EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Dated as of February 28, 2000
by and among
ReliaStar Financial Corp.,
Pilgrim Holdings Corporation
and Lexington Global Asset Managers, Inc.
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
February 28, 2000, is made among ReliaStar Financial Corp., a Delaware
corporation ("Buyer"), Pilgrim Holdings Corporation, a Delaware corporation and
a wholly owned subsidiary of Buyer ("Merger Sub"), and Lexington Global Asset
Managers, Inc., a Delaware corporation ("Lexington").
Recitals
Lexington (or one or more of its subsidiaries) acts as investment
adviser and/or principal underwriter for 16 open-end investment companies and as
sponsor for one registered unit investment trust (collectively, the "Lexington
Funds") registered under the Investment Company Act of 1940, as amended (the
"1940 Act").
Lexington (or one or more of its subsidiaries) is investment adviser
for various private accounts.
The Boards of Directors of Buyer, Merger Sub, and Lexington deem it
advisable and in the best interests of each corporation and its respective
stockholders that Merger Sub and Lexington combine in order to advance the
long-term business interests of Buyer, Merger Sub, Lexington, the Lexington
Funds and the Lexington investment advisory or subadvisory clients.
The strategic combination of Merger Sub and Lexington shall be effected
by the terms of this Agreement through a transaction in which Lexington will
merge with and into Merger Sub (the "Merger").
In the Merger each share of Lexington's common stock, $.0l par value
per share ("Lexington Common Stock"), issued and outstanding at the Effective
Time (as defined in Section 1.1), shall be converted into cash and/or a fraction
of a share of common stock, $.01 par value per share, of Buyer ("Buyer Common
Stock").
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For federal income tax purposes, it is intended that the Merger qualify
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
Agreement
Now, therefore, intending to be legally bound hereby, the parties agree
as follows:
ARTICLE I
The Merger
1.1 Effective Time of the Merger. Subject to the terms of this
Agreement, a Certificate of Merger (the "Certificate of Merger") shall be duly
executed by Merger Sub and Lexington and delivered to the office of the Delaware
Secretary of State for filing, as provided in Section 251 of the Delaware
General Corporation Law (the "Delaware Law"), as soon as practicable on the
Closing Date (as defined in Section 1.2). The Merger shall become effective at
the time at which the Certificate of Merger shall have been filed with the
Delaware Secretary of State or at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time").
1.2 Closing. Closing of the Merger (the "Closing") will take place at
11:00 a.m., New York time, on a date to be specified by Buyer and Lexington,
which shall be no later than the fifth business day after satisfaction or waiver
(to the extent waivable under Article VIII) of all conditions to the
consummation of the Merger set forth in Article VIII of this Agreement (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions), at the offices
of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, unless
another date or place is agreed to by Buyer and Lexington. The date on which the
Closing occurs is referred to as the "Closing Date." All actions taken at the
Closing shall be deemed to have been taken simultaneously at the Effective Time.
1.3 Effects of the Merger.
(a) At the Effective Time, in accordance with this Agreement
and the Delaware Law, (1) Lexington shall be merged with and into
Merger Sub, (2) the separate corporate existence of Lexington shall
cease, and (3) Merger Sub shall be the surviving corporation and shall
continue to be governed by the Delaware Law (Merger Sub is sometimes
referred to in this Agreement as the "Surviving Corporation").
(b) The Merger shall have the other effects set forth in Sections
259 and 261 of the Delaware Law.
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1.4 Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) The Certificate of Incorporation of Merger Sub as in effect
immediately before the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and of the Delaware Law.
(b) The Bylaws of Merger Sub in effect immediately before the
Effective Time shall be the Bylaws of the Surviving Corporation, until
duly amended in accordance with their terms, the Certificate of
Incorporation of the Surviving Corporation, and the Delaware Law.
1.5 Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub holding office at the Effective
Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation, to serve until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation, or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
(b) In addition to such other officers as the Board of Directors
of the Surviving Corporation may appoint from time to time, the
officers of Merger Sub holding office at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving
Corporation, to serve until their successors have been duly appointed
and qualified or until their earlier death, resignation, or removal in
accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
ARTICLE II
Conversion of Securities
2.1 Effect on Capital Stock. Subject to the other provisions of this
Article II, at the Effective Time, by virtue of the Merger and without any
action on the part of Buyer, Lexington, Merger Sub, or the holder of any shares
of the following securities:
(a) Merger Consideration. Subject to adjustment as provided in
Sections 2.1(b), 2.1(c) and 2.1(l) and the election and allocation
provisions of Sections 2.1(i) and 2.1(j), each issued and outstanding
share of Lexington Common Stock (other than shares of Lexington Common
Stock held of record by Buyer, Merger Sub, or Lexington or any other
direct or indirect subsidiary of Buyer or Lexington immediately before
the Effective Time and other than shares of Lexington Common Stock as
to which dissenters' rights of appraisal have been exercised as
contemplated by Section 2.1(k)) shall be automatically converted into
and become the right to receive (i) 0.231 of a share of Buyer Common
Stock, (the "Share Consideration"), and (ii) cash in the amount of
$3.306 (the "Cash Consideration" and, together with the Share
Consideration, the "Merger Consideration"). At the Effective Time, each
share of Lexington Common Stock held of record by Buyer, Merger Sub, or
Lexington or any direct or indirect subsidiary of Buyer or Lexington
shall be canceled and cease to exist, and no payment shall be made with
respect to those shares.
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(b) Adjustment of Merger Consideration Based on Buyer's Average
Share Price. The Share Consideration shall not be adjusted as a result
of changes in the market value of Buyer Common Stock unless the average
per share closing price of Buyer Common Stock on the New York Stock
Exchange (the "NYSE") for the five trading days immediately preceding
the date that is one business day before the Closing Date ("Buyer's
Average Share Price") is more than $31.625 or less than $25.625. If
Buyer's Average Share Price is more than $31.625, then the Share
Consideration shall be reduced to a fraction of a share of Buyer Common
Stock (expressed as a decimal, rounded to the nearest thousandth), the
numerator of which shall be the Share Consideration set forth in
Section 2.1(a)(i) multiplied by $31.625 and the denominator of which
shall be Buyer's Average Share Price. If Buyer's Average Share Price is
less than $25.652, then the Share Consideration shall be increased to a
fraction of a share of Buyer Common Stock (expressed as a decimal,
rounded to the nearest thousandth), the numerator of which shall be the
Share Consideration set forth in Section 2.1(a)(i) multiplied by
$25.625 and the denominator of which shall be Buyer's Average Share
Price; provided, however, that, in lieu of the foregoing adjustment,
Buyer may determine, by written notice to Lexington on or before the
Closing Date, to increase the Cash Consideration by an amount not to
exceed the product of the Share Consideration multiplied by the
difference between $25.625 and Buyer's Average Share Price and to
increase the Share Consideration by a decimal amount (rounded to the
nearest thousandth) equal to the quotient obtained by dividing (A) the
difference between (1) the product of the Share Consideration
multiplied by the difference between $25.625 and the Buyer's Average
Share Price minus (2) the amount of the increase in the Cash
Consideration made pursuant to Buyer's determination by (B) Buyer's
Average Share Price.
(c) Adjustment to Merger Consideration Based on Assets Under
Management. If any adjustment is required by the provisions of the
following subsections, the Merger Consideration payable by Buyer at the
Closing determined after giving effect to any adjustment required by
Section 2.1(b), will be reduced or increased by a percentage calculated
in the following manner:
(1) Attached hereto as Schedule 2.1(c) is a list prepared by
Lexington of the Lexington Funds and investment advisory or
subadvisory clients of Lexington as of December 31, 1999, showing
for each and as of that date, the client's or fund's name and
assets under management (the "Original Schedule"). The total assets
under management listed on the Original Schedule shall be referred
to as the "Base Net Assets."
(2) At the Closing, Lexington will deliver to Buyer a revised
Schedule 2.1(c) (the "Revised Schedule") as of the close of
business on the third business day before the Closing, prepared as
follows:
(A) all clients that have terminated their investment
advisory or subadvisory relationship with Lexington or that
have notified Lexington in writing of their intention to
terminate that relationship since the date of the Original
Schedule shall be deleted from the Revised Schedule;
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(B) clients that have engaged Lexington since the date
of the Original Schedule shall be added to the Revised
Schedule with their assets under management by Lexington
included in the Revised Schedule at the value of those assets
on the date Lexington's management commenced;
(C) for clients (other than Lexington Funds) that have
withdrawn assets from management by Lexington since the date
of the Original Schedule, assets under management for each
such client shall be reduced by the same percentage as is
calculated by dividing (A) the value of the assets withdrawn
as of the date of withdrawal, by (B) the aggregate value of
assets managed by Lexington for such client immediately prior
to the withdrawal;
(D) for clients (other than Lexington Funds and assets
managed by Lexington or its subsidiaries for the Richardson
family or any trust for the benefit of the Richardson family)
that have added to assets under management since the date of
the Original Schedule, assets under management shall be
increased by the same percentage as is calculated by dividing
(A) the value of the assets added as of the date of the
addition of the assets, by (B) the aggregate value of assets
managed by Lexington for such client immediately prior to the
date Lexington's management commenced;
(E) assets under management for each of the Lexington
Funds shall be increased or decreased, as appropriate, by the
total of the aggregate net sales or redemptions for such
Lexington Funds between December 31, 1999 and the third
business day before the Closing; and
(F) the Revised Schedule shall not reflect fluctuations
in the market value of assets under management since the date
of the Original Schedule.
Pro forma net assets under management shown on the Revised Schedule are referred
to as "Assigned Net Assets."
(3) Assigned Net Assets shall then be divided by Base Net
Assets, calculated as a percentage, and the resulting percentage
shall be determined to the nearest one-hundredth of one percent
(the "Adjustment Percentage").
(4) Any adjustment to the Merger Consideration shall adjust
the Share Consideration and Cash Consideration by the same
percentage, determined as follows:
(A) If the Adjustment Percentage is 90% or more but less
than or equal to 110%, there shall be no adjustment in the
Merger Consideration.
(B) If the Adjustment Percentage is less than 90%, then
the Merger Consideration payable at the Closing, determined
after giving effect to any adjustment required by Section
2.1(b), shall be reduced by one percent for each one percent
decrease in Adjustment Percentage in accordance with the
following
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table, with interpolation as necessary between percentages
rounded to the nearest one-thousandth of one percent:
Percent by which Merger
Adjustment Percentage Consideration shall be reduced
- --------------------------------------------------------------------------
90 0%
89 1
88 2
87 3
86 4
85 5
84 6
83 7
82 8
81 9
80 10
and so forth
(C) If the Adjustment Percentage is greater than 110%,
then the Merger Consideration payable at the Closing,
determined after giving effect to any adjustment required by
Section 2.1(b), shall be increased by one percent for each one
percent increase in Adjustment Percentage in accordance with
the following table, with interpolation as necessary between
percentages rounded to the nearest one-thousandth of one
percent:
Percent by which Merger
Adjustment Percentage Consideration shall be increased
- ----------------------------------------------------------------------------
110% 0%
111 1
112 2
113 3
114 4
115 5
116 6
117 7
118 8
119 9
120 10
and so forth
(d) Lexington Stock. All shares of Lexington Common Stock, when
converted pursuant to Section 2.1(a), shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and
holders of certificates that immediately before the Effective Time
represented shares of Lexington Common Stock (the "Certificates") shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration in
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consideration therefor upon the surrender of the Certificates in
accordance with Section 2.2, without interest.
(e) Lexington Incentive Plans. At the Effective Time, all
outstanding options (the "Lexington Options") to purchase Lexington
Common Stock granted under the Lexington 1995 Long Term Incentive Plan
(the "Lexington Incentive Plan") and all outstanding Lexington
Restricted Stock granted under the Lexington Incentive Plan (the
"Lexington Restricted Stock") will become options to purchase Buyer
Common Stock or Buyer Restricted Stock, respectively, in accordance
with Section 7.8.
(f) Capital Stock of Merger Sub. Each issued and outstanding
share of the capital stock of Merger Sub shall remain outstanding as
one share of capital stock of the Surviving Corporation and shall not
be converted into any other securities or cash in the Merger. The
certificates for such shares shall not be surrendered or in any way
modified by reason of the Merger. No stock of Merger Sub will be issued
in the Merger.
(g) Fractional Shares. No scrip or fractional shares of Buyer
Common Stock shall be issued in the Merger. Each fractional share of
Buyer Common Stock that a holder of Lexington Common Stock would
otherwise be entitled to receive (after aggregating all shares of Buyer
Common Stock to be received by that holder) shall be automatically
converted into the right to receive, at the Effective Time from Buyer,
an amount in cash in lieu of the fractional share of Buyer Common Stock
equal to the product of the fraction multiplied by Buyer's Average
Share Price (rounded up or down to the nearest $.01). Buyer will make
available to the Exchange Agent (as defined in Section 2.2) the cash
necessary for the purpose of paying for fractional shares.
(h) Buyer Stock. All shares of Buyer Common Stock into which
the shares of Lexington Common Stock are converted shall be validly
issued, fully paid and nonassessable and will have Buyer Rights
attached thereto in accordance with the Buyer Rights Agreement (as such
terms are defined in Section 5.2(b)).
(i) Election Procedures. Each record holder (as of the record
date determined by Lexington) of shares of Lexington Common Stock shall
have the right to elect in writing to have all of his shares of
Lexington Common Stock converted into cash or Buyer Common Stock, as
the case may be, subject to Section 2.1(j), in accordance with the
following procedures:
(1) At least thirty days prior to the Closing Date, a
letter of transmittal and election statement (an "Election
Statement") providing for the right to elect to receive cash
or Buyer Common Stock and for the tender to the Exchange Agent
of the Certificates representing Lexington Common Stock shall
be mailed to all record holders of Lexington Common Stock at
their respective addresses shown in Lexington's stock transfer
records.
(2) Any record holder of Lexington Common Stock may
specify, in an Election Statement meeting the requirements of
this Section 2.1(i), that, as to all shares of Lexington
Common Stock covered by such Election Statement:
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(A) all such shares shall be converted into
Cash Consideration and Share Consideration in the
proportions set forth in Section 2.1(a); provided,
however, that such election shall be subject to a
determination by Buyer in certain events under
Section 2.1(b) to convert to cash a portion of the
Merger Consideration that would otherwise be Buyer
Common Stock; or
(B) the Cash Consideration payable for all
such shares be converted to shares of Buyer Common
Stock, in which case such holder shall receive no
cash and shall receive additional shares of Buyer
Common Stock equal to .50 multiplied by the Share
Consideration for each issued and outstanding share
of Lexington Common Stock held; provided, however,
that such election shall be subject to a
determination by Buyer in certain events under
Section 2.1(b) to convert to cash a portion of the
Merger Consideration that would otherwise be Buyer
Common Stock; or
(C) the Share Consideration payable for all
such shares be converted into cash, in which case
such holder shall receive no Share Consideration and
shall receive additional cash equal to the Share
Consideration multiplied by Buyer's Average Share
Price.
(3) Notwithstanding anything to the contrary set
forth above:
(A) Any record holder of Lexington Common
Stock who is holding such shares for a beneficial
owner or as a nominee for one or more beneficial
owners may submit an Election Statement on behalf of
any such beneficial owner. Any beneficial owner of
Lexington Common Stock on whose behalf a record owner
of Lexington Common Stock has submitted an Election
Statement in accordance with this Section 2.1(i) will
be considered a separate holder of Lexington Common
Stock for purposes of this Agreement.
(B) Any holder of Lexington Common Stock who
may be considered, by reason of the ownership
attribution rules contained in Section 318 of the
Internal Revenue Code of 1986, as amended, to own
constructively shares of Lexington Common Stock in
addition to those actually owned by such holder may
submit an Election Statement jointly with one or more
of such persons whose shares of Lexington Common
Stock such holder may be considered to own
constructively, and any such joint Election Statement
shall for purposes of this Section 2.1(i) be
considered to be a single Election Statement.
(4) An Election Statement will be effective only if
a properly completed and signed copy thereof, accompanied by
Certificates for the shares of Lexington Common Stock which
such Election Statement covers, shall have been actually
received by the Exchange Agent no later than one business day
before the day of the meeting of the Lexington stockholders to
vote upon this agreement (such day being referred to herein as
the "Election Deadline"). Delivery shall be effected, and risk
of loss and title to the
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Certificate shall pass, only upon proper delivery of an
Election Statement which meets the requirements of this
Section 2.1(i) is hereinafter referred to as an "Effective
Election Statement."
(5) Any record holder of Lexington Common Stock who
has submitted an Effective Election Statement may at any time
until the Election Deadline amend such Election Statement if
the Exchange Agent actually receives, no later than the
Election Deadline, a later dated, properly completed and
signed amended Effective Election Statement.
(6) Any record holder of Lexington Common
Stock may at any time prior to the Election Deadline revoke
his Election Statement and withdraw certificates for shares of
Lexington Common Stock deposited therewith by written notice
actually received by the Exchange Agent no later than the
Election Deadline. Any Election Statement relating to shares
of Lexington Common Stock which are or become Dissenting
Shares (as defined in Section 2.1(k) hereof) shall be deemed
automatically revoked. Any notice of withdrawal shall be
effective only if it is properly executed and specifies the
record holder of the shares to be withdrawn and the
Certificate numbers shown on the Certificates representing the
shares to be withdrawn.
(7) Lexington and Buyer shall have the right to
make rules, not inconsistent with the terms of this Agreement,
governing the form, terms and conditions of the Election
Statements, the validity and effectiveness of Election
Statements and the manner and extent to which they are to be
taken into account in making the determinations prescribed by
Section 2.1(k) hereof. In the event this Agreement is
terminated, the Exchange Agent shall promptly return any
Certificates received to the respective record holders.
