circumstances. Any Eligible Holder who does
not ensure that KPMG has received a duly completed Tax Election Filing Package
on or before the Tax Election Date, will not be able to benefit from the
rollover provisions of the Income Tax Act (Canada) or any provincial tax
legislation. Accordingly, all Eligible Holders who wish to enter into a joint
election with Exchangeco should give their immediate attention to this matter.
The instruction for requesting a Tax Election Filing Package are set out in the
Letter of Transmittal and Election Form.
Eligible Holders are referred to Information Circular 76-19R3 and
Interpretation Bulletin IT-291R2 issued by Revenue Canada, and where relevant,
to Bulletin IMP-518-2R1 issued by the Ministere du Revenu du Quebec, for further
information respecting the election. Eligible Holders wishing to make the
election should consult their own tax advisors. The comments herein with respect
to such elections are provided for general assistance only. The law in this area
is complex and contains numerous technical requirements. Compliance with such
requirements to ensure the validity of the joint tax election will be the sole
responsibility of the Eligible Holder. See also "Tax Considerations to Newcourt
Shareholders - Newcourt Shareholders Resident in Canada" on page 102.
Stock Exchange Listings
Exchangeable Shares
The completion of the Transaction is subject to a condition that the
Exchangeable Shares are to be listed on The Toronto Stock Exchange. The Toronto
Stock Exchange has been notified of the proposed Transaction. The Toronto Stock
Exchange has conditionally approved the listing of the Exchangeable Shares,
subject to the usual conditions. There is no intention to list the Exchangeable
Shares on any other stock exchange in Canada, the United States or any other
jurisdiction. Newcourt Common Shares will be immediately delisted from The
Toronto Stock Exchange, the Montreal Exchange and the New York Stock Exchange
upon completion of the Transaction.
CIT Common Stock
The CIT Common Stock is traded on the New York Stock Exchange under the
symbol "CIT". The completion of the Transaction is subject to the condition that
the CIT Common Stock shall be listed on The Toronto Stock Exchange and the
shares of CIT Common Stock to be issued pursuant to the Stock Issuance Proposal
and the conversion of Exchangeable Shares and the exercise of the options shall
be listed on the New York Stock Exchange and The Toronto Stock Exchange. The
Toronto Stock Exchange has conditionally approved the listing of the CIT Common
Stock, subject to the usual conditions.
Eligibility for Investment in Canada
If the Transaction were to become effective on the date hereof, the
Exchangeable Shares would be permissible investments under the following
statutes (and, where applicable, the regulations thereunder):
Insurance Companies Act (Canada)
Pension Benefits Standards Act, 1985 (Canada)
Trust and Loan Companies Act (Canada)
Loan and Trust Corporations Act (Ontario)
Pension Benefits Act (Ontario)
94
subject to compliance with the prudent investment standards and general
investment provisions and restrictions of the statutes referred to above (and,
where applicable, the regulations thereunder) and, in certain cases, subject to
the satisfaction of additional requirements relating to investment or lending
policies or goals and, in certain cases, the filing of such policies or goals.
In the opinion of Blake, Cassels & Graydon, Canadian counsel to
Newcourt, and Goodman Phillips & Vineberg, Canadian counsel to CIT, if the
Transaction were to become effective on the date hereof, provided the
Exchangeable Shares were listed on a prescribed stock exchange in Canada (which
includes The Toronto Stock Exchange), the Exchangeable Shares would be qualified
investments under the Income Tax Act (Canada) for trusts governed by registered
retirement savings plans, registered retirement income funds, registered
education savings plans and deferred profit sharing plans under the Income Tax
Act (Canada). If the Transaction were to become effective on the date hereof,
CIT Common Stock would be a qualified investment under the Income Tax Act
(Canada) for such plans, provided such shares were listed on a prescribed stock
exchange in Canada or the United States (which includes The Toronto Stock
Exchange and the New York Stock Exchange).
If the Transaction were to become effective on the date hereof, the
Exchangeable Shares would not be foreign property under the Income Tax Act
(Canada) for trusts governed by registered pension plans, registered retirement
savings plans, registered retirement income funds, deferred profit sharing plans
and for certain other Persons to whom Part XI of the Income Tax Act (Canada) is
applicable. CIT Common Stock will be foreign property under the Income Tax Act
(Canada). The Ancillary Rights will not be qualified investments and will
constitute foreign property under the Income Tax Act (Canada). CIBC World
Markets is of the view, however, that the fair market value of the Ancillary
Rights is nominal.
Regulatory Matters
The obligations of each of CIT and Newcourt to complete the Transaction
are subject to the receipt of the Primary Approvals, without the imposition of
any condition or restriction that would materially adversely affect the
contemplated economic or business benefits of the Transaction so as to render
inadvisable, in the reasonable judgment of CIT or Newcourt, the completion of
the Transaction. Also, CIT and Newcourt have agreed not to complete the
Transaction without the consent of DKB if the approval by U.S. or Canadian
regulatory authorities of the Transaction imposes any new condition or
restriction on DKB or its subsidiaries (excluding CIT, Newcourt and their
respective subsidiaries), or if any Japanese regulatory authority imposes any
requirement on DKB with respect to the Transaction that would reasonably be
expected to have a Material Adverse Effect on the business or financial
condition of DKB and its subsidiaries (excluding CIT, Newcourt and their
respective subsidiaries) taken as a whole. Neither CIT nor Newcourt is aware of
any material licenses or regulatory permits that it holds which might be
adversely affected by the Transaction or of any material approval or other
action by any federal, provincial, state or foreign government or any
administrative or regulatory agency that would be required to be obtained prior
to the Effective Date, except as described below.
Bank Act (Canada)
Under the Bank Act (Canada), the Transaction may not be completed
without the consent of the Minister of Finance for Canada.
The Bank Act (Canada) provides that a foreign bank may not, without the
consent of the Minister of Finance, complete certain transactions if to do so
would result in, among other things, either (i) a Canadian entity that is
primarily engaged in dealing in securities or (ii) subject to certain
exceptions, a Canadian entity that has as its principal activity in Canada
providing any services that a bank is permitted to provide in Canada, becoming a
non-bank affiliate of a foreign bank for the purposes of the Bank Act (Canada).
CIT, by the nature of its business, is a foreign bank for purposes of the Bank
Act (Canada). The completion of the Transaction will result in Newcourt and all
of Newcourt's Canadian subsidiaries becoming non-bank affiliates of CIT. One of
Newcourt's Canadian subsidiaries, Newcourt Securities Inc., is a securities
dealer, and many of Newcourt's Canadian subsidiaries have as their principal
activities in Canada the provision of services that a bank is permitted to
provide in Canada. Accordingly, under the Bank Act (Canada), the Transaction may
not be completed without the consent of the Minister of Finance.
If, upon completion of the Transaction, DKB has any direct or indirect
influence that, if exercised, would result in control in fact of CIT, the Bank
Act (Canada) provides that the Transaction may not be completed
95
without the receipt by DKB of (i) certain additional consents and approvals, or
(ii) relief from the requirement to obtain such consents and approvals.
On August 16, 1999, CIT applied for the consents and, if necessary,
relief referred to above. The consents and, if necessary, relief under the
Bank Act (Canada) have not yet been given.
Federal Reserve
The BHC Act and Federal Reserve regulations require DKB to obtain the
approval of the Federal Reserve before DKB may engage directly or through a
subsidiary in new activities or make an acquisition. On April 28, 1999, DKB
filed a Notice with the Federal Reserve requesting such an approval. On August
23, 1999, DKB filed an additional submission with the Federal Reserve in
connection with this request. The Federal Reserve will only give its approval if
it determines that the activities in which Newcourt will engage after the
completion of the Transaction are "so closely related to banking or managing or
controlling banks as to be a proper incident thereto" or are permitted under
certain other exemptions from the restrictions of the BHC Act. Any activities of
Newcourt which are determined by the Federal Reserve to be impermissible
generally would have to be divested or restructured. The Federal Reserve will
also consider whether the proposed activities can reasonably be expected to
produce benefits to the public that outweigh any possible adverse effects.
Competition Act (Canada)
The Transaction is subject to the premerger notification provisions of
Part IX of the Competition Act (Canada). The Transaction may not be completed
until the earlier of (i) the making of a short-form filing under Part IX of the
Act, the expiration of the relevant waiting period and the issuance of a
"no-action" letter, or (ii) the issuance of an advance ruling certificate under
section 102 of the Act. On May 4, 1999, the parties made a short-form filing
under Part IX of the Act. On August 17, 1999, CIT applied for an advance ruling
certificate. The waiting period in respect of the short-form filing expired on
May 11, 1999. An advance ruling certificate was issued on August 20, 1999.
Investment Canada Act (Canada)
The Investment Canada Act (Canada) is Canada's statute of general
application governing the acquisition of control of Canadian businesses by
non-Canadians. The provisions of the Bank Act (Canada) referred to above
displace the operation of the Investment Canada Act in certain circumstances. In
light of these provisions, at the request of the parties the Investment Review
Division of Industry Canada, which administers the Investment Canada Act, has
clarified that only certain Newcourt entities are subject to the Act. Since the
combined asset value of those entities falls below the applicable threshold, the
Transaction is not subject to review and approval under the Act.
Australia
DKB is required to notify the Australian Prudential Regulation
Authority of the Transaction before its implementation. The notification
includes information requested by the Australian Prudential Regulation
Authority, including the particulars of the Plan of Arrangement and information
about Newcourt's Australian subsidiaries. In addition, CIT and Newcourt have
applied for clearance for the Transaction from the Foreign Investment Review
Board of Australia under the Foreign Acquisitions and Takeovers Act 1975 of
Australia and the Foreign Investment Policy of the Australian Government.
DKB, CIT and Newcourt have filed the notifications/applications
referred to above. The Foreign Investment Review Board of Australia has notified
CIT that it will not object to the consummation of the Transaction.
Ireland
CIT and Newcourt are each required to provide notice of the Transaction
to the Irish Department of Enterprise, Trade and Employment (the "Department")
pursuant to Section 5 of the Mergers Takeovers and Monopolies (Control) Act
1978. The notification has been made jointly by CIT and Newcourt seeking
confirmation that the relevant financial thresholds are not exceeded in respect
of Irish activities of CIT and Newcourt. It is anticipated that the Department
will issue a statement that it does not require additional
96
notification of the Transaction and that the Department does not intend to issue
a prohibition order or an order imposing any conditions on the Transaction.
Germany
DKB is not required to notify or file for approval of the Transaction
with German regulatory agencies. Other than receiving clearance for the
Transaction from the German Federal Cartel Office, CIT and Newcourt are not
required to notify or file for approval of the Transaction with any other German
regulatory agencies. Application to the German Federal Cartel Office was
prepared and submitted by German counsel to Newcourt on behalf of Newcourt and
in agreement with CIT. The German Federal Cartel Office has advised CIT and
Newcourt that it has no objection to the Transaction.
Singapore
DKB is required to notify the Monetary Authority of Singapore ("MAS")
before it consummates the Transaction. DKB has notified the MAS of its
intention to enter into the Transaction and obtained confirmation that approval
is not necessary.
Mexico
Pursuant to the Federal Commission of Competition and its Regulations,
CIT and Newcourt provided notice of the Transaction June 4, 1999, to the Federal
Commission of Competition. The notification includes relevant information about
the Plan of Arrangement and information about the Mexican subsidiaries and
affiliates of CIT and Newcourt. The Commission has notified the companies that
it will not object to the consummation of the Transaction. It is also
recommended that the Mexican subsidiaries and affiliates of CIT and Newcourt
that are authorized to act as auxiliary credit institutions pursuant to the
General Law of Credit Organizations and Auxiliary Credit Activities may also be
required to inform the Ministry of Finance and Public Credit of the Transaction
post-closing.
France
An application has been filed by CIT and Newcourt to the Credit
Institution Committee of the Bank of France advising the Bank of France of the
change in ownership of the share capital of Newcourt Credit Group Inc. The Bank
of France has notified the companies that it will not object to the consummation
of the Transaction. There is no specific requirement for DKB to notify the
French banking authorities prior to the implementation of the Transaction.
Securities Regulatory Authorities and Stock Exchanges
The obligations of CIT and Newcourt to complete the Transaction are
subject to the condition that the necessary securities regulatory and stock
exchange approvals are granted. Newcourt will apply to applicable Canadian
securities regulatory authorities for approval of the change in control of
Newcourt Securities Inc., a registered securities dealer under Canadian
securities laws, resulting from the completion of the Transaction.
Rulings or orders of the securities regulatory authorities of certain
Provinces in Canada are necessary to permit the issuance of the Exchangeable
Shares or the CIT Common Stock issuable under the Arrangement, upon the exchange
of Exchangeable Shares and upon the exercise of the Transition Options.
Exemption orders or rulings are also necessary in order to permit the resale of
those shares in various jurisdictions without restriction by persons other than
a "control person" provided that no unusual effort is made to prepare the market
for any such resale or to create a demand for the securities which are the
subject of any such resale. Also, exemptions or orders are required with respect
to certain take-over bid requirements in certain provinces in Canada. See "-
Resale of Exchangeable Shares and CIT Common Stock Received in the Transaction -
Canada" on page 100. CIT, Newco and Exchangeco will apply for such rulings or
orders of the relevant securities regulatory authorities in Canada. Further
filings, authorizations, orders and approvals may be required under the Business
Corporations Act (Ontario) and applicable federal, provincial or state
securities laws and the rules of The Toronto Stock Exchange and the New York
Stock Exchange. CIT and Newcourt have applied or will apply for any and all such
filings, authorizations, orders or approvals as may be required.
97
Regulation of the Combined Company's Business Operations
Federal Reserve
Because of DKB's ownership, CIT is subject to certain provisions of the
BHC Act and is subject to examination by the Federal Reserve. In general, the
BHC Act limits the activities in which a bank holding company and its
subsidiaries may engage to those of banking or managing or controlling banks or
performing services for their subsidiaries and to continuing activities which
the Federal Reserve has determined to be "so closely related to banking or
managing or controlling banks as to be a proper incident thereto." CIT's current
principal business activities constitute permissible activities for a nonbank
subsidiary of a bank holding company. CIT cannot engage in new activities or
acquire securities or assets of another company unless:
o the new activity or the activity of the other company is one that the
Federal Reserve has determined to be closely related to banking; and
o CIT has obtained the approval of the Federal Reserve to engage in that
activity or to acquire the securities or assets of the other company.
To obtain the Federal Reserve's approval, DKB must submit an
application to the Federal Reserve that provides information both about the
proposed activity or acquisition and about the financial condition and
operations of DKB and CIT.
Japanese Banking Law
Because of DKB's ownership of CIT's common stock, Japanese banking laws
and regulations also affect CIT's permissible activities.
CIT has entered into a regulatory agreement with DKB in order to
facilitate DKB's compliance with applicable U.S. and Japanese banking laws and
regulations. This regulatory agreement prohibits CIT from engaging in any new
activity or entering into any transaction for which prior approval, notice, or
filing is required under these laws and regulations, unless CIT or DKB obtains
the required approval, CIT or DKB gives prior notice, or CIT or DKB makes the
required filings. This regulatory agreement also prohibits CIT from engaging in
any activity that would cause DKB, CIT or any affiliate of DKB or CIT to violate
any of these laws or regulations. If, at any time, DKB determines that any of
CIT's activities are prohibited by these laws and regulations, CIT is required
to take all reasonable steps to cease those activities.
Canadian Law
Upon completion of the Transaction, CIT's operations in Canada will be
a continuation of the current Newcourt operations in Canada. If the consents
and, if necessary, relief applied for by CIT under the Bank Act (Canada) are
granted, such operations will not be subject to examination or supervision by
Canadian banking regulatory authorities but will otherwise be subject to laws of
general application to commercial and consumer financing, including laws
relating specifically to the protection of consumers.
New York Banking Law
Two of CIT's subsidiaries are investment companies organized under
Article XII of the New York Banking Law. New York's banking laws govern the
activities of these subsidiaries and state banking regulators examine these
subsidiaries. New York's banking laws also require that any person or entity
seeking to purchase "control" of CIT would be required to apply for and obtain
the prior approval of the New York Superintendent of Banks. "Control" is
presumed to exist if a person or entity would, directly or indirectly, own,
control, or hold (with power to vote) 10% or more of CIT's voting stock.
Additional Governmental Regulations
CIT's operations are subject, in certain instances, and following the
Transaction, the combined company's operations will be subject, in certain
instances, to supervision and regulation by governmental authorities in various
jurisdictions (including the U.S. and other countries where CIT engages in
business and, following the Transaction, where the combined company will engage
in business, and the respective states and political subdivisions of the U.S.
and such other countries) and may be subject to various laws and judicial and
administrative decisions of these jurisdictions imposing various requirements
and restrictions. Among other things, these laws, regulations, and decisions:
98
o regulate credit granting activities;
o establish maximum interest rates, finance charges, and other
charges;
o regulate customers' insurance coverages;
o require disclosures to customers;
o govern secured transactions; and
o set collection, foreclosure, repossession, and claims handling
procedures and other trade practices.
Depending on the provisions of the applicable law and the specific
facts and circumstances involved, violations of these laws may limit CIT's
ability to collect all or part of the principal of or interest on applicable
loans, may entitle the borrower to rescind the loan and any mortgage, or to
obtain a refund of amounts previously paid and, in addition, could subject us to
damages and administrative sanctions.
This regulation is primarily for the benefit and protection of CIT's
customers and not for the benefit of investors. This regulation could limit
CIT's discretion in operating CIT's businesses. No assurance can be given that
applicable laws or regulations will not be amended or construed differently,
that new laws and regulations will not be adopted, or that interest rates we
charge will not rise to maximum levels, any of which could adversely affect
CIT's business or results of operations.
Accounting Treatment
Under Accounting Principles Board Opinion No. 16, the accounting for
the Transaction will follow the purchase method of accounting, where the assets
and liabilities of the acquired company are recorded at fair value by the
acquiring company. Any excess of purchase price over the fair value of the net
assets acquired will be treated as goodwill.
Resale of Exchangeable Shares and CIT Common Stock Received in the Transaction
United States
The issuance of Exchangeable Shares and shares of CIT Common Stock to
Newcourt Shareholders will not be registered under the Securities Act. Such
shares will instead be issued in reliance upon the exemption provided by Section
3(a)(10) of the Securities Act. Section 3(a)(10) exempts securities issued in
exchange for one or more outstanding securities from the general requirement of
registration where the terms and conditions of the issuance and exchange of such
securities have been approved by any court of competent jurisdiction, after a
hearing upon the fairness of the terms and conditions of the issuance and
exchange at which all Persons to whom such securities will be issued have the
right to appear. The Superior Court of Justice (Ontario) is authorized to
determine the fairness of the terms and conditions of the Plan of Arrangement,
including the proposed issuance of securities in exchange for other outstanding
securities. The Superior Court of Justice (Ontario) entered the Interim Order on
September 20, 1999. Subject to the approval of the Arrangement Resolution by the
Newcourt Shareholders, a hearing on the fairness of the Plan of Arrangement will
be held on October 27, 1999 by the Superior Court of Justice (Ontario). See "-
Court Approval of the Plan of Arrangement and Completion of the Transaction" on
page 91.
The Exchangeable Shares and the shares of CIT Common Stock received in
exchange for Newcourt Common Shares in the Transaction will be freely
transferable under U.S. federal securities laws, except for Exchangeable Shares
and shares of CIT Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of Newcourt
prior to the Transaction. Such shares received by any such affiliates may be
resold by them only (i) in transactions permitted by the resale provisions of
(A) Rule 145(d)(1), (2), or (3) promulgated under the Securities Act, or (B)
Rule 903 or Rule 904 of Regulation S under the Securities Act, if available, or
(ii) as otherwise permitted under the Securities Act. Rule 145(d)(1) generally
provides that "affiliates" of either Newcourt or CIT may not sell securities of
CIT received in the Transaction unless such sale is effected pursuant to an
effective registration statement or in accordance with the volume, current
public information, manner of sale and timing limitations of Rule 144. These
limitations generally require that any sales made by an affiliate in any
three-month period shall not exceed the greater of 1% of the number of
outstanding shares in the class of securities being sold or the average weekly
trading volume over the four calendar weeks preceding the placement of the sell
order and that such sales be made in unsolicited, open market "broker
transactions." Rules 145(d)(2) and (3) generally provide that the foregoing
limitations lapse for
99
non-affiliates of CIT after a period of one or two years, respectively,
depending upon whether certain currently available information continues to be
available with respect to CIT. Under Rule 904, persons who are not "affiliates"
of CIT (or who are affiliates of CIT solely by virtue of holding a position as
an officer or director of CIT) may sell Exchangeable Shares and shares of CIT
Common Stock if no "directed selling efforts" (as defined in Rule 902 of
Regulation S) are made by the seller or any of its affiliates or any person
acting on their behalf, no offer is made to a person in the United States, and
either (i) at the time the buy order is originated, the buyer is outside the
United States, or the seller and any person acting on behalf of the seller
reasonably believes the buyer is outside the United States or (ii) the
transaction is executed in, on or through the facility of the TSE and neither
the seller nor any person acting on behalf of the seller knows that the
transaction has been pre-arranged with a buyer in the United States. In the case
of sales by a person who is an officer or director of CIT and is an affiliate of
CIT solely by virtue of holding that position, no selling concession, fee or
other remuneration may be paid in connection with the offer or sale other than
the usual and customary broker's commission that would be received by a person
executing the transaction as agent. Additional conditions apply to resales by
persons who are affiliates of CIT other than by virtue of holding a position as
an officer or director of CIT.
Persons who may be deemed to be affiliates of a company generally
include individuals or entities that control, are controlled by, or are under
common control with, such company, and may include certain officers and
directors of such company as well as principal shareholders of such company.
CIT has agreed that the issuance of CIT Common Stock from time to time
in exchange for the Exchangeable Shares will be registered under the Securities
Act prior to the Effective Time. Accordingly, such shares of CIT Common Stock
will be freely transferable under U.S. federal securities laws, except for the
restrictions on resale of CIT Common Stock held by affiliates of CIT discussed
above.
Canada
CIT, Exchangeco and Newco have applied for rulings or orders of certain
securities regulatory authorities in Canada to permit the issuance of the
Exchangeable Shares and the shares of CIT Common Stock, in each case, issuable
under the Reorganization Agreement, upon exchange of Exchangeable Shares and
upon exercise of Transition Options. Application has been made to permit resale
of those shares in various jurisdictions without restriction by Persons other
than a "control person," provided that no unusual effort is made to prepare the
market for any such resale or to create a demand for the securities which are
the subject of any such resale and no extraordinary commission or consideration
is paid in respect thereof.
Ongoing Canadian Reporting Obligations
Upon completion of the Transaction, Exchangeco will be an indirect
subsidiary of CIT. Exchangeco will be a reporting issuer or the equivalent
designation under applicable securities laws of certain Canadian provinces
requiring, among other things, that such an issuer must comply with financial
reporting requirements and that insiders of Exchangeco comply with insider
reporting requirements. Applications have been made or will be made for
exemptions from the financial and insider reporting requirements of applicable
Canadian provincial securities laws, on the condition that CIT continues to file
with the relevant securities regulatory authorities copies of certain of its
reports filed with the SEC and that holders of Exchangeable Shares receive
certain materials that are sent to holders of CIT Common Stock, including annual
and interim financial statements of CIT and stockholder meeting materials.
After the Effective Time, and subject to Exchangeco obtaining the
above-described reporting exemptions, holders of Exchangeable Shares will
receive annual and interim financial statements of CIT in lieu of financial
statements of Exchangeco.
Canadian Mutual Funds
Upon completion of the Transaction, certain Canadian mutual funds that
are currently Newcourt Shareholders may hold more than 10% of the outstanding
Exchangeable Shares. An application was filed by Newcourt under section 9.02 of
National Policy Statement No. 39 ("NP39") on behalf of those mutual funds for
relief from (or confirmation that "no action" will be taken under) the
provisions of section 2.04(1)(b) of NP39 which prohibit a mutual fund subject to
NP39 from purchasing the securities of any issuer if, as a result of such
purchase, the mutual fund would hold more than 10% of any class or series of a
class of shares of the issuer.
100
Such relief, if granted by Canadian securities regulatory authorities, would
permit such a mutual fund to hold the Exchangeable Shares that it elects to
receive under the Transaction until such time as the fund's portfolio adviser
deems it in the best interests of the mutual fund to dispose of such shares or
to exercise the exchange rights attaching thereto.
Future Issuances of Authorized Shares
The additional shares of CIT Common Stock and CIT Preferred Stock that
are authorized by CIT's Certificate of Incorporation could be issued, without
approval of holders of CIT Common Stock or the Exchangeable Shares, at such time
or times, to such persons and for such consideration as CIT may determine,
except as may otherwise be required by applicable laws, regulations or stock
exchange requirements. The New York Stock Exchange, on which the CIT Common
Stock now trades, and The Toronto Stock Exchange, on which CIT Common Stock and
the Exchangeable Shares will trade, currently require stockholder approval of
the issuance of shares in certain instances, including, with respect to the New
York Stock Exchange, transactions where the issuance could increase the number
of outstanding shares of common stock by 20% or more and, with respect to The
Toronto Stock Exchange, transactions where the issuance could increase the
number of outstanding shares by 25% or more.
CIT's Certificate of Incorporation authorizes the CIT Board of
Directors to issue shares of CIT Preferred Stock in one or more series and to
fix and state the designations, powers, preferences, qualifications,
limitations, restrictions and relative rights of the shares of each such series.
The CIT Board of Directors may determine, without any vote or action by its
stockholders, among other things, the payment dates and rates of dividends, if
any, whether dividends are to be cumulative or noncumulative, whether the series
is subject to redemption and, if so, the manner of redemption and the redemption
price, the preference of any series over any other series of CIT Preferred Stock
or CIT Common Stock on liquidation or dissolution of CIT, any sinking fund or
other retirement provisions for the series and any conversion or exchange rights
or other privilege of the holders to acquire shares of any other series of CIT
Preferred Stock or of CIT Common Stock. The CIT Board of Directors may also
determine the number of shares in each series, the stated value for which the
series may be issued and the voting rights of each series. The shares of each
series of CIT Preferred Stock may rank prior to the CIT Common Stock in respect
of dividends and rights in liquidation.
Other than pursuant to the Transaction, upon exchange of Exchangeable
Shares and pursuant to employee benefit plans, CIT has no present understanding
or agreement with respect to the issuance for any purpose of any additional
Exchangeable Shares or shares of CIT Common Stock and CIT Preferred Stock. The
additional Exchangeable Shares, shares of CIT Common Stock or shares of CIT
Preferred Stock that are authorized for issuance could be issued in one or more
transactions (within limitations imposed by applicable law) that would make a
takeover of CIT more difficult. The CIT Board of Directors and management of CIT
have no knowledge of any person or entity that intends to seek a controlling
interest in, or to make a takeover proposal with respect to, CIT.
101
TAX CONSIDERATIONS TO NEWCOURT SHAREHOLDERS
Certain Canadian Federal Income Tax Considerations for Newcourt Shareholders
In the opinion of Blake, Cassels & Graydon, Canadian counsel for
Newcourt, the following is a summary of the principal Canadian federal income
tax considerations under the Income Tax Act (Canada) generally applicable to
Newcourt Shareholders who dispose of Newcourt Common Shares and acquire
Exchangeable Shares or shares of CIT Common Stock under the Plan of Arrangement
and who, for purposes of the Income Tax Act (Canada), hold their Newcourt Common
Shares and will hold their Exchangeable Shares and CIT Common Stock as capital
property, deal at arm's length with Newcourt, CIT, Exchangeco and Newco and are
not affiliated with Newcourt, CIT, Exchangeco or Newco. This summary does not
apply to a Newcourt Shareholder with respect to whom CIT is or will be a foreign
affiliate within the meaning of the Income Tax Act (Canada).
Shares will generally be considered to be capital property to the
holder unless held in the course of carrying on a business, an adventure or
concern in the nature of trade or as "mark-to-market" property for purposes of
the Income Tax Act (Canada). Newcourt Shareholders to whom Newcourt Common
Shares, Exchangeable Shares or CIT Common Stock are not capital property should
consult their own tax advisers regarding their particular circumstances
including, in the case of certain "financial institutions" (as defined in the
Income Tax Act (Canada)), the potential application to them of the
"mark-to-market" rules in the Income Tax Act (Canada), as the following
discussion does not apply to such shareholders.
This summary is based on the Income Tax Act (Canada), the regulations
thereunder and counsel's understanding of the administrative policies and
assessing practices published by Revenue Canada all in effect as of the date of
this Circular. This summary takes into account all Tax Proposals, although no
assurances can be given that the Tax Proposals will be enacted in the form
proposed, or at all. This summary does not take into account or anticipate any
other changes in law, administrative policy or assessing practice, whether by
judicial, governmental or legislative action or decision, nor does it take into
account provincial, territorial or foreign income tax legislation or
considerations, which may differ from the Canadian federal income tax
considerations described herein. No advance income tax ruling has been sought or
obtained from Revenue Canada to confirm the tax consequences of any of the
transactions described herein.
This summary is of a general nature only and is not intended to be, and
should not be construed to be, legal, business or tax advice to any particular
shareholder. Shareholders should consult their own tax advisors for advice with
respect to their particular circumstances.
For the purposes of the Income Tax Act (Canada), all amounts must be
expressed in Canadian dollars, including dividends, adjusted cost base and
proceeds of disposition; amounts denominated in United States dollars must be
converted into Canadian dollars based on the United States dollar exchange rate
generally prevailing at the time such amounts arise.
Newcourt Shareholders Resident in Canada
The following portion of the summary is applicable to a Newcourt
Shareholder who is and will continue to be a Canadian Resident at all times
while it holds Exchangeable Shares or CIT Common Stock.
Exchange of Newcourt Common Shares for Exchangeable Shares and Ancillary Rights
Non-Rollover Transaction. A Newcourt Shareholder who exchanges Newcourt
Common Shares for Exchangeable Shares and Ancillary Rights will, unless such
Newcourt Shareholder is eligible to and makes a joint election under subsection
85(1) or 85(2) of the Income Tax Act (Canada) in respect of such exchange as
discussed below, be considered to have disposed of such Newcourt Common Shares
for proceeds of disposition equal to the sum of (i) the fair market value of the
Exchangeable Shares acquired by such Newcourt Shareholder on the exchange
(including any fractional interest in an Exchangeable Share to be sold by the
Depositary), and (ii) the fair market value of the Ancillary Rights acquired by
such Newcourt Shareholder on the exchange, and, as a result, the Newcourt
Shareholder will in general realize a capital gain (or capital loss) to the
extent that such proceeds of disposition, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to the Newcourt
Shareholder of such shares. See "Taxation of Capital Gain or Capital
102
Loss" below. The cost to a holder of Exchangeable Shares and Ancillary Rights
required on the exchange will be equal to the fair market value of such shares
and rights at the time of the exchange.
Rollover Transaction. A Newcourt Shareholder that is an Eligible Holder
and who exchanges Newcourt Common Shares for Exchangeable Shares and Ancillary
Rights may make a joint election with Exchangeco in respect of such exchange
pursuant to subsection 85(1) of the Income Tax Act (Canada) (or, in the case of
an Eligible Holder that is a partnership, pursuant to subsection 85(2) of the
Income Tax Act (Canada)) and may thereby obtain a full or partial tax-deferred
"rollover" for Canadian federal income tax purposes, depending on the Elected
Amount and the adjusted cost base to the Eligible Holder of such Newcourt Common
Shares at the time of the exchange. See "The Transaction - Procedure for Making
a Joint Tax Election" on page 92.
So long as, at the time of the exchange, the Eligible Holder's adjusted
cost base of such Newcourt Common Shares equals or exceeds the fair market value
of the Ancillary Rights acquired by such Newcourt Shareholder on the exchange,
the Eligible Holder may elect so as to not realize a capital gain on the
exchange for the purposes of the Income Tax Act (Canada).
In general, where an election is made, the Elected Amount must comply
with the following rules:
1. The Elected Amount may not be less than the fair market value of the
Ancillary Rights acquired on the exchange.
2. The Elected Amount may not be less than the lesser of the adjusted
cost base to the Eligible Holder of the Newcourt Common Shares so
exchanged, determined at the time of the exchange, and the fair market
value of such Newcourt Common Shares at that time.
3. The Elected Amount may not exceed the fair market value of such
Newcourt Common Shares at the time of the exchange.
Elected Amounts which do not otherwise comply with the foregoing limitations
will be automatically adjusted under the Income Tax Act (Canada) so that they
are in compliance.
Where an Eligible Holder and Exchangeco duly make an election in
respect of Newcourt Common Shares that are exchanged for Exchangeable Shares,
the tax treatment to the holder generally will be as follows:
1. Such Newcourt Common Shares will be deemed to have been disposed
of by the Eligible Holder for proceeds of disposition equal to
the Elected Amount.
2. If such proceeds of disposition are equal to the aggregate of
the Eligible Holder's adjusted cost base of such Newcourt Common
Shares, determined immediately before the exchange, plus any
reasonable costs of disposition, no capital gain or capital loss
will be realized by the Eligible Holder.
3. To the extent that such proceeds of disposition exceed (or are
less than) the aggregate of the Eligible Holder's adjusted cost
base of such Newcourt Common Shares and any reasonable costs of
disposition, the Eligible Holder will in general realize a
capital gain (or capital loss). See "Taxation of Capital Gain or
Capital Loss" below.
4. The cost to the Eligible Holder of Ancillary Rights received on
the exchange will be equal to the fair market value thereof at
that time and the Eligible Holder's aggregate cost of the
Exchangeable Shares received on the exchange (including any
fractional interest in an Exchangeable Share to be sold by the
Depositary) will be equal to the amount by which the proceeds of
disposition of the Newcourt Common Shares exchanged by the
holder exceeds the fair market value of the Ancillary Rights
received on the exchange. See "The Transaction - Transaction
Mechanics and Description of Exchangeable Shares" on page 84.
Consequently, notwithstanding any election, if the fair market value, at the
time of the exchange, of the Ancillary Rights acquired by such Eligible Holder
in connection with the exchange exceeds the Eligible Holder's adjusted cost base
of the related Newcourt Common Shares and any reasonable costs of disposition,
such holder will realize a capital gain at least equal to such excess. A
Newcourt Shareholder who is otherwise entitled to receive a fraction of an
Exchangeable Share on the exchange, and who receives a cash payment representing
such holder's pro rata portion of the net proceeds received upon the sale by the
Depositary of
103
whole shares representing the aggregate of all such fractions of Exchangeable
Shares, will be considered to have disposed of such fraction of an Exchangeable
Share for net proceeds of disposition equal to the cash payment, thereby
realizing a capital gain or loss. The taxation of capital gains and capital
losses is described below. See "Taxation of Capital Gain or Capital Loss" below.
Valuation of Ancillary Rights. For the above purposes, a Newcourt
Shareholder will be required to determine the fair market value of the Ancillary
Rights received on the exchange on a reasonable basis. CIBC World Markets is of
the view, however, that the Ancillary Rights have only nominal value. Tax
election forms will be executed by Exchangeco on the basis that the fair market
value of the Ancillary Rights is a nominal amount. Such amount will be provided
to Newcourt Shareholders in the letter of instructions included in the Tax
Election Filing Package. Such determinations of value are not binding on Revenue
Canada and counsel can express no opinion on matters of factual determinations
such as this.
Grant of Call Rights
CIBC World Markets is of the view that the Call Rights have nominal
value. If the Call Rights have nominal value, Newcourt Shareholders should not
realize a gain at the time that such rights are granted. Such determinations of
value are not binding on Revenue Canada and counsel can express no opinion on
matters of factual determination such as this.
Exchange of Newcourt Common Shares for CIT Common Stock
A Newcourt Shareholder who exchanges Newcourt Common Shares for CIT
Common Stock will be considered to have disposed of such Newcourt Common Shares
for proceeds of disposition equal to the sum of (i) the fair market value of the
CIT Common Stock acquired on the exchange (including any fractional interest in
a share of CIT Common Stock to be sold by the Depositary). As a result, such
Newcourt Shareholder will in general realize a capital gain (or capital loss) to
the extent that such proceeds of disposition, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to such Newcourt
Shareholder of such Newcourt Common Shares. See "- Taxation of Capital Gain and
Capital Loss" below. The cost to such Newcourt Shareholder of CIT Common Stock
acquired on the exchange will be equal to the fair market value of such CIT
Common Stock at the time of the exchange, which amount will be averaged with the
adjusted cost base of any other CIT Common Stock held by such Newcourt
Shareholder as capital property (other than CIT Common Stock considered to have
been continually held by such Newcourt Shareholder since 1971).
Dividends
Dividends on Exchangeable Shares. In the case of a holder of
Exchangeable Shares who is an individual, dividends received or deemed to be
received on the Exchangeable Shares will be included in computing such person's
income and will be subject to the gross-up and dividend tax credit rules
normally applicable to taxable dividends received from taxable Canadian
corporations.
Subject to the discussion below as to the denial of the dividend
deduction, in the case of a holder of Exchangeable Shares that is a corporation,
dividends received or deemed to be received on the Exchangeable Shares will be
included in computing the corporation's income and will normally be deductible
in computing its taxable income. CIT is a specified financial institution for
purposes of the Income Tax Act (Canada); where CIT (or any person with whom CIT
does not deal at arm's length) is a "specified financial institution" at or
immediately before the time a dividend is paid or deemed to be paid, the
dividend deduction for a corporation will generally not apply unless at the time
the dividend is received (or deemed to be received), the Exchangeable Shares are
listed on a prescribed stock exchange (which currently includes The Toronto
Stock Exchange), CIT controls Exchangeco and Newco, and the recipient (together
with persons with whom the recipient does not deal at arm's length or any
partnership or trust of which the recipient or person is a member or
beneficiary, respectively) does not receive dividends in respect of more than
ten percent of the issued and outstanding Exchangeable Shares.
In the case of a holder of Exchangeable Shares that is a specified
financial institution for the purposes of the Income Tax Act (Canada), a
dividend received or deemed to be received on the Exchangeable Shares will not
be deductible in computing its taxable income unless, in addition to the
requirements above, either: (i) the specified financial institution did not
acquire the Exchangeable Shares in the ordinary course of the business
104
carried on by such institution within the meaning of the Income Tax Act
(Canada); or (ii) at the time the dividend is paid (or deemed to be paid), the
Exchangeable Shares are not "term preferred shares" within the meaning of the
Income Tax Act (Canada). An Exchangeable Share will not be a term preferred
share at any time with respect to a specified financial institution that
receives (or is deemed to receive) a dividend in respect of the shares at that
time if the shares are listed on a prescribed stock exchange in Canada (which
currently includes The Toronto Stock Exchange) and the specified financial
institution, either alone or together with persons with whom it does not deal at
arm's length, does not receive (and is not deemed to receive) dividends in
respect of more than ten percent of the issued and outstanding Exchangeable
Shares either directly, through a partnership or (in certain cases) through a
trust. A corporation is a specified financial institution for purposes of the
Income Tax Act (Canada) if it is (a) a bank, a trust company, a credit union, an
insurance corporation, (b) a corporation whose principal business is the lending
of money to persons with whom the corporation is dealing at arm's length or the
purchasing of debt obligations issued by such persons or a combination thereof,
or a corporation prescribed to be a financial institution for purposes of Part
I.3 of the Income Tax Act (Canada), or (c) a corporation controlled by one or
more such entities. A corporation is also a specified financial institution if
it is related to one of the above entities other than a corporation described in
(b) above the principal business of which is the factoring of trade accounts
receivable that (i) the particular corporation acquired from a related person,
(ii) arose in the course of an active business carried on by a person (the
"first person") related at that time to the particular corporation, and (iii) at
no particular time before that time were held by a person other than a person
who was related to the first person. Specified financial institutions should
consult their own tax advisors.
A holder of Exchangeable Shares that is a "private corporation" (as
defined in the Income Tax Act (Canada)) or any other corporation resident in
Canada and controlled or deemed to be controlled by or for the benefit of an
individual (other than a trust) or a related group of individuals (other than
trusts) will generally be liable under Part IV of the Income Tax Act (Canada) to
pay a refundable tax of 33 1/3% on dividends received or deemed to be received
on the Exchangeable Shares to the extent that such dividends are deductible in
computing the holder's taxable income. A holder of Exchangeable Shares that is a
"Canadian-controlled private corporation" (as defined in the Income Tax Act
(Canada)) may be liable to pay an additional refundable tax of 6 2/3% on
dividends or deemed dividends that are not deductible in computing taxable
income.
The Exchangeable Shares will be "taxable preferred shares" and
"short-term preferred shares" for purposes of the Income Tax Act (Canada).
Dividends received or deemed to be received on the Exchangeable Shares will not
be subject to the ten percent tax under Part IV.1 of the Income Tax Act
(Canada). However, Exchangeco will generally be subject to a 66 2/3% tax under
Part VI.1 of the Income Tax Act (Canada) on dividends paid or deemed to be paid
on the Exchangeable Shares and will be entitled to deduct 9/4 of the tax so
payable in computing its taxable income under Part I of the Income Tax Act
(Canada).
Dividends on CIT Common Stock. Dividends on CIT Common Stock will be
included in the recipient's income for the purposes of the Income Tax Act
(Canada). Such dividends received by an individual shareholder will not be
subject to the gross-up and dividend tax credit rules in the Income Tax Act
(Canada). A holder of CIT Common Stock that is a corporation will include such
dividends in computing its income and generally will not be entitled to deduct
the amount of such dividends in computing its taxable income. A holder of CIT
Common Stock that is a Canadian-controlled private corporation may be liable to
pay an additional refundable tax of 6 2/3% on such dividends. United States
non-resident withholding tax on dividends may be eligible for foreign tax credit
or deduction treatment where applicable under the Income Tax Act (Canada).
Redemption or Exchange of Exchangeable Shares
If an Exchangeable Share is redeemed (including on a retraction) by
Exchangeco (as opposed to such share being purchased by Newco as discussed
below), the holder of such Exchangeable Share will be deemed to have received a
dividend equal to the amount, if any, by which the redemption proceeds (the fair
market value at that time of CIT Common Stock received from Exchangeco exceeds
the paid-up capital of the Exchangeable Share (as determined for purposes of the
Income Tax Act (Canada)) at the time of the redemption of the Exchangeable
Share. The tax treatment of any such deemed dividend to the holders of the
Exchangeable Shares will be as discussed above under "Dividends - Dividends on
Exchangeable Shares," except that the non-deductibility of such dividend to a
corporation that is a specified financial institution may be limited under
subsection 191(4) of the Income Tax Act (Canada). The terms and conditions of
the Exchangeable Shares provide that, for the
105
purposes of subsection 191(4) of the Income Tax Act (Canada), Exchangeco
specified an amount in respect of each Exchangeable Share equal to the closing
sale price of a Newcourt Common Share on The Toronto Stock Exchange on the
trading day immediately preceding the Effective Date, divided by the Exchange
Ratio. Newcourt Shareholders who intend to exchange the Newcourt Common Shares
for Exchangeable Shares and who are or may become specified financial
institutions at the time of redemption of their Exchangeable Shares should
consult with their tax advisors for advice with respect to the application of
subsection 191(4) of the Income Tax Act (Canada).
On the redemption (including a retraction) of Exchangeable Shares, the
holder will generally be considered to have disposed of the Exchangeable Shares
for proceeds of disposition equal to the redemption proceeds less the amount of
such deemed dividend. A holder will in general realize a capital gain (or a
capital loss) equal to the amount by which the adjusted cost base to the holder
of the Exchangeable Share is less than (or exceeds) such proceeds of
disposition. See "Taxation of Capital Gain or Capital Loss" below. In the case
of a holder that is a corporation, in some circumstances the amount of any such
deemed dividend may be treated as proceeds of disposition and not as a dividend.
If an Exchangeable Share is purchased by Newco (or by CIT pursuant to
the Automatic Exchange Right or the Exchange Right), the holder will in general
realize a capital gain (or a capital loss) to the extent that the proceeds of
disposition of the Exchangeable Share, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to the holder of
the Exchangeable Share. For these purposes, the proceeds of disposition will be
the fair market value, at the time of the exchange, of the CIT Common Stock
received from Newco or CIT (as the case may be) on the purchase. See "Taxation
of Capital Gain or Capital Loss" below.
Because of the existence of the Call Rights, the Exchange Right and the
Automatic Exchange Right, a holder of Exchangeable Shares cannot control whether
such holder will receive CIT Common Stock by way of redemption (or retraction)
of the Exchangeable Shares by Exchangeco or by way of purchase of the
Exchangeable Shares by Newco or CIT. As described above, the Canadian federal
income tax consequences of a redemption differ from those of a purchase.
Acquisition and Disposition of CIT Common Stock
The cost of CIT Common Stock received on the retraction, redemption or
exchange of an Exchangeable Share will be equal to the fair market value of such
CIT Common Stock at the time of such event, which amount will be averaged with
the adjusted cost base of any other CIT Common Stock held at that time by the
holder as capital property (other than CIT Common Stock considered to have been
continually held by the holder since 1971).
A disposition or deemed disposition of CIT Common Stock by a holder
will generally result in a capital gain (or capital loss) to the extent that the
proceeds of disposition, net of any reasonable costs of disposition, exceed (or
are less than) the adjusted cost base to the holder of CIT Common Stock
immediately before the disposition.
Taxation of Capital Gain or Capital Loss
Three-quarters of any capital gain (the "taxable capital gain")
realized by a shareholder will be included in that person's income for the year
of disposition. Three-quarters of any capital loss realized (the "allowable
capital loss") by a shareholder may be deducted by that person against taxable
capital gains for the year of disposition. Any excess of allowable capital
losses over taxable capital gains for the year of disposition may be carried
back up to three taxation years or forward indefinitely and deducted against net
taxable capital gains in those other years to the extent and subject to the
limitations prescribed in the Income Tax Act (Canada).
Capital gains realized by an individual or trust, other than certain
trusts, may give rise to alternative minimum tax under the Income Tax Act
(Canada). A shareholder that is a Canadian-controlled private corporation may be
liable to pay an additional refundable tax of 6 2/3% on taxable capital gains.
In the case of a corporation, the amount of any capital loss arising on
a disposition or deemed disposition of any share may be reduced by the amount of
dividends received or deemed to have been received by it on such share to the
extent and under circumstances prescribed by the Income Tax Act (Canada).
Similar rules may apply where a corporation is a member of a partnership or a
beneficiary of a trust that owns shares or where a trust or partnership of which
a corporation is a beneficiary or a member is a member of a partnership or a
beneficiary of a trust that owns any shares.
106
Foreign Property Information Reporting
A holder of CIT Common Stock who is a "specified Canadian entity" for a
taxation year or fiscal period and whose total cost amount of "specified foreign
property" (which includes the CIT Common Stock, the Exchangeable Shares and the
Ancillary Rights) at any time in the year or fiscal period exceeds C$100,000
will be required to file an information return in respect of such property
disclosing certain information including particulars of the holder's investment
in such property. A specified Canadian entity means a taxpayer resident in
Canada in the year, other than a corporation or a trust exempt from tax under
Part I of the Income Tax Act (Canada), a non-resident-owned investment
corporation, a mutual fund corporation, a mutual fund trust and certain other
entities. Holders of such specified foreign property should consult their tax
advisors.
Dissenting Shareholders
Dissenting Shareholders who are ultimately entitled to be paid the fair
value of their Newcourt Common Shares by Newcourt will be considered to have
realized a deemed dividend and capital gain (or capital loss) based on proceeds
equal to the fair value of such Newcourt Common Shares determined as of the
appropriate date, computed as generally described above in the case of a
redemption of an Exchangeable Share by Exchangeco for CIT Common Stock under
"Redemption or Exchange of Exchangeable Shares " above. The amount of any such
deemed dividend received by an individual will be included in computing the
individual's income and will be subject to the gross-up and dividend tax credit
rules normally applicable to taxable dividends received from taxable Canadian
corporations. The amount of any such deemed dividend received by a corporation
(except to the extent that it may in some circumstances be treated as proceeds
of disposition and not as a dividend) will be included in computing its income,
will normally be deductible in computing its taxable income and may be subject
to tax under Part IV of the Income Tax Act (Canada) if received by a private
corporation and certain other corporations as described under "Dividends -
Dividends on Exchangeable Shares" above. Pursuant to the Tax Proposals,
Dissenting Shareholders will not be entitled to the benefit of the "replacement
property" rules in the Income Tax Act (Canada) in respect of the disposition of
Newcourt Common Shares. Dissenting Shareholders should consult their own tax
advisors in respect of the treatment of such deemed dividends. Any interest
awarded to a Dissenting Shareholder by the Court will be included in the
Dissenting Shareholder's income for the purposes of the Income Tax Act (Canada).
Additional income tax considerations may be relevant to Dissenting Shareholders
who fail to perfect or withdraw their claims pursuant to the right of dissent.
Newcourt Shareholders Not Resident in Canada
The following portion of the summary is applicable to Newcourt
Shareholders who, for purposes of the Income Tax Act (Canada), have not been and
will not be resident or deemed to be resident in Canada at any time while they
hold or have held Newcourt Common Shares, or CIT Common Stock and to whom such
shares are not "taxable Canadian property" (as defined in the Income Tax Act
(Canada)) and who do not use or hold and are not deemed to use or hold such
shares in connection with carrying on a business in Canada. This summary is not
applicable to any non-resident of Canada which carries on an insurance business
in Canada and elsewhere, in respect of Newcourt Common Shares or CIT Common
Stock that are effectively connected with the non-resident's Canadian insurance
business or that are "designated insurance property" as defined in the Income
Tax Act (Canada).
Generally, Newcourt Common Shares and CIT Common Stock will not be
taxable Canadian property provided that the holder does not use or hold, and is
not deemed to use or hold, such shares in connection with carrying on a business
in Canada and, in the case of Newcourt Common Shares such shares are listed on a
prescribed stock exchange (which currently includes The Toronto Stock Exchange
and the New York Stock Exchange) and the holder, persons with whom such holder
does not deal at arm's length or the holder and such persons, has not owned
(taking into account any interest in or option in respect of the shares) 25% or
more of the issued shares of any class or series of the capital stock of
Newcourt at any time within five years preceding the date of disposition.
Such a Newcourt Shareholder will not be subject to tax under the Income
Tax Act (Canada) on the exchange of Newcourt Common Shares for CIT Common Stock
or on the sale or other disposition of CIT Common Stock. Newcourt Shareholders
who are not resident in Canada and who are members of a partnership that
acquires Exchangeable Shares should consult with their own tax advisors as to
the consequences of acquiring, holding and disposing of Exchangeable Shares.
107
Where such Newcourt Shareholder receives or is deemed to have received
a dividend or interest consequent upon the exercise of Dissent Rights (see
"Newcourt Shareholders Resident in Canada Dissenting Shareholders" above), such
amounts will be subject to Canadian withholding tax at the rate of 25% unless
the rate is reduced under the provisions of an applicable tax convention.
Additional income tax considerations may be relevant to Dissenting
Shareholders who fail to perfect or withdraw their claims pursuant to the right
of dissent.
Certain United States Federal Income Tax Considerations for Newcourt
Shareholders
The following is a general summary of certain United States federal
income tax considerations applicable to U.S. Holders (as defined below) who
receive CIT Common Stock and Non-U.S. Holders (as defined below) who receive
Exchangeable Shares or CIT Common Stock pursuant to the Plan of Arrangement. For
purposes of this discussion, a "U.S. Holder" is a beneficial owner of Newcourt
Common Shares that is (i) a citizen or resident of the United States, (ii) a
corporation or other entity treated as a corporation for United States federal
income tax purposes created or organized in or under the laws of the United
States or of any political subdivision thereof, (iii) an estate the income of
which is subject to United States federal income taxation regardless of its
source, or (iv) a trust if a United States court is able to exercise primary
supervision over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such trust. A
"Non-U.S. Holder" is a beneficial owner of Newcourt Common Shares that is (i) a
nonresident alien individual, (ii) a foreign corporation, or (iii) an estate or
trust that is not a U.S. Holder.
This discussion is based on provisions of the Code, Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect. This discussion does
not address all aspects of United States federal income taxation that may be
applicable to holders in light of their particular circumstances or to holders
subject to special treatment under United States federal income tax law
(including, without limitation, partnerships, certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities, certain U.S.
expatriates, persons that hold Newcourt Common Shares as part of a straddle,
hedge, conversion transaction or other integrated investment, U.S. Holders whose
functional currency is not the U.S. dollar and holders who acquired such shares
through exercise of employee stock options or otherwise as compensation). This
discussion is limited to holders that hold their Newcourt Common Shares as
capital assets and does not consider the tax treatment of holders that hold
Newcourt Common Shares through a partnership or other pass-through entity.
Furthermore, this summary does not discuss aspects of United States federal
income taxation that may be applicable to holders of Newcourt Options, nor does
it address any aspect of state, local or foreign taxation.
Each holder is advised to consult its tax advisor as to the particular
tax consequences to such holder of the United States federal, state, local and
foreign tax consequences of the Transaction and any actual or potential changes
in applicable tax laws, including any pending or proposed legislation or
regulations.
U.S. Holders
The following discussion applies only to U.S. Holders who receive CIT
Common Stock in exchange for their Newcourt Common shares. The discussion does
not address U.S. Holders that are subject to tax in both Canada and the United
States. Such U.S. Holders should consult their tax advisors concerning the
United States federal income tax consequences of the Transaction.
Exchange of Newcourt Common Shares for CIT Common Stock
The exchange of Newcourt Common Shares for CIT Common Stock pursuant to
the Plan of Arrangement will be a taxable exchange for United States federal
income tax purposes. Consequently, a U.S. Holder will recognize gain or loss
equal to the difference between (i) the sum of (a) the fair market value of the
CIT Common Stock received in the exchange and (b) any cash received in lieu of
fractional shares and (ii) such U.S. Holder's tax basis in its Newcourt Common
Shares. Subject to the discussion below under "- Potential Passive Foreign
Investment Company Status," any gain or loss on the exchange of Newcourt Common
Shares will be capital gain or loss and will be long-term capital gain or loss
if the U.S. Holder held its Newcourt Common Shares for more than one year. In
addition, the U.S. Holder's tax basis in its CIT Common Stock will be the fair
market value of the CIT Common Stock received by the U.S. Holder in the
exchange.
108
Potential Passive Foreign Investment Company Status. A foreign
corporation will be classified as a passive foreign investment company (a
"PFIC") for United States federal income tax purposes for any taxable year
during which either (i) 75% or more of its gross income is passive income or
(ii) on average for the taxable year, 50% or more of its assets produce or are
held for the production of passive income. The rules regarding the determination
of PFIC status are complex, and there is no authority regarding the application
of these rules in specific situations. While there can be no assurance with
respect to the classification of Newcourt as a PFIC, Newcourt believes that it
did not constitute a PFIC for any taxable year ending prior to consummation of
the Transaction and, based on Newcourt's estimate of its gross income and assets
and the nature of its current and proposed activities, does not believe that it
will constitute a PFIC for the current taxable year. At the present time, CIT
does not intend to engage in any transactions or activities which it believes
should cause Newcourt to be a PFIC for the current taxable year. If, however,
Newcourt had been or were to be a PFIC for any taxable year ending prior to
consummation of the Transaction or the current taxable year, any gain recognized
by a U.S. Holder that owned Newcourt Common Shares in a taxable year for which
Newcourt was a PFIC, would, in most circumstances, be taxed at rates applicable
to ordinary income and would potentially be subject to other adverse United
States federal income tax consequences. U.S. Holders should consult their own
tax advisors regarding the tax consequences that would result if Newcourt had
been or were to be a PFIC for any taxable year ending prior to consummation of
the Transaction or for the current taxable year.
Proposed Legislation
On February 1, 1999, President Clinton proposed legislation (the
"Proposed Legislation") that, if enacted in its current form, could affect the
United States federal income tax consequences of the exchange of Newcourt Common
Shares for CIT Common Stock by a U.S. Holder. Pursuant to such legislation, the
exchange of Newcourt Common Shares for CIT Common Stock by a U.S. Holder might,
under certain circumstances, be treated as a reorganization within the meaning
of Section 368(a) of the Code. In such case, the amount of gain or loss
recognized by a U.S. Holder and the U.S. Holder's tax basis and holding period
in its shares of CIT Common Stock would likely differ from those determined
pursuant to the preceding paragraphs.
Non-U.S. Holders
Exchange of Newcourt Common Shares
Non-U.S. Holders will recognize gain or loss on the exchange of
Newcourt Common Shares for CIT Common Stock or, unless at least 80% of the
Newcourt Common Shares are exchanged for Exchangeable Shares and certain other
conditions are satisfied, Exchangeable Shares pursuant to the Plan of
Arrangement for United States federal income tax purposes. Non-U.S. Holders will
not be subject to United States federal income tax on any gain so recognized
unless such gain is effectively connected with the conduct of a trade or
business by the Non-U.S. Holder within the United States or, if a treaty
applies, is attributable to a permanent establishment of the Non-U.S. Holder in
the United States, or, in the case of gain recognized by an individual Non-U.S.
Holder, such individual is present in the United States for 183 days or more
during the taxable year of the exchange and certain other conditions are
satisfied. If the Non-U.S. Holder is a corporation, any effectively connected
earnings and profits may also be subject to an additional "branch profits tax."
The Proposed Legislation, if enacted in its current form, might, under
certain circumstances, cause Non-U.S. Holders not to recognize gain or loss on
the exchange of Newcourt Common Shares for Exchangeable Shares or CIT Common
Stock pursuant to the Plan of Arrangement for United States federal income tax
purposes and, consequently, Non-U.S. Holders would not be subject to United
States federal income tax on such exchange even if such Non-U.S. Holders would
otherwise be subject to United States federal income tax on gain recognized.
Exchangeable Shares
Dividends on Exchangeable Shares. No statutory, judicial or
administrative authority exists that directly addresses the treatment of the
Exchangeable Shares for United States federal income tax purposes, including
whether such shares constitute shares of Exchangeco, shares of CIT or, possibly,
another financial instrument. Nevertheless, CIT intends to take the position
that the Exchangeable Shares are shares of Exchangeco and that, accordingly,
dividends received by a Non-U.S. Holder on Exchangeable Shares are not generally
subject to United States withholding tax. If, however, the Internal Revenue
Service (the "IRS") were to assert successfully
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that the Exchangeable Shares should be treated as shares of CIT, Non-U.S.
Holders of Exchangeable Shares would be subject to the rules described below
under "- CIT Common Stock - Dividends on CIT Common Stock" and "- Backup
Withholding and Information Reporting - Dividends."
Sale or Exchange of Exchangeable Shares. If the Exchangeable Shares are
treated as (i) shares of CIT or, (ii) shares of Exchangeco and, at the time of a
Non-U.S. Holder's exchange of Exchangeable Shares for CIT Common Stock, CIT has
already acquired or, upon the exchange with the Non-U.S. Holder, will acquire at
least 80% of the Exchangeable Shares and, in both cases, certain other
conditions are satisfied, a Non-U.S. Holder should recognize no gain or loss on
the exchange of Exchangeable Shares for CIT Common Stock. If a Non-U.S. Holder
is required to recognize gain or loss on the exchange of Exchangeable Shares for
CIT Common Stock or on the sale or other exchange of such Exchangeable Shares,
such Non-U.S. Holder generally will not be subject to United States federal
income tax on the gain recognized unless such gain is effectively connected with
the conduct of a trade or business by the Non-U.S. Holder within the United
States or, if a tax treaty applies, is attributable to a permanent establishment
of the Non-U.S. Holder in the United States, or, in the case of gain recognized
by an individual Non-U.S. Holder, such individual is present in the United
States for 183 days or more during the taxable year of the exchange and certain
other conditions are satisfied. In such a case, if the Exchangeable Shares are
treated as shares of CIT, see below under "- Backup Withholding and Information
Reporting - Sale or Exchange of CIT Common Stock." If the Non-U.S. Holder is a
corporation, any effectively connected earnings and profits may also be subject
to an additional "branch profits tax."
CIT Common Stock
Dividends on CIT Common Stock. Dividends paid to a Non-U.S. Holder of
CIT Common Stock will generally be subject to withholding of United States
federal income tax at a rate of 30% (or such lower rate as may be specified by
an applicable income tax treaty) unless the dividend is (a) effectively
connected with the conduct of a trade or business by the Non-U.S. Holder within
the United States, or (b) if a tax treaty applies, is attributable to a United
States permanent establishment of the Non-U.S. Holder, in which cases the
dividend will be taxed at ordinary United States federal income tax rates. A
Non-U.S. Holder may be required to satisfy certain certification requirements to
claim treaty benefits or otherwise to claim a reduction of, or exemption from,
the withholding obligation described above. If the Non-U.S. Holder is a
corporation, any effectively connected earnings and profits may also be subject
to an additional "branch profits tax."
Sale or Exchange of CIT Common Stock. A Non-U.S. Holder generally will
not be subject to United States federal income or withholding tax in respect of
any gain recognized on the sale or other taxable disposition of CIT Common Stock
unless (a) the gain is effectively connected with the conduct of a trade or
business by the Non-U.S. Holder within the United States or, if a tax treaty
applies, is attributable to a permanent establishment of the Non-U.S. Holder in
the United States; (b) in the case of a Non-U.S. Holder who is an individual,
the Non-U.S. Holder is present in the United States for 183 or more days during
the taxable year of the disposition and certain other conditions are satisfied;
or (c) (i) CIT is or has been during certain periods preceding the disposition a
"U.S. real property holding corporation" for United States federal income tax
purposes (which CIT does not believe it is or is likely to become), and (ii)
assuming that CIT Common Stock will be "regularly traded on an established
securities market" for United States federal income tax purposes, the Non-U.S.
Holder held, directly or indirectly, at any time during the five-year period
ending on the date of the disposition, more than 5% of the outstanding CIT
Common Stock. If the Non-U.S. Holder is a corporation, any effectively connected
earnings and profits may also be subject to an additional "branch profits tax."
Backup Withholding and Information Reporting
Dividends. United States backup withholding tax generally will not
apply to dividends paid on CIT Common Stock to a Non-U.S. Holder at an address
outside the United States. CIT must report annually to the IRS and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, such Non-U.S. Holder, regardless of whether any tax was actually
withheld. This information may also be made available to the tax authorities in
the Non-U.S. Holder's country of residence.
Sale or Exchange of CIT Common Stock. Upon the sale or other
disposition of CIT Common Stock by a Non-U.S. Holder to or through a United
States office of a broker, the broker must backup withhold at a rate of 31% and
report the sale to the IRS, unless the Non-U.S. Holder certifies its Non-U.S.
Holder status under
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penalties of perjury or otherwise establishes an exemption. Upon the sale or
other disposition of CIT Common Stock by a Non-U.S. Holder to or through the
foreign office of a United States broker, or a foreign broker with certain types
of relationships to the United States, the broker must report the sale to the
IRS (but not backup withhold), unless the broker has documentary evidence in its
files that the seller is a Non-U.S. Holder and/or certain other conditions are
met or the Non-U.S. Holder otherwise establishes an exemption.
Amounts withheld under the backup withholding rules are generally
allowable as a credit against such Non-U.S. Holder's United States federal
income tax liability, which may entitle such Non-U.S. Holder to a refund,
provided that certain required information is furnished to the IRS.
On October 6, 1997, the IRS issued final regulations relating to
withholding, information reporting and backup withholding on certain payments
made to Non-U.S. Holders, which are effective for payments made after December
31, 2000 (the "Final Regulations"). The Final Regulations alter the procedures
for claiming benefits under an income tax treaty and may also alter the
procedures for otherwise claiming a reduction of, or exemption from, the
withholding obligations described above. Non-U.S. Holders are urged to consult
their own tax advisors as to the effect, if any, of the Final Regulations on
their ownership and disposition of Exchangeable Shares and CIT Common Stock.
The discussion of certain United States federal income tax consequences
set forth above is for general information only and does not purport to be a
complete analysis or listing of all potential tax effects that may apply to a
Newcourt Shareholder. Newcourt Shareholders are strongly urged to consult their
own tax advisors to determine the particular tax consequences to them of the
Transaction, including the application and effect of United States federal,
state, local and foreign tax laws.
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DESCRIPTION OF CAPITAL STOCK OF CIT, NEWCOURT AND EXCHANGECO
CIT Capital Stock
General
The authorized capital stock of CIT consists of (i) 700,000,000 shares
of Class A Common Stock and 510,000,000 share of Class B Common Stock and (ii)
50,000,000 shares of Preferred Stock. The Special Voting Share will be issued on
the Election Date pursuant to the Voting and Exchange Trust Agreement. As of the
CIT Record Date, there were 161,209,826 shares of Class A Common Stock
outstanding. No shares of CIT Preferred Stock or Class B Common Stock are
outstanding. CIT will not issue any Class B Common Stock in the future. In
addition, there are (i) options to purchase 3,915,524 shares of Class A Common
Stock and (ii) 7,379,173 shares of Class A Common Stock which have been reserved
for future issuance under employee benefit plans. The following description of
CIT's Class A Common Stock is intended as a summary only and is qualified in its
entirety by reference to CIT's Certificate of Incorporation, which is on file
with the SEC, and to Delaware corporate law.
CIT Common Stock
Voting Rights. Holders of Class A Common Stock are entitled to one vote
per share. Holders of shares of Class A Common Stock are not entitled to
cumulate their votes for the election of directors. Generally, all matters to be
voted on by stockholders must be approved by a majority (or, in the case of the
election of directors, by a plurality) of the votes entitled to be cast by all
holders of shares of Class A Common Stock present in person or represented by
proxy, subject to any voting rights granted to holders of any Preferred Stock.
Except as otherwise provided by law or CIT's Certificate of Incorporation, and
subject to any voting rights granted to holders of any outstanding Preferred
Stock, amendments to CIT's Certificate of Incorporation must be approved by a
majority vote of the holders of the outstanding Class A Common Stock.
Dividends. Holders of Class A Common Stock share ratably on a per share
basis in any dividends declared by the CIT Board of Directors, subject to any
preferential rights of any outstanding Preferred Stock.
Other Rights. In the event of any merger, reorganization or
consolidation of CIT with or into another entity in connection with which shares
of Class A Common Stock are converted into or exchangeable for shares of stock,
other securities or property (including cash), all holders of Class A Common
Stock are entitled to receive the same kind and amount of shares of stock and
other securities and property (including cash).
On liquidation, dissolution or winding up of CIT, after payment in full
of the amounts required to be paid to holders of Preferred Stock, if any, all
holders of Class A Common Stock are entitled to share ratably in any assets
available for distribution to holders of shares of Class A Common Stock.
No shares of Class A Common Stock are subject to redemption. Shares of
Class A Common Stock do not have preemptive rights to purchase additional
shares.
Proposal to Amend CIT's Certificate of Incorporation. One of the
proposals to be presented to the CIT Stockholders at the CIT Stockholders
Meeting would eliminate the Class B Common Stock (none of which, by agreement,
may be issued) and redesignate the Class A Common Stock as "Common Stock." See
"Additional Matters for Consideration by CIT Stockholders - Proposal 2 -
Amendment to the Amended and Restated Certificate of Incorporation of CIT" on
page 125.
Special Voting Share
On the Effective Date, CIT will issue the Special Voting Share which
will be deposited with the Trustee for the benefit of holders of Exchangeable
Shares, pursuant to the provisions of the Voting and Exchange Trust Agreement.
The Special Voting Share will have a number of votes, which may be cast at any
meeting which CIT stockholders are entitled to vote, equal to the number of
outstanding Exchangeable Shares (other than Exchangeable Shares held by CIT and
its subsidiaries and affiliates). See "The Transaction - Transaction Mechanics
and Description of Exchangeable Shares Voting, Dividend and Liquidation Rights
of Holders of Exchangeable Shares" at page 87.
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CIT Preferred Stock
The CIT Preferred Stock will be issuable from time to time in one or
more series, with such designations and preferences for each series as shall be
stated in the resolutions providing for the designation and issue of each such
series adopted by the CIT Board of Directors. The CIT Board of Directors is
authorized by CIT's Certificate of Incorporation to determine, among other
things, the rights and preferences and the limitations thereon pertaining to
each such series. The CIT Board of Directors, without stockholder approval, may
issue Preferred Stock with voting and other rights that could adversely affect
the voting power and other rights of the holders of the Class A Common Stock and
could have certain anti-takeover effects. CIT has no Preferred Stock outstanding
and it has no current plans to issue any shares of Preferred Stock. The ability
of the CIT Board of Directors to issue Preferred Stock in the future without
stockholder approval could have the effect of delaying, deferring or preventing
a change in control of CIT or the removal of existing management.
Provisions That May Have an Anti-Takeover Effect
Certain provisions to be contained in CIT's Certificate of
Incorporation and Bylaws summarized below may be deemed to have an anti-takeover
effect and may delay, deter or prevent a tender offer or takeover attempt that a
stockholder might consider to be in its best interest, including attempts that
might result in a premium being paid over the market price for the shares held
by stockholders.
CIT's Certificate of Incorporation provides that, subject to any rights
of holders of Preferred Stock to elect additional directors under specified
circumstances, the number of directors of CIT is fixed as specified in the
Bylaws. The Bylaws provide that, (i) subject to any rights of holders of
Preferred Stock to elect additional directors under specified circumstances, the
number of directors is fixed at ten (10) unless the CIT Board of Directors votes
that such number be increased or decreased and (ii) subject to any rights of
holders of Preferred Stock, any director may be removed from office, with or
without cause, by vote of the holders of a majority of the votes entitled to be
cast by the holders of all outstanding shares of Class A Common Stock. In
addition, CIT's Certificate of Incorporation and Bylaws provide that, subject to
any rights of holders of Preferred Stock, and unless the CIT Board of Directors
otherwise determines, any vacancies may be filled by the affirmative vote of a
majority of the remaining members of the Board, though less than a quorum, or by
a sole remaining director, and except as otherwise provided by law, any such
vacancy may not be filled by the stockholders.
CIT's Bylaws provide for an advance notice procedure for the
nomination, other than by or at the direction of the CIT Board of Directors, of
candidates for election as directors as well as for other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise matters at such meetings must be received
in writing by CIT at its principal executive offices not less than 60 nor more
than 90 days prior to the first anniversary of the previous year's annual
meeting of stockholders, subject to adjustment in certain situations, and must
contain certain information concerning the person to be nominated or the matters
to be brought before the meeting and concerning the stockholder submitting the
proposal. CIT's Certificate of Incorporation and Bylaws also provide that
special meetings of stockholders may be called only by certain specified
officers of CIT or by any such officer at the request in writing of the CIT
Board of Directors; special meetings of stockholders cannot be called by
stockholders. In addition, CIT's Certificate of Incorporation provides that any
action required or permitted to be taken by stockholders may be effected only at
a duly called annual or special meeting of stockholders and may not be effected
by a written consent by stockholders in lieu of such a meeting.
Business Combinations with Interested Stockholders
CIT is not governed by Section 203 of the Delaware General Corporation
Law. Section 203 requires the affirmative vote of at least 66 2/3% of the
outstanding voting stock of a company, excluding shares owned by an interested
stockholder (as defined), to approve certain business combinations. As a result,
any such proposed business combination by CIT will require the vote of only a
majority of stockholders. See "Comparison of Stockholder Rights - Corporate
Opportunities" on page 122.
Limitations on Directors' Liability
CIT's Certificate of Incorporation provides that no director of CIT
shall be liable to CIT or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
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director's duty of loyalty to CIT or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions
will be to eliminate the rights of CIT and its stockholders (through
stockholders' derivative suits on behalf of CIT) to recover monetary damages
against a director for breach of fiduciary duty as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above.
Transfer Agent and Registrar
The transfer agent and registrar for the Class A Common Stock is The
Bank of New York.
Newcourt Share Capital
The authorized capital of Newcourt consists of an unlimited number of
Newcourt Common Shares, Special Shares and Class A Preference Shares. The
following summarizes the material provisions of Newcourt's share capital but
does not purport to be complete and is subject to, and qualified in its entirety
by, Newcourt's Articles, Newcourt Bylaws and applicable law.
Newcourt Common Shares
Each Newcourt Common Share is entitled to one vote at meetings of the
shareholders of Newcourt and to receive dividends if, as and when declared by
the Newcourt Board of Directors. Subject to the prior rights of holders of Class
A Preference Shares, holders of Newcourt Common Shares will participate ratably
in any distribution of the assets of Newcourt upon its liquidation, dissolution
or winding-up. As of September 20, 1999, there were 148,508,329 Newcourt Common
Shares issued and outstanding and a further 6,644,322 Newcourt Common Shares
reserved for issuance under Newcourt Options (excluding the Option under the
Stock Option Agreement).
Special Shares
The Special Shares carry exactly the same rights, privileges,
restrictions and conditions of the Newcourt Common Shares, except that holders
of the Special Shares are not entitled to vote at any meeting of the
shareholders of Newcourt. The holders of such Special Shares are entitled to
convert their Special Shares into Newcourt Common Shares on a share-for-share
basis. There are no Special Shares outstanding.
Class A Preference Shares
The Class A Preference Shares are issuable in series. Holders of such
preference shares are not entitled to notice of, or to attend or to vote at, any
meeting of the shareholders of Newcourt, except as may be specifically provided
in the provisions attaching to any series. The Class A Preference Shares rank
senior to the Newcourt Common Shares and Special Shares with respect to the
payment of dividends and distributions in the event of the liquidation,
dissolution or winding-up of Newcourt. The Newcourt Board of Directors is
empowered to fix, before the issue thereof, the number of Class A Preference
Shares of each series and the designation, rights, privileges, restrictions and
conditions attaching to the Class A Preference Shares of each series. There are
no Class A Preference Shares outstanding.
Exchangeco Share Capital
The authorized capital of Exchangeco, a limited liability company
incorporated under the laws of the Province of Nova Scotia consists of 1 million
Common Shares, C$15 billion non-cumulative non-voting Class A Preferred Shares,
C$1 billion cumulative non-voting Class B Preferred Shares and 1 billion
Exchangeable Shares. The following summarizes the material provisions of
Exchangeco's share capital but does not purport to be complete and is subject
to, and qualified in its entirety by, Exchangeco's memorandum of association,
articles of association and applicable law.
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Exchangeco Common Shares
Each Exchangeco common share is entitled to one vote at meetings of the
shareholders of Exchangeco and to receive dividends if, as and when declared by
the Exchangeco Board of Directors. Subject to the prior rights of holders of
Class A Preference Shares, Class B Preference Shares and Exchangeable Shares,
holders of Exchangeco common shares will participate rateably in any
distribution of the assets of Exchangeco upon its liquidation, dissolution or
winding up. Newco is the registered owner of all Exchangeco's issued and
outstanding common shares.
Exchangeco Class A Preference Shares
Immediately prior to the Effective Time, Newco will subscribe for Class
A Preference Shares having an aggregate redemption price equal to the fair
market value of the shares of CIT Common Stock to be issued to Newcourt
Shareholders under the Plan of Arrangement less the value of Class B Preference
Shares described below.
Holders of Class A Preference Shares are not entitled to notice of, or
to attend or to vote at, any meeting of the shareholders of Exchangeco except in
respect of any voluntary liquidation, dissolution or winding-up of Exchangeco or
as provided by the Companies Act (Nova Scotia). The holders of the Class A
Preference Shares are entitled to a non-cumulative fixed dividend of 4 percent
of the amount payable to them upon liquidation being C$1.00 per share less any
amount of capital previously returned to them. The Class A Preference Shares do
not otherwise participate on liquidation. The Class A Preference Shares rank
senior to the Exchangeco Common Shares and Exchangeable Shares and junior to the
Class B Preference Shares with respect to distributions in the event of the
liquidation, dissolution or winding-up of Exchangeco and with respect to amounts
that would be required to be paid to holders of shares that have a right to be
paid on a redemption; however with respect to the payment of dividends, the
Class A Preference Shares rank senior to the Exchangeco Common Shares but junior
to the Exchangeable Shares and the Class B Preference Shares. The Class A
Preference Shares are redeemable at the option of Exchangeco and retractable at
the option of the holder thereof for the amount payable on liquidation plus any
declared but unpaid dividends thereon.
Exchangeco Class B Preference Shares
Immediately prior to the Effective Time, Newco will subscribe for Class
B Preference Shares of which approximately 21% will be immediately sold by Newco
to a third party pursuant to a binding contract in effect prior to the Effective
Time.
Holders of Class B Preference Shares are not entitled to notice of, or
to attend or to vote at, any meeting of the shareholders of Exchangeco, except
in respect of any voluntary liquidation, dissolution or winding-up of Exchangeco
or as provided by the Companies Act (Nova Scotia). The holders of the Class B
Preference Shares will be entitled to a cumulative fixed dividend at a rate to
be determined at the time of sale which will be a percentage of the amount
payable to them upon liquidation being C$1.00 per share less any amount of
capital previously returned to them. The Class B Preference Shares do not
otherwise participate on liquidation. The Class B Preference Shares rank senior
to the Exchangeco Common Shares, Exchangeable Shares and the Class A Preference
Shares with respect to payment of dividends and distribution in the event of the
liquidation, dissolution or winding-up of Exchangeco. The Class B Preference
Shares are redeemable at the option of Exchangeco, seven years after the date of
issue, for the amount payable on liquidation plus any declared but unpaid
dividends thereon.
Exchangeable Shares
The Exchangeable Shares will be issued at the Effective Time to
Newcourt Shareholders who are Eligible Electing Holders who duly elect to
receive Exchangeable Shares in the Letter of Transmittal and Election Form
pursuant to the terms of the Plan of Arrangement. The provisions attaching to
the Exchangeable Shares are appended to the Plan of Arrangement in Annex F and
the attributes of the Exchangeable Shares are summarized herein under the "The
Transaction - Transaction Mechanics and Description of Exchangeable Shares" at
page 84.
Transfer Agent and Registrar
Montreal Trust Company of Canada will be the registrar and transfer
agent for the Exchangeable Shares at its principal offices in Toronto, Montreal
and Vancouver.
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COMPARISON OF STOCKHOLDER RIGHTS
In the event that the Transaction is completed, holders of Newcourt
Common Shares will, at the Effective Time, have their Newcourt Common Shares
exchanged for either Exchangeable Shares or shares of CIT Common Stock.
Thereafter, holders of Exchangeable Shares will have the right to exchange the
Exchangeable Shares for an equivalent number of shares of CIT Common Stock. CIT
is a corporation organized under the Delaware General Corporation Law. Newcourt
is a corporation organized under the Business Corporations Act (Ontario). While
the rights and privileges of shareholders of an Ontario corporation are, in many
instances, comparable to those of stockholders of a Delaware corporation, there
are certain differences. These differences arise from differences between
Ontario and Delaware law, between the Business Corporations Act (Ontario) and
Delaware General Corporation Law and between the Newcourt's Articles and
Newcourt Bylaws and the CIT's Certificate of Incorporation and CIT Bylaws.
Removal of Directors; Vacancies
CIT
Subject to any rights of holders of CIT Preferred Stock, any CIT
director may be removed from office, with or without cause, by the holders of a
majority of the votes entitled to be cast by holders of all outstanding shares
of CIT Common Stock, voting together as one class. Subject to any rights of the
holders of CIT Preferred Stock, any vacancy occurring in the CIT Board of
Directors may be filled by a vote of the majority of directors then in office.
The directors so chosen shall hold office until the next annual election.
Newcourt
The Newcourt Shareholders may, by ordinary resolution at an annual or
special meeting of shareholders, remove any director or directors from office,
and a vacancy created by the removal of a director may be filled at the meeting
of the shareholders at which the director is removed. A quorum of the Newcourt
Board of Directors may fill any vacancy in the board. The directors then in
office shall call a special meeting of the shareholders to fill the vacancy, and
if they fail to do so, the meeting may be called by any shareholder.
Special Meeting of Stockholders
CIT
Special meetings of CIT Stockholders may be held at any time upon the
call of the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the Chief Executive Officer, the President or, at the request in
writing of the majority of the CIT Board of Directors, any other officer.
Newcourt
The Newcourt Board of Directors, the chairman of the board, the
managing director or the president may at any time call a special meeting of
Newcourt Shareholders for transaction of any business which may properly be
brought before such a meeting of shareholders. Special meetings of Newcourt
Shareholders may, in certain circumstances, be requisitioned by a holder of at
least 5% of the outstanding Newcourt Common Shares or a court.
Quorum at Stockholder Meeting
CIT
At any meeting of stockholders, the presence in person or by proxy of
the holders of shares entitled to cast a majority of all votes which could be
cast at such meeting by the holders of all of the outstanding shares of stock of
CIT entitled to vote on such matters that are to be voted on without regard to
class at such meeting shall constitute a quorum.
Newcourt
Two persons present and holding or representing by proxy at least 51%
of the issued shares of Newcourt shall be a quorum at any meeting of
shareholders.
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Advance Notice of Stockholder-Proposed Business at Annual Meetings
CIT
Pursuant to the CIT Bylaws, notice of nominations of directors by CIT
Stockholders must be made by a notice in writing delivered to CIT at its
principal executive offices not less than 60 days nor more than 90 days prior to
the annual meeting, provided that, in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
the preceding year's anniversary date, notice by the CIT Stockholder, to be
timely, must be delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made.
Newcourt
The Newcourt Bylaws do not include a provision which requires that
advance notice be given to Newcourt of shareholder-proposed business to be
conducted at the annual meetings.
Vote Required for Extraordinary Transactions
CIT
Except with respect to certain mergers between parent and subsidiary
corporations, the Delaware General Corporation Law requires the affirmative vote
of a majority of the outstanding stock entitled to vote thereon to authorize any
merger, consolidation, dissolution or sale of substantially of the assets of a
corporation, except that, unless required by its certificate of incorporation:
(i) no authorizing shareholder vote is required of a corporation surviving a
merger if (A) such corporation's certificate of incorporation is not amended in
any respect by the merger, (B) each share of stock of such corporation
outstanding immediately prior to the effective date of the merger will be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger, and (C) the number of shares to be issued in the
merger plus those initially issued upon conversion of any other securities to be
issued in the merger do not exceed 20% of such corporation's outstanding common
stock immediately prior to the effective date of the merger; and (ii) no
authorizing shareholder vote is required of a corporation to authorize a merger
with or into a single direct or indirect wholly-owned subsidiary of such
corporation (provided certain other limited circumstances apply). Shareholder
approval is also not required under the Delaware General Corporation Law for
mergers or consolidations in which a parent corporation merges or consolidates
with a subsidiary of which it owns at least 90% of the outstanding shares of
each class of stock.
Newcourt
Under the Business Corporations Act (Ontario), certain extraordinary
corporate actions or "arrangements," such as certain reorganizations of the
shares or classes of shares of the corporation, amalgamations, continuances, and
sales, leases or exchanges of all or substantially all the property of a
corporation other than in the ordinary course of business, and other
extraordinary corporate actions such as liquidations, dissolutions and (if
ordered by a court) arrangements, are required to be approved by special
resolution. A special resolution is a resolution passed at a meeting by not less
than two-thirds of the votes cast by the shareholders entitled to vote on the
resolution. In certain cases, a special resolution to approve an extraordinary
corporate action is also required to be approved separately by the holders of a
class or series of shares.
Amendment to Governing Documents
CIT
Under the Delaware General Corporation Law, unless the certificate or
articles of incorporation or the bylaws otherwise provide, amendments of a
certificate of incorporation generally require the approval of the holders of a
majority of the outstanding stock entitled to vote thereon, and if such
amendments would increase or decrease the aggregate number of authorized shares
of any class or series or the par value of such shares or would adversely affect
the shares of such class or series, a majority of the outstanding stock of such
class or series would have to approve the amendment, whether or not entitled to
vote thereon by the certificate of incorporation.
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Newcourt
Under the Business Corporations Act (Ontario), any amendment to the
articles generally requires approval by special resolution, which is a
resolution passed by a majority of not less than two-thirds of the votes cast by
shareholders entitled to vote on the resolution. The Business Corporations Act
(Ontario) provides that unless the articles or bylaws otherwise provide, the
directors may, by resolution, make, amend or repeal any bylaws that regulate the
business or affairs of a corporation. Where the directors make, amend or repeal
a bylaw, they are required under the Business Corporations Act (Ontario) to
submit the bylaw, amendment or repeal to the shareholders at the next meeting of
shareholders, and the shareholders may confirm, reject or amend the bylaw,
amendment or repeal by an ordinary resolution, which is a resolution passed by a
majority of the votes cast by shareholders entitled to vote on the resolution.
Dissenters' Rights
CIT
Under the Delaware General Corporation Law, holders of shares of any
class or series have the right, in certain circumstances, to dissent from a
merger or consolidation by demanding payment in cash for their shares equal to
the fair value (excluding any appreciation or depreciation as a consequence or
in expectation of the transaction) of such shares, as determined by a court in
an action timely brought by the corporation or the dissenters. The Delaware
General Corporation Law grants dissenters appraisal rights only in the case of
mergers or consolidation and not in the case of a sale or transfer of assets or
a purchase of assets for stock regardless of the number of shares being issued.
Further, no appraisal rights are available for shares of any class or series
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 shareholders,
unless the agreement of merger of consolidation requires the holders thereof to
accept for such shares anything other than (i) stock of the surviving
corporation, (ii) stock of another corporation which is either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 shareholders, (iii) cash in
lieu of fractional shares, or (iv) some combination of the above. In addition,
such rights are not available for any shares of the surviving corporation if the
merger did not require the vote of the shareholders of the surviving
corporation.
Newcourt
The Business Corporations Act (Ontario) provides that shareholders of
an Ontario corporation entitled to vote on certain matters are entitled to
exercise dissent rights and to be paid the fair value of their shares in
connection therewith. The Business Corporations Act (Ontario) does not
distinguish for this purpose between listed and unlisted shares. Such matters
include (a) any amalgamation with another corporation (other than with certain
affiliated corporations); (b) an amendment to the corporation's articles to add,
change or remove any provisions restricting the issue, transfer or ownership of
shares; (c) an amendment to the corporation's articles to add, change or remove
any restriction upon the business or businesses that the corporation may carry
on or upon the powers that the corporation may exercise; (d) a continuance under
the laws of another jurisdiction; (e) a sale, lease or exchange of all or
substantially all the property of the corporation other than in the ordinary
course of business; (f) upon a court order permitting a shareholder to dissent
in connection with an application to the court for an order approving an
arrangement proposed by the corporation; and (g) certain amendments to the
articles of a corporation which require a separate class or series vote,
provided that a shareholder is not entitled to dissent, if in certain
circumstances, the articles of the corporation prohibit such dissent, or if an
amendment to the articles is effected by a court order approving a
reorganization or by a court order made in connection with an action for an
oppression remedy. See "Dissenting Shareholders' Rights" on page 123.
Oppression Remedy
The Business Corporations Act (Ontario) provides an oppression remedy
that enables the court to make any order, both interim and final, to rectify the
matters complained of where it is satisfied upon application by a complainant
(as defined below) that: (i) any act or omission of the corporation or an
affiliate effects or threatens to effect a result; (ii) the business or affairs
of the corporation or an affiliate are, have been or are
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threatened to be carried on or conducted in a manner; or (iii) the powers of the
directors of the corporation or an affiliate are, have been or are threatened to
be exercised in a manner, that is oppressive or unfairly prejudicial to or that
unfairly disregards the interest of any security holder, creditor, director or
officer of the corporation. Under the Business Corporation Act (Ontario) a
complainant means: (a) a present or former registered holder or beneficial owner
of securities of a corporation or any of its affiliates; (b) a present or former
officer or director of the corporation or any of its affiliates; and (c) any
other person who, in the discretion of the court, is a proper person to make
such application. Because of the breadth of the conduct which can be complained
of and the scope of the court's remedial powers, the oppression remedy is very
flexible and is sometimes relied upon to safeguard the interests of shareholders
and other complainants with a substantial interest in the corporation. Under the
Business Corporations Act (Ontario), it is not necessary to prove that the
directors of a corporation acted in bad faith or in contravention of their
fiduciary duties in order to seek an oppression remedy. Furthermore, the court
may order the corporation to pay the interim expenses of a complainant seeking
an oppression remedy, but the complainant may be held accountable for such
interim costs on final disposition of the complaint (as in the case of a
derivative action). The Delaware General Corporation Law does not provide for a
similar remedy.
Derivative Action
CIT
Derivative actions may be brought in Delaware by a stockholder on
behalf of, and for the benefit of, the corporation. The Delaware General
Corporation Law provides that a stockholder must aver in the complaint that he
or she was a stockholder of the corporation at the time of the transaction of
which he or she complains, or that his or her share thereafter devolved on him
or her by operation of law. A stockholder may not sue derivatively unless he or
she first makes demand on the corporation that it bring suit and such demand has
been refused, unless it is shown that such demand would have been futile.
Newcourt
Under the Business Corporations Act (Ontario), a complainant may apply
to the court for leave to bring an action in the name of and on behalf of a
corporation or any subsidiary, or to intervene in an existing action to which
any such body corporate is a party, for the purpose of prosecuting, defending or
discontinuing the action on behalf of the body corporate. Under the Business
Corporations Act (Ontario), no action may be brought and no intervention in an
action may be made unless the complainant has given 14 days' notice to the
directors of the corporation or its subsidiary of the complainant's intention to
apply to the court and the court is satisfied that (a) the directors of the
corporation or its subsidiary will not bring, diligently prosecute or defend or
discontinue the action; (b) the complainant is acting in good faith; and (c) it
appears to be in the interests of the corporation or its subsidiary that the
action be brought, prosecuted, defended or discontinued. Where a complainant
makes an application without having given the required notice, the Business
Corporations Act (Ontario) permits the court to make an interim order pending
the complainant giving the required notice, provided that the complainant can
establish to the satisfaction of the court that at the time of seeking the
interim order it was not expedient to give the required notice.
Under the Business Corporations Act (Ontario), the court in a
derivative action may make any order it thinks fit. Additionally, under the
Business Corporations Act (Ontario), a court may order a corporation or its
subsidiary to pay the complainant's interim costs, including reasonable legal
fees and disbursements. Although the complainant may be held accountable for the
interim costs on final disposition of the complaint, it is not required to give
security for costs in a derivative action.
Shareholder Consent in Lieu of Meeting
CIT
As permitted by the Delaware General Corporation Law, the CIT
Certificate of Incorporation provides that no action may be taken by
stockholders without a meeting except by the unanimous written consent of all
stockholders entitled to vote on such action. Special meetings of stockholders
may be called only by a majority of the CIT Board of Directors, the Chairman of
the Board or the President of CIT.
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Newcourt
Under the Business Corporations Act (Ontario), shareholder action
without a meeting may only be taken by written resolution signed by all
shareholders who would be entitled to vote thereon at a meeting. Special
meetings of shareholders may be called by the Newcourt Board of Directors or, in
certain circumstances, requisitioned by a holder of at least five percent of the
outstanding shares or a court.
Director Qualifications
Under the Business Corporations Act (Ontario), an offering corporation,
such as Newcourt, must have not fewer than three directors and a majority of the
directors must be resident Canadians. The Business Corporations Act (Ontario)
also requires that at least one-third of the directors of such a corporation
must not be officers or employees of the corporation or any of its affiliates.
The Delaware General Corporation Law does not have comparable requirements.
Fiduciary Duties of Directors CIT
Directors of corporations incorporated or organized under the Delaware
General Corporation Law have fiduciary obligations to the corporation and its
stockholders. Pursuant to these fiduciary obligations, the directors must act in
accordance with the so-called duties of "due care" and "loyalty." The duty of
care generally requires that the directors act in an informed and deliberative
manner and they inform themselves, prior to making a business decision, of all
material information reasonably available to them. The duty of loyalty can be
summarized as the duty to act in good faith in a manner which the directors
reasonably believe to be in the best interests of the stockholders. It generally
requires that there be no conflict between duty and self-interest.
Newcourt
Directors of corporations governed by the Business Corporations Act
(Ontario) have fiduciary obligations to the corporation. Under the Business
Corporations Act (Ontario), the statutory standard of care requires directors of
an Ontario corporation to act honestly and in good faith with a view to the best
interests of the corporation, and exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances.
