AGREEMENT AND PLAN OF MERGER
Dated as of June 21, 1996
among
VK/AC HOLDING, INC.,
MORGAN STANLEY GROUP INC.,
MSAM HOLDINGS II, INC.
and
MSAM ACQUISITION INC.
Index of Documents
------------------
1. Agreement and Plan of Merger, dated as of June 21, 1996, among VK/AC Holding,
Inc., Morgan Stanley Group Inc., MSAM Holdings II, Inc., and MSAM Acquisition
Inc.
2. Letter, dated June 21, 1996, with respect to the disclosure by VK/AC Holding,
Inc. of certain matters.
3. Letter, dated June 21, 1996, with respect to certain undertakings by the
Clayton & Dubilier Private Equity Fund IV Limited Partnership.
AGREEMENT AND PLAN OF MERGER
among
VK/AC HOLDING, INC.,
MORGAN STANLEY GROUP INC.,
MSAM HOLDINGS II, INC.
and
MSAM ACQUISITION INC.
-------------------------
Dated as of June 21, 1996
-------------------------
TABLE OF CONTENTS
-----------------
ARTICLE I
THE MERGER
Page
1.1. The Merger.......................................................... 2
1.2. Effective Time...................................................... 2
1.3. Organizational Documents, Directors and Officers of
the Surviving Corporation......................................... 3
1.4. Further Assurances.................................................. 3
1.5. Conversion of Common Stock, Preferred Stock and Options4
1.6. Acquisition Price................................................... 6
1.7. Dissenting Shares................................................... 7
1.8. Payment of Merger Consideration and Other Amounts................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company....................... 9
2.1.1. Authorization; No Conflicts; Status of
VKAC Group, etc........................................... 9
2.1.2. Capitalization.............................................. 11
2.1.3. Financial Information....................................... 12
2.1.4. Undisclosed Liabilities..................................... 13
2.1.5. Absence of Changes.......................................... 13
2.1.6. Taxes....................................................... 17
2.1.7. Properties and Assets....................................... 21
2.1.8. Contracts................................................... 22
2.1.9. Intellectual Property....................................... 24
2.1.10. Insurance................................................... 25
2.1.11. Litigation.................................................. 26
2.1.12. Compliance with Laws and Other
Instruments; Governmental Approvals....................... 26
2.1.13. Environmental Matters....................................... 27
2.1.14. Affiliate Transactions...................................... 28
2.1.15. Government Regulation....................................... 28
2.1.16. Funds; Sub-Advisory Funds; Clients.......................... 32
2.1.17. Labor Matters, etc.......................................... 34
2.1.18. ERISA....................................................... 34
2.1.19. Brokers, Finders, etc....................................... 36
2.1.20. List of ERISA Clients....................................... 36
2.1.21. Hedging Activities.......................................... 36
2.1.22. Financial Projections....................................... 36
2.1.23. Assets Under Management..................................... 37
2.2. Representations and Warranties of the Parent, Holdco
and the Buyer..................................................... 37
2.2.1. Corporate Status; Authority for
Agreement................................................. 37
2.2.2. No Conflicts, etc........................................... 37
2.2.3. Litigation.................................................. 38
2.2.4. Brokers, Finders, etc....................................... 38
2.2.5. No Disqualifying Participants............................... 38
2.2.6. Financing................................................... 39
2.2.7. Section 15(f) Materials..................................... 39
ARTICLE III
COVENANTS
3.1. Covenants of the Company............................................ 39
3.1.1. Conduct of Business......................................... 39
3.1.2. No Solicitation............................................. 40
3.1.3. Access and Information...................................... 41
3.1.4. Subsequent Financial Statements, Debt
Prepayments and Filings................................... 42
3.1.5. Public Announcements........................................ 42
3.1.6. Further Actions............................................. 43
3.1.7. Compliance with Investment Company
Act Section 15............................................ 45
3.1.8. Qualification of the Funds; Tax Affairs..................... 46
3.1.9. ERISA Clients............................................... 48
3.2. Covenants of the Parent, Holdco and the Buyer....................... 48
3.2.1. Public Announcements........................................ 48
3.2.2. Further Actions............................................. 48
3.2.3. Compliance with Investment Company
Act Section 15............................................ 49
3.2.4. Employee Matters Subsequent to the
Effective Time............................................ 51
3.2.5. List of Affiliates.......................................... 52
3.2.6. Contribution Agreement...................................... 52
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Each Party............................. 53
4.1.1. HSR Act Notification........................................ 53
4.1.2. No Injunction, etc. ........................................ 53
4.1.3. Contribution Agreement ..................................... 53
4.1.4. Assets Under Management..................................... 53
4.2. Conditions to Obligations of the Parent, Holdco and
the Buyer......................................................... 53
4.2.1. Representations; Performance................................ 54
4.2.2. Consents.................................................... 54
4.2.3. MCM Indemnity............................................... 54
4.2.4. Resignation of Directors.................................... 55
4.2.5. Opinion of Counsel.......................................... 55
4.2.6. Proceedings................................................. 55
4.2.7. Govett Agreements........................................... 55
4.2.8. FIRPTA Certification........................................ 55
4.3. Conditions to Obligations of the Company............................ 55
4.3.1. Representations, Performance, etc. ......................... 56
4.3.2. Consents.................................................... 56
4.3.3. Merger Consideration........................................ 56
4.3.4. Certain Indebtedness........................................ 57
4.3.5. Opinions of Counsel......................................... 57
4.3.6. Corporate Proceedings....................................... 57
ARTICLE V
TERMINATION
5.1. Termination......................................................... 57
5.2. Effect of Termination............................................... 58
ARTICLE VI
DEFINITIONS, MISCELLANEOUS
6.1. Definition of Certain Terms......................................... 58
6.2. Survival of Representations and Warranties.......................... 74
6.3. Expenses; Transfer Taxes............................................ 75
6.4. Severability........................................................ 75
6.5. Notices............................................................. 75
6.6. Miscellaneous....................................................... 76
6.6.1. Headings.................................................... 76
6.6.2. Entire Agreement............................................ 77
6.6.3. Counterparts................................................ 77
6.6.4. Governing Law............................................... 77
6.6.5. Binding Effect.............................................. 77
6.6.6. Assignment.................................................. 77
6.6.7. No Third Party Beneficiaries................................ 78
6.6.8. Waiver of Jury Trial........................................ 78
6.6.9. Amendment; Waivers.......................................... 78
6.6.10. Certain Disclosure......................................... 78
SCHEDULES AND EXHIBITS
Exhibit A --Adjustment Based on Assets Under
Management
Exhibit B --Form of MCM Indemnification Agreement
Exhibit C-1 --Form of Opinion of General Counsel of the Company
Exhibit C-2 --Form of Opinion of Special Counsel to the Company
Exhibit D --Form of Opinion of Special Counsel to the Buyer
Schedule 2.1.1(b) --Company Conflicts and Governmental Approvals
Schedule 2.1.1(c) --Due Organization
Schedule 2.1.2(a) --Owners of Preferred Stock and Common Stock
Schedule 2.1.2(b) --Equity Interests of the VKAC Group
Schedule 2.1.2(c) --Option Holders
Schedule 2.1.2(d) --Agreements with Respect to Capital Stock
Schedule 2.1.2(e) --Other Investments
Schedule 2.1.5 --Changes Since December31, 1995
Schedule 2.1.6(a) --Tax Returns; Payment of Taxes
Schedule 2.1.6(b) --Tax Extensions
Schedule 2.1.6(c) --Group For Tax Purposes; Tax Filing Jurisdictions
Schedule 2.1.6(d) --Tax Audits and Assessments
Schedule 2.1.6(f) --Tax Sharing Arrangements
Schedule 2.1.6(g) --Regulated Investment Company Exceptions
Schedule 2.1.6(j) --Real Property in Transfer Tax Jurisdictions
Schedule 2.1.6(k) --Qualified Stock Purchases
Schedule 2.1.7 --Real Property
Schedule 2.1.8(a) --Contracts
Schedule 2.1.8(b) --Contract Exceptions
Schedule 2.1.8(c) --Investment Advisory Clients
Schedule 2.1.8(f) --Proprietary and Preferred Vendors
Schedule 2.1.9(a) --Intellectual Property
Schedule 2.1.9(b) --Intellectual Property Infringements
Schedule 2.1.10 --Insurance Policies
Schedule 2.1.11 --Litigation
Schedule 2.1.12(a) --Compliance with Laws
Schedule 2.1.12(b) --Governmental Approvals
Schedule 2.1.14 --Affiliate Transactions
Schedule 2.1.15(a) --Regulatory Compliance: Investment Advisers
Schedule 2.1.15(b) --Regulatory Compliance: Broker-Dealers
Schedule 2.1.15(c) --Funds and Sub-Advisory Funds
Schedule 2.1.15(f) --Regulatory Compliance: Transfer Agent
Schedule 2.1.15(g) --Regulatory Compliance: Trust Companies
Schedule 2.1.18(a) --ERISA Plans
Schedule 2.1.19 --Brokers, Finders, etc.
Schedule 2.1.20 --ERISA Accounts
Schedule 2.2.2 --Parent and Buyer Conflicts and Governmental Approvals
Schedule 3.1.1 --Conduct of Business
Schedule 3.1.6(f) --Other Consents
Schedule 3.2.4(c) --Change of Control
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of June 21,
1996, among VK/AC Holding, Inc., a Delaware corporation (the "Company"),
Morgan StanleyGroup Inc., a Delaware corporation (the "Parent"), MSAM
Holdings II, Inc., a Delaware corporation and a wholly owned subsidiary
of the Parent("Holdco"), and MSAM Acquisition Inc., a Delaware
corporation and a wholly owned subsidiary of Holdco (the "Buyer").
WITNESSETH:
WHEREAS, the Company is a Delaware corporation
having authorized capital of (i) 32,500 shares of Preferred Stock, all
of which shares are issued and outstanding on the date hereof, (ii)
3,250,000 shares of Class A Common Stock, of which 2,317,474 shares are
issued and outstanding on the date hereof and (iii)3,250,000 shares of
Class B Common Stock, of which 117,817 shares are issued and outstanding
on the date hereof;
WHEREAS, the Company owns all of the issued and
outstanding capital stock of Van Kampen American Capital, Inc., a
Delaware corporation ("VKAC");
WHEREAS, the Buyer wishes to acquire the Company
on the terms and conditions and for the consideration described in this
Agreement (capitalized terms used herein without definition having the
meanings specified therefor in Section6.1);
WHEREAS, the Parent, Holdco and the Designated
Managers have entered into a Contribution Agreement dated as of the date
hereof (the "Contribution Agreement");
WHEREAS, in furtherance of such acquisition, (i)
the Boards of Directors of the Company and the Buyer have approved a
merger of the Buyer with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement, and
have directed that this Agreement be submitted to their respective
stockholders for adoption, and (ii) each of the holder of a majority of
the shares of Common Stock issued and outstanding on the date hereof and
Holdco, as the sole stockholder of the Buyer, has approved the Merger,
upon the terms and subject to the conditions set forth in this Agreement,
in each case pursuant to a written stockholder consent; and
WHEREAS, the Company, the Parent, Holdco and the
Buyer desire to make certain representations, warranties and agreements
in connection with the Merger and also to prescribe various conditions
to the Merger;
NOW, THEREFORE, in consideration of the mutual
promises, covenants, representations and warranties made herein and of
the mutual benefits to be derived therefrom, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger. In accordance with and subject to the terms and
provisions of this Agreement and the DGCL, at the Effective Time: (i) the
Buyer shall be merged with and into the Company, the separate existence
of the Buyer shall cease and the Company shall be the surviving corporation
(the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of Delaware; (ii) all rights, privileges,
immunities, powers, purposes, franchises, properties and assets of the
Company and the Buyer shall vest in the Surviving Corporation; and (iii)
all debts, liabilities, obligations, restrictions, disabilities and
duties of the Company and the Buyer shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving
Corporation.
1.2. Effective Time. Upon the terms and subject to the
conditions of this Agreement, no later than the second Business Day after
the satisfaction or waiver of the conditions set forth in Article IV, the
Company shall execute and file a Certificate of Merger (together with any
other documents required by Applicable Law to effectuate the Merger) with
the Secretary of State of the State of Delaware in accordance with Sections
251 and 103 of the DGCL (the "Certificate of Merger"). Prior to such
filing, a closing (the "Closing") will be held at the offices of Davis Polk
& Wardwell, 450 Lexington Avenue, New York, New York (or such other place
as the parties may agree), for the purpose of confirming all of the
foregoing. The Merger shall become effective simultaneously with the
filing of the Certificate of Merger. The date and time when the Merger
shall become effective is referred to in this Agreement as the "Effective
Time."
1.3. Organizational Documents, Directors and Officers of the
Surviving Corporation. Certificate of Incorporation. From and after
the Effective Time, the Certificate of Incorporation of the Buyer in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended,
altered or repealed as provided therein or by Applicable Law.
(b) By-Laws. From and after the Effective Time, the by-laws of
the Buyer in effect immediately prior to the Effective Time shall be the
by-laws of the Surviving Corporation until thereafter amended, altered or
repealed as provided therein.
(c) Directors and Officers. From and after the Effective Time,
the directors of the Buyer immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, each to hold office in accordance with the
certificate of incorporation and by-laws of the Surviving Corporation
until his or her successor is elected or appointed, as the case may be,
and qualified or until his or her earlier death, resignation,
disqualification or removal.
1.4. Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation its right, title or interest in,
to or under any of the rights, privileges, immunities, powers, purposes,
franchises, properties or assets of the Company or the Buyer, or (b)
otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors or their designees
shall be authorized to solicit in the name of the Company or the Buyer
any third party consents or other documents required to be delivered by any
third party, to execute and deliver, in the name and on behalf of the
Company or the Buyer, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of the Company or the Buyer,
all such other acts and things necessary, desirable or proper to vest,
perfect or confirm its right, title or interest in, to or under any of
the rights, privileges, immunities, powers, purposes, franchises,
properties or assets of the Company or the Buyer and otherwise to carry out
the purposes of this Agreement.
1.5. Conversion of Common Stock, Preferred Stock and Options.
Common Stock and Preferred Stock in General. Each share of Common Stock
and Preferred Stock outstanding at the Effective Time (except for (x) any
shares of Common Stock then held in the treasury of the Company or by any
Subsidiary of the Company, (y) Dissenting Shares and (z) any shares of
Common Stock then held by Holdco) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
Per Share Merger Consideration (such amounts, in the aggregate, the "Merger
Consideration").
(b) Shares Held by the Company, a Subsidiary or Holdco. Each share
of Common Stock that at the Effective Time is held in the treasury of the
Company, by any Subsidiary of the Company or by Holdco shall, by virtue
of the Merger and without any action on the part of the Company, any such
Subsidiary or Holdco, be cancelled and retired and cease to exist,
without any conversion thereof.
(c) No Rights as Stockholders. The holders of certificates
representing shares of Common Stock shall as of the Effective Time cease to
have any rights as stockholders of the Company, except such rights, if any,
as holders of Dissenting Shares may have pursuant to the DGCL, and,
except as aforesaid, their sole right shall be the right to receive their
share of the Merger Consideration, as determined and paid in the manner set
forth in this Agreement.
(d) Employee Options. At the Effective Time, each option
outstanding at such time under the VK/AC Holding, Inc. Stock Option Plan
(the "Option Plan") and the Management Stock Option Agreements entered into
pursuant to the Option Plan (each, an "Employee Option"), whether or not
vested, other than any Employee Option subject to an Acknowledgment, Waiver
and Agreement between the Company and the holder thereof (each such
agreement, a "Stock Option Waiver"), shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled for
the right to receive from the Surviving Corporation at the Effective Time
an amount of cash in dollars (subject to reduction for any applicable
withholding Taxes) equal to the product of (i) the excess of the Per
Share Merger Consideration over the exercise price per share of such
Employee Option, and (ii) the number of shares of Class A Common Stock
subject to such Employee Option. On the Business Day immediately preceding
the Effective Time, the Company shall deliver to the Buyer a certificate,
signed by an officer of the Company, setting forth (A) the aggregate amount
(the "Total Employee Option Cancellation Amount") payable by the
Surviving Corporation under this Section 1.5(d) without reduction for
applicable withholding Taxes and (B) the aggregate applicable withholding
Taxes payable with respect thereto.
(e) Deferred Stock Units. Each deferred stock unit outstanding
at such time under the separate Deferred Stock Agreements between the
Company and employees of members of the VKAC Group (each such employee, a
"Grantee," each such agreement, a "Deferred Stock Agreement" and each such
unit, a "Deferred Stock Unit") and each Employee Option outstanding at such
time that is subject to a Stock Option Waiver, in each case whether or
not vested, shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled in exchange for the right, subject
to and in accordance with the terms of the applicable Deferred Stock
Agreement in the case of the Deferred Stock Units, or the applicable
Stock Option Waiver in the case of the Employee Options, to receive from
the Surviving Corporation an amount of cash in dollars (subject to
reduction for any applicable withholding Taxes) equal to (i) in the case of
such Deferred Stock Unit, the Per Share Merger Consideration, and (ii) in
the case of such Employee Option, the product of (A) the excess of the
Per Share Merger Consideration over the exercise price per share of such
Employee Option, and (B) the number of shares of Class A Common Stock
subject to such Employee Option.
(f) Travelers Option and Jones Option. On the Business Day
immediately preceding the Effective Time, the Company shall prepare and
deliver to the Parent, Holdco and the Buyer: (i) in the event that the
Effective Time occurs after January 1, 1997, a certificate setting forth
(x) the number of shares of Class B Common Stock for which the Travelers
Option would become exercisable on the Closing Date (the "Travelers
Option Shares"), based upon the Average Annual Net Asset Value Increase (as
defined in the Travelers Option Agreement) as of the Business Day
immediately preceding the date such certificate is delivered and (y) (A)
the aggregate amount payable by the Surviving Corporation at the
Effective Time to Travelers in respect of the cancellation of the Travelers
Option without reduction for applicable withholding Taxes (such amount, the
"Travelers Option Cancellation Amount"), and (B) the aggregate applicable
withholding Taxes payable with respect thereto, if any; and (ii) a
certificate setting forth (x) the number of shares of Class A Common
Stock for which the Jones Option would become exercisable on the
Effective Time (the "Jones Option Shares"), based upon the Average Annual
Net Asset Value Increase (as defined in the Jones Option Agreement) as of
the Business Day immediately preceding the date such certificate is
delivered and (y) (A) the aggregate amount, if any, payable by the
Surviving Corporation at the Effective Time to E.D. Jones in respect of the
cancellation of the E.D. Jones Option without reduction for applicable
withholding Taxes (such amount, the "Jones Option Cancellation Amount") and
(B) the aggregate applicable withholding Taxes payable with respect
thereto.
(g) Common Stock of the Buyer. At the Effective Time, each share
of common stock of the Buyer then issued and outstanding shall, by virtue
of the Merger and without any action on the part of the Buyer, be converted
into and become one fully paid and nonassessable share of common stock, par
value $1.00 per share, of the Surviving Corporation.
1.6. Acquisition Price. Amount. The "Acquisition Price" shall
be $1,175,000,000, subject to adjustment as provided in Section 1.6(b).
(b) Adjustments to Acquisition Price. The Acquisition Price
shall be subject to the following two adjustments:
(i) The Acquisition Price shall be adjusted prior to the
Effective Time in accordance with the formula set forth in Exhibit A
hereto. At or prior to 12:00 noon, New York City time, on the Business Day
immediately preceding the Effective Time, the Company shall deliver to the
Buyer a certificate, signed by an officer of the Company, setting forth
the Closing Assets Under Management and the Market Assets Under Management
as of the close of business on the second Business Day immediately
preceding the Effective Time. Such certificate will include information
with respect to each open end Fund, the Prime Rate Trust and the
Institutional Accounts (including each Sub-Advisory Fund), and will show
the amount and calculation of the adjustment, if any, to the Acquisition
Price pursuant to Exhibit A hereto and this Section 1.6(b)(i).
(ii) In addition to the adjustment provided for in clause (i), the
Acquisition Price shall be reduced by: (A) the Adjusted Senior Notes
Amount; (B) the Adjusted Bank Debt Amount; and (C) 50% of the Transaction
Expenses up to an amount of such Expenses not to exceed $16,000,000 and
100% of any such Expenses in excess of $16,000,000. Two Business Days
prior to the Effective Time, the Company shall deliver to the Buyer a
certificate, executed by the president and the chief financial officer of
the Company, setting forth the individual amounts, if any, by which the
Acquisition Price will be adjusted pursuant to the foregoing clauses (A),
(B) and (C), together with reasonable supporting calculations for each
component of such adjustments, such determinations to be made as of the
Business Day (the "Determination Date") that is six Business Days prior
to the Effective Time.
(iii) The Acquisition Price shall be increased by an amount equal
to the product of (i) the Acquisition Price, as adjusted pursuant to
Section 1.6(b)(ii) but without regard to Section 1.6(b)(i) and this Section
1.6(b)(iii), times (ii) Base LIBOR (as defined in the Credit Agreement)
plus .15 of 1%, times (iii) a fraction, the numerator of which shall be the
number of days from and including the Determination Date to the Effective
Time and the denominator of which shall be 360. The Buyer and the
Company shall for federal Income Tax purposes treat the increase in the
Acquisition Price pursuant to this Section 1.6(b)(iii) as a portion of
the acquisition price for the Company, not as interest.
1.7. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Common Stock which are held by stockholders
who shall have effectively dissented from the Merger and perfected their
appraisal rights in accordance with the provisions of Section 262 of the
DGCL (the "Dissenting Shares"), shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, but the
holders thereof shall be entitled to payment from the Surviving Corporation
of the appraised value of such shares in accordance with the provisions
of Section 262 of the DGCL.
