EXHIBIT 10.20
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RETAIL BROKERAGE COMPANY FORMATION AGREEMENT
by and between
WACHOVIA CORPORATION
and
PRUDENTIAL FINANCIAL, INC.
DATED AS OF FEBRUARY 19, 2003
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.......................................................................................1
Section 1.1 Defined Terms..........................................................................1
ARTICLE 2 FORMATION OF VENTURE; CLOSING; RELATED TRANSACTIONS..............................................34
Section 2.1 Formation of Company..................................................................34
Section 2.2 Transactions Prior to the Closing.....................................................34
Section 2.3 Time and Place of the Closing.........................................................35
Section 2.4 Deliveries and Other Actions at the Closing...........................................35
Section 2.5 Post-Closing Adjustments..............................................................37
ARTICLE 3 BANK CHANNEL ARRANGEMENTS........................................................................40
Section 3.1 The Bank Channel......................................................................40
Section 3.2 Support for the Prudential Banks......................................................41
Section 3.3 Wachovia Research Activities..........................................................41
ARTICLE 4 REPRESENTATIONS AND WARRANTIES...................................................................42
Section 4.1 Representations and Warranties of Wachovia............................................42
Section 4.2 Representations and Warranties of Prudential..........................................57
ARTICLE 5 CERTAIN INTERIM AND OTHER COVENANTS..............................................................74
Section 5.1 Conduct of Business Prior to Closing..................................................74
Section 5.2 Access to Information.................................................................77
Section 5.3 Consents; Conditions; Further Assurances..............................................78
Section 5.4 Certain Contracts and IP..............................................................80
Section 5.5 Sufficiency of Assets.................................................................81
Section 5.6 Transfer Taxes........................................................................83
Section 5.7 Tax Sharing Agreements................................................................83
Section 5.8 Taxes.................................................................................83
Section 5.9 Real Estate Matters...................................................................86
Section 5.10 Wachovia Reorganization...............................................................86
ARTICLE 6 CONDITIONS TO CLOSING............................................................................86
Section 6.1 Conditions to Wachovia's Obligations..................................................86
Section 6.2 Conditions to Prudential's Obligations................................................88
ARTICLE 7 INDEMNIFICATION..................................................................................90
Section 7.1 Survival of Representations and Warranties............................................90
Section 7.2 Indemnification.......................................................................90
Section 7.3 Limitations on Amounts................................................................91
Section 7.4 Other Indemnification Provisions......................................................92
Section 7.5 Procedures............................................................................92
Section 7.6 Procedures for Third Party Claims.....................................................93
Section 7.7 Mutual Assistance.....................................................................97
ARTICLE 8 FURTHER AGREEMENTS...............................................................................97
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PAGE
Section 8.1 No Commitments........................................................................97
Section 8.2 Confidentiality after the Closing.....................................................97
Section 8.3 Non-Competition; Non-Solicit..........................................................99
Section 8.4 Employee Matters.....................................................................105
Section 8.5 Certain Contributed Businesses.......................................................119
Section 8.6 Further Assurances...................................................................120
Section 8.7 Hedge Fund Distribution..............................................................120
ARTICLE 9 CERTAIN COVENANTS AND AGREEMENTS REGARDING MEMBERSHIP INTERESTS.................................120
Section 9.1 Restrictions on Transfer; Permitted Transferees......................................120
Section 9.2 Right of First Refusal; Tag Along Right..............................................121
Section 9.3 Prudential Put/Wachovia Call.........................................................124
Section 9.4 Preliminary Valuation Procedures for Discretionary Put/Call..........................130
Section 9.5 Further Assurances; Timing...........................................................131
ARTICLE 10 TERM AND TERMINATION...........................................................................131
Section 10.1 Termination Prior to Closing.........................................................131
Section 10.2 Termination After Closing............................................................132
Section 10.3 Effect of Termination................................................................132
ARTICLE 11 FAIR MARKET VALUE..............................................................................133
Section 11.1 Appraised Value of the Company and Acquired Retail Brokerage Business................133
Section 11.2 Other Appraised Values...............................................................134
Section 11.3 Access to Information................................................................135
Section 11.4 Process..............................................................................135
ARTICLE 12 MISCELLANEOUS..................................................................................135
Section 12.1 Expenses.............................................................................135
Section 12.2 Publicity............................................................................136
Section 12.3 Amendment or Modification............................................................136
Section 12.4 Waiver...............................................................................136
Section 12.5 Entire Agreement.....................................................................137
Section 12.6 Third-Party Beneficiaries............................................................137
Section 12.7 Non-Assignability; Binding Effect....................................................137
Section 12.8 Severability.........................................................................137
Section 12.9 Injunctive Relief....................................................................137
Section 12.10 GOVERNING LAW........................................................................138
Section 12.11 Submission to Jurisdiction...........................................................138
Section 12.12 Alternative Dispute Resolution.......................................................138
Section 12.13 WAIVER OF JURY TRIAL.................................................................140
Section 12.14 Notices..............................................................................140
Section 12.15 Counterparts.........................................................................141
Section 12.16 Interpretation.......................................................................141
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SCHEDULES
Schedule Description
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Schedule 1.1(a) Wachovia Contributed Subsidiaries
Schedule 1.1(b) Prudential Contributed Subsidiaries
Schedule 1.1(c) Wachovia Contributed Leased Real Property
Schedule 1.1(d) Prudential Contributed Leased Real Property
Schedule 1.1(e)(i) One Time Costs for Contributed Businesses
Schedule 1.1(e)(ii) One Time Costs for Acquired Retail Brokerage Business
Schedule 1.1(f) Financial Statements of the Wachovia Contributed Business
Schedule 1.1(g) Financial Statements of the Prudential Contributed Business
Schedule 1.1(h) Wachovia Knowledge
Schedule 1.1(i) Prudential Knowledge
Schedule 1.1(j) Specified Wachovia Securities Officers
Schedule 1.1(k) Wachovia Contributed Assets
Schedule 1.1(l) Prudential Contributed Assets
Schedule 1.1(m) Wachovia Contributed Real Property
Schedule 1.1(n) Prudential Contributed Real Property
Schedule 1.1(o) Wachovia Contributed IP
Schedule 1.1(p) Prudential Contributed IP
Schedule 1.1(q) Wachovia Excluded Liabilities
Schedule 1.1(r) Prudential Excluded Liabilities
Schedule 1.1(s) Wachovia Contributed Liabilities
Schedule 1.1(t) Prudential Contributed Liabilities
Schedule 1.1(u) Wachovia Contributed Liabilities Relating to Employee Matters
Schedule 1.1(v) Prudential Contributed Liabilities Relating to Employee Matters
Schedule 1.1(w) Wachovia Excluded Assets
Schedule 1.1(x) Prudential Excluded Assets
Schedule 1.1(y) Certain Benefits Information
Schedule 1.1(z) Cost Basis Price
Schedule 2.2(a) Wachovia Reorganization
Schedule 2.2(b) Prudential Pre-Closing Conversion
Schedule 2.5(a)(i) Wachovia GAAP Exceptions
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Schedule 2.5(a)(ii) Prudential GAAP Exceptions
Schedule 3.1(b) Referral Fees
Schedule 3.3 Wachovia Research Activities
Schedule 4.1(e) Wachovia Governmental Approvals and Third Party Approvals
Schedule 4.1(f) Wachovia Undisclosed Liabilities
Schedule 4.1(h) Wachovia Liens
Schedule 4.1(i) Wachovia Contracts
Schedule 4.1(j)(i) Wachovia Claims
Schedule 4.1(j)(ii) Wachovia Orders
Schedule 4.1(k)(i) Wachovia Compliance with Laws
Schedule 4.1(k)(ii) Wachovia Permits
Schedule 4.1(k)(viii) Wachovia Memberships
Schedule 4.1(k)(ix) Wachovia Licenses and Registrations
Schedule 4.1(l) Wachovia Taxes
Schedule 4.1(m)(i) Wachovia Contributed Business Plans
Schedule 4.1(m)(iii)(B) Wachovia Benefit Plan Claims
Schedule 4.1(m)(iii)(E) Wachovia Retiree Welfare Plans
Schedule 4.1(o) Wachovia Intellectual Property Claims
Schedule 4.1(r) Wachovia Affiliate Transactions
Schedule 4.2(b) Prudential Contributed Subsidiaries
Schedule 4.2(d) Prudential Conflicts
Schedule 4.2(e) Prudential Governmental Approvals and Third Party Approvals
Schedule 4.2(f) Prudential Undisclosed Liabilities
Schedule 4.2(h) Prudential Liens
Schedule 4.2(i) Prudential Contracts
Schedule 4.2(j)(i) Prudential Claims
Schedule 4.2(j)(ii) Prudential Orders
Schedule 4.2(k)(i) Prudential Compliance with Laws
Schedule 4.2(k)(ii) Prudential Permits
Schedule 4.2(k)(viii) Prudential Memberships
Schedule 4.2(k)(ix) Prudential Licenses and Registrations
Schedule 4.2(l) Prudential Taxes
Schedule 4.2(m)(i)(A) Prudential Contributed Business Plans
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Schedule 4.2(m)(i)(B) Prudential Communication of Intent to Modify Benefit Plan
Schedule 4.2(m)(iii)(C) Prudential Multiemployer/Multiple-Employer Plans
Schedule 4.2(m)(iii)(E) Prudential Retiree Welfare Plans
Schedule 4.2(m)(iii)(F) Prudential Acceleration of Payments or Funding of Prudential
Contributed Business Plans
Schedule 4.2(m)(iv) Foreign Prudential Plans
Schedule 4.2(o) Prudential Intellectual Property Claims
Schedule 4.2(r) Prudential Affiliate Transactions
Schedule 5.1 Conduct of Business Prior to the Closing
Schedule 5.1(b)(vii)(D) Prudential Equity Awards to be Granted
Schedule 5.1(b)(vii)(G) Certain Wachovia Benefit Plans to be Amended
Schedule 5.4(b) Small Contracts
Schedule 5.9(a) Prudential Excluded Businesses Leased Real Property
Schedule 5.9(b) Prudential Excluded Leased Real Property
Schedule 6.1(d) Required Prudential Consents
Schedule 6.2(d) Required Wachovia Consents
Schedule 8.2(g) Disclosure Protocol
Schedule 8.4(a)(i)-1 Wachovia Eligible Individuals
Schedule 8.4(a)(i)-2 Prudential Eligible Individuals
Schedule 8.4(c)(iii) Certain Prudential Individuals
Schedule 8.4(f)(i) Prudential MasterShare Programs
Schedule 8.4(f)(ii) Prudential Nonqualified Plans
Schedule 8.4(f)(iv) Prudential Equity Awards
Schedule 9.3(f) Registration Rights
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EXHIBITS
Exhibit Description
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Exhibit A Form of Certificate of Formation
Exhibit B Form of Amended and Restated Limited Liability Company Agreement
Exhibit C Form of Wachovia/Company Master Agreement
Exhibit D Form of Prudential/Company Interim Agreement
Exhibit E Form of Product Agreement
Exhibit F Form of Wachovia Intellectual Property License Agreement
Exhibit G Form of Prudential Intellectual Property License Agreement
Exhibit H Form of Prudential Note
Exhibit I Form of Guarantee
Exhibit J Form of Company/Prudential Interim Agreement
Exhibit K Form of Company/Wachovia Letter Agreement
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RETAIL BROKERAGE COMPANY FORMATION AGREEMENT
THIS RETAIL BROKERAGE COMPANY FORMATION AGREEMENT (this "Agreement")
is made as of February 19, 2003, by and between WACHOVIA CORPORATION, a North
Carolina corporation ("Wachovia"), and PRUDENTIAL FINANCIAL, INC., a New Jersey
corporation ("Prudential") (hereinafter, each of which may be called a "Party"
and may collectively be called the "Parties").
RECITALS
A. Wachovia, primarily through the Wachovia Contributed Subsidiaries
(defined terms used in these recitals being used as defined in Section 1.1), is
engaged in the Wachovia Contributed Business, and Prudential, primarily through
Subsidiaries, is engaged in the Prudential Contributed Business.
B. The Parties desire to contribute their respective Contributed
Businesses to a Delaware limited liability company to be formed pursuant to
Section 2.1 (such entity and any successor thereof, the "Company").
C. The Parties desire to enter into this Agreement to set forth the
terms and conditions for the formation and operation of the Company and the
terms of ownership of their respective Interests therein.
ARTICLE 1
DEFINITIONS
Section 1.1 Defined Terms. In this Agreement, except where the
context otherwise requires:
"Accounts Payable" means all accounts and notes payable arising from
the Contributed Businesses, including those of the type reflected on the
balance sheet included in either the Financial Statements of the Wachovia
Contributed Business or the Financial Statements of the Prudential
Contributed Business as payable to customers, vendors, and others,
including but not limited to book overdrafts, dividend and interest
payable, amounts due to fund companies for shares purchased, amounts due to
banks for cleared CRA account checks, accrued sales contests, accrued
branch manager meeting expenses, accrued regulatory fees, accrued clearance
charges, accrued statement expenses, and accrued telecommunications
expenses.
"Accounts Receivable" means all accounts and notes receivable arising
from the Contributed Businesses, including those of the type reflected on
the balance sheet included in either the Financial Statements of the
Wachovia Contributed Business or the Financial Statements of the Prudential
Contributed Business as due from customers, brokers, dealers, clearing
organizations and others, including but not limited to amounts due
resulting from failures to deliver, securities borrowing transactions and
correspondent clearance transactions, dividends and interest receivable,
deposits in transit and amounts due from fund companies for sold or
liquidated shares and similar assets.
"Acquired Retail Brokerage Business" has the meaning set forth in
Section 8.3(b).
"Acquisition Representative" has the meaning set forth in Section
8.3(d).
"Advisers Act" means the Investment Advisers Act of 1940, as amended,
and the rules and regulations promulgated thereunder.
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such other Person, including but not limited to such Person's
Subsidiaries; and "control" (including, with correlative meanings, the
terms "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise. Unless otherwise specifically stated, the term
"Affiliate" does not include: (x) the Company Entities when used with
respect to any Party, any Wachovia Entity, or any Prudential Entity, and
(y) the Wachovia Entities or the Prudential Entities when used with respect
to any Company Entity. "Affiliated" and "Affiliation" shall have a
correlative meaning.
"Agreement" has the meaning set forth in the preamble hereto.
"Annual Bonus Plans" has the meaning set forth in Section 8.4(f).
"Appraised Company" has the meaning set forth in the definition of
Appraised Value.
"Appraised Value" means, with respect to an Acquired Retail Brokerage
Business or the Company, as the case may be (either, an "Appraised
Company"), the value that a Person (such Person, an "Appraiser") valuing
the common equity of the Appraised Company (or if the Appraised Company is
a division or other unincorporated unit of another company, the net fair
value of the assets and liabilities of such division or other unit)
pursuant to this Agreement has determined such Appraised Company would have
in the public markets if such Appraised Company were a public company, for
which purpose the Appraiser:
(i) shall assume the following: (A) the valuation is based on the
Appraised Company and its Subsidiaries taken as a whole, (B) the Appraised
Company will remain independent and have the continued ownership by such
Appraised Company of its Subsidiaries and (C) the Appraised Company's then
existing contractual relationships (including, in the case of the Company,
the then-existing Bank Channel arrangements, such as those relating to
pricing, referrals and exclusivity) shall remain in full force and effect
and continue unchanged;
(ii) shall take into account other factors relevant to such valuation,
including (A) the prospects of the Appraised Company and its Subsidiaries,
(B) the value of the
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estimated future earnings of the Appraised Company and its Subsidiaries,
(C) the size of the Appraised Company and its Subsidiaries, (D) the equity
and tangible equity of the Appraised Company and its Subsidiaries as
disclosed in its most recent consolidated financial statements, (E) the
public market trading values of comparable companies, (F) the business mix
of the Appraised Company relative to comparable companies, and (G) such
other factors as the Appraiser deems relevant; and
(iii) shall exclude any discounts to such valuation due solely to the
illiquid nature of an investment in such Appraised Company or any discount
relating solely to the fact that the Appraised Company is not a public
company, if any;
provided that in determining the Appraised Value of the Company (but not
any Acquired Retail Brokerage Business) for purposes of determining any
Put/Call Price calculated by reference to "Appraised Value" (but not for
purposes of determining the Appraised Value of the Company pursuant to
Article 3 of the LLC Agreement), the Appraiser shall not include any
minority discounts but instead shall include a control premium reflecting
the premium over the public trading value that the Appraiser determines
would likely be applicable in the event of a sale of 100% of the common
equity of the Company, assuming a willing buyer and a willing seller and
taking into account (A) premiums over public market prices in precedent
transactions of comparable size in the broker-dealer industry, the
financial services industry and recent precedent transactions outside of
the financial services industry where considered by the Appraiser to be
relevant, (B) multiples of future earnings, equity and tangible equity paid
in precedent transactions in the broker-dealer industry and (C) such other
factors as the Appraiser deems relevant; provided, further, that the
Appraised Value of the Company shall in no event be less than the Tangible
Book Value of the Company; and provided, further, that in no event shall
the Appraised Value of an Acquired Retail Brokerage Business exceed the
purchase price paid therefor by the applicable Party and its Affiliates
(exclusive of related One Time Costs payable by the Parties or any Members
pursuant to the Transaction Documents), it being understood that where the
Acquired Retail Brokerage Business was acquired in connection with the
acquisition of other assets, operations or entities, to determine the
purchase price of the Acquired Retail Brokerage Business for purposes of
this proviso, the Appraiser shall allocate the purchase price paid for the
entire acquisition among such acquired assets, operations or entities based
on their respective Appraised Values as determined for this purpose by the
Appraiser.
"Appraiser" has the meaning set forth in the definition of "Appraised
Value."
"Assignable Employees" has the meaning set forth in Section 4.2(m).
"Associate Options" has the meaning set forth in Section 8.4(f).
"Average Stock Price" means with respect to any shares of Wachovia
Common Stock as of any date, the average of the closing prices of such
shares on the NYSE (or such other principal stock exchange or automated
quotation system on which such shares are then traded) during the 10
trading day period ending on the trading day immediately preceding such
date.
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"Bank Channel" means all activities conducted by Wachovia's Investment
Services Group (or any corresponding successor group) and, after the
Closing, by the Company, in bank branches and customer call centers of
Wachovia Bank (or successor thereto) that are related to the offer and sale
of Securities Products by the employees of such group and by the Bank
Channel Employees to retail customers located in the United States.
"Bank Channel Employees" means those employees of Wachovia Bank who
are licensed as "associated persons" of a Wachovia Contributed Subsidiary
and, after Closing, are licensed as "associated persons" of the Company or
one of its Subsidiaries.
"Bankruptcy" means, with respect to a Party, any of the following
events:
(i) such Party or any of its Significant Subsidiaries (A) is
generally not paying, or admits in writing its inability to pay, its debts
as they become due, (B) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or
other similar Law of any jurisdiction, (C) makes an assignment for the
benefit of its creditors, (D) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it
or with respect to any substantial part of its property, (E) is adjudicated
as insolvent or to be liquidated, or (F) takes corporate action for the
purpose of any of the foregoing; or
(ii) a Governmental Authority of competent jurisdiction enters an
Order appointing, without consent by such Party or any of its Significant
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to such Party or any of its Significant Subsidiaries or
with respect to any substantial part of its or their property, or
constituting an Order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or receivership or for
liquidation or to take advantage of any bankruptcy, receivership or
insolvency Law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of such Party or any of its Significant Subsidiaries, or any
such petition shall be filed against such Party or any of its Significant
Subsidiaries and such petition shall not be dismissed within 60 days.
"Benefit Plan" shall mean a Wachovia Contributed Business Plan or a
Prudential Contributed Business Plan, as applicable, and any successor
employee compensation and benefit plans thereto established by any Company
Entity on or after the Closing Date.
"Binding Arbitrable Dispute" has the meaning set forth in Section
12.12(b).
"Board of Managers" has the meaning set forth in the LLC Agreement.
"Broker Contribution Date" has the meaning set forth in the LLC
Agreement.
"Business" means the offer and sale of (x) retail brokerage services
(including through direct, discount and on-line delivery channels) in
publicly traded stocks and bonds and money market instruments (excluding
products eligible for FDIC insurance) to
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individual (including high-net worth) investors located in the Territory,
and (y) securities correspondent clearing services to broker-dealers for
transactions in securities traded in markets in the United States for
customers anywhere in the world.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in Charlotte, North
Carolina or New York, New York are authorized or obligated by Law or
executive order to close.
"Cap" has the meaning set forth in Section 7.3(b).
"Certificate of Formation" means the Certificate of Formation of the
Company substantially in the form of Exhibit A hereto.
"Change of Control" means:
(i) with respect to either Party, the consummation of a
Combination Transaction between such Party or any of its Subsidiaries
(other than the Company Entities) and a Major Competitor or any of its
Affiliates in which such Party is not the Surviving Entity;
(ii) with respect to Wachovia, the consummation of a Combination
Transaction between any Wachovia Entity and a Major Insurance Company or
any of its Affiliates in which Wachovia is not the Surviving Entity; or
(iii) with respect to Prudential, the consummation of a Combination
Transaction between any Prudential Entity and a Major Banking Institution
or any of its Affiliates in which Prudential is not the Surviving Entity.
For purposes of the foregoing, a Party shall be deemed not to be a
"Surviving Entity" of a Combination Transaction if after giving effect
thereto (x) either the stockholders of such Party or individuals who
immediately prior to such Combination Transaction were members of the Board
of Directors of such Party cease to constitute at least 50% of the
stockholders or Board of Directors of such Party (or if such Party is not
the ultimate parent entity of the entity resulting from such Combination
Transaction, at least 50% of the stockholders or Board of Directors of such
ultimate parent entity) or (y) such Party has disposed of all or
substantially all of the assets of such Party, on a consolidated basis,
which it held immediately prior to such Combination Transaction.
"Claim" means any and all actions, suits, litigation, demands, claims
or counterclaims or legal, administrative or arbitral proceedings,
information requests or investigations or Orders.
"Closing" has the meaning and consists of the transactions set forth
in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
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"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the rules and regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Combination Transaction" means, with respect to any Person, any
transaction pursuant to which (i) such Person merges, consolidates or
otherwise combines with, or directly or indirectly acquires or is acquired
(in any case whether by stock purchase, asset purchase or otherwise) by, or
sells all or a substantial portion of its assets to, any other Person, or
(ii) any other Person acquires beneficial ownership of a majority of the
voting stock of, or the right to elect or appoint a majority of the Board
of Directors of, such Person. A "Combination Transaction" includes a Retail
Brokerage Combination Transaction.
"Combining Party" means a Party who is or publicly proposes to become
(or one or more of whose Affiliates is or publicly proposes to become) a
party to a Combination Transaction.
"Company" has the meaning set forth in the recitals hereto.
"Company Entities" means the Company and, from time to time, its
Subsidiaries, giving effect to the Closing.
"Company/Prudential Interim Agreement" means the Services Agreement
between the Company and Prudential, substantially in the form of Exhibit J
hereto, to be entered into pursuant to Section 2.4, pursuant to which the
Company shall provide certain services to Prudential and its Subsidiaries
on a temporary basis after the Closing, as the same may be amended,
supplemented or otherwise modified from time to time after the Closing
Date.
"Company Transferred Individuals" has the meaning set forth in Section
8.4(a).
"Company/Wachovia Letter Agreement" means that letter agreement
between the Company and Wachovia, substantially in the form of Exhibit K,
pursuant to which the Company will provide specified services to the
Wachovia Entities following the Closing Date, as the same may be amended,
supplemented or otherwise modified from time to time after the Closing
Date.
"Confidentiality Agreements" means the letters, dated as of March 26
and March 27, 2002, respectively, by and between Wachovia Securities and
Prudential Securities, as they may have been extended from time to time,
including pursuant to Section 8.2 hereof.
"Consent" means any consent, approval, authorization, waiver, grant,
franchise, concession, agreement, license, exemption or other Permit or
Order of, registration, declaration or filing with, or report or notice to,
any Person.
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"Consumer Price Index" means the Consumer Price Index for All Urban
Consumers for the U.S. City Average for All Items, as published from time
to time by the Bureau of Labor Statistics of the United States Department
of Labor.
"Contributed Assets" means the Wachovia Contributed Assets or the
Prudential Contributed Assets, or both, as the context requires.
"Contributed Business Individuals" has the meaning set forth in
Section 8.4(a).
"Contributed Businesses" means the Wachovia Contributed Business and
the Prudential Contributed Business, or either of them, as the context
requires.
"Contributed IP License" means, with respect to a Party, any license,
consent, royalty or other agreement concerning any Intellectual Property
licensed to such Party or a Subsidiary of such Party and used or held for
use exclusively or primarily with respect to such Party's Contributed
Business.
"Contributed Leased Real Property" means, with respect to Wachovia,
the real property occupied or used by Wachovia or one of its Subsidiaries
or other Affiliates pursuant to a Contributed Real Property Lease located
at the addresses set forth on Schedule 1.1(c) and, with respect to
Prudential, the real property occupied or used by Prudential Securities
pursuant to a Contributed Real Property Lease located at the addresses set
forth on Schedule 1.1(d).
"Contributed Real Property" means, with respect to Wachovia, the real
property owned in fee by Wachovia or one of its Subsidiaries or other
Affiliates located at the addresses set forth on Schedule 1.1(m) and, with
respect to Prudential, the real property owned in fee by Prudential
Securities located at the addresses set forth on Schedule 1.1(n).
"Contributed Real Property Lease" means any lease or sublease by or
under which Wachovia or one of its Subsidiaries or other Affiliates or
Prudential Securities holds a leasehold interest or uses or occupies or has
the right to use or occupy any Contributed Leased Real Property or any
portion thereof or interest therein.
"Contributed Subsidiary" means a Wachovia Contributed Subsidiary or a
Prudential Contributed Subsidiary, as the context requires.
"Controlling Party" has the meaning set forth in Section 7.6(b).
"Controlling Tax Party" has the meaning set forth in Section 5.8(d).
"Cost Basis Price" means the sum of (i) the initial capital
contribution of $1.0 billion by the Prudential Members at Closing, plus
(ii) the funding by the Prudential Members of their Percentage Interests of
One Time Costs (whether at Closing pursuant to Section 2.4 or by additional
capital contributions thereafter pursuant to Section 3.2(d) of the LLC
Agreement), plus (iii) the product of (x) the aggregate Percentage
Interests of the Prudential Members as of the relevant times multiplied by
(y) the sum of (A) the
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amount of One Time Costs which have reduced the aggregate sum of
Distributable Cash (as defined in the LLC Agreement) from the Closing Date
to the date as of which the Cost Basis Price is being determined and which
were not otherwise funded pursuant to clause (ii) plus (B) the aggregate
amount of financial advisor and branch manager retention payments made in
connection with the formation of the Company as set forth on Schedule
1.1(z), less any such retention payments that are included in the preceding
clause (A), plus (iv) to the extent not covered in clause (ii) or (iii),
the aggregate amount of the additional capital contributions of the
Prudential Members to the Company (whether (A) in cash (including any
deemed capital contribution pursuant to Section 3.2(b)(iv) of the LLC
Agreement) or (B) in respect of Acquired Retail Brokerage Businesses
acquired by Prudential and its Affiliates and contributed to the Company
pursuant to Section 3.4 of the LLC Agreement, or (C) in other property, in
each case valued as provided herein and in the LLC Agreement), plus (v) any
payments from Prudential Members to Wachovia Members to acquire Membership
Interests pursuant to Sections 3.4(d)(ii), (e)(iii) or (e)(iv) of the LLC
Agreement, minus (vi) any payments from Wachovia Members to Prudential
Members to acquire Membership Interests pursuant to Sections 3.4(d)(ii),
(e)(iii) or (e)(iv) of the LLC Agreement, and minus (vii) any payments from
the Company to the Prudential Members upon redemption of their Membership
Interests pursuant to Sections 3.2(d) or 3.5 of the LLC Agreement.
"CPA Firm" has the meaning set forth in Section 2.5(b).
"DCP" has the meaning set forth in Section 8.4(f).
"Derivatives and FX Product" means any exchange-traded or
over-the-counter transaction or product that is:
(i) a rate swap transaction, swap option, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option, credit
protection transaction, credit swap, credit default swap, credit
default option, total return swap, credit spread transaction,
repurchase transaction, reverse repurchase transaction, buy/sell-back
transaction, securities lending or borrowing transaction, weather
index transaction, forward purchase or sale of a security or a
commodity, listed option, exchange traded future, exchange traded fund
or other financial instrument or interest (including any option with
respect to any of the foregoing transactions) that is based on the
value of, any interest in, or any quantitative measure or the
occurrence of any event relating to one or more rates, currencies,
commodities, equity securities or other equity instruments, debt
securities or other debt instruments, economic indices or measures of
economic risk or value, or other benchmarks against which payments or
deliveries are to be made; or
(ii) a type of transaction that is similar to any
transaction or product referred to in clause (i) above that is
currently, or in the future, entered into in the financial markets and
that is a forward, swap, future, option or other derivative on
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one or more rates, currencies, commodities, equity securities or other
equity instruments, debt securities or other debt instruments,
economic indices or measures of economic risk or value, or other
benchmarks against which payments or deliveries are to be made; or
(iii) any combination of the foregoing transactions or
products, including but not limited to those offered in the form of a
certificate of deposit, warrant, note or other instrument or security
that is based on the value of, any interest in, or any quantitative
measure or the occurrence of any event relating to one or more rates,
currencies, commodities, equity securities or other equity
instruments, debt securities or other debt instruments, economic
indices or measures of economic risk or value, or other benchmarks
against which payments or deliveries are to be made, including,
without limitation, currency-linked, credit-linked, equity-linked or
commodity-linked notes, depositary instruments or hybrid securities;
or
(iv) a repurchase transaction, reverse repurchase
transaction, buy/sell-back transaction, or securities lending or
borrowing transaction.
"Designated Company Subsidiary" has the meaning set forth in Section
2.4(c).
"Discretionary Put/Call" means a Prudential Put or Wachovia Call
described in Section 9.3(a)(ii), 9.3(b)(i) or 9.3(b)(v).
"Discretionary Put/Call Closing Date" has the meaning set forth in
Section 9.3(e).
"Election Period" has the meaning set forth in Section 9.2(a).
"Eligible Individuals" has the meaning set forth in Section 8.4(a).
"End Date" has the meaning set forth in Section 8.4(f).
"Environmental Laws" means all Laws relating to the protection of the
environment, and to human health and safety (to the extent relating to the
environment or exposure to Hazardous Materials), including, without
limitation, (a) the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act, and the
Occupational Safety and Health Act, (b) all other requirements pertaining
to reporting, licensing, permitting, investigation or remediation of
emissions, discharges, releases or threatened releases of Hazardous
Materials into the air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport or handling of Hazardous Materials, and (c)
all other requirements pertaining to the protection of the health and
safety of employees or the public (to the extent relating to the
environment or exposure to Hazardous Materials).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
-9-
"Excluded Businesses" means the Wachovia Excluded Businesses or the
Prudential Excluded Businesses, or both, as the context requires.
"Excluded Claims" means, with respect to either Party, Losses due to a
Claim asserted against any Contributed Subsidiary or with respect to any
Contributed Assets or the Contributed Business of that Party, which arises
from an action, omission to act, condition or event (or series of related
actions, omissions, conditions or events) that first occurred prior to the
Closing, whether or not such action, omission, condition or event (or
series of related actions, omissions, conditions or events) continues after
the Closing (and including any such Losses that continue to accrue
therefrom at any time following the Closing), including but not limited to
the litigation referred to in Section 7.6(g); provided that Excluded Claims
shall exclude any Claims that arise from any such action, omission,
condition or event (or series of related actions, omissions, conditions or
events) to the extent that they continue to occur following the 270th day
after the Closing.
"Excluded Liabilities" means, in the case of Wachovia, the Wachovia
Excluded Liabilities, and, in the case of Prudential, the Prudential
Excluded Liabilities, or both of them, as the context requires.
"Excludible Retail Brokerage Business" means an Acquired Retail
Brokerage Business which, as of the date of such acquisition by a Party or
its Affiliates:
(i) within the preceding three years, has been permanently enjoined by
any Governmental Authority from (x) performing any sales related activity
or practice, (y) selling any type of product or (z) acting as an investment
adviser;
(ii) within the preceding twelve months has employed or retained as an
executive officer, director or control person (as those terms are used for
purposes of Item 401 of Regulation S-K promulgated under the Securities
Act) any individual who, within the preceding three years, has been charged
with, by way of indictment or criminal information, or within the last 10
years was convicted of, any crime involving fraud, misappropriation of
funds, or breach of trust;
(iii) within the preceding three years has been the subject, on more
than three occasions, of an Order in connection with any failure to
supervise its registered representatives;
(iv) within the preceding three years has been subject to, or has been
advised that it will be subject to, the NASD "Taping Rules" as detailed in
NASD Rule 3010; or
(v) is then currently or within the preceding three years has been the
subject of a Claim brought by or on behalf of a Governmental Authority (x)
which resulted in, or may reasonably be expected to result in, monetary
sanctions in excess of 10% of its revenues for the previous twelve-month
period or (y) in which the Governmental Authority is seeking to bar or
barred the firm from acting as an introducing broker, an investment adviser
or a broker or dealer.
"FA Notes" has the meaning set forth in the LLC Agreement.
-10-
"Federal Funds Rate" means, for any date, the weighted average of the
rates set forth in the weekly statistical release H.15 (519) (or any
successor publication) published by the Board of Governors of the Federal
Reserve System opposite the caption "Federal Funds (Effective)."
"Final Closing Balance Sheet" has the meaning set forth in Section
2.5(b).
"Financial Statements of the Prudential Contributed Business" means
the consolidated unaudited balance sheet of the Prudential Contributed
Business as of December 31, 2002, and the consolidated unaudited statements
of income of the Prudential Contributed Business for the twelve-month
periods ending on December 31, 2001 and December 31, 2002, copies of which
are included in Schedule 1.1(g) hereto.
"Financial Statements of the Wachovia Contributed Business" means the
consolidated unaudited balance sheet of the Wachovia Contributed Business
as of December 31, 2002, and the consolidated unaudited statements of
income of the Wachovia Contributed Business for the twelve-month periods
ending on December 31, 2001 and December 31, 2002, copies of which are
included in Schedule 1.1(f) hereto.
"First Refusal Right" has the meaning set forth in Section 9.2(b).
"Foreign Prudential Plans" has the meaning set forth in Section
4.2(m).
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Approval" means any Consent of, with or to any
Governmental Authority, and includes any applicable waiting periods
associated with any Governmental Approvals.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity, authority or body
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation,
any government authority, agency, department, board, body, commission or
instrumentality of the United States or foreign nation, or any state or
other political subdivision thereof, and any court, tribunal or arbitrator,
and any self-regulatory organization.
"Guarantee" means a guarantee, substantially in the form of Exhibit I
hereto, whereby a Party guarantees the performance and obligations of its
Subsidiaries under any Transaction Document.
"Hazardous Materials" means any substance that: (a) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials, (b) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous
waste" or "hazardous substance" thereunder, or (c) is toxic, explosive,
-11-
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Authority or
Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnitees" has the meaning set forth in Section 7.2.
"Indemnitor" has the meaning set forth in Section 7.2.
"Individual Schedules" has the meaning set forth in Section 8.4(a).
"Information" has the meaning set forth in Section 8.2(a).
"Information Representatives" has the meaning set forth in Section
8.2(c).
"Infringe" means, with respect to Intellectual Property, to infringe,
impair, dilute or otherwise violate "Infringement" shall have a correlative
meaning.
"Initial Members" means, in the case of Wachovia, each Initial
Wachovia Member, and, in the case of Prudential, each Initial Prudential
Member, or both of them, as the context requires.
"Initial Prudential Member" means any directly or indirectly
Wholly-Owned Subsidiary of Prudential to become a Member of the Company at
the Closing.
"Initial Wachovia Member" means any directly or indirectly
Wholly-Owned Subsidiary of Wachovia to become a Member of the Company at
the Closing.
"Integration Period" has the meaning set forth in the LLC Agreement.
"Intellectual Property" means all intellectual property rights under
any Law, including, without limitation: (a) (i) inventions, discoveries,
processes, designs, techniques, and related improvements, whether or not
patented or patentable; (ii) trademarks, trade dress, service marks,
service names, trade names, brand names, logos, Internet domain names,
business symbols, or other source indicators, and all goodwill associated
therewith and all common law rights relating thereto; (iii) copyrights and
works of authorship in any media; (iv) know-how, trade secrets, and
confidential or proprietary information and data; and (v) rights of
publicity and privacy, "name and likeness" rights and other similar rights;
(b) all applications, registrations, patents, certifications, and
recordings related thereto; (c) all rights to obtain renewals, extensions,
continuations, continuations-in-part, reissues, divisions or similar legal
protections related thereto; and (d) all rights to bring an action at law
or in equity for the Infringement of the foregoing before the Closing Date,
including the right to receive all proceeds and damages therefrom.
"Intentional Breach" by a Party shall, for purposes of Article 9, be
deemed to occur if:
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(a) all of the following conditions have been met:
(i) Such Party or any of its Subsidiaries shall have
intentionally and materially breached, after the Closing: (1) Article
3 or Sections 8.2, 8.3 or 9.2 of this Agreement, (2) Article 3 or 8 of
the LLC Agreement, (3) Article IV or V of the Product Agreement, (4)
the Wachovia/Company Master Agreement, or (5) the Prudential/Company
Interim Agreement. For purposes of this definition only,
"intentionally" means that a Party's senior management knowingly
participated in or knowingly acquiesced to such breach, or, upon
becoming aware of such breach, did not use all commercially reasonable
efforts to prevent or cure such breach in good faith, and "materially"
shall mean (i) resulting in, or likely to result in, (A) Losses to the
Company Entities or the other Party and its Subsidiaries of $200
million or more or (B) any Material Adverse Effect on the Company
(whether or not quantifiable in money damages);
(ii) The other Party shall have delivered written notice to
such Party stating that it believes such Party intentionally and
materially breached one or more of the provisions of this Agreement or
any other Transaction Document specified in clause (i) above, which
notice shall state with reasonable specificity the breach and shall
identify specific actions to be taken by such Party to cure the
breach; and
(iii) Such breach shall not have been cured within 60 days
following delivery of notice of breach by the other Party to such
Party; provided that if such breach is capable of being cured but not
within such 60-day period and such Party is acting in good faith to
cure such breach, then it shall not have been cured in such longer
period as may be required, but in no event longer than six months;
provided, further, that if Prudential and Wachovia are disputing the
existence of an Intentional Breach or whether such Intentional Breach
was cured within the applicable cure period pursuant to the procedures
set forth in Section 12.12(b), there shall have been a final
determination of the existence of such a breach or the absence of such
cure pursuant to the arbitration provisions of Section 12.12(b); or
(b) Such Party shall have failed to effect the divestiture of (i) an
Excludible Retail Brokerage Business, or (ii) a Large Retail Broker which
such Party elected to divest pursuant to Section 8.3(c), in each case on or
prior to the first anniversary of the acquisition thereof or such other
date after such first anniversary as the Parties may agree in writing.
"Interests" or "Membership Interests" means the limited liability
company interests of the Company as contemplated by the LLC Agreement, and
such other equity interests of the Company or any successor to the Company
into which such interests may be converted.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
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"ISP" has the meaning set forth in Section 8.4(d).
"IT Systems" means software, databases, systems, networks and Internet
sites.
"Joint Loss Claim" has the meaning set forth in Section 7.6(b).
"Knowledge" means, in the case of Wachovia, the actual knowledge after
due inquiry of the individuals set forth on Schedule 1.1(h), and, in the
case of Prudential, the actual knowledge after due inquiry of the
individuals set forth on Schedule 1.1(i).
"Large Retail Broker" means any Person whose revenues derived from
such Person's conduct of the Business during the most recently completed
fiscal year exceed (a) 25% of the total consolidated revenues of the
Company for the Company's most recently completed fiscal year or (b) in the
case of transactions occurring prior to January 1, 2005, $1.05 billion.
"Large Retail Brokerage Combination" means any Retail Brokerage
Combination Transaction involving a Large Retail Broker.
"Latin America" means the geographical region consisting of Central
America and South America, but excluding Mexico.
"Law" means any law (including but not limited to common law),
constitution, treaty, statute, code, rule, regulation, ordinance or other
pronouncement of a Governmental Authority having a similar effect and any
Order.
"Lien" means any lien, security interest, pledge, charge, encumbrance,
claim or similar right.
"LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement between each Initial Wachovia Member and each Initial
Prudential Member to be entered into pursuant to Section 2.4 hereof,
substantially in the form of Exhibit B hereto, and as it may be amended
from time to time after the Closing Date.
"Lookback Option" has the meaning set forth in the LLC Agreement.
"Lookback Period" has the meaning set forth in the LLC Agreement.
"Losses" has the meaning set forth in Section 7.2.
"Major Banking Institution" means any Person that is ranked among the
top 10 bank holding companies headquartered in the United States based on
total assets of its subsidiary FDIC-insured depository institutions as
shown on the most recent publicly-available call report data filed by such
depository institutions with the applicable federal banking agencies.
"Major Competitor" means a Person that is engaged in the Business with
revenues from the Business for the trailing 12-month period ending on the
last day of the most
-14-
recently completed fiscal quarter that are greater than 120% of the
revenues (or, for periods prior to the Closing Date, pro forma revenues) of
the Company Entities, on a consolidated basis, for a comparable period.
"Major Insurance Company" means a Person that either is ranked among
the top 10 ranked life insurance companies in the United States, based on
net premiums written in the United States, as published in the most recent
ranking thereof in A.M. Best's Insurance Reports-Life/Health, or that is
Affiliated with any such insurance company.
"MasterShare Programs" has the meaning set forth in Section 8.4(f).