Indemnification of Officers and Directors
CIT
CIT's Bylaws require indemnification of directors and officers to the
fullest extent permitted by the Delaware General Corporation Law. Pursuant to
the Delaware General Corporation Law, CIT generally has the power to indemnify
its present and former directors, officers, employees and agents against
expenses, judgments and amounts paid in settlements incurred by them in
connection with any suit to which they are, or are threatened to be made, a
party by reason of their serving in such positions so long as they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interest of CIT, and with respect to any criminal action, they had no
reasonable cause to believe their conduct was unlawful. With respect to suits by
or in the right of a corporation, however, indemnification is not available if
such person is finally adjudged to be liable to CIT or for amounts paid in
settlement, unless and only to the extent the court determines that
indemnification is appropriate.
Newcourt
Under the Business Corporations Act (Ontario), a corporation may
indemnify a director or officer, a former director or officer or a person who
acts or acted at the corporation's request as a director or officer of a body
corporate of which the corporation is or was a shareholder or creditor, and his
or her heirs and legal representatives (an "Indemnifiable Person"), against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him or her in respect of any civil,
criminal or administrative action or proceeding to which he or she is made a
party by reason of being or having been a
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director or officer of such corporation or such body corporate, if: (a) he or
she acted honestly and in good faith with a view to the best interests of such
corporation; and (b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he or she had reasonable
grounds for believing that his or her conduct was lawful. An Indemnifiable
Person is entitled to such indemnity from the corporation if he or she was
substantially successful on the merits in his or her defense of the action or
proceeding and fulfilled the conditions set out in (a) and (b), above. A
corporation may, with the approval of a court, also indemnify an Indemnifiable
Person in respect of an action by or on behalf of the corporation or body
corporate to procure a judgment in its favor, to which such person is made a
party by reason of being or having been a director or an officer of the
corporation or body corporate, if he or she fulfills the conditions set out in
(a) and (b), above. The Newcourt Bylaws provide for indemnification of directors
and officers to the fullest extent authorized by the Business Corporations Act
(Ontario).
Director Liability
CIT
The DGCL provides that the charter of a corporation may include a
provision which limits or eliminates the liability of directors to the
corporation or its shareholder s for monetary damages for breach of fiduciary
duty as a director, provided such liability does not arise from certain
prescribed conduct, including breach of the duty of loyalty, acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, the payment of unlawful dividends or expenditure of funds for unlawful
stock repurchases or redemptions or transactions for which such director derived
an improper personal benefit.
The CIT Certificate of Incorporation eliminates the personal liability
of each director of CIT to CIT or any of its stockholders for damages resulting
from breaches of fiduciary duty as a director involving any act or omission of
any such director. The CIT Certificate of Incorporation does not limit or
eliminate the liability of a director for actions or omissions involving
intentional misconduct, fraud, a knowing violation of law or payment of an
unlawful dividend.
Newcourt
The Business Corporations Act (Ontario) does not permit the limitation
of a director's liability for breach of fiduciary liability through the articles
of a corporation.
Related Party Transactions
Policies of certain Canadian securities regulatory authorities,
including Policy 9.1 of the Ontario Securities Commission ("Policy 9.1"),
contain requirements in connection with related party transactions. A related
party transaction means, generally, any transaction by which an issuer, directly
or indirectly, acquires or transfers an asset or acquires or issues treasury
securities or assumes or transfers a liability from or to, as the case may be, a
related party by any means whether in a single or multi-step transaction.
"Related party" is defined in Policy 9.1 and includes directors, senior officers
and holders of at least 10% of the voting securities of the issuer.
Policy 9.1 requires detailed disclosure in the proxy material sent to
security holders in connection with non-exempt related party transactions, and,
subject to certain exceptions, the preparation of a formal valuation of the
subject matter of the related party transaction and any non-cash consideration
offered therefor and the inclusion of a summary of the valuation in the proxy
material. Policy 9.1 also requires, subject to certain exceptions, that the
minority shareholders of the issuer separately approve the transaction, by
either a simple majority or two-thirds of the votes cast, depending on the
circumstances.
Enforceability of Civil Liabilities
Newcourt is a corporation incorporated under the laws of Ontario,
Canada. Most of the directors and officers of Newcourt, as well as certain
experts named herein, are residents of Canada and all or a substantial portion
of their assets and a substantial portion of the assets of Newcourt are located
outside the United States. As a result, it may be difficult for holders of
Newcourt Common Shares to effect service within the United States upon such
directors, officers and experts who are not residents of the United States or to
realize in the United States upon judgements of courts of the United States
predicated upon civil liability under the United
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States federal securities laws. Newcourt has been advised by Blake, Cassels &
Graydon, its Canadian counsel, that there is some doubt as to the enforceability
in Canada against Newcourt or any of its directors, officers or experts who are
not residents of the United States in original actions or in actions for
enforcement of judgements of United States courts, of liabilities predicated
solely upon United States federal securities laws.
Corporate Opportunities
The CIT Certificate of Incorporation provides that DKB has no duty to
refrain from engaging in the same or similar activities or lines of business as
CIT, and neither DKB nor any director, officer or other employee thereof (except
as provided below) is liable to CIT or its stockholders for breach of any
fiduciary duty by reason of any such activities of DKB. In the event that DKB
acquires knowledge of a potential transaction or matter which may be a corporate
opportunity for both DKB and CIT, DKB has no duty to communicate or offer such
corporate opportunity to CIT and is not liable to CIT or its stockholders for
breach of any fiduciary duty as a stockholder of CIT by reason of the fact that
DKB pursues or acquires such corporate opportunity for itself, directs such
corporate opportunity to another person or does not communicate information
regarding such corporate opportunity to CIT.
In the event that a director, officer or other employee of CIT who is
also a director or officer or other employee of DKB acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both
CIT and DKB, such director, officer or other employee of CIT is deemed to have
fully satisfied and fulfilled the fiduciary duty of such director, officer or
other employee of CIT and its stockholders with respect to such corporate
opportunity if such director, officer or other employee acts in a manner
consistent with the following policy:
(i) a corporate opportunity offered to any person who is an
officer or other employee of CIT, and who is also a director but not
an officer or other employee of DKB, belongs to CIT;
(ii) a corporate opportunity offered to any person who is a
director but not an officer or other employee of CIT, and who is also a
director or officer or other employee of DKB, belongs to CIT if such
opportunity is expressly offered to such person in writing solely in
his or her capacity as a director of CIT, and otherwise belongs to DKB;
and
(iii) a corporate opportunity offered to any person who is an
officer or other employee of both CIT and DKB, or an officer of one and
an employee of the other, belongs to CIT if such opportunity is offered
to such person in writing solely in his or her capacity as an officer
of CIT, and otherwise belongs to DKB.
For purposes of the foregoing:
(i) A director of CIT who is Chairman of the CIT Board of
Directors or of a committee thereof shall not be deemed to be an
officer or employee of CIT by reason of holding such position (without
regard to whether such position is deemed an officer of CIT under CIT's
Bylaws), unless such person is a full-time employee of CIT; and
(ii) (A) The term "CIT" means CIT and all corporations,
partnerships, joint ventures, associations and other entities
controlled directly or indirectly by CIT through the ownership of the
outstanding voting power of such corporation, partnership, joint
venture, association or other entity or otherwise and (B) the term
"DKB" means DKB and all corporations, partnerships, joint ventures,
associations and other entities (other than CIT, defined in accordance
with clause (A) of this section (ii)) controlled (directly or
indirectly) by DKB through the ownership of the outstanding voting
power of such corporation, partnership, joint venture, association or
other entity or otherwise.
The foregoing provisions of the CIT Certificate of Incorporation will
expire on the date that both DKB ceases to own beneficially Common Stock
representing at least 25% of the voting power of all classes of outstanding
Common Stock and no person who is a director, officer or employee of CIT is also
a director, officer or employee of DKB or any of its subsidiaries (other than
CIT).
Any person purchasing or otherwise acquiring CIT Common Stock is deemed
to have notice of, and to have consented to, the foregoing provisions of the CIT
Certificate of Incorporation.
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DISSENTING SHAREHOLDERS' RIGHTS
Newcourt
The following summary of the Dissent Procedures is qualified in its
entirety by the provisions of Section 185 of the Business Corporations Act
(Ontario), reprinted in its entirety as Annex B to this Joint Proxy Statement.
Pursuant to the terms of the Interim Order, a registered Newcourt
Shareholder is entitled to send to Newcourt a written objection to the
Arrangement Resolution. In addition to any other right a Newcourt Shareholder
may have, when the Transaction becomes effective, a registered Newcourt
Shareholder who complies with the dissent procedure under Section 185 of the
Business Corporations Act (Ontario) is entitled to be paid by Newcourt the fair
value of the Newcourt Common Shares held by the Newcourt Shareholder in respect
of which the Newcourt Shareholder dissents, determined as at the close of
business on the day before the Arrangement Resolution is adopted; provided that,
notwithstanding Section 185(6) of the Business Corporations Act (Ontario), the
written objection to the Arrangement Resolution referred to in Section 185(6) of
the Business Corporations Act (Ontario) must be received by Newcourt by 5:00
p.m. (Toronto time) on the Business Day preceding the Meeting (the "Dissent
Procedures").
Persons who are beneficial owners of Newcourt Common Shares registered
in the name of a broker, custodian, nominee or other intermediary who wish to
dissent should be aware that only the registered owner of said shares is
entitled to dissent. In many cases, shares beneficially owned by a
non-registered holder are registered either: (i) in the name of an intermediary
that the non-registered holder deals with in respect of the shares (such as
banks, trust companies, securities dealers and brokers, trustees or
administrators of self-administered registered retirement savings plans,
registered retirement income funds, registered education savings plans and
similar plans, and their nominees); or (ii) in the name of a clearing agency
(such as CDS) of which the intermediary is a participant. Accordingly, a
non-registered holder will not be entitled to exercise the right to dissent
under Section 185 directly. A non-registered holder who wishes to exercise the
right to dissent should immediately contact the intermediary who the
non-registered holder deals with in respect of the shares and either: (i)
instruct the intermediary to exercise the right to dissent on the non-registered
holder's behalf (which, if the shares are registered in the name of CDS or other
clearing agency, would require that the share first be re-registered in the name
of the intermediary); or (ii) instruct the intermediary to re-register the
shares in the name of the non-registered holder, in which case the
non-registered holder would have to exercise the right to dissent directly.
A registered Newcourt Shareholder who wishes to invoke the provisions
of Section 185 of the Business Corporations Act (Ontario) must send to Newcourt
a written objection to the Arrangement Resolution (the "Notice of Dissent") by
5:00 p.m. (Toronto time) on the Business Day prior to the Newcourt Shareholders
Meeting. The sending of a Notice of Dissent does not deprive a registered
Newcourt Shareholder of the right to vote on the Arrangement Resolution but a
vote either in person or by proxy against the Arrangement Resolution does not
constitute a Notice of Dissent. A vote in favor of the Arrangement Resolution
will deprive the registered Newcourt Shareholder of further rights under Section
185 of the Business Corporations Act (Ontario).
Within ten days after the adoption of the Arrangement Resolution by the
Newcourt Shareholders, Newcourt is required to notify in writing each Newcourt
Shareholder who has filed a Notice of Dissent (each, a "Dissenting Shareholder")
and has not voted for the Arrangement Resolution or withdrawn his objection that
the Arrangement Resolution has been adopted. A Dissenting Shareholder shall,
within 20 days after he or she receives notice of adoption of the Arrangement
Resolution or, if he or she does not receive such notice, within 20 days after
he or she learns that the Arrangement Resolution has been adopted, send to
Newcourt a written notice (the "Demand for Payment") containing his or her name
and address, the number of Newcourt Common Shares in respect of which he or she
dissents, and a demand for payment of the fair value of such shares. Within 30
days after sending his Demand for Payment, the Dissenting Shareholder shall send
the certificates representing the shares in respect of which he dissents to
Newcourt or its transfer agent. Newcourt or its transfer agent shall endorse on
the share certificates notice that the holder thereof is a Dissenting
Shareholder under Section 185 of the Business Corporations Act (Ontario) and
shall forthwith return the share certificates to the Dissenting Shareholder. If
a Dissenting Shareholder fails to send his or her share certificates, he or she
has no right to make a claim under Section 185 of the Business Corporations Act
(Ontario).
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After sending a Demand for Payment, a Dissenting Shareholder ceases to
have any rights as a holder of the shares in respect of which he has dissented
other than the right to be paid the fair value of such shares as determined
under Section 185 of the Business Corporations Act (Ontario), unless: (i) the
Dissenting Shareholder withdraws his or her Demand for Payment before Newcourt
makes a written offer to pay (the "Offer to Pay"); (ii) Newcourt fails to make a
timely Offer to Pay to the Dissenting Shareholder and the Dissenting Shareholder
withdraws his Demand for Payment; or (iii) the directors of Newcourt revoke the
Arrangement Resolution, in all of which cases the Dissenting Shareholder's
rights as a Newcourt Shareholder are reinstated and the Dissenting Shareholder's
Newcourt Common Shares will be transferred to Exchangeco by the holder thereof,
without any act or formality on its part, in exchange for that number of fully
paid and non-accessible shares of CIT common stock equal to the Exchange Ratio,
pursuant to the Plan of Arrangement.
Not later than seven days after the later of the Effective Date and the
day Newcourt receives the Demand for Payment, Newcourt shall send to each
Dissenting Shareholder who has sent a Demand for Payment, an Offer to Pay for
the Newcourt Common Shares of the Dissenting Shareholder in respect of which he
or she has dissented in an amount considered by the directors of Newcourt to be
the fair value thereof, accompanied by a statement showing how the fair value
was determined. Every Offer to Pay made to Dissenting Shareholders for shares of
the same class shall be on the same terms. The amount specified in an Offer to
Pay which has been accepted by a Dissenting Shareholder shall be paid by
Newcourt within ten days of the acceptance by the Dissenting Shareholder of the
Offer to Pay, but an Offer to Pay lapses if Newcourt has not received an
acceptance thereof within 30 days after the Offer to Pay has been made.
If an Offer to Pay is not made by Newcourt or if a Dissenting
Shareholder fails to accept an Offer to Pay, Newcourt may, within 50 days after
the Effective Date or within such further period as a court may allow, apply to
the court to fix a fair value for the Newcourt Common Shares of any Dissenting
Shareholder. If Newcourt fails to so apply to the court, a Dissenting
Shareholder may apply to the Superior Court of Justice (Ontario) for the same
purpose within a further period of 20 days or within such further period as the
court may allow. A Dissenting Shareholder is not required to give security for
costs in any application to the court.
On making an application to the court, Newcourt shall give to each
Dissenting Shareholder who has sent to Newcourt a Demand for Payment and has not
accepted an Offer to Pay, notice of the date, place and consequences of the
application and of his/her right to appear and be heard in person or by counsel.
All Dissenting Shareholders whose Newcourt Common Shares have not been purchased
by Newcourt shall be joined as parties to any such application to the court to
fix a fair value and shall be bound by the decision rendered by the court in the
proceedings commenced by such application. The court is authorized to determine
whether any other person is a Dissenting Shareholder who should be joined as a
party to such application.
The court shall fix a fair value for the Newcourt Common Shares of all
Dissenting Shareholders and may in its discretion allow a reasonable rate of
interest on the amount payable to each Dissenting Shareholder from the Effective
Time until the date of payment of the amount ordered by the court. The final
order of the court in the proceedings commenced by an application by Newcourt or
a Dissenting Shareholder shall be rendered against Newcourt, payable by Newcourt
in favor of each Dissenting Shareholder. The cost of any application to a court
by Newcourt or a Dissenting Shareholder will be in the discretion of the court.
The above is only a summary of the dissenting shareholder provisions of
Section 185 of the Business Corporations Act (Ontario) as modified by the
Interim Order, which are technical and complex. The foregoing summary is
qualified in its entirety by Section 185 of the Business Corporations Act
(Ontario), which is reprinted in its entirety as Annex B to this Joint Proxy
Statement. It is strongly recommended that any shareholder of Newcourt wishing
to exercise a right to dissent should seek legal advice, as failure to comply
strictly with the provisions of the Business Corporations Act (Ontario) as
modified by the Interim Order may result in the loss or unavailability of the
right to dissent.
CIT
Holders of CIT Common Stock who vote against the Transaction are not
entitled to demand appraisal of, or to receive payment for, their CIT Common
Stock.
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ADDITIONAL MATTERS FOR CONSIDERATION OF
CIT STOCKHOLDERS
PROPOSAL 2
AMENDMENT TO THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF CIT
On January 28, 1999, the Board of Directors approved the proposed
amendment to CIT's Certificate of Incorporation. The proposed amendment would
amend and restate the entire Certificate of Incorporation, the effect of which
would be to rename the Class A Common Stock as "Common Stock," reclassify the
authorized Class B Common Stock as Common Stock and eliminate the authorization
for the Class B Common Stock. The proposed Amended and Restated Certificate of
Incorporation incorporating the proposed amendment is attached as Annex O to
this Joint Proxy Statement.
The proposed amendment is permitted under Delaware law and the rules of
the New York Stock Exchange, upon which CIT Class A Common Stock is listed and
traded.
The proposed amendment is being presented individually to CIT
Stockholders for their approval.
Amendment to CIT's Certificate of Incorporation to rename the Class A Common
Stock as "Common Stock," reclassify the authorized Class B Common Stock as
Common Stock, and eliminate the authorization for Class B Common Stock
The Board of Directors has approved and recommends stockholder approval
of an amendment to the Certificate of Incorporation that would rename the Class
A Common Stock as "Common Stock," reclassify the authorized Class B Common Stock
as Common Stock, and eliminate authorization for Class B Common Stock.
Purposes And Effects Of Proposed Amendment
Pursuant to Article FOURTH of the Certificate of Incorporation, CIT's
authorized capital stock currently consists of 1,210,000,000 shares of Common
Stock, of which 700,000,000 shares are designated as Class A Common Stock, par
value $.01 per share, and 510,000,000 shares are designated as Class B Common
Stock, par value $.01 per share. In addition, 50,000,000 shares of Preferred
Stock, par value $.01 per share, are authorized.
CIT originally included the Class B Common Stock in its Certificate of
Incorporation for issuance to DKB. CIT issued 126,000,000 shares of Class B
Common Stock to DKB concurrently with its initial public offering in 1997. In
November 1998, in connection with a secondary public offering, DKB converted
certain of its shares of Class B Common Stock into shares of Class A Common
Stock for sale in such secondary offering. Simultaneously, DKB converted its
remaining shares of Class B Common Stock into Class A Common Stock. As a
consequence, there are no shares of Class B Common Stock currently outstanding.
Also, in connection with such secondary offering, CIT committed in the
underwriting agreement with several underwriters that CIT would not issue any
additional shares of Class B Common Stock.
The following compares the material terms of the Class A Common Stock
and the Class B Common Stock:
Voting Rights
The Class A Common Stock and Class B Common Stock generally have
identical rights, except that holders of Class A Common Stock are entitled to
one vote per share and holders of Class B Common Stock are entitled to five
votes per share on all matters to be voted on by stockholders, except that DKB
or the Class B Transferee (as defined below), as the case may be, may reduce
from time to time the number of votes per share of Class B Common Stock by
giving written notice to CIT specifying the reduced number of votes per share.
Generally, all matters to be voted on by stockholders must be approved by a
majority (or, in the case of the election of directors, by a plurality) of the
votes entitled to be cast by all holders of shares of Class A Common Stock and
Class B Common Stock present in person or represented by proxy, voting together
as a single class, subject to any voting rights granted to holders of any
Preferred Stock. Except as otherwise provided by law or by CIT's Certificate of
Incorporation, and subject to any voting rights granted to holders of any
outstanding
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Preferred Stock, amendments to CIT's Certificate of Incorporation must be
approved by the vote of the holders of Common Stock having a combined voting
power of a majority of all outstanding shares of Class A Common Stock and Class
B Common Stock, voting together as a single class. Amendments to CIT's
Certificate of Incorporation that would adversely alter or change the powers,
preferences or special rights of the Class B Common Stock also must be approved
by a majority of the votes entitled to be cast by the holders of the Class B
Common Stock. Notwithstanding the foregoing, any amendment to CIT's Certificate
of Incorporation to increase or decrease the authorized shares of either class
would have to be approved by the affirmative vote of the holders of Common Stock
having a combined voting power of a majority of the shares of Class A Common
Stock and Class B Common Stock, voting together as a single class.
Dividends
Holders of Class A Common Stock and Class B Common Stock share ratably
on a per share basis in any dividends declared by the Board of Directors,
subject to any preferential rights of any outstanding Preferred Stock. In the
case of dividends or other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock, only shares
of Class A Common Stock would be paid or distributed to holders of shares of
Class A Common Stock, and only shares of Class B Common Stock would be paid or
distributed to holders of Class B Common Stock.
Conversion
Each share of Class B Common Stock that may be issued would be
convertible at any time while held by DKB and/or any of its subsidiaries or the
Class B Transferee (as defined below) and/or any of its subsidiaries at the
option of the holder thereof into one share of Class A Common Stock.
Except as provided below, any shares of Class B Common Stock issued or
transferred to a person other than DKB or any of its subsidiaries or the Class B
Transferee or any of its subsidiaries would automatically convert into shares of
Class A Common Stock upon such transfer. Shares of Class B Common Stock
representing more than a 50% economic interest in CIT that are transferred by
DKB and/or any of its subsidiaries in a single transaction or series of related
transactions to one unrelated person (the "Class B Transferee") and/or any of
its subsidiaries do not automatically convert into shares of Class A Common
Stock upon such disposition. Any shares of Class B Common Stock retained by DKB
or any of its subsidiaries following any such disposition of more than a 50%
economic interest in CIT to the Class B Transferee and/or any of its
subsidiaries would automatically convert into shares of Class A Common Stock
upon such disposition.
All shares of Class B Common Stock would automatically convert into
Class A Common Stock if the number of outstanding shares of Class B Common Stock
beneficially owned by DKB and its subsidiaries or the Class B Transferee and its
subsidiaries, as the case may be, falls below 25% while still retaining control
of a majority of the voting power. All conversions would be effected on a
share-for-share basis.
Other Rights
In the event of any merger, reorganization, or consolidation of CIT
with or into another entity in connection with which shares of Common Stock are
converted into or exchangeable for shares of stock, other securities, or
property (including cash), all holders of Common Stock, regardless of class, are
entitled to receive the same kind and amount of shares of stock and other
securities and property (including cash), except that shares of stock or other
securities receivable upon such reorganization, consolidation, or merger by a
holder of a share of Class B Common Stock may differ from the shares of stock or
other securities receivable upon such reorganization, consolidation, or merger
by a holder of a share of Class A Common Stock to the extent that the Class B
Common Stock and Class A Common Stock differ as provided in CIT's Certificate of
Incorporation.
On liquidation, dissolution or winding up of CIT, after payment in full
of the amounts required to be paid to holders of Preferred Stock, if any, all
holders of Common Stock, regardless of class, would be entitled to share ratably
in any assets available for distribution to holders of shares of Common Stock.
Shares of Class A Common Stock do not have preemptive rights to
purchase additional shares. Shares of Class B Common Stock have preemptive
rights to subscribe for and receive additional securities of CIT upon all
additional issuances of stock by CIT (other than in connection with certain
issuances pursuant to employee
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stock or stock option benefit plans or in connection with any stock split or
stock dividend) of any or all classes or series thereof, or securities of CIT
convertible into such stock, such that such holder of Class B Common Stock may,
by purchasing such additional securities, maintain the percentage interest it
had immediately prior to such issuance of the votes of the capital stock of CIT
voting together as a single class and/or its economic interest in CIT.
If the proposed amendments are ratified by the stockholders, Article
FOURTH of CIT's Certificate of Incorporation will be amended to eliminate the
provisions authorizing the Class B Common Stock and to eliminate the provisions
establishing the relative powers, preferences, and participating, optional, or
other special rights and the qualifications, limitations, and restrictions of
the Class A Common Stock and the Class B Common Stock. The provision permitting
the holders of Class A Common Stock and Class B Common Stock to vote together as
a single class will also be eliminated.
Other conforming changes will also be made to CIT's Certificate of
Incorporation. Article EIGHTH will be modified to eliminate references to the
transferee of Class B Common Stock, and Article EIGHTH and Article NINTH will be
modified to eliminate references to multiple series of Common Stock. Article
EIGHTH will retain the current prohibition against stockholder action by written
consent.
If these proposed amendments are approved by the stockholders, the term
"Class A" will be eliminated from Class A Common Stock and such stock will be
named as Common Stock. Each outstanding share of Class A Common Stock shall
automatically be converted into a share of Common Stock. The Class A Common
Stock as so renamed will continue to be listed on the New York Stock Exchange.
After giving effect to the renaming of the Class A Common Stock as
"Common Stock," elimination of the Class B Common Stock, and the
reclassification of authorized Class B Common Stock as Common Stock, the
Company's authorized capital stock will consist of 1,260,000,000 shares, of
which (i) 50,000,000 are shares of Preferred Stock, par value $.01 per share,
none of which shares were issued and outstanding as of September 20, 1999, and
(ii) 1,210,000,000 shares of Common Stock, par value $.01 per share, of which
161,209,826 were issued and outstanding (71,000,000 shares (44%) of which is
held by DKB) and 1,965,410 were held as treasury stock.
Vote Required For Approval
Stockholder ratification of this proposal requires the affirmative vote
of the holders of a majority of the outstanding shares of Class A Common Stock
permitted to vote at the CIT Stockholders Meeting.
The Board of Directors recommends a vote "For" approval of the
amendment to CIT's Certificate of Incorporation which would rename Class A
Common Stock as "Common Stock," reclassify the authorized Class B Common Stock
as Common Stock, and eliminate the authorization for Class B Common Stock.
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PROPOSAL 3
APPROVAL OF THE CIT GROUP, INC.
LONG-TERM EQUITY COMPENSATION PLAN
Introduction
Effective as of November 1, 1997, the CIT Board of Directors adopted a
stock-based incentive plan, The CIT Group, Inc. Long-Term Equity Compensation
Plan (the "ECP"), covering members of the Board of Directors, and employees of
CIT and its subsidiaries (each a "Participant"). As of October 26, 1999, CIT has
amended and restated the ECP with respect to awards made after such date. The
ECP is not subject to the requirements of the Employee Retirement Income
Security Act of 1974 as amended or qualified under Section 401(a) of the IRC.
The full text of the ECP is set forth as Annex P to this Joint Proxy
Statement. The following is a summary of the principal features of the ECP and
does not purport to be complete. Stockholders are urged to read the ECP in its
entirety. The summary is subject to and qualified in its entirety by reference
to the ECP. Capitalized terms not otherwise defined herein have the meanings
provided in the Joint Proxy Statement.
Purpose
The objectives of the ECP are:
(i) to optimize the profitability and growth of CIT through
incentives which are consistent with CIT's goals and which link the
personal interests of ECP Participants to the interests of CIT
Stockholders;
(ii) to provide ECP Participants with an incentive for
excellence in individual performance;
(iii) to promote teamwork among ECP Participants;
(iv) to provide flexibility to CIT in its ability to motivate,
attract, and retain the services of ECP Participants who make
significant contributions to CIT's success; and
(v) to allow ECP Participants to share in the success of CIT.
Administration
The Compensation Committee administers the ECP. Day to day
administrative functions are handled by the Human Resources Department of CIT.
Granting of Awards under the ECP
Under the ECP, CIT may grant annual incentive awards (each an "Annual
Incentive Award"), incentive and non-qualified stock options (each an "Option"),
stock appreciation rights (each an "SAR"), restricted stock ("Restricted Stock")
and performance shares (each a "Performance Share") and performance units (each
a "Performance Unit") (individually, an "Award," or collectively, "Awards") to
selected Participants. Annual Incentive Awards and Performance Units are granted
upon the attainment of performance goals of CIT (although the Compensation
Committee may establish performance goals with respect to Restricted Stock) in
its sole discretion based on certain business criteria, including, but not
limited to, (i) pre-tax earnings, (ii) operating earnings, (iii) after-tax
earnings, (iv) return on investment, (v) earned value added, (vi) earnings per
share, (vii) revenues, (viii) cash flow or cash flow on investment, (ix) return
on assets or return on net assets, (x) return on capital, (xi) return on equity,
(xii) return on sales, (xiii) operating margin, (xiv) total shareholder return
or stock price appreciation determined in accordance with generally accepted
accounting principles consistently applied for CIT on a divisional, subsidiary
or consolidated basis, (xv) net income or any combination thereof (the
"Performance Target"). The Committee shall adopt in writing each year, within 90
days of such year, the applicable Performance Target that must be achieved in
order to receive Annual Incentive Awards, Restricted Stock (if applicable) or
Performance Units and Performance Shares under the ECP. The terms of the Awards
are set forth in award agreements ("Award Agreements") between CIT and each
Participant. The Committee selects the Participants (excluding Directors) to
whom Awards are granted and determines the type, size and terms and conditions
applicable to each Award, including, but not limited to, the Performance
Targets. The Committee also has the authority to interpret, construe and
implement the provisions of the ECP. The Committee's decisions are binding.
Awards to Directors are made by the CIT Board of Directors or by a committee of
Directors not otherwise entitled to participate in the ECP or based on a formula
developed by the Board of Directors or such committee.
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The ECP shall remain in effect, subject to the right of the Committee
to amend or terminate the ECP, until all Awards granted under the ECP are
satisfied by the issuance of shares of CIT Common Stock and/or the payment of
cash. No Award may be granted under the ECP on or after the tenth anniversary of
the effective date of the ECP. Although the Committee may amend, suspend or
terminate the ECP, no such amendment, suspension or termination may adversely
affect any Award previously made under the ECP without the affected
Participant's written consent.
Maximum Number of Shares under the ECP
Subject to adjustment as provided below and in accordance with
adjustments made as a result of a change in corporate capitalization or a
corporate transaction, the maximum aggregate number of shares of CIT Common
Stock for which Awards may be granted under the ECP is 23.8 million, plus (i)
the number of shares of CIT Common Stock pursuant to options that are not
granted to participants or are canceled, terminate, expire or lapse for any
reason without the issuance of shares of CIT Common Stock or payment in respect
thereof under the terms of The CIT Group, Inc. Transition Option Plan (the
"Transition Option Plan"), reduced by (ii) the number of shares of CIT Common
Stock granted pursuant to options under the Transition Option Plan in excess of
5.1 million, if any. As of July 31, 1999, Awards for 7.3 million shares of CIT
Common Stock have already been granted under the ECP. CIT may use authorized but
unissued shares, treasury shares or any combination of the two to issue shares
of CIT Common Stock under the ECP.
The Annual Incentive Award pool for each plan year (the "Pool") for
Participants designated by the Committee as a "covered employee" within the
meaning of Section 162(m) of the Code ("Covered Employees") shall be the sum of
(i) 3% of the consolidated pre-tax earnings of CIT and (ii) an amount not to
exceed $2 million of the remaining portion of the Pool, if any, that was not
paid to a Covered Employee in the preceding plan year. The maximum aggregate
payout with respect to Annual Incentive Awards granted in any one fiscal year to
any one Covered Employee shall not exceed 30% of the Pool for that plan year and
in no event shall Covered Employees, as a group, receive Annual Incentive Awards
in excess of 100% of the Pool for a plan year. If such 100% limitation is
exceeded, each Covered Employee's Annual Incentive Award shall be reduced pro
rata.
The maximum aggregate number of shares of CIT Common Stock that may be
granted in the form of Options, SARs, Restricted Stock, or Performance
Units/Performance Shares in any one fiscal year to any one Participant is 100%
of the maximum number of shares of CIT Common Stock that may be granted under
the ECP.
Awards under the ECP
Annual Incentive Awards
The Committee may grant Annual Incentive Awards under the ECP upon
attainment of the Performance Target, payable in cash or in shares of CIT Common
Stock, upon such terms and conditions as the Committee may establish. Annual
Incentive Awards may be granted in lieu of cash awards under The CIT Group Bonus
Plan.
Stock Options
The Committee may grant Options to purchase shares of CIT Common Stock
under the ECP. The Committee, in its discretion, may determine the exercise
price (the "Option Price") of the Options, but the Option Price cannot be less
than the closing trading price of a share of CIT Common Stock on the New York
Stock Exchange on the date of grant. However, the initial grants of Options
(designated as non-qualified stock options) under the ECP in November 1997 were
granted with an exercise price equal to the initial public offering price of the
CIT Common Stock. The Options may be either incentive or non-qualified stock
options. Each Option represents the right to purchase one share of CIT Common
Stock at the specified Option Price.
The Committee sets the term of each Option, but Options can expire no
later than 10 years after the date on which they are granted. Options become
exercisable at such times and in such installments as the Committee determines.
Unless the Committee determines otherwise, payment of the Option Price must be
made in full at the time of exercise in cash or its equivalent. The Committee
may permit a Participant to pay in full or in part by tendering shares of CIT
Common Stock having a fair market value equal to the Option Price (or such
portion thereof) to CIT or its designee. The Committee may also allow a cashless
exercise of such Options.
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Stock Appreciation Rights
The Committee may grant an Award of an SAR under the ECP with respect
to shares of CIT Common Stock. Generally, one SAR is granted with respect to one
share of CIT Common Stock. The SAR entitles the Participant, upon the exercise
of the SAR, to receive an amount equal to the appreciation in the underlying
share of CIT Common Stock. The appreciation is equal to the difference between
(i) the "base value" of the SAR (which is based upon the closing trading prices
of CIT Common Stock on the New York Stock Exchange on the date the SAR is
granted) and (ii) the closing trading price of CIT Common Stock on the New York
Stock Exchange on the date the SAR is exercised. Upon exercising a vested SAR,
the exercising Participant is entitled to receive the appreciation in the value
of one share of CIT Common Stock, payable at the discretion of the Participant
in cash, shares of CIT Common Stock, or some combination of the two, subject to
availability of shares of CIT Common Stock.
SARs will expire no later than 10 years after the date on which they
are granted. SARs become exercisable at such times and in such installments as
the Committee determines.
Tandem Options/SARs
The Committee may grant an Option and an SAR "in tandem" with each
other (a "Tandem Option/SAR"). An Option and an SAR are considered to be in
tandem with each other when the exercise of the Option aspect of the tandem unit
automatically cancels the right to exercise the SAR of the tandem unit, and vice
versa. The Option may be an incentive stock option or non-qualified stock
option, and the Option may be coupled with one SAR, more than one SAR or a
fractional SAR in any proportionate relationship selected by the Committee.
Descriptions of the terms of the Option and the SAR aspects of a Tandem
Option/SAR are provided above.
Restricted Stock
An Award of Restricted Stock is an Award of CIT Common Stock that is
subject to such restrictions as the Committee deems appropriate, including
forfeiture conditions and restrictions against transfer for a period specified
by the Committee. Restricted Stock Awards may be granted under the ECP for
services, and/or payment of cash and/or upon the attainment of the Performance
Target, if applicable. Restrictions on Restricted Stock may lapse in
installments based on factors selected by the Committee. Unless otherwise
provided by the Committee, a grantee who has received a Restricted Stock Award
generally has the rights of the stockholder of CIT during the restricted period,
including the right to vote and to receive cash dividends on the shares subject
to the Award. Stock dividends issued with respect to a Restricted Stock Award
may be treated as additional shares under such Award.
Performance Shares and Performance Units
The Committee may grant a Performance Share and/or a Performance Unit
under the ECP to eligible Participants upon the attainment of a Performance
Target. Each Performance Unit will have an initial value that is established by
the Committee at the time of grant. Each Performance Share will have an initial
value equal to the closing trading price of one share of CIT Common Stock on the
New York Stock Exchange on the date of grant. The number of performance-based
Awards granted under the ECP in any year is determined by the Committee in its
sole discretion.
The value of each performance-based Award shall be determined solely
upon achievement of certain pre-established objective performance goals during
each performance period (the "Performance Period"). The duration of a
Performance Period is set by the Committee. A new Performance Period may begin
every year, or at more or less frequent intervals, as determined by the
Committee. Payment to a Participant in settlement of a Performance Share and/or
Performance Unit at the end of a Performance Period will be determined by the
Committee in its sole discretion, based on whether the Performance Target has
been met. Payment will be made in cash or in shares of CIT Common Stock, or some
combination of the two, as determined by the Committee in its sole discretion,
subject to availability of shares of CIT Common Stock.
Termination of Employment or Relationship
Subject to the provisions of the ECP with respect to a Change of
Control (as defined in the ECP) of CIT, each Participant's Award Agreement will
set forth the effect of the Participant's termination of employment or
relationship with CIT, due to death, disability, retirement or otherwise, on the
Awards granted under the ECP.
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Such terms and conditions shall be determined in the sole discretion of the
Committee, need not be uniform among all Awards granted under the ECP and may
reflect distinctions based on the reasons for termination of employment or
relationship with CIT. However, although the provisions of the ECP regarding a
Change of Control of CIT still apply, if a Participant terminates employment or
a relationship with CIT for a reason other than death, disability or retirement
prior to the payment of an Annual Incentive Award for any plan year, such Annual
Incentive Award shall be forfeited by the Participant. If a Participant
terminates employment or a relationship with CIT due to death, disability or
retirement in the plan year, the Committee may grant and authorize payment to
the Participant (or the Participant's beneficiary) of an Annual Incentive Award
in an amount the Committee deems appropriate.
Transferability of Awards
Unless otherwise provided in the Participant's Award Agreement, no
Award granted under the ECP may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all rights with respect to Awards granted to
a Participant under the ECP shall be available during his or her lifetime only
to such Participant, or in the event of the Participant's legal incapacity, to
the Participant's legal guardian or representative. Notwithstanding the
foregoing, Participants who are executive officers of CIT may, in the
Committee's sole discretion, transfer a non-qualified stock option to a member
of such Participant's immediate family or to a trust for the benefit of such
Participant's immediate family pursuant to the provisions of IRS Revenue Ruling
98-21.
Federal Income Tax Consequences
The following summary describes the principal federal income tax
consequences of Awards made under the ECP. Capitalized terms used and not
otherwise defined have the meanings ascribed to them in the ECP. The summary is
based upon an analysis of the Code, as currently in effect, judicial decisions,
administrative rulings, regulations and proposed regulations, all of which are
subject to change. Any such change could have retroactive effect and could
affect the consequences described in the summary. The summary does not purport
to cover all federal income tax consequences that may apply to a Participant and
does not contain any discussion of foreign, state or local tax laws.
Participants are urged to consult their own tax advisors regarding the tax
consequences to them of Awards under the ECP.
Subject to the approval of the ECP by CIT Stockholders, it is
anticipated that where CIT is entitled to a tax deduction as described below,
such deduction will not be limited by Section 162(m) of the Code with respect to
compensation to executive officers in excess of US$1 million. If Restricted
Stock is granted without the attainment of Performance Targets, CIT's tax
deduction of the related compensation expense may be limited by Section 162(m)
of the Code.
Annual Incentive Awards
Annual Incentive Awards may be made in cash, shares of CIT Common
Stock, or some combination thereof. When a Participant receives payment with
respect to an Annual Incentive Award, the Participant will generally recognize
ordinary income, and CIT will be entitled to a deduction, in an amount equal to
the cash and the fair market value of any shares of CIT Common Stock received. A
Participant's basis in any shares of CIT Common Stock received will generally
equal the fair market value of the shares of CIT Common Stock at the time of
receipt. A Participant who later sells such shares of CIT Common Stock will
generally recognize capital gain or loss on the sale of the shares of CIT Common
Stock equal to the difference between the amount realized and such basis.
Options
A Participant will not recognize income upon the grant of a
Nonqualified Stock Option ("NQSO"). The Participant will recognize ordinary
income at the time of exercise of the NQSO in an amount equal to the difference
between the fair market value of the shares of CIT Common Stock received upon
exercise of the NQSO and the aggregate Option Price for the shares of CIT Common
Stock purchased upon such exercise. CIT will generally be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as the Participant is required to recognize ordinary income. The
Participant's basis in any shares of CIT Common Stock acquired upon exercise of
a NQSO will equal the fair market value of the shares of CIT
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Common Stock on the exercise date. A Participant who later sells such shares of
CIT Common Stock will generally recognize capital gain or loss on the sale of
the shares of CIT Common Stock equal to the difference between the amount
realized and the Participant's basis in the shares of CIT Common Stock.
A Participant to whom an Incentive Stock Option ("ISO") is granted will
not recognize income at the time of the grant or exercise of the ISO, and CIT
will not be entitled to a deduction at either time. However, upon the exercise
of the ISO, a Participant will be required to include in alternative minimum
taxable income an amount equal to the fair market value of the shares of CIT
Common Stock purchased upon such exercise at the time of exercise over the
aggregate Option Price the Participant paid in connection with such exercise,
for purposes of the federal alternative minimum tax that may apply to individual
Participants. If the shares of CIT Common Stock acquired upon exercise of an ISO
are not disposed of until more than one year after the date of transfer of the
shares of CIT Common Stock and more than two years after the date of the grant
of the ISO (the "Required Holding Period"), any gain recognized on such
disposition will be treated as a capital gain. If the shares of CIT Common Stock
purchased in the exercise of an ISO are disposed of prior to the expiration of
the Required Holding Period (a "Disqualifying Disposition"), then the
Participant will be required to recognize ordinary income in an amount equal to
the lesser of (i) the fair market value of the shares of CIT Common Stock at the
time of such exercise over the aggregate Option Price of the shares of CIT
Common Stock purchased and (ii) the amount realized on disposition over the
Participant's adjusted basis in the shares of CIT Common Stock. In the event of
a Disqualifying Disposition, CIT will be entitled to a deduction in an amount
equal to the amount the Participant was required to treat as ordinary income.
Restricted Stock
The grant of Restricted Stock will not result in any tax consequences
to the Participant or CIT unless the Participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"), in which case the grant will
result in the tax consequences described below. In the absence of such an
election, upon the lapse of the restrictions applicable to the Restricted Stock,
the Participant will recognize ordinary income, and CIT will be entitled to a
deduction, in an amount equal to the fair market value of the Restricted Stock
at the time of such lapse. If the Participant makes a Section 83(b) Election in
respect of the receipt of Restricted Stock, (i) the Participant will be required
to recognize ordinary income, and CIT will be entitled to a deduction, in an
amount equal to the fair market value of the Restricted Stock at the time of
such receipt (determined without regard to any applicable restrictions other
than a restriction that by its terms will never lapse), (ii) the Participant
will not be required to recognize any income, and CIT will not be entitled to a
deduction, upon the lapse of the applicable restrictions and (iii) if the
Participant subsequently forfeits the Restricted Stock, the Participant will not
be entitled to any deduction or loss in respect of such forfeiture, despite the
fact that the Participant was required to recognize ordinary income as a result
of the Section 83(b) Election at the time the Participant received the
Restricted Stock. A Section 83(b) Election must be made in accordance with the
requirements of the Code and the Treasury Regulations promulgated thereunder,
including the requirement that the Election be made within 30 days of the
transfer of the Restricted Stock to the Participant.
Stock Appreciation Rights, Performance Shares, and Performance Units
The grant of an SAR, Performance Share, or Performance Unit will not
have any tax consequences. A Participant will recognize ordinary income, and CIT
will be entitled to a deduction, when the Participant exercises an SAR or
receives payment with respect to a Performance Share or Performance Unit, in an
amount equal to the cash and the fair market value of the Shares received.
Stockholder Approval
An affirmative vote of a majority of the votes cast at the
CIT Stockholders Meeting is required for adoption of this proposal.
The CIT Board of Directors believes that it is in the best interests of
CIT and CIT Stockholders to approve the ECP.
The CIT Board of Directors recommends that CIT Stockholders vote "For"
approval of The CIT Group, Inc. Long-Term Equity Compensation Plan.
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PROPOSAL 4
APPROVAL OF THE CIT GROUP, INC. TRANSITION OPTION PLAN
Introduction
The Compensation Committee has adopted, subject to approval of CIT
Stockholders, The CIT Group, Inc. Transition Option Plan (the "Transition Plan")
and has directed that the Transition Plan be submitted to a vote of the CIT
Stockholders. If approved by CIT Stockholders, the Transition Plan will become
effective as of the Effective Time.
The full text of the Transition Plan is set forth as Annex Q to this
Joint Proxy Statement. The following is a summary of the principal features of
the Transition Plan and does not purport to be complete. CIT Stockholders are
urged to read the Transition Plan in its entirety. The summary is subject to and
qualified in its entirety by reference to the Transition Plan. Capitalized terms
not otherwise defined herein shall have the meanings provided in the Glossary of
Terms in Appendix I to this Joint Proxy Statement.
Purpose
The purpose of the Transition Plan is to provide a means by which
Newcourt Options to purchase Newcourt Common Shares under the Newcourt Option
Plan may be exchanged pursuant to the terms of the Reorganization Agreement into
options ("Transition Options") to purchase CIT Common Stock.
Administration
The Compensation Committee will administer the Transition Plan;
provided, however, that the Compensation Committee may delegate to the Chief
Executive Officer of CIT the authority, subject to such terms as the
Compensation Committee shall determine, to perform any and all functions as the
Compensation Committee may determine. Further, the Compensation Committee may
delegate to one or more of its members or to any other person or persons such
ministerial duties as it may deem advisable. The Transition Plan may be amended
or terminated at any time by the Compensation Committee, provided, however, that
no such amendment or other action that requires CIT Stockholder approval for the
Transition Plan to continue to comply with applicable law shall be effective
unless such amendment or other action shall be approved by the requisite vote of
CIT Stockholders entitled to vote thereon. Further, any amendment or termination
of the Transition Plan shall not, without the written consent of the Transition
Plan Participant, affect such Transition Plan Participant's rights under any
Transition Option theretofore granted to such Transition Plan Participant.
Eligible Employees
Individuals who were granted Newcourt Options under the Newcourt Option
Plan are eligible to participate in the Transition Plan (each, a "Transition
Plan Participant").
Terms and Conditions of Transition Options
Transition Options will be granted to Transition Plan Participants
under the Transition Plan in exchange for, and will constitute a release of, any
and all rights such individuals held under the Newcourt Option Plan in
accordance with the following and also subject to each Transition Plan
Participant's option agreement ("Option Agreement"):
(a) Number of Shares. The number of shares of CIT Common Stock subject
to each Transition Option shall be equal to the number of Newcourt Common Shares
subject to the Newcourt Option exchanged therefor multiplied by the Exchange
Ratio as defined in the Reorganization Agreement, rounded down to the nearest
whole share of CIT Common Stock.
(b) Grant Date. Each Transition Option shall state the Grant Date which
shall be the Effective Time.
(c) Option Price. The option price shall be the option price of the
Newcourt Option exchanged therefor divided by the Exchange Ratio as defined in
the Reorganization Agreement, increased to the nearest whole cent.
(d) Medium and Time of Payment. With respect to a Transition Option, or
portion thereof, the option price shall be payable on the exercise of the
Transition Option and shall be paid in cash or its equivalent, or such other
means satisfactory to the Compensation Committee.
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(e) Term. All Transition Options granted under the Transition Plan, to
the extent not previously exercised, shall terminate in accordance with the
provisions of the Transition Plan Participant's Option Agreement; provided,
however, that no Transition Option shall be exercisable later than the tenth
anniversary of the date of the grant of the Newcourt Option.
(f) Exercisability. All Transition Options shall become vested and
exercisable in accordance with the vesting schedule applicable to the Newcourt
Options granted under the Newcourt Option Plan, provided, however, that the
Compensation Committee may, in its discretion, accelerate the vesting of
Transition Options.
Maximum Number of Shares
Subject to adjustment, as described below and in accordance with the
anti-dilution provisions of the Transition Plan, the maximum number of shares of
CIT Common Stock which shall be available for sale under the Transition Plan is
5.1 million (the "Maximum Shares"). The shares of CIT Common Stock to be sold to
Transition Plan Participants under the Transition Plan may, at CIT's election,
be treasury shares, authorized but unissued shares or any combination thereof.
If, pursuant to the terms of the Reorganization Agreement, the number
of shares of CIT Common Stock underlying the Transition Options required to be
issued in exchange for Newcourt Options outstanding as of the Effective Time
exceeds the Maximum Shares, the Maximum Shares shall be increased to the amount
necessary so that Transition Options can be exchanged for all Newcourt Options
outstanding as of the Effective Time; provided that the number of shares of CIT
Common Stock available for award under the ECP is reduced by the number by which
the Maximum Shares is increased.
Shares of CIT Stock underlying Transition Options that are not required
to be issued in exchange for Newcourt Options outstanding as of the Effective
Time or any Transition Options that are canceled, terminate, expire or lapse for
any reason without the issuance of shares of CIT Common Stock or payment in
respect thereof, shall be available for grant under the ECP.
The maximum aggregate number of shares of CIT Common Stock that may be
granted in the form of Transition Options to any one Transition Plan Participant
under the Transition Plan in any one fiscal year is one million.
Nontransferability of Transition Options
No Transition Option may be assignable or transferable by a Transition
Plan Participant except by will or by the laws of descent and distribution,
unless prior written consent of the Compensation Committee is given.
No Rights as Shareholder
Neither a Transition Plan Participant nor a Transition Plan
Participant's successors shall have rights as a CIT Stockholder until the date
of issuance of a stock certificate for the shares of CIT Common Stock received
upon exercise of a Transition Option.
Take-over Bid
If a Take-over Bid (as defined in the Transition Plan) is made or
announced, the CIT Board of Directors may, in its sole and arbitrary discretion,
consent to the exercise of any Transition Options which are outstanding at the
time that such Take-over Bid was made regardless of whether unvested Transition
Options have vested in accordance with their terms. The CIT Board of Directors
shall, in its sole and arbitrary discretion, determine the procedures applicable
to the exercise and termination of such Transition Options upon a Take-over Bid.
U.S. Federal Income Tax Consequences
The following summary describes the principal federal income tax
consequences to CIT and Transition Plan Participants of participation in the
Transition Plan. The summary is based upon an analysis of the Code, as currently
in effect. Any change under the Code could have a retroactive effect and could
affect the consequences described in the summary. The summary does not purport
to cover all federal income tax consequences that may apply to CIT or a
Transition Plan Participant and does not contain any discussion of foreign,
state or local tax laws. Transition Plan Participants are urged to consult their
own tax advisors regarding the tax consequences to them resulting from
participation in the Transition Plan. The Transition Plan is not qualified under
Section 401(a) of the Code.
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Tax Consequences to CIT
Subject to the approval of the Transition Plan by CIT Stockholders, the
grant of Transition Options under the Transition Plan is intended to comply with
Section 162(m) of the Code to the extent that the option price of such
Transition Options is greater than or equal to the fair market value of shares
of CIT Common Stock on the date that Newcourt Options are exchanged for
Transition Options under the Transition Option Plan. As such, CIT will be
entitled to a federal income tax deduction at the same time and in the same
amount as the Transition Plan Participant is required to recognize ordinary
income (as described below). To the extent that the option price of a Transition
Option is less than the fair market value of shares of CIT Common Stock on the
date that Newcourt Options are exchanged for Transition Options under the
Transition Plan, CIT's federal income tax deduction may be limited by Section
162(m) of the Code.
Tax Consequences to the Transition Plan Participant
A Transition Plan Participant will not recognize income upon the grant
of a Transition Option. The Transition Plan Participant will recognize ordinary
income at the time of exercise of the Transition Option in an amount equal to
the difference between the fair market value of the shares of CIT Common Stock
received upon the exercise of the Transition Option and the aggregate option
price for the shares of CIT Common Stock purchased upon such exercise. The
Transition Plan Participant's basis in any shares of CIT Common Stock acquired
upon the exercise of a Transition Option will equal the fair market value of the
shares of CIT Common Stock on the exercise date. A Transition Plan Participant
who later sells such shares of CIT Common Stock will generally recognize a
capital gain or loss on the sale of shares of CIT Common Stock equal to the
difference between the amount realized and the Transition Plan Participant's
basis in the shares of CIT Common Stock.
Stockholder Approval
The affirmative vote of a majority of the votes cast at the
CIT Stockholders Meeting is required for adoption of this proposal.
The CIT Board of Directors believes that it is in the best interests of
CIT and the CIT Stockholders to approve the Transition Plan
The CIT Board of Directors recommends that CIT Stockholders vote "For"
the approval of The CIT Group, Inc. Transition Option Plan.
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PROPOSAL 5
APPROVAL OF THE AMENDMENT TO THE CIT GROUP, INC. EMPLOYEE
STOCK PURCHASE PLAN
Introduction
Effective October 1, 1998, the Board of Directors adopted, subject to
approval of stockholders, The CIT Group, Inc. Employee Stock Purchase Plan, as
amended (the "ESPP"), and directed that the ESPP be submitted to a vote of
stockholders. On January 28, 1999, the CIT Board of Directors amended the ESPP
as described below. The ESPP was approved by the CIT Stockholders at CIT's
Annual Meeting of Stockholders on September 8, 1999, effective as of October 1,
1998. In connection with the future participation of eligible Newcourt employees
in the ESPP, the Board of Directors adopted an amendment to increase the number
of shares of Common Stock available for sale under the ESPP from 500,000 to 1
million, subject to the approval of stockholders.
The full text of the ESPP as amended is set forth as Annex R to this
proxy statement. The following is a summary of the principal features of the
ESPP and does not purport to be complete. Stockholders are urged to read the
ESPP in its entirety. The summary is subject to and qualified in its entirety by
reference to the ESPP.
Purpose
The purpose of the ESPP is to provide eligible employees of CIT and
certain of its subsidiaries deemed eligible by CIT to participate in the ESPP
("Participating Subsidiaries") (each an "ESPP Participant") with an opportunity
to purchase shares of Common Stock through payroll deductions. The ESPP is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code, but is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Administration
Our Employee Benefit Plans Committee (the "EBP Committee") administers
the ESPP. Day to day administrative functions are handled by our Human Resources
Department. The members of the EBP Committee are appointed by the Chief
Executive Officer. The members of the EBP Committee may be removed for any
reason or for no reason at any time. The ESPP has no expiration date. The ESPP
may be amended or terminated at any time by the EBP Committee, provided,
however, that no such amendment or termination shall be made which would impair
the rights of any ESPP Participant under the ESPP without his or her consent.
Eligible Employees
All of our employees who are customarily employed for at least 20 hours
per week by the Company or a Participating Subsidiary are eligible to
participate in the ESPP.
Purchase of Shares
Prior to each calendar quarter of the ESPP (an "Offering Period"), an
ESPP Participant may authorize payroll deductions to be taken from his or her
base salary to be used to purchase shares of Common Stock under the ESPP. The
rate of payroll deductions shall be between 1% and 10% of the ESPP Participant's
base salary. Options are granted to ESPP Participants on the first day of each
Offering Period to purchase up to a number of shares of Common Stock equal to
the total amount of payroll deductions accumulated during the Offering Period
divided by the lesser of (i) 85% of the fair market value of a share of Common
Stock on the first business day of an Offering Period or (ii) 85% of the fair
market value of a share of Common Stock on the last business day of an Offering
Period. Thus, the option price per share is equal to 85% of the fair market
value of a share of Common Stock on either the first business day of an Offering
Period or the last business day of an Offering Period, whichever is lesser. The
fair market value of a share of Common Stock is the closing trading price of a
share of Common Stock on the New York Stock Exchange. Prior to the amendment of
the ESPP on January 28, 1999, effective for the Offering Period commencing on
October 1, 1998, the option price per share equaled 85% of the fair market value
of a share of Common Stock on the last day of the Offering
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Period, and effective for the Offering Period commencing on January 1, 1999, the
option price per share of such shares of Common Stock equaled the lesser of (i)
85% of the fair market value of a share of Common Stock on January 28, 1999 or
(ii) 85% of the fair market value of a share of Common Stock on the last
business day of the Offering Period.
The option to purchase shares of Common Stock under the ESPP is
automatically exercised on the last day of the Offering Period. The maximum
number of whole and fractional shares (rounded to the nearest ten thousandth) of
Common Stock subject to the option will be purchased for the ESPP Participant at
the applicable option price with the payroll deductions accumulated during the
Offering Period. In any calendar year, no ESPP Participant may purchase shares
of Common Stock which have a fair market value that exceeds US$25,000 when the
option to purchase such shares of Common Stock is granted to the ESPP
Participant.
The maximum number of shares of Common Stock which shall be available
for sale under the ESPP is 500,000 (prior to the Amendment) subject to
adjustment by us upon a change in our capitalization. The shares of Common Stock
to be sold to ESPP Participants under the ESPP may, at our election, be either
treasury shares, authorized but unissued shares or publicly traded shares.
If the shares of Common Stock to be sold to ESPP Participants under the
ESPP are publicly traded shares, we shall contribute 15% of the option price,
determined by the fair market value of a share of Common Stock.
ESPP Participants may enroll, increase or decrease their rate of
payroll deductions at any time to be effective for the next Offering Period so
long as the authorization for the payroll deduction change is made before
midnight of the 15th day before the beginning of the next Offering Period. An
ESPP Participant may not increase or decrease the rate of payroll deductions
during an Offering Period to be effective for that Offering Period.
No interest accrues on the payroll deductions held in an ESPP
Participant's account under the ESPP. Cash dividends for the shares of Common
Stock held in an ESPP Participant's account are automatically invested in shares
of Common Stock at the fair market value of the shares of Common Stock on the
date that the cash dividends are invested in such shares (with no contribution
by CIT for any discount toward the purchase of such shares of Common Stock).
Shares of Common Stock purchased with cash dividends are held in an ESPP
Participant's account under the ESPP.
An ESPP Participant shall have the right to vote shares of Common Stock
held in the ESPP Participant's account under the ESPP. However, an ESPP
Participant has no interest or voting right in shares of Common Stock covered by
an option until such option has been exercised under the provisions of the ESPP.
Withdrawal from ESPP; Assignment of Interest
ESPP Participants may withdraw all, but not less than all, payroll
deductions accumulated during the Offering Period at any time prior to the last
day of the Offering Period by giving notice to the EBP Committee. If an ESPP
Participant withdraws from the ESPP, the accumulated payroll deductions will be
paid to the ESPP Participant as promptly as administratively possible and no
further payroll deductions will be made for the ESPP Participant for such
Offering Period. An ESPP Participant's withdrawal from the ESPP during one
Offering Period does not affect such ESPP Participant's eligibility to
participate in subsequent Offering Periods. However, in such a case, the ESPP
Participant must authorize the resumption of payroll deductions and the rate of
such payroll deductions. An ESPP Participant's termination of employment for any
reason or failure to remain in the continuous employ of CIT or a Participating
Subsidiary for at least 20 hours per week during the Offering Period shall
constitute a withdrawal from the ESPP.
Neither payroll deductions credited to an ESPP Participant's account
nor any rights with regard to the exercise of an option or to receive shares of
Common Stock under the ESPP may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided to a beneficiary in accordance with the provisions
of the ESPP) by the ESPP Participant.
U.S. Federal Income Tax Consequences
The following summary describes the principal federal income tax
consequences to CIT and ESPP Participants of participation in the ESPP. The
summary is based upon an analysis of the Code, as currently in effect. Any
change under the Code could have a retroactive effect and could affect the
consequences described
137
in the summary. The summary does not purport to cover all federal income tax
consequences that may apply to CIT or an ESPP Participant and does not contain
any discussion of foreign, state or local tax laws. ESPP Participants are urged
to consult their own tax advisors regarding the tax consequences to them
resulting from participation in the ESPP. The ESPP is not qualified under
Section 401(a) of the Code, but is intended to comply with the provisions of
Section 423 of the Code as an "employee stock purchase plan."
Tax Consequences to CIT
CIT will be entitled to a tax deduction equal to the amount of payroll
deductions authorized by an ESPP Participant under the ESPP to the same extent
as other compensation paid to the ESPP Participant.
With respect to our 15% contribution, if an ESPP Participant satisfies
the applicable holding period, we will not be entitled to any tax deduction for
any income recognized by the ESPP Participant. If a disqualifying disposition
(as explained below) occurs, we will be entitled to a tax deduction equal to the
amount that the ESPP Participant includes as ordinary income in the year in
which the disqualifying disposition occurs.
Tax Consequences to the ESPP Participant
The payroll deductions authorized by an ESPP Participant under the ESPP
continue to be taxable income to the ESPP Participant in the year such amounts
are earned. Such income is subject to taxation to the same extent (Federal,
state and local) as other compensation income received by the ESPP Participant.
However, an ESPP Participant will not recognize income either upon enrollment in
the ESPP or upon any purchase of shares of Common Stock under the ESPP. All tax
consequences are deferred until an ESPP Participant sells the shares of Common
Stock acquired under the ESPP, disposes of such shares by gift, or dies.
The tax treatment with respect to a disposition of shares of Common
Stock purchased pursuant to an option under the ESPP depends on whether such
shares of Common Stock are disposed of within the holding period provided under
Section 423 of the Code. Under Section 423 of the Code, the required holding
period is the later of (i) two years after the date of the option grant or (ii)
one year after the option exercise date. The required holding period is also
satisfied if the ESPP Participant dies while holding shares of Common Stock
acquired under the ESPP. If a disposition does not satisfy the required holding
period under Section 423 of the Code, such disposition is called a
"disqualifying disposition." If a disqualifying disposition occurs, the ESPP
Participant must recognize as ordinary income, in the year of such disqualifying
disposition, the difference between the fair market value of the shares of
Common Stock on the date that the option is exercised and the option's exercise
price.
Since the ESPP provides that the option price per share of Common Stock
generally shall be the lesser of (i) 85% of the fair market value of a share of
Common Stock on the first business day of an Offering Period or (ii) 85% of the
fair market value of a share of Common Stock on the last business day of an
Offering Period, an ESPP Participant who satisfies the required holding period
under Section 423 of the Code must include as ordinary income at the time of
sale or other taxable disposition of the shares of Common Stock purchased
pursuant to an option, or upon the ESPP Participant's death while still holding
the shares of Common Stock purchased pursuant to an option exercised under the
ESPP, the lesser of:
(i) the amount, if any, by which the fair market value of the
shares of Common Stock when the option was exercised exceeds
the option price; or
(ii) the amount, if any, by which the fair market value of the
shares of Common Stock at the time of such disposition or
death exceeds the option price paid.
The basis of the shares of Common Stock purchased pursuant to an option
will be increased by the amount of ordinary income recognized. If an ESPP
Participant satisfies the applicable holding period with respect to the shares
of Common Stock purchased pursuant to an option, such shares of Common Stock
would be eligible for capital gains treatment under the Code.
138
Proposed Amendment to the ESPP
If the Amendment to the ESPP is approved by stockholders, the number of
shares of Common Stock available for sale under the ESPP will be increased from
500,000 to 1 million.
Stockholder Approval
The affirmative vote of a majority of the votes cast at the CIT
Stockholders Meeting is required for adoption of this proposal.
The Board of Directors believes that it is in the best interests of CIT
and the stockholders to approve the amendment to the ESPP.
The Board of Directors recommends a vote "For" the approval of the
Amendment to The CIT Group, Inc. Employee Stock Purchase Plan.
139
OTHER BUSINESS
Neither CIT's management nor Newcourt's management intends to bring any
business before its shareholder meeting other than the matters referred to in
this Joint Proxy Statement. If, however, any other matters properly come before
either shareholder meeting, it is intended that the persons named in the
accompanying proxy will vote pursuant to the proxy in accordance with their best
judgment on such matters to the extent permitted by applicable law and
regulations. With respect to CIT, the discretionary authority includes matters
which the CIT Board of Directors does not know are to be presented at the
meeting by others and any proposals of stockholders omitted from the proxy
material pursuant to Rule 14a-8 of the SEC.
STOCKHOLDERS PROPOSALS AND NOMINATIONS FOR THE 2000
ANNUAL MEETING
Stockholders proposals to be included in the proxy statement for CIT's
next annual meeting must be received by the Corporate Secretary of CIT not later
than December 2, 1999.
Also, under the CIT Bylaws, nominations for director or other business
proposals to be addressed at the meeting may be made by a stockholder entitled
to vote who has delivered a notice to the Corporate Secretary of CIT no later
than the close of business on March 28, 2000 and not earlier than February 26,
2000. The notice must contain the information required by the CIT Bylaws. These
advance notice provisions are in addition to, and separate from, the
requirements which a stockholder must meet in order to have a proposal included
in the Proxy Statement under the rules of the SEC.
Copies of the CIT Bylaws may be obtained from the Corporate Secretary.
AVAILABLE INFORMATION
CIT and Newcourt are subject to the informational requirements of the
Exchange Act, and in accordance therewith file reports and other information
with the SEC. The reports and other information filed by CIT and Newcourt with
the SEC can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. Copies of such material also can be obtained from
the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. In addition, such material
filed by CIT and Newcourt can be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. In addition, Newcourt is
subject to the information and continuous disclosure requirements of Canadian
securities legislation, The Toronto Stock Exchange and the Montreal Exchange.
Copies of Newcourt's public filings are available to the public through the
SEDAR website maintained by the Canadian securities regulatory authorities and
are also available upon request from Newcourt's Corporate Secretary at Newcourt
Centre, 207 Queens Quay West, Suite 700, Toronto, Ontario M5J 1A7.
All information in this Joint Proxy Statement relating to CIT has been
supplied by CIT, and all information relating to Newcourt has been supplied by
Newcourt.
You should rely only on the information contained in this Joint Proxy
Statement or to which either CIT or Newcourt refers you. Neither CIT nor
Newcourt has authorized anyone to give you any information. This Joint Proxy
Statement is an offer to sell, or a solicitation of an offer to buy the
Exchangeable Shares or shares of CIT Common Stock, or the solicitation of a
proxy only in jurisdictions where offers, sales or solicitations are permitted.
The information contained in this Joint Proxy Statement is accurate only as of
the date of this Joint Proxy Statement, regardless of the time of delivery of
this Joint Proxy Statement.
140
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
CIT
The following documents, which have been filed by CIT with the SEC
pursuant to the Exchange Act are incorporated in this Joint Proxy Statement by
reference and shall be deemed to be a part hereof for purposes of the Exchange
Act:
(a) CIT's Annual Report on Form 10-K for the year ended
December 31, 1998;
(b) CIT's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1999 and June 30, 1999;
(c) CIT's Current Reports on Form 8-K dated January 28, 1999,
February 22, 1999, March 8, 1999, March 22, 1999, April 27, 1999, May
10, 1999, May 17, 1999, June 14, 1999, July 30, 1999, August 5, 1999,
and August 18, 1999;
(d) CIT's Annual Proxy Statement on Schedule 14A as filed on
August 5, 1999; and
(e) The description of the CIT Common Stock contained in
Registration Statement 333-36435 initially filed by CIT with the SEC on
September 26, 1997, which is incorporated by reference into the
Registration Statement on Form 8-A, filed by CIT with the SEC on October
29, 1997.
All documents filed by CIT pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Joint Proxy Statement
and prior to the CIT Stockholders Meeting and any adjournment or postponement
thereof, shall be deemed to be incorporated by reference in this Joint Proxy
Statement and to be a part hereof for purposes of the Exchange Act from the date
of the filing of such documents. Any statement contained in this Joint Proxy
Statement, in a supplement to this Joint Proxy Statement or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Joint Proxy Statement to the
extent that a statement contained herein or in any subsequently filed supplement
to this Joint Proxy Statement or in any document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Joint Proxy Statement.
CIT will provide without charge to each person, including any
beneficial owner, to whom a copy of this Joint Proxy Statement has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated in
this Joint Proxy Statement by reference, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference in such
documents). Written or telephone requests for such copies should be directed to
Jeffrey Simon, Senior Vice President, Investor Relations, The CIT Group, Inc.,
1211 Avenue of the Americas, New York, New York 10036, Attention: Secretary
(telephone number (212) 536-1390).
Newcourt
The following documents, which have been filed by Newcourt with the SEC
pursuant to the Exchange Act (and the Canadian equivalent of such documents
which have been filed with Canadian securities regulatory authorities) are
incorporated in this Joint Proxy Statement by reference and shall be deemed to
be a part hereof for purposes of the Exchange Act:
(a) Newcourt's Annual Report on Form 40-F for the year ended
December 31, 1998 (including Newcourt's Renewal Annual Information Form
dated May 14, 1999);
(b) Newcourt' s quarterly unaudited financial statements for
the quarters ended March 31, 1999 and June 30, 1999 filed on Form 6-K
on May 5, 1999 and August 6, 1999 respectively;
(c) Newcourt's Current Reports on Form 6-K dated February 8,
1999, February 10, 1999, February 26, 1999, March 8, 1999, March 18,
1999,May 5, 1999, June 15, 1999, June 18, 1999, July 13, 1999, August 5,
1999,August 6, 1999, August 9, 1999, and August 20, 1999;
(d) Newcourt's audited consolidated financial statements and
the auditors' report thereon for the fiscal years ended December 31,
1998 and 1997 filed on Form 6-K dated February 26, 1999; and
141
(e) Newcourt's Management Information Circular on Form 6-K
dated February 26, 1999, except the sections entitled "Governance and
Compensation Committee," "Report on Executive Compensation," "Corporate
Governance" and the "Share Performance Graph".
Any documents of the type referred to in the preceding paragraph and
any material change reports (excluding confidential reports) filed by Newcourt
with a securities commission or any similar authority in Canada or the United
States after the date of this Joint Proxy Statement and prior to the Effective
Time shall be deemed to be incorporated by reference in this Joint Proxy
Statement.
Newcourt will provide without charge to each person, including any
beneficial owner, to whom a copy of this Joint Proxy Statement has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Joint Proxy Statement, other than certain exhibits to such
documents. Requests for such copies should be directed to the Corporate
Secretary, Newcourt Credit Group Inc., Newcourt Centre, 207 Queens Quay West,
Suite 700, Toronto, Ontario, M5J 1A7 (telephone number (416) 507-2400).
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Joint Proxy Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modified or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Joint Proxy
Statement. The making of a modifying or superseding statement shall not be
deemed an admission for any purposes that the modified or superseded statement,
when made, constituted a misrepresentation, an untrue statement of a material
fact or an omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in light of the
circumstances in which it was made.
By Order of the CIT Board of Directors
/s/ Albert R. Gamper, Jr.
Albert R. Gamper, Jr.
President and Chief
Executive Officer
September 21, 1999
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APPROVAL OF JOINT PROXY STATEMENT BY
NEWCOURT BOARD OF DIRECTORS
The contents of this joint management information circular and proxy
statement and the sending thereof to the shareholders of Newcourt have been
approved by the Newcourt Board of Directors.
By Order of the Newcourt Board of Directors
/s/ David F. Banks
David F. Banks
Chairman
September 21, 1999
143
APPENDIX 1
GLOSSARY OF TERMS
Unless the context otherwise requires, the following terms shall have
the meanings set forth below when used in this Joint Proxy Statement. These
defined terms are not always used in the financial statements included herein.
"Acquisition Proposal" means any tender or exchange offer, proposal for
a merger, consolidation, amalgamation, arrangement or other business combination
involving, or a recapitalization of, or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
of, Newcourt or CIT or any of their subsidiaries other than the transactions
contemplated or permitted by the Reorganization Agreement, but it will not
include the entering into of partnerships, joint ventures, virtual joint
ventures, investment funds and other similar arrangements as part of the
ordinary course funding activities of Newcourt or CIT.
"Adjusted Shareholders' Equity" means Newcourt's total shareholders'
equity under Canadian GAAP as of a specified month-end prior to Closing adjusted
to exclude goodwill, securitization gains to the extent they exceed $30 million
per month ($60 million for December 1999) on a cumulative basis, and specific
charges affecting shareholders' equity. CIT Stockholders and Newcourt
Shareholders should read the provisions of the Reorganization Agreement relating
to the potential adjustment to the Exchange Ratio. The Reorganization Agreement
is attached hereto as Annex E.
"AIC" means AIC Group of Funds.
"Alliance" means Alliance Capital Management and its affiliates.
"Alternative Proposal" means any amendment to either Newcourt's or
CIT's Certificate of Incorporation or Bylaws or other proposal or transaction
involving Newcourt or CIT or any of their subsidiaries which would in any manner
impede, frustrate, prevent, delay or nullify the Reorganization Agreement or any
of the other transactions contemplated by the Reorganization Agreement or change
in any manner the voting rights of any outstanding class of capital stock of
Newcourt or CIT.
"Ancillary Rights" means the Voting Rights, the Automatic Exchange
Right and the Exchange Right.
"Arrangement Resolution" means the special resolution of the Newcourt
Shareholders concerning the Transaction in the form set out in Annex A to this
Joint Proxy Statement.
"Automatic Exchange Right" means the benefit of the obligation of CIT,
in the event of a proposed liquidation, dissolution or winding-up of CIT, to
purchase all of the outstanding Exchangeable Shares (other than Exchangeable
Shares held by CIT, its subsidiaries or affiliates) from the holders thereof on
the fifth Business Day prior to the effective date of any such liquidation,
dissolution or winding-up in exchange for CIT Common Stock pursuant to the
Voting and Exchange Trust Agreement.
"BHC Act" means the Bank Holding Company Act of 1956, as amended, and
the rules and regulations promulgated thereunder, and the interpretations
thereof.
"Business Day" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario, other than a Saturday, a
Sunday or a day observed as a holiday in Toronto, Ontario under the laws of the
province of Ontario or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
"C$" means Canadian dollars.
"Call Rights" means the Liquidation Call Right, the Redemption Call
Right and the Retraction Call Right, collectively.
"Canadian Dollar Equivalent" has the meaning set forth in Section 1.1
of the Exchangeable Share Provisions.
"Canadian GAAP" means generally accepted accounting principles in
Canada.
"Canadian Resident" means a resident of Canada for the purposes of the
Income Tax Act (Canada).
"CIBC" means the Canadian Imperial Bank of Commerce, a bank pursuant to
Schedule I of the Bank Act (Canada).
"CIBC World Markets" means CIBC World Markets Inc.
A-1
"CIT" means The CIT Group, Inc., a Delaware corporation.
"CIT Board of Directors" means the board of directors of CIT.
"CIT Bylaws" means CIT's bylaws, as currently in force.
"CIT's Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of CIT, as currently in force.
"CIT Common Stock" means the fully paid and nonassessable shares of
Class A Common Stock, par value US$0.01 of CIT, and any other securities into
which such shares may be changed.
"CIT Control Transaction" means any merger, amalgamation, tender offer,
material sale of shares or rights or interests therein or thereto or similar
transactions involving CIT, or any proposal to do so.
"CIT Liquidation Event" means (i) any determination by the CIT Board of
Directors to institute bankruptcy, insolvency reorganization, voluntary
liquidation, dissolution, or winding-up, or composition or readjustment of debts
proceedings with respect to CIT or to effect any other distribution of its
assets among its stockholders for the purpose of winding up its affairs; (ii)
the earlier of (A) receipt by CIT of notice of, and (B) CIT's becoming aware of,
any threatened or instituted claim, suit, petition or other proceedings with
respect to the bankruptcy, insolvency reorganization, involuntary liquidation,
dissolution or winding-up of CIT or to effect any other distribution of assets
of CIT among its stockholders for the purpose of winding up its affairs, in each
case where CIT has failed to contest in good faith any such proceeding commenced
in respect of CIT within 30 days of becoming aware thereof; (iii) the entry by a
court having jurisdiction in the premises of (A) a decree or order for relief in
respect of CIT in an involuntary case or proceeding under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging CIT a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of CIT under any applicable federal or state law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of CIT or of any substantial part of the property of CIT, or
ordering the winding up or liquidation of the affairs of CIT, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive days; or (iv) any
written admission by CIT of its inability to pay its debts as they become due.
"CIT Preferred Stock" means the preferred stock issuable from time to
time in one or more series, with such designations and preferences for each
series as shall be stated in the resolutions providing for the designation and
issue of each such series adopted by the CIT Board of Directors.
"CIT Record Date" means September 20, 1999.
"CIT Stockholders" means the holders of CIT Common Stock.
"CIT Stockholders Meeting" means the special meeting of CIT
Stockholders to be held on October 26, 1999 and all adjournments thereof.
"CIT 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 50% or more of the net revenues, net income or the assets of
CIT and its subsidiaries taken as a whole, or 50% or more of the outstanding
voting securities of CIT, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 50% or more of the outstanding
voting securities of CIT, or any merger, amalgamation, plan of arrangement,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving CIT or the CIT Common Stock (or any one or more
of CIT's subsidiaries, if the business of such subsidiary or all of such
subsidiaries constitutes 50% or more of the net revenues, net income or assets
of CIT and its subsidiaries taken as a whole), other than the transactions
contemplated by the Reorganization Agreement.
"Class A Preference Shares" means the Class A preference shares in the
capital of Exchangeco.
"Class B Preference Shares" means the Class B preference shares in the
capital of Exchangeco.
"Closing" means the execution and delivery of the documents required as
a condition to the completion of, or to complete, the Transaction contemplated
by the Reorganization Agreement and the closing of the transactions contemplated
thereby.
A-2
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Current Market Price" means, in respect of a share of CIT Common Stock
on any date, the Canadian Dollar equivalent of the average of the closing bid
and asked prices of CIT Common Stock during a period of 20 consecutive trading
days ending not more than three trading days before such date on the New York
Stock Exchange, or, if the CIT Common Stock are not then quoted on the New York
Stock Exchange, on such other stock exchange or automated quotation system on
which the CIT Common Stock are listed or quoted, as the case may be, as may be
selected by the Board of Directors of Exchangeco for such purpose; provided,
however, that if in the opinion of the Board of Directors of Exchangeco the
public distribution or trading activity of CIT Common Stock during such period
does not create a market which reflects the fair market value of a share of CIT
Common Stock, then the Current Market Price of a share of CIT Common Stock shall
be determined by the Board of Directors of Exchangeco, in good faith and in its
sole discretion, and provided further that any such selection, opinion or
determination by the Board of Directors of Exchangeco shall be conclusive and
binding.
"Dell Contract" means the Agreement of Limited Partnership of Dell
Financial Services, LP, dated April 14, 1997, by and among Dell Credit Company
LLC, Dell DFS Corporation and Newcourt DFS Inc., and the "Ancillary Agreements"
contemplated therein.
"Depositary" means Montreal Trust Company of Canada at its offices set
out in the Letter of Transmittal and Election Form.
"Dissent Procedures" means the dissent procedures described under the
heading "Dissenting Shareholder Rights."
"Dissent Rights" means the rights of a registered Newcourt Shareholder
to dissent from the Arrangement Resolution in compliance with the Dissent
Procedures.
"Dissenting Shareholder" means a registered Newcourt Shareholder who
dissents in respect to the Transaction in strict compliance with the Dissent
Procedures and who is entitled to receive the court-determined fair value of
his, her, or its Newcourt Common Shares pursuant to the OBCA.
"DKB" means The Dai-Ichi Kangyo Bank, Limited, a Japanese banking
corporation.
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.
"Effective Date" means the date shown on the certificate of arrangement
issued by the Director under the Business Corporations Act (Ontario) giving
effect to the Transaction.
"Effective Time" means 12:01 a.m. (Toronto time) on the Effective Date.
"Elected Amount" means the amount selected by an Eligible Holder to be
the deemed proceeds of disposition of the Newcourt Common Shares in the election
made pursuant to subsection 85(1) or 85(2) of the Income Tax Act (Canada), as
may be automatically adjusted under the Income Tax Act (Canada).
"Eligible Electing Holder" means a Newcourt Shareholder: (i) who is a
Canadian Resident; or (ii) which is a partnership that owns Newcourt Common
Shares, if one or more of its members would be an Eligible Electing Holder if
such member held such shares directly.
"Eligible Holder" means a Newcourt Shareholder (i) who is a Canadian
Resident, other than any such shareholder who is generally exempt from tax under
the Income Tax Act (Canada), or (ii) which is a partnership that owns Newcourt
Common Shares, if one or more of its members would be an Eligible Holder if such
member held such shares directly.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Exchange Ratio" means 0.70, such that each Newcourt Common Share (not
held by a Dissenting Shareholder) is exchanged pursuant to the Plan of
Arrangement for 0.70 Exchangeable Shares and applicable Ancillary Rights or 0.70
shares of CIT Common Stock, as the case may be in each case, subject to a
potential downward adjustment pursuant to the Reorganization Agreement.
"Exchange Right" means the exchange right, granted to the Trustee as
trustee for and on behalf of and for the benefit of the holders of the
Exchangeable Shares pursuant to the Voting and Exchange Trust Agreement, to
A-3
require CIT to purchase all or any part of the Exchangeable Shares from the
holders thereof in exchange for CIT Common Stock, upon the occurrence and during
the continuance of an Exchangeco Insolvency Event.
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares, as set out in
Appendix 1 to the Plan of Arrangement, which is attached hereto as Annex F.
"Exchangeable Share Support Agreement" means the Exchangeable Share
Support Agreement to be entered into as of the Effective Date among CIT, Newco
and Exchangeco, substantially in the form of Annex G hereto.
"Exchangeable Shares" means the fully paid and non-assessable shares in
the class of non-voting exchangeable shares in the capital of Exchangeco.
"Exchangeable Share Voting Event" means any matter in respect of which
holders of Exchangeable Shares are entitled to vote as shareholders of
Exchangeco, other than an Exempt Exchangeable Share Voting Event, and excluding
any matter in respect of which holders of Exchangeable Shares are entitled to
vote (or instruct the Trustee to vote) in their capacity as Beneficiaries under
(and as that term is defined in) the Voting and Exchange Trust Agreement. If,
prior to November 1, 2004, an Exchangeable Share Voting Event is proposed, and
if the Board of Directors of Exchangeco has determined, in good faith and in its
sole discretion, that it is not reasonably practicable to accomplish the
business purpose intended by the Exchangeable Share Voting Event, the Redemption
Date shall be the Business Day prior to the record date for any meeting or vote
of the holders of the Exchangeable Shares to consider the Exchangeable Share
Voting Event. The business purpose for such Exchangeable Share Voting Event must
be bona fide and not for the primary purpose of causing the occurrence of a
redemption date in any other commercially reasonable manner that does not result
in an Exchangeable Share Voting Event. The Board of Directors of Exchangeco
shall give such number of days' prior written notice of such redemption to the
registered holders of the Exchangeable Shares as it may determine to be
reasonably practicable in such circumstances.
"Exchangeco" means CIT Exchangeco Inc., a company limited by shares
under the laws of the Province of Nova Scotia, all of the outstanding common
shares of which are owned by Newco.
"Exchangeco Insolvency Event" means (i) any determination by the
Exchangeco Board of Directors to institute bankruptcy, insolvency
reorganization, voluntary liquidation, dissolution, or winding-up, or
composition or readjustment of debts proceedings under any bankruptcy,
insolvency or analogous laws, including without limitation the Companies
Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency (Canada),
with respect to Exchangeco or to effect any other distribution of its assets
among its stockholders for the purpose of winding up its affairs; (ii) the
earlier of (A) receipt by Exchangeco of notice of, and (B) Exchangeco becoming
aware of, any threatened or instituted claim, suit, petition or other
proceedings with respect to the bankruptcy, insolvency reorganization,
involuntary liquidation, dissolution or winding-up of Exchangeco or to effect
any other distribution of assets of Exchangeco among its shareholders for the
purpose of winding up its affairs, in each case where Exchangeco has failed to
contest in good faith any such proceeding commenced in respect of Exchangeco
within 30 days of becoming aware thereof; (iii) the entry by a court having
jurisdiction in the premises of (A) a decree or order for relief in respect of
Exchangeco in an involuntary case or proceeding under any applicable federal
bankruptcy, insolvency, reorganization or other similar law or (B) a decree or
order adjudging Exchangeco a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of Exchangeco under any applicable federal law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of Exchangeco or of any substantial part of the property of
Exchangeco, or ordering the winding up or liquidation of the affairs of
Exchangeco, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60 consecutive
days; (iv) Exchangeco's admission in writing of its inability to pay its debts
as they become due; or (v) Exchangeco not being permitted, pursuant to solvency
requirements of applicable law, to retract the Exchangeable Shares.
"Exchangeco Liquidation Amount" means with respect to each Exchangeable
Share, an amount equal to the Current Market Price of a share of CIT Common
Stock on the last Business Day prior to the Exchangeco Liquidation Date, to be
satisfied by the delivery of one share of CIT Common Stock.
A-4
"Exchangeco Liquidation Date" means the effective date of the
liquidation, dissolution or winding-up of Exchangeco.
"Exempt Exchangeable Share Voting Event" means any matter in respect of
which holders of Exchangeable Shares are entitled to vote as shareholders of
Exchangeco in order to approve or disapprove, as applicable, any change to, or
in the rights of the holders of, the Exchangeable Shares, where the approval or
disapproval, as applicable, of such change would be required to maintain the
functional and economic equivalence of the Exchangeable Shares and the CIT
Common Stock.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Final Order" means the final order of the Superior Court of Justice
(Ontario) approving the Plan of Arrangement as such order may be amended at any
time prior to the Effective Time, or if appealed, then, unless such appeal is
withdrawn or denied, as affirmed.
"Goldman Sachs" means Goldman, Sachs & Co.
"Governmental Entity" means any (i) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or public
department, central bank, court, tribunal, arbitral body, commission, board,
bureau or agency, domestic or foreign: (ii) any subdivision, agent, commission,
board or authority of any of the foregoing: or (iii) any quasi-governmental or
private body exercising any regulatory, expropriation or taxing authority under
or for the account of any of the foregoing.
"Hercules" means Hercules Holdings (UK) Limited, an English company and
its affiliates and assigns.
"Income Tax Act (Canada)" means the Income Tax Act (Canada), R.S.C.
1985, C.1 (5th Supp.), as amended.
"Initial Exchange Ratio" means the fixed exchange ratio of 0.92 as
provided by the March Agreement.
"Interim Order" means the interim order of the Superior Court of
Justice (Ontario) in respect of the Plan of Arrangement dated September 20,
1999, a copy of which is attached hereto as Annex C.
"Intermediary" means an intermediary that a Non-Registered Holder may
deal with, including banks, trust companies, securities dealers or brokers and
trustees or administrators of self-directed Registered Retirement Savings Plans,
Registered Retirement Income Funds, Registered Education Savings Plans and
similar plans.
"IRS" means the United States Internal Revenue Service.
"J.P. Morgan" means J.P. Morgan Securities Inc.
"Joint Proxy Statement" means, together, the Notice of Meetings of CIT
and Newcourt and this Joint Management Information Circular and Proxy Statement
relating to the meetings.
"June 30th Equity" means Newcourt's total shareholder's equity under
Canadian GAAP, less goodwill, as of June 30, 1999.
"KPMG" means KPMG LLP.
"Letter of Transmittal and Election Form" means the letter of
transmittal and election form delivered to Newcourt Shareholders (printed on
green paper) with this Joint Proxy Statement which, when duly completed and
returned with a certificate for Newcourt Common Shares, will enable a Newcourt
Shareholder to exchange such certificate or certificates for Exchangeable Shares
and/or CIT Common Stock, as the case may be.
"Liquidation Call Right" means the overriding right of Newco, in the
event of and notwithstanding the proposed liquidation, dissolution or winding-up
of Exchangeco, to purchase from all but not less than all of the holders of
Exchangeable Shares (other than CIT and its subsidiaries or affiliates) on the
effective date of any such liquidation, dissolution or winding-up all but not
less than all of the Exchangeable Shares held by each holder in exchange for CIT
Common Stock, pursuant to the Plan of Arrangement.
"Lucent Contract" means that certain Financial Services Agreement,
dated March 9, 1998, by and between Lucent Technologies Inc. and Newcourt.
A-5
"March Agreement" means the Agreement and Plan of Reorganization
between CIT and Newcourt dated as of March 7, 1999, and which has been
superseded by the Reorganization Agreement.
"Material Adverse Effect" means, with respect to CIT or Newcourt, as
the case may be, a material adverse effect on (a) the business or financial
condition of such party and its subsidiaries taken as a whole, other than any
such effect attributable to or resulting from (i) any change in general economic
or capital market conditions or in prevailing levels of interest rates, (ii)
with respect to Newcourt, any change in Canadian GAAP or, with respect to CIT,
any change in U.S. GAAP, (iii) any action or omission of Newcourt or CIT or any
subsidiary of either of them taken with the prior written consent of the other
party, or (iv) solely with respect to a material adverse effect on the financial
condition of Newcourt and its subsidiaries taken as a whole, any fact,
circumstance or event to the extent such fact, circumstance or event is
reflected in the calculation of Adjusted Shareholders' Equity as of the end of
the applicable month in conjunction with the Closing in accordance with the
Reorganization Agreement, or (b) the ability of such party and its subsidiaries
to consummate the transactions contemplated by the Reorganization Agreement.
"Newco" means 3026192 Nova Scotia Company, an unlimited liability
company incorporated under the laws of the Province of Nova Scotia and a
wholly-owned subsidiary of CIT.
"Newcourt" means Newcourt Credit Group Inc., a corporation incorporated
under the Business Corporations Act (Ontario).
"Newcourt's Articles" means Newcourt's Restated Articles of
Incorporation, as amended, as currently in force.
"Newcourt Common Shares" means the common shares in the capital of
Newcourt.
"Newcourt Board of Directors" means the board of directors of Newcourt.
"Newcourt Bylaws" means Newcourt's bylaws, as currently in force.
"Newcourt Option" means a Newcourt Common Share purchase option granted
under the Newcourt Option Plan, and being outstanding and unexercised on the
Effective Date.
"Newcourt Option Plan" means Newcourt's Stock Option Plan, as amended,
dated as of February 18, 1999.
"Newcourt Record Date" means September 20, 1999.
"Newcourt Shareholders" means the holders of Newcourt Common Shares.
"Newcourt Shareholders Meeting" means the special meeting of Newcourt
Shareholders to be held on October 26, 1999 and any adjournments thereof.
"Newcourt 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 50% or more of the net revenues, net income or the
assets of Newcourt and its subsidiaries taken as a whole, or 50% or more of the
outstanding voting securities of Newcourt, any tender offer or exchange offer
that if consummated would result in any person beneficially owning 50% or more
of the outstanding voting securities of Newcourt, or any merger, amalgamation,
plan of arrangement, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Newcourt or the
Newcourt Common Shares (or any one or more of Newcourt's subsidiaries, if the
business of such subsidiary or all of such subsidiaries constitutes 50% or more
of the net revenues, net income or assets of Newcourt and its subsidiaries taken
as a whole), other than the transactions contemplated by the Reorganization
Agreement.
"Non-Registered Holder" means a Newcourt Shareholder who is a
beneficial owner, and not a registered holder, of Newcourt Common Shares.
"Non-U.S. Holder" has the meaning ascribed to such term under the
heading "Tax Considerations to Newcourt Shareholders - Certain United States
Federal Tax Considerations for Newcourt Shareholders" on page 108.
"Option" means the unconditional, irrevocable option pursuant to the
Stock Option Agreement to purchase up to 22,273,249 fully paid and
non-assessable Newcourt Common Shares at a price of US$15.6875 per share.
A-6
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor, administrator,
legal personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, governmental entity, syndicate or
other entity, whether or not having legal status.
"Plan of Arrangement" means the plan of arrangement proposed under
Section 182 of the Ontario Business Corporations Act substantially in the form
attached hereto as Annex B, as amended, modified or supplemented from time to
time in accordance with its terms or Section 9.3 of the Reorganization Agreement
or at the direction of the Superior Court of Justice (Ontario) in the Final
Order.
"Primary Approval" means the approvals, if any, of the Federal Reserve
Board, Office of the Superintendent of Financial Institutions of Canada, the
Minister of Finance of Canada, the Governor in Council of Canada, the Ministry
of Finance of Japan (including any acceptance of notice by the Ministry of
Finance of Japan) and the Financial Supervisory Agency of Japan required to
consummate the Transaction and compliance with the pre-merger notification
filing requirements under Part IX of the Competition Act (Canada) and the
expiration of the applicable waiting period in relation thereto or the receipt
of an advance ruling certificate pursuant to Section 102 of such act.
"Redemption Call Right" means the overriding right of Newco to purchase
from all but not less than all of the holders of Exchangeable Shares (other than
CIT and its subsidiaries or affiliates) on the Redemption Date all but not less
than all of the Exchangeable Shares held by each such holder in exchange for CIT
Common Stock, pursuant to the Plan of Arrangement.