1.8. Payment of Merger Consideration and Other Amounts. Surrender
of Certificates, etc. Prior to the Effective Time, the Parent, Holdco, the
Buyer and the Company shall enter into an exchange agent agreement (the
"Exchange Agent Agreement") with a bank or trust company designated by
the Company and reasonably acceptable to the Buyer pursuant to which such
bank or trust company shall act as exchange agent (the "Exchange Agent")
for the payment of the Merger Consideration. As soon as practicable
after the Effective Time, each holder of a certificate or certificates
which immediately prior to the Effective Time represented outstanding
shares of Common Stock or Preferred Stock (the "Certificates") shall,
upon surrender to the Exchange Agent of such Certificate or Certificates
and acceptance thereof by the Exchange Agent, be entitled to the amount
of cash (rounded to the nearest $0.01) into which the aggregate number of
shares of Common Stock or Preferred Stock previously represented by such
Certificate or Certificates surrendered shall have been converted
pursuant to Section 1.5(a) of this Agreement. The Exchange Agent shall
accept such Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. The Exchange Agent
shall deliver all funds which each holder of Common Stock or Preferred
Stock is entitled to receive pursuant to this Section 1.8 within one
Business Day following such holder's surrender of such holder's
Certificates. The Buyer shall furnish to the Exchange Agent prior to or at
the Effective Time all funds required to make such payments. No interest
will be paid or accrued on the Merger Consideration upon the surrender of
the Certificates. All payments in respect of shares of Common Stock or
Preferred Stock which are made in accordance with the terms hereof shall be
deemed to have been made in full satisfaction of all rights pertaining to
such shares. With respect to any Certificate alleged to have been lost,
stolen or destroyed, the owner or owners of such Certificate shall be
entitled to the Merger Consideration in respect of such Certificate upon
delivery to the Exchange Agent of an affidavit of such owner or owners
setting forth such allegation and a bond sufficient to indemnify the
Parent, Holdco and the Surviving Corporation against any claim that may
be made against any of them on account of the alleged loss, theft or
destruction of any such Certificate or the delivery of such Merger
Consideration.
(b) Payments in Respect of Options. At or prior to the Effective
Time, the Buyer shall pay to the Company an amount equal to the Total
Employee Option Cancellation Amount, the Jones Option Cancellation Amount
and, if the Effective Time occurs after January 1, 1997, the Travelers
Option Cancellation Amount, net in each case of withholding Taxes, if
any, which amounts shall be paid by the Surviving Corporation to the
Persons entitled to receive such amounts pursuant to Sections 1.5(d) and
(f).
(c) Endorsement of Certificates; Transfer Taxes. If Merger
Consideration is to be delivered to a Person other than the Person in whose
name the Certificate surrendered in exchange therefor is registered, it
shall be a condition to delivery of such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the Person requesting such Merger
Consideration shall pay any transfer or other Taxes required by reason of
the payment to a Person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Exchange Agent and
the Surviving Corporation that such Tax has been paid or is not applicable.
(d) Status of Certificates. Until surrendered in accordance with
the provisions of this Section 1.8, from and after the Effective Time, each
Certificate (other than (i) Certificates representing shares of Common
Stock held in the treasury of the Surviving Corporation, by any
Subsidiary of the Surviving Corporation or by Holdco and (ii) Dissenting
Shares in respect of which appraisal rights are perfected) shall
represent for all purposes only the right to receive a portion of the
Merger Consideration as determined and paid in the manner set forth in this
Agreement.
(e) No Further Transfers. After the Effective Time there shall
be no transfers on the stock transfer books of the Surviving Corporation of
the shares of Common Stock or Preferred Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration as provided in Section
1.8(d).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company . The Company
represents and warrants to the Parent, Holdco and the Buyer as follows:
2.1.1. Authorization; No Conflicts; Status of VKAC Group, etc.
Authorization, etc. The Company has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by it. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, by the Company have
been duly authorized by all requisite corporate action of the Company. This
Agreement has been duly executed and delivered by the Company and
constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) No Conflicts. Except as set forth in Schedule 2.1.1(b), the
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will
not contravene, result in any violation of, loss of rights or default
under, constitute an event creating rights of acceleration, termination,
repayment or cancellation under, entitle any party to receive any payment
pursuant to, or result in the creation of any Lien upon any of the
properties or assets of any member of the VKAC Group under, (i) any
provision of the Organizational Documents of any member of the VKAC
Group, (ii) any Applicable Law applicable to any member of the VKAC Group
or any Fund or any of their respective properties or (iii) any Contract,
except for, in the case of this clause (iii), any such contraventions,
violations, losses, defaults, accelerations, terminations, repayments,
cancellations or Liens that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Except as set
forth in Schedule 2.1.1(b), no Governmental Approval (other than pursuant
to the HSR Act) or other Consent is required to be obtained or made by
any member of the VKAC Group or any Fund in connection with the execution
and delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby.
(c) Due Organization, etc. Schedule 2.1.1(c) sets forth a
correct and complete list of each member of the VKAC Group, its form and
jurisdiction of organization and each jurisdiction in which such member
is qualified to do business. Each member of the VKAC Group is a
corporation, partnership, limited liability company, trust or trust company
duly organized, validly existing and in good standing under the laws of
such member's jurisdiction of organization, with the requisite corporate,
partnership, company, trust or trust company power and authority, as
applicable, to carry on its business as now conducted and to own or lease
and to operate its properties as and in the places where such business is
now conducted and such properties are now owned, leased or operated.
Each member of the VKAC Group is duly qualified to do business and is in
good standing as a foreign corporation, partnership, limited liability
company, trust or trust company, as applicable, in all jurisdictions in
which the failure to be so qualified, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on such
member of the VKAC Group.
(d) Organizational Documents, etc. The Company has made
available to the Buyer complete and correct copies of the Organizational
Documents, as in effect on the date hereof, of each member of the VKAC
Group. The Buyer has been given the opportunity to inspect the corporate
minutes and stock transfer books of the Company and VKAC.
2.1.2. Capitalization. The Company. The authorized capital
stock of the Company consists of (i) 3,250,000 shares of Class A Common
Stock, of which 2,317,474 shares as of the date hereof are issued and
outstanding, (ii) 3,250,000 shares of Class B Common Stock, of which
117,817 shares as of the date hereof are issued and outstanding and (iii)
32,500 shares of Preferred Stock, all of which shares as of the date hereof
are issued and outstanding. All of the outstanding shares of Preferred
Stock and Common Stock have been duly authorized, validly issued, fully
paid and nonassessable. The record owners as of the date hereof of the
Preferred Stock and the Common Stock are listed in Schedule 2.1.2(a).
(b) Other Members of the VKAC Group. Schedule 2.1.2(b) sets
forth a complete and correct description of the authorized stock or other
equity interests of each member of the VKAC Group (other than the
Company) and the amount of such stock or other equity interests that are
issued and outstanding as of the date hereof. All of such outstanding
shares of stock or other equity interests of each member of the VKAC
Group (other than the Company) have been duly authorized and validly issued
and are fully paid and nonassessable, and are owned beneficially and of
record by the member of the VKAC Group or other Person specified on such
Schedule 2.1.2(b).
(c) Options. There are 358,301 shares of Class A Common Stock
reserved for issuance upon exercise of the Employee Options outstanding
on the date hereof, 57,750 shares of Class A Common Stock reserved for
issuance upon exercise of the Jones Option, 120,222 shares of Class B
Common Stock reserved for issuance upon exercise of the Travelers Option
(the Employee Options, the Jones Option and the Travelers Option,
collectively, the "Options"), 3,350 shares of Class A Common Stock reserved
for issuance in connection with Deferred Stock Units outstanding on the
date hereof, 32,500 shares of Class A Common Stock reserved for issuance
upon exchange of the Preferred Stock for such shares and 3,132,183 shares
of Class B Common Stock reserved for issuance upon exchange of shares of
Class A Common Stock for such shares. There are Options relating to
536,273 shares of Common Stock outstanding as of the date hereof, and the
Company has not agreed to, nor does it have commitments to, issue options
relating to any additional shares of Common Stock. The Travelers Option
will terminate without having become exercisable so long as the Effective
Time occurs prior to January 1, 1997. Schedule 2.1.2(c) sets forth a
complete and correct list of all holders of Options as of the date hereof
(collectively, the "Option Holders") and all holders of Deferred Stock
Units as of the date hereof, including the exercise price of each such
Option and the number of shares of Common Stock issuable upon exercise
thereof and upon vesting of each such Deferred Stock Unit.
(d) Other Agreements with Respect to Capital Stock. There are no
preemptive or similar rights on the part of any Person with respect to
the issuance of any shares of capital stock of the Company or any other
member of the VKAC Group, except for such rights as may be set forth in the
Registration and Participation Agreement. Except (i) for this Agreement,
(ii) in respect of the Options and the Deferred Stock Agreements, (iii)
in respect of certain repurchase rights with respect to the shares of Class
A Common Stock held by current or former officers or employees of the
Company or any of its Subsidiaries and (iv) and as set forth in Schedule
2.1.2(c) or 2.1.2(d), currently there are no subscriptions, options,
warrants or other similar rights, agreements or commitments of any kind
obligating the Company or any other member of the VKAC Group to issue or
sell, or to cause to be issued or sold, or to repurchase or otherwise
acquire, any shares of its capital stock or any securities convertible into
or exchangeable for, or any options, warrants or other similar rights
relating to, any such shares.
(e) Other Investments. Except as set forth in Schedule 2.1.2(e)
and except for securities of and other interests in members of the VKAC
Group, investments in publicly traded securities acquired or held in the
ordinary course of business as trading inventory, investments in the
Company's investment products and cash equivalents, no VKAC Company holds
any outstanding securities or other interests in any corporation,
partnership, company, joint venture or other entity.
2.1.3. Financial Information. The Company has delivered to the Buyer
the Financial Statements. The Financial Statements have been prepared in
all material respects in accordance with generally accepted accounting
principles in the United States applied on a consistent basis ("GAAP")
throughout the periods presented in the Financial Statements, except, in
the case of the Company Financial Statements as at and for the three months
ended March 31, 1996, for normal year-end audit adjustments and the absence
of footnotes. The consolidated balance sheets of the Company and its
Subsidiaries included in the Company Financial Statements present fairly in
all material respects the financial position of the Company and its
Subsidiaries as at the respective dates thereof; and the consolidated
statements of income, statements of stockholders' equity and statements
of cash flow of the Company and its Subsidiaries included in the Company
Financial Statements present fairly in all material respects the results of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the respective periods indicated. The statements of net
assets or statements of assets and liabilities and investment portfolio
included in the Fund Financial Statements for each of the Funds present
fairly in all material respects the financial position of such Fund as at
the respective dates thereof, and the statements of operations and
statements of changes in net assets included in the Fund Financial
Statements for each of the Funds present fairly in all material respects
the results of operations and changes in net assets of such Funds for the
respective periods indicated.
2.1.4. Undisclosed Liabilities. The VKAC Group is not subject to any
obligation or liability of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, and, to the
knowledge of the Company, there is no existing condition, situation or
set of circumstances which would reasonably be expected to result in such
an obligation or liability, that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, other than (i)
obligations and liabilities contemplated by or in connection with this
Agreement or the transactions contemplated hereby, (ii) as and to the
extent disclosed or reserved against in the audited consolidated balance
sheet as at December 31, 1995 included in the Company Financial
Statements and (iii) obligations and liabilities incurred since December
31, 1995 in the ordinary course of business consistent with past
practices and not prohibited by this Agreement.
2.1.5. Absence of Changes. Since December 31, 1995, except (i) as
set forth in Schedule 2.1.5, (ii) as reflected or reserved against in the
Financial Statements, or (iii) as contemplated by (including, without
limitation, Section 3.1.1) or in connection with this Agreement or the
transactions contemplated hereby, the business of the VKAC Group and, to
the knowledge of the Company, the Funds have been conducted in the ordinary
course consistent with past practices and no member of the VKAC Group
and, to the knowledge of the Company, no Fund has:
(a) undergone any change in its business, financial condition, results
of operations or properties (other than changes of a general economic or
political nature, including but not limited to changes in the net asset
value of any Fund or Sub-Advisory Fund resulting from fluctuations in
market price) that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect;
(b) in the case of the Company or the Funds, declared, set aside, made
or paid any dividend or other distribution in respect of its capital
stock or repurchased, redeemed or otherwise acquired any shares of its
capital stock, except, in the case of the Funds, in the ordinary course
of business consistent with past practices;
(c) issued or sold any shares of its capital stock of any class or any
options, warrants or other similar rights, agreements or commitments of any
kind to purchase any such shares or any securities convertible into or
exchangeable for any such shares, except (i) for issuances or sales of
shares of capital stock of the Funds in the ordinary course of business
consistent with past practices and (ii) as permitted under Section 3.1.2;
(d) in the case of any member of the VKAC Group, incurred, assumed,
guaranteed or prepaid any indebtedness for borrowed money (including,
without limitation, letters of credit) or issued or sold any debt
securities, except for any such incurrence, assumption, guarantee or
prepayment of (i) indebtedness under the Credit Agreement which, in the
case of prepayments after the date hereof, shall not exceed the Permitted
Debt Prepayment Amount for the applicable period, (ii) indebtedness under
the BONY Loan Agreement for the purpose of financing trading inventory in
the ordinary course of business consistent with past practices or (iii)
other indebtedness in the ordinary course of business consistent with
past practices in an aggregate amount not exceeding $5,000,000;
(e) mortgaged, pledged or otherwise subjected to any Lien any of its
properties or assets, tangible or intangible, except for Permitted
Encumbrances or in the ordinary course of business consistent with past
practices;
(f) entered into (i) any agreement or commitment involving more than
$1,000,000 that, pursuant to its terms, is not cancelable without penalty
on 60 days' notice or less or (ii) any other agreement, commitment or other
transaction, other than (A) any agreement, commitment or other
transaction involving an expenditure of not more than $500,000 or (B)
Investment Advisory Contracts, distribution agreements, Underwriting
Agreements and Custodian/Transfer Agent Agreements entered into in the
ordinary course of business consistent with past practices;
(g) paid (or committed to pay) any bonus or other incentive compensation
to any officer, director, partner, employee or sales representative or
granted (or committed to grant) to any officer, director, partner, employee
or sales representative any other increase in compensation, except in
each case in the ordinary course of business consistent with past practices
or pursuant to the terms of any agreement or commitment existing at
December 31, 1995;
(h) (i) entered into, adopted or amended in any material respect, any
employment, collective bargaining, deferred compensation, severance,
retirement, bonus, profit-sharing, stock option or other equity, pension or
welfare plan or agreement maintained for the benefit of any officer,
director, partner, employee or sales representative or (ii) granted any
severance or termination pay to any officer, director, partner, employee or
sales representative, except in any such case in the ordinary course of
business consistent with past practices, as required under Applicable Law
or, in the case of clause (ii), for any such grant required to be made
pursuant to any plan, agreement or commitment existing at December 31,
1995;
(i) suffered any strike or other labor dispute that has had or would
reasonably be expected to have a Material Adverse Effect;
(j) suffered any loss of employees or customers that has had or would
reasonably be expected to have a Material Adverse Effect;
(k) amended its certificate of incorporation or by-laws or any other
Organizational Documents;
(l) granted any rights or licenses under any of its trademarks or
trade names or other Company Intellectual Property or entered into any
licensing or similar agreements or arrangements other than in the
ordinary course of business consistent with past practices;
(m) made any material changes in policies or practices relating to
selling practices, returns, discounts or other material terms of sale or
accounting therefor, including any material change in sales load
reallowance policies with respect to sales of shares of the Funds;
(n) in the case of any Fund, had any action taken by the Board of
Directors or Trustees of such Fund other than in the ordinary course of
business consistent with past practices or as contemplated by or in
connection with this Agreement;
(o) changed in any material respect its accounting practices, policies
or principles, other than any such changes as may be required under GAAP;
(p) in the case of any VKAC Company, amended or agreed to amend (i)
any fee arrangement with respect to services provided by it to any Fund,
(ii) any fee arrangement with any Person relating to the distribution of
shares of any Fund or (iii) any fee arrangement existing under any
Investment Advisory Contract;
(q) in the case of any Fund, amended or agreed to amend the
distribution-related fees payable to any Person in connection with the
distribution of its shares, or otherwise amended the terms applicable to
any existing class of its shares, or authorized the creation of a new class
of shares;
(r) suffered any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting its properties or assets which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect; or
(s) taken any action or omitted to take any action that would result
in the occurrence of any of the foregoing.
2.1.6. Taxes. (a) Filing of Returns and Payment of Taxes. Except as
set forth on Schedule 2.1.6(a), all material Returns required to be filed
on or before the date hereof have been filed in accordance with
Applicable Law and all material Returns required to be filed on or before
the Closing Date will have been filed by the Closing Date in accordance
with Applicable Law or, in each case, the time for filing such Returns
shall have been validly extended as set forth in Schedule 2.1.6(b). Except
for Taxes set forth on Schedule 2.1.6(a), the following Taxes
(collectively, "Company Taxes") have (or, in the case of Taxes that
become due after the date hereof and on or before the Closing Date, by
the Closing Date will have) been duly paid: (i) all Taxes shown to be due
on such Returns and (ii) all material Taxes due and payable on or before
the date hereof and all material Taxes due and payable on or before the
Closing Date that are or may become payable by the VKAC Companies or
chargeable as a Lien upon the assets thereof (whether or not shown on any
Return). Except as set forth on Schedule 2.1.6(a), all material Employment
and Withholding Taxes required to be withheld and paid on or before the
date hereof, and all material Employment and Withholding Taxes required
to be withheld and paid on or before the Closing Date, have been or by
the Closing Date will have been duly paid to the proper Governmental
Authority or properly set aside in accounts for such purpose. Except as set
forth on Schedule 2.1.6(a), all interest and penalties in respect of
material Taxes that were not timely paid have been paid.
(b) Extensions, etc. Except as set forth on Schedule
2.1.6(b), (i) no agreement or document extending or waiving, or having
the effect of extending or waiving, the period of assessment or
collection of any Company Taxes or Employment and Withholding Taxes, and no
power of attorney with respect to any such Taxes, has been executed or
filed with the IRS or any other taxing authority; (ii) none of the VKAC
Companies has requested any extension of time within which to file any
Return and has not yet filed such Return; and (iii) there are no requests
for rulings in respect of any Company Taxes or Employment and Withholding
Taxes pending between any VKAC Company and any Governmental Authority.
(c) Tax Filing Groups; Income Tax Jurisdictions. Except as
set forth on Schedule 2.1.6(c), none of the VKAC Companies is or has been
at any time a member of any affiliated, consolidated, combined or unitary
group for Tax purposes. Set forth on Schedule 2.1.6(c) for the VKAC
Companies are all countries, states, provinces, cities or other
jurisdictions in which any material Tax is properly payable by any VKAC
Company.
(d) Copies of Returns; Audits; etc. The Company has (or by
the Closing Date will have) made available to the Buyer complete and
accurate copies of all Returns as filed and, if applicable, as amended,
with respect to all open Tax periods that have been filed or will be
required to be filed (after giving effect to all valid extensions of time
for filing) on or before the Closing Date. Except as set forth on Schedule
2.1.6(d), (i) no Company Taxes or Employment and Withholding Taxes have
been asserted in writing (or, to the knowledge of the Company, after
January 31, 1995, orally) by any Governmental Authority to be due in
respect of any open Tax period, (ii) no revenue agent's report or written
(or, to the knowledge of the Company, after January 31, 1995, orally)
assessment for Taxes has been issued by any Governmental Authority in the
course of any audit with respect to Company Taxes or Employment and
Withholding Taxes for any open Tax period and (iii) no issue has been
raised by any Governmental Authority in writing (in a writing that has been
received by the VKAC Companies) or, to the knowledge of the Company,
after January 31, 1995, orally in the course of any audit that has not been
completed with respect to Company Taxes or Employment and Withholding
Taxes. Except as set forth on Schedule 2.1.6(d), all Returns filed with
respect to Tax years of the VKAC Companies through the Tax year ended
December 31, 1983, have been closed or are Returns with respect to which
the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired. The audits of the Returns
with respect to federal Income Taxes for the following taxable periods have
been completed: All taxable periods beginning on or after September 9,
1983 and ended on or prior to December 31, 1986. The Returns with
respect to federal Income Taxes for the following taxable periods are
currently under audit by the IRS: 1987 through 1992. Except as set forth on
Schedule 2.1.6(d), there is no judicial or administrative claim, audit,
action, suit, proceeding or, to the knowledge of the Company, investigation
now pending or threatened against or with respect to any VKAC Company in
respect of any Company Tax, Employment and Withholding Tax or Tax Asset.
Except as set forth on Schedule 2.1.6(d), there is no reasonable basis
for any deficiency, claim or adjustment of additional Company Taxes or
Employment and Withholding Taxes of which the Company is aware. Except as
set forth on Schedule 2.1.6(d), there are no Liens for Taxes upon the
assets of any VKAC Company except Liens for current Taxes not yet due or
being contested in good faith and by appropriate proceedings.
(e) Section 1445(a) of the Code. The Buyer will not be required
to deduct and withhold any amount pursuant to section 1445(a) of the Code
upon the payment of the Merger Consideration pursuant to this Agreement.
(f) Tax Sharing Agreements. Except as set forth on Schedule
2.1.6(f), (i) none of the VKAC Companies is a party to or bound by or has
any obligation under any Tax sharing agreement or arrangement and (ii) no
VKAC Company is currently under any contractual obligation to pay any
amounts of the type described in clause (ii) or (iii) or the definition
of "Tax."
(g) Regulated Investment Company, etc. (i) As to each of the
Funds other than those to which the provisions of paragraph (ii) or (iii)
of this Section 2.1.6(g) apply: Except as set forth on Schedule
2.1.6(g), (A) each of such Funds made or will make the election set forth
in section 851(b) of the Code for its first taxable year for which it
represented to its shareholders that it was a RIC; (B) except for its
current taxable year and other than Van Kampen American Capital Pace Fund
prior to June 30, 1977, each of such Funds has qualified as a RIC, for such
first taxable year and for each succeeding taxable year; (C) except for
failure to comply with the provisions of section 852(a)(1) of the Code,
each of such Funds would qualify as a RIC, for its current taxable year
if the last day of its most recent fiscal quarter ended on or prior to
the date of this Agreement were treated as the last date of such taxable
year and (D) no such Fund has any earnings and profits accumulated in any
taxable year in which it did not qualify as a RIC.