"Material Adverse Effect" means (a) (x) with respect to a Person, a
material adverse effect on the business, operations, assets, liabilities,
financial condition or results of operations of such Person and its
Subsidiaries taken as a whole or (y) with respect to a Contributed
Business, a material adverse effect on such Contributed Business or the
operations, assets, liabilities, financial condition or results of
operations of such Contributed Business taken as a whole, in either case
other than any change, event, occurrence or effect occurring on or after
the date of this Agreement and relating to (i) changes in the economy or
securities markets of the United States or the Territory, including but not
limited to market price and trading volume fluctuations and changes in
interest rates and exchange rates, (ii) the financial services, retail
securities brokerage and securities clearing industries or insurance
industry generally, (iii) except for purposes of Section 4.1(k) or 4.2(k),
the announcement or performance of this Agreement and the transactions
contemplated by this Agreement or any other Transaction Document,
including, without limitation, the impact thereof on relationships with
employees and customers of the Contributed Business, or (iv) any outbreak
of major hostilities in which the United States is involved, any act of
terrorism within the United States or any declaration of war by the United
States Congress; or (b) with respect to a Person or a Contributed Business,
any change, event, occurrence or effect that (x) prevents or materially
delays the performance by such Person or its Subsidiaries or the Company
Entities of their material obligations under the Transaction Documents
taken as a whole or (y) delays the consummation of the transactions
contemplated by this Agreement past the date set forth in Section 10.1(c).
"Material Contracts" means, with respect to a Party, each of the
following to which such Party or any of its Subsidiaries is a party and
which relate primarily to its Contributed Business, or by which its
Contributed Assets are bound:
(i) agreements with a Third Party for the purchase of services,
materials, supplies, merchandise or equipment (A) in an aggregate amount
for the unexpired term thereof equal to or greater than $3,000,000, (B)
providing for the payment (or potential liability for payment) of a penalty
(including but not limited to any early termination fee, prepayment penalty
or similar charge), fee or any other amount during or after the unexpired
term thereof equal to or greater than $3,000,000, or (C) having an
unexpired term of more than 18 months;
-15-
(ii) broker's or finder's agreements as to which the total fees
payable thereunder could reasonably be expected to exceed $3,000,000;
(iii) member agreements with trade associations;
(iv) agreements under which administrative and other services are
provided to or on behalf of a Third Party and which provide for an
aggregate payment for the unexpired term thereof in excess of $3,000,000;
(v) reimbursement agreements, repurchase agreements and equipment
leases with a Third Party providing for aggregate payments in excess of
$3,000,000;
(vi) Contributed Real Property Leases having an unexpired lease
term of more than five years and an annual rent in excess of $500,000;
(vii) material Contributed IP Licenses;
(viii) loan agreements, indentures, letters of credit (including
related letter of credit applications and reimbursement obligations),
mortgages, security agreements, pledge agreements, deeds of trust, bonds,
notes, guarantees, instruments and other contracts relating to the
incurrence of indebtedness or obtaining of or extension of credit;
(ix) joint venture, partnership and similar agreements involving a
sharing of profits or expenses;
(x) agreements prohibiting or materially restricting the ability
of a Party or any of its Subsidiaries to conduct its Contributed Business,
operate its Contributed Business in any geographical area or compete with
any Person in its Contributed Business;
(xi) agreements which require the referral of any business or
require such Party's Contributed Subsidiaries or such Party's Contributed
Business to make available investment or other business opportunities or
products or services on a priority, equal or exclusive basis;
(xii) agreements, any of the benefits of which will be increased or
accelerated by virtue of the consummation of the transactions contemplated
hereby in any respect material to the Company Entities as a whole; and
(xiii) agreements which (or the violation of which) would reasonably
be expected to have a Material Adverse Effect on the Company.
"Mediation Forum" has the meaning set forth in Section 12.12(a).
"Member" has the meaning set forth in the LLC Agreement.
"Missing Employment Agreements" has the meaning set forth in Section
4.2(m).
-16-
"NASD" means the National Association of Securities Dealers, Inc.
"New Prudential Broker LLC" has the meaning set forth in Section
5.3(h).
"Non-Combining Party" means the Party other than the Combining Party.
"Non-Controlling Tax Party" has the meaning set forth in Section
5.8(d).
"Nonqualified Plans" has the meaning set forth in Section 8.4(f).
"NYSE" means the New York Stock Exchange, Inc.
"Objection" has the meaning set forth in Section 2.5(b).
"Offered Interests" has the meaning set forth in Section 9.2(a).
"One Time Costs" means (i) with respect to the contribution of the
Contributed Businesses to the Company, the costs incurred by (A) the
Company or (B) either Party at the express written request, or with the
prior written approval, of the Company (or prior to the Closing, at the
express written request or with the prior written approval of the Wachovia
Securities officers specified on Schedule 1.1(j)) in connection with the
actions specified in Schedule 1.1(e)(i), and (ii) with respect to the
contribution and integration of any Acquired Retail Brokerage Business into
the Company, the types of costs specified in Schedule 1.1(e)(ii).
"Option Payment" has the meaning set forth in Section 8.4(f).
"Order" means any order, writ, judgment, decree, injunction, award or
decision of, or Consent agreement or similar arrangement with, any
Governmental Authority.
"Other Combining Person" has the meaning set forth in Section 8.3(b).
"Party" and "Parties" have the respective meanings set forth in the
preamble hereto.
"Percentage Interest" has the meaning given to such term in the LLC
Agreement.
"Permits" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings issued by, and
other Governmental Approvals of, any Governmental Authority.
"Permitted Liens" means (i) Liens for Taxes or other governmental
charges which are not yet due and payable or the amount or validity of
which is being contested in good faith by appropriate proceedings and for
which adequate reserves have been made on the Financial Statements of the
Wachovia Contributed Business or the Financial Statements of the Prudential
Contributed Business, as the case may be, (ii) Liens of carriers,
warehousemen, mechanics, materialmen or other similar Persons or otherwise
imposed by Law arising or incurred in the ordinary course of business for
sums not yet delinquent
-17-
or being contested in good faith by appropriate proceedings and for which
adequate reserves have been made on the Financial Statements of the
Wachovia Contributed Business or the Financial Statements of the Prudential
Contributed Business, as the case may be, (iii) zoning, entitlement,
building, land use and similar governmental restrictions, (iv) covenants,
conditions, restrictions, easements, rights-of-way and other matters shown
in public records and (v) Liens that, individually and in the aggregate
with all other Permitted Liens, do not and will not materially detract from
the value of any of the Contributed Assets or materially interfere with the
use of any of the Contributed Assets as currently used or contemplated to
be used.
"Permitted Transferee" means (i) with respect to a Wachovia Member or
a Prudential Member, a Wachovia Permitted Transferee or Prudential
Permitted Transferee, respectively, and (ii) with respect to a Third Party
Member (as defined in the LLC Agreement), (A) any Wholly-Owned Subsidiary
of such Third Party Member, and (B) any Person of which such Third Party
Member is a Wholly-Owned Subsidiary or any Person that is also a
Wholly-Owned Subsidiary of the same ultimate parent of such Third Party
Member, and in either clause (i) or (ii), such term includes a transferee
permitted by clauses (i) or (ii) that is a Designated Combining Member or
Designated Non-Combining Member (each as defined in the LLC Agreement) in
connection with the additional capital contributions or the purchase or
receipt of Membership Interests pursuant to Section 3.4 of the LLC
Agreement.
"Person" means an individual, corporation, partnership, limited
liability company, trust, joint venture, association, unincorporated
organization or other entity or a Governmental Authority.
"Pre-Closing Matter" means any event, circumstance or condition
existing at any time prior to the effective time of the Closing.
"Preliminary Closing Balance Sheets" has the meaning set forth in
Section 2.5(a).
"Preliminary Prudential Closing Balance Sheet" has the meaning set
forth in Section 2.5(a).
"Preliminary Valuation" has the meaning set forth in Section 9.4(a).
"Preliminary Wachovia Closing Balance Sheet" has the meaning set forth
in Section 2.5(a).
"Preparing Party" has the meaning set forth in Section 2.5(b).
"Product Agreement" means the Product Agreement among the Parties and
the Company, substantially in the form of Exhibit E hereto, as the same may
be amended, supplemented or otherwise modified from time to time after the
Closing Date.
"Prudential" has the meaning set forth in the preamble hereto.
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"Prudential Banks" means The Prudential Bank and Trust Company, a
state chartered bank, and The Prudential Savings Bank, F.S.B., a federally
chartered savings bank.
"Prudential Business IP" means all Intellectual Property (i) owned by
Prudential or a Subsidiary of Prudential (including Prudential's
Contributed Subsidiaries) and (ii) used or held for use with respect to the
Prudential Contributed Business (including Prudential Contributed IP).
"Prudential/Company Interim Agreement" means the Prudential/Company
Interim Agreement between Prudential and the Company, which is to be
entered into pursuant to Section 2.4 hereof in order to provide on a
temporary basis certain services, substantially in the form of Exhibit D
hereto, as the same may be amended, supplemented or otherwise modified from
time to time after the Closing Date.
"Prudential Contracts" has the meaning set forth in Section 4.2(i).
"Prudential Contributed Assets" means the following assets (real,
personal, mixed, tangible or intangible) of Prudential and its Subsidiaries
utilized primarily in the conduct of the Prudential Contributed Business
(other than the Prudential Excluded Assets):
(i) the Prudential Contributed Equity Interests;
(ii) Prudential's Contributed Real Property;
(iii) Prudential's Contributed Real Property Leases, including any
security deposits paid thereunder;
(iv) Prudential's Contributed IP Licenses and, subject to Section
5.4(c), the Prudential Contributed IP;
(v) all furniture, fixtures, equipment (including but not limited
to telephones, telephone numbers, switches, servers, computers, printers,
scanners, and data processing equipment), machinery, automobiles, office
supply inventories, and other tangible personal property utilized primarily
in the Prudential Contributed Business;
(vi) all contracts and agreements between Prudential or one of its
Subsidiaries, on the one hand, and any retail brokerage customer of the
Prudential Contributed Business, on the other, pursuant to which retail
brokerage services are to be delivered to such customer, including any
assets or rights (including any funds or securities and any commodity
positions) of customers that are held by Prudential and its Subsidiaries
under the possession and control provisions of Rule 15c3-3 of the Exchange
Act pursuant to any such contract or agreement, including for distribution
or payment or as collateral;
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(vii) all margin and other customer debit balances of Prudential and
its Subsidiaries related to the Prudential Contributed Business to the
extent reflected on the Final Closing Balance Sheet of the Prudential
Contributed Business;
(viii) subject to Section 5.4, the Prudential Contributed Contracts;
(ix) all of the books and records in any form or medium of
Prudential and its Subsidiaries related to the Prudential Contributed
Business (including personnel records, customer records, transaction
histories, correspondence files and other records relating to dealings with
customers of the Prudential Contributed Business), other than in any such
case, such books and records that relate primarily to Prudential Excluded
Businesses;
(x) all rights, claims, credits, causes of action, rights of
recovery and rights of set-off of any kind relating to the Prudential
Contributed Assets, including any unliquidated rights under manufacturers'
and vendors' warranties;
(xi) all Accounts Receivable of the Prudential Contributed
Business, including but not limited to FA Notes and other employee loans;
(xii) all customer accounts of the Prudential Contributed Business
and the customer relationships and goodwill relating thereto;
(xiii) all federal, state, municipal, foreign and other Permits
(including but not limited to those identified on Schedule 4.2(k)(ix)) held
or used by Prudential and its Subsidiaries primarily in connection with the
Prudential Contributed Business, to the extent transferable;
(xiv) all membership and trading privileges held or used by Wexford
Clearing Services Corporation primarily in connection with the Prudential
Contributed Business, to the extent transferable, including but not limited
to those held by it among those identified on Schedule 4.2(k)(viii);
(xv) all such leases, contracts and agreements of Prudential or its
Subsidiaries that relate primarily or exclusively to the Prudential
Contributed Business and are not Material Contracts;
(xvi) those assets related to those Prudential Contributed Business
Plans that are transferred or assigned to, or assumed by, the Company
pursuant to and in accordance with Section 8.4 of this Agreement (the
"Prudential Transferred Plans") (other than those assets related
exclusively to Pre-Closing Matters of the Prudential Transferred Plans),
and those contracts and agreements of Prudential or its Subsidiaries that
relate primarily or exclusively to any Prudential Transferred Plan (but
only if the Company has expressly agreed to administer such Prudential
Transferred Plans);
(xvii) all securities held for investment or resale, including
without limitation firm investments and proprietary positions;
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(xviii) all customer lists and prospective customer lists, customer
information, finding broker lists, databases, trading models, and policies
and procedures;
(xix) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and prepaid items to the extent that the
underlying assets related thereto are Prudential Contributed Assets;
(xx) all cash, bank accounts and deposits with clearing
organizations, depositories and similar organizations;
(xxi) manuals, research reports and marketing materials (in any form
or medium), including without limitation advertising matter, brochures,
catalogues, price lists, mailing lists, distribution lists, photographs,
production data, and sales and promotional materials;
(xxii) those assets identified on Schedule 1.1(l) hereto; and
(xxiii) all other assets of Prudential and its Subsidiaries used or
held for use primarily in connection with the Prudential Contributed
Business, other than any such asset the use of which is being provided to
the Company after the Closing pursuant to a Transaction Document.
"Prudential Contributed Business" means the retail securities
brokerage and retail sales and trading business, including the
correspondent securities clearing and settlement business, currently
conducted by Prudential and its Subsidiaries in the United States and Latin
America, which consists of the following businesses and activities of
Prudential and its Subsidiaries:
(i) the United States retail brokerage and retail financial advisory
business currently referred to by Prudential as its "Private Client Group";
(ii) the United States portion of the business currently referred to
by Prudential as "Retail Debt Capital Markets", consisting of the United
States sale and trading of debt, preferred and similar securities and
related products for retail and institutional clients, including, but not
limited to, the activities carried on by Prudential Securities' United
States (but not London or Hong Kong) retail trading desk;
(iii) the securities clearing and settlement business currently
referred to by Prudential as "Global Processing", including, but not
limited to, the business and activities of Wexford Clearing Services
Corporation; and
(iv) the retail brokerage and financial advisory business conducted by
Prudential Securities and its Subsidiaries in Latin America, including any
activities and operations of Prudential and its Subsidiaries of a type
similar to the activities described in clauses (i) through (iii) above;
provided, however, that the Prudential Contributed Business shall in each
case exclude all Prudential Excluded Assets and Prudential Excluded
Liabilities.
-21-
"Prudential Contributed Business Filings" has the meaning set forth in
Section 4.2(k).
"Prudential Contributed Business Individuals" has the meaning set
forth in Section 8.4(a).
"Prudential Contributed Business Plans" means each "employee benefit
plan", as such term is defined in Section 3(3) of ERISA, including, without
limitation, "multiemployer plans" within the meaning of Section 3(37) of
ERISA, and each bonus, incentive or deferred compensation, employment,
consulting, employee loan, severance, termination, retention, change of
control, stock option, stock appreciation, stock purchase, phantom stock or
other equity-based, performance or other employee or retiree benefit or
compensation plan, program, arrangement, agreement, policy or
understanding, whether written or unwritten, that has been maintained or
established by Prudential or any Prudential Related Person and that
provides, has provided or may provide benefits or compensation (i) in
respect of any Prudential Contributed Business Individual, or (ii) (A) in
respect of any former employee or independent contractor of Prudential or
any Subsidiary of Prudential and (B) in respect of which any Company Entity
may incur any liability.
"Prudential Contributed Contracts" means those Prudential Contracts
marked with an asterisk on Schedule 4.2(i) and such other Prudential
Contracts, if any, as may be designated by Wachovia as Contributed Assets
and Contributed Liabilities in accordance with Section 5.4.
"Prudential Contributed Equity Interests" means the limited liability
company interests, stock or other equity interests of the Prudential
Contributed Subsidiaries.
"Prudential Contributed IP" means, subject to Section 5.4(c), at
Wachovia's option and without any additional consideration, any or all of
the Prudential Business IP used or held for use exclusively or primarily in
the Prudential Contributed Business, including but not limited to (i) the
Prudential Business IP listed on Schedule 1.1(p), (ii) the "BOSS" software
and all related Prudential Business IP software, and (iii) any software and
trademarks constituting Prudential Business IP related to Wexford Clearing
Services Corporation.
"Prudential Contributed Liabilities" means the following: (i) all free
credit and other customer balances of Prudential and its Subsidiaries
related to the Prudential Contributed Business to the extent such free
credit and other balances, including but not limited to amounts withheld on
customer transactions and payable to Governmental Authorities, are
reflected on the Final Closing Balance Sheet of the Prudential Contributed
Business; (ii) all obligations of Prudential and its Subsidiaries under the
Prudential Contributed Contracts, subject to the application of Section
5.4, and the other contracts and agreements constituting part of the
Prudential Contributed Assets, in each case to the extent not related to
any Pre-Closing Matter; (iii) liabilities relating primarily to the
Prudential Contributed Business that are fully reflected on the Final
Closing Balance Sheet of the Prudential Contributed Business; (iv) all
liabilities of the Prudential
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Contributed Subsidiaries arising under the Transaction Documents; (v) the
Prudential Transferred Plans and those liabilities of Prudential and/or its
Subsidiaries to be assumed by the Company Entities pursuant to Section 8.4,
as set forth on Schedule 1.1(v), and all other contracts and agreements
primarily or exclusively relating to any Prudential Transferred Plan (but
only if the Company has expressly agreed to administer such Prudential
Transferred Plans); (vi) all Accounts Payable of the Prudential Contributed
Business that are fully reflected on the Final Closing Balance Sheet of the
Prudential Contributed Business; (vii) securities sold under repurchase
agreements and not yet repurchased and attributable to the Prudential
Contributed Business; and (viii) those liabilities identified in Schedule
1.1(t) hereto.
"Prudential Contributed Subsidiaries" means the Subsidiaries of
Prudential listed on Schedule 1.1(b) hereto; provided that the term
"Prudential Contributed Subsidiaries" shall also include their respective
predecessor companies and businesses unless the context otherwise requires.
"Prudential Domestic Subsidiary Individuals" means those Prudential
Contributed Business Individuals who are employees of Bache Insurance
Agency Incorporated, Bache Insurance Agency of Alabama, Inc. and Wexford
Clearing Services Corporation.
"Prudential Employment Agreements" has the meaning set forth in
Section 4.2(m).
"Prudential Entities" means Prudential and its Subsidiaries other than
the Prudential Contributed Subsidiaries.
"Prudential Equity Awards" has the meaning set forth in Section
8.4(f).
"Prudential Excluded Assets" means any asset listed on Schedule 1.1(x)
and any asset otherwise not to be transferred or assigned to, or acquired
by, the Company in respect of Prudential Transferred Plans pursuant to and
in accordance with Section 8.4 of this Agreement.
"Prudential Excluded Businesses" means the businesses, accounts and
activities carried on by and the assets, liabilities, employees and
management associated with, or Persons currently referred to by Prudential
as:
(i) the "Global Derivatives Division", consisting of its Traded
Futures business, its Precious Metals business, its Base Metals business,
and its Foreign Exchange business;
(ii) the "Institutional Equity Group", consisting of (A) Equity
Research, (B) Equity Marketing, (C) Equity Capital Markets, (D) Listed &
NASDAQ Equity Trading, (E) Retail Facilitation & Floors, (F) Institutional
Equity Sales, (G) International Institutional Equity, and (H) Equity
Finance and Administration;
(iii) the "Alternative Investments Group", consisting of one or more
(A) distributors of hedge funds, hedge funds of funds and managed futures
funds, (B) general
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partners, managing owners and investment managers of managed futures funds,
(C) co-managers of hedge funds of funds and (D) hedge marketing and
research services providers to various distribution channels;
(iv) its "Non-Latin American International Business", consisting of
the businesses and activities conducted by Prudential and its Subsidiaries
from facilities outside of the United States other than the Latin American
offices of Prudential Securities and its Subsidiaries;
(v) its "PI Systems Group", consisting of employees of Prudential and
its Subsidiaries primarily engaged in the provision of software
development, maintenance and support for Prudential's managed account
programs;
(vi) the "eDG Group", consisting of employees of Prudential Securities
primarily engaged in the development and maintenance of websites and other
electronic business; and
(vii) all other businesses of Prudential and its Subsidiaries other
than the Prudential Contributed Business.
"Prudential Excluded Businesses Leased Real Property" means, with
respect to Prudential, any portion of a Contributed Real Property Lease
occupied or used by Prudential or one of its Subsidiaries or other
Affiliates, or any interest in any portion of a Contributed Real Property
Lease held by Prudential or one of its Subsidiaries or other Affiliates, in
connection with the Prudential Excluded Businesses located at the addresses
set forth on Schedule 5.9(a).
"Prudential Excluded Individuals" has the meaning set forth in Section
8.4(a).
"Prudential Excluded Leased Real Property" means, with respect to
Prudential, any real property leased, subleased, occupied or used by
Prudential Securities pursuant to a lease, sublease, co-location agreement,
sharing agreement or other occupancy agreement or reserve/space bank
designation located at the addresses set forth on Schedule 5.9(b).
"Prudential Excluded Liabilities" means any liability, obligation or
duty, whether or not related to the Prudential Contributed Business, that
is not a Prudential Contributed Liability, including but not limited to
Excluded Claims and those liabilities, obligations and duties listed on
Schedule 1.1(r) hereto.
"Prudential Intellectual Property License Agreement" means a license
agreement substantially in the form of Exhibit G hereto, as the same may be
amended, supplemented or otherwise modified from time to time after the
Closing Date.
"Prudential Member" means the Initial Prudential Member as of the
Closing and thereafter any Prudential Permitted Transferee that then is a
Member; provided that such Prudential Member is at all times a Prudential
Permitted Transferee.
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"Prudential Note" means the promissory note by the Company in favor of
Prudential, substantially in the form of Exhibit H hereto, as the same may
be amended, supplemented or otherwise modified from time to time after the
Closing Date.
"Prudential Pension Plan" has the meaning set forth in Section 8.4(d).
"Prudential Permitted Transferee" has the meaning set forth in Section
9.1(d).
"Prudential Pre-Closing Conversion" has the meaning set forth in
Section 2.2(b).
"Prudential Put" has the meaning set forth in Section 9.3(a).
"Prudential Put Event" has the meaning set forth in Section 9.3(a).
"Prudential Put Price" has the meaning set forth in Section 9.3(a).
"Prudential Related Person" means any trade or business, whether or
not incorporated, which, together with Prudential or any member of the
Prudential Contributed Business, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
"Prudential Savings Plan" has the meaning set forth in Section 8.4(e).
"Prudential Securities" means Prudential Securities Incorporated, a
Delaware corporation and a Wholly-Owned Subsidiary of Prudential.
"Prudential Tangible Book Value" means, as of the Closing Date and
based on the respective amounts shown on the Final Closing Balance Sheet of
the Prudential Contributed Business, the total assets minus goodwill minus
total liabilities of the Prudential Contributed Business, as determined in
accordance with Section 2.5.
"Prudential Transferees" has the meaning set forth in Section 8.4(a).
"Prudential Transferors" means Prudential and each Subsidiary of
Prudential that owns, as of the date hereof or as of the Closing Date, (i)
any equity interest in any Prudential Contributed Subsidiary, (ii) any
Prudential Contributed Assets or (iii) any Prudential Contributed
Liabilities.
"Prudential Transferred Plans" has the meaning set forth in the
definition of "Prudential Contributed Assets."
"PS Savings Plan" has the meaning set forth in Section 8.4(e).
"PUP" has the meaning set forth in Section 8.4(d).
"Put/Call Closing" has the meaning set forth in Section 9.3(e).
"Put/Call Event" has the meaning set forth in Section 9.3(b).
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"Put/Call Exercise Notice" has the meaning set forth in Section
9.3(c).
"Put/Call Plan" has the meaning set forth in Section 9.3(d).
"Put/Call Price" has the meaning set forth in Section 9.3(b).
"Put/Call Representative" has the meaning set forth in Section 9.3(d).
"RAP" has the meaning set forth in Section 8.4(f).
"Real Property Transfer Documents" means the conveyance deeds and
assignments, leases and subleases to be entered into pursuant to Section
5.9, as the same may be amended, supplemented or otherwise modified from
time to time.
"Receiving Party" has the meaning set forth in Section 2.5(b).
"Release" means any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, migration, transporting, placing and the
like, including without limitation, the moving of any materials through,
into or upon, any land, soil, surface water, ground water or air, or
otherwise entering into the environment.
"Retail Brokerage Combination Transaction" means any Combination
Transaction in which a Combining Party acquires, is acquired by or
otherwise combines or becomes Affiliated with an Acquired Retail Brokerage
Business that is either a Large Retail Broker or Small Retail Broker.
"Sale Notice" has the meaning set forth in Section 9.2(a).
"Sale Offer" has the meaning set forth in Section 9.2(a).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Products" means (i) financial products or services the
sale or distribution of which requires that the Person selling or
distributing such product or service be licensed or registered as an
associated person of a securities broker or dealer under Section 15(a) of
the Exchange Act and (ii) fixed rate annuities.
"SERP" has the meaning set forth in Section 8.4(d).
"Severance Benefit Level" has the meaning set forth in Section 8.4(b).
"Shared Service Contracts" means the contracts listed on Schedule
4.2(i) other than those contracts designated with either an asterisk (*) or
a double asterisk (**) thereon.
-26-
"Significant Subsidiary" means, with respect to a Person, at any time,
any Subsidiary that would at such time constitute a "Significant
Subsidiary" (as defined in Rule 1-02 of Regulation S-X promulgated by the
SEC) of such Person (or such Person's ultimate parent entity).
"Small Contracts" has the meaning set forth in Section 5.4(b).
"Small Retail Broker" means any Acquired Retail Brokerage Business
other than a Large Retail Broker.
"Straddle Period" means any taxable period ending after the Closing
Date that includes the Closing Date.
"Straddle Period Taxes" means Taxes attributable to a Straddle Period.
"Subsidiary" means, with respect to any Person, (i) any corporation
50% or more of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation is at the time owned by such Person, directly or indirectly
through one or more Subsidiaries, and (ii) any other Person (other than an
individual), including but not limited to a joint venture, a general or
limited partnership or a limited liability company, in which such Person,
directly or indirectly through one or more Subsidiaries, at the time owns
at least 50% or more of the ownership interests entitled to vote in the
election of managing partners, managers or trustees thereof (or other
Persons performing such functions) or acts as the general partner, managing
member, trustee (or Persons performing similar functions) of such other
Person; provided that, notwithstanding the foregoing, the Company Entities
shall not be deemed a Subsidiary of any Wachovia Entity on or after the
Closing.
"Surviving Entity" has the meaning set forth in the definition of
Change of Control.
"Tag Along Right" has the meaning set forth in Section 9.2(b).
"Tangible Book Value" means, with respect to a Person, total assets
minus goodwill minus total liabilities of such Person, as determined in
accordance with GAAP.
"Tax Contest" has the meaning set forth in Section 5.8(d).
"Tax Returns" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Taxes" means any taxes, assessments, duties, fees, levies or other
governmental charges, including, without limitation, all federal, state,
local and foreign and other income, franchise, profits, capital gains,
capital stock, transfer, sales, use, ad valorem, occupation, property,
excise, gross receipts, stamp, license, payroll, withholding, alternative
or minimum tax and other taxes, assessments, duties, fees, levies or other
governmental charges of any kind whatsoever, and all estimated taxes,
additions to tax,
-27-
penalties, interest and additional amounts attributable thereto or to the
filing of any Tax Return.
"Territory" has the meaning set forth in Section 8.3(a).
"Third Party" means any Person that is neither a Party or a Company
Entity nor an Affiliate of either a Party or a Company Entity.
"Third Party Approval" means any Consent of, with or to any Person
other than any Governmental Authority.
"Third Party Claims" has the meaning set forth in Section 7.6.
"Third Party Offer" has the meaning set forth in Section 9.2(a).
"Threshold" has the meaning set forth in Section 7.3(a).
"Transaction Documents" means this Agreement, the LLC Agreement, the
Wachovia/Company Master Agreement, the Company/Wachovia Letter Agreement,
the Prudential/Company Interim Agreement, the Company/Prudential Interim
Agreement, the Product Agreement, the Wachovia Intellectual Property
License Agreement, the Prudential Intellectual Property License Agreement,
the Real Property Transfer Documents, the Prudential Note and the
Guarantees and each of the side letters executed on the date hereof.
"Transfer" means any transfer, sale, assignment, pledge, hypothecation
or gift of, creation of a security interest in or encumbrance or other Lien
on, or any other disposal (whether or not voluntary) of, any Interest or
beneficial interest therein.
"Transition Period" has the meaning set forth in Section 8.4(b).
"Treasury Regulations" means the regulations promulgated under the
Code as such regulations may be amended from time to time (including the
corresponding provisions of succeeding regulations).
"Trust" has the meaning set forth in Section 8.4(f).
"Trust Agreement" has the meaning set forth in Section 8.4(f).
"Wachovia" has the meaning set forth in the preamble hereto.
"Wachovia Bank" means Wachovia Bank, National Association.
"Wachovia Business IP" means all Intellectual Property (i) owned by
Wachovia or a Subsidiary of Wachovia (including Wachovia's Contributed
Subsidiaries) and (ii) used or held for use with respect to the Wachovia
Contributed Business (including Wachovia Contributed IP).
"Wachovia Call" has the meaning set forth in Section 9.3(b).
-28-
"Wachovia Call Event" has the meaning set forth in Section 9.3(b).
"Wachovia Call Price" has the meaning set forth in Section 9.3(b).
"Wachovia Common Stock" means the common stock, par value $3.33 1/3
per share, of Wachovia, and any common stock of any successor thereto.
"Wachovia/Company Master Agreement" means the Wachovia/Company Master
Agreement between Wachovia and the Company to be entered into pursuant to
Section 2.4 hereof, substantially in the form of Exhibit C hereto, as the
same may be amended, supplemented or otherwise modified from time to time
after the Closing Date.
"Wachovia Contracts" has the meaning set forth in Section 4.1(i).
"Wachovia Contributed Assets" means the following assets (real,
personal, mixed, tangible or intangible) of Wachovia and its Subsidiaries
utilized primarily in the conduct of the Wachovia Contributed Business
(other than the Wachovia Excluded Assets):
(i) the Wachovia Contributed Membership Interests and the other
limited liability company interests (or other equity interests) of the
other Wachovia Contributed Subsidiaries;
(ii) Wachovia's Contributed Real Property;
(iii) Wachovia's Contributed Real Property Leases, including any
security deposits paid thereunder;
(iv) Wachovia's Contributed IP Licenses and the Wachovia Contributed
IP;
(v) all furniture, fixtures, equipment (including but not limited to
telephones, telephone numbers, switches, servers, computers, printers,
scanners, and data processing equipment), machinery, automobiles, office
supply inventories, and other tangible personal property utilized primarily
in the Wachovia Contributed Business;
(vi) all contracts and agreements between Wachovia or one of its
Subsidiaries, on the one hand, and any retail brokerage customer of the
Wachovia Contributed Business, on the other, pursuant to which retail
brokerage services are to be delivered to such customer, including any
assets or rights (including any funds or securities and any commodity
positions) of customers that are held by Wachovia and its Subsidiaries
under the possession and control provisions of Rule 15c3-3 under the
Exchange Act pursuant to any such contract or agreement, including for
distribution or payment or as collateral;
(vii) all margin and other customer debit balances of Wachovia and its
Subsidiaries related to the Wachovia Contributed Business to the extent
reflected on the Final Closing Balance Sheet of the Wachovia Contributed
Business;
-29-
(viii) the Wachovia Contracts and any Material Contracts entered into
by Wachovia or any of its Subsidiaries after the date of this Agreement to
the extent permitted by Prudential pursuant to Section 5.1(b)(xiii);
(ix) all of the books and records in any form or medium of the
Wachovia Contributed Subsidiaries related to the Wachovia Contributed
Business (including personnel records, customer records, transaction
histories, correspondence files and other records relating to dealings with
customers of the Wachovia Contributed Business), other than in any such
case, such books and records that relate primarily to Wachovia Excluded
Businesses;
(x) all rights, claims, credits, causes of action, rights of recovery
and rights of set-off of any kind relating to the Wachovia Contributed
Assets, including any unliquidated rights under manufacturers' and vendors'
warranties;
(xi) all Accounts Receivable of the Wachovia Contributed Business,
including but not limited to FA Notes and other employee loans;
(xii) all customer accounts of the Wachovia Contributed Business and
the customer relationships and goodwill relating thereto;
(xiii) all federal, state, municipal, foreign and other Permits
(including but not limited to those identified on Schedule 4.1(k)(ix)) held
or used by the Wachovia Contributed Subsidiaries in connection with the
Wachovia Contributed Business, to the extent transferable;
(xiv) all membership and trading privileges held or used by the
Wachovia Contributed Subsidiaries in connection with the Wachovia
Contributed Business, to the extent transferable, including but not limited
to those identified on Schedule 4.1(k)(viii);
(xv) all such leases, contracts and agreements of Wachovia or its
Subsidiaries that relate primarily or exclusively to the Wachovia
Contributed Business and are not Material Contracts;
(xvi) those assets related to those Wachovia Contributed Business
Plans that are contributed to the Company, or assumed by the Company,
pursuant to Section 8.4 of this Agreement (the "Wachovia Transferred
Plans") (other than those assets related exclusively to Pre-Closing Matters
of the Wachovia Transferred Plans), and those contracts and agreements of
Wachovia or its Subsidiaries that relate primarily or exclusively to any
Wachovia Transferred Plan (but only if the Company has expressly agreed to
administer such Wachovia Transferred Plans);
(xvii) all securities held for investment or resale, including without
limitation firm investments and proprietary positions;
(xviii) all customer lists and prospective customer lists, customer
information, finding broker lists, databases, trading models, and policies
and procedures;
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(xix) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and prepaid items to the extent that the
underlying assets related thereto are Wachovia Contributed Assets;
(xx) all cash, bank accounts and deposits with clearing organizations,
depositories and similar organizations;
(xxi) manuals, research reports and marketing materials (in any form
or medium), including without limitation advertising matter, brochures,
catalogues, price lists, mailing lists, distribution lists, photographs,
production data, and sales and promotional materials;
(xxii) those assets identified on Schedule 1.1(k) hereto; and
(xxiii) all other assets of Wachovia and its Subsidiaries used or held
for use primarily in connection with the Wachovia Contributed Business,
other than any such asset the use of which is being provided after the
Closing pursuant to a Transaction Document.
"Wachovia Contributed Business" means the retail securities brokerage
business, including the correspondent securities clearing and settlement
business, currently conducted by Wachovia and its Subsidiaries in the
United States, which consists of the following businesses and activities of
Wachovia and its Subsidiaries:
(i) the retail securities brokerage and financial advisory business
currently referred to by Wachovia as its "Private Client Group";
(ii) the Bank Channel;
(iii) Wachovia's "Independent Channel" and "Direct Channel", which
consist of Wachovia's FiNet business, Wachovia's retail securities
brokerage related e-commerce activities, and Wachovia's discount trading
and online brokerage business; and
(iv) the securities clearing and settlement business currently
referred to by Wachovia as its "Correspondent Business";
provided, however, that the Wachovia Contributed Business shall in each
case exclude all Wachovia Excluded Assets and Wachovia Excluded
Liabilities.
"Wachovia Contributed Business Individuals" has the meaning set forth
in Section 8.4(a).
"Wachovia Contributed Business Plans" means each "employee benefit
plan", as such term is defined in Section 3(3) of ERISA, including, without
limitation, "multiemployer plans" within the meaning of Section 3(37) of
ERISA, and each bonus, incentive or deferred compensation, employment,
consulting, employee loan, severance, termination, retention, change of
control, stock option, stock appreciation, stock purchase, phantom stock or
other equity-based, performance or other employee or retiree benefit or
compensation plan, program, arrangement, agreement, policy or
understanding,
-31-
whether written or unwritten, that has been maintained or established by
Wachovia or any Wachovia Related Person and that provides, has provided or
may provide benefits or compensation (i) in respect of any Wachovia
Contributed Business Individual, or (ii) (A) in respect of any former
employee or independent contractor of Wachovia or any Subsidiary of
Wachovia and (B) in respect of which any Company Entity may incur any
liability.
"Wachovia Contributed IP" means all Wachovia Business IP listed or
described on Schedule 1.1(o).
"Wachovia Contributed Liabilities" means the following: (i) all free
credit and other customer balances of Wachovia and its Subsidiaries related
to the Wachovia Contributed Business to the extent such free credit and
other balances, including but not limited to amounts withheld on customer
transactions and payable to Governmental Authorities, are reflected on the
Final Closing Balance Sheet of the Wachovia Contributed Business; (ii) all
obligations of Wachovia and its Subsidiaries under the Wachovia Contracts
and the other contracts and agreements constituting part of the Wachovia
Contributed Assets, in each case to the extent not related to any
Pre-Closing Matter; (iii) liabilities relating primarily to the Wachovia
Contributed Business that are fully reflected on the Final Closing Balance
Sheet of the Wachovia Contributed Business; (iv) all liabilities of the
Wachovia Contributed Subsidiaries arising under the Transaction Documents;
(v) the Wachovia Transferred Plans and those liabilities of Wachovia and/or
its Subsidiaries to be assumed or retained by the Company Entities pursuant
to Section 8.4, as set forth on Schedule 1.1(u), and all other contracts
and agreements primarily or exclusively relating to any Wachovia
Transferred Plan (but only if the Company has expressly agreed to
administer such Wachovia Transferred Plans); (vi) all Accounts Payable of
the Wachovia Contributed Business that are fully reflected on the Final
Closing Balance Sheet of the Wachovia Contributed Business; (vii)
securities sold under repurchase agreements and not yet repurchased and
attributable to the Wachovia Contributed Business; and (viii) those
liabilities identified on Schedule 1.1(s) hereto.
"Wachovia Contributed Membership Interests" means the limited
liability company interests (or other equity interests) of those Wachovia
Contributed Subsidiaries directly held by each Initial Wachovia Member
following consummation of the Wachovia Reorganization.
"Wachovia Contributed Subsidiaries" means as of any date the
Subsidiaries of Wachovia engaged in the Wachovia Contributed Business as of
such date, as listed on Schedule 1.1(a) hereto (to the extent in existence
on the date hereof); provided that the term "Wachovia Contributed
Subsidiaries" shall (i) also include their respective predecessor companies
and businesses unless the context otherwise requires, and (ii) in the case
of Wachovia Contributed Subsidiaries to be formed after the date of this
Agreement, refer to such entities from and after the date of their
formation. For purposes of Section 4.1 only, Wachovia Contributed
Subsidiaries will also include the Bank Channel.
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"Wachovia Contributed Subsidiary Filings" has the meaning set forth in
Section 4.1(k).
"Wachovia Entities" means Wachovia and its Subsidiaries other than the
Wachovia Contributed Subsidiaries.
"Wachovia Excluded Assets" means any asset listed on Schedule 1.1(w)
and any asset otherwise not to be contributed to, or acquired by, the
Company in respect of Wachovia Transferred Plans pursuant to and in
accordance with Section 8.4 of this Agreement.
"Wachovia Excluded Businesses" means Wachovia's corporate and
investment banking, securities underwriting, derivatives (including but not
limited to equity derivatives), fixed income, international, merchant
banking, mutual funds, wealth management, asset management, banking and
trust businesses and all other businesses, accounts and activities of or
carried on by, and the assets, liabilities, employees and management
associated with, Wachovia and its Subsidiaries, including the Wachovia
Contributed Subsidiaries, other than the Wachovia Contributed Business.
"Wachovia Excluded Individuals" has the meaning set forth in Section
8.4(a).
"Wachovia Excluded Liabilities" means any liability, obligation or
duty, whether or not related to the Wachovia Contributed Business, that is
not a Wachovia Contributed Liability, including but not limited to Excluded
Claims and those liabilities, obligations and duties listed on Schedule
1.1(q) hereto.
"Wachovia Intellectual Property License Agreement" means a license
agreement substantially in the form of Exhibit F hereto, as the same may be
amended, supplemented or otherwise modified from time to time after the
Closing Date.
"Wachovia Member" means the Initial Wachovia Member as of the Closing
and thereafter any Wachovia Permitted Transferee that then is a Member;
provided that such Wachovia Member is at all times a Wachovia Permitted
Transferee.
"Wachovia Pension Plan" has the meaning set forth in Section 8.4(d).
"Wachovia Permitted Transferee" has the meaning set forth in Section
9.1(d).
"Wachovia Related Person" means any trade or business, whether or not
incorporated, which, together with Wachovia or any member of the Wachovia
Contributed Business, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code.
"Wachovia Reorganization" has the meaning set forth in Section 2.2(a).
"Wachovia Securities" means Wachovia Securities, Inc., which as of the
date of this Agreement is a Delaware corporation and an indirect
Wholly-Owned Subsidiary of Wachovia.
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"Wachovia Tangible Book Value" means, as of the Closing Date and based
on the respective amounts shown on the Final Closing Balance Sheet of the
Wachovia Contributed Business, the total assets minus goodwill minus total
liabilities of the Wachovia Contributed Business, as determined in
accordance with Section 2.5.
"Wachovia Transferees" has the meaning set forth in Section 8.4(a).
"Wachovia Transferred Plans" has the meaning set forth in the
definition of "Wachovia Contributed Assets."
"WARN" has the meaning set forth in Section 4.1(n).
"Wholly-Owned Subsidiary" of a Person means a Subsidiary of such
Person, all of the issued and outstanding shares (other than directors'
qualifying shares) of the capital stock or other ownership interests,
including but not limited to limited liability company interests, of which
shall at the time be owned by such Person or one or more of its
Wholly-Owned Subsidiaries or by such Person and one or more of its
Wholly-Owned Subsidiaries.
ARTICLE 2
FORMATION OF VENTURE; CLOSING;
RELATED TRANSACTIONS
Section 2.1 Formation of Company. Following execution of this
Agreement (but in any event prior to the Closing), Wachovia will cause the
Company to be formed as a direct or indirect Wholly-Owned Subsidiary by filing
the Certificate of Formation with the Secretary of State of the State of
Delaware and any other required documents with such other applicable
Governmental Authorities as Wachovia shall determine.