"Redemption Date" means the date, if any, established by the Board of
Directors of Exchangeco for the redemption by Exchangeco of all but not less
than all of the outstanding Exchangeable Shares pursuant to the Exchangeable
Share Provisions, which date shall be no earlier than November 1, 2004 unless:
(i) there are fewer than 1,000,000 Exchangeable Shares outstanding (other than
Exchangeable Shares held by CIT and its subsidiaries or affiliates and subject
to adjustment in certain events described in the Exchangeable Share Provisions),
in which case the Board of Directors of Exchangeco may accelerate such
Redemption Date to such date prior to November 1, 2004 as it may determine, upon
at least 60 days' prior written notice to the registered holders of the
Exchangeable Shares; (ii) a CIT Control Transaction occurs, in which case,
provided that the Board of Directors of Exchangeco determines, in good faith and
in its sole discretion, that it is not reasonably practicable to substantially
replicate the terms and conditions of the Exchangeable Shares in connection with
such CIT Control Transaction and that the redemption of all but not less than
all of the outstanding Exchangeable Shares is necessary to enable the completion
of such CIT Control Transaction in accordance with its terms, the Board of
Directors of Exchangeco may accelerate such Redemption Date to such date prior
to November 1, 2004 as it may determine, upon such number of days' prior written
notice to the registered holders of the Exchangeable Shares as the Board of
Directors of Exchangeco may determine to be reasonably practicable in such
circumstances; (iii) an Exchangeable Share Voting Event is proposed, in which
case, provided that the Board of Directors of Exchangeco has determined, in good
faith and in its sole discretion, that it is not reasonably practicable to
accomplish the business purpose intended by the Exchangeable Share Voting Event,
which business purpose must be bona fide and not for the primary purpose of
causing the occurrence of a Redemption Date, in any other commercially
reasonable manner that does not result in an Exchangeable Share Voting Event,
the Redemption Date shall be the Business Day prior to the record date for any
meeting or vote of the holders of the Exchangeable Shares to consider the
Exchangeable Share Voting Event and the Board of Directors of Exchangeco shall
give such number of days' prior written notice of such redemption to the
registered holders of the Exchangeable Shares as the Board of Directors of
Exchangeco may determine to be reasonably practicable in such circumstances; or
(iv) an Exempt Exchangeable Share Voting Event is proposed and the holders of
the Exchangeable Shares fail to take the necessary action at a meeting or other
vote of holders of Exchangeable Shares, to approve or disapprove, as applicable,
the Exempt Exchangeable Share Voting Event, in which case the Redemption Date
shall be the Business Day following the day on which the holders of the
Exchangeable Shares failed to take such action and the Board of Directors of
Exchangeco shall give such number of days' prior written notice of such
redemption to the holders of the Exchangeable Shares as the Board of Directors
of Exchangeco may determine to be reasonably practicable in such circumstances;
provided, however that the accidental failure or omission to give any notice of
redemption under clause (i), (ii), (iii) or (iv) above to less than ten percent
of such holders of Exchangeable Shares shall not affect the validity of any such
redemption.
A-7
"Redemption Price" means with respect to each Exchangeable Share, an
amount equal to the Current Market Price of a share of CIT Common Stock on the
last Business Day prior to the Redemption Date, to be satisfied by the delivery
of one share of CIT Common Stock.
"Registration Statement" means a registration statement filed with the
SEC on the appropriate form with respect to the shares of CIT Common Stock to be
issued upon exchange or redemption of the Exchangeable Shares.
"Reorganization Agreement" means the Amended and Restated Agreement and
Plan of Reorganization between CIT and Newcourt dated as of August 5, 1999, a
copy of which is attached to this Joint Proxy Statement as Annex E, as amended
from time to time.
"Restructuring Charge" means the aggregate costs associated with the
Transaction, including, without limitation, financial advisory, legal and
accounting fees and disbursements, severance payments, and operational
redundancies.
"Retracted Shares" means the Exchangeable Shares in respect of which a
holder thereof has exercised the right under Article 6 of the Exchangeable Share
Provisions to require Exchangeco to redeem Exchangeable Shares, as described in
"The Transaction - Transaction Mechanics and Description of Exchangeable Shares
- - Retraction, Redemption and Call Rights" on page 85.
"Retraction Call Right" means the overriding right of Newco, in the
event of an exercise of the right under Article 6 of the Exchangeable Share
Provisions to require Exchangeco to redeem Exchangeable Shares by a holder
thereof, to purchase from such holder on the Retraction Date all but not less
than all of the Exchangeable Shares tendered for redemption, pursuant to the
Exchangeable Share Provisions.
"Retraction Date" means the Business Day on which a holder of
Exchangeable Shares desires to have Exchangeco redeem the Exchangeable Shares as
set out in the Exchangeable Share Provisions and described in "The Transaction -
Transaction Mechanics and Description of Exchangeable Shares - Retraction,
Redemption and Call Rights" on page 85.
"Retraction Price" means, at any time, with respect to each
Exchangeable Share, an amount equal to the Current Market Price of a share of
CIT Common Stock on the last Business Day prior to the Retraction Date, to be
satisfied by the delivery of one share of CIT Common Stock.
"Retraction Request" means a duly executed request for redemption made
by a holder of Exchangeable Shares in the form of Schedule A to the Exchangeable
Share Provisions, or in such other form as may be acceptable to Newcourt.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder and the Accounting
Series Releases.
"Special Shares" means the non-voting shares in the capital of
Newcourt.
"Special Voting Share" means the share of Special Voting Stock, US$.01
par value, to be issued by CIT and deposited with the Trustee pursuant to the
Voting and Exchange Trust Agreement.
"Stock Issuance Proposal" means the issuance of shares of CIT Common
Stock pursuant to the Reorganization Agreement.
"Stock Option Agreement" means the Stock Option Agreement between
Newcourt and CIT dated August 5, 1999, a copy of which is attached to this Joint
Proxy Statement as Annex I.
"Superior Proposal" means an Acquisition Proposal that the Newcourt
Board of Directors determines in good faith to be more favorable to its
shareholders than the Transaction, and for which financing is committed or for
which, in the good faith judgment of the Newcourt Board of Directors, financing
is reasonably capable of being obtained by the party making such Acquisition
Proposal.
"Supporting Shareholder" means each of CIBC, Hercules and certain
members of Newcourt's senior management who are parties to Voting Agreements as
holders of Newcourt Common Shares.
"Tax Election Date" means the later of March 1, 2000 and 75 days after
the Effective Date.
A-8
"Tax Election Filing Package" means Canadian income tax election forms
and other related materials to be delivered to Eligible Holders who check the
appropriate box on the Letter of Transmittal and Election Form.
"Tax Proposals" means specific proposals to amend the Income Tax Act
(Canada) and regulations announced by the Department of Finance (Canada) prior
to the date hereof.
"Transaction" means the transactions contemplated by the Reorganization
Agreement and the Plan of Arrangement, whereby, among other things, CIT acquires
Newcourt and Exchangeco becomes the sole beneficial holder of the Newcourt
Common Shares outstanding after giving effect to the Transaction.
"Transition Option" means an option issued by CIT to purchase CIT
Common Stock issued in exchange for a Newcourt Option as described in "The
Transaction - Transaction Mechanics and Description of Exchangeable Shares - The
Plan of Arrangement" on page 84.
"Trustee" means Montreal Trust Company of Canada, or any successor
thereto, in any of its capacities as Trustee under the Voting and Exchange Trust
Agreement, transfer agent for the Exchangeable Shares and Canadian co-registrar
for CIT Common Stock.
"U.S. dollars" or "US$" means United States dollars.
"U.S. GAAP" means generally accepted accounting principles in the
United States.
"U.S. Holder" has the meaning ascribed to such term under the heading
"Tax Considerations to Newcourt Shareholders - Certain United States Federal Tax
Considerations for Newcourt Shareholders" on page 108.
"Voting Agreements" means the agreements dated as of August 5, 1999
entered into by CIT with each of CIBC, Hercules and certain members of
Newcourt's senior management and by CIT and Newcourt with DKB, substantially in
the form of Annex J hereto.
"Voting and Exchange Trust Agreement" means the voting and exchange
trust agreement to be entered into as of the Effective Date among CIT,
Exchangeco and the Trustee, substantially in the form of Annex H hereto.
"Voting Rights" means the rights of the holders of Exchangeable Shares
to direct the voting of the Special Voting Share in accordance with the Voting
and Exchange Trust Agreement.
A-9
ANNEX A
FORM OF ARRANGEMENT RESOLUTION
AT THE SPECIAL MEETING OF SHAREHOLDERS OF
NEWCOURT CREDIT GROUP INC.
ARRANGEMENT RESOLUTION
BE IT RESOLVED THAT:
1. The arrangement (the "Arrangement") under section 182 of the Business
Corporations Act (Ontario) involving Newcourt Credit Group Inc. (the
"Corporation"), as more particularly described and set forth in the Management
Information Circular (the "Circular") of the Corporation accompanying the notice
of this meeting (as the Arrangement may be modified or amended) is hereby
authorized, approved and adopted.
2. The Plan of Arrangement involving the Corporation, the full text of
which is set out as Annex F to the Circular, (as the same may be or may have
been amended) is hereby approved and adopted.
3. Notwithstanding that this resolution has been passed (and the
Arrangement adopted) by the Shareholders of the Corporation or that the
Arrangement has been approved by the Superior Court of Justice (Ontario), the
directors of the Corporation are hereby authorized and empowered (i) to amend
the Amended and Restated Agreement and Plan of Reorganization (the "Agreement
and Plan of Reorganization") made as of August 5, 1999 between The CIT Group,
Inc. and the Corporation, or the Plan of Arrangement to the extent permitted by
the Agreement and Plan of Reorganization, and (ii) not to proceed with the
Arrangement at any time prior to the issuance of a certificate of arrangement
giving effect to the Arrangement, without the further approval of the
shareholders of the Corporation, but only if the Agreement and Plan of
Reorganization is terminated in accordance with Article IX thereof.
4. Each officer of the Corporation is hereby authorized, acting for, in
the name of and on behalf of the Corporation, to execute, under the seal of the
Corporation or otherwise, and to deliver for filing articles of arrangement, and
such other documents as are necessary or desirable, to the Director under the
Business Corporations Act (Ontario) in accordance with the Agreement and Plan of
Reorganization.
5. Each officer of the Corporation is hereby authorized, acting for, in
the name of and on behalf of the Corporation, to execute or cause to be
executed, under the seal of the Corporation or otherwise, and to deliver or to
cause to be delivered, all such documents, agreements and instruments, and to do
or to cause to be done all such other acts and things, as such officer
determines to be necessary or desirable in order to carry out the intent of the
foregoing paragraphs of this resolution and the matters authorized thereby, such
determination to be conclusively evidenced by the execution and delivery of such
document, agreement or instrument or the doing of any such act or thing.
1
Annex A
ANNEX B
SECTION 185 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
Rights of dissenting shareholders -- s. 185(1)
185. (1) Subject to subsection (3) and to sections 186 and 248, if a
corporation resolves to,
(a) amend its articles under section 168 to add, remove or change
restrictions on the issue, transfer or ownership of shares of a class
or series of the shares of the corporation;
(b) amend its articles under section 168 to add, remove or change any
restriction upon the business or businesses that the corporation may
carry on or upon the powers that the corporation may exercise;
(c) amalgamate with another corporation under sections 175 and 176;
(d) be continued under the laws of another jurisdiction under section
181; or
(e) sell, lease or exchange all or substantially all its property under
subsection 184(3), a holder of shares of any class or series
entitled to vote on the resolution may dissent.
Idem -- s. 185(2)
(2) If a corporation resolves to amend its articles in a manner referred
to in subsection 170(1), a holder of shares of any class or series entitled to
vote on the amendment under section 168 or 170 may dissent, except in respect of
an amendment referred to in,
(a) clause 170(1)(a), (b) or (e) where the articles provide that the
holders of shares of such class or series are not entitled to
dissent; or
(b) subsection 170(5) or (6).
Exception -- s. 185(3)
(3) A shareholder of a corporation incorporated before the 29th day of
July, 1983 is not entitled to dissent under this section in respect of an
amendment of the articles of the corporation to the extent that the amendment,
(a) amends the express terms of any provision of the articles of the
corporation to conform to the terms of the provision as deemed to be
amended by section 277; or
(b) deletes from the articles of the corporation all of the objects of
the corporation set out in its articles, provided that the deletion
is made by the 29th day of July, 1986.
Shareholder's right to be paid fair value -- s. 185(4)
(4) In addition to any other right the shareholder may have, but subject
to subsection (30), a shareholder who complies with this section is entitled,
when the action approved by the resolution from which the shareholder dissents
becomes effective, to be paid by the corporation the fair value of the shares
held by the shareholder in respect of which the shareholder dissents, determined
as of the close of business on the day before the resolution was adopted.
No partial dissent -- s. 185(5)
(5) A dissenting shareholder may only claim under this section with
respect to all the shares of a class held by the dissenting shareholder on
behalf of any one beneficial owner and registered in the name of the dissenting
shareholder.
Objection -- s. 185(6)
(6) A dissenting shareholder shall send to the corporation, at or before
any meeting of shareholders at which a resolution referred to in subsection (1)
or (2) is to be voted on, a written objection to the resolution, unless the
corporation did not give notice to the shareholder of the purpose of the meeting
or of the shareholder's right to dissent.
Idem -- s. 185(7)
(7) The execution or exercise of a proxy does not constitute a written
objection for purposes of subsection (6).
1
Annex B
Notice of adoption of resolution -- s. 185(8)
(8) The corporation shall, within ten days after the shareholders adopt
the resolution, send to each shareholder who has filed the objection referred to
in subsection (6) notice that the resolution has been adopted, but such notice
is not required to be sent to any shareholder who voted for the resolution or
who has withdrawn the objection.
Idem -- s. 185(9)
(9) A notice sent under subsection (8) shall set out the rights of the
dissenting shareholder and the procedures to be followed to exercise those
rights.
Demand for payment of fair value -- s. 185(10)
(10) A dissenting shareholder entitled to receive notice under subsection
(8) shall, within twenty days after receiving such notice, or, if the
shareholder does not receive such notice, within twenty days after learning that
the resolution has been adopted, send to the corporation a written notice
containing,
(a) the shareholder's name and address;
(b) the number and class of shares in respect of which the shareholder
dissents; and
(c) a demand for payment of the fair value of such shares.
Certificates to be sent in -- s. 185(11)
(11) Not later than the thirtieth day after the sending of a notice under
subsection (10), a dissenting shareholder shall send the certificates
representing the shares in respect of which the shareholder dissents to the
corporation or its transfer agent.
Idem -- s. 185(12)
(12) A dissenting shareholder who fails to comply with subsections (6),
(10) and (11) has no right to make a claim under this section.
Endorsement on certificate -- s. 185(13)
(13) A corporation or its transfer agent shall endorse on any share
certificate received under subsection (11) a notice that the holder is a
dissenting shareholder under this section and shall return forthwith the share
certificates to the dissenting shareholder.
Rights of dissenting shareholder -- s. 185(14)
(14) On sending a notice under subsection (10), a dissenting shareholder
ceases to have any rights as a shareholder other than the right to be paid the
fair value of the shares as determined under this section except where,
(a) the dissenting shareholder withdraws notice before the corporation
makes an offer under subsection (15);
(b) the corporation fails to make an offer in accordance with subsection
(15) and the dissenting shareholder withdraws notice; or
(c) the directors revoke a resolution to amend the articles under
subsection 168(3), terminate an amalgamation agreement under
subsection 176(5) or an application for continuance under
subsection 181(5), or abandon a sale, lease or exchange under
subsection 184(8), in which case the dissenting shareholder's
rights are reinstated as of the date the dissenting shareholder
sent the notice referred to in subsection (10), and the dissenting
shareholder is entitled, upon presentation and surrender to the
corporation or its transfer agent of any certificate representing
the shares that has been endorsed in accordance with subsection
(13), to be issued a new certificate representing the same number
of shares as the certificate so presented, without payment of any
fee.
Offer to pay -- s. 185(15)
(15) A corporation shall, not later than seven days after the later of the
day on which the action approved by the resolution is effective or the day the
corporation received the notice referred to in subsection (10), send to each
dissenting shareholder who has sent such notice,
2
Annex B
(a) a written offer to pay for the dissenting shareholder's shares in an
amount considered by the directors of the corporation to be the fair
value thereof, accompanied by a statement showing how the fair value
was determined; or
(b) if subsection (30) applies, a notification that it is unable lawfully
to pay dissenting shareholders for their shares.
Idem -- s. 185(16)
(16) Every offer made under subsection (15) for shares of the same class
or series shall be on the same terms.
Idem -- s. 185(17)
(17) Subject to subsection (30), a corporation shall pay for the shares of
a dissenting shareholder within ten days after an offer made under subsection
(15) has been accepted, but any such offer lapses if the corporation does not
receive an acceptance thereof within thirty days after the offer has been made.
Application to court to fix fair value -- s. 185(18)
(18) Where a corporation fails to make an offer under subsection (15) or
if a dissenting shareholder fails to accept an offer, the corporation may,
within fifty days after the action approved by the resolution is effective or
within such further period as the court may allow, apply to the court to fix a
fair value for the shares of any dissenting shareholder.
Idem -- s. 185(19)
(19) If a corporation fails to apply to the court under subsection (18), a
dissenting shareholder may apply to the court for the same purpose within a
further period of twenty days or within such further period as the court may
allow.
Idem -- s. 185(20)
(20) A dissenting shareholder is not required to give security for costs
in an application made under subsection (18) or (19).
Costs -- s. 185(21)
(21) If a corporation fails to comply with subsection (15), then the costs
of a shareholder application under subsection (19) are to be borne by the
corporation unless the court otherwise orders.
Notice to shareholders -- s. 185(22)
(22) Before making application to the court under subsection (18) or not
later than seven days after receiving notice of an application to the court
under subsection (19), as the case may be, a corporation shall give notice to
each dissenting shareholder who, at the date upon which the notice is given,
(a) has sent to the corporation the notice referred to in subsection
(10); and
(b) has not accepted an offer made by the corporation under subsection
(15), if such an offer was made, of the date, place and consequences
of the application and of the dissenting shareholder's right to
appear and be heard in person or by counsel, and a similar notice
shall be given to each dissenting shareholder who, after the date of
such first mentioned notice and before termination of the proceedings
commenced by the application, satisfies the conditions set out in
clauses (a) and (b) within three days after the dissenting
shareholder satisfies such conditions.
Parties joined -- s. 185(23)
(23) All dissenting shareholders who satisfy the conditions set out in
clauses (22)(a) and (b) shall be deemed to be joined as parties to an
application under subsection (18) or (19) on the later of the date upon which
the application is brought and the date upon which they satisfy the conditions,
and shall be bound by the decision rendered by the court in the proceedings
commenced by the application.
3
Annex B
Idem -- s. 185(24)
(24) Upon an application to the court under subsection (18) or (19), the
court may determine whether any other person is a dissenting shareholder who
should be joined as a party, and the court shall fix a fair value for the shares
of all dissenting shareholders.
Appraisers -- s. 185(25)
(25) The court may in its discretion appoint one or more appraisers to
assist the court to fix a fair value for the shares of the dissenting
shareholders.
Final order -- s. 185(26)
(26) The final order of the court in the proceedings commenced by an
application under subsection (18) or (19) shall be rendered against the
corporation and in favour of each dissenting shareholder who, whether before or
after the date of the order, complies with the conditions set out in clauses
(22)(a) and (b).
Interest -- s. 185(27)
(27) The court may in its discretion allow a reasonable rate of interest
on the amount payable to each dissenting shareholder from the date the action
approved by the resolution is effective until the date of payment.
Where corporation unable to pay -- s. 185(28)
(28) Where subsection (30) applies, the corporation shall, within ten days
after the pronouncement of an order under subsection (26), notify each
dissenting shareholder that it is unable lawfully to pay dissenting shareholders
for their shares.
Idem -- s. 185(29)
(29) Where subsection (30) applies, a dissenting shareholder, by written
notice sent to the corporation within thirty days after receiving a notice under
subsection (28), may,
(a) withdraw a notice of dissent, in which case the corporation is deemed
to consent to the withdrawal and the shareholder's full rights are
reinstated; or
(b) retain a status as a claimant against the corporation, to be paid as
soon as the corporation is lawfully able to do so or, in a
liquidation, to be ranked subordinate to the rights of creditors of
the corporation but in priority to its shareholders.
Idem -- s. 185(30)
(30) A corporation shall not make a payment to a dissenting shareholder
under this section if there are reasonable grounds for believing that,
(a) the corporation is or, after the payment, would be unable to pay its
liabilities as they become due; or
(b) the realizable value of the corporation's assets would thereby be less
than the aggregate of its liabilities.
Court order -- s. 185(31)
(31) Upon application by a corporation that proposes to take any of the
actions referred to in subsection (1) or (2), the court may, if satisfied that
the proposed action is not in all the circumstances one that should give rise to
the rights arising under subsection (4), by order declare that those rights will
not arise upon the taking of the proposed action, and the order may be subject
to compliance upon such terms and conditions as the court thinks fit and, if the
corporation is an offering corporation, notice of any such application and a
copy of any order made by the court upon such application shall be served upon
the Commission.
Commission may appear -- s. 185(32)
(32) The Commission may appoint counsel to assist the court upon the
hearing of an application under subsection (31), if the corporation is an
offering corporation.
4
Annex B
ANNEX C
INTERIM ORDER
Court File No. 99-CL-3503
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
THE HONOURABLE ) MONDAY, THE 20th
JUSTICE BLAIR ) DAY OF SEPTEMBER, 1999
IN THE MATTER OF a proposed plan of arrangement involving Newcourt Credit
Group Inc. and The CIT Group, Inc.
AND IN THE MATTER OF an application by
Newcourt Credit Group Inc. under the provisions of the
Business Corporations Act (Ontario), R.S.O. 1990, c. B.16
as amended
APPLICATION UNDER section 182 of the Business Corporations Act
(Ontario), R.S.O. 1990, c. B.16, as amended.
INTERIM ORDER
THIS MOTION, made by the Applicant, Newcourt Credit Group Inc. ("Newcourt"
or the "Applicant"), for the advice and directions of the Court in connection
with an arrangement under section 182 of the Business Corporations Act
(Ontario), R.S.O. 1990, c. B.16, as amended (the "OBCA") was heard this day at
393 University Avenue, Toronto, Ontario.
ON READING the Notice of Application dated September 16, 1999, the Notice
of Motion dated September 16, 1999, the Affidavit of David F. Banks, Chairman of
Board of Directors of Newcourt, sworn September 17, 1999 and the exhibits
thereto, the consent of The CIT Group, Inc., 3026192 Nova Scotia Company and CIT
Exchangeco Inc. by their solicitors filed, and on hearing the submissions of
counsel for the Applicant,
1. THIS COURT ORDERS that Newcourt call, hold and conduct a special meeting
(the "Special Meeting") of the holders of Common Shares of Newcourt (the
"Common Shares") on October 26, 1999 to consider and, if deemed advisable,
to pass, with or without variation, a special resolution (the "Arrangement
Resolution") to approve a plan of arrangement (the "Arrangement")
substantially in the form set forth in Annex F to the draft joint
management information circular and proxy statement of Newcourt and The
CIT Group, Inc. (the "Management Information Circular") marked Exhibit "A"
to the Affidavit of David F. Banks; and to transact such other business as
may properly come before the meeting or any adjournment thereof.
2. THIS COURT ORDERS that the Special Meeting shall be called, held and
conducted in accordance with the OBCA, the articles and by-laws of the
Applicant, the Management Information Circular and this Order.
3. THIS COURT ORDERS that Newcourt, if it deems it advisable, is specifically
authorized to adjourn or postpone the Special Meeting on one or more
occasion, without the necessity of first convening the Special Meeting or
first obtaining any vote of the holders of the Common Shares respecting
the adjournment or postponement.
4. THIS COURT ORDERS that the record date for determining shareholders
entitled to receive the Notice of Special Meeting and the Management
Information Circular, and for determining common shareholders entitled to
vote at the Special Meeting, shall be September 20, 1999 (the "Record
Date"), as previously approved by the Board of Directors of Newcourt and
published by Newcourt.
5. THIS COURT ORDERS that the Notice of Application herein, Notice of Special
Meeting and Management Information Circular of Newcourt in substantially
the same form as contained in Exhibit "A" to
1
Annex C
the said Affidavit of David F. Banks (with such amendments thereto as
counsel for the Applicant may advise are necessary or desirable, provided
that such amendments are not inconsistent with the terms of this Order and
are subsequently filed with the Court), shall be mailed, with copies of
the Notice of Application herein and this Interim Order both annexed
thereto, to the holders of the Common Shares (at the addresses shown on
the books and records of Newcourt at the close of business on the Record
Date), to Newcourt's directors and auditors, and to the Director under the
OBCA, by mailing the same by prepaid ordinary mail to such persons in
accordance with the OBCA at least 21 days prior to the date of the Special
Meeting, excluding the date of mailing and excluding the date of the
Special Meeting.
6. THIS COURT ORDERS that the Notice of Application herein in the form of the
notice attached as Schedule "A" hereto shall be published no later than
October 5, 1999 in the newspaper known as the national edition of The
Globe and Mail published at Toronto, Ontario, Canada and the newspaper
known as the Wall Street Journal published at New York City, New York,
United States of America and that publishing of such notice as set out
herein shall constitute good and sufficient services of such Notice of
Application upon all holders of other securities (including convertible
securities) and creditors of Newcourt who may wish to appear in these
proceedings and no other form of service need be made and such service
shall be effective on the fifth day after final publication of such
notice.
7. THIS COURT ORDERS that the Notice of the Special Meeting be accompanied by
a Form of Proxy, Letter of Transmittal and Election Form and Notice of
Guaranteed Delivery substantially in the form set forth in Exhibit "C" to
the Affidavit of David F. Banks.
8. THIS COURT ORDERS that the quorum required at the Special Meeting shall be
two persons present at the Special Meeting and holding or representing 51%
of the Common Shares.
9. THIS COURT ORDERS that the vote required to pass the Arrangement
Resolution at the Special Meeting shall be the affirmative vote of at
least 662/3% of the votes cast by the holders of Common Shares in respect
of the Arrangement Resolution present in person or by proxy at the Special
Meeting.
10. THIS COURT ORDERS that the holders of Common Shares shall be entitled to
exercise rights of dissent in respect of the Arrangement Resolution in
accordance and compliance with section 185 of the OBCA, as varied herein,
so long as, and not withstanding section 185(6) of the OBCA, they provide
to Newcourt written objection to the Arrangement by 5:00 p.m. (Toronto
time) on the Business Day (as defined in the Management Information
Circular) preceding the Special Meeting and they otherwise comply with the
requirements of section 185 of the OBCA and the Arrangement.
11. THIS COURT ORDERS that the only persons entitled to notice of or to attend
the Special Meeting shall be the holders of Common Shares or their
proxies, and Newcourt's directors, auditors and advisors, and
representatives of The CIT Group, Inc. and its advisors, and that the only
persons entitled to be represented and to vote at the Special Meeting
shall be the registered holders of the Common Shares at the close of
business on September 20, 1999, or their proxies, subject to the
provisions of the OBCA with respect to persons who become the registered
holders of the Common Shares after that date.
12. THIS COURT ORDERS that the hearing for approval of the Arrangement shall
be held on October 27, 1999, or such other date as the Court may
determine, and that service of the Notice of Application herein, in
accordance with paragraph 5 and 6 of this Order, shall constitute good and
sufficient service of such Notice of Application upon all persons who are
entitled to receive such Notice of Application pursuant to this Order and
no other form of service need be made and no other material need be served
on such persons in respect of these proceedings, unless a Notice of
Appearance is served on the Applicant's solicitors within five days prior
to the date for the hearing of the Application.
13. THIS COURT ORDERS that the only persons entitled to appear and be heard at
the hearing to approve the Arrangement shall be the Applicant and persons
who have filed a Notice of Appearance in accordance with the Rules of
Civil Procedure.
2
Annex C
SCHEDULE "A" TO THE ORDER OF THE
SUPERIOR COURT OF JUSTICE
DATED ________, 1999
NOTICE IS HEREBY GIVEN that Newcourt Credit Group Inc. and The CIT Group, Inc.
propose to enter into a plan of arrangement pursuant to the provisions of the
Business Corporations Act (Ontario) and that the holders of securities
(including convertible securities) and creditors of Newcourt Credit Group Inc.
may appear and be heard at the hearing scheduled before a Justice of the
Superior Court of Ontario presiding over the Commercial List at 393 University
Avenue, Toronto, Ontario on October 27, 1999 at 10:00 a.m. if they comply with
the Notice of Application and Interim Order with respect to such hearing, copies
of which are attached as exhibits to the joint management information circular
and proxy statement dated September 21, 1999 of each of Newcourt Credit Group
Inc. and The CIT Group, Inc. with respect to the meetings of their respective
shareholders to be each held on October 26, 1999. Copies of the notices of
special meeting and the joint management information circular and proxy
statement prepared in connection with such meetings may be obtained from the
Secretary of Newcourt Credit Group Inc., 207 Queens Quay West, Suite 700,
Toronto, Ontario, M5J 1A7.
DATE: , 1999.
---------------------------------------------
Secretary,
Newcourt Credit Group Inc.
3
Annex C
ANNEX D
NOTICE OF APPLICATION FOR FINAL ORDER
Court File No. 99-CL-3503
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF a proposed plan of arrangement
involving Newcourt Credit Group Inc. and The CIT
Group, Inc.
AND IN THE MATTER OF an application by Newcourt Credit
Group Inc. under the provisions of the Business
Corporations Act (Ontario), R.S.O. 1990, c. B.16, as
amended
APPLICATION UNDER section 182 of the Business
Corporations Act (Ontario), R.S.O. 1990, c. B.16, as
amended.
NOTICE OF APPLICATION
TO THE RESPONDENTS
A LEGAL PROCEEDING HAS BEEN COMMENCED by the applicant. The claim made by
the applicant appears on the following pages.
THIS APPLICATION will come on for a hearing before a judge presiding over
the Commercial List at 393 University Avenue, Toronto, on October 27, 1999 at
10:00 a.m., or as soon after that time as the matter can be heard.
IF YOU WISH TO OPPOSE THIS APPLICATION, to receive notice of any step in
the application or to be served with any documents in the application, you or an
Ontario lawyer acting for you must forthwith prepare a notice of appearance in
Form 38A prescribed by the Rules of Civil Procedure, serve it on the applicant's
lawyer or, where the applicant does not have a lawyer, serve it on the
applicant, and file it, with proof of service, in this court office, and you or
your lawyer must appear at the hearing.
IF YOU WISH TO PRESENT AFFIDAVIT OR OTHER DOCUMENTARY EVIDENCE TO THE
COURT OR TO EXAMINE OR CROSS-EXAMINE WITNESSES ON THE APPLICATION, you or your
lawyer must, in addition to serving your notice of appearance, serve a copy of
the evidence on the applicant's lawyer or, where the applicant does not have a
lawyer, serve it on the applicant, and file it, with proof of service, in the
court office where the application is to be heard as soon as possible, but not
later than 2 p.m. on the day before the hearing.
IF YOU FAIL TO APPEAR AT THE HEARING, JUDGMENT MAY BE GIVEN IN YOUR
ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. IF YOU WISH TO OPPOSE THIS
APPLICATION BUT ARE UNABLE TO PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU
BY CONTACTING A LOCAL LEGAL AID OFFICE.
Date: September 16, 1999 Issued by:________________________
Local Registrar
Address of court office:
393 University Avenue,
10th Floor
Toronto, Ontario
M5G 1E6
1
Annex D
TO: The Director under the Business Corporations Act (Ontario)
AND TO: The CIT Group, Inc.
3026192 Nova Scotia Company
CIT Exchangeco Inc.
c/o Goodman Phillips & Vineberg
Barristers & Solicitors
1501 McGill College Avenue, 26th Floor
Montreal, Quebec
Attn: Sidney Horn
Tel: (514) 841-6422
Fax: (514) 841-6499
Solicitors for The CIT Group, Inc., 3026192 Nova Scotia
Company and CIT Exchangeco Inc.
AND TO: All Registered Holders of Common Shares of Newcourt Credit
Group Inc.
2
Annex D
APPLICATION
1. The applicant, Newcourt Credit Group Inc. ("Newcourt"), makes
application for:
(a) an order pursuant to Section 182 of the Business Corporations Act
(Ontario), R.S.O. 1990, c. B.16, as amended (the "OBCA") approving
the plan of arrangement (the "Arrangement") proposed by the applicant
substantially in the form described in the Joint Management
Information Circular and Proxy Statement of Newcourt and The CIT
Group, Inc. attached as exhibit "A" to the affidavit of Scott J.
Moore filed in support of this application;
(b) an interim order for the advice and directions of this Court pursuant
to section 182(5) of the OBCA with respect to the Arrangement and
this Application; and
(c) such further and other relief as this Court may deem just.
2. The grounds for the application are:
(a) all statutory requirements under the OBCA have been fulfilled or will
be fulfilled by the date of the return of this Application;
(b) the Arrangement is fair and reasonable and it is appropriate for this
Court to approve the Arrangement;
(c) section 182 of the OBCA; and
(d) Rules 14.05(2), 16.04, 17.02 and 38 of the Rules of Civil Procedure.
3. If made, the order of this Honourable Court will constitute the basis
for an exemption from the registration and prospectus requirements under section
3(a)(10) of the Securities Act of 1933, as amended, of the United States of
America with respect to the shares of common stock of The CIT Group, Inc. to be
issued under the Arrangement.
4. The following documentary evidence will be used at the hearing of the
application:
(a) such Interim Order as may be granted by this Court;
(b) the Affidavit of Scott J. Moore, and the exhibits thereto;
(c) the further affidavits of deponents on behalf of the applicant,
reporting as to the results of any meetings ordered by the Court; and
(d) such further and other material as counsel may advise and this Court
may permit.
5. The Notice of Application will be sent to all registered holders of
common shares in the capital stock of Newcourt at their addresses as they appear
on the records of Newcourt at the close of business on September 20, 1999,
including, pursuant to Rules 17.02(a), (n) and (o) of the Rules of Civil
Procedure, the registered shareholders whose addresses are outside of Ontario.
September 16, 1999. Blake, Cassels & Graydon
Box 25, Commerce Court West
Toronto, Ontario M5L 1A9
Jeffrey Galway
Tel: (416) 863-3859
Fax: (416) 863-2653
S. Gordon McKee
Tel: (416) 863-3884
Fax: (416) 863-2653
Solicitors for the Applicant
3
Annex D
ANNEX E
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
Between
THE CIT GROUP, INC.
and
NEWCOURT CREDIT GROUP INC.
Amended and Restated as of August 5, 1999
================================================================================
Annex E
TABLE OF CONTENTS
Page
----
ARTICLE I
THE ARRANGEMENT ............................. 1
1.1. Plan of Arrangement ................................................... 1
1.2. Implementation of Arrangement by Newcourt ............................. 2
1.3. Implementation of Arrangement by CIT .................................. 2
1.4. Interim Order ......................................................... 3
1.5. Articles of Arrangement ............................................... 3
1.6. Treatment of Stock Options ............................................ 3
ARTICLE II
CERTAIN DEFINITIONS ........................... 4
2.1. Certain Definitions ................................................... 4
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES .................. 9
3.1. Disclosure Schedules .................................................. 9
3.2. Standards ............................................................. 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCOURT ............... 10
4.1. Corporate Organization ................................................ 10
4.2. Capitalization ........................................................ 11
4.3. Authority; No Violation ............................................... 11
4.4. Consents and Approvals ................................................ 12
4.5. Reports ............................................................... 12
4.6. Financial Statements .................................................. 13
4.7. Broker's Fees ......................................................... 13
4.8. Absence of Changes .................................................... 13
4.9. Legal Proceedings ..................................................... 14
4.10. Taxes ................................................................. 14
4.11. Employees ............................................................. 14
4.12. OSC and SEC Reports ................................................... 15
4.13. Newcourt Information .................................................. 15
4.14. Compliance with Applicable Law ........................................ 15
4.15. Certain Contracts ..................................................... 16
4.16. Agreements with Regulatory Agencies ................................... 16
4.17. Environmental Matters ................................................. 16
4.18. Opinion ............................................................... 17
4.19. [reserved] ............................................................ 17
4.20. Property .............................................................. 17
4.21. Year 2000 Compliance Plan ............................................. 17
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4.22. Interested Party Transactions ........................................ 17
4.23. Insurance ............................................................ 18
4.24. Board Approval ....................................................... 18
4.25. Intellectual Property ................................................ 18
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF CIT ................................. 18
5.1. Corporate Organization ................................................ 18
5.2. Capitalization ........................................................ 18
5.3. Authority; No Violation ............................................... 19
5.4. Consents and Approvals ................................................ 20
5.5. Reports ............................................................... 20
5.6. Financial Statements .................................................. 20
5.7. Broker's Fees ......................................................... 21
5.8. Absence of Changes; Conduct of Business ............................... 21
5.9. Legal Proceedings ..................................................... 21
5.10. Taxes ................................................................. 21
5.11. Employees ............................................................. 22
5.12. SEC Reports ........................................................... 22
5.13. CIT Information ....................................................... 23
5.14. Compliance with Applicable Law ........................................ 23
5.15. Certain Contracts ..................................................... 23
5.16. Agreements with Regulatory Agencies ................................... 23
5.17. Environmental Matters ................................................. 23
5.18. Opinion ............................................................... 24
5.19. Ownership of Newcourt Common Shares. .................................. 24
5.20. Property .............................................................. 24
5.21. Year 2000 Compliance Plan ............................................. 24
5.22. Interested Party Transactions ......................................... 24
5.23. Insurance ............................................................. 24
5.24. Board Approval ........................................................ 24
5.25. Intellectual Property ................................................. 25
5.26. DGCL Section 203 ...................................................... 25
5.27. CIT Knowledge ......................................................... 25
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS ................ 25
6.1. Covenants of CIT and Newcourt ......................................... 25
ARTICLE VII
ADDITIONAL AGREEMENTS .......................... 28
7.1. Regulatory Matters. ................................................... 28
7.2. Access to Information ................................................. 29
7.3. Shareholder Meetings .................................................. 29
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7.4. Legal Conditions to Arrangement ....................................... 30
7.5. Affiliates ............................................................ 30
7.6. Stock Exchange Listings; Tax Status ................................... 30
7.7. Employee Benefit Plans; Existing Agreements ........................... 31
7.8. Indemnification ....................................................... 32
7.9. Additional Agreements ................................................. 33
7.10. Coordination of Dividends ............................................. 33
7.11. [reserved] ............................................................ 33
7.12. [reserved] ............................................................ 33
7.13. Board of Directors .................................................... 33
7.14. Notification of Certain Matters ....................................... 34
7.15. Comfort Letters. ...................................................... 34
7.16. Year 2000 ............................................................. 34
7.17. No Inconsistent Actions ............................................... 34
7.18. [reserved] ............................................................ 34
7.19. Phase II Transactions ................................................. 34
7.20. Newcourt Allowance .................................................... 35
ARTICLE VIII
CONDITIONS PRECEDENT .......................... 35
8.1. Conditions to Each Party's Obligation To Effect the Arrangement ....... 35
8.2. Conditions to Obligations of CIT ...................................... 36
8.3. Conditions to Obligations of Newcourt ................................. 37
8.4. No Adverse DKB Regulatory Condition; No Adverse Amendment ............. 38
8.5. Satisfaction of Conditions ............................................ 39
ARTICLE IX
TERMINATION AND AMENDMENT ........................ 39
9.1. Termination ........................................................... 39
9.2. Effect of Termination ................................................. 40
9.3. Amendment ............................................................. 41
9.4. Extension; Waiver ..................................................... 41
ARTICLE X
GENERAL PROVISIONS ........................... 41
10.1. Closing .............................................................. 41
10.2. Nonsurvival of Representations, Warranties and Agreements ............ 42
10.3. Expenses ............................................................. 42
10.4. Notices .............................................................. 42
10.5. Interpretation ....................................................... 43
10.6. Counterparts ......................................................... 43
10.7. Entire Agreement ..................................................... 43
10.8. Governing Law ........................................................ 43
10.9. Enforcement of Agreement ............................................. 43
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10.10. Severability ........................................................ 43
10.11. Publicity ........................................................... 43
10.12. Assignment; No Third Party Beneficiaries ............................ 43
10.13. No Personal Liability ............................................... 43
Exhibit A - Form of Plan of Arrangement (including Exchangeable
Share of Provisions)
Exhibit B - Form of Arrangement Resolution
Exhibit C - Form of Support Agreement
Exhibit D - Form of Voting and Exchange Trust Agreement
Exhibit E - Forms of Comfort Letters
Exhibit F - Form of Comfort Letter for Final Adjusted Shareholders'
Equity calculation
Exhibit 7.5 - Forms of Affiliates Letters
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION,
amended and restated as of August 5, 1999 (this "Agreement"), between The CIT
Group, Inc., a Delaware corporation ("CIT"), and Newcourt Credit Group Inc., an
Ontario corporation ("Newcourt").
WHEREAS, the parties previously entered into an Agreement and
Plan of Reorganization, dated as of March 7, 1999 (as amended, the "March
Agreement"); and
WHEREAS, the Boards of Directors of CIT and Newcourt have
determined that it is in the best interests of their respective companies and
their shareholders to amend and restate the March Agreement and to consummate
the business combination transaction provided for herein; and
WHEREAS, in order to induce Newcourt to enter into this
Agreement, The Dai-Ichi Kangyo Bank, Limited, a Japanese bank ("DKB") which
beneficially owns approximately 43% of the outstanding shares of CIT Common
Stock (as defined herein) is contemporaneously entering into an Amended and
Restated Voting Agreement, of even date herewith (the "DKB Voting Agreement"),
with Newcourt; and
WHEREAS, in order to induce CIT to enter into this Agreement,
each of Hercules Holdings (Cayman) Limited, a Cayman Islands company which
beneficially owns approximately 11.8% of the outstanding Newcourt Common Shares
(as defined herein), and Canadian Imperial Bank of Commerce, a chartered bank
pursuant to the Bank Act (Canada) which beneficially owns approximately 9.5% of
the outstanding Newcourt Common Shares, and each of the executive officers of
Newcourt listed on Appendix I attached hereto, is contemporaneously entering
into a Voting Agreement, of even date herewith, with CIT; and
WHEREAS, as a condition and inducement to CIT's willingness to
enter into this Agreement, Newcourt and CIT are contemporaneously entering into
a Stock Option Agreement, of even date herewith (the "Stock Option Agreement");
and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Arrangement (as defined herein)
and also to prescribe certain conditions to the Arrangement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
THE ARRANGEMENT
1.1. Plan of Arrangement. Subject to the terms and conditions of this
Agreement and the Plan of Arrangement, substantially in the form attached hereto
as Exhibit A (the "Plan of Arrangement"), at the Effective Time (as defined
herein) (i) each outstanding Newcourt Common Share of which the holder is an
Eligible Electing Holder (as defined in Section 2.1 hereof) for which the holder
thereof shall have made a valid election shall be transferred by the holder
thereof, without any act or formality on the part of such holder, to Exchangeco
in exchange for a number of fully paid and non-assessable shares of Class A
Common Stock, par value $0.01 per share (the "CIT Common Stock"), of CIT equal
to the Exchange Ratio (as defined in Section 2.1 hereof), (ii) each Newcourt
Common Share of which the holder is an Eligible Electing Holder for which the
holder thereof shall have made a valid election shall be transferred by the
holder thereof, without any act or formality on the part of such holder, to
Exchangeco in exchange for a number of fully paid and non-assessable shares in
the class of non-voting exchangeable shares in the capital of Exchangeco (each,
an "Exchangeable Share") equal to the Exchange Ratio, (iii) each Newcourt Common
Share held by any holder who is not an Eligible Electing Holder or who is an
Eligible Electing Holder but who has not made a valid election as described
above (other than (x) Newcourt Common Shares held by a Dissenting Shareholder
who is ultimately entitled to be paid the fair value of the Newcourt Common
Shares held by such shareholder and (y) Newcourt Common Shares held by CIT or
any Subsidiary or affiliate thereof) shall be transferred by the holder thereof,
without any act or formality on the part of such holder, to Exchangeco in
exchange for a number of fully paid and non-assessable shares of CIT Common
Stock equal to the Exchange Ratio, (iv) each Newcourt Option shall
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for a Replacement Option to purchase shares of CIT Common Stock as contemplated
by Section 1.6 and (v) the other terms set forth in the Plan of Arrangement
shall be implemented. The Plan of Arrangement provides for the terms of the
Arrangement and the mode of carrying the Arrangement into effect. Such terms and
conditions are incorporated by reference herein and made a part hereof.
1.2. Implementation of Arrangement by Newcourt. Newcourt shall, following
preparation with CIT of the Proxy Circular:
(a) apply in a manner reasonably acceptable to CIT under section 182 of the
OBCA for an order approving the Arrangement and for the Interim Order, and
thereafter proceed with and diligently pursue the obtaining of the Interim
Order;
(b) convene and hold the meeting of Newcourt's shareholders contemplated by
Section 7.3 hereof for the purpose of considering the Arrangement Resolution and
for any other proper purpose as may be set out in the notice for such meeting;
(c) subject to obtaining such shareholder approval as is required by the
Interim Order, proceed with and diligently pursue the application to the Court
for the Final Order; and
(d) subject to obtaining the Final Order and the satisfaction or waiver of
the other conditions set forth herein, send to the Director for endorsement as a
certificate of arrangement under section 183(2) of the OBCA, the Articles of
Arrangement and such other documents as may be required in connection therewith
under the OBCA to give effect to the Arrangement.
1.3. Implementation of Arrangement by CIT. (a) As promptly as practicable
following the date of this Agreement:
(1) CIT shall incorporate Newco as a Nova Scotia unlimited liability
company and a wholly owned Subsidiary of CIT with a class of common shares
("Newco Common Shares") and a class of preferred shares ("Newco Preferred
Shares"); and
(2) CIT shall, or shall cause Newco to, incorporate Exchangeco as a
Nova Scotia limited liability company and a Subsidiary of Newco with
authorized capital of (A) one million common shares ("Exchangeco Common
Shares"), (B) 15 billion non-cumulative non-voting Class A preferred
shares ("Exchangeco Class A Preferred Shares"), which shares shall be
redeemable and retractable at any time for C$1.00 per share, (C) one
billion cumulative non-voting Class B preferred shares ("Exchangeco Class
B Preferred Shares"), which shares shall be redeemable after seven years
at the option of Exchangeco for C$1.00 per share, and (D) one billion
Exchangeable Shares.
(b) At or prior to the Effective Time and subject to the satisfaction or
waiver of the other conditions set forth herein:
(1) CIT shall execute and deliver, and shall cause each of Newco and
Exchangeco to execute and deliver, the Support Agreement;
(2) CIT shall execute and deliver, and shall cause each of Newco and
Exchangeco to execute and deliver, the Voting and Exchange Trust Agreement; and
(3) CIT shall issue to the Trustee the CIT Special Voting Share.
(c) Not later than the day next preceding the Effective Date, and subject
to the satisfaction or waiver of the conditions set forth herein:
(1) CIT shall transfer to Newco, in exchange for additional Newco
Common Shares, shares of CIT Common Stock (the "CIT Closing Issuance
Shares") in an amount sufficient to allow Exchangeco to meet its
obligations to transfer CIT Common Stock to shareholders of Newcourt in
accordance with the terms of the Plan of Arrangement;
(2) CIT shall cause Newco to transfer the CIT Closing Issuance Shares
to Exchangeco, in exchange for (A) Exchangeco Class B Preferred Shares
having an aggregate fair market value not less than 2 percent of the value
of Newcourt on the date of this Agreement (determined based on the Exchange
Ratio and the closing price of CIT Common Stock on the New York Stock
Exchange on the
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Annex E
day prior to the date of this Agreement) and (B) Exchangeco
Class A Preferred Shares having an aggregate redemption price equal to the
amount obtained by subtracting the aggregate fair market value of the
Exchangeco Class B Preferred Shares from the aggregate current market price
of the CIT Closing Issuance Shares; and
(3) CIT shall cause Newco to sell to a third party not affiliated
with either CIT or Newcourt a number of Exchangeco Class B Preferred
Shares that exceeds 20 percent of the number of Exchangeco Class B
Preferred Shares transferred to Newco pursuant to Section 1.3(c)(2).
1.4. Interim Order. The notice of motion for the application referred to
in Section 1.2(a) shall request that the Interim Order provide:
(a) for the class of Persons to whom notice is to be provided in
respect of the Arrangement and the meeting of Newcourt's shareholders
contemplated by Section 7.3 hereof and for the manner in which such notice
is to be provided;
(b) that the requisite shareholder approval for the Arrangement
Resolution shall be 66 2/3% of the votes cast on the Arrangement
Resolution by holders of Newcourt Common Shares present in person or by
proxy at the meeting of Newcourt's shareholders contemplated by Section
7.3 hereof;
(c) that, in all other respects, the terms, restrictions and
conditions of the by-laws and articles of Newcourt, including quorum
requirements and all other matters, shall apply in respect of the meeting
of Newcourt's shareholders contemplated by Section 7.3 hereof; and
(d) for the grant of the Dissent Rights.
1.5. Articles of Arrangement. The Articles of Arrangement shall, with such
other matters as are necessary to effect the Arrangement as described in
Sections 1.1 and 1.6 hereof, provide as contemplated by the Plan of Arrangement.
1.6. Treatment of Stock Options. At the Effective Time, each option
granted by Newcourt (a "Newcourt Option") to purchase Newcourt Common Shares
which is outstanding and unexercised immediately prior thereto shall be
converted automatically into an option to purchase shares of CIT Common Stock
(each a "Replacement Option") under the CIT Transition Option Plan in an amount
and at an exercise price determined as provided below (and otherwise subject to
the terms of the CIT Transition Option Plan):
(a) The number of shares of CIT Common Stock to be subject to the
Replacement Option shall be equal to the product of the number of Newcourt
Common Shares subject to the original Newcourt Option immediately prior to
the Effective Time and the Exchange Ratio, provided that any fractional
shares of CIT Common Stock resulting from such multiplication shall be
rounded down to the nearest whole number of shares of CIT Common Stock;
(b) The exercise price per share of CIT Common Stock under the
Replacement Option shall be equal to the exercise price per Newcourt
Common Share under the original Newcourt Option immediately prior to the
Effective Time divided by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent; and
(c) The Board of Directors of Newcourt shall not exercise any
discretion or take any action which would result in the acceleration of
the vesting of any unvested Newcourt Option, or would result in any cash
becoming payable by Newcourt or, after the Effective Time, CIT in respect
of any such option; provided, however, that nothing contained herein shall
be deemed to prohibit any such acceleration or cashout which is provided
in any employment agreement between Newcourt and any holder of a Newcourt
Option or in any new employment agreement between CIT and any holder of a
Newcourt Option.
The duration and other terms of each Replacement Option shall be the same as the
original Newcourt Option immediately prior to the Effective Time, except that
all references to Newcourt shall be deemed to be references to CIT and except to
the extent a new employment agreement to be entered into hereunder modifies the
duration or the terms of the Replacement Options.
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ARTICLE II
CERTAIN DEFINITIONS
2.1. Certain Definitions. For purposes of this Agreement, the following
terms shall have the respective meanings indicated:
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation, amalgamation, arrangement or other business combination
involving, or a recapitalization of, a party to this Agreement or any of its
Subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of, a party to this
Agreement or any of its Subsidiaries other than the transactions contemplated or
permitted by this Agreement, but "Acquisition Proposal" shall not include the
entering into of partnerships, joint ventures, virtual joint ventures,
investment funds and other similar arrangements as part of the ordinary course
funding activities of such party;
"Adjusted Exchange Ratio" means the Exchange Ratio that would be applicable
under the first proviso to the definition of Exchange Ratio if Final Adjusted
Shareholders' Equity was exactly $1,730,319,000.
"Adjusted Shareholders Equity" as of any date shall mean total
shareholders' equity reflected on the Section 7.2(d) Balance Sheet as of such
date, (i) minus the amount of goodwill reflected on the Section 7.2(d) Balance
Sheet as of such date, minus (ii) Excess After-Tax Securitization Fees, and
(iii) adjusted to exclude the effects of any Net Worth Charges.
"Arrangement" means an arrangement under Section 182 of the OBCA on the
terms and subject to the conditions set forth in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with Section
9.3 hereof or Article 6 of the Plan of Arrangement or made at the direction of
the Court in the Final Order.
"Arrangement Documents" has the meaning set forth in Section 5.3.
"Arrangement Resolution" means the special resolution of the holders of
Newcourt Common Shares, to be substantially in the form and content of Exhibit B
attached hereto.
"Articles of Arrangement" means the articles of arrangement of Newcourt in
respect of the Arrangement filed under the OBCA after the Final Order is made
giving effect to the Arrangement.
"Bankruptcy Exception" means, in respect of any agreement, contract or
commitment, any limitation thereon imposed (i) by any bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar law affecting
creditors' rights and remedies generally and (ii) with respect to the
enforceability of any agreement, contract or commitment, by general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at law
or in equity).
"Base Equity" equals $1,830,319,000.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Canadian GAAP" means Canadian generally accepted accounting principles.
"Canadian Resident" means a resident of Canada for the purpose of the
Income Tax Act (Canada).
"CIT Closing Issuance Shares" has the meaning set forth in Section
1.3(c)(1).
"CIT Common Stock" has the meaning set forth in Section 1.1 (it being
understood that to the extent that, prior to the Effective Time, the CIT
Certificate of Incorporation is amended to rename or reclassify the Class A
common stock, "CIT Common Stock" shall refer to the Class A common stock as so
renamed or reclassified).
"CIT Contract" has the meaning set forth in Section 5.15.
"CIT Disclosure Schedule" has the meaning set forth in Section 3.1.
"CIT ERISA Affiliate" has the meaning set forth in Section 5.11.
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Annex E
"CIT Plans" has the meaning set forth in Section 5.11.
"CIT Price" means $26.0625.
"CIT Regulatory Agencies" has the meaning set forth in Section 5.5.
"CIT Regulatory Agreement" has the meaning set forth in Section 5.16.
"CIT Reports" has the meaning set forth in Section 5.12.
"CIT Shareholder Matters" has the meaning set forth in Section 7.3.
"CIT Special Voting Share" has the meaning set forth in the Voting and
Exchange Trust Agreement.
"CIT Subsidiary" means each Subsidiary of CIT.
"CIT Transition Option Plan" means an option plan to be established by CIT
pursuant to which Replacement Options will be issued.
"Closing" has the meaning set forth in Section 10.1.
"Closing Date" has the meaning set forth in Section 10.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" has the meaning set forth in Section 7.2.
"Court" means the Ontario Court of Justice (General Division).
"Co-Venturer" has the meaning set forth in Section 7.1.
"Date Data" has the meaning set forth in Section 4.21.
"Date-Sensitive System" has the meaning set forth in Section 4.21.
"Dell Contract" means the Agreement of Limited Partnership of Dell
Financial Services, LP, dated April 14, 1997, by and among Dell Credit Company
LLC, Dell DFS Corporation and Newcourt DFS Inc. and the "Ancillary Agreements"
contemplated therein.
"Director" means the Director appointed pursuant to Section 278 of the
OBCA.
"Dissenting Shareholder" has the meaning set forth in Section 1.1 of the
Plan of Arrangement.
"Dissent Rights" means the rights of dissent in respect of the Arrangement
granted to holders of Newcourt Common Shares described in the Plan of
Arrangement.
"Effective Time" has the meaning set forth in the Plan of Arrangement.
"Eligible Holder" means a holder of Newcourt Common Shares (i) who is a
Canadian Resident, or (ii) which is a partnership that owns Newcourt Common
Shares if one or more of its members would be an Eligible Electing Holder under
clause (i) of this definition if such members held such shares directly.
"Encumbrance" means, with respect to any Property, any encumbrance,
mortgage, hypothecation, prior claim, lien, pledge, collateral assignment,
assignment for security, charge, security interest or equitable interest in
respect of such Property or any restriction on the right to vote, sell or
otherwise dispose of such Property.
"Environmental Laws" has the meaning set forth in Section 4.17.
"ERISA" has the meaning set forth in Section 4.11.
"ERISA Affiliate" has the meaning set forth in Section 4.11.
"Excess After-Tax Securitization Fees" shall mean the product of (i) Excess
Securitization Fees and (ii) .60.
"Excess Securitization Fees" shall mean: (i) if the Final Net Worth
Statement is dated as of September 30, 1999, the amount, if any, by which
Securitization Fees realized during the period from July 1, 1999 through
September 30, 1999 exceeds $90 million; (ii) if the Final Net Worth Statement is
dated as of October 31, 1999,
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Annex E
the amount, if any, by which Securitization Fees realized during the period from
July 1, 1999 through October 31, 1999 exceeds $120 million; (iii) if the Final
Net Worth Statement is dated as of November 30, 1999, the amount, if any, by
which Securitization Fees realized during the period from July 1, 1999 through
November 30, 1999 exceeds $150 million; and (iv) if the Final Net Worth
Statement is dated as of December 31, 1999, the amount, if any, by which
Securitization Fees realized during the period from July 1, 1999 through
December 31, 1999 exceeds $210 million.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall mean .70, provided, however, that if Final Adjusted
Shareholders' Equity is less than Base Equity and equal to or greater than
$1,730,319,000, then the Exchange Ratio shall equal the quotient (rounded to the
nearest ten-thousandth (1/10,000) of a share) obtained by dividing (i) the
amount by which (A) the product of (x) .70 and (y) Total Newcourt Shares exceeds
(B) the quotient obtained by dividing (x) the amount by which Base Equity
exceeds Final Adjusted Shareholders' Equity by (y) the CIT Price by (ii) Total
Newcourt Shares; provided further, however, that if Final Adjusted Shareholders'
Equity is less than $1,730,319,000 then the Exchange Ratio shall equal the
quotient (rounded to the nearest ten-thousandth (1/10,000) of a share) obtained
by dividing (i) the amount by which (A) the product of (x) the Adjusted Exchange
Ratio and (y) Total Newcourt Shares exceeds (B) the quotient obtained by
dividing (x) the product of (1) 1.5 and (2) the amount by which $1,730,319,000
exceeds Final Adjusted Shareholders' Equity by (y) the CIT Price by (ii) Total
Newcourt Shares.
"Exchangeable Shares" has the meaning set forth in Section 1.1.
"Exchangeco" means a Subsidiary of Newco incorporated as a limited
liability company under the laws of the Province of Nova Scotia, all of the
Exchangeco Common Shares of which will be owned by Newco.
"Exchangeco Class A Preferred Shares" has the meaning set forth in Section
1.3(a)(2).
"Exchangeco Class B Preferred Shares" has the meaning set forth in Section
1.3(a)(2).
"Exchangeco Common Shares" has the meaning set forth in Section 1.3(a)(2).
"Federal Reserve Board" has the meaning set forth in Section 5.4.
"Final Adjusted Shareholders' Equity" shall mean Adjusted Shareholders'
Equity calculated on the basis of the Final Net Worth Statement.
"Final Net Worth Statement" shall mean the Section 7.2(d) Balance Sheet as
of the end of the month immediately preceding the month in which the Closing
shall occur; provided, however, that if the Closing Date is a day that is the
fifteenth or earlier day of a month, then the "Final Net Worth Statement" shall
mean the Section 7.2(b) Balance Sheet as of the end of the second preceding
month prior to the month in which the Closing shall occur.
"Final Order" means the final order of the Court approving the Arrangement
as such order may be amended at any time prior to the Effective Time or, if
appealed, then unless such appeal is withdrawn or denied, as affirmed.
"Governmental Entity" has the meaning set forth in Section 4.4.
"Hazardous Materials" has the meaning set forth in Section 4.17.
"Injunction" has the meaning set forth in Section 8.1.
"Interim Order" means the interim order of the Court in respect of the
Arrangement as contemplated by Section 1.4.
"ITA" means the Income Tax Act (Canada).
"Lucent Contract" means the Financial Services Agreement, dated March 9,
1998, by and between Lucent Technologies Inc. and Newcourt Credit Group, Inc.
"Material Adverse Effect" means, with respect to CIT or Newcourt, as the
case may be, a material adverse effect on (a) the business or financial
condition of such party and its Subsidiaries taken as a whole, other than
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any such effect attributable to or resulting from (i) any change in general
economic or capital market conditions or in prevailing levels of interest rates,
(ii) with respect to Newcourt, any change in Canadian GAAP or, with respect to
CIT, any change in U.S. GAAP, (iii) any action or omission of Newcourt or CIT or
any Subsidiary of either of them taken with the prior written consent of the
other party hereto, or (iv) solely with respect to a material adverse effect on
the financial condition of Newcourt and its Subsidiaries taken as a whole, any
fact, circumstance or event to the extent such fact, circumstance or event is
reflected in the calculation of Final Adjusted Shareholders' Equity, or (b) the
ability of such party and its Subsidiaries to consummate the transactions
contemplated hereby.
"ME" means the Montreal Exchange.
"New CIT" means CIT from and after the Effective Time.
"Net Worth Charge" means costs, losses, provisions, charge-offs and
write-offs (including provisions that are made to comply with Section 7.20
hereof to the extent such provisions are made in respect of charge-offs of any
assets set forth on Schedule X attached to Section 4.6 of the Newcourt
Disclosure Schedule) which have the effect of reducing shareholders' equity and
which result from or relate to (i) the assets, accounts and balance sheet items
reflected on such Schedule X but only to the extent specified thereon and (ii)
up to $30 million of out-of-pocket or accrued fees and expenses (consisting of
legal, accounting, and investment banking fees and expenses, registration and
filing fees, and printing expenses) incurred and to be incurred by Newcourt in
connection with the transactions contemplated hereby, plus litigation costs in
respect of any shareholder litigation commenced on or after the date hereof,
plus all severance-related costs (other than those set forth in Section 2.1 of
the Newcourt Disclosure Schedule), retention-related costs not to exceed $12
million and disclosed prior to the date hereof to CIT, and retention-related
costs expressly approved by CIT after the date hereof.
"Newco" means a wholly owned Subsidiary of CIT incorporated as an unlimited
liability company under the laws of the Province of Nova Scotia.
"Newco Common Share" has the meaning set forth in Section 1.3(a)(1).
"Newco Preferred Share" has the meaning set forth in Section 1.3(a)(1).
"Newcourt Common Share" means a common share in the capital of Newcourt,
and, for purposes of Section 1.1, shall mean a common share in the capital of
Newcourt or a Newcourt Special Share.
"Newcourt Contract" has the meaning set forth in Section 4.15.
"Newcourt Disclosure Schedule" has the meaning set forth in Section 3.1.
"Newcourt Employees" has the meaning set forth in Section 7.7.
"Newcourt Fee Amount" has the meaning set forth in Section 9.2(b).
"Newcourt Option Plan" means the Employee Stock Option Plan of Newcourt,
adopted on November 19, 1993, as amended on October 24, 1995, March 25, 1997,
May 2, 1997, February 4, 1998 and February 18, 1999.
"Newcourt OSC Report" has the meaning set forth in Section 4.12.
"Newcourt SEC Report" has the meaning set forth in Section 4.12.
"Newcourt Regulatory Agency" has the meaning set forth in Section 4.5.
"Newcourt Regulatory Agreement" has the meaning set forth in Section 4.16.
"Newcourt Reports" has the meaning set forth in Section 4.12.
"Newcourt Shareholder Matters" has the meaning set forth in Section 7.3.
"Newcourt Special Share" has the meaning set forth in Section 4.2.
"Newcourt Subsidiary" means each Subsidiary of Newcourt.
"NYSE" means the New York Stock Exchange.
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Annex E
"OBCA" means the Business Corporations Act (Ontario).
"Ontario Securities Act" means the Securities Act (Ontario).
"OSC" means the Ontario Securities Commission.
"OSFI" means the Office of the Superintendent of Financial Institutions of
Canada.
"Outside Termination Date" has the meaning set forth in Section 9.1(c).
"Permitted Encumbrance" means, with respect to a particular party, (a) any
lien for Taxes not yet due and payable or being contested in good faith, (b) any
mechanics', materialmen's, workmen's, warehousemen's, carriers' and other
similar liens and Encumbrances arising in the ordinary course of business, (c)
as to any Property with respect to which such party or any of its Subsidiaries
is the lessor, seller or secured party, as the case may be, pursuant to the
terms of any loan, lease, sale contract, credit or finance agreement or similar
arrangement (a "receivable") (whether initially or as an assignee), any
Encumbrance that is permitted in accordance with the terms of, or created by,
such receivable relating to such Property, (d) any Encumbrance to the extent
that the obligation secured thereby is reflected on such party's December 31,
1998 balance sheet, (e) any imperfection of title, easement or Encumbrance, if
any, that does not interfere with the use or materially impair the value of the
respective Property as such Property is used on the date of this Agreement, (f)
any Encumbrance incurred after December 31, 1998, in the ordinary course of
business, consistent with past practice, (g) any rights under any vendor program
permitting the repurchase of receivables originated, purchased or financed
thereunder and (h) buyout rights under partnerships, joint ventures or virtual
joint venture relationships in accordance with the terms of the agreements
establishing such partnerships, joint ventures or virtual joint venture
relationships.
"Person" means an individual, partnership, limited partnership, limited
liability partnership, limited liability company, foreign limited liability
company, trust, estate, corporation, custodian, trustee, executor,
administrator, nominee or any other entity.
"Phase II Transactions" has the meaning set forth in Section 7.19(a).
"Plan" has the meaning set forth in Section 4.11.
"Plan of Arrangement" has the meaning set forth in Section 1.1.
"Primary Approvals" means the approvals, if any, of the Federal Reserve
Board, the OSFI, the Minister of Finance of Canada, the Governor in Council of
Canada, the Ministry of Finance of Japan (including any acceptance of notice by
the Ministry of Finance of Japan) and the Financial Supervisory Agency of Japan
required to consummate the transactions contemplated hereby (including the
Arrangement), and compliance with the pre-merger notification filing
requirements under Part IX of the Competition Act (Canada) and the expiration of
the applicable waiting period in relation thereto or the receipt of an ARC (as
defined in Section 4.4 hereof) pursuant to Section 102 of such act.
"Property" means any property and assets of whatsoever nature, including
real property, personal property (whether tangible or intangible) and any
claims, rights and choses in action.
"Proxy Circular" has the meaning set forth in Section 4.4.
"Registration Statement" has the meaning set forth in Section 7.1.
"Replacement Option" has the meaning set forth in Section 1.6.
"SEC" means the Securities and Exchange Commission.
"Section 7.2(d) Balance Sheet" means any consolidated balance sheet
delivered pursuant to Section 7.2(d) hereof.
"Section 7.2(d) Income Statement" means any consolidated income statement
delivered pursuant to Section 7.2(d) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
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Annex E
"Securitization Fees" means securitization gains of Newcourt recorded
during the period July 1, 1999 through the date of the Final Net Worth
Statement, as set forth in the Schedule 7.2(d) Income Statements for such period
and calculated on a basis consistent with past practice.
"Significant Newcourt Subsidiary" means any Newcourt Subsidiary that
constitutes a "significant subsidiary" under Rule 405 promulgated by the SEC
under the Securities Act.
"Significant CIT Subsidiary" means any CIT Subsidiary that constitutes a
"significant subsidiary" under Rule 405 promulgated by the SEC under the
Securities Act.
"SRO" has the meaning set forth in Section 4.5.
"State Regulator" has the meaning set forth in Section 4.5.
"Stock Option Agreement" has the meaning set forth in the fifth WHEREAS
clause at the beginning of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such Person for financial reporting purposes.
"Support Agreement" means an Exchangeable Share Support Agreement to be
made among Exchangeco, CIT and Newco substantially in the form and content
attached to Exhibit C hereto, with such changes thereto as shall be reasonably
acceptable to the parties hereto.
"Taxes" has the meaning set forth in Section 4.10.
"Tax Return" has the meaning set forth in Section 4.10.
"Total Newcourt Shares" shall mean the sum of (i) the total number of
Newcourt Common Shares issued and outstanding immediately prior to the Effective
Time (including Newcourt Common Shares held by CIT or any of its Subsidiaries,
Newcourt Common Shares held by shareholders who perfect Dissent Rights and
Newcourt Common Shares held by Newcourt or any of its Subsidiaries to the extent
such shares are held in a fiduciary capacity for the benefit of third parties)
and (ii) the number of Newcourt Common Shares subject to Newcourt Options that
are deemed to be outstanding immediately prior to the Effective Time calculated
under the treasury method assuming the Exchange Ratio is .70 and based on the
CIT Price.
"Trustee" means a Canadian trust company reasonably acceptable to both
Newcourt and CIT, which will act as trustee under the Voting and Exchange Trust
Agreement.
"TSE" means The Toronto Stock Exchange.
"U.S. GAAP" has the meaning set forth in Section 5.6.
"Voting and Exchange Trust Agreement" means an agreement to be made among
CIT, Exchangeco and the Trustee substantially in the form and content of Exhibit
D attached hereto, with such changes thereto as shall be reasonably acceptable
to the parties hereto.
"Year 2000 Compliant" has the meaning set forth in Section 4.21.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. Prior to the execution and delivery of this
Agreement, Newcourt has delivered to CIT, and CIT has delivered to Newcourt, a
schedule (in the case of Newcourt, the "Newcourt Disclosure Schedule," and in
the case of CIT, the "CIT Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more of such party's representations or warranties
contained in Article IV, in the case of Newcourt, or Article V, in the case of
CIT, or to one or more of such party's covenants contained in Article VI;
provided, however, that notwithstanding anything in this Agreement
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Annex E
to the contrary (a) no such item is required to be set forth in the Disclosure
Schedule as an exception to a representation or warranty (other than Sections
4.2, 4.3(a) and 4.3(b)(i), 4.7, 4.11(a) and 4.18, with respect to Newcourt, and
Sections 5.2, 5.3(a) and 5.3(b)(i), 5.7, 5.11(a) and 5.18, with respect to CIT)
if its absence would not result in the related representation or warranty being
deemed untrue or incorrect under the standard established by Section 3.2;
provided, that the party shall have used its best efforts to cause its
Disclosure Schedule to be accurate (provided that a party shall not be deemed
not to have used its best efforts if it fails to disclose items or matters
which, individually or in the aggregate, are not material), and (b) the mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or material fact, event or circumstance or
that such item has had or is reasonably expected to have a Material Adverse
Effect with respect to either Newcourt or CIT, respectively.
3.2. Standards. No representation or warranty of Newcourt contained in
Article IV (other than the representations and warranties contained in Sections
4.2, 4.3(a) and 4.3(b)(i), 4.7, 4.11(a), and 4.18) or of CIT contained in
Article V (other than the representations and warranties contained in Sections
5.2, 5.3(a) and 5.3(b)(i), 5.7, 5.11(a), and 5.18) shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party hereto shall be
deemed to have breached any such representation or warranty for any purpose
under this Agreement, in any case as a consequence of the existence or absence
of any fact, circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts, circumstances or
events inconsistent with any representations or warranties contained in Article
IV, in the case of Newcourt, or Article V, in the case of CIT, has had or is
reasonably expected to have a Material Adverse Effect with respect to Newcourt
or CIT, respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCOURT
Subject to Article III and except as contemplated by this Agreement and the
Plan of Arrangement or as set forth in the Newcourt Disclosure Schedule,
Newcourt hereby represents and warrants to CIT as follows:
4.1. Corporate Organization. (a) Newcourt is a corporation duly organized,
validly existing and in good standing under the laws of Ontario. Newcourt has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The restated articles of incorporation dated February 8, 1996, as amended by
articles of amendment dated March 26, 1997 (the "Restated Articles of
Incorporation"), and by-laws no. 1 and 4 of Newcourt, copies of which have
previously been delivered to CIT, are true and correct copies of such documents
as in effect as of the date of this Agreement.
(b) Each Newcourt Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each Newcourt Subsidiary has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or the location of the properties and assets owned or
leased by it makes such licensing or qualification necessary. The articles of
incorporation, by-laws and similar governing documents of each Significant
Newcourt Subsidiary, copies of which have previously been made available to CIT,
are true and correct copies of such documents as in effect as of the date of
this Agreement. As of the date of this Agreement, other than the Newcourt
Subsidiaries, Newcourt does not own beneficially, directly or indirectly, more
than 5% of any class of equity securities or similar interests of any
corporation, bank, business trust, association or similar organization, and is
not, directly or indirectly, a partner in any partnership or party to any joint
venture.
(c) The minute books of Newcourt and each Newcourt Subsidiary contain true
and correct records of all meetings and other corporate actions held or taken
since December 31, 1996 of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
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Annex E
4.2. Capitalization. (a) As of the date of this Agreement, the authorized
capital stock of Newcourt consists of an unlimited number of Newcourt Common
Shares, an unlimited number of special shares (the "Newcourt Special Shares")
and an unlimited number of Class A preference shares (the "Newcourt Class A
Preferred Shares"). As of August 3, 1999, there were 148,488,329 Newcourt Common
Shares outstanding and no Newcourt Common Shares held by Newcourt as treasury
stock. As of August 3, 1999, there were (i) no Newcourt Common Shares reserved
for issuance upon exercise of outstanding stock options or otherwise, except for
(x) 7,137,055 Newcourt Common Shares reserved for issuance pursuant to options
outstanding under the Newcourt Option Plan and (y) 22,273,249 Newcourt Common
Shares reserved for issuance upon exercise of the option granted to CIT pursuant
to the Stock Option Agreement, and (ii) no Newcourt Special Shares or Newcourt
Class A Preference Shares issued or outstanding, held in Newcourt's treasury or
reserved for issuance upon exercise of outstanding stock options or otherwise.
All of the issued and outstanding Newcourt Common Shares have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Except as referred to above, Newcourt does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any Newcourt
Common Shares, Newcourt Special Shares or Newcourt Class A Preferred Shares or
any other equity security of Newcourt or any securities representing the right
to purchase or otherwise receive any Newcourt Common Shares or any other equity
security of Newcourt. The names of the optionees, the date of each option to
purchase Newcourt Common Shares granted, the number of shares subject to each
such option, the expiration date of each such option, and the price at which
each such option may be exercised under the Newcourt Option Plan are set forth
in Section 4.2(a) of the Newcourt Disclosure Schedule.
(b) Section 4.2(b) of the Newcourt Disclosure Schedule sets forth a true
and correct list of all of the Newcourt Subsidiaries as of the date of this
Agreement. As of the date of this Agreement, Newcourt owns, directly or
indirectly, all of the issued and outstanding shares of the capital stock of
each of such Subsidiaries, free and clear of all Encumbrances other than
Permitted Encumbrances contemplated by clause (h) of the definition thereof, and
all of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except for Permitted Encumbrances
contemplated by clause (h) of the definition thereof, as of the date of this
Agreement, no Newcourt Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. Assuming compliance by CIT with Section 1.6,
at the Effective Time, there will not be any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character by which Newcourt or
any of the Newcourt Subsidiaries will be bound calling for the purchase or
issuance of any shares of the capital stock of Newcourt or, except for buyout
rights under partnerships, joint ventures or virtual joint venture relationships
in accordance with the terms of the agreements establishing such partnerships,
joint ventures or virtual joint venture relationships, any of the Newcourt
Subsidiaries.
4.3. Authority; No Violation. (a) Newcourt has full corporate power and
authority to execute and deliver this Agreement and, subject to receipt of the
approval of Newcourt's shareholders and the Court, to consummate the
transactions contemplated hereby and by the Plan of Arrangement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and by the Plan of Arrangement have been duly and validly
approved by the Board of Directors of Newcourt. The Board of Directors of
Newcourt has directed that the Arrangement Resolution be submitted to Newcourt's
shareholders for approval at a meeting of such shareholders and, except for the
approval of the Arrangement Resolution by the requisite vote of the holders of
the Newcourt Common Shares and the approval by Newcourt of the Proxy Circular
and of other matters relating solely to the implementation of the Arrangement,
no other corporate proceedings on the part of Newcourt are necessary to approve
this Agreement and the Plan of Arrangement and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly and validly
executed and delivered by Newcourt and (assuming due authorization, execution
and delivery by CIT) this Agreement constitutes a valid and binding obligation
of Newcourt, enforceable against Newcourt in accordance with its terms, except
as may be limited by the Bankruptcy Exception.
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Annex E
(b) Neither the execution and delivery of this Agreement by Newcourt, nor
the consummation by Newcourt of the transactions contemplated hereby or by the
Plan of Arrangement, nor compliance by Newcourt with any of the terms or
provisions hereof, will (i) violate any provision of the Restated Articles of
Incorporation or By-laws of Newcourt, (ii) violate any provision of the
certificate of incorporation, by-laws or similar governing documents of any of
the Newcourt Subsidiaries, or (iii) assuming that the consents and approvals
referred to in Section 4.4 hereof are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, mandatory government policy, judgment, order,
writ, decree or injunction applicable to Newcourt or any of the Newcourt
Subsidiaries, or any of their respective Properties, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, require any payment under, result in the
termination of or a right of termination or cancellation under, accelerate or
permit the creation of an obligation to accelerate the performance required by,
result in the loss of any benefit under, or result in a right of first refusal
or option to purchase or acquire, or result in the creation of any Encumbrance
(other than any Permitted Encumbrance) upon any of the respective Properties of
Newcourt or any of the Newcourt Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, loan or credit agreement or other agreement or other instrument or
obligation to which Newcourt or any of the Newcourt Subsidiaries is a party, or
by which they or any of their respective Properties may be bound or affected.
4.4. Consents and Approvals. Except for (a)(i) compliance with the
premerger notification filing requirements under Part IX of the Competition Act
(Canada) and the expiration of the applicable waiting period in relation thereto
or (ii) receipt of an advance ruling certificate (an "ARC") pursuant to section
102 of the Competition Act (Canada), (b) the filing of applications with the
appropriate financial regulatory authorities in the provinces, states and
countries in which Newcourt or any Newcourt Subsidiary conducts business, (c)
receipt of exemption orders from the provincial securities regulators from the
registration and prospectus requirements with respect to the Exchangeable
Shares, (d) the filing with the Court, the SEC, the OSC and other Canadian
securities regulatory authorities of a joint proxy statement and proxy circular
in definitive form relating to the meetings of Newcourt's shareholders and CIT's
shareholders to be held in connection with this Agreement and the transactions
contemplated hereby (the "Proxy Circular") and the mailing to Newcourt's
shareholders of the Proxy Circular and the filing by CIT and declaration of the
effectiveness of the Registration Statement in respect of the shares of CIT
Common Stock issuable upon the exchange of the Exchangeable Shares, (e) the
approval of the Plan of Arrangement by the requisite vote of the shareholders of
Newcourt, (f) filings with the Director appointed pursuant to Section 278 of the
OBCA, (g) approval of the TSE regarding the listing of the Exchangeable Shares,
(i) the approval of the Court of the Arrangement and the filing of the Articles
of Arrangement and any other documents required by the OBCA by way of issuance
of the Interim Order and the Final Order, and (h) such filings, authorizations,
orders and approvals as may be required under the Ontario Securities Act and
other relevant Canadian securities statutes, any other applicable federal,
provincial or state securities laws and the rules of the TSE, the ME and the
NYSE, no consents, orders or approvals of or filings or registrations with any
foreign or domestic court, regulatory body, administrative agency or commission
or other governmental authority or instrumentality (each a "Governmental
Entity") or with any third party are necessary in connection with (1) the
execution and delivery by Newcourt of this Agreement and the Plan of Arrangement
and (2) the consummation by Newcourt of the Arrangement and the other
transactions contemplated hereby.
4.5. Reports. Newcourt and each of the Newcourt Subsidiaries have timely
filed all reports, schedules, forms, registrations, statements and other
documents, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1996 with (i) any
state finance commissions or any other provincial or state regulatory authority,
other than Tax authorities (each a "State Regulator"), (ii) the OSC, (iii) the
TSE, the ME and the NYSE and (iv) any self-regulatory organization ("SRO")
(collectively, the "Newcourt Regulatory Agencies"), and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Newcourt Regulatory Agency in the regular course of
the business of Newcourt and the Newcourt Subsidiaries, and except as set forth
in Section 4.5 of the Newcourt Disclosure Schedule, no Newcourt Regulatory
Agency has initiated any proceeding or, to the knowledge of Newcourt,
investigation into the business or operations of Newcourt or any of the Newcourt
Subsidiaries since December 31, 1996. Except as set forth in Section 4.5 of the
Newcourt Disclosure Schedule, there is no unresolved violation or exception by
any Newcourt Regulatory Agency with respect to any report or statement relating
to any examinations of Newcourt or any of the Newcourt Subsidiaries.
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Annex E
4.6. Financial Statements. Newcourt has previously made available to CIT
copies of (a) the consolidated balance sheets of Newcourt and the Newcourt
Subsidiaries as of December 31 for the fiscal years 1997 and 1998, and the
related consolidated statements of income and retained earnings and cash flows
for the fiscal years 1996 through 1998, inclusive, in each case accompanied by
the audit report of Ernst & Young, independent public accountants with respect
to Newcourt and (b) the unaudited consolidated balance sheets of Newcourt and
the Newcourt Subsidiaries as of March 31, 1999 and June 30, 1999 and the related
unaudited consolidated statements of income and retained earnings and cash flows
for the three month and six month periods then ended, respectively, each of
which has been reviewed by Ernst & Young in accordance with the procedures
specified by the Canadian Institute of Chartered Accountants for a review of
interim financial information as described in Section 7100 of the Handbook of
the Canadian Institute of Chartered Accountants. The December 31, 1997 and 1998
consolidated balance sheets of Newcourt, including the related notes, fairly
present the consolidated financial position of Newcourt and the Newcourt
Subsidiaries as of the dates thereof, and the other financial statements
referred to in this Section 4.6 (including the related notes, where applicable)
fairly present, and the financial statements to be filed with the OSC after the
date hereof will fairly present (subject, in the case of unaudited interim
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and consolidated financial position of
Newcourt and the Newcourt Subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) complies, and the financial statements to
be filed with the OSC after the date hereof will comply, with applicable
accounting requirements and with the published rules and regulations of the OSC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be filed with the
OSC after the date hereof will be, prepared in accordance with Canadian GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited interim statements, as permitted by
the rules and regulations of the OSC. Except (A) as reflected in such financial
statements or in the notes thereto, (B) for liabilities incurred in connection
with this Agreement or the transactions contemplated hereby and (C) for
liabilities or obligations incurred in the ordinary course of business, neither
Newcourt nor any of the Newcourt Subsidiaries has any liabilities or obligations
of any nature as of the date of this Agreement, which, individually or in the
aggregate, have had a Material Adverse Effect on Newcourt as of the date of this
Agreement. The books and records of Newcourt and the Significant Newcourt
Subsidiaries have been, and are being, maintained in all material respects in
accordance with Canadian GAAP and any other applicable legal and accounting
requirements.
4.7. Broker's Fees. Neither Newcourt nor any Newcourt Subsidiary nor any
of their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, except
that Newcourt has engaged, and will pay a fee or commission to, Goldman, Sachs &
Co. ("Goldman Sachs") and CIBC World Markets Inc. ("Gundy") in accordance with
the terms of a letter agreement among Goldman Sachs, Gundy and Newcourt, a true
and correct copy of which has been previously made available by Newcourt to CIT.
4.8. Absence of Changes. (a) Since December 31, 1998, (x) there has not
been: (1) any declaration, setting aside or payment of any dividend or other
distribution with respect to Newcourt's shares other than the declaration and
payment of regular quarterly cash dividends; (2) to the knowledge of Newcourt,
any labor dispute or charge of unfair labor practice (other than routine
individual grievances), any activity or proceeding by a labor union or
representative hereof to organize any employees of Newcourt or any Newcourt
Subsidiary or any campaign conducted to solicit authorization from such
employees to be represented by such labor union; or (3) any increase in or
modification of the compensation or benefits payable or to become payable by any
of Newcourt or the Newcourt Subsidiaries to any of its directors or employees,
except in the ordinary course of business consistent with past practices; (4)
any acquisition or sale of Property of Newcourt or any Significant Newcourt
Subsidiary, other than in the ordinary course of business consistent with past
practice and other than as permitted under Section 6.1 or 7.4(b); (5) any change
by Newcourt in accounting methods, principles or practices (other than as
disclosed in the notes to Newcourt's consolidated financial statements as of and
for the year ended December 31, 1998) except as required by changes in Canadian
GAAP or U.S. GAAP as concurred to by Newcourt's independent auditors; or (6)
through the date of this Agreement, any writing off of the value of any assets,
other than as disclosed in the Newcourt Reports filed after December 31, 1998
and prior to the date of this Agreement or disclosed in the consolidated
financial statements of Newcourt furnished to CIT prior to
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Annex E
the date of this Agreement; and (y) except for actions taken by Newcourt in
connection with the transactions contemplated by this Agreement or the March
Agreement, Newcourt and the Newcourt Subsidiaries have carried on their
respective businesses in the ordinary course consistent with their past
practices.
(b) The books, records and accounts of Newcourt and the Newcourt
Subsidiaries (i) have been maintained in accordance with good business practices
on a basis consistent with prior years and (ii) are stated in reasonable detail
and accurately and fairly reflect the transactions and dispositions of Newcourt.
Newcourt has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (x) transactions are executed
in accordance with management's general or specific authorization; and (y)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with Canadian GAAP, U.S. GAAP or any other criteria
applicable to such statements and (B) to maintain accountability of assets.
4.9. Legal Proceedings. (a) Neither Newcourt nor any of the Newcourt
Subsidiaries is a party to any, and there are no pending or, to the knowledge of
Newcourt, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Newcourt or any of the Newcourt Subsidiaries or challenging the validity
or propriety of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Newcourt, any of the Newcourt Subsidiaries or the
assets of Newcourt or any of the Newcourt Subsidiaries.
4.10. Taxes. (a) Each of Newcourt and the Newcourt Subsidiaries has (i)
duly and timely filed (including applicable extensions granted without penalty)
all material Tax Returns (as hereinafter defined) required to be filed at or
prior to the Effective Time, and such Tax Returns are true and correct in all
material respects except to the extent adequate provision has been made with
respect thereto in Newcourt's consolidated financial statements, (ii) paid in
full or made adequate provision in the financial statements of Newcourt (in
accordance with Canadian GAAP) for all Taxes (as hereinafter defined) shown to
be due on such Tax Returns and (iii) not received written notice of a proposed
assessment or reassessment of a material liability for unpaid Taxes, the amount
of which has not been previously paid or adequately provided for in Newcourt's
consolidated financial statements. As of the date hereof neither Newcourt nor
any of the Newcourt Subsidiaries has requested any extension of time within
which to file any material Tax Returns in respect of any fiscal year which have
not since been filed and no request for waivers of the time to assess any Taxes
are pending or outstanding. No material Tax liens have been filed with respect
to Newcourt or any Newcourt Subsidiary, other than for Taxes not yet due and
payable or those being contested in good faith.
(b) For the purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll, Canada
or Quebec Pension Plan premiums, withholding, social security or other taxes,
including any interest, penalties or additions attributable thereto. For
purposes of this Agreement, "Tax Return" shall mean any return, report,
information return or other document (including any related or supporting
information) with respect to Taxes.
4.11. Employees. (a) Section 4.11(a) of the Newcourt Disclosure Schedule
sets forth a true and correct list of each material deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA or the ITA); each material
employment, termination or severance agreement (other than employment letters
with employees entered into in the ordinary course of business); and each other
material employee benefit plan, fund, program, agreement or arrangement, in each
case, that is (or, with respect to any pension plan that is or was subject to
Title IV of ERISA, during any time in the last six years was) sponsored,
maintained, participated in or contributed to or required to be contributed to
(the "Plans") by Newcourt, any of the Newcourt Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with Newcourt would be deemed a "single employer" within the meaning of
Section 4001 of ERISA, for the benefit of any employee or former employee of
Newcourt or any Newcourt Subsidiary.
(b) To the extent that Newcourt has provided or made available any of the
following documents to CIT, the copies so provided or made available were true
and correct copies of such documents: (i) any Plan document
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Annex E
including all amendments thereto; (ii) any actuarial report for such Plan for
each of the last two years, (iii) the most recent determination letter from the
Internal Revenue Service for any such Plan; (iv) the most recent summary plan
description and related summaries of modifications or (v) the most recent Form
5500 (including all schedules) filed with the IRS and the most recent reports
and declarations filed with Revenue Canada.
(c) Each of the Plans is in compliance with all applicable provisions of
the Code and ERISA; each of the Plans and related trusts intended to be
"qualified" within the meaning of Sections 401(a) and 501(a) of the Code has
received a favorable determination letter from the IRS and nothing has occurred
to cause the loss of such qualified status; no Plan has an accumulated or waived
funding deficiency within the meaning of Section 412 of the Code; all
contributions required to be made by Newcourt or any Newcourt Subsidiary to any
Plan have been made by the due date; neither Newcourt nor any ERISA Affiliate
has incurred, directly or indirectly, any liability to or on account of a Plan
pursuant to Title IV of ERISA (other than for premiums not yet due to the
Pension Benefit Guaranty Corporation); to the knowledge of Newcourt no
proceedings have been instituted to terminate any Plan that is subject to Title
IV of ERISA; no "reportable event," as such term is defined in Section 4043(c)
of ERISA, has occurred with respect to any Plan (other than a reportable event
with respect to which the thirty day notice period has been waived); and no
condition exists that presents a risk to Newcourt of incurring a liability to or
on account of a Plan pursuant to Title IV of ERISA; no Plan is a multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) and no Plan is a
multiple employer plan (as defined in Section 413 of the Code); except as
required by Section 4980B of the Code or Part 6 of Title I of ERISA, no Plan
provides post-retirement welfare benefits and there are no pending, or to the
knowledge of Newcourt, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans or any trusts
related thereto or against Newcourt, any Newcourt Subsidiary or any individual
or entity for which the Plans, Newcourt or any Newcourt Subsidiary may have
liability; all employee benefit plans that are subject to the laws of any
jurisdiction outside the United States are in compliance with such applicable
laws and the requirements of any trust deed or other document under which they
are established or maintained.
4.12. OSC and SEC Reports. (a) No final report, schedule, statement,
shareholder communication or other document required to be filed since December
31, 1996 by Newcourt with the OSC (the "Newcourt OSC Reports") contained any
misrepresentation (as defined in the Ontario Securities Act), except that
information as of a later date contained or incorporated by reference in a
Newcourt OSC Report filed prior to the date of this Agreement shall be deemed to
modify information as of an earlier date.
(b) No final report, schedule, statement, shareholder communication or
other document required to be filed since December 31, 1996 by Newcourt with the
SEC pursuant to the Securities Act or the Exchange Act (the "Newcourt SEC
Reports" and, together with the Newcourt OSC Reports, the "Newcourt Reports")
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date contained or incorporated
by reference in a Newcourt SEC Report filed prior to the date of this Agreement
shall be deemed to modify information as of an earlier date. Since December 31,
1996, Newcourt has timely filed all material Newcourt Reports and other material
documents required to be filed by it with the OSC or the SEC, as the case may
be, and, as of their respective dates, all Newcourt Reports complied in all
material respects with the published rules and regulations of the OSC or the
SEC, as the case may be, and the rules, regulations and mandatory policies of
the TSE and the ME, in each case, with respect thereto.
4.13. Newcourt Information. The information which is provided to CIT by
Newcourt specifically for inclusion in the Proxy Circular and the Registration
Statement, or in any other document filed with any other regulatory agency in
connection herewith, will not at the time the Proxy Circular is mailed to
shareholders and at the time of each of the Newcourt and the CIT shareholders'
meetings contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy Circular (except
for such portions thereof that relate only to or are prepared by CIT or any of
the CIT Subsidiaries) will comply in all material respects with the provisions
of the OBCA, applicable law and the rules, regulations and mandatory policies of
the TSE and the ME.
4.14. Compliance with Applicable Law. Newcourt and each of the Newcourt
Subsidiaries hold, and have at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their
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Annex E
respective businesses under and pursuant to all, and have complied with and are
not in default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
Newcourt or any of the Newcourt Subsidiaries or the conduct of their respective
businesses, and neither Newcourt nor any of the Newcourt Subsidiaries has
received notice of any violations of any of the above.