As of the Closing Date, each of such Funds will have qualified as
a RIC, for each of its taxable years ended prior to the Closing Date, other
than Van Kampen American Capital Pace Fund prior to June 30, 1977. As of
the Closing Date, except for failure to comply with the provisions of
section 852(a)(1) of the Code, (E) each of such Funds whose taxable years
end within three months after the Closing Date would so qualify for its
taxable year during which the Closing Date occurs if the Business Day
immediately preceding the Closing Date were treated as the last date of
such taxable year, and (F) except for a failure to comply with section
851(b)(4) of the Code that would not prevent such Fund from curing such
failure under section 851(d) of the Code and that is consistent with past
practice of such Fund and with such Fund's fiduciary obligations, each of
such Funds would so qualify for its taxable year in which the Closing
Date occurs if the last day of its most recent fiscal quarter ended on or
prior to the Closing Date were treated as the last date of such taxable
year.
(ii) In the case of Van Kampen American Capital Exchange Fund,
Van Kampen American Capital Monthly Accumulation Plans and each of the
Funds that is a unit investment trust, other than those unit investment
trusts that have made the election set forth in section 851(b) of the
Code (to which the provisions of paragraph (i) of this Section 2.1.6(g)
shall apply), such Fund is not and has not been at any time since its
inception (or, if later, the effective date of section 851(f) of the
Code) an association taxable as a corporation for federal Income Tax
purposes. Van Kampen American Capital Exchange Fund is and has been
since its inception treated as a partnership for federal Income Tax
purposes. Van Kampen American Capital Monthly Accumulation Plans is and
has been since its inception (or, if later, the effective date of section
851(f) of the Code) treated as a business arrangement to which the
provisions of such section 851(f) apply. All portions of each Fund that is
a unit investment trust, other than a unit investment trust that has made
the election set forth in section 851(b) of the Code, are and have been
since their inception subject to subpart E of part I of subchapter J of
chapter 1 of subtitle A of the Code.
(iii) Each of the Van Kampen American Capital Navigator Funds is
organized as a "socit d'investissement capital variable compartiments
multiples" under the laws of Luxembourg. Each such Fund maintains its
principal office, as defined for purposes of section 864(b)(2)(A)(ii) of
the Code, outside the United States.
(iv) Except as set forth on Schedule 2.1.6(g), all material
Tax returns, reports, declarations, forms or information statements
relating to Taxes required to be filed by any Fund with any Governmental
Authority, or provided by any Fund to any other Person, on or before the
Closing Date (the "Fund Returns") have been duly filed, or provided to
the appropriate Person, by or on behalf of such Fund in accordance with all
applicable laws. Except as set forth on Schedule 2.1.6(g), as of the
time each Fund Return was filed or provided to the relevant Person, such
Fund Return was accurate and complete in all material respects. Except
as set forth on Schedule 2.1.6(g), all material Taxes payable by or on
behalf of any Fund on or before the date hereof have been timely paid, or
withheld and remitted, to the appropriate Governmental Authority. Except
as set forth on Schedule 2.1.6(g), there is no judicial or administrative
claim, audit, action, suit, proceeding or investigation now pending or to
the knowledge of the Company, threatened against or with respect to any
Fund in respect of any Tax.
(h) Reserves for Taxes. As of the date hereof, the financial
statements of the VKAC Companies reflect charges, accruals and reserves
to cover taxes and deferred taxes that are adequate in all material
respects in accordance with GAAP. As of the Closing Date, the financial
statements of the VKAC Companies will reflect charges, accruals and
reserves to cover taxes and deferred taxes that are adequate in all
material respects in accordance with GAAP. All information set forth in
the Financial Statements, including the notes thereto, relating to tax
matters is true and complete in all material respects in accordance with
GAAP.
(i) Section 481 Adjustment. No VKAC Company is or will be
required to include any adjustment in taxable income for any Post-Closing
Tax Period under Section 481(c) of the Code (or any similar provision of
the Tax laws of any jurisdiction) as a result of a change in method of
accounting for a Pre-Closing Tax Period or pursuant to the provisions of
any agreement entered into with any Taxing Authority on or before the
Closing Date with regard to the Tax liability of any VKAC Company for any
Pre-Closing Tax Period.
(j) Real Property. Except as set forth on Schedule 2.1.6(j),
none of the VKAC Companies owns any interest in real property in the
State of New York or in any other jurisdiction in which a Tax is imposed on
the transfer of a controlling interest in an entity that owns any
interest in real property.
(k) Qualified Stock Purchases. Except as set forth on
Schedule 2.1.6(k), no VKAC Company has consummated a "qualified stock
purchase" within the meaning of section 338 of the Code since December
20, 1994.
2.1.7. Properties and Assets. Schedule 2.1.7 sets forth a complete
and correct list, as of the date hereof, of all real property leased by any
member of the VKAC Group (the "Real Property"), including the names of each
of the parties to such lease and the location of the applicable
property. None of the members of the VKAC Group owns any real property.
Each member of the VKAC Group has valid title to all material personal
property owned by it, and valid leasehold interests in all real and
material personal property leased by it, in each case free and clear of
all Liens, except (i) Liens specified in Schedule 2.1.7 or reflected in the
Financial Statements, (ii) Liens for Taxes not yet delinquent or which
are being contested in good faith by appropriate proceedings if adequate
reserves with respect thereto are maintained on its books in accordance
with GAAP, (iii) statutory Liens incurred in the ordinary course of
business consistent with past practices that have not had and would not
reasonably be expected to have a Material Adverse Effect and (iv) Liens
which do not materially detract from the value or materially interfere with
the use of the properties affected thereby (the exceptions described in the
foregoing clauses (i), (ii), (iii) and (iv) being referred to
collectively as "Permitted Encumbrances"). Schedule 2.1.7 sets forth a
list of each real property lease under which any VKAC Company is a lessee
as to which the consummation by the Company of the transactions
contemplated hereby would result in a violation of, loss of rights or
default under or constitute an event creating rights of acceleration,
termination or cancellation under such lease.
2.1.8. Contracts. Schedule of Contracts, etc. Schedule 2.1.8(a)
sets forth a correct and complete list, as of the date hereof, of all
Contracts. The term "Contracts" means all written agreements, contracts
and commitments of the following types to which any member of the VKAC
Group is a party or by which any member of the VKAC Group or its respective
properties is bound and which is currently in effect, as amended,
supplemented, waived or otherwise modified as of the date hereof: (i)
agreements, contracts and commitments for the performance of investment
advisory or investment management services for clients (the "Investment
Advisory Contracts"); (ii) agreements, contracts and commitments for the
distribution of shares of the Funds or any other mutual funds, closed end
companies, variable annuities or other similar products to which any of the
top 20 selling agents (which such agents represented more than 54% of the
sales of such products during the year ended December 31, 1995) of the
investment products of the VKAC Group (measured by sales of such products
during the year ended December 31, 1995) is a party (the "Selling
Agreements") and underwriting agreements with the Funds as to which any
member of the VKAC Group is the principal underwriter (the "Underwriting
Agreements"); (iii) custody, transfer agent and other similar material
agreements (the "Custodian/Transfer Agent Agreements"); (iv) employment,
consulting, retention and collective bargaining agreements, if any, with
officers, directors, key employees, former employees or sales
representatives; (v) mortgages, indentures, security agreements relating to
indebtedness for borrowed money, letters of credit, loan agreements and
other material agreements, guarantees and instruments relating to the
borrowing of money or extension of credit; (vi) material licenses and other
similar material agreements involving Intellectual Property rights; (vii)
joint venture, partnership and similar agreements; (viii) stock purchase
agreements (other than any such agreements pursuant to which the Company
issued Preferred Stock or Common Stock to any Person), asset purchase
agreements and other acquisition or divestiture agreements; (ix) material
agreements, contracts and commitments with respect to the sharing or
capping of fees or other payments received from any Client or other
Person or the sharing of expenses of any other Person; (x) personal
property leases providing for annual rentals of $1,000,000 or more; (xi)
agreements, contracts and commitments for the purchase of supplies,
services, equipment or other assets that provide for either (A) annual
payments by the VKAC Group of $500,000 or more or (B) aggregate payments by
the VKAC Group of $1,000,000 or more; (xii) any other agreements, contracts
or commitments that are material to the business, financial condition,
results of operations or properties of the VKAC Group, taken as a whole;
and (xiii) any guaranty of any of the foregoing. The Company has made
available to the Buyer for inspection complete and correct copies of all
Contracts, including a fee schedule, where applicable.
(b) No Defaults, etc. Except as set forth in Schedule 2.1.8(b) and
excluding any failure to obtain Consents with respect to the Contracts
listed in Schedule 2.1.1(b), (i) each Contract is in full force and
effect in all material respects, and (ii) there does not exist under any
material Contract any material event of default, or any event or
condition that, after notice or lapse of time or both, would constitute a
material event of default, on the part of any member of the VKAC Group
or, to the knowledge of the Company, on the part of any other party to
any material Contract. Except as disclosed in Schedule 2.1.8(b), no member
of the VKAC Group is subject to any contract, agreement or commitment
materially restricting or limiting the type or scope of business or
operations that it may conduct now or immediately after the Effective Time.
(c) Certain Investment Advisory Clients. Schedule 2.1.8(c) sets
forth a correct and complete list of each investment advisory client of the
VKAC Companies as of the date hereof. Except as set forth on Schedule
2.1.8(c), as of the date hereof each such client is being served by the
VKAC Company specified on such Schedule and the Company has not received
written notice from any such client of, and, to the knowledge of the
Company, no such client has stated orally, its intention to terminate its
Investment Advisory Contract.
(d) Certain Selling Agents. As of the date hereof, the Company has
not received written notice from any selling agent that is a party to any
Selling Agreement of, and, to the knowledge of the Company, no such party
has stated orally, its intention to terminate its Selling Agreement.
(e) Investment Contracts. To the knowledge of the Company, and
except as would not reasonably be expected to have a Material Adverse
Effect on any VKAC Company or Fund party thereto, (x) each Investment
Advisory Contract, Selling Agreement, Underwriting Agreement and Custodian/
Transfer Agent Agreement and any renewal thereof after the date hereof
and prior to the Effective Time has been duly authorized, executed and
delivered by each party thereto and, to the extent applicable, has been
adopted in compliance with Section 15 of the Investment Company Act and
is a valid and binding agreement of each such party, enforceable in
accordance with its terms (subject to bankruptcy, insolvency, moratorium,
fraudulent transfer and similar laws affecting creditors' rights
generally and to general equity principles) and (y) each of the Company
and, to the knowledge of the Company, the other party thereto is in
compliance in all material respects with the terms of each Investment
Advisory Contract, Selling Agreement, Underwriting Agreement and Custodian/
Transfer Agent Agreement to which it is a party, and no event has
occurred or condition exists that constitutes or with notice or the passage
of time would constitute a material default by any member of the VKAC Group
thereunder.
(f) Status. Schedule 2.1.8(f) sets forth a complete and correct
list of the top 20 firms (measured by sales of Fund shares during the
year ended December 31, 1995) that distribute shares of the Funds with whom
the VKAC Group has a proprietary vendor or preferred vendor relationship as
of the date hereof.
2.1.9. Intellectual Property. Schedule of Intellectual
Property. Schedule 2.1.9(a) sets forth a correct and complete list of
all of the trade or service marks and all other material Intellectual
Property used in the business and operations of the VKAC Group as of the
date hereof (the "Company Intellectual Property") and sets forth the
owner and nature of the interest of the VKAC Group therein. The Company
has previously made available to the Buyer correct and complete copies of
all licenses, sublicenses or other similar agreements (including any
amendments thereto) set forth on Schedule 2.1.9(a). Except as set forth in
Schedule 2.1.9(a), the VKAC Group has the legal right to use the Company
Intellectual Property in connection with the business as currently
conducted by the VKAC Group and, except as set forth on Schedule
2.1.1(b), immediately after the Effective Time, the Surviving Corporation
or its Subsidiaries will have such right to the same extent and on the same
terms as the VKAC Group was entitled to use the Company Intellectual
Property immediately prior to the Effective Time.
(b) No Infringement, etc. To the knowledge of the Company, the
business and operations of the VKAC Group as currently conducted do not
infringe or otherwise conflict with any rights of any Person in respect
of any Intellectual Property. To the knowledge of the Company, none of the
Company Intellectual Property owned by any member of the VKAC Group is
being materially infringed or otherwise materially used or available for
use by any Person other than a member of the VKAC Group, except as set
forth in Schedule 2.1.9(a) or (b). No Company Intellectual Property
owned by any member of the VKAC Group is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use
thereof by any member of the VKAC Group with respect to its business or
restricting the licensing thereof by such member to any Person. Except
as set forth on Schedule 2.1.9(b), no member of the VKAC Group has
entered into any agreement to indemnify any other Person against any charge
of infringement of Intellectual Property, other than pursuant to any such
agreements entered into in connection with the use of commercially
available information systems applications.
2.1.10. Insurance. Schedule 2.1.10 sets forth a correct and
complete list of all insurance policies and fidelity bonds maintained on
the date hereof by or for the benefit of the members of the VKAC Group
and the Funds. The Company has made available to the Buyer complete and
correct copies of all such policies and bonds, together with all riders and
amendments thereto as of the date hereof. As of the date hereof, such
policies and bonds are in full force and effect, and all premiums due
thereon have been paid. The members of the VKAC Group have complied in all
material respects with the terms and provisions of such policies and bonds.
Except as set forth on Schedule 2.1.10, there is no claim in excess of
$100,000 by any member of the VKAC Group or any Fund pending as of the date
hereof under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
bonds. Such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since the
Relevant Date and are of the type and in amounts customarily carried by
Persons conducting businesses similar to the businesses of the VKAC
Group. If so requested by the Parent, the VKAC Companies will have their
insurance broker(s) notify the underwriters of such policies and bonds of
the transactions contemplated by this Agreement and advise such insurance
broker(s) to maintain all such policies and bonds in accordance with
their terms until further notice. Immediately after the Effective Time,
the members of the VKAC Group shall continue to have coverage under the
policies and bonds set forth in items 2, 3, 4, 5, 6, 7, 8, 10 and 11 of
Schedule 2.1.10. The fidelity insurance, the directors and officers
liability insurance, and errors and omissions policies and all other
insurance coverage of each member of the VKAC Group and, to the knowledge
of the Company, each Fund has been since the Relevant Date maintained in
accordance with Applicable Law.
2.1.11. Litigation. Except as set forth in Schedule 2.1.11, there
is no judicial or administrative action, suit, investigation, inquiry or
proceeding pending or, to the knowledge of the Company, threatened that (a)
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or result in any liability on the part of the
VKAC Group in an amount in excess of $2,000,000 individually or
$5,000,000 in the aggregate or (b) questions the validity of this Agreement
or of any action taken or to be taken by any member of the VKAC Group in
connection herewith.
2.1.12. Compliance with Laws and Other Instruments; Governmental
Approvals. Compliance with Laws, etc. Except as disclosed in
Schedule 2.1.12(a), no member of the VKAC Group and, to the knowledge of
the Company, no Fund is in material violation of or material default under,
or has at any time since the Relevant Date materially violated or been in
material default under, (i) any Applicable Law applicable to it or any of
its properties or business or (ii) any provision of its Organizational
Documents. Schedule 2.1.12(a) sets forth a correct and complete list of all
consent decrees or other similar agreements entered into by any member of
the VKAC Group with any Governmental Authority after the Relevant Date or
prior to the Relevant Date if currently in effect.
(b) Governmental Approvals. Except as disclosed in Schedule
2.1.12(b), all material Governmental Approvals necessary for the conduct of
the business and operations of each member of the VKAC Group have been duly
obtained and are in full force and effect. There are no proceedings
pending or, to the knowledge of the Company, threatened that would
reasonably be expected to result in the revocation, cancellation or
suspension, or any materially adverse modification, of any such
Governmental Approval, and except with respect to Governmental Approvals
set forth on Schedule 2.1.1(b), the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any such revocation, cancellation, suspension or
modification.
(c) Filings. Since the Relevant Date, the VKAC Group has filed
all material registrations, reports, statements, notices and other
material filings required to be filed with the Commission or any other
Governmental Authority by any member of the VKAC Group, including all
required amendments or supplements to any of the above (the "Filings").
The Filings complied in all material respects, where applicable, with the
requirements of the Securities Act, the Exchange Act, the Advisers Act
and the Investment Company Act. As of their respective dates, each of
the Filings constituting prospectuses, statements of additional
information, Part II of Form ADVs or annual reports on Form 10K did not
contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
has made or will make available to the Buyer complete and correct copies of
(i) all Filings made within the past two years (including but not limited
to all filings on Form ADV, Form TA, Form NSAR and Form BD), (ii) of all
audit reports received by any member of the VKAC Group from the
Commission or any other Governmental Authority and all written responses
thereto made by any such member during the past two years, (iii) copies
of all inspection reports provided to any VKAC Company by the Commission or
any state regulatory authority during the past two years and (iv) all
correspondence relating to any inquiry or investigation provided to any
VKAC Company by the Commission or any state regulatory authority during the
past two years.
2.1.13. Environmental Matters. Each member of the VKAC Group is and
has been in compliance in all material respects with all Environmental Laws
applicable to it and its properties, and no Environmental Activity has
otherwise occurred in material violation of any Environmental Law for which
any member of the VKAC Group may be responsible. No member of the VKAC
Group has any material liabilities, absolute or contingent, in connection
with any Environmental Activity or under any Environmental Law. To the
knowledge of the Company, all Real Property is free from contamination in
all material respects from any Hazardous Materials (including but not
limited to asbestos). All material permits, licenses, registrations and
authorizations required under applicable Environmental Laws as currently in
effect for the conduct of the business and operations of the VKAC Group
have been obtained and are presently in effect, and there are no material
violations thereof outstanding.
2.1.14. Affiliate Transactions. Schedule 2.1.14 sets forth a
correct and complete list of all agreements, arrangements or other
commitments in effect as of December 31, 1995 between any member of the
VKAC Group, on the one hand, and any Affiliate of any member of the VKAC
Group, other than another member of the VKAC Group or the Funds and other
than, in the case of any officer or employee of the Company or any of its
Subsidiaries who may be deemed to be an Affiliate, in the ordinary course
of business consistent with past practices, on the other hand. Since
December 31, 1995, except as set forth in Schedule 2.1.14, no member of the
VKAC Group has entered into any agreement, arrangement or other
commitment or transaction with any Affiliate of the Company, other than
another member of the VKAC Group or the Funds and other than, in the case
of any officer or employee of the Company or any of its Subsidiaries who
may be deemed to be an Affiliate, in the ordinary course of business
consistent with past practices.
2.1.15. Government Regulation. Investment Advisers. Each of Van
Kampen American Capital Investment Advisory Corp., Van Kampen American
Capital Management, Inc., Van Kampen American Capital Advisors, Inc., Van
Kampen American Capital Asset Management, Inc. and Van Kampen Merritt
Equity Advisors Corp. (collectively, the "Registered Investment
Advisers") is, and at all times required by the Advisers Act during the
past five years has been, duly registered as an investment adviser under
the Advisers Act. Except as set forth in Schedule 2.1.15(a), each of the
Registered Investment Advisers is, and at all times required by
Applicable Law (other than the Advisers Act) during the past two years
has been, duly registered, licensed or qualified as an investment adviser
in each state where the conduct of its business required such registration,
licensing or qualification, except for any such failure to be so
registered, licensed or qualified that would not reasonably be expected
to have a Material Adverse Effect on such Registered Investment Adviser.
Each such United States federal and state registration, license or
qualification, as of the date hereof, is listed in Schedule 2.1.15(a) and
is in full force and effect. No VKAC Company other than the Registered
Investment Advisers is or has been during the past five years an
"investment adviser" within the meaning of the Advisers Act, required to be
registered, licensed or qualified as an investment adviser under the
Advisers Act or subject to any material liability or disability by reason
of any failure to be so registered, licensed or qualified. None of the
VKAC Companies is or has been during the past five years an Investment
Company.
(b) Broker-Dealers. Each of Van Kampen American Capital
Distributors, Inc. and American Capital Contractual Services, Inc.
(collectively, the "Registered Broker-Dealers") is, and at all times
required by the Exchange Act during the past five years has been, a broker-
dealer duly registered under the Exchange Act and a member firm in good
standing of the NASD and, to the extent required, the Municipal
Securities Rulemaking Board. Except for any Registered Broker-Dealer set
forth on Schedule 2.1.15(b), each of the Registered Broker-Dealers is,
and at all times required by Applicable Law (other than the Exchange Act)
during the past two years has been, duly registered, licensed or
qualified as a broker-dealer in each state where the conduct of its
business required such registration, licensing or qualification, except for
any such failure to be so registered, licensed or qualified that would
not reasonably be expected to have a Material Adverse Effect on such
Registered Broker-Dealer. Each such United States federal and state
registration, license or qualification, as of the date hereof, is listed in
Schedule 2.1.15(b) and is in full force and effect. Except for any
Registered Broker-Dealer set forth on Schedule 2.1.15(b), no VKAC Company
other than the Registered Broker-Dealers is or has been during the past
five years required to be registered, licensed or qualified as a broker-
dealer under the Exchange Act, or subject to any material liability or
disability by reason of any failure to be so registered, licensed or
qualified, except for any such failure that would not reasonably be
expected to have a Material Adverse Effect on such VKAC Company.
(c) Funds and Sub-Advisory Funds. Schedule 2.1.15(c) sets forth
each Investment Company for which a VKAC Company acts as investment
adviser, sponsor or manager as of the date hereof, including but not
limited to mutual funds, closed end companies, unit investment trusts and
any other pooled investment vehicle (whether or not registered)
(collectively, the "Funds"), and each Investment Company for which a VKAC
Company acts as an investment subadviser as of the date hereof (the "Sub-
Advisory Funds"). Each of the Funds and, to the knowledge of the
Company, the Sub-Advisory Funds that is or during the past five years in
the case of the Funds and two years in the case of the Sub-Advisory Funds
has been required by the Investment Company Act to be registered with the
Commission as an investment company under the Investment Company Act is,
and at all times required by the Investment Company Act during the past
five years or two years, as the case may be, has been, so registered.