Section 2.2 Transactions Prior to the Closing. Subject to the
terms and conditions hereof, prior to the Closing:
(a) Wachovia shall carry out a reorganization, as further described in
Schedule 2.2(a), such that pursuant thereto and upon completion thereof,
(i) the Wachovia Contributed Business shall be transferred to and acquired
by the Wachovia Contributed Subsidiaries, to the extent not already
conducted or owned by the Wachovia Contributed Subsidiaries, and any
Wachovia Excluded Businesses that were conducted therein shall be
transferred to and acquired by one or more Wachovia Entities, (ii) the
Wachovia Contributed Subsidiaries shall be converted into limited liability
companies (or other disregarded entities for U.S. federal income tax
purposes) with limited liability company operating agreements (or
comparable organizational documents) in form and substance reasonably
satisfactory to the Parties, (iii) the Wachovia Contributed Subsidiaries
shall own and be obligated in respect of all of the Wachovia Contributed
Assets and the Wachovia Contributed Liabilities, respectively, (iv) except
for assets or liabilities that may not be extracted, assigned or removed as
a matter of Law, and for which, in the case of liabilities, Wachovia would
have an obligation to fully indemnify Prudential and the Company Entities
hereunder, the Wachovia Contributed Subsidiaries shall not own or be
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obligated in respect of any assets or liabilities other than the Wachovia
Contributed Assets and the Wachovia Contributed Liabilities and such as may
arise pursuant to, or as may be permitted by, this Agreement and the
transactions contemplated hereby, (v) the Initial Wachovia Member shall
own, directly or indirectly, all of the issued and outstanding limited
liability company interests (or other equity interests) of the Wachovia
Contributed Subsidiaries, and (vi) all intercompany Tax accounts, if any,
of each Wachovia Contributed Subsidiary shall have been settled by it or by
Wachovia on its behalf (all of the foregoing actions described in this
Section 2.2(a), collectively, the "Wachovia Reorganization").
(b) Prudential shall, as further described in Schedule 2.2(b), (i)
cause all Prudential Excluded Assets and Prudential Excluded Liabilities
owned by, and all Prudential Excluded Businesses conducted by, each of the
Prudential Contributed Subsidiaries or to which they are subject, to be
transferred to and acquired and assumed by one or more Prudential Entities,
(ii) cause each of the Prudential Contributed Subsidiaries (except as set
forth on Schedule 4.2(b)) to be converted into entities which are
disregarded entities for U.S. federal income tax purposes with limited
liability company operating agreements (or comparable organizational
documents) in form and substance reasonably satisfactory to the Parties,
(iii) except for assets or liabilities that may not be extracted, assigned
or removed as a matter of Law, and for which, in the case of liabilities,
Prudential would have an obligation to fully indemnify Wachovia and the
Company Entities hereunder, cause the Prudential Contributed Subsidiaries
to neither own nor be obligated in respect of any assets or liabilities
other than the Prudential Contributed Assets and the Prudential Contributed
Liabilities and such as may arise pursuant to, or as may be permitted by,
this Agreement and the transactions contemplated hereby, and (iv) cause all
intercompany Tax accounts, if any, of each Prudential Contributed
Subsidiary to be settled by it or by Prudential on its behalf (all of the
foregoing actions described in this Section 2.2(b), collectively, the
"Prudential Pre-Closing Conversion").
Section 2.3 Time and Place of the Closing. Subject to the
provisions of Article 6, the closing (the "Closing") of the transactions
contemplated hereby shall take place at the offices of Xxxxxxx Xxxxxxx &
Xxxxxxxx, at 10:00 a.m., New York time, on the first Business Day of the
calendar month that is not less than five Business Days following the date on
which the conditions set forth in Article 6 have been satisfied or waived,
excluding conditions that by their terms are to be satisfied on the Closing
Date, or such other place, time and/or date as is mutually agreed upon by the
Parties. The date on which the Closing occurs is herein called the "Closing
Date." The Closing shall be effective as of 12:01 a.m., New York time, on the
Closing Date.
Section 2.4 Deliveries and Other Actions at the Closing. On the
Closing Date:
(a) Each Party shall cause each of its Initial Members to execute and
deliver the LLC Agreement;
(b) Wachovia shall cause the Initial Wachovia Member to transfer,
assign and deliver to the Company, as a capital contribution to the
Company, all of its right, title and interest in and to the Wachovia
Contributed Membership Interests, free and clear of all
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Liens, other than Permitted Liens and Liens created pursuant to the
Transaction Documents, and in consideration therefor, Wachovia shall cause
the Company to issue Membership Interests to the Initial Wachovia Member
with an aggregate Percentage Interest equal to 62%;
(c) Prudential shall, and shall cause each of the Prudential
Transferors to, transfer, assign and deliver to the Company, or to a
Wachovia Contributed Subsidiary designated by Wachovia (each a "Designated
Company Subsidiary"), as a capital contribution to the Company, all of
their respective right, title and interest in and to the Prudential
Contributed Assets, free and clear of all Liens, other than Permitted Liens
and Liens created pursuant to the Transaction Documents and in
consideration therefor, Wachovia shall cause the Company to (i) issue
Membership Interests to the Initial Prudential Member, on behalf of the
Prudential Transferors, with an aggregate Percentage Interest equal to 38%
and (ii) assume, or cause a Designated Company Subsidiary to assume, the
Prudential Contributed Liabilities; provided, however, that, to the extent
provided in Section 5.3, in lieu of such contribution to the Designated
Company Subsidiary, Prudential shall, and shall cause the other Prudential
Transferors to, make such capital contribution to New Prudential Broker LLC
in accordance with Section 5.3 and cause all of the limited liability
company interests in New Prudential Broker LLC to be contributed as a
capital contribution to the Company; it being understood that, in selecting
the appropriate Designated Company Subsidiaries, the Parties will cooperate
to ensure that such Designated Company Subsidiaries have adequate capital
to support the Prudential Contributed Liabilities being transferred to and
assumed by them at the Closing.
(d) The Parties shall cause the Company and each of their respective
Initial Members to execute and deliver a written agreement (which shall in
each case be in form and substance reasonably satisfactory to the Parties)
to be bound by the terms and conditions of this Agreement that are
applicable to it (which in the case of the Initial Members shall be limited
to the provisions of Article 8 (other than Section 8.4) and Articles 9, 10,
11 and 12);
(e) The Parties shall, or shall cause their respective Initial Members
to, contribute to the Company an amount of cash equal to their respective
initial Percentage Interests of the estimated One Time Costs that have been
and are expected to be incurred within 60 days following the Closing Date
by the Company Entities (and have not been previously paid pursuant to
Section 12.1);
(f) Wachovia and the Company shall execute and deliver the
Wachovia/Company Master Agreement;
(g) Prudential and the Company shall execute and deliver the
Prudential/Company Interim Agreement;
(h) The Company and Prudential shall execute and deliver the
Company/Prudential Interim Agreement;
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(i) The Company and each other Person to be a party thereto shall
execute and deliver the Product Agreement;
(j) The Company and Wachovia shall execute and deliver the Wachovia
Intellectual Property License Agreement;
(k) The Company and Prudential shall execute and deliver the
Prudential Intellectual Property License Agreement;
(l) The Parties shall, and shall cause their respective Subsidiaries
to, execute and deliver to the other parties thereto, the Real Property
Transfer Documents;
(m) As shown on the balance sheet as of December 31, 2002 included in
the Financial Statements of the Prudential Contributed Business, the
Company shall assume the $417 million intercompany obligation of Prudential
Securities to Prudential by executing and delivering the Prudential Note;
(n) Each Party shall execute and deliver a Guarantee;
(o) Wachovia Bank and the Company shall execute and deliver the
Company/Wachovia Letter Agreement;
(p) The Parties and the Company shall, and shall cause their
respective applicable Subsidiaries to, execute and deliver such additional
instruments of assignment and conveyance as are necessary and appropriate
to convey the Wachovia Contributed Membership Interests and the Prudential
Contributed Assets;
(q) The Company shall, and shall cause the Designated Company
Subsidiaries to, execute and deliver such additional assignments and
instruments of assumption as may be appropriate for the assumption by the
Company and the Designated Company Subsidiaries all of the Prudential
Contributed Liabilities; and
(r) The Parties shall execute and deliver any other agreement mutually
agreed by the Parties to be executed on the Closing Date.
Section 2.5 Post-Closing Adjustments.
(a) Within 60 days after the Closing Date: (i) Wachovia shall prepare
and deliver (or cause to be prepared and delivered) to Prudential and the
Company a balance sheet for the Wachovia Contributed Business as of the
Closing Date (immediately prior to giving effect to the Closing) (the
"Preliminary Wachovia Closing Balance Sheet"), which shall be prepared in
accordance with GAAP applied on a consistent basis (except to the extent
specified in Schedule 2.5(a)(i)) with the preparation of the Financial
Statements of the Wachovia Contributed Business, and shall be accompanied
by the final draft of the auditors' report thereon from Wachovia's
accountants, and (ii) Prudential shall prepare and deliver (or cause to be
prepared and delivered) to Wachovia and the Company a balance sheet for the
Prudential Contributed Business as of the Closing Date (immediately prior
to giving effect to the Closing) (the "Preliminary Prudential Closing
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Balance Sheet" and collectively with the Preliminary Wachovia Closing
Balance Sheet, the "Preliminary Closing Balance Sheets"), which shall be
prepared in accordance with GAAP applied on a consistent basis (except to
the extent specified in Schedule 2.5(a)(ii)) with the preparation of the
Financial Statements of the Prudential Contributed Business, and shall be
accompanied by the final draft of the auditors' report thereon from
Prudential's accountants. Each of the Parties shall pay the fees and
disbursements of its accountants. The Company and the Parties shall make
reasonably available to each other and to their respective accountants all
relevant books and records, any work papers (including accountants' work
papers) and other supporting documentation relating to the Preliminary
Closing Balance Sheets.
(b) In the event that, within 30 days after delivery by one Party (the
"Preparing Party") to the other Party (the "Receiving Party") and the
Company of the Preparing Party's Preliminary Closing Balance Sheet, such
Receiving Party determines that the Preliminary Closing Balance Sheet so
received has not been prepared on a basis consistent with the requirements
of Section 2.5(a), the Receiving Party shall have the right (but not the
obligation) to, on or before the last day of such 30-day period, deliver a
written objection (an "Objection") to the Company and the Preparing Party,
setting forth, in reasonable detail, the basis of the Objection and the
adjustments to such Preliminary Closing Balance Sheet which the Receiving
Party believes should be made, and the Parties shall be deemed to have
accepted any items not specifically disputed in the Objection; provided
that, for a period of fifteen days following a Receiving Party's receipt of
an Objection to such Receiving Party's Preliminary Closing Balance Sheet,
the Receiving Party shall have the right (but not the obligation) to
deliver to the Company and the Preparing Party additional objections to the
Preparing Party's Preliminary Closing Balance Sheet that are based on
similar arguments and are of the same type as the objections that were made
by the Preparing Party to the Receiving Party's Preliminary Closing Balance
Sheet. Failure to so notify the Company and the Preparing Party shall
constitute acceptance and approval of such Preliminary Closing Balance
Sheet. The Parties shall then have 30 days following the date the Preparing
Party receives any Objection to review and respond to such Objection. If
the Parties are unable to resolve all of their disagreements with respect
to the foregoing by the 30th day following the Preparing Party's receipt of
an Objection (including, if later, any additional objection made pursuant
to the proviso of the second preceding sentence), after having used their
good faith efforts to reach a resolution, they shall refer their remaining
differences to Ernst & Young LLP or another nationally recognized firm of
independent public accountants as to which the Parties shall mutually agree
(the "CPA Firm"), who shall, acting as experts in accounting and not as
arbitrators, determine on a basis consistent with the requirements of
Section 2.5(a), and only with respect to the specific remaining
accounting-related differences set forth in the applicable Objection and so
submitted to the CPA Firm, whether and to what extent, if any, the relevant
Preliminary Closing Balance Sheet(s) require(s) adjustment in order to
comply with the provisions of Section 2.5(a). In the event that Objections
are pending with respect to both Preliminary Closing Balance Sheets, the
Parties shall submit all such objections to the same CPA Firm to be
considered and resolved at the same time. The Parties shall request the CPA
Firm to use its best efforts to render its determination within 45 days of
its engagement. The CPA Firm's determination shall be conclusive and
binding upon the Company and
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the Parties. The Company and the Parties shall make reasonably available to
the CPA Firm all relevant books and records, any work papers (including
those of the Parties' respective accountants) and supporting documentation
relating to the Preliminary Closing Balance Sheets and all other items
reasonably requested by the CPA Firm in order to render its determination.
The "Final Closing Balance Sheet" of the Wachovia Contributed Business or
the Prudential Contributed Business, as the case may be, shall be (i) the
applicable Preliminary Closing Balance Sheet if (x) no Objection is
delivered during the initial 30-day period (or, if applicable, the
subsequent 15-day period) specified above or (y) the Parties so agree, (ii)
the applicable Preliminary Closing Balance Sheet, adjusted in accordance
with the Objection, in the event that (x) the Preparing Party does not
respond to the Objection during the 30-day period specified above following
receipt of the Objection or (y) the Parties so agree, or (iii) the
applicable Preliminary Closing Balance Sheet, as adjusted pursuant to the
agreement of the Parties or as adjusted by the CPA Firm as provided above.
The Final Closing Balance Sheet shall be used solely for determining
whether a payment is due by either Party under Section 2.5(c) below. All
fees and disbursements of the CPA Firm shall be shared equally by the
Parties.
(c) If the Wachovia Tangible Book Value reflected in the Final Closing
Balance Sheet of the Wachovia Contributed Business is less than $1.0
billion, then Wachovia shall pay such deficiency, plus interest thereon at
the applicable Federal Funds Rate during the period from the Closing Date
to the date of such payment, to the Company in immediately available funds
within 3 Business Days after the ultimate determination of such Final
Closing Balance Sheet. If the Wachovia Tangible Book Value reflected in the
Final Closing Balance Sheet of the Wachovia Contributed Business is more
than $1.0 billion, the Company shall pay (without any contribution from
Prudential or Wachovia) an amount equal to such excess, plus interest
thereon at the applicable Federal Funds Rate during the period from the
Closing Date to the date of such payment, to Wachovia in immediately
available funds within 3 Business Days after the ultimate determination of
such Final Closing Balance Sheet. If the Prudential Tangible Book Value
reflected in the Final Closing Balance Sheet of the Prudential Contributed
Business is less than $1.0 billion, then Prudential shall pay such
deficiency, plus interest thereon at the applicable Federal Funds Rate
during the period from the Closing Date to the date of such payment, to the
Company in immediately available funds within 3 Business Days after the
ultimate determination of such Final Closing Balance Sheet. If the
Prudential Tangible Book Value reflected in the Final Closing Balance Sheet
of the Prudential Contributed Business is more than $1.0 billion, the
Company shall pay (without any contribution from Prudential or Wachovia) an
amount equal to such excess, plus interest thereon at the applicable
Federal Funds Rate during the period from the Closing Date to the date of
such payment, to Prudential in immediately available funds within 3
Business Days after the ultimate determination of such Final Closing
Balance Sheet. Any such payments, as well as any payments made pursuant to
Section 2.4(e), shall be treated as capital contributions or adjustments
necessary for consistency with the agreed-upon capital allocation of the
Parties' initial Percentage Interests set forth in Sections 2.4(b) and (c)
and shall not change such allocation in any way. Any payment to a Party
pursuant to this Section 2.5(c) shall be effected in a manner that, to the
extent possible, does not result in recognition of income to that Party or
its Subsidiaries for federal income tax purposes.
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(d) If Ernst & Young is unable or unwilling to serve in the capacity
specified in clause (b) above (or in Section 11.1(f)) and the Parties are
unable to agree on another nationally recognized firm of independent public
accountants to act as the CPA Firm within five Business Days following the
30th day following the Preparing Party's response to the Objection (or
following a Party's request to submit remaining objections to the CPA Firm
in accordance with Section 11.1(f)), the Parties shall select another
nationally recognized firm of independent public accountants to act as the
CPA Firm as follows: (i) on such fifth Business Day, each Party shall
deliver to the other Party a list with three such accounting firms that
currently audit NYSE-listed companies for purposes of their annual reports
filed on Form 10-K with the SEC, none of which shall have been retained by
such Party within the prior two-year period. Each Party shall cross off two
of such accounting firms from the list it receives from the other Party.
The CPA Firm shall be selected from the remaining two firms by lot.
ARTICLE 3
BANK CHANNEL ARRANGEMENTS
Section 3.1 The Bank Channel.
(a) During the period following the Closing Date through the earliest
of (i) the date the Wachovia Entities cease to maintain a Bank Channel,
(ii) the termination of this Agreement and (iii) the date on which the
Wachovia Members shall have Transferred all of their Membership Interests
to a Third Party, the Company shall have the exclusive right to offer
Securities Products in and through the Bank Channel; provided that (A) to
the extent not prohibited pursuant to Section 8.3, Wachovia and its
Affiliates may offer Securities Products through the Bank Channel and (B)
Prudential may offer Securities Products through the Bank Channel to the
extent provided in the Product Agreement.
(b) During each year in which Section 3.1(a) is in effect, the Company
shall pay or cause to be paid to Wachovia on a monthly basis the referral
or other fees then in effect for such year. Such referral fees with respect
to the calendar year in which the Closing occurs are set forth on Schedule
3.1(b) hereto. From time to time, the Company may renegotiate with Wachovia
the referral and other amounts and arrangements relating to the Bank
Channel. The Company may alter these arrangements with Wachovia in its
discretion so long as the change is not materially adverse to the Company.
Any change shall be approved by the Board of Managers of the Company before
becoming effective.
(c) The Parties agree that: (i) Wachovia Bank shall retain sole
control (subject to supervisory responsibilities imposed upon the Company
by applicable Law) over the activities of Bank Channel Employees; (ii)
Wachovia Bank shall determine the number of Bank Channel Employees
supporting the Bank Channel at any given time; (iii) the Bank Channel shall
not include any Persons associated with Wachovia's Evergreen business or
any accounts, employees or activities of Wachovia's Wealth Management
group, which distributes products and services to high net worth
individuals, including but not limited to private banking, trust, personal
trust, investment and asset management, insurance services (including but
not limited to life and property and casualty), planning (including
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but not limited to financial, estate and Tax planning) and charitable and
consulting services; and (iv) the Bank Channel shall not include any
accounts, employees or activities of Wachovia's Corporate and Investment
Banking group.
Section 3.2 Support for the Prudential Banks.
(a) After receipt of notification from Prudential prior to the first
anniversary of the Closing Date that Prudential plans to cause the loan
portfolios of the Prudential Banks to be sold, either to Wachovia based on
its bid as contemplated in Section 3.2(b) or to a Third Party, Wachovia
agrees at any time prior to such first anniversary to provide reasonable
operational consulting services in support of the sale and transfer of
servicing of such loan portfolios. Further, Wachovia agrees to provide
operational, financial and technical support for the purpose of
establishing substitute loan, credit and banking services between Wachovia
and the Company, subject to Wachovia's right to approve all scheduling
matters relating to such support.
(b) Following receipt of the notification from Prudential referred to
in Section 3.2(a), Wachovia agrees to perform due diligence, as it deems
reasonable and appropriate, on the loan portfolios of the Prudential Banks,
for the purpose of providing a bid, on market-based terms, to purchase such
loans, at any time prior to the first anniversary of the Closing Date.
(c) After receipt of notification from Prudential of plans to wind-up
the operations of the Prudential Banks, the Wachovia Entities and the
Company Entities agree to provide, at any time prior to the first
anniversary of the Closing Date, reasonable consulting services at no
charge, in support of operational and financial activities associated with
the closing of the Prudential Banks; provided that such assistance shall
not impair in any material respect the conduct of the business of any
Wachovia Entity or Company Entity. Prudential agrees to indemnify Wachovia
and the Company and their Affiliates (including but not limited to their
respective directors, officers, employees, agents and representatives) for
any and all Losses arising out of any Third Party Claim that may arise as a
result of its or their involvement in any and all activities associated
with its or their efforts in support of closing the Prudential Banks.
Section 3.3 Wachovia Research Activities. With respect to each
twelve-month period commencing on the Closing Date, to the extent the Wachovia
Entities make available equity research services to the Company in accordance
with an agreement to be entered into between the Company and the appropriate
Wachovia Entities, the Company shall, or shall cause another appropriate Company
Entity to, pay to Wachovia or other relevant Wachovia Entity making such
services available an amount as set forth on Schedule 3.3; provided that for
each such twelve-month period commencing on the fourth anniversary of the
Closing Date and on each anniversary thereafter, the amounts payable for the
12-month period following such anniversary shall be increased by the percentage
that the Consumer Price Index for the 12-month period ending on such anniversary
has increased, if at all, in comparison to the Consumer Price Index for the
12-month period ending on the immediately preceding anniversary of the Closing
Date.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Wachovia. Wachovia
represents and warrants to Prudential, as of the date hereof, that except as set
forth herein by reference to a Schedule identified to a subsection of this
Section 4.1 and except to the extent that any of the representations and
warranties set forth below relate or apply to the Wachovia Excluded Assets, the
Wachovia Excluded Liabilities or Wachovia Excluded Businesses:
(a) Organization, Standing and Power of Wachovia and Subsidiaries.
Wachovia is a corporation duly organized, validly existing and in good
standing under the Laws of the State of North Carolina. Wachovia has all
requisite corporate power and authority to execute and deliver this
Agreement and any other Transaction Document to which it will be a party,
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. Each Subsidiary of Wachovia
to become a party to a Transaction Document will have at the Closing all
requisite corporate or comparable power and authority to execute and
deliver each Transaction Document to be executed and delivered by it, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby.
(b) Wachovia Contributed Subsidiaries. Each Wachovia Contributed
Subsidiary is (or in the case of Wachovia Contributed Subsidiaries formed
after the date hereof, will be by Closing) an entity duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
organization, and each Wachovia Contributed Subsidiary will be at the
Closing a limited liability company (or such other type of comparable
entity as may be disregarded for U.S. federal income tax purposes) duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization. Each Wachovia Contributed Subsidiary has (or
in the case of Wachovia Contributed Subsidiaries formed after the date
hereof, will have by Closing) all requisite corporate or comparable power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted or as proposed to be conducted from
and after the Closing. Each Wachovia Contributed Subsidiary will have at
the Closing all requisite limited liability company or comparable power and
authority to own, lease and operate the Wachovia Contributed Assets and to
carry on the Wachovia Contributed Business. Each Wachovia Contributed
Subsidiary is (or in the case of Wachovia Contributed Subsidiaries formed
after the date hereof, will be) duly qualified and in good standing as a
foreign entity authorized to transact business in each jurisdiction where
the conduct of its business or the ownership of its properties requires
such qualification other than in jurisdictions where the failure to be so
qualified, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on the Wachovia Contributed
Subsidiaries. Wachovia has made available to Prudential complete and
correct copies of (i) the charter, bylaws or comparable organizational
documents of each Wachovia Contributed Subsidiary as in effect on the date
hereof and (ii) the minute books or comparable records of each Wachovia
Contributed Subsidiary, which at the date such books and records were made
available reflected in all material respects all corporate or comparable
actions taken by the stockholders or comparable equity holders, and
directors
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or comparable governing body (and any committee thereof), of each Wachovia
Contributed Subsidiary.
(c) Authority and Validity. The execution and delivery of this
Agreement and each other Transaction Document to be executed and delivered
by Wachovia and its Subsidiaries, the performance of their respective
obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been, or in the case of
Transaction Documents not yet executed and delivered on the date hereof,
will be by the Closing, duly and validly authorized by all necessary
corporate or comparable action on the part of such Person. This Agreement
and each other Transaction Document to be executed and delivered by
Wachovia or any of its Subsidiaries have been, or in the case of
Transaction Documents not yet executed on the date hereof will be by the
Closing, duly executed and delivered and are (or will be by Closing) valid
and binding obligations of Wachovia or such Subsidiary, as applicable, that
is a party thereto, enforceable against it in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law), and an implied covenant of
good faith and fair dealing.
(d) No Conflicts. Subject to obtaining the Governmental Approvals and
Third Party Approvals contemplated in Section 4.1(e), the execution and
delivery of this Agreement and each other Transaction Document intended to
be executed by Wachovia and its Subsidiaries, and the performance of their
respective obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby do not (i) conflict with or
result in a breach of any provision of any of their respective articles of
incorporation or by-laws or comparable organizational documents, or (ii)
conflict with, result in a breach of any provision of, constitute a default
(or an event which with notice or lapse of time or both would become a
default) or give to any Third Party any right of termination, cancellation,
amendment or acceleration under, or result in the creation of a Lien on any
of their respective properties under, any of the terms, conditions or
provisions of any note, bond, debenture, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which any
of them is a party, or by which any of them or any of their respective
properties may be bound or subject, or (iii) violate or conflict with any
Law applicable to such Person or any of its properties, except, in the
cases of clauses (ii) and (iii), as would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect on
the Wachovia Contributed Subsidiaries.
(e) Governmental and Third Party Approvals. No Governmental Approval
or Third Party Approval is required in connection with the execution and
delivery by Wachovia and its Subsidiaries of this Agreement and the other
Transaction Documents or the performance of their respective obligations
hereunder and thereunder or the consummation by Wachovia and its
Subsidiaries of the transactions contemplated hereby and thereby, except
for (i) the Governmental Approvals and Third Party Approvals identified on
Schedule 4.1(e) and (ii) any Governmental Approval or Third Party Approval
the failure of which to be obtained would not, individually or in the
aggregate,
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be reasonably expected to result in a Material Adverse Effect on the
Wachovia Contributed Subsidiaries.
(f) Financial Statements; Undisclosed Liabilities; No Adverse Change.
(i) The Financial Statements of the Wachovia Contributed
Business present fairly, in all material respects, the financial
position and results of operations of the Wachovia Contributed
Business, in accordance with GAAP applied on a consistent basis, as of
the dates or for the periods presented, except as otherwise specified
in Schedule 2.5(a)(i). The Financial Statements of the Wachovia
Contributed Business have been derived from the accounting books and
records of Wachovia and its Subsidiaries.
(ii) The balance sheet as of December 31, 2002 included in
the Financial Statements of the Wachovia Contributed Business does not
include any assets or liabilities not constituting a part of the
Wachovia Contributed Business. The statements of income and statement
of stockholders' or members' equity included in the Financial
Statements of the Wachovia Contributed Business do not reflect the
operations of any Person or business not constituting a part of the
Wachovia Contributed Business.
(iii) Except as set forth in Schedule 4.1(f) and Wachovia
Excluded Liabilities, the Wachovia Contributed Subsidiaries have no
liabilities or obligations, whether known, absolute, accrued,
contingent or otherwise and whether due or to become due, except for
liabilities or obligations (x) reflected on, accrued or reserved
against in the balance sheet contained in the Financial Statements of
the Wachovia Contributed Business (in each case, to the extent so
reflected, accrued or reserved), or (y) incurred after the date of
such balance sheet in the ordinary course of business consistent with
past practice to the extent permitted by this Agreement.
(iv) During the period from December 31, 2002 to the date
hereof, there has occurred no Material Adverse Effect on the Wachovia
Contributed Subsidiaries, and no event or occurrence, which would
reasonably be expected to result in a Material Adverse Effect on the
Wachovia Contributed Subsidiaries.
(g) Capitalization. As of the date hereof, all outstanding shares of
capital stock of the Wachovia Contributed Subsidiaries (other than Wachovia
Contributed Subsidiaries to be formed after the date hereof) are duly
authorized, validly issued, fully paid and nonassessable, are subject to no
preemptive or similar rights, and were not issued in violation of any
preemptive or similar rights. As of the Closing, all outstanding equity
interests of the Wachovia Contributed Subsidiaries will be duly authorized
and validly issued limited liability company interests or comparable equity
interests of the Wachovia Contributed Subsidiaries, will be fully paid and
nonassessable, will not have been issued in violation of any preemptive or
similar rights and, except as contemplated by the Transaction Documents,
will be subject to no preemptive or similar rights. Upon contribution by
Wachovia (or any of its Affiliates) to the Company, the Company will
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acquire 100% of the limited liability company interests or comparable
equity interests of the Wachovia Contributed Subsidiaries free and clear of
any Liens, except for Permitted Liens and Liens created pursuant to the
Transaction Documents. Except as contemplated by this Agreement (including
the Wachovia Reorganization) or the other Transaction Documents, (A) no
capital stock, limited liability company interests or other equity
securities (including but not limited to any options, warrants or rights or
other security convertible into or exercisable or exchangeable for any
capital stock, limited liability company interest or other equity security)
of any Wachovia Contributed Subsidiary is or may become required to be
issued (other than to a Company Entity) by reason of any security, contract
or other obligation, (B) there are no contracts, commitments or other
obligations by which any Wachovia Contributed Subsidiary is or may be bound
to sell or otherwise transfer or repurchase, redeem or otherwise acquire
any capital stock, limited liability company interests or other equity
securities of such Wachovia Contributed Subsidiary (other than to or from a
Company Entity), and (C) there are no contracts, commitments or other
obligations relating to the right to vote or dispose of any capital stock,
limited liability company interest or other equity security of any Wachovia
Contributed Subsidiary.
(h) Assets; Title; Real Property.
(i) The assets (real, personal, mixed, tangible or
intangible) constituting the Wachovia Contributed Assets, taking into
account the benefits to be provided under the other Transaction
Documents, constitute all of the assets used in, necessary for the
conduct of, or otherwise material to, the Wachovia Contributed
Business as presently conducted. Immediately after the Closing, taking
into account the benefits to be provided under the other Transaction
Documents, the Wachovia Contributed Subsidiaries will have good and
marketable title to, or have good title pursuant to a valid leasehold
interest in or have a valid right to use or occupy, all of the assets
(real, personal, mixed, tangible or intangible) used in, necessary for
the conduct of, or otherwise material to, the Wachovia Contributed
Business as presently conducted, including the assets shown on the
Financial Statements of the Wachovia Contributed Business and all of
the Contributed Real Property of Wachovia, free and clear of any
Liens, except (A) for Permitted Liens, (B) as set forth in Schedule
4.1(h) or (C) as would not reasonably be expected to result in a
Material Adverse Effect on the Wachovia Contributed Subsidiaries. All
of such assets are adequate and suitable in all material respects for
the purposes for which they are presently being used. At the Closing,
all of such tangible assets will be in sufficiently good operating
condition and repair to permit their use in the operations of the
Wachovia Contributed Subsidiaries as such operations are presently
conducted, subject to normal wear and tear.
(ii) At the Closing, the Initial Wachovia Member will
transfer to the Company good title to the Wachovia Contributed
Membership Interests, free and clear of any Liens except Permitted
Liens and Liens created pursuant to this Agreement and the other
Transaction Documents.
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(iii) At the Closing, there will be no leases, subleases,
licenses, concessions or any other contracts or agreements granting to
any Person other than the Company Entities any right to the
possession, use, occupancy, or enjoyment of any Contributed Real
Property of Wachovia or any portion thereof, except as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Wachovia Contributed Subsidiaries. With
respect to the Contributed Real Property of Wachovia, (A) the current
operation and use of such Contributed Real Property does not violate
any Law now in effect, including but not limited to planning, zoning,
health, safety and fire Laws and regulations, and the use being made
of such Contributed Real Property is in conformity with the
certificate of occupancy issued therefor, and (B) no default or breach
exists under any of the covenants, conditions, restrictions,
rights-of-way or easements, if any, affecting all or any portion of
such Contributed Real Property, which are to be performed or complied
with by any Wachovia Contributed Subsidiaries, except in the case of
(A) or (B) as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Wachovia
Contributed Subsidiaries.
(i) Contracts. Set forth in Schedule 4.1(i) is a true and complete
list of all of the Material Contracts of Wachovia in effect on the date of
this Agreement (the "Wachovia Contracts"). Each Wachovia Contract is in
full force and effect and a valid and binding obligation of the applicable
Wachovia Contributed Subsidiary party thereto and, to the Knowledge of
Wachovia, the other parties thereto, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar Laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law), and an implied covenant of good faith and fair dealing. Neither the
Wachovia Contributed Subsidiary party thereto nor, to the Knowledge of
Wachovia, any other party thereto is in default under, or in breach or
violation of, any Wachovia Contract, and no event has occurred (to the
Knowledge of Wachovia, in the case of any other party thereto) that would,
with notice or lapse of time or both, constitute such a default, breach or
violation, except in each such case to the extent such default, breach or
violation would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Wachovia Contributed
Subsidiaries.
(j) No Litigation.
(i) Schedule 4.1(j)(i) sets forth a list of each
individual Claim pending or, to the Knowledge of Wachovia, threatened
against or affecting any Wachovia Contributed Subsidiary (whether or
not related to the Wachovia Contributed Business) or any Wachovia
Contributed Asset that would in any such case be reasonably expected
to result in monetary damages in excess of $250,000 or the imposition
of injunctive or other non-monetary relief that would reasonably be
expected to materially interfere with the operations of the Wachovia
Contributed Subsidiaries or with the Wachovia Contributed Business
after the Closing Date (without regard to whether the defense thereof
or liability in respect thereof is covered by polices of insurance or
any indemnity, contribution, cost sharing or
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similar agreement or arrangement by or with any other Person). Except
as set forth on Schedule 4.1(j)(i), there are no Claims pending or, to
the Knowledge of Wachovia, threatened against or affecting any
Wachovia Contributed Subsidiary (whether or not related to the
Wachovia Contributed Business), Wachovia Contributed Assets or
Wachovia Contributed Liabilities that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Wachovia Contributed Subsidiaries.
(ii) Schedule 4.1(j)(ii) sets forth a list of each
individual Order that would be reasonably expected to result in
monetary damages in excess of $250,000 or the imposition of injunctive
or other non-monetary relief that would reasonably be expected to
materially interfere with the operations of the Wachovia Contributed
Subsidiaries or with the Wachovia Contributed Business after the
Closing Date (without regard to whether the defense thereof or
liability in respect thereof is covered by policies of insurance or
any indemnity, contribution, cost sharing or similar agreement or
arrangement by or with any other Person). Except as set forth in such
Schedule, there are no outstanding Orders applicable to any Wachovia
Contributed Subsidiary (whether or not related to the Wachovia
Contributed Business) or any other Subsidiary of Wachovia with respect
to the Wachovia Contributed Business that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on the Wachovia Contributed Subsidiaries. Wachovia has supplied
or made available to Prudential copies of all Orders applicable to any
Wachovia Contributed Subsidiary (whether or not related to the
Wachovia Contributed Business) or other Subsidiary of Wachovia with
respect to the Wachovia Contributed Business that are material to the
Wachovia Contributed Subsidiaries or the Wachovia Contributed
Business. To the Knowledge of Wachovia, no Governmental Authority has
advised Wachovia, any Wachovia Contributed Subsidiary or any
Subsidiary of Wachovia holding Wachovia Contributed Assets that it is
contemplating issuing any Order of a type referred to above in this
clause (ii).
(k) Compliance with Laws; Permits.
(i) Except as set forth on Schedule 4.1(k)(i), each
Wachovia Contributed Subsidiary is conducting and has conducted its
business in compliance with all Laws applicable to it except for any
such failures to be in such compliance that would not, individually or
in the aggregate, be reasonably expected to have a Material Adverse
Effect on the Wachovia Contributed Subsidiaries.
(ii) Except as set forth on Schedule 4.1(k)(ii), each
Wachovia Contributed Subsidiary has obtained and holds (or in the case
of Wachovia Contributed Subsidiaries formed after the date hereof,
will by Closing obtain and hold) all Permits necessary for the conduct
of the operations of the Wachovia Contributed Subsidiaries or for the
Wachovia Contributed Business, in each case except for any Permits the
failure of which to obtain would not, individually or in
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the aggregate, be reasonably expected to result in a Material Adverse
Effect on the Wachovia Contributed Subsidiaries. Except as set forth
in Schedule 4.1(k)(ii), there is no Claim pending or, to the Knowledge
of Wachovia, threatened by any Governmental Authority that would
result in the nonrenewal, revocation, cancellation or suspension, or
any adverse modification, of any such Permits, and the execution and
delivery of this Agreement and the other Transaction Documents, and
the consummation of the transactions contemplated hereby and thereby
will not result in any such nonrenewal, revocation, cancellation,
suspension or modification, in each case except as would not,
individually or in the aggregate, be reasonably expected to result in
a Material Adverse Effect on the Wachovia Contributed Subsidiaries. No
Wachovia Contributed Subsidiary is in violation of any Permits
applicable to it, except for any such violations that would not,
individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Wachovia Contributed Subsidiaries.
(iii) Each Wachovia Contributed Subsidiary has timely filed
all registrations, declarations, reports, notices, forms and other
filings required to be filed with the SEC, NASD, NYSE or any other
Governmental Authority, and all amendments or supplements to any of
the foregoing (the "Wachovia Contributed Subsidiary Filings"), except
where any failure to file would not, individually or in the aggregate,
be reasonably expected to result in a Material Adverse Effect on the
Wachovia Contributed Subsidiaries. The Wachovia Contributed Subsidiary
Filings were prepared in all material respects, where applicable, in
accordance with applicable Law, and all fees and assessments due and
payable in connection therewith have been paid in all material
respects.
(iv) Each Wachovia Contributed Subsidiary and each of its
respective employees is (or, in the case of Wachovia Contributed
Subsidiaries not yet formed, will at the Closing be) duly registered,
licensed or qualified as a broker-dealer and/or investment adviser in
each jurisdiction where the conduct of its business requires such
registration, licensing or qualification, and is (or, in the case of
Wachovia Contributed Subsidiaries not yet formed, will at the Closing
be) in compliance with all Laws requiring any such registration,
licensing or qualification and is (or, in the case of Wachovia
Contributed Subsidiaries not yet formed, will at the Closing be)
subject to no material liability or disability by reason of the
failure to be so registered, licensed or qualified.
(v) Wachovia has delivered or made available to Prudential
a true and complete copy of currently effective Forms BD and ADV as
filed with the SEC by each applicable Wachovia Contributed Subsidiary,
all state and other federal registration forms, all reports and all
material correspondence filed by each applicable Wachovia Contributed
Subsidiary with any Governmental Authority under the Exchange Act, the
Investment Company Act, the Advisers Act and under similar state
statutes within the last three years. Wachovia shall deliver to
Prudential such forms and reports as are filed by each Wachovia
Contributed Subsidiary from and after the date hereof until the
Closing. The information contained in such forms and reports was (or
will be, in the case of any forms and
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reports filed after the date hereof) complete and accurate in all
material respects as of the time of filing thereof.
(vi) Except as disclosed on Forms ADV or BD filed prior to
the date of this Agreement, no Wachovia Contributed Subsidiary nor any
of its directors, officers, employees, "associated persons" (as
defined in the Exchange Act) or "affiliated persons" (as defined in
the Investment Company Act) has been the subject of any disciplinary
proceedings or Orders of any Governmental Authority arising under
applicable Laws which would be required to be disclosed on Forms ADV
or BD. No such disciplinary proceeding or Order is pending or, to the
Knowledge of Wachovia, threatened. Except as disclosed on such Forms
ADV or BD filed prior to the date of this Agreement, no Wachovia
Contributed Subsidiary nor any of its directors, officers, employees,
associated persons or affiliated persons, has been permanently
enjoined by the Order of any Governmental Authority from engaging or
continuing any conduct or practice in connection with any activity or
in connection with the purchase or sale of any security. Except as
disclosed on such Forms ADV or BD filed prior to the date of this
Agreement, no Wachovia Contributed Subsidiary nor any of its
directors, officers, employees, associated persons or affiliated
persons is or has been ineligible to serve as an investment adviser
under the Advisers Act or as a broker-dealer or an associated person
of a broker-dealer under Section 15(b) of the Exchange Act (including
being subject to any "statutory disqualification" as defined in
Section 3(a)(39) of the Exchange Act), or ineligible to serve in, or
subject to any disqualification which would be the basis for any
limitation on serving in, any of the capacities specified in Section
9(a) or 9(b) of the Investment Company Act.
(vii) Each Wachovia Contributed Subsidiary has at all times
since December 31, 1999 or its date of formation, whichever is later,
rendered investment advisory services to investment advisory clients
with whom such entity is or was a party to an investment advisory
agreement or similar arrangement in material compliance with all
applicable requirements as to portfolio composition and portfolio
management including, but not limited to, the terms of such investment
advisory agreements, written instructions from such investment
advisory clients, prospectuses or other offering materials, board of
directors or trustee directives and applicable Law. No Wachovia
Contributed Subsidiary is, or is required to register as, an
"investment company" within the meaning of the Investment Company Act.
(viii) Schedule 4.1(k)(viii) sets forth a complete list of
all securities exchanges, commodities exchanges, boards of trade,
clearing organizations, trade associations and similar organizations
in which the Wachovia Contributed Subsidiaries and any other
Subsidiaries of Wachovia with respect to the Wachovia Contributed
Business hold membership or have been granted trading privileges.
(ix) Schedule 4.1(k)(ix) sets forth with respect to each
Wachovia Contributed Subsidiary a complete list of all (i)
broker-dealer licenses or
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registrations and (ii) all licenses and registrations as an investment
adviser under the Advisers Act or any similar state Laws. Except as
set forth on Schedule 4.1(k)(ix), no Wachovia Contributed Subsidiary
is, or is required to be, registered as a futures commission merchant,
commodities trading adviser, commodity pool operator or introducing
broker under the Commodities Futures Trading Act or any similar state
Laws.
(x) Assuming the accuracy of the representation of
Prudential set forth in Section 4.2(k)(x), (A) Wachovia has all
necessary regulatory power and authority under the Bank Holding
Company Act of 1956, as amended, to own and hold its Membership
Interests in the Company, and (B) no Wachovia Entity is subject to any
Law or Order preventing or making unlawful its conduct of the
Contributed Businesses.