4.15. Certain Contracts. (a) Except as set forth in Section 4.15(a) of the
Newcourt Disclosure Schedule, neither Newcourt nor any of the Newcourt
Subsidiaries is a party to or bound by any contract or commitment (whether
written or oral) (i) which, upon the consummation of the transactions
contemplated by this Agreement, will (either alone or upon the occurrence of any
additional acts or events) result in any payment or benefits (whether of
severance pay or otherwise) becoming due, or the acceleration or vesting of any
rights to any payment or benefits, from CIT, Newcourt or any of their respective
Subsidiaries to any director, officer, employee, contractor or consultant
thereof, (ii) which is a material contract (as defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of this Agreement that
has not been filed or incorporated by reference in the Newcourt Reports, (iii)
which materially increases any benefits otherwise payable under any Newcourt
compensation plan or other benefit arrangement, (iv) which requires Newcourt to
register any securities under the Securities Act or otherwise or (v) which
materially restricts the conduct of any line of business by Newcourt or any of
the Newcourt Subsidiaries. Each contract, arrangement, commitment or
understanding of the type described in clause (ii) of this Section 4.15(a),
whether or not set forth in Section 4.15(a) of the Newcourt Disclosure Schedule,
and any amendment, side letter or business plan relating thereto is referred to
herein as a "Newcourt Contract". Newcourt has previously delivered or made
available to CIT true and correct copies of each Newcourt Contract listed in
Section 4.15(a) of the Newcourt Disclosure Schedule which is marked with an
asterisk.
(b) (i) Each Newcourt Contract is valid and binding and in full force and
effect, (ii) neither Newcourt nor any of the Newcourt Subsidiaries is in default
in respect of its obligations under any Newcourt Contract, (iii) no event or
condition exists which constitutes or, after notice or lapse of time or both,
would constitute, a default on the part of Newcourt or any of the Newcourt
Subsidiaries under any Newcourt Contract, and (iv) no other party to any
Newcourt Contract is, to the knowledge of Newcourt, in default in any respect
thereunder.
4.16. Agreements with Regulatory Agencies. Neither Newcourt nor any of the
Newcourt Subsidiaries is subject to any cease-and-desist or other order issued
by, or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth on Section 4.16 of the
Newcourt Disclosure Schedule, a "Newcourt Regulatory Agreement"), any Newcourt
Regulatory Agency or other Governmental Entity that restricts the conduct of its
business or that relates to its capital adequacy, its credit policies, its
management or its business, nor has Newcourt or any of the Newcourt Subsidiaries
been advised by any Newcourt Regulatory Agency or other Governmental Entity that
it is considering issuing or requesting any Newcourt Regulatory Agreement.
4.17. Environmental Matters. (a) Each of Newcourt and the Newcourt
Subsidiaries and, to the knowledge of Newcourt, each of the Participation
Facilities (as hereinafter defined), are in compliance with all applicable
Canadian or United States federal, provincial, state, local and foreign laws,
including common law, regulations and ordinances, and with all applicable
decrees, orders and contractual obligations relating to pollution or the
discharge of, or exposure to, Hazardous Materials (as hereinafter defined) in
the environment or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Newcourt, threatened, before any Governmental Entity or other forum
in which Newcourt, any of the Newcourt Subsidiaries or any Participation
Facility, has been or, with respect to threatened proceedings, could reasonably
be expected to be, named as a defendant (x) for alleged noncompliance (including
by any predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by Newcourt or any of the
Newcourt Subsidiaries or any Participation Facility;
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Annex E
(c) To the knowledge of Newcourt, during the period of (i) Newcourt's or
any of the Newcourt Subsidiaries' ownership or operation of any of their
respective current or former properties or (ii) Newcourt's or any of the
Newcourt Subsidiaries' participation in the management of any Participation
Facility, there has been no release of Hazardous Materials in, on, under or
affecting any such property. To the knowledge of Newcourt, prior to the period
of (x) Newcourt's or any of the Newcourt Subsidiaries' ownership or operation of
any of their respective current or former properties or (y) Newcourt's or any of
the Newcourt Subsidiaries' participation in the management of any Participation
Facility, there was no release of Hazardous Materials in, on, under or affecting
any such property or Participation Facility; and
(d) The following definitions apply for purposes of this Section 4.19: (x)
"Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials, and (y)
"Participation Facility" means any facility in which Newcourt or any of the
Newcourt Subsidiaries participates in the management and, where required by the
context, said term means the owner or operator of such facility.
4.18. Opinion. Prior to the execution of this Agreement, Newcourt has
received opinions from each of Goldman Sachs and Gundy to the effect that as of
the date thereof and based upon and subject to the matters set forth therein,
the Exchange Ratio is fair to the holders of Newcourt Common Shares from a
financial point of view. Such opinions have not been amended or rescinded as of
the date of this Agreement.
4.19. [reserved]
4.20. Property. Newcourt or one of the Newcourt Subsidiaries has good and
marketable title free and clear of all Encumbrances to all of the Properties
which are reflected on the consolidated balance sheet of Newcourt as of December
31, 1998 or were acquired after such date, except for (i) Permitted Encumbrances
and (ii) dispositions of, and Encumbrances on, such Properties in the ordinary
course of business or as otherwise permitted or required hereunder.
4.21. Year 2000 Compliance Plan. Section 4.21 of the Newcourt
Disclosure Schedule sets forth a true and complete copy of Newcourt's plan to
cause all of the Date-Sensitive Systems owned, leased for use by or used by
Newcourt or any Newcourt Subsidiary intended and necessary for use after
December 31, 1999, or licensed to Newcourt or any Newcourt Subsidiary for use by
Newcourt or such Newcourt Subsidiary, and all of Newcourt's and each Newcourt
Subsidiary's Date Data to be Year 2000 Compliant (Newcourt's "Y2K Plan").
Newcourt believes that its Y2K Plan can be substantially achieved on or before
September 30, 1999, with aggregate expenditures under the Y2K Plan not
materially in excess of $35,000,000.
(b) For purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Date Data" means any data of any type that includes date information or
that is otherwise derived from, dependent on, or related to date information.
"Date-Sensitive System" means, with respect to a particular Person, any
software, microcode or hardware system or component, including any electronic or
electronically controlled system or component, that processes any Date Data and
that is installed in a development or on order by such Person or any Subsidiary
of such Person for its internal use.
"Year 2000 Compliant" means, (i) with respect to Date Data, that such data
that are in proper format for all dates in the twentieth and twenty-first
centuries and (ii) with respect to Date-Sensitive Systems, that each such system
accurately processes all Date Data, including for the twentieth and twenty-first
centuries, without loss of any functionality or performance, including
calculating, comparing, sequencing, storing and displaying such Date Data
(including all leap-year considerations), when used as a stand-alone system or
in combination with other software or hardware.
4.22. Interested Party Transactions. Except as disclosed in the Newcourt
Reports filed prior to the date of this Agreement, no executive officer of
Newcourt has, either directly or indirectly, a material interest in (1) any
Person which purchases from or sells, licenses or furnishes to Newcourt or any
of the Newcourt Subsidiaries any material goods, property, technology or
intellectual or other material property rights or services or (2) any material
contract or agreement to which Newcourt or any of the Newcourt Subsidiaries is a
party or by which it may be bound or affected.
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Annex E
4.23. Insurance. Newcourt and each of the Newcourt Subsidiaries have their
respective assets insured against loss or damages as appropriate in their
businesses and assets in such amounts and against such risks as are appropriate
in their business, and such insurance coverage will be continued in full force
and effect to and including the Effective Time.
4.24. Board Approval. The Board of Directors of Newcourt has, as of the
date hereof, (i) approved this Agreement, (ii) determined that the Arrangement
is in the best interests of the shareholders of Newcourt and (iii) recommended
the shareholders of Newcourt approve the Arrangement Resolution.
4.25. Intellectual Property. Newcourt and the Newcourt 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 "Newcourt Intellectual Property") necessary to
carry on its business substantially as currently conducted. Neither Newcourt nor
any such subsidiary has received any notice of infringement of or conflict with,
and, to Newcourt's knowledge, there are no infringements of or conflicts with,
the rights of others with respect to the use of any material Newcourt
Intellectual Property which have not been previously resolved.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF CIT
Subject to Article III and except as contemplated by this Agreement and the
Plan of Arrangement or as set forth in the CIT Disclosure Schedule, CIT hereby
represents and warrants to Newcourt as follows:
5.1. Corporate Organization. (a) CIT is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
CIT has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. The Certificate of Incorporation and By-laws of CIT,
copies of which have previously been delivered to Newcourt, are true and correct
copies of such documents as in effect as of the date of this Agreement.
(b) Each CIT Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each CIT
Subsidiary has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. The articles of incorporation, by-laws and similar
governing documents of each Significant CIT Subsidiary, copies of which have
previously been made available to Newcourt, are true and correct copies of such
documents as in effect as of the date of this Agreement.
(c) The minute books of CIT and each CIT Subsidiary contain true and
correct records of all meetings and other corporate actions held or taken since
December 31, 1996 of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
5.2 Capitalization. (a) As of the date of this Agreement, the authorized
capital stock of CIT consists of 700,000,000 shares of CIT Common Stock,
510,000,000 shares of Class B Common Stock, par value $0.01 per share ("CIT B
Stock"), and 50,000,000 shares of preferred stock, par value $0.01 per share
("CIT Preferred Stock"). As of August 2, 1999, there were 161,604,093 shares of
CIT Common Stock, no shares of CIT B Stock and no shares of CIT Preferred Stock
issued and outstanding, and 1,580,480 shares of CIT Common Stock held in CIT's
treasury. As of the date of this Agreement, no shares of CIT Common Stock or CIT
Preferred Stock were reserved for issuance, except that (i) 12,898,999 shares of
CIT Common Stock were reserved for issuance upon the exercise of stock options
pursuant to the Employee Long Term Equity Compensation Plan and the Employee
Stock Purchase Plan (collectively, the "CIT Stock Plans"). All of the issued and
outstanding shares of CIT Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except as referred to above, CIT does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
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Annex E
shares of CIT Common Stock or CIT Preferred Stock or any other equity securities
of CIT or any securities representing the right to purchase or otherwise receive
any shares of CIT Common Stock or CIT Preferred Stock. The shares of CIT Common
Stock to be issued pursuant to the Arrangement or upon exchange from time to
time of the Exchangeable Shares have been duly authorized and, on their
respective dates of issue, such shares will be validly issued, fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) Section 5.2(b) of the CIT Disclosure Schedule sets forth a true and
correct list of all of the CIT Subsidiaries as of the date of this Agreement. As
of the date of this Agreement, CIT owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of each of the CIT Subsidiaries,
free and clear of all Encumbrances other than Permitted Encumbrances, and all of
such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except for
Permitted Encumbrances, no CIT Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. At the Effective Time, there will not be any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character by which CIT or any of the CIT Subsidiaries will be bound
calling for the purchase or issuance of any shares of the capital stock of CIT
or any of the CIT Subsidiaries.
5.3.Authority; No Violation. (a) CIT has full corporate power and
authority to execute and deliver this Agreement and, subject to receipt of the
approval of CIT's shareholders, to consummate the transactions contemplated
hereby and by the Plan of Arrangement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and by
the Plan of Arrangement, and the execution of the DKB Voting Agreement by CIT,
have been duly and validly approved by the Board of Directors of CIT. The Board
of Directors of CIT has directed that the CIT Shareholder Matters (as defined in
Section 7.3) be submitted to CIT's shareholders for approval at a meeting of
such shareholders and, except for the approval of the CIT Shareholder Matters by
the requisite vote of CIT's shareholders, no other corporate proceedings on the
part of CIT are necessary to approve this Agreement and the Plan of Arrangement
and to consummate the transactions contemplated hereby and thereby. This
Agreement and the Plan of Arrangement have been (and in the case of the
Arrangement Documents, will be) duly and validly executed and delivered by CIT
and (assuming due authorization, execution and delivery by Newcourt) each of
this Agreement and the Plan of Arrangement constitutes a valid and binding
obligation of CIT, enforceable against CIT in accordance with its terms, except
as may be limited by the Bankruptcy Exception. Upon their formation, each of
Newco and Exchangeco will have full corporate power and authority to execute and
deliver the Support Agreement and the Voting and Exchange Trust Agreement (the
"Arrangement Documents") and to consummate the transactions contemplated
thereby. The execution and delivery of the Arrangement Documents and the
consummation of the transactions contemplated thereby will be duly and validly
approved by the Board of Directors of each of CIT, Newco and Exchangeco. Upon
the due and valid approval of the Arrangement Documents by the Board of
Directors of each of CIT, Newco and Exchangeco, no other corporate proceedings
on the part of CIT, Newco or Exchangeco are necessary to approve the Arrangement
Documents and to consummate the transactions contemplated thereby. The
Arrangement Documents will be duly and validly executed and delivered by each of
CIT, Newco and Exchangeco and (assuming due authorization, execution and
delivery by Newcourt) each of the Arrangement Documents will constitute a valid
and binding obligation of each of CIT, Newco and Exchangeco, enforceable against
each of CIT, Newco and Exchangeco in accordance with its terms, except as may be
limited by the Bankruptcy Exception.
(b) Neither the execution and delivery of this Agreement and the
Arrangement Documents by CIT or the Arrangement Documents by Newco and
Exchangeco, nor the consummation by CIT, Newco and Exchangeco of the
transactions contemplated hereby or by the Plan of Arrangement or the
Arrangement Documents, nor compliance by CIT, Newco and Exchangeco with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate of Incorporation or By-Laws of CIT, (ii) violate the articles of
incorporation or by-laws or similar governing documents of any of the CIT
Subsidiaries or (iii) assuming that the consents and approvals referred to in
Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, mandatory government policy, judgment, order, writ, decree or
injunction applicable to CIT or
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Annex E
any of its Subsidiaries or any of their respective Properties, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, require any payment under, result in
the termination of or a right of termination or cancellation under, accelerate
or permit the creation of an obligation to accelerate the performance required
by, result in the loss of any benefit under, or result in a right of first
refusal or option to purchase or acquire, or result in the creation of any
Encumbrance (other than any Permitted Encumbrance) upon any of the respective
Properties of CIT or any of the CIT Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, loan or credit agreement or other agreement or other instrument
or obligation to which CIT or any of the CIT Subsidiaries is a party, or by
which they or any of their respective Properties may be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (b)(i) compliance with the premerger notification
filing requirements under Part IX of the Competition Act (Canada) and the
expiration of the applicable waiting period in relation thereto or (ii) receipt
of an ARC pursuant to section 102 of the Competition Act (Canada), (c) the
filing of a notification under the Investment Canada Act, (d) the filing of
applications with, and the approval of such applications by, the appropriate
financial regulatory authorities in the provinces, states and countries in which
CIT or any CIT Subsidiary conducts business, (e) receipt of exemption orders
from the provincial securities regulators from the registration and prospectus
requirements with respect to the issuance of and first trade in CIT Common
Stock, (f) the filing with the Court, the SEC, the OSC and other Canadian
securities regulatory authorities of the Proxy Circular and the filing and
declaration of effectiveness of the Registration Statement, (g) the approval of
the CIT Shareholder Matters, (h) approval of the listing of the CIT Common Stock
to be issued in the Arrangement, upon exchange of the Exchangeable Shares and
upon exercise of the Replacement Options on the NYSE, (i) approvals or orders in
respect of CIT and/or DKB under section 518 or 521 of the Bank Act (Canada), and
(j) approvals, if applicable, of the Ministry of Finance of Japan and the
Financial Supervisory Agency of Japan, no consents, orders or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary in connection with (1) the execution and delivery by CIT of this
Agreement, the Arrangement Documents and the Plan of Arrangement and by Newco
and Exchangeco of the Arrangement Documents and (2) the consummation by CIT,
Newco and Exchangeco of the Arrangement and the other transactions contemplated
hereby and by the Arrangement Documents.
5.5. Reports. CIT and each of the CIT Subsidiaries have timely filed all
reports, schedules, forms, registrations, statements and other documents,
together with any amendments required to be made with respect thereto, that they
were required to file since December 31, 1996 with the Federal Reserve Board,
any State Regulator or any SRO (collectively, the "CIT Regulatory Agencies"),
and have paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a CIT Regulatory Agency in the
regular course of the business of CIT and the CIT Subsidiaries, no CIT
Regulatory Agency has initiated any proceeding or, to the knowledge of CIT,
investigation into the business or operations of CIT or any of the CIT
Subsidiaries since December 31, 1996. There is no unresolved violation or
exception by any CIT Regulatory Agency with respect to any report or statement
relating to any examinations of CIT or any of the CIT Subsidiaries.
5.6. Financial Statements. CIT has previously made available to Newcourt
copies of (a) the consolidated balance sheets of CIT and the CIT Subsidiaries as
of December 31 for the fiscal years 1997 and 1998 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
fiscal years 1996 through 1998, inclusive, in each case accompanied by the audit
report of KPMG LLP, independent public accountants with respect to CIT and (b)
the unaudited consolidated balance sheets of CIT and the CIT Subsidiaries as of
March 31, 1999 and June 30, 1999 and the related unaudited consolidated
statements of income, changes in shareholders' equity and cash flows for the
three month and six month periods then ended, respectively. The December 31,
1997 and 1998 consolidated balance sheets of CIT, including the related notes,
fairly present the consolidated financial position of CIT and its Subsidiaries
as of the dates thereof, and the other financial statements referred to in this
Section 5.6 (including the related notes, where applicable) fairly present and
the financial statements to be filed with the SEC after the date hereof will
fairly present (subject, in the case of unaudited interim statements, to
recurring audit adjustments normal in nature and amount), the results of the
consolidated operations and changes in shareholders' equity and consolidated
financial position of
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CIT and the CIT Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements (including the
related notes, where applicable) complies, and the financial statements to be
filed with the SEC after the date hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements to be filed with the SEC
after the date hereof will be, prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") consistently applied
during the periods involved, except as indicated in the notes thereto or, in the
case of unaudited interim statements, as permitted by Form 10-Q. Except (A) as
reflected in such financial statements or in the notes thereto, (B) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby and (C) for liabilities or obligations incurred in the
ordinary course of business, neither CIT nor any of the CIT Subsidiaries has any
liabilities or obligations of any nature as of the date of this Agreement,
which, individually or in the aggregate, have had a Material Adverse Effect on
CIT as of the date of this Agreement. The books and records of CIT and the
Significant CIT Subsidiaries have been, and are being, maintained in all
material respects in accordance with U.S. GAAP and any other applicable legal
and accounting requirements.
5.7. Broker's Fees. Neither CIT nor any CIT Subsidiary, nor any of their
respective officers or directors, has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement, except that CIT has
engaged, and will pay a fee or commission to, each of J.P. Morgan Securities
Inc. and Donaldson Lufkin & Jenrette Securities Corporation.
5.8. Absence of Changes; Conduct of Business. (a) Since December 31, 1998,
(x) there has not been: (1) any declaration, setting aside or payment of any
dividend or other distribution with respect to CIT capital stock other than the
declaration and payment of regular quarterly cash dividends; (2) any change by
CIT in accounting methods, principles or practices except as required by changes
in U.S. GAAP as concurred to by CIT's independent auditors; (3) to the knowledge
of CIT, any labor dispute or charge of unfair labor practice (other than routine
individual grievances), any activity or proceeding by a labor union or
representative hereof to organize any employees of CIT or any CIT Subsidiary or
any campaign conducted to solicit authorization from such employees to be
represented by such labor union; (4) any increase in or modification of the
compensation or benefits payable or to become payable by any of CIT or the CIT
Subsidiaries to any of its directors or employees, except in the ordinary course
of business consistent with past practice; (5) any acquisition or sale of
Property of CIT or any Significant CIT Subsidiary, other than in the ordinary
course of business consistent with past practice and other than as permitted
under Section 6.1 or 7.4(b); or (6) through the date of this Agreement, any
writing off of the value of any assets, other than as disclosed in the CIT
Reports filed after December 31, 1998 and prior to the date of this Agreement or
disclosed in the consolidated financial statements of CIT furnished to Newcourt
prior to the date of this Agreement; and (y) CIT and the CIT Subsidiaries have
carried on their respective businesses in the ordinary course consistent with
their past practices.
(b) The books, records and accounts of CIT and the CIT Subsidiaries (i)
have been maintained in accordance with good business practices on a basis
consistent with prior years and (ii) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of CIT. CIT has
devised and maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (x) transactions are executed in accordance
with management's general or specific authorization; and (y) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with U.S. GAAP or any other criteria applicable to such statements
and (B) to maintain accountability of assets.
5.9. Legal Proceedings. (a) Neither CIT nor any of the CIT Subsidiaries is
a party to any and there are no pending or, to CIT's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against CIT or any of
the CIT Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon CIT, any of the CIT Subsidiaries or the assets of CIT
or any of the CIT Subsidiaries.
5.10. Taxes. Each of CIT and its Subsidiaries has (i) duly and timely filed
(including applicable extensions granted without penalty) all material Tax
Returns required to be filed at or prior to the Effective Time, and such
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Tax Returns are true and correct in all material respects except to the extent
adequate provision has been made with respect thereto in CIT's consolidated
financial statements, (ii) paid in full or made adequate provision in the
financial statements of CIT (in accordance with U.S. GAAP) for all Taxes shown
to be due on such Tax Returns and (iii) not received written notice of a
proposed assessment or reassessment of a material liability for unpaid Taxes,
the amount of which has not been previously paid or adequately provided for in
CIT's consolidated financial statements. As of the date hereof, neither CIT nor
any of its Subsidiaries has requested any extension of time within which to file
any material Tax Returns in respect of any fiscal year which have not since been
filed and no request for waivers of the time to assess any Taxes are pending or
outstanding. No material Tax liens have been filed with respect to CIT or any
CIT Subsidiary, other than for Taxes not yet due and payable or those being
contested in good faith.
5.11 Employees. (a) Section 5.11(a) of the CIT Disclosure Schedule sets
forth a true and correct list of each material deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the ERISA); "pension" plan, fund
or program (within the meaning of section 3(2) of ERISA); each material
employment, termination or severance agreement; and each other material employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
(or, with respect to any pension plan that is or was subject to Title IV of
ERISA, during any time in the last six years was) sponsored, maintained,
participated in or contributed to or required to be contributed to as of the
date of this Agreement (the "CIT Plans") by CIT, any of its Subsidiaries or by
any trade or business, whether or not incorporated (a "CIT ERISA Affiliate"),
all of which together with CIT would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of CIT or any Subsidiary.
(b) To the extent that CIT has provided or made available any of the
following documents to Newcourt, the copies so provided or made available were
true and correct copies of such documents: (i) any CIT Plan document including
all amendments thereto; (ii) any actuarial report for such CIT Plan for each of
the last two years, (iii) the most recent determination letter from the Internal
Revenue Service for any such CIT Plan; (iv) the most recent summary plan
description and related summaries of modifications or (v) the most recent Form
5500 (including all schedules) filed with the IRS.
(c) Each of the CIT Plans is in compliance with all applicable provisions
of the Code and ERISA; each of the CIT Plans and related trusts intended to be
"qualified" within the meaning of Sections 401(a) and 501(a) of the Code has
received a favorable determination letter from the IRS and nothing has occurred
to cause the loss of such qualified status; no CIT Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code; all
contributions required to be made by CIT or any CIT Subsidiary to any CIT Plan
have been made by the due date; neither CIT nor any CIT ERISA Affiliate has
incurred, directly or indirectly, any liability to or on account of a CIT Plan
pursuant to Title IV of ERISA (other than for premiums not yet due to the
Pension Benefit Guaranty Corporation); to the knowledge of CIT no proceedings
have been instituted to terminate any CIT Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(c) of
ERISA, has occurred with respect to any CIT Plan (other than a reportable event
with respect to which the thirty day notice period has been waived); and no
condition exists that presents a risk to CIT of incurring a liability to or on
account of a CIT Plan pursuant to Title IV of ERISA; no CIT Plan is a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) and no
CIT Plan is a multiple employer plan (as defined in Section 413 of the Code);
except as required by Section 4980B of the Code or Part 6 of Title I of ERISA,
no CIT Plan provides post-retirement welfare benefits and there are no pending,
or, to the knowledge of CIT, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the CIT Plans or
any trusts related thereto or against CIT, any CIT Subsidiary or any individual
or entity for which the CIT Plans, CIT or any CIT Subsidiary may have liability;
all employee benefit plans that are subject to the laws of any jurisdiction
outside the United States are in compliance with such applicable laws and the
requirements of any trust deed or other document under which they are
established or maintained.
5.12. SEC Reports. No final registration statement, prospectus, report,
schedule, definitive proxy statement or other document required to be filed
since December 31, 1996 by CIT with the SEC pursuant to the Securities Act or
the Exchange Act (the "CIT Reports") contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later contained or
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incorporated by reference in a CIT Report date shall be deemed to modify
information as of an earlier date. Since December 31, 1996, CIT has timely filed
all material CIT Reports and other material documents required to be filed by it
under the Securities Act and the Exchange Act, and, as of their respective
dates, all CIT Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
5.13. CIT Information. The information to be contained in the Proxy
Circular and the Registration Statement, or in any other document filed with any
other regulatory agency in connection herewith (other than any information which
is provided to CIT by Newcourt specifically for inclusion in such document),
will not at the time the Proxy Circular is mailed to shareholders and at the
time of each of the Newcourt and the CIT shareholders' meetings contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances in which they are
made, not misleading. The Proxy Circular (except for such portions thereof that
relate only to or are prepared by Newcourt or any of the Newcourt Subsidiaries)
will comply with the provisions of the Exchange Act and the rules and
regulations thereunder. The Registration Statement will comply with the
provisions of the Securities Act and the rules and regulations thereunder.
5.14 Compliance with Applicable Law. CIT and each of its Subsidiaries
holds, and has at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to CIT or any of its
Subsidiaries or the conduct of their respective businesses and neither CIT nor
any of the CIT Subsidiaries knows of, or has received notice of violation of,
any violations of any of the above.
5.15. Certain Contracts. (a) Except as set forth in Section 5.15(a) of the
CIT Disclosure Schedule, neither CIT nor any of the CIT Subsidiaries is a party
to or bound by any contract or commitment (whether written or oral) (i) which,
upon the consummation of the transactions contemplated by this Agreement, will
(either alone or upon the occurrence of any additional acts or events) result in
any payment or benefits (whether of severance pay or otherwise) becoming due, or
the acceleration or vesting of any rights to any payment or benefits, from CIT,
Newcourt or any of their respective Subsidiaries to any director, officer,
employee, contractor or consultant thereof, (ii) which is a material contract
(as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed
after the date of this Agreement that has not been filed or incorporated by
reference in the CIT Reports, (iii) which materially increases any benefits
otherwise payable under any CIT compensation plan or other benefit arrangement,
(iv) which requires CIT to register any securities under the Securities Act or
otherwise or (v) which materially restricts the conduct of any line of business
by CIT or any of the CIT Subsidiaries. Each contract, arrangement, commitment or
understanding of the type described in clause (ii) of this Section 5.15(a),
whether or not set forth in Section 5.15(a) of the CIT Disclosure Schedule, is
referred to herein as a "CIT Contract". CIT has previously delivered or made
available to Newcourt true and correct copies of each CIT Contract.
(b)(i) Each CIT Contract is valid and binding and in full force and effect,
(ii) neither CIT nor any of the CIT Subsidiaries is in default in respect of its
obligations under any CIT Contract, (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
default on the part of CIT or any of the CIT Subsidiaries under any CIT
Contract, and (iv) no other party to any CIT Contract is, to the knowledge of
CIT, in default in any respect thereunder.
5.16. Agreements with Regulatory Agencies. Neither CIT nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth in Section 5.16 of the CIT
Disclosure Schedule, a "CIT Regulatory Agreement"), any CIT Regulatory Agency or
other Governmental Entity that restricts the conduct of its business or that
relates to its capital adequacy, its credit policies, its management or its
business, nor has CIT or any of its Subsidiaries been advised by any CIT
Regulatory Agency or other Governmental Entity that it is considering issuing or
requesting any CIT Regulatory Agreement.
5.17. Environmental Matters. (a) Each of CIT and its Subsidiaries and, to
the knowledge of CIT, each of the Participation Facilities (as hereinafter
defined), are in compliance with all Environmental Laws;
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(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of CIT, threatened, before any Governmental Entity or other forum in
which CIT, any of its Subsidiaries or any Participation Facility, has been or,
with respect to threatened proceedings, could reasonably be expected to be,
named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by CIT or any of its
Subsidiaries or any Participation Facility;
(c) To the knowledge of CIT during the period of (i) CIT's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties or (ii) CIT's or any of its Subsidiaries' participation in the
management of any Participation Facility, there has been no release of Hazardous
Materials in, on, under or affecting any such property. To the knowledge of CIT,
prior to the period of (x) CIT's or any of its Subsidiaries' ownership or
operation of any of their respective current or former properties or (y) CIT's
or any of its Subsidiaries' participation in the management of any Participation
Facility, there was no release of Hazardous Materials in, on, under or affecting
any such property or Participation Facility; and
(d) The following definition applies for purposes of this Section 5.17:
"Participation Facility" means any facility in which CIT or any of its
Subsidiaries participates in the management and, where required by the context,
said term means the owner or operator of such facility.
5.18. Opinion. Prior to the execution of this Agreement, CIT has received
an opinion from each of J.P. Morgan Securities Inc. and Donaldson Lufkin &
Jenrette Securities Corporation to the effect that as of the date thereof and
based upon and subject to the matters set forth therein, the Exchange Ratio
pursuant to this Agreement is fair from a financial point of view to CIT. Such
opinion has not been amended or rescinded as of the date of this Agreement.
5.19. Ownership of Newcourt Common Shares. Neither CIT nor, to the
knowledge of CIT, any of its affiliates or associates (as such terms are defined
under the Exchange Act) (a) beneficially owns, directly or indirectly, or (b) is
a party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of capital stock of
Newcourt.
5.20. Property. Each of CIT and its Subsidiaries has good and marketable
title free and clear of all Encumbrances to all of the Properties which are
reflected on the consolidated statement of financial condition of CIT as of
December 31, 1998 or were acquired after such date, except for (i) Permitted
Encumbrances and (ii) dispositions of, and Encumbrances on, such Properties in
the ordinary course of business or as otherwise permitted or required hereunder.
5.21. Year 2000 Compliance Plan. Section 5.21 of the CIT Disclosure
Schedule sets forth a true and complete copy of CIT's plan to cause all of the
Date-Sensitive Systems owned, leased for use by or used by the CIT or any CIT
Subsidiary intended and necessary for use after December 31, 1999, or licensed
to the CIT or any CIT Subsidiary for use by CIT or such CIT Subsidiary, and all
of CIT's and each CIT Subsidiary's Date Data to be Year 2000 Compliant (CIT's
"Y2K Plan"). CIT believes that its Y2K Plan can be substantially achieved on or
before September 30, 1999.
5.22. Interested Party Transaction. Except as disclosed in the CIT
Reports filed prior to the date of this Agreement, no executive officer of CIT
has, either directly or indirectly, a material interest in (1) any Person which
purchases from or sells, licenses or furnishes to CIT or any of the CIT
Subsidiaries any material goods, property, technology or intellectual or other
material property rights or services or (2) any material contract or agreement
to which CIT or any of the CIT Subsidiaries is a party or by which it may be
bound or affected.
5.23 Insurance. CIT and each of the CIT Subsidiaries have their respective
assets insured against loss or damages as appropriate in their businesses and
assets in such amounts and against such risks as are appropriate in their
business, and such insurance coverage will be continued in full force and effect
to and including the Effective Time.
5.24 Board Approval. The Board of Directors of CIT has, as of the date
hereof, (i) approved this Agreement and the Arrangement, (ii) determined that
the Arrangement is in the best interests of CIT and the shareholders of CIT and
(iii) recommended the shareholders of CIT approve the issuance of shares of CIT
Common Stock pursuant to this Agreement and the Plan of Arrangement and upon
conversion of the Exchangeable Shares.
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Annex E
5.25 Intellectual Property. CIT and the CIT 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 "CIT Intellectual Property") necessary to carry on its
business substantially as currently conducted. Neither CIT nor any such
subsidiary has received any notice of infringement of or conflict with, and, to
CIT's knowledge, there are no infringements of or conflicts with, the rights of
others with respect to the use of any material CIT Intellectual Property which
have not been previously resolved.
5.26. DGCL Section 203. The provisions of Section 203 of the Delaware
General Corporation Law will not apply to Newcourt (by virtue of the DKB Voting
Agreement or otherwise), this Agreement or the Plan of Arrangement or any of the
transactions contemplated hereby or thereby.
5.27. CIT Knowledge. As of the date of this Agreement, CIT is not aware of
any matter, except as set forth on the Newcourt Disclosure Schedule, as to which
CIT believes that such matter would result in a Net Worth Charge.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of CIT and Newcourt. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
the other party, Newcourt, CIT and each of their respective Subsidiaries shall
(x) carry on their respective businesses in the ordinary course consistent with
past practice and (y) use reasonable efforts to maintain and preserve intact its
business organization and advantageous business relationships and retain the
services of its officers and key employees. Without limiting the generality of
the foregoing, except as set forth in the Newcourt Disclosure Schedule or the
CIT Disclosure Schedule, and except as otherwise contemplated by this Agreement
or consented to in writing by the other party, neither Newcourt nor CIT shall,
and neither Newcourt nor CIT shall permit any of its Subsidiaries to:
(a) solely in the case of Newcourt and CIT, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock, other than quarterly dividends not in excess of (i) Cdn$0.06 per
Newcourt Common Share, in the case of Newcourt, and (ii) US$0.10 per share
of CIT Common Stock, in the case of CIT;
(b)(i) repurchase, redeem or otherwise acquire any shares of the
capital stock of such party or any of its Subsidiaries, or any securities
convertible into or exercisable for any shares of the capital stock of such
party or any of its Subsidiaries, (ii) split, combine or reclassify any
shares of its capital stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (iii) issue, deliver, allocate, sell or
pledge, or authorize or propose the issuance, delivery, allocation, sale or
pledge of, any shares of its capital stock or any stock appreciation rights
or securities convertible into or exercisable for, or any rights, warrants
or options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing except, in the case of clauses (ii) and
(iii), for (x) the issuance of such party's common shares upon the exercise
or fulfillment of rights or options issued or existing pursuant to employee
benefit plans, programs or arrangements, all to the extent outstanding and
in existence on the date of this Agreement and in accordance with their
present terms, (y) in the case of Newcourt, the distribution or sale of
outstanding Newcourt Common Shares currently held for Newcourt's employees
pursuant to Newcourt's employee share loan program and (z) in the case of
CIT, the grant of additional stock options to its directors and employees,
in the ordinary course consistent with past practice as to both the timing
of such grants and the amount of such grants, pursuant to CIT's stock
option and stock incentive plans for employees and directors;
(c) amend its charter, by-laws or other similar governing documents;
(d) solely in the case of Newcourt and the Newcourt Subsidiaries,
authorize or permit any of its officers, directors, employees or agents to
directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, an
Acquisition Proposal, or participate in any discussions or negotiations, or
provide third parties with any nonpublic information,
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Annex E
relating to any such inquiry or proposal or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however,
that (x) Newcourt may, in response to an Acquisition Proposal that the
Board of Directors of Newcourt determines in good faith to be more
favorable to its shareholders than the transactions contemplated hereby,
and for which financing is committed or for which, in the good faith
judgment of the Board of Directors of Newcourt, financing is reasonably
capable of being obtained by such third party (a "Superior Proposal"), and
subject to providing prior written notice of such Superior Proposal to CIT,
participate in any discussions or negotiations regarding, or provide the
party making such Superior Proposal with any nonpublic information
(pursuant to a customary confiden- tiality agreement and provided Newcourt
provides CIT with such information, concurrently with or prior to providing
it to such party) in connection with, such Superior Proposal, or otherwise
facilitate any effort or attempt to implement such Superior Proposal, if
the Board of Directors of Newcourt determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order
to comply with its fiduciary duties to Newcourt and to Newcourt's
shareholders under applicable law, (y) Newcourt may communicate information
about any Acquisition Proposal to its shareholders if, in the judgment of
Newcourt's Board of Directors, based upon the advice of outside counsel,
such communication is required under applicable law and (z) nothing
contained in this Agreement shall prevent Newcourt or its Board of
Directors from complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal, provided, however, that, except in
connection with a Superior Proposal, neither the Board of Directors of
Newcourt nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the Newcourt
Shareholder Matters, or approve or recommend, or propose publicly to
approve or recommend, an Acquisition Proposal. Newcourt will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations previously conducted with any parties other than CIT with
respect to any of the foregoing and Newcourt will take all actions
necessary or advisable to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in
this Section 6.1(d). Newcourt will (A) notify CIT immediately if any such
inquiries or Acquisition Proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, Newcourt and (B) promptly inform CIT in
writing of all of the relevant details and status with respect to the
foregoing;
(e) make any capital expenditures in excess of the US$50 million
budgeted for calendar year 1999;
(f) enter into any new line of business or, other than in the ordinary
course of its business, enter into any material transaction, provided,
however, that the negative covenants contained in this clause (f) shall
apply to CIT and its Subsidiaries only to the extent that any of the
actions contemplated would, or would reasonably be expected to, delay or
inhibit the receipt of any regulatory approvals required for the
consummation of the transactions contemplated hereby;
(g) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire any assets, other than (i) in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with past
practices and (ii) partnerships, joint ventures, virtual joint ventures,
investment funds and other similar arrangements as part of the ordinary
course business activities of such party, provided, however, that the
negative covenants contained in this clause (g) shall apply to CIT and its
Subsidiaries only to the extent that any of the actions contemplated would,
or would reasonably be expected to, delay or inhibit the receipt of any
regulatory approvals required for the consummation of the transactions
contemplated hereby;
(h) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue, or in any of the conditions to the
Arrangement set forth in Article VIII not being satisfied;
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Annex E
(i) change its methods of accounting in effect at December 31, 1998,
except as required by changes in (x) Canadian GAAP or U.S. GAAP as
concurred to by Newcourt's independent auditors, in the case of Newcourt or
(y) U.S. GAAP as concurred to by CIT's independent auditors, in the case of
CIT;
(j) solely in the case of Newcourt and the Newcourt Subsidiaries (i)
except as set forth in Section 7.7 hereof, as required by applicable law or
as required to maintain qualification pursuant to the Code or the ITA,
adopt, amend, or terminate any employee benefit plan or any agreement,
arrangement, plan or policy between such party or any of its Subsidiaries
and one or more of its current or former directors, officers or employees,
or any collective bargaining, bonus, profit sharing, compensation, stock
option, pension, retirement, employee stock ownership, deferred
compensation employment termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors,
officers or employees or (ii) except for normal increases in the ordinary
course of business consistent with past practice and except as required by
applicable law, increase in any manner the compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by any
employee benefit plan or agreement as in effect as of the date of this
Agreement (including, without limitation, the granting of stock options,
stock appreciation rights, restricted stock, restricted stock units or
performance units or shares); provided, however, that nothing contained
herein shall prohibit Newcourt from paying 1998 bonuses which have been
earned and accrued on its books; provided further, however, that the
aggregate amount of cash compensation paid in respect of fiscal year 1999
to the nine executive officers of Newcourt listed on Section 6.1(j) of the
Newcourt Disclosure Schedule (exclusive of the aggregate amount of any
severance payments and any retention or stay bonuses paid to any of such
officers) shall not exceed the aggregate amount of cash compensation paid
to such persons in respect of fiscal year 1998;
(k) solely in the case of Newcourt and the Newcourt Subsidiaries,
other than activities in the ordinary course of business consistent with
past practice (including financing, securitization, syndication, pooling
and other similar activities), sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose
of, any of its material assets, properties or other rights or agreements;
provided, however, that Newcourt and the Newcourt Subsidiaries may not sell
or otherwise dispose of any line of business, or any material portion of
any line of business or any of Newcourt's remaining investment in KMC
Telecom;
(l) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any unrelated individual, corporation or other entity;
(m) other than in the ordinary course of business, create, renew,
amend or terminate or give notice of a proposed renewal, amendment or
termination of, any material contract, agreement or lease (as lessee) for
goods, services or office space to which such party or any of its
Subsidiaries is a party or by which such party or any of its Subsidiaries
or their respective properties is bound, other than any amendment or
renewal which does not materially reduce the benefits of any such contract,
agreement or lease to such party;
(n) solely in the case of Newcourt and the Newcourt Subsidiaries,
enter into any new joint ventures without the consent of CIT, which shall
not be unreasonably withheld, it being understood that the withholding of
such consent would be reasonable if the entering into such joint venture
would, in the good faith reasonable judgment of CIT, reasonably be expected
to jeopardize or delay the receipt of (or result in the imposition of any
conditions in connection with) any Primary Approval;
(o) solely in the case of Newcourt and the Newcourt Subsidiaries,
engage in any interest rate risk management or other derivative
transactions or arrangements other than for hedging purposes;
(p) solely in the case of Newcourt and the Newcourt Subsidiaries,
enter into any financing program agreements or arrangements containing any
exclusivity or non-competition provisions without the consent of CIT, which
consent shall not be unreasonably withheld; or
(q) agree to do any of the foregoing.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters. (a) Newcourt and CIT shall promptly prepare the
Proxy Circular, and CIT shall use its reasonable best efforts to file the Proxy
Circular with the SEC not later than 20 days after the date of this Agreement.
Each of Newcourt and CIT shall thereafter mail the Proxy Circular to its
respective shareholders. CIT shall use its reasonable best efforts to prepare
and file with the SEC not later than 20 days after the date of this Agreement a
registration statement on the appropriate form with respect to the shares of CIT
Common Stock to be issued upon exchange of any Exchangeable Shares (the
"Registration Statement") and shall take all actions necessary to maintain such
Registration Statement current and effective for as long as shall be required to
enable the holders of Exchangeable Shares to sell the shares of CIT Common Stock
received upon exchange thereof. Each of Newcourt and CIT shall use its
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing. CIT shall
also use its reasonable best efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement.
(b) Newcourt shall file the Proxy Circular in all Canadian jurisdictions
where the Proxy Circular is required to be filed and with the SEC, the TSE and
the ME in accordance with the applicable rules and regulations thereof. The
parties shall use all reasonable efforts to obtain all orders required from the
applicable Canadian securities authorities to permit the issuance and first
resale of (i) the Exchangeable Shares and the shares of CIT Common Stock to be
issued pursuant to the Arrangement, (ii) the shares of CIT Common Stock to be
issued upon exchange of the Exchangeable Shares from time to time and (iii) the
shares of CIT Common Stock to be issued from time to time upon the exercise of
the Replacement Options, in each case without qualification with or approval of
or the filing of any document, including any prospectus or similar document, or
the taking of any proceeding with, or the obtaining of any further order,
ruling, or consent from, any Governmental Entity or regulatory authority under
any Canadian federal, provincial or territorial securities laws or pursuant to
the rules and regulations of any regulatory authority administering such laws,
or the fulfilment of any other legal requirement in any such jurisdiction (other
than, with respect to such first resales, any restrictions on transfer by reason
of, among other things, a holder being a "control person" of Newcourt or CIT for
purposes of Canadian federal, provincial or territorial securities laws).
(c) The parties hereto shall cooperate with each other and use their
reasonable best efforts to prepare and file not later than 10 days after the
date of this Agreement all necessary documentation (including, with respect to
applications, notices, and filings made by the parties prior to the date of this
Agreement, all updated and/or supplemental information required in connection
therewith), to effect all applications, notices, petitions and filings, and to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including the Arrangement) and for the parties and their Subsidiaries
to conduct their respective businesses after the Closing Date in substantially
the same manner as conducted currently, or which are required in order to
maintain in effect any governmental authorizations, licenses or approvals
pursuant to which either of the parties or their Subsidiaries carries on its
business as currently conducted. Newcourt and CIT each will furnish to the other
for review in advance, and to the extent practicable each will consult the other
on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to Newcourt or CIT, as the case may
be, and any of their respective Subsidiaries, which appears in any filing made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act reasonably
and as promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and, in each case subject to applicable law relating to the exchange
of information, each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein. Promptly upon
the reasonable request of CIT, Newcourt will provide, and will use its
reasonable efforts to cause each other Co-Venturer (and the ultimate parent
entity thereof) in a Joint Venture to provide promptly, to CIT, to the extent
reasonably available to Newcourt or such other party, the information required
in order to respond to any questions asked by the Federal Reserve Board
regarding any
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Annex E
Co-Venturer or any joint venture. "Co-Venturer" means any company that (i) owns
an interest in a company in which Newcourt has an interest or (ii) has entered
into an agreement with Newcourt for Newcourt or its affiliates to finance the
sale of the company's products.
(d) Newcourt and CIT shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Circular, the Registration Statement or any other
statement, filing, notice or application made by or on behalf of Newcourt, CIT
or any of their respective Subsidiaries to any Governmental Entity in connection
with the Arrangement and the other transactions contemplated by this Agreement.
Without limiting the foregoing, Newcourt shall as promptly as practicable
provide to CIT upon its request all financial information pertaining to Newcourt
reasonably necessary or advisable in connection with the foregoing, including
the Canadian to U.S. GAAP reconciliation for the period ended June 30, 1999 and
the necessary information to conform Newcourt's financial information to CIT's
accounting policies and reporting format.
(e) Newcourt and CIT shall, subject to applicable law, promptly furnish
each other with copies of written communications received by Newcourt or CIT, as
the case may be, or any of their respective Subsidiaries, Affiliates or
Associates (as such terms are defined in Rule 12b-2 under the Exchange Act as in
effect on the date of this Agreement) from, or delivered by any of the foregoing
to, any Governmental Entity in respect of the transactions contemplated hereby.
(f) Each party will give the other party a reasonable opportunity to
participate in the defense of any shareholder litigation against such party and
its directors relating to the transactions contemplated hereby; provided,
however, that (x) the foregoing shall not require either party to take any such
action which would be reasonably likely to jeopardize such party's
attorney-client privilege and (y) the party to this Agreement that is the
defendant in such litigation shall control such litigation.
7.2. Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each party shall, and
shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, reasonable
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and other representatives and, during such
period, it shall, and shall cause its Subsidiaries to, make available to the
other party all information concerning its business, properties and personnel as
the other party may reasonably request. Neither party nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate the rights of its customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will use their
reasonable best efforts to (x) mitigate any restrictions pursuant to the
preceding sentence and (y) make appropriate substitute disclosure arrangements
under circumstances in which such restrictions cannot be so mitigated. The
access described above shall include the right of CIT to maintain on Newcourt's
premises during all normal business hours one or more representatives of CIT who
shall be afforded access in the manner set forth above.
(b) All information furnished to either party pursuant to Section 7.2(a)
shall be subject to, and such party shall hold all such information in
confidence in accordance with, the provisions of the confidentiality agreement,
dated February 24, 1999 (the "Confidentiality Agreement"), between Newcourt and
CIT.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
(d) Within twenty-one (21) days following the last day of each month after
the date of this Agreement, Newcourt shall provide CIT with its consolidated
balance sheet as of the end of such month and the related consolidated statement
of income, in each case prepared in accordance with Canadian GAAP consistently
applied, together with a statement setting forth in reasonable detail a
computation of Adjusted Shareholders' Equity as of such month end.
7.3. Shareholder Meetings. Newcourt and CIT each shall take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
respective shareholders to be held as soon as is reasonably practicable
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Annex E
after the issuance of the Interim Order for the purpose of voting upon the
approval of (a) the Plan of Arrangement and the consummation of the transactions
contemplated thereby (the "Newcourt Shareholder Matters"), in the case of
Newcourt, and (b) the issuance of shares of CIT Common Stock pursuant to this
Agreement and the Plan of Arrangement, upon exchange of Exchangeable Shares and
upon exercise of the Replacement Options, and the CIT Transition Option Plan
(collectively, the "CIT Shareholder Matters"), in the case of CIT. CIT will and,
subject to the penultimate sentence of this Section 7.3, Newcourt will, through
its respective Board of Directors, recommend to its respective shareholders (x)
approval of the Newcourt Shareholder Matters, in the case of Newcourt, and (y)
approval of the CIT Shareholder Matters, in the case of CIT, and, in each case,
such other matters as may be submitted to its shareholders in connection with
this Agreement. Neither the Board of Directors of either party nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to the other party, the approval or recommendation by such
Board of Directors or such committee of the Newcourt Shareholder Matters, in the
case of Newcourt, or the CIT Shareholder Matters, in the case of CIT, and
neither the Board of Directors of Newcourt nor any committee thereof shall (i)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (ii) cause Newcourt to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
an "Acquisition Agreement") related to any Acquisition Proposal. Notwithstanding
the foregoing, in the event that the Board of Directors of Newcourt determines
in good faith, after consultation with outside counsel, that in light of a
Superior Proposal it is necessary to do so in order to comply with its fiduciary
duties to Newcourt and to Newcourt's shareholders under applicable law, the
Board of Directors of Newcourt may terminate this Agreement solely in order to
concurrently enter into an Acquisition Agreement with respect to a Superior
Proposal, but only after the fifth day following CIT's receipt of written notice
advising CIT that the Board of Directors of Newcourt is prepared to accept a
Superior Proposal, and only if, during such five-day period, if CIT so elects,
Newcourt and its advisors shall have negotiated in good faith with CIT to make
such adjustments in the terms and conditions of this Agreement as would enable
CIT to proceed with the transactions contemplated herein on such adjusted terms.
Newcourt and CIT shall coordinate and cooperate with respect to the foregoing
matters with a view toward, among other things, holding the respective meetings
of each party's shareholders on the same day.
7.4. Legal Conditions to Arrangement. (a) Each of Newcourt and CIT shall,
and shall cause its Subsidiaries (including, in the case of CIT, Newco and
Exchangeco) to, use their reasonable best efforts (i) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Arrangement and, subject to the conditions set forth in Article
VIII hereof, to consummate the transactions contemplated by this Agreement; (ii)
to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Newcourt or
CIT or any of their respective Subsidiaries in connection with the Arrangement
and the other transactions contemplated by this Agreement, and to comply with
the terms and conditions of such consent, authorization, order or approval; and
(iii) in the case of CIT, to execute and deliver (and cause Newco and Exchangeco
to execute and deliver) the Arrangement Documents.
(b) Without limiting the generality of Section 7.4(a), in the event that
either party fails or expects to fail to obtain any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity because of
the type or nature of any assets or the activities of any business of either
party or any of its Subsidiaries, such party shall use its reasonable best
efforts to take or cause to be taken all actions necessary to either obtain the
required approval or obviate the need to obtain such approval, including, if
necessary, discontinuing or disposing of such business or assets or
restructuring the conduct of such business; provided, however, that no party
shall be required to take any such action if doing so would reasonably be
expected to have a Material Adverse Effect on Newcourt and CIT (on a combined
basis).
7.5. Affiliates. Newcourt shall use its reasonable best efforts to cause
each director, executive officer and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act) of Newcourt to deliver to CIT, as
soon as practicable after the date of this Agreement, a written agreement, in
the form of Exhibit 7.5(a) or Exhibit 7.5(b) hereto, as applicable.
7.6. Stock Exchange Listings; Tax Status. Each of CIT and Newcourt shall,
to the extent applicable, use its reasonable best efforts to (i) cause the
Exchangeable Shares and the shares of CIT Common Stock to be listed
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and posted for trading on the TSE by the Effective Time and, with respect to the
Exchangeable Shares, to maintain the listing as long as any Exchangeable Shares
are outstanding, (ii) cause the shares of CIT Common Stock to be issued in the
Arrangement or upon exchange of the Exchangeable Shares and upon exercise of the
Replacement Options from time to time to be approved for listing on the NYSE,
subject to official notice of issuance, as of the Effective Time and (iii)
ensure that Exchangeco remains a "public corporation" within the meaning of the
ITA until the earlier of (x) such time as there are no Exchangeable Shares
outstanding and (y) five years after the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements. (a) From and after the
Effective Time, the employees of Newcourt and the Newcourt Subsidiaries as of
the Effective Time (the "Newcourt Employees") shall continue to participate in
Newcourt's employee benefit and compensation plans in which they currently
participate or, at CIT's discretion, in CIT's employee benefit and compensation
plans or a combination thereof. Prior to December 31, 2000, CIT shall not, and
shall not permit any of its Subsidiaries to, modify or amend the benefit
programs applicable to Newcourt Employees in any manner which would cause the
benefits provided to such employees under such plans in the aggregate, to be
less favorable than those provided to Newcourt Employees under such plans
immediately prior to the Effective Time except to the extent agreed to by
Messrs. Gamper and Banks of New CIT. The foregoing limitation on CIT's and its
subsidiaries' right to amend or modify the compensation plans does not apply to
Newcourt employees who have employee contracts with New CIT. Without limiting
the generality of the foregoing, from and after the Effective Time, CIT shall
continue to maintain Newcourt's share loan program (including the related
financial support thereof) with respect to participants in such program as of
the Effective Time for the sole purpose of permitting participants in the
program at the Effective Time to repay outstanding loans without adverse
amendment or adverse alteration in the administration thereof for so long as any
loans remain outstanding thereunder.
(b) Following December 31, 2000 (or such earlier date that a Newcourt
Employee commences participation in a plan), with respect to each deferred
compensation plan, incentive compensation plan, equity compensation plan,
"welfare" plan, fund or program, "pension" plan, fund or program; each
termination or severance plan or program; and each other employee benefit plan,
fund, program, agreement or arrangement, in each case, in which Newcourt
Employees participate (the "New CIT Plans"), for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including for
severance benefits and vacation entitlement (but not for accrual of pension
benefits or post-retirement welfare benefits), service with Newcourt (or
predecessor employers to the extent Newcourt provides past service credit) shall
be treated as service with New CIT. Such service also shall apply for purposes
of satisfying any waiting periods, evidence of insurability requirements, or the
application of any preexisting condition limitations. Each New CIT Plan shall
waive pre-existing condition limitations to the same extent waived under the
applicable Newcourt Plan. Newcourt Employees shall be given credit for amounts
paid under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the New CIT
Plan.
(c) Not later than March 15, 2000 (the "1999 Bonus Payment Date"), in
addition to any amounts that the Newcourt Employees shall have earned under
CIT's incentive bonus plans in 1999, CIT shall, or shall cause Newcourt to, pay
to each Newcourt Employee who is employed on the Bonus Payment Date a pro-rata
1999 bonus under Newcourt's incentive bonus plans in respect of the period from
January 1, 1999 through the Closing Date based on Newcourt's annualized
performance (without regard to the effect (including the cost) of any actions
taken by Newcourt or any of the Newcourt Subsidiaries in contemplation of the
Arrangement or at the request of CIT) from January 1, 1999 through the end of
the last full month prior to consummation of the Arrangement; provided, however,
that if, prior to the 1999 Bonus Payment Date, any Newcourt Employee is
terminated other than for cause, CIT shall, or shall cause Newcourt to, pay to
such Newcourt Employee on the date of termination the pro-rata 1999 bonus that
would have otherwise been payable to such employee on the 1999 Bonus Payment
Date. The provisions of this Section 7.7(c) are intended to be for the benefit
of, and shall be enforceable by, each such director, officer or employee.
(d) As of the Effective Time, CIT shall assume and honor and shall cause
the appropriate Subsidiaries of CIT to assume and to honor in accordance with
their terms all employment, severance and other compensation agreements and
arrangements existing prior to or as of the execution of this Agreement which
are between Newcourt or any of its Subsidiaries and any director, officer or
employee thereof and whether or not disclosed
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in the Newcourt Disclosure Schedule, including, without limitation, the
Separation Agreements and General Releases of even date herewith between
Newcourt and each of the parties thereto as listed in Section 4.8(a)(x)(3) of
the Newcourt Disclosure Schedule. CIT acknowledges and agrees that the
Arrangement constitutes a "Change in Control" for all purposes pursuant to such
agreements and arrangements, except that, with respect to the AT&T Capital
Member Severance Plan, the AT&T Capital 1995 Leadership Severance Plan and any
AT&T Capital Annual Incentive Plan, the existing Plan Administrators and
Benefits Committee (as defined therein) under each such plan will seek advice
and make a determination as to whether the Arrangement constitutes such a Change
of Control, and the acknowledgment of CIT in this sentence shall be deemed
operative with respect to any such plan only to the extent the Arrangement is so
determined by the Plan Administrators and the Benefits Committee for such plan
to constitute a Change of Control under and pursuant to such Plan. The
provisions of this Section 7.7(d) are intended to be for the benefit of, and
shall be enforceable by, each such director, officer or employee.
(e) Prior to the Effective Time, Newcourt shall amend or cause to be
amended the Newcourt Credit Group Inc. Savings and Investment Plan (the "Savings
Plan") so that, as of the Effective Time, participants in the Savings Plan will
not be permitted to transfer balances into, make contributions to, or have
contributions made to, the Newcourt Common Share investment option under the
Savings Plan.
(f) Newcourt and CIT shall take all such steps as may be required to
provide that, with respect to each Section 16 Affiliate (as defined below), (i)
the transactions contemplated by this Agreement and the Plan of Arrangement, and
(ii) any other acquisitions of CIT equity securities (including derivative
securities) in connection with this Agreement or the Plan of Arrangement, shall
be exempt under Rule 16b-3 promulgated under the Exchange Act, in accordance
with the terms and conditions set forth in that certain No-Action Letter, dated
January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
For purposes of this Agreement, "Section 16 Affiliate" shall mean each
individual who (x) immediately prior to the Effective Time is a director or
officer of Newcourt or (y) at the Effective Time will become a director or
officer of CIT.
7.8. Indemnification. (a) From and after the Effective Time, CIT agrees to
maintain, or cause to be maintained, 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 Newcourt or any Newcourt Subsidiary as provided in their respective
articles of incorporation or by-laws or similar governing documents, and CIT
hereby assumes, effective at the Effective Time, all such liability.
(b) In addition to the foregoing, in the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director, officer or employee of Newcourt or any of its Subsidiaries,
(the "Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was a director, officer or employee of Newcourt, any of
the Subsidiaries of Newcourt or any of their respective predecessors or
affiliates or (ii) this Agreement, the March Agreement or any of the
transactions contemplated hereby or thereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto. It
is understood and agreed that after the Effective Time, CIT shall indemnify and
hold harmless each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party) judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with CIT; provided, however,
that (1) CIT shall have the right to assume the defense thereof and upon such
assumption CIT shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if CIT
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises that there are issues which raise conflicts of interest
between CIT and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with CIT, and CIT
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) CIT shall in
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all cases (other than cases involving issues which raise conflicts of interest
between or among two or more Indemnified Parties, in which cases the limitation
on CIT's obligations contained in this clause (2) shall not apply) be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) CIT shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) CIT shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
Indemnification under this Section 7.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify CIT thereof, provided
that the failure to so notify shall not affect the obligations of CIT under this
Section 7.8 except to the extent such failure to notify materially prejudices
CIT. CIT's obligations under this Section 7.8 shall continue in full force and
effect without time limit from and after the Effective Time.
(c) CIT shall cause the persons serving as officers and directors of
Newcourt immediately prior to the Effective Time to be covered for a period of
six years from the Effective Time by the directors' and officers' liability
insurance policy maintained by Newcourt (provided that CIT may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are in the aggregate not less advantageous than such policy)
with respect to acts or omissions occurring prior to the Effective Time which
were committed by such officers and directors in their capacity as such;
provided, however, that in no event shall CIT be required to expend on an annual
basis more than 150% of the current amount expended by Newcourt (the "Insurance
Amount") to maintain or procure insurance coverage, and further provided that if
CIT is unable to maintain or obtain the insurance called for by this Section
7.8(c), CIT shall use all reasonable efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
(d) In the event CIT or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of CIT assume the
obligations set forth in this section.
(e) The provisions of this Section 7.8 are intended to be for the benefit
of, and shall be enforceable by, each such officer, director and employee
referred to in this Section 7.8.
7.9. Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement and
their respective Subsidiaries shall take all such necessary action as may be
reasonably requested by either party.
7.10. Coordination of Dividends. After the date of this Agreement each of
CIT and Newcourt shall coordinate with the other regarding the declaration and
payment of any dividends in respect of the CIT Common Stock and the Newcourt
Common Shares and the record dates and payment dates relating thereto, it being
the intention of the parties that any holder of Newcourt Common Shares shall not
receive more than one dividend, or fail to receive one dividend, for any single
calendar quarter with respect to such holder's Newcourt Common Shares and/or any
shares of CIT Common Stock or Exchangeable Shares any such holder receives
pursuant to the Arrangement.
7.11. [reserved]
7.12. [reserved]
7.13. Board of Directors. At the Effective Time, the total number of
persons serving on the Board of Directors of New CIT shall be sixteen (16),
twelve (12) of whom shall be selected by the Board of Directors of CIT as
provided below and four (4) of whom shall be selected by the Board of Directors
of Newcourt as provided below (such four directors, the "Newcourt Directors").
Two of the twelve initial directors selected by CIT shall be designated by DKB
and shall be Hisao Kobayashi and Keiji Torii. One of the four initial Newcourt
Directors shall be David Banks, who will serve as non-executive Vice Chairman of
the Board of Directors of New CIT, and two of the remaining initial Newcourt
Directors shall be a person designated by Hercules Holdings (Cayman) Limited
("Hercules") and a person designated by Canadian Imperial Bank of Commerce
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("CIBC"), in each case, pursuant to the Amended and Restated Voting Agreements
entered into as of the date of this Agreement between each of such parties,
respectively, and CIT. If within two years after the Effective Time, any
Newcourt Director ceases to serve as a director of New CIT, or either or both of
CIBC and Hercules ceases to have the right to nominate a director to serve on
the Board of New CIT pursuant to the terms of its Amended and Restated Voting
Agreement with CIT, then the remaining Newcourt Directors shall designate a
successor director to serve on the Board of New CIT, subject to the concurrence
of CIT. The remaining person to serve initially on the Board of Directors of New
CIT as of the Effective Time who is to be selected by Newcourt shall be selected
by the Board of Directors of Newcourt, subject to the concurrence of CIT, from
among those persons serving on the Board of Directors of Newcourt prior to the
Effective Time; and the remaining ten persons to serve on the Board of Directors
of New CIT as of the Effective Time who are to be selected by CIT shall be
selected solely by and at the absolute discretion of the Board of Directors of
CIT. In the event that, prior to the Effective Time, any person named above or
any other person so selected to serve on the Board of Directors of New CIT after
the Effective Time is unable or unwilling to serve in such position, the Board
of Directors or stockholders which selected such person shall designate another
of its members to serve in such person's stead in accordance with the provisions
of the immediately preceding sentence, including in the case of Newcourt
Directors the concurrence of CIT.
7.14. Notification of Certain Matters. Each of Newcourt and CIT will give
prompt notice to the other party of (i) any change or event which would cause
any representation or warranty made by it to be untrue or inaccurate as of the
Effective Time, subject to Article III, or (ii) any material failure by it to
comply with or satisfy any covenant or agreement to be complied with by it
hereunder.
7.15. Comfort Letters. Each of Newcourt and CIT shall use its reasonable
efforts to cause to be delivered to the other party a letter of its respective
independent public accountants, substantially in the form attached hereto as
Exhibit E, dated (i) the date on which the Registration Statement shall become
effective, or, if there is no Registration Statement, the date of mailing of the
Proxy Circular, and (ii) a date shortly prior to the Effective Time, and
addressed to such other party.
7.16. Year 2000. Each Party shall use its reasonable best efforts to
implement its respective Y2K Plan. At the request of the other party, each party
shall periodically update the other party regarding its process with respect to
its Y2K Plan.
7.17. No Inconsistent Actions. Neither Newcourt nor CIT shall effectuate
any transaction or enter into any agreement the effect of which would be to
interfere with or otherwise impede consummation of the transactions contemplated
hereby.
7.18. [reserved]
7.19. Phase II Transactions. (a) From and after the date of this Agreement,
the parties hereto hereby agree to use their reasonable best efforts to cause
the transactions described in Section 7.19 of the Newcourt Disclosure Schedule
(such transactions, the "Phase II Transactions") to occur as soon as practicable
following the Effective Time, and, in furtherance of the foregoing, from and
after the date of this Agreement, each of CIT and Newcourt shall cooperate with
each other and use their reasonable best efforts to promptly prepare and file
all necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
which are necessary or advisable to consummate the Phase II Transactions, or
which are required as a result of the Phase II Transactions in order to maintain
in effect any governmental authorizations, licenses or approvals pursuant to
which either of the parties or their Subsidiaries carries on its business as
currently conducted (which, in the case of CIT, shall include, without
limitation, entering into, effective as of the effective time of the Phase II
Transactions, any and all such supplemental indentures, assumption agreements,
support agreements and guarantees with respect to the existing debt obligations
of Newcourt and its Subsidiaries as are necessary or advisable to consummate the
Phase II Transactions); provided, however, that no party shall be required to
take any action pursuant to this Section 7.19(a) to the extent that doing so
would jeopardize or delay the consummation of any of the transactions
contemplated hereby or the satisfaction of any of the conditions contained in
Article VIII.
(b) Newcourt and CIT each will furnish to the other for review in advance,
and to the extent practicable each will consult the other on, in each case
subject to applicable laws relating to the exchange of information,
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all the information relating to Newcourt or CIT, as the case may be, and any of
their respective Subsidiaries, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the Phase II Transactions. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the Phase
II Transactions and, in each case subject to applicable law relating to the
exchange of information, each party will keep the other apprised of the status
of matters relating to completion of the Phase II Transactions. Newcourt and CIT
shall, upon request, furnish each other with all information concerning
themselves, their Subsidiaries, directors, officers and shareholders and such
other matters as may be reasonably necessary or advisable in connection with any
statement, filing, notice or application made by or on behalf of Newcourt, CIT
or any of their respective Subsidiaries to any Governmental Entity in connection
with the Phase II Transactions.
(c) Notwithstanding anything to the contrary contained in this Agreement,
the terms and phrases "transactions contemplated hereby," "transactions
contemplated by this Agreement" and "Arrangement," when used anywhere in this
Agreement, shall not be deemed for any purpose to include any of the Phase II
Transactions. Without limiting the foregoing or the covenants contained in the
other paragraphs of this Section 7.19, the parties expressly acknowledge that
none of the conditions contained in Article VIII of this Agreement (including
those contained in Sections 8.1(d), 8.2(g) and 8.3(e)), other than Section
8.2(e) shall require for its satisfaction that the parties obtain any consent,
permit, approval or authorization of any third parties or Governmental Entity
which is necessary or advisable for the consummation of the Phase II
Transactions and not otherwise required for the consummation of the Arrangement.
7.20. Newcourt Allowance. Newcourt shall take such actions as shall be
necessary so that, as of the end of each month between the date of this
Agreement and the Effective Time, Newcourt's allowance for credit losses
reflected on its consolidated balance sheet for such month equals or exceeds
1.7% of the aggregate net book value of Newcourt's "Finance Assets Held for
Investment" and "Equipment Under Operating Lease" reflected on its consolidated
balance sheet for such month.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the Arrangement . The
respective obligation of each party to effect the Arrangement shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approvals. (i) The Arrangement Resolution shall have
been approved and adopted by the requisite vote of not less than two-thirds
of the votes cast by the holders of Newcourt Common Shares who are
represented in person or by proxy at the meeting of Newcourt's shareholders
contemplated by Section 7.3 and in accordance with any other conditions
which may be imposed by the Interim Order and (ii) the issuance of shares
of CIT Common Stock pursuant to this Agreement and the Plan of Arrangement
and upon exchange of Exchangeable Shares and upon issuance or exercise of
Replacement Options shall have been approved and adopted by the requisite
vote of the holders of the outstanding shares of CIT Common Stock under the
rules of the NYSE.
(b) Interim and Final Orders. The Interim Order and the Final Order
shall each have been obtained in form and terms reasonably satisfactory to
each of Newcourt and CIT, and shall such orders not have been set aside or
modified on appeal or otherwise in a manner which is not reasonably
acceptable to such parties.
(c) Listing of Shares. The Exchangeable Shares and the shares of CIT
Common Stock shall have been conditionally approved for listing on the TSE,
subject to the usual conditions, and the shares of CIT Common Stock which
shall be issued to the shareholders of Newcourt upon consummation of the
Arrangement, upon exchange of the Exchangeable Shares or upon exercise of
the Replacement Options shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
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(d) Primary Approvals. The Primary Approvals shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired, provided that the party asserting
the failure of the condition set forth in this Section 8.1(d) shall have
taken any and all actions that such party is required to take under Section
7.4(b).
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(f) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
Arrangement (an "Injunction") shall be in effect. No statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits,
restricts or makes illegal consummation of the Arrangement.
(g) Dissenting Shareholders. Newcourt shall not have received from
holders of more than 10% of the Newcourt Common Shares the written
objection to the Arrangement Resolution referred to in Section 185(6) of
the OBCA where (i) such objections (x) shall have been made timely under
Section 3.1 of the Plan of Arrangement and (y) shall not have been
withdrawn and (ii) such shares are not voted in favor of the Plan of
Arrangement, unless within 30 days after the meeting of Newcourt's
shareholders held pursuant to Section 7.3 or, if earlier, immediately prior
to the Effective Time, any of Goldman Sachs, J.P. Morgan Securities Inc.,
Donaldson Lufkin & Jenrette Securities Corporation or any of their
respective affiliates, has provided Newcourt and CIT with a letter stating
that in the good faith reasonable judgment of such firm, such firm believes
that it can place a sufficient amount of permanent equity securities of New
CIT to fund the payments required to be made in respect of those shares in
excess of 10% of the Newcourt Common Shares for which Dissent Rights shall
have been perfected.
8.2. Conditions to Obligations of CIT. The obligation of CIT to effect the
Arrangement is also subject to the satisfaction or waiver by CIT at or prior to
the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of Newcourt set forth in this Agreement
(other than those set forth in Sections 4.2, 4.3(a) and 4.3(b)(i), 4.7,
4.11(a) and 4.18) shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and
as of the Closing Date; and (ii) the representations and warranties of
Newcourt set forth in Sections 4.2, 4.3(a) and 4.3(b)(i), 4.7, 4.11(a) and
4.18 of this Agreement shall be true and correct in all material respects
(without giving effect to Section 3.2 of this Agreement) as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. CIT shall have received a certificate
signed on behalf of Newcourt by the Chairman and the Chief Financial
Officer of Newcourt to the foregoing effect.
(b) Performance of Obligations of Newcourt. Newcourt shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and CIT shall
have received a certificate signed on behalf of Newcourt by the Chairman
and the Chief Financial Officer of Newcourt to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Dell Contract. Any consent, approval or waiver which may be
required in order for the Dell Contract to remain in full force and effect
immediately after consummation of the Arrangement shall have been obtained
and the Dell Contract shall remain in full force and effect, without any
amendment or modification from the terms thereof as in effect on the date
of this Agreement, other than any such amendment or modification which does
not materially reduce the economic benefits of such agreement to Newcourt.
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(e) Lucent Contract. Any consent, approval or waiver which may be
required in order for the Lucent Contract to remain in full force and
effect immediately after consummation of the Arrangement and the Phase II
Transactions shall have been obtained and the Lucent Contract shall remain
in full force and effect, without any amendment or modification from the
terms thereof as in effect on the date of this Agreement, other than any
such amendment or modification which does not materially reduce the
economic benefits of such agreement to Newcourt.
(f) Availability of Executives. The persons listed on Section 8.2(f)
of the Newcourt Disclosure Schedule shall be serving as officers of
Newcourt immediately prior to the Effective Time.
(g) Third Party Consents. The consent, approval or waiver of each
Person (other than the Governmental Entities referred to in Section 8.1(d))
whose consent to or approval of the Arrangement shall be required under any
note, bond, mortgage, indenture, deed of trust, license, lease, loan or
credit agreement or other agreement or other instrument or obligation to
which Newcourt or any of the Newcourt Subsidiaries is a party, or by which
they or any of their respective Properties may be bound or affected (other
than the Dell Contract and the Lucent Contract) shall have been obtained
and shall remain in full force and effect, except where the failure to have
obtained such consent, waiver or approval, or the failure of any such
consent, waiver or approval to be in full force and effect, would not,
individually or in the aggregate, have a Material Adverse Effect on
Newcourt.
(h) Comfort Letter. Ernst & Young LLP shall have delivered to CIT a
comfort letter with respect to the calculation of Final Adjusted
Shareholders' Equity in the form of Exhibit F.
(i) Litigation. As of the Closing Date, other than as set forth on
Section 4.9 of the Newcourt Disclosure Schedule, neither Newcourt nor any
of the Newcourt Subsidiaries shall be a party to any legal, administrative,
arbitral or other proceedings, claims, actions or governmental or
regulatory investigations against Newcourt or any of the Newcourt
Subsidiaries which has had or is reasonably expected to have a Material
Adverse Effect on Newcourt.
(j) Regulatory Conditions. No Primary Approval shall have imposed any
condition or restriction that would so materially adversely affect the
economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable, in the reasonable good faith
judgment of CIT, the consummation of the transactions contemplated hereby.
8.3. Conditions to Obligations of Newcourt. The obligation of Newcourt to
effect the Arrangement is also subject to the satisfaction or waiver by Newcourt
at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of CIT set forth in this Agreement (other
than those set forth in Sections 5.2, 5.3(a) and 5.3(b)(i), 5.7, 5.11(a)
and 5.18) shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date; and (ii) the representations and warranties of CIT set forth
in Sections 5.2, 5.3(a) and 5.3(b)(i), 5.7, 5.11(a) and 5.18 of this
Agreement shall be true and correct in all material respects (without
giving effect to Section 3.2 of this Agreement) as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and
as of the Closing Date. Newcourt shall have received a certificate signed
on behalf of CIT by the Chief Executive Officer and the Chief Financial
Officer of CIT to the foregoing effect.
(b) Performance of Obligations of CIT. CIT shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Newcourt shall have received
a certificate signed on behalf of CIT by the Chief Executive Officer and
the Chief Financial Officer of CIT to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Board of Directors. CIT shall have taken all such actions as shall
be necessary so that at the Effective Time, the composition of New CIT's
Board of Directors shall comply with Section 7.13
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hereof (assuming Newcourt has designated the initial Directors of New CIT
that it is permitted to designate under Section 7.13 hereof).
(e) Third Party Consents. The consent, approval or waiver of each
Person (other than the Governmental Entities referred to in Section 8.1(d))
whose consent to or approval of the Arrangement shall be required under any
note, bond, mortgage, indenture, deed of trust, license, lease, loan or
credit agreement or other agreement or other instrument or obligation to
which CIT or any of the CIT Subsidiaries is a party, or by which they or
any of their respective Properties may be bound or affected shall have been
obtained and shall remain in full force and effect, except where the
failure to have obtained such consent, waiver or approval, or the failure
of any such consent, waiver or approval to be in full force and effect,
would not, individually or in the aggregate, have a Material Adverse Effect
on CIT.
(f) Litigation. As of the Closing Date, other than as set forth on
Section 5.9 of the CIT Disclosure Schedule, neither CIT nor any of the CIT
Subsidiaries shall be a party to any legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory
investigations against CIT or any of the CIT Subsidiaries which has had or
is reasonably expected to have a Material Adverse Effect on CIT.
(g) Regulatory Conditions. No Primary Approval shall have imposed any
condition or restriction that would so materially adversely affect the
economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable, in the reasonable good faith
judgment of Newcourt, the consummation of the transactions contemplated
hereby.
8.4. No Adverse DKB Regulatory Condition; No Adverse Amendment. (a) In
addition to the other conditions set forth in this Article VIII, if any approval
of the Federal Reserve Board, the OSFI, the Minister of Finance of Canada or the
Governor in Council of Canada required to consummate the transactions
contemplated hereby (including the Arrangement) shall have imposed any condition
or restriction on DKB or any of its Subsidiaries, other than (x) any conditions
or restrictions that relate to the business, activities or investments of
Newcourt or CIT or any of their respective Subsidiaries but do not relate to the
business, activities or investments of DKB or any of its Subsidiaries (other
than Newcourt, CIT or any of their respective Subsidiaries), and (y) any
existing requirement, restriction or condition imposed by any such regulatory
authority with respect to DKB or any of its Subsidiaries on or prior to the date
hereof, the parties hereto shall not effect the Arrangement unless such
condition or restriction is satisfactory to DKB in its sole reasonable judgment.
(b) If the Ministry of Finance of Japan, the Financial Supervisory
Agency of Japan or any other Japanese regulatory authority shall have
imposed any requirement on DKB with respect to the transactions
contemplated hereby (including the Arrangement) that would reasonably be
expected to have a material adverse effect on the business or financial
condition of DKB and its Subsidiaries (other than CIT and its
Subsidiaries), taken as a whole, the parties hereto shall not effect the
Arrangement without the prior written consent of DKB.
(c) Newcourt and CIT shall not amend or modify this Agreement in any
manner that would (i) increase the Exchange Ratio or alter the form of the
consideration payable to the shareholders of Newcourt hereunder, (ii)
extend the Outside Termination Date, (iii) result in a change in the
structure of the transactions contemplated hereby, or (iv) alter or amend
Section 7.13 hereof, or otherwise enter into any agreements addressing the
composition of the Board of Directors of New CIT (other than the Voting
Agreements referred to in the Recitals to this Agreement) or any current or
future Chief Executive Officer of CIT (in each case other than the
agreements set forth herein) unless such amendment or modification is
satisfactory to DKB in its sole reasonable judgment.
(d) The provisions of this Section 8.4 may not be amended or waived by
the parties without the prior written consent of DKB.
(e) The provisions of this Section 8.4 are intended to be for the
benefit of, and shall be enforceable by, DKB.
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8.5. Satisfaction of Conditions. The conditions precedent set forth in
Sections 8.1, 8.2, 8.3 and 8.4 shall be conclusively deemed to have been
satisfied or waived when, with the agreement of Newcourt and CIT and absent a
prior written objection from DKB under Section 8.4, a certificate of arrangement
in respect of the Arrangement is issued by the Director.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Arrangement by the shareholders of both Newcourt and CIT:
(a) by mutual consent of Newcourt and CIT in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either CIT or Newcourt upon written notice to the other party
(i) from and after the 30th day after the date on which any request or
application for a Primary Approval shall have been denied or withdrawn at
the request or recommendation of the Governmental Entity which must grant
such Primary Approval, unless within the 30-day period following such
denial or withdrawal a petition for rehearing or an amended application has
been filed with the applicable Governmental Entity; provided, however, that
no party shall have the right to terminate this Agreement pursuant to this
Section 9.1(b)(i) if the party seeking to terminate this Agreement shall
have failed to perform or observe the covenants and agreements of such
party set forth herein (including Section 7.4(b)); provided further,
however, that in no event shall either party have the right to terminate
this Agreement pursuant to this Section 9.1(b) at any time before December
31, 1999; or (ii) subject to Section 7.4(b), if any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the Arrangement;
(c) by either CIT or Newcourt if the Arrangement shall not have been
consummated on or before January 31, 2000 (the "Outside Termination Date"),
unless the failure of the Closing to occur by such date shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein;
(d) by either CIT or Newcourt (provided that the terminating party
shall not be in material breach of any of its obligations under Section
7.3) if any approval of the shareholders of Newcourt required for the
consummation of the Arrangement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of such
shareholders or at any adjournment or postponement thereof;
(e) by either CIT or Newcourt (provided that the terminating party
shall not be in material breach of any of its obligations under Section
7.3) if any approval of the shareholders of CIT required for the
consummation of the Arrangement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of such
shareholders or at any adjournment or postponement thereof;
(f) by either CIT or Newcourt (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty days following written notice to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the Closing;
provided, however, that neither party shall have the right to terminate
this Agreement pursuant to this Section 9.1(f) unless the breach of
representation or warranty, together with all other such breaches, would
entitle the party receiving such representation not to consummate the
transactions contemplated hereby under Section 8.2(a) (in the case of a
breach of representation or warranty by Newcourt) or Section 8.3(a) (in the
case of a breach of representation or warranty by CIT);
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(g) by either CIT or Newcourt (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements set forth in this Agreement on
the part of the other party, which breach shall not have been cured within
thirty days following receipt by the breaching party of written notice of
such breach from the other party hereto, or which breach, by its nature,
cannot be cured prior to the Closing;
(h) by Newcourt, without any further action, if Newcourt shall have
entered into an Acquisition Agreement with any party other than CIT as
permitted by and in accordance with Section 7.3 hereof;
(i) by CIT, if either the Dell Contract or the Lucent Contract shall
have been terminated, or either of the conditions contained in Sections
8.2(d) and 8.2(e) shall have otherwise become incapable of being satisfied;
or
(j) by CIT, if, at any time after the date of this Agreement, any of
the persons listed on Section 8.2(f) of the Newcourt Disclosure Schedule
shall not be serving as an officer of Newcourt.
9.2. Effect of Termination. (a) In the event of termination of this
Agreement by either CIT or Newcourt as provided in Section 9.1, this Agreement
shall forthwith become void and have no effect except (i) Sections 7.2(b), 9.2
and 10.3 shall survive any termination of this Agreement and (ii) that
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
(b) If Newcourt terminates this Agreement pursuant to Section 9.1(h),
Newcourt shall pay to CIT a termination fee equal to the Newcourt Fee
Amount by wire transfer of same day funds on the date of termination. The
"Newcourt Fee Amount" shall be $105 million; provided, however, that if the
Stock Option Agreement shall terminate pursuant to the last sentence of
Section 2(a) of the Stock Option Agreement, the Newcourt Fee Amount shall
be $120 million less any amounts paid by Newcourt to CIT pursuant to the
terms of the Stock Option Agreement.
(c) In the event that an Acquisition Proposal with respect to Newcourt
or any of its Subsidiaries shall have been made known to Newcourt or any of
its Subsidiaries and shall have been publicly announced or otherwise become
public, or shall have been made to the shareholders of Newcourt generally,
and thereafter (x) this Agreement is terminated by either Newcourt or CIT
pursuant to Section 9.1(d) of this Agreement, and (y) within twelve months
of such termination Newcourt or any of its Subsidiaries enters into any
Newcourt Acquisition Agreement (as defined below) or consummates a Newcourt
Takeover Proposal (as defined below), then upon the first occurrence of any
of the events contemplated by clause (y) Newcourt shall pay CIT a
termination fee equal to the Newcourt Fee Amount by wire transfer of same
day funds. "Newcourt Takeover Proposal" shall mean any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or
purchase of a business that constitutes 50% or more of the net revenues,
net income or the assets of Newcourt and its subsidiaries taken as a whole,
or 50% or more of the outstanding voting securities of Newcourt, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 50% or more of the outstanding voting securities of
Newcourt, or any merger, amalgamation, plan of arrangement, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Newcourt or the Newcourt Common Shares (or any one or
more of Newcourt's Subsidiaries, if the business of such Subsidiary or all
of such Subsidiaries constitutes 50% or more of the net revenues, net
income or assets of Newcourt and its Subsidiaries taken as a whole), other
than the transactions contemplated by this Agreement. "Newcourt Acquisition
Agreement" shall mean any agreement, letter of intent or other binding
agreement relating to any transaction of the type described in the
definition of Newcourt Takeover Proposal.
(d) In the event that an Acquisition Proposal with respect to CIT or
any of its Subsidiaries shall have been made known to CIT or any of its
Subsidiaries and shall have been publicly announced or otherwise become
public, or shall have been made to the shareholders of CIT generally, and
thereafter (x) this Agreement is terminated by either Newcourt or CIT
pursuant to Section 9.1(e) of this Agreement, and (y) within twelve months
of such termination CIT or any of its Subsidiaries enters
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into any CIT Acquisition Agreement (as defined below) or consummates a CIT
Takeover Proposal (as defined below), then upon the first occurrence of any
of the events contemplated by clause (y) CIT shall pay Newcourt a
termination fee equal to $120 million by wire transfer of same day funds.
"CIT Takeover Proposal" shall mean any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
business that constitutes 50% or more of the net revenues, net income or
the assets of CIT and its subsidiaries taken as a whole, or 50% or more of
the outstanding voting securities of CIT, any tender offer or exchange
offer that if consummated would result in any person beneficially owning
50% or more of the outstanding voting securities of CIT, or any merger,
amalgamation, plan of arrangement, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
CIT or the CIT Common Shares (or any one or more of CIT's Subsidiaries, if
the business of such Subsidiary or all of such Subsidiaries constitutes 50%
or more of the net revenues, net income or assets of CIT and its
Subsidiaries taken as a whole), other than the transactions contemplated by
this Agreement. "CIT Acquisition Agreement" shall mean any agreement,
letter of intent or other binding agreement relating to any transaction of
the type described in the definition of CIT Takeover Proposal.
(e) Newcourt and CIT agree that the agreements contained in Sections
9.2(b), 9.2(c) and 9.2(d) above are integral parts of the transactions
contemplated by this Agreement and constitute liquidated damages and not a
penalty. If one party fails to promptly pay to the other party any fee due
under Section 9.2(b), 9.2(c) or 9.2(d), the defaulting party shall pay the
costs and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A. from the
date such fee was required to be paid.
9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Arrangement by the shareholders of
either Newcourt or CIT; provided, however, that after any approval of the
transactions contemplated by this Agreement by Newcourt's shareholders, there
may not be, without further approval of such shareholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to Newcourt shareholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective Time, each of
the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this Agreement, the
closing of the Arrangement (the "Closing") will take place at 10:00 a.m. on the
third business day after the satisfaction or waiver (subject to applicable law)
of the latest to occur of the conditions set forth in Article VIII hereof (other
than those conditions which relate to actions to be taken at the Closing)(the
"Closing Date"), at the offices of Schulte Roth & Zabel LLP unless another time,
date or place is agreed to in writing by the parties hereto, provided, however,
that if such third business day is the sixteenth day or later day of a month,
then the Closing Date shall be the last day of such month so as to permit the
preparation and delivery of the Final Net Worth Statement as of the end of the
immediately preceding month.
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Annex E
10.2. Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
10.3. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, except that Newcourt shall bear and pay 50%
of, and CIT shall bear and pay 50% of, the costs and expenses incurred in
connection with the filing, printing and mailing of the Registration Statement
and the Proxy Circular (including SEC filing fees).
10.4. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to CIT, to:
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Ernest Stein, Esq.
with copies to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn: Marc Weingarten, Esq.
and
Goodman Phillips & Vineberg
1501 McGill College Avenue, 26th Floor
Montreal, Quebec
Attn: Sidney Horn, Esq.
and
(b) if to Newcourt, to:
Newcourt Credit Group Inc.
2 GateHall Center
Parsippany, New Jersey 07924
Attention: David F. Banks, Chairman
with copies to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.
and
Blake, Cassels & Graydon
Box 25 Commerce Court West
Toronto, Canada M5L 1A9
Attn: Gordon Currie, Esq.
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Annex E
10.5. Interpretation. Unless otherwise explicitly indicated, all references
in this Agreement to "dollars," "$" or "US$" are intended to refer to United
States dollars. When a reference is made in this Agreement to Sections, Exhibits
or Schedules, such reference shall be to a Section of or Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The phrases "the date
of this Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to August 5, 1999. No
provision of this Agreement shall be construed to require Newcourt, CIT or any
of their respective Subsidiaries or affiliates to take any action, or refrain
from taking any action, where taking or refraining from taking such action would
violate any applicable law (whether statutory or common), rule or regulation.
10.6. Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
10.7. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein or delivered in connection herewith) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, other than the Confidentiality Agreement.
10.8. Governing Law. This Agreement and the other documents delivered in
connection herewith (including the Releases) shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.
10.9. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in 7.2(b) of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of Section 7.2(b) of this
Agreement and to enforce specifically the terms and provisions thereof in any
court of competent jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.10. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.11. Publicity. Except as otherwise required by law or the rules of the
ME, the TSE or the NYSE, so long as this Agreement is in effect, neither CIT nor
Newcourt shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld.
10.12. Assignment; No Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
either of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
10.13. No Personal Liability. (a) No director or officer of Newcourt shall
have any personal liability whatsoever to CIT under this Agreement, or any other
document delivered in connection with the Arrangement on behalf of Newcourt.
(b) No director or officer of CIT shall have any personal liability
whatsoever to Newcourt under this Agreement, or any other document delivered in
connection with the Arrangement on behalf of CIT.
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Annex E
IN WITNESS WHEREOF, CIT and Newcourt have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NEWCOURT CREDIT GROUP INC.
By /s/ David F. Banks
-----------------------------------------
Name: David F. Banks
Title: Chairman
By /s/ David McKerroll
-----------------------------------------
Name: David McKerrol
Title: President, Corporation Finance
THE CIT GROUP, INC.
By /s/ Albert R. Gamper
-----------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
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Annex E
APPENDIX I
Executive Officers Signing Voting Agreement
-------------------------------------------
Steven K. Hudson
Bradley D. Nullmeyer
David D. McKerroll
Daniel A. Jauernig
Scott J. Moore
David J. Sharpless
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Annex E
ANNEX F
PLAN OF ARRANGEMENT INCLUDING EXCHANGEABLE SHARE PROVISIONS
PLAN OF ARRANGEMENT
UNDER SECTION 182
OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
"Agreement and Plan of Reorganization" means the amended and restated
agreement and plan of reorganization made as of August 5, 1999 between CIT and
Newcourt, as amended, supplemented and/or restated in accordance therewith prior
to the Effective Date, providing for, among other things, the Arrangement.
"Arrangement" means the arrangement under section 182 of the OBCA on the
terms and subject to the conditions set out in this Plan of Arrangement, subject
to any amendments or variations thereto made in accordance with Article IX of
the Agreement and Plan of Reorganization or Article 6 hereof or made at the
direction of the Court in the Final Order.
"Ancillary Rights" means the Voting Rights, the Automatic Exchange Right
and the Exchange Right.
"Arrangement Resolution" means the special resolution passed by the
holders of the Newcourt Common Shares at the Newcourt Meeting.
"Articles of Arrangement" means the articles of arrangement of Newcourt in
respect of the Arrangement, required by the OBCA to be sent to the Director
after the Final Order is made.
"Automatic Exchange Right" means the benefit of the obligation of CIT to
effect the automatic exchange of CIT Common Shares for Exchangeable Shares
pursuant to section 5.12 of the Voting and Exchange Trust Agreement.
"Business Day" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario, other than a Saturday, a
Sunday or a day observed as a holiday in Toronto, Ontario under the laws of the
Province of Ontario or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
"Canadian Resident" means a resident of Canada for the purpose of the ITA.
"Certificate" means the certificate of arrangement giving effect to the
Arrangement, issued pursuant to subsection 183(2) of the OBCA after the Articles
of Arrangement have been filed.
"CIT" means The CIT Group Inc., a corporation existing under the laws of
the State of Delaware.
"CIT Common Share" means a share of Class A Common Stock, par value
U.S.$0.01 per share, in the capital of CIT, and any other securities into which
such shares may be changed.
"CIT Control Transaction" has the meaning ascribed thereto in the
Exchangeable Share Provisions.
"CIT Meeting" means the meeting of holders of CIT Common Shares (including
any adjournment thereof) that is to be convened to consider, and if advisable,
approve amongst other matters, the issuance of CIT Common Shares pursuant to
this Plan of Arrangement.
"Court" means the Superior Court of Justice (Ontario).
"Current Market Price" has the meaning ascribed thereto in the
Exchangeable Share Provisions.
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Annex F
"Depositary" means Montreal Trust Company of Canada at its offices set out
in the Letter of Transmittal and Election Form.
"Director" means the Director appointed under section 278 of the OBCA.
"Dissent Procedures" has the meaning set out in section 3.1.
"Dissenting Shareholder" means a holder of Newcourt Common Shares who
dissents in respect of the Arrangement in strict compliance with the Dissent
Procedures.
"Dividend Amount" has the meaning ascribed thereto in section 5.1(a).
"Effective Date" means the date shown on the Certificate.
"Effective Time" means 12:01 a.m. on the Effective Date.
"Election Deadline" means 5:00 p.m. (local time) at the place of deposit
on the date which is one Business Day prior to the date of the Newcourt Meeting.
"Eligible Electing Holder" means a holder of Newcourt Common Shares (i)
who is a Canadian Resident; or (ii) which is a partnership that owns Newcourt
Common Shares if one or more of its members would be an Eligible Electing Holder
if such member held such shares directly.