(j) Allocations. The allocation of cash and/or Buyer
Common Stock among holders of outstanding shares of Lexington Common
Stock shall be effected as hereinafter provided:
(1) Except as otherwise provided in Sections
2.1(i)(2)(A), 2.1(j)(4) and 2.1(j)(5), all of the shares of
Lexington Common Stock held by shareholders who elected to
receive cash and Buyer Common Stock in the proportions set
forth in Section 2.1(a) or who did not elect in any Effective
Election Statement to receive all cash or all Buyer Common
Stock shall be converted into cash and Buyer Common Stock at
the conversion rate specified in Section 2.1(a) hereof;
(2) Except as otherwise provided in Sections
2.1(i)(2)(B) and 2.1(j)(5), all of the shares of Lexington
Common Stock held by shareholders who elected in an Effective
Election Statement to receive all Buyer Common Stock shall be
converted into all Buyer Common Stock on the terms and
conditions set forth in Section 2.1(i);
(3) Subject to Section 2.1(j)(4) hereof, Lexington
Common Stock held by shareholders who elected in an Effective
Election Statement to receive all cash shall be
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converted into cash, on the terms and conditions set forth in
Section 2.1(i) hereof but only up to the percentage specified
below.
(4) If the aggregate amount of cash payable to
holders of Lexington Common Stock after giving effect to the
foregoing provisions of this Section 2.1(j), including cash
payable to holders of Dissenting Shares and cash payable due
to fractional shares, pursuant to the Merger exceeds one-third
(or, if Buyer has made a determination to increase the Cash
Consideration pursuant to Section 2.1(b), such higher
percentage as shall be equal to the percentage of the Total
Consideration payable in cash, after giving effect to such
determination) (the "Specified Cash Percentage") of the Merger
Consideration plus the cash payable to holders of Dissenting
Shares (the "Total Consideration"), the cash otherwise payable
to Lexington stockholders who would otherwise receive any
portion of the Merger Consideration in cash shall be reduced
pro rata so that the aggregate amount of cash does not exceed
the Specified Cash Percentage and such Lexington stockholders
shall receive Buyer Common Stock in lieu thereof.
(5) If the aggregate amount of Buyer Common Stock
issuable to holders of Lexington Common Stock pursuant to the
Merger after giving effect to the foregoing provisions of this
Section 2.1(j) exceeds two-thirds (or, if Buyer has made a
determination to increase the Cash Consideration pursuant to
Section 2.1(b), such lower percentage as shall be equal to the
percentage of the Total Consideration payable in Buyer Common
Stock, after giving effect to such determination) of the Total
Consideration (the "Specified Stock Percentage"), the Buyer
Common Stock otherwise issuable to Lexington stockholders who
would receive any portion of the Merger Consideration in Buyer
Common Stock shall be reduced pro rata so that the aggregate
amount of Buyer Common Stock does not exceed the Specified
Stock Percentage and such Lexington stockholders shall receive
cash in lieu thereof.
(6) If the foregoing election and allocation
procedures are found to be unlawful for federal regulatory
purposes, this Section 2.2(j) shall be amended to provide such
other procedure for reduction of the number of shares of
Lexington Common Stock converted to cash and/or Buyer Common
Stock as may be agreed upon by Buyer and Lexington and as is
consistent with such regulatory purposes.
(k) Dissenters' Rights.
(1) Notwithstanding any provision of this Agreement
to the contrary, any shares of Lexington Common Stock held by
a holder who has properly asserted his right, if any, for
appraisal of such shares in accordance with the Delaware Law
and who, as of the Effective Time, has not effectively lost
such right to appraisal (the "Dissenting Shares"), shall not
be converted into or represent a right to receive the Merger
Consideration pursuant to Section 2.1 (a), but the holder
thereof shall only be entitled to such rights as are granted
by the Delaware Law.
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(2) Notwithstanding the provision of Section
2.1(k)(1), if any holder of shares of Lexington Common Stock
who asserts his rights, if any, for appraisal or demands
payment for such shares under the Delaware Law shall
effectively lose his right to appraisal, then, as of the
later of the Effective Time or the occurrence of such event,
such holder's shares of Lexington Common Stock shall
automatically be converted into and represent only the right
to receive the Merger Consideration as provided in Section
2.1(a), upon surrender of the Certificates representing such
shares.
(l) Adjustments. The Merger Consideration shall be
appropriately adjusted to reflect any stock split, reverse stock
split, stock dividend, recapitalization, exchange, subdivision,
combination of, or other similar change (including the exercise
of any Buyer Rights under the Buyer Rights Agreement) in
Lexington Common Stock or Buyer Common Stock after the date of
this Agreement.
2.2 Exchange of Certificates.
(a) The transfer agent for Buyer Common Stock shall serve
as exchange agent hereunder (the "Exchange Agent"). Promptly
after the Effective Time, Buyer shall deposit in trust with the
Exchange Agent cash and certificates representing the aggregate
Merger Consideration to be paid to holders of Lexington Common
Stock and to pay for fractional shares then known to Buyer (such
Common Stock and cash amounts being referred to as the "Exchange
Fund"). The Exchange Agent shall, under irrevocable instructions
received from Buyer, pay the amounts of cash provided for in this
Article II out of the Exchange Fund. Additional amounts of cash,
if any, needed from time to time by the Exchange Agent shall be
provided by Buyer and shall become part of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose, except as
provided in this Agreement, or as otherwise agreed to by Buyer
and Lexington before the Effective Time.
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each record holder of Lexington Common
Stock who, as of the Effective Time was a holder of a Certificate, a
letter of transmittal (reasonably satisfactory in form and substance to
Lexington and Buyer) and instructions for its use in effecting the
surrender of the Certificate for payment therefor and conversion
thereof. Delivery shall be effected, and risk of loss and title to the
Certificate shall pass, only upon proper delivery of the Certificate to
the Exchange Agent and the letter of transmittal shall so reflect. Upon
surrender to the Exchange Agent of a Certificate, together with a
letter of transmittal duly executed and properly completed, the holder
of the Certificate shall be entitled to receive in exchange therefor
cash and shares of Buyer Common Stock to which that holder of Lexington
Common Stock is entitled pursuant to the terms of this Agreement (with
the cash amount being rounded up or down to the nearest $.0l) and the
Certificate so surrendered shall be marked "Canceled." No interest will
be paid or accrued on any Merger Consideration.
(c) If any portion of the consideration to be received
under this Article II upon exchange of a Certificate is to be issued or
paid to a person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition
of such payment that the Certificate so surrendered shall be properly
endorsed or otherwise in
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proper form for transfer and that the person requesting such exchange
shall pay in advance any transfer or other taxes required by reason of
a check representing the Merger Consideration, or establish to the
satisfaction of the Exchange Agent that such tax has been paid or that
no such tax is applicable. Buyer shall pay any transfer or other taxes
required by reason of the issuance of a certificate representing shares
of Buyer Common Stock if the certificate is issued in the name of the
person in whose name the certificate surrendered in exchange therefor
is registered; provided, however, that Buyer shall not pay any transfer
or other tax if payment of any such tax by Buyer otherwise would cause
the Merger to fail to qualify as a tax-free reorganization under the
Code.
(d) From the Effective Time until surrender in accordance with
this Section 2.2, each Certificate (other than Certificates
representing shares held by Buyer, Merger Sub, or Lexington or any
direct or indirect subsidiary of Buyer or Lexington) shall be deemed,
for all corporate purposes other than the payment of dividends or other
distributions, to evidence only the right to receive the cash and/or
Buyer Common Stock into which such shares of Lexington Common Stock
shall have been so converted or, in the case of Dissenting Shares, to
evidence only such rights as are granted by the Delaware Law. After
surrender, there shall be paid to the person in whose name the Buyer
Common Stock shall be issued any dividends on Buyer Common Stock that
shall have a record date and payment date on or after the Effective
Time and before surrender. All payments in respect of shares of
Lexington Common Stock that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to those securities.
(e) In case of any lost, stolen, or destroyed Certificate, the
holder thereof may be required, as a condition precedent to the
delivery to the holder of the consideration described in Section 2.1,
and in accordance with Section 167 of the Delaware Law, to deliver to
Buyer a bond in such reasonable sum as Buyer may direct as indemnity
against any claim that may be made against the Exchange Agent, Buyer,
or the Surviving Corporation with respect to the Certificate alleged to
have been lost, stolen, or destroyed.
(f) After the Effective Time, there shall be no transfers on
the books of the Surviving Corporation of the shares of Lexington
Common Stock that were outstanding immediately before the Effective
Time. If, after the Effective Time, Certificates are presented to
Surviving Corporation for transfer, they shall be canceled and
exchanged for the consideration described in Section 2.1. After the
Effective Time, the shares of Lexington Common Stock shall be delisted
from the Nasdaq National Market System.
(g) Any portion of the Exchange Fund that remains unclaimed by
the stockholders of Lexington for one year after the Effective Time
shall be returned to Buyer, upon demand, and any holder of Lexington
Common Stock who has not theretofore complied with this Section 2.2
shall thereafter look only to Buyer for issuance of the Merger
Consideration to which the holder has become entitled under Section
2.1; provided, however, that neither the Exchange Agent nor any party
to this Agreement shall be liable to a holder of shares of Lexington
Common Stock for any amount required to be paid to a public official or
public entity under any applicable abandoned-property, escheat, or
similar law.
12
ARTICLE III
Representations and Warranties of Lexington
3.1 General. Lexington represents and warrants to Buyer and Merger
Sub that the statements contained in this Article III are true and correct,
except as set forth in the disclosure schedule delivered by Lexington to Buyer
on the date of this Agreement (the "Lexington Disclosure Schedule").
Notwithstanding any other provision of this Agreement, each exception set forth
in the Lexington Disclosure Schedule shall be deemed to qualify each
representation and warranty set forth in this Agreement (i) that is specifically
identified (by cross-reference or otherwise) in the Lexington Disclosure
Schedule as being qualified by such exception, or (ii) with respect to which the
relevance of such exception is apparent on the face of the disclosure of such
exception set forth in the Lexington Disclosure Schedule. As used throughout
this agreement with respect to any person, the term "Material Adverse Effect"
means any change or effect that, individually or when taken together with all
changes or effects that have occurred before the determination of the occurrence
of the Material Adverse Effect, has had or is reasonably likely to have a
material adverse effect on the business, financial condition, or results of
operations of the person and its subsidiaries taken as a whole; provided,
however, that Material Adverse Effect with respect to any person shall not
include any change in or effect upon the business, financial condition, or
results of operations of such person or any of its subsidiaries directly or
indirectly arising out of or attributable to (a) conditions, events, or
circumstances generally affecting the U.S. economy as a whole, (b) conditions,
events, or circumstances generally affecting the mutual fund industry as a whole
(including regulatory and legal), or (c) any decreases in Lexington Mutual Fund
Assets Under Management. It is further understood that any decrease in the
market price of shares of Lexington Common Stock or Buyer Common Stock shall not
be relevant to a determination of whether a Material Adverse Effect has
occurred.
3.2 Representations and Warranties.
(a) Organization, Standing, Qualification.
(1) Each of Lexington and its subsidiaries (which, for
purposes of this Article includes Troika Dialog Lexington
Partners (BVI) Ltd. ("TDLPL")) is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its organization and has the requisite power and
authority to own, lease, and operate its properties and assets
and to carry on its business as it is now being conducted. Each
of Lexington and its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of the properties owned,
operated, or leased by it, or the nature of its business, makes
such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or
in good standing would not have a Material Adverse Effect on
Lexington. The Lexington Disclosure Schedule sets forth a list of
all of Lexington's subsidiaries and their state of incorporation;
except as so set forth and except for securities held solely for
investment purposes, Lexington does not directly or indirectly
own any capital stock of, or other equity interest in, any
person. Copies of the charter and bylaws (or similar
organizational documents) of Lexington
13
and each subsidiary of Lexington have been made available to
Buyer and are complete and correct as of the date hereof.
(2) Each of Lexington Management Corporation and Lexington
Market Systems Research Advisors, Inc. ("MSR") is and has been
duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and under
Applicable Law (as defined in Section 4.2(f)). The Lexington
Disclosure Schedule lists the jurisdictions in which Lexington
Management Corporation or MSR is registered as an investment
adviser. Each such registration is in full force and effect.
Other than the jurisdictions set forth in the Lexington
Disclosure Schedule for Lexington Management Corporation or MSR,
neither Lexington nor its subsidiaries is required to be
registered as an investment adviser in any jurisdiction.
(3) Lexington Funds Distributor, Inc. ("Lexington
Distributor") is and has been duly registered as a broker-dealer
under the Securities Exchange Act of 1934 and under other
Applicable Law. The Lexington Disclosure Schedule lists the
jurisdictions in which Lexington Distributor is registered as a
broker-dealer. Each such registration is in full force and
effect. Other than the jurisdictions set forth in the Lexington
Disclosure Schedule, Lexington Distributor is not required to be
registered as a broker-dealer in any other jurisdiction.
Lexington Distributor is a member in good standing and has all
licenses and authorizations in self-regulatory or trade
organizations or registered clearing agencies, required to permit
the operation of its business as presently conducted, except
where such failure would not have a Material Adverse Effect on
Lexington.
(4) TDLPL has all requisite licenses and other
registrations necessary for it to manage the assets of the Troika
Dialog Lexington Eurasia Fund.
(b) Capitalization. The authorized capital stock of Lexington
consists of 15 million shares of Lexington Common Stock, of which, as
of the close of business on February 28, 2000, 4,505,038 shares were
issued and outstanding, and 5 million shares of preferred stock, $.01
par value, none of which are outstanding. The authorized capital stock
of MSR consists of 1,000 shares of common stock, $.01 par value. All of
the issued and outstanding shares of capital stock of Lexington and the
capital stock or other equity interests of each of its subsidiaries
have been duly authorized and validly issued, are fully paid and
nonassessable, and were not granted in violation of any statutory
preemptive rights. There are no outstanding subscriptions, options,
warrants, calls, or other agreements or commitments under which
Lexington or any subsidiary is or may become obligated to issue, sell,
transfer, or otherwise dispose of, or purchase, redeem, or otherwise
acquire, any shares of capital stock of, or other equity interests in,
Lexington or any subsidiary, and there are no outstanding securities
convertible into or exchangeable for any such capital stock or other
equity interests, except for options to purchase up to an aggregate of
437,100 shares of Lexington Common Stock, as of the close of business
on February 28, 2000 at an average exercise price of $5.51 and as set
forth in the Lexington Disclosure Schedule. There are no stock
appreciation rights, phantom stock rights, or, performance shares
outstanding issued by Lexington with respect to Lexington or any of its
subsidiaries. Lexington owns, directly or indirectly, all of the issued
and outstanding
14
shares of each class of capital stock of each of its subsidiaries
which is wholly owned, and the number of shares of capital stock or
equity interests set forth on the Lexington Disclosure Schedule of
each subsidiary which is not wholly owned, in each case free and clear
of all liens, security interests, pledges, charges, and other
encumbrances. There are no agreements or understandings to which
Lexington or any of its subsidiaries is a party with respect to the
capital stock of Lexington or its subsidiaries.
(c) Authorization and Execution. Lexington has the corporate
power and authority to execute and deliver this Agreement and, subject
to approval by the stockholders of a majority of the outstanding
shares of Lexington Common Stock, to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement by Lexington have been duly authorized by the Board of
Directors of Lexington, and no further corporate action of Lexington,
other than the approval of its stockholders, is necessary to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Lexington and, assuming the
accuracy of the representations and warranties of Buyer set forth in
Section 5.2(c), this Agreement constitutes the legal, valid, and
binding obligation of Lexington, enforceable against Lexington in
accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally, and subject
to general principles of equity.
(d) No Conflicts. Neither the execution and delivery of this
Agreement by Lexington, nor the consummation by Lexington of the
transactions contemplated hereby will:
(1) conflict with or result in a breach of the charter,
bylaws, or similar organizational documents, as currently in
effect, of Lexington or any of its subsidiaries;
(2) require any filing with, or consent or approval of, any
government, state, or political subdivision thereof, entity
exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government,
including the Securities and Exchange Commission (the "SEC") and
any other government authority, agency, department, board,
commission, or instrumentality of the United States, any State of
the United States, or any political subdivision thereof, any
court, tribunal, or arbitrator of competent jurisdiction, or any
governmental or nongovernmental self-regulatory organization,
agency, or authority (including the Nasdaq National Market and
the National Association of Securities Dealers, Inc. (the
"NASD")) (each, a "Governmental Authority") having jurisdiction
over any of the businesses or assets of Lexington or any of its
subsidiaries, except for (A) compliance with the requirements
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"); (B) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate
documents reflecting the occurrence of the Merger with the
relevant authorities of the other states in which Lexington is
licensed or qualified to do business; (C) the consents,
approvals, filings, and notices required under the 1940 Act and
the Advisers Act; (D) any consents, approvals, filings, or
notices required with the NASD or any industry self-regulatory
organizations; (E) the filing with the SEC of the Proxy
Statement/Prospectus (as defined in Section 5.2(e)) and
compliance with any
15
other applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and (F) such other
filings, consents, or approvals the failure of which to make or
obtain would not reasonably be expected to prevent consummation
of the Merger or to have a Material Adverse Effect on Lexington;
(3) subject to the exceptions contained in, and assuming
compliance with, clauses (A) through (F) of subsection (d)(2)
above, violate any Applicable Law applicable to Lexington or any
of its subsidiaries; or
(4) result in a material breach of, or constitute a
material default or an event that, with the passage of time or
the giving of notice, or both, would constitute a material
default, give rise to a right of termination, cancellation, or
acceleration, create any entitlement of any third party to any
material payment or benefit, require the consent of any third
party, or result in the creation of any material lien on the
assets of Lexington or any of its subsidiaries under, any
Material Contract (as defined in Section 3.2(j)).
(e) SEC Reports and Financial Statements.
(1) Since December 13, 1995, Lexington and its subsidiaries
have filed all material reports, registration statements, Forms
ADV, Forms BD and other filings, together with any material
amendments required to be made with respect thereto, that it has
been required to file with any relevant Governmental Authority
under federal and state securities laws, including the Securities
Act of 1933, as amended (the "Securities Act"), the Exchange Act.