Except with respect to the Funds and the Sub-Advisory Funds, no VKAC
Company acts as investment adviser or subadviser to any Investment Company.
Each VKAC Company that acts as investment adviser or subadviser to a Fund
or Sub-Advisory Fund has a written Investment Advisory Contract pursuant to
which such VKAC Company serves as investment adviser or subadviser to
such Fund or Sub-Advisory Fund. As of the date hereof, no VKAC Company and
no "interested person" of any VKAC Company, as such term is defined in
the Investment Company Act, receives or is entitled to receive any
compensation directly or indirectly (a) from any Person in connection
with the purchase or sale of securities or other property to, from or on
behalf of any of the Funds or Sub-Advisory Funds, other than bona fide
ordinary compensation as principal underwriter, distributor or sponsor
for the Funds, or (b) from the Funds or Sub-Advisory Funds or their
respective security holders for other than bona fide investment advisory,
sub-advisory or other services.
(d) Codes of Ethics, etc. The VKAC Companies have adopted a
formal code of ethics and a written policy regarding insider trading, a
complete and accurate copy of each of which has been made available to
the Buyer. Such code of ethics complies in all material respects with
Section 17(j) of the Investment Company Act, Rule 17j-1 thereunder and
Section 204A of the Advisers Act. Such insider trading policy complies
in all material respects with Section 204A of the Advisers Act and
Section 15(f) of the Exchange Act. The policies of the VKAC Companies as
of the date hereof with respect to avoiding conflicts of interest are as
set forth in the most recent Form ADV or policy manual of the VKAC
Companies, as amended, which has been made available to the Buyer. To
the knowledge of the Company, there have been no violations of such code
of ethics or such policies that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(ii) Each Fund that is registered under the Investment Company Act
has duly adopted procedures pursuant to Rules 17a-7, 17e-1 and 10f-3
under the Investment Company Act, to the extent applicable. Each Fund that
is registered under the Investment Company Act has for the past two years
been operated and is currently operating in compliance in all material
respects with Rules 17a-7, 17e-1 and 10f-3 thereunder, to the extent
applicable.
(e) No Disqualifications. (i) No member of the VKAC Group, (ii) no
Person "associated" (as defined under the Advisers Act) with any member
of the VKAC Group and (iii) with respect to the Funds, no Person within the
scope of Section 9(a) of the Investment Company Act, is or has been
during the past two years subject to any disqualification that would be a
basis (A) for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Advisers Act or Rule 206(4)-
4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act,
(B) for disqualification as an investment adviser or a principal
underwriter for an investment company pursuant to Section 9(a) of the
Investment Company Act or (C) for prohibition from holding certain
positions pursuant to Section 411 of ERISA and, to the knowledge of the
Company, there is no proceeding or investigation, and no basis for any
proceeding or investigation, that would reasonably be expected to become
the basis for any such disqualification, denial, suspension, revocation
or prohibition.
(f) Transfer Agent. ACCESS Investor Services, Inc. (the
"Transfer Agent") is, and at all times required by the Exchange Act
during the past five years has been, duly registered as a transfer agent
under the Exchange Act. Except as set forth in Schedule 2.1.15(f), the
Transfer Agent is, and at all times required by Applicable Law (other
than the Exchange Act) during the past two years has been, duly registered,
licensed or qualified as a transfer agent in each state where the conduct
of its business required such registration, licensing or qualification,
except for any such failure to be so registered, licensed or qualified that
would not reasonably be expected to have a Material Adverse Effect on the
Transfer Agent. Each such United States federal and state registration,
license or qualification, as of the date hereof, is listed in Schedule
2.1.15(f) and is in full force and effect. No VKAC Company other than
the Transfer Agent is or has been during the past five years a "transfer
agent" within the meaning of the Exchange Act, or required to be
registered, licensed or qualified as a transfer agent under the Exchange
Act, or subject to any material liability or disability by reason of any
failure to be so registered, licensed or qualified, except for any such
failure that would not reasonably be expected to have a Material Adverse
Effect on such VKAC Company.
(g) Trust Companies. Except as set forth in Schedule 2.1.15(g),
Van Kampen American Capital Trust Company is, and at all times required
by Applicable Law during the past two years has been, duly registered,
licensed or qualified as a trust company in each state, if any, where the
conduct of its business required such registration, licensing or
qualification, except for any such failure to be so registered, licensed or
qualified that would not reasonably be expected to have a Material
Adverse Effect on such company. Each such registration, license or
qualification, as of the date hereof, is listed in Schedule 2.1.15(g) and
is in full force and effect. No VKAC Company other than Van Kampen
American Capital Trust Company is or has been during the past two years
required to be registered, licensed or qualified as a trust company under
any Applicable Law, or subject to any material liability or disability by
reason of any failure to be so registered, licensed or qualified, except
for any such failure that would not reasonably be expected to have a
Material Adverse Effect on such VKAC Company.
(h) Other Entities. The members of the VKAC Group and each of
their partners or employees which are or who are required to be
registered as a registered representative, an investment adviser
representative, insurance agent or a sales person with the Commission,
the securities or insurance commission of any state or any self-
regulatory body is duly registered as such and such registration is in full
force and effect, except where the failure to be so registered or to have
such registration in full force and effect would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
2.1.16. Funds; Sub-Advisory Funds; Clients. Fund Compliance with
Legal and Other Requirements. Each Investment Advisory Contract with
respect to any Fund and, to the knowledge of the Company, with respect to
any Sub-Advisory Fund, and each Underwriting Agreement, during the past
five years in the case of a Fund and two years in the case of a Sub-
Advisory Fund, has been duly adopted and maintained in compliance in all
material respects with Section 15 of the Investment Company Act.
(ii) Since the Relevant Date, each Fund has been operated in
compliance with its respective objectives, policies and restrictions,
including without limitation those set forth in the applicable prospectus
and registration statement for a Fund or governing instruments for a
client, except where lack of compliance would not reasonably be expected
to have a Material Adverse Effect.
(iii) To the extent that any VKAC Company has acted as a fiduciary,
plan administrator or other service provider where such VKAC Company is
deemed to be a fiduciary to any employee benefit plan that is subject to
ERISA, such VKAC Company during the past four years has complied with the
requirements of ERISA and the Code in the performance of its duties and
responsibilities with respect to such plan, except any such failures to
comply that would not reasonably be expected to have a Material Adverse
Effect on such VKAC Company.
(b) Status of the Funds and Sub-Advisory Funds. Except where the
violation of any of the representations and warranties contained in this
Section 2.1.16(b) would not reasonably be expected to have a Material
Adverse Effect:
(i) (A) The shares of each Fund are qualified for sale, or an
exemption therefrom is in full force and effect, in each state and
territory of the United States and the District of Columbia to the extent
required by Applicable Law; (B) all outstanding shares of each Fund that
were required to be registered under the Securities Act have been sold
pursuant to an effective registration statement filed thereunder; (C) all
outstanding shares of each Fund have been duly authorized, validly issued
and are fully paid and nonassessable and (D) each Fund and, to the
knowledge of the Company, each Sub-Advisory Fund is currently operating
in compliance with Applicable Law, has been operating in compliance with
Applicable Law of (1) any U.S. federal Governmental Authority for the
past five years and (2) any other Governmental Authority for the past two
years and is not subject to any stop order or similar order restricting the
sale of its shares.
(ii) To the knowledge of the Company, (a) no Fund registration
statement contained, as of its effective date, (b) no Fund proxy
statement contained, as of its date, and (c) no current prospectus (which
term, as used in this Agreement, shall include any related statement of
additional information and any private placement memorandum), as amended or
supplemented, relating to a Fund, contained or contains any untrue
statement of a material fact or omitted or (in the case of any such current
prospectus) omits to state a material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the knowledge of the Company,
each such current prospectus and all current advertising and marketing
materials relating to a Fund and, to the extent applicable, relating to any
VKAC Company complies in all material respects with the Securities Act, the
Investment Company Act, applicable provisions of state law and, in the case
of such advertising and marketing materials only, in form and substance
with the applicable rules of the NASD.
(iii) Each Fund and, to the knowledge of the Company, each Sub-Advisory
Fund that is a juridical entity is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and
has the requisite corporate, trust or partnership power and authority to
own its properties and to carry on its business as it is now conducted, and
is qualified to do business in each jurisdiction where it is required to do
so under Applicable Law.
2.1.17. Labor Matters, etc. No member of the VKAC Group is a party to
or bound by any collective bargaining agreement. Each member of the VKAC
Group has materially complied for the past four years and is in material
compliance with all applicable provisions of United States federal, state
and local laws pertaining to the employment or termination of their
respective employees.
2.1.18. ERISA. Schedule of Plans, etc. Schedule 2.1.18(a) sets
forth a list of each written "employee benefit plan," within the meaning of
section 3(3) of ERISA, and each written bonus, incentive or deferred
compensation, stock option or other equity, severance, retention, change in
control or other employee benefit plan, program or arrangement,
including, but not limited to, those providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits and retirement benefits, (x) that is maintained by any member of
the VKAC Group or any ERISA Affiliate of any member of the VKAC Group or to
which any member of the VKAC Group or any ERISA Affiliate of any member
of the VKAC Group contributes or is obligated to contribute and (y) under
which any employee of any member of the VKAC Group is or may become
entitled to, or any former employee thereof is currently entitled to, an
accrued benefit (collectively, the "Plans"). For purposes of this
Section 2.1.18, "ERISA Affiliate" of any entity means any other entity
which, together with such entity, is treated as a single employer under
section 414(b), (c) or (m) of the Code. The Company has made available
to the Buyer correct and complete copies of all written Plans, all
related trust agreements and the most recent IRS Form 5500 filed in respect
of any such Plan. Except as disclosed on Schedule 2.1.18(a), each Plan
intended to be qualified under section 401(a) of the Code has received a
favorable determination letter from the IRS as to its qualification under
the Code and, to the knowledge of the Company, (x) no amendment has been
made to any such Plan since the date of its most recent determination
letter that would reasonably be expected to result in the
disqualification of such Plan and (y) no other event has occurred with
respect to any such Plan which would reasonably be expected to adversely
affect the qualification of such Plan. The Company has provided to the
Buyer copies of the most recent Internal Revenue Service determination
letters received with respect to each such Plan.
(b) No Minimum Funding Standards, etc. No Plan is subject to the
minimum funding standards of section 302 of ERISA or section 412 of the
Code. No Plan is a multiemployer plan (as defined in section 3(37) of
ERISA) or a multiple employer plan and no Plan is maintained in
connection with any trust described in section 501(c)(9) of the Code. No
material liability to the Pension Benefit Guaranty Corporation in respect
of any Plan or any other plan subject to Title IV of ERISA maintained by
any member of the VKAC Group or any ERISA Affiliate of any member of the
VKAC Group has been incurred pursuant to the provisions of Title IV of
ERISA by any member of the VKAC Group or any ERISA Affiliate of any
member of the VKAC Group.
(c) Operation of the Plans, etc. Each of the Plans has been
operated and administered in material compliance with its terms and all
Applicable Law, including but not limited to ERISA and the Code. There are
no material claims pending or, to the knowledge of the Company,
threatened by or on behalf of any employee of any member of the VKAC
Group involving any such Plan (other than routine claims for benefits under
the terms of any such Plan). All contributions required to have been
made to any Plan or any other plan subject to Title IV of ERISA
maintained by any member of the VKAC Group or any ERISA Affiliate of any
member of the VKAC Group by any member of the VKAC Group or any ERISA
Affiliate of any member of the VKAC Group pursuant to Applicable Law
(including, without limitation, ERISA and the Code) have been made.
(d) Code Section 280G. There is no contract, agreement, plan or
arrangement covering any employee of any member of the VKAC Group that,
to the knowledge of the Company, individually or collectively, would
reasonably be expected to give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G of the Code.
2.1.19. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Company
in such manner as to give rise to any valid claim against any member of the
VKAC Group or the Buyer for any brokerage or finder's commission, fee or
similar compensation, other than as set forth in Schedule 2.1.19, and by
Goldman, Sachs & Co. and Merrill Lynch & Co., Inc., in each case whose
fee for services provided in respect of this Agreement and the transactions
contemplated hereby shall be paid by the Company.
2.1.20. List of ERISA Clients. Schedule 2.1.20 sets forth a
correct and complete list of each Client (other than a Client that is a
Client solely by reason of its investment in a Fund that is an Investment
Company) that, to the knowledge of the Company, is (i) an employee
benefit plan, as defined in Section 3(3) of ERISA (unless the Client has
represented to the Company that it is a governmental plan, church plan or
otherwise not subject to Title I of ERISA or Code section 4975 or the
Company reasonably believes that it is not subject to Title I of ERISA or
Code section 4975) or (ii) a person acting on behalf of such a plan
(hereinafter referred to as an "ERISA Client").
2.1.21. Hedging Activities. The derivative products held by any
VKAC Company were acquired (i) for the purpose of hedging against market
value changes in such VKAC Company's trading inventory relating to its unit
investment trust business in the ordinary course of business consistent
with past practices or (ii) to hedge its variable rate debt.
2.1.22. Financial Projections. The financial projections relating
to the VKAC Companies that have been delivered to the Parent or the Buyer
by the Company were made in good faith and, to the knowledge of the
Company, were not unreasonable when made.
2.1.23. Assets Under Management. As of the close of business on
June 20, 1996, the aggregate amount of assets under management for (i) the
open end Funds was $27,797,424,000, (ii) the Prime Rate Trust was
$4,804,106,000 and (iii) the Institutional Accounts (including the Sub-
Advisory Funds) was $3,310,303,000.
2.2. Representations and Warranties of the Parent, Holdco and the
Buyer. The Parent, Holdco and the Buyer represent and warrant to the
Company as follows:
2.2.1. Corporate Status; Authority for Agreement. Each of the
Parent, Holdco and the Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Each of the
Parent, Holdco and the Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by it. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, by the Parent, Holdco
and the Buyer have been duly authorized (except for the authorization of
the shares of common stock of the Parent that will be issuable to the
Designated Managers in exchange for certain shares of preferred stock of
Holdco as contemplated by the Contribution Agreement) by all requisite
corporate action of the Parent, Holdco and the Buyer. This Agreement has
been duly executed and delivered by each of the Parent, Holdco and the
Buyer and constitutes the valid and legally binding obligation of the
Parent, Holdco and the Buyer, enforceable against each of them in
accordance with its terms. Each of the Parent, Holdco and the Buyer has all
requisite corporate power and authority to carry on its business as now
conducted and to own or lease or to operate its properties as and in the
places where such business is now conducted and such properties are now
owned, leased or operated.
2.2.2. No Conflicts, etc. Except as set forth in Schedule 2.2.2, the
execution and delivery by the Parent, Holdco and the Buyer of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any violation of, loss of rights or default under, constitute
an event creating rights of acceleration, termination, repayment or
cancellation under, entitle any party to receive any payment pursuant to,
or result in the creation of any Lien upon any of the properties or
assets of the Buyer under, (i) any provision of the Organizational
Documents of the Parent, Holdco or the Buyer, (ii) any Applicable Law
applicable to the Parent, Holdco, the Buyer or any of their respective
properties or (iii) any agreement or other instrument to which the
Parent, Holdco or the Buyer is a party or by which the Parent, Holdco or
the Buyer or any of its properties is bound, except, in the case of
clause (iii), for violations, losses, defaults, accelerations,
terminations, repayments, cancellations or Liens that would not
reasonably be expected to have a material adverse effect on the ability
of the Parent, Holdco or the Buyer to consummate the Merger and the other
transactions contemplated hereby. Except as set forth in Schedule 2.2.2,
no Governmental Approval or other Consent (other than pursuant to the HSR
Act) is required to be obtained or made by the Parent, Holdco or the
Buyer in connection with the execution and delivery of this Agreement or
the consummation by the Parent, Holdco and the Buyer of the transactions
contemplated hereby.
2.2.3. Litigation. There is no judicial or administrative action,
proceeding or investigation pending or, to the knowledge of the Parent,
Holdco or the Buyer, threatened which (a) questions the validity of this
Agreement or any action taken or to be taken by the Parent, Holdco or the
Buyer in connection herewith, or (b) would reasonably be expected to have a
material adverse effect on the business, financial condition, results of
operations or properties of the Parent, Holdco or the Buyer or the
ability of the Parent, Holdco or the Buyer to consummate the Merger and the
other transactions contemplated hereby.
2.2.4. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Parent,
Holdco, the Buyer or any of their Affiliates in such manner as to give rise
to any valid claim against the Company, any other member or Affiliate of
the VKAC Group or any stockholder of the Company for any brokerage or
finder's commission, fee or similar compensation.
2.2.5. No Disqualifying Participants. The consummation of the Merger
will not cause any member of the VKAC Group to become subject to any
disqualification that would be a basis (i) for denial, suspension or
revocation of registration as an investment adviser under Section 203(e) of
the Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under
Section 15 of the Exchange Act, (ii) for disqualification as an
investment adviser or a principal underwriter for an investment company
pursuant to Section 9(a) of the Investment Company Act or (iii) for
prohibition from holding certain positions pursuant to Section 411 of
ERISA.
2.2.6. Financing. The Buyer will have available as of the
Effective Time immediately available funds sufficient to consummate the
transactions contemplated by this Agreement.
2.2.7 Section 15(f) Materials. Neither the Parent, Holdco, the
Buyer nor any of their respective Affiliates is aware of any documents,
records, memoranda, work papers or other written materials that would
reasonably be likely to be evidence that the requirements of any of the
provisions of Section 15(f) of the Investment Company Act have not been
or will not be met in respect of this Agreement and the transactions
contemplated hereby, except for such as have been furnished to the
Company or described in writing to the Company in reasonable detail.
ARTICLE III
COVENANTS
3.1 Covenants of the Company.
3.1.1. Conduct of Business. From the date hereof to the Effective
Time, except as contemplated by or in connection with this Agreement or the
transactions contemplated hereby, as described on Schedule 3.1.1 or as
consented to by the Parent, any request for such consent to be considered
by the Parent in good faith, the Company will, and will cause each of the
VKAC Companies to and, subject to applicable fiduciary duties to the Funds,
will use its reasonable best efforts to cause each of the Funds to:
(a) carry on its business in the ordinary course consistent with past
practices, and use all reasonable best efforts (to the extent consistent
with good business judgment) to preserve intact its present business
organization, keep available the services of its executive officers and key
employees, and preserve its relationships with customers, clients,
suppliers and others having material business dealings with it;
(b) not amend its certificate of incorporation or by-laws or other
Organizational Document;
(c) not merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially all of the assets of, or otherwise
acquire any business or any corporation, partnership, association or
other business organization or division thereof;
(d) not engage in any transaction with the Buyer, the Parent or their
Affiliates that would be a violation of the Investment Company Act, the
Advisers Act, ERISA or other Applicable Law, provided that none of the
Company, any other VKAC Company or any Fund will be in breach of this
Section 3.1.1(d) if it engages in a transaction with an Affiliate of the
Buyer or the Parent that violates ERISA unless the Company, such other VKAC
Company or such Fund engaging in such transaction has or reasonably
should have had knowledge of such affiliation;
(e) not take any action or omit to take any action, which action or
omission would result in a breach or inaccuracy of any of the
representations and warranties set forth in Section 2.1.5 at, or as of
any time prior to, the Effective Time;
(f) not sell any assets outside the ordinary course of business
consistent with past practices;
(g) not sell, transfer or otherwise dispose of any CDSC Assets;
(h) not agree or commit to do any of the foregoing referred to in
clauses (a)-(g); and
(i) promptly advise the Buyer of any fact, condition, occurrence or
change known to the Company that is reasonably expected to have a
Material Adverse Effect or cause a breach of this Section 3.1.1.
3.1.2. No Solicitation. From the date hereof to the earlier of the
Effective Time and the termination of this Agreement, the Company shall
not, and shall not permit any member of the VKAC Group or any officer,
director, partner, employee, agent or advisor of any member of the VKAC
Group to, directly or indirectly, (a) solicit, initiate or encourage any
proposals for, or enter into any discussions with respect to, a merger or
other business combination involving the Company or VKAC or the acquisition
of shares of capital stock of any member of the VKAC Group or all, or
substantially all, of the assets of any member of the VKAC Group (an
"Acquisition Proposal") or (b) furnish or cause to be furnished in
connection with any proposals described in clause (a) above any non-
public information concerning the business and operations of any member
of the VKAC Group to any Person (other than the Parent, Holdco, the Buyer
and their agents and representatives and the Company and their agents and
representatives). From the date hereof to the Effective Time, the
Company shall not, and shall not permit any member of the VKAC Group to,
sell, transfer or otherwise dispose of, grant any option or proxy to any
Person with respect to, create any Lien upon, or transfer any interest
in, any shares of capital stock of any VKAC Company, other than (i) as
contemplated by or in connection with this Agreement or the transactions
contemplated hereby, (ii) such sales, transfers, dispositions, grants and
creations to or in favor of the Company or (iii) pursuant to any
agreement or commitment existing on the date hereof. If at any time
after the date hereof and prior to the Effective Time, the Company or any
of its representatives is approached by, or receives an offer from, any
third party concerning an Acquisition Proposal or a request to provide
information referred to in clause (b) above, the Company will promptly
disclose such offer or request to the Parent and will keep the Parent fully
informed of the nature, details and status of any such offer or request.
3.1.3. Access and Information. From the date hereof to the Effective
Time, the Company will, and will cause each member of the VKAC Group to,
give to the Parent and the Parent's accountants, counsel and other
representatives reasonable access during normal business hours to such of
the VKAC Companies' and the Funds' respective offices, properties, books,
contracts, commitments, reports and records relating to the VKAC
Companies and the Funds, and to furnish them or provide them access to
all such documents, financial data, records and information with respect to
the properties and businesses of the VKAC Companies as the Parent shall
from time to time reasonably request, provided that the foregoing shall
be under the general coordination of the Company and shall be subject to
the Confidentiality Agreement. In addition, from the date hereof to the
Effective Time the Company will, and will cause each member of the VKAC
Group to, permit the Parent and the Parent's accountants, counsel and other
representatives reasonable access to such personnel of the VKAC Group
during normal business hours as may be necessary to or reasonably requested
by the Parent in its review of the properties of the VKAC Group and the
Funds, the business affairs of the VKAC Group and the Funds and the above-
mentioned documents and records, provided that the Company shall have the
right to have its representatives participate in such discussions with
personnel of the VKAC Group and the Funds and such discussions shall be
subject to the Confidentiality Agreement.