"Eligible Holder" means a holder of Newcourt Common Shares (i) who is a
resident of Canada for the purposes of the ITA, other than any holder who is
generally exempt from tax under the ITA, or (ii) which is a partnership that
owns Newcourt Common Shares if one or more of its members would be an Eligible
Holder if such member held such shares directly.
"Exchange Ratio" means 0.70, subject to downward adjustment pursuant to
the Agreement and Plan of Reorganization.
"Exchange Right" has the meaning ascribed thereto in the Voting and
Exchange Trust Agreement.
"Exchangeable Share" means a share in the class of non-voting exchangeable
shares in the capital of Exchangeco.
"Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares, which rights, privileges,
restrictions and conditions shall be substantially as set forth in Appendix 1
hereto.
"Exchangeco" means CIT Exchangeco Inc., a company limited by shares
existing under the laws of the Province of Nova Scotia and being a subsidiary of
Newco, all of the common shares of which are owned by Newco.
"Final Order" means the final order of the Court approving the
Arrangement.
"Interim Order" means the interim order of the Court dated September 20,
1999 made in connection with the process for obtaining shareholder approval of
the Arrangement and related matters.
"ITA" means the Income Tax Act (Canada).
"Letter of Transmittal and Election Form" means the Letter of Transmittal
and Election Form for use by holders of Newcourt Common Shares, in the form
accompanying the Proxy Circular.
"Liquidation Call Purchase Price" has the meaning ascribed thereto in
section 5.1(a).
"Liquidation Call Right" has the meaning ascribed thereto in section
5.1(a).
"Liquidation Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions.
"Meeting Date" means the date of the Newcourt Meeting.
"Newco" means 3026192 Nova Scotia Company, an unlimited liability company
existing under the laws of the Province of Nova Scotia and being a wholly-owned
subsidiary of CIT.
"Newcourt" means Newcourt Credit Group Inc., a corporation existing under
the laws of the Province of Ontario.
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Annex F
"Newcourt Common Shares" means the outstanding common shares in the
capital of Newcourt and includes, for the purposes hereof, any Special Shares
outstanding at the Effective Date.
"Newcourt Meeting" means the special meeting of the holders of Newcourt
Common Shares (including any adjournment thereof) that is to be convened as
provided by the Interim Order to consider, and if deemed advisable, approve the
Arrangement Resolution.
"Newcourt Option" means an option to acquire a Newcourt Common Share
granted under Newcourt's Stock Option Plan, as amended, and being outstanding
and unexercised on the Effective Date.
"NSCA" means the Companies Act (Nova Scotia), R.S. 1990, c.81.
"OBCA" means the Business Corporations Act (Ontario), R.S.O. 1990, c.
B.16.
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor, administrator,
legal personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, government body, syndicate or other
entity, whether or not having legal status.
"Proxy Circular" means the notices of the Newcourt Meeting and the CIT
Meeting and accompanying joint management information circular and proxy
statement dated September 21, 1999 sent to holders of Newcourt Common Shares and
holders of CIT Common Shares in connection with the Newcourt Meeting and the CIT
Meeting.
"Redemption Call Purchase Price" has the meaning ascribed thereto in
section 5.2(a).
"Redemption Call Right" has the meaning ascribed thereto in section
5.2(a).
"Redemption Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions.
"Replacement Option" has the meaning ascribed thereto in section 2.2(d).
"Special Share" means the non-voting shares in the capital of Newcourt.
"Special Voting Share" means the share of Special Voting Stock of CIT
having substantially the rights, privileges, restrictions and conditions
described in the Voting and Exchange Trust Agreement.
"Tax Election Date" has the meaning ascribed thereto in the Proxy
Circular.
"Tax Election Filing Package" has the meaning ascribed thereto in the
Proxy Circular.
"Transition Option Plan" means the transition option plan established by
CIT, effective as of the Effective Time, pursuant to which the Replacement
Options will be issued.
"Transfer Agent" has the meaning ascribed thereto in section 5.1(b).
"Trustee" means Montreal Trust Company of Canada.
"Voting and Exchange Trust Agreement" has the meaning ascribed thereto in
the Exchangeable Share Provisions.
"Voting Rights" means the rights of the holders of Exchangeable Shares to
direct the voting of the Special Voting Share in accordance with the Voting and
Exchange Trust Agreement.
1.2 Sections and Headings
The division of this Plan of Arrangement into sections and the insertion
of headings are for reference purposes only and shall not affect the
interpretation of this Plan of Arrangement. Unless otherwise indicated, any
reference in this Plan of Arrangement to a section or an exhibit refers to the
specified section of or exhibit to this Plan of Arrangement.
1.3 Number, Gender and Persons
In this Plan of Arrangement, unless the context otherwise requires, words
importing the singular number include the plural and vice versa and words
importing any gender include all genders.
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Annex F
ARTICLE 2
ARRANGEMENT
2.1 Binding Effect
This Plan of Arrangement will become effective at, and be binding at and
after, the Effective Time on (i) Newcourt, (ii) CIT, (iii) Exchangeco, (iv)
Newco, (v) all holders of Newcourt Common Shares, and (vi) all holders of
securities exchangeable for or convertible into Newcourt Common Shares.
2.2 Arrangement
Commencing at the Effective Time, the following shall occur and shall be
deemed to occur in the following order without any further act or formality:
(a) each outstanding Newcourt Common Share the holder of which is an
Eligible Electing Holder and in respect of which such holder shall
have made a valid election to exchange for CIT Common Shares shall be
transferred by the holder thereof, without any act or formality on his
part, to Exchangeco in exchange for that number of fully paid and
non-assessable CIT Common Shares equal to the Exchange Ratio, and the
name of each such holder will be removed from the register of holders
of Newcourt Common Shares and added to the register of holders of CIT
Common Shares and Exchangeco will be recorded as the registered holder
of such Newcourt Common Shares so transferred and will be deemed to be
the legal and beneficial owner thereof;
(b) each outstanding Newcourt Common Share the holder of which is an
Eligible Electing Holder and which the holder thereof shall have made
a valid election to exchange for Exchangeable Shares and applicable
Ancillary Rights shall be transferred by the holder thereof, without
any act or formality on his part, to Exchangeco in exchange for that
number of fully paid and non-assessable Exchangeable Shares equal to
the Exchange Ratio and applicable Ancillary Rights, and the name of
each such holder will be removed from the register of holders of
Newcourt Common Shares and added to the register of holders of
Exchangeable Shares and Exchangeco will be recorded as the registered
holder of such Newcourt Common Shares so transferred and will be
deemed to be the legal and beneficial owner thereof;
(c) each outstanding Newcourt Common Share the holder of which is not an
Eligible Electing Holder or is an Eligible Electing Holder who has not
made a valid election as described above, (other than (i) Newcourt
Common Shares held by Dissenting Shareholders who are ultimately
entitled to be paid the fair value of such Newcourt Common Shares and
(ii) Newcourt Common Shares held by CIT, Exchangeco or any subsidiary
or affiliate thereof) shall be transferred by the holder thereof,
without any act or formality on his part, to Exchangeco in exchange
for that number of fully paid and non-assessable CIT Common Shares
equal to the Exchange Ratio, and the name of each such holder will be
removed from the register of holders of Newcourt Common Shares and
added to the register of holders of CIT Common Shares and Exchangeco
will be recorded as the registered holder of such Newcourt Common
Shares so transferred and will be deemed to be the legal and
beneficial owner thereof; Newcourt Common Shares held by CIT,
Exchangeco or any subsidiary or affiliate thereof shall not be
transferred under this Arrangement and shall remain outstanding as
Newcourt Common Shares held by CIT, Exchangeco or any subsidiary or
affiliate thereof;
(d) each Newcourt Option which is outstanding and unexercised immediately
prior to the Effective Time shall be converted automatically into an
option issued by CIT under CIT's Transition Option Plan (a
"Replacement Option") to purchase a number of CIT Common Shares equal
to the product of the Exchange Ratio multiplied by the number of
Newcourt Common Shares subject to such Newcourt Option. Such
Replacement Option shall provide for an exercise price per CIT Common
Share equal to the exercise price per Newcourt Common Share under such
Newcourt Option immediately prior to the Effective Time divided by the
Exchange Ratio, provided that such exercise price shall be rounded up
to the nearest cent. If the foregoing calculation results in a
Replacement Option being exercisable for a fraction of a CIT Common
Share, then the number of CIT Common Shares subject to such
Replacement Option shall be rounded down to the next whole number of
CIT Common Shares. The term to expiry, conditions to and manner of
exercising, vesting schedule, and all other terms and
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Annex F
conditions of such Replacement Option will otherwise be unchanged,
and any document or agreement previously evidencing a Newcourt
Option shall thereafter evidence and be deemed to evidence such
Replacement Option under the CIT Transition Option Plan; and
(e) CIT shall issue to and deposit with the Trustee the Special Voting
Share, in consideration of the payment to CIT of US$1, to be
thereafter held of record by the Trustee as trustee for and on behalf
of, and for the use and benefit of, the holders of the Exchangeable
Shares in accordance with the Voting and Exchange Trust Agreement.
2.3 Elections
(a) Each Eligible Electing Holder will be entitled to make an election at
or prior to the Election Deadline to receive either Exchangeable
Shares and applicable Ancillary Rights or CIT Common Shares, in
exchange for such holder's Newcourt Common Shares, on the basis set
forth herein and in the Letter of Transmittal and Election Form.
(b) Holders of Newcourt Common Shares who are Eligible Holders and who
have elected to receive Exchangeable Shares and Ancillary Rights in
exchange for Newcourt Common Shares shall be entitled to make a joint
income tax election with Exchangeco pursuant to section 85 of the ITA
(and the analogous provisions of provincial income tax law) with
respect to the transfer of such Newcourt Common Shares to Exchangeco
by providing a duly completed Tax Election Filing Package together
with any required supporting schedules, signed and forwarded by the
Eligible Holder to KPMG LLP on or before the Tax Election Date, all as
provided for in the Proxy Circular. Thereafter, subject to the
election forms and other documents complying with the provisions of
the ITA (or applicable provincial income tax law), the forms will be
signed by Exchangeco and forwarded by mail to the appropriate tax
authorities, with a copy thereof to the Eligible Holder all as
provided for in the Proxy Circular.
ARTICLE 3
RIGHTS OF DISSENT
3.1 Rights of Dissent
Holders of Newcourt Common Shares may exercise rights of dissent with
respect to such shares pursuant to and in strict compliance with the manner set
forth in section 185 of the OBCA and this section 3.1 (the "Dissent Procedures")
in connection with the Arrangement; provided that, notwithstanding subsection
185(6) of the OBCA, the written objection to the Arrangement Resolution referred
to in subsection 185(6) of the OBCA must be received by Newcourt not later than
5:00 p.m. (Toronto time) on the Business Day preceding the Newcourt Meeting.
Holders of Newcourt Common Shares who duly exercise such rights of dissent and
who:
(a) are ultimately entitled to be paid fair value for their Newcourt
Common Shares shall be deemed to have transferred such Newcourt Common
Shares to Exchangeco and such shares shall be cancelled on the
Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid fair value for
their Newcourt Common Shares shall be deemed to have participated in
the Arrangement on the same basis as a non-dissenting holder of
Newcourt Common Shares and shall receive CIT Common Shares on the
basis determined in accordance with section 2.2(c),
but in no case shall CIT, Newcourt, Exchangeco or any other Person be required
to recognize such holders as holders of Newcourt Common Shares after the
Effective Time, and the names of such holders of Newcourt Common Shares shall be
deleted from the register of holders of Newcourt Common Shares at the Effective
Time.
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Annex F
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
4.1 Issuance of Certificates Representing Exchangeable Shares
At or promptly after the Effective Time, Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Newcourt Common Shares who will
receive Exchangeable Shares in connection with the Arrangement, certificates
representing the Exchangeable Shares issued pursuant to section 2.2 in exchange
for Newcourt Common Shares. Upon surrender to the Depositary for cancellation of
a certificate which immediately prior to the Effective Time represented one or
more Newcourt Common Shares that were transferred to Exchangeco for one or more
Exchangeable Shares under the Arrangement, together with such other documents
and instruments as would have been required to effect the transfer of the shares
formerly represented by such certificate under the OBCA and the by-laws of
Newcourt and such additional documents and instruments as the Depositary may
reasonably require, the holder of such surrendered certificate shall be entitled
to receive in exchange therefor, and the Depositary shall deliver to such
holder, a certificate representing that number (rounded down to the nearest
whole number) of Exchangeable Shares which such holder has the right to receive
(together with any dividends or distributions with respect thereto pursuant to
section 4.3 and any cash in lieu of fractional Exchangeable Shares pursuant to
section 4.4), and the certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of Newcourt Common Shares that is not
registered in the transfer records of Newcourt, a certificate representing the
proper number of Exchangeable Shares may be issued to the transferee if the
certificate representing such Newcourt Common Shares is presented to the
Depositary, accompanied by all documents required to evidence and effect such
transfer. Until surrendered as contemplated by this section 4.1, each
certificate which immediately prior to the Effective Time represented Newcourt
Common Shares that were exchanged for Exchangeable Shares shall be deemed at all
times after the Effective Time to represent only the right to receive upon such
surrender (i) the certificate representing Exchangeable Shares as contemplated
by this section 4.1, (ii) a cash payment in lieu of any fractional Exchangeable
Shares as contemplated by section 4.4, and (iii) any dividends or distributions
with a record date after the Effective Time theretofore paid or payable with
respect to Exchangeable Shares as contemplated by section 4.3.
4.2 Exchange of Certificates for CIT Common Shares
At or promptly after the Effective Time, Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Newcourt Common Shares who will
receive CIT Common Shares in connection with the Arrangement, certificates
representing the CIT Common Shares issued pursuant to section 2.2 in exchange
for Newcourt Common Shares. Upon surrender to the Depositary for cancellation of
a certificate which immediately prior to the Effective Time represented
outstanding Newcourt Common Shares that were transferred to Exchangeco for CIT
Common Shares, together with such other documents and instruments as would have
been required to effect the transfer of the shares formerly represented by such
certificate under the OBCA and the by-laws of Newcourt and such additional
documents and instruments as the Depositary may reasonably require, the holder
of such surrendered certificate shall be entitled to receive in exchange
therefor, and the Depositary shall deliver to such holder, a certificate
representing that number (rounded down to the nearest whole number) of CIT
Common Shares which such holder has the right to receive (together with any
dividends or distributions with respect thereto pursuant to section 4.3 and any
cash in lieu of fractional CIT Common Shares pursuant to section 4.4), and the
certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Newcourt Common Shares which is not registered in the
transfer records of Newcourt, a certificate representing the proper number of
CIT Common Shares may be issued to the transferee if the certificate
representing such Newcourt Common Shares is presented to the Depositary,
accompanied by all documents required to evidence and effect such transfer.
Until surrendered as contemplated by this section 4.2, each certificate which
immediately prior to the Effective Time represented one or more outstanding
Newcourt Common Shares that were exchanged for CIT Common Shares shall be deemed
at all times after the Effective Time to represent only the right to receive
upon such surrender (i) the certificate representing CIT Common Shares as
contemplated by this section 4.2, (ii) a cash payment in lieu of any fractional
CIT Common Shares as contemplated by section 4.4, and (iii) any dividends or
distributions with a record date after the Effective Time theretofore paid or
payable with respect to CIT Common Shares as contemplated by section 4.3.
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Annex F
4.3 Distributions with Respect to Unsurrendered Certificates
No dividends or other distributions declared or made after the Effective
Time with respect to Exchangeable Shares or CIT Common Shares with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
certificate which immediately prior to the Effective Time represented
outstanding Newcourt Common Shares that were transferred pursuant to section
2.2, and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to section 4.4, unless and until the holder of record of such
certificate shall surrender such certificate in accordance with section 4.1 or
4.2. Subject to applicable law, at the time of such surrender of any such
certificate, there shall be paid to the holder of record of the certificates
representing whole Newcourt Common Shares, without interest, (i) the amount of
any cash payable in lieu of a fractional Exchangeable Share or CIT Common Share
to which such holder is entitled pursuant to section 4.4, (ii) the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Exchangeable Share or CIT Common
Share, as the case may be, and (iii) on the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole Exchangeable Share or CIT Common Share, as the case may
be.
4.4 No Fractional Shares
No certificates or scrip representing fractional Exchangeable Shares or
fractional CIT Common Shares shall be issued upon the surrender for exchange of
certificates pursuant to section 4.1 or 4.2 and no dividend, stock split or
other change in the capital structure of Newcourt shall relate to any such
fractional security and such fractional interests shall not entitle the owner
thereof to exercise any rights as a security holder of CIT or Newcourt, as the
case may be. In lieu of any such fractional securities:
(a) each Person otherwise entitled to a fractional interest in an
Exchangeable Share will receive a cash payment equal to such Person's
pro rata portion of the net proceeds after expenses received by the
Depositary upon the sale of whole shares representing an accumulation
of all fractional interests in Exchangeable Shares to which all such
Persons would otherwise be entitled. The Depositary will sell such
Exchangeable Shares by private sale (including by way of sale through
the facilities of any stock exchange upon which the Exchangeable
Shares are then listed) within 15 Business Days following the
Effective Date. The aggregate net proceeds after expenses of such sale
will be distributed by the Depositary, pro rata in relation to the
respective fractions, among the Persons otherwise entitled to receive
fractional interests in Exchangeable Shares; and
(b) each Person otherwise entitled to a fractional interest in a CIT
Common Share will receive a cash payment equal to such Person's pro
rata portion of the net proceeds after expenses received by the
Depositary upon the sale of whole shares representing an accumulation
of all fractional interests in CIT Common Shares to which all such
Persons would otherwise be entitled. The Depositary will sell such CIT
Common Shares on the New York Stock Exchange or The Toronto Stock
Exchange within 15 Business Days following the Effective Date for
those Newcourt Common Shares received by the Depositary prior to the
Newcourt Shareholders Meeting. For those Newcourt Common Shares
received by the Depositary after the Newcourt Shareholders Meeting,
the Depositary will sell such CIT Common Stock on the New York Stock
Exchange or The Toronto Stock Exchange as soon as reasonably
practicable thereafter. The aggregate net proceeds after expenses of
such sale will be distributed by the Depositary, pro rata in relation
to the respective fractions, among the Persons otherwise entitled to
receive fractional interests in CIT Common Shares.
4.5 Lost Certificates
In the event any certificate which immediately prior to the Effective Time
represented one or more outstanding Newcourt Common Shares that were transferred
pursuant to section 2.2 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, the Depositary will issue in exchange for such
lost, stolen or destroyed certificate, cash and/or one or more certificates
representing one or more Exchangeable Shares or CIT Common Shares (and any
dividends or distributions with respect thereto and any cash pursuant to section
4.4) deliverable in accordance with such holder's Letter of Transmittal and
Election Form. When authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the Person to whom certificates representing Exchangeable
Shares or
7
Annex F
CIT Common Shares are to be issued shall, as a condition precedent to the
issuance thereof, give a bond satisfactory to Exchangeco or CIT, as the case may
be, and their respective transfer agents in such sum as Exchangeco or CIT may
direct or otherwise indemnify Exchangeco and CIT in a manner satisfactory to
Exchangeco and CIT against any claim that may be made against Exchangeco or CIT
with respect to the certificate alleged to have been lost, stolen or destroyed.
4.6 Extinction of Rights
Any certificate which immediately prior to the Effective Time represented
outstanding Newcourt Common Shares that were transferred pursuant to section 2.2
and not deposited, with all other instruments required by section 4.1 or 4.2, on
or prior to the third anniversary of the Effective Date shall cease to represent
a claim or interest of any kind or nature as a shareholder of Exchangeco or CIT.
On such date, the Exchangeable Shares or CIT Common Shares (or cash in lieu of
fractional interests therein, as provided in section 4.4) to which the former
registered holder of the certificate referred to in the preceding sentence was
ultimately entitled shall be deemed to have been surrendered to Exchangeco or
CIT, as the case may be, together with all entitlements to dividends,
distributions and interest thereon held for such former registered holder.
4.7 Withholding Rights
Newcourt, Exchangeco, Newco, CIT and the Depositary shall be entitled to
deduct and withhold from any dividend or consideration otherwise payable to any
holder of Newcourt Common Shares, CIT Common Shares or Exchangeable Shares such
amounts as Newcourt, Exchangeco, Newco, CIT or the Depositary is required or
permitted to deduct and withhold with respect to such payment under the ITA, the
United States Internal Revenue Code of 1986 or any provision of provincial,
state, local or foreign tax law, in each case, as amended. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to the holder of the shares in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the
amount so required or permitted to be deducted or withheld from any payment to a
holder exceeds the cash portion of the consideration otherwise payable to the
holder, Newcourt, Exchangeco, Newco, CIT and the Depositary are hereby
authorized to sell or otherwise dispose of such portion of the consideration as
is necessary to provide sufficient funds to Newcourt, Exchangeco, Newco, CIT or
the Depositary, as the case may be, to enable it to comply with such deduction
or withholding requirement and Newcourt, Exchangeco, Newco, CIT or the
Depositary shall notify the holder thereof and remit any unapplied balance of
the net proceeds of such sale.
ARTICLE 5
CERTAIN RIGHTS OF NEWCO TO ACQUIRE EXCHANGEABLE SHARES
5.1 Newco Liquidation Call Right
(a) Newco shall have the overriding right (the "Liquidation Call Right"),
in the event of and notwithstanding the proposed liquidation,
dissolution or winding-up of Exchangeco pursuant to Article 5 of the
Exchangeable Share Provisions, to purchase from all but not less than
all of the holders of Exchangeable Shares (other than CIT or a
subsidiary or affiliate of CIT which is a holder of Exchangeable
Shares) on the Liquidation Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by Newco of an
amount per share equal to the Current Market Price of a CIT Common
Share on the last Business Day prior to the Liquidation Date (the
"Liquidation Call Purchase Price"), which shall be satisfied in full
by Newco causing to be delivered to such holder one CIT Common Share.
For greater certainty, it is hereby confirmed that such holder shall
also continue to be entitled to receive from Exchangeco on the
designated payment date therefor in respect of the shares acquired by
Newco (under the Liquidation Call Right), the full amount of all
declared but unpaid dividends on each such Exchangeable Share held by
such holder on any dividend record date which occurred prior to the
date of purchase by Newco (the "Dividend Amount") and, to the extent
such amount is not paid by Exchangeco on the designated payment date
therefor, such amount shall be paid by Newco on such date for and on
behalf of Exchangeco. In the
8
Annex F
event of the exercise of the Liquidation Call Right by Newco, each
holder shall be obligated to sell all the Exchangeable Shares held
by the holder to Newco on the Liquidation Date on payment by Newco
to the holder of the Liquidation Call Purchase Price for each such
share, and Exchangeco shall have no obligation to redeem such shares
so purchased by Newco.
(b) To exercise the Liquidation Call Right, Newco must notify Exchangeco's
transfer agent (the "Transfer Agent"), as agent for the holders of
Exchangeable Shares, and Exchangeco, of Newco's intention to exercise
such right at least 45 days before the Liquidation Date in the case of
a voluntary liquidation, dissolution or winding-up of Exchangeco, and
at least five Business Days before the Liquidation Date in the case of
an involuntary liquidation, dissolution or winding-up of Exchangeco.
The Transfer Agent will notify the holders of Exchangeable Shares as
to whether or not Newco has exercised the Liquidation Call Right
forthwith after the expiry of the period during which the same may be
exercised by Newco. If Newco exercises the Liquidation Call Right,
then on the Liquidation Date, Newco will purchase and the holders will
sell all of the Exchangeable Shares then outstanding for a price per
share equal to the Liquidation Call Purchase Price to be satisfied in
the manner provided in section 5.1(a).
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, Newco shall deposit with the
Transfer Agent, on or before the Liquidation Date, certificates
representing the aggregate number of CIT Common Shares deliverable by
Newco in payment of the Liquidation Call Purchase Price less any
amounts withheld pursuant to section 4.7 hereof. Provided that Newco
has complied with the immediately preceding sentence, on and after the
Liquidation Date the rights of each holder of Exchangeable Shares will
be limited to receiving any declared but unpaid dividends from
Exchangeco and, if and to the extent applicable, the unpaid Dividend
Amount from Newco and, upon presentation and surrender by the holder
of certificates representing the Exchangeable Shares held by such
holder, the Liquidation Call Purchase Price. The holder shall on and
after the Liquidation Date be considered and deemed for all purposes
to be the holder of the CIT Common Shares to which it is entitled.
Upon surrender to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with such other documents
and instruments as may be required to effect a transfer of
Exchangeable Shares under the NSCA and the by-laws of Exchangeco and
such additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and
the Transfer Agent on behalf of Newco shall deliver to such holder,
certificates representing the CIT Common Shares to which the holder is
entitled and, if applicable and on or before the payment date
therefor, a cheque or cheques of Newco payable at par at any branch of
the bankers of Newco in payment of the remaining portion, if any, of
the total Liquidation Call Purchase Price and, if and to the extent
applicable, the unpaid Dividend Amount, less any amounts withheld
pursuant to section 4.7 hereof. If Newco does not exercise the
Liquidation Call Right in the manner described above, on the
Liquidation Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the liquidation price
otherwise payable by Exchangeco in connection with the liquidation,
dissolution or winding-up of Exchangeco pursuant to Article 5 of the
Exchangeable Share Provisions.
5.2 Newco Redemption Call Right
(a) Newco shall have the overriding right (the "Redemption Call Right"),
notwithstanding the proposed redemption of the Exchangeable Shares by
Exchangeco pursuant to Article 7 of the Exchangeable Share Provisions,
to purchase from all but not less than all of the holders of
Exchangeable Shares (other than CIT or any subsidiary or affiliate of
CIT which is a holder of Exchangeable Shares) on the Redemption Date
all but not less than all of the Exchangeable Shares held by each such
holder on payment by Newco to each holder of an amount per
Exchangeable Share equal to the Current Market Price of a CIT Common
Share on the last Business Day prior to the Redemption Date (the
"Redemption Call Purchase Price"), which shall be satisfied in full by
Newco causing to be delivered to such holder one CIT Common Share. For
greater certainty, it is hereby confirmed that such holder shall also
continue to be entitled to receive from Exchangeco on the designated
payment
9
Annex F
date therefor, the Dividend Amount and, to the extent such amount is
not paid by Exchangeco on the designated payment date therefor in
respect of the shares acquired by Newco under the Redemption Call
Right, such amount shall be paid by Newco at such date for and on
behalf of Exchangeco. In the event of the exercise of the Redemption
Call Right by Newco, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Newco on the Redemption
Date on payment by Newco to the holder of the Redemption Call
Purchase Price for each such share, and Exchangeco shall have no
obligation to redeem such shares so purchased by Newco.
(b) To exercise the Redemption Call Right, Newco must notify the Transfer
Agent, as agent for the holders of Exchangeable Shares, and Exchangeco
of Newco's intention to exercise such right at least 60 days before
the Redemption Date, except in the case of a redemption occurring as a
result of a CIT Control Transaction, an Exchangeable Share Voting
Event or an Exempt Exchangeable Share Voting Event (each as defined in
the Exchangeable Share Provisions), in which case Newco shall so
notify the Transfer Agent and Exchangeco on or before the Redemption
Date. The Transfer Agent will notify the holders of the Exchangeable
Shares as to whether or not Newco has exercised the Redemption Call
Right forthwith after the expiry of the period during which the same
may be exercised by Newco. If Newco exercises the Redemption Call
Right, on the Redemption Date, Newco will purchase and the holders
will sell all of the Exchangeable Shares then outstanding for a price
per share equal to the Redemption Call Purchase Price to be satisfied
in the manner provided in section 5.2(a).
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Redemption Call Right, Newco shall deposit with the
Transfer Agent, on or before the Redemption Date, certificates
representing the aggregate number of CIT Common Shares deliverable by
Newco in payment of the Redemption Call Purchase Price, less any
amounts withheld pursuant to section 4.7 hereof. Provided that Newco
has complied with the immediately preceding sentence, on and after the
Redemption Date the rights of each holder of Exchangeable Shares will
be limited to receiving any declared and unpaid dividends from
Exchangeco and, if and to the extent applicable, the unpaid Dividend
Amount from Newco and, upon presentation and surrender by the holder
of certificates representing the Exchangeable Shares held by such
holder, the Redemption Call Purchase Price. The holder shall on and
after the Redemption Date be considered and deemed for all purposes to
be the holder of the CIT Common Shares to which it is entitled. Upon
surrender to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with such other documents
and instruments as may be required to effect a transfer of
Exchangeable Shares under the NCSA and the by-laws of Exchangeco and
such additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and
the Transfer Agent on behalf of Newco shall deliver to such holder,
certificates representing the CIT Common Shares to which the holder is
entitled and, if applicable and on or before the payment date therefor
a cheque or cheques of Newco payable at par at any branch of the
bankers of Newco in payment of the remaining portion, if any, of the
total Redemption Call Purchase Price and, if and to the extent
applicable, the unpaid Dividend Amount, less any amounts withheld
pursuant to section 4.7 hereof. If Newco does not exercise the
Redemption Call Right in the manner described above, on the Redemption
Date the holders of the Exchangeable Shares will be entitled to
receive in exchange therefor the redemption price otherwise payable by
Exchangeco in connection with the redemption of the Exchangeable
Shares pursuant to Article 7 of the Exchangeable Share Provisions.
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Annex F
ARTICLE 6
AMENDMENTS
6.1 Amendments to Plan of Arrangement
Newcourt reserves the right to amend, modify and/or supplement this Plan
of Arrangement at any time and from time to time prior to the Effective Date,
provided that each such amendment, modification and/or supplement must be (i)
set out in writing, (ii) approved by CIT in writing, (iii) filed with the Court
and, if made following the Newcourt Meeting, approved by the Court, and (iv)
communicated to holders of Newcourt Common Shares if and as required by the
Court.
Any amendment, modification or supplement to this Plan of Arrangement may
be proposed by Newcourt at any time prior to the Newcourt Meeting (provided that
CIT shall have consented thereto in writing) with or without any other prior
notice or communication, and if so proposed and accepted by the Persons voting
at the Newcourt Meeting (other than as may be required under the Interim Order),
shall become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement that
is approved by the Court following the Newcourt Meeting shall be effective only
if (i) it is consented to in writing by each of Newcourt and CIT, and (ii) if
required by the Court, it is consented to by holders of the Newcourt Common
Shares voting in the manner directed by the Court.
11
Annex F
APPENDIX 1 TO ANNEX F
PROVISIONS ATTACHING TO THE
EXCHANGEABLE SHARES OF CIT EXCHANGECO INC.
The Exchangeable Shares shall have the following rights, privileges,
restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by, or under common control of, that Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control of"), as applied to any
Person, means the possession by another Person, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
first mentioned Person, whether through the ownership of voting securities, by
contract or otherwise.
"Board of Directors" means the board of directors of Exchangeco.
"Business Day" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario other than a Saturday, a
Sunday or a day observed as a holiday in Toronto, Ontario under the laws of the
Province of Ontario or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
"Canadian Dollar Equivalent" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying:
(a) the Foreign Currency Amount by,
(b) the noon spot exchange rate on such date for such foreign currency
expressed in Canadian dollars as reported by the Bank of Canada or,
in the event such spot exchange rate is not available, such spot
exchange rate on such date for such foreign currency expressed in
Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose.
"CIT" means The CIT Group, Inc., a corporation existing under the laws of
the State of Delaware, and any successor corporation thereto.
"CIT Common Stock" means the shares of Class A Common Stock, par value
U.S.$0.01 per share, in the capital of CIT, and any other securities into which
such shares may be changed.
"CIT Control Transaction" means any merger, amalgamation, tender offer,
material sale of shares or rights or interests therein or thereto or similar
transactions involving CIT, or any proposal to do so.
"CIT Dividend Declaration Date" means the date on which the board of
directors of CIT declares any dividend on the CIT Common Stock.
"Class A Preference Shares" means the 4% non-cumulative, non-voting,
redeemable and retractable Class A preference shares in the capital of
Exchangeco.
"Class B Preference Shares" means the Class B preference shares in the
capital of Exchangeco.
"Common Shares" means the common shares in the capital of Exchangeco.
"Current Market Price" means, in respect of a share of CIT Common Stock on
any date, the Canadian Dollar Equivalent of the average of the closing bid and
asked prices of CIT Common Stock during a period of 20 consecutive trading days
ending not more than three trading days before such date on the New York Stock
Exchange, or, if the CIT Common Stock are not then quoted on the New York Stock
Exchange, on such other stock exchange or automated quotation system on which
the CIT Common Stock are listed or quoted, as the case may be, as may be
selected by the Board of Directors for such purpose; provided, however, that if
in the opinion of the Board of Directors the public distribution or trading
activity of CIT Common Stock during such
1
Appendix 1 to Annex F
period does not create a market which reflects the fair market value of a share
of CIT Common Stock, then the Current Market Price of a share of CIT Common
Stock shall be determined by the Board of Directors, in good faith and in its
sole discretion, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding.
"Dividend Amount" has the meaning ascribed thereto in section 6.3 of these
share provisions.
"Exchangeable Shares" mean the non-voting exchangeable shares in the
capital of Exchangeco having the rights, privileges, restrictions and conditions
set forth herein.
"Exchangeable Share Voting Event" means any matter in respect of which
holders of Exchangeable Shares are entitled to vote as shareholders of
Exchangeco (for example, to approve an amalgamation involving Exchangeco where
the amalgamation is not with a wholly-owned subsidiary of Exchangeco), other
than an Exempt Exchangeable Share Voting Event, and, for greater certainty,
excluding any matter in respect of which holders of Exchangeable Shares are
entitled to vote (or instruct the Trustee to vote) in their capacity as
Beneficiaries under (and as that term is defined in) the Voting and Exchange
Trust Agreement. If, prior to November 1, 2004, an Exchangeable Share Voting
Event is proposed, and if the Board of Directors has determined, in good faith
and in its sole discretion, that it is not reasonably practicable to accomplish
the business purpose intended by the Exchangeable Share Voting Event, the
Redemption Date shall be the Business Day prior to the record date for any
meeting or vote of the holders of the Exchangeable Shares to consider the
Exchangeable Share Voting Event. The business purpose for such Exchangeable
Share Voting Event must be bona fide and not for the primary purpose of causing
the occurrence of a Redemption Date in any other commercially reasonable manner
that does not result in an Exchangeable Share Voting Event. The Board of
Directors shall give such number of days' prior written notice of such
redemption to the registered holders of the Exchangeable Shares as it may
determine to be reasonably practicable in such circumstances.
"Exchangeco" means CIT Exchangeco Inc., a company limited by shares
existing under the laws of the Province of Nova Scotia, and being a subsidiary
of Newco, all of the common shares of which are owned by Newco.
"Exchange Ratio" means 0.70 subject to downward adjustment pursuant to the
Agreement and Plan of Reorganization.
"Exempt Exchangeable Share Voting Event" means any matter in respect of
which holders of Exchangeable Shares are entitled to vote as shareholders of
Exchangeco in order to approve or disapprove, as applicable, any change to, or
in the rights of the holders of, the Exchangeable Shares, where the approval or
disapproval, as applicable, of such change would be required to maintain the
equivalence of the Exchangeable Shares and the CIT Common Stock.
"Liquidation Amount" has the meaning ascribed thereto in section 5.1 of
these share provisions.
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Liquidation Date" has the meaning ascribed thereto in section 5.1 of
these share provisions.
"Newco" means 3026192 Nova Scotia Company, an unlimited liability company
existing under the laws of the Province of Nova Scotia and being a wholly-owned
subsidiary of CIT.
"Newco Call Notice" has the meaning ascribed thereto in section 6.3 of
these share provisions.
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor, administrator,
legal personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, government body, syndicate or other
entity, whether or not having legal status.
"Plan of Arrangement" means the plan of arrangement relating to the
arrangement of Newcourt Credit Group Inc. under section 182 of the Business
Corporations Act (Ontario), to which plan these share provisions are attached as
Appendix 1 and which plan (other than Appendix 1 thereto) is attached to these
share provisions as Exhibit A.
2
Appendix 1 to Annex F
"Purchase Price" has the meaning ascribed thereto in section 6.3 of these
share provisions.
"Redemption Call Purchase Price" has the meaning ascribed thereto in the
Plan of Arrangement.
"Redemption Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Redemption Date" means the date, if any, established by the Board of
Directors for the redemption by Exchangeco of all but not less than all of the
outstanding Exchangeable Shares pursuant to Article 7 of these share provisions,
which date shall be no earlier than November 1, 2004, unless:
(a) there are fewer than 1,000,000 Exchangeable Shares outstanding (other
than Exchangeable Shares held by CIT and its Affiliates, and as such
number of shares may be adjusted as deemed appropriate by the Board of
Directors to give effect to any subdivision or consolidation of or
stock dividend on the Exchangeable Shares, any issue or distribution
of rights to acquire Exchangeable Shares or securities exchangeable
for or convertible into Exchangeable Shares, any issue or distribution
of other securities or rights or evidences of indebtedness or assets,
or any other capital reorganization or other transaction affecting the
Exchangeable Shares), in which case the Board of Directors may
accelerate such redemption date to such date prior to November 1, 2004
as it may determine, upon at least 60 days' prior written notice to
the registered holders of the Exchangeable Shares;
(b) a CIT Control Transaction occurs, in which case, provided that the
Board of Directors determines, in good faith and in its sole
discretion, that it is not reasonably practicable to substantially
replicate the terms and conditions of the Exchangeable Shares in
connection with such CIT Control Transaction and that the redemption
of all but not less than all of the outstanding Exchangeable Shares is
necessary to enable the completion of such CIT Control Transaction in
accordance with its terms, the Board of Directors may accelerate such
redemption date to such date prior to November 1, 2004 as it may
determine, upon such number of days' prior written notice to the
registered holders of the Exchangeable Shares as the Board of
Directors may determine to be reasonably practicable in such
circumstances;
(c) an Exchangeable Share Voting Event is proposed, in which case,
provided that the Board of Directors has determined, in good faith and
in its sole discretion, that it is not reasonably practicable to
accomplish the business purpose intended by the Exchangeable Share
Voting Event, which business purpose must be bona fide and not for the
primary purpose of causing the occurrence of a Redemption Date, in any
other commercially reasonable manner that does not result in an
Exchangeable Share Voting Event, the redemption date shall be the
Business Day prior to the record date for any meeting or vote of the
holders of the Exchangeable Shares to consider the Exchangeable Share
Voting Event and the Board of Directors shall give such number of
days' prior written notice of such redemption to the registered
holders of the Exchangeable Shares as the Board of Directors may
determine to be reasonably practicable in such circumstances; or
(d) an Exempt Exchangeable Share Voting Event is proposed and the holders
of the Exchangeable Shares fail to take the necessary action at a
meeting or other vote of holders of Exchangeable Shares, to approve
or disapprove, as applicable, the Exempt Exchangeable Share Voting
Event, in which case the redemption date shall be the Business Day
following the day on which the holders of the Exchangeable Shares
failed to take such action and the Board of Directors shall give such
number of days' prior written notice of such redemption to the
registered holders of the Exchangeable Shares as the Board of
Directors may determine to be reasonably practicable in such
circumstances,
provided, however, that the accidental failure or omission to give any notice of
redemption under clauses (a), (b), (c) or (d) above to less than 10% of such
holders of Exchangeable Shares shall not affect the validity of any such
redemption.
"Redemption Price" has the meaning ascribed thereto in section 7.1 of
these share provisions.
"Retracted Shares" has the meaning ascribed thereto in section 6.1(a) of
these share provisions.
"Retraction Call Right" has the meaning ascribed thereto in section 6.1(c)
of these share provisions.
"Retraction Date" has the meaning ascribed thereto in section 6.1(b) of
these share provisions.
3
Appendix 1 to Annex F
"Retraction Price" has the meaning ascribed thereto in section 6.1 of
these share provisions.
"Retraction Request" has the meaning ascribed thereto in section 6.1 of
these share provisions.
"Support Agreement" means that certain Exchangeable Share Support
Agreement between CIT, Newco and Exchangeco, to be entered into in connection
with the Plan of Arrangement.
"Transfer Agent" means Montreal Trust Company of Canada or such other
Person as may from time to time be appointed by Exchangeco as the registrar and
transfer agent for the Exchangeable Shares.
"Trustee" means the trustee under the Voting and Exchange Trust Agreement,
being a corporation organized and existing under the laws of Canada and
authorized to carry on the business of a trust company in all the provinces of
Canada, and any successor trustee appointed under the Voting and Exchange Trust
Agreement.
"Voting and Exchange Trust Agreement" means that certain Voting and
Exchange Trust Agreement between CIT, Exchangeco and the Trustee, to be entered
into in connection with the Plan of Arrangement.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank behind the Class B Preference
Shares, but shall be entitled to a preference over the Class A Preference
Shares, the Common Shares and any other shares ranking junior to the
Exchangeable Shares, with respect to the payment of dividends. The Exchangeable
Shares shall rank behind the Class A Preference Shares and Class B Preference
Shares, but shall be entitled to a preference over the Common Shares and any
other shares ranking junior to the Exchangeable Shares, with respect to the
distribution of assets in the event of the liquidation, dissolution or
winding-up of Exchangeco, whether voluntary or involuntary, or any other
distribution of the assets of Exchangeco, among its shareholders for the purpose
of winding-up its affairs.
ARTICLE 3
DIVIDENDS
3.1 Subject to the prior rights of holders of Class B Preference Shares, a
holder of an Exchangeable Share shall be entitled to receive and the Board of
Directors shall, subject to applicable law, on each CIT Dividend Declaration
Date, declare a dividend on each Exchangeable Share:
(a) in the case of a cash dividend declared on the CIT Common Stock, in an
amount in cash for each Exchangeable Share in U.S. dollars, or, at the
option of the Board of Directors, the Canadian Dollar Equivalent
thereof on the CIT Dividend Declaration Date, in each case,
corresponding to the cash dividend declared on each share of CIT
Common Stock;
(b) in the case of a stock dividend declared on the CIT Common Stock to be
paid in CIT Common Stock, in such number of Exchangeable Shares for
each Exchangeable Share as is equal to the number of CIT Common Stock
to be paid on each share of CIT Common Stock; or
(c) in the case of a dividend declared on the CIT Common Stock in property
other than cash or CIT Common Stock, in such type and amount of
property for each Exchangeable Share as is the same as or economically
equivalent to (to be determined by the Board of Directors as
contemplated by section 3.5 hereof) the type and amount of property
declared as a dividend on each share of CIT Common Stock.
Such dividends shall be paid out of money, assets or property of Exchangeco
properly applicable to the payment of dividends, or out of authorized but
unissued shares of Exchangeco, as applicable.
3.2 Cheques of Exchangeco payable at par at any branch of the bankers of
Exchangeco shall be issued in respect of any cash dividends contemplated by
section 3.1(a) hereof and the sending of such a cheque to each holder of an
Exchangeable Share shall satisfy the cash dividend represented thereby unless
the cheque is not paid on presentation. Certificates registered in the name of
the registered holder of Exchangeable Shares shall be issued or transferred in
respect of any stock dividends contemplated by section 3.1(b) hereof and the
sending
4
Appendix 1 to Annex F
of such a certificate to each holder of an Exchangeable Share shall satisfy the
stock dividend represented thereby. Such other type and amount of property in
respect of any dividends contemplated by section 3.1(c) hereof shall be issued,
distributed or transferred by Exchangeco in such manner as it shall determine
and the issuance, distribution or transfer thereof by Exchangeco to each holder
of an Exchangeable Share shall satisfy the dividend represented thereby. No
holder of an Exchangeable Share shall be entitled to recover by action or other
legal process against Exchangeco any dividend that is represented by a cheque
that has not been duly presented to Exchangeco's bankers for payment or that
otherwise remains unclaimed for a period of six years from the date on which
such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under section 3.1 hereof shall be the same
dates as the record date and payment date, respectively, for the corresponding
dividend declared on the CIT Common Stock.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares outstanding on the record date for such dividend, any such
dividends that remain unpaid shall be paid on a subsequent date or dates
determined by the Board of Directors on which Exchangeco shall have sufficient
moneys, assets or property properly applicable to the payment of such dividends.
3.5 The Board of Directors shall determine, in good faith and in its sole
discretion, economic equivalence for the purposes of section 3.1 hereof, and
each such determination shall be conclusive and binding on Exchangeco and its
shareholders. In making each such determination, the following factors shall,
without excluding other factors determined by the Board of Directors to be
relevant, be considered by the Board of Directors:
(a) in the case of any stock dividend or other distribution payable in
CIT Common Stock, the number of such shares issued in proportion to
the number of CIT Common Stock previously outstanding;
(b) in the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase CIT Common Stock (or securities
exchangeable for or convertible into or carrying rights to acquire
CIT Common Stock), the relationship between the exercise price of
each such right, option or warrant and the current market value (as
determined by the Board of Directors in the manner above
contemplated) of a share of CIT Common Stock;
(c) in the case of the issuance or distribution of any other form of
property (including, without limitation, any shares or securities of
CIT of any class other than CIT Common Stock, any rights, options or
warrants other than those referred to in section 3.5(b) above, any
evidences of indebtedness of CIT or any assets of CIT), the
relationship between the fair market value (as determined by the
Board of Directors in the manner above contemplated) of such property
to be issued or distributed with respect to each outstanding share of
CIT Common Stock and the current market value (as determined by the
Board of Directors in the manner above contemplated) of a share of
CIT Common Stock; and
(d) in all such cases, the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that such
consequences may differ from the taxation consequences to holders of
CIT Common Stock as a result of differences between taxation laws of
Canada and the United States (except for any differing consequences
arising as a result of differing marginal taxation rates and without
regard to the individual circumstances of holders of Exchangeable
Shares).
For purposes of the foregoing determinations, the current market value of
any security listed and traded or quoted on a securities exchange shall be the
average of the closing bid and asked prices of such security during a period of
not less than 20 consecutive trading days ending not more than three trading
days before the date of determination on the principal securities exchange on
which such securities are listed and traded or quoted; provided, however, that
if in the opinion of the Board of Directors the public distribution or trading
activity of such securities during such period does not create a market which
reflects the fair market value of such securities, then the current market value
thereof shall be determined by the Board of Directors, in good faith and in its
sole discretion, and provided further that any such determination by the Board
of Directors shall be conclusive and binding on Exchangeco and its shareholders.
5
Appendix 1 to Annex F
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, Exchangeco
shall not at any time without, but may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in section 10.2 of these
share provisions:
(a) pay any dividends on the Class A Preference Shares, Common Shares or
any other shares ranking junior to the Exchangeable Shares with
respect to the payment of dividends, other than stock dividends
payable in Class A Preference Shares, Common Shares, or any such
other shares ranking junior to the Exchangeable Shares with respect
to the payment of dividends, as the case may be;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable
Shares with respect to the distribution of assets in the event of a
liquidation, dissolution or winding-up of Exchangeco whether
voluntary or involuntary or any other distribution of the assets of
Exchangeco among its shareholders for the purpose of winding-up its
affairs;
(c) redeem or purchase any other shares of Exchangeco ranking equally
with the Exchangeable Shares on any liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of Exchangeco
ranking equally with, or superior to, the Exchangeable Shares other
than by way of stock dividends to the holders of such Exchangeable
Shares.
The restrictions in sections 4.1(a), 4.1(b), 4.1(c) and 4.1(d) above shall
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared and paid to date on the CIT Common Stock shall have been
declared on the Exchangeable Shares and, to the extent paid on the CIT Common
Stock, have been paid on the Exchangeable Shares.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of
Exchangeco or any other distribution of the assets of Exchangeco among its
shareholders for the purpose of winding-up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law and to the Liquidation Call
Right, to receive from the assets of Exchangeco in respect of each Exchangeable
Share held by such holder on the effective date (the "Liquidation Date") of such
liquidation, dissolution or winding-up, before any distribution of any part of
the assets of Exchangeco among the holders of the Common Shares, or any other
shares ranking junior to the Exchangeable Shares with respect to the
distribution of assets in the event of a liquidation, dissolution or winding-up,
an amount per share (the "Liquidation Amount"), equal to the Current Market
Price of a share of CIT Common Stock on the last Business Day prior to the
Liquidation Date which shall be satisfied in full by Exchangeco causing to be
delivered to such holder one share of CIT Common Stock.
5.2 On or promptly after the Liquidation Date, and subject to the exercise
by Newco of the Liquidation Call Right, Exchangeco shall cause to be delivered
to the holders of the Exchangeable Shares the Liquidation Amount for each such
Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the Companies Act (Nova Scotia) and the by-laws of Exchangeco and such
additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of Exchangeco or at any office of the Transfer
Agent as may be specified by Exchangeco by notice to the holders of the
Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of Exchangeco for the
Exchangeable Shares or by holding for pick-up by the holder at the registered
office of Exchangeco or at any office of the Transfer Agent as may be specified
by Exchangeco by notice to the holders of Exchangeable Shares, on behalf of
Exchangeco of certificates representing CIT Common Stock (which shares shall be
duly issued as fully paid and non-assessable and shall be free and clear of any
lien, claim or encumbrance) and a cheque of Exchangeco payable at par at any
branch of the bankers of Exchangeco in respect of the remaining portion, if any,
of the total Liquidation Amount (in each case less any amounts
6
Appendix 1 to Annex F
withheld on account of tax required to be deducted and withheld therefrom). On
and after the Liquidation Date, the holders of the Exchangeable Shares shall
cease to be holders of such Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect thereof, other than the right
to receive their proportionate part of the total Liquidation Amount, unless
payment of the total Liquidation Amount for such Exchangeable Shares shall not
be made upon presentation and surrender of share certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. Exchangeco shall have the right at any time on or after
the Liquidation Date to deposit or cause to be deposited the total Liquidation
Amount in respect of the Exchangeable Shares represented by certificates that
have not at the Liquidation Date been surrendered by the holders thereof in a
custodial account with any chartered bank or trust company in Canada. Upon such
deposit being made, the rights of the holders of Exchangeable Shares after such
deposit shall be limited to receiving their proportionate part of the total
Liquidation Amount (in each case less any amounts withheld on account of tax
required to be deducted and withheld therefrom) for such Exchangeable Shares so
deposited, against presentation and surrender of the said certificates held by
them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of the total Liquidation Amount, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be holders of the CIT Common Stock delivered to them or the custodian on
their behalf.
5.3 After Exchangeco has satisfied its obligations to pay the holders of
the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant
to section 5.1 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of Exchangeco. For greater
certainty, it is hereby confirmed that notwithstanding any other provisions of
this Article 5, such holders shall continue to be entitled to receive on the
designated payment date therefor, all declared and unpaid dividends on each such
Exchangeable Share held by such holder on any dividend record date which
occurred prior to the Liquidation Date.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject
to the exercise by Newco of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require Exchangeco to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount per share equal to the Current Market Price of a share of
CIT Common Stock on the last Business Day prior to the Retraction Date (the
"Retraction Price"), which shall be satisfied in full by Exchangeco causing to
be delivered to such holder one share of CIT Common Stock for each Exchangeable
Share presented and surrendered by the holder. To effect such redemption, the
holder shall present and surrender at the registered office of Exchangeco, or at
any office of the Transfer Agent as may be specified by Exchangeco by notice to
the holders of Exchangeable Shares, the certificate or certificates representing
the Exchangeable Shares which the holder desires to have Exchangeco redeem,
together with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Companies Act (Nova Scotia) and the
by-laws of Exchangeco and such additional documents and instruments as the
Transfer Agent may reasonably require, and together with a duly executed notice
of retraction (the "Retraction Request") in the form of Schedule A hereto or in
such other form as may be acceptable to Exchangeco:
(a) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by such
certificate or certificates (the "Retracted Shares") redeemed by
Exchangeco;
(b) stating the Business Day on which the holder desires to have
Exchangeco redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than 10 Business
Days nor more than 15 Business Days after the date on which the
Retraction Request is received by Exchangeco and further provided
that, in the event that no such Business Day is specified by the
holder in the Retraction Request, the Retraction Date shall be deemed
to be the 15th Business Day after the date on which the Retraction
Request is received by Exchangeco; and
(c) acknowledging the overriding right (the "Retraction Call Right") of
Newco to purchase all but not less than all the Retracted Shares
directly from the holder and that the Retraction Request shall be
7
Appendix 1 to Annex F
deemed to be a revocable offer by the holder to sell the Retracted
Shares to Newco in accordance with the Retraction Call Right on the
terms and conditions set out in section 6.3 below.
6.2 Subject to the exercise by Newco of the Retraction Call Right, upon
receipt by Exchangeco or the Transfer Agent in the manner specified in section
6.1 hereof of a certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have Exchangeco redeem, together
with a Retraction Request, and provided that the Retraction Request is not
revoked by the holder in the manner specified in section 6.7, Exchangeco shall
redeem the Retracted Shares effective at the close of business on the Retraction
Date and shall cause to be delivered to such holder the total Retraction Price
with respect to such shares, less any amounts withheld on account of tax
required to be deducted and withheld therefrom. If only a part of the
Exchangeable Shares represented by any certificate is redeemed (or purchased by
Exchangeco pursuant to the Retraction Call Right), a new certificate for the
balance of such Exchangeable Shares shall be issued to the holder at the expense
of Exchangeco. For greater certainty, it is hereby confirmed that,
notwithstanding the redemption of the Retracted Shares as aforesaid, such holder
shall continue to be entitled to receive, on the designated payment date
therefor all declared but unpaid dividends for which the record date has
occurred prior to the Retraction Date.
6.3 Upon receipt by Exchangeco of a Retraction Request, Exchangeco shall
immediately notify Newco thereof. In order to exercise the Retraction Call
Right, Newco must notify Exchangeco of its determination to do so (the "Newco
Call Notice") within five Business Days of notification to Newco by Exchangeco
of the receipt by Exchangeco of the Retraction Request. If Newco does not so
notify Exchangeco within such five Business Day period, Exchangeco will notify
the holder as soon as possible thereafter that Newco will not exercise the
Retraction Call Right. If Newco delivers the Newco Call Notice within such five
Business Day period, and provided that the Retraction Request is not revoked by
the holder in the manner specified in section 6.7, the Retraction Request shall
thereupon be considered only to be an offer by the holder to sell the Retracted
Shares to Newco in accordance with the Retraction Call Right. In such event,
Exchangeco shall not redeem the Retracted Shares and Newco shall purchase from
such holder and such holder shall sell to Newco on the Retraction Date the
Retracted Shares for an amount (the "Purchase Price") per share equal to the
Retraction Price per share. For greater certainty, it is hereby confirmed that
such holder shall also continue to be entitled to receive from Exchangeco on the
designated payment date therefor, the full amount of all declared but unpaid
dividends on those Retracted Shares held by such holder on any dividend record
date which occurred prior to the Retraction Date (the "Dividend Amount") and, to
the extent such amount is not paid by Exchangeco on the designated date for
payment, such amount shall be paid by Newco on such date for and on behalf of
Exchangeco. For the purposes of completing a purchase pursuant to the Retraction
Call Right, Newco shall deposit with the Transfer Agent, on or before the
Retraction Date, certificates representing CIT Common Stock, less any amounts
withheld on account of tax required to be deducted and withheld therefrom. If
required by the preceding provisions, Newco shall also deposit with the Transfer
Agent, on or before the date for payment thereof a cheque or cheques of Newco
payable at par at any branch of the bankers of Newco representing the aggregate
unpaid Dividend Amount, less any amounts withheld on account of tax required to
be deducted and withheld therefrom. Provided that Newco has complied with the
second preceding sentence, the closing of the purchase and sale of the Retracted
Shares pursuant to the Retraction Call Right shall be deemed to have occurred as
at the close of business on the Retraction Date and, for greater certainty, no
redemption by Exchangeco of such Retracted Shares shall take place on the
Retraction Date. In the event that Newco does not deliver a Newco Call Notice
within such five Business Day period, and provided that the Retraction Request
is not revoked by the holder in the manner specified in section 6.7, Exchangeco
shall redeem the Retracted Shares on the Retraction Date and in the manner
otherwise contemplated in this Article 6.
6.4 Exchangeco or Newco, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of the holder
recorded in the securities register of Exchangeco for the Exchangeable Shares or
at the address specified in the holder's Retraction Request or by holding for
pick-up by the holder at the registered office of Exchangeco or at any office of
the Transfer Agent as may be specified by Exchangeco by notice to the holders of
Exchangeable Shares, certificates representing the CIT Common Stock (which
shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim or encumbrance) registered in the name of the
holder or in such other name as the holder may request, and, if applicable and
on or before the payment date therefor, a cheque payable at par at any branch of
the bankers of
8
Appendix 1 to Annex F
Exchangeco or Newco, as applicable, representing the aggregate declared but
unpaid dividends or unpaid Dividend Amount, as the case may be, in respect of
the Retracted Shares in each case, less any amounts withheld on account of tax
required to be deducted and withheld therefrom, and such delivery of such
certificates and cheques on behalf of Exchangeco or by Newco, as the case may
be, or by the Transfer Agent shall be deemed to be payment of and shall satisfy
and discharge all liability for the total Retraction Price or total Purchase
Price and the total declared but unpaid dividends or Dividend Amount, as the
case may be, to the extent that the same is represented by such share
certificates and cheques (plus any tax deducted and withheld therefrom and
remitted to the proper tax authority).
6.5 On and after the close of business on the Retraction Date, the holder
of the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than his right to receive any declared and unpaid dividend or the
Dividend Amount, as the case may be, other than the right to receive his
proportionate part of the total Retraction Price or total Purchase Price, as the
case may be, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total Retraction Price
or the total Purchase Price, as the case may be, shall not be made as provided
in section 6.4, in which case the rights of such holder shall remain unaffected
until the total Retraction Price or the total Purchase Price, as the case may
be, has been paid in the manner hereinbefore provided. On and after the close of
business on the Retraction Date, provided that presentation and surrender of
certificates and payment of the total Retraction Price or the total Purchase
Price, as the case may be, has been made in accordance with the foregoing
provisions, the holder of the Retracted Shares so redeemed by Exchangeco or
purchased by Newco shall thereafter be considered and deemed for all purposes to
be a holder of the CIT Common Stock delivered to it.
6.6 Notwithstanding any other provision of this Article 6, Exchangeco
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
Exchangeco believes that on any Retraction Date it would not be permitted by any
of such provisions to redeem the Retracted Shares tendered for redemption on
such date, and provided that Newco shall not have exercised the Retraction Call
Right with respect to the Retracted Shares, Exchangeco shall only be obligated
to redeem Retracted Shares specified by a holder in a Retraction Request to the
extent of the maximum number that may be so redeemed (rounded down to a whole
number of shares) as would not be contrary to such provisions and shall notify
the holder at least two Business Days prior to the Retraction Date as to the
number of Retracted Shares which will not be redeemed by Exchangeco. In any case
in which the redemption by Exchangeco of Retracted Shares would be contrary to
solvency requirements or other provisions of applicable law and provided the
Retraction Request is not revoked by the holder in the manner specified in
section 6.7, Exchangeco shall redeem Retracted Shares in accordance with section
6.2 of these share provisions on a pro rata basis and shall issue to each holder
of Retracted Shares a new certificate, at the expense of Exchangeco,
representing the Retracted Shares not redeemed by Exchangeco pursuant to section
6.2 hereof. Provided that the Retraction Request is not revoked by the holder in
the manner specified in section 6.7, the holder of any such Retracted Shares not
redeemed by Exchangeco pursuant to section 6.2 of these share provisions as a
result of solvency requirements or other provisions of applicable law shall be
deemed by giving the Retraction Request to require CIT to purchase such
Retracted Shares from such holder on the Retraction Date or as soon as
practicable thereafter on payment by CIT to such holder of the Purchase Price
for each such Retracted Share, all as more specifically provided in the Voting
and Exchange Trust Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to Exchangeco before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request, in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Newco shall be deemed to have been revoked.
6.8 Subject to the Support Agreement, the Voting and Exchange Trust
Agreement and to the rights of holders of Exchangeable Shares (other than CIT or
its subsidiaries or affiliates), in the event Newco acquires Exchangeable Shares
pursuant to the Retraction Call Right or the Redemption Call Right, Newco shall
be entitled to exchange such Exchangeable Shares for Common Shares on terms
approved by the Board of Directors.
9
Appendix 1 to Annex F
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY EXCHANGECO
7.1 Subject to applicable law, and provided Newco has not exercised the
overriding Redemption Call Right, Exchangeco shall on the Redemption Date redeem
all but not less than all of the then outstanding Exchangeable Shares for an
amount per share equal to the Current Market Price of a share of CIT Common
Stock on the last Business Day prior to the Redemption Date (the "Redemption
Price"), which shall be satisfied in full by Exchangeco causing to be delivered
to each holder of Exchangeable Shares one share of CIT Common Stock for each
Exchangeable Share held by such holder. For greater certainty, it is hereby
confirmed that, notwithstanding the redemption of Exchangeable Shares pursuant
to this Article 7, such holder shall continue to be entitled to receive, on the
designated payment date therefor, the full amount of all declared and unpaid
dividends on each such Exchangeable Share held by such holder on any dividend
record date which occurred prior to the Redemption Date.
7.2 In any case of a redemption of Exchangeable Shares under this Article
7, Exchangeco shall, at least 60 days before the Redemption Date (other than a
Redemption Date established in connection with a CIT Control Transaction, an
Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event),
send or cause to be sent to each holder of Exchangeable Shares a notice in
writing of the redemption by Exchangeco or the purchase by Newco under the
Redemption Call Right, as the case may be, of the Exchangeable Shares held by
such holder. In the case of a Redemption Date established in connection with a
CIT Control Transaction, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event, the written notice of redemption by Exchangeco
or the purchase by Newco under the Redemption Call Right will be sent on or
before the Redemption Date, on as many days prior written notice as may be
determined by the Board of Directors of Exchangeco to be reasonably practicable
in the circumstances. In any such case, such notice shall set out the formula
for determining the Redemption Price or the Redemption Call Purchase Price, as
the case may be, the Redemption Date and, if applicable, particulars of the
Redemption Call Right.
7.3 On or after the Redemption Date and subject to the exercise by Newco
of the Redemption Call Right, Exchangeco shall cause to be delivered to the
holders of the Exchangeable Shares to be redeemed the Redemption Price for each
such Exchangeable Share, upon presentation and surrender at the registered
office of Exchangeco or at any office of the Transfer Agent as may be specified
by Exchangeco in such notice of the certificates representing such Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Companies Act (Nova Scotia)
and the by-laws of Exchangeco and such additional documents and instruments as
the Transfer Agent may reasonably require. Payment of the total Redemption Price
for such Exchangeable Shares and, if applicable, payment of any declared but
unpaid dividends referred to in section 7.1, shall be made by delivery to each
holder, at the address of the holder recorded in the securities register of
Exchangeco or by holding for pick-up by the holder at the registered office of
Exchangeco or at any office of the Transfer Agent as may be specified by
Exchangeco in such notice, on behalf of Exchangeco of certificates representing
CIT Common Stock (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or encumbrance)
and, if applicable, a cheque of Exchangeco payable at par at any branch of the
bankers of Exchangeco in payment of any such dividends, in each case, less any
amounts withheld on account of tax required to be deducted and withheld
therefrom. On and after the Redemption Date, the holders of the Exchangeable
Shares called for redemption shall cease to be holders of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of holders in
respect thereof, other than the right to receive their proportionate part of the
total Redemption Price and any such dividends, unless payment of the total
Redemption Price and any such dividends for such Exchangeable Shares shall not
be made upon presentation and surrender of certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Redemption Price and any such dividends have been
paid in the manner hereinbefore provided. Exchangeco shall have the right at any
time after the sending of notice of its intention to redeem the Exchangeable
Shares as aforesaid to deposit or cause to be deposited the total Redemption
Price for and the full amount of such dividends on (except as provided in the
preceding sentence) the Exchangeable Shares so called for redemption, or of such
of the said Exchangeable Shares represented by certificates that have not at the
date of such deposit been surrendered by the holders thereof in connection with
such redemption, in a custodial account with any chartered bank or trust company
in Canada named in such notice, less any amounts withheld
10
Appendix 1 to Annex F
on account of tax required to be deducted and withheld therefrom. Upon the later
of such deposit being made and the Redemption Date, the Exchangeable Shares in
respect whereof such deposit shall have been made shall be redeemed and the
rights of the holders thereof after such deposit or Redemption Date, as the case
may be, shall be limited to receiving their proportionate part of the total
Redemption Price and such dividends for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Upon such payment or
deposit of the total Redemption Price and the full amount of such dividends, the
holders of the Exchangeable Shares shall thereafter be considered and deemed for
all purposes to be holders of the CIT Common Stock delivered to them or the
custodian on their behalf.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and the articles of Exchangeco, Exchangeco
may at any time and from time to time purchase for cancellation all or any part
of the outstanding Exchangeable Shares at any price by tender to all the holders
of record of Exchangeable Shares then outstanding or through the facilities of
any stock exchange on which the Exchangeable Shares are listed or quoted at any
price per share. For greater certainty, it is hereby confirmed that,
notwithstanding the purchase for cancellation of Exchangeable Shares pursuant to
this Article 8, holders whose Exchangeable Shares are subject to purchase shall
continue to be entitled to all declared but unpaid dividends thereon for which
the record date has occurred prior to the date of purchase. If in response to an
invitation for tenders under the provisions of this section 8.1, more
Exchangeable Shares are tendered at a price or prices acceptable to Exchangeco
than Exchangeco is prepared to purchase, the Exchangeable Shares to be purchased
by Exchangeco shall be purchased as nearly as may be pro rata according to the
number of shares tendered by each holder who submits a tender to Exchangeco,
provided that when shares are tendered at different prices, the pro rating shall
be effected (disregarding fractions) only with respect to the shares tendered at
the price at which more shares were tendered than Exchangeco is prepared to
purchase after Exchangeco has purchased all the shares tendered at lower prices.
If part only of the Exchangeable Shares represented by any certificate shall be
purchased a new certificate for the balance of such shares shall be issued at
the expense of Exchangeco.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and by section 9.2 and Article 10
hereof, the holders of the Exchangeable Shares shall not be entitled as such to
receive notice of or to attend any meeting of the shareholders of Exchangeco or
to vote at any such meeting.
9.2 The holders of Exchangeable Shares shall be entitled to vote
separately as a class in respect of any voluntary liquidation, dissolution or
winding-up of Exchangeco.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified.
10.2 Any approval given by the holders of the Exchangeable Shares to add
to, change or remove any right, privilege, restriction or condition attaching to
the Exchangeable Shares or any other matter requiring the approval or consent of
the holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than two-thirds of the votes cast on such resolution at a meeting of
holders of Exchangeable Shares duly called and held at which a quorum is present
or represented by proxy. If no quorum is present or represented by proxy within
one-half hour after the time appointed for such meeting, then the meeting shall
be adjourned to the same day, in the next week, at the same time and place. At
such adjourned meeting, if a quorum is not present or represented by proxy
within one-half hour from the time
11
Appendix 1 to Annex F
appointed for the meeting, the holders of Exchangeable Shares present or
represented by proxy thereat may transact the business for which the meeting was
originally called and a resolution passed thereat by the affirmative vote of not
less than two-thirds of the votes cast on such resolution at such meeting shall
constitute the approval or consent of the holders of the Exchangeable Shares.
ARTICLE 11
RECIPROCAL CHANGES, ETC.
IN RESPECT OF CIT COMMON STOCK
11.1 Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that CIT will not without the prior approval of
Exchangeco and the prior approval of the holders of the Exchangeable Shares
given in accordance with section 10.2 of these share provisions:
(a) issue or distribute CIT Common Stock (or securities exchangeable for
or convertible into or carrying rights to acquire CIT Common Stock)
to the holders of all or substantially all of the then outstanding
CIT Common Stock by way of stock dividend or other distribution,
other than an issue of CIT Common Stock (or securities exchangeable
for or convertible into or carrying rights to acquire CIT Common
Stock) to holders of CIT Common Stock who exercise an option to
receive dividends in CIT Common Stock (or securities exchangeable for
or convertible into or carrying rights to acquire CIT Common Stock)
in lieu of receiving cash dividends;
(b) issue or distribute rights, options or warrants to the holders of all
or substantially all of the then outstanding CIT Common Stock
entitling them to subscribe for or to purchase CIT Common Stock (or
securities exchangeable for or convertible into or carrying rights to
acquire CIT Common Stock); or
(c) issue or distribute to the holders of all or substantially all of the
then outstanding CIT Common Stock:
(i) shares or securities of CIT of any class other than CIT Common
Stock (other than shares convertible into or exchangeable for or
carrying rights to acquire CIT Common Stock);
(ii) rights, options or warrants other than those referred to in
section 11.1(b) above;
(iii) (evidences of indebtedness of CIT); or
(iv) assets of CIT,
unless the economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets is issued or
distributed simultaneously to holders of the Exchangeable Shares.
11.2 Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that CIT will not without the prior
approval of Exchangeco and the prior approval of the holders of the Exchangeable
Shares given in accordance with section 10.2 of these share provisions:
(a) subdivide, redivide or change the then outstanding CIT Common Stock
into a greater number of CIT Common Stock;
(b) reduce, combine, consolidate or change the then outstanding CIT
Common Stock into a lesser number of CIT Common Stock; or
(c) reclassify or otherwise change the CIT Common Stock or effect an
amalgamation, merger, reorganization or other transaction affecting
the CIT Common Stock,
unless the same or an economically equivalent change shall simultaneously be
made to, or in, the rights of the holders of the Exchangeable Shares. The
Support Agreement further provides, in part, that the aforesaid provisions of
the Support Agreement shall not be changed without the approval of the holders
of the Exchangeable Shares given in accordance with section 10.2 of these share
provisions.
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Appendix 1 to Annex F
ARTICLE 12
ACTIONS BY EXCHANGECO UNDER SUPPORT AGREEMENT
12.1 Exchangeco will take all such actions and do all such things as shall
be necessary or advisable to perform and comply with and to ensure performance
and compliance by CIT, Exchangeco and Newco with all provisions of the Support
Agreement applicable to CIT, Exchangeco and Newco, respectively, in accordance
with the terms thereof including, without limitation, taking all such actions
and doing all such things as shall be necessary or advisable to enforce to the
fullest extent possible for the direct benefit of Exchangeco all rights and
benefits in favor of Exchangeco under or pursuant to such agreement.
12.2 Exchangeco shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement without the approval of the holders of the Exchangeable
Shares given in accordance with section 10.2 of these share provisions other
than such amendments, waivers and/or forgiveness as may be necessary or
advisable for the purposes of:
(a) adding to the covenants of the other parties to such agreement for
the protection of Exchangeco or the holders of the Exchangeable
Shares thereunder;
(b) making such provisions or modifications not inconsistent with such
agreement as may be necessary or desirable with respect to matters or
questions arising thereunder which, in the good faith opinion of the
Board of Directors, it may be expedient to make, provided that the
Board of Directors shall be of the good faith opinion, after
consultation with counsel, that such provisions and modifications
will not be prejudicial to the interests of the holders of the
Exchangeable Shares; or
(c) making such changes in or corrections to such agreement which, on the
advice of counsel to Exchangeco, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest error contained
therein, provided that the Board of Directors shall be of the good
faith opinion, after consultation with counsel, that such changes or
corrections will not be prejudicial to the interests of the holders
of the Exchangeable Shares.
12.3 For purposes of subsection 191(4) of the ITA, Exchangeco hereby
specifies an amount in respect of each Exchangeable Share equal to the closing
sale price of a Common Share of Newcourt Credit Group Inc. on The Toronto Stock
Exchange on the trading day immediately preceding the Effective Date, divided by
the Exchange Ratio.
ARTICLE 13
LEGEND; CALL RIGHTS
13.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Liquidation Call Right and the Redemption Call
Right, and the Voting and Exchange Trust Agreement (including the provisions
with respect to the voting rights, exchange rights and automatic exchange
thereunder).
13.2 Each holder of an Exchangeable Share, whether of record or
beneficial, by virtue of becoming and being such a holder shall be deemed to
acknowledge each of the Liquidation Call Right, the Retraction Call Right and
the Redemption Call Right, in each case, in favor of Newco, and the overriding
nature thereof in connection with the liquidation, dissolution or winding-up of
Exchangeco or the retraction or redemption of Exchangeable Shares, as the case
may be, and to be bound thereby in favor of Newco as therein provided.
ARTICLE 14
NOTICES
14.1 Any notice, request or other communication to be given to Exchangeco
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of Exchangeco and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by Exchangeco.
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Appendix 1 to Annex F
14.2 Any presentation and surrender by a holder of Exchangeable Shares to
Exchangeco or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of
Exchangeco or the retraction or redemption of Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the registered office of
Exchangeco or to such office of the Transfer Agent as may be specified by
Exchangeco, in each case, addressed to the attention of the President of
Exchangeco. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by
Exchangeco or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
14.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of Exchangeco or Newco, as the case may be,
shall be in writing and shall be valid and effective if given by mail (postage
prepaid) or by delivery to the address of the holder recorded in the securities
register of Exchangeco or, in the event of the address of any such holder not
being so recorded, then at the last known address of such holder. Any such
notice, request or other communication, if given by mail, shall be deemed to
have been given and received on the third Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission to give any
notice, request or other communication to one or more holders of Exchangeable
Shares shall not invalidate or otherwise alter or affect any action or
proceeding to be taken by Exchangeco or Newco, as the case may be, pursuant
thereto.
14
Appendix 1 to Annex F
SCHEDULE A
NOTICE OF RETRACTION
To: CIT Exchangeco Inc. ("Exchangeco") and 3026192 Nova Scotia Company
("Newco").
This notice is given pursuant to Article 6 of the provisions (the "Share
Provisions") attaching to the Exchangeable Shares of Exchangeco represented by
this certificate. All capitalized words and expressions used in this notice that
are defined in the Share Provisions have the meanings ascribed to such words and
expressions in such Share Provisions.
The undersigned hereby notifies Exchangeco that, subject to the Retraction
Call Right referred to below, the undersigned desires to have Exchangeco redeem
in accordance with Article 6 of the Share Provisions:
|_| all share(s) represented by this certificate; or
|_| __________________share(s) only.
The undersigned hereby notifies Exchangeco that the Retraction Date shall
be ________________________.
NOTE: The Retraction Date must be a Business Day and must not be less
than 10 Business Days nor more than 15 Business Days after the
date upon which this notice is received by Exchangeco. If no
such Business Day is specified above, the Retraction Date shall
be deemed to be the 15th Business Day after the date on which
this notice is received by Exchangeco
The undersigned acknowledges the overriding Retraction Call Right of Newco
to purchase all but not less than all the Retracted Shares from the undersigned
and that this notice is and shall be deemed to be a revocable offer by the
undersigned to sell the Retracted Shares to Newco in accordance with the
Retraction Call Right on the Retraction Date for the Purchase Price and on the
other terms and conditions set out in section 6.3 of the Share Provisions. This
notice of retraction, and this offer to sell the Retracted Shares to Newco, may
be revoked and withdrawn by the undersigned only by notice in writing given to
Exchangeco at any time before the close of business on the Business Day
immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions
of applicable law, Exchangeco is unable to redeem all Retracted Shares, tendered
by the holder, then Exchangeco will redeem only those Retracted Shares tendered
by the holder as would not be contrary to such provisions of applicable law
(rounded down to a whole number of shares). The undersigned will be deemed to
have exercised the Exchange Right (as defined in the Voting and Exchange Trust
Agreement) so as to require CIT to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to Exchangeco and Newco
that the undersigned:
|_| is
(select one)
|_| is not
a non-resident of Canada for purposes of the Income Tax Act (Canada). The
undersigned acknowledges that in the absence of an indication that the
undersigned is not a non-resident of Canada, withholding on account of Canadian
tax may be made from amounts payable to the undersigned on the redemption or
purchase of the Retracted Shares.
By reason of the use by the undersigned of an English language form of
Notice, the undersigned shall be deemed to have required that any contract
evidenced by the Arrangement as accepted through this Notice, as well as all
documents related thereto, be drawn exclusively in the English language. En
raison de l'usage d'une version anglaise de la presente avis par le soussigne,
ce dernier est repute avoir demande que tout contrat atteste par l'arrangement,
qui est accepte au moyen de la presente avis, de meme que tous les documents qui
s'y rapportent soient rediges exclusivement en anglais.
15
Appendix 1 to Annex F
The undersigned hereby represents and warrants to Exchangeco and Newco
that the undersigned has good title to, and owns, the share(s) represented by
this certificate to be acquired by Exchangeco or Newco, as the case may be, free
and clear of all liens, claims and encumbrances.
__________________ ___________________________ ________________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
|_| Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for
pick-up by the shareholder from the Transfer Agent, failing which the
securities and any cheque(s) will be mailed to the last address of the
shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent. The securities and any cheque(s)
resulting from the retraction or purchase of the Retracted Shares will
be issued and registered in, and made payable to, respectively, the
name of the shareholder as it appears on the register of Exchangeco and
the securities and any cheque(s) resulting from such retraction or
purchase will be delivered to such shareholder as indicated above,
unless the form appearing immediately below is duly completed.
Date: ____________________________
Name of Person in Whose Name
Securities or Cheque(s)
Are to be Registered, Issued
or Delivered (please print): _____________________________________________
Street Address or P.O. Box: ______________________________________________
Signature of Shareholder: ________________________________________________
City, Province and Postal Code: __________________________________________
NOTE: If this notice of retraction is for less than all of the shares
represented by this certificate, a certificate representing the
remaining share(s) of Exchangeco represented by this certificate will
be issued and registered in the name of the shareholder as it appears
on the register of Exchangeco, unless the Share Transfer Power on the
share certificate is duly completed in respect of such share(s).
16
Appendix 1 to Annex F
ANNEX G
EXCHANGEABLE SHARE SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the __ day of November, 1999.
B E T W E E N:
THE CIT GROUP, INC.
a corporation existing under the laws of
the State of Delaware
(hereinafter referred to as "CIT"),
OF THE FIRST PART,
-- and --
3026192 NOVA SCOTIA COMPANY,
an unlimited liability company existing under the of the
Province of Nova Scotia and a wholly-owned subsidiary of
CIT (hereinafter referred to as "Newco")
OF THE SECOND PART,
-- and --
CIT EXCHANGECO INC.,
a company limited by shares existing under the laws of the
Province of Nova Scotia and a subsidiary of Newco
(hereinafter referred to as "Exchangeco")
OF THE THIRD PART.
WHEREAS pursuant to an amended and restated agreement and plan of
reorganization dated as of August 5, 1999 between Newcourt Credit Group Inc.
("Newcourt") and CIT (the "Agreement and Plan of Reorganization"), CIT has
agreed to cause Exchangeco to issue exchangeable shares (the "Exchangeable
Shares") to certain holders of common shares of Newcourt pursuant to the plan of
arrangement (the "Arrangement") contemplated by the Agreement and Plan of
Reorganization;
AND WHEREAS pursuant to the Agreement and Plan of Reorganization,
Exchangeco, Newco and CIT have agreed to execute a support agreement
substantially in the form of this agreement;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
I.1 Defined Terms
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning ascribed thereto in the rights,
privileges, restrictions and conditions (collectively, the "Share Provisions")
attaching to the Exchangeable Shares attached as Appendix 1 to the Plan of
Arrangement as set out in the Articles of Arrangement of Newcourt, unless the
context requires otherwise.
I.2 Interpretation Not Affected by Headings
The division of this agreement into Articles, sections and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this agreement.
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Annex G
Unless otherwise indicated, all references to an "Article" or "section" followed
by a number and/or a letter refer to the specified Article or section of this
agreement. The terms "this agreement", "hereof", "herein" and "hereunder" and
similar expressions refer to this agreement and not to any particular Article,
section or other portion hereof and include any agreement or instrument
supplementary or ancillary hereto.
I.3 Number, Gender
Words importing the singular number only shall include the plural and vice
versa. Words importing any gender shall include all genders.
I.4 Date for any Action
If any date on which any action is required to be taken under this
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE II
COVENANTS OF CIT AND EXCHANGECO
II.1 Covenants Regarding Exchangeable Shares
So long as any Exchangeable Shares not owned by CIT or its Affiliates are
outstanding, CIT shall:
(a) not declare or pay any dividend on the CIT Common Stock unless (i)
Exchangeco shall simultaneously declare or pay, as the case may be,
an equivalent dividend (as provided for in the Share Provisions) on
the Exchangeable Shares and (ii) Exchangeco shall have sufficient
money or other assets or authorized but unissued securities available
to enable the due declaration and the due and punctual payment, in
accordance with applicable law, of any such dividend on the
Exchangeable Shares;
(b) advise Exchangeco sufficiently in advance of the declaration by CIT
of any dividend on CIT Common Stock and take all such other actions
as are reasonably necessary, in cooperation with Exchangeco, to
ensure that the respective declaration date, record date and payment
date for a dividend on the Exchangeable Shares shall be the same as
the declaration date, record date and payment date for the
corresponding dividend on the CIT Common Stock;
(c) ensure that the record date for any dividend declared on CIT Common
Stock is not less than 10 Business Days after the declaration date of
such dividend;
(d) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Exchangeco, in accordance
with applicable law, to pay and otherwise perform its obligations with
respect to the payment of dividends declared on the Exchangeable
shares and satisfaction of the Liquidation Amount, the Retraction
Price or the Redemption Price in respect of each issued and
outstanding Exchangeable Share upon the liquidation, dissolution or
winding-up of Exchangeco, the delivery of a Retraction Request by a
holder of Exchangeable Shares or a redemption of Exchangeable Shares
by Exchangeco, as the case may be, including without limitation all
such actions and all such things as are necessary or desirable to
enable and permit Exchangeco to cause to be delivered CIT Common Stock
to the holders of Exchangeable Shares in accordance with the
provisions of Article 5, 6 or 7, as the case may be, of the Share
Provisions; and
(e) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Newco, in accordance with
applicable law, to perform its obligations arising upon the exercise
by it of the Liquidation Call Right, the Retraction Call Right or the
Redemption Call Right, including without limitation all such actions
and all such things as are necessary or desirable to enable and permit
Newco to cause to be delivered CIT Common Stock to the holders of
Exchangeable Shares in accordance with the provisions of the
Liquidation Call Right, the Retraction Call Right or the Redemption
Call Right, as the case may be.
II.2 Segregation of Funds
CIT will cause Exchangeco to deposit a sufficient amount of funds in a
separate account of Exchangeco and segregate a sufficient amount of such other
assets and property as is necessary to enable Exchangeco to pay
2
Annex G
dividends when due and to pay or otherwise satisfy its respective obligations
under Article 5, 6 or 7 of the Share Provisions, as applicable.
II.3 Reservation of CIT Common Stock
CIT hereby represents, warrants and covenants in favour of Exchangeco and
Newco that CIT has reserved for issuance and will, at all times while any
Exchangeable Shares (other than Exchangeable Shares held by CIT or its
Affiliates) are outstanding, keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of CIT
Common Stock (or other shares or securities into which CIT Common Stock may be
reclassified or changed as contemplated by section 2.7 hereof) (a) as is equal
to the sum of (i) the number of Exchangeable Shares issued and outstanding from
time to time and (ii) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares outstanding from time to
time and (b) as are now and may hereafter be required to enable and permit CIT
to meet its obligations under the Voting and Exchange Trust Agreement and under
any other security or commitment pursuant to which CIT may now or hereafter be
required to issue CIT Common Stock, to enable and permit Newco to meet its
obligations under each of the Liquidation Call Right, the Retraction Call Right
and the Redemption Call Right and to enable and permit Exchangeco to meet its
respective obligations hereunder and under the Share Provisions. CIT further
represents, warrants and covenants in favour of Exchangeco and Newco that CIT
has reserved for issuance and will, at all times while any Replacement Options
are outstanding, keep available out of its authorized and unissued capital stock
such number of CIT Common Stock as is equal to the number of CIT Common Stock
issuable upon exercise of Replacement Options.
II.4 Notification of Certain Events
In order to assist CIT to comply with its obligations hereunder and to
permit Newco to exercise the Liquidation Call Right, the Retraction Call Right
and the Redemption Call Right, Exchangeco will notify CIT and Newco of each of
the following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of
Exchangeco to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Exchangeco or to effect any
other distribution of the assets of Exchangeco among its shareholders
for the purpose of winding up its affairs, at least 60 days prior to
the proposed effective date of such liquidation, dissolution,
winding-up or other distribution;
(b) promptly, upon the earlier of receipt by Exchangeco of notice of and
Exchangeco otherwise becoming aware of any threatened or instituted
claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of Exchangeco or
to effect any other distribution of the assets of Exchangeco among
its shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by Exchangeco of a Retraction Request;
(d) on the same date on which notice of redemption is given to holders of
Exchangeable Shares, upon the determination of a Redemption Date in
accordance with the Share Provisions; and
(e) as soon as practicable upon the issuance by Exchangeco of any
Exchangeable Shares or rights to acquire Exchangeable Shares (other
than the issuance of Exchangeable Shares and rights to acquire
Exchangeable Shares in exchange for outstanding Newcourt Common
Shares pursuant to the Arrangement).
II.5 Delivery of Common Shares to Exchangeco and Newco
In furtherance of its obligations under sections 2.1(d) and (e) hereof,
upon notice from Exchangeco or Newco of any event that requires Exchangeco or
Newco to cause to be delivered CIT Common Stock to any holder of Exchangeable
Shares, CIT shall forthwith issue and deliver or cause to be delivered to
Exchangeco or Newco the requisite number of CIT Common Stock to be received by,
and issued to or to the order of, the former holder of the surrendered
Exchangeable Shares, as Exchangeco or Newco shall direct. All such CIT Common
Stock shall be duly authorized and validly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or encumbrance. In
consideration of the issuance and delivery of each such CIT
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Annex G
Common Stock, Exchangeco or Newco, as the case may be, shall issue to CIT, or as
CIT shall direct, common shares of Exchangeco or Newco having equivalent value.
II.6 Qualification of CIT Common Stock
If any CIT Common Stock (or other shares or securities into which CIT
Common Stock may be reclassified or changed as contemplated by section 2.7
hereof) to be issued and delivered hereunder require registration or
qualification with or approval of or the filing of any document, including any
prospectus or similar document or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any governmental or regulatory
authority under any Canadian or United States federal, provincial or state
securities or other law or regulation or pursuant to the rules and regulations
of any securities or other regulatory authority or the fulfillment of any other
United States or Canadian legal requirement before such shares (or such other
shares or securities) may be issued by CIT and delivered by CIT at the direction
of Newco or Exchangeco, if applicable, to the holder of surrendered Exchangeable
Shares or in order that such shares (or such other shares or securities) may be
freely traded thereafter (other than any restrictions of general application on
transfer by reason of a holder being a "control person" for purposes of Canadian
provincial securities law or an "affiliate" of CIT for purposes of United States
federal or state securities law), CIT will in good faith expeditiously take all
such actions and do all such things as are necessary or desirable to cause such
CIT Common Stock (or such other shares or securities) to be and remain duly
registered, qualified or approved under United States and/or Canadian law, as
the case may be. CIT will in good faith expeditiously take all such actions and
do all such things as are reasonably necessary or desirable to cause all CIT
Common Stock (or such other shares or securities) to be delivered hereunder to
be listed, quoted or posted for trading on all stock exchanges and quotation
systems on which outstanding CIT Common Stock (or such other shares or
securities) have been listed by CIT and remain listed and are quoted or posted
for trading at such time.
II.7 Economic Equivalence.
(a) CIT will not without the prior approval of Exchangeco and the prior
approval of the holders of the Exchangeable Shares given in
accordance with section 10.2 of the Share Provisions:
(i) issue or distribute CIT Common Stock (or securities exchangeable
for or convertible into or carrying rights to acquire CIT Common
Stock) to the holders of all or substantially all of the then
outstanding CIT Common Stock by way of stock dividend or other
distribution, other than an issue of CIT Common Stock (or
securities exchangeable for or convertible into or carrying
rights to acquire CIT Common Stock) to holders of CIT Common
Stock who exercise an option to receive dividends in CIT Common
Stock (or securities exchangeable for or convertible into or
carrying rights to acquire CIT Common Stock) in lieu of
receiving cash dividends;
(ii) issue or distribute rights, options or warrants to the holders
of all or substantially all of the then outstanding CIT Common
Stock entitling them to subscribe for or to purchase CIT Common
Stock (or securities exchangeable for or convertible into or
carrying rights to acquire CIT Common Stock); or
(iii) issue or distribute to the holders of all or substantially all
of the then outstanding CIT Common Stock (A) shares or
securities of CIT of any class other than CIT Common Stock
(other than shares convertible into or exchangeable for or
carrying rights to acquire CIT Common Stock), (B) rights,
options or warrants other than those referred to in section 2.7
(a) (ii) above, (C) evidences of indebtedness of CIT, or (D)
assets of CIT,
unless the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other
assets is issued or distributed simultaneously to holders of the
Exchangeable Shares; provided that, for greater certainty, the above
restrictions shall not apply to any securities issued or distributed
by CIT in order to give effect to and to consummate the transactions
contemplated by, and in accordance with, the Agreement and Plan of
Reorganization.
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Annex G
(b) CIT will not without the prior approval of Exchangeco and the prior
approval of the holders of the Exchangeable Shares given in
accordance with section 10.2 of the Share Provisions:
(i) subdivide, redivide or change the then outstanding CIT Common
Stock into a greater number of CIT Common Stock;
(ii) reduce, combine, consolidate or change the then outstanding CIT
Common Stock into a lesser number of CIT Common Stock; or
(iii)reclassify or otherwise change CIT Common Stock or effect an
amalgamation, merger, reorganization or other transaction
affecting CIT Common Stock,
unless the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the
Exchangeable Shares.
(c) CIT will ensure that the record date for any event referred to in
section 2.7 (a) or 2.7(b) above, or (if no record date is applicable
for such event) the effective date for any such event, is not less
than five Business Days after the date on which such event is
declared or announced by CIT (with contemporaneous notification
thereof by CIT to Exchangeco).
(d) The Board of Directors of Exchangeco shall determine, in good faith,
acting reasonably, and in its sole discretion, economic equivalence
for the purposes of any event referred to in section 2.7(a) or
2.7(b) above and each such determination shall be conclusive and
binding on CIT. In making each such determination, the following
factors shall, without excluding other factors determined by the
Board of Directors of Exchangeco to be relevant,be considered by the
Board of Directors of Exchangeco:
(i) in the case of any stock dividend or other distribution
payable in CIT Common Stock, the number of such shares issued
in proportion to the number of CIT Common Stock previously
outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase CIT Common
Stock (or securities exchangeable for or convertible into or
carrying rights to acquire CIT Common Stock), the relationship
between the exercise price of each such right, option or
warrant and the current market value (as determined by the
Board of Directors of Exchangeco in the manner contemplated
below) of a CIT Common Stock;
(iii) in the case of the issuance or distribution of any other form
of property (including without limitation any shares or
securities of CIT of any class other than CIT Common Stock,
any rights, options or warrants other than those referred to
in section 2.7(d) (ii) above, any evidences of indebtedness of
CIT or any assets of CIT), the relationship between the fair
market value (as determined by the Board of Directors of
Exchangeco in the manner contemplated below) of such property
to be issued or distributed with respect to each outstanding
CIT Common Stock and the current market value (as determined
by the Board of Directors of Exchangeco in the manner
contemplated below) of a CIT Common Stock;
(iv) in the case of any subdivision, redivision or change of the
then outstanding CIT Common Stock into a greater number of CIT
Common Stock or the reduction, combination, consolidation or
change of the then outstanding CIT Common Stock into a lesser
number of CIT Common Stock or any amalgamation, merger,
reorganization or other transaction affecting CIT Common
Stock, the effect thereof upon the then outstanding CIT Common
Stock; and
(v) in all such cases, the general taxation consequences of the
relevant event to holders of Exchangeable Shares to the extent
that such consequences may differ from the taxation
consequences to holders of CIT Common Stock as a result of
differences between taxation laws of Canada and the United
States (except for any differing consequences arising as a
result of differing marginal taxation rates and without regard
to the individual circumstances of holders of Exchangeable
Shares).