All reports, registration statements, and other filings
(including all exhibits, notes, and schedules thereto and all
documents incorporated by reference therein) filed by Lexington
or its subsidiaries with the SEC on or after December 13, 1995,
together with any amendments thereto, are collectively referred
to as the "Lexington SEC Reports." As of: (A) with respect to all
of the Lexington SEC Reports other than registration statements
filed under the Securities Act, the respective dates of their
filing with the SEC; and (B) with respect to all registration
statements filed under the Securities Act, their respective
effective dates, the Lexington SEC Reports complied in all
material respects with the rules and regulations of the SEC and
did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading.
Since its inception in June 1998, TDLPL has filed all reports,
registration statements, and other filings, together with any
amendments required to be made with respect thereto, that it has
been required to file with any relevant Governmental Authority
under U.S. federal and state securities laws and under foreign
law.
(2) The consolidated financial statements (including any
related notes or schedules) included in Lexington's 1998 Annual
Report on Form 10-K, as filed with the SEC, were prepared in
accordance with generally accepted accounting principles,
consistently applied ("GAAP"), except as may be noted therein or
in the notes or schedules thereto, and fairly present in all
material respects the consolidated financial position of
Lexington and its subsidiaries (except to the extent that TDLPL
is not
16
consolidated) as of December 31, 1997 and 1998 and the
consolidated results of their operations and cash flows for each
of the three years in the three-year period ended December 31,
1998.
(3) The audited consolidated financial statements of
Lexington and its subsidiaries as of and for the year ended
December 31, 1999 when delivered will be consistent in all
material respects with the unaudited consolidated financial
statements of Lexington and its subsidiaries as of and for
December 31, 1999 that were previously delivered to Buyer.
(f) Proxy Statement. The information supplied by Lexington for
inclusion in the Proxy Statement (as defined in Section 5.2(e)), as of
the date of the Proxy Statement/Prospectus and as of the date of the
meeting of Lexington's stockholders to consider this Agreement and the
Merger, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Absence of Certain Changes or Events. Except as disclosed in
any Lexington SEC Report, from December 31, 1998 to the date of this
Agreement, Lexington and its subsidiaries have conducted their
respective businesses and operations in the ordinary course consistent
with past practices, and neither Lexington nor any of its subsidiaries
has:
(1) split, combined, or reclassified any shares of its
capital stock or made any other changes in its equity capital
structure;
(2) purchased, redeemed, or otherwise acquired, directly or
indirectly, any shares of its equity securities or any options,
rights, or warrants to purchase equity securities or any
securities convertible into equity securities;
(3) declared or paid any dividends on or made any other
distributions (whether in cash, stock, or property) in respect of
shares of its capital stock, or split, combined, or reclassified
any of its capital stock, or issued or authorized the issuance of
any other securities in respect of, in lieu of, or in
substitution for shares of capital stock of such entity;
(4) issued, delivered, or sold any shares of its capital
stock or securities convertible into shares of its capital stock,
or subscriptions, rights, warrants, or options to acquire, or
other agreements or commitments of any character obligating it to
issue, any such shares or other convertible securities (other
than the grant of options to employees in a manner consistent
with past practices under the Lexington Incentive Plan, and the
issuance of shares upon the exercise of such options);
(5) incurred, assumed, or guaranteed any indebtedness for
money borrowed, other than intercompany indebtedness, other than
that incurred under currently existing debt instruments;
17
(6) changed or modified in any material respect any
existing accounting method, principle, or practice, other than as
required by GAAP;
(7) suffered any business interruption, damage to or
destruction of its properties, or other incident, occurrence, or
event (other than changes in general industry, economic, or
market conditions), which would have a Material Adverse Effect on
Lexington; or
(8) except for this Agreement, entered into any commitment
to do any of the foregoing.
(h) Tax Matters.
(1) Lexington and its subsidiaries have timely filed (or
received appropriate extensions for) all material federal, state,
local, and foreign tax returns ("Tax Returns") required to be
filed by them with respect to income, gross receipts,
withholding, social security, unemployment, payroll, franchise,
excise, use, premium, and other taxes of whatever kind ("Taxes"),
and have paid all Taxes shown on those Tax Returns to the extent
they have become due. Lexington's Tax Returns are accurate and
complete in all material respects.
(2) No Tax Returns filed by Lexington or any of its
subsidiaries are the subject of pending audits. Neither Lexington
nor any of its subsidiaries has received, before the date of this
Agreement, a notice of deficiency or assessment of additional
material Taxes that remains unresolved. Neither Lexington nor any
of its subsidiaries has extended the period for assessment or
payment of any Tax, which extension has not since expired.
(3) Lexington and its subsidiaries have withheld and paid
over to the appropriate Governmental Authorities all Taxes
required by law to have been withheld and paid in connection with
amounts paid or owing to any employee, except for any such Taxes
that are immaterial in amount.
(4) Neither Lexington nor any of its subsidiaries has been
a member of an affiliated group (as defined in Section 1504 of
the Code) filing a consolidated federal income tax return for any
tax year since January 1, 1992 other than a group the common
parent of which was Lexington (the "Lexington Consolidated
Group").
(5) Neither Lexington nor any of its subsidiaries has filed
a consent under Code Section 341(f) concerning collapsible
corporations.
(6) Lexington has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section
897(c)(1)(A)(ii).
18
(7) Neither Lexington nor any of its subsidiaries is a
party to any Tax allocation or sharing agreement, except among
members of the Lexington Consolidated Group.
(8) Neither Lexington nor any of its subsidiaries is
subject to a Tax lien on any of its property or assets, except
for current liens for Taxes not yet due.
(9) Lexington has delivered or made available to Buyer true
and complete copies of all requested federal, state, local, and
foreign income tax returns with respect to Lexington and its
subsidiaries.
(10) Neither Lexington nor any of its Subsidiaries has made
any payments, is obligated to make any payments, or is a party to
any agreement that could obligate it to make any payment that is
not deductible under Code Section 280G.
(11) The reserve for Taxes set forth on the financial
statements of Lexington contained in Lexington's most recent
Annual Report on Form 10-K is adequate for the payment of all
material Taxes through the date thereof and no material Taxes
have been incurred after December 31, 1998 that were not incurred
in the ordinary course of business.
(12) The 1995 spin-off transaction involving Lexington
resulted in such federal tax consequences as are consistent with
the statements as to such matters set forth in the Information
Statement dated November 30, 1995 relating thereto.
(i) Properties.
(1) Lexington owns no real property. The Lexington
Disclosure Schedule sets forth a true and complete list of all
real property leased by Lexington or any of its subsidiaries and
the name of the lessor, the date of the lease, and each amendment
thereto and the aggregate annual rental or other fee payable
under the lease. All such leases are enforceable in accordance
with their respective terms, and there is not, under any such
lease, any existing material default or event of default by
Lexington (or event which with notice or lapse of time, or both,
would constitute a default and in respect of which Lexington has
not taken adequate steps to prevent the default from occurring).
(2) Lexington has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in,
all of its tangible properties and assets, real, personal, and
mixed, used in its business, free and clear of any mortgages,
liens, pledges, charges, restrictions, encroachments, rights of
third parties, or other encumbrances of any kind, except for (A)
liens for current Taxes not yet due and payable, (B) inchoate
mechanic's, warehousemen's, materialmen's, or similar liens or
rights arising in the ordinary course of business, (C) liens,
encumbrances, restrictions, encroachments, and easements, all
with respect to tangible properties that were not incurred with
the borrowing of money or the obtaining of advances or credit and
that do not materially detract the value of or materially
interfere with the present use of the property subject thereto or
effected thereby, or otherwise materially impair present
19
business operations at such properties, and (D) existing
mortgages, liens, and encumbrances disclosed in the Lexington SEC
Reports.
(j) Material Contracts. Except as disclosed in any
Lexington SEC Report, as of the date hereof, neither Lexington
nor any of its subsidiaries is a party to or bound by any written
or oral contract:
(1) with respect to the employment of any directors,
officers, or employees, other than noncompetition and
confidentiality agreements with such persons and contracts
terminable by Lexington upon no more than 60 days' notice without
penalty;
(2) that is a "material contract" (as is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement;
(3) that, after the Effective Time, will materially
restrict the conduct of any line of business by Lexington or its
subsidiaries or upon consummation of the Merger will materially
restrict the ability of the Surviving Corporation to engage in
any line of business in which it may lawfully engage;
(4) with a labor union (including any collective bargaining
agreement); or
(5) except as required by the Lexington Incentive Plan
(including any stock option plan, stock appreciation rights plan,
restricted stock plan, or stock purchase plan) and the Lexington
Senior Management Severance Plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will
be accelerated, by the occurrence of any stockholder approval or
the consummation of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement.
All of the foregoing are collectively called "Material Contracts." To
the extent Material Contracts are evidenced by documents, true and complete
copies thereof have been delivered or made available to Buyer. The Lexington
Disclosure Schedule sets forth a true and complete description of the material
terms of each Material Contract that has not been reduced to writing. Each
Material Contract is in full force and effect. Neither Lexington nor any of its
subsidiaries nor, to the knowledge of Lexington, any other party is in material
breach of or in material default under any of the Material Contracts.
(k) Intellectual Property. Lexington and its subsidiaries own
or possess adequate licenses or other valid rights to use (without the
making of any payment to others, other than licenses for commercially
available software and payments under agreements disclosed in the
Lexington Disclosure Schedule, or the obligation to grant rights to
others in exchange) all of the material patents, trademarks, trade
names, service marks, domain names, and copyrights, and all
registrations and applications for any of the foregoing (collectively,
"Proprietary Rights") necessary to the conduct of its business in the
manner in which it is presently being conducted. As of the date of this
Agreement, neither Lexington nor any of its subsidiaries has received
any written notice that any Proprietary Rights have been declared
unenforceable or otherwise invalid by any court or Governmental
Authority. There is, to the knowledge of
20
Lexington, no material existing infringement, misuse, or
misappropriation of any Proprietary Rights by others. From December
13, 1995 to the date of this Agreement, neither Lexington nor any of
its subsidiaries has received any written notice alleging that the
operation of the business of Lexington or any of its subsidiaries
infringes in any material respect upon the intellectual property
rights of others. The consummation of the Merger and the other
transactions contemplated by this Agreement will not result in the
loss by Lexington of any rights to use computer and telecommunications
software including source and object code and documentation and any
other media (including manuals, journals, and reference books) that is
material to the operation of its business substantially as currently
conducted.
(l) Litigation. No litigation, arbitration, or administrative
proceeding (1) is pending or, to the knowledge of Lexington,
threatened against Lexington or any of its subsidiaries as of the date
of this Agreement that, if decided adversely to Lexington or such
subsidiary, would have a Material Adverse Effect on Lexington, or (2)
is pending or, to the knowledge of Lexington, threatened against
Lexington or any of its subsidiaries as of the date of this Agreement
that seeks to enjoin or otherwise challenges the consummation of the
transactions contemplated by this Agreement. As of the date of this
Agreement, neither Lexington nor any of its subsidiaries is
specifically identified as a party subject to any material
restrictions or limitations under any injunction, writ, judgment,
order, or decree of any Governmental Authority.
(m) Permits; Compliance with Laws. Each of Lexington and its
subsidiaries has all material licenses, franchises, permits, and other
authorizations of Governmental Authorities necessary to conduct its
business, and neither Lexington nor any of its subsidiaries is in
violation of any such license, franchise, permit, or other
authorization of a Governmental Authority or any Applicable Law,
except where such failure or violation would not have a Material
Adverse Effect on Lexington.
(n) No Brokers or Finders. Except for Putnam, Lovell, de
Guardiola & Thornton Inc., Lexington has not engaged any investment
banker, broker, or finder in connection with the transactions
contemplated hereby.
(o) Retirement and Benefit Plans; Employees.
(1) Each employee pension benefit plan ("Pension Plan"), as
defined in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), each employee welfare benefit
plan ("Welfare Plan"), as defined in Section 3 of ERISA, and each
deferred compensation, bonus, incentive, stock incentive, option,
stock purchase, severance, or other employee benefit plan,
agreement, commitment, or arrangement ("Benefit Plan"), that is
currently maintained by Lexington or any of its ERISA Affiliates
(as defined in clause (9) below) or to which Lexington or any of
its ERISA Affiliates currently contributes or is under any
current obligation to contribute (collectively, the "Lexington
Employee Plans" and individually, an "Lexington Employee Plan")
is listed in the Lexington Disclosure Schedule and, to the extent
any Lexington Employee Plan is evidenced by documents, insurance
policies, or manuals, true and complete copies thereof have been
delivered to Buyer, including copies of any
21
trust agreement or other funding contract with respect to any
Lexington Employee Plan. In addition, copies of the most recent
determination letter issued by the Internal Revenue Service with
respect to each Pension Plan, copies of the most recent actuarial
report for each Pension Plan, where applicable, and copies of the
annual report (Form 5500 Series) required to be filed with any
Governmental Authority with respect to each Pension Plan and each
Welfare Plan, for the three most recent plan years of such plan
for which reports have been filed, have been delivered to Buyer.
In addition, copies of all material employee communications
(including summary plan descriptions and employee manuals) with
respect to each Lexington Employee Plan have been delivered to
Buyer.
(2) Each of Lexington and its ERISA Affiliates has made on
a timely basis all contributions or payments required to be made
by it under the terms of the Lexington Employee Plans, ERISA, the
Code, or other applicable laws.
(3) No Lexington Employee Plan has an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or
Section 302 of ERISA). Each Lexington Employee Plan that is
intended to be qualified under Section 401(c) of the Code is the
subject of a currently effective favorable IRS determination
letter as to such Plan's qualification under Section 401(a) of
the Code.
(4) Neither Lexington nor any of its ERISA Affiliates has
maintained, contributed to or otherwise had any obligation with
respect to any "multiemployer plan" (as defined in Section 3 of
ERISA) within the past six years.
(5) To the best of Lexington's knowledge, each Lexington
Employee Plan (and any related trust or other funding instrument)
is being administered in all material respects in compliance with
its terms, and in both form and operation, is in compliance in
all material respects with the applicable provisions of ERISA,
the Code, and other laws and regulations (other than adoption of
any plan amendments for which the deadline has not yet expired),
and all reports required to be filed with any Governmental
Authority with respect to each Pension Plan and each Welfare Plan
required to be listed on the Lexington Disclosure Schedule have
in all material respects been timely filed.
(6) There is no litigation, arbitration, or administrative
proceeding pending or, to the knowledge of Lexington, threatened
against Lexington or any of its ERISA Affiliates or, to the
knowledge of Lexington, any plan fiduciary by the Internal
Revenue Service, the U.S. Department of Labor, the PBGC, or any
participant or beneficiary with respect to any Lexington Employee
Plan. To the best of Lexington's knowledge, neither Lexington nor
any of its ERISA Affiliates nor, to the knowledge of Lexington,
any plan fiduciary of any Pension Plan or Welfare Plan required
to be listed on the Disclosure Schedule has engaged in any
transaction in violation of Section 406(a) or (b) of ERISA for
which an exemption does not exist under Section 408 of ERISA or
any "prohibited transaction" (as defined in Section 4975(c)(1) of
the Code) for which an exemption does not exist under Section
4975(c)(2) or 4975(d) of the Code, or is subject
22
to any material excise tax or penalty imposed by the Code or
ERISA with respect to any Lexington Employee Plan.
(7) Lexington or its ERISA Affiliates have the right to
terminate or amend any Lexington Employee Plan (including any
group health plan covering retirees or other former employees) or
discontinue contributions to any Lexington Employee Plan without
incurring any liability other than a benefit liability accrued
under such plan immediately before termination, amendment, or
discontinuance of contributions.
(8) No Lexington Employee Plan is maintained outside the
United States.
(9) For purposes of this Section 3.2(o), the term "ERISA
Affiliate" means any entity which is under "common control" with
Lexington (within the meaning of Section 4001(b) of ERISA).
(10) Neither the execution and delivery of this Agreement
nor the consummation of the Merger will by itself (A) result in
any payment (including severance, unemployment compensation,
excess parachute payment (within the meaning of Section 280G of
the Code), forgiveness of indebtedness, or otherwise) becoming
due to any director or any employee of Lexington or any ERISA
Affiliate from Lexington or any ERISA Affiliate under any
Lexington Employee Plans or otherwise, (B) increase any benefits
otherwise payable under any Lexington Employee Plan, or (C)
result in any acceleration of the time of payment or vesting of
any such benefits.
(p) Environmental Matters.
(1) For purposes of this Section 3.2(p):
(A) "Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability Act, 32
U.S.C. (S) 9601 et seq., the Resource Conservation and
Recovery Act, 32 U.S.C. (S) 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. (S) 1201 et seq., the Clean
Water Act, 33 U.S.C. (S) 1321 et seq., the Clean Air Act, 32
U.S.C. (S) 7301 et seq., and any other federal, state, local
or other governmental statute, regulation, law or ordinance
dealing with the protection of human health, natural
resources, or the environment; and
(B) "Hazardous Substance" means any pollutant,
contaminant, hazardous substance or waste, solid waste,
petroleum or any fraction thereof, or any other chemical,
substance, or material listed or identified in or regulated
by any Environmental Law.
(2) No Hazardous Substances have been spilled, discharged,
leaked, emitted, injected, disposed of, dumped, or released by
Lexington or any of its subsidiaries or, to the knowledge of
Lexington, any other person on, beneath, above, or into the
environment surrounding any of the real property currently or
formerly leased
23
by Lexington or any of its subsidiaries in such a way as to
create any unpaid liability of Lexington or any of its
subsidiaries under any applicable Environmental Law, that would
have a Material Adverse Effect on Lexington.
(q) Labor Matters. Lexington has no knowledge, as of the date of
this Agreement, of any activities or proceedings of any labor union to
organize any of its or its subsidiaries' employees.
(r) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Lexington Common Stock is the
only vote of the holders of any class or series of capital stock of
Lexington necessary to approve this Agreement and the Merger.