3.1.4. Subsequent Financial Statements, Debt Prepayments and Filings.
From the date hereof to the Effective Time, the Company will cause the
members of the VKAC Group to make available to the Parent, promptly after
the same become available, copies of (i) the monthly management reports for
the VKAC Group substantially in the form furnished to the senior management
of the Company, together with such monthly financial statements furnished
to such management and (ii) the financial statements of the Funds as the
same are filed with the Commission.
(b) After the date hereof and until the Effective Time, within five
Business Days after the end of each month, the Company shall deliver a
certificate to the Buyer, signed by the chief financial officer of the
Company, setting forth the aggregate amount of loans that were prepaid
under the Credit Agreement during such month and the Pre-Tax Income as of
the end of such month.
(c) From the date hereof to the Effective Time, the Company will
file, or cause to be filed, with the Commission or other relevant
Governmental Authority, and promptly thereafter make available to the
Parent, copies of each registration, report, statement, notice or other
filing required to be filed by any member of the VKAC Group with the
Commission or any other Governmental Authority under the Exchange Act,
the Advisers Act, the Investment Company Act, the Securities Act or any
other Applicable Law. All such registrations, reports, statements, notices
or other filings shall comply in all material respects with Applicable Law.
(d) From the date hereof to the Effective Time, the Company will
cause the members of the VKAC Group to make available to the Parent,
promptly after the same become available, (i) copies of all inspection
reports provided to any VKAC Company by the Commission or any state
regulatory authority or any self-regulatory agency and (ii) all
correspondence and other documents relating to any inquiry or investigation
provided to any VKAC Company by the Commission or any state regulatory
authority or any self-regulatory agency.
3.1.5. Public Announcements. From the date hereof to the Effective
Time, except as required by Applicable Law, the Company shall not, and
shall not permit any member of the VKAC Group to, make any public
announcement in respect of this Agreement or the transactions
contemplated hereby without the prior consent of the Parent.
3.1.6. Further Actions. Generally. From the date hereof to the
Effective Time, the Company will, and will cause each member of the VKAC
Group to, use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated
hereby.
(b) Filings, etc. From the date hereof to the Effective Time,
the Company will, as promptly as practicable, file or supply, or cause to
be filed or supplied, all applications, notifications and information
required to be filed or supplied by or on behalf of the Company or any
member of the VKAC Group pursuant to Applicable Law in connection with this
Agreement, the Merger or the consummation of the other transactions
contemplated hereby, including but not limited to filings pursuant to the
HSR Act. From the date hereof to the Effective Time, the Company, as
promptly as practicable, will make, or cause to be made, all such other
filings and submissions under any Applicable Law applicable to the
Company or any member of the VKAC Group and give such reasonable
undertakings, as may be required for the Company to consummate the Merger
and the other transactions contemplated hereby.
(c) Investment Company Consents. The members of the VKAC Group
shall use their reasonable best efforts to (i) cause the boards of
trustees/directors of Investment Company Clients to approve, and to solicit
their respective shareholders as promptly as practicable with regard to the
approval of, new investment advisory agreements and related ancillary
agreements for such Clients, and (ii) cause the boards of trustees/
directors of Investment Company Clients to approve, to the extent such
approval is required by Applicable Law or the terms of existing
agreements relating to such services, new agreements relating to any
other services provided by members of the VKAC Group to Investment
Company Clients, including, but not limited to, such agreements relating to
the distribution of fund shares, fund administration, accounting and
transfer agency, in each case referred to in clauses (i) and (ii) above,
such approval to be effective on or as promptly as practicable after the
Effective Time, pursuant to the provisions of Section 15 of the
Investment Company Act, and consistent with all requirements of the
Investment Company Act applicable thereto, provided that, in the case of
both such clauses (i) and (ii), such agreements are identical in all
material respects to the existing agreements other than the term of the
agreement and other than such non-material changes as may be made in
order to make any such agreement consistent with other agreements of the
same type to which any VKAC Company is a party.
(d) Certain Other Consents. As promptly as practicable after
execution of this Agreement, the Company shall cause the Clients of the
VKAC Group listed on Schedule 2.1.8(c)(A)(9) to be informed of the
transactions contemplated by this Agreement and shall request the written
Consent of such Clients to the transaction, such Consents to be in form and
substance satisfactory to the Parent in its reasonable judgment. If such
Consent is not received from any such Client within 60 days, the Company
will promptly send a new notice advising such Client of its intention to
continue the advisory services, pursuant to the Company's existing
contracts with such Clients, subject to such Client's right to terminate
such contract within 45 days of receipt of such notice, and that each
such Client's consent will be implied if it continues to accept the
services without rejection during such specified 45-day period. At least
two weeks prior to the Effective Time, the Company shall also use its
reasonable best efforts to contact personally each such Client which has
not yet executed a Consent to inquire as to such Client's intentions unless
the Parent in its sole discretion agrees to waive this requirement with
respect to any such Client.
(e) Consent Procedures. In connection with obtaining the
Consents required by subsections (c) and (d), the Company shall (i) keep
the Parent informed of the status of obtaining Client Consents, (ii)
facilitate the Parent's or the Buyer's communication with Clients regarding
Consents, (iii) provide to the Parent draft proxy statements and (iv) to
the extent applicable, deliver to the Parent prior to the Closing copies of
all executed Client Consents and make available for inspection the
originals of such Consents prior to the Closing.
(f) Other Consents. The Company, as promptly as practicable,
will use its reasonable best efforts to obtain, or cause to be obtained,
the Consents listed on Schedule 3.1.6(f).
(g) Other Actions. The Company will use, and cause each member
of the VKAC Group to use, its reasonable best efforts to take, or cause
to be taken, all other actions necessary, proper or advisable in order
for them to fulfill their obligations in respect of this Agreement and
the transactions contemplated hereby. The Company will, and will cause
each member of the VKAC Group to, coordinate and cooperate with the
Parent in exchanging such information and supplying such reasonable
assistance as may be reasonably requested by the Parent in connection
with the filings and other actions contemplated by Section 3.2.2.
(h) Notice of Certain Events. From the date hereof to the
Effective Time, the Company shall promptly notify the Parent of:
(i) any fact, condition, event or occurrence known to the Company
that will or reasonably may be expected to result in the failure of any
of the conditions contained in Sections 4.1 and 4.2 to be satisfied;
(ii) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(iii) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement; and
(iv) any actions, suits, claims, investigations or proceedings commenced
or, to the knowledge of the Company, threatened against, relating to or
involving or otherwise affecting any member of the VKAC Group which, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 2.1.11 or which relate to the
consummation of the transactions contemplated by this Agreement.
3.1.7. Compliance with Investment Company Act Section 15. The
Company will not take and, prior to the Effective Time, will cause each
member of the VKAC Group not to take, any action not contemplated by this
Agreement that would have the effect, directly or indirectly, of causing
the requirements of any of the provisions of Section 15(f) of the
Investment Company Act not to be met in respect of this Agreement and the
transactions contemplated hereby. In addition, the Company will not fail
to take, and, prior to the Effective Time, will not cause any member of the
VKAC Group to fail to take, any action if the failure to take such action
would have the effect, directly or indirectly, of causing the
requirements of any of the provisions of Section 15(f) of the Investment
Company Act not to be met in respect of this Agreement and the transactions
contemplated hereby.
3.1.8. Qualification of the Funds; Tax Affairs. (a) Subject to
applicable fiduciary duties to the Funds, the Company will cause the VKAC
Companies to refrain from, and will use its reasonable best efforts to
cause each of the Funds to refrain from, taking any action after the date
hereof and on or prior to the Closing Date (a) (i) in the case of each of
the Funds to which the provisions of paragraph (i) of Section 2.1.6(g)
apply, that would prevent such Fund from qualifying as a RIC, or that would
require such Fund to take actions in order to so qualify that would have
a material adverse effect on such Fund, (ii) in the case of each of the
Funds to which the provisions of paragraph (ii) of Section 2.1.6(g)
apply, that would cause it to be an association taxable as a corporation
for federal Income Tax purposes, (iii) in the case of Van Kampen American
Capital Monthly Accumulation Plans, that would prevent any portion
thereof from being treated as a business arrangement to which the
provisions of section 851(f) of the Code apply, (iv) in the case of Van
Kampen American Capital Exchange Fund, that would prevent it from being
treated as a partnership for federal Income Tax purposes or (v) in the case
of the unit investment trusts to which the provisions of paragraph (ii)
of Section 2.1.6(g) apply, that would prevent any portion thereof from
being subject to subpart E of part I of subchapter J of chapter 1 of
subtitle A of the Code, or (b) that would conflict in any material
respect with the registration statement, prospectus and other offering
materials of such Fund.
(b) After the date hereof and until the Closing Date, the
Company shall supply to the Parent all calculations and other written
information it produces or receives with respect to the qualification as
RICs of the Funds to which the provisions of paragraph (i) of Section
2.1.6(g) apply within 5 Business Days after such calculations or
information are produced or received. As promptly as possible, and in no
event later than the Closing Date, the Company shall deliver to the
Parent (i) with respect to each of such Funds, a full description of the
reasons, if any (other than failure to comply with the provisions of
section 852(a)(1) of the Code) that such Fund would fail to qualify as a
RIC for its then-current taxable year if the last day of its most recent
fiscal quarter ended on or prior to the Closing Date were treated as the
last date of such taxable year and (ii) with respect to each of such
Funds whose taxable year ends within three months after the Closing Date, a
full description of the reasons, if any, (other than failure to comply with
the provisions of section 852(a)(1) of the Code) that such Fund would
fail to qualify as a RIC for its then-current taxable year if the
Business Day immediately preceding the Closing Date were treated as the
last date of such taxable year. As promptly as possible, and in no event
later than three Business Days after the date hereof, the Company shall
deliver to the Parent with respect to each of such Funds, a full
description of the reasons, if any (other than failure to comply with the
provisions of section 852(a)(1) of the Code) that such Fund would fail to
qualify as a RIC for its current taxable year if June 19, 1996 were treated
as the last day of such taxable year.
(c) Without the prior written consent of the Parent, none of the
VKAC Companies shall, to the extent it may affect or relate to the VKAC
Companies, make or change any Tax election (other than making an election
pursuant to section 338(h)(10) of the Code with respect to the sale of
Advantage Capital Corporation pursuant to Section 5.8 of the Stock Purchase
Agreement between SunAmerica Inc. and the Company, dated as of December 21,
1995), change any annual Tax accounting period, adopt or change any
method of Tax accounting, file any amended Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim
a Tax refund, consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment or take or knowingly
omit to take any other similar action (but excluding the Company's
reporting the distribution of MCM and Hansberger as a taxable disposition
on its Return for the taxable year in which the distributions occur) if (i)
any such action or omission would have the effect of increasing the Tax
liability or reducing any Tax Asset of any VKAC Company, the Parent or
any Affiliate of the Parent by more than $25,000 or (ii) all such actions
or omissions would, in the aggregate, have the effect of increasing the Tax
liability or reducing any Tax Asset of any VKAC Company, the Parent or
any Affiliate of the Parent by more than $100,000. The Company shall
notify Lou Palladino of Morgan Stanley & Co. Incorporated at 1251 Avenue of
the Americas, 21th floor, New York, New York 10020, in writing of any
proposed action or omission that would require the Parent's consent
pursuant to this Section 3.1.8(c).
(d) After the date hereof and until the Closing Date, the VKAC
Companies shall conduct all affairs relating to Taxes only in good faith
and in a manner consistent with past practices of the VKAC Companies.
3.1.9. ERISA Clients. As soon as practicable following the date of
this Agreement, the Company and the Parent shall cooperate and, in
connection therewith, shall each use its reasonable best efforts, to
identify each written contract or agreement in effect as of the date of
this Agreement entered into by any member of the VKAC Group with or on
behalf of any ERISA Client pursuant to which, to the knowledge of the
Company or the Parent, in each case, after due inquiry, the Parent or any
of its Affiliates has agreed to: (i) execute securities transactions;
(ii) provide any other goods or services; or (iii) purchase, sell, exchange
or swap securities or other economic interests therein or derivatives
thereof, including, but not limited to, rights to receive or obligations to
pay interest or principal under any debt obligation or rights to receive or
obligations to pay interest or principal denominated in a particular
security.
3.2. Covenants of the Parent, Holdco and the Buyer.
3.2.1. Public Announcements. From the date hereof to the Effective
Time, except as required by Applicable Law, neither the Parent, Holdco
nor the Buyer shall, nor shall any of them permit any of their Affiliates
to, make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior consent of the Company.
3.2.2. Further Actions. Generally. The Parent, Holdco and the
Buyer agree to use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated hereby.
(b) Filings, Consents, etc. Each of the Parent, Holdco and the
Buyer will, as promptly as practicable, file or supply, or cause to be
filed or supplied, all applications, notifications and information required
to be filed or supplied by or on behalf of it or its Affiliates pursuant to
Applicable Law in connection with this Agreement, the Merger or the
consummation of the other transactions contemplated hereby, including but
not limited to filings pursuant to the HSR Act. Each of the Parent, Holdco
and the Buyer, as promptly as practicable, (i) will make, or cause to be
made, all such other filings and submissions under any Applicable Law
applicable to the Parent, Holdco, the Buyer or any of their respective
Affiliates, and give such reasonable undertakings, as may be required for
the Parent, Holdco and the Buyer to consummate the Merger and the other
transactions contemplated hereby, (ii) will use its reasonable best efforts
to obtain, or cause to be obtained, all Consents (including, without
limitation, all Governmental Approvals) necessary to be obtained by it or
any of its Affiliates in order for it so to consummate the Merger and
such transactions, and (iii) will use its reasonable best efforts to
take, or cause to be taken, all other actions necessary, proper or
advisable in order for it to fulfill its obligations in respect of this
Agreement and the transactions contemplated hereby. Each of the Parent,
Holdco and the Buyer will coordinate and cooperate with the Company,
including by supplying such reasonable assistance and information (which
information shall be correct and complete and shall conform in all material
respects with the requirements of all Applicable Laws) as may be reasonably
requested by the Company, in connection with the filings and other
actions contemplated by Section 3.1.6.
(c) Notice of Certain Events. At all times prior to the
Effective Time, the Parent, Holdco and the Buyer shall promptly notify
the Company of:
(i) any fact, condition, event or occurrence known to either of
them that will or reasonably may be expected to result in the failure of
any of the conditions contained in Sections 4.1 and 4.3 to be satisfied; and
(ii) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Parent, Holdco or the Buyer,
threatened against, relating to or involving or otherwise affecting the
Parent, Holdco or the Buyer which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 2.3.3 or
which relate to the consummation of the transactions contemplated by this
Agreement.
3.2.3. Compliance with Investment Company Act Section 15. No
Unfair Burden, etc. The Parent, Holdco and the Buyer acknowledge that the
Company has entered into this Agreement in reliance upon the benefits and
protections provided by Section 15(f) of the Investment Company Act. Each
of the Parent, Holdco and the Buyer shall not take, and each of them
shall cause its Affiliates not to take, any action not contemplated by this
Agreement that would have the effect, directly or indirectly, of causing
the requirements of any of the provisions of Section 15(f) of the
Investment Company Act not to be met in respect of this Agreement and the
transactions contemplated hereby, and each of them shall not fail to
take, and, after the Effective Time, shall not cause any member of the VKAC
Group to fail to take, any action if the failure to take such action
would have the effect, directly or indirectly, of causing the
requirements of any of the provisions of Section 15(f) of the Investment
Company Act not to be met in respect of this Agreement and the transactions
contemplated hereby. In that regard, each of the Parent, Holdco and the
Buyer shall conduct its business and shall, subject to applicable fiduciary
duties to the Funds and the Sub-Advisory Funds, use its reasonable best
efforts to cause each of its Affiliates to conduct its business so as to
assure that, insofar as within the control of the Parent, Holdco, the Buyer
or their respective Affiliates:
(i) for a period of three years after the Effective Time, at least 75%
of the members of the Board of Directors or trustees of each of the Funds
that is registered under the Investment Company Act and that continues
after the Effective Time its existing or a replacement Investment
Advisory Contract with any of the VKAC Companies, the Parent, Holdco, the
Buyer or any Affiliate of the Parent, Holdco or the Buyer are not (A)
"interested persons" of the investment manager of such Fund after the
Effective Time, or (B) "interested persons" of the present investment
manager of such Fund;
(ii) for a period of two years after the Effective Time, the investment
advisory fee paid to any VKAC Company by any Fund or Sub-Advisory Fund that
is registered under the Investment Company Act shall not be increased,
nor shall any waiver in effect on the date hereof of any portion of such an
investment advisory fee be allowed to expire except in accordance with
the terms of such waiver and except, in each case, (x) pursuant to an
exemptive order naming the Funds as parties issued by the Commission,
subject in each case to each of the conditions set forth in such
exemptive order having been satisfied in the reasonable judgment of C&D
Fund IV, or (y) with the prior written consent of C&D Fund IV; and
(iii) for a period of two years after the Effective Time, there shall not be
imposed on any of the Funds or Sub-Advisory Funds that is registered
under the Investment Company Act an "unfair burden" as a result of the
transactions contemplated by this Agreement, or any terms, conditions or
understandings applicable thereto.
(b) Certain Terms. The terms used in quotations in this Section
3.2.3 shall have the meanings set forth in Section 15(f) or Section
2(a)(19) of the Investment Company Act.
(c) No Assignment of Investment Advisory Contracts. For a period
of three years from the Effective Time, none of the Parent, Holdco, the
Buyer, any of their respective Affiliates nor any of the VKAC Companies
will voluntarily engage in any transaction which would constitute an
assignment of any Investment Advisory Contract with any Fund that is
registered under the Investment Company Act currently managed by any of the
VKAC Companies to which the Parent, Holdco, the Buyer, any such Affiliate
or any VKAC Company is a party without first obtaining a covenant in all
material respects the same as that contained in this Section 3.2.3.
3.2.4. Employee Matters Subsequent to the Effective Time.
(a) Employee Plans and Agreements. From and after the Effective
Time, the Parent, Holdco and the Buyer will, and will cause each member
of the VKAC Group to, honor, without modification, perform all acts and pay
all amounts required or due under or with respect to each Plan and each
agreement which relates to any current or former employee of the VKAC Group
or the terms of any such employee's employment or termination of
employment, including without limitation, all employment, retention, change
of control, employment protection, severance, termination, consulting,
deferred compensation, executive pension and retirement, welfare and fringe
benefit agreements, plans and programs, except for any modification to
any such Plan or agreement to the extent permitted in accordance with
Section 3.2.4(d).
(b) Maintenance of Employee Benefits. For a period of two years
from the Effective Time, the Parent or the Buyer will, or will cause the
VKAC Companies to, continue to maintain employee and retiree compensation
and benefit plans, programs, arrangements and policies (other than equity
based plans) for the benefit of current and former employees of the VKAC
Group which provide compensation and benefits that are substantially
comparable, in the aggregate, to those provided by the VKAC Companies for
the benefit of such employees and former employees immediately prior to the
Effective Time.
(c) Change of Control. Each of the Parent, Holdco and the Buyer
acknowledges and agrees that the consummation of the transactions
contemplated by this Agreement will constitute a "change of control" of the
Company for purposes of each Plan and each program, policy and agreement
covering any current or former employee of the VKAC Group identified in
Schedule 3.2.4(c) and, accordingly, agrees to, and to cause the Company and
each other member of the VKAC Group to, honor all provisions under such
Plans, programs, policies and agreements relating to a change of control.
(d) Modifications. Notwithstanding the foregoing, nothing in
this Section 3.2.4 shall preclude the Buyer from seeking to (i) modify
any employment agreement with the consent of the affected employee or
employees or (ii) modify any Plan to the extent such modification is
permitted by the terms of such Plan and is consistent with Section
3.2.4(b).
(e) Withholding Taxes. Following the Effective Time, the Parent
shall, or shall cause the Surviving Corporation to, pay on a timely basis
all withholding Taxes payable by the Surviving Corporation in connection
with the transactions contemplated by Sections 1.5(d), 1.5(e) and 1.5(f).
3.2.5. List of Affiliates. As soon as practicable following the date
hereof, the Parent shall deliver to the Company a list of each entity
that is an Affiliate of the Parent, Holdco or the Buyer.
3.2.6. Contribution Agreement. Each of the Parent, Holdco and the
Buyer agree to use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by the Contribution Agreement and, in connection therewith,
will not agree to amend or modify any of the closing conditions set forth
in the Contribution Agreement in a way that would impair the ability of the
parties thereto to satisfy such conditions on or before the Effective Time,
provided that nothing in this Section 3.2.6 shall prohibit the parties to
the Contribution Agreement from unilaterally agreeing to terminate such
agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Each Party. The obligations of
the Company, the Parent, Holdco and the Buyer to effect the Merger and to
consummate the other transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Effective Time of the following
conditions:
4.1.1. HSR Act Notification. In respect of the notifications of
the Parent, Holdco and the Buyer on the one hand and the Company on the
other hand pursuant to the HSR Act, the applicable waiting period and any
extensions thereof shall have expired or been terminated.
4.1.2. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree
or judgment of any court or other Governmental Authority, and no action
or proceeding brought by any Governmental Authority shall be pending at the
Effective Time before any court or other Governmental Authority to
restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated hereby, and there shall not have been
promulgated, entered, issued or determined by any court or other
Governmental Authority to be applicable to this Agreement any Applicable
Law making illegal the consummation of the transactions contemplated hereby
and no proceeding brought by any Governmental Authority with respect to the
application of any such Applicable Law shall be pending.
4.1.3. Contribution Agreement. If the Contribution Agreement has not
been terminated prior to the Effective Time, the transactions
contemplated by the Contribution Agreement shall have been consummated.
4.1.4. Assets Under Management. Market Assets Under Management shall
not be less than $26,933,875,000 and Closing Assets Under Management
shall not be less than $30,525,058,000 or more than $41,298,608,000.