For purposes of the foregoing determinations, the current market value of
any security listed and traded or quoted on a securities exchange shall be
the average of the closing bid and asked prices of such security during a
period of not less than 20 consecutive trading days ending not more than
three trading days before the date of determination on the principal
securities exchange on which such securities are listed and traded or
quoted; provided, however, that if in the opinion of the Board of
Directors of
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Annex G
Exchangeco the public distribution or trading activity of such securities
during such period does not create a market which reflects the fair market
value of such securities, then the current market value thereof shall be
determined by the Board of Directors of Exchangeco, in good faith and in
its sole discretion, and provided further that any such determination by
the Board of Directors of Exchangeco shall be conclusive and binding on
CIT.
(e) Exchangeco agrees that, to the extent required, upon due notice from
CIT, Exchangeco will use its best efforts to take or cause to be
taken such steps as may be necessary for the purposes of ensuring
that appropriate dividends are paid or other distributions are made
by Exchangeco, or subdivisions, redivisions or changes are made to
the Exchangeable Shares, in order to implement the required economic
equivalent with respect to the CIT Common Stock and Exchangeable
Shares as provided for in this section 2.7.
II.8 Tender Offers
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to CIT Common Stock (an
"Offer") is proposed by CIT or is proposed to CIT or its stockholders and is
recommended by the Board of Directors of CIT, or is otherwise effected or to be
effected with the consent or approval of the Board of Directors of CIT, and the
Exchangeable Shares are not redeemed by Exchangeco or purchased by Newco
pursuant to the Redemption Call Right, CIT will use its reasonable efforts
expeditiously and in good faith to take all such actions and do all such things
as are necessary or desirable to enable and permit holders of Exchangeable
Shares to participate in such Offer to the same extent and on an economically
equivalent basis as the holders of CIT Common Stock, without discrimination.
Without limiting the generality of the foregoing, CIT will use its reasonable
efforts expeditiously and in good faith to ensure that holders of Exchangeable
Shares may participate in all such Offers without being required to retract
Exchangeable Shares as against Exchangeco (or, if so required, to ensure that
any such retraction, shall be effective only upon, and shall be conditional
upon, the closing of the Offer and only to the extent necessary to tender or
deposit to the Offer). Nothing herein shall affect the rights of Exchangeco to
redeem (or Newco to purchase pursuant to the Redemption Call Right) Exchangeable
Shares, as applicable, in the event of a CIT Control Transaction.
II.9 Ownership of Outstanding Shares
Without the prior approval of Exchangeco and the prior approval of the
holders of the Exchangeable Shares, voting as a separate class, CIT covenants
and agrees in favour of Exchangeco that, as long as any outstanding Exchangeable
Shares are owned by any Person other than CIT or any of its Affiliates, CIT will
be and will remain the direct or indirect beneficial owner of all issued and
outstanding voting shares in the capital of Newcourt, Exchangeco and Newco.
II.10 CIT and Affiliates Not to Vote Exchangeable Shares
CIT covenants and agrees that it will appoint and cause to be appointed
proxyholders with respect to all Exchangeable Shares held by it and its
Affiliates for the sole purpose of attending each meeting of holders of
Exchangeable Shares in order to be counted as part of the quorum for each such
meeting. CIT further covenants and agrees that it will not, and will cause its
Affiliates not to, exercise any voting rights which may be exercisable by
holders of Exchangeable Shares from time to time pursuant to the Share
Provisions or pursuant to the provisions of the Companies Act (Nova Scotia) (or
any successor or other corporate statute by which Exchangeco may in the future
be governed) with respect to any Exchangeable Shares held by it or by its
Affiliates in respect of any matter considered at any meeting of holders of
Exchangeable Shares.
II.11 Rule 10b-18 Purchases
For certainty, nothing contained in this Agreement, including without
limitation the obligations of CIT contained in section 2.8 hereof, shall limit
the ability of CIT or Exchangeco to make a "Rule 10b-18 Purchase" of CIT Common
Stock pursuant to Rule 10b-18 of the U.S. Securities Exchange Act of 1934, as
amended, or any successor provisions thereof.
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II.12 Stock Exchange Listing
CIT covenants and agrees in favour of Exchangeco that, as long as any
outstanding Exchangeable Shares are owned by any person or entity other than CIT
or any of its Affiliates, CIT will use its reasonable best efforts to maintain a
listing for such Exchangeable Shares on The Toronto Stock Exchange.
ARTICLE III
CIT SUCCESSORS
III.1 Certain Requirements in Respect of Combination, etc.
CIT shall not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other person or, in the case of a
merger, of the continuing corporation resulting therefrom unless:
(a) such other person or continuing corporation (the "CIT Successor") by
operation of law, becomes, without more, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior to
or contemporaneously with the consummation of such transaction, an
agreement supplemental hereto and such other instruments (if any) as
are reasonably necessary or advisable to evidence the assumption by
the CIT Successor of liability for all moneys payable and property
deliverable hereunder and the covenant of such CIT Successor to pay
and deliver or cause to be delivered the same and its agreement to
observe and perform all the covenants and obligations of CIT under
this Agreement; and
(b) such transaction shall be upon such terms and conditions as
substantially to preserve and not to impair in any material respect
any of the rights, duties, powers and authorities of the other
parties hereunder.
III.2 Vesting of Powers in Successor
Whenever the conditions of section 3.1 have been duly observed and
performed, the parties, if required by section 3.1, shall execute and deliver a
supplemental agreement hereto and thereupon the CIT Successor shall possess and
from time to time may exercise each and every right and power of CIT under this
Agreement in the name of CIT or otherwise and any act or proceeding by any
provision of this Agreement required to be done or performed by the board of
directors of CIT or any officers of CIT may be done and performed with like
force and effect by the directors or officers of such CIT Successor.
III.3 Wholly-Owned Subsidiaries
Nothing herein shall be construed as preventing the amalgamation or merger
of any wholly-owned direct or indirect subsidiary of CIT with or into CIT or the
winding-up, liquidation or dissolution of any wholly-owned subsidiary of CIT
provided that all of the assets of such subsidiary are transferred to CIT or
another wholly-owned direct or indirect subsidiary of CIT and any such
transactions are expressly permitted by this Article 3.
ARTICLE IV
GENERAL
IV.1 Term
This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any person or
entity other than CIT and any of its Affiliates.
IV.2 Changes in Capital of CIT and Exchangeco
At all times after the occurrence of any event contemplated pursuant to
sections 2.7 and 2.8 hereof or otherwise, as a result of which either CIT Common
Stock or the Exchangeable Shares or both are in any way changed, this Agreement
shall forthwith be amended and modified as necessary in order that it shall
apply with
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Annex G
full force and effect, mutatis mutandis, to all new securities into which CIT
Common Stock or the Exchangeable Shares or both are so changed and the parties
hereto shall execute and deliver an agreement in writing giving effect to and
evidencing such necessary amendments and modifications.
IV.3 Severability
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
IV.4 Amendments, Modifications
This Agreement may not be amended or modified except by an agreement in
writing executed by Exchangeco, Newco and CIT and approved by the holders of the
Exchangeable Shares in accordance with section 10.2 of the Share Provisions.
IV.5 Ministerial Amendments
Notwithstanding the provisions of section 4.4, the parties to this
Agreement may in writing at any time and from time to time, without the approval
of the holders of the Exchangeable Shares, amend or modify this Agreement for
the purposes of:
(a) adding to the covenants of any or all parties provided that the Board
of Directors of each of Exchangeco, Newco and CIT shall be of the
good faith opinion that such additions will not be prejudicial to the
rights or interests of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions which, in the good faith opinion of the Board of Directors
of each of Exchangeco, Newco and CIT, it may be expedient to make,
provided that each such Board of Directors shall be of the good faith
opinion that such amendments or modifications will not be prejudicial
to the rights or interests of the holders of the Exchangeable Shares;
or
(c) making such changes or corrections which, on the advice of counsel to
Exchangeco, Newco and CIT, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the
Board of Directors of each of Exchangeco, Newco and CIT shall be of
the good faith opinion that such changes or corrections will not be
prejudicial to the rights or interests of the holders of the
Exchangeable Shares.
IV.6 Meeting to Consider Amendments
Exchangeco, at the request of CIT, shall call a meeting or meetings of the
holders of the Exchangeable Shares for the purpose of considering any proposed
amendment or modification requiring approval pursuant to section 4.4 hereof. Any
such meeting or meetings shall be called and held in accordance with the by-laws
of Exchangeco, the Share Provisions and all applicable laws.
IV.7 Amendments Only in Writing
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto.
IV.8 Enurement
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and assigns.
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Annex G
IV.9 Notices to Parties
All notices and other communications between the parties to this Agreement
shall be in writing and shall be deemed to have been given and received if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for any such party as shall be specified in
like notice):
(a) if to Exchangeco:
c/o The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
U.S.A.
Attention: Ernest D. Stein, Secretary
Telecopier No.: (212) 536-1912
(b) if to CIT or Newco:
1211 Avenue of the Americas
New York, New York 10036
U.S.A.
Attention: Ernest D. Stein, Secretary
Telecopier No.: (212) 536-1912
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
IV.10 Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.
IV.11 Jurisdiction
This Agreement shall be construed and enforced in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein.
IV.12 Attornment
Each of CIT and Newco agrees that any action or proceeding arising out of
or relating to this Agreement may be instituted in the courts of Ontario, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of the said courts in any
such action or proceeding, agrees to be bound by any judgment of the said courts
and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints Exchangeco
at its registered office in the Province of Nova Scotia as attorney for service
of process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
THE CIT GROUP, INC.
By: ________________________________
Name:
Title:
3026192 NOVA SCOTIA COMPANY
By: ________________________________
Name:
Title:
CIT EXCHANGECO INC.
By: ________________________________
Name:
Title:
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Annex G
ANNEX H
FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the __ day of
November, 1999.
B E T W E E N:
CIT EXCHANGECO INC.,
a company limited by shares existing under the
laws of the Province of Nova Scotia, and a
subsidiary of Newco (hereinafter referred to
as "Exchangeco"),
OF THE FIRST PART,
-- and --
THE CIT GROUP, INC.,
a corporation existing under the laws of the
State of Delaware, (hereinafter referred to
as "CIT"),
OF THE SECOND PART,
-- and --
MONTREAL TRUST COMPANY OF CANADA,
a trust company incorporated under the laws of
Canada, (hereinafter referred to as
"Trustee"),
OF THE THIRD PART.
WHEREAS pursuant to an amended and restated agreement and plan of
reorganization dated as of August 5, 1999 between CIT and Newcourt Credit Group
Inc. ("Newcourt") (the "Agreement and Plan of Reorganization"), CIT has agreed
to cause Exchangeco to issue exchangeable shares (the "Exchangeable Shares") to
certain holders of common shares of Newcourt pursuant to the plan of arrangement
(the "Plan of Arrangement") contemplated by the Agreement and Plan of
Reorganization;
AND WHEREAS pursuant to the Agreement and Plan of Reorganization CIT and
Exchangeco have agreed to execute a voting and exchange trust agreement
substantially in the form of this trust agreement;
AND WHEREAS the above recitals and statements of fact are made by CIT
and Exchangeco and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this trust agreement and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this trust agreement, the following terms shall have the following
meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlled by, or under control of, that Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to any Person, means
the possession by another Person, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that first mentioned
Person, whether through the ownership of voting securities, by contract or
otherwise.
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Annex H
"Arrangement" means the arrangement involving, among others, Newcourt and
its shareholders contemplated by the Plan of Arrangement.
"Automatic Exchange Rights" means the benefit of the obligation of CIT to
effect the automatic exchange of CIT Common Stock for Exchangeable Shares
pursuant to section 5.12.
"Beneficiaries" means the registered holders from time to time of
Exchangeable Shares, other than CIT and its Affiliates.
"Beneficiary Votes" has the meaning ascribed thereto in section 4.2.
"Board of Directors" means the Board of Directors of CIT.
"Business Day" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario, other than a Saturday, a
Sunday or a day observed as a holiday in Toronto, Ontario under the laws of the
province of Ontario or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
"Canadian Dollar Equivalent" means, in respect of an amount expressed in a
currency other than Canadian dollars (the "Foreign Currency Amount") at any
date, the product obtained by multiplying (a) the Foreign Currency Amount by (b)
the noon spot exchange rate on such date for such foreign currency expressed in
Canadian dollars as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date for such foreign
currency expressed in Canadian dollars as may be deemed by the Board of
Directors to be appropriate for such purpose.
"CIT Affiliates" means Affiliates of CIT.
"CIT Common Stock" means the shares of Class A Common Stock, par value
U.S.$0.01 per share, in the capital of CIT and any other securities into which
such shares may be changed.
"CIT Consent" has the meaning ascribed thereto in section 4.2.
"CIT Meeting" has the meaning ascribed thereto in section 4.2.
"CIT Special Voting Share" means the one share of Special Voting Stock of
CIT, par value U.S.$0.01, which entitles the holder of record to a number of
votes at meetings of holders of CIT Common Stock equal to the number of
Exchangeable Shares outstanding from time to time (other than Exchangeable
Shares held by CIT and CIT Affiliates), which share is to be issued to,
deposited with, and voted by, the Trustee as described herein.
"CIT Successor" has the meaning ascribed thereto in section 11.1(a).
"Current Market Price" means, in respect of a CIT Common Stock on any
date, the Canadian Dollar Equivalent of the average of the closing bid and asked
prices of CIT Common Stock during a period of 20 consecutive trading days ending
not more than three trading days before such date on the New York Stock
Exchange, or, if the CIT Common Stock are not then quoted on the New York Stock
Exchange, on such other stock exchange or automated quotation system on which
the CIT Common Stock are listed or quoted, as the case may be, as may be
selected by the Board of Directors for such purpose; provided however, that if
in the opinion of the Board of Directors the public distribution or trading
activity of CIT Common Stock during such period does not create a market which
reflects the fair market value of a CIT Common Stock, then the Current Market
Price of a share of CIT Common Stock shall be determined by the Board of
Directors, in good faith and in its sole discretion, and provided further that
any such selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"Exchange Right" has the meaning ascribed thereto in section 5.1.
"Exchangeable Shares" means the non-voting exchangeable shares in the
capital of Exchangeco.
"Insolvency Event" means the institution by Exchangeco of any proceeding
to be adjudicated a bankrupt or insolvent or to be wound up, or the consent of
Exchangeco to the institution of bankruptcy, insolvency or winding-up
proceedings against it, or the filing of a petition, answer or consent seeking
dissolution or winding-up under any bankruptcy, insolvency or analogous laws,
including without limitation the Companies Creditors'
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Annex H
Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the
failure by Newcourt to contest in good faith any such proceedings commenced in
respect of Exchangeco within 30 days of becoming aware thereof, or the consent
by Exchangeco to the filing of any such petition or to the appointment of a
receiver, or the making by Exchangeco of a general assignment for the benefit of
creditors, or the admission in writing by Exchangeco of its inability to pay its
debts generally as they become due, or Exchangeco not being permitted, pursuant
to solvency requirements of applicable law, to redeem any Retracted Shares
pursuant to section 6.6 of the Share Provisions.
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Liquidation Event" has the meaning ascribed thereto in section 5.12(b).
"Liquidation Event Effective Date" has the meaning ascribed thereto in
section 5.12(c).
"List" has the meaning ascribed thereto in section 4.6.
"Newco" means 3026192 Nova Scotia Company, an unlimited liability company
existing under the laws of Nova Scotia and a wholly-owned subsidiary of CIT.
"Officer's Certificate" means, with respect to CIT or Exchangeco, as the
case may be, a certificate signed by any one of the President or Chief Financial
Officer of CIT or Exchangeco, as the case may be.
"Person" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"Plan of Arrangement" means the plan of arrangement of Newcourt providing
for the Arrangement.
"Redemption Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Retracted Shares" has the meaning ascribed thereto in section 5.7.
"Retraction Call Right" has the meaning ascribed thereto in the Share
Provisions.
"Share Provisions" means the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares.
"Support Agreement" means that certain exchangeable share support
agreement made as of even date herewith between Exchangeco, Newco and CIT.
"Trust" means the trust created by this trust agreement.
"Trust Estate" means the CIT Special Voting Share, any other securities,
the Exchange Right, the Automatic Exchange Rights and any money or other
property which may be held by the Trustee from time to time pursuant to this
trust agreement.
"Trustee" means Montreal Trust Company of Canada and, subject to the
provisions of Article 10, includes any successor trustee.
"Voting Rights" means the voting rights attached to the CIT Special Voting
Share.
1.2 Interpretation Not Affected by Headings, etc.
The division of this trust agreement into Articles, sections and other
portions and the insertion of headings are for convenience of reference only and
should not affect the construction or interpretation of this trust agreement.
Unless otherwise indicated, all references to an "Article" or "section" followed
by a number and/or a letter refer to the specified Article or section of this
trust agreement. The terms "this trust agreement", "hereof", "herein" and
"hereunder" and similar expressions refer to this trust agreement and not to any
particular Article, section or other portion hereof and include any agreement or
instrument supplementary or ancillary hereto.
1.3 Number, Gender, etc.
Words importing the singular number only shall include the plural and vice
versa. Words importing any gender shall include all genders.
1.4 Date for any Action
If any date on which any action is required to be taken under this trust
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
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Annex H
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 Establishment of Trust
The purpose of this trust agreement is to create the Trust for the benefit
of the Beneficiaries, as herein provided. The Trustee will hold the CIT Special
Voting Share in order to enable the Trustee to exercise the Voting Rights and
will hold the Exchange Right and the Automatic Exchange Rights in order to
enable the Trustee to exercise such rights, in each case as trustee for and on
behalf of the Beneficiaries as provided in this trust agreement.
ARTICLE 3
CIT SPECIAL VOTING SHARE
3.1 Issue and Ownership of the CIT Special Voting Share
CIT hereby issues to and deposits with the Trustee, the CIT Special Voting
Share to be hereafter held of record by the Trustee as trustee for and on behalf
of, and for the use and benefit of, the Beneficiaries and in accordance with the
provisions of this trust agreement. CIT hereby acknowledges receipt from the
Trustee as trustee for and on behalf of the Beneficiaries of good and valuable
consideration (and the adequacy thereof) for the issuance of the CIT Special
Voting Share by CIT to the Trustee. During the term of the Trust and subject to
the terms and conditions of this trust agreement, the Trustee shall possess and
be vested with full legal ownership of the CIT Special Voting Share and shall be
entitled to exercise all of the rights and powers of an owner with respect to
the CIT Special Voting Share provided that the Trustee shall:
(a) hold the CIT Special Voting Share and the legal title thereto as
trustee solely for the use and benefit of the Beneficiaries in
accordance with the provisions of this trust agreement; and
(b) except as specifically authorized by this trust agreement, have no
power or authority to sell, transfer, vote or otherwise deal in or
with the CIT Special Voting Share and the CIT Special Voting Share
shall not be used or disposed of by the Trustee for any purpose other
than the purposes for which this Trust is created pursuant to this
trust agreement.
3.2 Legended Share Certificates
Exchangeco will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Beneficiaries of their right to
instruct the Trustee with respect to the exercise of the Voting Rights in
respect of the Exchangeable Shares of the Beneficiaries.
3.3 Safe Keeping of Certificate
The certificate representing the CIT Special Voting Share shall at all
times be held in safe keeping by the Trustee.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 Voting Rights
The Trustee, as the holder of record of the CIT Special Voting Share,
shall be entitled to all of the Voting Rights, including the right to vote in
person or by proxy the CIT Special Voting Share on any matters, questions,
proposals or propositions whatsoever that may properly come before the
shareholders of CIT at a CIT Meeting or in connection with a CIT Consent. The
Voting Rights shall be and remain vested in and exercised by the Trustee.
Subject to section 7.15:
(a) the Trustee shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 4 from Beneficiaries
entitled to instruct the Trustee as to the voting thereof at the time
at which the CIT Meeting is held; and
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Annex H
(b) to the extent that no instructions are received from a Beneficiary
with respect to the Voting Rights to which such Beneficiary is
entitled, the Trustee shall not exercise or permit the exercise of
such Voting Rights.
4.2 Number of Votes
With respect to all meetings of shareholders of CIT at which holders of
CIT Common Stock are entitled to vote (each, a "CIT Meeting") and with respect
to all written consents sought by CIT from its shareholders including the
holders of CIT Common Stock (each, a "CIT Consent"), each Beneficiary shall be
entitled to instruct the Trustee to cast and exercise in the manner instructed
one of the votes comprised in the Voting Rights for each Exchangeable Share
owned of record by such Beneficiary on the record date established by CIT or by
applicable law for such CIT Meeting or CIT Consent, as the case may be (the
"Beneficiary Votes"), in respect of each matter, question, proposal or
proposition to be voted on at such CIT Meeting or in connection with such CIT
Consent.
4.3 Mailings to Shareholders
With respect to each CIT Meeting and CIT Consent, the Trustee will mail or
cause to be mailed (or otherwise communicate in the same manner as CIT utilizes
in communications to holders of CIT Common Stock) to each of the Beneficiaries
named in the List referred to in section 4.6, such mailing or communication to
be given on the same day as the mailing or notice (or other communication) with
respect thereto is given by CIT to its shareholders:
(a) a copy of such notice, together with any related materials to be
provided to shareholders of CIT;
(b) a statement that such Beneficiary is entitled to instruct the Trustee
as to the exercise of the Beneficiary Votes with respect to such CIT
Meeting or CIT Consent or, pursuant to section 4.7, to attend such CIT
Meeting and to exercise personally the Beneficiary Votes thereat;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions may
be given to the Trustee to give:
(i) a proxy to such Beneficiary or his designee to exercise
personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative of the
management of CIT to exercise such Beneficiary Votes;
(d) a statement that if no such instructions are received from the
Beneficiary, the Beneficiary Votes to which such Beneficiary is
entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and instruct
the Trustee as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by the Trustee in order to be binding upon it, which in the
case of a CIT Meeting shall not be earlier than the close of business
on the second Business Day prior to such meeting, and of the method
for revoking or amending such instructions.
For the purpose of determining Beneficiary Votes to which a Beneficiary is
entitled in respect of any CIT Meeting or CIT Consent, the number of
Exchangeable Shares owned of record by the Beneficiary shall be determined at
the close of business on the record date established by CIT or by applicable law
for purposes of determining shareholders entitled to vote at such CIT Meeting.
CIT will notify the Trustee of any decision of the Board of Directors of CIT
with respect to the calling of any CIT Meeting and shall provide all necessary
information and materials to the Trustee in each case promptly and in any event
in sufficient time to enable the Trustee to perform its obligations contemplated
by this section 4.3.
4.4 Copies of Shareholder Information
CIT will deliver to the Trustee copies of all proxy materials (including
notices of CIT Meetings but excluding proxies to vote CIT Common Stock),
information statements, reports (including without limitation, all interim and
annual financial statements) and other written communications that, in each
case, are to be
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Annex H
distributed from time to time to holders of CIT Common Stock in sufficient
quantities and in sufficient time so as to enable the Trustee to send those
materials to each Beneficiary at the same time as such materials are first sent
to holders of CIT Common Stock. The Trustee will mail or otherwise send to each
Beneficiary, at the expense of CIT, copies of all such materials (and all
materials specifically directed to the Beneficiaries or to the Trustee for the
benefit of the Beneficiaries by CIT) received by the Trustee from CIT
contemporaneously with the sending of such materials to holders of CIT Common
Stock. The Trustee will also make available for inspection by any Beneficiary at
the Trustee's principal corporate trust office in the City of Toronto all proxy
materials, information statements, reports and other written communications that
are:
(a) received by the Trustee as the registered holder of the CIT Special
Voting Share and made available by CIT generally to the holders of CIT
Common Stock: or
(b) specifically directed to the Beneficiaries or to the Trustee for the benefit
of the Beneficiaries by CIT.
4.5 Other Materials
As soon as reasonably practicable after receipt by CIT or shareholders of
CIT (if such receipt is known by CIT) of any material sent or given by or on
behalf of a third party to holders of CIT Common Stock generally, including
without limitation, dissident proxy and information circulars (and related
information and material) and tender and exchange offer circulars (and related
information and material), CIT shall use its reasonable efforts to obtain and
deliver to the Trustee copies thereof in sufficient quantities so as to enable
the Trustee to forward such material (unless the same has been provided directly
to Beneficiaries by such third party) to each Beneficiary as soon as possible
thereafter. Immediately upon receipt thereof, the Trustee will mail or otherwise
send to each Beneficiary, at the expense of CIT, copies of all such materials
received by the Trustee from CIT. The Trustee will also make available for
inspection by any Beneficiary at the Trustee's principal corporate trust office
in the City of Toronto copies of all such materials.
4.6 List of Persons Entitled to Vote
Exchangeco shall (a) prior to each annual, general and special CIT Meeting
or the seeking of any CIT Consent and (b) forthwith upon each request made at
any time by the Trustee in writing, prepare or cause to be prepared a list (a
"List") of the names and addresses of the Beneficiaries arranged in alphabetical
order and showing the number of Exchangeable Shares held of record by each such
Beneficiary, in each case at the close of business on the date specified by the
Trustee in such request or, in the case of a List prepared in connection with a
CIT Meeting or a CIT Consent, at the close of business on the record date
established by CIT or pursuant to applicable law for determining the holders of
CIT Common Stock entitled to receive notice of and/or to vote at such CIT
Meeting or to give consent in connection with such CIT Consent. Each such List
shall be delivered to the Trustee promptly after receipt by Exchangeco of such
request or the record date for such meeting or seeking of consent, as the case
may be, and in any event within sufficient time as to enable the Trustee to
perform its obligations under this Agreement. CIT agrees to give Exchangeco
notice (with a copy to the Trustee) of the calling of any CIT Meeting or the
seeking of any CIT Consent, together with the record dates therefor,
sufficiently prior to the date of the calling of such meeting or seeking of such
consent so as to enable Exchangeco to perform its obligations under this section
4.6.
4.7 Entitlement to Direct Votes
Any Beneficiary named in a List prepared in connection with any CIT
Meeting or CIT Consent will be entitled (a) to instruct the Trustee in the
manner described in section 4.3 with respect to the exercise of the Beneficiary
Votes to which such Beneficiary is entitled or (b) to attend such meeting and
personally exercise thereat or to exercise (with respect to any written
consent), as the proxy of the Trustee, the Beneficiary Votes to which such
Beneficiary is entitled.
4.8 Voting by Trustee, and Attendance of Trustee Representative at Meeting
(a) In connection with each CIT Meeting and CIT Consent, the Trustee shall
exercise, either in person or by proxy, in accordance with the instructions
received from a Beneficiary pursuant to section 4.3, the Beneficiary Votes as to
which such Beneficiary is entitled to direct the vote (or any lesser number
thereof as may be set forth in the instructions); provided, however, that such
written instructions are received by the Trustee from the Beneficiary prior to
the time and date fixed by the Trustee for receipt of such instruction in the
notice given by the Trustee to the Beneficiary pursuant to section 4.3.
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Annex H
(b) The Trustee shall cause a representative who is empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend
each CIT Meeting. Upon submission by a Beneficiary (or its designee) of
identification satisfactory to the Trustee's representative, and at the
Beneficiary's request, such representative shall sign and deliver to such
Beneficiary (or its designee) a proxy to exercise personally the Beneficiary
Votes as to which such Beneficiary is otherwise entitled hereunder to direct the
vote, if such Beneficiary either (1) has not previously given the Trustee
instructions pursuant to section 4.3 in respect of such meeting or (ii) submits
to such representative written revocation of any such previous instructions. At
such meeting, the Beneficiary exercising such Beneficiary Votes shall have the
same rights as the Trustee to speak at the meeting in favour of any matter,
question, proposal or proposition, to vote by way of ballot at the meeting in
respect of any matter, question, proposal or proposition, and to vote at such
meeting by way of a show of hands in respect of any matter, question or
proposition.
4.9 Distribution of Written Materials
Any written materials distributed by the Trustee pursuant to this trust
agreement shall be sent by mail (or otherwise communicated in the same manner as
CIT utilizes in communications to holders of CIT Common Stock) to each
Beneficiary at its address as shown on the books of Exchangeco. Exchangeco shall
provide or cause to be provided to the Trustee for this purpose, on a timely
basis and without charge or other expense:
(a) a current List; and
(b) upon the request of the Trustee, mailing labels to enable the Trustee
to carry out its duties under this trust agreement.
4.10 Termination of Voting Rights
All of the rights of a Beneficiary with respect to the Beneficiary Votes
exercisable in respect of the Exchangeable Shares held by such Beneficiary,
including the right to instruct the Trustee as to the voting of or to vote
personally such Beneficiary Votes, shall be deemed to be surrendered by the
Beneficiary to CIT or Newco, as the case may be, and such Beneficiary Votes and
the Voting Rights represented thereby shall cease immediately upon the delivery
by such holder to the Trustee of the certificates representing such Exchangeable
Shares in connection with the exercise by the Beneficiary of the Exchange Right
or the occurrence of the automatic exchange of Exchangeable Shares for CIT
Common Stock, as specified in Article 5 (unless, in either case, CIT shall not
have delivered the requisite CIT Common Stock issuable in exchange therefor to
the Trustee for delivery to the Beneficiaries), or upon the redemption of
Exchangeable Shares pursuant to Article 6 or 7 of the Share Provisions, or upon
the effective date of the liquidation, dissolution or winding-up of Exchangeco
pursuant to Article 5 of the Share Provisions, or upon the purchase of
Exchangeable Shares from the holder thereof by Newco pursuant to the exercise by
Newco of the Retraction Call Right, the Redemption Call Right or the Liquidation
Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Right
CIT hereby grants to the Trustee as trustee for and on behalf of, and for
the use and benefit of, the Beneficiaries the right (the "Exchange Right"), upon
the occurrence and during the continuance of an Insolvency Event, to require CIT
to purchase from each or any Beneficiary all or any part of the Exchangeable
Shares held by the Beneficiary and the Automatic Exchange Rights, all in
accordance with the provisions of this trust agreement. CIT hereby acknowledges
receipt from the Trustee as trustee for and on behalf of the Beneficiaries of
good and valuable consideration (and the adequacy thereof) for the grant of the
Exchange Right and the Automatic Exchange Rights by CIT to the Trustee. During
the term of the Trust and subject to the terms and conditions of this trust
agreement, the Trustee shall possess and be vested with full legal ownership of
the Exchange Right and the Automatic Exchange Rights and shall be entitled to
exercise all of the rights and powers of an owner with respect to the Exchange
Right and the Automatic Exchange Rights, provided that the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and the
legal title thereto as trustee solely for the use and benefit of the
Beneficiaries in accordance with the provisions of this trust
agreement; and
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Annex H
(b) except as specifically authorized by this trust agreement, have no
power or authority to exercise or otherwise deal in or with the
Exchange Right or the Automatic Exchange Rights, and the Trustee shall
not exercise any such rights for any purpose other than the purposes
for which the Trust is created pursuant to this trust agreement.
5.2 Legended Share Certificates
Exchangeco will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Beneficiaries of:
(a) their right to instruct the Trustee with respect to the exercise of
the Exchange Right in respect of the Exchangeable Shares held by a
Beneficiary; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Right
The Exchange Right shall be and remain vested in and exercisable by the
Trustee. Subject to section 7.15, the Trustee shall exercise the Exchange Right
only on the basis of instructions received pursuant to this Article 5 from
Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To
the extent that no instructions are received from a Beneficiary with respect to
the Exchange Right, the Trustee shall not exercise or permit the exercise of the
Exchange Right.
5.4 Purchase Price
The purchase price payable by CIT for each Exchangeable Share to be
purchased by CIT under the Exchange Right shall be an amount per share equal to
the Current Market Price of a share of CIT Common Stock on the last Business Day
prior to the day of closing of the purchase and sale of such Exchangeable Share
under the Exchange Right, which shall be satisfied in full by CIT causing to be
sent to such holder one share of CIT Common Stock. For greater certainty, it is
hereby confirmed that such holders shall also be entitled to continue to receive
from Exchangeco, on the designated payment date therefor, the full amount of all
declared but unpaid dividends on each such Exchangeable Share held by such
holder on any dividend record date which occurred prior to the closing of the
purchase and sale and, to the extent such amount is not paid by Exchangeco on
the designated payment date therefor, such amount shall be paid by CIT on such
date for and on behalf of Exchangeco. The purchase price for each such
Exchangeable Share so purchased may be satisfied only by CIT issuing and
delivering or causing to be delivered to the Trustee, on behalf of the relevant
Beneficiary, one CIT Common Stock and on the applicable payment date CIT shall
deliver or cause to be delivered by the Trustee, on behalf of the relevant
Beneficiary a cheque for the amount, if any, of the declared but unpaid
dividends referred to above, without interest (but less any amounts withheld
pursuant to section 5.13).
5.5 Exercise Instructions
Subject to the terms and conditions herein set forth, a Beneficiary shall
be entitled, upon the occurrence and during the continuance of an Insolvency
Event, to instruct the Trustee to exercise the Exchange Right with respect to
all or any part of the Exchangeable Shares registered in the name of such
Beneficiary on the books of Exchangeco. To cause the exercise of the Exchange
Right by the Trustee, the Beneficiary shall deliver to the Trustee, in person or
by certified or registered mail, at its principal corporate trust office in
Toronto, Ontario or at such other places in Canada as the Trustee may from time
to time designate by written notice to the Beneficiaries, the certificates
representing the Exchangeable Shares which such Beneficiary desires CIT to
purchase, duly endorsed in blank for transfer, and accompanied by such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Companies Act (Nova Scotia) and the by-laws of
Exchangeco and such additional documents and instruments as the Trustee may
reasonably require together with (a) a duly completed form of notice of exercise
of the Exchange Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating (i) that the Beneficiary thereby
instructs the Trustee to exercise the Exchange Right so as to require CIT to
purchase from the Beneficiary the number of Exchangeable Shares specified
therein, (ii) that such Beneficiary has good title to and owns all such
Exchangeable Shares to be acquired by CIT free and clear of all liens, claims
and encumbrances, (iii) the names in which the certificates representing CIT
Common Stock issuable in connection with the exercise of the Exchange Right are
to be
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Annex H
issued and (iv) the names and addresses of the persons to whom such new
certificates should be delivered and (b) payment (or evidence satisfactory to
the Trustee, Exchangeco and CIT of payment) of the taxes (if any) payable as
contemplated by section 5.8 of this trust agreement. If only a part of the
Exchangeable Shares represented by any certificate or certificates delivered to
the Trustee are to be purchased by CIT under the Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be issued to the
holder at the expense of Exchangeco.
5.6 Delivery of CIT Common Stock; Effect of Exercise
Promptly after receipt of the certificates representing the Exchangeable
Shares which the Beneficiary desires CIT to purchase under the Exchange Right,
together with such documents and instruments of transfer and a duly completed
form of notice of exercise of the Exchange Right (and payment of taxes, if any,
payable as contemplated by section 5.8 or evidence thereof), duly endorsed for
transfer to CIT, the Trustee shall notify CIT and Exchangeco of its receipt of
the same, which notice to CIT and Exchangeco shall constitute exercise of the
Exchange Right by the Trustee on behalf of the holder of such Exchangeable
Shares, and CIT shall promptly thereafter deliver or cause to be delivered to
the Trustee, for delivery to the Beneficiary of such Exchangeable Shares (or to
such other persons, if any, properly designated by such Beneficiary)
certificates representing the number of shares of CIT Common Stock issuable in
connection with the exercise of the Exchange Right which shares shall be duly
issued as fully paid and non-assessable and shall be free and clear of any
liens, and on the applicable payment date cheques for the amount, if any, of the
declared but unpaid dividends referred to in section 5.6 without interest (but
less any amounts withheld pursuant to section 5.13); provided, however, that no
such delivery shall be made unless and until the Beneficiary requesting the same
shall have paid (or provided evidence satisfactory to the Trustee, Exchangeco
and CIT of the payment of) the taxes (if any) payable as contemplated by section
5.8 of this trust agreement. Immediately upon the giving of notice by the
Trustee to CIT and Exchangeco of the exercise of the Exchange Right as provided
in this section 5.6, the closing of the transaction of purchase and sale
contemplated by the Exchange Right shall be deemed to have occurred and the
holder of such Exchangeable Shares shall be deemed to have transferred to CIT
all of such holder's right, title and interest in and to such Exchangeable
Shares and the related interest in the Trust Estate and shall cease to be a
holder of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of a holder in respect thereof, other than the right to receive any
declared but unpaid dividends as provided in section 5.6 and other than the
right to receive his proportionate part of the total purchase price therefor,
unless the requisite number of CIT Common Stock is not allotted, issued and
delivered by CIT to the Trustee within five Business Days of the date of the
giving of such notice by the Trustee, in which case the rights of the
Beneficiary shall remain unaffected until such CIT Common Stock are so allotted,
issued and delivered by CIT. Upon delivery by CIT to the Trustee of such CIT
Common Stock, the Trustee shall deliver such CIT Common Stock to such
Beneficiary (or to such other persons, if any, properly designated by such
Beneficiary). Concurrently with such Beneficiary ceasing to be a holder of
Exchangeable Shares, the Beneficiary shall be considered and deemed for all
purposes to be the holder of the CIT Common Stock delivered to it pursuant to
the Exchange Right. The Trustee shall not be responsible or liable in any manner
whatsoever for the sufficiency, correctness, genuineness or validity of any
security deposited with it. The Trustee shall incur no liability with respect to
the delivery or non-delivery of any certificate or certificates, whether
delivered by hand, mail or other means.
5.7 Exercise of Exchange Right Subsequent to Retraction
In the event that a Beneficiary has exercised its right under Article 6 of
the Share Provisions to require Exchangeco to redeem any or all of the
Exchangeable Shares held by the Beneficiary (the "Retracted Shares") and is
notified by Exchangeco pursuant to section 6.6 of the Share Provisions that
Exchangeco will not be permitted as a result of solvency requirements of
applicable law to redeem all such Retracted Shares, and provided that Newco
shall not have exercised the Retraction Call Right with respect to the Retracted
Shares and that the Beneficiary has not revoked the retraction request delivered
by the Beneficiary to Exchangeco pursuant to section 6.1 of the Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Beneficiary to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares that
Exchangeco is unable to redeem. In any such event, Exchangeco hereby agrees with
the Trustee and in favour of the Beneficiary promptly to forward or cause to be
forwarded to the Trustee all relevant materials delivered by the Beneficiary to
Exchangeco or to the transfer agent of the Exchangeable
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Annex H
Shares (including without limitation, a copy of the retraction request delivered
pursuant to section 6.1 of the Share Provisions) in connection with such
proposed redemption of the Retracted Shares and the Trustee will thereupon
exercise the Exchange Right with respect to the Retracted Shares that Exchangeco
is not permitted to redeem and will require CIT to purchase such shares in
accordance with the provisions of this Article 5.
5.8 Stamp or Other Transfer Taxes
Upon any sale of Exchangeable Shares to CIT pursuant to the Exchange Right
or the Automatic Exchange Rights, the share certificate or certificates
representing CIT Common Stock to be delivered in connection with the payment of
the total purchase price therefor shall be issued in the name of the Beneficiary
of the Exchangeable Shares so sold or in such names as such Beneficiary may
otherwise direct in writing without charge to the holder of the Exchangeable
Shares so sold; provided, however, that such Beneficiary (a) shall pay (and none
of CIT, Exchangeco or the Trustee shall be required to pay) any documentary,
stamp, transfer or other taxes that may be payable in respect of any transfer
involved in the issuance or delivery of such shares to a person other than such
Beneficiary or (b) shall have evidenced to the satisfaction of the Trustee, CIT
and Newcourt that such taxes, if any, have been paid.
5.9 Notice of Insolvency Event
As soon as practicable following the occurrence of an Insolvency Event or
any event that with the giving of notice or the passage of time or both would be
an Insolvency Event, Exchangeco and CIT shall give written notice thereof to the
Trustee. Immediately upon the receipt of notice from Exchangeco and CIT of the
occurrence of an Insolvency Event, or upon the Trustee becoming aware of an
Insolvency Event, the Trustee will mail to each Beneficiary, at the expense of
CIT, a notice of such Insolvency Event, which notice shall contain a brief
statement of the rights of the Beneficiaries with respect to the Exchange Right.
5.10 Qualification of CIT Common Stock
CIT covenants that if any CIT Common Stock to be issued and delivered
pursuant to the Exchange Right or the Automatic Exchange Rights require
registration or qualification with or approval of or the filing of any document,
including any prospectus or similar document, or the taking of any proceeding
with or the obtaining of any order, ruling or consent from any governmental or
regulatory authority under any Canadian or United States federal, provincial or
state law or regulation or pursuant to the rules and regulations of any
regulatory authority or the fulfillment of any other Canadian or United States
federal, provincial or state legal requirement before such shares may be issued
and delivered by CIT to the initial holder thereof or in order that such shares
may be freely traded thereafter (other than any restrictions of general
application on transfer by reason of a holder being a "control person" of CIT
for purposes of Canadian provincial securities law or an "affiliate" of CIT for
purposes of United States federal or state securities law), CIT will in good
faith expeditiously take all such actions and do all such things as are
necessary or desirable to cause such CIT Common Stock to be and remain duly
registered, qualified or approved. CIT will in good faith expeditiously take all
such actions and do all such things as are reasonably necessary or desirable to
cause all CIT Common Stock to be delivered pursuant to the Exchange Right or the
Automatic Exchange Rights to be listed, quoted or posted for trading on all
stock exchanges and quotation systems on which outstanding CIT Common Stock have
been listed by CIT and remain listed and are quoted or posted for trading at
such time.
5.11 CIT Common Stock
CIT hereby represents, warrants and covenants that the CIT Common Stock
issuable as described herein will be duly authorized and validly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance.
5.12 Automatic Exchange on Liquidation of CIT
(a) CIT will give the Trustee notice of each of the following events at
the time set forth below:
(i) in the event of any determination by the Board of Directors of CIT to
institute voluntary liquidation, dissolution or winding-up proceedings
with respect to CIT or to effect any other distribution of assets of
CIT among its shareholders for the purpose of winding up its affairs,
at least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution; and
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Annex H
(ii)as soon as practicable following the earlier of (A) receipt by CIT of
notice of, and (B) CIT otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of CIT or to
effect any other distribution of assets of CIT among its shareholders
for the purpose of winding-up its affairs.
(b) As soon as practicable following receipt by the Trustee from CIT of
notice of any event (a "Liquidation Event") contemplated by section 5.12 (a) (i)
or 5.12 (a) (ii) above, the Trustee will give notice thereof to the
Beneficiaries. Such notice shall include a brief description of the automatic
exchange of Exchangeable Shares for CIT Common Stock provided for in section
5.12(c).
(c) In order that the Beneficiaries will be able to participate on a pro
rata basis with the holders of CIT Common Stock in the distribution of assets of
CIT in connection with a Liquidation Event, on the fifth Business Day prior to
the effective date (the "Liquidation Event Effective Date") of a Liquidation
Event all of the then outstanding Exchangeable Shares shall be automatically
exchanged for CIT Common Stock. To effect such automatic exchange, CIT shall
purchase on the fifth Business Day prior to the Liquidation Event Effective Date
each Exchangeable Share then outstanding and held by Beneficiaries, and each
Beneficiary shall sell the Exchangeable Shares held by it at such time, for a
purchase price per share equal to the Current Market Price of a share of CIT
Common Stock on the fifth Business Day prior to the Liquidation Event Effective
Date, which shall be satisfied in full by CIT issuing to the Beneficiary one
share of CIT Common Stock. For greater certainty, it is hereby confirmed that
such holder shall also continue to be entitled to receive from Exchangeco, on
the designated payment date therefor, the full amount of all declared but unpaid
dividends on each such Exchangeable Share held by such holder on any dividend
record date which occurred prior to the date of the exchange and, to the extent
such amount is not paid by Exchangeco on the designated payment date therefor,
such amount shall be paid by CIT on such date for and on behalf of Exchangeco.
(d) On the fifth Business Day prior to the Liquidation Event Effective
Date, the closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Shares for CIT Common Stock shall be deemed
to have occurred, and each Beneficiary shall be deemed to have transferred to
CIT all of the Beneficiary's right, title and interest in and to such
Beneficiary's Exchangeable Shares and the related interest in the Trust Estate
and shall cease to be a holder of such Exchangeable Shares and CIT shall issue
to the Beneficiary the CIT Common Stock issuable upon the automatic exchange of
Exchangeable Shares for CIT Common Stock and on the applicable payment date
shall deliver to the Trustee for delivery to the Beneficiary a cheque for the
amount, if any, of the declared but unpaid dividends as aforesaid for such
Exchangeable Shares, without interest but less any amounts withheld pursuant to
section 5.13. Concurrently with such Beneficiary ceasing to be a holder of
Exchangeable Shares, the Beneficiary shall be considered and deemed for all
purposes to be the holder of the CIT Common Stock issued pursuant to the
automatic exchange of Exchangeable Shares for CIT Common Stock and the
certificates held by the Beneficiary previously representing the Exchangeable
Shares exchanged by the Beneficiary with CIT pursuant to such automatic exchange
shall thereafter be deemed to represent CIT Common Stock issued to the
Beneficiary by CIT pursuant to such automatic exchange. Upon the request of a
Beneficiary and the surrender by the Beneficiary of Exchangeable Share
certificates deemed to represent CIT Common Stock, duly endorsed in blank and
accompanied by such instruments of transfer as CIT may reasonably require, CIT
shall deliver or cause to be delivered to the Beneficiary certificates
representing CIT Common Stock of which the Beneficiary is the holder.
5.13 Withholding Rights
CIT, Exchangeco and the Trustee shall be entitled to deduct and withhold
from any consideration otherwise payable under this trust agreement to any
holder of Exchangeable Shares or CIT Common Stock such amounts as CIT,
Exchangeco or the Trustee is required or permitted to deduct and withhold with
respect to such payment under the Income Tax Act (Canada), the United States
Internal Revenue Code of 1986 or any provision of provincial, state, local or
foreign tax law, in each case as amended or succeeded. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
as having been paid to the holder of the shares in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the
amount so required or permitted to be deducted or withheld from any payment to a
holder exceeds the cash portion of the consideration otherwise payable to the
holder, CIT, Exchangeco and the Trustee are hereby authorized to sell or
otherwise dispose of
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Annex H
such portion of the consideration as is necessary to provide sufficient funds to
CIT, Exchangeco or the Trustee, as the case may be, to enable it to comply with
such deduction or withholding requirement and CIT, Exchangeco or the Trustee
shall notify the holder thereof and remit to such holder any unapplied balance
of the net proceeds of such sale. CIT represents and warrants that, based upon
facts currently known to it, it has no current intention, as at the date of this
Agreement, to deduct or withhold from any dividend paid to holders of
Exchangeable Shares any amounts under the United States Internal Revenue Code of
1986, as amended.
ARTICLE 6
RESTRICTIONS ON ISSUE OF CIT SPECIAL VOTING STOCK
6.1 Issue of Additional Shares
During the term of this trust agreement, CIT will not, without the consent
of the holders at the relevant time of Exchangeable Shares, given in accordance
with section 10.2 of the Share Provisions, issue any shares of its Special
Voting Stock in addition to the CIT Special Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 Powers and Duties of the Trustee
The rights, powers, duties and authorities of the Trustee under this trust
agreement, in its capacity as Trustee of the Trust, shall include:
(a) receipt and deposit of the CIT Special Voting Share from CIT as
Trustee for and on behalf of the Beneficiaries in accordance with the
provisions of this trust agreement;
(b) granting proxies and distributing materials to Beneficiaries as
provided in this trust agreement;
(c) voting the Beneficiary Votes in accordance with the provisions of this
trust agreement;
(d) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from CIT as Trustee for and on behalf of the Beneficiaries in
accordance with the provisions of this trust agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this trust agreement, and in connection therewith
receiving from Beneficiaries Exchangeable Shares and other requisite
documents and distributing to such Beneficiaries CIT Common Stock and
cheques, if any, to which such Beneficiaries are entitled upon the
exercise of the Exchange Right or pursuant to the Automatic Exchange
Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this trust agreement;
(h) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of CIT and
Exchangeco under this trust agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this trust agreement.
For greater certainty, the Trustee shall have only those duties as are set
out specifically in this Agreement.
Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall obligate the Trustee to have knowledge of, comply with, or
otherwise act in accordance with laws or regulations of a jurisdiction other
than the Province of Ontario and Canada.
In the exercise of such rights, powers, duties and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers,
duties and authority not in conflict with any of the provisions of this trust
agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers, duties
and authorities by the Trustee shall be final, conclusive and binding upon all
persons.
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Annex H
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith and with a view to the best
interests of the Beneficiaries and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
7.2 No Conflict of Interest
The Trustee represents to CIT and Exchangeco that at the date of execution
and delivery of this trust agreement there exists no material conflict of
interest in the role of the Trustee as a fiduciary hereunder and the role of the
Trustee in any other capacity. The Trustee shall, within 90 days after it
becomes aware that such material conflict of interest exists, either eliminate
such material conflict of interest or resign in the manner and with the effect
specified in Article 10. If, notwithstanding the foregoing provisions of this
section 7.2, the Trustee has such a material conflict of interest, the validity
and enforceability of this trust agreement shall not be affected in any manner
whatsoever by reason only of the existence of such material conflict of
interest. If the Trustee contravenes the foregoing provisions of this section
7.2, any interested party may apply to the Ontario Superior Court of Justice for
an order that the Trustee be replaced as Trustee hereunder.
7.3 Dealings with Transfer Agents, Registrars, etc.
CIT and Exchangeco irrevocably authorize the Trustee, from time to time,
to:
(a) consult, communicate and otherwise deal with the respective registrars
and transfer agents, and with any such subsequent registrar or transfer agent,
of the Exchangeable Shares and CIT Common Stock; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the records maintained by
it which the Trustee may reasonably require for the discharge of its duties and
responsibilities under this trust agreement and (ii) from the transfer agent of
CIT Common Stock, and any subsequent transfer agent of such shares, the share
certificates issuable upon the exercise from time to time of the Exchange Right
and pursuant to the Automatic Exchange Rights.
CIT and Exchangeco irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. CIT covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Right and the
Automatic Exchange Rights.
7.4 Books and Records
The Trustee shall keep available for inspection by CIT and Exchangeco at
the Trustee's principal corporate trust office in Toronto, Ontario correct and
complete books and records of account relating to the Trust created by this
trust agreement, including without limitation, all relevant data relating to
mailings and instructions to and from Beneficiaries and all transactions
pursuant to the Exchange Right and the Automatic Exchange Rights. On or before
March 31, 2000, and on or before March 31 in every year thereafter, so long as
the CIT Special Voting Share is on deposit with the Trustee, the Trustee shall
transmit to CIT and Exchangeco a brief report, dated as of the preceding
December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on
behalf of Beneficiaries in consideration of the issuance and delivery
by CIT of CIT Common Stock in connection with the Exchange Right,
during the calendar year ended on such December 31; and
(c) any action taken by the Trustee in the performance of its duties under
this trust agreement which it had not previously reported and which,
in the Trustee's opinion, materially affects the Trust Estate.
7.5 Income Tax Returns and Reports
The Trustee shall, to the extent necessary, arrange for the preparation
and filing on behalf of the Trust appropriate United States and Canadian income
tax returns and any other returns or reports as may be required by applicable
law or pursuant to the rules and regulations of any securities exchange or other
trading system through which the Exchangeable Shares are traded and may obtain
the advice and assistance of such experts as the Trustee may consider necessary
or desirable. If requested by the Trustee, CIT shall retain such experts for the
purposes of providing such advice or assistance.
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7.6 Indemnification Prior to Certain Actions by Trustee
The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this trust agreement at the request, order or
direction of any Beneficiary upon such Beneficiary furnishing to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred by the Trustee therein or thereby, provided that no
Beneficiary shall be obligated to furnish to the Trustee any such security or
indemnity in connection with the exercise by the Trustee of any of its rights,
duties, powers and authorities with respect to the CIT Special Voting Share
pursuant to Article 4, subject to section 7.15, and with respect to the Exchange
Right pursuant to Article 5, subject to section 7.15, and with respect to the
Automatic Exchange Rights pursuant to Article 5.
None of the provisions contained in this trust agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties, or authorities unless
funded, given security and indemnified as aforesaid.
7.7 Action of Beneficiaries
No Beneficiary shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this trust agreement
for the purpose of enforcing any of its rights or for the execution of any trust
or power hereunder unless the Beneficiary has requested the Trustee to take or
institute such action, suit or proceeding and furnished the Trustee with the
security or indemnity referred to in section 7.6 and the Trustee shall have
failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Beneficiary shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Beneficiaries shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or the Voting Rights, the
Exchange Rights or the Automatic Exchange Rights except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Beneficiaries.
7.8 Reliance Upon Declarations
The Trustee shall not be considered to be in contravention of any its
rights, powers, duties and authorities hereunder if, when required, it acts and
relies in good faith upon statutory declarations, certificates, opinions, lists,
mailing labels, notices or reports and other papers and documents furnished
pursuant to the provisions hereof or required by the Trustee to be furnished to
it in the exercise of its rights, powers, duties and authorities hereunder if
such statutory declarations, certificates, opinions or reports comply with the
provisions of section 7.9, if applicable, and with any other applicable
provisions of this trust agreement.
7.9 Evidence and Authority to Trustee
CIT and/or Exchangeco shall furnish to the Trustee evidence of compliance
with the conditions provided for in this trust agreement relating to any action
or step required or permitted to be taken by CIT and/or Exchangeco or the
Trustee under this trust agreement or as a result of any obligation imposed
under this trust agreement, including, without limitation, in respect of the
Voting Rights or the Exchange Right or the Automatic Exchange Rights and the
taking of any other action to be taken by the Trustee at the request of or on
the application of CIT and/or Exchangeco promptly if and when:
(a) such evidence is required by any other section of this trust agreement
to be furnished to the Trustee in accordance with the terms of this
section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this trust agreement, gives CIT and/or Exchangeco
written notice requiring it to furnish such evidence in relation to
any particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of CIT and/or
Exchangeco or a statutory declaration or a certificate made by persons entitled
to sign an Officer's Certificate stating that any such condition has been
complied with in accordance with the terms of this trust agreement.
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Annex H
Whenever such evidence relates to a matter other than the Voting Rights or
the Exchange Right or the Automatic Exchange Rights or the taking of any other
action to be taken by the Trustee at the request or on the application of CIT
and/or Exchangeco, and except as otherwise specifically provided herein, such
evidence may consist of a report or opinion of any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert or any other person
whose qualifications give authority to a statement made by him, provided that if
such report or opinion is furnished by a director, officer or employee of CIT
and/or Exchangeco it shall be in the form of an Officer's Certificate or a
statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this trust agreement shall include a statement by the person giving the
evidence:
(a) declaring that he has read and understands the provisions of this
trust agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement
or opinion; and
(c) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed therein.
7.10 Experts, Advisers and Agents
The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice of
or information obtained from any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by CIT and/or Exchangeco or otherwise, and
may employ such assistants as may be necessary to the proper discharge
of its powers and duties and determination of its rights hereunder and
may pay proper and reasonable compensation for all such legal and
other advice or assistance as aforesaid. The fees of such experts are
to be part of the Trustee's fees hereunder; and
(b) employ such agents and other assistants as it may reasonably require
for the proper discharge of its powers and duties hereunder, and may
pay reasonable remuneration for all services performed for it (and
shall be compensated sufficiently to pay such agent's fees) in the
discharge of the trusts hereof and compensation for all disbursements,
costs and expenses made or incurred by it in the discharge of its
duties hereunder and in the management of the Trust.
7.11 Investment of Moneys Held by Trustee
Unless otherwise provided in this trust agreement, any moneys held by or
on behalf of the Trustee which under the terms of this trust agreement may or
ought to be invested or which may be on deposit with the Trustee or which may be
in the hands of the Trustee may be invested and reinvested in the name or under
the control of the Trustee in securities in which, under the laws of the
Province of Ontario, trustees are authorized to invest trust moneys and the
Trustee shall invest such moneys, solely upon the written direction and
authorization of Exchangeco. Exchangeco shall be restricted from directing the
investment of such moneys other than investment in short-term Canadian money
market instruments that are stated to mature within two years after their
purchase by the Trustee. Pending the investment of any moneys as hereinbefore
provided, such moneys may be deposited in the name of the Trustee in any
chartered bank in Canada or, with the consent of Exchangeco, in the deposit
department of the Trustee or any other loan or trust company authorized to
accept deposits under the laws of Canada or any province thereof at the rate of
interest then current on similar deposits.
7.12 Trustee Not Required to Give Security
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts, rights, duties, powers and authorities of this
trust agreement or otherwise in respect of the premises.
7.13 Trustee Not Bound to Act on Request
Except as in this trust agreement otherwise specifically provided, the
Trustee shall not be bound to act in accordance with any direction or request of
CIT and/or Exchangeco or of the directors thereof until a duly authenticated
copy of the instrument or resolution containing such direction or request shall
have been delivered
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Annex H
to the Trustee, and the Trustee shall be empowered to act upon any such copy
purporting to be authenticated and believed by the Trustee to be genuine.
7.14 Authority to Carry on Business
The Trustee represents to CIT and Exchangeco that at the date of execution
and delivery by it of this trust agreement it is authorized to carry on the
business of a trust company in each of the Provinces of Canada but if,
notwithstanding the provisions of this section 7.14, it ceases to be so
authorized to carry on business, the validity and enforceability of this trust
agreement and the Voting Rights, the Exchange Right and the Automatic Exchange
Rights shall not be affected in any manner whatsoever by reason only of such
event but the Trustee shall, within 90 days after ceasing to be authorized to
carry on the business of a trust company in any Province of Canada, either
become so authorized or resign in the manner and with the effect specified in
Article 10.
7.15 Conflicting Claims
If conflicting claims or demands are made or asserted with respect to any
interest of any Beneficiary in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Beneficiary in any
Exchangeable Shares, resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claims or demands.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Rights or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with any
such conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or
demands have been conclusively settled by a valid written agreement
binding on all such adverse claimants, and the Trustee shall have been
furnished with an executed copy of such agreement certified to be in
full force and effect.
If the Trustee elects to recognize any claim or comply with any demand
made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate to fully indemnify it as between all
conflicting claims or demands.
7.16 Notice to Trustee
The Trustee shall not be bound to give any notice or do or take any act,
action or proceeding by virtue of the powers conferred on it hereby unless and
until it shall have been required to do so under the terms of this Agreement;
nor shall the Trustee be required to take notice of, be deemed to have actual or
constructive notice or knowledge of any matter under this Agreement, or take any
action in connection with any notice of any CIT Meeting or the seeking of any
CIT Consent or any prohibition of Exchangeco against redeeming any Retracted
Shares as set out in Section 6.6 of the Provisions Attaching to the Exchangeable
Shares of Exchangeco or of any Insolvency Event, or Liquidation Event as set out
in Article 5 of this Agreement, respectively (collectively, a "Notice Event"),
unless and until notified in writing of such Notice Event in accordance with
this Agreement, which notice shall distinctly specify the Notice Event desired
to be brought to the attention of the Trustee and in the absence of any such
notice the Trustee may for all purposes of this Agreement conclusively assume
that no such Notice Event had occurred.
7.17 Merger or Consolidation of Trustee
Any corporation into or which the Trustee may be merged or consolidated or
amalgamated, or any corporation resulting therefrom to which the Trustee may be
a party, or any corporation succeeding to the trust business of the Trustee
shall be the successor to the Trustee under this Agreement without any further
act on its part or any of the parties hereto, provided that such corporation
would be eligible for appointment as a successor trustee under the provisions of
this Agreement.
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Annex H
7.18 No Personal Liability
In the exercise of the powers, authorities or discretion conferred upon
the Trustee under this Agreement, the Trustee is and shall be conclusively
deemed to be acting as trustee of the Trust and shall not be subject to any
personal liability for any of the liabilities, obligations, claims, demands,
judgments, costs or expenses against or with respect to the Trust.
7.19 Incumbency Certificate
Each of CIT and Exchangeco shall file with the Trustee a certificate of
incumbency setting forth the names of the individuals authorized to give
instructions, directions or other instruments to the Trustee ("Authorized
Persons"), together with specimen signatures of such persons, and the Trustee
shall be entitled to rely on the latest certificate of incumbency filed with it
unless it receives notice of a change in Authorized Persons with updated
specimen signatures.
The Trustee shall not be liable for any error in judgment or for any act
done or step taken or omitted by it in good faith or for any mistake, in fact or
law, or for anything which it may do or refrain from doing in connection
herewith except arising out of its own negligence or willful misconduct.
7.20 Acceptance of Trust
The Trustee hereby accepts the Trust created and provided for by and in
this trust agreement and agrees to perform the same upon the terms and
conditions herein set forth and to hold all rights, privileges and benefits
conferred hereby and by law in trust for the various persons who shall from time
to time be Beneficiaries, subject to all the terms and conditions herein set
forth.
ARTICLE 8
COMPENSATION
8.1 Fees and Expenses of the Trustee
CIT agrees to pay the Trustee reasonable compensation for all of the
services rendered by it under this trust agreement and will reimburse the
Trustee for all reasonable expenses (including taxes other than taxes based on
the net income of the Trustee) and disbursements, including fees and expenses
for attendance at any meeting of shareholders, if so requested by CIT or
Exchangeco, fees and expenses of experts, advisors and agents, retained pursuant
to ss..7.10 and the cost and expense of any suit or litigation of any character
and any proceedings before any governmental agency reasonably incurred by the
Trustee in connection with its duties under this trust agreement; provided that
CIT shall have no obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or with
negligence, recklessness or wilful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Indemnification of the Trustee
CIT and Exchangeco jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers and agents appointed
and acting in accordance with this trust agreement (collectively, the
"Indemnified Parties") against all claims, losses, damages, reasonable costs,
penalties, fines, liabilities, actions and reasonable expenses (including
reasonable expenses of the Trustee's legal counsel) which, without fraud,
negligence, recklessness, wilful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by
reason or as a result of the Trustee's acceptance or administration of the
Trust, its compliance with its duties set forth in this trust agreement, or any
written or oral instruction delivered to the Trustee by CIT or Exchangeco
pursuant hereto. This indemnification survives the termination of the agreement
or the resignation or removal of the Trustee.
In no case shall CIT or Exchangeco be liable under this indemnity for any
claim against any of the Indemnified Parties unless CIT and Exchangeco shall be
notified by the Trustee of the written assertion of a claim or of any action
commenced against the Indemnified Parties, promptly after any of the Indemnified
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Annex H
Parties shall have received any such written assertion of a claim or shall have
been served with a summons or other first legal process giving information as to
the nature and basis of the claim. Subject to (ii) below, CIT and Exchangeco
shall be entitled to participate at their own expense in the defence and, if CIT
and Exchangeco so elect at any time after receipt of such notice, either of them
may assume the defence of any suit brought to enforce any such claim. The
Trustee shall have the right to employ separate counsel in any such suit and
participate in the defence thereof but the fees and expenses of such counsel
shall be at the expense of the Trustee unless: (i) the employment of such
counsel has been authorized by CIT or Exchangeco; (ii) the named parties to any
such suit include both the Trustee and CIT or Exchangeco and the Trustee shall
have been advised by counsel acceptable to CIT or Exchangeco that there may be
one or more legal defences available to the Trustee that are different from or
in addition to those available to CIT or Exchangeco and that an actual or
potential conflict exists (in which case CIT and Exchangeco shall not have the
right to assume the defence of such suit on behalf of the Trustee but shall be
liable to pay the reasonable fees and expenses of counsel for the Trustee); or
(iii) CIT or Exchangeco shall not have retained legal counsel on behalf of the
Trustee within a reasonable time after it has given them notice of a written
assertion of a claim or action against any indemnified Party.
9.2 Limitation of Liability
The Trustee shall not be held liable for any loss which may occur by
reason of depreciation of the value of any part of the Trust Estate or any loss
incurred on any investment of funds pursuant to this trust agreement, except to
the extent that such loss is attributable to the fraud, negligence,
recklessness, wilful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 Resignation
The Trustee, or any trustee hereafter appointed, may at any time resign by
giving written notice of such resignation to CIT and Exchangeco specifying the
date on which it desires to resign, provided that such notice shall not be given
less than one month before such desired resignation date unless CIT and
Exchangeco otherwise agree and provided further that such resignation shall not
take effect until the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee. Upon receiving such
notice of resignation, CIT and Exchangeco shall promptly appoint a successor
trustee by written instrument in duplicate, one copy of which shall be delivered
to the resigning trustee and one copy to the successor trustee. Failing
acceptance by a successor trustee, a successor trustee may be appointed by an
order of the Superior Court of Justice (Ontario) upon application of one or more
of the parties hereto.
10.2 Removal
The Trustee, or any trustee hereafter appointed, may (provided a successor
trustee is appointed) be removed at any time on not less than 30 days' prior
notice by written instrument executed by CIT and Exchangeco, in duplicate, one
copy of which shall be delivered to the trustee so removed and one copy to the
successor trustee.
10.3 Successor Trustee
Any successor trustee appointed as provided under this trust agreement
shall execute, acknowledge and deliver to CIT and Exchangeco and to its
predecessor trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor under this trust agreement, with the like effect as if originally
named as trustee in this trust agreement. However, on the written request of CIT
and Exchangeco or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of this trust
agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, CIT, Exchangeco and such predecessor
trustee shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers.
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Annex H
10.4 Notice of Successor Trustee
Upon acceptance of appointment by a successor trustee as provided herein,
CIT and Exchangeco shall cause to be mailed notice of the succession of such
trustee hereunder to each Beneficiary specified in a List. If CIT or Exchangeco
shall fail to cause such notice to be mailed within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of CIT and Exchangeco.
ARTICLE 11
CIT SUCCESSORS
11.1 Certain Requirements in Respect of Combination, etc.
CIT shall not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other Person or, in the case of a
merger, of the continuing corporation resulting therefrom unless, but may do so
if:
(a) such other Person or continuing corporation (herein called the "CIT
Successor"), by operation of law, becomes, without more, bound by the
terms and provisions of this trust agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of such
transaction, a trust agreement supplemental hereto and such other
instruments (if any) as are satisfactory to the Trustee, acting
reasonably, and in the opinion of legal counsel to the Trustee are
reasonably necessary or advisable to evidence the assumption by the
CIT Successor of liability for all moneys payable and property
deliverable hereunder and the covenant of such CIT Successor to pay
and deliver or cause to be delivered the same and its agreement to
observe and perform all the covenants and obligations of CIT under
this trust agreement; and
(b) such transaction shall, to the satisfaction of the Trustee, acting
reasonably, and in the opinion of legal counsel to the Trustee, be
upon such terms and conditions as substantially to preserve and not to
impair in any material respect any of the rights, duties, powers and
authorities of the Trustee or of the Beneficiaries hereunder.
11.2 Vesting of Powers in Successor
Whenever the conditions of section 11.1 have been duly observed and
performed, the Trustee and, if required by section 11. 1, CIT Successor and
Exchangeco shall execute and deliver the supplemental trust agreement provided
for in Article 12 and thereupon CIT Successor shall possess and from time to
time may exercise each and every right and power of CIT under this trust
agreement in the name of CIT or otherwise and any act or proceeding by any
provision of this trust agreement required to be done or performed by the Board
of Directors of CIT or any officers of CIT may be done and performed with like
force and effect by the directors or officers of such CIT Successor.
11.3 Wholly-Owned Subsidiaries
Nothing herein shall be construed as preventing the amalgamation or merger
of any wholly-owned direct or indirect subsidiary of CIT with or into CIT or the
winding-up, liquidation or dissolution of any wholly-owned subsidiary of CIT
provided that all of the assets of such subsidiary are transferred to CIT or
another wholly owned direct or indirect subsidiary of CIT and any such
transactions are expressly permitted by this Article 11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1 Amendments, Modifications, etc.
This trust agreement may not be amended or modified except by an agreement
in writing executed by CIT, Exchangeco and the Trustee and approved by the
Beneficiaries in accordance with section 10.2 of the Share Provisions.
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Annex H
12.2 Ministerial Amendments
Notwithstanding the provisions of section 12.1, the parties to this trust
agreement may in writing, at any time and from time to time, without the
approval of the Beneficiaries, amend or modify this trust agreement for the
purposes of:
(a) adding to the covenants of any or all parties hereto for the
protection of the Beneficiaries hereunder provided that the Board of
Directors of each of Exchangeco and CIT as well as the Trustee, on the
advice of counsel, shall be of the good faith opinion that such
additions will not be prejudicial to the rights or interests of the
Beneficiaries;
(b) making such amendments or modifications not inconsistent with this
trust agreement as may be necessary or desirable with respect to
matters or questions which, in the good faith opinion of the Board of
Directors of each of CIT and Exchangeco and in the opinion of the
Trustee, on the advice of counsel, having in mind the best interests
of the Beneficiaries, it may be expedient to make, provided that such
Boards of Directors and the Trustee, on the advice of counsel, shall
be of the opinion that such amendments and modifications will not be
prejudicial to the interests of the Beneficiaries; or
(c) making such changes or corrections which, on the advice of counsel to
CIT, Exchangeco and the Trustee, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error, provided that the
Trustee and the Board of Directors of each of CIT and Exchangeco shall
be of the opinion that such changes or corrections will not be
prejudicial to the rights and interests of the Beneficiaries.
12.3 Meeting to Consider Amendments
Exchangeco, at the request of CIT, shall call a meeting or meetings of the
Beneficiaries for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Any such meeting or meetings
shall be called and held in accordance with the by-laws of Exchangeco, the Share
Provisions and all applicable laws.
12.4 Changes in Capital of CIT and Exchangeco
At all times after the occurrence of any event contemplated pursuant to
section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which
either CIT Common Stock or the Exchangeable Shares or both are in any way
changed, this trust agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which CIT Common Stock or the Exchangeable
Shares or both are so changed and the parties hereto shall execute and deliver a
supplemental trust agreement giving effect to and evidencing such necessary
amendments and modifications.
12.5 Execution of Supplemental Trust Agreements
No amendment to or modification or waiver of any of the provisions of this
trust agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto. From time to time Exchangeco
(when authorized by a resolution of its board of directors, CIT (when authorized
by a resolution of its Board of Directors) and the Trustee may, subject to the
provisions of these presents, and they shall, when so directed by these
presents, execute and deliver by their proper officers, trust agreements or
other instruments supplemental hereto, which thereafter shall form part hereof,
for any one or more of the following purposes:
(a) evidencing the succession of CIT Successors and the covenants of and
obligations assumed by each such CIT Successor in accordance with the
provisions of Article 11 and the successors of any successor trustee
in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the
provisions of this trust agreement or the Voting Rights, the Exchange
Right or the Automatic Exchange Rights, which, in the opinion of the
Trustee, will not be prejudicial to the interests of the Beneficiaries
or are, in the opinion of counsel to the Trustee, necessary or
advisable in order to incorporate, reflect or comply with any
legislation the provisions of which apply to CIT, Exchangeco, the
Trustee or this trust agreement; and
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Annex H
(c) for any other purposes not inconsistent with the provisions of this
trust agreement, including without limitation, to make or evidence any
amendment or modification to this trust agreement as contemplated
hereby, provided that, in the opinion of the Trustee, the rights of
the Trustee and Beneficiaries will not be prejudiced thereby.
ARTICLE 13
TERMINATION
13.1 Term
The Trust created by this trust agreement shall continue until the
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Beneficiary;
(b) each of CIT and Exchangeco elects in writing to terminate the Trust
and such termination is approved by the Beneficiaries in accordance
with section 10.2 of the Share Provisions; and
(c) 21 years after the death of the last survivor of the descendants of
His Majesty King George VI of Canada and the United Kingdom of Great
Britain and Northern Ireland living on the date of the creation of the
Trust.
13.2 Survival of Agreement
This trust agreement shall survive any termination of the Trust and shall
continue until there are no Exchangeable Shares outstanding held by a
Beneficiary: provided, however, that the provisions of Articles 8 and 9 shall
survive any such termination of this trust agreement.
ARTICLE 14
GENERAL
14.1 Severability
If any provision of this trust agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
trust agreement shall not in any way be affected or impaired thereby and the
agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
14.2 Enurement
This trust agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns and to the
benefit of the Beneficiaries.
14.3 Notices to Parties
All notices and other communications between the parties hereunder shall
be in writing and shall be deemed to have been given if delivered personally or
by confirmed telecopy to the parties at the following addresses (or at such
other address for such party as shall be specified in like notice):
(a) if to Exchangeco:
c/o The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
U.S.A.
Attention: Ernest D. Stein, Secretary
Telecopier No.: (212) 536-1912
(b) if to CIT:
1211 Avenue of the Americas
New York, New York 10036
U.S.A.
Attention: Ernest D. Stein, Secretary
Telecopier No.: (212) 536-1912
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Annex H
(c) if to the Trustee:
Montreal Trust Company of Canada
151 Front Street West, Suite 605
Toronto, Ontario
M5J 2N1
Attention: Manager, Client Services
Telecopier No.: (416) 981-9777
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
14.4 Notice to Beneficiaries
Any and all notices to be given and any documents to be sent to any
Beneficiaries may be given or sent to the address of such Beneficiary shown on
the register of holders of Exchangeable Shares in any manner permitted by the
by-laws of Exchangeco from time to time in force in respect of notices to
shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such by-laws, the provisions of which by-laws
shall apply mutatis mutandis to notices or documents as aforesaid sent to such
Beneficiaries.
14.5 Counterparts
This trust agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute one and
the same instrument.
14.6 Jurisdiction
This trust agreement shall be construed and enforced in accordance with
the laws of the Province of Nova Scotia and the laws of Canada applicable
therein.
14.7 Attornment
Each of the Trustee and CIT and Exchangeco agrees that any action or
proceeding arising out of or relating to this trust agreement may be instituted
in the courts of Ontario, waives any objection which it may have now or
hereafter to the venue of any such action or proceeding, irrevocably submits to
the jurisdiction of the said courts in any such action or proceeding, agrees to
be bound by any final judgment of the said courts and not to seek, and hereby
waives, any review of the merits of any such judgment by the courts of any other
jurisdiction and hereby appoints Exchangeco at its registered office in the
Province of Nova Scotia as attorney for service of process.
22
Annex H
IN WITNESS WHEREOF the parties hereto have caused this trust agreement to
be duly executed as of the date first above written.
CIT EXCHANGECO INC.
By: ________________________________
Name:
Title:
THE CIT GROUP, INC.
By: ________________________________
Name:
Title:
MONTREAL TRUST COMPANY OF CANADA
By: ________________________________
Name:
Title:
23
Annex H
ANNEX I
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT (ONTARIO) AND THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated August 5, 1999, between Newcourt Credit
Group Inc., an Ontario corporation ("Issuer"), and The CIT Group, Inc., a
Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Amended and Restated
Agreement and Plan of Reorganization of even date herewith (as the same may be
amended or supplemented, the "Reorganization Agreement"), which agreement has
been executed by the parties hereto immediately prior to the execution of this
Stock Option Agreement (this "Agreement") and provides that Grantee shall
combine with Issuer pursuant to a Plan of Arrangement in the form attached to
the Reorganization Agreement (the "Plan of Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, as a condition to Grantee's entering into the Reorganization
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Reorganization Agreement, the parties
hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof (including
Section 2(a) hereof), up to 22,273,249 fully paid and nonassessable common
shares ("Common Shares") of Issuer at a price of $15.6875 per share (the "Option
Price"); provided, however, that in no event shall the number of Common Shares
for which this Option is exercisable exceed 15% of the Issuer's issued and
outstanding Common Shares without giving effect to any shares subject to or
issued pursuant to the Option. The number of Common Shares that may be received
upon the exercise of the Option and the Option Price are subject to adjustment
as herein set forth.
(b) In the event that any additional Common Shares are either (i) issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise
cease to be outstanding after the date of this Agreement, the number of Common
Shares subject to the Option shall be increased or decreased, as appropriate, so
that, after such issuance, such number equals 15% of the number of Common Shares
then issued and outstanding without giving effect to any shares subject to or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Reorganization Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, (A) both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined) and (B) approval for the grant of the
Option and the issuance of the Common Shares hereunder has been received from
The Toronto Stock Exchange (the "TSE") and the Montreal Stock Exchange (the
"ME") (collectively, the "Exchange Approvals"), provided, however, that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within ninety (90) days following such
Subsequent Triggering Event (or such longer period as provided in Section 10).
Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Plan of Arrangement); (ii) termination of the
Reorganization Agreement in accordance with the provisions thereof, other than a
termination by either Issuer or Grantee pursuant to Section 9.1(d) of the
Reorganization Agreement following the occurrence of an Initial Triggering Event
(as defined below); or (iii) the passage of 12 months after a termination of the
Reorganization Agreement by either Issuer or Grantee pursuant to Section 9.1(d)
thereof if such termination follows the occurrence of an Initial Triggering
Event. The term "Holder" shall mean the holder or holders of the Option. Issuer
agrees to use its reasonable best efforts to obtain the Exchange
1
Annex I
Approvals as expeditiously as possible following the date of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, in the
event that either of the Exchange Approvals has not been obtained prior to the
time that the termination fee provided for in Section 9.2(b) or 9.2(c) of the
Reorganization Agreement becomes payable to the Grantee by Issuer, then this
Agreement and the Option granted hereunder shall terminate and shall have no
further force or effect.
(b) An "Initial Triggering Event" shall be deemed to have occurred for
purposes of this Agreement if, at any time following the date of this Agreement,
(i) an Acquisition Proposal (as defined in the Reorganization Agreement) with
respect to Issuer or any of its Subsidiaries shall have been publicly announced
or otherwise become public, or shall have been made to the shareholders of
Issuer generally, or (ii) a Newcourt Acquisition Agreement is entered into
concurrently with a termination by Issuer of the Reorganization Agreement
pursuant to Section 9.1(h) thereof.
(c) A "Subsequent Triggering Event" shall be deemed to have occurred for
purposes of this Agreement if, at any time following the date of this Agreement,
Issuer or any of its Subsidiaries enters into a Newcourt Acquisition Agreement
or consummates a Newcourt Takeover Proposal (each as defined in the
Reorganization Agreement), other than a Newcourt Acquisition Agreement entered
into concurrently with a termination of the Reorganization Agreement by Issuer
pursuant to Section 9.1(h) thereof.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than sixty (60) business days from the Notice
Date for the closing of such purchase (the "Closing Date"); provided, however,
that if prior notification to or approval of the Federal Reserve Board, the
applicable regulatory authority under the Bank Act (Canada) or any other
regulatory authority is required in connection with such purchase, the Holder
shall promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the Common Shares
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Issuer, provided, however, that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
Common Shares purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder, and the Holder shall deliver to
Issuer this Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) Certificates for Common Shares delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate may be
subject to certain provisions of a stock option agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended, the Securities
Act (Ontario) and other Canadian securities legislation. A copy of
such agreement is on file at the principal office of Issuer and will
be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor."
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Annex I
It is understood and agreed that: (i) the respective references to the
resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"),
the Securities Act (Ontario) (the "Ontario Act") and other Canadian securities
legislation in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have delivered to
Issuer a copy of an opinion or opinions of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act, the Ontario Act or any other Canadian
securities legislation; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the Common Shares issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such Common Shares shall
not then be actually delivered to the Holder. Issuer shall pay all expenses and
any and all federal, provincial, state and local taxes and other charges that
may be payable in connection with the preparation, issue and delivery of share
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued Common Shares so that the
Option may be exercised without additional authorization of Common Shares after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Common Shares; (ii) that it will not, by amendment to its
articles or by-laws or through reorganization, consolidation, amalgamation, plan
of arrangement, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including, if required, (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. ss.18a and the
Competition Act (Canada) and the respective regulations promulgated thereunder
and (y) in the event, under any Canadian and/or United States federal,
provincial or state banking or other law or regulation prior approval of or
notice to the Federal Reserve Board, the applicable regulatory authority under
the Bank Act (Canada), the responsible minister under the Investment Canada Act
or any other government or regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board, the applicable regulatory authority under the Bank Act (Canada), the
responsible minister under the Investment Canada Act or such other federal,
provincial or state government or regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue Common Shares pursuant hereto; and (iv) promptly to take
all action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of Common Shares purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Stock Option Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of Common Shares that are
purchasable upon exercise of the Option pursuant to Section 1 of this Agreement,
the number of Common Shares purchasable upon the
3
Annex I
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Shares by reason of stock dividends,
split-ups, mergers, amalgamations, recapitalizations, combinations,
subdivisions, consolidations, conversions, exchanges of shares, distributions on
or in respect of the Common Shares, or the like, the type and number of Common
Shares purchasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any agreement
or resolution governing any such transaction or event to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any subsequent holder of this Option
(or part thereof) or any of the Common Shares issued pursuant hereto) delivered
within ninety (90) days of such Subsequent Triggering Event (or such longer
period as provided in Section 10), promptly prepare, file and keep current a
registration statement under the 1933 Act covering this Option and any Common
Shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of this Option and any
Common Shares issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee. Issuer
will use its reasonable best efforts to cause such registration statement first
to become effective and then to remain effective for such period not in excess
of 180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Issuer shall also, if required under the Securities Act (Ontario)
and other applicable Canadian provincial securities legislation in connection
with a sale by Grantee of Common Shares issued pursuant hereto, file and obtain
a receipt for a (final) prospectus from the Ontario Securities Commission and
other applicable Canadian securities regulatory authorities. Grantee shall have
the right to demand up to two (2) registrations and/or prospectus filings
pursuant to this Section 6 (e.g., two registrations and no prospectus filings,
two prospectus filings and no registrations or one of each). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares or the filing of a prospectus as provided above,
Issuer is in registration or has filed a prospectus with respect to an
underwritten public offering of Common Shares, and if in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
Common Shares offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement or prospectus contemplated hereby may be
reduced; provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement and/or
prospectus for the balance as promptly as practicable and no reduction shall
thereafter occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement and/or
prospectus to be filed hereunder. If requested by any such Holder in connection
with such registration and/or prospectus offering, Issuer shall become a party
to any underwriting agreement relating to the sale of such shares, but only to
the extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two (2) registrations and/or prospectus filings pursuant to
this Section 6 by reason of the fact that there shall be more than one Grantee
as a result of any assignment or division of this Agreement.
7. (a) Notwithstanding anything to the contrary contained in this
Agreement (but subject to applicable law and the last sentence of Section 2(a)
of this Agreement), at or at any time within the 30-day period immediately
following such time as the termination fee provided for in Section 9.2(b) or
9.2(c) of the Reorganization Agreement becomes payable to Grantee by Issuer, and
prior to any exercise of the Option, upon two business days' prior written
notice given by Grantee, Issuer (or any successor thereto pursuant to Section 8
of this Agreement) shall repurchase the Option from the Grantee, in whole but
not in part, at a price (the "Option Repurchase Price") equal to (i) $15
million.
4
Annex I
(b) Grantee may exercise its right to require Issuer to repurchase the
Option pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, this Agreement accompanied by a written notice stating
that Grantee elects to require Issuer to repurchase this Option in accordance
with the provisions of this Section 7. Within two business days after the
surrender of the Option and the receipt of such notice relating thereto, Issuer
shall deliver or cause to be delivered to Grantee the Option Repurchase Price
therefor or the portion thereof that Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option in full, Issuer shall immediately so
notify Grantee and thereafter deliver or cause to be delivered, from time to
time, to Grantee the portion of the Option Repurchase Price that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
Grantee the Option Repurchase Price in full (and Issuer hereby undertakes to use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), Grantee may revoke its notice of repurchase of
the Option, either in whole or to the extent of the prohibition, whereupon, in
the latter case, Issuer shall promptly (i) deliver to Grantee that portion of
the Option Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver to Grantee a new Stock Option Agreement evidencing the right of
Grantee to purchase that number of Common Shares obtained by multiplying the
number of Common Shares for which the surrendered Stock Option Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to Grantee and the denominator of which is the Option
Repurchase Price.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to amalgamate or consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and in the case
of a consolidation or merger shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than Grantee or one of its Subsidiaries, to amalgamate with or merge into Issuer
and Issuer shall be the continuing or surviving corporation, but, in connection
with such amalgamation, consolidation or merger, the then outstanding Common
Shares shall be changed into or exchanged for shares or other securities of any
other person or cash or any other property or the then outstanding Common Shares
shall after such amalgamation, consolidation or merger represent less than 50%
of the outstanding voting shares and voting share equivalents of the amalgamated
or merged company, or (iii) to sell or otherwise transfer all or a substantial
portion of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation, amalgamation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Shares" shall mean the common shares issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price per
Common Share at which a tender offer or exchange offer therefor has been
made, (ii) the price per Common Share to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
Common Shares within the six-month period immediately preceding the date of
consummation of the transaction contemplated by Section 8(a) hereof, or
(iv) in the event of a sale of all or a substantial portion of Issuer's
assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm in Canada selected by Grantee
and reasonably acceptable to Issuer, divided by the number of Common Shares
of Issuer outstanding at the time of such sale. In determining the Assigned
Value, the value of consideration other than cash shall be
5
Annex I
determined by a nationally recognized investment banking firm in Canada
selected by Grantee and reasonably acceptable to Issuer.
(4) "Average Price" shall mean the average closing price on the TSE of
a share of the Substitute Common Shares for the one-year period immediately
preceding the amalgamation, consolidation, merger or sale in question, but
in no event higher than the closing price of the shares of Substitute
Common Shares on the day preceding such amalgamation, consolidation, merger
or sale; provided, however, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a common share
issued by the person amalgamating with or merging into Issuer or by any
company which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, however, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
Substitute Common Shares as is equal to the Assigned Value multiplied by the
number of Common Shares for which the Option is then exercisable, divided by the
Average Price. The exercise price of the Substitute Option per Substitute Common
Share shall then be equal to the Option Price multiplied by a fraction, the
numerator of which shall be the number of Common Shares for which the Option is
then exercisable and the denominator of which shall be the number of Substitute
Common Shares for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 15% of the Substitute Common
Shares outstanding prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 15% of the Substitute
Common Shares outstanding prior to exercise but for this clause (e), the issuer
of the Substitute Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over (ii) the value
of the Substitute Option after giving effect to the limitation in this clause
(e). This difference in value shall be determined by a nationally recognized
investment banking firm in Canada selected by Grantee and reasonably acceptable
to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. [reserved]
10. The 30-day or 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 14 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights, and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended, by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of Common
Shares equal to the maximum number of Common Shares at any time and from time to
time issuable hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized and, subject to the receipt of the Exchange Approvals
and compliance with any conditions contained therein, validly issued, fully
paid, nonassessable, and will be
6
Annex I
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
12.Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly and validly executed and delivered by
Grantee.
(b) The Option is not being, and any Common Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
both the Ontario Act and the 1933 Act.
13. (a) Notwithstanding anything to the contrary contained herein, in no
event shall Grantee's Total Profit (as defined below in Section 13(c) hereof)
exceed $15 million.
(b) Notwithstanding anything to the contrary contained herein, the Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below in Section 13(d)
hereof) of more than $15 million; provided, however, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) any amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7 hereof, (ii) (x) the cash amounts received by Grantee pursuant to
the arm's-length sale of Option Shares (or any other securities into which such
Option Shares shall be converted or exchanged) to any party not affiliated with
Grantee, less (y) the aggregate purchase price paid by Grantee with respect to
such Option Shares, (iii) any amounts received by Grantee pursuant to the
transfer of the Option (or any portion thereof) to any party not affiliated with
Grantee, and (iv) any equivalent amounts with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of such proposed exercise assuming
that the Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Shares on the TSE as of the close of business on the
preceding trading day (less customary brokerage commissions).
14. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof and
compliance with applicable securities laws, may assign in whole or in part its
rights and obligations hereunder within ninety (90) days following such
Subsequent Triggering Event (or such longer period as provided in Section 10);
provided, however, that until the date 15 days following the later of the dates
on which the Federal Reserve Board and the applicable regulatory authority under
the Bank Act (Canada) approves an application by Grantee to acquire the Common
Shares subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf, or (iv) any other manner approved by the
Federal Reserve Board and the applicable regulatory authority under the Bank Act
(Canada).
15. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
Common Shares issuable hereunder on the TSE, the ME and The New York Stock
Exchange upon official notice of issuance and applying
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Annex I
to the Federal Reserve Board and the applicable regulatory authority under the
Bank Act (Canada) for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to any United States state banking
authorities for approval to acquire the Common Shares issuable hereunder until
such time, if ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a U.S. or Canadian federal, state or provincial
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the
full number of Common Shares provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Reorganization Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Reorganization
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Reorganization Agreement. Unless
otherwise explicitly indicated, all references in this Agreement to "dollars,"
"$" or "US$" are intended to refer to United States dollars.
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Annex I
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the date first above written.
NEWCOURT CREDIT GROUP INC.
By: /s/ David F. Banks
-----------------------------
Name: David F. Banks
Title: Chairman
By: /s/ David D. McKerroll
-----------------------------
Name: David D. McKerroll
Title: President, Corporation Finance
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
-----------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
ANNEX J
AMENDED AND RESTATED VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement"), amended and
restated as of August 5, 1999, by and among The Dai-Ichi Kangyo Bank, Limited a
Japanese banking corporation (the "Stockholder"), Newcourt Credit Group Inc., an
Ontario corporation ("Newcourt"), and The CIT Group, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Newcourt and the Company propose to enter into an Amended and
Restated Agreement and Plan of Reorganization, amended and restated as of the
date hereof (as the same may be amended or supplemented, the "Reorganization
Agreement"), providing that the Company shall combine with Newcourt pursuant to
a Plan of Arrangement (the "Arrangement"), upon the terms and subject to the
conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder owns of record and possesses legal title to
71,000,000 shares of Class A Common Stock, par value $0.01 per share ("Company
Common Stock"), of the Company (the "Subject Shares"); and
WHEREAS, the transactions contemplated by the Reorganization Agreement may
constitute a "Covered Activity" for purposes of the Regulatory Compliance
Agreement dated as of November 18, 1997 by and between Stockholder and the
Company (the "Regulatory Compliance Agreement"); and
WHEREAS, as an inducement to Newcourt to enter into the Reorganization
Agreement, Newcourt has required that the Stockholder enter into this Agreement;
and
WHEREAS, Newcourt is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce Newcourt to enter into, and in consideration of
its entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Newcourt as of the date hereof as follows:
(a) Authority; No Violation. The Stockholder has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance by
the Stockholder of its obligations hereunder have been duly and validly approved
by all requisite corporate action on the part of the Stockholder and no other
corporate proceedings on the part of the Stockholder are necessary to approve
this Agreement and to perform its obligations hereunder. This Agreement has been
duly and validly executed and delivered by the Stockholder and (assuming due
authorization, execution and delivery by Newcourt) constitutes a valid and
binding obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by the Stockholder, nor the
consummation by the Stockholder of the transactions contemplated hereby, nor
compliance by the Stockholder with any of the terms or provisions hereof, will
(x) violate any provision of the governing documents of the Stockholder or the
certificate of incorporation, by-laws or similar governing documents of any of
the Stockholder's Subsidiaries, (y) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Stockholder or any of the Stockholder's Subsidiaries, or any of their respective
properties or assets, or (z) violate, conflict with or
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result in a breach of any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Stockholder or any of the Stockholder's
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
(b) The Subject Shares. The Stockholder is the beneficial owner of and has
the sole right to vote and dispose of the Subject Shares, free and clear of any
Encumbrances whatsoever. None of the Subject Shares is subject to any voting
trust or other agreement, arrangement or restriction, except as contemplated by
this Agreement.
(c) Certain Transactions Involving Company Common Stock. Since January 1,
1999, the Stockholder has not purchased, received, accepted as collateral, sold,
transferred, hypothecated, pledged, or exchanged any shares of Company Common
Stock, or any options, warrants, or rights to purchase or sell shares of Company
Common Stock, and has not entered into any agreement to do any of the foregoing.
(d) Regulatory Agreements With Respect to the Company. The Regulatory
Compliance Agreement has not been amended or modified in any manner since
November 18, 1997, and the Stockholder is neither a party to nor bound by any
other agreement, arrangement or understanding that amends or modifies the
Regulatory Compliance Agreement or that covers or relates to the matters covered
by the Regulatory Compliance Agreement, other than the letter dated April 29,
1999 from Ernest Stein to the Stockholder previously furnished to Newcourt.