(s) Anti-Takeover Provisions. No restrictive provision of any
"fair price," "moratorium," "control share acquisition," "interested
stockholder," or other anti-takeover statute or regulation or any
restrictive effect of any applicable anti-takeover provision in
Lexington's Certificate of Incorporation or Bylaws is, or at the
Effective Time will be, applicable to the Merger or the other
transactions contemplated hereby.
(t) Insurance Coverage. Lexington and its subsidiaries have in
effect insurance coverage with reputable insurers or are self-insured,
which in respect of amounts, premiums, types, and risks insured,
constitutes reasonably adequate coverage against all risks customarily
insured by companies and their subsidiaries comparable in size and
industry to Lexington and its subsidiaries. All of the insurance
policies and bonds of Lexington and its subsidiaries are listed in the
Lexington Disclosure Schedule. Each such insurance policy or bond in
full force and effect and none of Lexington or any of its subsidiaries
has received notice or any other indication from any insurer or agent
of any intent to cancel any such insurance policy or bond.
(u) Management Agreements. The Lexington Disclosure Schedule
sets forth a true and complete list of each of the portfolio
management agreements and investment advisory or management agreements
(collectively, the "Management Agreements") related to Lexington's (or
a subsidiary's) rendering investment advisory services to any client
other than a U.S.-registered investment company for which Lexington or
a subsidiary serves as investment adviser (but not sub-adviser),
distributor or sponsor (but including investment companies for which
Lexington or a subsidiary serves solely as a sub-adviser and including
the Troika Dialog Lexington Eurasia Fund) ("Private Accounts"). Each
such Management Agreement is currently in full force and effect and
has been performed by Lexington (or its subsidiaries) in accordance
with all Applicable Laws. No material default or condition or event
that, after notice or lapse of time or both, would constitute a
material default on the part of Lexington or any of its subsidiaries
or, to the knowledge of Lexington, on the part of the other parties to
such Management Agreements, exists under any of those agreements, and
each Private Account has, during the term of the pertinent Management
Agreement, been managed in all material respects consistent with the
investment goals and restrictions specified in the Management
Agreement.
(v) Voting Agreements. The Board of Directors of Lexington has
approved a voting agreement (a "Voting Agreement"), in substantially
the form of Exhibit A, which voting agreement shall be executed by the
parties set forth on Schedule 3.2(v).
24
ARTICLE IV
Representations and Warranties Relating to the Lexington Funds
4.1 General. Lexington represents and warrants to Buyer and Merger
Sub that the statements contained in this Article IV are true and correct,
except as set forth in the Lexington Disclosure Schedule.
4.2 Representations and Warranties.
(a) No Prohibitions. To the knowledge of Lexington, neither
Lexington or any of its subsidiaries nor any person associated (as
such term is construed under Section 3(18) of the Exchange Act or
Section 202(a)(17) of the Advisers Act) with those companies has
committed any act (1) enumerated in, or that may subject it to the
provisions of, Section 15(b)(4) of the Exchange Act, Section 203(e) of
the Advisers Act or Rule 206(4)-4(b) promulgated thereunder, or
Section 9 of the 1940 Act, or (2) that would result in a "yes" answer
to any question contained in Item 22 of Form U-4 (Uniform Application
for Securities Industry Registration or Transfer) or the equivalent
item of any successor form or of any non-uniform state form, to the
extent that such act would result in a Material Adverse Effect on
Lexington.
(b) Organization of the Funds. Each of the Lexington Funds
(sometimes collectively referred to as the "Lexington Fund Family") is
a registered investment company (a "Registrant"), or a series of a
Registrant, organized as a Maryland corporation, or a Massachusetts
business trust, or a New York grantor trust, duly formed and validly
existing, and with respect to Lexington Funds that are Maryland
corporations and Massachusetts business trusts, in good standing under
the law of its jurisdiction of organization. The Lexington Disclosure
Schedule sets forth a true, complete, and correct list, as of the date
hereof, of each of the Registrants and any series thereof, and whether
any of Lexington, Lexington Management Corporation, or any other
subsidiary of Lexington acts as investment adviser, broker-dealer, or
sponsor for the Registrant. Each Lexington Fund for which any
affiliate of Lexington will act in such capacities after the Effective
Time is so indicated in the Lexington Disclosure Schedule. Each
Lexington Fund has the requisite power and authority to carry on its
business as it is now being conducted.
(c) Capitalization of the Lexington Funds. All issued and
outstanding shares of common stock and shares or units of beneficial
interest of each Lexington Fund (collectively, "Fund Shares") are, and
at the Effective Time will be, and all of the authorized but unissued
Fund Shares of each Lexington Fund will be, when issued for the
consideration described in the current registration statement relating
to that Lexington Fund, duly and legally issued and outstanding, fully
paid, and non-assessable (or in the case of a Massachusetts business
trust, non-assessable by the Lexington Fund). All of the issued and
outstanding Fund Shares will, at the Effective Time, be held of record
by the persons and in the names and amounts set forth in the records
of State Street Bank and Trust Company, Inc., the transfer agent of
the Lexington Funds. No Lexington Fund has outstanding any options,
warrants, or other rights to subscribe
25
for or purchase any of its shares, nor is there outstanding any
security convertible into Fund Shares.
(d) Financial Statements of the Lexington Funds. Lexington has
furnished to Buyer true and complete copies of the audited statements
of assets and liabilities (including the notes thereto) of each
Lexington Fund as of the two most recent fiscal/calendar years, the
related audited statements of operations and changes in net assets for
the three most recent fiscal/calendar years, and the related audited
schedules of portfolio investments for the two most recent
fiscal/calendar years. Lexington also has furnished to Buyer true and
complete copies of the unaudited statement of assets and liabilities
(including the notes thereto) of each Lexington Fund as of the most
recent semi-annual period (June 30, 1999 for the Lexington Funds using
a calendar year), and the related unaudited statements of operations
and changes in net assets for such semiannual period.
(e) Accuracy of Financial Statements. The audited and unaudited
financial statements of each Lexington Fund referred to in Section
4.2(d) present in all material respects the financial position and
results of operations of the Lexington Fund at the dates and for the
periods to which they relate and have been prepared in accordance with
GAAP subject, in the case of the unaudited financial statements, to
normal year-end audit adjustments and the absence of footnotes. The
audited financial statements of each Lexington Fund have been
certified by that Lexington Fund's independent accounting firm.
(f) Compliance With Applicable Law. Each Lexington Fund is an
open-end management investment company or a unit investment trust
registered under the 1940 Act. Each Lexington Fund is in compliance,
and at all times since a Lexington subsidiary has served as investment
adviser or sponsor has been in compliance, in all material respects
with each federal or state statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction,
directive, judgment, decree, policy, guideline, or other requirement
(including those of the Nasdaq National Market or the NASD)
promulgated by a Governmental Authority (collectively, "Applicable
Law") applicable to any Lexington Fund, except, in each case, for any
failure to so comply that would have a Material Adverse Effect on the
applicable Lexington Fund. The shares of each Lexington Fund are
registered in each jurisdiction in the United States where such
registration is required due to the offer or sale of such shares in
the jurisdiction, and those registrations have not been revoked,
withdrawn, or suspended in any way. The sale of shares in each
Lexington Fund is currently authorized in each of the United States
and the District of Columbia. Lexington has furnished to Buyer copies
of each Registrant's current post-effective amendment to its
registration statement as most recently filed with the SEC together
with copies of each Registrant's charter, bylaws, and trust
instruments, as the case may be. The current prospectus and related
registration statement, including the current statement of additional
information, for each of the Registrants (copies of which have been
delivered to Buyer) conform in all material respects to the applicable
requirements of the Securities Act, the 1940 Act, and the rules and
regulations of the SEC thereunder, as well as the applicable
requirements of the various state securities laws, and do not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
26
(g) No Conflicts. Neither the execution and delivery of this
Agreement by Lexington, nor the consummation by Lexington of the
transactions contemplated hereby will:
(1) conflict with or result in a breach of the charter,
bylaws, or similar organizational documents, as currently in
effect, of any of the Registrants;
(2) require any filing with, or consent or approval of, any
Governmental Authority having jurisdiction over any of the
businesses or assets of any of the Registrants, except for the
consents, approvals, filings, and notices required under the 1940
Act;
(3) violate any statute, law, ordinance, rule, or
regulation applicable to a Registrant or any injunction,
judgment, order, writ, or decree to which a Registrant has been
specifically identified as subject that would have a Material
Adverse Effect on such Lexington Fund; or
(4) result in a breach of, or constitute a default or an
event that, with the passage of time or the giving of notice, or
both, would constitute a default, give rise to a right of
termination, cancellation, or acceleration, create any
entitlement of any third party to any material payment or
benefit, require the consent of any third party, or result in the
creation of any lien on the assets of a Registrant under, any
contract of the type referred to in Section 4.2(l) other than
contracts subject to Section 12(b) or Section 15 of the 1940 Act,
except such breaches, defaults, terminations, cancellations,
accelerations, entitlements, absences of consents, or liens that
would not have a Material Adverse Effect on such Lexington Fund.
(h) Adherence to Investment Policies and Restrictions.
Investments held by each of the Lexington Funds that are open-end
management investment companies are, and for so long as each Lexington
Fund has been advised by a Lexington subsidiary have been, consistent
with the investment policies and restrictions applicable to the
applicable Lexington Fund. Investments held by each of the Lexington
Funds that are unit investment trusts are, for so long as a Lexington
subsidiary has served as sponsor to the unit trust, consistent with
the prospectus, as amended, for the unit trust. The value of each
Lexington Fund's net assets is determined using portfolio-valuation
methods that comply in all material respects with the 1940 Act.
(i) Litigation. There are no legal or governmental actions or
proceedings pending or, to the knowledge of Lexington, threatened
against any of the Lexington Funds; nor, to the knowledge of
Lexington, are there any legal or governmental investigations pending
or threatened against any of the Lexington Funds; nor is there any
judgment, decree, injunction, rule, order (or, to the knowledge of
Lexington, any investigation) of any Governmental Authority
outstanding against any of the Lexington Funds. Neither the SEC, the
NASD, nor any other regulatory agency has identified any material
issue in any deficiency letter or other similar inquiry relating to a
Lexington Fund or its operations, nor is there any unresolved
violation, criticism, or exception by any such regulatory agency or
authority therewith that would in any such case have a Material
Adverse Effect on any such Lexington Fund.
27
(j) Required Reports. For so long as a Lexington subsidiary has
served as investment adviser, each of the Lexington Funds has filed
all material prospectuses, annual information forms, financial
statements, other forms, reports, sales literature, and advertising,
and any other material documents required to be filed with applicable
Governmental Authorities, and any material amendments thereto (the
"Reports"). The Reports have been prepared in accordance with the
requirements of Applicable Law in all material respects.
(k) Taxes. Each Lexington Fund that is registered as an open-end
management investment company has elected to qualify and, for all
taxable years that a Lexington subsidiary served as investment adviser
and with respect to which the applicable statute of limitations
(including any extensions) has not expired ("open taxable years"), has
continuously qualified to be treated as a "regulated investment
company" under Subchapter M of the Code and has continuously been
eligible to compute, and has for each such taxable year computed, its
federal income tax under Section 852 of the Code and has no earnings
and profits accumulated in any taxable year. Each Lexington Fund that
is a registered unit investment trust is, and has been for all taxable
years that a Lexington subsidiary has served as a sponsor, a "trust"
(as defined in Treas. Reg. 301.7701-4) that is subject to subpart E of
part I of subchapter J of chapter 1 of subtitle A of the Code. At the
Effective Time, all federal, state, local and foreign tax returns with
respect to Taxes for any taxable period for which the applicable
statute of limitations (including any extensions) has not expired and
during which a Lexington subsidiary has served as investment adviser
that were or are required to be filed on or before such date by or on
behalf of a Lexington Fund ("Fund Tax Returns") were or shall have
been timely filed and were or shall be complete and correct, and all
federal and other Taxes, including interest, penalties, and additions
to tax, shown or required to be shown as due on such returns, shall
have been paid or provided for. No such Fund Tax Return or other
filing is currently under audit, no assessment has been asserted with
respect to such Fund Tax Returns or other filings, and no requests for
waivers of the time to make any such assessment are pending. None of
the Lexington Funds is delinquent in the payment of any material Tax,
assessment, or governmental charge.
(l) Contracts. The Lexington Disclosure Schedule lists all
material contracts, including all agreements and arrangements for the
distribution of shares, to which a Lexington Fund is a party or by
which a Lexington Fund or its property is bound, other than contracts
for the purchase or sale of portfolio securities entered into in the
ordinary course of business. Each contract subject to Section 12(b) or
15 of the 1940 Act has been duly approved at all times in compliance
in all material respects with Section 12(b) or 15 of the 1940 Act and
all other Applicable Laws. Each such contract is currently in full
force and effect and has been performed by the relevant entity in
accordance with the 1940 Act and all other Applicable Laws. No
material default or condition or event that, after notice or lapse of
time or both, would constitute a material default on the part of
Lexington or any of its subsidiaries or, to the knowledge of
Lexington, on the part of the other parties to such advisory and sub-
advisory agreements, exists under any of those material contracts. Any
agreements between Lexington or any of its subsidiaries and the
Lexington Funds that are open-end management investment companies for
the provision of administrative services, including accounting and
shareholder services, are valid and enforceable, and the amounts paid
to Lexington and/or its subsidiaries under the agreements have been
properly determined in accordance with the terms of the agreements.
Copies of all such material contracts have been delivered or made
available for inspection by Buyer and are true and complete.
(m) No Material Adverse Changes. Since December 31, 1998 no
Material Adverse Effect has occurred with respect to any Lexington
Fund or the status of any Lexington Fund as a regulated investment
company under the Code.
(n) Books. The books and records of each Lexington Fund
reflecting, among other things, the investment transactions undertaken
on behalf of each Lexington Fund, the purchase and sale of shares of
that Lexington Fund by its holders of common stock or shares or units
of beneficial interests (collectively, "Fund Stockholders"), the
number of issued and outstanding Lexington Fund shares owned by each
Fund Stockholder, and the state or other jurisdiction in which those
shares were offered and sold, are, to the knowledge of Lexington,
complete and accurate in all material respects.
(o) Absence of Undisclosed Liabilities. Each Lexington Fund has,
to the knowledge of Lexington, no material debts, obligations, or
liabilities, whether due or to become due, absolute, contingent, or
otherwise, that are required to be reflected in that Lexington Fund's
financial statements in accordance with GAAP that are not so reflected
except for debts, obligations, or liabilities incurred in the ordinary
course of business since the date of the Lexington Fund's most recent
audited or unaudited financial statements or that would not be
material to the applicable Lexington Fund.
28
(p) No Pending Transaction. No Lexington Fund is a party to or
bound by any agreement, undertaking, or commitment (1) to merge or
consolidate with, or acquire all or substantially all of the property
and assets of, any other person, (2) to sell, lease, or exchange all
or substantially all of its property and assets to any other person,
or (3) to enter into any investment advisory agreement or distribution
agreement.
(q) Proxy Statements. All proxy statements to be prepared for
use by the Lexington Funds in connection with the transactions
contemplated by this Agreement will, with respect to information
provided by Lexington, any of its subsidiaries, or a Lexington Fund,
not contain any untrue statement of a material fact, or omit to state
any material fact required to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(r) Code of Ethics. Lexington Management Corporation, MSR and
each of the Lexington Funds have adopted a formal code of ethics and a
written policy regarding personal trading. Such codes and policies
comply in all materials respects with Section 17(j) of the 1940 Act,
Rule 17j-1 thereunder, and Section 204A of the Advisers Act, as the
case may be. To the knowledge of Lexington, for so long as a Lexington
Fund has been advised or sponsored by a Lexington subsidiary, there
has been no violation of its code of ethics and personal trading
policy that would be material to any of the Lexington Funds.
(s) No Disqualification. To the knowledge of Lexington, no
person "associated" (as defined under the Advisers Act) with Lexington
Management Corporation or MSR has, for a period of five years before
the date hereof, been convicted of any crime or is or has been subject
to any disqualification that would be a basis 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. To the knowledge
of Lexington, no "affiliated person" (as defined under the 1940 Act)
of Lexington Management Corporation or MSR has during a period of five
years before the date hereof been convicted of any crime or is or has
been subject to any disqualification that would be a basis for
disqualification as an investment adviser for any investment company
under Section 9(a) of the 1940 Act, and there is no basis for, or
proceeding or investigation that is reasonably likely to become the
basis for, any such disqualification, denial, suspension, or
revocation.
(t) Insurance. Each Registrant has in full force and effect such
insurance as is required by the 1940 Act and each Registrant that is
registered as an open-end management investment company has directors'
and officers' and errors and omissions insurance policies issued in
amounts reasonably believed to be adequate and appropriate by the
Registrant's Board. No Registrant is in default under any such
insurance policy. Complete and correct copies of all insurance
policies of the Registrants have been made available to Buyer. All
premiums that are due and payable under such policies have been paid.
ARTICLE V
Representations and Warranties of Buyer and Merger Sub
5.1 General. Buyer and Merger Sub jointly and severally
represent and warrant to Lexington that the statements contained in this Article
V are true and correct, except as set forth in the disclosure schedule delivered
by Buyer to Lexington on or before the date of this Agreement (the "Buyer
Disclosure Schedule"). Notwithstanding any other provision of this Agreement,
each exception set forth in the Buyer Disclosure Schedule shall be deemed to
qualify each representation and warranty set forth in this Agreement (i) that is
specifically identified (by cross-reference or otherwise) in the Buyer
Disclosure Schedule as being qualified by such exception, or (ii) with respect
to which the relevance of such exception is apparent on the face of the
disclosure of such exception set forth in the Buyer Disclosure Schedule.
5.2 Representations and Warranties.
29
(a) Organization, Standing, Qualification. Each of Buyer
and Merger Sub is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has the
requisite power and authority to own, lease, and operate its
properties and assets and to carry on its business as it is now being
conducted. Each of Buyer and Merger Sub is duly qualified or licensed
as a foreign entity to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, operated, or
leased by it, or the nature of its business, makes such qualification
or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or in good standing would not
have a Material Adverse Effect on Buyer. Copies of the certificate of
incorporation and bylaws of Buyer and Merger Sub have been made
available to Lexington and are complete and correct as of the date
hereof.