4.2. Conditions to Obligations of the Parent, Holdco and the Buyer.
The obligations of the Parent, Holdco and the Buyer to effect the Merger
and to consummate the other transactions contemplated hereby shall be
subject to the fulfillment (or waiver by the Buyer) at or prior to the
Effective Time of the following additional conditions, which the Company
agrees to use its reasonable best efforts to cause to be fulfilled:
4.2.1. Representations; Performance. The representations and
warranties set forth in Section 2.1 shall have been true and correct in all
material respects at and as of the date hereof, and shall be true and
correct in all respects at and as of the Effective Time as though made at
and as of the Effective Time, without regard to any qualification as to
materiality or Material Adverse Effect contained therein, except to the
extent that any failure to be true and correct at and as of the Effective
Time would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, provided that the accuracy of any
representation or warranty that by its terms speaks only as of the date
hereof or another date prior to the Effective Time shall be determined
solely as of the date hereof or such other date, as the case may be. The
Company shall have duly performed and complied in all material respects
with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Effective Time. The
Company shall have delivered to the Parent and the Buyer a certificate,
dated the Effective Time and signed by the President or a Vice President of
the Company, to the effect set forth above in this Section 4.2.1 and with
respect to the matters set forth in Section 4.1.4.
4.2.2. Consents. All Consents required to be made or obtained by the
Company or any member of the VKAC Group in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby shall have been made or obtained that are (i)
Governmental Approvals, Consents of the Boards of Directors or Trustees
of the Funds or Consents of any member of the VKAC Group, (ii) Consents
of shareholders of the Prime Rate Trust and (iii) the Consents listed in
Schedule 3.1.6(f). Copies of all such Consents shall have been delivered
to the Parent. All Governmental Approvals required to be made or
obtained by the Parent, Holdco, the Buyer or their respective Affiliates in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby shall have been made
or obtained.
4.2.3. MCM Indemnity. An Indemnification Agreement, dated as of
the Effective Time, substantially in the form of Exhibit B hereto, and a
tax sharing agreement reasonably satisfactory to the Buyer, shall have been
entered into by MCM.
4.2.4. Resignation of Directors. All directors of the VKAC Companies
whose resignations shall have been requested by the Parent in writing not
less than ten Business Days prior to the Effective Time shall have
submitted their resignations or been removed from office effective as of
the Effective Time.
4.2.5. Opinion of Counsel. The Buyer shall have received favorable
opinions, in each case addressed to it and dated the Closing Date, from the
General Counsel of the Company and from Debevoise & Plimpton, special
counsel to the Company, with respect to the matters and substantially in
the form set forth in Exhibits C-1 and C-2 hereto, respectively.
4.2.6. Proceedings. All corporate and other proceedings of the
Company and the VKAC Group that are required in connection with the
transactions contemplated by this Agreement, and all documents and
instruments incident to such proceedings, shall be reasonably
satisfactory to the Buyer and its counsel, and the Buyer and its counsel
shall have received all such documents and instruments, or copies
thereof, certified if requested, as may be reasonably requested.
4.2.7. Govett Agreements. Within five Business Days following the
delivery to the Company of a notice from the Parent requesting the
Company to terminate any Govett Agreement, the Company shall have sent
written notice under such Govett Agreement to terminate such agreement.
4.2.8. FIRPTA Certification. The Parent and the Buyer shall have
received (a) a certification from the Company, dated no more than 30 days
prior to the Closing Date and signed by a responsible corporate officer
of the Company, that the Company is not, and has not been at any time
during the five years preceding the date of such certification, a United
States real property holding company, as defined in section 897(c)(2) of
the Code, and (b) proof reasonably satisfactory to the Parent and the Buyer
that the Company has provided notice of such certification to the
Internal Revenue Service in accordance with the provisions of Treasury
regulations section 1.897-2(h)(2).
4.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger and to consummate the other transactions
contemplated hereby shall be subject to the fulfillment (or waiver by the
Company), at or prior to the Effective Time, of the following additional
conditions, which each of the Parent, Holdco and the Buyer agrees to use
its reasonable best efforts to cause to be fulfilled:
4.3.1. Representations, Performance, etc. The representations and
warranties set forth in Section 2.2 shall have been true and correct in all
material respects at and as of the date hereof, and shall be true and
correct in all material respects at and as of the Effective Time as
though made at and as of the Effective Time except to the extent that any
failure to be true and correct would not reasonably be expected to
materially adversely affect the ability of the Parent, Holdco and the Buyer
to consummate the transactions contemplated by this Agreement, provided
that the accuracy of any representation or warranty that by its terms
speaks only as of the date hereof or another date prior to the Effective
Time shall be determined solely as of the date hereof or such other date,
as the case may be. The Parent, Holdco, the Buyer and their respective
Affiliates shall have duly performed and complied in all material
respects with all agreements and conditions required by this Agreement to
be performed or complied with by them prior to or at the Effective Time.
The Parent, Holdco and the Buyer shall have delivered to the Company a
certificate or certificates, dated the Effective Time and signed by the
President or a Vice President of each of them, to the effect set forth
above in this Section 4.3.1.
4.3.2. Consents. All Consents required to be made or obtained by the
Buyer or its Affiliates in connection with the execution and delivery of
the Agreement or the consummation of the transactions contemplated hereby
shall have been made or obtained that are (i) Governmental Approvals or
(ii) other Consents not included in clause (i), except for any such other
Consents the failure of which to be made or obtained would not reasonably
be expected to adversely affect the ability of the Buyer or its
Affiliates to consummate the transactions contemplated hereby. Copies of
all such Consents shall have been delivered to the Company. All
Governmental Approvals required to be made or obtained by any member of the
VKAC Group in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby shall
have been made or obtained.
4.3.3. Merger Consideration. The Buyer shall have deposited with the
Exchange Agent the Merger Consideration, and with the Company (net of
applicable withholding Taxes, if any) the Total Employee Option
Cancellation Amount, the Jones Option Cancellation Amount and, if the
Effective Time occurs after January 1, 1997, the Travelers Option
Cancellation Amount, in each case, in immediately available funds.
4.3.4. Certain Indebtedness. The Buyer shall have provided for
either (i) the repayment of all borrowings outstanding under the Credit
Agreement immediately prior to or as of the Effective Time, the payment
of all other amounts then due and payable thereunder and the termination of
the Credit Agreement or (ii) a waiver by the requisite lenders under the
Credit Agreement of all defaults and events of default that may occur as
a result of the Merger and the other transactions contemplated hereby.
4.3.5. Opinions of Counsel. The Company shall have received a
favorable opinion, addressed to it and dated the Closing Date, from Davis
Polk & Wardwell, special counsel to the Buyer, with respect to the
matters and substantially in the form set forth in Exhibit D hereto.
4.3.6. Corporate Proceedings. All corporate and other proceedings of
the Buyer and its Affiliates in connection with the transactions
contemplated by this Agreement, and all documents and instruments
incident thereto, shall be reasonably satisfactory to the Company and its
special counsel, and the Company and such counsel shall have received all
such documents and instruments, or copies thereof, certified if
requested, as may be reasonably requested.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the written agreement of the Buyer and the Company;
(b) by the Company, on the one hand, or the Buyer, on the other hand, by
written notice to the other after 5:00 p.m., New York City time, on
February 1, 1997 if the Effective Time shall not have occurred by such date
(unless the failure of the Effective Time to occur shall be due to any
material breach of this Agreement by the party seeking to terminate),
unless such date is extended by the mutual written consent of the Company
and the Buyer;
(c) by the Company if there has been a breach on the part of the Parent,
Holdco or the Buyer of the covenants of the Parent, Holdco and the Buyer
set forth herein, or any failure on the part of the Parent, Holdco, the
Buyer or any of their respective Affiliates to perform its obligations
hereunder (provided that the terminating party shall have performed and
complied with, in all material respects, all agreements and covenants
required by this Agreement to have been performed or complied with by
such terminating party) prior to such time, such that, in any such case,
any of the conditions to the effectiveness of the Merger set forth in
Section 4.1 or 4.3 could not be satisfied on or prior to the termination
date contemplated by Section 5.1(b); or
(d) by the Buyer, if there has been a breach on the part of the
Company of its covenants set forth herein or any failure on the part of the
Company to perform its obligations hereunder (provided that the terminating
party shall have performed and complied with, in all material respects, all
agreements and covenants required by this Agreement to have been
performed or complied with by such terminating party) prior to such time,
such that, in any such case, any of the conditions to the effectiveness
of the Merger set forth in Sections 4.1 or 4.2 could not be satisfied on or
prior to the termination date contemplated by Section 5.1(b).
5.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 5.1, this Agreement shall become void
and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto,
or any of its directors, officers, employees, agents, consultants,
representatives, advisers, stockholders or Affiliates, except for any
liability resulting from any party's breach of this Agreement and except
that the provisions of Article VI shall survive any such termination.
ARTICLE VI
DEFINITIONS, MISCELLANEOUS
6.1. Definition of Certain Terms. The terms defined in this
Section 6.1, whenever used in this Agreement (including in the Schedules)
shall have the respective meanings indicated below for all purposes of this
Agreement. All references herein to a Section, Article or Schedule are
to a Section, Article or Schedule of or to this Agreement, unless otherwise
indicated.
Acquisition Price: as defined in Section 1.6(a).
Acquisition Proposal: as defined in Section 3.1.2.
Adjusted Bank Debt Amount: the sum of (i) the principal amount of
all loans outstanding on the Determination Date under the Credit Agreement,
plus any accrued and unpaid interest thereon on the Determination Date,
minus (ii) all Transaction Expenses that have been paid prior to the
Determination Date, plus (iii) the absolute amount of Working Capital at
the Determination Date, if the actual amount is a negative number plus (iv)
the amount, if any, by which the Total Debt Prepayment Amount exceeds the
Permitted Debt Prepayment Amount determined as of the Determination Date.
Adjusted Senior Note Amount: $153,000,000 plus accrued and unpaid
interest as of the Determination Date on the outstanding principal amount
of VKAC's 9_% Senior Secured Notes due 2003.
Advisers Act: the Investment Advisers Act of 1940, as amended, and
the rules and regulations of the Commission promulgated thereunder.
Affiliate: of a Person means a Person that directly, or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, the first Person, including but not limited to a
Subsidiary of the first Person, a Person of which the first Person is a
Subsidiary, or another Subsidiary of a Person of which the first Person
is also a Subsidiary. "Control" (including the terms "Controlled by" and
"under common Control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities,
by contract, as trustee or executor, or otherwise.
Aggregate Employee Option Exercise Price: an amount equal to the
sum of the respective exercise price under each Employee Option outstanding
immediately prior to the Effective Time, whether or not vested,
multiplied by the respective number of shares of Class A Common Stock
subject to each such Employee Option.
Aggregate Jones Option Exercise Price: an amount equal to the
exercise price under the Jones Option multiplied by the number of Jones
Option Shares.
Aggregate Travelers Option Exercise Price: an amount equal to the
exercise price under the Travelers Option multiplied by the number of
Travelers Option Shares.
Agreement: this Agreement and Plan of Merger, including the Schedules
and Exhibits hereto.
American Capital Companies: collectively, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital Asset Management, Inc.,
ACCESS Investor Services, Inc., Van Kampen American Capital Trust
Company, Van Kampen American Capital Exchange Corporation, Van Kampen
American Capital Services, Inc., American Capital Contractual Services,
Inc., American Capital Shareholders Corporation and Advantage Capital
Credit Services, Inc.
Applicable Law: all applicable provisions of all (i) statutes,
laws, rules, administrative codes, regulations or ordinances of any
Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, injunctions, judgments, awards and decrees of any Governmental
Authority.
BONY Loan Agreement: the General Loan and Security Agreement, dated
as of February 3, 1989, between Van Kampen American Capital Distributors,
Inc. and The Bank of New York, as amended, supplemented, waived or
otherwise modified from time to time.
Business Day: a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required
by law to close.
Buyer: as defined in the introductory paragraph of this Agreement.
C&D Fund IV: The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership.
CDSC Assets: assets reflected on the Company's balance sheet in
respect of deferred company funded distribution costs (including 12b-1
receivables).
Certificate of Merger: as defined in Section 1.2.
Certificates: as defined in Section 1.8(a).
Class A Common Stock: the Class A Common Stock, par value $.01 per
share, of the Company.
Class B Common Stock: the Class B Common Stock, par value $.01 per
share, of the Company.
Client: any client (including any Fund or Sub-Advisory Fund) to which
the Company or any of its Subsidiaries or Affiliates provides investment
management, investment advisory, administration or distribution services on
the date hereof or on the Closing Date, as the case may be.
Closing: as defined in Section 1.2.
Closing Assets Under Management: the aggregate assets of such of the
open end Funds, the Institutional Accounts (including the Sub-Advisory
Funds) and the Prime Rate Trust as to which any VKAC Company (i) has
received shareholder Consent or, in the case of Institutional Accounts
(other than a Sub-Advisory Fund), has followed the procedures set forth
in Section 3.1.6(d) or other procedures reasonably acceptable to the Parent
and no VKAC Company has been notified, orally or in writing, as of the
close of business on the second Business Day immediately preceding the
Effective Time, of any such Institutional Account's intention to
terminate its relationship with the applicable VKAC Company and (ii) will
act as investment adviser, subadviser or manager immediately following
the Effective Time, determined as follows:
(x) in the case of open end Funds and Sub-Advisory Funds,
based on the average of such aggregate amount over the 10-day period
immediately prior to the second Business Day immediately preceding the
Effective Time, provided that, as of any date of determination, the
aggregate assets of such Funds and Sub-Advisory Funds shall be deemed to be
equal to the sum of (i) the aggregate net asset values of the outstanding
shares of such Funds and Sub-Advisory Funds as of June 20, 1996 or, if
later, the first date on which such Fund or Sub-Advisory Fund issued
shares, plus (ii) the aggregate number of shares of such Funds and Sub-
Advisory Funds issued since such date (including dividend reinvestments)
multiplied by the respective net asset values of such shares when issued,
minus (iii) the aggregate number of shares of such Funds and Sub-Advisory
Funds redeemed since such date multiplied by the respective net asset
values of such shares when redeemed;
(y) in the case of the Prime Rate Trust, its aggregate assets
shall be deemed to be equal to the sum of (i) the aggregate net asset
values of the outstanding shares of the Prime Rate Trust as of June 20,
1996, plus (ii) the aggregate number of shares of the Prime Rate Trust
issued after June 20, 1996 to the close of business on the second
Business Day immediately preceding the Effective Time (including dividend
reinvestments), multiplied by the respective net asset values of such
shares when issued, minus (iii) the aggregate number of shares of the Prime
Rate Trust redeemed since such date multiplied by the respective net
asset values of such shares when redeemed; and
(z) the aggregate assets of such Institutional Accounts (other
than the Sub-Advisory Funds) shall be deemed to be equal to the sum of
(i) the aggregate assets under management of such Institutional Accounts as
of June 20, 1996 or, if later, the date on which such Institutional Account
was created, plus (ii) the aggregate amount of assets deposited in such
Institutional Accounts from such date to the close of business on the
second Business Day immediately preceding the Effective Time, based upon
the respective asset values at the time of such deposits, minus (iii) the
aggregate amount of assets withdrawn, or for which oral or written notice
of withdrawal has been given, from Institutional Accounts (including
terminated Institutional Accounts) from such date to the close of
business on the second Business Day immediately preceding the Effective
Time, based upon the respective asset values at the time of such
withdrawals or terminations.
Closing Date: the date of the Closing.
Code: the Internal Revenue Code of 1986, as amended.
Commission: the Securities and Exchange Commission.
Common Stock: the Class A Common Stock and the Class B Common Stock.
Company: as defined in the introductory paragraph of this Agreement.
Company Financial Statements: the consolidated financial statements
of the Company and its Subsidiaries as at and for the three months ended
March 31, 1996 and the years ended December 31, 1995 and 1994, including in
each case a balance sheet, a statement of income, a statement of
stockholders' equity and a statement of cash flows, together, in the case
of such financial statements as at and for the years ended December 31,
1995 and 1994, with an audit report thereon by KPMG Peat Marwick, dated
January 26, 1996 except for the second and following paragraphs of Note 15,
as to which the date is June 4, 1996.
Company Intellectual Property: as defined in Section 2.1.9(a).
Company Taxes: as defined in Section 2.1.6(a).
Confidentiality Agreement: that letter agreement, dated March 4,
1996, between Morgan Stanley & Co. Incorporated and the Company.
Consent: any consent, approval, authorization, waiver, permit,
license, grant, exemption or order of, or registration, declaration or
filing with, any Person, including but not limited to any Governmental
Authority.
Contract: as defined in Section 2.1.8(a).
Contribution Agreement: as defined in the fourth recital of this
Agreement.
Credit Agreement: the Amended and Restated Credit Agreement, dated as
of December 20, 1994, among VKAC, the Company, the banks named therein
and Chemical Bank, as administrative agent, collateral agent and issuing
bank, and Chemical Bank and The Chase Manhattan Bank, N.A., as managing
agents, as amended, supplemented, waived or otherwise modified from time to
time.
Custodian/Transfer Agent Agreements: as defined in Section 2.1.8(a).
Deferred Stock Agreement: as defined in Section 1.5(e).
Deferred Stock Unit: as defined in Section 1.5(e).
Designated Managers: the employees of any member of the VKAC Group
who are parties to the Contribution Agreement as of the Effective Time.
Determination Date: as defined in Section 1.6(b)(ii).
DGCL: the General Corporation Law of the State of Delaware, as in
effect from time to time.
Disclosed Matter: any fact that was (i) disclosed by the Company, any
of its Subsidiaries or any Fund or any of their respective employees,
attorneys, accountants or financial and other advisers
("Representatives") to Parent, Holdco, the Buyer or any of their respective
Representatives and reviewed by Parent, the Buyer or any of their
respective Representatives or (ii) discovered by Parent, Holdco, the
Buyer or any of their respective Representatives and discussed with the
Company, any of its Subsidiaries or any Fund or any of their respective
Representatives, in each case on or prior to the date hereof.
Dissenting Shares: as defined in Section 1.7.
Effective Time: as defined in Section 1.2.
Employee Option: as defined in Section 1.5(d).
Employment and Withholding Taxes: any federal, state, local,
foreign or other employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care or other similar
tax, duty or other governmental charge or assessment or deficiencies
thereof and all Taxes required to be withheld by or on behalf of each of
the VKAC Companies in connection with amounts paid or owing to any
employee, independent contractor, creditor or other party (including, but
not limited to, all interest and penalties thereon and additions thereto
whether disputed or not).
Environmental Activity: any storage, holding, release, emission,
discharge, generation, disposal, handling or transportation of any
Hazardous Materials.
Environmental Laws: all Applicable Laws relating to the protection of
the environment, to human health and safety, or to any Environmental
Activity, including, without limitation, (i) the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, and the Occupational Safety and Health
Act, and (ii) all other requirements pertaining to reporting, licensing,
permitting, investigation or remediation of emissions, discharges or
releases of Hazardous Materials into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use,
sale, treatment, receipt, storage, disposal, transport or handling of
Hazardous Materials.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliate: as defined in Section 2.1.18(a).
ERISA Client: as defined in Section 2.1.20.
Exchange Act: the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
Exchange Agent: as defined in Section 1.8(a).
Exchange Agent Agreement: as defined in Section 1.8(a).
Filings: as defined in Section 2.1.12(c).
Financial Statements: the Company Financial Statements and the Fund
Financial Statements.
Fund Financial Statements: the audited financial statements of each
of the Funds (excluding the unit investment trusts) for the two most
recently completed fiscal years which have been filed with the
Commission, together with reports on such year-end statements by such
Fund's independent public accountants, including, in each case, a statement
of net assets or statement of assets and liabilities and investment
portfolio, a statement of operations and a statement of changes in net
assets.
Fund Returns: as defined in Section 2.1.6(g)(iv).
Funds: as defined in Section 2.1.15(c).
GAAP: as defined in Section 2.1.3.
Governmental Approval: any Consent of, with or to any Governmental
Authority.
Governmental Authority: any nation or government, any state or
other political subdivision thereof, including, without limitation, any
governmental agency, department, commission or instrumentality of the
United States, any State of the United States or any political
subdivision thereof, or any stock exchange or self-regulatory agency or
authority.
Govett Agreements: (i) the Master Agreement, dated September 1994,
among John Govett & Co. Limited and various of its affiliates and various
members of the VKAC Group and (ii) the Underwriting Agreement, dated
November 17, 1995, between The Govett Funds, Inc. and Van Kampen American
Capital Distributors, Inc. (successor by merger to American Capital
Marketing, Inc.).
Hazardous Materials: any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, (ii) requires
investigation, removal or remediation under any Environmental Law, or is
defined as a "hazardous waste" or "hazardous substance" thereunder, or
(iii) is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is regulated by any
Governmental Authority or Environmental Law.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
Holdco: as defined in the introductory paragraph of this Agreement.
Income Tax: any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, net worth, capital, profits or windfall profits tax or other similar
tax, estimated tax, duty or other governmental charge or assessment or
deficiencies thereof (including, but not limited to, all interest and
penalties thereon and additions thereto whether disputed or not).
Institutional Accounts: Clients, other than the Funds, OakRe Life
Insurance Company and the Cova Series Trust, as to which any VKAC Company
acts as investment adviser, subadviser or manager.
Intellectual Property: United States and foreign trademarks,
service marks, trade names, trade dress, copyrights, and similar rights,
including registrations and applications to register or renew the
registration of any of the foregoing; United States and foreign letters
patent and patent applications; and inventions, processes, designs,
formulae, trade secrets, know-how and all similar intellectual property
rights.
Investment Advisory Contracts: as defined in Section 2.1.8(a).
Investment Company: as defined in the Investment Company Act.
Investment Company Act: the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
IRS: the Internal Revenue Service.
Jones Option: the option to purchase up to 57,750 shares of Class A
Common Stock granted to The Jones Financial Companies, a Limited
Partnership, pursuant to the Jones Option Agreement.
Jones Option Agreement: The Amended and Restated Stock Option
Agreement, dated as of June 1, 1995, between the Company and The Jones
Financial Companies, a Limited Partnership.