(l) Tax. Except as set forth on Schedule 4.1(l) or as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Wachovia Contributed Subsidiaries, (i) the Wachovia
Contributed Subsidiaries and the other Subsidiaries of Wachovia with
respect to the Wachovia Contributed Business have timely filed (or Wachovia
has timely filed on their behalf) with the appropriate taxing authorities
all Tax Returns required to be filed by or with respect to the Wachovia
Contributed Business, (ii) the Wachovia Contributed Subsidiaries and the
other Subsidiaries of Wachovia with respect to the Wachovia Contributed
Business have paid in full (or Wachovia has paid in full on their behalf)
all Taxes due by or in respect of the Wachovia Contributed Business for all
periods, (iii) each Wachovia Contributed Subsidiary and each other
Subsidiary of Wachovia with respect to the Wachovia Contributed Business
has duly and timely withheld all Taxes required to be withheld in
connection with its business or assets, and such withheld Taxes have been
either duly and timely paid to the proper Governmental Authorities or
properly set aside in accounts for such purpose, (iv) there are no material
outstanding adjustments for Tax purposes applicable to any Wachovia
Contributed Subsidiary or other Subsidiary of Wachovia with respect to the
Wachovia Contributed Business and required as a result of changes in
methods of accounting effected on or before the Closing Date, which
adjustments will remain in force or by which any Wachovia Contributed
Subsidiary or other Company Entity will be bound after the Closing Date,
(v) no material elections for Tax purposes have been made by any Wachovia
Contributed Subsidiary or other Subsidiary of Wachovia with respect to the
Wachovia Contributed Business that will remain in force or by which any
Wachovia Contributed Subsidiary or other Company Entity will be bound after
the Closing Date, (vi) no Wachovia Contributed Subsidiary is a party to or
bound by or has any rights or obligations under any Tax allocation,
sharing, indemnity or similar agreement or arrangement that will remain in
effect after the Closing Date, and (vii) no Wachovia Contributed Subsidiary
is or has been a member of any group of companies filing a consolidated,
combined or unitary Tax Return for any Tax period for which the statute of
limitations for the assessment or collection of any Tax remains open, other
than a group of which Wachovia or one of its Subsidiaries has at all times
been the common parent.
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(m) Individual Benefit Plans and Related Matters; ERISA.
(i) Individual Benefit Plans.
(A) Schedule 4.1(m)(i) sets forth a complete and
correct list of each Wachovia Contributed Business Plan. With
respect to each such Wachovia Contributed Business Plan,
Wachovia has provided or made available to Prudential complete
and correct copies of: (x) such Wachovia Contributed Business
Plan, if written, or a description of such Wachovia
Contributed Business Plan if not written, (y) to the extent
applicable to such Wachovia Contributed Business Plan, all
trust agreements, insurance contracts or other funding
arrangements, the two most recent actuarial and trust reports,
the two most recent Forms 5500 required to have been filed
with the IRS and all schedules thereto, the most recent IRS
determination letter, all current summary plan descriptions,
all material written communications received from or sent to
the IRS, the Pension Benefit Guaranty Corporation or the
Department of Labor, the most recent actuarial report
regarding any post-employment life or medical benefits
provided under any such Wachovia Contributed Business Plan,
the most recent statements or other communications regarding
Wachovia withdrawal or other multiemployer plan liabilities,
if any, and (z) all amendments and modifications with a
prospective effect to any Wachovia Contributed Business Plan
and related trust agreements and/or insurance contracts or
other funding arrangements. In addition, Wachovia has
indicated on Schedule 4.1(m)(i) which Wachovia Contributed
Business Plans are deferred compensation, supplemental defined
benefit retirement, stock and other equity (or equity-based)
compensation, short-term bonus, and retiree welfare benefit
plans, employment contracts, and non-compete,
non-solicitation, and nondisclosure agreements.
(B) None of Wachovia or any member of the Wachovia
Contributed Business has communicated in writing to any
Wachovia Contributed Business Individual any intention or
commitment to modify any Wachovia Contributed Business Plan or
to establish or implement any other employee, retiree or
independent contractor benefit or compensation plan or
arrangement following the date of this Agreement.
(ii) Qualification. Each Wachovia Contributed Business Plan
intended to be qualified under Section 401(a) of the Code is so
qualified and has received a favorable determination letter from the
IRS as to its qualification under the Code and to the effect that any
trust forming a part thereof is exempt from taxation under Section
501(a) of the Code, and nothing has occurred since the date of such
determination letter that could reasonably be expected to adversely
affect such qualification or tax-exempt status.
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(iii) Compliance; Liability.
(A) Neither Wachovia nor any Wachovia Related Person
has been involved in any transaction that would reasonably be
expected to cause, following the Closing, any Company Entity
to be subject to liability under Section 4069 or 4212 of
ERISA. Neither Wachovia nor any Wachovia Related Person has
incurred (either directly or indirectly, including as a result
of an indemnification obligation) any material liability under
or pursuant to Title IV of ERISA or the penalty, excise Tax or
joint and several liability provisions of the Code relating to
employee benefit plans and, to the Knowledge of Wachovia, no
event, transaction or condition has occurred or exists that
would, individually or in the aggregate, reasonably be
expected to result in any such liability to, following the
Closing, Wachovia or any of its Affiliates or any Company
Entity. All contributions and premiums required to have been
paid or accrued through the Closing Date by Wachovia and each
Wachovia Related Person to any Wachovia Contributed Business
Plan under the terms of any such plan or its related trust,
insurance contract or other funding arrangement (whether as a
result of the transactions contemplated by the Transaction
Documents or otherwise) or pursuant to any applicable Law or
collective bargaining agreement (including ERISA and the Code)
have been paid within the earliest time prescribed by any such
plan, agreement or applicable Law or have been properly
accrued and none of the Company Entities shall be liable for
any such contributions or premiums unless such have been so
accrued on the Final Closing Balance Sheet of the Wachovia
Contributed Business.
(B) Each of the Wachovia Contributed Business Plans
has been operated and administered in all material respects in
compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements. Except as set
forth on Schedule 4.1(m)(iii)(B), there are no material
pending or, to the Knowledge of Wachovia, threatened, Claims
by or on behalf of any of the Wachovia Contributed Business
Plans, by any Wachovia Contributed Business Individual or
otherwise involving any such Wachovia Contributed Business
Plan or the assets of any Wachovia Contributed Business Plan
(other than routine claims for benefits, all of which have
been fully reserved for on the balance sheet included in the
Financial Statements of the Wachovia Contributed Business).
(C) No Wachovia Contributed Business Plan is or will
be, as a result of the Closing, a multiemployer plan (as
defined in Section 4001(a)(3) of ERISA) or a "multiple
employer plan" within the meaning of Section 4063 or 4064 of
ERISA.
(D) Each Wachovia Contributed Business Plan that is
subject to the minimum funding standards of ERISA or the Code
satisfies such standards under Sections 412 and 302 of the
Code and ERISA, respectively, and no
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such Wachovia Contributed Business Plan has incurred an
"accumulated funding deficiency" within the meaning of such
sections, whether or not waived. No "prohibited transaction"
(within the meaning of Section 406 of ERISA and Section 4975
of the Code) has occurred or would reasonably be expected to
occur with respect to any Wachovia Contributed Business Plan
that would reasonably be expected to result, individually or
in the aggregate, in a material liability to any Company
Entity.
(E) Except as set forth on Schedule 4.1(m)(iii)(E), or
otherwise provided in Section 8.4 of this Agreement, no
Wachovia Contributed Business Individual is or will become, on
and after the Closing, entitled to receive post-employment
benefits of any kind by reason of employment with any member
of the Wachovia Contributed Business under any Wachovia
Contributed Business Plan for which any of the Company
Entities will bear any expense, including, without limitation,
death or medical benefits (whether or not insured), other than
(I) coverage mandated by Section 4980B of the Code or (II)
retirement benefits payable under any Wachovia Contributed
Business Plan qualified under Section 401(a) of the Code. In
addition, except as set forth on Schedule 4.1(m)(iii)(E), all
agreements with (x) any independent contractor that provides
services to any Wachovia Contributed Subsidiaries and (y) any
Third Party service provider (including, without limitation,
any vendor or administrator) that provides services with
respect to the Wachovia Contributed Business Plans or the
Wachovia Transferees, may in any of the cases described in
clauses (x) and (y) above, be terminated in accordance with
the terms of any such agreement without liability to Wachovia
or its Affiliates or any Company Entity at any time, other
than fees payable in the normal course for services rendered
prior to such termination.
(F) The announcement or consummation of the
transactions contemplated by this Agreement and the other
Transaction Documents, either alone or in combination with a
subsequent event, will not result in the payment or provision
of, or an increase in the amount of, compensation or benefits
or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any
Wachovia Contributed Business Individual or the funding of any
grantor trust relating to such individual.
(G) All Wachovia Contributed Business Plans that are
welfare benefit plans or nonqualified deferred compensation
plans may be terminated without liability to Wachovia or its
Affiliates or any Company Entity at any time (or with such
applicable notice to participants as any such plans may
require).
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(H) None of Prudential, its Affiliates, any Company
Entity or any Benefit Plan (other than the Wachovia Pension
Plan) is entitled, or has any rights or Claims, to any assets
of the Wachovia Pension Plan.
(iv) Foreign Plans. No Wachovia Contributed Business Plan
is maintained outside the jurisdiction of the United States, or covers
any Wachovia Contributed Business Individual residing or working
outside the United States.
(n) Labor. No Wachovia Contributed Subsidiary is a party to or bound
by any collective bargaining agreement, contract or other understanding
with a labor union or labor organization with respect to the Wachovia
Contributed Business Individuals, and to the Knowledge of Wachovia, there
is no activity involving the Wachovia Contributed Business Individuals
seeking to certify a collective bargaining unit or engaging in any similar
organizational activity. Wachovia and its Subsidiaries are in compliance
with its obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988, as amended ("WARN"), and all other notification
and bargaining obligations arising under any collective bargaining
agreement, statute or otherwise. In no event shall Prudential or its
Affiliates or any of the Company Entities have or bear any liability or
responsibility with respect to WARN arising on or prior to the Closing Date
as a result of the transactions contemplated by this Agreement as it
applies to any Wachovia Contributed Subsidiary or Wachovia Contributed
Business Individual, unless such liability arises as a result of any action
(or any failure to act) by Prudential or any Company Entity after the
Closing Date. Except to the extent a failure to do so would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on the Wachovia Contributed Subsidiaries, the Wachovia
Contributed Subsidiaries have complied with all applicable Laws pertaining
to the employment or termination of employment of the Wachovia Contributed
Business Individuals, including without limitation, all such Laws relating
to labor relations, equal employment opportunities, fair employment
practices, prohibited discrimination or distinction and other similar
employment activities.
(o) Intellectual Property.
(i) Wachovia has made available to Prudential complete and
correct lists as of the date hereof of all material patents,
registered trademarks, registered copyrights, domain names and
applications with respect to any of the foregoing with respect to all
Wachovia Business IP.
(ii) To the Knowledge of Wachovia: (A) each Wachovia
Contributed Subsidiary has the right to the use all Intellectual
Property used by it in or for the benefit of the Wachovia Contributed
Business, free and clear of all Liens other than Permitted Liens,
Liens pursuant to licenses that are not included in the Wachovia
Contributed Assets and Liens created pursuant to this Agreement and
the other Transaction Documents, (B) Wachovia has taken commercially
reasonable steps to protect and maintain the Wachovia Business IP, and
the Wachovia Business IP is valid, enforceable and currently
subsisting, and (C) the Intellectual Property used by each Wachovia
Contributed Subsidiary and the use
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thereof in the manner in which such Intellectual Property is currently
used in the Wachovia Contributed Business does not Infringe the rights
of others, the Wachovia Business IP is not being Infringed by others,
and, except as identified on Schedule 4.1(o), Wachovia and the
Wachovia Contributed Subsidiaries have not received any written claims
alleging Infringement of any Third Party's Intellectual Property by a
Wachovia Contributed Subsidiary within the last two years (without
regard to whether any such claim has been settled), except, in the
case of (A), (B) or (C), as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Wachovia Contributed Subsidiaries.
(iii) Wachovia has established and maintains a commercially
reasonable security program, including technology, practices,
procedures, and processes meeting or exceeding industry standards that
are designed to protect the integrity of transactions executed through
its IT Systems, including using encryption and/or other security
protocols and techniques when appropriate.
(p) Environmental. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Wachovia Contributed Subsidiaries:
(i) Each Wachovia Contributed Subsidiary has complied and
is in compliance with all applicable Environmental Laws pertaining to
the Wachovia Contributed Assets (including its Contributed Real
Property) held by it and the use and ownership thereof, and to the
operation of the Wachovia Contributed Business;
(ii) No violation by any Wachovia Contributed Subsidiary is
being alleged of any applicable Environmental Law relating to any of
the Wachovia Contributed Assets (including its Contributed Real
Property) held by it or the use or ownership thereof, or to the
operation of the Wachovia Contributed Business; and
(iii) No Wachovia Contributed Subsidiary or any other Person
(including any tenant or subtenant) has caused or taken any action
that will result in, and no Wachovia Contributed Subsidiary is subject
to, any liability or obligation relating to (x) the environmental
conditions on, under, or about the Contributed Real Property of
Wachovia or other properties or assets owned, leased, operated or used
by any Wachovia Contributed Subsidiary at the present time or in the
past, including without limitation, the air, soil and groundwater
conditions at such properties or (y) the past or present use,
management, handling, transport, treatment, generation, storage,
disposal or Release of any Hazardous Materials.
(q) Insurance. The Wachovia Contributed Subsidiaries maintain
insurance policies (or are covered by insurance policies maintained by or
on behalf of Wachovia or its other Subsidiaries) for the Wachovia
Contributed Business that are customary in scope
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and amount of coverage. All of such insurance policies are in full force
and effect, and no Wachovia Contributed Subsidiary (or Wachovia or any
other Subsidiary, if applicable) is in default in any material respect with
respect to its obligations under any of such insurance policies. All
premiums or payments payable under all such insurance policies for periods
prior to and ending on the date hereof have been duly paid or accrued
therefor on the Financial Statements of the Wachovia Contributed Business.
(r) Affiliate Transactions.
(i) Set forth on Schedule 4.1(r) is a complete and correct
list of all contracts, arrangements or other transactions (other than
the Transaction Documents), whether or not entered into in the
ordinary course of business, to or by which any Wachovia Contributed
Subsidiary, on the one hand, and Wachovia Entity, on the other hand,
are or have been a party or otherwise bound or affected, which: (A)
will be in effect after the Wachovia Reorganization, and (B) either
(x) involve liabilities and obligations that are material to any
Wachovia Contributed Subsidiary or (y) provide any Wachovia
Contributed Subsidiary any material benefits.
(ii) At the Closing, none of the Wachovia Contributed
Subsidiaries will be a party or subject to any contract with any of
the Wachovia Entities or their respective Affiliates except for any
applicable Transaction Documents (or as contemplated thereby), as
disclosed pursuant to Section 4.1(r)(i), or as otherwise disclosed in
the Financial Statements of the Wachovia Contributed Business.
(s) Accounting Controls. The Wachovia Contributed Subsidiaries have
devised and maintained systems of internal accounting controls with respect
to the Wachovia Contributed Business sufficient to provide reasonable
assurances that (i) all transactions are executed in accordance with
management's general or specific authorization, (ii) all transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with GAAP and to maintain proper accountability for items, (iii)
access to their property and assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for items is compared with the actual levels at reasonable
intervals and appropriate action is taken with respect to any differences,
except with respect to (i) through (iv) for such failures as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Wachovia Contributed Subsidiaries. Each Wachovia
Contributed Subsidiary that is registered as a broker-dealer has adopted
record keeping systems that comply in all material respects with the
requirements of applicable Law (including, in the case of U.S.
broker-dealer entities, Section 17 of the Exchange Act and the rules and
regulations thereunder) and the rules of all self-regulatory organizations
having jurisdiction over such Wachovia Contributed Subsidiary, and
maintains its records in substantial compliance therewith.
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(t) Corrupt Practices.
(i) No Wachovia Contributed Subsidiary, and to the
Knowledge of Wachovia, none of the senior managers of any Wachovia
Contributed Subsidiary, has been convicted of any criminal offense or
found guilty of any civil offense in either case involving fraud,
misrepresentation, dishonesty, breach of fiduciary duty, substantive
violation of banking or corporate Tax laws, embezzlement or other
fraudulent conversion or misappropriation of property.
(ii) No Wachovia Contributed Subsidiary has made any
contribution or expenditure, whether in the form of money, products,
services or facilities, in connection with any election for political
office or to any public official except to the extent permitted by
applicable Law. No Wachovia Contributed Subsidiary has offered or
provided any unlawful remuneration, entertainment or gifts to any
Person, including any official of a Governmental Authority, except for
small payments to expedite or secure the performance of routine
governmental action such as processing governmental papers (e.g.,
visas and shipping documents), providing mail or phone services,
scheduling inspections and obtaining Permits.
(iii) Since December 31, 1999, each Wachovia Contributed
Subsidiary has been in compliance in all material respects with all
requirements applicable to it regarding anti-money laundering and
anti-terrorist rules and regulations, including without limitation the
applicable provisions of the USA PATRIOT Act and the rules and
regulations thereunder.
(u) No Broker. Except for Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated and Berkshire Capital Corporation, Wachovia is not, and no
Wachovia Contributed Subsidiary at the Closing will be, committed to any
liability for any brokers' or finders' fees or any similar fees, including
but not limited to any bonus payable to any director, officer, employee,
agent or representative of or consultant to any Wachovia Contributed
Subsidiary, in connection with the transactions contemplated by this
Agreement.
Section 4.2 Representations and Warranties of Prudential.
Prudential, on behalf of itself and the other Prudential Transferors, represents
and warrants to Wachovia, as of the date hereof, that except as set forth herein
by reference to a Schedule identified to a subsection of this Section 4.2 and
except to the extent that any of the representations and warranties set forth
below relate to or apply to the Prudential Excluded Assets, the Prudential
Excluded Liabilities, or the Prudential Excluded Businesses:
(a) Organization, Standing and Power of Prudential and Subsidiaries.
Prudential is a corporation duly organized, validly existing and in good
standing under the Laws of the State of New Jersey. Prudential has all
requisite corporate power and authority to execute and deliver this
Agreement and any other Transaction Document to which it will be a party,
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. Each other Prudential
Transferor is duly organized, validly existing and (except to the extent
inapplicable to foreign Subsidiaries) in good standing under the Laws of
its jurisdiction of organization and will at the Closing
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have all requisite corporate or comparable power and authority to perform
the obligations applicable to such Prudential Transferor hereunder and
under the other Transaction Documents and to consummate the transactions
contemplated hereby and thereby. Each Subsidiary of Prudential to become a
party to a Transaction Document will have at the Closing all requisite
corporate or comparable power and authority to execute and deliver each
Transaction Document to be executed and delivered by it, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. Each Prudential Transferor has all
requisite corporate or comparable power and authority to own and operate
the Prudential Contributed Assets and the Prudential Contributed
Liabilities and to operate the Prudential Contributed Business as currently
conducted and is duly qualified to do business and in good standing as a
foreign entity authorized to transact business in each jurisdiction where
the ownership of such assets and liabilities or the operation of such
business requires such qualification or license, except where failure to
obtain such license would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Prudential Contributed
Business.
(b) Prudential Contributed Subsidiaries. Except as set forth on
Schedule 4.2(b), each Prudential Contributed Subsidiary is (or in the case
of Prudential Contributed Subsidiaries formed after the date hereof, will
be by Closing) an entity duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization, and each
Prudential Contributed Subsidiary will be at the Closing an entity which is
a disregarded entity for U.S. federal income tax purposes) (except as set
forth in Schedule 4.2(b)) and duly organized, validly existing and (except
to the extent not applicable to foreign Subsidiaries) in good standing
under the Laws of its jurisdiction of organization. Each Prudential
Contributed Subsidiary has (or in the case of Prudential Contributed
Subsidiaries formed after the date hereof, will have by Closing) all
requisite corporate or comparable power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted or as proposed to be conducted from and after the Closing. Each
Prudential Contributed Subsidiary will have at the Closing all requisite
limited liability company or comparable power and authority to own, lease
and operate the Prudential Contributed Assets and to carry on the
Prudential Contributed Business. Each Prudential Contributed Subsidiary is
(or in the case of Prudential Contributed Subsidiaries formed after the
date hereof, will be) duly qualified and (except to the extent not
applicable to foreign Subsidiaries) in good standing as a foreign entity
authorized to transact business in each jurisdiction where the conduct of
its business or the ownership of its properties requires such qualification
other than in jurisdictions where the failure to be so qualified,
individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect on the Prudential Contributed Business.
Prudential has made available to Wachovia complete and correct copies of
(i) the charter, bylaws or comparable organizational documents of each
Prudential Contributed Subsidiary as in effect on the date hereof and (ii)
the minute books or comparable records of each Prudential Contributed
Subsidiary, which at the date such books and records were made available
reflected in all material respects all corporate or comparable actions
taken by the stockholders or comparable equity holders, and directors or
comparable governing body (and any committee thereof), of each Prudential
Contributed Subsidiary.
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(c) Authority and Validity. The execution and delivery of this
Agreement and each other Transaction Document to be executed and delivered
by Prudential and its Subsidiaries, the performance of their respective
obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been, or in the case of
Transaction Documents not yet executed and delivered on the date hereof,
will be by the Closing, duly and validly authorized by all necessary
corporate or comparable action on the part of such Person. This Agreement
and each other Transaction Document to be executed and delivered by
Prudential or any of its Subsidiaries have been, or in the case of
Transaction Documents not yet executed on the date hereof will be by the
Closing, duly executed and delivered and are (or will be by Closing) valid
and binding obligations of Prudential or such Subsidiary, as applicable,
that is a party thereto, enforceable against it in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar Laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law), and an implied
covenant of good faith and fair dealing.
(d) No Conflicts. Subject to obtaining the Governmental Approvals and
Third Party Approvals contemplated in Section 4.2(e), and except as set
forth on Schedule 4.2(d), the execution and delivery of this Agreement and
each other Transaction Document intended to be executed by Prudential and
its Subsidiaries, and the performance of their respective obligations
hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby do not (i) conflict with or result in a
breach of any provision of any of their respective articles of
incorporation or by-laws or comparable organizational documents, or (ii)
conflict with, result in a breach of any provision of, constitute a default
(or an event which with notice or lapse of time or both would become a
default) or give to any Third Party any right of termination, cancellation,
amendment or acceleration under, or result in the creation of a Lien on any
of their respective properties under, any of the terms, conditions or
provisions of any note, bond, debenture, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which any
of them is a party, or by which any of them or any of their respective
properties may be bound or subject, or (iii) violate or conflict with any
Law applicable to such Person or any of its properties, except, in the
cases of clauses (ii) and (iii), as would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect on
the Prudential Contributed Business.
(e) Governmental and Third Party Approvals. No Governmental Approval
or Third Party Approval is required in connection with the execution and
delivery by Prudential and its Subsidiaries of this Agreement and the other
Transaction Documents or the performance of their respective obligations
hereunder and thereunder or the consummation by Prudential and its
Subsidiaries of the transactions contemplated hereby and thereby, except
for (i) the Governmental Approvals and Third Party Approvals identified on
Schedule 4.2(e) and (ii) any Governmental Approval or Third Party Approval
the failure of which to be obtained would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect on
the Prudential Contributed Business.
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(f) Financial Statements; Undisclosed Liabilities; No Adverse Change.
(i) The Financial Statements of the Prudential Contributed
Business present fairly, in all material respects, the financial
position and results of operations of the Prudential Contributed
Business, in accordance with GAAP applied on a consistent basis, as of
the dates or for the periods presented, except as otherwise specified
in Schedule 2.5(a)(ii). The Financial Statements of the Prudential
Contributed Business have been derived from the accounting books and
records of Prudential and its Subsidiaries.
(ii) The balance sheet as of December 31, 2002 included in
the Financial Statements of the Prudential Contributed Business does
not include any assets or liabilities not constituting a part of the
Prudential Contributed Business. The statements of income and
statement of stockholders' or members' equity included in the
Financial Statements of the Prudential Contributed Business do not
reflect the operations of any Person or business not constituting a
part of the Prudential Contributed Business.
(iii) Except as set forth in Schedule 4.2(f) and Prudential
Excluded Liabilities, the Prudential Contributed Business has no
liabilities or obligations, whether known, absolute, accrued,
contingent or otherwise and whether due or to become due, except for
liabilities or obligations (x) reflected on, accrued or reserved
against in the balance sheet contained in the Financial Statements of
the Prudential Contributed Business (in each case, to the extent so
reflected, accrued or reserved), or (y) incurred after the date of
such balance sheet in the ordinary course of business consistent with
past practice to the extent permitted by this Agreement.
(iv) During the period from December 31, 2002 to the date
hereof, there has occurred no Material Adverse Effect on the
Prudential Contributed Business, and no event or occurrence, which
would reasonably be expected to result in a Material Adverse Effect on
the Prudential Contributed Business.
(g) Capitalization. As of the date hereof, all outstanding shares of
capital stock of the Prudential Contributed Subsidiaries (other than
Prudential Contributed Subsidiaries to be formed after the date hereof) are
duly authorized, validly issued, fully paid and nonassessable, are subject
to no preemptive or similar rights, and were not issued in violation of any
preemptive or similar rights. As of the Closing, all outstanding equity
interests of the Prudential Contributed Subsidiaries will be duly
authorized and validly issued limited liability company interests or
comparable equity interests of the Prudential Contributed Subsidiaries,
will be fully paid and nonassessable, will not have been issued in
violation of any preemptive or similar rights and, except as contemplated
by the Transaction Documents, will be subject to no preemptive or similar
rights. Upon contribution by Prudential (or any of its Affiliates) to the
Company, the Company will acquire 100% of the equity interests of the
Prudential Contributed Subsidiaries free and clear of any Liens, except for
Permitted Liens and Liens created pursuant to the Transaction Documents.
Except as contemplated by this Agreement (including the
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Prudential Pre-Closing Conversion) or the other Transaction Documents, (A)
no capital stock, limited liability company interests or other equity
securities (including but not limited to any options, warrants or rights or
other security convertible into or exercisable or exchangeable for any
capital stock, limited liability company interest or other equity security)
of any Prudential Contributed Subsidiary is or may become required to be
issued (other than to a Company Entity) by reason of any security, contract
or other obligation, (B) there are no contracts, commitments or other
obligations by which any Prudential Contributed Subsidiary is or may be
bound to sell or otherwise transfer or repurchase, redeem or otherwise
acquire any capital stock, limited liability company interests or other
equity securities of such Prudential Contributed Subsidiary (other than to
or from a Company Entity), and (C) there are no contracts, commitments or
other obligations relating to the right to vote or dispose of any capital
stock, limited liability company interest or other equity security of any
Prudential Contributed Subsidiary.
(h) Assets; Title; Real Property.
(i) The assets (real, personal, mixed, tangible or
intangible) constituting the Prudential Contributed Assets, taking
into account the benefits to be provided under the other Transaction
Documents, constitute all of the assets used in, necessary for the
conduct of, or otherwise material to, the Prudential Contributed
Business as presently conducted. Immediately after the Closing, taking
into account the benefits to be provided under the other Transaction
Documents, the Company Entities will have good and marketable title
to, or have good title pursuant to a valid leasehold interest in or
have a valid right to use or occupy, all of the assets (real,
personal, mixed, tangible or intangible) used in, necessary for the
conduct of, or otherwise material to, the Prudential Contributed
Business as presently conducted, including the assets shown on the
Financial Statements of the Prudential Contributed Business and all of
the Contributed Real Property of Prudential, free and clear of any
Liens, except (A) for Permitted Liens, (B) as set forth in Schedule
4.2(h) or (C) as would not reasonably be expected to result in a
Material Adverse Effect on the Prudential Contributed Business. All of
such assets are adequate and suitable in all material respects for the
purposes for which they are presently being used. At the Closing, all
of such tangible assets will be in sufficiently good operating
condition and repair to permit their use in the operations of the
Prudential Contributed Business as such operations are presently
conducted, subject to normal wear and tear.
(ii) At the Closing, the applicable Prudential Transferors
will transfer to the Company good title to the Prudential Contributed
Equity Interests, free and clear of any Liens except Permitted Liens
and Liens created pursuant to this Agreement and the other Transaction
Documents.
(iii) At the Closing, there will be no leases, subleases,
licenses, concessions or any other contracts or agreements granting to
any Person other than the Company Entities any right to the
possession, use, occupancy, or enjoyment of any Contributed Real
Property of Prudential or any portion thereof, except as would not,
individually or in the aggregate, reasonably be expected to
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have a Material Adverse Effect on the Prudential Contributed
Subsidiaries. With respect to the Contributed Real Property of
Prudential, (A) the current operation and use of such Contributed Real
Property does not violate any Law now in effect, including but not
limited to planning, zoning, health, safety and fire Laws and
regulations, and the use being made of such Contributed Real Property
is in conformity with the certificate of occupancy issued therefor,
and (B) no default or breach exists under any of the covenants,
conditions, restrictions, rights-of-way or easements, if any,
affecting all or any portion of such Contributed Real Property, except
in the case of (A) or (B) as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Prudential Contributed Business.
(i) Contracts. Set forth in Schedule 4.2(i) is true and complete list
of all of the Material Contracts of Prudential in effect on the date of
this Agreement (the "Prudential Contracts"). Each Prudential Contract is in
full force and effect and a valid and binding obligation of the applicable
Prudential Transferor party thereto and, to the Knowledge of Prudential,
the other parties thereto, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar Laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law), and an implied covenant of good faith and fair dealing. Neither the
Prudential Transferor party thereto nor, to the Knowledge of Prudential,
any other party thereto is in default under, or in breach or violation of,
any Prudential Contract, and no event has occurred (to the Knowledge of
Prudential, in the case of any other party thereto) that would, with notice
or lapse of time or both, constitute such a default, breach or violation,
except in each such case to the extent such default, breach or violation
would not, individually or in the aggregate, be reasonably expected to have
a Material Adverse Effect on the Prudential Contributed Business.
(j) No Litigation.
(i) Schedule 4.2(j)(i) sets forth a list of each
individual Claim pending or, to the Knowledge of Prudential,
threatened against or affecting any Prudential Contributed Subsidiary
(whether or not related to the Prudential Contributed Business) or any
Prudential Contributed Asset that would in any such case be reasonably
expected to result in monetary damages in excess of $250,000 or the
imposition of injunctive or other non-monetary relief that would
reasonably be expected to materially interfere with the operations of
the Prudential Contributed Business after the Closing Date (without
regard to whether the defense thereof or liability in respect thereof
is covered by polices of insurance or any indemnity, contribution,
cost sharing or similar agreement or arrangement by or with any other
Person). Except as set forth on Schedule 4.2(j)(i), there are no
Claims pending or, to the Knowledge of Prudential, threatened against
or affecting any Prudential Contributed Subsidiary (whether or not
related to the Prudential Contributed Business) or Prudential
Transferor with respect to the Prudential Contributed Business, the
Prudential Contributed Assets or Prudential Contributed Liabilities
that would, individually or in the aggregate, reasonably be
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expected to have a Material Adverse Effect on the Prudential
Contributed Business.
(ii) Schedule 4.2(j)(ii) sets forth a list of each
individual Order that would be reasonably expected to result in
monetary damages in excess of $250,000 or the imposition of injunctive
or other non-monetary relief that would reasonably be expected to
materially interfere with the Prudential Contributed Business after
the Closing Date (without regard to whether the defense thereof or
liability in respect thereof is covered by policies of insurance or
any indemnity, contribution, cost sharing or similar agreement or
arrangement by or with any other Person). Except as set forth on such
Schedule, there are no outstanding Orders applicable to any Prudential
Contributed Subsidiary (whether or not related to the Prudential
Contributed Business) or any Prudential Transferor with respect to the
Prudential Contributed Business which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on
the Prudential Contributed Business. Prudential has supplied or made
available to Wachovia copies of all Orders applicable to any
Prudential Contributed Subsidiary (whether or not related to the
Prudential Contributed Business) or Prudential Transferor with respect
to the Prudential Contributed Business that are material to the
Prudential Contributed Subsidiaries or the Prudential Contributed
Business. To the Knowledge of Prudential, no Governmental Authority
has advised Prudential, any Prudential Contributed Subsidiary or any
Prudential Transferor that it is contemplating issuing any Order of a
type referred to above in this clause (ii).
(k) Compliance with Laws; Permits.
(i) Except as set forth on Schedule 4.2(k)(i), each
Prudential Contributed Subsidiary and each Prudential Transferor is
conducting and has conducted the Prudential Contributed Business and
is using and operating and has used and operated the Prudential
Contributed Assets in compliance with all Laws applicable to it except
for any such failures to be in such compliance that would not,
individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Prudential Contributed Business.
(ii) Except as set forth on Schedule 4.2(k)(ii), each
Prudential Contributed Subsidiary and each Prudential Transferor has
obtained and holds (or in the case of Prudential Contributed
Subsidiaries formed after the date hereof, will by Closing obtain and
hold) all Permits necessary for the conduct of the Prudential
Contributed Business, in each case except for any Permits the failure
of which to obtain would not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect on the
Prudential Contributed Business. Except as set forth on Schedule
4.2(k)(ii), there is no Claim pending or, to the Knowledge of
Prudential, threatened by any Governmental Authority that would result
in the nonrenewal, revocation, cancellation or suspension, or any
adverse modification, of any such Permits, and the execution and
delivery of this Agreement and other Transaction Documents, and the
consummation of the
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transactions contemplated hereby and thereby will not result in any
such nonrenewal, revocation, cancellation, suspension or modification,
in each case except as would not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect on the
Prudential Contributed Business. No Prudential Transferor or
Prudential Contributed Subsidiary is in violation of any Permits
applicable to it with respect to the Prudential Contributed Assets or
the Prudential Contributed Business, except for any such violations
that would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Prudential
Contributed Business.
(iii) Each Prudential Contributed Subsidiary and Prudential
Transferor has timely filed all registrations, declarations, reports,
notices, forms and other filings required to be filed with the SEC,
NASD, NYSE or any other Governmental Authority, and all amendments or
supplements to any of the foregoing (the "Prudential Contributed
Business Filings"), except where any failure to file would not,
individually or in the aggregate, be reasonably expected to result in
a Material Adverse Effect on the Prudential Contributed Business. The
Prudential Contributed Business Filings were prepared in all material
respects, where applicable, in accordance with applicable Law, and all
fees and assessments due and payable in connection therewith have been
paid in all material respects.
(iv) Each Prudential Contributed Subsidiary, each
Prudential Transferor and each of their respective employees is (or,
in the case of Prudential Contributed Subsidiaries not yet formed,
will at the Closing be) duly registered, licensed or qualified as a
broker-dealer and/or investment adviser in each jurisdiction where the
conduct of its business requires such registration, licensing or
qualification, and is (or, in the case of Prudential Contributed
Subsidiaries not yet formed, will at the Closing be) in compliance
with all Laws requiring any such registration, licensing or
qualification and is (or, in the case of Prudential Contributed
Subsidiaries not yet formed, will at the Closing be) subject to no
material liability or disability by reason of the failure to be so
registered, licensed or qualified.
(v) Prudential has delivered or made available to Wachovia
a true and complete copy of currently effective Forms BD and ADV as
filed with the SEC by each applicable Subsidiary of Prudential
conducting the Prudential Contributed Business, all state and other
federal registration forms, all reports and all material
correspondence filed by each such applicable Subsidiary with any
Governmental Authority under the Exchange Act, the Investment Company
Act, the Advisers Act and under similar state statutes within the last
three years, in each case with respect to the Prudential Contributed
Business. Prudential shall deliver to Wachovia such forms and reports
as are filed by each Subsidiary of Prudential conducting the
Prudential Contributed Business from and after the date hereof until
the Closing. The information contained in such forms and reports was
(or will be, in the case of any forms and reports filed after the date
hereof) complete and accurate in all material respects as of the time
of filing thereof.
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(vi) Except as disclosed on Forms ADV or BD filed prior to
the date of this Agreement, neither any Prudential Contributed
Subsidiary (whether or not related to the Prudential Contributed
Business), any Prudential Transferor (with respect to the Prudential
Contributed Business) nor any of their respective directors, officers,
employees, "associated persons" (as defined in the Exchange Act) or
"affiliated persons" (as defined in the Investment Company Act) has
been the subject of any disciplinary proceedings or Orders of any
Governmental Authority arising under applicable Laws which would be
required to be disclosed on Forms ADV or BD. No such disciplinary
proceeding or Order is pending or, to the Knowledge of Prudential,
threatened. Except as disclosed on such Forms ADV or BD filed prior to
the date of this Agreement, neither any Prudential Contributed
Subsidiary, any other Subsidiary of Prudential conducting the
Prudential Contributed Business nor any of their respective directors,
officers, employees, associated persons or affiliated persons, has
been permanently enjoined by the Order of any Governmental Authority
from engaging or continuing any conduct or practice in connection with
any activity or in connection with the purchase or sale of any
security. Except as disclosed on such Forms ADV or BD filed prior to
the date of this Agreement, neither any Prudential Contributed
Subsidiary, any Prudential Transferor nor any of their respective
directors, officers, employees, associated persons or affiliated
persons is or has been ineligible to serve as an investment adviser
under the Advisers Act or as a broker-dealer or an associated person
of a broker-dealer under Section 15(b) of the Exchange Act (including
being subject to any "statutory disqualification" as defined in
Section 3(a)(39) of the Exchange Act), or ineligible to serve in, or
subject to any disqualification which would be the basis for any
limitation on serving in, any of the capacities specified in Section
9(a) or 9(b) of the Investment Company Act.
(vii) Each Prudential Contributed Subsidiary and each
Prudential Transferor has at all times since December 31, 1999 or its
date of formation, whichever is later, rendered investment advisory
services to investment advisory clients with whom such entity is or
was a party to an investment advisory agreement or similar arrangement
in material compliance with all applicable requirements as to
portfolio composition and portfolio management including, but not
limited to, the terms of such investment advisory agreements, written
instructions from such investment advisory clients, prospectuses or
other offering materials, board of directors or trustee directives and
applicable Law. No Prudential Contributed Subsidiary is, or is
required to register as, an "investment company" within the meaning of
the Investment Company Act.
(viii) Schedule 4.2(k)(viii) sets forth a complete list of
all securities exchanges, commodities exchanges, boards of trade,
clearing organizations, trade associations and similar organizations
in which the Prudential Contributed Subsidiaries and the Prudential
Transferors with respect to the Prudential Contributed Business hold
membership or have been granted trading privileges.
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(ix) Schedule 4.2(k)(ix) sets forth with respect to each
Prudential Contributed Subsidiary and each Prudential Transferor with
respect to the Prudential Contributed Business a complete list of all
(i) broker-dealer licenses or registrations and (ii) all licenses and
registrations as an investment adviser under the Advisers Act or any
similar state Laws. No Prudential Contributed Subsidiary is, or is
required to be, registered as a futures commission merchant,
commodities trading adviser, commodity pool operator or introducing
broker under the Commodities Futures Trading Act or any similar state
Laws.
(x) All of the activities conducted by the Prudential
Contributed Subsidiaries and the Prudential Transferors are "financial
in nature" or "incidental to a financial activity" within the meaning
of Section 225.86 of Regulation Y promulgated by the Board of
Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended, and no Prudential Entity is subject to any
Law or Order that would prevent or make unlawful the conduct by any
Company Entity of the Contributed Businesses.
(l) Tax. Except as set forth on Schedule 4.2(l) or as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Prudential Contributed Business, (i) the Prudential
Contributed Subsidiaries and the other Subsidiaries of Prudential with
respect to the Prudential Contributed Business have timely filed (or
Prudential has timely filed on their behalf) with the appropriate taxing
authorities all Tax Returns required to be filed by or with respect to the
Prudential Contributed Business, (ii) the Prudential Contributed
Subsidiaries and the other Subsidiaries of Prudential with respect to the
Prudential Contributed Business have paid in full (or Prudential has paid
in full on their behalf) all Taxes due by or in respect of the Prudential
Contributed Business for all periods, (iii) each Prudential Contributed
Subsidiary and each other Subsidiary of Prudential with respect to the
Prudential Contributed Business has duly and timely withheld all Taxes
required to be withheld in connection with its business or assets, and such
withheld Taxes have been either duly and timely paid to the proper
Governmental Authorities or properly set aside in accounts for such
purpose, (iv) there are no material outstanding adjustments for Tax
purposes applicable to any Prudential Contributed Subsidiary or other
Subsidiary of Prudential with respect to the Prudential Contributed
Business and required as a result of changes in methods of accounting
effected on or before the Closing Date, which adjustments will remain in
force or by which any Prudential Contributed Subsidiary or other Company
Entity will be bound after the Closing Date, (v) no material elections for
Tax purposes have been made by any Prudential Contributed Subsidiary or
other Subsidiary of Prudential with respect to the Prudential Contributed
Business that will remain in force or by which any Prudential Contributed
Subsidiary or other Company Entity will be bound after the Closing Date,
(vi) no Prudential Contributed Subsidiary is a party to or bound by or has
any rights or obligations under any Tax allocation, sharing, indemnity or
similar agreement or arrangement that will remain in effect after the
Closing Date, and (vii) no Prudential Contributed Subsidiary is or has been
a member of any group of companies filing a consolidated, combined or
unitary Tax Return for any Tax period for which the statute of limitations
for the assessment or collection of any Tax remains open, other than
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a group of which Prudential or one of its Subsidiaries has at all times
been the common parent.
(m) Individual Benefit Plans and Related Matters; ERISA.
(i) Individual Benefit Plans.
(A) Schedule 4.2(m)(i)(A) sets forth a complete and
correct list of each Prudential Contributed Business Plan.