(b) Capitalization. The authorized capital stock of Buyer
consists of 200 million shares of Buyer Common Stock, of which, as of
the close of business on February 25, 2000, 88,344,229 shares were
issued and outstanding, and seven million shares of preferred stock,
none of which are outstanding. As of February 25, 2000, Buyer has
reserved for issuance six million shares of Series A Junior
Participating Preferred Stock issuable under the Amended and Restated
Rights Agreement, dated as of February 11, 1999, between Buyer and
Norwest Bank Minnesota, National Association (the "Buyer Rights
Agreement"). Under the Buyer Rights Agreement, each outstanding share
of Buyer Common Stock has attached to it certain rights ("Buyer
Right"), including rights to purchase, under certain circumstances,
one-twentieth of a share of Series A Junior Participating Preferred
Stock of Buyer for $100, subject to adjustment. The authorized capital
stock of Merger Sub consists of 5,166,667 shares of common stock and
1,750 shares of preferred stock, all of which are outstanding and held
by Buyer. All of the issued and outstanding shares of Buyer Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were not granted in violation of any statutory
preemptive rights. There are no outstanding subscriptions, options,
warrants, calls, or other agreements or commitments under which Buyer
is or may become obligated to issue, sell, transfer, or otherwise
dispose of or purchase, redeem, or otherwise acquire, any shares of
capital stock of, or other equity interests in, Buyer and there are no
outstanding securities issued by Buyer convertible into or
exchangeable for any Buyer Common Stock, except for options to
purchase up to an aggregate of 8,229,385 shares of Buyer Common Stock,
as of February 25, 2000. There are no stock appreciation rights,
phantom stock rights, or performance shares outstanding with respect
to Buyer. Buyer owns, directly or indirectly, all of the issued and
outstanding shares of each class of capital stock of each of its
subsidiaries, free and clear of all liens, security interests,
pledges, charges, and other encumbrances.
(c) Authorization and Execution Each of Buyer and Merger
Sub has the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement by Buyer and
Merger Sub have been duly authorized by the Boards of Directors of
Buyer and Merger Sub, and no further corporate action of either Buyer
or Merger Sub is necessary to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyer
and Merger Sub and, assuming the accuracy of the representations and
warranties of Lexington set forth in Section 3.2(c), this Agreement
constitutes the legal, valid, and binding
30
obligation of Buyer and Merger Sub, enforceable against them in
accordance with its terms, except to the extent that enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally, and subject
to general principles of equity.
(d) No Conflicts. Neither the execution and delivery of this
Agreement by Buyer and Merger Sub, nor the consummation by them of the
transactions contemplated hereby will:
(1) conflict with or result in a breach of the certificate
of incorporation or bylaws, as currently in effect, of Buyer or
Merger Sub;
(2) require any filing with, or consent or approval of, any
Governmental Authority having jurisdiction over any of the
businesses or assets of Buyer, Merger Sub, or any of their
subsidiaries, except for (A) compliance with the filing
requirements under the HSR Act; (B) the filing of the Certificate
of Merger with the Delaware Secretary of State and appropriate
documents reflecting the occurrence of the Merger with the
relevant authorities of other states in which Buyer or Merger Sub
is licensed or qualified to do business; (C) the consents,
approvals, filings, and notices required under the 1940 Act and
the Advisers Act; (D) any consents, approvals, filings, or
notices required with the NASD or any industry self-regulatory
organizations; and (E) the filing of the Proxy
Statement/Prospectus and any other compliance with the applicable
requirements of the Exchange Act; (F) such filings and approvals
as are required to be made or obtained under the securities or
"blue sky" laws of various states; and (G) such other filings,
consents or, approvals the failure to make or obtain would not
reasonably be expected to prevent consummation of the Merger or
have a Material Adverse Effect on Buyer;
(3) subject to the exceptions of and assuming compliance
with clauses (A) through (G) of subsection (d)(2) above, violate
any Applicable Law applicable to Buyer or Merger Sub; or
(4) result in a material breach of, or constitute a
material default or an event that, with the passage of time or
the giving of notice, or both, would constitute a material
default, give rise to a right of termination, cancellation, or
acceleration, create any entitlement of any third party to any
material payment or benefit or require the consent of any third
party under, any contract that is a "material contract" (as is
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement.
(e) Proxy Statement. The information supplied by Buyer and
Merger Sub for inclusion in (a) the Registration Statement on Form S-4
to be filed under the Securities Act with the SEC by Buyer in
connection with the Merger for the purpose of registering the shares of
Buyer Common Stock to be issued in connection with the Merger and the
resale thereof by persons who may be deemed to be underwriters under
Rule 145 of the Securities Act (the "Registration Statement") or (b)
the proxy statement to be distributed in connection with Lexington's
meeting of stockholders to vote upon this Agreement and the
transactions contemplated hereby (the "Proxy Statement" and, together
with the prospectus included in the
31
Registration Statement, the "Proxy Statement/Prospectus") will, in the
case of the Proxy Statement, as of the date of the Proxy Statement and
as of the date of the meeting of Lexington's stockholders to consider
this Agreement and the Merger, or, in the case of the Registration
Statement, as amended or supplemented, at the time it becomes effective
and at the time of such meeting of the stockholders of Lexington, not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement/Prospectus will, as
of its effective date, comply as to form in all material respects with
all applicable laws, including the provisions of the Securities Act and
the Exchange Act and the rules and regulations promulgated thereunder,
except that no representation is made by Buyer or Merger Sub with
respect to information supplied by Lexington for inclusion therein.
Buyer is qualified to use Form S-3 under the Securities Act.
(f) SEC Reports and Financial Statements.
(1) Since December 31, 1995, Buyer has filed all reports,
registration statements, and other filings, together with any
amendments required to be made with respect thereto, that it has
been required to file with the SEC under the Securities Act and
Exchange Act. All reports, registration statements, and other
filings (including all exhibits, notes, and schedules thereto and
documents incorporated by reference therein) filed by Buyer with
the SEC on or after January 1, 1996, together with any amendments
thereto are collectively referred to as the "Buyer SEC Reports."
As of: (A) with respect to all of the Buyer SEC Reports other
than registration statements filed under the Securities Act, the
respective dates of their filing with the SEC; and (B) with
respect to all registration statements filed under the Securities
Act, their respective effective dates, the Buyer SEC Reports
complied in all material respects with the rules and regulations
of the SEC and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to made the statements made therein not
misleading.
(2) The consolidated financial statements (including any
related notes or schedules) included in Buyer's 1998 Annual
Report on Form 10-K, as filed with the SEC, were prepared in
accordance with GAAP (except as may be noted therein or in the
notes or schedules thereto) and fairly present in all material
respects the consolidated financial position of Buyer and its
subsidiaries as of December 31, 1997 and 1998 and the
consolidated results of their operations and cash flows for each
of the three years in the three-year period ended December 31,
1998.
(g) Litigation. No litigation, arbitration, or administrative
proceeding is (i) pending or, to the knowledge of Buyer, threatened
against Buyer, its subsidiaries or Merger Sub as of the date of this
Agreement that, if decided adversely to Buyer, its subsidiaries or
Merger Sub, would have a Material Adverse Effect on Buyer, or (ii)
pending or, to the knowledge of Buyer, threatened against Buyer, its
subsidiaries, or Merger Sub as of the date of this Agreement that seeks
to enjoin or otherwise challenges the consummation of the transactions
contemplated by this Agreement. As of the date of this Agreement,
neither Buyer, its subsidiaries, nor Merger
32
Sub is specifically identified as a party subject to any material
restrictions or limitations under any injunction, writ, judgment,
order, or decree of any Governmental Authority that seeks to enjoin or
otherwise challenges or affects the ability of the Buyer to consummate
the transactions contemplated by this Agreement.
(h) Absence of Certain Changes or Events. Except as disclosed in
the Buyer SEC Reports, from December 31, 1998 to the date of this
Agreement, Buyer and its subsidiaries have conducted their respective
businesses and operations in the ordinary course consistent with past
practices.
(i) No Material Adverse Effect. From December 31, 1998 to the
date of this Agreement, there has been no business interruption, damage
to or destruction of its properties, or other incident, occurrence, or
event (other than changes in general industry, economic, or market
conditions), which would have a Material Adverse Effect on Buyer.
(j) Permits; Compliance with Laws. Each of Buyer and Merger Sub
has all material licenses, franchises, permits, and other
authorizations of Governmental Authorities necessary to conduct its
business, and neither Buyer nor Merger Sub is in violation of any such
license, franchise, permit, or other authorization of a Governmental
Authority, or any statute, law, ordinance, rule, or regulation
applicable to it or any of its properties, except where such failure
would not have a Material Adverse Effect on Buyer.
(k) No Brokers or Finders. Neither Buyer nor Merger Sub has
engaged any investment banker, broker, or finder in connection with the
transactions contemplated hereby.
(l) No Disqualification. To the knowledge of Buyer, no person
"associated" (as defined under the Advisers Act) with Merger Sub has,
for a period of five years before the date hereof, been convicted of
any crime or is or has been subject to any disqualification that would
be a basis 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. To the knowledge of Buyer, no "affiliated person" (as
defined under the 1940 Act) of Merger Sub has during a period of five
years before the date hereof been convicted of any crime or is or has
been subject to any disqualification that would be a basis for
disqualification as an investment adviser for any investment company
under Section 9(a) of the 1940 Act, and there is no basis for, or
proceeding or investigation that is reasonably likely to become the
basis for, any such disqualification, denial, suspension, or
revocation.
33
ARTICLE VI
Covenants Relating to the Lexington Funds
6.1 Requisite Approvals Concerning the Lexington Funds. With respect to
each Lexington Fund, and pursuant to the provisions of Section 15 of the 1940
Act, Section 12 of the 1940 Act and Rule 12b-1 thereunder, and each Registrant's
charter, bylaws, and/or trust instruments, each of Lexington and its
subsidiaries, Buyer, and Merger Sub will use its respective reasonable best
efforts in good faith to obtain (and cooperate with one another in obtaining),
as promptly as practicable, the approval of the Registrant's Board of Directors,
if the Registrant is a corporation, or Board of Trustees, if the Registrant is a
business trust (as used in this Agreement, the term "Board," when used with
respect to a Registrant, means the Board of Directors or the Board of Trustees,
as the case may be) of each Registrant in the Lexington Fund Family and of the
stockholders, as required by Section 15 or, to the extent necessary, Rule 12b-1,
of new investment advisory, sub-advisory, administrative, and distribution
agreements and agreements related to plans for each Lexington Fund identical in
all respects to those in effect immediately before the Effective Time which will
be effective immediately after the Effective Time, except for any changes
approved by Buyer and approved by the applicable Board. With respect to each
Lexington Fund that is registered as a unit investment trust, each of Lexington
and its subsidiaries, Buyer and Merger Sub will use its respective reasonable
best efforts in good faith to assign to a person designated by Buyer any
agreement under which Lexington or a subsidiary serve as sponsor, or for Buyer
or such designated person to replace Lexington or its subsidiary as such
sponsor, and to obtain the consent of the trustee of the unit trust to such
action.
6.2 Termination of Existing Advisory, Sub-Advisory, and Distribution
Arrangements. Each of Lexington and its subsidiaries and Buyer and Merger Sub
shall use its respective reasonable best efforts to cause the Board of each
Registrant to take, and Lexington and its subsidiaries will take, all necessary
and appropriate actions to provide written notice of termination in connection
with the change in control and resulting assignment, as of the Effective Time,
pursuant to the requirements of each existing advisory, sub-advisory,
administrative, and distribution agreement applicable to each such Fund, each
such termination to be effective as of the Effective Time, except for any
changes approved by Buyer and approved by the applicable Board.
6.3 Information Regarding the Lexington Funds. With respect to each
Registrant, Buyer shall provide as promptly as practicable to the Board of each
Registrant, with copies to Lexington, all information as the Board shall
reasonably request, in accordance with its responsibilities under Sections 15 of
the 1940 Act, to evaluate the terms of the proposed advisory and any
sub-advisory agreements relating to the Lexington Funds. Further, with respect
to each Registrant, Buyer also shall provide to the respective Board, with
copies to Lexington, all information requested to approve the terms of the
distribution agreement and to permit preparation of proxy materials or
prospectuses, as the case may be, to be sent to the stockholders of each
Registrant for the special meeting of stockholders referred in Section 7.6(b).
6.4 Access to Information Regarding the Lexington Funds. Upon reasonable
notice, Lexington shall (and shall cause its subsidiaries and the Lexington
Funds to) afford to the officers, employees, accountants, counsel, and other
representatives of Buyer, reasonable access, during normal
34
business hours, to all its properties, books, contracts, commitments, and
records and will cause its, its subsidiaries', and the Lexington Funds'
employees, counsel, financial advisers, and auditors to cooperate with Buyer and
its representatives in its investigation of the business of the Lexington Funds.
Lexington shall (and shall cause its subsidiaries and the Lexington Funds to)
furnish promptly to Buyer a copy of each report, schedule, registration
statement, and other document filed or received by it during such period under
the requirements of securities laws and all other information concerning its
business, properties, and personnel as Buyer or its representatives may
reasonably request. Buyer's investigations shall be conducted in a manner as not
to unreasonably interfere with the operations of the Lexington Funds, and Buyer
will take reasonable precautions to protect the confidentiality of any
information of the Lexington Funds disclosed to such persons during the
investigation. No information or knowledge obtained in any investigation under
this Section 6.4 shall be deemed to modify a representation or warranty
contained in this Agreement or the conditions to the obligation of Buyer to
consummate the Merger.
6.5 The Registrants' Registration Statements. Lexington and Buyer will
cooperate with each other and each will endeavor in good faith to cause each
Registrant to file a revised prospectus or a post-effective amendment to that
Registrant's registration statement on Form N-1A or S-6, which revised
prospectus or amendment shall reflect changes as necessary in that Registrant's
affairs as a consequence of the transactions contemplated by this Agreement, and
shall cooperate with one another in causing each Registrant to make any other
filing necessary to satisfy disclosure requirements to enable the public
distribution of the shares of beneficial interest of that Registrant to continue
unabated after the Closing.
6.6 Operations of the Lexington Funds. Lexington shall, or shall cause
its applicable subsidiaries to, (a) inform Buyer weekly of purchases and sales
transactions of each Lexington Fund and provide weekly summaries of portfolio
positions (no earlier than five business days from those transactions); (b)
supply to Buyer unaudited financial statements of each Lexington Fund monthly;
(c) otherwise conduct its activities as investment adviser to each Lexington
Fund in the ordinary course of business consistent with past practice; and (d)
provide Buyer with weekly sales and redemption reports.
6.7 Undertakings Related to Section 15(f) of the 1940 Act. Buyer and
Lexington agree that neither of them nor any of their affiliates has any express
or implied understanding or arrangement that would impose an "unfair burden" (as
defined in Section 15(f)(2)(B) of the 1940 Act) on any of the Lexington Funds or
would in any way interfere with Lexington's reliance on Section 15(f) of the
1940 Act as a result of the transactions contemplated by this Agreement. The
parties agree to use their respective reasonable best efforts to comply and to
cause the respective Boards to comply with the provisions of Section 15(f) of
the 1940 Act. Compliance with Section 15(f) shall include the following
requirements for the minimum time periods specified in that section:
(a) for a period of three years after the Effective Time, at least
75% of the members of the Board of each Registrant involved, or any
successor Board by reorganization or otherwise, shall not be "interested
persons" (as defined in the 1940 Act) of the predecessor or new investment
adviser or sub-adviser;
35
(b) for a period of two years after the Effective Time, no unfair
burden shall be imposed on a Lexington Fund (or any successor thereto by
any reorganization or otherwise) or its stockholders; provided that it is
understood that any payments or amounts received by Lexington or its
affiliates in connection with the transaction contemplated hereunder and
as specified hereunder shall not be deemed to violate Buyer's and its
affiliates' compliance with the unfair-burden provisions of Section 15(f);
and
(c) all vacancies on the Board of each Lexington Fund (other than
vacancies created by the death, disqualification, or resignation of any
Board member interested in Buyer, Lexington, or any of its affiliates or
otherwise to be filled by such a person) shall be filled by a person who
is not an interested person of the predecessor or new investment advisor
and who has been selected and proposed for election by a majority of the
Board members who are not interested persons of the predecessor or new
investment advisor.
6.8 Continued Qualification. Lexington shall use its reasonable best
efforts to ensure that no Registrant takes any action that (a) would prevent any
Lexington Fund from qualifying as a "regulated investment company" under Section
851 of the Code or (b) would be inconsistent with each Lexington Fund's
prospectus and other offering, advertising, and marketing materials.