Jones Option Cancellation Amount: as defined in Section 1.5(f).
Jones Option Shares: as defined in Section 1.5(f).
knowledge of the Company: the actual knowledge, after due inquiry, of
Don G. Powell, Dennis J. McDonnell, William R. Molinari, William R.
Rybak, Ronald A. Nyberg, Paul R. Wolkenberg, Alan T. Sachtleben, Peter W.
Hegel, William N. Brown, Douglas B. Gehrman, Robert Peck, Jack Zimmerman,
Scott West, Gary DeMoss, Jeffrey W. Maillet, Robert J. Froehlich, Gwen
Shaneyfelt and Walter E. Rein.
Lien: any mortgage, pledge, hypothecation, security interest,
encumbrance, title retention agreement, lien, charge or other similar
restriction.
Market Assets Under Management: the aggregate assets of such of the
open end Funds, the Institutional Accounts (including the Sub-Advisory
Funds) and the Prime Rate Trust as to which any VKAC Company (i) has
received shareholder Consent or, in the case of Institutional Accounts
(other than a Sub-Advisory Fund), has followed the procedures set forth
in Section 3.1.6(d) or other procedures reasonably acceptable to the Parent
and no VKAC Company has been notified, orally or in writing, as of the
close of business on the second Business Day immediately preceding the
Effective Time, of any such Institutional Account's intention to
terminate its relationship with the applicable VKAC Company and (ii) will
act as investment adviser, subadviser or manager immediately following
the Effective Time, determined as of the close of business on the second
Business Day immediately preceding the Effective Time based on the
average of such aggregate amount over the 10-day period immediately prior
to such date.
Material Adverse Effect: with respect to any Person or Persons, a
materially adverse effect on the business, financial condition, results
of operations or properties of such Person or Persons, taken as a whole
in the event that there is more than one such Person, other than any such
materially adverse effect arising because of the identity of the Buyer, the
Parent or any of their respective Affiliates, and provided that neither a
decline in the securities markets nor in assets under management of any
Fund or Sub-Advisory Fund shall be taken into account in determining if a
materially adverse effect shall have occurred. Any reference in this
Agreement to "Material Adverse Effect" without a reference to a specific
Person or Persons shall mean a Material Adverse Effect on the VKAC Group,
taken as a whole.
MCM: McCarthy, Crisanti & Maffei, Inc., a New York corporation.
Merger Consideration: as defined in Section 1.5(a).
NASD: National Association of Securities Dealers, Inc.
Option Holder: as defined in Section 2.1.2(c).
Option Plan: as defined in Section 1.5(d).
Options: as defined in Section 2.1.2(c).
Organizational Documents: as to any Person, if a corporation, its
articles or certificate of incorporation and by-laws; if a partnership, its
partnership agreement; and if some other entity, its constituent documents.
Per Share Merger Consideration: an amount of cash in dollars (rounded
to the nearest $0.0001) determined by dividing (i) an amount equal to the
sum of (A) the Acquisition Price, (B) the Aggregate Employee Option
Exercise Price, (C) the Aggregate Jones Option Exercise Price and (D) in
the event that the Closing Date occurs after January 1, 1997, the Aggregate
Travelers Option Exercise Price, by (ii) an amount equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior to
the Effective Time (including the number of shares of Common Stock
subject to the Contribution Agreement), (B) the aggregate number of
shares of Class A Common Stock subject to the Employee Options
immediately prior to the Effective Time, whether or not vested, (C) the
Jones Option Shares, (D) in the event that the Closing Date occurs after
January 1, 1997, the Travelers Option Shares, (E) the number of shares of
Preferred Stock outstanding immediately prior to the Effective Time and (F)
the number of Deferred Stock Units outstanding immediately prior to the
Effective Time.
Permitted Debt Prepayment Amount: as of the end of any calendar month,
the Prepayment Target for such month, provided that (x) if Pre-Tax Income
as of the end of such month is less than Pre-Tax Income Target as of the
end of such month, then the Permitted Debt Prepayment Amount shall be the
Prepayment Target minus the amount of such shortfall and (y) if Pre-Tax
Income as of the end of such month is greater than Pre-Tax Income Target as
of the end of such month, then the Permitted Debt Prepayment Amount shall
be the Prepayment Target plus 50% of such excess; provided further that
if the Determination Date is any day other than on the last Business Day of
any month, "Prepayment Target" and "Pre-Tax Income Target" for the month in
which the Determination Date occurs shall be equal to (A) the amount
therefor determined as of the end of the preceding month plus (B) a pro
rata amount (based on the number of days elapsed in the month in which
the Determination Date occurs) of the difference between (i) the Prepayment
Target or the Pre-Tax Income Target, as the case may be, for the end of the
month in which the Determination Date occurs and (ii) the Prepayment Target
or the Pre-Tax Income Target, as the case may be, as of the end of the
preceding month.
Permitted Encumbrances: as defined in Section 2.1.7.
Person: any natural person or any firm, partnership, limited
liability partnership, association, corporation, limited liability company,
trust, business trust, Governmental Authority or other entity.
Plans: as defined in Section 2.1.18(a).
Post-Closing Tax Period: any Tax period (or portion thereof) ending
after the close of business on the Closing Date.
Pre-Closing Tax Period: any Tax period (or portion thereof) ending on
or before the close of business on the Closing Date.
Prepayment Target: with respect to the period as of the end of any
month, the amount set forth on Exhibit E for such month below the heading
"Cumulative Debt Repayment Target."
Pre-Tax Income: pre-tax income of the VKAC Group on a consolidated
basis determined in accordance with GAAP for the period from July 1, 1996
to the Determination Date without giving effect to extraordinary items.
Pre-Tax Income Target: with respect to the period as of the end of
any month, the amount set forth on Exhibit E for such month below the
heading "Cumulative Pre-Tax Target Income."
Preferred Stock: the Junior Non-Cumulative Participating Preferred
Stock, par value $200.00 per share, of the Company.
Preferred Stock Trustee: Van Kampen American Capital Trust Company,
as trustee with respect to The Van Kampen American Capital, Inc. Profit
Sharing and Savings Plan pursuant to the Master Defined Contribution
Trust Agreement, dated as of December 20, 1994, between the Company and Van
Kampen American Capital Trust Company, as amended, supplemented, waived
or otherwise modified from time to time.
Prime Rate Trust: the Van Kampen American Capital Prime Rate Income
Trust.
Real Property: as defined in Section 2.1.7.
Registered Broker-Dealers: as defined in Section 2.1.15(b).
Registered Investment Advisers: as defined in Section 2.1.15(a).
Registration and Participation Agreement: the Registration and
Participation Agreement, dated as of February 17, 1993, as amended by
Amendment No. 1 to Registration and Participation Agreement, dated as of
April 15, 1994, Amendment No. 2 to Registration and Participation
Agreement, dated as of December 20, 1994, and Amendment No. 3 to
Registration and Participation Agreement, dated as of May 1, 1995, among
the Company and certain stockholders of the Company.
Relevant Date: February 17, 1993, with respect to the Van Kampen
Companies (without giving effect to any merger into such companies of the
American Capital Companies); or December 20, 1994, with respect to the
American Capital Companies.
Return: any return, report, declaration, form, claim for refund or
information statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, required to be
filed by or on behalf of any VKAC Company.
RIC: a "regulated investment company" within the meaning of section
851 of the Code.
Securities Act: the Securities Act of 1933, as amended.
Selling Agreements: as defined in Section 2.1.8(a).
Stock Option Waiver: as defined in Section 1.5(d).
Sub-Advisory Funds: as defined in Section 2.1.15(c).
Subsidiary: each corporation or other Person in which a Person owns
or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or
other equity interests.
Surviving Corporation: as defined in Section 1.1.
Tax: (i) any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales, use, excise, custom duties, transfer, registration,
stamp, premium, real property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment, social security,
disability, workers' compensation, payroll, withholding, estimated or other
similar tax, duty or other governmental charge of any kind whatsoever
(including, but not limited to, all interest and penalties thereon and
additions thereto whether disputed or not), (ii) any liability of any
VKAC Company for the payment of any amounts of the type described in clause
(i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, or of being a party to any agreement or
arrangement whereby liability of any VKAC Company for payments of such
amounts was determined or taken into account with reference to the
liability of any other Person, and (iii) any liability of any VKAC
Company for the payment of any amounts as a result of being party to any
tax sharing agreement with respect to the payment of any amounts of the
type described in clause (i) or (ii) as a result of any obligation to
indemnify any other Person.
Tax Asset: any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could reduce Taxes through carryovers or carrybacks to other
taxable years (including, without limitation, deductions and credits
related to alternative minimum Taxes).
Total Debt Prepayment Amount: the aggregate amount of loans under the
Credit Agreement prepaid from the date hereof to the Determination Date.
Total Employee Option Cancellation Amount: as defined in Section
1.5(d).
Transaction Expenses: (i) the fees and expenses payable to Goldman,
Sachs & Co. and Merrill Lynch & Co., Inc. in connection with the Merger;
(ii) the fee payable to Gordon McMahon, a director of the Company, in
connection with the Merger; (iii) the fees and expenses of Debevoise &
Plimpton, as special counsel to the Company, and of Friedman & Kaplan, as
special counsel to the Designated Managers, incurred in connection with the
transactions contemplated by the Merger Agreement; (iv) the expenses, costs
and fees incurred by the Company in connection with any and all Consents
required to be obtained by the VKAC Companies in connection with the
transactions contemplated hereby; and (v) all transfer Taxes (including any
real property transfer gains Taxes but excluding stock transfer Taxes) that
relate to or result from the Merger.
Transfer Agent: as defined in Section 2.1.15(f).
Travelers Option: the option to purchase up to 120,222 shares of
Class B Common Stock granted to The Travelers Inc. pursuant to the
Travelers Option Agreement.
Travelers Option Agreement: The Stock Option Agreement, dated as of
December 20, 1994, between the Company and The Travelers Inc.
Travelers Option Cancellation Amount: as defined in Section 1.5(f).
Travelers Option Shares: as defined in Section 1.5(f).
Underwriting Agreements: as defined in Section 2.1.8(a).
Van Kampen Companies: collectively, the Company, VKAC, Van Kampen
American Capital Investment Advisory Corp., Van Kampen American Capital
Management, Inc., Van Kampen American Capital Distributors, Inc., VSM Inc.,
VCJ Inc., Van Kampen Merritt Equity Holdings Corp. and Van Kampen Merritt
Equity Advisors Corp.
VKAC: as defined in the second recital to this Agreement.
VKAC Companies or VKAC Group: the Company, VKAC and VKAC's direct and
indirect Subsidiaries.
Working Capital: Working Capital Assets minus Working Capital
Liabilities.
Working Capital Assets: as of any date, all cash and cash equivalents
(whether or not restricted), short-term investments, receivables, trading
inventory and investments in VKAC funds related to deferred compensation,
in each case as set forth on the consolidated balance sheet of the VKAC
Group, in accordance with GAAP.
Working Capital Liabilities: as of any date, all broker-dealer
loans (including loans outstanding under the BONY Agreement), accounts
payable and accrued expenses (excluding accrued interest on loans under the
Credit Agreement and the Senior Notes), payables to Affiliates (MCM/ACC),
payables to trustees, all outstanding indebtedness incurred after the
date of this Agreement under Section 2.1.5(d)(iii), deferred compensation
and current income taxes payable in each case as set forth on the
consolidated balance sheet of the VKAC Group, in accordance with GAAP,
excluding (i) deferred Taxes and (ii) any accrued but unpaid Transaction
Expenses.
6.2. Survival of Representations and Warranties. The
representations and warranties, and covenants and other obligations to be
performed prior to or at the Effective Time, contained in this Agreement or
in any certificate delivered in connection herewith shall survive the
execution and delivery of this Agreement but shall not survive the
Effective Time, and any and all breaches of such representations and
warranties and covenants and other obligations shall be deemed to be waived
as of the Effective Time.
6.3. Expenses; Transfer Taxes. Except as set forth below in this
Section 6.3 and except with respect to Transaction Expenses, the Company,
on the one hand, and the Parent, Holdco and the Buyer, on the other hand,
shall bear their respective expenses, costs and fees (including
attorneys' fees) in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this Agreement and
compliance herewith, whether or not the transactions contemplated hereby
shall be consummated. All Transaction Expenses shall be borne by the
Company, and the Acquisition Price shall be adjusted in respect thereof
as provided in Section 1.6(b)(ii). The Parent, Holdco and the Buyer shall
bear all stock transfer Taxes that relate to or result from the Merger.
6.4. Severability. If any provision of this Agreement is
inoperative or unenforceable for any reason, such circumstances shall not
have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any
other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatsoever. The invalidity of any one or
more phrases, sentences, clauses, Sections or subsections of this Agreement
shall not affect the remaining portions of this Agreement.
6.5. Notices. All notices, requests, demands and other
communications made in connection with this Agreement shall be in writing
and shall be (a) mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or (b) transmitted by hand
delivery or reputable overnight delivery service, addressed as follows:
(i) if to the Company, to:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60187
Telecopy: (708) 684-6155
Telephone: (708) 684-6363
Attention: Ronald A. Nyberg, Esq.
With a copy to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Telecopy: (212) 407-5252
Telephone: (212) 407-5200
Attention: Mr. Alberto Cribiore
and to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
(ii) if to the Parent, Holdco or the Buyer, to:
Morgan Stanley Asset Management, Inc.
1321 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 296-7778
Telephone: (212) 296-7125
Attention: Mr. James M. Allwin
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Telephone: (212) 450-4000
Attention: John R. Ettinger, Esq.
or, in each case, at such other address as may be specified in writing to
the other parties hereto.
6.6. Miscellaneous.
6.6.1. Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.6.2. Entire Agreement. This Agreement, including the Schedules and
Exhibits, and the Confidentiality Agreement constitute the entire
agreement, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof.
6.6.3. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
6.6.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT THE LAWS
OF THE STATE OF DELAWARE SHALL MANDATORILY APPLY. THE PARENT, HOLDCO,
THE BUYER AND THE COMPANY HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA LOCATED IN THE STATE, CITY AND COUNTY OF NEW YORK
SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS
OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND
HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT
OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH
DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR
PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THE VENUE THEREOF MAY NOT BE APPROPRIATE, AND THE PARTIES HERETO
IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING
SHALL BE HEARD AND DETERMINED IN SUCH A NEW YORK STATE OR FEDERAL COURT.
THE PARENT, HOLDCO, THE BUYER AND THE COMPANY HEREBY CONSENT TO AND GRANT
ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE
SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR
OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 6.5, OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY
LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
6.6.5. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
6.6.6. Assignment. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
6.6.7. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns, except that
each Person that is a stockholder of the Company, or that holds any Options
or Deferred Stock Units, immediately prior to the Effective Time shall be a
third party beneficiary with respect to the covenants of the Parent, Holdco
and the Buyer set forth in Section 3.2.3.
6.6.8. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (C) IT MAKES THIS WAIVER VOLUNTARILY AND (D) IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.6.8.
6.6.9. Amendment; Waivers. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is
sought. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the
rights of the party granting such waiver in any other respect or at any
other time. Neither the waiver by any of the parties hereto of a breach of
or a default under any of the provisions of this Agreement, nor the failure
by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of
a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder.
6.6.10. Certain Disclosures. To the extent that any Disclosed
Matter can reasonably be deemed to constitute an exception to any of the
representations or warranties made by the Company in Section 2.1.6, such
Disclosed Matter shall be deemed to have been adequately disclosed in the
Schedules hereto for purposes of the representations and warranties
contained in Sections 2.1.6, 2.1.3 and 2.1.4.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
VK/AC HOLDING, INC.
By: /s/ Ronald A. Nyberg
------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
MORGAN STANLEY GROUP INC.
By: /s/ Eileen K. Murray
------------------------
Name: Eileen K. Murray
Title: Treasurer
MSAM HOLDINGS II, INC.
By: /s/ Harold Schaaff
----------------------
Name: Harold Schaaff
Title: Vice President and Secretary
MSAM ACQUISITION INC.
By: /s/ Harold Schaaff
----------------------
Name: Harold Schaaff
Title: Vice President and Secretary
Exhibit A
Adjustment to Acquisition Price
Based on Assets Under Management
--------------------------------
The amount of the increase or decrease in the Acquisition Price
pursuant to Section 1.6(a)(i) shall be equal to the amount determined
pursuant to the following formula:
1. If Closing Assets Under Management is greater than $37.707 billion but
is equal to or less than $39.503 billion, increase Acquisition Price
by the product of .0115 times the excess of Closing Assets Under
Management over $37.707 billion.
2. If Closing Assets Under Management is greater than $39.503 billion,
increase Acquisition Price by $20.649 million plus the product of .0231
times the excess of Closing Assets Under Management over $39.503
billion.
3. If Closing Assets Under Management is equal to or greater than $34.116
billion and equal to or less than $37.707 billion, no change in
Acquisition Price.
4. If Closing Assets Under Management is less than $34.116 billion but
greater than or equal to $32.321 billion, decrease Acquisition Price
by the product of .0115 times the excess of $34.116 billion over
Closing Assets Under Management.
5. If Closing Assets Under Management is less than $32.321 billion,
decrease Acquisition Price by $20.649 million plus the product of .0231
times the excess of $32.321 billion over Closing Assets Under Management.
Exhibit B
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of ________, 1996, made by
McCarthy, Crisanti & Maffei, Inc., a New York corporation (the "Company"), in
favor of VK/AC Holding, Inc., a Delaware corporation ("VKAC Holding") and
Morgan Stanley Group Inc., a Delaware corporation ("Morgan Stanley").
WHEREAS, VKAC Holding has entered into an Agreement and Plan of
Merger with Morgan Stanley, Holdco and the Buyer, dated as of June 21, 1996
(as such agreement may be amended, the "Merger Agreement");
WHEREAS, prior to the closing of the transactions contemplated by
the Merger Agreement, VKAC Holding intends to distribute to its common
stockholders (the "MCM Spin-off") all of the outstanding common stock of a new
Delaware corporation ("MCM Holding") to be formed by VKAC Holding for the
purpose of holding all of the outstanding common stock of the Company, which
is currently a wholly-owned subsidiary of VKAC Holding (collectively, MCM
Holding, the Company and the subsidiaries of the Company, the "MCM
Group");
WHEREAS, in connection with the MCM Spin-off, the Company and VKAC
Holding have entered into a Tax Sharing Agreement, dated as of _________,
1996, (the "Tax Sharing Agreement"); and
WHEREAS, pursuant to Section 4.2.3 of the Merger Agreement, it is a
condition to the obligations of Morgan Stanley and the Buyer that the Company
shall have entered into an Indemnification Agreement with respect to the
ownership of the stock of the Company and of MCM Holding prior to the MCM
Spin-off;
NOW THEREFORE, in consideration of the promises herein contained and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, VKAC Holding and Morgan Stanley hereby agree
as follows:
1. Indemnity. (a) The Company (hereinafter sometimes referred to
as the "Indemnitor") hereby agrees to indemnify and hold harmless VKAC
Holding, Morgan Stanley and their respective affiliates, successors and
assigns (collectively, the "Indemnitees"), from and against, and to pay or
reimburse each Indemnitee for, any and all claims, actions, causes of action,
suits, judgments, losses, taxes, liabilities, damages, obligations, costs and
expenses including, but not limited to, reasonable attorneys' fees (and the
costs and expenses, including reasonable attorneys' fees and expenses, of
enforcing the Company's obligations hereunder) incurred by any of the
Indemnitees in connection with or arising from (each, an "Indemnifiable Loss")
incurred or suffered by any of the Indemnitees, whether arising before, on or
after the MCM Spin-off, (i) except as otherwise provided in the Tax Sharing
Agreement, of or relating to the MCM Group or arising from or in connection
with the conduct of the business of the MCM Group, including but not limited
to taxes of the MCM Group to the extent that such taxes are attributable to
income, assets or operations of the MCM Group and VKAC Holding has not
previously received a payment with respect thereto, (ii) the ownership of the
stock of the Company and MCM Holding prior to the MCM Spin-off (other than any
taxes imposed upon VKAC Holding or any of its subsidiaries as a consequence of
the Spin-Off) and (iii) the Guarantee, dated December 7, 1993, by Van Kampen
American Capital, Inc. of the Company's obligations under the Lease Agreement,
dated December 7, 1993, between the Company, as lessee, and The Chase
Manhattan Bank, N.A., as lessor, with respect to certain premises occupied by
the Company on the 37th floor of the building located at One Chase Manhattan
Plaza, New York, New York.
(b) Any indemnity payable hereunder shall be made on an after-tax
basis (taking into account both the deductibility of the Indemnifiable Loss
and the inclusion in income of the indemnity payment and using for this
purpose the maximum statutory rate applicable to the recipient of such
indemnity payment for the relevant taxable year).
2. Claims. In the case of any claim asserted by a third party
against an Indemnitee, notice shall be given by such Indemnitee to the
Indemnitor promptly after such Indemnitee shall have received (i) notice of
the commencement by a third party of any suit or other proceeding against or
otherwise involving such Indemnitee or (ii) information from a third party
alleging the existence of a claim against such Indemnitee, in either case,
with respect to which indemnification may be sought under this Agreement (a
"Third-Party Claim"); provided that the failure of such Indemnitee to give
notice as provided by this Section 2 shall not relieve the Indemnitor of its
obligations under this Agreement, except to the extent that the Indemnitor is
materially damaged as a result of such failure to give notice. Within 30 days
after receipt of such notice, the Indemnitor may (i) by giving written notice
thereof to such Indemnitee, acknowledge liability for such indemnification
claim and at its option and at its sole cost and expense assume the defense of
any claim or any litigation resulting therefrom, provided that counsel for the
Indemnitor, who shall conduct the defense of such claim or litigation, shall
be reasonably satisfactory to such Indemnitee, and such Indemnitee may
participate in such defense at such Indemnitee's expense, or (ii) object to
the claim for indemnification set forth in the notice delivered by such
Indemnitee pursuant to this Section 2, provided that if the Indemnitor does
not within such 30-day period give such Indemnitee written notice objecting to
such indemnification claim and setting forth the grounds therefor, the
Indemnitor shall be deemed to have acknowledged its liability for such
indemnification claim. The Indemnitor, in the defense of any such claim or
litigation, shall not, except with the prior written consent of the Indemnitee
against whom the claim was made or the litigation was brought, consent to
entry of any judgment or enter into any settlement that provides for
injunctive or other non-monetary relief affecting such Indemnitee or that does
not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnitee of a release from all liability with respect to
such claim or litigation. In the event that an Indemnitee shall in good faith
determine that such Indemnitee has available to it one or more defenses or
counterclaims that conflict with one or more of those that may be available to
the Indemnitor in respect of such claim or any litigation relating thereto,
such Indemnitee shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
any such claim at the sole cost of the Indemnitor, provided that if such
Indemnitee does so take over and assume control, such Indemnitee shall not
consent to entry of any judgment or settle such claim or litigation without
the prior written consent of the Indemnitor. In the event that the Indemnitor
does not exercise its right to assume the defense of any matter as above
provided, the Indemnitee shall have the right (but not the obligation) to
defend against any such claim or demand.