With respect to each such Prudential Contributed Business
Plan, Prudential has provided or made available to Wachovia
complete and correct copies of: (x) such Prudential
Contributed Business Plan, if written, or a description of
such Prudential Contributed Business Plan if not written, (y)
to the extent applicable to such Prudential Contributed
Business Plan, all trust agreements, insurance contracts or
other funding arrangements, the two most recent actuarial and
trust reports, the two most recent Forms 5500 required to have
been filed with the IRS and all schedules thereto, the most
recent IRS determination letter, all current summary plan
descriptions, all material written communications received
from or sent to the IRS, the Pension Benefit Guaranty
Corporation or the Department of Labor, the most recent
actuarial report regarding any post-employment life or medical
benefits provided under any such Prudential Contributed
Business Plan, the most recent statements or other
communications regarding Prudential withdrawal or other
multiemployer plan liabilities, if any, and (z) all amendments
and modifications with a prospective effect to any Prudential
Contributed Business Plan and related trust agreements and/or
insurance contracts or other funding arrangements. In
addition, Prudential has indicated on Schedule 4.2(m)(i)(A)
which Prudential Contributed Business Plans are deferred
compensation, supplemental defined benefit retirement, stock
and other equity (or equity-based) compensation, short-term
bonus, and retiree welfare benefit plans and non-compete,
non-solicitation, and nondisclosure agreements. Prudential has
also indicated on Schedule 4.2(m)(i)(A) all employment
contracts of the Prudential Contributed Business Individuals
(the "Prudential Employment Agreements"). Of such employment
contracts, (I) Prudential shall indicate with one asterisk
those employment contracts that do not require the employee's
consent to be assigned to the Company (those individuals with
such contracts, the "Assignable Employees"), and (II) Wachovia
shall designate with the marking "(MA)" those employment
contracts that Wachovia has not, as of February 14, 2003, been
fully provided (the "Missing Employment Agreements").
(B) Except as set forth on Schedule 4.2(m)(i)(B), none
of Prudential or any member of the Prudential Contributed
Business has communicated in writing to any Prudential
Contributed Business Individual any intention or commitment to
modify any Prudential Contributed Business Plan or to
establish or implement any other
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employee, retiree or independent contractor benefit or
compensation plan or arrangement following the date of this
Agreement.
(ii) Qualification. Each Prudential Contributed Business
Plan intended to be qualified under Section 401(a) of the Code is so
qualified and has received a favorable determination letter from the
IRS as to its qualification under the Code and to the effect that any
trust forming a part thereof is exempt from taxation under Section
501(a) of the Code, and nothing has occurred since the date of such
determination letter that could reasonably be expected to adversely
affect such qualification or tax-exempt status.
(iii) Compliance; Liability.
(A) Neither Prudential nor any Prudential Related
Person has been involved in any transaction that would
reasonably be expected to cause, following the Closing, any
Company Entity to be subject to liability under Section 4069
or 4212 of ERISA. Neither Prudential nor any Prudential
Related Person has incurred (either directly or indirectly,
including as a result of an indemnification obligation) any
material liability under or pursuant to Title IV of ERISA or
the penalty, excise Tax or joint and several liability
provisions of the Code relating to employee benefit plans and,
to the Knowledge of Prudential, no event, transaction or
condition has occurred or exists that would, individually or
in the aggregate, reasonably be expected to result in any such
liability to, following the Closing, Wachovia or any of its
Affiliates or any Company Entity. All contributions and
premiums required to have been paid or accrued through the
Closing Date by Prudential and each Prudential Related Person
to any Prudential Contributed Business Plan under the terms of
any such plan or its related trust, insurance contract or
other funding arrangement (whether as a result of the
transactions contemplated by the Transaction Documents or
otherwise) or pursuant to any applicable Law or collective
bargaining agreement (including ERISA and the Code) have been
paid within the earliest time prescribed by any such plan,
agreement or applicable Law or have been properly accrued and
none of the Company Entities shall be liable for any such
contributions or premiums unless such have been so accrued on
the Final Closing Balance Sheet of the Prudential Contributed
Business.
(B) Each of the Prudential Contributed Business Plans
has been operated and administered in all material respects in
compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements. There are no
material pending or, to the Knowledge of Prudential,
threatened, Claims by or on behalf of any of the Prudential
Contributed Business Plans, by any Prudential Contributed
Business Individual or otherwise involving any such Prudential
Contributed Business Plan or the assets of any Prudential
Contributed Business Plan (other than routine claims for
benefits, all of which have been fully
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reserved for on the balance sheet included in the Financial
Statements of the Prudential Contributed Business).
(C) Except as set forth on Schedule 4.2(m)(iii)(C), no
Prudential Contributed Business Plan is or will be, as a
result of the Closing, a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) or a "multiple employer plan"
within the meaning of Section 4063 or 4064 of ERISA.
(D) Each Prudential Contributed Business Plan that is
subject to the minimum funding standards of ERISA or the Code
satisfies such standards under Sections 412 and 302 of the
Code and ERISA, respectively, and no such Prudential
Contributed Business Plan has incurred an "accumulated funding
deficiency" within the meaning of such sections, whether or
not waived. No "prohibited transaction" (within the meaning of
Section 406 of ERISA and Section 4975 of the Code) has
occurred or would reasonably be expected to occur with respect
to any Prudential Contributed Business Plan that would
reasonably be expected to result, individually or in the
aggregate, in a material liability to any Company Entity.
(E) Except as set forth on Schedule 4.2(m)(iii)(E) or
as otherwise provided in Section 8.4 of this Agreement, no
Prudential Contributed Business Individual is or will become,
on and after the Closing, entitled to receive post-employment
benefits of any kind by reason of employment with any member
of the Prudential Contributed Business under any Prudential
Contributed Business Plan for which any of the Company
Entities will bear any expense, including, without limitation,
death or medical benefits (whether or not insured), other than
(I) coverage mandated by Section 4980B of the Code or (II)
retirement benefits payable under any Prudential Contributed
Business Plan qualified under Section 401(a) of the Code. In
addition, all agreements with (x) any independent contractor
that provides services to any Prudential Contributed
Subsidiaries and (y) any Third Party service provider
(including, without limitation, any vendor or administrator)
that provides services with respect to the Prudential
Contributed Business Plans or the Prudential Transferees, may
in any of the cases described in clauses (x) and (y) above, be
terminated in accordance with the terms of any such agreement
without liability to Wachovia or its Affiliates or any Company
Entity at any time, other than fees payable in the normal
course for services rendered prior to such termination.
(F) Except as set forth on Schedule 4.2(m)(iii)(F),
the announcement or consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents, either alone or in combination with a subsequent
event, will not result in the payment or provision of, or an
increase in the amount of, compensation or benefits or
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the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any
Prudential Contributed Business Individual or the funding of
any grantor trust relating to such individual.
(G) All Prudential Contributed Business Plans that are
welfare benefit plans or nonqualified deferred compensation
plans may be terminated without liability to Wachovia or its
Affiliates or any Company Entity at any time (or with such
applicable notice to participants as any such plans may
require).
(H) None of Wachovia, its Affiliates, any Company
Entity or any Benefit Plan (other than the Prudential Pension
Plan) is entitled, or has any rights or Claims, to any assets
of the Prudential Pension Plan.
(I) All participants in the Prudential Securities
General Partners Pension Plan have, prior to or as of the date
hereof, terminated employment with Prudential and its
Subsidiaries.
(iv) Foreign Plans. Except as set forth in Schedule
4.2(m)(iv), no Prudential Contributed Business Plan is maintained
outside the jurisdiction of the United States, or covers any
Prudential Contributed Business Individual residing or working outside
the United States that is not required and sponsored by a Governmental
Authority in such jurisdiction (any such Benefit Plan set forth in
Schedule 4.2(m)(iv), the "Foreign Prudential Plans"). With respect to
any Foreign Prudential Plans, (i) all Foreign Prudential Plans have
been established, maintained and administered in material compliance
with their terms and all applicable Law, and no unfunded liability
exists with respect to any such plan, and (ii) no material liability
or obligation of the Prudential Contributed Business exists, or would,
individually or in the aggregate, be reasonably expected to arise
either in connection with the transactions contemplated under this
Agreement and the other Transaction Documents or otherwise with
respect to any failure to comply with the applicable Laws, in any of
the foregoing cases with respect to the Foreign Prudential Plans.
(n) Labor. Neither Prudential nor a Subsidiary of Prudential is a
party to or bound by any collective bargaining agreement, contract or other
understanding with a labor union or labor organization with respect to the
Prudential Contributed Business Individuals, and to the Knowledge of
Prudential, there is no activity involving the Prudential Contributed
Business Individuals seeking to certify a collective bargaining unit or
engaging in any similar organizational activity. Prudential and its
Subsidiaries are in compliance with its obligations pursuant to WARN, and
all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise. In no event shall
Wachovia or its Affiliates or any of the Company Entities have or bear any
liability or responsibility with respect to WARN arising on or prior to the
Closing Date as a result of the transactions contemplated by this Agreement
as it applies to any Prudential Contributed Subsidiary or Prudential
Contributed Business Individual, unless such liability arises as a result
of any action (or any failure to act) by
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Wachovia or any Company Entity after the Closing Date. Except to the extent
a failure to do so would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on the Prudential
Contributed Business, the Prudential Contributed Subsidiaries have complied
with all applicable Laws pertaining to the employment or termination of
employment of the Prudential Contributed Business Individuals, including
without limitation, all such Laws relating to labor relations, equal
employment opportunities, fair employment practices, prohibited
discrimination or distinction and other similar employment activities.
(o) Intellectual Property.
(i) Prudential has made available to Wachovia complete and
correct lists as of the date hereof of all material patents,
registered trademarks, registered copyrights, domain names and
applications with respect to any of the foregoing with respect to all
Prudential Business IP.
(ii) To the Knowledge of Prudential: (A) each Prudential
Contributed Subsidiary and each Prudential Transferor with respect to
the Prudential Contributed Business has the right to use all
Intellectual Property used by it in or for the benefit of the
Prudential Contributed Business, free and clear of all Liens other
than Permitted Liens, Liens pursuant to licenses that are not included
in the Prudential Contributed Assets and Liens created pursuant to
this Agreement and the other Transaction Documents, (B) each
Prudential Contributed Subsidiary and each Prudential Transferor with
respect to the Prudential Contributed Business has taken commercially
reasonable steps to protect and maintain the Prudential Business IP,
and the Prudential Business IP is valid, enforceable and currently
subsisting, and (C) the Intellectual Property used by Prudential and
its Subsidiaries with respect to the Prudential Contributed Business
and the use thereof in the manner in which such Intellectual Property
is currently used in the Prudential Contributed Business does not
Infringe the rights of others, the Prudential Business IP is not being
Infringed by others, and, except as identified on Schedule 4.2(o),
Prudential and its Subsidiaries have not with respect to the
Prudential Contributed Business, received any written claims alleging
Infringement of any Third Party's Intellectual Property within the
last two years (without regard to whether any such claim has been
settled), except, in the case of (A), (B) or (C), as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Prudential Contributed Business.
(iii) Each Prudential Contributed Subsidiary and each
Prudential Transferor with respect to the Prudential Contributed
Business has established and maintains a commercially reasonable
security program, including technology, practices, procedures, and
processes meeting or exceeding industry standards that are designed to
protect the integrity of transactions executed through its IT Systems,
including using encryption and/or other security protocols and
techniques when appropriate.
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(p) Environmental. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Prudential Contributed Business:
(i) Each Prudential Contributed Subsidiary and each
Prudential Transferor with respect to the Prudential Contributed
Business has complied and is in compliance with all applicable
Environmental Laws pertaining to the Prudential Contributed Assets
(including its Contributed Real Property) held by it and the use and
ownership thereof, and to the operation of the Prudential Contributed
Business;
(ii) No violation by any Prudential Contributed Subsidiary
or any Prudential Transferor with respect to the Prudential
Contributed Business is being alleged of any applicable Environmental
Law relating to any of the Prudential Contributed Assets (including
its Contributed Real Property) held by it or the use or ownership
thereof, or to the operation of the Prudential Contributed Business;
and
(iii) No Prudential Contributed Subsidiary or Prudential
Transferor with respect to the Prudential Contributed Business or any
other Person (including any tenant or subtenant) has caused or taken
any action that will result in, and no Prudential Contributed
Subsidiary or Prudential Transferor with respect to the Prudential
Contributed Business is subject to, any liability or obligation
relating to (x) the environmental conditions on, under, or about the
Contributed Real Property of Prudential or other properties or assets
owned, leased, operated or used by any Prudential Contributed
Subsidiary or Prudential Transferor with respect to the Prudential
Contributed Business at the present time or in the past, including
without limitation, the air, soil and groundwater conditions at such
properties or (y) the past or present use, management, handling,
transport, treatment, generation, storage, disposal or Release of any
Hazardous Materials.
(q) Insurance. The Prudential Contributed Subsidiaries and the
Prudential Transferors with respect to the Prudential Contributed Business
maintain insurance policies (or are covered by insurance policies
maintained by or on behalf of Prudential or its other Subsidiaries) for the
Prudential Contributed Business that are customary in scope and amount of
coverage. All of such insurance policies are in full force and effect, and
no Prudential Contributed Subsidiary or Prudential Transferor is in default
in any material respect with respect to its obligations under any of such
insurance policies. All premiums or payments payable under all such
insurance policies for periods prior to and ending on the date hereof have
been duly paid or accrued therefor on the Financial Statements of the
Prudential Contributed Business.
(r) Affiliate Transactions.
(i) Set forth on Schedule 4.2(r) is a complete and correct
list of all contracts, arrangements or other transactions (other than
the Transaction Documents), whether or not entered into in the
ordinary course of business, to or
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by which any Prudential Contributed Subsidiary or Prudential
Transferor, on the one hand, and a Prudential Entity, on the other
hand, are or have been a party or otherwise bound or affected, which:
(A) will be in effect after the Prudential Pre-Closing Conversion, and
(B) either (x) involve liabilities and obligations that are material
to any Prudential Contributed Subsidiary or other Subsidiary of
Prudential with respect to the Prudential Contributed Business or (y)
provide any Prudential Contributed Subsidiary or Prudential Transferor
with respect to the Prudential Contributed Business any material
benefits.
(ii) At the Closing, none of the Prudential Contributed
Subsidiaries will be a party or subject to any contract with any of
the Prudential Entities or their respective Affiliates except for any
applicable Transaction Documents (or as contemplated thereby), as
disclosed pursuant to Section 4.2(r)(i), or as otherwise disclosed in
the Financial Statements of the Prudential Contributed Business.
(s) Accounting Controls. The Prudential Contributed Subsidiaries and
the Prudential Transferors with respect to the Prudential Contributed
Business have devised and maintained systems of internal accounting
controls with respect to the Prudential Contributed Business sufficient to
provide reasonable assurances that (i) all transactions are executed in
accordance with management's general or specific authorization, (ii) all
transactions are recorded as necessary to permit the preparation of
financial statements in conformity with GAAP and to maintain proper
accountability for items, (iii) access to their property and assets is
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for items is compared
with the actual levels at reasonable intervals and appropriate action is
taken with respect to any differences, except with respect to (i) through
(iv) for such failures as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Prudential
Contributed Business. Each Prudential Contributed Subsidiary and each
Prudential Transferor that is registered as a broker-dealer has adopted
record keeping systems that comply in all material respects with the
requirements of applicable Law (including, in the case of U.S.
broker-dealer entities, Section 17 of the Exchange Act and the rules and
regulations thereunder) and the rules of all self-regulatory organizations
having jurisdiction over such Prudential Contributed Subsidiary or
Prudential Transferor with respect to the Prudential Contributed Business,
and maintains its records in substantial compliance therewith.
(t) Corrupt Practices.
(i) No Prudential Contributed Subsidiary and no Prudential
Transferor with respect to the Prudential Contributed Business, and to
the Knowledge of Prudential, none of the senior managers of any
Prudential Contributed Subsidiary or Prudential Transferor has been
convicted of any criminal offense or found guilty of any civil offense
in either case involving fraud, misrepresentation, dishonesty, breach
of fiduciary duty, substantive violation of banking or corporate Tax
laws, embezzlement or other fraudulent conversion or misappropriation
of property.
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(ii) No Prudential Contributed Subsidiary and no Prudential
Transferor with respect to the Prudential Contributed Business has
made any contribution or expenditure, whether in the form of money,
products, services or facilities, in connection with any election for
political office or to any public official except to the extent
permitted by applicable Law. No Prudential Contributed Subsidiary and
no Prudential Transferor with respect to the Prudential Contributed
Business has offered or provided any unlawful remuneration,
entertainment or gifts to any Person, including any official of a
Governmental Authority, except for small payments to expedite or
secure the performance of routine governmental action such as
processing governmental papers (e.g., visas and shipping documents),
providing mail or phone services, scheduling inspections and obtaining
Permits.
(iii) Since December 31, 1999, each Prudential Contributed
Subsidiary and each Prudential Transferor with respect to the
Prudential Contributed Business has been in compliance in all material
respects with all requirements applicable to it regarding anti-money
laundering and anti-terrorist rules and regulations, including without
limitation the applicable provisions of the USA PATRIOT Act and the
rules and regulations thereunder.
(u) No Broker. Except for Xxxxxxx, Xxxxx & Co., Prudential is not, and
no Prudential Contributed Subsidiary at the Closing will be, committed to
any liability for any brokers' or finders' fees or any similar fees,
including but not limited to any bonus payable to any director, officer,
employee, agent or representative of or consultant to any Prudential
Contributed Subsidiary or Prudential Transferor in connection with the
transactions contemplated by this Agreement.
ARTICLE 5
CERTAIN INTERIM AND OTHER COVENANTS
Section 5.1 Conduct of Business Prior to Closing.
(a) Except as contemplated or permitted hereby (including pursuant to
the Wachovia Reorganization or the Prudential Pre-Closing Conversion), as set
forth on Schedule 5.1 or with the prior written consent of the other Party
(which consent shall not be unreasonably withheld or delayed), and subject to
the other provisions hereof (including Section 5.1(b)), between the date hereof
and the Closing, each Party will, and will cause each of its respective
Subsidiaries to, use their respective commercially reasonable efforts to
conduct, in all material respects, their respective Contributed Businesses in
the ordinary and usual course of business consistent with past practice, to
preserve intact the business, business organization, properties, employees and
goodwill with respect to such Contributed Businesses and to preserve for the
Company existing business relations necessary in the conduct of such Contributed
Businesses consistent with past practice. For the avoidance of doubt, it is
understood and agreed that voluntary customer or employee attrition at a Party's
Contributed Business following the execution and delivery and public
announcement of this Agreement and the transactions contemplated hereby shall
not, by itself, constitute a breach of such Party's obligations under this
Section 5.1(a).
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(b) Except as expressly contemplated or permitted hereby (including
pursuant to the Wachovia Reorganization or the Prudential Pre-Closing
Conversion), as set forth on Schedule 5.1, or with the prior written consent of
the other Party (which consent will not be unreasonably withheld or delayed),
between the date hereof and the Closing, each of the Parties shall not:
(i) permit any of its Contributed Subsidiaries to (A)
issue any capital stock or other equity securities, (B) make, declare,
pay or set aside any dividend or other distribution in respect of its
capital stock or other equity securities, or (C) split, combine,
reclassify, redeem, purchase or otherwise acquire or transfer any of
its capital stock or other equity securities, except in each case in
accordance with the Wachovia Reorganization or the Prudential
Pre-Closing Conversion, as the case may be, and except for issuances,
dividends and distributions to other Contributed Subsidiaries or to
Wachovia or Prudential and to their other respective Wholly-Owned
Subsidiaries, as applicable;
(ii) permit any of its Subsidiaries to incur or guarantee
indebtedness for borrowed money or other obligations with respect to
its Contributed Business, except in the ordinary course of business
consistent with past practice;
(iii) permit any of its Subsidiaries to take (or fail to
take) any action with respect to its Contributed Business that, if
taken (or failed to have been taken) by the Company Entities after the
Closing, would require the consent of the Members pursuant to Section
4.12 of the LLC Agreement or would result in a change in the
respective initial Percentage Interests of the Wachovia Members and
the Prudential Members in accordance with the terms of this Agreement
and the LLC Agreement;
(iv) intentionally take or fail to take, or permit any of
its Subsidiaries to intentionally take or fail to take, any action
that would either (x) prevent the satisfaction of any conditions
specified in Section 6.2 if such Party is Wachovia or (y) prevent the
satisfaction of any conditions specified in Section 6.1 if such Party
is Prudential;
(v) (A) dispose of any Contributed Subsidiary, except in
accordance with the Wachovia Reorganization or the Prudential
Pre-Closing Conversion, as the case may be; (B) except in the ordinary
course of business consistent with past practice, dispose of any
Wachovia Contributed Assets or Prudential Contributed Assets, as the
case may be; or (C) except for pledges of securities held in inventory
(or in trading positions) in the ordinary course of business
consistent with past practice, mortgage, pledge or subject to any Lien
other than a Permitted Lien any Wachovia Contributed Assets or
Prudential Contributed Assets, as the case may be;
(vi) permit any Contributed Subsidiary to enter into any
new material line of business or change its material investment, risk
or other material operating policies; open any new offices or
facilities or relocate or close any existing offices
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or facilities, except in the ordinary course of business consistent
with past practice and except for those openings, relocations or
closings in progress or planned on the date hereof; or change in any
material respect the pricing and terms of its customer services
(except in response to changes in competitive conditions or prevailing
market practices, but in any such case only after notice to and
consultation with the other Party, to the extent permitted by
applicable Law);
(vii) increase, or make any binding or non-binding
commitment to increase, the benefits provided by any Benefit Plan, or
the compensation levels of Wachovia or Prudential Contributed Business
Individuals, as the case may be (including any across-the-board
increases for any groups of such employees), or grant any bonus to, or
increase the level of any bonus opportunity for, or adopt, amend or
terminate any plan, agreement, program, policy or other arrangement
relating to, any Contributed Business Individuals or any individual
for whom any Company Entity will incur any liability, except (A) for
amendments to any qualified defined benefit plan that will not
increase the cost of maintaining the plan to any Company Entity; (B)
for grants or increases required pursuant to any Benefit Plan or
applicable Law; (C) for increases of compensation necessary to retain
an individual Contributed Business Individual deemed essential to the
Contributed Business, which shall not exceed the percentage of such
individual's annual rate of salary as set forth on Schedule 1.1(y),
the aggregate annualized cost of all such increases which shall not
exceed the amount set forth on Schedule 1.1(y); (D) Prudential may
adopt the Prudential Omnibus Incentive Plan and Prudential may make
the Prudential Equity Awards (as defined in Section 8.4(f)(iv)) set
forth on Schedule 5.1(b)(vii)(D) (which Schedule may be amended with
Wachovia's consent after the date hereof); (E) Wachovia may pay, or
may cause to be paid, annual incentive payments to Wachovia
Contributed Business Individuals pursuant to the terms of the Wachovia
Securities Brokerage Home Office Plan; (F) Wachovia may, in connection
with determinations made by the proposed Chief Executive Officer of
the Company after consultation with Prudential, provide the
Contributed Business Individuals with communications regarding
employment and/or retention plans or agreements to be entered into
with such individuals; or (G) Wachovia may amend the Benefit Plans set
forth on Schedule 5.1(b)(vii)(G), in the manner described in such
Schedule;
(viii) except as provided in Section 5.1(b)(vii)(D) above,
make any equity or other grants, including but not limited to options,
stock or other equity-related awards, to any Contributed Business
Individuals, except for any such grants made by Wachovia in the
ordinary course of the Wachovia Contributed Business, consistent with
past practice;
(ix) hire or transfer any Contributed Business Individual
or any individual who is intended to be a Contributed Business
Individual (including any employees hired as replacements for
terminating employees) unless Prudential or Wachovia, as the case may
be, reviews all such hires or transfers with the proposed Chief
Executive Officer of the Company on at least a monthly basis, and
provided that the maximum number of such new hires by Prudential and
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Wachovia, respectively, and their Affiliates shall not exceed for each
of Prudential and Wachovia, ten (10) individuals per month, up to an
aggregate of seventy-five (75) individuals, excluding brokers and
branch support personnel;
(x) expend, or commit to expend, funds for capital
expenditures with respect to its Contributed Business in excess of $10
million in the aggregate;
(xi) settle or compromise any Claim of, against or
affecting its Contributed Business (whether or not existing on the
date of this Agreement) if such Claim would result in the issuance of
an Order that would affect or apply to the Company Entities after the
Closing, or would involve an admission of wrongdoing by any of the
Company Entities or with respect to the Contributed Businesses;
(xii) except as may be required as a result of a change in
GAAP approved in writing by the Party's independent accountants,
change any of the accounting methods, practices or material policies
used by such Party with respect to its Contributed Business, in each
case as set forth in, or used in the preparation of, the Financial
Statements of the Wachovia Contributed Business or the Financial
Statements of the Prudential Contributed Business, as applicable;
(xiii) (A) enter into any contract, agreement or instrument
that would constitute a Contributed Asset or amend, terminate or waive
any rights under any such contract, agreement or instrument, as
applicable, or (B) enter into, amend, terminate or waive any rights
under any contract or agreement with any Party or its Subsidiaries
with respect to its Contributed Business that would become a
Contributed Asset or a Contributed Liability, or (C) permit any
Subsidiary to do any of the foregoing; provided that, notwithstanding
anything herein to the contrary, each Party and its Subsidiaries and
other Affiliates may document and reduce to writing any transaction,
agreement or other arrangement that is in effect on the date hereof as
disclosed on Schedule 4.1(r) or 4.2(r); or
(xiv) enter into, or cause any Subsidiary of such Party with
respect to its Contributed Business to enter into, any contract,
commitment or understanding with respect to any of the foregoing.
Section 5.2 Access to Information.
(a) Between the date hereof and the Closing, each Party (the
"delivering Party") shall, and shall cause its Subsidiaries to, give the
other Party (the "requesting Party") and its representatives reasonable
access at all reasonable times to the employees, representatives,
properties, books and records of the delivering Party's Contributed
Business and furnish them with such information and documents in its
possession relating to such Contributed Business as the requesting Party
may from time to time reasonably request in connection with the
consummation of the transactions contemplated hereby and the performance of
the requesting Party's obligations hereunder; provided that the requesting
Party shall not unreasonably interfere with the conduct of business of the
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delivering Party or any of its Subsidiaries; and provided, further, that
the furnishing of such documents or information shall not violate
confidentiality obligations to a client or jeopardize the attorney-client
privilege of the delivering Party or any of its Subsidiaries (in which case
the Parties will use their reasonable best efforts to institute appropriate
substitute disclosure arrangements, to the extent practical in the
circumstances).
(b) All such information and other documents obtained or provided
pursuant to this Section 5.2 shall be subject to the Confidentiality
Agreements.
Section 5.3 Consents; Conditions; Further Assurances.
(a) Between the date hereof and the Closing, each of the Parties
hereby agrees to use its reasonable best efforts (i) to obtain, and to
cause the Parties' respective Subsidiaries and other controlled Affiliates
to use their respective reasonable best efforts to obtain, any and all
Governmental Approvals and Third Party Approvals (including without
limitation those listed on Schedule 4.1(e), in the case of Wachovia, or
Schedule 4.2(e), in the case of Prudential) required in connection with the
consummation of the transactions contemplated by this Agreement and the
other Transaction Documents (including, but not limited to, any and all
Governmental Approvals and Third Party Approvals to separate the Excluded
Businesses and to otherwise consummate the Wachovia Reorganization with
respect to Wachovia and the Prudential Pre-Closing Conversion with respect
to Prudential), (ii) to comply, and cause the Parties' respective
Subsidiaries and other controlled Affiliates to use their respective
reasonable best efforts to comply, with all conditions and covenants
applicable or related to it as contemplated by this Agreement and the other
Transaction Documents, and (iii) to do, and cause the Parties' respective
Subsidiaries and other controlled Affiliates to use their respective
reasonable best efforts to do, all such other acts as are necessary or
advisable in order to cause the consummation of the transactions
contemplated hereby and by the other Transaction Documents.
(b) Without limiting the foregoing, between the date hereof and the
Closing, each Party shall timely file, or cause to be timely filed, in each
case in form and content in compliance with applicable Laws, and
concurrently deliver to the other Party, copies of each registration,
report, statement, notice, form or other filing requested or required to be
filed by any of the first Party's or its Subsidiaries with the applicable
Governmental Authority under the HSR Act, the Exchange Act, the Securities
Act, the Advisers Act or any other similar Law.
(c) Without limiting the foregoing, each Party shall negotiate in good
faith the terms and conditions of any Transaction Documents which are not
attached as exhibits to this Agreement and which are to be executed and
delivered after the date hereof and by the Closing.
(d) Each Party shall coordinate and cooperate prior to the Closing
with the other Party in exchanging such information and supplying such
reasonable assistance as may be reasonably requested by the other Party in
connection with any of the actions
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contemplated by this Section 5.3, including without limitation any filings
that are required to be made as a result of the transactions contemplated
herein.
(e) At all times prior to the Closing Date, each Party shall promptly
notify the other Party in writing of any fact, condition, event or
occurrence that would reasonably be expected to result in the failure of
any of the conditions contained in Section 6.2, in the case of Wachovia,
and Section 6.1, in the case of Prudential, promptly upon becoming aware of
the same.
(f) Each Party shall, and shall cause its Subsidiaries to, use
reasonable best efforts to obtain any consents to the extent necessary or
advisable from the investment advisory clients of its Contributed Business
in connection with the "assignment" of any applicable investment advisory
agreements that may occur as a result of the transactions contemplated
hereby; provided that the other Party agrees that other than with respect
to any such investment advisory agreement which by its terms expressly
requires written consent to its assignment, effective consent to such
"assignment" may be obtained for all purposes hereunder and under
applicable Law by requesting written consent from the investment advisory
client and informing such client of (i) the intention to complete the
transactions contemplated hereby, (ii) the Company's and the relevant
Subsidiaries' intention to continue the advisory services pursuant to the
existing investment advisory agreement with such client after the Closing
Date if such client does not terminate such agreement prior to the Closing
Date, and (iii) that the consent of such client will be deemed to have been
granted if such client continues to accept such advisory services for at
least 45 days after receipt of such notice and does not terminate the
investment advisory contract within that period. Each Party shall, and
shall cause each of its Subsidiaries to, use its reasonable best efforts to
send such notices to its investment advisory clients as soon as practicable
after the date hereof.
(g) Without limiting the foregoing provisions of this Section 5.3, if
(i) a Law is enacted or (ii) a Governmental Authority issues, or seeks the
issuance of, an Order of the type that would cause the closing conditions
set forth in Sections 6.1(c) and 6.2(c) to not be satisfied, the Parties
shall, and shall cause their respective Subsidiaries to, use its and their
reasonable best efforts to obtain the elimination of such Law or the
lifting, withdrawal or termination of such Order or the termination of the
efforts by such Governmental Authority to obtain the issuance of such an
Order at the earliest practicable time and/or, for a period not to exceed
120 days after such event, to negotiate in good faith to implement
alternative arrangements that will permit the Closing and the consummation
of the transactions contemplated hereby to be consummated without a
violation of such Law or Order.
(h) If, notwithstanding the Parties reasonable best efforts in
accordance with this Section 5.3, the Parties are informed that any
Governmental Authority the Governmental Approval of which is required in
order to consummate the transactions contemplated hereby is unwilling to
grant such Governmental Approval if the Parties cause the direct
contribution of the Prudential Contributed Assets and Prudential
Contributed Liabilities to a Designated Company Subsidiary, then in lieu of
such contribution, Prudential shall
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be entitled to take the following actions if Prudential reasonably
concludes that such actions will facilitate the receipt of such
Governmental Approval:
(i) Prudential shall organize a newly-formed limited
liability company ("New Prudential Broker LLC") to accept the
contribution of the Prudential Contributed Assets and Prudential
Contributed Liabilities. New Prudential Broker LLC shall have no
assets, liabilities or operations, shall be formed solely for the
purpose of effecting the transactions contemplated hereby, and shall
be formed pursuant to organizational documents (including a
certificate of formation and limited liability company operating
agreement) as shall be reasonably satisfactory to the Parties;
(ii) Prudential shall cause New Prudential Broker LLC to be
licensed and registered as a broker-dealer, and to otherwise obtain
all Permits as are necessary to permit New Prudential Broker LLC to
conduct the Prudential Contributed Business following the contribution
referred to in clause (iii) below;
(iii) Immediately prior to the Closing, Prudential shall
contribute to New Prudential Broker LLC the Prudential Contributed
Assets and the Prudential Contributed Liabilities (and no other assets
or liabilities of any kind or nature) on the same terms as the
Prudential Transferors would have transferred the Prudential
Contributed Assets and the Prudential Contributed Liabilities to the
Designated Company Subsidiary pursuant to Section 2.4(c); and
(iv) At the Closing, Prudential shall cause New Prudential
Broker LLC to be contributed to the Company in accordance with Section
2.4.
In the event that the actions enumerated above are taken, all references to
the Prudential Contributed Subsidiaries herein shall be deemed to also
include New Prudential Broker LLC and all references to the Prudential
Contributed Equity Interests shall be deemed to also include all limited
liability company interests of New Prudential Broker LLC.
Section 5.4 Certain Contracts and IP.
(a) Notwithstanding anything in this Agreement to the contrary, the
Parties agree that only those Prudential Contracts designated with an
asterisk in Schedule 4.2(i) have been accepted as Prudential Contributed
Assets or Prudential Contributed Liabilities as of the date of this
Agreement. During the period following the date of this Agreement and prior
to the Closing Date, Prudential shall make available to Wachovia true and
complete copies of all Prudential Contracts and each amendment, supplement
or other modification thereto, and shall make its employees and other
representatives reasonably available to assist Wachovia in completing its
review of all such Prudential Contracts. Upon completion of such review,
Wachovia shall be entitled to designate any or all of the remainder of the
items listed on Schedule 4.2(i) as Prudential Contributed Assets and
Prudential Contributed Liabilities, and any of such items not so designated
by Wachovia shall be retained by the Prudential Entities as Prudential
Excluded Assets and Prudential Excluded Liabilities and shall not be
contributed to the Company on the Closing Date. In
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connection with any such contracts constituting Shared Service Contracts,
to the extent Wachovia elects to cause the contribution of such Shared
Service Contracts to the Company, Wachovia shall be required to continue to
make the benefits and related obligations thereunder available to the
Prudential Entities to the extent and on substantially the same terms as
are in effect on the date hereof, to the extent permitted by the terms of
such contracts.
(b) If the Company elects after the Closing to terminate any lease,
contract, agreement or instrument referred to in clause (xv) of the
definition of Prudential Contributed Assets (each, a "Small Contract"), the
amount of costs that the Company shall pay in connection with such
terminations (including but not limited to early termination fees,
prepayment penalties and similar charges), taken together with any payments
made by Wachovia pursuant to Section 12.1 in respect of Small Contracts,
shall not exceed the amount set forth in Schedule 5.4(b) for any such costs
associated with any single such Small Contract or the aggregate amount set
forth in Schedule 5.4(b) for such costs associated with all such Small
Contracts. Prudential shall indemnify the Company for the amount of any
such costs arising in connection therewith in excess of such maximum
amounts set forth in Schedule 5.4(b).
(c) During the period following the date of this Agreement and prior
to the Closing Date, Prudential shall make available to Wachovia
information regarding the Prudential Business IP referred to in the
definition of Prudential Contributed IP and shall make its employees and
other representatives reasonably available to assist Wachovia in completing
its review of all such Prudential Business IP. Upon completion of such
review, Wachovia shall be entitled to designate any such Prudential
Business IP as Prudential Contributed IP, and any of such items not so
designated by Wachovia shall be retained by the Prudential Entities as
Prudential Excluded Assets and Prudential Excluded Liabilities and shall
not be contributed to the Company on the Closing Date, but shall be
licensed to the Company Entities pursuant to the Prudential Intellectual
Property License Agreement.
Section 5.5 Sufficiency of Assets.
(a) Each Party shall, and shall cause its Subsidiaries to, use its and
their reasonable best efforts to employ, own, license, lease or otherwise
have access to the services of, pursuant to an appropriate service or other
agreement, as of the Closing, all of the Persons, properties and assets
(real, personal, mixed, tangible or intangible) that (i) are necessary in
any material respect for the conduct of, or otherwise material to, its
Contributed Business (including, without limitation, the services provided
by its Contributed Business) and (ii) generated in any material respect the
results of operations set forth in the statements of income included in the
Financial Statements of the Wachovia Contributed Business or the Financial
Statements of the Prudential Contributed Business, as the case may be
(other than employees who have terminated their employment with, or refused
employment with, its Subsidiaries). Upon discovery that such Party's
Subsidiaries do not employ, own, license, lease or have such rights with
respect to such Persons, properties or assets, the Parties shall consult
with one another about the most appropriate manner in which such Persons,
properties or assets should be
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provided to the Company Entities, including by way of contribution thereof
or the provision of services to such Company Entities pursuant to a
servicing or similar agreement, in each case within a reasonable amount of
time after such discovery and consultation.
(b) The Parties shall, and shall cause their Subsidiaries to, use
reasonable best efforts to obtain all such Third Party Approvals and
Governmental Approvals as may be necessary or appropriate to assign or
transfer any interest in any instrument, Permit, contract, lease or other
agreement or arrangement or any claim, right or benefit arising thereunder
or resulting therefrom, as may be contemplated by this Agreement (or in
lieu thereof (with the consent of the other Party, to the extent required
pursuant to Section 5.1(b), which consent will not be unreasonably withheld
or delayed), agree with the counterparty to replace any such instrument,
Permit, contract, lease or other agreement or arrangement related thereto
on terms which will satisfy the requirements of Section 6.1(d) or 6.2(d),
as applicable (without regard to the exception at the end thereof).
(c) This Agreement shall not constitute an agreement to assign or
transfer any interest in any instrument, Permit, contract, lease or other
agreement or arrangement or any Claim, right or benefit arising thereunder
or resulting therefrom, if an assignment or transfer or an attempt to make
such an assignment or transfer without a Third Party Approval or
Governmental Approval would constitute a breach or violation thereof or
affect adversely the rights of the Parties, the Company or any of their
respective Subsidiaries thereunder; and any assignment or transfer to the
Parties, the Company or any of their respective Subsidiaries of any
interest under any such instrument, Permit, contract, lease or other
agreement or arrangement that requires a Third Party Approval or
Governmental Approval shall be made subject to such Third Party Approval or
Governmental Approval being obtained. If any such Third Party Approval or
Governmental Approval is not obtained on or prior to the Closing Date (and
no adequate substitute therefor or replacement thereof has been obtained
pursuant to Section 5.5(b)), the Parties shall continue to use all
reasonable efforts to obtain any such Third Party Approval or Governmental
Approval (or in lieu thereof agree with the counterparty to replace any
such instrument, Permit, contract, lease, license or other agreement or
arrangement on terms which would have satisfied the requirements of Section
6.1(d) or 6.2(d), as applicable (without regard to the exception at the end
thereof), had it occurred prior to the Closing) after the Closing Date
until such time as such Third Party Approval or Governmental Approval (or
substitute or replacement in lieu thereof) has been obtained, and until
such time as such Third Party Approval or Governmental Approval (or
substitute or replacement in lieu thereof) is obtained, the Parties and the
Company shall enter into alternative arrangements, the expense of which
shall be paid in accordance with Section 12.1, until such time as such
Third Party Approval or Governmental Approval (or substitute or replacement
in lieu thereof) has been obtained so that the Company Entities shall
receive the benefits and assume the obligations thereunder in accordance
with this Agreement. Nothing in this Section 5.5 shall relieve the Parties
of their respective obligations under any other provision of this
Agreement.
(d) To the extent that, after the Closing, the Company or either Party
discovers the inclusion of any asset or liability on the Final Closing
Balance Sheets that is not a
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Contributed Asset or Contributed Liability: (x) the applicable Company
Entity that acquired or retained such asset shall transfer such asset to
the applicable transferor Party thereof in exchange for a payment by such
Party of an amount in cash equal to the reported value of such asset on the
applicable Final Closing Balance Sheet, and (y) the applicable Company
Entity that acquired or retained such liability shall transfer such
liability to the applicable transferor Party thereof and shall make a
payment to such Party of an amount in cash equal to the reported value of
such liability on the applicable Final Closing Balance Sheet; provided that
the amounts payable pursuant to this Section 5.5(d) or Section 5.5(e) shall
be netted against each other to the fullest extent possible.
(e) To the extent that, after the Closing, the Company or either Party
discovers the failure to include any asset or liability on the Final
Closing Balance Sheets that is a Contributed Asset or Contributed
Liability: (x) the Party that should have transferred such asset shall
transfer such asset to the Company and in exchange receive a payment from
the Company of an amount in cash equal to the value of such asset as of the
Closing Date (as initially determined in good faith by the Company and
notified to both Parties) as if it had been included in the applicable
Final Closing Balance Sheet, and (y) the Party that should have transferred
such liability shall transfer such liability to the Company, and such Party
shall pay to the Company an amount in cash equal to the cost of such
liability as of the Closing Date (as initially determined in good faith by
the Company and notified to both Parties) as if it had been included in the
applicable Final Closing Balance Sheet; provided that the amounts payable
pursuant to this Section 5.5(e) or Section 5.5(d) shall be netted against
each other to the fullest extent possible; and provided, further, that any
disagreement between the Parties as to the value of any such asset or
liability shall be resolved by following the procedures set forth in
Section 2.5(b).
Section 5.6 Transfer Taxes. Wachovia shall be responsible for the
payment of any transfer or similar Taxes resulting from the Wachovia
Reorganization and the contribution of the Wachovia Contributed Membership
Interests to the Company at the Closing. Prudential shall be responsible for the
payment of any transfer or similar Taxes resulting from the Prudential
Pre-Closing Conversion and the contribution of the Prudential Contributed Assets
to the Company at the Closing.
Section 5.7 Tax Sharing Agreements. Wachovia shall terminate or
cause to be terminated prior to the Closing any Tax sharing agreement or
arrangement to which any Wachovia Contributed Subsidiary, on the one hand, and
Wachovia or any of its Affiliates, on the other hand, are parties. Prudential
shall terminate or cause to be terminated prior to the Closing any Tax sharing
agreement or arrangement to which any Prudential Contributed Subsidiary, on the
one hand, and Prudential or any of its Affiliates, on the other hand, are
parties.
Section 5.8 Taxes.