ARTICLE VII
Covenants Relating to the Parties
7.1 Business Operations of Lexington. Lexington agrees as to itself and
its subsidiaries (except to the extent that Buyer otherwise consents (not to be
unreasonably withheld or delayed) in writing or as contemplated by this
Agreement), to carry on its business in the usual and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
taxes when due subject to good faith disputes over those debts or taxes, to pay
or perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, to keep available
the services of its present officers and key employees and preserve its material
relationships with clients, customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, and generally to
preserve its goodwill and ongoing businesses. Except as expressly stated in this
Agreement, Lexington may not (and may not permit any of its subsidiaries to),
without the prior written consent of Buyer (not to be unreasonably withheld or
delayed):
(a) accelerate, amend, or change the period of exercisability of
options, performance shares, or restricted stock granted under any stock
plan or authorize cash payments in exchange for any awards granted under
any of those plans, except as required by the terms of those plans or any
related agreements or other arrangements in effect as of the date hereof,
(b) transfer or license to any person or entity or otherwise extend,
amend, or modify any of its Proprietary Rights;
36
(c) declare or pay any dividends on or make any other
distributions (whether in cash, stock, or property) in respect of
shares of its capital stock, or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of, or in substitution for shares of capital stock, or
purchase, redeem, or otherwise acquire, or propose to purchase, redeem,
or otherwise acquire, directly or indirectly, any shares of its capital
stock or any options, rights, or warrants to purchase any capital stock
or any securities convertible into or exchangeable for capital stock;
(d) issue, deliver, or sell or authorize or propose the
issuance, delivery, or sale of any shares of its capital stock or
securities convertible into shares of its capital stock, or
subscriptions, rights, warrants, or options to acquire, or other
agreements or commitments of any character obligating it to issue, any
such shares or other convertible securities (other than the grant of
options to employees in a manner consistent with past practices and
under the Lexington Incentive Plan, and the issuance of shares upon the
exercise of options that were either outstanding as of the date hereof
or were granted after the date hereof in compliance with this Section
7.1(d));
(e) acquire (whether by merger, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, or other
business organization or division thereof, or otherwise acquire or
agree to acquire any assets that are material, individually or in the
aggregate, to the business of Lexington and its subsidiaries, taken as
a whole, other than the joint venture described on Schedule 7.1(e);
(f) sell, lease, license, or otherwise dispose of any of its
properties or assets that are material, individually or in the
aggregate, to the business of Lexington and its subsidiaries, taken as
a whole;
(g) (1) other than as described on Schedule 7.1(g), increase the
compensation or benefits payable or to become payable to its directors,
officers, or employees, except for increases for non-executive-level
employees in the ordinary course of business; (2) enter into any
employment or severance agreements with any person; (3) grant any
severance or termination pay to, except under agreements or policies
disclosed in the Lexington Disclosure Schedule, or enter into any
employment or severance agreement with, any employee, except severance
agreements in accordance with the policies disclosed in the Lexington
Disclosure Schedule; (4) enter into any collective bargaining
agreement; (5) establish or, except as required by applicable law,
amend any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance, or other plan, trust, fund, policy,
or arrangement for the benefit of any directors, officers, employees,
or consultants; or (6) establish any new executive-officer employee
position;
(h) (1) revalue any of its assets, other than revaluations that
are required in accordance with GAAP or in the ordinary course of
business; or (2) change or modify in any material respect any existing
accounting method, principle, or practice, other than as required by
GAAP;
37
(i) incur any indebtedness for borrowed money or guarantee or
assume any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of Lexington or any
of its subsidiaries or guarantee any debt securities of others, or
voluntary prepay any outstanding indebtedness (provided that this
Section 7.1(i) does not preclude intercompany indebtedness, guaranties,
or assumptions);
(j) amend or propose to amend its charter, bylaws, or similar
organizational documents;
(k) make any capital expenditure or commitment other than as
described on Schedule 7.1(k) or for which it is not contractually bound
at the date hereof, except for capital expenditures and commitments not
to exceed $300,000 in total;
(l) enter into any new Material Contract (other than in the
ordinary course of business), or modify in any respect materially
adverse to Lexington or any of its subsidiaries any existing Material
Contract;
(m) other than as described on Schedule 7.1(m), engage in the
business of selling any products or services materially different from
existing products and services, or enter into new lines of business;
(n) enter into, terminate, or amend (1) any agreement under
which it agrees to indemnify any party on behalf of its business or
under which it agrees to refrain from competing with any party with
respect to its business or (2) any investment advisory, sub-advisory,
management, distribution, marketing, custody, or other service
agreements relating to the Lexington Funds, except for selling
agreements; or
(o) agree to take any of the actions described in subsections
(a) through (n) above, or take or agree to take any action that is
reasonably likely to make any of Lexington's representations or
warranties contained in this Agreement untrue or incorrect in any
material respect as of the Effective Time.
7.2 Cooperation. Subject to compliance with applicable law, from the
date hereof until the Effective Time, Buyer, Merger Sub, and Lexington shall
confer on a regular and frequent basis with one or more representatives of the
other parties to report operational matters of materiality and the general
status of ongoing operations and shall promptly provide the other parties and
their counsel with copies of all filings made by the party with any Governmental
Authority in connection with this Agreement, the Merger, and the transactions
contemplated hereby.
7.3 Access to Information. Upon reasonable notice, Lexington shall
(and shall cause its subsidiaries to) afford to the officers, employees,
accountants, counsel, and other representatives of Buyer, reasonable access,
during normal business hours, to all its properties, books, contracts,
commitments, and records and will instruct its, and its subsidiaries',
employees, counsel, financial advisers, and auditors to cooperate with Buyer and
its representatives in its investigation of the business of Lexington and its
subsidiaries. Lexington shall (and shall cause its subsidiaries to) furnish
promptly to Buyer (a) a copy of each report, schedule, registration statement,
and other document filed or received by it during such period under the
requirements of securities laws and (b) all other
38
information concerning its business, properties, and personnel as Buyer or its
representatives may reasonably request. Buyer's investigations shall be
conducted in a manner as not to unreasonably interfere with the operations of
Lexington and its subsidiaries, and Buyer will take reasonable precautions to
protect the confidentiality of any information of Lexington and its subsidiaries
disclosed to such persons during the investigation. No information or knowledge
obtained in any investigation under this Section 7.3 shall be deemed to modify a
representation or warranty contained in this Agreement or the conditions to the
obligation of Buyer to consummate the Merger.
7.4 No Solicitation.
(a) Lexington may not, directly or indirectly, through any officer,
director, employee, representative, or agent of Lexington or any of its
subsidiaries:
(1) seek, encourage, initiate, or solicit any inquiries,
proposals, or offers from any person or group to acquire any shares of
capital stock (including by way of a tender offer, but nothing shall
prohibit customary calls with analysts consistent with past practice
in respect of Lexington results) of it, any of its subsidiaries, or
any of the Lexington Funds, to merge or consolidate with it, any of
its subsidiaries, or any Lexington Fund, or to otherwise acquire any
significant portion of the assets of it, any of its subsidiaries, or
the Lexington Funds, or similar transaction involving Lexington, any
of its subsidiaries, or the Lexington Funds, other than the
transactions contemplated by this Agreement (any of the foregoing
inquiries, proposals, or offers being an "Acquisition Proposal");
(2) engage in negotiations or discussions concerning an
Acquisition Proposal with any person or group or disclose or provide
any non-public information relating to the business of Lexington, any
of its subsidiaries, or any Lexington Fund, or afford access to the
properties, books, or records of Lexington, any of its subsidiaries,
or any Lexington Fund to any person or group that the party has reason
to believe may be considering an Acquisition Proposal; or
(3) agree to, approve, or recommend any Acquisition Proposal.
(b) Any violation of the restrictions set forth in Section 7.4(a) by
any director or officer of Lexington or any of its subsidiaries or any of
Lexington or its subsidiaries' financial advisers, attorneys, accountants,
or other representatives, acting on behalf of Lexington or its
subsidiaries, shall be deemed a violation of Section 7.4(a) by Lexington.
(c) Nothing contained in Section 7.4(a), however, prevents Lexington
from (1) authorizing any of its officers, financial advisers, attorneys,
accountants, or other representatives to furnish non-public information or
access to, or to enter into discussions or negotiations with, any person in
connection with a bona fide Acquisition Proposal by such person that has
not been solicited after the date hereof, or recommending to its
stockholders a bona fide written Acquisition Proposal that has not been
solicited after the date hereof, if, and only to the extent that, (A) the
Board of Directors of Lexington determines in good faith that such action
is necessary for it to comply with its fiduciary duties to stockholders
under Delaware law, (B) before furnishing such non-public information to,
or entering into
39
discussions or negotiations with, such person, the Board of Directors
receives from such person an executed confidentiality agreement on terms no
less favorable to Lexington than those contained in the Confidentiality
Agreement discussed in Section 7.14, (C) the Board of Directors determines
in good faith that such Acquisition Proposal is reasonably likely to lead
to a Superior Proposal (as defined in Section 7.4(d)), and (D) the
Acquisition Proposal did not result from a breach of Section 7.4(a), or (2)
complying with Rule 14e-2 or Rule 14d-9 promulgated under the Exchange Act
with regard to an Acquisition Proposal; provided, however, that the
foregoing clause (2) shall not alter the covenants of Lexington set forth
in clause (3) of Section 7.4(a).
(d) For purposes of this Agreement, "Superior Proposal" means an
Acquisition Proposal that the Board of Directors of Lexington determines in
its good faith judgment to be more favorable to its stockholders than the
Merger and for which financing, to the extent required, is committed or, in
the good faith judgment of the Board of Directors, is reasonably capable of
being obtained by the third party.
(e) Lexington shall immediately cease and cause to be terminated any
activities, discussions, or negotiations, existing on the date hereof, with
any person with respect to any Acquisition Proposal, and will promptly
request that each such person return or destroy all confidential
information previously produced to that person by Lexington or its
subsidiaries.
(f) Lexington shall immediately notify Buyer upon receipt by it or
its advisers of any Acquisition Proposal or any request for non-public
information in connection with an Acquisition Proposal or for access to the
properties, books, or records thereof by any person that informs Lexington
that it is considering making, or has made, an Acquisition Proposal. Such
notice shall be made orally and in writing and shall indicate in reasonable
detail the terms and conditions of the proposal, inquiry, or contact, but
need not disclose the identity of the person making the Acquisition
Proposal or the request. If Buyer is notified by Lexington of a Superior
Proposal, then Buyer shall have five business days to make a counter
proposal; provided, however, that neither the submission nor the failure to
submit such a counter proposal shall affect Buyer's right to be paid a
termination fee under Section 10.3.
7.5 Proxy Statement; Board Recommendation. As promptly as practicable
after the execution hereof, Buyer and Lexington shall jointly prepare the Proxy
Statement, and Buyer shall prepare and file with the SEC as soon as practicable
after the execution hereof the Registration Statement, in which the Proxy
Statement will be included. Buyer shall use its best efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable
after such filing. If at any time any event shall occur which should be set
forth in an amendment of or supplement to the Registration Statement, Buyer
shall prepare and file with the SEC such amendment or supplement as soon
thereafter as is reasonably practicable. The Proxy Statement shall include the
recommendation of the Board of Directors of Lexington in favor of this Agreement
and the Merger; provided that the Board of Directors of Lexington may withdraw
such recommendation if it determines that there exists a Superior Proposal and
its Board of Directors determines that the withdrawal of the recommendation is
necessary for the Board of Directors to comply with its fiduciary duties under
the Delaware law.
40
7.6 Stockholders' Meetings of Lexington and the Lexington Funds; Consents
for Private Accounts.
(a) Lexington shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the approval of this
Agreement and the Merger. The meeting of Lexington's stockholders shall be
held to vote on this Agreement and the Merger regardless of whether the
Board of Directors of Lexington determines at any time after the date
hereof that this Agreement and the Merger are no longer advisable and
recommends that the stockholders vote against this Agreement and the
Merger. Subject to Section 7.5, Lexington shall use its reasonable best
efforts to solicit from its stockholders proxies in favor of approval of
this Agreement and the Merger.
(b) Lexington will use and will cause its subsidiaries to use their
reasonable best efforts to obtain, as promptly as reasonably practicable,
the agreement of the Board of each Registrant to call a special meeting of
stockholders to be held as promptly as reasonably practicable for the
purpose of voting upon the approval of the advisory agreements to the
extent consistent with its fiduciary duties under the 1940 Act, to
recommend that shareholders approve such proposed advisory agreements.
(c) With respect to each Private Account, Lexington and its
subsidiaries, with the assistance of Buyer and Merger Sub, will each use
its reasonable best efforts in good faith to obtain (and cooperate with one
another in obtaining), as promptly as practicable, any consent required of
each other party or of other required persons under any Management
Agreement to the assignment of such Management Agreements before the
Closing, including written consent where required under a Management
Agreement.
7.7 Legal Conditions to Merger. Each of Buyer, Merger Sub, and Lexington
shall take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on it with respect to the Merger (including
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Authorities) and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their subsidiaries in
connection with the Merger. Each of Buyer and Lexington shall, and shall cause
its subsidiaries to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order, or
approval of, or any exemption by, any Governmental Authority or other public
third party, required to be obtained or made by Buyer, Lexington, or any of
their subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement. Nothing in this Section 7.7, however,
shall require Buyer or any of its subsidiaries, in connection with the receipt
of any regulatory approval, to agree (a) to sell, discontinue, or limit, before
or after the Effective Time, any assets, businesses, or interest in any assets
or businesses of it or any of its affiliates, or (b) to any conditions relating
to, or changes or restriction in, the operations of any such assets or
businesses that is reasonably likely to materially and adversely impact the
economic or business benefits to Buyer and Merger Sub of transactions
contemplated hereby.
7.8 Stock Plans and Options.
41
(a) At the Effective Time, the Lexington Options shall be assumed by
Buyer. Each Lexington Option so assumed by Buyer under this Agreement shall
continue to have, and be subject to, substantially the same terms and
conditions as were applicable under the Lexington Incentive Plan and the
documents governing such Lexington Option immediately before the Effective
Time, except that (i) such Lexington Option will vest and become
immediately exercisable to the extent set forth in the Lexington Incentive
Plan and the documents governing such Lexington Option and (ii) each
Lexington Option will be exercisable for that number of whole shares of
Buyer Common Stock equal to the product of the number of shares of
Lexington Common Stock that were issuable upon exercise of the option
immediately before the Effective Time multiplied by the Option Ratio (as
defined in Section 7.8(d)) and rounded down to the nearest whole number of
shares of Buyer Common Stock, and the per-share exercise price for the
shares of Buyer Common Stock issuable upon exercise of such assumed
Lexington Option will be equal to the quotient determined by dividing the
exercise price per share of Lexington Common Stock at which the option was
exercisable immediately before the Effective Time by the Option Ratio,
rounded up to the nearest whole cent. It is the intention of the parties
that the Lexington Options so assumed by Buyer qualify following the
Effective Time as "incentive stock options," as defined in Section 422 of
the Code, to the extent such options qualified as incentive stock options
immediately before the Effective Time.
(b) At the Effective Time, each share of Lexington Restricted Stock
as to which restrictions have not lapsed pursuant to the terms of the
Lexington Incentive Plan and the documents governing the Lexington
Restricted Stock shall continue to have, and be subject to, substantially
the same terms and conditions as were applicable under the Lexington
Incentive Plan and the documents governing such shares of Lexington
Restricted Stock immediately before the Effective Time, except that there
shall be substituted for the shares of Lexington Common Stock a number of
shares of Buyer Common Stock equal to the product obtained by multiplying
the number of shares of Lexington Restricted Stock by the Option Ratio, and
rounding the result to the nearest whole number of shares of Buyer Common
Stock. The resulting number will equal the number of shares of Buyer
Restricted Stock, so that each share of Buyer Restricted Stock will
represent the right to receive one share of Buyer Common Stock.
(c) Buyer shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery
upon exercise of all Lexington Options and the vesting of all Lexington
Restricted Stock assumed in accordance with this Section 7.8. As soon as
practicable after the Effective Time, Buyer shall file a registration
statement on Form S-8 (or other applicable form) with respect to the shares
of Buyer Common Stock subject to those options and restricted stock and
shall use its best efforts to maintain the effectiveness of the
registration statement for so long as those options and shares of
restricted stock remain outstanding.
(d) For purposes of this Agreement, the "Option Ratio" shall equal
the quotient obtained by dividing (i) the Merger Consideration by (ii) the
Buyer's Average Share Price.
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7.9 Consents. Lexington shall use all reasonable efforts to obtain all
necessary third-party consents, waivers, and approvals under any of Lexington's
material agreements, contracts, licenses, or leases to consummate the Merger and
the transactions contemplated thereby.
7.10 Tax-Free Reorganization. Buyer and Lexington shall each use all
reasonable best efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code
(a "Reorganization"), including any mutually agreeable re-allocation of the
Merger Consideration between the Share Consideration and the Cash Consideration
that is reasonably necessary to obtain such treatment. To the extent permitted
under applicable tax laws, the Merger shall be reported as a Reorganization in
all federal, state and local Tax Returns filed after the Effective Time. If
Buyer exercises its right to pay additional cash pursuant to the last sentence
of Section 2.1(b) and solely as a result thereof Lexington and Buyer, based on
the advice of tax counsel reasonably believe that the Merger will not be treated
as a Reorganization, the Merger Consideration shall be increased by $3.5
million.
7.11 NYSE Listing. Buyer shall cause the shares of Buyer Common Stock to be
issued in the Merger to be approved for listing on the NYSE, subject to official
notice of issuance, before the Closing Date.
7.12 Payment of Transaction Expenses. Prior to the Closing Date, Lexington
shall pay all of its fees and expenses incurred in, or arising from, the
preparation and negotiation of this Agreement and the combination of the parties
through consummation of the Merger and other transactions contemplated hereby,
including termination of employment agreements, change-of-control and severance
payments and fees and expenses of legal counsel, accountants, and financial
advisers.
7.13 Additional Agreements; Reasonable Efforts. Subject to the terms
hereof, including Section 7.5, each of the parties shall 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 under Applicable Law to
consummate and make effective the transactions contemplated by this Agreement.
7.14 Confidentiality Agreement. The Confidentiality Agreement between Buyer
and Lexington dated January 24, 2000 shall remain in full force and effect until
the Effective Time. Until the Effective Time, the parties shall comply with the
terms of the Confidentiality Agreement.
7.15 Amendment to Rights Agreement. Prior to the date hereof, the Board of
Directors of Lexington has authorized an amendment to the Rights Agreement dated
as of December 13, 1995 between Lexington and First Chicago Trust Company of New
York (the "Lexington Rights Agreement") to provide that (a) Buyer will not
become an "Acquiring Person" as a result of the consummation of the Merger or
the execution of the Voting Agreement and related proxies, (b) no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Lexington Rights Agreement) will occur as a result of the consummation of the
Merger or the execution of the Voting Agreement and related proxies, and (c) all
outstanding rights issued and outstanding under the Lexington Rights Agreement
will expire immediately before the Effective Time.