2. Representations and Warranties of Newcourt. Newcourt hereby represents
and warrants to the Stockholder that Newcourt has full corporate power and
authority to execute and deliver this Agreement. The execution and delivery of
this Agreement have been duly and validly approved by the Board of Directors of
Newcourt and no other corporate proceedings on the part of Newcourt are
necessary to approve this Agreement. This Agreement has been duly and validly
executed and delivered by Newcourt and (assuming due authorization, execution
and delivery by the Stockholder) constitutes a valid and binding obligation of
Newcourt, enforceable against Newcourt in accordance with its terms, except that
such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity and the discretion
of the court before which any proceedings seeking injunctive relief or specific
performance may be brought. Neither the execution and delivery of this Agreement
by Newcourt nor the consummation by Newcourt of the transactions contemplated
hereby, nor compliance by Newcourt with any of the terms or provisions hereof,
will (x) violate any provision of the governing documents of Newcourt or the
certificate of incorporation, bylaws or similar governing documents of any of
Newcourt's Subsidiaries, (y) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Newcourt
or any of Newcourt's Subsidiaries, or any of their respective properties or
assets, or (z) violate, conflict with or result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Encumbrance upon
any of the respective properties or assets of Newcourt or any of Newcourt's
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Newcourt or any of Newcourt's Subsidiaries is
a party, or by which they or any of their respective properties or assets may be
bound or affected.
3. Covenants of the Stockholder as to Voting. Subject to Newcourt's
compliance with the terms of this Agreement, Newcourt's compliance with Section
8.4(c) of the Reorganization Agreement, the absence, at the time of any vote
contemplated by clause (a) or clause (b) below, of the imposition by any of the
Governmental Entities identified in Section 8.4(a) or 8.4(b) of any condition or
requirement of the type specified in Section 8.4(a) or 8.4(b) or of the issuance
of an order denying approval by any of such Governmental Entities, and subject
to the continuing recommendation by the Company's Board of Directors of the
transactions contemplated by the Reorganization Agreement (it being understood
and agreed that the disclosure of facts relating to the business, financial
condition, results of operations or prospects of Newcourt or the Company shall
not be deemed to constitute a modification or withdrawal of such
recommendation), and until the termination of this Section 3 in accordance with
Section 10, the Stockholder agrees as follows:
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(a) Vote for the Company Approval Matters. At any duly noticed meeting of
stockholders of the Company called to vote upon the CIT Shareholder Matters, or
at any adjournment or postponement of such meeting or in any other circumstances
upon which a vote, consent or other approval (including by written consent) with
respect to the CIT Shareholder Matters is sought, the Stockholder shall vote (or
cause to be voted), or execute a written consent in respect of, the Subject
Shares in favor of the CIT Shareholder Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
stockholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's stockholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's certificate of incorporation or bylaws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as either the Company or Newcourt may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
6. Regulatory Approvals.
(a) Preparation and Filing of Applications. The Stockholder shall
promptly prepare and file all necessary applications, notices, petitions and
filings (together with any supplemental information required to update any of
the foregoing to reflect the transactions contemplated by the Reorganization
Agreement) required by the Stockholder in order to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
which are necessary to consummate the transactions contemplated by the
Reorganization Agreement (including the Arrangement) (collectively, the
"Applications"). DKB shall use its reasonable efforts to prepare and file any
and all of the foregoing not later than 10 days after the date of this
Agreement. The Applications shall include all of the information that is
responsive to the requirements thereof. The Stockholder shall use its reasonable
efforts to obtain as promptly as practicable all such permits, consents,
approvals and authorizations from Governmental Entities; provided, however, that
the Stockholder shall not be required to take any action pursuant to the
foregoing if and to the extent that the taking of such action: (i) would result
in or from the failure of the conditions set forth in Section 8.4 of the
Reorganization Agreement to be satisfied; (ii) would involve the Stockholder
providing, other than to the Governmental Entities covered by Section 8.4 of the
Reorganization Agreement, information in addition to the information that is
required by the second sentence of this Section to any Governmental Entity that
it had not previously provided to such Governmental Entity; or (iii) would
require the Stockholder or any of its Subsidiaries (other than the Company,
Newcourt or any of their respective Subsidiaries) to (A) refrain from engaging
in or expanding any business, (B) terminate or reduce any of its business or
operations, or (C) modify the manner in which any of its businesses or
operations is or could be conducted; provided that the foregoing shall not
impose any obligations on the Stockholder with respect to the approvals covered
by Sections 8.4(a) and (b) of the Reorganization Agreement except as set forth
therein. Newcourt shall have the right to review in advance, and to the extent
practicable each party will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to Newcourt and any of its Subsidiaries which appears in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity by the Stockholder in connection with the transactions
contemplated by the Reorganization Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
Subject to the foregoing, Newcourt shall, upon the Stockholder's request and
subject to applicable laws and regulations relating to the exchange of
information, furnish the Stockholder with all information concerning itself and
its Subsidiaries, directors, officers and stockholders as shall be reasonably
necessary in connection with any such filing, notice, petition or application
made by or on behalf of the Stockholder to or with any Governmental Entity in
connection with the transactions
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Annex J
contemplated by the Reorganization Agreement, provided, however, that Newcourt
shall not be required to provide any such information where to do so would
violate or prejudice the rights of its customers, jeopardize any attorney-client
privilege or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement. Promptly upon the reasonable request of the Stockholder, Newcourt
will provide, and will use its reasonable efforts to cause each other
Co-Venturer (and the ultimate parent entity thereof) in a Joint Venture to
provide promptly, to the Stockholder, to the extent reasonably available to
Newcourt or such other party, the information required in order to respond to
any questions asked by the Federal Reserve Board regarding any Co-Venturer or
any joint venture.
(b) Provision of Information. The Stockholder shall, upon request and
subject to applicable laws and regulations relating to the exchange of
information, furnish Newcourt and the Company with all information concerning
the Stockholder, its Subsidiaries, directors, officers and stockholders and such
other matters as may be reasonably necessary or advisable in connection with the
Proxy Circular, the Registration Statement or any other statement, filing,
notice or application made by or on behalf of Newcourt, the Company or any of
their respective Subsidiaries to any Governmental Entity in connection with the
Arrangement and the other transactions contemplated by Reorganization Agreement,
provided, however, that the Stockholder shall not be required to provide any
such information (i) where to do so would violate or prejudice the rights of its
customers, jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement or (ii) where such information is not
disclosed other than to a Governmental Entity.
(c) Communications. The Stockholder shall (x) keep Newcourt reasonably
apprised of the status of matters relating to receipt of the consents and
approvals contemplated by this Section 6, (y) promptly advise Newcourt upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by the
Reorganization Agreement, which communication causes the Stockholder to believe
that any such consent or approval (i) will not be obtained, (ii) will be
materially delayed, or (iii) will contain any term, condition or restriction
which would cause the condition contained in Section 8.4 of the Reorganization
Agreement to fail to be satisfied, and (z) promptly apprise Newcourt of any
material developments with respect to the foregoing.
(d) Newcourt Information. Newcourt shall, upon Stockholder's request and
subject to applicable laws and regulations relating to the exchange of
information, furnish the Stockholder with all information concerning itself and
its Subsidiaries, directors, officers and stockholders as shall be reasonably
necessary in order to enable the Stockholder to obtain any such consent,
authorization, order or approval of any such Governmental Entity in connection
with the transactions contemplated by the Reorganization Agreement, provided,
however, that Newcourt shall not be required to provide any such information
where to do so would violate or prejudice the rights of its customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement.
(e) Confidentiality. All information furnished by either party to the
other party pursuant to this Section 6 shall be treated as the sole property of
the delivering party and, if the Arrangement and the other transactions
contemplated by the Reorganization Agreement shall not occur or if the
delivering party shall so request, the receiving party shall, within five (5)
business days, return to the delivering party all of such written information
and all documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The receiving party shall, and
shall cause its representatives to, keep confidential all such information,
shall not directly or indirectly use such information for any competitive or
other commercial purpose, and shall use its reasonable best efforts to assure
that any Governmental Entity to whom such information is furnished will accord
all such information confidential treatment. The parties' respective obligations
to keep such information confidential shall continue for ten years from the date
the Reorganization Agreement is terminated and shall not apply to (i) any
information which (x) was already in the receiving party's possession prior to
the disclosure thereof by the delivering party; (y) was then generally known to
the public; or (z) was disclosed to the receiving party by a third party not
known by the receiving party to be bound by an obligation of confidentiality or
(ii) disclosures made as required by law. It is further agreed that, if in the
absence of a protective order or the receipt of a waiver hereunder the receiving
party is nonetheless compelled to disclose information concerning the delivering
party to any tribunal or Governmental Entity or else stand liable for contempt
or suffer other censure or penalty, the receiving party may, subject to its
provision of prior notice to the delivering party and its cooperation with the
delivering party with respect to the content, nature and
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Annex J
timing of the disclosure, disclose such information to such tribunal or
Governmental Entity without liability hereunder.
7. Approval Under Regulatory Compliance Agreement. The Stockholder hereby
approves, subject to the satisfaction of the conditions set forth in Section 8.4
of the Reorganization Agreement, for purposes of the Regulatory Compliance
Agreement, the transactions contemplated by the Reorganization Agreement.
8. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
9. Transfer of Subject Shares. Except as contemplated by this Agreement,
and subject to Section 10 hereof, the Stockholder agrees not to (i) transfer,
sell, pledge, assign or otherwise dispose of (including by gift) (collectively,
"Transfer"), or enter into any contract, option or other arrangement (including
any profit sharing arrangement) with respect to the Transfer of, any of the
Subject Shares to any person other than pursuant to the terms of this Agreement,
or (ii) enter into any voting arrangement, whether by proxy, power-of-attorney,
voting agreement, voting trust or otherwise in connection, directly or
indirectly, with respect to such Subject Shares.
10. Termination. This Agreement (other than Sections 6(e), 8, 10, 11, 12,
14 and 15) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of Sections 6(e), 8, 10, 11, 12, 14 and 15 shall
survive any such termination indefinitely or as otherwise set forth in such
Sections.
11. Board Representation. From and after the Effective Time and for so
long as the Stockholder's Voting Percentage (as defined below) is greater than
or equal to 10%, the Company, through its Board of Directors or any nominating
committee thereof, shall nominate and solicit proxies for the election of two
persons selected by the Stockholder for election to the Board of Directors of
the Company at the Company's annual meeting of stockholders. From and after such
time as the Stockholder's Voting Percentage shall be reduced below 10%, and for
so long (if ever) as the Stockholder's Voting Percentage remains at or above 3%,
the Company, through its Board of Directors or any nominating committee thereof,
shall nominate and solicit proxies for the election of one person selected by
the Stockholder for election to the Board of Directors of the Company at the
Company's annual meeting of stockholders. From and after such time as the
Stockholder's Voting Percentage drops below 3%, the Stockholder shall have no
further rights under this Section 11. "Voting Percentage" means, as of a
particular date, a quotient, expressed as a percentage, equal to (i) the total
number of votes represented by the shares of capital stock of the Company
beneficially owned by the Stockholder as of such date (which for these purposes
shall include that number of votes which the Stockholder shall be entitled to
direct through ownership of Exchangeable Shares as of such date), divided by
(ii) the total number of votes represented by the shares of capital stock of the
Company outstanding as of such date (including the Special Voting Share).
12. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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
Newcourt in accordance with the notification provision contained in the
Reorganization Agreement and to the Stockholder at its address set forth on the
books of the Company (or at such other address for a party as shall be specified
by like notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
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(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein or delivered in connection herewith) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
(f) 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 conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(i) Publicity. Except as otherwise required by law or the rules of the
Montreal Exchange, the TSE, the NYSE or the Tokyo Stock Exchange, so long as
this Agreement is in effect, none of the Stockholder, the Company or Newcourt
shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the status of the regulatory
approvals with respect to the transactions contemplated by this Agreement or the
Reorganization Agreement without prior consultation with the other parties
hereto.
13. Stockholder Representative. The Stockholder signs solely in its
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by any officer, director,
partner, affiliate or representative of the Stockholder who is or becomes an
officer or a director of the Company in his or her capacity as an officer or
director of the Company and none of such actions in such capacity shall be
deemed to constitute a breach of this Agreement; provided, however, that nothing
contained herein shall be deemed to relieve the Company from its obligations
under the Reorganization Agreement.
14. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than
the United States District Court for the Southern District of New York, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby, and (e) appoints Da-Ichi Kangyo Trust Company of New York
as such party's agent for service of process in the State of New York in
connection with any action to enforce this Agreement.
6
Annex J
15. Release. For good and valuable consideration, receipt whereof is
hereby acknowledged, the Stockholder, on behalf of itself and its affiliated
companies (other than CIT and its Subsidiaries), subsidiaries, predecessors,
successors and assigns (collectively, the "Releasors"), hereby irrevocably,
fully and unconditionally releases and forever discharges Newcourt and its
affiliated companies, subsidiaries, predecessors, successors, assigns, and all
of its past and present employees, officers, directors, trustees, partners,
shareholders, agents, attorneys and representatives (collectively, "Newcourt
Representatives"), including, without limitation the Newcourt Representatives
listed on Exhibit A hereto, each of whom is a third party beneficiary of this
Section 15 of this Agreement from all actions, causes of actions, suits, debts,
claims, liabilities, obligations, promises, covenants, agreements, contracts,
and judgments, of any kind or nature whatsoever, known or unknown, either at law
or at equity, which the Releasors ever have, now have, or hereafter can, shall
or may have for, upon, or by reason of any matter, cause or thing whatsoever,
arising from the beginning of the world to the day of the date of this Agreement
("Claims") relating to (i) the financial results and public disclosures of
Newcourt, (ii) the Agreement and Plan of Reorganization, dated as of March 7,
1999, between the Company and Newcourt, including without limitation, all oral
and written communications of any kind whatsoever referring or relating thereto
or to the matters contemplated thereby and all oral and written communications
made during the due diligence process and negotiations relating thereto and the
decisions of the parties thereto not to proceed thereunder and/or (iii) any oral
or written statements by Newcourt or any of the Newcourt Representatives of any
kind whatsoever referring or relating to the matters set forth in clauses (i) or
(ii).
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
NEWCOURT CREDIT GROUP INC.
By: /s/ David F. Banks
--------------------------------------------
Name: David F. Banks
Title: Chairman
By: /s/ David D. McKerroll
--------------------------------------------
Name: David D. McKerroll
Title: President, Corporate Finance
THE DAI-ICHI KANGYO BANK, LIMITED
By: /s/ Keiji Torii
--------------------------------------------
Name: Keiji Torii
Title: Director and General Manager
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
--------------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
7
Annex J
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is entered into as of September
15, 1999, by and among Hercules Holdings (UK) Limited, an English company (the
"Stockholder"), Hercules Holdings (Cayman) Limited, a Cayman Islands company
("Hercules Cayman") and The CIT Group, Inc., a Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), have entered into an Amended and Restated Agreement and Plan of
Reorganization, dated as of August 5, 1999 (as the same may be amended or
supplemented, the "Reorganization Agreement"), providing that CIT shall combine
with the Company pursuant to a Plan of Arrangement (the "Arrangement"), upon the
terms and subject to the conditions set forth in the Reorganization Agreement;
and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, Hercules Cayman and CIT entered into an Amended and Restated
Voting Agreement concurrently with the execution of the Reorganization Agreement
(the "Existing Voting Agreement"); and
WHEREAS, concurrently with the execution of this Agreement, Hercules
Cayman is transferring to the Stockholder all of its right, title and interest
in and to 17,633,857 common shares, without par value ("Company Common Shares"),
of the Company (the "Subject Shares") which are subject to the terms of the
Existing Voting Agreement; and
WHEREAS, in consideration of CIT's termination of the Existing Voting
Agreement, the Stockholder is entering into this Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties, intending to be legally
bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. The Stockholder has full corporate power and
authority to execute and deliver this Agreement and subject only to being
registered as the holder of the Subject Shares following the transfer of the
same to the Stockholders by Hercules Cayman to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance of
its obligations hereunder have been duly and validly approved by the Board of
Directors of the Stockholder and no other corporate proceedings on the part of
the Stockholder are necessary to approve this Agreement and to perform its
obligations hereunder. This Agreement has been duly and validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms, except that
such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity and the discretion
of the court before which any proceedings seeking injunctive relief or specific
performance may be brought. Neither the execution and delivery of this Agreement
by the Stockholder, nor the consummation by the Stockholder of the transactions
contemplated hereby, nor compliance by the Stockholder with any of the terms or
provisions hereof, will (x) violate any provision of the governing documents of
the Stockholder or the certificate of incorporation, by-laws or similar
governing documents of any of the Stockholder's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Stockholder or any of the Stockholder's
Subsidiaries, or any of their respective properties or assets, or (z) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the respective properties
or assets of the Stockholder or any of the Stockholder's Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease,
1
Voting Agreement
agreement or other instrument or obligation to which the Stockholder or any of
the Stockholder's Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected.
(b) The Subject Shares. The Stockholder is the beneficial owner of and
subject only to being registered as the holder of the Subject Shares following
the transfer of the same to the Stockholder by Hercules Cayman has the sole
right to vote and dispose of the Subject Shares, free and clear of any
Encumbrances whatsoever, except for any Encumbrances which arise hereunder or
under the Amended and Restated Shareholders' Agreement, dated as of November 17,
1997, among the Hercules Cayman, The Mutual Life Assurance Company of Canada
("Mutual"), Canadian Imperial Bank of Commerce ("CIBC"), Cameron Capital
Corporation, A&A Capital Limited and M&S Capital Limited (the "Shareholders'
Agreement"). None of the Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction, except as contemplated by this Agreement
and the Shareholders' Agreement.
(c) Certain Transactions Involving Company Common Shares. The Stockholder
has not purchased, received, accepted as collateral, sold, transferred,
hypothecated, pledged, or exchanged any Company Common Shares, or any options,
warrants, or rights to purchase or sell Company Common Shares, and has not
entered into any agreement to do any of the foregoing.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
have been duly and validly approved by the Board of Directors of CIT and no
other corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's Subsidiaries, or any of their
respective properties or assets, or (z) violate, conflict with or result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the respective properties
or assets of CIT or any of CIT's Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which CIT or any
of CIT's Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8 and so long as the Reorganization
Agreement shall not have been amended to (i) change the terms thereof relating
to the determination of the Exchange Ratio, (ii) alter the form of consideration
payable to the stockholders of the Company or (iii) otherwise materially alter
its commercial terms in a manner adverse to the Stockholder without the consent
of the Stockholder, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other
2
Voting Agreement
approval of the Company's shareholders is sought, the Stockholder shall be
present (in person or by proxy) and shall vote (or cause to be voted) the
Subject Shares against any amendment of the Company's articles of incorporation
or by-laws or other proposal or transaction involving the Company or any of its
Subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent, delay or nullify the Reorganization Agreement
or any of the other transactions contemplated by the Reorganization Agreement or
change in any manner the voting rights of any outstanding class of capital stock
of the Company, provided that the Stockholder shall vote the Subject Shares in
favor of any of the foregoing to the extent that any such business shall have
been approved or recommended by the Board of Directors of the Company in a
manner consistent with its obligations under the Reorganization Agreement. The
Stockholder further agrees not to commit or agree to take any action
inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, the
Stockholder agrees not to (i) transfer, sell, pledge, assign or otherwise
dispose of (including by gift) (collectively, "Transfer"), or enter into any
contract, option or other arrangement (including any profit sharing arrangement)
with respect to the Transfer of, any of the Subject Shares to any person other
than pursuant to the terms of this Agreement, or (ii) enter into any voting
arrangement, whether by proxy, power-of-attorney, voting agreement, voting trust
or otherwise in connection, directly or indirectly, with respect to such Subject
Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 6,
9, 10, 11, 12 and 13) shall terminate upon the earlier of (x) the termination of
the Reorganization Agreement in accordance with Section 9.1 thereof (including
delivery by the Company of a notice of termination pursuant to Section 9.1(h) of
the Reorganization Agreement) and (y) the Effective Time. The provisions of this
Section 8 and Sections 6, 9, 10, 11, 12 and 13 shall survive any such
termination indefinitely or as otherwise set forth in such Sections.
9. Board Representation. From and after the Effective Time and for so long
as the Stockholder's Voting Percentage (as defined below) is greater than or
equal to 3%, CIT, through its Board of Directors or any nominating committee
thereof, shall nominate and solicit proxies for the election of one (1) person
selected by the Stockholder for election to the Board of Directors of CIT at
CIT's annual meeting of stockholders. From and after such time as the
Stockholder's Voting Percentage drops below 3%, the Stockholder shall have no
further rights under this Section 9. "Voting Percentage" means, as of a
particular date, a quotient, expressed as a percentage, equal to (i) the total
number of votes represented by the shares of capital stock of CIT beneficially
owned by the Stockholder as of such date (which for these purposes shall include
that number of votes which the Stockholder shall be entitled to direct through
ownership of Exchangeable Shares as of such date), divided by (ii) the total
number of votes represented by the shares of capital stock of CIT outstanding as
of such date (including the Special Voting Share).
10. Termination of Agreements. (a) The Stockholder and the Company
acknowledge that upon consummation of the Arrangement and the other transactions
contemplated by the Reorganization Agreement, each of the Amended and Restated
Investment Agreement, dated as of November 17, 1997, among the Company, Mutual,
CIBC and Hercules Cayman (the "Investment Agreement"), and the Registration
Rights Agreement, dated as of November 17, 1997, between the Company and the
Stockholder (the "Registration Rights Agreement") shall terminate, and the
Stockholder shall have no further rights under either the Investment Agreement
or the Registration Rights Agreement at and after the Effective Time.
3
Voting Agreement
(b) CIT and Hercules Cayman hereby agree that upon registration of the
transfer of the Subject Shares from Hercules Cayman to the Stockholder, the
Existing Voting Agreement shall terminate and be of no further force or effect,
and neither CIT nor Hercules Cayman shall have any further rights or obligations
thereunder. CIT hereby irrevocably and unconditionally consents to such transfer
of the Subject Shares to the Stockholder.
11. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September 15, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
12. Stockholder Representative. The Stockholder signs solely in its
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by any officer, director,
partner, affiliate or representative of the Stockholder who is or becomes an
officer or a director of the Company in his or her capacity as an officer or
director of the Company and none of such actions in such capacity shall be
deemed to constitute a breach of this Agreement; provided, however, that nothing
contained herein shall be deemed to relieve the Company from its obligations
under the Reorganization Agreement.
13. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
4
Voting Agreement
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the United States
District Court for the Southern District of New York, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit such party to the personal
jurisdiction of the United States District Court for the Southern District of
New York in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (b) agrees that such party will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court, (c) agrees that such party will not bring any action
relating to this Agreement or the transactions contemplated hereby in any court
other than the United States District Court for the Southern District of New
York, (d) waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby, and (e) appoints The Corporation Trust Company
as such party's agent for service of process in the State of New York in
connection with any action to enforce this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
----------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
HERCULES HOLDINGS (UK) LTD.
By: /s/ Lewis V. Howes
----------------------------------------
Name: Lewis V. Howes
Title: Director
HERCULES HOLDINGS (CAYMAN) LTD.
By: /s/ Riaz Punta
----------------------------------------
Name: Riaz Punta
Title: Director
5
Voting Agreement
AMENDED AND RESTATED VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement") is amended
and restated as of August 5, 1999, by and between Canadian Imperial Bank of
Commerce, a chartered bank pursuant to the Bank Act (Canada) (the
"Stockholder"), and The CIT Group, Inc., a Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Amended and Restated Agreement and Plan of
Reorganization, amended and restated as of the date hereof (as the same may be
amended or supplemented, the "Reorganization Agreement"), providing that CIT
shall combine with the Company pursuant to a Plan of Arrangement (the
"Arrangement"), upon the terms and subject to the conditions set forth in the
Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder owns of record and possesses legal title to not
less than 14,067,962 common shares, without par value ("Company Common Shares"),
of the Company (the "Subject Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. The Stockholder has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance of
its obligations hereunder have been duly and validly approved by all requisite
corporate action on the part of the Stockholder and no other corporate
proceedings on the part of the Stockholder are necessary to approve this
Agreement and to perform its obligations hereunder. This Agreement has been duly
and validly executed and delivered by the Stockholder and (assuming due
authorization, execution and delivery by CIT) constitutes a valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by the Stockholder, nor the
consummation by the Stockholder of the transactions contemplated hereby, nor
compliance by the Stockholder with any of the terms or provisions hereof, will
(x) violate any provision of the governing documents of the Stockholder or the
certificate of incorporation, by-laws or similar governing documents of any of
the Stockholder's Subsidiaries, (y) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Stockholder or any of the Stockholder's Subsidiaries, or any of their respective
properties or assets, or (z) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the respective properties or assets of the Stockholder
or any of the Stockholder's Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Stockholder or
any of the Stockholder's Subsidiaries is a party, or by which they or any of
their respective properties or assets may be bound or affected.
1
Amended and Restated Voting Agreement
(b) The Subject Shares. The Stockholder is the beneficial owner of and has
the sole right to vote and dispose of the Subject Shares, free and clear of any
Encumbrances whatsoever, except for any Encumbrances which arise hereunder or
under (i) the Amended and Restated Shareholders' Agreement, dated as of November
17, 1997, among the Stockholder, The Mutual Life Assurance Company of Canada
("Mutual"), Hercules Holdings (Cayman) Limited ("Hercules"), Cameron Capital
Corporation, A&A Capital Limited and M&S Capital Limited (the "Shareholders'
Agreement"), or (ii) the Transfer Restriction Agreement, dated as of August 29,
1997, between the Stockholder and the Company (the "Transfer Restriction
Agreement"). None of the Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction, except as contemplated by this Agreement,
the Shareholders' Agreement or the Transfer Restriction Agreement.
(c) Certain Transactions Involving Company Common Shares. Except for (i)
transactions in respect of approximately 800,000 Subject Shares and (ii) pledges
of Company Common Shares in favor of the Stockholder in respect of loans to
employees of the Company, since January 1, 1999, the Stockholder has not
purchased, received, accepted as collateral, sold, transferred, hypothecated,
pledged, or exchanged any Company Common Shares, or any options, warrants, or
rights to purchase or sell Company Common Shares, and has not entered into any
agreement to do any of the foregoing.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
have been duly and validly approved by the Board of Directors of CIT and no
other corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's Subsidiaries, or any of their
respective properties or assets, or (z) violate, conflict with or result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the respective properties
or assets of CIT or any of CIT's Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which CIT or any
of CIT's Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 9 and so long as the Reorganization
Agreement shall not have been amended to (i) change the terms thereof relating
to the determination of the Exchange Ratio, (ii) alter the form of consideration
payable to the stockholders of the Company or (iii) otherwise materially alter
its commercial terms in a manner adverse to the Stockholder without the consent
of the Stockholder, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or
2
Amended and Restated Voting Agreement
other approval of the Company's shareholders is sought, the Stockholder shall be
present (in person or by proxy) and shall vote (or cause to be voted) the
Subject Shares against any amendment of the Company's articles of incorporation
or by-laws or other proposal or transaction involving the Company or any of its
Subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent, delay or nullify the Reorganization Agreement
or any of the other transactions contemplated by the Reorganization Agreement or
change in any manner the voting rights of any outstanding class of capital stock
of the Company, provided that the Stockholder shall vote the Subject Shares in
favor of any of the foregoing to the extent that any such business shall have
been approved or recommended by the Board of Directors of the Company in a
manner consistent with its obligations under the Reorganization Agreement. The
Stockholder further agrees not to commit or agree to take any action
inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Regulatory Approvals.
(a) Preparation and Filing of Applications. The Stockholder shall promptly
prepare and file all necessary applications, notices, petitions and filings
required by the Stockholder in order to obtain all permits, consents, approvals
and authorizations of all third parties and Governmental Entities which are
necessary to consummate the transactions contemplated by the Reorganization
Agreement (including the Arrangement) (collectively, the "Applications"). The
Applications shall include all of the information that is responsive to the
requirements thereof. The Stockholder shall use its reasonable efforts to obtain
as promptly as practicable all such permits, consents, approvals and
authorizations from Governmental Entities on terms and conditions satisfactory
to the Stockholder in its reasonable judgment. CIT shall have the right to
review in advance, and to the extent practicable each party will consult the
other on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to CIT and any of its Subsidiaries
which appears in any filing made with, or written materials submitted to, any
third party or any Governmental Entity by the Stockholder in connection with the
transactions contemplated by the Reorganization Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. Subject to the foregoing, CIT shall, upon the Stockholder's
request and subject to applicable laws and regulations relating to the exchange
of information, furnish the Stockholder with all information concerning itself
and its Subsidiaries, directors, officers and stockholders as shall be
reasonably necessary in connection with any such filing, notice, petition or
application made by or on behalf of the Stockholder or any of its Subsidiaries
to or with any Governmental Entity in connection with the transactions
contemplated by the Reorganization Agreement, provided, however, that CIT shall
not be required to provide any such information (i) where to do so would violate
or prejudice the rights of its customers, jeopardize any attorney-client
privilege or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement or (ii) where such information is to be disclosed to a person other
than to a Governmental Entity.
(b) Provision of Information. The Stockholder shall, upon request and
subject to applicable laws and regulations relating to the exchange of
information, furnish CIT with all information concerning the Stockholder, its
Subsidiaries, directors, officers and stockholders and such other matters as
shall be reasonably necessary in connection with any statement, filing, notice
or application made by or on behalf of CIT or any of its Subsidiaries to or with
any Governmental Entity in connection with the Arrangement and the other
transactions contemplated by the Reorganization Agreement, provided, however,
that the Stockholder shall not be required to provide any such information (i)
where to do so would violate or prejudice the rights of its customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement or (ii) where such information is to be
disclosed to a person other than to a Governmental Entity. The Stockholder shall
have the right to review in advance, and to the extent practicable each party
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to the Stockholder and
any of its Subsidiaries, directors, officers and stockholders which appears in
any filing made with, or written
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Amended and Restated Voting Agreement
materials submitted to, any third party or any Governmental Entity by CIT in
connection with the transactions contemplated by the Reorganization Agreement.
In exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable.
(c) Communications. The Parties shall (x) keep one another reasonably
apprised of the status of matters relating to receipt of the consents and
approvals contemplated by this Section 6, (y) promptly advise one another upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by the
Reorganization Agreement, which communication causes the receiving party to
believe that any such consent or approval (i) will not be obtained or (ii) will
be materially delayed, and (z) promptly apprise one another of any material
developments with respect to the foregoing.
(d) Confidentiality. All information furnished by either party to the
other party pursuant to this Section 6 shall be treated as the sole property of
the delivering party and, if the Arrangement and the other transactions
contemplated by the Reorganization Agreement shall not occur or if the
delivering party shall so request, the receiving party shall, within five (5)
business days, return to the delivering party all of such written information
and all documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The receiving party shall, and
shall cause its representatives to, keep confidential all such information,
shall not directly or indirectly use such information for any competitive or
other commercial purpose, and shall use its reasonable best efforts to assure
that any third party or Governmental Entity to whom such information is
furnished as contemplated herein will accord all such information confidential
treatment. The parties' respective obligations to keep such information
confidential shall continue for ten years from the date the Reorganization
Agreement is terminated and shall not apply to (i) any information which: (x)
was already in the receiving party's possession prior to the disclosure thereof
by the delivering party; (y) was then generally known to the public; or (z) was
disclosed to the receiving party by a third party not known by the receiving
party to be bound by an obligation of confidentiality or (ii) disclosures made
as required by law. It is further agreed that, if in the absence of a protective
order or the receipt of a waiver hereunder the receiving party is nonetheless
compelled to disclose information concerning the delivering party to any
tribunal or Governmental Entity or else stand liable for contempt or suffer
other censure or penalty, the receiving party may, subject to its provision of
prior notice to the delivering party and its cooperation with the delivering
party with respect to the content, nature and timing of the disclosure, disclose
such information to such tribunal or Governmental Entity without liability
hereunder.
7. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
8. Transfer of Subject Shares. Except pursuant to this Agreement, the
Stockholder agrees not to (i) transfer, sell, pledge, assign or otherwise
dispose of (including by gift) (collectively, "Transfer"), or enter into any
contract, option or other arrangement (including any profit sharing arrangement)
with respect to the Transfer of, any of the Subject Shares to any person other
than pursuant to the terms of this Agreement and except for Transfers to
affiliates of the Stockholder who agree to be bound by all of the terms hereof,
or (ii) enter into any voting arrangement, whether by proxy, power-of-attorney,
voting agreement, voting trust or otherwise in connection, directly or
indirectly, with respect to such Subject Shares.
9. Termination. This Agreement (other than this Section 9 and Sections
6(d), 7, 10, 11, 12, 13 and 14) shall terminate upon the earlier of (x) the
termination of the Reorganization Agreement in accordance with Section 9.1
thereof and (y) the Effective Time. The provisions of this Section 9 and
Sections 6(d), 7, 10, 11, 12, 13 and 14 shall survive any such termination
indefinitely or as otherwise set forth in such Sections.
10. Board Representation. From and after the Effective Time and for so
long as the Stockholder's Voting Percentage (as defined below) is greater than
or equal to 3%, CIT, through its Board of Directors or any
4
Amended and Restated Voting Agreement
nominating committee thereof, shall nominate and solicit proxies for the
election of one (1) person selected by the Stockholder for election to the Board
of Directors of CIT at CIT's annual meeting of stockholders. From and after such
time as the Stockholder's Voting Percentage drops below 3%, the Stockholder
shall have no further rights under this Section 10. "Voting Percentage" means,
as of a particular date, a quotient, expressed as a percentage, equal to (i) the
total number of votes represented by the shares of capital stock of CIT
beneficially owned by the Stockholder as of such date (which for these purposes
shall include that number of votes which the Stockholder shall be entitled to
direct through ownership of Exchangeable Shares as of such date), divided by
(ii) the total number of votes represented by the shares of capital stock of CIT
outstanding as of such date (including the Special Voting Share).
11. Termination of Agreement. The Stockholder and the Company acknowledge
that upon consummation of the Arrangement and the other transactions
contemplated by the Reorganization Agreement, the Stockholder shall have no
further rights under the Amended and Restated Investment Agreement, dated as of
November 17, 1997, among the Company, Mutual, Hercules and the Stockholder (the
"Investment Agreement").
12. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only
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Amended and Restated Voting Agreement
if set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
13. Stockholder Representative. The Stockholder signs solely in its
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by any officer, director,
partner, affiliate or representative of the Stockholder who is or becomes an
officer or a director of the Company in his or her capacity as an officer or
director of the Company and none of such actions in such capacity shall be
deemed to constitute a breach of this Agreement; provided, however, that nothing
contained herein shall be deemed to relieve the Company from its obligations
under the Reorganization Agreement.
14. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than
the United States District Court for the Southern District of New York, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby, and (e) appoints The Corporation Trust Company as such
party's agent for service of process in the State of New York in connection with
any action to enforce this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
--------------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Richard Venn
--------------------------------------------
Name: Richard Venn
Title: SEVP
By: /s/ Gerry Beasley
--------------------------------------------
Name: Gerry Beasley
Title: SEVP
6
Amended and Restated Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between Borden Rosiak (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder beneficially owns 32,793 common shares, without
par value ("Company Common Shares"), of the Company (the "Subject Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder or the Company's Share Loan Program. None of
the Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction, except as contemplated by this Agreement or the
Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's Subsidiaries, or any of their
respective properties or assets, or (z) violate, conflict with or result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon
1
Voting Agreement
any of the respective properties or assets of CIT or any of CIT's Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which CIT or any of CIT's Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 9
and 11) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 9 and 11 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
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Voting Agreement
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
11. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than
the United States District Court for the Southern District of New York, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this
3
Voting Agreement
Agreement or any of the transactions contemplated hereby, and (e) appoints The
Corporation Trust Company as such party's agent for service of process in the
State of New York in connection with any action to enforce this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
--------------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ Borden Rosiak
--------------------------------------------
Name: Borden Rosiak
Title: Executive Vice President
4
Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between David F. Banks (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder beneficially owns 164,429 common shares, without
par value ("Company Common Shares"), of the Company (the "Subject Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder or the Company's Share Loan Program. None of
the Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction, except as contemplated by this Agreement or the
Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's Subsidiaries, or any of their
respective properties or assets, or (z) violate, conflict with or result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon
1
Voting Agreement
any of the respective properties or assets of CIT or any of CIT's Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which CIT or any of CIT's Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 9
and 11) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 9 and 11 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to
2
Voting Agreement
the Stockholder at its address set forth on the books of the Company (or at such
other address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
11. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than
the United States District Court for the Southern District of New York, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby, and (e) appoints The Corporation Trust Company as such
party's agent for service of process in the State of New York in connection with
any action to enforce this Agreement.
3
Voting Agreement
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
-----------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ David F. Banks
-----------------------------------------
Name: David F. Banks
Title: Chairman of the Board of Directors
4
Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between Scott J. Moore (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder beneficially owns 18,673 common shares, without
par value ("Company Common Shares"), of the Company (the "Subject Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder or the Company's Share Loan Program. None of
the Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction, except as contemplated by this Agreement or the
Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's Subsidiaries, or any of their
respective properties or assets, or (z) violate, conflict with or result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon
1
Voting Agreement
any of the respective properties or assets of CIT or any of CIT's Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which CIT or any of CIT's Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 9
and 11) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 9 and 11 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
2
Voting Agreement
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
11. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than
the United States District Court for the Southern District of New York, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this
3
Voting Agreement
Agreement or any of the transactions contemplated hereby, and (e) appoints The
Corporation Trust Company as such party's agent for service of process in the
State of New York in connection with any action to enforce this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
--------------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ Scott J. Moore
--------------------------------------------
Name: Scott J. Moore
Title: Senior Vice President, Legal and
General Counsel
4
Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between Steven K. Hudson (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder beneficially owns 3,454,277 common shares,
without par value ("Company Common Shares"), of the Company (the "Subject
Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder, under the Amended and Restated Shareholders'
Agreement, dated as of November 17, 1997, among the Stockholder, The Mutual Life
Assurance Company of Canada ("Mutual"), Hercules Holdings (Cayman) Limited
("Hercules"), Cameron Capital Corporation, A&A Capital Limited and M&S Capital
Limited (the "Shareholders' Agreement") or under the Company's Share Loan
Program. None of the Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction, except as contemplated by this Agreement,
the Shareholders' Agreement or the Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's
1
Voting Agreement
Subsidiaries, or any of their respective properties or assets, or (z) violate,
conflict with or result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Encumbrance upon any of the
respective properties or assets of CIT or any of CIT's Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which CIT or any of CIT's Subsidiaries is a party, or by which they or any of
their respective properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 10
and 12) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 10 and 12 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
9. Termination of Agreement. The Stockholder and the Company acknowledge
that upon consummation of the Arrangement and the other transactions
contemplated by the Reorganization Agreement, the Shareholders' Agreement shall
terminate, and the Stockholder shall have no further rights under the
Shareholders' Agreement at and after the Effective Time.
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Voting Agreement
10. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
11. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
12. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such
3
Voting Agreement
party will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (c) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than the United States District Court for the Southern
District of New York, (d) waives any right to trial by jury with respect to any
claim or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby, and (e) appoints The Corporation Trust Company
as such party's agent for service of process in the State of New York in
connection with any action to enforce this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
---------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ Steven K. Hudson
---------------------------------------
Name: Steven K. Hudson
Title: Chief Executive Officer
4
Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between David D. McKerroll (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder benefically owns 1,562,428 common shares, without
par value ("Company Common Shares"), of the Company (the "Subject Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder, under the Amended and Restated Shareholders'
Agreement, dated as of November 17, 1997, among the Stockholder, The Mutual Life
Assurance Company of Canada ("Mutual"), Hercules Holdings (Cayman) Limited
("Hercules"), Cameron Capital Corporation, A&A Capital Limited and M&S Capital
Limited (the "Shareholders' Agreement") or under the Company's Share Loan
Program. None of the Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction, except as contemplated by this Agreement,
the Shareholders' Agreement or the Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute,
1
Voting Agreement
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to CIT or any of CIT's Subsidiaries, or any of their respective
properties or assets, or (z) violate, conflict with or result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the respective properties or assets of CIT or any of
CIT's Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which CIT or any of CIT's Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 10
and 12) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 10 and 12 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
2
Voting Agreement
9. Termination of Agreement. The Stockholder and the Company acknowledge
that upon consummation of the Arrangement and the other transactions
contemplated by the Reorganization Agreement, the Shareholders' Agreement shall
terminate, and the Stockholder shall have no further rights under the
Shareholders' Agreement at and after the Effective Time.
10. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
11. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
12. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent
3
Voting Agreement
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in the United States District Court for the Southern District
of New York, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit such party to the personal jurisdiction of the United States
District Court for the Southern District of New York in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby, (b)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that such party will not bring any action relating to this Agreement or
the transactions contemplated hereby in any court other than the United States
District Court for the Southern District of New York, (d) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby, and (e)
appoints The Corporation Trust Company as such party's agent for service of
process in the State of New York in connection with any action to enforce this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ ALBERT R. GAMPER
----------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ DAVID D. MCKERROLL
-----------------------------------
Name: David D. McKerroll
Title: President, Corporate Finance
4
Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between Bradley D. Nullmeyer (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder beneficially owns 1,829,204 common shares,
without par value ("Company Common Shares"), of the Company (the "Subject
Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder, under the Amended and Restated Shareholders'
Agreement, dated as of November 17, 1997, among the Stockholder, The Mutual Life
Assurance Company of Canada ("Mutual"), Hercules Holdings (Cayman) Limited
("Hercules"), Cameron Capital Corporation, A&A Capital Limited and M&S Capital
Limited (the "Shareholders' Agreement") or under the Company's Share Loan
Program. None of the Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction, except as contemplated by this Agreement,
the Shareholders' Agreement or the Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute,
1
Voting Agreement
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to CIT or any of CIT's Subsidiaries, or any of their respective
properties or assets, or (z) violate, conflict with or result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the respective properties or assets of CIT or any of
CIT's Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which CIT or any of CIT's Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 10
and 12) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 9 and 11 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
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Voting Agreement
9. Termination of Agreement. The Stockholder and the Company acknowledge
that upon consummation of the Arrangement and the other transactions
contemplated by the Reorganization Agreement, the Shareholders' Agreement shall
terminate, and the Stockholder shall have no further rights under the
Shareholders' Agreement at and after the Effective Time.
10. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
11. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
12. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent
3
Voting Agreement
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in the United States District Court for the Southern District
of New York, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit such party to the personal jurisdiction of the United States
District Court for the Southern District of New York in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby, (b)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that such party will not bring any action relating to this Agreement or
the transactions contemplated hereby in any court other than the United States
District Court for the Southern District of New York, (d) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby, and (e)
appoints The Corporation Trust Company as such party's agent for service of
process in the State of New York in connection with any action to enforce this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
--------------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ Bradley D. Nullmeyer
--------------------------------------------
Name: Bradley D. Nullmeyer
Title: President, Commercial Finance
4
Voting Agreement
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of August 5, 1999, by
and between David J. Sharpless (the "Stockholder") and The CIT Group, Inc., a
Delaware corporation ("CIT").
W I T N E S S E T H:
WHEREAS, CIT and Newcourt Credit Group Inc., an Ontario corporation (the
"Company"), propose to enter into an Agreement and Plan of Reorganization, dated
as of the date hereof (as the same may be amended or supplemented, the
"Reorganization Agreement"), providing that CIT shall combine with the Company
pursuant to a Plan of Arrangement (the "Arrangement"), upon the terms and
subject to the conditions set forth in the Reorganization Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings set forth in the Reorganization Agreement; and
WHEREAS, the Stockholder beneficially owns 64,217 common shares, without
par value ("Company Common Shares"), of the Company (the "Subject Shares"); and
WHEREAS, as an inducement to CIT to enter into the Reorganization
Agreement, CIT has required that the Stockholder enter into this Agreement; and
WHEREAS, CIT is prepared to execute the Reorganization Agreement and
tender it to the Company for execution by the Company upon receipt of this
Agreement duly executed by the Stockholder.
NOW, THEREFORE, to induce CIT to enter into, and in consideration of its
entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein and
therein, the parties, intending to be legally bound hereby, agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to CIT as of the date hereof as follows:
(a) Authority; No Violation. This Agreement has been validly executed and
delivered by the Stockholder and (assuming due authorization, execution and
delivery by CIT) constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) The Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the sole right to vote and dispose of the
Subject Shares, free and clear of any Encumbrances whatsoever, except for any
Encumbrances which arise hereunder or the Company's Share Loan Program. None of
the Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction, except as contemplated by this Agreement or the
Company's Share Loan Program.
2. Representations and Warranties of CIT. CIT hereby represents and
warrants to the Stockholder that CIT has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this Agreement
has been duly and validly approved by the Board of Directors of CIT and no other
corporate proceedings on the part of CIT are necessary to approve this
Agreement. This Agreement has been duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by the Stockholder)
constitutes a valid and binding obligation of CIT, enforceable against CIT in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity and the discretion of the court before which any
proceedings seeking injunctive relief or specific performance may be brought.
Neither the execution and delivery of this Agreement by CIT nor the consummation
by CIT of the transactions contemplated hereby, nor compliance by CIT with any
of the terms or provisions hereof, will (x) violate any provision of the
governing documents of CIT or the certificate of incorporation, by-laws or
similar governing documents of any of CIT's Subsidiaries, (y) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CIT or any of CIT's Subsidiaries, or any of their
respective properties or assets, or (z) violate, conflict with or result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of
1
Voting Agreement
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Encumbrance upon any of the
respective properties or assets of CIT or any of CIT's Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which CIT or any of CIT's Subsidiaries is a party, or by which they or any of
their respective properties or assets may be bound or affected.
3. Covenants of the Stockholder as to Voting. Until the termination of
this Section 3 in accordance with Section 8, the Stockholder agrees as follows:
(a) Vote for the Company Approval Matters. At any duly noticed meeting of
shareholders of the Company called to vote upon the approval and adoption of the
Reorganization Agreement, the Plan of Arrangement and the consummation of the
transactions contemplated thereby (collectively, the "Company Approval
Matters"), or at any adjournment or postponement of such meeting or in any other
circumstances upon which a vote, consent or other approval (including written
consent) with respect to the Company Approval Matters is sought, the Stockholder
shall vote (or cause to be voted), or execute a written consent in respect of,
the Subject Shares in favor of the Company Approval Matters.
(b) Vote Against Alternative Proposals. At any duly noticed meeting of
shareholders of the Company or at any adjournment or postponement thereof or in
any other circumstances upon which the vote, consent or other approval of the
Company's shareholders is sought, the Stockholder shall be present (in person or
by proxy) and shall vote (or cause to be voted) the Subject Shares against any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent, delay or nullify the Reorganization Agreement or any of the
other transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any outstanding class of capital stock of the
Company. The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
4. Representation as to Proxies. The Stockholder represents that any
proxies heretofore given in respect of the Subject Shares are not irrevocable,
and that any such proxies are hereby revoked.
5. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CIT may reasonably request for the
purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment; No Third Party Beneficiaries. Except as provided herein,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7. Transfer of Subject Shares. Except pursuant to this Agreement, prior to
the Closing, the Stockholder agrees not to (i) transfer, sell, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to any
person other than pursuant to the terms of this Agreement, or (ii) enter into
any voting arrangement, whether by proxy, power-of-attorney, voting agreement,
voting trust or otherwise in connection, directly or indirectly, with respect to
such Subject Shares.
8. Termination. This Agreement (other than this Section 8 and Sections 9
and 11) shall terminate upon the earlier of (x) the termination of the
Reorganization Agreement in accordance with Section 9.1 thereof and (y) the
Effective Time. The provisions of this Section 8 and Sections 9 and 11 shall
survive any such termination indefinitely or as otherwise set forth in such
sections.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
2
Voting Agreement
(b) Notice. All notices and other communications hereunder 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 CIT in
accordance with the notification provision contained in the Reorganization
Agreement and to the Stockholder at its address set forth on the books of the
Company (or at such other address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. 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. Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 5, 1999.
(d) Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
(e) Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof
or of any other jurisdiction.
(g) Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law, and the parties hereto shall
reasonably negotiate in good faith a substitute term or provision that comes as
close as possible to the invalidated and unenforceable term or provision, and
that puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(h) Waiver. Any provisions of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10. Stockholder Representative. The Stockholder signs solely in his
capacity as the beneficial owner of the Subject Shares and nothing contained
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or a director of the Company, and none of such actions in
such capacity shall be deemed to constitute a breach of this Agreement.
11. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the Southern District of New York, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit such party to the personal jurisdiction of
the United States District Court for the Southern District of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (b) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than
the United States District Court for the Southern District of New York, (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this
3
Voting Agreement
Agreement or any of the transactions contemplated hereby, and (e) appoints The
Corporation Trust Company as such party's agent for service of process in the
State of New York in connection with any action to enforce this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
--------------------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
By: /s/ David J. Sharpless
--------------------------------------------
Name: David J. Sharpless
Title: Deputy Chairman of the Board of
Directors
4
Voting Agreement
ANNEX K
J P Morgan
September 21, 1999
J.P. Morgan Securities, Inc.
60 Wall Street
New York, NY
10260-0060
The Board of Directors
The CIT Group, Inc.
1211 Avenue of the Americas
New York, NY 10036
Attention: Albert R. Gamper, Jr.
President and Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to The CIT Group, Inc. (the "Company") of the exchange ratio in connection
with the proposed transaction (the "Transaction") involving the Company and
Newcourt Credit Group, Inc. (the "Seller"). Pursuant to the Amended and Restated
Agreement and Plan of Reorganization, dated as of August 5, 1999 (the
"Agreement"), between the Company and the Seller, the Seller will become a
wholly-owned subsidiary of the Company, and the Company will exchange for each
share of Common Stock, par value $0.01 per share, of the Seller consideration
equal to 0.70 shares of the Company, subject to the provisions of the Agreement.
In arriving at our opinion, we have reviewed: (i) the Agreement; (ii) the draft
Joint Management Information Circular and Proxy Statement of the Company and the
Seller relating to the Transaction (the "Proxy Statement"); (iii) certain
publicly available information concerning the business of the Seller and the
Company and of certain other companies engaged in businesses comparable to those
of the Seller and the Company, and the reported market prices for certain other
companies' securities deemed comparable; (iv) publicly available terms of
certain transactions involving companies comparable to the Seller and the
Company and the consideration received for such companies; (v) current and
historical market prices of the common stock of the Seller and the Company; (vi)
the audited financial statements of the Company and the Seller for the fiscal
year ended December 31, 1998; (vii) the unaudited financial statements of the
Company and the Seller for the period ended June 30, 1999; (viii) relative
comparisons of the Company and the Seller on a variety of financial and market
measures; (ix) certain internal financial analyses and forecasts prepared by the
Company and its management; (x) certain internal financial analyses and
forecasts prepared by the Seller and its management; (xi) certain internal
financial analyses and forecasts with respect to the Seller that were prepared
and adjusted by the Company and its management; and (xii) the terms of other
business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the management of
the Company and the Seller with respect to certain aspects of the Transaction,
the past and current business operations of the Company and the Seller, the
financial condition and future prospects and operations of the Company and the
Seller, the effects of the Transaction on the financial condition and future
prospects of the Company and the Seller, and certain other matters we believed
necessary or approximate to our inquiry. We have reviewed such other financial
studies and analyses and considered such other information as we deemed
appropriate for the purposes of this opinion.
1
Annex K
J P Morgan
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and the Seller or otherwise
reviewed by us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or
liabilities, nor have any such valuations or appraisals been provided to us. In
relying on financial analyses and forecasts provided to us, we have assumed that
they have been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of the Company and the
Seller to which such analyses or forecasts relate. We have also assumed that the
Transaction will have the tax consequences described in the Proxy Statement and
in discussions with, and materials furnished to us by, representatives of the
Company, and that the other transactions contemplated by the Agreement will be
consummated as described in the Agreement and the Proxy Statement. We have
relied as to all legal matters relevant to rendering our opinion upon the advice
of counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the Company's stock
will trade at any future time.
We have acted as financial advisor to the Company with respect to the proposed
Transaction and will receive a fee from the Company for our services. We
maintain customary banking relationships with the Company and the Seller and
have provided services to each of them in the past. In the ordinary course of
their businesses, our affiliates may actively trade the debt and equity
securities of the Company or the Seller for their own account or for the
accounts of customers and, accordingly, they may at any time hold long or short
positions in such securities.
On the basis of and subject to the foregoing, it is our opinion at of the date
hereof that the exchange ratio in the proposed Transaction is fair, from a
financial point of view, to the Company.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Transaction. This opinion
does not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote with respect to the Transaction. This opinion may
be reproduced in full in any proxy or information statement mailed to
stockholders of the Company.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ William F. Cruger
----------------------------------
Name: William F. Cruger
Title: Managing Director
2
Annex K
ANNEX L
Donaldson, Lufkin & Jenrette
277 Park Avenue, New York, New York 10172 o (212) 892-3000
September 21, 1999
Board of Directors
The CIT Group, Inc.
650 CIT Drive
Livingston, NJ 07039
Dear Sirs:
You have requested our opinion as to the fairness from a financial point
of view to The CIT Group, Inc. (the "Company") of the Exchange Ratio (as defined
below) pursuant to the terms of the Amended and Restated Agreement and Plan of
Reorganization, dated as of August 5, 1999 (the "Agreement"), between the
Company and Newcourt Credit Group Inc. ("NCT") pursuant to which NCT will become
a wholly-owned subsidiary of the Company (the "Transaction").
Pursuant to the Agreement and except as described in the next sentence,
each share of NCT common stock will be converted into the right to receive 0.70
shares (the "Exchange Ratio") of Class A common stock, par value $0.01 per
share, of the Company (the "Company Common Stock"). In lieu of Company Common
Stock, certain Canadian holders of NCT common stock may elect to receive for
each share of such stock an amount of non-voting exchangeable shares of a
subsidiary of the Company equal to the Exchange Ratio, which shares are
exchangeable into Company Common Stock as more fully set forth in the Agreement.
In each case, the Exchange Ratio is subject to reduction as set forth in the
Agreement.
In arriving at our opinion, we have reviewed the Agreement, as well as
financial and other information that was publicly available or furnished to us
by the Company and NCT including information provided during discussions with
their respective managements. Included in the information provided during
discussions with management were certain financial projections of NCT for the
period beginning January 1, 1999 and ending December 31, 2003 prepared by the
management of NCT and adjusted by the management of the Company and certain
financial projections of the Company for the period beginning January 1, 1999
and ending December 31, 2003 prepared by the management of the Company. From
these financial projections, we extrapolated for the one-year period ending
December 31, 2004, which extrapolations were reviewed by management of CIT. In
addition, we have compared certain financial and securities data of the Company
and NCT with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the common
stock of NCT and the Company, reviewed prices and premiums paid in certain other
business combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or NCT, or that
was otherwise reviewed by us. In particular, we have relied upon the estimates
of the management of the Company as to the amount and timing of the operating
synergies achievable as a result of the Transaction and upon our discussion of
such synergies and the timing thereof with the management of the Company. With
respect to the financial projections supplied to us, we have relied on
representations that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective managements
of the Company and NCT as to the future operating and financial performance of
the Company and NCT. With respect to the projections for the one-year period
ending December 31, 2004, we have assumed that the bases on which they were
prepared do not materially differ from the best available estimates and
judgement of the management of CIT for such period. We have not assumed any
responsibility for making any independent evaluation of any assets or
liabilities of the Company or NCT or for making any independent verification of
any of the information reviewed by us. We have relied as to certain legal
matters on advice of counsel to the Company. As you know, we have had the
opportunity to conduct only limited due diligence on NCT.
1
Annex L
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Transaction and any other business strategies being considered by
the Company's Board of Directors, nor does it address the Board's decision to
proceed with the Transaction. We are expressing no opinion as to the prices at
which the Company's Common Stock will trade at any time. Our opinion does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DLJ has
performed investment banking and other services for the Company, including
mergers and acquisitions advisory and debt underwriting, and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that the Exchange Ratio is fair to the Company from a
financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Robert H. Clymer III
----------------------------------
Name: Robert H. Clymer III
Title: Managing Director
2
Annex L
ANNEX M
GOLDMAN, SACHS & CO.
OPINION
PERSONAL AND CONFIDENTIAL
September 21, 1999
Board of Directors
Newcourt Credit Group Inc.
207 Queens Quay West
Suite 700
Toronto, Ontario M5J 1A7
Canada
Gentlemen:
You have requested our opinion as to the fairness from a financial point
of view to the holders of the outstanding shares of Common Shares (the "Newcourt
Shares") of Newcourt Credit Group Inc. (the "Company") of the exchange ratio of
0.70 shares, subject to adjustment as provided in the Amended Agreement (as
defined below), of either (a) shares of Class A Common Stock, par value $0.01
per share (the "CIT Common Stock"), of The CIT Group, Inc. ("CIT"), or (b) at
the valid election of the Canadian resident holders of the Newcourt Shares,
non-voting exchangeable shares of a newly formed indirect subsidiary of CIT (the
"Exchangeable Shares"), each of which will be exchangeable for one share of CIT
Common Stock, to be received for each Newcourt Share (the "Exchange Ratio")
pursuant to the Amended and Restated Agreement and Plan of Reorganization
between CIT and the Company (the "Amended Agreement") dated as of August 5,
1999, and the related Plan of Arrangement. The Amended Agreement supersedes the
Agreement and Plan of Reorganization between CIT and the Company (the
"Agreement") dated as of March 7, 1999, and the related Plan of Arrangement,
pursuant to which the Exchange Ratio was 0.92.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as financial advisor in
connection with the acquisition of AT&T Capital Corporation ("AT&T Capital"), as
a co-manager of an offering of 38,500,000 Subscription Rights for Newcourt
Shares in November 1997, as a lead or co-manager of offerings of selected debt
securities and medium-term notes of the Company and AT&T Capital with varying
maturities and coupons, as a dealer of the Company's commercial paper, and as
its financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Agreement and the subsequent Amended Agreement.
We also have provided certain investment banking services to CIT from time to
time,
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including having acted as a joint lead manager in the initial public offering of
31,500,000 shares of CIT Common Stock in November 1997, and as lead or
co-manager of offerings of selected senior debt securities and medium-term notes
with varying maturities and coupons. In addition, we may provide investment
banking services to CIT in the future. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or CIT for its own
account and for the accounts of its customers.
In connection with this opinion, we have reviewed, among other things, the
Joint Management Information Circular and Proxy Statement; the Amended
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of CIT
for the five years ended December 31, 1998; Annual Reports to Shareholders of
the Company for the five years ended December 31, 1998; Annual Reports to
Stockholders and Annual Reports on Form 10-K of AT&T Capital for the four years
ended December 31, 1997; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of CIT and AT&T Capital; certain interim reports to
shareholders and Quarterly Reports on Form 6-K of the Company; certain other
communications from the Company and CIT to their respective shareholders;
certain internal financial analyses and forecasts for the Company, as revised,
on a stand-alone basis under alternative scenarios prepared by management of the
Company; certain internal financial analyses and forecasts for CIT prepared by
the management of CIT; and certain operating cost savings and funding benefits
projected by the managements of the Company and CIT to result from the
transaction contemplated by the Amended Agreement (the "Synergies"). We also
have held discussions with members of the senior management of the Company and
CIT regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Amended Agreement and the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for the Newcourt Shares and CIT Common Stock, compared certain
financial, stock market, and fixed income market information for the Company and
CIT with similar information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations in the finance industry specifically and in other industries
generally and performed such other studies and analyses as we considered
appropriate.
The Company's financial forecasts, as revised, reflect modifications in
projected financial results from the Company management projections previously
furnished to, and utilized by, us in connection with our prior opinion, dated
March 7, 1999. In rendering our opinion, we took into account, with your
consent, the views of the management of the Company as to the risks and
uncertainties associated with operating the business on a stand-alone basis.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this
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opinion. In that regard, we have assumed, with your consent, that the internal
financial forecasts and the Synergies, prepared by the managements of the
Company and CIT have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the Company and CIT and that such
Synergies will be realized in the amounts and at the times contemplated thereby.
We are not experts in the evaluation of loan and lease portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of the Company
and CIT are in the aggregate adequate to cover all such losses. In addition, we
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company, CIT or any
of their subsidiaries and we have not been furnished with any such evaluation or
appraisal. We also have assumed that all material governmental, regulatory or
other consents and approvals necessary for the consummation of the transaction
contemplated by the Amended Agreement will be obtained without any adverse
effect on the Company, CIT or the combined company or on the contemplated
benefits of the transaction contemplated by the Amended Agreement.
Our advisory services and the opinion expressed herein are provided for
the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the Amended
Agreement and such opinion does not constitute a recommendation as to how any
holder of Newcourt Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio is fair from a financial point of view to the holders of Newcourt
Shares. We are not expressing any opinion herein as to the prices at which the
Exchangeable Shares may trade if and when they are issued or as to the election
between the CIT Common Stock and the Exchangeable Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
------------------------
Goldman, Sachs & Co.
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ANNEX N
CIBC WORLD MARKETS INC.
September 21, 1999
The Board of Directors
Newcourt Credit Group Inc.
207 Queens Quay West
Suite 700
Toronto, ON
M5J 1A7
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding common shares (the "Newcourt Shares")
of Newcourt Credit Group Inc. (the "Company") of the Exchange Ratio (defined
below) provided for in the Amended and Restated Agreement and Plan of
Reorganization dated as of August 5, 1999 and the related Plan of Arrangement,
appended thereto, (collectively, the "Amended Agreement"), between the Company
and The CIT Group, Inc. ("CIT"). As more fully described in the Amended
Agreement, each outstanding Newcourt Share will be transferred to a subsidiary
of CIT ("Sub") in exchange for, at the holder's election and subject to
adjustment as more fully described in the Amended Agreement, 0.70 (the "Exchange
Ratio") of a share of (i) Class A Common Stock, par value $0.01 per share, of
CIT (the "CIT Common Stock") or (ii) exchangeable shares in the capital of Sub
(the "Exchangeable Shares"), which shares will be exchangeable, at the holder's
election, on a one-for-one share basis for shares of CIT Common Stock; provided
that holders of Newcourt Shares who are not eligible Canadian residents will not
be entitled to elect to receive Exchangeable Shares. The Amended Agreement
supersedes the Agreement and Plan of Reorganization between CIT and the Company
dated as of March 7, 1999, and the related Plan of Arrangement, appended thereto
(collectively, the "Agreement"), pursuant to which the exchange ratio was 0.92.
CIBC World Markets Inc. ("CIBC World Markets") was jointly retained along
with Goldman Sachs & Co. by the Board of Directors of the Company to provide to
the Board financial advice and an opinion as to the fairness from a financial
point of view of the Exchange Ratio to the holders of Newcourt Shares. Pursuant
to the terms of the engagement, the Company has agreed to pay CIBC World Markets
financial advisory fees plus a success fee. In addition, the Company has agreed
to reimburse CIBC World Markets for its reasonable out-of-pocket expenses
incurred in connection with the services provided by it and to indemnify and
hold harmless CIBC World Markets and certain related parties, to the full extent
lawful, from and against certain liabilities and expenses, including certain
liabilities under the federal securities laws of the United States, incurred in
connection with its engagement.
CIBC World Markets, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. CIBC World
Markets provides a full range of financial advisory and securities services and,
in the course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company or CIT for its own account and for the accounts of customers. We are
familiar with the Company having acted as its financial advisor in connection
with the transaction contemplated by the Amended Agreement, and having
participated in certain of the negotiations leading to the Agreement and the
Amended Agreement. We also have provided certain investment banking services to
the Company from time to time, including having acted as financial advisor and
lead underwriter in August 1997 regarding the Company's acquisition of Commcorp
Financial Services Inc. and the
1
Annex N
related C$279.5 million equity offering as well as the Company's November 1997
acquisition of AT&T Capital Corporation ("AT&T Capital") and the related C$1.771
billion equity offering. Canadian Imperial Bank of Commerce, ("CIBC") parent
company to CIBC World Markets, provides a range of credit-related products and
services, including shareholder loans, to the Company on an on-going basis. CIBC
has acted as lead arranger of a C$1.2 billion revolving credit facility and
co-arranger of two revolving credit facilities totaling US$2.25 billion over the
past 24 months. CIBC is also the lead arranger of C$2.4 billion of asset
securitization vehicles in support of the Company's on-going origination
activities. In addition to the corporate and investment banking services
rendered, CIBC holds a direct interest in the Company representing approximately
9.5% of the Newcourt Shares outstanding and has the right, pursuant to a
shareholders agreement with certain institutional shareholders and members of
management, to nominate two representatives for election to the Company's Board
of Directors and has exercised that right. CIBC has also participated in
selected CIT credit facilities with varying terms and maturities.
In connection with this opinion, we have reviewed, among other things, the
Amended Agreement; Annual Reports to Stockholders and Annual Reports on Form
10-K of CIT for the five years ended December 31, 1998; Annual Reports to
Shareholders of the Company for the five years ended December 31, 1998; Annual
Reports on Form 40-F of the Company for the two years ended December 31, 1998;
Annual Reports to Stockholders and Annual Reports on Form 10-K of AT&T Capital
for the four years ended December 31, 1997; certain interim reports to
shareholders and Quarterly Reports on Form 6-K for the Company; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q for AT&T Capital;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q for
CIT; certain other communications from the Company and CIT to their respective
stockholders; certain internal financial analyses and forecasts for the Company,
as revised to reflect modifications in projected financial results from the
Company's management projections furnished to, and utilized by, us in connection
with our prior opinion, dated March 7, 1999 in connection with the Agreement;
certain internal financial analyses and forecasts for CIT prepared by the
management of CIT; and certain operating cost savings and funding benefits
projected by the managements of the Company and CIT to result from the
transaction contemplated by the Amended Agreement (the "Synergies"). We also
have held discussions with members of the senior management of the Company and
CIT regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Amended Agreement and the past and current
business operations, regulatory relationships, financial condition, and future
prospects of their respective companies. In addition, we have reviewed the
reported price and trading activity for the Newcourt Shares and CIT Common
Stock, compared certain financial, stock market and fixed income market
information for the Company and CIT with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the finance industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
This opinion is rendered on the basis of securities markets and economic,
financial and general business conditions prevailing as at the date hereof. In
its analyses and in preparing the opinion, CIBC World Markets made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters as they exist and can be evaluated by us on the
date hereof, many of which are beyond the control of CIBC World Markets or any
party involved in the transaction contemplated by the Amended Agreement.
In rendering our opinion, we have relied upon and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information provided to or discussed with us. In that
regard, we have assumed, with your consent, that the financial forecasts,
including, without limitation, the Synergies, have been reasonably prepared on a
basis reflecting the best currently available information, judgments and
estimates of the Company and CIT and that such forecasts and Synergies will be
realized in the amounts and at the times contemplated thereby. We are not
experts in the evaluation of loan and lease portfolios for purposes of assessing
the adequacy of the allowances for losses with respect thereto and have assumed,
with your consent, that such allowances for each of the Company and CIT are in
the aggregate adequate to cover all such losses. In addition, we have not
reviewed individual credit files nor have we made an independent evaluation or
appraisal of the assets or liabilities of the Company, CIT or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We also have assumed, with your consent, that the transaction
contemplated by the Amended Agreement will be accounted for as a purchase
2
Annex N
under generally accepted accounting principles and that obtaining any necessary
governmental, regulatory or other consents and approvals necessary for the
consummation of the transaction contemplated by the Amended Agreement or
otherwise will not have a material adverse effect on the Company, CIT or the
combined company resulting from the transaction contemplated by the Amended
Agreement or on the contemplated benefits of the transaction. We are not
expressing an opinion as to the underlying valuation, future performance or
long-term viability of the Company or CIT or the prices at which the CIT Common
Stock or the Exchangeable Shares may trade at any time in the future. In
addition our opinion does not address the relative merits of the transaction
contemplated by the Amended Agreement as compared to any alternative business
transactions that might be available to the Company.
Our advisory services and the opinion expressed herein are provided for
the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the Amended
Agreement and such opinion does not constitute a recommendation as to how any
holder of Newcourt Shares should vote with respect to such transaction or the
form of consideration to be elected by such shareholder in the transaction
contemplated by the Amended Agreement.
We understand that this transaction is not subject to the formal valuation
requirements under Ontario Securities Commission Policy Statement No. 9.1 and
Quebec Securities Commission Policy Statement No. Q-27. Accordingly, we were not
engaged to prepare and have not prepared a formal valuation or appraisal of the
common shares, assets or liabilities (contingent or otherwise) of the Company or
CIT and this opinion should not be construed as such.
The opinion is given as of the date hereof and CIBC World Markets
disclaims any undertaking or obligation to advise the Board of any change in any
fact or matter affecting the opinion which may come or be brought to CIBC World
Markets' attention after the date hereof. Notwithstanding and without limiting
the foregoing, in the event that there is any material change in any fact or
matter affecting the opinion after the date hereof, CIBC World Markets reserves
the right to change, modify or withdraw the opinion.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Amended Agreement is fair, from a financial point
of view, to the holders of Newcourt Shares.
Very truly yours,
CIBC WORLD MARKETS INC.
3
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ANNEX O
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
OF THE CIT GROUP, INC.
Under Sections 242 and 245 of the Delaware General Corporation Law
The CIT Group, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that:
1. The name of the Corporation is The CIT Group, Inc.
2. The original certificate of incorporation of the Corporation was filed
by the Secretary of State of the State of Delaware on the 29th day of August,
1979. The name under which the Corporation was originally incorporated was "RCA
Holdings Corp." The certificate of incorporation was amended by amendments filed
with the Secretary of State of the State of Delaware on January 31, 1980 and
April 30, 1986, further amended and restated in its entirety by the filing of a
Restated Certificate of Incorporation on December 29, 1989, subsequently further
amended by the filing of an amendment thereto on September 26, 1997, and further
amended and restated in its entirety by the filing of an Amended and Restated
Certificate of Incorporation on November 12, 1997 (as so amended, the "Restated
Certificate of Incorporation").
3. This Amended and Restated Certificate of Incorporation restates,
integrates and further amends the Corporation's existing Restated Certificate of
Incorporation as follows:
(1) Article FOURTH has been amended to rename the Class A Common Stock as
"Common Stock," to remove the authorization for the issuance of Class B Common
Stock, to reclassify all authorized Class B Common Stock as Common Stock and to
remove the conversion and other provisions relating to the Class B Common Stock;
(2) Article EIGHTH has been amended to eliminate the reference to the
Class B Transferee and to eliminate references to multiple classes of common
stock; and
(3) Article NINTH has been amended to eliminate references to multiple
classes of common stock.
4. The Restated Certificate of Incorporation of The CIT Group, Inc., as
amended or supplemented heretofore, is further amended hereby, and is hereby
restated to read in its entirety, as hereinafter set forth:
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
THE CIT GROUP, INC.
FIRST: The name of the Corporation is The CIT Group, Inc.
SECOND: Its registered office in the State of Delaware is located at
Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is THE
CORPORATION TRUST COMPANY.
THIRD: The purpose and powers of the Corporation are to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of stock that the Corporation shall
have authority to issue is 1,260,000,000, of which (i) 50,000,000 shares shall
be shares of preferred stock, par value $.01 per share (the "Preferred Stock"),
and (ii) 1,210,000,000 shares shall be shares of Common Stock, par value $.01
per share ("Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series. Subject to any limitations set forth in this Amended and Restated
Certificate of Incorporation and any limitations prescribed by the laws of the
State of Delaware, the Board of Directors is expressly authorized, prior to the
issuance of any series of Preferred Stock, to fix by resolution or resolutions
providing for the issue of any series, the number of
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shares included in such series and the designation, relative powers, preferences
and participating, optional or other special rights, and the qualifications,
limitations or restrictions of such series.
(c) The Board of Directors shall have the sole power to issue additional
shares of stock of any class or series at any time or from time to time.
FIFTH: In determining the number of the record holders of outstanding
shares of any class of stock of the Corporation for the purpose of computing or
determining the method of computing the vote or determining the right to vote at
any meeting of stockholders or of a class of stockholders, the original stock
ledger of the Corporation as at the close of business on the record date fixed
for such meeting or, if the stock transfer books of the Corporation shall have
been closed for a period immediately preceding the date of such meeting, then as
at the close of business on the date as of which such stock transfer books were
so closed, shall be conclusive for all purposes, and in determining the number
or the record holders of outstanding shares of any class of stock of the
Corporation for any other purpose, the original stock ledger of the Corporation
as at the close of business on the date as of which the determination is being
made, shall be conclusive for all purposes; all notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation.
SIXTH: The Board of Directors shall have all powers and authorities
conferred upon it by the laws of the State of Delaware and is expressly
authorized to adopt, amend or repeal the By-Laws of the Corporation. The
Corporation may in its By-Laws confer powers upon its directors in addition to
the powers and authorities expressly conferred upon them by the laws of the
State of Delaware.
SEVENTH: (a) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specific circumstances, the
number of directors of the Corporation shall be fixed by the By-Laws of the
Corporation and may be increased or decreased from time to time in such a manner
as may be prescribed by the By-Laws. The directors of the Corporation need not
be stockholders thereof.
(b) Unless and except to the extent that the By-Laws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
(c) Subject to any rights of holders of Preferred Stock, any vacancy
occurring in the Board of Directors caused by death, resignation, increase in
number of directors or otherwise may be filled by a majority of the directors
then in office, though less than a quorum, or by a sole remaining director.
EIGHTH: (a) Any corporate action required to be taken at any annual or
special meeting of the stockholders, or any corporate action which may be taken
at any annual or special meeting of the stockholders, may be taken only at a
duly called annual or special meeting of stockholders and may not be taken by
written consent of the stockholders in lieu of a meeting.
(b) Unless otherwise prescribed by law or this Amended and Restated
Certificate of Incorporation, special meetings of stockholders may be held at
any time on call of the Chairman of the Board of Directors, a Vice Chairman of
the Board of Directors, the Chief Executive Officer, the President or, at the
request in writing of a majority of the Board of Directors, any other officer.
NINTH: (a) In anticipation that DKB will remain a substantial stockholder
of the Corporation, and in anticipation that the Corporation and DKB may engage
in the same or similar activities or lines of business and have an interest in
the same areas of corporate opportunities, and in recognition of the benefits to
be derived by the Corporation through its continued contractual, corporate and
business relations with DKB (including possible service of directors and
officers and other employees of DKB as directors or officers or other employees
of the Corporation), the provisions of this Article NINTH are set forth to
regulate and define the conduct of certain affairs of the Corporation as they
may involve DKB and its directors and officers and other employees, and the
powers, rights, duties and liabilities of the Corporation and its directors,
officers and other employees and stockholders in connection therewith.
(b) DKB shall have no duty to refrain from engaging in the same or similar
activities or lines of business as the Corporation, and neither DKB nor any
director or officer or other employee thereof (except as provided in subsection
(c) below) shall be liable to the Corporation or its stockholders for breach of
any fiduciary duty by reason of any such activities of DKB. In the event that
DKB acquires knowledge of a potential transaction or matter which may be a
corporate opportunity for both DKB and the Corporation, DKB shall have no duty
to
2
Annex O
communicate or offer such corporate opportunity to the Corporation and shall
not be liable to the Corporation or its stockholders for breach of any fiduciary
duty as a stockholder of the Corporation by reason of the fact that DKB pursues
or acquires such corporate opportunity for itself, directs such corporate
opportunity to another person or does not communicate information regarding such
corporate opportunity to the Corporation.
(c) In the event that a director or officer or other employee of the
Corporation who is also a director or officer or other employee of DKB acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both the Corporation and DKB, such director or officer or other
employee of the Corporation shall have fully satisfied and fulfilled his
fiduciary duty to the Corporation and its stockholders with respect to such
corporate opportunity, if such person acts in a manner consistent with the
following policy:
(1) A corporate opportunity offered to any person who is an officer or
employee of the Corporation, and who is also a director but not an officer
or employee of DKB, shall belong to the Corporation; (2) a corporate
opportunity offered to any person who is a director but not an officer or
employee of the Corporation, and who is also a director or officer or other
employee of DKB shall belong to the Corporation if such opportunity is
expressly offered to such person in writing solely in his capacity as a
director of the Corporation, and otherwise shall belong to DKB; and (3) a
corporate opportunity offered to any person who is an officer or other
employee of both the Corporation and DKB, or an officer of one and a
non-officer employee of the other, shall belong to the Corporation if such
opportunity is expressly offered to such person in writing solely in his
capacity as an officer or employee of the Corporation, and otherwise shall
belong to DKB.
(d) Any person purchasing or otherwise acquiring any interest in shares of
the capital stock of the Corporation shall be deemed to have notice of and to
have consented to the provisions of this Article NINTH.
(e) For purposes of this Article NINTH only:
(1) A director of the Corporation who is Chairman of the Board of
Directors of the Corporation or of a committee thereof shall not be deemed
to be an officer or employee of the Corporation by reason of holding such
position (without regard to whether such position is deemed an officer of
the Corporation under the By-Laws of the Corporation), unless such person
is a full-time employee of the Corporation; and
(2) (i) The term "Corporation" shall mean the Corporation and all
corporations, partnerships, joint ventures, associations and other entities
which are controlled by the Corporation (directly or indirectly) through
the ownership of the outstanding voting power of such corporation,
partnership, joint venture, association or other entity or otherwise and
(ii) the term "DKB" shall mean DKB and all corporations, partnerships,
joint ventures, associations and other entities (other than the
Corporation, defined in accordance with subsection (i) of this Section
(e)(2)) which are controlled by DKB (directly or indirectly) through the
ownership of the outstanding voting power of such corporation, partnership,
joint venture, association or other entity or otherwise.
(f) Notwithstanding anything in this Amended and Restated Certificate of
Incorporation to the contrary, the foregoing provisions of this Article NINTH
shall expire on the date that DKB ceases to own beneficially Common Stock
representing at least 25% of the total voting power of outstanding Common Stock
of the Corporation and no person who is a director or officer or other employee
of the Corporation is also a director or officer or other employee of DKB.
Neither the alteration, amendment or repeal of this Article NINTH nor the
adoption of any provision of this Amended and Restated Certificate of
Incorporation inconsistent with this Article shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article NINTH, would accrue or arise,
prior to such alteration, amendment, repeal or adoption.
TENTH: The Corporation elects not to be governed by Section 203 of the
General Corporation Law.
ELEVENTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the General Corporation Law
(including, without limitation, paragraph (7) of subsection (b) of Section 102
thereof), as the same may be amended and supplemented from time to time. Any
repeal or
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Annex O
modification of this Article ELEVENTH shall not adversely affect any
right or protection of a director of the Corporation existing hereunder with
respect to any act or omission occurring prior to or at the time of such repeal
or modification.
TWELFTH: The Corporation shall, to the fullest extent permitted by the
General Corporation Law (including, without limitation, Section 145 thereof), as
the same may be amended and supplemented from time to time, indemnify any and
all persons whom it shall have power to indemnify under the General Corporation
Law. The indemnification provided for herein shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled, whether
as a matter of law or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
THIRTEENTH: The By-Laws of the Corporation may be altered, amended or
repealed at any meeting of the Board of Directors or of the stockholders,
provided that notice of such alteration, amendment or repeal be contained in the
notice of such meeting of the Board of Directors or stockholders (subject, in
the case of meetings of stockholders, to the provisions of Article II of the
By-Laws), as the case may be.
FOURTEENTH: Unless the context of this Amended and Restated Certificate of
Incorporation otherwise requires, words of any gender shall be deemed to include
each other gender and words using the singular or plural number shall also
include the plural or singular number, respectively.
5. This Amended and Restated Certificate of Incorporation was duly adopted
by the Board of Directors of the Corporation in accordance with Section 245 of
the General Corporation Law and by the affirmative vote of the holders of a
majority of the outstanding stock of the Corporation entitled to vote thereon,
in accordance with Section 242 of the General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Albert R. Gamper, Jr., its President and Chief Executive Officer, this
___ day of _____________, 1999.
THE CIT GROUP, INC.
By: ________________________________
Name: Albert R. Gamper, Jr.
Title: President and Chief Executive Officer
ATTEST:
--------------------------
Ernest D. Stein, Secretary
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ANNEX P
The CIT Group, Inc.
Long-Term Equity Compensation Plan
Amended and Restated
as of October 26, 1999
Article 1. Establishment, Objectives, and Duration
1.1. Establishment of the Plan. The CIT Group, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as "The CIT Group, Inc. Long-Term Equity
Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Annual Incentive Awards, Nonqualified
Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Performance Shares and Performance Units.
The Plan became effective as of November 1, 1997 (the "Effective Date").
The Plan has been amended and restated as of October 26, 1999 with respect to
awards made on or after such date and shall remain in effect as provided in
Section 1.3 hereof.
1.2. Objectives of the Plan. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Compensation Committee of the Board of Directors of the Company to
amend or terminate the Plan at any time pursuant to Article 14 hereof, until all
Awards granted hereunder are satisfied by the issuance of Shares and/or the
payment of cash. However, in no event may an Award be granted under the Plan on
or after the tenth anniversary of the Effective Date.
Article 2. Definitions
Except where the context otherwise indicates, any masculine term used
herein shall include the feminine, the plural shall include the singular, and
the singular shall include the plural.
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Annual Incentive Award" means annual incentive compensation awarded
under Article 6.
2.2. "Award" means, individually or collectively, a grant under this Plan
of Annual Incentive Awards, Nonqualified Stock Options, Incentive Stock Options,
Stock Appreciation Rights, Restricted Stock, Performance Shares or Performance
Units.
2.3. "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to an Award.
2.4. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5. "Board" or "Board of Directors" means the board of directors of the
Company.
2.6. "Change of Control"
(a) Any Person becomes the Beneficial Owner, directly or indirectly,
of securities representing a majority of the combined voting power of the
Company's then outstanding securities generally entitled to vote for the
election of Directors;
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(b) As a result of a cash tender offer, merger or other business
combination, sales of assets or contested election, or any combination of
the foregoing transactions (a "Transaction"), the persons who were
Directors of the Company immediately before the Transaction shall cease to
constitute a majority of the Board of the Company or of any successor to
the Company. Notwithstanding the foregoing, the Company's initial public
offering shall not constitute a Change of Control for the purposes of this
Plan.
2.7. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.8. "Committee" means the Compensation Committee of the Board or such
other Committee appointed by the Board pursuant to Section 3.1 to administer the
Plan with respect to grants of Awards.
2.9. "Company" means The CIT Group, Inc., a Delaware corporation, and any
successor thereto, or any Subsidiary, division or affiliate thereof.
2.10 "Covered Employee" means any Participant who is designated by the
Committee prior to the date that the Committee establishes the Performance
Targets for a Plan Year, to be a "covered employee" within the meaning of Code
Section 162(m).
2.11. "Director" means any individual who is a member of the Board of
Directors.
2.12. "Disability" means a physical or mental impairment sufficient to
make an individual eligible for benefits under the Company's Long-Term
Disability Plan.
2.13. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.14. "Employee" means any individual who is an employee of the Company or
any Subsidiary.
2.15. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor thereto.
2.16. "Fair Market Value" means the closing sale price at which Shares
were sold regular way on the relevant date on the principal securities exchange
on which Shares were traded on such date or, if there was no sale on the
relevant date, then on the last previous day on which there was such a sale;
provided that "Fair Market Value" for any Awards made concurrent with or
contingent upon the consummation of the initial public offering of Shares in
1997 means the initial public offering price of Shares covered by such initial
public offering.
2.17. "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 8 herein.
2.18. "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 7 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.19. "Insider" shall mean an individual who is, on the relevant date, an
officer, Director or Beneficial Owner of ten percent (10%) or more of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act and the
General Rules and Regulations promulgated thereunder.
2.20. "Nonemployee Director" means a Director who is not an Employee of
the Company or any Subsidiary or of The Dai-Ichi Kangyo Bank, Limited or any of
its direct or indirect subsidiaries.
2.21. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 7 herein which is not intended to be treated as an
"incentive stock option" under Code Section 422.
2.22. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.23. "Option Price" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
2.24. "Participant" means an Employee or Director designated by the
Committee to participate in the Plan.
2.25. "Performance Share" means an Award granted to a Participant, as
described in Article 10 herein.
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2.26. "Performance Target" means a Company goal which shall be equal to a
desired level or levels for any Plan Year or Plan Years of any or a combination
of the following criteria on an absolute or relative basis and, where
applicable, measured before or after interest, depreciation, amortization,
service fees, extraordinary items and/or special items: (i) pre-tax earnings,
(ii) operating earnings, (iii) after-tax earnings, (iv) return on investment,
(v) earned value added, (vi) earnings per share, (vii) revenues, (viii) cash
flow or cash flow on investment, (ix) return on assets or return on net assets,
(x) return on capital, (xi) return on equity, (xii) return on sales, (xiii)
operating margin, (xiv) total shareholder return or stock price appreciation or
(xv) net income, in each case determined in accordance with generally accepted
accounting principles (subject to modifications approved by the Committee)
consistently applied for the Company on a divisional, subsidiary or consolidated
basis or any combination thereof.
2.27. "Performance Unit" means an Award granted to a Participant, as
described in Article 10 herein.
2.28. "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of a Performance Target, if applicable, or upon the
occurrence of other events as determined by the Committee, at its discretion),
and the Shares are subject to a substantial risk of forfeiture, as provided in
Article 9 herein.
2.29. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as described in Section 13(d) thereof.
2.30. "Plan" means The CIT Group, Inc. Long-Term Equity Compensation Plan.
2.31. "Plan Year" means the fiscal year of the Company.
2.32. "Restricted Stock" means an Award of Shares granted to a Participant
pursuant to Article 9 herein.
2.33. "Retirement" shall have the meaning ascribed to such term in The
CIT Group, Inc. Retirement Plan.
2.34. "Shares" means the shares of Class A common stock of the Company par
value $.01 per Share.
2.35. "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 8 herein. An SAR may be either a Freestanding SAR or a Tandem SAR.
2.36. "Subsidiary" means any corporation, partnership, joint venture, or
other entity which is consolidated with the Company for financial reporting
purposes, provided that for ISOs, "Subsidiary" has the meaning set forth in Code
Section 422.
2.37. "Tandem SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 8 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
Article 3. Administration
3.1. The Administrator. The Plan shall be administered by the Committee.
3.2. Authority of the Administrator. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions of the Plan, the Committee shall have full power and authority, in
its sole discretion, to (a) select Participants from among all eligible
Employees and Directors and determine the nature, amount, terms and conditions
of Awards in a manner consistent with the Plan; (b) make Awards to Participants;
(c) construe and interpret the Plan and any agreement or instrument entered into
under the Plan; (d) adopt, amend, waive or rescind such rules and regulations as
the Committee may deem appropriate for the proper administration or operation of
the Plan; (e) subject to the provisions of Article 14, amend the terms and
conditions of any outstanding Award to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan; and (f) make all
other determinations and take all other actions as may be necessary, appropriate
or advisable for the administration or operation of the Plan. As permitted by
law and to the extent permitted by Code Section 162(m), the Committee may
delegate to any individual or committee (including a Committee of Nonemployee
Directors, to the extent that the Committee shall not be so constituted) its
authority, or any part thereof, as it deems necessary, appropriate or advisable
for proper administration or operation of the Plan.
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3.3 Determination of Performance Target. The Committee shall adopt in
writing each year, within 90 days of such year, the applicable Performance
Target that must be achieved in order to receive Annual Incentive Awards, Shares
of Restricted Stock (if applicable) or Performance Units and Performance Shares
under the Plan.
3.4. Decisions Binding. All determinations, interpretations, decisions or
other actions made or taken by the Committee pursuant to the provisions of the
Plan and all related orders and resolutions of the Committee shall be final,
conclusive and binding for all purposes and upon all persons, including without
limitation the Company, its stockholders, Directors, Employees, Participants,
and Participants' estates and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in this Section 4.1 and Section 4.3 herein, the maximum number of
Shares with respect to which Awards may be granted to Participants under the
Plan shall be 23.8 million of the Company's total outstanding shares of all
classes of common stock of the Company, plus (i) the number of Shares pursuant
to options that are not granted to participants or are canceled, terminate,
expire or lapse for any reason without the issuance of Shares or payment in
respect thereof under the terms of The CIT Group, Inc. Transition Option Plan
(the "Transition Option Plan"), reduced by (ii) the number of Shares granted
pursuant to options under the Transition Option Plan in excess of 5.1 million,
if any. Shares issued under the Plan may be either authorized but unissued
Shares, treasury Shares or any combination thereof.
4.2. Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason without the issuance of Shares or
payment in respect thereof (with the exceptions of the termination of a Tandem
SAR upon exercise of the related Option, or the termination of a related Option
upon exercise of the corresponding Tandem SAR), any Shares subject to such Award
again shall be available for the grant of an Award under the Plan to the fullest
extent permitted under Rule 16b-3 of the Exchange Act and Sections 422 and
162(m) of the Code.
4.3. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, stock dividend or combination
of shares or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Code Section 368), or any partial or complete
liquidation of the Company, an adjustment shall be made in the number and class
of Shares which may be delivered under Section 4.1, in the number and class of
and/or price of Shares subject to outstanding Awards granted under the Plan, and
in the Awards limits set forth in subsections 4.4 (a), (b), (c), (d) and (e) as
may be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights, provided, however,
that the number of Shares subject to any Award shall always be a whole number.
4.4. Maximum Awards. The following rules shall apply to grants of such
Awards under the Plan:
(a) Annual Incentive Awards: The Annual Incentive Award pool for each
Plan Year for Covered Employees shall be the sum of (i) 3% of the
consolidated pre-tax earnings of the Company (the "Annual Pool") and
(ii) an amount not to exceed $2 million of the remaining portion of
the preceding Plan Year's Annual Pool, if any, that was not paid to
Covered Employees in the preceding Plan Year ((the "Carryover
Amount"), together (the "Total Pool")). The maximum aggregate payout
with respect to Annual Incentive Awards granted in any one Plan Year
to any one Covered Employee shall not exceed (i) 30% of the Annual
Pool plus (ii) one half of the Carryover Amount and in no event shall
Covered Employees, as a group, receive Annual Incentive Awards in
excess of 100% of the Total Pool for a Plan Year. If such 100%
limitation is exceeded, each Covered Employee's Annual Incentive Award
shall be reduced pro rata.
(b) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in
any one Plan Year to any one single Participant shall be 100% of the
maximum number of Shares provided under Section 4.1.
(c) SARs: The maximum aggregate number of Shares that may be granted
in the form of Stock Appreciation Rights, pursuant to any Award
granted in any one Plan Year to any one single Participant shall be
100% of the maximum number of Shares provided under Section 4.1.
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(d) Restricted Stock: The maximum aggregate grant with respect to
Awards of Restricted Stock granted in any one Plan Year to any one
Participant shall be 100% of the maximum number of Shares provided
under Section 4.1.
(e) Performance Shares/Performance Units: The maximum aggregate grant
with respect to Awards of Performance Shares or Performance Units
granted in any one Plan Year to any one Participant shall be 100% of
the maximum number of Shares provided under Section 4.1.
Article 5. Eligibility and Participation
5.1. Eligibility. Persons eligible to participate in this Plan include
Directors and all Employees of the Company and its Subsidiaries, including
Employees who are members of the Board.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees and
Directors, those to whom Awards shall be granted and shall determine the nature,
amount and terms and conditions of each Award.
Article 6. Annual Incentive Awards
6.1. General. Subject to the provisions of the Plan, the Committee may
grant Annual Incentive Awards to Participants at any time and from time to time
in such amount and upon such terms and conditions as the Committee may
determine.
6.2. Determination of Annual Incentive Awards. The Committee shall
determine the Annual Incentive Award, if any, subject to the attainment of the
Performance Target and the maximum Annual Incentive Award limit specified in
Section 4.4, payable to each Participant. As soon as practicable after the close
of each Plan Year, the Committee shall determine with respect to each
Participant whether and the extent to which any applicable Performance Targets
were attained or exceeded.
6.3. Payment of Annual Incentive Awards. Annual Incentive Awards shall be
payable to Participants at such time(s) and in cash or in Shares of equivalent
value or in some combination thereof, as the Committee shall determine.