(a) Prudential's Obligations. Except to the extent expressly included
and provided for in the calculation of Prudential Tangible Book Value
reflected in the Final Closing Balance Sheet of the Prudential Contributed
Business, Prudential shall (i) pay (and file or cause to be filed all Tax
Returns with respect to) all Taxes attributable to the Prudential
Contributed Business or payable by any of the Prudential Contributed
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Subsidiaries in respect of taxable periods ending on or before the Closing
Date, including, without limitation, any Tax for which a Prudential
Contributed Subsidiary is entitled to receive, but does not receive or
collect, a contribution or indemnity from a Third Party (in which case
Prudential shall be subrogated to such claim); (ii) pay any amounts
required to be paid to satisfy liabilities of any of the Prudential
Contributed Subsidiaries arising under any Tax allocation, sharing,
indemnity or similar agreement or arrangement entered into on or prior to
the Closing Date or, with respect to any taxable period ending on or before
the Closing Date, under Section 1.1502-6 of the Treasury Regulations (or
any comparable provision of state, local or foreign Law); (iii) pay all
Straddle Period Taxes attributable to the Prudential Contributed Business
or payable by any of the Prudential Contributed Subsidiaries attributable
to the portion of the relevant Straddle Period ending on the Closing Date,
together with, in each case, all costs and expenses incurred in connection
with the assessment or collection thereof; and (iv) pay all Taxes
attributable to the conversion, following the Closing Date, of a Prudential
Contributed Subsidiary listed on Schedule 4.2(b) to an entity that is
disregarded or treated as a partnership for United States federal income
tax purposes.
(b) Wachovia's Obligations. Except to the extent expressly included
and provided for in the calculation of Wachovia Tangible Book Value
reflected in the Final Closing Balance Sheet of the Wachovia Contributed
Business, Wachovia shall (i) pay (and file or cause to be filed all Tax
Returns with respect to) all Taxes attributable to the Wachovia Contributed
Business or payable by any of the Wachovia Contributed Subsidiaries in
respect of taxable periods ending on or before the Closing Date, including,
without limitation, any Tax for which a Wachovia Contributed Subsidiary is
entitled to receive, but does not receive or collect, a contribution or
indemnity from a Third Party (in which case Wachovia shall be subrogated to
such claim); (ii) pay any amounts required to be paid to satisfy
liabilities of any of the Wachovia Contributed Subsidiaries arising under
any Tax allocation, sharing, indemnity or similar agreement or arrangement
entered into on or prior to the Closing Date or, with respect to any
taxable period ending on or before the Closing Date, under Section 1.1502-6
of the Treasury Regulations (or any comparable provision of state, local or
foreign Law); and (iii) pay all Straddle Period Taxes attributable to the
Wachovia Contributed Business or payable by any of the Wachovia Contributed
Subsidiaries attributable to the portion of the relevant Straddle Period
ending on the Closing Date, together with, in each case, all costs and
expenses incurred in connection with the assessment or collection thereof.
(c) The Company's Obligations. Prudential and Wachovia shall cause the
Company to pay or cause to be paid (and file or cause to be filed all Tax
Returns with respect to) all Taxes (i) required to be paid by each of the
Prudential Contributed Subsidiaries and each of the Wachovia Contributed
Subsidiaries for all taxable periods ending after the Closing Date or (ii)
expressly included and provided for in the calculation of Tangible Book
Value reflected in the Final Closing Balance Sheet of the Wachovia
Contributed Business or of the Prudential Contributed Business; provided,
however, that with respect to Straddle Period Taxes required to be paid by
any Prudential Contributed Subsidiary or with respect to the Prudential
Contributed Business or Wachovia Contributed Subsidiary or with respect to
the Wachovia Contributed Business (other than such Taxes referred to in
clause (ii)), the Company shall be entitled to be
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reimbursed by Prudential or Wachovia, as the case may be, for such Straddle
Period Taxes to the extent attributable to the portion of the relevant
Straddle Period ending on the Closing Date.
(d) Contests.
(i) Prudential shall have the right to represent the
interests of each of the Prudential Contributed Subsidiaries in and to
control the conduct of any Tax audit or administrative or court
proceeding (a "Tax Contest") to the extent relating to Taxes that are
described as being the responsibility of Prudential in Section 5.8(a).
(ii) Wachovia shall have the right to represent the
interests of each of the Wachovia Contributed Subsidiaries in and to
control the conduct of any Tax Contest to the extent relating to Taxes
that are described as being the responsibility of Wachovia in Section
5.8(b).
(iii) The Company and Wachovia shall jointly represent the
interests of each of the Wachovia Contributed Subsidiaries in any Tax
Contest to the extent relating to Straddle Period Taxes. The Company
and Prudential shall jointly represent the interests of each of the
Prudential Contributed Subsidiaries in any Tax Contest to the extent
relating to Straddle Period Taxes.
(iv) If the resolution of any Tax Contest could result in
an increase in the amount of Taxes required to be paid by any Party
pursuant to this Section 5.8, (A) the Party (the "Controlling Tax
Party") in control of such Tax Contest shall keep the Party (the
"Non-Controlling Tax Party") not in control of such Tax Contest fully
informed of any proceedings, events and developments relating to or in
connection with such Tax Contest; (B) the Non-Controlling Tax Party
shall be entitled to receive copies of all correspondence and
documents relating to such Tax Contest; and (C) if requested, the
Controlling Tax Party shall consult with the Non-Controlling Tax Party
or its counsel and shall not enter into any settlement with respect to
any such Tax Contest that could result in a claim for indemnification
against the Non-Controlling Tax Party hereunder or that purports to
bind any of the Contributed Subsidiaries of the Non-Controlling Tax
Party after the Closing without the Non-Controlling Tax Party's prior
written consent, which consent shall not be unreasonably withheld.
(e) Exclusivity. The provisions of this Section 5.8 shall exclusively
govern all rights to indemnification pursuant to this Agreement with
respect to Taxes. Without limiting the generality of the foregoing, the
representations and warranties contained in Sections 4.1 and 4.2 of this
Agreement shall have no effect on the matters set forth in this Section
5.8, and any breach of such representations and warranties shall provide no
independent claim for indemnification or recovery with respect to Taxes
from or by either Party.
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(f) Cooperation. The Parties shall consult with one another to
determine in good faith whether transactions contemplated by this Agreement
and the LLC Agreement that may be consummated after the Closing can be
accomplished in an alternative manner that will optimize the Tax results
for the Parties and their respective Affiliates, taken as a whole.
Section 5.9 Real Estate Matters. Following the date hereof and
prior to the Closing, the Parties shall prepare, execute and deliver: (i) with
respect to the Contributed Real Property of Wachovia identified on Schedule
1.1(m), a special warranty deed in proper form for recording in the appropriate
jurisdiction from the owner of each Contributed Real Property of Wachovia to one
or more Designated Company Subsidiaries, (ii) with respect to the Contributed
Leased Real Property of Prudential Securities identified on Schedule 1.1(d), an
assignment between Prudential Securities as assignor and one or more Designated
Company Subsidiaries as assignee providing for the assignment of such
Contributed Leased Real Property to one or more Designated Company Subsidiaries;
and (iii) with respect to the Prudential Excluded Businesses Leased Real
Property identified on Schedule 5.9(a), a sublease agreement between one or more
Designated Company Subsidiaries as sublessor and the relevant Prudential Entity
as sublessee granting such relevant Prudential Entity the right to use or occupy
such Prudential Excluded Businesses Leased Real Property, on the same terms as
are reflected in the underlying lease or sublease, as applicable, (including,
without limitation, the Contributed Leased Real Property located at Xxx Xxx Xxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx), with costs and expenses proportionately adjusted,
and (iv) with respect to the Prudential Excluded Leased Real Property identified
on Schedule 5.9(b), a sublease agreement mutually agreed upon by the Parties
granting one or more Designated Company Subsidiaries the right to use or occupy
such Prudential Excluded Leased Real Property.
Section 5.10 Wachovia Reorganization. After the date of expiration
of the condition set forth in clause (ii) of Section 6.1(e), if the Wachovia
Reorganization is not completed at the time the other conditions to Closing are
satisfied or waived, the Parties shall negotiate in good faith to make such
modifications to the Transaction Documents as are necessary to provide for the
separate operations of the Wachovia Excluded Businesses within the Wachovia
Contributed Subsidiaries and for the full and exclusive enjoyment of the
benefits of such operations by Wachovia after the Closing.
ARTICLE 6
CONDITIONS TO CLOSING
Section 6.1 Conditions to Wachovia's Obligations. The obligation
of Wachovia to perform its obligations set forth in Section 2.4 and to
consummate the Closing is subject to the fulfillment, at or prior to the
Closing, of the following conditions:
(a) Representations and Warranties.
(i) Each of the representations and warranties of
Prudential in this Agreement shall have been true and correct when
made subject to such exceptions as do not have and would not
reasonably be expected to have, individually or in
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the aggregate with all other breaches of representations and
warranties, a Material Adverse Effect on the Company, and Wachovia
shall have received a certificate from an executive officer of
Prudential to such effect; and
(ii) Each of the representations and warranties of
Prudential set forth in Sections 4.2(a), (c), (h)(i) and (h)(ii), all
of which shall be deemed to have been made again at and as of the
Closing Date, shall be true and correct at and as of the Closing Date,
subject to such exceptions as do not have and would not be reasonably
be expected to have, individually or in the aggregate with all other
breaches of representations or warranties, a Material Adverse Effect
on the Company, and Wachovia shall have received a certificate from an
executive officer of Prudential to such effect.
(b) Performance of Agreements. Prudential shall have performed and
complied with in all material respects the obligations, covenants and
conditions applicable to Prudential contained in Sections 5.1 through
5.4(a) and Sections 5.5(a) and (b), 5.7 and 5.9 to be performed and
complied with by Prudential at or prior to the Closing, and Wachovia shall
have received a certificate from an executive officer of Prudential to such
effect; provided that solely for purposes of this Section 6.1(b), the
obligations of Prudential under Sections 5.5(a) and (b) shall be deemed to
have been satisfied if the condition set forth in Section 6.1(a)(ii) shall
have been satisfied as of the Closing Date.
(c) No Injunction. At the Closing Date, there shall be no Order of any
Governmental Authority of competent jurisdiction in effect, and no pending
or threatened Claim brought by any Governmental Authority of competent
jurisdiction which seeks the issuance or entry of an Order, and no Law in
effect, that (i) restrains or prohibits or renders illegal either (A) the
Closing or (B) the consummation of the other transactions contemplated by
the Transaction Documents (including the Prudential Pre-Closing Conversion
and the Wachovia Reorganization), other than, in the case of clause (B),
such other transactions the failure of which to be so consummated would not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on the Company or to otherwise materially and
adversely affect the economic benefits of the transactions contemplated by
this Agreement for Wachovia, as determined in Wachovia's reasonable
judgment, or (ii) would impose on the Company or Wachovia criminal
penalties or significant civil penalties (unless such civil penalties would
be fully indemnified pursuant to Article 7) or would otherwise impair in
any significant respect the business of the Company or Wachovia if the
Closing or such other transactions were to occur notwithstanding the
existence of such Order.
(d) Consents and Approvals. All Governmental Approvals set forth in
Schedule 6.1(d) shall have been obtained and shall be in full force and
effect without any condition or requirement that would reasonably be
expected to have a Material Adverse Effect on the Company; any applicable
waiting periods in respect thereof shall have been satisfied; and all Third
Party Approvals required in connection with the execution and delivery by
Prudential and its Subsidiaries of this Agreement and the other Transaction
Documents and the performance of their respective obligations hereunder and
thereunder and the consummation by Prudential and its Subsidiaries of the
transactions contemplated hereby
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and thereby shall have been obtained and shall be in full force and effect,
or adequate substitute arrangements on comparable terms (including cost)
shall have been implemented at Prudential's expense, to the extent such
expense exceeds the limits set forth in the second proviso of Section 12.1,
and with Wachovia's consent (which consent shall not be unreasonably
withheld or delayed), except in any such case for such Third Party
Approvals as would not reasonably be expected, either individually or in
the aggregate, to have a Material Adverse Effect on the Company.
(e) Wachovia Reorganization and Prudential Pre-Closing Conversion. (i)
Prudential shall have completed the Prudential Pre-Closing Conversion in
all material respects in accordance with Section 2.2(b); provided that the
failure of any Prudential Contributed Subsidiary listed on Schedule 4.2(b)
to be converted to an entity which is disregarded for U.S. federal income
tax purposes shall not be treated as a material failure to complete the
Prudential Pre-Closing Conversion; and (ii) Wachovia shall have completed
the Wachovia Reorganization in all material respects in accordance with
Section 2.2(a); provided that the condition set forth in this clause (ii)
shall be of no further force or effect on and following August 1, 2003.
Section 6.2 Conditions to Prudential's Obligations. The obligation
of Prudential to perform its obligations set forth in Section 2.4 and to
consummate the Closing is subject to the fulfillment, at or prior to the
Closing, of the following conditions:
(a) Representations and Warranties.
(i) Each of the representations and warranties of Wachovia
in this Agreement shall have been true and correct when made subject
to such exceptions as do not have and would not reasonably be expected
to have, individually or in the aggregate with all other breaches of
representations and warranties, a Material Adverse Effect on the
Company, and Prudential shall have received a certificate from an
executive officer of Wachovia to such effect; and
(ii) Each of the representations and warranties of Wachovia
set forth in Sections 4.1(a), (c), (h)(i) and (h)(ii), all of which
shall be deemed to have been made again at and as of the Closing Date,
shall be true and correct at and as of the Closing Date, subject to
such exceptions as do not have and would not be reasonably be expected
to have, individually or in the aggregate with all other breaches of
representations or warranties, a Material Adverse Effect on the
Company, and Prudential shall have received a certificate from an
executive officer of Wachovia to such effect.
(b) Performance of Agreements. Wachovia shall have performed and
complied with in all material respects the obligations, covenants and
conditions applicable to Wachovia contained in Sections 5.1 through 5.4(a)
and Sections 5.5(a) and (b), 5.7 and 5.9 to be performed and complied with
by Wachovia at or prior to the Closing, and Prudential shall have received
a certificate from an executive officer of Wachovia to such effect;
provided that solely for purposes of this Section 6.2(b), the obligations
of
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Wachovia under Sections 5.5(a) and (b) shall be deemed to have been
satisfied if the condition set in Section 6.2(a)(ii) shall have been
satisfied as of the Closing Date.
(c) No Injunction. At the Closing Date, there shall be no Order of any
Governmental Authority of competent jurisdiction in effect, and no pending
or threatened Claim brought by any Governmental Authority of competent
jurisdiction which seeks the issuance or entry of an Order, and no Law in
effect, that (i) restrains or prohibits or renders illegal either (A) the
Closing or (B) the consummation of the other transactions contemplated by
the Transaction Documents (including the Prudential Pre-Closing Conversion
and the Wachovia Reorganization), other than, in the case of clause (B),
such other transactions the failure of which to be so consummated would not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on the Company or to otherwise materially and
adversely affect the economic benefits of the transactions contemplated by
this Agreement for Prudential, as determined in Prudential's reasonable
judgment, or (ii) would impose on the Company or Prudential criminal
penalties or significant civil penalties (unless such civil penalties would
be fully indemnified pursuant to Article 7) or would otherwise impair in
any significant respect the business of the Company or Prudential if the
Closing or such other transactions were to occur notwithstanding the
existence of such Order.
(d) Consents and Approvals. All Governmental Approvals set forth in
Schedule 6.2(d) shall have been obtained and shall be in full force and
effect without any condition or requirement that would reasonably be
expected to have a Material Adverse Effect on the Company; any applicable
waiting periods in respect thereof shall have been satisfied; and all Third
Party Approvals required in connection with the execution and delivery by
Wachovia and its Subsidiaries of this Agreement and the other Transaction
Documents and the performance of their respective obligations hereunder and
thereunder and the consummation by Wachovia and its Subsidiaries of the
transactions contemplated hereby and thereby shall have been obtained and
shall be in full force and effect, or adequate substitute arrangements on
comparable terms (including cost) shall have been implemented with
Prudential's consent (which consent shall not be unreasonably withheld or
delayed), except in any such case for such Third Party Approvals as would
not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect on the Company.
(e) Wachovia Reorganization. Wachovia shall have completed the
Wachovia Reorganization in all material respects in accordance with Section
2.2(a); provided that the condition set forth in this clause (e) shall be
of no further force or effect on and following August 1, 2003.
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ARTICLE 7
INDEMNIFICATION
Section 7.1 Survival of Representations and Warranties.
(a) The representations and warranties contained in Sections 4.1 and
4.2 will survive the Closing until the second anniversary of the Closing
except that the representations and warranties set forth in subsections
(a), (b), (c), (d), (g), (m) and (u) of Sections 4.1 and 4.2 will survive
until the expiration of the relevant statute of limitations and except that
the representations and warranties set forth in subsection (l) of Sections
4.1 and 4.2 shall not survive the Closing.
(b) Notwithstanding the foregoing, any representation or warranty
shall, to the extent that a Claim with respect thereto is timely asserted
in writing on or prior to the expiration thereof, survive until a final
adjudication or resolution of such Claim thereto.
(c) The representations and warranties contained in Article 4, and the
rights and remedies that may be exercised by any Person seeking
indemnification hereunder, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by,
any such Person or its representatives.
(d) The right of an Indemnitee to indemnification or to otherwise
receive payments pursuant to Section 5.8 or Section 7.2(b), (c) or (d)
shall be separate and in addition to, and shall not be limited by, such
Person's right to indemnification pursuant to Section 7.2(a), and shall
survive any termination or expiration of the representations and warranties
set forth in this Agreement pursuant to this Section 7.1.
Section 7.2 Indemnification. Subject to the limitations set forth
in this Article 7, each Party (the "Indemnitor") shall indemnify, defend and
hold harmless the other Party, the other Party's Affiliates and the Company
Entities and their Affiliates, including but not limited to their respective
directors, officers, employees, partners, managers, members, shareholders (other
than the shareholders of the Parties), agents and representatives (collectively,
the "Indemnitees"), from and against any losses, damages, liabilities, costs,
expenses (including but not limited to legal fees and expenses), fees,
penalties, fines, judgments, settlements and Claims of whatever kind and nature
(each, a "Loss" and, in the aggregate, "Losses") incurred by an Indemnitee
arising out of:
(a) the failure of any representation or warranty to be true and
correct when made (or when deemed to be made) by the Indemnitor in this
Agreement;
(b) the failure by the Indemnitor or any of its Subsidiaries (other
than the Company Entities) to perform any of its or their covenants or
agreements contained in this Agreement (including, without limitation, any
failure to comply with any provision of, or any failure to satisfy any
liability or other obligation assumed or retained by such Party or its
Subsidiaries pursuant to, Sections 5.8 or 8.4);
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(c) in the case of Wachovia, the Wachovia Excluded Liabilities and any
Excluded Claims, and in the case of Prudential, the Prudential Excluded
Liabilities and any Excluded Claims, except in each case as specifically
set forth in Section 7.6(b)(ii)(D)(3) and (4);
(d) (i) in the case of Wachovia, events that occurred or the operation
of the Wachovia Contributed Business prior to the Closing, except to the
extent expressly included and provided for in the Final Closing Balance
Sheet of the Wachovia Contributed Business, and (ii) in the case of
Prudential, events that occurred or the operation of the Prudential
Contributed Business prior to the Closing, except to the extent expressly
included and provided for in the Final Closing Balance Sheet of the
Prudential Contributed Business, or except as specifically set forth in
Section 7.6(b)(ii)(D)(3) or (4); or
(e) the failure of any representation or warranty that was true and
correct when made by the Indemnitor in this Agreement to continue to be
true and correct as of the Closing (or as of such other date as is
expressly specified in such representation and warranty as the date at
which such representation and warranty is true) as if such representation
and warranty were made again at the Closing (or such other specified date).
Section 7.3 Limitations on Amounts.
(a) An Indemnitor shall have no liability under Section 7.2(a):
(i) for any Claim (or series of related Claims), which
totals less than $50,000 in Losses; and
(ii) until the amount of Losses theretofore indemnifiable
by the Indemnitor but for this sentence exceeds an aggregate amount
equal to $10 million (excluding Claims (or series of related Claims)
subject to clause (i)) (the "Threshold");
in which case the Indemnitees shall be entitled to indemnification of all
Losses including Losses that would have been covered by Section 7.2(a) but
for the Threshold, but excluding Claims (or related series of Claims)
subject to clause (i) above. If an Indemnitor elects to assume the defense
of, or settle or compromise, any Claim, the Indemnitees shall reimburse the
Indemnitor for any Losses actually paid by the Indemnitor in connection
therewith to the extent such Losses, together with any prior Losses subject
to the limitation of Section 7.3(a)(ii), do not result in total Losses of
the Indemnitees which exceed the Threshold.
(b) An Indemnitor's aggregate liability under Section 7.2(a) shall in
no event exceed $1 billion (the "Cap").
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Section 7.4 Other Indemnification Provisions.
(a) For all purposes of this Article 7, the amount of Losses arising
out of any breach of a representation or warranty (other than the first
sentences of each of Sections 4.1(i) and 4.2(i), and all of Sections
4.1(o)(i) and 4.2(o)(i) and Sections 4.1(r) and 4.2(r)), and whether a
representation or warranty has been breached, shall be determined without
regard to qualifications of materiality or of Material Adverse Effect and
without regard to whether the matter giving rise to such Losses was
disclosed to the other Party (or its representatives) or was investigated
by the other Party (or its representatives).
(b) Notwithstanding anything to the contrary contained in this Article
7, no Indemnitor shall be liable for any indirect, consequential or
punitive damages related to or arising in connection with any
indemnification in this Article 7, except in cases where such damages are
recovered from an Indemnitee by a Third Party.
(c) In no event shall any Indemnitee recover more than once for any
Loss, regardless of whether alternative theories of recovery exist under
this Agreement or applicable Law.
(d) This Article 7 sets forth the Parties' exclusive remedy for any
Loss that may result from the breach of any of the representations or
warranties contained in this Agreement or any other matter arising under
this Agreement, except for (A) Losses resulting from the willful misconduct
or fraud of an Indemnitor or its Affiliates, (B) the remedies for an
"Intentional Breach" by a Party pursuant to Section 9.3 and (C) as
otherwise specifically set forth in this Agreement.
(e) Notwithstanding anything to the contrary contained herein, no
Indemnitor shall be required to indemnify any Indemnitee for any Loss
relating to a reduction in the value of the Company or any of its
Subsidiaries to the extent the Company or any of its Subsidiaries is
indemnified therefor in accordance with the terms hereof.
(f) If any Indemnitee receives any amounts in respect of Losses
previously paid by the Indemnitor or obtains any judgment or award in any
litigation relating to an Excluded Liability or Excluded Claim of such
Indemnitor which was previously paid by such Indemnitor, the Indemnitee
shall distribute such amounts received to the Indemnitor.
(g) This Agreement shall not be deemed to amend or otherwise modify
the provisions or application of any indemnification or similar agreement
between (x) any broker or other employee of a Party or a Company Entity and
(y) such Party or its Subsidiaries or such Company Entity. In addition,
notwithstanding any provision in this Agreement to the contrary, nothing in
this Agreement shall (x) require the Indemnitor to indemnify the brokers or
other employees of the Indemnitor or any of its Subsidiaries or the Company
Entities or (y) be deemed to waive any right of the Indemnitor to receive
reimbursement from such brokers or other employees for, among other things,
Losses caused by their criminal conduct, willful misconduct or bad faith.
Section 7.5 Procedures. In the event any Indemnitee should have a
Claim under this Article 7 against any Indemnitor that does not involve a Claim
being asserted against
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or sought to be collected from such Indemnitee by a Third Party, the Indemnitee
shall deliver notice of such Claim, specifying in reasonable detail the basis
therefor, with reasonable promptness to the Indemnitor. The failure or delay by
any Indemnitee so to notify the Indemnitor shall not relieve the Indemnitor from
any liability which it may have to such Indemnitee, except to the extent that
the Indemnitor has been materially prejudiced by such failure or delay. If the
Indemnitor does not notify the Indemnitee within 15 Business Days following its
receipt of such notice that the Indemnitor disputes its liability to the
Indemnitee, such Claims specified by the Indemnitee in such notice shall be
conclusively deemed a liability of the Indemnitor, and the Indemnitor shall pay
the amount of such liability to the Indemnitee on demand or, in the case of any
notice in which the amount of the Claims (or any portion thereof) is estimated,
on such later date when the amount of such Claim (or such portion thereof)
becomes finally determined.
Section 7.6 Procedures for Third Party Claims. The following
procedures shall apply to all matters or circumstances that may result in a Loss
by reason of a Claim brought by a Third Party, including but not limited to a
Claim that may be asserted by a Governmental Authority ("Third Party Claims";
provided that the term "Third Party Claim" shall include a Claim that may be
asserted by an employee of a Party or Company Entity and shall not include any
Claim governed by Section 5.8):
(a) Notice. Promptly after an Indemnitee receives written notice of
any matter or circumstance that may reasonably be expected to result in a
Loss to such Indemnitee by reason of a Third Party Claim, the Indemnitee
shall give written notice thereof to the Indemnitor. The right to
indemnification hereunder will not be affected by any failure of an
Indemnitee to give such notice (or delay by any Indemnitee in giving such
notice) unless (and then only to the extent that) the rights and remedies
of the Indemnitor have been materially prejudiced as a result of the
failure to give, or the delay in giving, such notice. The notice of the
Third Party Claim shall describe the Third Party Claim in reasonable
detail, including an indication of the estimated amount (to the extent
feasible) of the Loss that has been or may be incurred by the Indemnitee.
(b) Control of Third Party Claims. Third Party Claims shall be
controlled as follows:
(i) Except as provided in Section 7.6(b)(ii) or for
Excluded Claims referred to in Section 7.6(g), which shall be
administered in accordance with that Section, the Indemnitor shall be
the Person entitled to control the defense of such Third Party Claim
(the "Controlling Party") and shall: (A) retain outside counsel of its
own choosing, which counsel shall be reasonably acceptable to the
Indemnitee, and (B) control and direct the defense of any such Third
Party Claim, including the development and implementation of legal
strategy for such Third Party Claim, and subject to Section 7.6(c),
the decision to settle or compromise (or not to settle or compromise)
such Third Party Claim.
(ii) Notwithstanding Section 7.6(b)(i), with respect to any
Third Party Claim in respect of which, if adversely determined, one or
more of (x) the Company Entities or their Affiliates, (y) Wachovia or
its Affiliates, and/or (z)
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Prudential or its Affiliates, would reasonably be expected to incur
Losses for which such Person is not fully indemnified pursuant to
Section 7.2 (each such Third Party Claim, a "Joint Loss Claim"):
(A) The Parties shall mutually determine in good faith
whether (x) Prudential and its Affiliates, (y) Wachovia and
its Affiliates, or (z) the Company Entities and their
Affiliates, in each case, would be reasonably likely to incur
Losses with respect to such Joint Loss Claim and, in each
case, the amount of such Losses;
(B) Based on such mutual determination, if (x)
Prudential and its Affiliates would reasonably be likely to
incur the greatest aggregate amount of Losses in respect of
such Joint Loss Claim, then Prudential shall be the
Controlling Party with respect to such Joint Loss Claim, (y)
Wachovia and its Affiliates would reasonably be likely to
incur the greatest aggregate amount of such Losses in respect
of such Joint Loss Claim, then Wachovia shall be the
Controlling Party with respect to such Joint Loss Claim, or
(z) the Company Entities and their Affiliates would reasonably
be likely to incur the greatest aggregate amount of such
Losses in respect of such Joint Loss Claim, then the Company
shall be the Controlling Party with respect to such Joint Loss
Claim;
(C) The Controlling Party shall (1) retain outside
counsel of its own choosing, which counsel shall be reasonably
acceptable to the Indemnitee(s), and (2) control and direct
the defense of any such Joint Loss Claim, including the
development and implementation of legal strategy for such
Joint Loss Claim and, subject to Section 7.6(c), the decision
to settle or compromise (or not to settle or compromise) such
Joint Loss Claim; provided that, for purposes of clarity, the
Indemnitor shall continue to pay the legal fees and similar
expenses for defending such Joint Loss Claim until the
resolution of such Joint Loss Claim; and provided, further,
that upon the resolution of such Joint Loss Claim, each
Indemnitee shall pay the Indemnitor its pro rata portion of
such legal fees and similar expenses paid by the Indemnitor
based on the ratio that the unindemnifiable Losses incurred by
such Indemnitee have to the total amount of Losses payable by
the Indemnitor;
(D) Notwithstanding the foregoing, if Prudential or
any of its Affiliates is the Controlling Party of such Joint
Loss Claim as to which Losses may result, and if the Company
delivers written notice to the Indemnitor that it elects to
control the defense of such Joint Loss Claim for any
reputational or other concerns, then:
(1) The Indemnitor shall not have the rights as
the Controlling Party set forth in clause (C), and the
Company shall be the Controlling Party with respect to
such Joint Loss Claim pursuant to this clause (D);
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(2) The Company shall (x) retain outside
counsel of its own choosing, which counsel shall be
reasonably acceptable to the Indemnitor, and (y)
control and direct the defense of any such Joint Loss
Claim, including the development and implementation of
legal strategy for such Joint Loss Claim and, subject
to Section 7.6(c), the decision to settle or
compromise (or not to settle or compromise) such Joint
Loss Claim;
(3) From and after the delivery of the
Company's notice of election to control the defense of
such Joint Loss Claim, the Company shall be
responsible for, and shall from time to time pay, 50%
of all legal fees and similar expenses incurred for
defending such Joint Loss Claim and the Indemnitor
shall be responsible for paying the remainder of such
fees and expenses; and
(4) Upon the resolution of such Joint Loss
Claim, the Company shall be responsible for and pay
50% of the Losses incurred by it and the other
Indemnitees (excluding the legal fees and similar
expenses already paid by it for defending such Third
Party Claim) and the Indemnitor shall be responsible
for paying the remainder of such Losses.
(iii) Except as explicitly set forth in clauses (D)(3) and
(D)(4), nothing in Section 7.6(b)(ii) shall be deemed to relieve the
Indemnitor from indemnifying the Company Entities and their Affiliates
to the extent any of them are Indemnitees hereunder. To the extent
that the Company is intended to be the "Controlling Party" pursuant to
Section 7.6(b)(ii), the Company shall, and the Parties agree to cause
the Company to, comply with Sections 7.6(c) through (f) as the
Controlling Party thereunder.
(c) Settlements. If required by the Controlling Party, the Indemnitee
(and, if the Company is the Controlling Party, the Indemnitor) shall agree
to any strategic decision (including settlement or compromise) made by the
Controlling Party; provided that the Controlling Party must first obtain
the Indemnitee's consent (and, if the Company is the Controlling Party, the
Indemnitor's consent) (each of which shall be timely sought and shall not
be unreasonably withheld or delayed) to any settlement or compromise
pursuant to which Losses are not fully indemnified or which imposes
equitable relief or any regulatory sanctions on (or would require a
Governmental Approval by) the Indemnitee (and if the Company is not the
Controlling Party, any of the Company Entities) or involves an admission of
misconduct or wrongdoing or any other non-monetary sanctions; and provided,
further, that if the Company is the Controlling Party, then in addition to
the foregoing, the Company must first obtain the consent of the Indemnitor
(which shall be timely sought and shall not be unreasonably withheld or
delayed) to the total dollar amount of money damages payable by the
Indemnitor pursuant to such settlement or compromise. If the Controlling
Party fails to assume the defense of a Third Party Claim, the Indemnitee
(or, if the Controlling Party is the Company, the Indemnitor)
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may defend, settle or otherwise compromise the Third Party Claim; provided
that any such settlement or compromise shall require the consent of the
Controlling Party (or the Indemnitor, as the case may be) (each of which
shall be timely sought and shall not be unreasonably withheld or delayed).
(d) Conflicts of Interest. The Indemnitee in respect of any Claim
shall be entitled to engage separate counsel of its choice to participate
in the defense of such Claim; provided that, except as set forth in the
remainder of this Section 7.6(d), the fees and expenses of such separate
counsel shall be borne solely by the Indemnitee and shall not be subject to
reimbursement by the Indemnitor; and provided, further, that this sentence
shall not affect, in any respect, the control of such Claim as provided in
Section 7.6(b). Notwithstanding the foregoing, if the defendants in a Claim
include both an Indemnitee and the Indemnitor, and counsel to the
Indemnitee (or, if the Indemnitee is the Controlling Party, counsel to the
Indemnitor) shall have reasonably concluded that joint representation would
be inappropriate due to potential or actual conflicts of interest between
the Controlling Party, the Indemnitor and/or the Indemnitee, the Indemnitee
shall have the right to retain a single firm of separate counsel reasonably
acceptable to the Controlling Party (and, if the Company is the Controlling
Party, the Indemnitor) (each of which consents shall be timely sought and
shall not be unreasonably withheld or delayed) to participate in the
defense of that Claim on behalf of such Indemnitee and at the expense of
the Indemnitor (and, if the Company is the Controlling Party, only as set
forth in Sections 7.6(b)(ii)(D)(3) and (4)).
(e) Status. The Controlling Party shall, at least monthly, notify the
Indemnitee (and, if the Company is the Controlling Party, the Indemnitor)
regarding the status, including any significant developments, with respect
to Third Party Claims the defense of which is being conducted by the
Controlling Party on behalf of an Indemnitee (or the Indemnitor, as the
case may be).
(f) Defense of Claims against Officers and Directors. Notwithstanding
any provision to the contrary regarding the rights of an Indemnitor to be
the Controlling Party with respect to Third Party Claims, to the extent
that any senior executive officer or director of a Party is named as a
defendant in a Third Party Claim under circumstances in which such
individual is an Indemnitee, that individual nevertheless may, at its sole
discretion, conduct its own defense or elect to transfer the defense to the
Indemnitor, in either situation with the cost of the defense to be borne by
the Indemnitor.
(g) Pre-Closing Litigation. Without limiting any other provision in
this Agreement, and for purposes of clarifying the Parties' intent only,
the Parties agree that (i) each Party shall remain responsible for, and
control, all litigation with respect to its Contributed Business pending or
threatened in writing immediately prior to the Closing, including without
limitation any Claims pending or threatened in writing by each Party as
plaintiff relating to its Contributed Business (which Claims such Party
shall continue to prosecute and shall use good faith efforts to obtain a
favorable judgement or settlement), (ii) no such litigation shall be
contributed to, or be the responsibility of, the Company Entities, which
shall be treated as Indemnitees for purposes of Article 7 with respect to
all such litigation (it being understood that any settlement of any Claim
being pursued as
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plaintiff will not be settled without the consent of the Company (which
consent shall not be unreasonably withheld or delayed) if such settlement
would impair the value of any Contributed Asset in any respect and any
proceeds of any such settlement with respect to any Contributed Asset shall
be paid over to the Company), and (iii) such litigation shall be
administered by the current counsel appointed with respect thereto
(including in-house counsel, whose allocated costs shall be borne by such
Party and not passed through to any Company Entity) in accordance with the
current procedures applicable thereto, but subject to the procedures and
limitations reflected in Sections 7.6(c) through (f).
Section 7.7 Mutual Assistance. The Indemnitor and Indemnitee shall
reasonably cooperate with each other in the defense of any Claim subject to
indemnity pursuant to this Article 7. Without limiting the foregoing, after the
Closing, Wachovia agrees that it will, and that it will cause the other Wachovia
Entities to, and Prudential agrees that it will, and will cause the other
Prudential Entities to, and the Parties agree to cause the Company and the other
Company Entities to, cooperate with each of the Parties, the Company and their
respective Subsidiaries, generally seek to avoid the imposition of regulatory
sanctions on the Parties, the Company or their Subsidiaries to the extent
reasonable under the circumstances, and furnish to each of them access to such
employees and other Persons under their control, and such information,
documents, records, evidence, testimony and other assistance as any of them may
reasonably request, in connection with any actions, proceedings, arrangements or
disputes of any nature involving or affecting the Company Entities that
reasonably relate to matters that occurred prior to the Closing and in which any
of them, as the case may be, was involved or for which such Person has records,
information or knowledge. The reasonable expenses incurred by any Person in
complying with any request for cooperation pursuant to this Section 7.7 shall be
borne by the Indemnitor or other Person requesting such cooperation; provided,
however, that such expenses shall not include incidental time incurred by
employees of any Party responding to such a request for cooperation.
ARTICLE 8
FURTHER AGREEMENTS
The Parties further agree as follows:
Section 8.1 No Commitments. Each Party agrees that, except for the
liabilities to be assumed by the Company pursuant to this Agreement and the
other Transaction Documents or as expressly contemplated or permitted hereby or
thereby, neither it nor any of its Subsidiaries will take, without the prior
written consent of the other Party, any action that will commit or bind the
Company or any Member thereof (in such capacity) to any act, agreement, contract
or undertaking of any kind or nature whatsoever.
Section 8.2 Confidentiality after the Closing.
(a) As used herein, "Information" means all technical, financial and
other information (including but not limited to information relating to
customers of the Company Entities or the other Party and information of any
regulatory nature) whatsoever, in whatever form it may be held, relating to the
business and operations of the Company and the other
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Company Entities, or so furnished under the Transaction Documents and made
available to the Company Entities or a Party in connection with the transactions
contemplated hereby. For purposes of this Section 8.2, the term "Party" shall
include such Party and all its Affiliates, and the term "Company Entity" shall
include such Company Entity and all its Affiliates.
(b) Each Party shall, and shall cause its Subsidiaries to, comply with
the provisions of Law regarding confidentiality as they relate to any Party or
Company Entity. Without limiting the foregoing, each Party and the Company
shall, and shall cause their Subsidiaries to, comply with all applicable
federal, state and other Laws (including Title V of the Xxxxx-Xxxxx-Xxxxxx Act
of 1999, as amended) relating to the sharing and disclosure of personally
identifiable customer information or any other Information that may be covered
thereby.
(c) Each Party shall treat all Information of the other Party and of
each Company Entity with the same degree of care and confidentiality that it
affords its own trade secrets and proprietary information. Except as permitted
pursuant to Section 12.2 and Schedule 8.2(g), each Party agrees not to disclose
or communicate to any Person (other than, to the extent permitted by Law, to any
agents or Subsidiaries of such Party who need to know such Information, or
counterparties to any contracts or agreements with such Party who need to know
such information for valid business purposes in furtherance of the transactions
contemplated by the Transaction Documents (collectively, "Information
Representatives" of such Party), in each case who are informed of and agree to
comply with the terms and conditions of this Section 8.2), in any manner
whatsoever, any Information supplied by any Party or the Company Entities,
without the prior written consent of the Party or Company Entity that furnished
such Information. Each Party shall be responsible for any breach of the terms of
this Section 8.2 by any Information Representative of such Party.
(d) Each Party agrees to use Information received from the other Party
or the Company Entities only in connection with the transactions contemplated by
the Transaction Documents, and for no other purpose, except as otherwise
expressly permitted by this Agreement.
(e) Nothing contained herein shall be construed as restricting or
creating any liability for the disclosure, communication or use of Information
that:
(i) is or becomes publicly known through no wrongful act
of the disclosing Party or its Affiliates;
(ii) is received, without breach of this Agreement, from a
Person who is not known by the disclosing Party to be under
any confidentiality obligation to the other Party or any Company
Entity with respect thereto;
(iii) is disclosed pursuant to Law, including the rules of
any stock exchange on which such Party's securities are listed;
provided, however, that prior to any such disclosure, the disclosing
Party shall provide advance written notice to the other Party of its
intention to do so pursuant to this exception to the extent that it
is practicable in the circumstances to do so; or
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(iv) is information regarding the Company Entities (but not
the Prudential Entities or Wachovia Entities) disclosed in connection
with a due diligence review related to a proposed acquisition, merger,
consolidation or other reorganization involving a Party or to any
financing by a Party, including financings which are offerings of debt
or equity securities issued by such Party; provided that the recipient
of such Information agrees to be bound in writing by the provisions of
this Section 8.2.
(f) The provisions of Sections 8.2(a) through (e) and (g) shall become
effective only upon the occurrence of the Closing. The terms of the
Confidentiality Agreements shall remain in full force and effect up to and
immediately prior to the Closing, and, notwithstanding any provision therein for
the survival of any provision after the termination thereof, all of the
provisions of the Confidentiality Agreements shall terminate at the Closing;
provided that no termination of the Confidentiality Agreements shall release a
breaching party thereto from any liability for any breach thereof prior to the
Closing. After the Closing, the provisions of this Section 8.2 shall survive
termination of this Agreement and the LLC Agreement but shall expire, with
respect to any Person, on the second anniversary of the last date on which
neither such Person nor any of its Affiliates is a Member of the Company.
(g) Schedule 8.2(g) sets forth the Parties' protocol regarding
disclosure of Information as part of each Party's investor relations programs.
To the extent there is any inconsistency between Schedule 8.2(g) and clauses (c)
through (f) of this Section 8.2, Schedule 8.2(g) will control.
Section 8.3 Non-Competition; Non-Solicit.
(a) Except as the other Party may expressly agree with respect to any
particular transaction or class of transactions by prior written consent as
provided herein, each Party agrees that it will not, and will cause each of
its Affiliates not to, directly or indirectly (including by means of a
management, advisory, operating, consulting or similar agreement or
arrangement or by record or beneficial ownership in any capacity of equity
interests in any Person), at any time prior to the termination of this
Agreement, develop, acquire or hold an equity interest in any Person
directly or indirectly engaged in, or otherwise directly or indirectly
engage in, the Business anywhere in North America, Central America or South
America (but excluding Canada and Mexico) (such geographic area, the
"Territory"), except through the Company Entities in accordance with the
Transaction Documents.