3. Cooperation. The Indemnitees and their affiliates shall make
available to the Indemnitor and its attorneys and accountants, and the
Indemnitor and its affiliates shall make available to the Indemnitees and
their attorneys and accountants, at reasonable times and for reasonable
periods, during normal business hours, all books and records in its possession
or under its control reasonably requested by the Indemnitor relating to any
matter with respect to which indemnification is being provided pursuant to
this Agreement, and the Indemnitees and the Indemnitor, and their respective
affiliates, shall render to the Indemnitor or the Indemnitees, as the case may
be, such assistance as may be reasonably required to ensure prompt and
adequate prosecution or the defense of any suit, claim or proceeding,
including using its reasonable efforts to make available for interviews and to
give testimony those officers or employees of the Indemnitees or the
Indemnitor, or their respective affiliates, as the Indemnitor or the
Indemnitees, as the case may be, may reasonably request; provided, however,
that in each such case, any expense reasonably incurred by the Indemnitees in
connection therewith shall be promptly paid by the Indemnitor upon submission
to the Indemnitor of an itemized request for such payment.
4. Subrogation. The Indemnitor shall be subrogated to any claims
or rights of the Indemnitees against any other person with respect to any
Indemnifiable Loss assumed or borne by the Indemnitor. The Indemnitees shall
cooperate with the Indemnitor to the extent reasonable under the circumstances
consistent with the provisions of Section 3, at the expense of the Indemnitor,
in connection with the assertion by the Indemnitor of any such claim against
any such other persons.
5. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and addressed to:
(i) if to the Indemnitor:
McCarthy, Crisanti & Maffei, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Attention: President
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
(ii) if to the Indemnitees:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60187
Telecopy: (708) 684-6155
Telephone: (708) 684-6363
Attention: Ronald A. Nyberg, Esq.
with a copy to:
Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 296-7778
Telephone: (212) 296-7125
Attention: James M. Allwin
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Telephone: (212) 450-4000
Attention: John R. Ettinger, Esq.
(iii) or, as to any party, at such other address as shall be designated by
such party in a written notice to other parties.
All such notices and other communications shall be made by certified
mail, postage prepaid, and shall be effective the third business day after
being deposited in the mails; provided that such notices and other
communications may be faxed, telegraphed, telexed or delivered by hand
delivery, but in any such case shall be effective only when receipt is
confirmed in writing by the party to which sent.
6. Waivers; Remedies. No failure on the part of Indemnitees to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
7. Amendments, Etc. No amendment, waiver, modification, discharge
or termination of any provisions of this Agreement, and no consent to any
departure by the Indemnitor herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Indemnitee or Indemnitees
affected thereby, and then such amendment, waiver, modification, discharge,
termination or consent shall be effective only in the specific instance and
for the specific purpose for which given. Any such amendment, waiver,
modification, discharge, termination or consent shall be effective only if
approved by the directors of the applicable Indemnitees who are unaffiliated
with the Indemnitor.
8. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW).
9. Parties in Interest. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties
hereto, and any attempt to assign this Agreement without such consent shall be
void and of no effect. This Agreement shall be binding on and enforceable
against the Indemnitor and its successors and permitted assigns, and shall
inure to the benefit of and be enforceable by the Indemnitees and their
respective successors and permitted assigns.
10. Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
Page 1
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Indemnitor and the Indemnitees has
caused this Indemnification Agreement to be duly executed and delivered by its
officer duly authorized as of the date first written above.
MCCARTHY, CRISANTI &
MAFFEI, INC.
By ______________________
Name:
Title:
VK/AC HOLDING, INC.
By ______________________
Name:
Title:
MORGAN STANLEY GROUP INC.
By ______________________
Name:
Title:
Page 2
Exhibit C-1
________ __, 1996
Morgan Stanley Group Inc.
MSAM Holdings II, Inc.
MSAM Acquisition Inc.
c/o Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Secretary of
VK/AC Holding, Inc., a Delaware corporation (the "Company"). As such, I and
other members of the Office of the General Counsel of the Company have
counseled the Company in connection with the execution and delivery of the
Agreement and Plan of Merger, dated as of June 21, 1996 (the "Merger
Agreement"), among the Company, Morgan Stanley Group Inc., a Delaware
corporation (the "Parent"), MSAM Holdings II, Inc., a Delaware corporation
("Holdco"), and MSAM Acquisition Inc., a Delaware corporation (the "Buyer"),
and the transactions contemplated thereby. Capitalized terms used herein and
not otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, I have reviewed or caused to be reviewed under my
supervision the Merger Agreement.
I have examined and relied upon the representations and warranties
as to factual matters contained in or made pursuant to the Merger Agreement
and have examined and relied upon originals or copies, certified or otherwise
identified to my satisfaction, of such other agreements, instruments,
certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates, corporate or other records, authorizations, proceedings and
other instruments, and have made such additional examinations and conducted
such other investigations of fact and law, as I have deemed necessary or
appropriate for the purposes of rendering the opinions expressed below. I
have assumed the genuineness of all signatures of, and the authority of,
persons signing the Merger Agreement on behalf of parties thereto other than
the Company and the authenticity of all documents submitted to me as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies.
Based upon the foregoing, I am of the opinion that:
Corporate Status. Each Significant Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization, with the requisite corporate power and authority
to carry on its business as now conducted. Each Significant Subsidiary is
duly qualified to do business and is in good standing as a foreign corporation
in all jurisdictions in which the failure to be so qualified, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect. As used herein, "Significant Subsidiary" means the companies listed
on Annex I hereto.
Capitalization. The authorized capital stock of the Company
consists of (i) 3,250,000 shares of Class A Common Stock, of which __________
shares are issued and outstanding, (ii) 3,250,000 shares of Class B Common
Stock, of which 117,817 shares are issued and outstanding and (iii) 32,500
shares of Preferred Stock of which 32,500 shares are issued and
outstanding.
As of the date of the Merger Agreement, to the best of my knowledge,
there were _______ shares of Class A Common Stock reserved for issuance upon
exercise of the Employee Options outstanding on the date thereof, 57,750
shares of Class A Common Stock reserved for issuance upon exercise of the
Jones Option, 120,222 shares of Class B Common Stock reserved for issuance
upon exercise of the Travelers Option (the Employee Options, the Jones Option
and the Travelers Option, collectively, the "Options"), 3,350 shares of Class
A Common Stock reserved for issuance in connection with Deferred Stock Units
outstanding on the date thereof, 32,500 shares of Class A Common Stock
reserved for issuance upon exchange of the Preferred Stock for such shares and
3,132,183 shares of Class B Common Stock reserved for issuance upon exchange
of shares of Class A Common Stock for such shares. There were Options
relating to _________ shares of Common Stock outstanding as of the date of the
Merger Agreement, and since the date thereof the Company has not agreed to,
nor does it have commitments to, issue options relating to any additional
shares of Common Stock.
To the best of my knowledge, there are no preemptive or similar
rights on the part of any Person with respect to the issuance of any shares of
capital stock of the Company or any other member of the VKAC Group, except for
such rights as may be set forth in the Registration and Participation
Agreement. Except (i) for this Agreement, (ii) in respect of the Options and
the Deferred Stock Agreements, (iii) in respect of certain repurchase rights
with respect to shares of Class A Common Stock held by current or former
officers or employees of the Company or any of its Subsidiaries and (iv) as
set forth in Schedule 2.1.2(c) or 2.1.2(d) of the Merger Agreement, there are
no subscriptions, options, warrants or other similar rights, agreements or
commitments of any kind obligating the Company or any other member of the VKAC
Group to issue or sell, or to cause to be issued or sold, or to repurchase or
otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable for, or any options, warrants or other
similar rights relating to, any such shares.
No Conflict. Except as set forth in Schedule 2.1.1(b) to the
Merger Agreement, the execution and delivery by the Company of the Merger
Agreement, and the consummation of the transactions contemplated thereby, will
not result in any violation of, loss of rights or default under, constitute an
event creating rights of acceleration, termination, repayment or cancellation
under, entitle any party to any payment pursuant to or result in the creation
of any Lien (or any obligation to create any Lien) upon any of the properties
or assets of any member of the VKAC Group under (i) any provision of the
Organizational Documents of any member of the VKAC Group or (ii) to the best
of my knowledge, any Material Contract, except for, in the case of clause
(ii), any such violations, losses, defaults, accelerations, terminations,
repayments, cancellations or Liens that, individually and in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. As used
herein, "Material Contract" shall mean any Contract that would be a "material
contract" of any member of the VKAC Group within the meaning of Item
601(b)(10) of Securities and Exchange Commission Regulation S-K, without
giving effect (except as to management contracts) to clause (iii)(A) of such
Item 601(b)(10).
Litigation . To the best of my knowledge, except as set forth in
Schedule 2.1.11 of the Merger Agreement, there is no judicial or
administrative action, suit, investigation, inquiry or proceeding pending or
threatened that (a) individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or result in any liability on the
part of the VKAC Group in an amount in excess of $2,000,000 individually or
$5,000,000 in the aggregate or (b) questions the validity of the Merger
Agreement or of any action taken or to be taken by any member of the VKAC
Group in connection therewith.
Regulatory Matters. Each of the Registered Investment Advisers is
duly registered as an investment adviser under the Advisers Act. Each such
registration is in full force and effect. Each of the Registered Investment
Advisers is not registered and is not required to be registered as a
broker-dealer under federal law, and is not a member and is not required to be
a member of any self-regulatory organization. Each of the Registered
Broker-Dealers is a broker-dealer duly registered under the Exchange Act and a
member firm in good standing of the NASD, and, to the extent required, the
Municipal Securities Rulemaking Board. Each such registration is in full
force and effect. No VKAC Company other than the Registered Broker-Dealers is
required to be registered, licensed or qualified as a broker-dealer under the
Exchange Act, or subject to any material liability or disability by reason of
any failure to be so registered, licensed or qualified. Except with respect
to the Funds and the Sub-Advisory Funds, no VKAC Company acts as investment
adviser or subadviser to any Investment Company. The Transfer Agent is duly
registered as a transfer agent under the Exchange Act. Such registration is
in full force and effect. No VKAC Company other than the Transfer Agent is a
"transfer agent" within the meaning of the Exchange Act, or required to be
registered, licensed or qualified as a transfer agent under the Exchange Act,
or subject to any material liability or disability by reason of any failure to
be so registered, licensed or qualified. None of the VKAC Companies is an
Investment Company. Van Kampen American Capital Trust Company is duly
registered, licensed or qualified as a trust company in the State of Texas and
such registration, license or qualification is in full force and
effect.
Certain Approvals and Contracts. The approval of each investment
advisory agreement with a Client of the Registered Investment Adviser which is
an Investment Company required in connection with the performance by the
parties of the Merger Agreement has been effected in accordance with the
provisions of Section 15 of the Investment Company Act. Each Investment
Advisory Contract with respect to any Fund, and each Underwriting Agreement,
has been duly adopted and maintained in compliance in all material respects
with Section 15 of the Investment Company Act. With respect to each client of
the VKAC Group listed on Schedule 2.1.8(c)(A)(9) of the Merger Agreement the
assets of which have been included by the Company in determining Closing
Assets Under Management and Market Assets Under Management under the Merger
Agreement, a Consent has been obtained in accordance with the provisions of
Section 3.1.6(d) of the Merger Agreement which, to my knowledge, is consistent
with the requirements of the Advisers Act as interpreted by the staff of the
Commission in Jennison Associates Capital Corp. (avail. Dec. 2,
1985).
I am a member of the Bar of the State of Illinois and express no
opinion as to matters governed by any laws other than the laws of the State of
Illinois, the Federal laws of the United States of America, the General
Corporation Law of the State of Delaware and, with respect to the opinion
expressed in the last sentence of paragraph (5) above, the State of Texas. In
rendering the opinions set forth above, I have, with your permission, relied
on certain members of my staff with respect to certain matters covered in this
opinion.
I am delivering this opinion to you pursuant to Section 4.2.6 of the
Merger Agreement and no person other than you is entitled to rely on this
opinion.
Very truly yours,
Significant Subsidiaries
Annex I
Van Kampen American Capital, Inc.
Van Kampen American Capital Investment Advisory Corp.
Van Kampen American Capital Asset Management, Inc.
Van Kampen American Capital Management, Inc.
Van Kampen American Capital Distributors, Inc.
ACCESS Investor Services, Inc.
Van Kampen American Capital Trust Company
American Capital Contractual Services, Inc.
Van Kampen American Capital Advisors, Inc.
Exhibit C-2
_________ __, 1996
Morgan Stanley Group Inc.
MSAM Holdings II, Inc.
MSAM Acquisition Inc.
c/o Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
We have acted as special counsel to VK/AC Holding, Inc., a Delaware
corporation (the "Company"), in connection with the execution and delivery of
the Agreement and Plan of Merger, dated as of June 21, 1996 (the "Merger
Agreement"), among the Company, Morgan Stanley Group Inc., a Delaware
corporation (the "Parent"), MSAM Holdings II, Inc., a Delaware corporation
("Holdco"), and MSAM Acquisition Inc., a Delaware corporation (the "Buyer"),
and the transactions contemplated thereby. Capitalized terms used herein and
not otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, we have participated in the preparation of the Merger
Agreement.
We have examined and relied upon the representations and warranties
as to factual matters contained in or made pursuant to the Merger Agreement
and have examined and relied upon originals or copies, certified or otherwise
identified to our satisfaction, of such other agreements, instruments,
certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates, corporate or other records, authorizations, proceedings and
other instruments, and have made such additional examinations and conducted
such other investigations of fact and law, as we have deemed necessary or
appropriate for the purposes of rendering the opinions expressed below. We
have assumed the genuineness of all signatures of, and the authority of,
persons signing the Merger Agreement on behalf of parties thereto other than
the Company and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies.
Based upon the foregoing, we are of the opinion that:
Corporate Status; Merger Agreement; Etc. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite corporate power
and authority to execute and deliver the Merger Agreement, to perform its
respective obligations thereunder and to consummate the transactions
contemplated thereby. The execution and delivery of the Merger Agreement, and
the consummation of the transactions contemplated thereby, have been duly
authorized by all requisite corporate action of the Company. The Merger
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization or other laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
No Conflict. The execution and delivery by the Company of the
Merger Agreement, and the consummation of the transactions contemplated
thereby, will not result in any violation of any New York State or federal
law, rule or regulation or the Delaware General Corporation Law (it being
understood that the rules and regulations of a self regulatory body or
organization such as the National Association of Securities Dealers, Inc.
shall not be deemed to be federal laws, rules or regulations).
Governmental Approvals. Except for filings in connection with
the Merger which will become effective after the Closing and other
Governmental Approvals to be made or obtained after the Closing (none of which
are required to be made prior to the Closing), no Governmental Approval (other
than pursuant to the HSR Act, which Governmental Approval has been obtained)
required by the laws of the State of New York, the federal laws of the United
States or the Delaware General Corporation Law is required to be obtained or
made by the Company in connection with the execution and delivery of the
Merger Agreement or the consummation of the transactions contemplated thereby
other than those which have been obtained or made.
We are members of the Bar of the State of New York and express no
opinion as to matters governed by any laws other than the laws of the State of
New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware.
We are delivering this opinion to you pursuant to Section 4.2.6 of
the Merger Agreement and no person other than you is entitled to rely on this
opinion.
Very truly yours,
Debevoise & Plimpton
Page 1
Exhibit D
______________ _____, 1996
VK/AC Holding, Inc.
One Park View Plaza
Oakbrook Terrace, Illinois 60181
Each of the Designated Managers
Party to the Contribution Agreement
Referred to herein
Ladies and Gentlemen:
We have acted as special counsel to MSAM Acquisition Inc., a
Delaware corporation (the "Buyer"), MSAM Holdings II, Inc., a Delaware
corporation ("Holdco"), and Morgan Stanley Group Inc., a Delaware corporation
(the "Parent"), in connection with (i) the execution and delivery of the
Agreement and Plan of Merger, dated as of June 21, 1996, (the "Merger
Agreement"), among VK/AC Holding, Inc., a Delaware corporation (the Company"),
the Parent, Holdco and the Buyer, and (ii) the execution and delivery of the
Contribution Agreement, dated as of June 21, 1996 (the "Contribution
Agreement"), among the Parent, Holdco and the Designated Managers, and the
transactions contemplated thereby. Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, we have participated in the preparation of the Merger
Agreement and the Contribution Agreement.
We have examined and relied upon the representations and warranties
as to factual matters contained in or made pursuant to the Merger Agreement
and the Contribution Agreement and have examined and relied upon originals or
copies, certified or otherwise identified to our satisfaction, of such other
agreements, instruments, certificates of public officials, certificates of
officers or other representatives of the Buyer and others, and such other
documents, certificates, corporate or other records, authorizations,
proceedings and other instruments, and have made such additional examinations
and conducted such other investigations of fact and law, as we have deemed
necessary or appropriate for the purposes of rendering the opinions expressed
below. We have assumed the genuineness of all signatures of, and the
authority of, persons signing the Merger Agreement and the Contribution
Agreement on behalf of parties thereto other than the Buyer, Holdco and the
Parent and the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such
copies.
Based upon the foregoing, we are of the opinion that:
Corporate Status; Authority for AgreementsThis opinion to cover
such other agreements in addition to the Contribution Agreement as Parent or
Holdco may enter into pursuant to Section 6.1(c) of the Contribution
Agreement.; Etc. Each of the Parent, Holdco and the Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. All of the outstanding shares of capital stock of the
Buyer are owned by Holdco, and all the outstanding shares of capital stock of
Holdco are owned by Parent, except for the Preferred Stock referred to below
being issued to the Designated Managers pursuant to the Contribution
Agreement. Each of the Parent, Holdco and the Buyer, as the case may be, has
the requisite corporate power and authority to execute and deliver the Merger
Agreement, and the Contribution Agreement, to perform its respective
obligations thereunder and to consummate the transactions contemplated
thereby. The execution and delivery of the Merger Agreement and the
Contribution Agreement, and the consummation of the transactions contemplated
thereby, have been duly authorized by all requisite corporate action of the
Parent, Holdco and the Buyer, as the case may be. Each of the Merger
Agreement and the Contribution Agreement has been duly executed and delivered
by each of the Parent, Holdco and the Buyer, as the case may be, and
constitutes the legal, valid and binding obligation of each of them,
enforceable against each of them, as the case may be, in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization or other laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Validity of Shares. The shares of 4% Exchangeable Redeemable
Preferred Stock, par value $100 per share (the "Preferred Stock"), of Holdco
to be issued to the Designated Managers pursuant to the Contribution Agreement
have been duly authorized and, when issued and delivered in accordance with
the terms of such Contribution Agreement, will be validly issued, fully paid
and non-assessable. The Certificate of Designation of the Preferred Stock has
been duly authorized by Holdco, and has been duly filed with the Secretary of
State of the State of Delaware. The shares of common stock, par value $1.00
per share, of the Parent issuable in exchange for the Preferred Stock have
been duly authorized and, when issued and delivered in exchange for shares of
the Preferred Stock in accordance with the terms thereof, will be validly
issued, fully paid and nonassessable.To be included in the opinion if the
Preferred Stock is issued.
No Conflict.See Note 1. The execution and delivery by each of
the Parent, Holdco and the Buyer, as the case may be, of the Merger Agreement
and the Contribution Agreement, and the consummation of the transactions
contemplated thereby, will not result in any violation of (i) any provision of
the certificate of incorporation, by-laws of other organizational documents of
such party or (ii) any New York State or federal law, rule or regulation or
the Delaware General Corporation Law (it being understood that the rules and
regulations of a self regulatory body or organization such as the National
Association of Securities Dealers, Inc. shall not be deemed to be federal
laws, rules or regulations).
Governmental Approvals.See note 1. Except for filings in
connection with the Merger which will become effective after the Closing and
other Governmental Approvals to be made or obtained after the Closing (none of
which are required to be made prior to the Closing), no Governmental Approval
required by the laws of the State of New York, the federal laws of the United
States or the Delaware General Corporation Law is required to be obtained or
made by the Parent, Holdco or the Buyer, as the case may be, in connection
with the execution and delivery of the Merger Agreement and the Contribution
Agreement or the consummation of the transactions contemplated thereby other
than those which have been obtained or made.
We are members of the Bar of the State of New York and express no
opinion as to matters governed by any laws other than the laws of the State of
New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware (but including only those federal and
New York State and Delaware laws which, in our experience, are normally
applicable to transactions of this type).
We are delivering this opinion to you pursuant to Section 4.3.5 of
the Merger Agreement and Section 6.3 of the Contribution Agreement and no
person other than you is entitled to rely on this opinion.
Very truly yours,
Davis Polk & Wardwell
Schedule of Cumulative Pre-Tax
Income Target Amount and Cumulative
Debt Prepayment Target Amounts
-----------------------------------
Cumulative Pre-Tax Cumulative Debt
Month Income Target Prepayment Target*
- ----- ------------------ ------------------
($ in millions)
July $ 7.3 $15
August 14.9 20
September 22.3 35
October 30.4 45
November 38.3 55
December 47.0 65
January 56.0 75
* Based on the assumption that debt outstanding under the Credit
Agreement on the date hereof is $275,000,000.