6.4. Termination of Employment with the Company.
(a) Subject to Section 6.5(b) hereto and the provisions of Article 13,
if a Participant's employment with the Company is terminated prior to
the payment by the Company of an Annual Incentive Award for any Plan
Year, such Award shall be forfeited and shall not be payable to the
Participant.
(b) In the event of the Participant's death, Disability or Retirement
in the Plan Year, the Committee may grant and authorize payment of an
Award for such Plan Year to the Participant or, in the event of death,
the Participant's beneficiary as designated under Article 11 hereto,
in such amount as the Committee in its discretion deems appropriate.
6.5 Nontransferability of Annual Incentive Award. No right to an Annual
Incentive Award may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution.
6.6 Adjustment. If any Performance Target or other criterion upon which
Annual Incentive Awards for any Plan Year or Plan Years is based shall have been
affected by special factors (including material changes in accounting policies
or practices, material acquisitions or dispositions of property, or other
unusual or unplanned items) which in the Committee's judgment should or should
not be taken into account, in whole or in part, in the equitable administration
of the Plan, the Committee may, for any purpose of the Plan, adjust the
Performance Target or criterion for such Plan Year or Plan Years (and subsequent
Plan Years, as appropriate) and make credits, payments and reductions
accordingly under the Plan; provided, however, that the Committee shall not have
the authority to make any such adjustments with respect to Annual Incentive
Awards paid to any Participant who is at such time a Covered Employee.
Article 7. Stock Options
7.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined
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by the Committee, provided however, in the case of ISOs, the aggregate Fair
Market Value (determined at the time the ISO is granted) of the Shares with
respect to which ISOs are exercisable for the first time by any optionee during
any calendar year (under all plans of the Company and any Subsidiary) shall not
exceed $100,000.
7.2. Award Agreement. Each Option granted shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
7.3. Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted except that (i) initial
grants of NQSOs made under the Plan concurrent with or contingent upon the
consummation of the initial public offering of Shares in 1997 may be granted
with an exercise price equal to the initial public offering price of Shares
covered by such initial public offering and (ii) and in the case of an ISO
granted to a Participant owning (actually or constructively under Code Section
424(d)) more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of a Subsidiary, the Option Price shall not
be less than one hundred and ten percent (110%) of the Fair Market Value of the
Shares on the date of grant.
7.4. Duration of Options. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant and no ISO granted to a five percent (5%)
shareholder of the Company shall be exercisable later than the fifth anniversary
of the date of grant.
7.5. Exercise of Options. Options granted under this Article 7 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each Award or for each Participant.
7.6. Payment. Options granted under this Article 7 shall be exercised by
the delivery of notice of exercise to the Company or its designee, setting forth
the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company or its designee in full either (a) in cash or its equivalent, or (b) by
tendering previously acquired Shares having an aggregate Fair Market Value at
the time of exercise equal to the total Option price (provided that the Shares
which are tendered must have been held by the Participant for at least six (6)
months prior to their tender to satisfy the Option Price), or (c) by a
combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s); provided, however, that if the Committee permits cashless
exercise of Options, a Participant may elect to receive the cash proceeds from
the cashless exercise in lieu of Shares.
7.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on the transfer of any Shares acquired pursuant to the exercise of
an Option granted under this Article 7 as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
7.8. Termination of Employment with the Company. Subject to the provisions
of Article 13, each Participant's Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the Option following
termination of the Participant's employment with the Company or any Subsidiary.
Such provisions shall be determined in the sole discretion of the Committee,
shall be included in the Award
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Agreement entered into with each Participant, need not be uniform among all
Options issued pursuant to this Article 7, and may reflect distinctions based on
the reasons for termination of employment with the Company.
7.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant or in the event of the Participant's legal incapacity, the
Participant's legal guardian or representative.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 7
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution; provided, however, Participants who are executive
officers of the Company, may in the Committee's sole discretion,
transfer a NQSO to a member of such Participant's immediate family or
to a trust for the benefit of such Participant's immediate family
pursuant to the provisions of Revenue Ruling 98-21. Further, except as
otherwise provided in a Participant's Award Agreement or with respect
to the immediate family member or trust established for the immediate
family of an executive officer of the Company, as determined by the
Committee, in its sole discretion, all NQSOs granted to a Participant
under this Article 7 shall be exercisable during his or her lifetime
only by such Participant or in the event of the Participant's legal
incapacity, the Participant's legal guardian or representative.
Article 8. Stock Appreciation Rights.
8.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant; and, consistent with the provisions of the
Plan, in determining the terms and conditions pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
8.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
8.3. Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.
8.4. SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
8.5. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
8.6. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
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(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of a Participant, the payment upon SAR exercise may be
in cash, in Shares of equivalent value, or in some combination thereof, subject
to the availability of Shares to the Company.
8.7. Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of any
exemption from the liability provisions of Section 16 of the Exchange Act (or
any successor rule).
8.8. Termination of Employment with the Company. Subject to the provisions
of Article 13, each SAR Award Agreement shall set forth the extent to which the
Participant shall have the right to exercise the SAR following termination of
the Participant's employment with the Company or a Subsidiary. Such provisions
shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreement entered into with a Participant, need not be uniform
among all SARs issued pursuant to the Plan, and may reflect distinctions based
on the reasons for termination of employment with the Company.
8.9. Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or in the event of the Participant's legal incapacity, the
Participant's legal guardian or representative.
Article 9. Restricted Stock
9.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine upon the attainment of the Performance Target, if applicable. As soon
as practicable after the close of each Plan Year, the Committee shall determine
with respect to each Participant whether and the extent to which any applicable
Performance Targets were attained or exceeded.
9.2. Restricted Stock Agreement. Each Restricted Stock Award shall be
evidenced by a Restricted Stock Award Agreement that shall specify the
restrictions, including restrictions creating a substantial risk of forfeiture,
the Period(s) of Restriction, the number of Shares of Restricted Stock granted,
and as such other provisions as the Committee shall determine. Restrictions on
Restricted Stock shall lapse at such time(s) and in such manner and subject to
such conditions as the Committee shall in each instance determine, which need
not be the same for each Award or for each Participant.
9.3. Transferability. Except as provided in this Article 9, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant, or in the event of the Participant's
legal incapacity, to the Participant's legal guardian or representative.
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9.4. Other Restrictions. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
time-based restrictions on vesting following the attainment of the Performance
Target, if applicable, and/or restrictions under applicable Federal or state
securities laws.
The Company or its designee shall retain the certificates representing
Shares of Restricted Stock in the Company's possession until such time as all
conditions and/or restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 9, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
9.5. Voting Rights. During the Period of Restriction, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
9.6. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. In the event that any dividend
constitutes a "derivative security" within the meaning of Rule 16a-1 of the
General Rules and Regulations promulgated under the Exchange Act or an "equity
security" within the meaning of Section 3(a)(11) of the Exchange Act, such
dividend shall be subject to a period of restriction equal to the remaining
Period of Restriction applicable to the Restricted Stock with respect to which
the dividend has been paid.
9.7. Termination of Employment with the Company. Subject to the provisions
of Article 13, each Restricted Stock Award Agreement shall set forth the extent
to which the Participant shall have the right to receive unvested Restricted
Shares following termination of the Participant's employment with the Company or
any Subsidiary. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted Stock issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment with the Company.
Article 10. Performance Units and Performance Shares.
10.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee upon the attainment of the Performance
Target. Each Award of Performance Shares and/or Performance Units shall be
evidenced by an Award Agreement that shall specify the initial value of such
Performance Shares and/or Performance Units, the Performance Target which
payment of such Performance Shares and/or Performance Units depends, the time
period during which the Performance Target must be met (the "Performance
Period"), the number of Performance Shares and/or Performance Units awarded and
such other terms and conditions as the Committee may determine.
10.2. Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant.
10.3. Earning of Performance Units/Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined, as a function of the extent to which the corresponding
Performance Target has been achieved. As soon as practicable after the close of
each Plan Year, the Committee shall determine with respect to each Participant
whether and the extent to which any applicable Performance Targets were attained
or exceeded.
10.4. Payment of Performance Shares/Units. As soon as practicable after
the end of a Performance Period, if the applicable Performance Target for that
Performance Period have been achieved, the Company shall deliver to a
Participant payment for such Participant's Performance Shares and/or Performance
Units in an
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amount determined, as specified in such Participant's Performance Share and/or
Unit Award Agreement, on the last day of the Performance Period by reference to
the achievement of the applicable Performance Target. The Committee may permit a
Participant to elect payment of the aggregate value of such Participant's
Performance Shares and/or Performance Units in cash or in Shares of equivalent
value or in some combination thereof, subject to the availability of Shares to
the Company. If, and to the extent that, dividends with respect to Shares are
declared or paid during the Performance Period, the Committee may direct payment
of dividend equivalents to a Participant in an amount equal to the dividends
that such Participant would receive or have received if such Participant's
Performance Shares were Shares; provided, however, that such dividend
equivalents shall be subject to the same restrictions as apply to dividends
payable with respect to Restricted Stock pursuant to Section 9.4.
10.5. Termination of Employment with the Company. Subject to the
provisions of Article 13, each Participant's Performance Share and/or Unit Award
Agreement shall set forth if, and the extent to which, the Participant shall
have the right to receive payment of Performance Shares and/or Performance Units
following termination of the Participant's employment with the Company or any
Subsidiary. Such terms and conditions shall be determined in the sole discretion
of the Committee, need not be uniform among all Performance Share and/or
Performance Unit Awards and may reflect distinctions based on the reasons for
termination of employment with the Company.
10.6. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or, in the
event of the Participant's legal incapacity, the Participant's legal
representative.
Article 11. Beneficiary Designation
The beneficiary or beneficiaries of the Participant to whom any benefit
under the Plan is to be paid in case of his or her death before he or she
receives any or all of such benefit shall be determined under the Company's
Group Life Insurance Plan. A Participant under the Plan may, from time to time,
name any beneficiary or beneficiaries to receive any benefit in case of his or
her death before he or she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same Participant,
including the beneficiary designated under the Company's Group Life Insurance
Plan, and will be effective only when filed by the Participant in writing (in
such form or manner as may be prescribed by the Committee) with the Company
during the Participant's lifetime. In the absence of a valid designation under
the Company's Group Life Insurance Plan or otherwise, if no validly designated
beneficiary survives the Participant or if each surviving validly designated
beneficiary is legally impaired or prohibited from taking, the Participant's
beneficiary shall be the Participant's estate.
Article 12. Deferrals
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Article 13. Termination of Employment with the Company After a Change of
Control
13.1. Treatment of Outstanding Awards. If a Participant's employment with
the Company is terminated by the Company, or, if applicable, a Subsidiary, or a
successor to the Company or a Subsidiary, on or after a Change of Control and
prior to the first anniversary of such Change of Control:
(a) Any and all SARs and Options granted hereunder, other than Options
granted in consideration of the termination of The CIT Group, Inc.
Career Incentive Plan (the "CIT Career Incentive Plan") or granted in
consideration of The CIT Group, Inc. Initial Public Offering (the "CIT
Initial Public Offering"), shall become immediately exercisable, and
shall remain exercisable throughout their entire term;
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(b) Any Period of Restriction and restrictions imposed on Restricted
Stock, other than Restricted Stock granted in consideration of the
termination of the CIT Career Incentive Plan or granted in
consideration of the CIT Initial Public Offering, shall lapse; and
(c) The Performance Target with respect to all outstanding Awards of
Annual Incentive Awards, Restricted Stock, Performance Units and
Performance Shares shall be deemed to have been attained as of the
date of the Participant's termination of employment with the Company.
The vesting of all Awards denominated in Shares shall be accelerated
as of the date of the Participant's termination of employment with the
Company.
13.2. Treatment of Options and Restricted Stock Granted in Consideration
of the Termination of the CIT Career Incentive Plan or Granted in Consideration
of the CIT Initial Public Offering. If a Participant's employment with the
Company is terminated by the Company, or, if applicable, a Subsidiary, or a
successor to the Company or a Subsidiary, on or after a Change of Control and
prior to the fifth anniversary of the Effective Date:
(a) All Options granted in consideration of the termination of the CIT
Career Incentive Plan or granted in consideration of the CIT Initial
Public Offering held by the Participant, if any, shall become
immediately exercisable and shall remain exercisable throughout their
entire term; and
(b) Any Period of Restriction and all restrictions imposed on
Restricted Stock granted in consideration of the termination of the
CIT Career Incentive Plan or granted in consideration of the CIT
Initial Public Offering, if any, shall lapse.
13.3 Discretionary Vesting upon a Change of Control. Notwithstanding the
provisions of Section 13.1 and Section 13.2 of the Plan, the Board may, in its
sole discretion, prior to the date of a Change of Control, accelerate the
vesting of any Award granted to a Participant under the Plan upon a Change of
Control.
13.4. Termination, Amendment, and Modifications of Change of Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 13 may not be terminated,
amended, or modified on or after the date of Change of Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Board of Directors, upon recommendation of the
Committee, may terminate, amend or modify this Article 13 at any time and from
time to time prior to the date of a Change of Control.
Article 14. Amendment, Adjustment, and Termination.
14.1. Amendment and Termination. Subject to Section 14.3, the Committee
may at any time, and from time to time, in its sole discretion alter, amend,
suspend or terminate the Plan in whole or in part for any reason or for no
reason; provided, however, that no amendment or other action that requires
stockholder approval in order for the Plan to continue to comply with applicable
law shall be effective unless such amendment or other action shall be approved
by the requisite vote of stockholders of the Company entitled to vote thereon.
14.2. Adjustment of Awards. Subject to Section 14.3, the Committee may
make adjustments to Awards and in the terms and conditions of, and the criteria
included in, Award Agreements in recognition of (a) unusual or nonrecurring
events (including, without limitation, the events described in Section 4.3)
affecting the Company or the financial statements of the Company, and/or (b)
changes in applicable laws, regulations or accounting principles whenever the
Committee determines that such adjustments are appropriate.
14.3. Awards Previously Granted. No alteration, amendment, suspension or
termination of the Plan shall adversely affect in any material way any Award
previously made under the Plan without the written consent of the affected
Participant; provided, however, that the Committee may modify, without a
Participant's consent, any Award previously made to a Participant who is a
foreign national or employed outside the United States to recognize differences
in local law, tax policy or custom.
14.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award of
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Restricted Stock, compliance with Code Section 162(m) will not be required. In
addition, in the event that changes are made to Code Section 162(m) to permit
greater flexibility with respect to any Award or Awards available under the
Plan, the Committee may, subject to this Article 14, make any adjustments it
deems appropriate.
Article 15 Withholding.
15.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
15.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect to satisfy the withholding requirement, in whole or in
part, by having the Company withhold Shares having a Fair Market Value on the
date the tax is to be determined equal to the statutory total tax (using the
Federal Supplemental wage rate, and state or local equivalent as well as any
FICA or Medicare taxes) which could be imposed on the transaction. All such
elections shall be irrevocable, made in such form as the Committee shall
designate, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
Article 16. Successors.
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Article 17. Legal Construction.
17.1. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
17.3. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
17.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
Plan or action by Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
17.5. Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of New York.
17.6. Special Compensation. Except as otherwise required by law or as
specifically provided in any plan or program maintained by the Company, no
payment under the Plan shall be included or taken into account in determining
any benefit under any pension, thrift, profit sharing, group insurance, or other
benefit plan maintained by the Company.
17.7. Incompetent Payee. If the Committee shall find that any individual
to whom any amount is payable under the Plan is found by a court of competent
jurisdiction to be unable to care for his affairs because of illness or
accident, or is a minor, or has died, then the payment due him or his estate
(unless a prior claim thereof has been made by a duly appointed legal
representative) may, if the Committee so elects, be paid to his spouse, a
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child, a relative, an institution maintaining or having custody of such
individual, or any other individual deemed by the Committee to be a proper
recipient on behalf of such individual otherwise entitled to payment. Any such
payment shall constitute a complete discharge of all liability of the Plan
thereof.
17.8. Plan Not an Employment Contract. This Plan is not and shall not be
deemed to constitute a contract of employment between the Company and any
Employee or other individual, nor shall anything herein contained be deemed to
give any Employee or other individual any right to be retained in his employer's
employ or to in any way limit or restrict his employer's right or power to
discharge any Employee or other individual at any time and to treat such
Employee without any regard to the effect which such treatment might have upon
him as a Participant of the Plan.
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ANNEX Q
THE CIT GROUP, INC.
TRANSITION OPTION PLAN
Effective as of the Effective Time, as defined in the
Amended and Restated Agreement and Plan of Reorganization between
The CIT Group, Inc. and Newcourt Credit Group Inc., dated August 5, 1999
1. PURPOSE
This Plan has been established by The CIT Group, Inc. to provide a means
by which options to purchase shares of Newcourt Credit Group Inc. common stock
under the Newcourt Credit Group Inc. Stock Option Plan may be exchanged pursuant
to the terms of the Amended and Restated Agreement and Plan of Reorganization
between the Company and Newcourt, dated August 5, 1999 into options to purchase
shares of the Company's common stock par value $.01 per share (all capitalized
terms shall have the meanings provided below).
2. DEFINITIONS
In this Plan, the following terms have the following meanings:
"Agreement" means an agreement entered into by the Company and each
Participant setting forth the terms and provisions applicable to a
CIT Option.
"Board" means the board of directors of the Company.
"CIT Options" mean options granted under the Plan.
"CIT Shares" mean the shares of Class A common stock of the Company
par value $.01 per share.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board or such
other committee appointed by the Board to administer the Plan.
"Company" means The CIT Group, Inc., a Delaware corporation, and any
successor thereto, or any subsidiary, division or affiliate thereof.
"ECP" means The CIT Group, Inc. Long-Term Equity Compensation Plan,
amended and restated as of October 26, 1999.
"Effective Time" shall have the meaning provided in the
Reorganization Agreement.
"Exchange Ratio" shall have the meaning provided in the
Reorganization Agreement.
"Fair Market Value" means on any day, with respect to CIT Shares
which are (a) listed on a United States securities exchange, the last
sales price of such shares on such day on the largest United States
securities exchange on which such shares shall have traded on such
day, or if such day is not a day on which a United States securities
exchange is open for trading, on the immediately preceding day on
which such securities exchange was open, (b) not listed on a United
States securities exchange but is included in The NASDAQ Stock Market
System (including The NASDAQ National Market), the last sales price
on such system of such shares on such day, or if such day is not a
trading day, on the immediately preceding trading day, (c) neither
listed on a United States securities exchange nor included in The
NASDAQ Stock Market System, but are listed on the Toronto Stock
Exchange (the "TSE"), the last sales price on the TSE of such shares
on such day, or if such day is not a day the TSE is open for trading,
on the immediately preceding trading day or (d) not listed on a
United States securities exchange, not included in The NASDAQ Stock
Market System and not listed on the TSE, the fair market value of
such shares as determined from time to time by the Board in good
faith in its sole discretion.
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"Grant Date" means the date on which a Newcourt Option is exchanged
for a CIT Option pursuant to the terms of the Plan.
"Newcourt" means Newcourt Credit Group, Inc., an Ontario corporation.
"Newcourt Grant Letter" means the letter from Newcourt to each
grantee of a Newcourt Option under the Newcourt Plan setting forth
the terms and provisions applicable to a Newcourt Option.
"Newcourt Options" mean options granted under the Newcourt Plan.
"Newcourt Plan" means the Newcourt Credit Group Inc. Stock Option
Plan, dated as of February 18, 1999.
"Newcourt Shares" mean shares of common stock of Newcourt.
"Option Price" shall have the meaning as set forth in Section 6(c)
herein.
"Participant" means any person who has been granted a CIT Option
under the Plan.
"Participant's Successors" shall mean the Participant's estate or the
person or persons to whom a CIT Option has been transferred by will
or by the laws of descent or distribution.
"Plan" means The CIT Group, Inc. Transition Option Plan, as amended
and restated from time to time.
"Reorganization Agreement" means the Amended and Restated Agreement
and Plan of Reorganization between the Company and Newcourt, dated
August 5, 1999.
"Take-over Bid" means (a) a bona fide offer by any person or company
or group of persons or companies (an "Offeror") to acquire CIT Shares
where the CIT Shares subject to the offer to acquire, together with
the Offeror's CIT Shares, constitute in the aggregate 50% or more of
the issued and outstanding CIT Shares at the date of the offer to
acquire; (b) a bona fide offer to exchange CIT Shares for the shares
of another company pursuant to an amalgamation, tender offer, merger
or similar transaction where the CIT Shares subject to the offer to
exchange, together with the Offeror's CIT Shares, constitute in the
aggregate 50% or more of the issued and outstanding CIT Shares at the
date of the offer to exchange; (c) a bona fide offer to acquire CIT
Shares pursuant to a plan of arrangement or similar transaction where
the CIT Shares subject to the offer to acquire together with the
Offeror's CIT Shares constitute in the aggregate 50% or more of the
issued and outstanding CIT Shares at the date of the offer to
acquire; and (d) any transaction similar in substance to the
foregoing. For purposes of the Plan, the Reorganization Agreement and
the transactions contemplated thereunder, shall not constitute a
Take-over Bid under the Plan.
"Take-over Bid Notice" means the notice given by the Company to a
Participant advising him or her of a Take-over Bid.
In this Plan, unless the context requires otherwise, references to the
male gender include the female gender, words importing in the singular number
may be construed to extend to and include the plural number, and words importing
the plural number may be construed to extend to and include the singular number.
3. ADMINISTRATION
(a) This Plan shall be administered by the Committee. The members of the
Committee shall be appointed by the Board. The Board may from time to time
remove members from or add members to the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board.
(b) Subject to the express provisions of this Plan and the Reorganization
Agreement, the Committee shall have the power and authority to grant CIT Options
in exchange for Newcourt Options on the terms stated in Section 6 below.
(c) The Committee may delegate to one or more of its members or to any
other person or persons such ministerial duties as it may deem advisable. The
Committee may also delegate to the Chief Executive Officer of the Company the
authority, subject to such terms as the Committee shall determine, to perform
any and all
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functions as the Committee may determine. The Committee may also employ
attorneys, consultants, accountants or other professional advisors and shall be
entitled to rely upon the advice, options or valuations of any such advisors.
(d) The interpretation and construction by the Committee of any provisions
of this Plan or of any CIT Option granted hereunder and all actions of the
Committee shall be final and binding on all parties hereto. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to this Plan or any CIT Option granted hereunder.
(e) No member of the Committee, nor the Chief Executive Officer, or any
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to this
Plan or CIT Options granted hereunder, and each member of the Committee and the
Chief Executive Officer shall be fully indemnified and protected by the Company
with respect to any liability he or she may incur with respect to any such
action, interpretation or determination, to the extent permitted by applicable
law and to the extent provided in the Company's Certificate of Incorporation and
Bylaws, as amended from time to time, or under any agreement between such
member, the Chief Executive Officer and the Company.
4. ELIGIBILITY
CIT Options under this Plan shall be granted in accordance with Section 6
to each individual who was granted one or more Newcourt Options under the
Newcourt Plan. Such individuals are Participants under the Plan.
5. SHARES SUBJECT TO PLAN AND MAXIMUM SHARES TO PARTICIPANTS
(a) Subject to adjustment in accordance with the provisions of this
Section 5 and Section 7 of this Plan, the maximum number of CIT Shares for which
CIT Options may be granted under this Plan shall be 5.1 million. The CIT Shares
subject to this Plan shall be authorized but unissued CIT Shares, treasury CIT
Shares or any combination thereof.
(b) If, pursuant to the terms of the Reorganization Agreement, the number
of CIT Shares underlying the CIT Options required to be issued in exchange for
Newcourt Options outstanding as of the Effective Time exceeds the number of CIT
Shares set forth in Section 5(a), the maximum number of CIT Shares under the
Plan shall be increased to the amount necessary so that CIT Options can be
exchanged for all Newcourt Options outstanding as of the Effective Time;
provided that the number of CIT Shares available for award under the ECP is
reduced by the number of CIT Shares that Section 5(a) is increased.
(c) With respect to CIT Shares underlying CIT Options that are not
required to be issued in exchange for Newcourt Options outstanding as of the
Effective Time or any CIT Options that are canceled, terminate, expire or lapse
for any reason without the issuance of CIT Shares or payment in respect thereof,
shall be available for grant under the ECP.
(d) The maximum aggregate number of CIT Shares that may be granted in the
form of CIT Options granted in any one fiscal year to any one Participant shall
be 1 million.
6. TERMS AND CONDITIONS OF CIT OPTIONS
In accordance with Section 1.6 of the Reorganization Agreement, CIT
Options granted to a Participant pursuant to this Plan shall be in exchange for
and shall constitute a release of any and all rights to each Newcourt Option
granted to such Participant under the Newcourt Plan. The CIT Options shall be
authorized by the Committee under terms and conditions approved by the Committee
and shall be evidenced by Agreements in such form as the Committee shall from
time to time approve, which such Agreements shall contain or shall be subject to
the following terms and conditions, whether or not such terms and conditions are
specifically included therein:
(a) Number of Shares. Each CIT Option shall state the number of CIT Shares
to which it pertains. The number of CIT Shares subject to each CIT Option shall
be equal to the number of Newcourt Shares subject to the Newcourt Option
exchanged therefor multiplied by the Exchange Ratio, rounded down to the nearest
whole CIT Share.
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(b) Grant Date. Each CIT Option shall state the Grant Date which shall be
the Effective Time.
(c) Option Price. The Option Price shall be the option price of the
Newcourt Option exchanged therefor divided by the Exchange Ratio, increased to
the nearest whole cent.
(d) Medium and Time of Payment. With respect to a CIT Option, or portion
thereof, the Option Price shall be payable on the exercise of the CIT Option and
shall be paid in cash or its equivalent, or such other means satisfactory to the
Committee.
(e) Term. All CIT Options granted under this Plan, to the extent not
previously exercised, shall terminate in accordance with the provisions of the
Participant's Agreement; provided, however, that no CIT Option shall be
exercisable later than the tenth anniversary of the date of the original grant
of the Newcourt Option.
(f) Exercisability. All CIT Options shall become vested and exercisable in
accordance with the vesting schedule applicable to the Newcourt Options granted
under the Newcourt Plan pursuant to the Newcourt Grant Letter, provided,
however, that the Committee may, in its discretion, accelerate the vesting of
CIT Options. The Committee shall set forth the accelerated vesting provisions,
if any, in the Participant's Agreement.
(g) Registration Obligation. The Company shall use its best efforts to
cause there to be effective as of a date as soon as practicable after the
Effective Time, a registration statement on Form S-8 (or any successor form) or
another appropriate form, with respect to the CIT Shares subject to CIT Options,
and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as CIT
Options relating to CIT Shares remain outstanding.
(h) Effect of Death. A Participant's Successors may exercise the CIT
Options that were held by the Participant on the date of the Participant's death
upon proof satisfactory to the Company of their authority. The Participant or
the Participant's Successors must exercise any such CIT Option within the period
of time set forth in the Participant's Agreement and in any event prior to the
date on which the CIT Option expires as provided by Section 6(e) of this Plan.
Such exercise shall be subject to the terms and conditions of this Plan.
(i) Nonassignability of CIT Option Rights. No CIT Option shall be
assignable or transferable by the Participant except by will or by the laws of
descent and distribution unless prior written consent of the Committee is given.
During the lifetime of the Participant, the CIT Option shall be exercisable only
by the Participant.
(j) Rights as Shareholder. Neither a Participant nor a Participant's
Successors shall have rights as a shareholder of the Company with respect to any
CIT Shares subject to a CIT Option until the date of issuance of a stock
certificate to him or her for such CIT Shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 7
hereof.
7. ANTI-DILUTION PROVISIONS
The number of CIT Shares deliverable upon the exercise of a CIT Option
shall be subject to adjustment in the events and in the manner following:
(a) In the event of any subdivision or subdivisions of the CIT Shares of
the Company as such CIT Shares are constituted on the Grant Date, at any time
while such CIT Option is in effect into a greater number of CIT Shares, the
Company will thereafter deliver at the time of purchase of CIT Shares pursuant
to a CIT Option, in addition to the number of CIT Shares in respect of which the
right to purchase is then being exercised, such additional number of CIT Shares
as result from said subdivision or subdivisions without the Participant making
any additional payment or giving any other consideration therefor.
(b) In the event of any consolidation or consolidations of the CIT Shares
of the Company as such CIT Shares are constituted on the Grant Date, at any time
while such CIT Option is in effect, into a lesser number of CIT Shares, the
Company will thereafter deliver and the Participant shall accept, at the time of
purchase of CIT
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Annex Q
Shares hereunder, in lieu of the number of CIT Shares in respect of which the
right to purchase is then being exercised, the lesser number of CIT Shares as
result from such consolidation or consolidations.
(c) In the event of any change of the CIT Shares of the Company as such
CIT Shares are constituted on the Grant Date, at any time while such CIT Option
is in effect, the Company will thereafter deliver at the time of purchase of CIT
Shares hereunder the number of CIT Shares of the appropriate class resulting
from such change as the Participant would have been entitled to receive in
respect of the number of CIT Shares so purchased had the right to purchase been
exercised before such change.
(d) In the event of any capital reorganization, reclassification or change
of outstanding CIT Shares of the Company or in the event of any consolidation,
merger or amalgamation of the Company with or into any other company or in the
event of any sale of the property of the Company as or substantially as an
entity at any time while any CIT Option is in effect, the Participant shall
thereafter have the right to purchase and receive, in lieu of the CIT Shares
immediately theretofore purchasable and receivable upon the exercise of such CIT
Option, the kind and amount of shares and other securities and property
receivable upon such capital reorganization, reclassification, change,
consolidation, merger, amalgamation or sale which the holder of a number of CIT
Shares equal to the number of CIT Shares immediately theretofore purchasable and
receivable upon the exercise of such CIT Option would have received as a result
of such reorganization, reclassification, change, consolidation, merger,
amalgamation or sale. The subdivision or consolidation of CIT Shares at any time
outstanding into a greater or lesser number of CIT Shares shall not be deemed to
be a capital reorganization or a reclassification of the capital of the Company
for the purposes of this Section 7(d).
(e) The adjustments provided for in this Section 7 are cumulative.
(f) The Company shall not be required to issue fractional shares in
satisfaction of its obligations hereunder. Any fractional interest in a CIT
Share that would, except for the provisions of this Section 7(f) be deliverable
upon the exercise of any CIT Option shall be cancelled and not be deliverable by
the Company.
8. TAKE-OVER BID
If a Take-over Bid is made or announced, then, notwithstanding Section 6,
but subject to the other provisions of the Plan and subject to any required
regulatory approvals, the following shall apply:
(a) The Board may, in its sole and arbitrary discretion, (i) give its
express consent to the exercise of any CIT Options which are outstanding at the
time that such Take-over Bid was made regardless of whether unvested CIT Options
have vested in accordance with their terms; and (ii) determine an appropriate
mechanism for dealing with all outstanding CIT Options (vested or unvested) if a
Take-over Bid is made or announced.
(b) If the Board has so expressly consented to the exercise of any
unvested CIT Options outstanding at the time that such Take-over Bid was made or
announced, the Company shall immediately after such consent has been given,
provide a Take-over Notice to each Participant then holding unexpired CIT
Options (whether vested or unvested) advising of the Take-over Bid and such
Take-over Bid Notice shall (i) provide reasonable particulars of the Take-over
Bid and the Board's recommendation in respect thereof, and (ii) shall specify
how all outstanding CIT Options shall be treated under the Take-over Bid, which
may, but is not required to, include a specification that the Participant may,
at any time during the period commencing on the date of the Take-over Bid Notice
and ending on a date specified by the Company, exercise all or any portion of
any such unexpired CIT Options then held by the Participant.
(c) If a Participant wishes to exercise any such CIT Options, such
exercise shall be made in accordance with Section 6 hereof, provided that, if
necessary in order to permit such Participant to participate in the Take-over
Bid and the Company has so specified in the Take-over Bid Notice, the CIT
Options so exercised shall be deemed to have been exercised and the issuance of
the CIT Shares issuable upon such exercise (such CIT Shares being referred to in
this Section 8 as the "Specified CIT Shares") shall be deemed to have been
issued, effective as of the first business day immediately prior to the date on
which the Take-over Bid was made or announced.
(d) If a Participant does not exercise any of his/her CIT Options prior to
(i) the completion of the Take-over Bid, or (ii) the expiration of the exercise
period specified in the Takeover Bid Notice, as applicable, then the
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Participant shall cease to have any further right to exercise such CIT Options,
in whole or in part, and each such CIT Option shall be deemed to have expired
and shall be null and void.
(e) The Take-over Bid Notice shall specify the manner in which the Company
shall deal with any Specified Shares not taken up and paid for by the Offeror
(whether by non-completion of the Take-over Bid or otherwise), which
arrangements may, but are not required to, include in the sole discretion of the
Company: (i) that the Specified Shares or portion thereof be returned by the
Participant to the Company with the Company refunding the applicable aggregate
Option Price (without interest but inclusive of all taxes paid or payable by the
Participant in connection with the exercise of CIT Options), and (ii)
reinstating the original CIT Options (with the original terms thereof)
notwithstanding the deemed exercise or cancellation of such CIT Options as
specified in the Take-over Notice.
(f) In no event shall a Participant who has acquired CIT Shares pursuant
to a CIT Option made exercisable pursuant to this Section 8 be entitled to sell
or otherwise dispose of the Specified Shares otherwise than pursuant to the
Take-over Bid, a subsequent Takeover Bid or as otherwise authorized by the
Board.
9. AMENDMENT AND TERMINATION
The Committee may at any time, and from time to time, in its sole
discretion alter, amend, suspend or terminate the Plan in whole or in part for
any reason or for no reason; provided, however, that no amendment or other
action that requires stockholder approval for the Plan to continue to comply
with applicable law shall be effective unless such amendment or other action
shall be approved by the requisite vote of stockholders of the Company entitled
to vote thereon.
Any amendment or termination of this Plan shall not, without the written
consent of the Participant, affect such Participant's rights under any CIT
Option theretofore granted to such Participant.
10. TAX WITHHOLDING
The Company shall have the right to require a Participant or a
Participant's Successors to remit to the Company an amount sufficient to satisfy
Federal, state and local withholding tax requirements, if any, or to deduct from
all payments under this Plan amounts sufficient to satisfy all withholding tax
requirements. Whenever payments under this Plan are to be made to a Participant
in cash, such payments shall be net of any amounts sufficient to satisfy all
Federal, state and local withholding tax requirements. The Committee may, in its
sole discretion, permit a Participant to satisfy his or her tax withholding
obligation either by (i) surrendering CIT Shares owned by such Participant, or
(ii) having the Company withhold from CIT Shares otherwise deliverable to such
Participant. CIT Shares surrendered or withheld shall be valued at their Fair
Market Value as of the date on which income is required to be recognized for
income tax purposes.
11. NOTICES
(a) Any payment, notice, statement, certificate or other instrument
required or permitted to be given to a Participant or any person claiming or
deriving any rights through him shall be given by:
(i) delivering it personally to the Participant or to the person
claiming or deriving rights through him, as the case may be, or
(ii) mailing it postage paid (provided that the postal service is then
in operation) or delivering it to the address which is maintained for the
Participant in the Company's personnel records.
(b) Any payment, notice, statement, certificate or instrument required or
permitted to be given to the Company or its designee shall be given by mailing
it postage prepaid (provided that the postal service is then in operation) or
delivering it to the Company or its designee at the following address or such
other address as the Committee may determine:
The CIT Group, Inc.
650 CIT Drive
Livingston, New Jersey 07039
Attention: Human Resources Department
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(c) Any payment, notice, statement, certificate or other instrument
referred to in (a) or (b) above, if delivered, shall be deemed to have been
given or delivered on the date on which it was delivered or, if mailed (provided
that the postal service is then in operation), shall be deemed to have been
given or delivered on the second business day following the date on which it was
mailed.
12. COMPLIANCE WITH SECTION 162(m) OF THE CODE
The grant of CIT Options under the Plan is intended to comply with Section
162(m) of the Code to the extent that the Option Price of such CIT Options is
greater than or equal to the Fair Market Value of CIT Shares on the Grant Date.
13. MISCELLANEOUS
(a) The granting of a CIT Option shall impose no obligation upon the
Participant to exercise such CIT Option.
(b) The Committee shall have the power to make such rules and regulations
for the administration of this Plan, and to interpret the provisions hereof and
of such rules and regulations, as it shall in its sole discretion determine to
be appropriate.
(c) The determination by the Committee of any question which may arise as
to the interpretation or implementation of the Plan or any of the CIT Options
granted hereunder shall be final and binding on all Participants and other
persons claiming or deriving rights through any of them.
(d) The Plan shall inure to the benefit of and be binding upon the
Company, its successors and assigns. The interest of any Participant under the
Plan or in any CIT Option shall not be transferable or alienable by him either
by pledge, assignment or in any other manner whatsoever and, during his
lifetime, shall be vested only in him, but shall thereafter inure to the benefit
of and be binding upon the legal personal representatives of the Participant.
(e) The Company's obligation to issue CIT Shares in accordance with the
terms of this Plan and any CIT Options granted hereunder is subject to
compliance with the laws, rules and regulations of all public agencies and
authorities applicable to the issuance and distribution of such CIT Shares and
to the listing of such CIT Shares on any stock exchange on which any of the CIT
Shares of the Company may be listed. As a condition of participating in the
Plan, each Participant agrees to comply with all such laws, rules and
regulations and agrees to furnish to the Company all information and
undertakings as may be required to permit compliance with such laws, rules and
regulations.
(f) Subject to the terms of Section 1.6 of the Reorganization Agreement,
no Participant or other person shall have any claim or right to be granted CIT
Options under the Plan. Neither the Plan nor any action taken thereunder shall
interfere with the right of the employer of a Participant to terminate that
Participant's employment or relationship with the Company at any time. Neither
any period of notice nor any payment in lieu thereof upon termination of
employment or relationship with the Company shall be considered as extending the
period of employment or relationship with the Company for the purposes of the
Plan.
14. GOVERNING LAW
To the extent not preempted by Federal law, this Plan, and all Agreements
hereunder, shall be construed in accordance with and governed by the laws of the
State of New York.
15. EFFECTIVE DATE
This Plan shall become effective as of the Effective Time; provided that
the shareholders of the Company approve of the issuance of CIT Shares pursuant
to the Reorganization Agreement.
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ANNEX R
THE CIT GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
As Amended and Restated
January 28, 1999 and Amended September 17, 1999
The following constitute the provisions of The CIT Group, Inc. Employee
Stock Purchase Plan (the "Plan") of The CIT Group, Inc. (the "Company").
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its subsidiaries with an opportunity to purchase shares of Common Stock of
the Company through payroll deductions. It is the intention of the Company to
have the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Account" shall mean the account established for each Participant
under the Plan.
(b) "Base Salary" shall mean an Employee's salary or wages for each pay
period during any Offering Period as determined from the payroll records of the
Company.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Broker" shall mean the brokerage firm designated in Section 9.
(e) "Closing Date" shall mean the last business day of each Offering
Period.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Employee Benefit Plans Committee of the
Company.
(h) "Common Stock" shall mean the Class A common stock of the Company par
value $.01 per share.
(i) "Company" shall mean The CIT Group, Inc., a Delaware corporation.
(j) "Employee" shall mean any person who is customarily employed for at
least twenty (20) hours per week by the Company or a Participating Subsidiary.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" shall mean on any day, with respect to Common
Stock of the Company which is (a) listed on a United States securities exchange,
the last sales price of such stock on such day on the largest United States
securities exchange on which such stock shall have traded on such day, or if
such day is not a day on which a United States securities exchange is open for
trading, on the immediately preceding day on which such securities exchange was
open, (b) not listed on a United States securities exchange but is included in
The NASDAQ Stock Market System (including The NASDAQ National Market), the last
sales price on such system of such stock on such day, or if such day is not a
trading day, on the immediately preceding trading day, or (c) neither listed on
a United States securities exchange nor included in The NASDAQ Stock Market
System, the fair market value of such stock as determined from time to time by
the Board in good faith in its sole discretion.
(m) "Offering Date" shall mean the first business day of each Offering
Period.
(n) "Offering Period" shall mean each three (3) month period when Options
for shares of Common Stock are offered by the Company.
(o) "Option" shall mean the right of a Participant to purchase shares of
Common Stock of the Company under the Plan.
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(p) "Participant" shall mean an Employee of the Company or a Participating
Subsidiary who is enrolled in the Plan in accordance with Section 3 hereof.
(q) "Participating Subsidiary" shall mean anySubsidiary that the Company
has deemed eligible to Participate in the Plan.
(r) "Plan" shall mean The CIT Group, Inc. Employee Stock Purchase Plan.
(s) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than fifty percent (50%) of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) As soon as administratively possible, any Employee who shall be
employed by the Company or a Participating Subsidiary shall be eligible to
participate in the Plan as of the date of the first Offering Period following
the Employee's commencement of employment with the Company or a Participating
Subsidiary.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an Option under the Plan (i) if, immediately after the
grant, such Employee would own shares of Common Stock or hold outstanding
options to purchase shares of Common Stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of shares of the
Company or of any Subsidiary of the Company, or (ii) which causes him or her to
purchase shares of Common Stock under all employee stock purchase plans of the
Company and its Subsidiaries which have a Fair Market Value which exceeds
Twenty-Five Thousand Dollars ($25,000) (determined at the time such Option is
granted) for each calendar year in which such Option is outstanding at any time.
4. Offering Dates. The Plan shall be implemented by one offering during
each three (3) month period (calendar quarter) of the Plan, commencing on
October 1, 1998, and continuing thereafter until terminated in accordance with
Section 21 hereof. The Offering Periods for each calendar quarter are as
follows:
October 1 -- December 31
January 1 -- March 31
April 1 -- June 30
July 1 -- September 30
The Committee shall have the power to change the duration of Offering
Periods with respect to future offerings without shareholder approval if such
change is announced at least fifteen (15) days prior to the scheduled beginning
of the first Offering Period to be affected.
5. Participation. An eligible Employee may become a Participant in the
Plan by authorizing payroll deductions in such form or manner as the Committee
may prescribe prior to the applicable Offering Date. Once authorized, such
authorization for payroll deductions shall commence on the first Offering Date
after authorization is effected and shall remain effective for all subsequent
Offering Periods until the Participant withdraws from the Plan as provided in
Section 11 hereof or, subject to Section 6 hereof, authorizes a change in the
amount of his or her payroll deductions.
6. Payroll Deductions.
(a) At the time a Participant authorizes payroll deductions, he or she
shall elect to have payroll deductions made on each payday during subsequent
Offering Periods at a rate between one percent (1%) and ten percent (10%) of
Base Salary (such percentage representing a whole number percentage).
(b) All payroll deductions made by a Participant shall be credited to his
or her Account under the Plan. A Participant may not make any additional
payments into such Account.
(c) A Participant may increase or decrease his or her rate of payroll
deductions (within the limitations set forth in Section 6(a) hereof) to be
effective for the next Offering Period by authorizing a new rate of payroll
deductions at least fifteen (15) days before the beginning of such Offering
Period. A Participant may not increase or decrease the rate of payroll
deductions during an Offering Period to be effective for that Offering Period.
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Annex R
(d) A Participant must continue payroll deductions for the duration of the
Offering Period in order to exercise an Option in accordance with Section 8
hereof. In the event that a Participant does not continue payroll deductions for
the entire Offering Period, such Participant shall be treated as withdrawing
from such Offering Period in accordance with Section 11(a) hereof.
7. Grant of Option.
(a) On each Offering Date, each eligible Employee participating in the
Plan shall be granted an Option to purchase (at the per share Option price) up
to a number of shares of the Company's Common Stock determined by dividing the
Employee's to be accumulated payroll deductions (not to exceed an amount equal
to ten percent (10%) of his or her Base Salary during the applicable Offering
Period) by the option price, determined in accordance with this Section 7.
(b) Subject to Sections 7(c) and 7(d), the Option price per share of such
shares of Common Stock shall be the lesser of (i) eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock of the Company on the Offering
Date or (ii) eighty-five percent (85%) of the Fair Market Value of a share of
Common Stock of the Company on the Closing Date.
(c) Effective for the Offering Period commencing January 1, 1999, the
option price per share of such shares of Common Stock shall be the lesser of (i)
the higher of (A) eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock of the Company on the Offering Date or (B) eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock of the Company on
January 28, 1999 or (ii) eighty-five percent (85%) of the Fair Market Value of a
share of Common Stock of the Company on the Closing Date.
(d) Effective for the Offering Period commencing on October 1, 1998, the
option price per share of such shares of Common Stock shall be eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock of the Company
on the Closing Date.
8. Exercise of Option. Unless a Participant withdraws from the Plan as
provided in Section 11 hereof, his or her Option for the purchase of shares of
Common Stock will be exercised automatically on the Closing Date, and the
maximum number of whole and fractional shares (rounded to the nearest ten
thousandth) of Common Stock subject to the Option will be purchased for him or
her at the applicable Option price with the accumulated payroll deductions in
his or her Account. During his or her lifetime, a Participant's Option to
purchase shares of Common Stock hereunder is exercisable only by him or her.
9. Designation of Broker and Participant's Account with Broker. The
Company has designated Morgan Stanley Dean Witter & Co. and its affiliates to
open and maintain an Account for each Participant. The Company reserves the
right to change such designation at any time without prior notice to
Participants and the Broker has reserved the right to terminate its services as
Broker under the Plan at any time. The Broker shall deliver to each Participant
as promptly as practicable, by mail or otherwise, all notices of meetings, proxy
statements and other materials distributed by the Company to its shareholders.
The whole and fractional shares in each Participant's Account shall be voted in
accordance with the Participant's signed proxy instructions duly delivered to
the Broker by mail or otherwise, in accordance with the rules applicable to
stock listed on the New York Stock Exchange.
10. Delivery of Certificates. A Participant may request, in accordance
with Section 22 hereof, that the Company arrange for the delivery of a
certificate representing the number of whole shares of Common Stock of the
Company purchased upon exercise of the Participant's Option as promptly as
practicable after each Closing Date. A Participant may not require delivery for
a fractional share, but may instruct the Broker to sell the fractional share. In
connection with the delivery of certificates to a Participant, the Committee
may, in its sole discretion, impose a reasonable charge.
11. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his or her Account under the Plan at any time prior to
the Closing Date by giving notice to the Committee in such form or manner as the
Committee may prescribe. All of the Participant's payroll deductions credited to
his or her Account will be paid to him or her as soon as administratively
possible after receipt of his or her notice of
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Annex R
withdrawal and his or her Option for the current Offering Period will be
automatically terminated, and no further payroll deductions for the purchase of
shares of Common Stock will be made during such Offering Period.
(b) Upon termination of the Participant's employment prior to the Closing
Date for any reason, including retirement or death, the payroll deductions
credited to his or her Account will be returned to him or her or, in the case of
his or her death, to the person or persons entitled thereto under Section 16
hereof, as soon as administratively possible, and his or her Option will be
automatically terminated.
(c) In the event an Employee fails to remain in the continuous employ of
the Company or a Participating Subsidiary for at least twenty (20) hours per
week during the Offering Period in which the employee is a Participant, he or
she will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to his or her Account will be returned to him or her as soon
as administratively possible and his or her Option will be terminated.
(d) A Participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company. However, in such
a case, the Participant must authorize the resumption of payroll deductions and
the rate of such payroll deductions.
12. No Interest. No interest shall accrue on the payroll deductions held
in the Account of a Participant in the Plan.
13. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be one million (1,000,000), subject to
adjustment upon changes in capitalization of the Company as provided in Section
20 hereof. The shares of Common Stock to be sold to Participants under the Plan
may, at the election of the Company, be either treasury shares, authorized but
unissued shares or publicly traded shares. If at the termination of any Offering
Period the total number of shares of Common Stock which would otherwise be
subject to Options granted pursuant to Section 7(a) hereof exceeds the number of
shares of Common Stock then available under the Plan (after deduction of all
shares of Common Stock for which Options have been exercised or are then
outstanding), the Company shall promptly notify the Participants, and shall, in
its sole discretion (i) make a pro rata allocation of the shares of Common Stock
remaining available for Option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable, (ii) terminate the
Offering Period without issuance of any shares of Common Stock or (iii) obtain
shareholder approval for an increase in the number of shares of Common Stock
authorized under the Plan such that all Options could be exercised in full. The
Company may delay determining which of (i), (ii) or (iii) above it shall decide
to effect, and may accordingly delay issuances of any shares of Common Stock
under the Plan for such time as is necessary to attempt to obtain shareholder
approval for any increase in shares of Common Stock authorized under the Plan.
The Company shall promptly notify Participants of its determination to effect
(i), (ii) or (iii) above upon making such decision. A Participant may withdraw
all but not less than all the payroll deductions credited to his or her Account
under the Plan at any time prior to such notification from the Company. In the
event the Company determines to effect (i) or (ii) above, it shall promptly upon
such determination return to each Participant all payroll deductions not applied
towards the purchase of shares of Common Stock.
(b) The Participant will have no interest or voting right in shares of
Common Stock covered by his or her Option until such Option has been exercised.
(c) Shares of Common Stock to be delivered to a Participant under the Plan
shall be registered in the name of the Participant.
14. Dividends. Cash dividends for shares of Common Stock in Participants'
Accounts under the Plan shall not be distributed to Participants directly, but
shall be automatically invested in shares of Common Stock at the full Fair
Market Value on the date of such investment as soon as administratively possible
after such dividends are paid by the Company. Such shares of Common Stock will
be held in Accounts under the Plan.
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Annex R
15. Administration. The Plan shall be administered by the Committee. The
administration, interpretation or application of the Plan by the Committee shall
be final, conclusive and binding upon all Participants.
16. Designation of Beneficiary. The beneficiary or beneficiaries of the
Participant to receive any shares of Common Stock and cash, if any, from the
Participant's Account under the Plan in the event of such Participant's death
prior to delivery to him or her of such shares of Common Stock and cash shall be
determined under the Company's Group Life Insurance Plan. A Participant under
the Plan may, from time to time, name any beneficiary or beneficiaries to
receive any shares of Common Stock and cash, if any, from the Participant's
Account under the Plan. Each such designation shall revoke all prior
designations by the same Participant, including the beneficiary designated under
the Company's Group Life Insurance Plan, and will be effective only when filed
by the Participant in writing (in such form or manner as may be prescribed by
the Committee) with the Company during the Participant's lifetime.
17. Transferability. Neither payroll deductions credited to a
Participant's Account nor any rights with regard to the exercise of an Option or
to receive shares of Common Stock under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 16 hereof) by the
Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section 11 hereof.
18. No Segregation of Funds. The Company shall not be obligated to
segregate payroll deductions received or held by the Company under the Plan.
Such payroll deductions shall be used to purchase shares of Common Stock under
the Plan in accordance with Section 8 hereof.
19. Reports. Individual Accounts will be maintained for each Participant
in the Plan. Statements of Account will be given to Participants within a
reasonable period of time following each Closing Date.
20. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each Option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under Option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
Option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend (but only
on the Common Stock) or any other increase or decrease in the number of shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration".
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into or exercisable for shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding Option under the Plan, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
21. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Committee may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Participant
under any Option theretofore granted without his or her consent.
(b) Shareholder Approval of Amendments. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Rule 16b-3 promulgated under the Exchange Act or with Section 423
of the Code (or any successor statute or rule or other applicable law, rule or
regulation),
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Annex R
such shareholder approval to be obtained in such a manner and to such a degree
as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted hereunder and such Options
shall remain in full force and effect as if this Plan had not been amended or
terminated.
22. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof. All notices or
other communications to a Participant by the Company shall be deemed to have
been duly given when sent by the Company by regular mail to the address of the
Participant on the human resources records of the Company.
23. Conditions Upon Issuance of Shares of Common Stock. Shares of Common
Stock shall not be issued with respect to an Option unless the exercise of such
Option and the issuance and delivery of such shares of Common Stock pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or automated quotation system upon which the
shares of Common Stock may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the shares of Common Stock are being purchased only for investment
and without any present intention to sell or distribute such shares of Common
Stock if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned applicable provisions of law.
24. No Contract of Employment. The Plan is not and shall not be deemed to
constitute a contract of employment between the Company and any Employee or
other individual, nor shall anything herein contained be deemed to give any
Employee or other individual any right to be retained in the Company's employ or
to in any way limit or restrict the Company's right or power to discharge any
Employee or other individual at any time and to treat him without any regard to
the effect which such treatment might have upon him as a Participant of the
Plan.
25. Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the state of New York.
26. Effective Date and Approval of Plan by Shareholders. The Plan shall
become effective on October 1, 1998, subject however, to receipt of approval of
the Plan by shareholders of the Company in accordance with Section 423(b)(2) of
the Code.
6
Annex R
NEWCOURT CREDIT GROUP INC.
Instrument of Proxy for the
Special Meeting of Shareholders
October 26, 1999
The undersigned shareholder of Newcourt Credit Group Inc. (the
"Corporation") hereby appoints DAVID F. BANKS, or failing him, DAVID J.
SHARPLESS, or instead of either of the foregoing _____________________ as
proxyholder of the undersigned, with full power of substitution, to attend, vote
and act for and on behalf of the undersigned at the Special Meeting of
Shareholders of the Corporation to be held on October 26, 1999, and at any
adjournment thereof (the "Meeting"), and on every ballot that may take place in
consequence thereof to the same extent and with the same powers as if the
undersigned was personally present at the Meeting, with authority to vote at the
proxyholder's discretion on amendments or variations to matters identified in
the Notice of Meeting or such other matters as may properly be brought before
the Meeting, except as otherwise specified below. Without limiting the general
power hereby conferred, the undersigned hereby directs the proxyholder to vote
the Common Shares of the Corporation represented by this proxy in the following
manner:
VOTE FOR _______________ OR AGAINST ________________
(or, if not specified, VOTE FOR) the special resolution
set forth at Annex "A" of the Joint Management
Information Circular and Proxy Statement of the
Corporation and The CIT Group, Inc. dated September 21,
1999, approving an arrangement pursuant to Section 182
of the Business Corporations Act (Ontario) with The CIT
Group, Inc.
This proxy is solicited on behalf of the management of
the Corporation. Each shareholder has the right to
appoint a person other than the management nominees
specified above to attend and act on his, her or its
behalf at the Meeting. Such right may be exercised by
inserting the name of the person to be appointed in the
space provided, or by completing another proper form of
proxy and, in either case, depositing the form of proxy
not later than 5:00 p.m. (Toronto time) on the business
day prior to the Meeting to the attention of the Proxy
Department (if delivered) at the office of Montreal
Trust Company of Canada, 151 Front Street West, 8th
Floor, Toronto, Ontario, M5J 2N1; or to the attention of
the Corporate Secretary (if mailed in the postage
pre-paid envelope provided), c/o Montreal Trust Company
of Canada, 151 Front Street West, 8th Floor, Toronto,
Ontario M5J 2N1. The Common Shares of the Corporation
represented by this proxy will be voted for or against
the proposed special resolution in accordance with the
instructions set forth above on any ballot that may be
called for.
The undersigned hereby revokes any prior proxies.
DATED this __________day of ___________________, 1999.
--------------------------------------------------------
Signature of shareholder
--------------------------------------------------------
Name of shareholder (Please Print)
The signature of the shareholder on this Proxy must be
exactly the same as the name in which the Common Shares
are registered.
If this Proxy is not dated in the space provided, it
shall be deemed to bear the date on which it was mailed
to the Corporation.
This Proxy must be executed by the shareholder or an
attorney authorized in writing or, if the shareholder is
a corporation, under its corporate seal or by an officer
or attorney thereof duly authorized.
LETTER OF TRANSMITTAL AND ELECTION FORM
WITH RESPECT TO COMMON SHARES OF
NEWCOURT CREDIT GROUP
This Letter of Transmittal and Election Form is for use by holders
("Shareholders") of common shares (the "Newcourt Common Shares") of Newcourt
Credit Group Inc. ("Newcourt") in connection with the proposed arrangement (the
"Arrangement") involving Newcourt, its Shareholders and The CIT Group, Inc. that
is being submitted for approval at the special meeting of Shareholders to be
held on October 26, 1999. Shareholders are referred to the Joint Management
Information Circular and Proxy Statement (the "Joint Proxy Statement") dated
September 21, 1999 that accompanies this Letter of Transmittal and Election
Form. Capitalized terms used but not defined in this Letter of Transmittal and
Election Form that are defined in the Joint Proxy Statement have the respective
meanings set out in the Joint Proxy Statement.
This Letter of Transmittal and Election Form, properly completed and
duly executed, together with all other required documents, must accompany all
certificates for Newcourt Common Shares deposited for exchange pursuant to the
Arrangement.
The Effective Date of the Arrangement is anticipated to be as soon as
practicable after the date the approval of the Shareholders of the Arrangement
is obtained. On the Effective Date, Shareholders who are Eligible Electing
Holders (other than Dissenting Shareholders) will receive in exchange for their
Newcourt Common Shares, at the holder's option, either: (i) the number of
Exchangeable Shares, equal to the product of the Exchange Ratio (which is 0.70
but subject to downward adjustment as described in the Joint Proxy Statement)
and the number of Newcourt Common Shares in respect of which the holder duly
elects to receive Exchangeable Shares, together with applicable Ancillary
Rights, or (ii) the number of shares of CIT Common Stock equal to the product of
the Exchange Ratio and the number of Newcourt Common Shares in respect of which
the holder duly elects to receive CIT Common Stock (plus, in each case, cash in
lieu of fractional interests). The Exchangeable Shares are exchangeable at any
time at the option of the holder into CIT Common Stock on a one-for-one basis,
as described in the Joint Proxy Statement.
On the Effective Date, Shareholders who are not Eligible Electing
Holders or who are Eligible Electing Holders who have not made a valid election
pursuant hereto (other than Dissenting Shareholders who are ultimately entitled
to be paid the fair value of the Newcourt Common Shares held by them) will
receive in exchange for their Newcourt Common Shares the number of shares of CIT
Common Stock, equal to the product of the Exchange Ratio and the number of
Newcourt Common Shares held by such Shareholder (plus cash in lieu of fractional
interests).
For Eligible Electing Holders who wish to elect to receive Exchangeable
Shares, to be effective, this Letter of Transmittal and Election Form, properly
completed and signed, must be received by the Depositary no later than 5:00 p.m.
(Toronto time) on October 25, 1999. After 5:00 p.m. (Toronto time) on October
25, 1999, all Shareholders who have not deposited a duly completed Letter of
Transmittal and Election Form with the Depositary will be entitled only to
receive shares of CIT Common Stock upon completion and delivery to the
Depositary of a Letter of Transmittal and Election Form. In order for
Shareholders to obtain certificates evidencing the Exchangeable Shares or shares
of CIT Common Stock to which they are entitled, Shareholders are required to
deposit the certificates representing the Newcourt Common Shares held by them
with the Depositary.
Please read carefully the Joint Proxy Statement and the Instructions
set out below before completing this Letter of Transmittal and Election Form. If
you are an Eligible Electing Holder who wishes to elect to receive Exchangeable
Shares but you fail to properly complete, sign and deliver this Letter of
Transmittal and Election Form to the Depositary by 5:00 p.m. (Toronto time) on
October 25, 1999, you will be entitled only to receive shares of CIT Common
Stock (plus any cash amount in lieu of fractional interests).
- 2 -
TO: NEWCOURT CREDIT GROUP INC.
AND TO: CIT EXCHANGECO INC.
AND TO: MONTREAL TRUST COMPANY OF CANADA (the "Depositary"), at its
offices set out below.
The undersigned hereby delivers to you the enclosed certificate(s) for
Newcourt Common Shares, details of which are as follows:
================================================================================
Certificate Number(s) Name of Registered Holder Number of Newcourt
Common Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Shares:
================================================================================
The undersigned transmits herewith for exchange upon the Arrangement
becoming effective the certificate(s) described above representing Newcourt
Common Shares.
NOTE: If the space provided is insufficient, details may be listed on
a separate schedule to this Letter of Transmittal and Election Form.
The undersigned holder of Newcourt Common Shares represents that he,
she or it
[ ] is
[ ] is not
an Eligible Electing Holder (check appropriate box).
An "Eligible Electing Holder" is Shareholder who (i) is a resident of Canada for
the purposes of the Income Tax Act (Canada) or (ii) which is a partnership that
owns Newcourt Common Shares, if one or more of its members would be an Eligible
Electing Holder if such member held Newcourt Common Shares directly.
Canadian Residents who are individuals must provide their social insurance
number and U.S. residents/citizens must provide their taxpayer identification
number
================================================================================
ELECTION FOR SHAREHOLDERS WHO ARE ELIGIBLE ELECTING HOLDERS
Under the Arrangement, the undersigned hereby elects to have the
deposited Newcourt Common Shares represented by the above certificate(s)
exchanged for (please check one):
[ ] Exchangeable Share(s); or
[ ] Share(s) of CIT Common Stock
If an election is not made, or is not properly made, the undersigned
will be deemed to have elected to have all deposited Newcourt Common Shares
exchanged for shares of CIT Common Stock.
================================================================================
-3-
*Note: Shareholders who are not Eligible Electing Holders or Eligible Electing
Holders who do not deliver to the Depositary a properly completed
Letter of Transmittal and Election Form by 5:00 p.m. (Toronto time) on
October 25, 1999 (other than Dissenting Shareholders who are ultimately
entitled to be paid the fair value of the Newcourt Common Shares held
by them) will receive that number of shares of CIT Common Stock equal
to the product of the Exchange Ratio (subject to downward adjustment)
and the number of Newcourt Common Shares deposited. Eligible Electing
Holders who elect to receive Exchangeable Shares will also receive
applicable Ancillary Rights.
No fractional Exchangeable Shares or fractional shares of CIT Common
Stock will be delivered in exchange for Newcourt Common Shares pursuant to the
Arrangement. In lieu of fractional shares, the Depositary will mail (to the
Shareholder's address specified herein), within 15 Business Days following the
Effective Date for those Newcourt Common Shares received by the Depositary prior
to the Newcourt Shareholders Meeting, to each Shareholder otherwise entitled to
a fractional interest in shares of CIT Common Stock or Exchangeable Shares, as
the case may be, a cheque payable to such Shareholder equal to such
Shareholder's pro rata portion of the net proceeds (after expenses) received by
the Depositary upon a sale of whole shares representing an accumulation of all
fractional interests in shares of CIT Common Stock or Exchangeable Shares (as
the case may be) to which all such Shareholders would otherwise be entitled. See
the Joint Proxy Statement at page 85 under the heading "Transaction Mechanics
and Description of Exchangeable Shares - Fractional Shares".
================================================================================
FOR CANADIAN RESIDENT SHAREHOLDERS WHO ARE ELIGIBLE
FOR AND DESIRE A CANADIAN TAX DEFERRAL
By checking the box below, the undersigned: (i) requests a Tax Election
Filing Package be forwarded to the Shareholder at the address specified herein;
(ii) represents that the undersigned is an Eligible Holder (as defined below);
(iii) acknowledges that it is the undersigned's responsibility to prepare and
file the appropriate document(s) that will be included in the Tax Election
Package and send such documents to KPMG LLP, Chartered Accountants, at its
address at the attention of Mr. Michael Stewart, KPMG LLP, P.O. Box 31, STN
Commerce Court, Toronto, Ontario M5L 1B2 on or before the later of March 1, 2000
and 75 days after the Effective Date; (iv) acknowledges that a deferral may only
be available to the extent the undersigned receives Exchangeable Shares in
respect of the Newcourt Common Shares deposited herewith. See "Tax
Considerations to Newcourt Shareholders - Canadian Federal Income Tax
Considerations to Newcourt Shareholders - Newcourt Shareholders Resident in
Canada" in the Joint Proxy Statement.
[ ] Please check if you want and are eligible for a Tax Election
Filing Package
An "Eligible Holder" is a Shareholder (i) who is a resident of Canada
for purposes of the Income Tax Act (Canada), other than any such Shareholder who
is generally exempt from tax under the Income Tax Act (Canada), or (ii) which is
a partnership that owns Newcourt Common Shares if one or more of its members
would be an Eligible Holder if such member held such Newcourt Common Shares
directly. See "Tax Considerations to Newcourt Shareholders - Canadian Federal
Income Tax Considerations to Newcourt Shareholders - Newcourt Shareholders
Resident in Canada" in the Joint Proxy Statement.
Eligible Holders who are requesting a Tax Election Filing Package
should check the appropriate box(es) below:
Yes No
The undersigned is a partnership [ ] [ ]
The undersigned intends to file an election in Quebec [ ] [ ]
================================================================================
The undersigned acknowledges that the intention of Exchangeco in
creating the Exchangeable Shares is to have the dividend, liquidation and voting
rights associated with the Exchangeable Shares be, as nearly as practicable,
functionally and economically equivalent to those of shares of CIT Common Stock.
CIT will covenant in the Voting and Exchange Trust Agreement to provide
financial and other information regarding CIT to holders of
-4-
Exchangeable Shares. By electing to receive Exchangeable Shares as indicated
above, the undersigned acknowledges CIT's covenant in that regard.
It is understood that upon receipt of this Letter of Transmittal and
Election Form and of the certificate(s) representing Newcourt Common Shares
deposited herewith and following the Effective Date of the Arrangement,
Exchangeco or its agent will send to the undersigned certificate(s) for
Exchangeable Shares or CIT Common Stock to which the undersigned is entitled
under the Arrangement. The share certificate(s) will be registered in the name
(and at the address) of the Shareholder set forth below.
The undersigned holder of Newcourt Common Shares covenants, represents
and warrants that (i) the undersigned is the owner of the Newcourt Common Shares
being deposited, (ii) such shares are owned by the undersigned free and clear of
all mortgages, liens, charges, encumbrances, security interests and adverse
claims, (iii) the undersigned has full power and authority to execute and
deliver this Letter of Transmittal and Election Form, and (iv) unless the
undersigned shall have revoked this Letter of Transmittal and Election Form by
notice in writing given to the Depositary not later than 5:00 p.m. (Toronto
time) on the last Business Day preceding the Effective Date of the Arrangement,
the undersigned will not, prior to such time, transfer or permit to be
transferred any of such deposited Newcourt Common Shares.
The covenants, representations and warranties of the undersigned herein
contained shall survive the completion of the Arrangement.
The undersigned revokes any and all authority, other than as granted in
this Letter of Transmittal and Election Form, whether as agent,
attorney-in-fact, attorney, proxy or otherwise, previously conferred or agreed
to be conferred by the undersigned at any time with respect to the Newcourt
Common Shares being deposited. No subsequent authority, whether as agent,
attorney-in-fact, attorney, proxy or otherwise will be granted with respect to
the deposited Newcourt Common Shares.
Each authority conferred or agreed to be conferred by the undersigned
in this Letter of Transmittal and Election Form shall survive the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, legal representatives, successors and assigns
of the undersigned.
The undersigned instructs Exchangeco and the Depositary to mail the
certificate(s) representing Exchangeable Shares and/or shares of CIT Common
Stock, and any cheque to which the undersigned is entitled under the
Arrangement, promptly after the Effective Date, by first class insured mail,
postage prepaid, to the undersigned, or to hold such certificates for pick-up,
in accordance with the instructions given below. Should the Arrangement not be
completed, the deposited Newcourt Common Shares and all other ancillary
documents shall be returned to the undersigned in accordance with the
instructions in the preceding sentence. The undersigned recognizes that Newcourt
has no obligation pursuant to the instructions given below to transfer any
Newcourt Common Shares from the name of the registered holder thereof if the
Arrangement is not completed.
By reason of the use by the undersigned of an English language form of
Letter of Transmittal and Election Form, the undersigned shall be deemed to have
required that any contract evidenced by the Arrangement as accepted through this
Letter of Transmittal and Election Form, as well as all documents related
thereto, be drawn exclusively in the English language. En raison de l'usage
d'une version anglaise des presentes lettre d'envoi et formule de choix par le
soussigne, ce dernier est repute avoir demande que tout contrat atteste par
l'arrangement, qui est accepte au moyen des presentes lettre d'envoi et formule
de choix, de meme que tous les documents qui s'y rapportent soient rediges
exclusivement en anglais.
Signature guaranteed by: Dated: ______________________________, 1999.
(if required under Instruction 3):
- ------------------------------------------------ --------------------------------------------------
Authorized Signature Signature of Shareholder or Authorized
Representative - see Instructions 2, 3 and 4
-5-
- ------------------------------------------------ --------------------------------------------------
Name of Guarantor (please print or type) Name of Shareholder (please print or type)
- ------------------------------------------------ --------------------------------------------------
Address of Shareholder (please print or type) Social Insurance Number (Canadian Residents) or
Taxpayer Identification Number (US residents) of
Shareholder
(please print or type)
--------------------------------------------------
Name of Authorized Representative, if applicable
(please print or type)
If the Arrangement is not proceeded with, the enclosed certificate(s)
will be returned forthwith to the undersigned at the address set out below or,
failing such address being specified, to the undersigned at the last address of
the undersigned as it appears on the common share register of Newcourt.
================================================================================
DELIVERY INSTRUCTIONS
(See Instructions 3, 4, 5 and 6)
[ ] Mail certificate(s) and any cheque in lieu of fractional interests to
(please fill in address for mailing):
------------------------------------
------------------------------------
------------------------------------
------------------------------------
[ ] Hold certificate(s) for pick up at the Toronto office of the Depositary
listed below.
================================================================================
-6-
U.S. citizens/residents must complete the Substitute Form W-9 below.
Non-U.S. citizens/residents must complete the Substitute Form W-8BEN below.
Please review carefully items 9 and 10 of the Instructions set forth below
regarding backup withholding before completing the following information.
SUBSTITUTE PLEASE PROVIDE YOUR TAXPAYER Social Security No.
FORM W-9 IDENTIFICATION NO. OR SOCIAL or Taxpayer
SECURITY NO. IN THE SPACE AT THE Identification No.
RIGHT AND CERTIFY BY SIGNING (TIN)
AND DATING BELOW -----------------------
[ ] Awaiting TIN
- --------------------------------------------------------------------------------
Certification -- Under penalties of perjury, I certify that (1) the number shown
on this form is my correct Social Security Number or Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and (2) I am not
subject to backup withholding either because I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends or the IRS has notified
me that I am no longer subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you are subject to backup withholding, you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2).
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
Signature _________________________________ Date _______________
================================================================================
Note: Failure to complete and return this form may result in backup withholding
of 31% of any payments (including non-cash payments) made to you.
If you checked the "Awaiting TIN" box on the Substitute Form W-9, you must
complete the following certificate.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that (i) a TIN has not been issued to
me, (ii) either (a) I have mailed or delivered an application to receive a TIN
to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in the
near future, and (iii) I understand that, if I do not provide a TIN within 60
days, I will be subject to backup withholding at a rate of 31% until I provide a
TIN.
SIGNATURE ___________________________ DATE________________
Note: Failure to complete and return this form may result in backup withholding
of 31% of any payments (including non-cash payments) made to you.
-7-
SUBSTITUTE FORM W-8BEN
- ----------------------------------------------------------------------------------------------------------------------------------
Do not use this form for: ..................................................................................... Instead, use Form:
o A U.S. citizen or other U.S. person, including a resident alien individual ................................................. W-9
o A foreign government, international organization, foreign central bank of
issue, tax-exempt organization, or private foundation, claiming the
applicability of Internal Revenue Code section(s) 501(c), 892, 895, or 1443(b) .............................. W-8ECI or W-8EXP
o A person acting as an intermediary ...................................................................................... W-8IMY
o A person claiming an exemption from U.S. withholding on
income effectively connected with the conduct
of a trade or business in the United States ............................................................................. W-8ECI
- ----------------------------------------------------------------------------------------------------------------------------------
Identification of Beneficial Owner
- ----------------------------------------------------------------------------------------------------------------------------------
1 Name of individual or organization that is the beneficial owner 2 Country of incorporation or organization
- ----------------------------------------------------------------------------------------------------------------------------------
3 Type of beneficial owner [ ] Individual [ ] Corporation [ ] Disregarded entity
[ ] Partnership [ ] Trust [ ] Estate [ ] Foreign government [ ] International organization
[ ] Foreign central bank of issue [ ] Foreign tax-exempt organization
- ----------------------------------------------------------------------------------------------------------------------------------
4 Permanent residence address (street, apt. or suite no., or rural route). Do not use a P.O. box.
- ----------------------------------------------------------------------------------------------------------------------------------
City or town, state or province. Include postal code where appropriate. Country (do not abbreviate)
- ----------------------------------------------------------------------------------------------------------------------------------
5 Mailing address (if different from above)
- ----------------------------------------------------------------------------------------------------------------------------------
City or town, state or province. Include postal code where appropriate. Country (do not abbreviate)
- ----------------------------------------------------------------------------------------------------------------------------------
6 U.S. taxpayer identification number, if any.
[ ] SSN or TIN [ ] EIN
- ----------------------------------------------------------------------------------------------------------------------------------
Certification
- ----------------------------------------------------------------------------------------------------------------------------------
Under penalties of perjury, I declare that I have examined the information on
this form and to the best of my knowledge and belief it is true, correct, and
complete. I further certify under penalties of perjury that:
o I am the beneficial owner (or am authorized to sign for the beneficial
owner) of all the income to which this form relates;
o The beneficial owner is a foreign person;
o The income to which this form relates is not effectively connected with the
conduct of a trade or business in the United States;
o For broker transactions or barter exchanges, the beneficial owner is an
exempt foreign person as defined in the instructions; and
o I am not a former citizen or long-term resident of the United States subject
to section 877 (relating to certain acts of expatriation) or, if I am subject
to section 877, I am nevertheless entitled to treaty benefits with respect to
the amounts received.
The Internal Revenue Service does not require your consent to any provisions of
this document other than the certifications required to establish your status as
a foreign person and, if applicable, obtain a reduced rate of withholding.
Signature ------------------------------- -------- ------------------------
Signature of beneficial owner Date Capacity in which acting
(or individual authorized to
sign for beneficial owner)
- ----------------------------------------------------------------------------------------------------------------------------------
Note: Failure to complete and return this form may result in back-up withholding of 31% of any payments (including
non-cash payments) made to you.
-8-
INSTRUCTIONS
1. Use of Letter of Transmittal and Election Form
(a) Shareholders who are Eligible Electing Holders, in order to make a
valid election to exchange their Newcourt Common Shares for
Exchangeable Share(s), must deliver this properly completed Letter
of Transmittal and Election Form (or manually signed facsimile
thereof) together with accompanying certificate(s) representing
Newcourt Common Shares, which must all be received by the Depositary
at one of the offices specified below before 5:00 p.m. (Toronto
time) on October 25, 1999.
(b) After 5:00 p.m. (Toronto time) on October 25, 1999, all Shareholders
(including Eligible Electing Holders) who deliver to the Depositary
this properly completed Letter of Transmittal and Election Form (or
manually signed facsimile thereof), together with accompanying
certificate(s) representing Newcourt Common Shares, will be entitled
to receive only shares of CIT Common Stock (plus any cash in lieu of
fractional interests).
(c) The method used to deliver this Letter of Transmittal and Election
Form and any accompanying certificate(s) representing Newcourt
Common Shares is at the option and risk of the holder, and delivery
will be deemed effective only when such documents are actually
received. Newcourt recommends that the necessary documentation be
hand delivered to the Depositary at one of the addresses specified
below and a receipt obtained; otherwise the use of first class
insured mail, with return receipt requested, is recommended. A
pre-addressed postage-paid security return envelope is enclosed for
your convenience. Shareholders whose Newcourt Common Shares are
registered in the name of a broker, investment dealer, bank, trust
company or other nominee should contact that nominee for assistance
in delivering those Newcourt Common Shares, which can be facilitated
through the execution and delivery of a Notice of Guaranteed
Delivery in the form enclosed with the Joint Proxy Statement.
2. Procedure for Guaranteed Delivery
If a Shareholder wishes to deposit Newcourt Common Shares pursuant to
the Arrangement and (i) the certificate(s) representing such Newcourt Common
Shares are not immediately available or (ii) the Newcourt Shareholder cannot
cause the certificate(s) representing such Newcourt Common Shares and all other
required documents to be delivered to the Depositary at or prior to 5:00 p.m.
(Toronto time) on October 25, 1999, such Newcourt Common Shares may nevertheless
be deposited under the Arrangement provided that all of the following conditions
are met:
(a) such deposit is made by or through an Eligible Institution (as
defined in Instruction 4 below);
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, including a properly completed Election included in the
Notice of Guaranteed Delivery, in the form accompanying this Letter
of Transmittal and Election Form or a facsimile thereof, properly
completed and signed, together with a guarantee by an Eligible
Institution in the form set forth in such Notice of Guaranteed
Delivery, is received by the Depositary at its Toronto office as set
forth in the Notice of Guaranteed Delivery (by hand, by courier, by
first class insured mail or by facsimile transmission) at or prior
to 5:00 p.m. (Toronto time) on October 25, 1999; and
(c) the following documents are received by the Depositary at its
Toronto office at or prior to 5:00 p.m. (Toronto time) on the third
trading day on The Toronto Stock Exchange after October 25, 1999:
(i) the certificate(s) representing deposited Newcourt Common Shares
in proper form for transfer; (ii) a Letter of Transmittal and
Election Form or a facsimile thereof, properly completed and signed;
and (iii) all other documents required by the Letter of Transmittal
and Election Form.
Note: The completed election contained in the Notice of Guaranteed
Delivery will not be acted upon by the Depositary unless all
the documents referred to in Instruction 2(c), including a
properly completed and signed Letter of Transmittal and
Election Form, are received by the
-9-
Depositary before 5:00 p.m. (Toronto time) on October 28,
1999, in which case the elections contained in the Letter of
Transmittal and Election Form will be acted upon by the
Depositary.
3. Signatures
This Letter of Transmittal and Election Form must be filled in, dated
and signed by the holder of Newcourt Common Shares or by such holder's duly
authorized representative (in accordance with Instruction 4).
(a) If this Letter of Transmittal and Election Form is signed by the
registered owner(s) of the accompanying certificate(s), such
signature(s) on this Letter of Transmittal and Election Form must
correspond with the name(s) as registered or as written on the face
of such certificate(s) without any change whatsoever, and the
certificate(s) need not be endorsed. If such transmitted
certificate(s) is owned of record by two or more joint owners, all
such owners must sign this Letter of Transmittal and Election Form.
(b) If this Letter of Transmittal and Election Form is signed by a
person other than the registered owner(s) of the accompanying
certificate(s), or if certificates representing Exchangeable Shares
or CIT Common Stock are to be issued to a person other than the
registered owner(s):
(i) such deposited certificate(s) must be endorsed or be
accompanied by appropriate share transfer power(s) of attorney
properly completed by the registered owner(s); and
(ii) the signature(s) on such endorsement or power(s) of attorney
must correspond exactly to the name(s) of the registered
owner(s) as registered or as appearing on the certificate(s)
and must be guaranteed as noted in Instruction 3.
4. Guarantee of Signatures
If this Letter of Transmittal and Election Form is signed by a person
other than the registered owner(s) of the Newcourt Common Shares, such signature
must be guaranteed by an Eligible Institution, or in some other manner
satisfactory to the Depositary (except that no guarantee is required if the
signature is that of an Eligible Institution).
An "Eligible Institution" means a Canadian chartered bank, a major
trust company in Canada or a member firm of a recognized Medallion Program
(STAMP), (SEMP) or (MSP).
5. Fiduciaries, Representatives and Authorizations
Where this Letter of Transmittal and Election Form is executed by a
person as an executor, administrator, trustee or guardian, or on behalf of a
corporation, partnership or association or is executed by any other person
acting in a representative capacity, this Letter of Transmittal and Election
Form must be accompanied by satisfactory evidence of authority to act. Any of
Newcourt, Exchangeco or the Depositary, in their discretion, may require
additional evidence of authority or additional documentation.
6. Delivery Instructions
In all cases, the box entitled "Delivery Instructions" should be
completed. If that box is not completed, any new share certificate(s) issued in
exchange for Newcourt Common Shares will be mailed to the depositing Shareholder
at the address of the Shareholder as it appears in this Letter of Transmittal
and Election Form or, if no address of the Shareholder is provided in this
Letter of Transmittal and Election Form, then it will be mailed to the address
of the Shareholder as it appears on the common share register of Newcourt.
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7. Miscellaneous
(a) If the space on this Letter of Transmittal and Election Form is
insufficient to list all certificates for Newcourt Common Shares,
additional certificate numbers and numbers of shares may be included
on a separate signed list affixed to this Letter of Transmittal and
Election Form.
(b) If Newcourt Common Shares are registered in different forms (e.g.
"John Doe" and "J. Doe"), a separate Letter of Transmittal and
Election Form should be signed for each different registration.
(c) The undersigned must check the appropriate box on this Letter of
Transmittal and Election Form indicating whether the undersigned is
an Eligible Electing Holder or not an Eligible Electing Holder.
(d) No alternative, conditional or contingent deposits will be accepted
and no fractional Exchangeable Shares or shares of CIT Common Stock
will be issued.
(e) Additional copies of this Letter of Transmittal and Election Form
may be obtained from the Depositary at one of the offices specified
below.
(f) It is strongly recommended that prior to completing this Letter of
Transmittal and Election Form, the undersigned read the accompanying
Joint Proxy Statement.
(g) Newcourt and Exchangeco reserve the right, if they so elect
collectively, in their absolute discretion, to instruct the
Depositary to waive any defect or irregularity contained in any
Letter of Transmittal and Election Form received by them.
8. Lost Certificates
If a share certificate has been lost or destroyed, this Letter of
Transmittal and Election Form should be completed as fully as possible and
forwarded, together with a letter describing the loss, to the Depositary. The
Depositary and/or the registrar and transfer agent for the Newcourt Common
Shares will respond with the replacement requirements.
9. Substitute Form W-9 - U.S. Shareholders
In order to avoid "backup withholding" of United States federal income
tax on payments made to a Shareholder, the Shareholder must generally provide
the Shareholder's correct taxpayer identification number ("TIN") on a form such
as Substitute Form W-9 above and certify, under penalties of perjury, that such
number is correct and that the Shareholder is not subject to backup withholding.
If the correct TIN is not provided or if any other information is not correctly
provided, a penalty of up to $500 may be imposed on the Shareholder by the
Internal Revenue Service and payments made to the Shareholder may be subject to
backup withholding at a rate of 31%. Willfully falsifying certifications or
affirmations may result in criminal penalties.
Backup withholding is not an additional United States income tax.
Rather, the United States income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained provided that the
required information is furnished in a timely manner to the Internal Revenue
Service.
The TIN for an individual United States citizen or resident is the
individual's social security number. The "Awaiting TIN" box of the Substitute
Form W-9 may be checked if a Shareholder has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the
"Awaiting TIN" box is checked, the Shareholder must also complete the
Certificate of Awaiting Taxpayer Identification Number found below the
Substitute Form W-9 in order to avoid backup withholding. If the Shareholder
does not provide a TIN within 60 days, the Shareholder will be subject to backup
withholding at a rate of 31% until a TIN is provided.
Exempt persons (including, among others, corporations) are not subject
to backup withholding. A Shareholder should consult its tax adviser as to the
Shareholder's qualification for an exemption from backup withholding and the
procedure for obtaining such exemption.
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10. Substitute W-8BEN - Non-U.S. Shareholders
Exempt persons are not subject to backup withholding. Beneficial owners
of Newcourt Common Shares that are neither United States citizens nor residents,
as well as foreign corporations, partnerships, estates and trusts may qualify as
exempt persons by submitting the Substitute Form W-8BEN above, signed under
penalties of perjury, certifying such person's foreign status. A Shareholder
should consult its tax adviser as to the Shareholder's qualification for an
exemption from backup withholding.
Please note that special rules apply to the "beneficial owner" and
"permanent residence address" requirements found in Blocks 1 and 4 of Part I to
the Substitute Form W-8BEN. For purposes of the Substitute Form W-8BEN, a
beneficial owner is the person that is the owner of income with respect to the
Newcourt Common Shares for United States federal income tax purposes and who
beneficially owns such income. Thus, a person receiving such income as a
nominee, custodian, or agent for another person or a person that is classified
as a conduit entity under Section 7701(1) of the United States Internal Revenue
Code is not the beneficial owner of such income. Generally, a person is treated
as the owner of such income to the extent such person is required under United
States federal income tax principles to include amounts paid in respect of
Newcourt Common Shares in gross income on a tax return. The beneficial owners of
income paid to a partnership are those persons who, under United States federal
income tax principles, are the owners of the income for United States federal
income tax purposes in their separate or individual capacities and who
beneficially own the income. Thus, the beneficial owners of income paid to a
partnership are generally the partners, other than a partner that is itself a
partnership or a conduit. A Shareholder should consult its tax adviser to
determine the appropriate beneficial owner for purposes of the Substitute Form
W-8BEN.
The beneficial owner's permanent residence address is the address in
the country where such person claims to be resident for purposes of that
country's income tax. Do not show the address of a financial institution, a post
office box, or an address used solely for mailing purposes. If the beneficial
owner is an individual who does not have a tax residence in any country, the
permanent residence address is where such person normally resides. If the
beneficial owner is not an individual and does not have a tax residence in any
country, the permanent residence address is where such person maintains its
principal office.
11. MONTREAL TRUST COMPANY OF CANADA (SEE BELOW FOR ADDRESSES AND TELEPHONE
NUMBERS) OR YOUR BROKER OR OTHER FINANCIAL ADVISER WILL BE ABLE TO
ASSIST YOU IN COMPLETING THIS LETTER OF TRANSMITTAL AND ELECTION FORM.
-12-
Offices of the Depositary in Canada
Montreal Trust Company of Canada
Toronto
By Mail
151 Front Street West
Suite 800
Toronto, Ontario
M5J 2N1
Toronto
By Hand or by Courier
151 Front Street West
8th Floor
Toronto, Ontario
M5J 2NI
Telephone: (416) 981-9633
Toll Free: 1-800-663-9097
By Hand or by Courier
Montreal Halifax
1800 McGill College Avenue 1465 Brenton Street
6th Floor 5th Floor
Montreal, Quebec Halifax, Nova Scotia
H3A 3K9 B3J 3S9
Calgary Vancouver
Western Gas Tower 510 Burrard Street
6th Floor 2nd Floor
Suite 600 530 - 8th Avenue S.W. Vancouver, B.C.
Calgary, Alberta V6C 3B9
T2P 3S8
Any questions and requests for assistance may be directed by
Shareholders to the Depositary at the telephone numbers and locations set out
above.
THIS IS NOT A LETTER OF TRANSMITTAL
NOTICE OF GUARANTEED DELIVERY
(including Election)
for
Deposit of Common Shares
of
NEWCOURT CREDIT GROUP INC.
This Notice of Guaranteed Delivery must be used by holders
("Shareholders") of common shares (the "Newcourt Common Shares") of Newcourt
Credit Group Inc. ("Newcourt") in connection with the proposed arrangement (the
"Arrangement") involving Newcourt, its Shareholders and The CIT Group, Inc. that
is being submitted for approval at the special meeting of Shareholders to be
held on October 26, 1999, if certificates for the Newcourt Common Shares are not
immediately available or time will not permit all required documents to reach
the Depositary at or prior to 5:00 p.m. (Toronto time) on October 25, 1999 (the
"Expiry Time"). This Notice of Guaranteed Delivery must be delivered by hand,
transmitted by facsimile transmission or delivered by mail to the office of the
Depositary in the City of Toronto listed below no later than the Expiry Time.
Shareholders are referred to the Joint Management Information Circular
and Proxy Statement (the "Joint Proxy Statement") dated September 21, 1999 that
accompanies this Notice of Guaranteed Delivery. Capitalized terms used but not
defined in this Notice of Guaranteed Delivery that are defined in the Joint
Proxy Statement have the respective meanings set out in the Joint Proxy
Statement.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal and Election Form (the
"Letter of Transmittal") is required to be guaranteed by an Eligible
Institution, such signature must appear in the applicable space in the Letter of
Transmittal.
The undersigned hereby deposits with Newcourt and Exchangeco, upon the
terms and subject to the conditions set forth in the Arrangement and the Letter
of Transmittal (receipt of which is hereby acknowledged), the Newcourt Common
Shares listed below.
The deposit of Newcourt Common Shares will not be accepted from or on
behalf of Shareholders in any jurisdiction outside of Canada in which the
Arrangement would not be in compliance with the laws of such jurisdiction. The
undersigned hereby declares that the undersigned is not acting for the account
or benefit of a person from such jurisdiction and is not in, or delivering this
Notice of Guaranteed Delivery, from such jurisdiction.
An "Eligible Institution" means a Canadian chartered bank, a major
trust company in Canada or a member firm of a recognized Medallion Program
(STAMP), (SEMP) or (MSP).
TO: NEWCOURT CREDIT GROUP INC.
AND TO: CIT EXCHANGECO INC.
AND TO: THE DEPOSITARY, MONTREAL TRUST COMPANY OF CANADA
By Hand and By Courier By Facsimile By Mail
151 Front Street West 416-981-9600 151 Front Street West
8th Floor Suite 800
Toronto, Ontario Toronto, Ontario
M5J 2N1 M5J 2N1
Delivery of this Notice of Guaranteed Delivery to an address or
transmission of this Notice of Guaranteed Delivery via a facsimile number other
than set forth above does not constitute a valid delivery. If this Notice of
Guaranteed Delivery is being used, Eligible Electing Holders who wish to receive
Exchangeable Shares under the Arrangement must properly complete the Election
----
below before delivery of this Notice of Guaranteed Delivery to the Depositary.
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Number of Newcourt Common Name and address(es) of
Shares Certificate No. (if available) Shareholder(s) (please print)
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Total Shares:
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ELECTION FOR SHAREHOLDERS WHO ARE ELIGIBLE ELECTING HOLDERS
Under the Arrangement, the undersigned hereby elects to have the
deposited Newcourt Common Shares represented by the above certificate(s)
exchanged for (please check one):
[ ] Exchangeable Share(s); or
[ ] Share(s) of CIT Common Stock
An "Eligible Electing Holder" is Shareholder who (i) is a resident of
Canada for the purposes of the Income Tax Act (Canada) or (ii) which is a
partnership that owns Newcourt Common Shares, if one or more of its members
would be an Eligible Electing Holder if such member held Newcourt Common Shares
directly.
If an election is not made, or is not properly made, the undersigned
will be deemed to have elected to have all deposited Newcourt Common Shares
exchanged for shares of CIT Common Stock.
No fractional Exchangeable Shares or fractional shares of CIT Common
Stock will be delivered in exchange for Newcourt Common Shares pursuant to the
Arrangement. In lieu of fractional shares, the Depositary will mail (to the
Shareholder's address specified herein), within 15 Business Days following the
Effective Date for those Newcourt Common Shares received by the Depositary by
the Expiry Time, to each Shareholder otherwise entitled to a fractional interest
in shares of CIT Common Stock or Exchangeable Shares a cheque payable to such
Shareholder equal to such Shareholder's pro rata portion of the net proceeds
(after expenses) received by the Depositary upon a sale of whole shares
representing an accumulation of all fractional interests in shares of CIT Common
Stock or Exchangeable Shares (as the case may be) to which all such Shareholders
would otherwise be entitled. See the Joint Proxy Statement at page 85 under the
heading "Transaction Mechanics and Description of Exchangeable Shares -
Fractional Shares".
- --------------------------------------------------------------------------------
Area code and Telephone Number during Business Hours:
( )____________________________________________________
Dated:____________________________________________________
__________________________________________________________
__________________________________________________________
Signature(s)
GUARANTEE
The undersigned, an Eligible Institution, guarantees delivery to the
office of the Depositary in the City of Toronto of the certificates representing
Newcourt Common Shares tendered hereby, in proper form for transfer, in either
case with delivery of a Letter of Transmittal and Election Form or a facsimile
thereof, properly completed and signed, and all other documents required by the
Letter of Transmittal and Election Form, all at or prior to 5:00 p.m. (Toronto
time) on the third trading day on The Toronto Stock Exchange after the Expiry
Time.
Dated: __________________ , 1999 _____________________________________________
Firm
_____________________________________________
Authorized Signature
_____________________________________________
Name and Title (please print or type)
_____________________________________________
Address of Firm
_____________________________________________
Area Code and Telephone Number