(b) Notwithstanding the foregoing:
(i) Each Party and its Affiliates shall be entitled to
acquire less than 2% of the voting stock or 5% of the capital stock or
other equity interests of any Person engaged directly or indirectly in
the Business in the Territory; provided that such acquisition is and
remains an investment solely for investment purposes, and such Party
and its Affiliates do not participate in the day-to-day management of
such Person; provided, however, that notwithstanding anything to the
contrary contained in this Section 8.3, each Party and its Affiliates:
(A) shall be entitled to
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conduct principal investing and merchant banking activities in the
ordinary course of business and, in connection therewith, acquire,
directly or indirectly, capital stock and other equity interests
(including but not limited to options, warrants, and other rights to
acquire capital stock and other equity interests) in any Person,
including without limitation a Person engaged, directly or indirectly,
in the Business in the Territory, without regard to the limitations on
the amount of capital stock or other equity interests set forth
herein, and (B) shall not be required to divest or contribute to the
Company any such principal investing or merchant banking investment in
any Person engaged, directly or indirectly, in the Business in the
Territory.
(ii) Each Party and its Affiliates shall be entitled to
provide financial services of the types that are included in the
Business, directly or indirectly through Affiliates, through any
individual who is a licensed insurance agent, registered investment
adviser, certified financial planner or certified public accountant,
so long as reasonable steps are taken to ensure that not more than 25%
of such individual's gross income in any calendar year will be derived
from the Business.
(iii) For the avoidance of doubt, notwithstanding anything
in this Section 8.3 to the contrary:
(A) Each Party and its Affiliates shall be entitled to
conduct any business of a kind that it is currently conducting
so long as it does not constitute the Business and to offer
and sell in the Territory through distribution channels owned
and operated by such Party or Affiliate or by Third Parties:
(1) shares of and other interests in investment
companies and pooled investment vehicles of all kinds,
including real estate, commodity and derivatives
funds, whether or not registered under the Investment
Company Act and the Securities Act, and whether or not
such investment companies and pooled investment
vehicles are managed by such Party or its Affiliate;
(2) variable annuity contracts, variable life
insurance policies and other insurance products,
whether or not the interests therein or the funding
options offered thereby are registered under the
Investment Company Act and the Securities Act and
whether or not such funding options are managed by
such Party or its Affiliate;
(3) deposit products eligible for FDIC
insurance; and
(4) Derivatives and FX Products.
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(B) Prudential and its Affiliates shall be entitled to
continue to maintain and service accounts of the type
constituting Prudential Excluded Assets;
(C) Each Party and its Affiliates shall be entitled:
(1) except as otherwise provided in the Product
Agreement, to offer and sell in the Territory, through
distribution channels owned and operated by such Party
or such Affiliate or by a Third Party, "wrap" services
for individuals and other broker-dealers under which
such Party or its Affiliate provides a platform and
advice for the selection of Third Party investment
managers, mutual funds or other investment media;
(2) to engage in equity block-trading,
securities-related executive services activities,
restricted stock trading, corporate share repurchase
programs (including tender offers), 10b5-1 trading
programs, bought deals, derivative and hedging
activities and program trading;
(3) to act as underwriter, dealer or agent in
connection with any offering of securities;
(4) to engage in correspondent securities
clearing, payment and settlement activities conducted
by Wachovia's Corporate and Investment Banking group,
Prudential's corresponding corporate and investment
banking group, Wachovia Bank or the Prudential Banks,
or in each case by any successor division or entity
thereof;
(5) to acquire, directly or indirectly, any
voting stock, capital stock or other equity interests
(including convertible securities) of any Person in
connection with any hedging or other customer or
proprietary driven Derivatives and FX Products without
regard to any limitations contained in this Agreement,
including any limitations in Section 8.3(b)(i);
(6) to enter into referral arrangements with
Third Parties relating to the distribution of such
Party's and its Affiliates' certificates of deposit
and Derivatives and FX Products or Third Party
certificates of deposits and Derivatives and FX
Products;
(7) to provide prime brokerage services whether
to the customers of the Company Entities or other
Third Parties;
(8) to produce and distribute research reports
regarding issuers and securities;
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(9) to enter into and engage in soft dollar
arrangements; and
(10) to engage in institutional equity and fixed
income trading, sales and dealing activities.
(iv) None of the following activities shall be prohibited
by Section 8.3(a): (A) ordinary course investments made through trust
departments, institutional custody, managed mutual funds, separate
accounts or other Third Party investment sources for the benefit of
clients and other customers, (B) assets or securities acquired in the
ordinary course of business in satisfaction of debts previously
contracted in good faith, (C) bona-fide market-making, proprietary,
floor or specialist trading, third market trading, or merger and
acquisition advisory or dealer manager activity involving securities
(or relating to Derivatives and FX Products) of any Person engaged
directly or indirectly in the Business in the Territory, or (D) any
other activity conducted in the ordinary course of business which, if
conducted in the United States, would not require the Persons
conducting such activities to be licensed or registered as a
securities broker or dealer;
(v) A Combining Party may acquire or become Affiliated
with any other Person that is engaged directly or indirectly in the
Business in the Territory for purposes of Section 8.3(a) and is not
otherwise exempted pursuant to clauses (i), (ii), (iii) or (iv) of
this Section 8.3(b) (the "Other Combining Person") so long as the
portion of the Other Combining Person conducting the Business in the
Territory (but excluding any assets, capital stock or equity interests
acquired by the Combining Person that are permitted pursuant to
Section 8.3(b)) (the "Acquired Retail Brokerage Business") is
contributed to the Company as an in-kind capital contribution in
accordance with Article 3 of the LLC Agreement on the date of
consummation of the Combination Transaction or as soon thereafter as
is reasonably practicable (or on such other date as may be provided in
Section 3.4 of the LLC Agreement). Notwithstanding the foregoing:
(A) Unless otherwise requested by the Board of
Managers of the Company, a Party shall not be permitted to
enter into any such Combination Transaction if (1) the
consolidated net revenues of the Other Combining Person and
any Subsidiaries thereof derived from the Business in the
Territory exceed 50% of the Other Combining Person's total
consolidated net revenues for the immediately preceding two
fiscal years and any interim year-to-date period, and (2) the
Acquired Retail Brokerage Business is a Small Retail Broker;
(B) If (1) the Acquired Retail Brokerage Business
(other than an Acquired Retail Brokerage Business that is the
subject of a Combination Transaction requested by the Board of
Managers referred to in clause (A) above) is an Excludible
Retail Brokerage Business and the Non-Combining Member has not
consented to its contribution to the Company pursuant to
Section 8.3(c)(ii) or (2) in response to the receipt of a
Put/Call Exercise Notice from the Non-Combining
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Party, the Combining Party elects to divest the Acquired
Retail Brokerage Business in order to avoid the occurrence of
a Put/Call Event, then such Acquired Retail Brokerage Business
shall not be contributed to the Company and shall be divested
by the Combining Party as promptly as practicable, but in any
event within one year following the date of consummation of
the Combination Transaction, and during the period prior to
such divestiture such Acquired Retail Brokerage Business (x)
shall be conducted by the Combining Party only in the ordinary
course consistent with past practice and shall not be
expanded, and (y) shall not be subject to, or eligible to
participate in, any of the arrangements in this Agreement, the
Product Agreement or the other Transaction Documents;
(C) If the Affiliated Members of the Non-Combining
Party elect to delay the contribution of the Acquired Retail
Brokerage Business until the end of the Integration Period
pursuant to Section 3.4(c) of the LLC Agreement, the Combining
Party and its Affiliates shall not be in violation of this
Section 8.3 during the Integration Period but such Acquired
Retail Brokerage Business shall not be subject to, or eligible
to participate in, any of the arrangements described in this
Agreement, the Product Agreement or the other Transaction
Documents; and
(D) If Prudential is the Combining Party and
Wachovia sends a Put/Call Exercise Notice pursuant to Section
8.3(c) below to which Prudential has not responded by electing
within the time period specified below to divest such Acquired
Retail Brokerage Business, Prudential shall retain such
Acquired Retail Brokerage Business in lieu of contributing it
to the Company and shall not be in breach of this Section 8.3
by reason of such action.
(c) With respect to the following Combination Transactions:
(i) Within ten Business Days following the date on which a
Combining Party or one of its Affiliates (1) executes and delivers a
definitive binding agreement to effect a Combination Transaction that
would, upon consummation, either (A) result in an Affiliation with an
Acquired Retail Brokerage Business or (B) result in a Change of
Control with respect to such Combining Party, or (2) publicly
announces the commencement of a tender offer or exchange offer with
respect to any such Combination Transaction, the Combining Party shall
give written notice of such fact to the Non-Combining Party, and shall
notify the Non-Combining Party as to whether the Acquired Retail
Brokerage Business is an Excludible Retail Brokerage Business, if such
information is known at such time.
(ii) On or prior to the 20th Business Day following receipt
of such notice, the Non-Combining Party may, (x) if the Acquired
Retail Brokerage Business is an Excludible Retail Brokerage Business,
notify the Combining Party as to whether it will permit such Acquired
Retail Brokerage Business to be
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contributed to the Company, or (y) if such Combination Transaction (1)
is a Large Retail Brokerage Combination or (2) would constitute a
Change of Control with respect to the Combining Party, and such
Non-Combining Party intends to exercise its put or call rights
pursuant to Section 9.3 upon consummation thereof, deliver a Put/Call
Exercise Notice to the Combining Party. If the Non-Combining Party
fails to take either of the actions set forth in the prior sentence,
then the Combining Party shall contribute the Acquired Brokerage
Business to the Company on the date of consummation of the related
Combination Transaction or as soon thereafter as is reasonably
practicable; provided, however, that if subsequent to such 20th
Business Day, it is determined that the Acquired Retail Brokerage
Business is an Excludible Retail Brokerage Business (which
determination the Combining Party shall in all events make at least
five Business Days prior to the consummation of such Combination
Transaction), the Combining Party shall notify the Non-Combining Party
as promptly as practicable of such determination and the Non-Combining
Party may make the notification referred to in clause (x) above within
a reasonable time after such determination but in any event prior to
the applicable consummation date.
(iii) If the Non-Combining Party determines that the
Acquired Retail Brokerage Business is an Excludible Retail Brokerage
Business, it shall promptly deliver a notice to that effect to the
Combining Party and the Combining Party shall not contribute such
Acquired Retail Brokerage to the Company without the consent of the
Non-Combining Party and the Company.
(iv) If the Non-Combining Party delivers a Put/Call
Exercise Notice with respect to a Large Retail Brokerage Combination,
the Combining Party shall, within ten Business Days following receipt
of such Put/Call Exercise Notice but in any event prior to the
applicable consummation date, provide written notice to the
Non-Combining Party as to whether the Combining Party (A) accepts the
Put/Call Exercise Notice (in which case the Prudential Put or Wachovia
Call will be effected in accordance with Section 9.3) or (B) intends
to hold the Acquired Retail Brokerage Business for divestiture in
accordance with Section 8.3(b)(v)(B). If the Combining Party delivers
notice that it intends to divest such Large Retail Broker, the
Put/Call Exercise Notice shall be deemed to be withdrawn without any
further action by the Non-Combining Party.
(d) Upon delivery of a notice pursuant to Section 8.3(c)(i), each
Party shall promptly designate a representative (an "Acquisition
Representative") who shall be an individual responsible for overseeing the
contribution of the relevant Acquired Retail Brokerage Business (and the
valuation process in connection therewith) or the divestiture thereof, to
whom all communications on such matter will be directed, and who shall have
authority to act on behalf of the Party that appointed him or her. Each
Party may replace its Acquisition Representative at any time upon written
notice to the other Acquisition Representative. The Acquisition
Representatives shall meet as soon as practicable, and in any event not
later than five Business Days following delivery of the notice by the
Combining Party pursuant to Section 8.3(c)(i). The Acquisition
Representatives will meet in good faith to prepare a plan with respect to
such acquisition or divestiture. The
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Parties, through their Acquisition Representatives, will promptly cause the
applicable procedures for determining the Appraised Value to be commenced,
shall identify and promptly commence the steps necessary for obtaining all
Consents required under applicable Law, and shall prepare all required
documentation. The Parties shall take, or cause to be taken, all necessary
and appropriate steps to cause the above-referenced plan to be implemented
as promptly as practicable.
(e) Prudential agrees that, from the date hereof and until the one
year anniversary of the date of any termination of this Agreement with
respect to Prudential, it will not, and will cause its Affiliates not to,
directly or indirectly, solicit to hire or hire any employees of any
Company Entity, or employees of Wachovia or any other Wachovia Entity
assigned to assist any Company Entity in the Business with whom Prudential
or any of its directors, officers, advisors or other employees have contact
in connection with the Business; provided that nothing contained in this
Section 8.3 shall prohibit Prudential from hiring any such individual (i)
responding to any advertisement or other general solicitation not targeted
at any Company Entity, Wachovia or any of such employees of any Company
Entity or Wachovia, or (ii) whose employment with any Company Entity or
Wachovia has terminated and such termination was not induced or solicited
by Prudential.
(f) If any provision contained in this Section 8.3 shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section 8.3, but this Section 8.3 shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein. It is the intention of the Parties that if any of the
restrictions or covenants contained herein are held to cover a geographic
area or to be for a length of time which is not permitted by applicable
Law, or in any way construed to be too broad or to any extent invalid, such
provision shall not be construed to be null, void and of no effect, but to
the extent such provision would be valid or enforceable under applicable
Law, a court of competent jurisdiction shall construe and interpret or
reform this Section 8.3 to provide for a covenant having the maximum
enforceable geographic area, time period and other provisions (not greater
than those contained herein) as shall be valid and enforceable under such
applicable Law. This Section 8.3(f) is in furtherance of, and not intended
to limit, the application of Section 12.8.
(g) This Section 8.3 shall become effective on the Closing Date,
except that Section 8.3(e) is effective as of the date hereof.
Section 8.4 Employee Matters.
(a) Transfers of Personnel.
(i) Identification of Contributed Business Individuals.
(A) Attached hereto are Schedules 8.4(a)(i)-1 and
8.4(a)(i)-2, which consist, respectively, of lists of Wachovia
and Prudential, and their respective Subsidiaries' employees
and independent contractors (other
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than any independent contractor whose assignment is expected
to last less than three months) who, as of the date of this
Agreement, (I) perform more than 50% of their services for the
benefit of the Contributed Businesses (the "Eligible
Individuals") and (II) are intended to become employed by (or
become an independent contractor of) a Company Entity (or
Wachovia, as described in subsection (a)(ii) below) as of the
Closing Date. Such lists shall generally be subject to
correction and verification by Wachovia and Prudential,
respectively, after the date of this Agreement. The names of
all individuals listed on Schedule 8.4(a)(i)-1 or 8.4(a)(i)-2
shall be corrected, verified and/or approved as described
herein no later than 60 days after the Closing Date (unless
otherwise agreed by the Parties) (such schedules, as so
corrected, verified and/or approved, together shall be
referred to hereinafter as the "Individual Schedules"). Any
additions to such lists after the date of this Agreement
(including employees hired or transferred to replace
terminating employees and newly hired employees or newly hired
independent contractors) by any Party shall be subject to the
other Party's approval, not to be unreasonably withheld. All
such employees and independent contractors of Wachovia and its
Subsidiaries set forth on Schedule 8.4(a)(i)-1 from time to
time will be the "Wachovia Contributed Business Individuals"
and such employees and independent contractors of Prudential
and its Subsidiaries set forth on Schedule 8.4(a)(i)-2 from
time to time will be the "Prudential Contributed Business
Individuals" (Wachovia Contributed Business Individuals and
Prudential Contributed Business Individuals, collectively,
"Contributed Business Individuals"); provided, however, that
any Contributed Business Individual to whom a notice of
termination has been given prior to the Closing and all
liabilities with respect to such individual shall remain or
become the responsibility of Wachovia or Prudential, as the
case may be, even if the actual termination of such employee's
employment occurs after the Closing; and provided, further,
however, that in no event shall any notice regarding the
transactions contemplated under this Agreement (or any other
Transaction Document) or any offer of employment made by any
Company Entity (described in Section 8.4(a)(i)(B) below)
constitute a notice of termination for purposes of this
Section 8.4(a)(i)(A). On and after the date hereof, Wachovia
and Prudential each agree to use their reasonable best efforts
to cause each of their Contributed Business Individuals,
respectively, to devote 100% of their time to Contributed
Business-related matters.
(B) The Parties intend for there to be continuity of
employment with respect to the Contributed Business Employees.
Prior to the Closing Date, the Company (or the applicable
Company Entity) shall make offers of employment to employees
and offers to retain independent contractors who are
Prudential Contributed Business Individuals (other than with
respect to the Assignable Employees and the Prudential
Domestic Subsidiary Individuals), such employment and
retention to be effective as of the Closing Date. In addition,
effective as of the Closing Date,
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Prudential shall, or shall cause its applicable Subsidiary to,
assign to the Company all Prudential Employment Agreements
that are Prudential Transferred Plans; provided, however,
that, with respect to the Prudential Transferees covered by
the Missing Employment Agreements, (A) Wachovia shall only be
liable for (I) base salary, annual bonus opportunity (if any),
and benefits after the Closing Date pursuant to the applicable
Company Entity's (or Wachovia's, if applicable) compensation
and benefits structure generally in effect from time to time
and (II) after the Closing Date, if a Company Entity
terminates such Prudential Transferee without cause, any
severance payments or benefits that may become payable to such
Prudential Transferee pursuant to the applicable Company
severance plan (in accordance with Section 8.4(b)(i) of this
Agreement); and (B) Prudential (or its Subsidiaries, as
applicable) shall be liable for all other payments,
obligations, costs and Claims of Prudential Transferees
covered by the Missing Employment Agreements (including,
without limitation, any guaranteed bonus or loan amounts and
any severance payments or benefits that are in excess of any
such payments and benefits to which such Prudential Transferee
may be entitled under the applicable compensation and benefits
structure (including any applicable Company severance plan)).
Effective as of the Closing Date, all (I) Prudential
Contributed Business Individuals who either have been assigned
to, or have accepted an offer from a Company Entity (which
shall include the Prudential Domestic Subsidiary Individuals),
and (II) Wachovia Contributed Business Individuals shall
become employees (or independent contractors, as the case may
be) of a Company Entity, except that some Wachovia Contributed
Business Individuals shall remain with Wachovia and some
Prudential Contributed Business Individuals shall subsequently
be transferred to Wachovia, both as described in subsection
(a)(ii) below. For purposes of this Agreement, all Wachovia
Contributed Business Individuals who, as of the Closing Date,
become employed by (or become independent contractors of, as
the case may be) a Company Entity (or remain employed by
Wachovia, as applicable) are hereinafter referred to as
"Wachovia Transferees" and all Prudential Contributed Business
Individuals who, as of the Closing Date, become employed by
(or become independent contractors of) a Company Entity (or
Wachovia, as described in subsection (a)(ii) below), are
hereinafter referred to as "Prudential Transferees" (Wachovia
Transferees and Prudential Transferees, collectively, the
"Company Transferred Individuals"). In connection with the
foregoing, Prudential shall, and shall cause its Subsidiaries
to, facilitate the provision of the offers of employment and
retention described above, and shall use their commercially
reasonable efforts to ensure that all Prudential Contributed
Business Individuals become Prudential Transferees. Also,
Prudential shall, and shall cause its Subsidiaries to,
cooperate with all reasonable requests made by Wachovia in
connection with the foregoing.
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(C) With respect to any Prudential Transferee who
becomes employed by a Company Entity (or by Wachovia as
described in Section 8.4(a)(ii) below), Prudential and
Wachovia shall, and shall cause their respective Affiliates
to, to the extent feasible or practicable, (I) treat such
Company Entity or Wachovia, as the case may be, as a
"successor employer" and Prudential or its Subsidiary as a
"predecessor," within the meaning of Section 3121(a)(1) and
3306(b)(1) of the Code, to the extent appropriate, for
purposes of Taxes imposed under the United States Federal
Insurance Contributions Act or the United States Federal
Unemployment Tax Act, each as amended, and (ii) cooperate with
each other to avoid, to the extent possible, the filing of
more than one IRS Form W-2 with respect to each such
Prudential Transferee for the calendar year within which the
Closing Date occurs.
(ii) Support and Compliance Individuals. Those Company
Transferred Individuals whose principal duties are in the areas of
human resources, legal, technology, finance or risk management shall
immediately after the Closing, in the case of any such Wachovia
Transferees, remain employed by Wachovia, and in the case of any such
Prudential Transferees, be transferred to Wachovia. All Contributed
Business Individuals described in this Section 8.4(a)(ii) shall be so
designated on the Individual Schedules by placing an asterisk after
such employees' names.
(iii) Treatment of Wachovia and Prudential Excluded
Individuals.
(A) Prior to the Closing Date, Wachovia shall, or
shall cause its Subsidiaries to, take all actions necessary to
cause all employees and independent contractors of its
Subsidiaries that are not set forth on the Individual
Schedules to be terminated or transferred to (or retained by,
as the case may be) Wachovia or its Subsidiaries, as
applicable (other than the Contributed Subsidiaries), (such
individuals, the "Wachovia Excluded Individuals"). In
addition, prior to the Closing Date, Prudential shall, or
shall cause its Subsidiaries to, cause all employees and
independent contractors of Prudential and its Subsidiaries, as
applicable, who are not set forth on the Individual Schedules
(the "Prudential Excluded Individuals") to cease to
participate in any Prudential Contributed Business Plan that
any Company Entity will be sponsoring or maintaining on and
after the Closing Date.
(B) Prudential shall be solely responsible for any
costs, liabilities or Claims, however arising, related to the
Prudential Excluded Individuals, and Wachovia shall be solely
responsible for any costs or liabilities, however arising,
relating to the Wachovia Excluded Individuals.
(iv) No Right to Continued Employment. Nothing contained in
this Agreement shall confer on any Company Transferred Individual any
right, on or
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after the Closing Date, to continued employment or to change his or
her status as an employee at will.
(b) Benefit Plans for Company Transferred Individuals -- General
Provisions.
(i) Continuation of Benefit Plans During Transition
Period.
(A) Except as otherwise set forth in this Agreement,
for the period commencing on the Closing Date and ending
December 31, 2003 (the "Transition Period"), Wachovia and
Prudential shall, or shall cause their respective Subsidiaries
(including, with respect to Wachovia, any Company Entity) to,
continue to provide their respective Company Transferred
Individuals with the same Benefit Plans in which they
participated immediately prior to the Closing Date; provided,
however, that individuals who are newly hired (or re-hired) by
a Company Entity after the Closing Date shall be covered under
the Wachovia Contributed Business Plans or the Prudential
Contributed Business Plans depending upon the location of such
employee's workplace, as reasonably determined by the Company;
and provided, further, however, that all Company Transferred
Individuals shall be covered by a relocation plan that
provides benefits substantially similar to the applicable
Wachovia Contributed Business Plan that is a relocation plan.
The Company Entities shall bear, and/or reimburse the
applicable Party for, the cost of the benefits provided under
the applicable Benefit Plan.
(B) Subject to and consistent with Section
8.4(b)(i)(A) above, during the Transition Period, Wachovia and
Prudential shall, or shall cause their respective Subsidiaries
(including, with respect to Wachovia, any Company Entity) to,
continue to provide their respective Company Transferred
Individuals with welfare benefits (including, without
limitation the levels of benefits) that are substantially
similar to the benefits such employees were entitled to
receive under the Wachovia Contributed Business Plans or the
Prudential Contributed Business Plans, as applicable,
immediately prior to the Closing Date; provided, however, that
nothing contained in this Agreement shall limit Wachovia,
Prudential, their respective Subsidiaries or any Company
Entity from amending or terminating any Benefit Plans at any
time on and after the Closing Date.
(C) From the Closing Date through the end of the
Transition Period, all Company Transferred Individuals shall
participate in one or more Company severance plans (to be
administered by the Company) that provide a level of severance
payments and benefits ("Severance Benefit Level")
substantially similar to the Severance Benefit Level provided
under the applicable Wachovia Contributed Business Plans that
are severance plans; provided, however, that for the period
commencing on the Closing Date and ending on December 31,
2004, all Prudential Transferees (other than any Prudential
Transferees who do not perform
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services in the United States) shall participate in a Company
severance plan pursuant to which they will be entitled, in the
event of a qualifying termination (as determined under such
Company severance plan), to the Severance Benefit Level
provided under the applicable Prudential Securities severance
plan immediately prior to the Closing Date (except that any
rights to health benefits provided to such Prudential
Transferees under COBRA shall be provided under such Company
health plans as may be in effect from time to time); provided,
further, however, that Prudential shall be responsible and
liable for all severance payments and benefits that are in
excess of the Severance Benefit Level to which such Prudential
Transferees would be entitled if such Prudential Transferees
were Wachovia Transferees, as well as for all costs of
administration that are in excess of the administration costs
that the Company would incur if such Prudential Transferees
were entitled to receive the same Severance Benefit Level as
Wachovia Transferees.
(ii) Compensation Arrangements and Benefit Plans After
Transition Period. Except as otherwise set forth in this Agreement,
after the Transition Period, all Company Transferred Individuals
(whether transferred to any Company Entity or Wachovia) shall be
compensated pursuant to an appropriate set or sets of compensation
arrangements and benefit plans, which may consist, in whole or in
part, of Wachovia Contributed Business Plans or Benefit Plans newly
established or maintained by the Company or its Subsidiaries.
(iii) Service Credit. Periods of employment with Wachovia,
the Wachovia Contributed Subsidiaries and their Subsidiaries, as
applicable (with respect to any Wachovia Transferees), and periods of
employment with Prudential and its Subsidiaries, as applicable (with
respect to any Prudential Transferees), in each case for which credit
was given under the Wachovia Contributed Business Plans or the
Prudential Contributed Business Plans, respectively, shall be taken
into account under the Benefit Plans for all purposes (including,
without limitation, eligibility, vesting, and benefit level, but not
for purposes of benefit accruals under any defined benefit pension
plans or any other plans) to the same extent they were taken into
account under the applicable Contributed Business Plan; provided,
however, that in no event shall any Company Transferred Individuals be
entitled to any credit for service to the extent that it would result
in a duplication of benefits with respect to the same period of
service.
(iv) Non-Termination of Employment. Except as otherwise
expressly provided herein, no provision of this Agreement shall be
construed to create any right, or accelerate entitlement, to any
compensation or benefit whatsoever on the part of any Eligible
Individual, Wachovia or Prudential Contributed Business Individual,
Company Transferred Individual or any other future, present, or former
employee or independent contractor of the Contributed Businesses under
any Benefit Plan or otherwise. Prudential shall be solely responsible
for all costs or liabilities, however arising, related to any payments
or benefits (or the acceleration or increase in the amounts or timing
of the payment or provision
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thereof) that become due under any Prudential Contributed Business
Plans that are employment or severance agreements (including, without
limitation, any guarantees), resulting from the announcement or
consummation of the transactions contemplated under this Agreement and
the other Transaction Documents, either alone or in combination with a
subsequent event; provided, however, that Prudential shall not be
liable for, and the applicable Company Entity shall be liable for, any
such payments and benefits that become due to any Prudential
Transferee under a Prudential Employment Agreement (other than a
Missing Employment Agreement) or applicable severance agreement as a
result of the applicable Company Entity involuntarily terminating
(other than with respect to any constructive termination) such
Prudential Transferee's employment after the Closing Date.
(v) Administrative Costs. If, on or after the Closing
Date, Wachovia or Prudential provides administrative services with
respect to any Benefit Plan sponsored by a Company Entity, or with
regard to which the Company Entity is responsible to pay for
administrative services, the Company Entity shall pay Wachovia or
Prudential, as the case may be, for such services, pursuant to, where
applicable (and to the extent provided under), the Wachovia/Company
Master Agreement or Prudential/Company Interim Agreement, as
applicable. If a Company Entity provides administrative services with
respect to any Benefit Plan sponsored by Wachovia or Prudential, or
with regard to which Wachovia or Prudential is responsible to pay for
administrative services, Wachovia or Prudential, as the case may be,
shall pay a Company Entity for such services pursuant to the
Company/Prudential Interim Agreement.
(c) Welfare Plans.
(i) Welfare Benefit Plans. Effective as of the Closing
Date and through the Transition Period, the Company Entities shall
assume sponsorship of and maintain those Prudential Contributed
Business Plans that (A) were sponsored by Prudential Securities or any
of its Subsidiaries immediately prior to the Closing Date and (B) are
welfare benefit plans (including, without limitation, health, life,
retiree medical, long-term disability and short-term disability plans
and programs) identified in Schedule 4.2(m)(i) as plans that are to be
sponsored and maintained after the Closing Date by a Company Entity
for the benefit of the Prudential Transferred Individuals and newly
hired employees who, pursuant to Section 8.4(b)(i), are to be covered
by Prudential Contributed Business Plans. Notwithstanding the
foregoing, in accordance with and pursuant to the terms of the
Prudential/Company Interim Agreement, for so long as the Company
Entities maintain such Benefit Plans, Prudential shall, or shall cause
its appropriate Affiliate to, provide such administrative services
with respect to all aspects of providing any benefits (including
notices, payments and the provision of benefits) as may be necessary
under any such plans to any Company Transferred Individual or other
individual who is or becomes entitled to receive such benefits.
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(ii) Prudential Severance Liabilities. Except as provided
in Section 8.4(c)(iii), Prudential shall be solely responsible for all
severance liabilities and obligations (including any obligation to pay
all or any portion of any annual incentive compensation awards or
bonuses) related to any severance plan of Prudential or its
Subsidiaries, regardless of whether such liability arose before, on,
or after the Closing Date.
(iii) Treatment of Certain Prudential Individuals. The
Parties hereby agree that with respect to those Eligible Individuals
employed by Prudential or its Subsidiaries (other than Prudential
Contributed Business Individuals) whose employment is or will be
terminated as a result of the transactions contemplated by this
Agreement (a list of which is set forth on Schedule 8.4(c)(iii)), the
Company or its Subsidiaries shall reimburse Prudential for severance
and retention liabilities (inclusive of any employer-paid taxes) that
are the responsibility of Prudential and its Subsidiaries, incurred
after the Closing Date, in an aggregate amount not to exceed the
amount set forth on Schedule 1.1(y). The list set forth on Schedule
8.4(c)(iii) shall generally be subject to correction and verification
by Prudential and Wachovia within 60 days after the date of this
Agreement; provided, however, that any additions to such lists after
the date of this Agreement by Prudential shall be subject to
Wachovia's approval, which shall not be unreasonably withheld.
(d) Defined Benefit Plans.
(i) Qualified Defined Benefit Pension Plans. Effective as
of the Closing Date, Prudential shall (A) cause all Prudential
Transferees to become fully vested in their unvested accrued benefits
under the Prudential Merged Retirement Plan (the "Prudential Pension
Plan"), (B) permit all Prudential Transferees to continue, during the
Transition Period, to receive (and be fully vested in) additional
accruals under the Prudential Pension Plan as if such Prudential
Transferees were employed by Prudential, and (C) retain all liability
and responsibility for all benefits and obligations described in
clauses (A) and (B) above and for all Claims arising in respect of the
Prudential Pension Plan. Prudential may charge the Company Entities
for the cost of the additional accruals (other than that portion of
such accruals that relates to the additional compensation to be
reported on the 2003 Form W-2s of the applicable Prudential
Transferees as a result of the acceleration of payments under the
Prudential Securities 2002 Performance Unit Plan (the "PUP"), the
Prudential Securities 2001 Incentive Share Program (the "ISP") and any
other Nonqualified Plans) occurring during the Transition Period
pursuant to this Section 8.4(d)(i), such cost to be determined in good
faith by agreement of Prudential's and Wachovia's actuaries. No assets
of the Prudential Pension Plan shall be transferred to Wachovia, its
Affiliates or any Company Entity or any plan maintained by them, and
neither Prudential, its Subsidiaries nor any Company Entity shall have
any liability and responsibility for any benefits, obligations or
Claims arising in respect of the Wachovia Pension Plan and Trust (the
"Wachovia Pension Plan") through the end of the Transition Period;
provided, however, that Wachovia may
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charge the Company Entities for the cost of any benefits provided to
the Company Transferred Employees under the Wachovia Pension Plan.
(ii) Supplemental Retirement Plans. Effective as of the
Closing Date, Prudential Securities shall, or shall cause one of its
Affiliates to, (A) retain sponsorship of, and maintain the Prudential
Securities General Partners Pension Plan and the Prudential Securities
Supplemental Retirement Plan for Executives (the "SERP") for the
benefit of those Prudential Transferees who participated in such plans
immediately prior to the Closing Date, (B) fully vest all such
Prudential Transferees in their accrued benefits under the SERP, (C)
allow such Prudential Transferees to continue to accrue benefits under
the SERP during the Transition Period while employed by the Company
(or Wachovia, as applicable), as if such Prudential Transferees had
continued to participate in such plan as active employees of
Prudential Securities, (D) cause the SERP to give any such Prudential
Transferee whose employment is involuntarily terminated without cause,
credit for their increase in age while employed by, and periods of
service with, a Company Entity (or Wachovia, as applicable) for
purposes of such Prudential Transferee's eligibility for early
retirement and disability subsidies, and (E) assume all liabilities
and obligations with respect to the benefits such Prudential
Transferees have accrued prior to the Closing Date or may accrue, on
and after the Closing Date, under the SERP, and all Claims arising
under the SERP. After the end of the Transition Period, Prudential may
either terminate the SERP and pay out all benefits accrued thereunder
immediately, pursuant to the terms of the SERP, or end any further
accruals under the SERP and pay out such frozen benefits from time to
time in accordance with the terms of the SERP. In the event that
Prudential terminates the SERP, Prudential's and Wachovia's actuaries
shall determine and agree in good faith as to the appropriate
valuation of the early retirement and disability subsidies in
determining the benefit of the Prudential Transferees who participated
in the SERP consistently with the way such subsidy would be valued in
the event of the termination of a tax-qualified defined benefit plan.
Prudential may charge the Company Entities for the cost of the
additional accruals occurring during the Transition Period pursuant to
this Section 8.4(d)(ii) (other than that portion of such accruals that
relates to the additional compensation to be reported on the 2003 Form
W-2s of the applicable Prudential Transferees as a result of the
acceleration of payments under the PUP, the ISP and any other
Nonqualified Plans), such cost to be determined in good faith by
agreement of Prudential's and Wachovia's actuaries.
(e) Qualified Defined Contribution Plan.
(i) Spinoff of Prudential Excluded Individual Account
Balances. Prior to the Closing Date, Prudential (or Prudential
Securities, as the case may be) shall cause the trustee of the
Prudential Securities 401(k) Plan (the "PS Savings Plan") (I) to
segregate, in accordance with the spinoff provisions of Section 414(l)
of the Code, assets of the Company Savings Plan equal to the full
account balances of the participants who are Prudential Excluded
Individuals and (II) to transfer such assets and all liabilities
relating to the Prudential Excluded
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Individuals under the PS Savings Plan to the trustee of a qualified
defined contribution plan sponsored by Prudential or one of its
Subsidiaries (the "Prudential Savings Plan"). Such assets shall be
transferred in cash or in kind from each investment fund of the PS
Savings Plan in the same proportion as the interest of such
participants in each such investment fund bears to the total assets of
such fund, including notes representing loans to such participants,
all based on the value of such participants' account balances on the
day before the transfer of such full account balances described
herein. Prudential Securities and Prudential shall make, or cause to
be made, all required filings and submissions to appropriate
Governmental Authorities and all required amendments to the PS Savings
Plan and Prudential Savings Plan and related trust agreements
necessary to provide for the transfer of assets and liabilities
described herein.
(ii) Effect of Closing; Treatment of Prudential Common
Stock Fund. Effective as of the Closing Date:
(A) The Company shall assume sponsorship of the PS
Savings Plan;
(B) The Prudential Common Stock Fund (an investment
option under the PS Savings Plan) shall cease to be an
investment option into which any additional amounts may be
placed, whether by contribution or transfer; and
(C) All participants in the PS Savings Plan shall be
required to transfer all amounts currently invested in the
Prudential Common Stock Fund under the PS Savings Plan into
other investment options by no later than the end of the
Transition Period.
In addition, during the Transition Period, Prudential shall, or shall
cause its appropriate Affiliate to, provide administrative and
recordkeeping services with respect to all aspects of the PS Savings
Plan. Notwithstanding anything set forth above, Prudential shall
assume all liabilities arising out of or in connection with the
Prudential Common Stock Fund of the PS Savings Plan.
(f) Compensation Arrangements.
(i) Prudential MasterShare Programs.
(A) With respect to the various equity-linked
compensation plans set forth on Schedule 8.4(f)(i) (the
"MasterShare Programs"), effective as of the Closing Date: (I)
the Company shall assume sponsorship of the MasterShare
Programs, subject to subsection (B) below; (II) no further
amounts shall be invested in Prudential Common Stock under the
MasterShare Programs; and (III) any participants in such
programs who become employed by Wachovia or the Company
Entities pursuant to Section 8.4(a) above will not be deemed,
for purposes of the MasterShare Programs, to have an
involuntary termination of employment
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unless and until such individuals are actually terminated from
employment by Wachovia, its Affiliates and the Company
Entities.
(B) During the Transition Period, the Company shall
continue to accept deferrals (and transfer the equity
purchased with such deferrals to the participants) under the
MasterShare Programs and to operate the MasterShare Programs
in accordance with their terms for the benefit of Prudential
Transferees. Prudential shall provide any administrative and
recordkeeping services necessary to operate the MasterShare
Programs through the end of the Transition Period pursuant to
the terms of the Prudential/Company Interim Agreement, and
shall be responsible for all liabilities and Claims relating
to the MasterShare Programs, regardless of how or when they
arise, other than (x) the Company's obligation to make equity
purchases under the MasterShare Programs in the ordinary
course in accordance with the terms of the MasterShare
Programs and (y) the Company's liabilities assumed under
clause (III) below. In connection with the foregoing, the
Company shall (I) only continue to sponsor and maintain the
MasterShare Programs through the end of the Transition Period
and until such time in 2004 as the awards have been provided
thereunder to the plans' participants in respect of 2003 (such
time, the "End Date"), (II) beginning on the End Date, provide
all administrative and recordkeeping services necessary to
operate the MasterShare Programs and (III) be liable for any
Claims in respect of such administrative and recordkeeping
services with respect to the MasterShare Programs performed
after the End Date.
(ii) Other Prudential Nonqualified Plans; Grantor Trust.
Prudential Securities is the grantor of a trust (the "Trust")
established pursuant to the Trust Agreement dated as of September 22,
1998 by and between Prudential Securities, its successors and assigns,
and U.S. Trust Company of California, as amended (the "Trust
Agreement"), which Trust is intended to fund certain deferred
compensation and incentive bonus plans (known as the "Plans" under the
Trust Agreement, hereinafter referred to as the "Nonqualified Plans")
in the event Prudential Securities incurs a "Change of Control" (as
defined in the Trust Agreement). The Nonqualified Plans are listed on
Appendix A attached to an amendment to the Trust Agreement dated
February 4, 2003 (as set forth on Schedule 8.4(f)(ii)), which list
Prudential hereby represents includes all non-qualified deferred
compensation plans covering Prudential Transferees, other than the
MasterShare Programs. In connection with the foregoing:
(A) Prior to the Closing Date, Prudential shall, or
shall cause Prudential Securities or another Affiliate or
Subsidiary to, make a contribution to the Trust in an amount
up to the amount accrued on the Final Closing Balance Sheet of
the Prudential Contributed Business;
(B) Prudential Securities shall (I) retain the
sponsorship of the Trust and the Nonqualified Plans, and (II)
retain all obligations of
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Prudential Securities under the Trust Agreement. In addition,
Prudential shall amend the Prudential Retirement Accumulation
Plan (the "RAP") solely to eliminate the requirement that a
participant must be granted a minimum of five awards as a
condition of eligibility for benefits under the RAP, such
amendment to be effective as of the Closing; and
(C) On and after Closing Date: (I) Prudential shall,
or shall cause Prudential Securities or another Affiliate to,
administer the Nonqualified Plans in accordance with their
terms, and, except as set forth below, be liable for all
amounts payable under, and all liabilities related to, the
Nonqualified Plans, Trust or the Trust Agreement; (II)
Prudential shall, or shall cause Prudential Securities or
another Affiliate to, credit ongoing service with a Company
Entity (or Wachovia, as applicable) of those Prudential
Transferees who participated in the Nonqualified Plans
immediately prior to the Closing Date for purposes of
continued vesting and for purposes of determining whether a
substantial risk of forfeiture has lapsed with respect to the
Nonqualified Plans, for so long as such Prudential Transferees
remain employed by a Company Entity (or Wachovia, as
applicable); (III) Prudential shall continue to credit awards
under the RAP and to accept deferrals under the Prudential
2003 Deferred Compensation Plan (the "DCP") for such
Prudential Transferees in respect of the Transition Period;
(IV) Prudential will not, and will cause Prudential Securities
or another Affiliate not to, amend the Nonqualified Plans in
any way so as to reduce the benefit amounts or credits of such
Prudential Transferees accrued through the date of such
amendment, without the written consent of the Company (which
consent shall not be unreasonably withheld); (V) as soon as
practicable, Prudential shall, or shall cause Prudential
Securities or another Affiliate to, terminate and distribute
cash under the ISP to participants thereunder equal to the
value of their "Incentive Shares", which shall be valued at
not less than their "Initial Value Per Share" (as defined in
the ISP); (VI) as soon as practicable, Prudential shall, or
shall cause Prudential Securities or another Affiliate to,
terminate and distribute cash under the PUP to participants
thereunder equal to the value of their "Performance Units",
which shall be valued at not less than their "Initial Value
Per Unit" (as defined in the PUP), and (VII) neither Wachovia
nor any Company Entity shall have any liability, obligation or
responsibility with respect to the Nonqualified Plans, the
Trust or the Trust Agreement, except as determined pursuant to
the next succeeding sentence. In connection with the
foregoing, Prudential may charge the Company Entities for the
costs of the additional accruals and deferrals under the
Nonqualified Plans, where applicable, during the Transition
Period, to be determined as follows: (x) the cost of
additional accruals under the RAP shall be determined in good
faith by agreement of Prudential's and Wachovia's actuaries,
(y) the cost in respect of the DCP shall be the amount of the
participant deferrals from the Closing Date through the end of
the Transition Period and (z) the cost of additional accruals
under any other applicable Nonqualified Plan during
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the Transition Period shall be determined in good faith by
agreement of Wachovia's and Prudential's actuaries, subject to
the final approval of such costs by the Chief Executive
Officer of the Company. Prudential further agrees, effective
upon Closing, to amend (or cause Prudential Securities or
another Affiliate to amend) each of the Nonqualified Plans
that is denominated a "Deferred Compensation Plan" to provide
that the "PSI Base Loan Rate" referenced therein shall be
changed to the base loan rate used by the Company to set the
interest rate which is charged to Company customers with
margin debt balances (subject to the same minimum and maximum
rates as currently provided under such plans). Thereafter,
Prudential agrees to either (a) preserve the new base loan
rate provisions of each such Deferred Compensation Plan or (b)
upon the merger of such Deferred Compensation Plans with any
other deferred compensation plans sponsored by Prudential, to
substitute such interests rate with an interest or crediting
rate offered under such other deferred compensation plans,
which rate is used for substantially all of the Prudential
active employees who participate in such plans (again subject
to the same minimum and maximum rates as currently provided
for under each such Deferred Compensation Plan).