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ARTICLE VIII
Conditions Precedent
8.1 Conditions to the Parties' Obligation to Effect the Merger. The
respective obligations of the parties to effect the Merger are subject to the
satisfaction before the Closing of the following conditions, any of which may be
waived, to the extent legally allowed, in writing, by mutual written consent of
the parties:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved by the requisite vote of the stockholders of Lexington, as
required by the Delaware Law and by any applicable provisions of
Lexington's Certificate of Incorporation and Bylaws. The proposals to be
acted upon at the special meetings of stockholders of the Lexington Funds
discussed in Section 7.6(b) shall have received affirmative votes
sufficient for their adoption by (i) Lexington Funds holding 90% of the net
assets held by all Lexington Funds as reflected on the Revised Schedule
2.1(c) and (ii) all Lexington Funds except those Lexington Funds set forth
on Schedule 8.1(a). The consents required under Section 7.6(c), if any,
shall have been obtained from Private Accounts of institutional clients
holding 90% of the net assets held by all such Private Accounts and from
Private Accounts of all other clients holding 80% of the net assets held by
all such Private Accounts, in each case as reflected on the Revised
Schedule 2.1(c).
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) Approvals. There shall have been obtained all permits, consents,
and approvals of all Governmental Authorities of the type referred to in
clauses (A), (B), (D), (E), and (F) of Section 3.2(d)(2).
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction, or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall
have been issued, nor shall any proceeding brought by a Governmental
Authority seeking any of the foregoing be pending; nor shall there be any
action taken, or any statute, rule, regulation, or order enacted, entered,
enforced, or deemed applicable to the Merger which makes the consummation
of the Merger illegal.
(e) The shares of Buyer Common Stock issuable in the Merger shall
have been authorized for listing on the NYSE upon official notice of
issuance.
(f) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities.
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8.2 Additional Conditions to the Obligations of Buyer and Merger Sub. The
obligations of Buyer and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing by Buyer and Merger Sub:
(a) Representations and Warranties. The representations and
warranties of Lexington contained in Articles III and IV hereof shall be
true and correct in all material respects (provided that solely for the
purposes of this Section 8.2(a), the term "in all material respects" shall
not be deemed to further qualify any representation or warranty that by its
terms is qualified by any materiality qualification) as of the date hereof
and immediately before the Effective Time, with the same force and effect
as if made as of the Effective Time, except that the accuracy of
representations and warranties that by their terms speak as of the date of
this Agreement or some other date will be determined as of that date.
(b) Performance of Obligations of Lexington. Lexington shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or before the Closing Date.
(c) No Material Adverse Change. Since the date hereof, no Material
Adverse Effect with respect to Lexington or any of the Lexington Funds
shall have occurred.
(d) Officers' Certificate. Buyer shall have received a certificate
signed on behalf of Lexington by the Chief Executive and Chief Financial
Officers of Lexington confirming the satisfaction of subsections (a), (b),
and (c) of this Section 8.2.
(e) Legal Opinions. Buyer shall have received an opinion of Ballard
Spahr Andrews & Ingersoll, LLP and Kramer Levin Naftallis and Frankel (or
such other outside legal counsel selected by Lexington or the Registrants
and reasonably acceptable to Buyer), each, special legal counsel to
Lexington and/or the Lexington Funds, dated the Closing Date reasonably
acceptable in form and substance to Buyer.
(f) Dissenters' Rights. The number of Dissenting Shares shall not
equal more than 5% of the total of the outstanding shares of Lexington
Common Stock.
(g) Certain Consents. Lexington shall have obtained in writing all
consents, waivers, or approvals, necessary to provide that consummation of
the Merger does not constitute a default under, or effect or give rise to a
right of termination of, each of the Material Contracts identified by an
asterisk in Part 3.2(d)(4) of the Lexington Disclosure Schedule.
(h) Comfort Letter. Buyer shall have received "comfort" letters in
customary form and substance reasonably satisfactory to Buyer from KPMG
LLP, certified public accountants for Lexington, dated the date of the
Proxy Statement, the effective date of the Registration Statement, and the
Closing Date (or such other dates reasonably acceptable to Buyer) with
respect to certain financial statements and other financial information
included in the Registration Statement and any subsequent changes in
specified balance sheet and income statement items, including total assets,
working capital, total stockholders' equity, total revenues, and per-share
amounts of net income.
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(i) Lexington Assets Under Management. The Adjustment Percentage
shall be no less than 55%.
(j) Closing Date Balance Sheet. Lexington shall have delivered to
Buyer an unaudited pro forma balance sheet, dated the Closing Date, which
shall present a positive book value for Lexington.
(k) 1999 Financials. Lexington shall have delivered to Buyer its
audited consolidated financial statements (including any related notes or
schedules) as of and for the one-year period ended December 31, 1999.
(l) Spin-off Tax Opinion. Lexington shall have delivered to Buyer an
accurate copy of the opinion of Davis Polk & Wardwell regarding the tax-
free status of the 1995 Lexington spin-off transaction.
8.3 Additional Conditions to the Obligation of Lexington. The obligation
of Lexington to effect the Merger is subject to the satisfaction of each of the
following conditions, any of which may be waived in writing by Lexington:
(a) Representations and Warranties. The representations and
warranties of Buyer and Merger Sub contained in Article V hereof shall be
true and correct in all material respects (provided that solely for the
purposes of this Section 8.3(a), the term "in all material respects" shall
not be deemed to further qualify any representation or warranty that by its
terms is qualified by any materiality qualification) as of the date hereof,
and immediately before the Effective Time, with the same force and effect
as if made as of the Effective Time, except that the accuracy of
representations and warranties that by their terms speak as of the date of
this Agreement or some other date will be determined as of that date.
(b) Performance of Obligations of Buyer and Merger Sub. Buyer and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or before the
Closing Date.
(c) Officers' Certificate. Lexington shall have received a
certificate signed on behalf of Buyer by a Senior Vice President of Buyer,
and on behalf of Merger Sub by the President or any Vice President of
Merger Sub, confirming the satisfaction of subsections (a) and (b) of this
Section 8.3.
(d) Legal Opinion. Lexington shall have received an opinion of Faegre
& Benson LLP, legal counsel to Buyer, dated the Closing Date reasonably
acceptable in form and substance to Lexington.
(e) Tax Opinion. Lexington shall have received from Ballard Spahr
Andrews & Ingersoll, LLP an opinion substantially to the effect that, on
the basis of facts, representations and assumptions referenced in such
opinion that are reasonably consistent with the state of facts existing at
the Effective Time, the Merger will be treated for United States federal
income tax purposes as a reorganization within the meaning of Sections
368(a)(1)(A) and 368 (a)(2)(D) of the Code, and that no gain or loss should
be required to be recognized by a shareholder of
46
Lexington to the extent such shareholder receives Buyer Common Stock in
exchange for shares of Lexington Common Stock. In rendering such opinion,
counsel may request and rely upon representations contained in certificates
of officers of Lexington, Buyer and Merger Sub and the parties shall use
their reasonable best efforts to make available such truthful certificates.
(f) Comfort Letter. Lexington shall have received "comfort" letters
in customary form and substance reasonably satisfactory to Lexington from
Deloitte & Touche LLP, certified public accountants for Buyer and Merger
Sub, dated the date of the Proxy Statement, the effective date of the
Registration Statement and the Closing Date (or such other dates reasonably
acceptable to Lexington) with respect to certain financial statements and
other financial information included in the Registration Statement and any
subsequent changes in specified balance sheet and income statement items,
including total assets, working capital, total stockholders' equity, total
revenues and the total and per share amounts of net income.
(g) Employment Agreements. Merger Sub shall have executed employment
agreements with terms set forth on Exhibit B-1 and B-2 and such other terms
as agreed by the parties thereto with each of Richard Hisey (Exhibit B-1),
Alfredo Viegas, Mustafa Zaidi, and Dennis Jamison (for all but Mr. Hisey,
Exhibit B-2).
ARTICLE IX
Conduct and Transactions After the Effective Time
9.1 Employee Matters.
(a) From and after the Effective Time, the employee pension benefit
plans, as defined in Section 3(2) of ERISA, and welfare and other benefit
plans, programs, and arrangements in effect and sponsored by Lexington
and/or all or any of its subsidiaries as of the Effective Time shall,
subject to applicable law, the terms of this Agreement, and the terms of
such plans, programs, and arrangements, remain in effect with respect to
those individuals who are employees of Lexington and its subsidiaries until
such time as the Surviving Corporation shall adopt new employee benefit
plans and arrangements with respect to employees of the Surviving
Corporation and its subsidiaries; provided, however, that for employees on
Lexington's or its subsidiaries' payroll as of the Closing Date, such
benefit plans and arrangements shall (1) contain no waiting period or pre-
existing condition exclusions and (2) not be less favorable, in the
aggregate, than the benefit plans and arrangements provided to similarly
situated employees of Buyer. Buyer shall be responsible for perpetuating
the group health plan continuation coverages pursuant to Section 4980B of
the Code and Sections 601 through 609 of ERISA for all employees of
Lexington as of the Closing Date and their eligible dependents.
(b) From and after the Effective Time, for purposes of determining
eligibility, vesting, any length of service requirements, waiting periods,
or benefits based on length of service, and entitlement to vacation and
severance benefits for employees employed by Lexington or any of its
subsidiaries immediately before the Effective Time under any compensation,
severance, welfare, pension, benefit, or savings plan of the Surviving
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Corporation or any of its affiliates in which such employees of Lexington
and its subsidiaries were, or could reasonably expect to become, eligible
to participate, service with Lexington or any of its subsidiaries shall be
credited as if such service had been rendered to the Surviving Corporation
or such affiliate; provided, however, that such service credit shall not
operate to duplicate any benefit or the funding thereof.
9.2 Indemnification. All rights to indemnification, expense advancement,
and exculpation existing in favor of any present or former director, officer,
employee, or agent of Lexington or any of its subsidiaries as provided in the
charter, bylaws, or similar organizational documents of Lexington or any of its
subsidiaries or by law as in effect on the date hereof shall survive the Merger
and continue in full force and effect without amendment thereto for a period of
at least six years after the Effective Time (or, if any relevant claim is
asserted or made within that six-year period, until final disposition of the
claim) with respect to matters occurring at or before the Effective Time, and no
action taken during that period shall be deemed to diminish the obligations set
forth in this Section 9.2. Further, the Surviving Corporation, by virtue of the
Merger and without further action, shall assume as of the Effective Time all
indemnification agreements of Lexington in effect as of the date hereof. Buyer
hereby guarantees the performance of the covenants set forth in this Section
9.2. The provisions of this Section 9.2 are intended for the benefit of, and
shall be enforceable by, directors, officers, and others entitled to
indemnification hereunder and their respective heirs and personal
representatives.
9.3 Directors and Officers Liability Insurance. For a period of at least
six years after the Effective Time, Buyer shall maintain in effect either (a)
policies of directors' and officers' liability insurance providing at least the
same coverage and amounts and containing terms and conditions that are no less
advantageous in any material respect to the insured parties under such policies
maintained by Lexington as of the date hereof with respect to claims arising
from facts or events that occurred at or before the Effective Time (including
consummation of the transactions contemplated by this Agreement), or (b) a run-
off (that is, a "tail") policy or endorsement with respect to the current policy
of directors' and officers' liability insurance covering claims asserted within
six years after the Effective Time arising from facts or events that occurred at
or before the Effective Time (including consummation of the transactions
contemplated by this Agreement); and such policies or endorsements shall name as
insureds thereunder all present and former directors and officers of Lexington
or any of its subsidiaries.
9.4 Tax-Free Reorganization Covenants.
(a) Following the Merger, the Surviving Corporation will, and Buyer
will cause the Surviving Corporation to, continue the historic business of
Lexington or use a significant portion of Lexington's business assets in a
business.
(b) Following the Merger, the Surviving Corporation will not issue,
and Buyer will not cause the Surviving Corporation to issue, additional
shares of stock of the Surviving Corporation that would result in Buyer
losing "control" (within the meaning of Section 368(c) of the Code) of the
Surviving Corporation.
(c) Buyer has no plan or intention to reacquire any of its Common
Stock issued in the Merger.
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(d) Buyer has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with and into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation or to cause the Surviving Corporation to sell or otherwise
dispose of any of the assets of Lexington acquired in the Merger, except
for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.
ARTICLE X
Termination
10.1 Generally. This Agreement may be terminated at any time before the
Effective Time, whether before or after approval by the stockholders of
Lexington:
(a) by mutual written consent of Buyer, Merger Sub, and Lexington;
(b) by Buyer and Merger Sub or by Lexington if the transactions
contemplated hereby have not been consummated on or before December 31,
2000 (which date may be extended by mutual agreement of Buyer, Merger Sub,
and Lexington), provided that such failure is not due to the failure of the
party seeking to terminate this Agreement to comply in all material
respects with its obligations under this Agreement;
(c) by Buyer and Merger Sub, if (1) any of the conditions set forth
in Sections 8.1 or 8.2 shall become impossible to fulfill other than for
reasons within the control of Buyer or Merger Sub, and such conditions
shall not have been waived under Article VIII, or (2) the stockholders of
Lexington fail to approve this Agreement and the Merger by the vote
required by the Delaware Law and Lexington's Certificate of Incorporation
and Bylaws at the first stockholders' meeting called for that purpose,
including any adjournments thereof;
(d) by Lexington, if (1) any of the conditions set forth in Sections
8.1 or 8.3 shall become impossible to fulfill other than for reasons within
the control of Lexington, and such conditions shall not have been waived
under Article VIII, or (2) the stockholders of Lexington fail to approve
this Agreement and the Merger by the vote required by the Delaware Law and
Lexington's Certificate of Incorporation and Bylaws at the first
stockholders' meeting called for that purpose, including any adjournments
thereof;
(e) by Buyer and Merger Sub, if the Lexington Board of Directors
withdraws or adversely modifies its recommendation to its stockholders of
this Agreement and the Merger;
(f) by Buyer and Merger Sub, if Lexington shall have (1) failed to
observe or perform in any material respect any of its covenants set forth
in this Agreement that cannot be or has not been cured within 30 days of
the giving of written notice to Lexington of such failure or, (2) breached
a representation or warranty contained in Article III or IV hereof, and
such breach cannot be or has not been cured within 30 days of the giving of
written notice to Lexington of such breach, and the condition set forth in
Section 8.2(a) cannot be satisfied;
49
(g) by Lexington, if Buyer or Merger Sub shall have (1) failed to
observe or perform in any material respect any of its covenants set forth
in this Agreement that cannot be or has not been cured within 30 days of
the giving of written notice to Buyer of such failure or, (2) breached a
representation or warranty contained in Article V hereof, and such breach
cannot be or has not been cured within 30 days of the giving of written
notice to Buyer of such breach, and the condition set forth in Section
8.3(a) cannot be satisfied.
10.2 Procedure and Effect of Termination. Upon termination of this
Agreement by Lexington or by Buyer and Merger Sub under Section 10.1, written
notice thereof shall forthwith be given to the other parties and this Agreement
shall terminate and the Merger shall be abandoned without further action by any
of the parties. If this Agreement is terminated as provided herein, no party
shall have any liability or further obligation to any other party to this
Agreement, except as provided in Section 10.3 or to the extent the termination
is the direct result of a willful and material breach by the party of a
representation, warranty, or covenant contained in this Agreement.
10.3 Expenses; Termination Fee.
(a) All expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the
party incurring the expenses.
(b) If this Agreement is terminated by Buyer under Sections
10.1(c)(2) or (f), or by Lexington under Section 10.1(d)(2);
(1) then Lexington shall, within five business days of
termination, pay to Buyer an amount, not to exceed $450,000, equal to
all reasonable out-of-pocket expenses (including fees and costs of
attorneys and accountants) incurred by Buyer or Merger Sub in
connection with the transactions contemplated by this Agreement; and
(2) if, on or before the date that is one year after the date of
termination, a Third-Party Transaction (as defined in subsection (e)
below) is consummated, then Lexington shall, within five business days
after the consummation of such Third-Party Transaction, pay to Buyer
an additional $1.8 million.
(c) If this Agreement is terminated by Buyer under Section 10.1(e),
(1) then Lexington shall, within five business days of
termination, pay to Buyer $1.125 million; and
(2) if, on or before the date that is one year after the date of
termination, a Third-Party Transaction is consummated, then Lexington
shall, within five business days after the consummation of such Third-
Party Transaction, pay to Buyer an additional $1 million.
(d) If this Agreement is terminated by Lexington under Section
10.1(g), then Buyer shall, within five business days of termination, pay to
Lexington an amount, not to exceed $450,000, equal to all reasonable out-
of-pocket expenses (including fees and costs of attorneys
50
and accountants) incurred by Lexington in connection with the transactions
contemplated by this Agreement.
(e) As used in Sections 10.3(b) and (c), "Third-Party Transaction"
means the occurrence of any of the following events: (1) the acquisition of
Lexington by merger, consolidation, statutory share exchange, or other
business combination transaction by any person other than Buyer, Merger
Sub, or any affiliate thereof (a "Third Party"), in which the holders of
shares of Lexington Common Stock do not, immediately after the transaction,
directly or indirectly own more than 50% of the voting power of the capital
stock of Lexington or the surviving corporation in substantially the same
proportion as before the transaction; (2) the acquisition by any Third
Party of 50% or more (in book value or market value) of the total assets of
Lexington and its subsidiaries, taken as a whole; or (3) the acquisition by
a Third Party of 50% or more of the outstanding shares of Lexington Common
Stock, whether by tender offer, exchange offer, or otherwise.
(f) This Section 10.3 shall survive termination of this Agreement for
any reason for a period of 13 months thereafter.
ARTICLE XI
Miscellaneous Provisions
11.1 Termination of Representations and Warranties. The representations and
warranties set forth in this Agreement (including those set forth in the
Lexington Disclosure Schedule and the Buyer Disclosure Schedule) or in any
certificate furnished under this Agreement shall not survive the Effective Time.
The covenant of Buyer and Surviving Corporation contained in Section 9.4 shall
survive until the fifth anniversary of the Effective Time. This Section 11.1
shall not limit any other covenant or agreement of the parties that, by its
terms contemplates performance after the Effective Time.
11.2 Amendment and Modification. To the extent permitted by applicable law,
this Agreement may be amended, modified, or supplemented only by written
agreement of the parties at any time before the Effective Time with respect to
any of the terms contained herein, except that after the special meeting of
Lexington's stockholders to approve this Agreement and the Merger, the amount
and form of the consideration payable in the Merger may not be altered without
the approval of the stockholders of Lexington.
11.3 Waiver of Compliance; Consents. Any failure of a party to comply with
any obligation, covenant, agreement, or condition herein, to the extent legally
allowed, may be waived in writing by the other, but any such waiver or failure
to insist upon strict compliance with the obligation, covenant, agreement, or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, the consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 11.3.
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11.4 Press Releases and Public Announcements. No party may issue any press
release or make any public announcement relating to the subject matter hereof
without the prior written approval of the other parties, which may not be
unreasonably withheld; provided, however, that each party may make any public
disclosure it believes in good faith is required by applicable law, SEC
regulations, or any listing or trading agreement concerning its publicly traded
securities (in which case the disclosing party will use its reasonable best
efforts to consult with and advise the other parties regarding the form and
content of the disclosure before making the disclosure).
11.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, effective when
delivered, or if delivered by express delivery service or facsimile, effective
when delivered, or if mailed by registered or certified mail (return receipt
requested), effective three business days after mailing, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Buyer:
ReliaStar Financial Corp.
20 Washington Avenue South
Minneapolis, MN 55401
Attn: General Counsel
Facsimile: (612) 342-3160
With a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attn: Thomas G. Morgan
Facsimile: (612) 336-3026
If to Merger Sub:
Pilgrim Holdings Corporation
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004
Attn: Robert W. Stallings
Facsimile: (602) 417-8301
If to Lexington:
Lexington Global Asset Manager, Inc.
Park 80 West
Plaza Two
Saddle Brook, NJ 07663
Attn: Robert M. DeMichele
With a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attn: William H. Rheiner, Esquire
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11.6 Assignment. This Agreement and all of its provisions shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned or delegated by any
party without the prior written consent of the other parties. This Agreement is
not intended to confer upon any other person except the parties any rights or
remedies hereunder.
11.7 Interpretation. As used in this Agreement, unless otherwise defined
herein:
(a) "including" means "including without limitation";
(b) "person" means an individual, a partnership, a limited liability
company, a joint venture, a corporation, a trust, an incorporated
organization, or a government or any department or agency thereof;
(c) "affiliate" has the meaning set forth in Rule 12b-2 under the
Exchange Act;
(d) "business day" means any day other than a Saturday, Sunday, or a
day that is a statutory holiday under the laws of the United States or the
States of Minnesota or New Jersey;
(e) all dollar amounts are expressed in United States funds;
(f) "to the knowledge of a party" or any similar phrase means the
actual knowledge of one or more of the executive officers of the party; and
(g) "subsidiary" of any specified corporation means, unless
otherwise provided herein, any corporation of which the outstanding
securities having ordinary voting power to elect a majority of the board of
directors are directly or indirectly owned by the corporation, including
MSR with respect to Lexington.
11.8 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without giving effect to choice-of-law principles.
11.9 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.
11.10 Headings; Internal References. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties, and shall not affect the interpretation
hereof.
11.11 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, the Lexington Disclosure Schedule, the Buyer Disclosure
Schedule, and the Confidentiality Agreement, embody the entire agreement and
understanding of the parties in respect of the subject matter contained herein
and supersede all prior agreements and understandings among the parties with
respect to that subject matter. There are no restrictions, promises,
representations, warranties (express or implied), covenants, or undertakings of
the parties, other than those expressly set forth or referred to in this
Agreement.
53
11.12 Severability. If any provision hereof is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remainder of the
provisions hereof shall continue in full force and effect and will in no way be
affected or invalidated.
11.13 Equitable Remedies. The parties agree that money damages or other
remedy at law would not be a sufficient or adequate remedy for any breach or
violation of, or default under, this Agreement by them and that in addition to
all other remedies available to them, each of them shall be entitled, to the
fullest extent permitted by law, to an injunction restraining such breach,
violation, or default or threatened breach, violation, or default and to any
other equitable relief, including specific performance, without bond or other
security being required.
54
In witness whereof, Buyer, Merger Sub and Lexington have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
ReliaStar Financial Corp.
By:
Title:
Pilgrim Holdings Corporation
By:
Title:
Lexington Global Asset Managers, Inc.
By:
Title:
55
Table of Contents
Page
ARTICLE I The Merger......................................................................................... 12
1.1 Effective Time of the Merger......................................................................... 12
1.2 Closing.............................................................................................. 12
1.3 Effects of the Merger................................................................................ 12
1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation................................. 13
1.5 Directors and Officers of the Surviving Corporation.................................................. 13
ARTICLE II Conversion of Securities.......................................................................... 13
2.1 Effect on Capital Stock.............................................................................. 13
(a) Merger Consideration.............................................................................. 13
(b) Adjustment of Merger Consideration Based on Buyer's Average Share Price........................... 14
(c) Adjustment to Merger Consideration Based on Assets Under Management............................... 14
(d) Lexington Stock................................................................................... 16
(e) Lexington Incentive Plans......................................................................... 17
(f) Capital Stock of Merger Sub....................................................................... 17
(g) Fractional Shares................................................................................. 17
(h) Buyer Stock....................................................................................... 17
(i) Election Procedures............................................................................... 17
2.2 Exchange of Certificates............................................................................. 21
ARTICLE III Representations and Warranties of Lexington...................................................... 23
3.1 General.............................................................................................. 23
3.2 Representations and Warranties....................................................................... 23
(a) Organization, Standing, Qualification............................................................. 23
(b) Capitalization.................................................................................... 24
(c) Authorization and Execution....................................................................... 25
(d) No Conflicts...................................................................................... 25
(e) SEC Reports and Financial Statements.............................................................. 26
(f) Proxy Statement................................................................................... 27
(g) Absence of Certain Changes or Events.............................................................. 27
(h) Tax Matters....................................................................................... 28
(i) Properties........................................................................................ 29
(j) Material Contracts................................................................................ 30
(k) Intellectual Property............................................................................. 30
(l) Litigation........................................................................................ 31
(m) Permits; Compliance with Laws..................................................................... 31
(n) No Brokers or Finders............................................................................. 31
(o) Retirement and Benefit Plans; Employees........................................................... 31
(p) Environmental Matters............................................................................. 33
(q) Labor Matters..................................................................................... 34
(r) Vote Required..................................................................................... 34
(s) Anti-Takeover Provisions.......................................................................... 34
(u) Management Agreements............................................................................. 34
(v) Voting Agreements................................................................................. 34
ARTICLE IV Representations and Warranties Relating to the Lexington Funds.................................... 35
4.1 General.............................................................................................. 35
4.2 Representations and Warranties....................................................................... 35
(d) Financial Statements of the Lexington Funds....................................................... 36
56
(e) Accuracy of Financial Statements.................................................................. 36
(f) Compliance With Applicable Law.................................................................... 36
(g) No Conflicts...................................................................................... 37
(h) Adherence to Investment Policies and Restrictions................................................. 37
(i) Litigation........................................................................................ 37
(j) Required Reports.................................................................................. 38
(k) Taxes............................................................................................. 38
(l) Contracts......................................................................................... 38
(m) No Material Adverse Changes....................................................................... 38
(n) Books............................................................................................. 38
(o) Absence of Undisclosed Liabilities................................................................ 38
(p) No Pending Transaction............................................................................ 39
(q) Proxy Statements.................................................................................. 39
(r) Code of Ethics.................................................................................... 39
(s) No Disqualification............................................................................... 39
(t) Insurance......................................................................................... 39
ARTICLE V Representations and Warranties of Buyer and Merger Sub............................................. 39
5.1 General.............................................................................................. 39
5.2 Representations and Warranties....................................................................... 39
(a) Organization, Standing, Qualification............................................................. 40
(b) Capitalization.................................................................................... 40
(c) Authorization and Execution....................................................................... 40
(d) No Conflicts...................................................................................... 41
(e) Proxy Statement................................................................................... 41
(f) SEC Reports and Financial Statements.............................................................. 42
(g) Litigation........................................................................................ 42
(h) Absence of Certain Changes or Events.............................................................. 43
(i) No Material Adverse Effect........................................................................ 43
(j) Permits; Compliance with Laws..................................................................... 43
(k) No Brokers or Finders............................................................................. 43
(l) No Disqualification............................................................................... 43
ARTICLE VI Covenants Relating to the Lexington Funds......................................................... 44
6.1 Requisite Approvals Concerning the Lexington Funds................................................... 44
6.2 Termination of Existing Advisory, Sub-Advisory, and Distribution Arrangements........................ 44
6.3 Information Regarding the Lexington Funds............................................................ 44
6.4 Access to Information Regarding the Lexington Funds.................................................. 44
6.5 The Registrants' Registration Statements............................................................. 45
6.6 Operations of the Lexington Funds.................................................................... 45
6.7 Undertakings Related to Section 15(f) of the 1940 Act................................................ 45
6.8 Continued Qualification.............................................................................. 46
ARTICLE VII Covenants Relating to the Parties................................................................ 46
7.1 Business Operations of Lexington..................................................................... 46
7.2 Cooperation.......................................................................................... 48
7.3 Access to Information................................................................................ 48
7.4 No Solicitation...................................................................................... 49
7.5 Proxy Statement; Board Recommendation................................................................ 50
7.6 Stockholders' Meetings of Lexington and the Lexington Funds; Consents for Private
Accounts............................................................................................. 51
7.7 Legal Conditions to Merger........................................................................... 51
7.8 Stock Plans and Options.................................................................................51
57
7.9 Consents............................................................................................. 53
7.10 Tax-Free Reorganization........................................................................... 53
7.11 NYSE Listing...................................................................................... 53
7.12 Payment of Transaction Expenses................................................................... 53
7.14 Confidentiality Agreement......................................................................... 53
7.15 Amendment to Rights Agreement..................................................................... 53
ARTICLE VIII Conditions Precedent............................................................................ 54
8.1 Conditions to the Parties' Obligation to Effect the Merger........................................... 54
(a) Stockholder Approval.............................................................................. 54
(b) HSR Act........................................................................................... 54
(c) Approvals......................................................................................... 54
(d) No Injunctions or Restraints; Illegality.......................................................... 54
8.2 Additional Conditions to the Obligations of Buyer and Merger Sub..................................... 55
(a) Representations and Warranties.................................................................... 55
(b) Performance of Obligations of Lexington........................................................... 55
(c) No Material Adverse Change........................................................................ 55
(d) Officers' Certificate............................................................................. 55
(e) Legal Opinions.................................................................................... 55
(f) Dissenters' Rights................................................................................ 55
(g) Certain Consents.................................................................................. 55
(h) Comfort Letter.................................................................................... 55
(i) Lexington Assets Under Management................................................................. 56
(j) Closing Date Balance Sheet........................................................................ 56
(k) 1999 Financials................................................................................... 56
(l) Spin-off Tax Opinion.............................................................................. 56
8.3 Additional Conditions to the Obligation of Lexington................................................. 56
(a) Representations and Warranties.................................................................... 56
(b) Performance of Obligations of Buyer and Merger Sub................................................ 56
(c) Officers' Certificate............................................................................. 56
(d) Legal Opinion..................................................................................... 56
(e) Tax Opinion....................................................................................... 56
(f) Comfort Letter.................................................................................... 57
(g) Employment Agreements............................................................................. 57
ARTICLE IX Conduct and Transactions After the Effective Time................................................. 57
9.1 Employee Matters..................................................................................... 57
9.2 Indemnification...................................................................................... 58
9.4 Tax-Free Reorganization Covenants.................................................................... 58
ARTICLE X Termination........................................................................................ 59
10.1 Generally......................................................................................... 59
10.2 Procedure and Effect of Termination............................................................... 60
10.3 Expenses; Termination Fee......................................................................... 60
ARTICLE XI Miscellaneous Provisions.......................................................................... 61
11.1 Termination of Representations and Warranties..................................................... 61
11.2 Amendment and Modification........................................................................ 61
11.3 Waiver of Compliance; Consents.................................................................... 61
11.4 Press Releases and Public Announcements........................................................... 62
11.6 Assignment........................................................................................ 63
11.7 Interpretation.................................................................................... 63
11.8 Governing Law..................................................................................... 63
11.9 Counterparts...................................................................................... 63
58
11.10 Headings; Internal References................................. 63
11.11 Entire Agreement.............................................. 63
11.12 Severability.................................................. 64
11.13 Equitable Remedies............................................ 64
Index of Defined Terms
Term Location
1940 Act..................................................... Recitals
Acquisition Proposal......................................... (S) 7.4(a)(1)
Adjustment Percentage........................................ (S) 2.1(c)(3)
Advisers Act................................................. (S) 3.2(a)(2)
Affiliate.................................................... (S) 11.7(c)
Agreement.................................................... Preamble
Applicable Law............................................... (S) 4.2(f)
Assigned Net Assets.......................................... (S) 2.1(c)(2)
Base Net Assets.............................................. (S) 2.1 (c)(1)
Benefit Plan................................................. (S) 3.2(o)(1)
Board........................................................ (S) 6.1
Business Day................................................. (S) 11.7(d)
Buyer........................................................ Preamble
Buyer's Average Share Price.................................. (S) 2.1(b)
Buyer Common Stock........................................... Recitals
Buyer Disclosure Schedule.................................... (S) 5.1
Buyer SEC Reports............................................ (S) 5.2(f)(1)
Cash Consideration .......................................... (S) 2.1(a)
Certificate of Merger........................................ (S) 1.1
Certificates................................................. (S) 2.1(d)
Closing...................................................... (S) 1.2
Closing Date................................................. (S) 1.2
Code......................................................... Recitals
Delaware Law................................................. (S) 1.1
Dissenting Shares............................................ (S) 2.1(k)(1)
Effective Time............................................... (S) 1.1
Election Statement........................................... (S) 2.1(i)(1)
Environmental Law............................................ (S) 3.2(p)(1)(A)
ERISA........................................................ (S) 3.2(o)(1)
ERISA Affiliates............................................. (S) 3.2(o)(9)
Exchange Act................................................. (S) 3.2(d)(2)
Exchange Agent............................................... (S) 2.2(a)
Exchange Fund................................................ (S) 2.2(a)
Fund Shares.................................................. (S) 4.2(c)
Fund Stockholders............................................ (S) 4.2(n)
Fund Tax Returns............................................. (S) 4.2(k)
GAAP......................................................... (S) 3.2(e)(2)
Governmental Authority....................................... (S) 3.2(d)(2)
Hazardous Substance.......................................... (S) 3.2(p)(1)(B)
HSR Act...................................................... (S) 3.2(d)(2)
Including.................................................... (S) 11.7(a)
Lexington.................................................... Preamble
Lexington Common Stock....................................... Recitals
Lexington Consolidated Group................................. (S) 3.2(h)(4)
Lexington Disclosure Schedule................................ (S) 3.1
Lexington Distributor........................................ (S) 3.2(a)(3)
Lexington Employee Plan(s)................................... (S) 3.2(o)(1)
Lexington Fund Family........................................ (S) 4.2(b)
Lexington Funds.............................................. Recitals
Lexington Incentive Plans.................................... (S) 2.1(d)
59
Lexington Options............................................ (S) 2.1(d)
Lexington Restricted Stock................................... (S) 2.1(e)
Lexington Rights Agreement................................... (S) 7.15
Lexington SEC Reports........................................ (S) 3.2(e)(1)
Management Agreements........................................ (S) 3.2(u)
Material Adverse Effect...................................... (S) 3.1
Material Contracts........................................... (S) 3.2(j)
Merger....................................................... Recitals
Merger Consideration......................................... (S) 2.1(a)
Merger Sub................................................... Preamble
MSR.......................................................... (S) 3.2(a)(2)
Multiemployer Plan........................................... (S) 3.2(o)(4)
NASD......................................................... (S) 3.2(d)(2)
NYSE......................................................... (S) 2.1(b)
Option Ratio................................................. (S) 7.8(d)
Original Schedule............................................ (S) 2.1(c)(1)
Pension Plan................................................. (S) 3.2(o)(1)
Person....................................................... (S) 11.7(b)
Private Accounts............................................. (S) 3.2(u)
Prohibited Transaction....................................... (S) 3.2(o)(6)
Proprietary Rights........................................... (S) 3.2(k)
Proxy Statement/Prospectus................................... (S) 5.2(e)
Registrant................................................... (S) 4.2(b)
Registration Statement....................................... (S) 5.2(e)
Reorganization............................................... (S) 7.10
Reports...................................................... (S) 4.2(j)
Revised Schedule............................................. (S) 2.1(c)(2)
SEC.......................................................... (S) 3.2(d)(2)
Securities Act............................................... (S) 3.2(e)(1)
Share Consideration.......................................... (S) 2.1(a)
Specified Cash Percentage.................................... (S) 2.1(j)(4)
Specified Stock Percentage................................... (S) 2.1(j)(5)
Subsidiary................................................... (S) 11.7(g)
Superior Proposal............................................ (S) 7.4(d)
Surviving Corporation........................................ (S) 1.3(a)
Tax Returns.................................................. (S) 3.2(h)(1)
Taxes........................................................ (S) 3.2(h)(1)
TDLPL........................................................ (S) 3.2(a)(1)
Third Party.................................................. (S) 10.3(e)
To the knowledge of a party.................................. (S) 11.7(f)
Total Consideration.......................................... (S) 2.1(j)(4)
Voting Agreement............................................. (S) 3.2(v)
Welfare Plan................................................. (S) 3.2(o)(1)
Index of Exhibits
Exhibit A - Form of Voting Agreement
Exhibit B-1 - Employment Agreement - Portfolio of Managers
Exhibit B-2 - Employment Agreement - Hisey
60