(iii) Wachovia Nonqualified Plans. Wachovia shall retain all
liability and responsibility for any benefits, obligations or Claims
arising in respect of the Wachovia nonqualified plans through the end
of the Transition Period, and neither Prudential, its Subsidiaries nor
any Company Entity shall have any liability and responsibility for the
Wachovia nonqualified plans through the end of the Transition Period;
provided, however, that Wachovia may charge the Company Entities for
the cost of any benefits provided to the Company Transferred
Individuals under any such plans.
(iv) Prudential Equity Awards. Schedule 8.4(f)(iv) attached
hereto sets forth, for each Prudential Transferee, the amounts, date
of grant, vesting schedule, strike price and term of any option,
restricted stock or other equity grant made to such Prudential
Transferee prior to the Closing Date (the "Prudential Equity Awards").
Each Prudential Equity Award shall be the responsibility of, and
administered by, Prudential in accordance with its terms; provided
that with respect to those stock option grants made to certain
Prudential Transferees pursuant to the Prudential Stock Option Plan
(identified on Schedule 8.4(f)(iv) as the "Associate Stock Option
Grants") (the "Associate Options"), the Company shall establish and
maintain a cash retention program, pursuant to which each Prudential
Transferee who holds Associate Options as of the date hereof shall
receive an amount in cash in respect of his or her Associate Options
(which amount shall be calculated by multiplying the amount set forth
on Schedule 1.1(y) by the number of shares of Prudential Common Stock
subject to such Associate Options that are, as of the date hereof,
unexercisable (such amount, the "Option Payment"); provided, however,
in the event that the Closing Date occurs after an additional tranche
of Associate Options becomes exercisable in 2003 (in accordance with
the terms of the Associate Options), the Company shall equitably
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adjust the amount of the Option Payment, based on the same
methodologies used to initially determine the per share payment
amount. Pursuant to this program, the Company shall pay to each
applicable Prudential Transferee his or her Option Payment in one cash
lump sum payment on the earlier to occur of (I) November 1, 2004 (so
long as such Prudential Transferee continues to be employed by a
Company Entity (or Wachovia, as applicable) through October 31, 2004)
or (II) if, prior to November 1, 2004, such Prudential Transferee
terminates employment as a result of his or her death, long-term
disability or under circumstances that would give rise to a payment of
severance, as soon as practicable after the date of such termination
of employment. In connection with the foregoing, Prudential shall
promptly reimburse the Company for all such Option Payments (plus all
employer-paid taxes thereon) paid by the Company, and shall otherwise
be responsible and liable for all Option Payments and all Claims
arising in respect of the Associate Options.
(v) Short-Term Bonus Plans. With respect to any Benefit
Plans that are short-term incentive compensation plans (specifically,
item H-16 on Schedule 4.1(m)(i)(A) and item 6 on Schedule
4.2(m)(i)(A)) (collectively, the "Annual Bonus Plans"), Wachovia and
Prudential shall each cause there to be appropriately accrued on each
of the Final Closing Balance Sheets of the Wachovia Contributed
Business and the Prudential Contributed Business, respectively, the
applicable amount of short-term incentive compensation liabilities in
respect of the Wachovia Transferees and Prudential Transferees,
respectively, under such Annual Bonus Plans for the period beginning
January 1, 2003 and ending on the Closing Date, based on the amounts
paid or accrued under such respective plans for 2002. The Company
Entities shall pay annual bonus amounts to such Company Transferred
Individuals for 2003 as the Company shall determine in its discretion.
The aggregate annual bonuses paid to the Wachovia Transferees and the
Prudential Transferees, respectively, shall not be less than the
respective amounts accrued for the period beginning January 1, 2003
and ending on the Closing Date pursuant to this Section 8.4(f)(v);
provided, however, that any such requirement shall be equitably
reduced to reflect terminations or transfers of employment occurring
among the Company Transferred Individuals and shall not apply to the
extent that the Chief Executive Officer of the Company, in good faith,
determines that such level of bonus payment is inappropriate or
unwarranted due to unforeseen adverse market or other developments. In
addition, Prudential shall provide such administrative and record
keeping services as may be reasonably requested by Wachovia or the
Company in connection with the continuation of the Prudential Annual
Bonus Plans through the completion of the systems conversion and
harmonization of the Financial Advisor Branch Managers and Other Field
Commissioned Pay Programs (such service costs to be borne by the
Company Entities in accordance with the Company/Prudential Interim
Agreement).
(vi) Retention Awards. The applicable Company Entity shall
make retention awards (inclusive of employer-paid taxes thereon) to
Company Transferred Individuals, in an aggregate amount of not less or
more than the
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amounts set forth on Schedule 1.1(y), under such terms as shall be
determined in good faith by the proposed Chief Executive Officer of
the Company after consultation with Wachovia and Prudential, in order
to provide such employees with appropriate retention incentives;
provided, however, that a portion of such retention awards shall be
dedicated to the grant of incremental awards to Prudential Transferees
whose benefits or compensation awards (other than any Associate
Options) are reduced or forfeited as a result of the transactions
contemplated in this Agreement. Notwithstanding the foregoing, the
aggregate retention award value set forth above shall be equitably
reduced to reflect terminations or transfers of employment occurring
among the Company Transferred Individuals in the good faith discretion
of the Chief Executive Officer of the Company.
(vii) Non-U.S. Individuals. With respect to any Company
Transferred Individuals who do not perform services in the United
States, all such individuals shall also continue to be employees (or
independent contractors, as applicable) of their respective
Contributed Subsidiary employers, notwithstanding the transfer of such
Contributed Businesses to the Company as of the Closing Date, and
shall (A) during the Transition Period, generally be provided with the
same Benefit Plans in which they participated immediately prior to the
Closing Date and with benefits (including, without limitation the
levels of benefits) that are substantially similar to the benefits
such individuals were entitled to receive immediately prior to the
Closing Date; provided, however, that any such Company Transferred
Individuals who are newly hired (or re-hired) by a Company Entity
after the Closing Date shall be covered under the Wachovia Contributed
Business Plans or the Prudential Contributed Business Plans depending
upon the location of such individual's workplace, as reasonably
determined by the Company, to the extent permitted by applicable Law;
and (B) after the Transition Period, shall be provided such
compensation arrangements and benefit plans in accordance with Section
8.4(b)(ii) above, to the extent permitted by applicable Law.
Notwithstanding the foregoing, Prudential shall retain all liabilities
related to any plans, programs, agreements or arrangements that meet
the definition of "Foreign Plan", as defined in this Agreement, but
which are not set forth on Schedule 4.2(m)(iv).
(viii) Non-Exempt Employees. Wachovia shall retain all
liabilities and responsibility with respect to any Claims arising out
of events or circumstances occurring on or prior to the Closing Date
that any Wachovia Transferees are, or should be treated as, non-exempt
employees (within the meaning of the Fair Labor Standard Act and any
state statutes, if applicable) and Prudential shall retain all
liability and responsibility with respect to any Claims arising out of
events or circumstances occurring on or prior to the Closing Date that
any Prudential Transferees are, or should be treated as, non-exempt
employees (within the meaning of the Fair Labor Standard Act, and any
state statutes, if applicable).
Section 8.5 Certain Contributed Businesses. To the extent that any
portion of the activities of the Prudential Contributed Business consist of
activities, other than the Business, that are conducted by Wachovia's Corporate
and Investment Banking group on the date of this
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Agreement, such portion of such activities shall, in the sole discretion of
Wachovia, be (i) permitted to continue to operate in the Company, (ii)
transferred to Wachovia's Corporate and Investment Banking group or (iii)
discontinued, in any such case on terms and conditions as may be determined by
Wachovia in its sole discretion. For purposes of this Section 8.5, the term
"Business" shall not include any securities underwriting activities or any
institutional sales, trading or dealing activities.
Section 8.6 Further Assurances. Following the Closing Date, each
Party shall, and shall cause each of its Subsidiaries to, from time to time,
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably be requested by the Company or the other Party (including, without
limitation, sharing all reasonable participant information necessary for, and
cooperating with each other in good faith in connection with, the administration
and integration of the Benefit Plans and any Benefit Plan-related services), to
confirm and assure the rights and obligations provided for in this Article 8
(including, without limitation, adhering to, and using commercially reasonable
best efforts to cause authorized employees, agents, administrators, service
providers and vendors to adhere to, all Laws and agreements relating to
confidentiality with respect to the subjects of Section 8.4) and render
effective the consummation of the transactions contemplated by this Article 8,
or otherwise to carry out the intent and purposes of this Article 8. For
purposes of this Article 8, a Party shall not be obligated to cause Affiliates
that it does not control to comply with this Article 8, but shall be obligated
to use its best efforts to cause such Affiliates to comply with this Article 8.
Section 8.7 Hedge Fund Distribution. The Parties shall negotiate
in good faith to enter into mutually satisfactory arrangements with respect to
the distribution of hedge funds, hedge funds of funds and managed futures funds
constituting part of Prudential's alternative investments strategies business
with a view to substantially preserving the economic and other terms of those
arrangements for the Prudential Contributed Business and the Prudential Excluded
Businesses as they exist on the date of this Agreement.
ARTICLE 9
CERTAIN COVENANTS AND AGREEMENTS
REGARDING MEMBERSHIP INTERESTS
Section 9.1 Restrictions on Transfer; Permitted Transferees.
(a) Any Transfer of an Interest shall be null and void ab initio
unless expressly permitted by this Section 9.1 and consummated in
accordance with the terms of this Agreement and the LLC Agreement.
(b) Each Wachovia Member shall be permitted to Transfer any or all of
its Interests to a Third Party on and after the fifth anniversary of the
Closing Date as long as it complies with the provisions of Section 9.2.
(c) Each Prudential Member shall be permitted to Transfer any of its
Interests to a Third Party at any time only as permitted by Section 9.2(d).
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(d) Subject to Section 9.1(e), none of the restrictions contained in
this Section 9.1 or Section 9.2 with respect to any Transfer or proposed
Transfer shall apply to any Transfer by any Wachovia Member to Wachovia or
any Wholly-Owned Subsidiary of Wachovia (collectively, a "Wachovia
Permitted Transferee") or by any Prudential Member to Prudential or any
Wholly-Owned Subsidiary of Prudential (collectively, a "Prudential
Permitted Transferee").
(e) Prior to any Transfer of any Interest to a Member's Permitted
Transferee (including a Transfer of Interests from a Member's Permitted
Transferee to one or more of such Member's other Permitted Transferees
pursuant to Section 9.1(d)), and as a condition thereto, the applicable
Party agrees (x) to cause such Permitted Transferee to agree in writing
(for the benefit of the transferor and each other Party and Member bound by
any provisions of this Agreement) to be bound by the terms and conditions
of Article 8 (other than Section 8.4) and Articles 9, 10, 11 and 12 of this
Agreement and to execute and deliver a counterpart to the LLC Agreement and
(y) that the ultimate parent of such Transferring Member shall remain
directly liable for the performance of all obligations, including those of
such Permitted Transferee of such Party, under this Agreement and the LLC
Agreement.
(f) Each Party agrees not to cause or permit any Affiliate of such
Party (including but not limited to any of such Party's Initial Members,
Designated Combining Members (as defined in the LLC Agreement), Designated
Non-Combining Members (as defined in the LLC Agreement) or other Permitted
Transferees) that is or becomes a Member to cease to be a Wholly-Owned
Subsidiary of such Party so long as such Affiliate owns directly or
indirectly any Interest of the Company, and if such Affiliate shall cease
to be such a Wholly-Owned Subsidiary, such Affiliate shall automatically
upon the occurrence of such event cease to be a "Permitted Transferee" for
any purpose under this Agreement or the LLC Agreement, and the Party that
was the ultimate parent thereof shall, or shall cause one or more of its
Permitted Transferees to, immediately after the occurrence of such event,
purchase all of such Interests held by such Affiliate free and clear of all
Liens.
(g) Any Person that receives a Transfer of Interests pursuant to this
Article 9 shall, subject to its compliance with the applicable provisions
of this Article 9, including, in the case of a Permitted Transferee,
Section 9.1(e), and in the case of any Third Party recipient of any
Transfer of Interests, Section 9.2(e), be admitted as a Member of the
Company in accordance with Article 8 of the LLC Agreement.
Section 9.2 Right of First Refusal; Tag Along Right.
(a) The Parties agree that if, at any time on or after the fifth
anniversary of the Closing Date, any one or more Wachovia Members propose
to Transfer any or all of its or their outstanding Interests to one or more
Third Party transferees, Wachovia, on behalf of such Wachovia Members,
shall first (i) obtain a bona fide written offer from such proposed
transferee(s) setting forth in reasonable detail the terms and conditions
of such offer (the "Third Party Offer") and (ii) offer to Prudential to
sell to the Prudential Member or Members designated by Prudential, all but
not less than all of the Interests proposed to be Transferred by such
Wachovia Members pursuant to the Third Party Offer
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(the "Offered Interests") at the same price and upon substantially the same
terms and conditions as to certainty, financing support, contingent
obligations and similarly material terms and without a materially longer
period of time required to obtain any necessary Government Approvals as the
Third Party Offer; provided that if such Third Party Offer shall provide
for any non-cash consideration, in lieu thereof, the Prudential Member or
Members must pay an amount in cash equal to the Appraised Value of such
non-cash consideration in accordance with Section 11.2. Such offer by
Wachovia to Prudential (the "Sale Offer") shall be in writing (the "Sale
Notice") and irrevocable for a period (the "Election Period") of not less
than 20 Business Days or, if later because of the delay in the
determination of the fair market value of any non-cash consideration
included in the Third Party Offer pursuant to Section 11.2, not less than
10 Business Days after such determination, shall have a copy of the Third
Party Offer attached thereto, and shall include the identity of the Third
Party transferee(s) and the material terms and conditions of such Third
Party Offer including price and other financial terms to the extent not
provided in the copy thereof attached to the Sale Notice.
(b) At any time during the Election Period, Prudential may elect to
exercise (i) its right (the "First Refusal Right") to accept, on behalf of
the Prudential Member or Members designated by it, the Sale Offer in its
entirety, including but not limited to a purchase of all but not less than
all of the Offered Interests or (ii) its right pursuant to Section 9.2(d)
(the "Tag Along Right") to have the Prudential Members participate in the
proposed Transfer pursuant to the Third Party Offer, in either case by
delivering written notice to Wachovia within the Election Period specifying
its election.
(c) If Prudential elects, on behalf of the Prudential Members, to
exercise its First Refusal Right, then the following provisions shall
apply:
(i) The closing of the sale of all such Offered Interests
to the Prudential Members designated by Prudential shall take place as
soon as reasonably practicable after the delivery of the written
notice of election by Prudential referred to above, but in any event
not more than 15 Business Days following the end of the Election
Period (or such later date as may be required to comply with
applicable Law).
(ii) At such closing, the applicable Wachovia Members shall
sell the Offered Interests to the Prudential Members designated by
Prudential, and such Prudential Members shall make full payment of the
purchase price for the Offered Interests by wire transfer in
immediately available funds, to an account specified by Wachovia.
(d) If Prudential elects, on behalf of the Prudential Members, to
exercise its Tag Along Right, the following provisions shall apply:
(i) The Prudential Members designated by Prudential shall
have the right to sell to the proposed transferee(s) that made the
Third Party Offer, as a condition to such Transfer by the Wachovia
Members, the Interests representing the same proportion of the
aggregate Percentage Interest owned by all Prudential
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Members as the Offered Interests represent of the aggregate Interests
owned by all Wachovia Members immediately prior to such Transfer (or,
if the proposed transferee that made the Third Party Offer is a Major
Insurance Company, then the Prudential Members designated by
Prudential may sell 100% of their Membership Interests (or such lesser
amount as Prudential, in its sole discretion, shall decide) to such
transferee, regardless of the Percentage Interest that the Offered
Interests represent), at the same price per Interest as the price to
be paid for the Offered Interests as set forth in the Third Party
Offer and otherwise on the same terms and conditions as are specified
in the Third Party Offer, including but not limited to making the same
representations, warranties, covenants, indemnities and agreements
that the Wachovia Entities agree to make (except that, in the case of
representations, warranties, covenants, indemnities and agreements
pertaining specifically to the Wachovia Entities, the Prudential
Entities shall make the comparable representations, warranties,
covenants, indemnities and agreements pertaining specifically to such
Prudential Entities, and any indemnification obligations of the
Prudential Entities shall be several and joint only among the
Prudential Entities).
(ii) The Wachovia Members may sell in the proposed Transfer
the balance (but not more than 100%) of the Offered Interests proposed
to be so Transferred. Wachovia and the Wachovia Members shall use
their reasonable efforts to obtain the agreement of the proposed
transferee(s) to the participation of the Prudential Members
designated by Prudential in any proposed Transfer and shall not
Transfer any Interests to such proposed transferee(s) unless such
proposed transferee(s) allows the participation of such Prudential
Members on the terms specified in the Third Party Offer.
(e) If Prudential does not exercise its First Refusal Right or Tag
Along Right within the Election Period, or upon performance of Wachovia's
obligations pursuant to Section 9.2(d) if Prudential has elected to
exercise its Tag Along Right, the Wachovia Members may then Transfer all of
the Offered Interests to the proposed transferee(s) who made the Third
Party Offer (subject to reduction, if any, for Interests sold by the
Prudential Members pursuant to the Tag Along Right) at the price and upon
substantially the same terms and conditions of the Third Party Offer, and
such proposed transferee(s) shall receive the Offered Interests so
purchased. Such transferee shall (i) agree in writing (for the benefit of
the transferor and each Party and Member bound by any of the terms of this
Agreement) to be bound, on a proportionate basis (if applicable), by the
terms and conditions of Article 8 (other than Section 8.4) and Articles 9
through 12 of this Agreement applicable to the transferor from which such
transferee acquired such Offered Interests and (ii) execute and deliver a
counterpart to the LLC Agreement (and, if requested by any Party, a
guarantee substantially similar to Exhibit I hereto by the ultimate parent
of such transferee), and shall be admitted as a Member of the Company in
accordance with the terms of the LLC Agreement. Wachovia shall notify
Prudential as to the identity of such Third Party transferee(s), the amount
of Interests Transferred, and the date of Transfer, promptly upon the
consummation of any Transfer of Interests with respect to which Prudential
has exercised neither its First Refusal Right nor its Tag Along Right. The
Wachovia Members shall not, and Wachovia shall not permit them to, make
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any Transfer of any of such Offered Interests unless such Transfer is
concluded within 90 days after expiration of the Election Period (or such
longer period as may be required to comply with applicable Law). Upon the
expiration of such period, the provisions of this Section 9.2 shall again
apply to all Offered Interests remaining unsold.
(f) Any change in price or material change in the terms and conditions
of the Third Party Offer, or any change in the identity of the proposed
transferee(s) (except for an Affiliate of such proposed transferee(s) who
made the applicable Third Party Offer), shall make operative again the
terms of this Section 9.2, and Wachovia, on behalf of the applicable
Wachovia Members, shall again be required to offer such Offered Interests
pursuant to the procedures set forth in this Section 9.2 to Prudential, on
behalf of the Prudential Members, at such changed price or upon such
materially changed terms and conditions or, in the case of such changed
identity, at the applicable price or upon the applicable terms and
conditions thereof.
Section 9.3 Prudential Put/Wachovia Call.
(a) Prudential and any Prudential Member shall have the right to
require Wachovia, and Wachovia shall, or shall cause any Affiliate thereof
designated by Wachovia, including any Company Entity, to purchase all (but
not less than all) of the Interests in the Company held by all Prudential
Members (the "Prudential Put") upon any of the following events (each, a
"Prudential Put Event") at the prices indicated below (each, a "Prudential
Put Price") (references to Prudential's investment in the Company and to
Prudential's Percentage Interest as used in Sections 9.3 or 9.4 shall be
deemed to include such investment and the Membership Interests and
aggregate Percentage Interests of all of the Prudential Members):
(i) At any time after the second anniversary of the
Closing Date and on or before the fifth anniversary of the Closing
Date, at a price equal to the Cost Basis Price;
(ii) At any time after the fifth anniversary of the Closing
Date, at a price equal to Prudential's Percentage Interest of the
Appraised Value of the Company, provided, however, that Prudential
shall not be entitled to exercise a Prudential Put pursuant to this
Section 9.3(a)(ii) at any time prior to the first anniversary of the
end of a Lookback Period if Prudential elected to make a capital
contribution or a payment to the Combining Member at the end of such
Lookback Period pursuant to Section 3.4(b)(iv)(A) of the LLC
Agreement;
(iii) Upon a Bankruptcy of Wachovia, at a price equal to
Prudential's Percentage Interest of the Appraised Value of the
Company;
(iv) Upon an Intentional Breach by Wachovia, at a price
equal to Prudential's Percentage Interest of the Appraised Value of
the Company;
(v) Upon a Change of Control of Wachovia, at a price equal
to Prudential's Percentage Interest of the Appraised Value of the
Company;
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(vi) Upon the occurrence of a Broker Contribution Date with
respect to a Large Retail Brokerage Combination in which Wachovia or
any of its Affiliates is the Combining Party, unless Prudential shall
have elected to exercise its Lookback Option, at a price equal to
Prudential's Percentage Interest of the Appraised Value of the
Company; provided that for purposes of this clause (vi), such
Appraised Value shall not include the Appraised Value of the Acquired
Retail Brokerage Business in respect of which Prudential has exercised
the Prudential Put; and
(vii) Upon the expiration of the Lookback Period with
respect to the contribution of a Large Retail Broker as to which
Prudential has exercised its Lookback Option, at a price equal to
Prudential's Percentage Interest of the Appraised Value of the
Company; provided that for purposes of this clause (vii), (A) such
Appraised Value shall not include the Appraised Value of the Acquired
Retail Brokerage Business in respect of which the Prudential Members
shall have exercised their Lookback Option, (B) no adjustments shall
be made to the Appraised Value of the Company for events or changes
occurring after the Broker Contribution Date, (C) such Appraised Value
shall be deemed to be equal to the Appraised Value of the Company as
of the Broker Contribution Date (but giving effect for these purposes
to the applicable provisos contained in the definition of "Appraised
Value"), (D) there shall be added to such Appraised Value (1) any
capital contributions made by the Prudential Members to the Company
during the Lookback Period and (2) any amounts paid by the Prudential
Members to the Wachovia Members in respect of any purchase of
Membership Interests from such Wachovia Members, and (E) there shall
be subtracted from such Appraised Value (1) any amounts paid by the
Wachovia Members to the Prudential Members in respect of any purchase
of Membership Interests from such Prudential Members and (2) any
payments from the Company to the Prudential Members upon redemption of
their Membership Interests.
(b) Wachovia and any Wachovia Member shall have the right to require
Prudential and all of the Prudential Members to sell to Wachovia or any
Affiliate thereof designated by Wachovia, including any Company Entity, all
(but not less than all) of the Interests in the Company held by all
Prudential Members (the "Wachovia Call") upon any of the following events
(each, a "Wachovia Call Event" and, together with a Prudential Put Event, a
"Put/Call Event") at the prices indicated below (each, a "Wachovia Call
Price" and, together with a Prudential Put Price, a "Put/Call Price"):
(i) At any time after the fifteenth anniversary of the
Closing Date, at a price equal to Prudential's Percentage Interest of
the Appraised Value of the Company;
(ii) Upon a Bankruptcy of Prudential, at a price equal to
Prudential's Percentage Interest of the Appraised Value of the
Company;
(iii) Upon an Intentional Breach by Prudential, at a price
equal to the following: (A) in the case of a breach described in
clause (a) of the definition of
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"Intentional Breach" occurring on or before the fifth anniversary of
the Closing Date, Prudential's Percentage Interest of the Tangible
Book Value of the Company, or (B) in the case of (1) a breach
described in clause (a) of the definition of "Intentional Breach"
occurring after the fifth anniversary of the Closing Date or (2) a
breach described in clause (b) of the definition of Intentional Breach
occurring at any time, Prudential's Percentage Interest of the
Appraised Value of the Company;
(iv) Upon a Change of Control of Prudential, at a price
equal to Prudential's Percentage Interest of the Appraised Value of
the Company;
(v) At any time after the fifth anniversary of the Closing
Date, if Prudential's Percentage Interest is less than 10.0%, at a
price equal to Prudential's Percentage Interest of the Appraised Value
of the Company; provided that if Prudential has exercised its Lookback
Option, Wachovia shall not be entitled to exercise its call right
pursuant to this Section 9.3(b)(v) until the expiration of the related
Lookback Period; and
(vi) Upon the consummation of a Large Retail Brokerage
Combination in which Prudential or any of its Affiliates is the
Combining Party, at a price equal to Prudential's Percentage Interest
of the Appraised Value of the Company, unless Prudential is required
to, or shall have elected to exercise its right to, divest such Large
Retail Broker pursuant to Section 8.3(c)(iv).
(c) If a Party exercises its right pursuant to a Prudential Put or
Wachovia Call, the Party exercising such right shall give the other Party
notice in writing stating such election (the "Put/Call Exercise Notice").
Such Put/Call Exercise Notice shall be delivered as follows:
(i) In the case of a Put/Call Event described in Section
9.3(a)(i), at any time during the period specified in such Section or
up to 180 days prior to the beginning of such period;
(ii) In the case of a Discretionary Put/Call, within 30
days after the receipt of any Preliminary Valuation issued pursuant to
Section 9.4;
(iii) In the case of a Put/Call Event specified in Sections
9.3(a)(iii), 9.3(a)(iv), 9.3(b)(ii) or 9.3(b)(iii), within 30 days
after the expiration of the applicable grace period set forth in the
definition of Intentional Breach or Bankruptcy Event, as applicable
or, if later, in the case of an Intentional Breach, the final
determination that such Intentional Breach occurred and was uncured
pursuant to Section 12.12(b); provided that the Put/Call Event giving
rise to the Put/Call Exercise Notice is continuing on such date of
delivery (which, in the case of an Intentional Breach, shall be
presumed following receipt of the arbitrator's decision as provided in
Section 12.12(b)); and provided, further, that in the case of a
Put/Call Event arising from an Intentional Breach of a type described
in clause (b) of the definition thereof, if the non-breaching Party
elects to extend the
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one-year grace period referred to in such clause (b), the period
during which such non-breaching Party shall be entitled to exercise
its Wachovia Call or Prudential Put (as the case may be) in respect
thereof shall be similarly extended;
(iv) In the case of a Put/Call Event specified in Sections
9.3(a)(v), 9.3(a)(vi), 9.3(b)(iv) or 9.3(b)(vi), on or prior to the
20th Business Day following receipt of the notice provided by the
Combining Party with respect to the Put/Call Event pursuant to Section
8.3(c)(i); and
(v) In the case of a Put/Call Event specified in Section
9.3(a)(vii), not later than the date of the expiration of the Lookback
Period.
(d) Upon delivery of a Put/Call Exercise Notice, each Party shall
promptly designate a representative (a "Put/Call Representative") who shall
be an individual responsible for overseeing the exercise of the Prudential
Put or Wachovia Call, to whom all communications on such matter will be
directed, and who shall have authority to act on behalf of the Party that
appointed him or her. Each Party may replace its Put/Call Representative at
any time upon written notice to the other Put/Call Representative. The
Put/Call Representatives shall meet as soon as practicable, but in any
event not later than five Business Days, following delivery of the Put/Call
Exercise Notice (or if more than one has been delivered, the first to have
been delivered). The Put/Call Representatives will meet in good faith to
prepare a plan (a "Put/Call Plan") pursuant to which Wachovia shall acquire
Prudential's Interests based upon the valuation method specified for the
applicable Put/Call Event. If the applicable Prudential Put Price is the
Cost Basis Price, such price shall be determined as of the date of delivery
of the applicable Put/Call Exercise Notice. If the applicable Wachovia Call
Price is the Tangible Book Value of the Company, such price shall be
determined as of the last day of the month immediately preceding the
delivery of the Put/Call Exercise Notice. For all other Put/Call Events,
the Put/Call Price shall be determined as of the date of the final
determination of the Appraised Value of the Company in accordance with
Section 9.4 or Article 11, as applicable. The Parties, through their
Put/Call Representatives, will promptly cause the applicable procedures for
determining the applicable Put/Call Price to be commenced, shall identify
and promptly commence the steps necessary for obtaining all Governmental
Approvals and Third Party Approvals necessary to consummate the Prudential
Put or Wachovia Call, as applicable, and shall prepare all required
documentation. The Parties shall take, or cause to be taken, all necessary
and appropriate steps to cause such Put/Call Plan to be implemented as
promptly as practicable. If the Parties are disputing the existence of a
Put/Call Event in accordance with Sections 12.11 or 12.12, the Parties
shall nonetheless appoint Put/Call Representatives who shall prepare the
Put/Call Plan but may delay the implementation thereof until the existence
of the Put/Call Event has been determined.
(e) The closing of any Prudential Put shall take place at such
location and on such date after the delivery of the relevant Put/Call
Exercise Notice as shall be determined by Prudential, and the closing of
any Wachovia Call shall take place at such location and on such date after
the delivery of the relevant Put/Call Exercise Notice as shall be
determined by Wachovia (either, the "Put/Call Closing"); provided, however,
that, except
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in the case of a Discretionary Put/Call, the Put/Call Closing shall occur
not earlier than 30 days after and not later than 180 days after the
delivery of the Put/Call Exercise Notice. In the case of a Discretionary
Put/Call, the Put/Call Closing shall occur on or as soon as reasonably
practicable following the first anniversary of the delivery of the Put/Call
Exercise Notice (the "Discretionary Put/Call Closing Date") unless such
Put/Call Exercise Notice is withdrawn as permitted in accordance with
Section 9.4. Subject to Section 8.3(c)(iv), except with respect to such
withdrawal of a Discretionary Put/Call in accordance with Section 9.4, once
delivered, a Put/Call Exercise Notice shall be irrevocable except with the
mutual consent of the Parties. The Parties shall act in good faith to cause
the Put/Call Closing to occur at such location and on such date as
determined by the foregoing provisions; provided that the Parties
acknowledge that such date may be delayed due to delays in the receipt of
any Governmental Approvals required under applicable Law for Wachovia to
acquire Prudential's Interests in such Prudential Put or Wachovia Call.
(f) Wachovia may pay the purchase price for the Wachovia Call or the
Prudential Put either in cash by wire transfer of immediately available
funds, by delivery of a number of shares of Wachovia Common Stock equal to
the Put/Call Price divided by the Average Stock Price as of the date of the
Put/Call Closing, or with a combination thereof, in the sole discretion of
Wachovia, as indicated in the Put/Call Exercise Notice (or in the case of a
Prudential Put, in a written notice by Wachovia delivered to Prudential
with 15 Business Days following such Put/Call Exercise Notice); provided
that such purchase price shall be payable only in cash and not in Wachovia
Common Stock if on the date of the Put/Call Closing:
(i) there has occurred and is continuing a Bankruptcy of
Wachovia;
(ii) the issuance of Wachovia Common Stock to Prudential is
prohibited by applicable Law; or
(iii) Wachovia fails to deliver an opinion of counsel (which
may be in-house counsel) confirming that (x) such shares of Wachovia
Common Stock are duly authorized, validly issued, fully paid and
non-assessable, and (y) such shares have been accepted for listing or
quotation (subject to official notice of issuance) on the primary
stock exchange or quotation system on which the Wachovia Common Stock
is then listed or traded.
In the event that Wachovia pays all or part of the Put/Call Price in such
shares of Wachovia Common Stock, then (1) Wachovia shall register such
shares for resale pursuant to a shelf registration statement by using its
reasonable best efforts to file a registration statement and have it
declared effective within 120 days after delivery of the Put/Call Exercise
Notice or, if the Put/Call Closing is scheduled to occur later than the end
of such 120-day period, on the date of the Put/Call Closing, and to use its
reasonable best efforts to cause such registration statement to remain
effective until the earlier of (A) the second anniversary of the applicable
Put/Call Closing, and (B) such time as Prudential has disposed of such
shares or is permitted to dispose of such shares pursuant to Rule 144(k) of
the Securities Act, (2) Wachovia and Prudential shall enter into a
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registration rights agreement containing customary terms and conditions,
including those set forth in Schedule 9.3(f), and (3) Prudential shall make
such customary representations, warranties and covenants to Wachovia
applicable for an issuance of securities pursuant to Section 4(2) of the
Securities Act, including but not limited to such customary
representations, warranties and covenants to permit Wachovia to make a
filing with the SEC on Form D in reliance upon Rule 506 of the Securities
Act.
(g) In cases where more than one Put/Call Event applies, the Parties
agree as follows:
(i) Wachovia may specify in its Put/Call Exercise Notice
the Wachovia Call Event that results in the lowest payment to
Prudential;
(ii) Prudential may specify in its Put/Call Exercise Notice
the Prudential Put Event that results in the highest payment to
Prudential;
(iii) if the Parties deliver Put/Call Exercise Notices to
each other within 20 Business Days of the date of delivery of such
Put/Call Exercise Notices, (x) if one Party's Put/Call Exercise Notice
is in connection with a Discretionary Put/Call or a Prudential Put
Event described in Section 9.3(a)(i), such Party's Put/Call Exercise
Notice shall be disregarded, and (y) after giving effect to clause
(x), the Put/Call Price shall be the lowest of the applicable Put/Call
Prices; and
(iv) if a Party delivers a Put/Call Exercise Notice to the
other Party more than 20 Business Days after the date of delivery of a
Put/Call Exercise Notice by the first Party, then (x) if only one such
Put/Call Exercise Notice is with respect to a Discretionary Put/Call,
such Put/Call Exercise Notice shall be disregarded, and (y) after
giving effect to clause (x), the first delivered Put/Call Exercise
Notice shall control.
(h) During any Third Party Offer, either Party may exercise a
Prudential Put or Wachovia Call, as the case may be; provided that neither
a Prudential Put nor a Wachovia Call may be exercised after Prudential has
exercised its Right of First Refusal or Tag Along Right until such rights
with respect to the Third Party Offer related thereto are consummated or
expire pursuant to Section 9.2. If after the delivery of a Put/Call
Exercise Notice but before the Put/Call Closing, there is a Third Party
Offer, Prudential may in its sole discretion elect to Transfer its
Interests pursuant to either the Prudential Put or Wachovia Call (as
applicable) or to exercise its Tag Along Right (as applicable), or if
applicable a combination of the foregoing, in its discretion; provided that
all of Prudential's Interests that are not Transferred pursuant to such Tag
Along Right shall remain subject to the Wachovia Call or the Prudential
Put, as the case may be.
(i) Within 30 days after the Put/Call Closing, Wachovia shall repay or
cause one of its Affiliates or a Company Entity to repay the Prudential
Note in full or purchase the Prudential Note from Prudential at a price
equal to the unpaid principal amount thereof plus accrued and unpaid
interest to the date of repurchase.
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Section 9.4 Preliminary Valuation Procedures for Discretionary
Put/Call.
(a) If either Party desires to exercise a Discretionary Put/Call, it
shall first retain a nationally recognized investment banking firm that is
not an Affiliate of either Party or the Company on such Party's behalf to
calculate the Appraised Value of the Company (the "Preliminary Valuation")
in accordance with the definition of Appraised Value and the parameters set
forth in Section 11.4. The Company shall cooperate with such investment
banking firm to provide such information as may be reasonably requested by
it in connection with the Preliminary Valuation. The fees and expenses of
such investment banking firm shall be paid by the Party exercising such
Discretionary Put/Call.
(b) Within 30 days of receiving the Preliminary Valuation, the
exercising Party may, at its election, deliver to the other Party a
Put/Call Exercise Notice.
(c) If a Put/Call Exercise Notice is sent following a Preliminary
Valuation, then the Parties' Put/Call Representatives shall, not later than
the 180th day after delivery of the Put/Call Exercise Notice, commence a
determination of the Appraised Value of the Company in accordance with
Article 11; provided that the completion of the final determination of
Appraised Value pursuant to that process shall be managed to ensure that
such final determination shall be the Appraised Value of the Company as of
a date not more than 30 nor less than 15 days prior to the Discretionary
Put/Call Closing Date.
(d) If Prudential is the Party that delivered the Put/Call Exercise
Notice and if the Appraised Value determined pursuant to Section 9.4(c) is
greater than or equal to 80% of the Preliminary Valuation, then Prudential
shall be obligated to exercise its Prudential Put, at a price equal to its
Percentage Interest of the Appraised Value of the Company determined
pursuant to the Preliminary Valuation, and to consummate the Prudential Put
on the Discretionary Put/Call Closing Date or as soon as reasonably
practicable thereafter. If the Appraised Value determined pursuant to
Section 9.4(c) is less than 80% of the Appraised Value determined pursuant
to the Preliminary Valuation, Prudential shall be entitled, but not
obligated, to exercise the Prudential Put at a Put Price equal to its
Percentage Interest of the Appraised Value of the Company determined
pursuant to Section 9.4(c), and if Prudential elects not to exercise its
Prudential Put in such event, it shall deliver a written notice to Wachovia
withdrawing its Put/Call Exercise Notice not less than five Business Days
prior to the Discretionary Put/Call Closing Date.
(e) If Wachovia is the Party that delivered the Put/Call Exercise
Notice and if the Appraised Value determined pursuant to Section 9.4(c) is
less than or equal to 120% of the Preliminary Valuation, then Wachovia
shall be obligated to exercise its Wachovia Call, at a price equal to
Prudential's Percentage Interest of the Appraised Value of the Company as
determined pursuant to the Preliminary Valuation, and to consummate the
purchase pursuant to the Wachovia Call on the Discretionary Put/Call
Closing Date or as soon as reasonably practicable thereafter. If the
Appraised Value determined pursuant to Section 9.4(c) is more than 120% of
the Appraised Value determined pursuant to the Preliminary Valuation,
Wachovia shall be entitled, but not obligated, to exercise the Wachovia
Call at a Call Price equal to Prudential's Percentage Interest of the
Appraised
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Value of the Company determined pursuant to Section 9.4(c), and if Wachovia
elects not to exercise its Wachovia Call, it shall deliver a written notice
to Prudential withdrawing its Put/Call Exercise Notice not less than five
Business Days prior to the Discretionary Put/Call Closing Date.
(f) No Party shall be entitled to deliver a Put/Call Exercise Notice
with respect to a Discretionary Put/Call more than once in any 36-month
period commencing on the date such Party last delivered a Put/Call Exercise
Notice.
Section 9.5 Further Assurances; Timing.
(a) Each Party shall, and shall cause each of its Permitted
Transferees to, take such actions and execute such documents and
instruments as the Company or the other Party reasonably deems necessary or
desirable in order to consummate expeditiously any of the Transfers or
other transactions permitted or required by this Article 9. Any of the
dates referred to in this Article 9 in connection with Transfers, the First
Refusal Right, the Tag Along Right, the Prudential Put or the Wachovia Call
may be delayed by the Company or any Party, in each case acting in good
faith, if any Governmental Approval or Third Party Approval is required
therefor and has not yet been obtained; provided that such delay shall not
have been caused by, or due to the lack of diligence by, the Person seeking
such delay; and provided, further that if the Put/Call Closing Date is
delayed due to a Governmental Approval or Third Party Approval, the
Put/Call Closing Date shall occur on the fifth Business Day following the
date on which the last such Governmental Approval or Third Party Approval
is obtained.
(b) Each Party covenants that it shall not, and shall cause its
controlled Affiliates not to, enter into any agreement that prevents the
performance of any of their respective obligations with respect to the
exercise of the Prudential Put or Wachovia Call on the terms specified in
Section 9.3.
ARTICLE 10
TERM AND TERMINATION
Section 10.1 Termination Prior to Closing. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written consent of the Parties at any time;
(b) by either Party upon written notice to the other Party in the
event that any Governmental Authority (i) the Governmental Approval of
which is listed on Schedule 6.1(d) or Schedule 6.2(d) shall have issued an
Order or taken any other official action denying such Governmental
Approval, or (ii) has taken any of the actions specified in Sections 6.1(c)
or 6.2(c), and in any such case such Order or other action shall have
become final and non-appealable;
(c) by any Party upon written notice to the other Party at any time
after 5:00 p.m., New York City time, on November 30, 2003, in the event
that the Closing shall not have
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occurred on or prior to such date and time; provided, however, that such
date shall be extended by an additional 60 days if (i) the conditions set
forth in Sections 6.1(d) or 6.2(d) shall not have been satisfied prior to
such date and time, (ii) all other conditions to Closing in this Agreement
have been satisfied or waived, and (iii) the applicable Party is continuing
to diligently pursue such Governmental Approvals; and provided, further,
that the right to terminate this Agreement under this Section 10.1(c) shall
not be available to any Party that is at such time in material breach of
any of the provisions of this Agreement or any other Transaction Document;
(d) by Wachovia, upon written notice to Prudential, if (A) there has
been a material misrepresentation or breach of warranty or covenant or
agreement made or to be performed by or on the part of Prudential pursuant
to this Agreement, (B) such misrepresentation or breach has not been or
cannot be cured within a period of 120 days following the delivery of
written notice to Prudential of such misrepresentation or breach by
Wachovia, and (C) the effect of such misrepresentation or breach is to
prevent the satisfaction of any condition specified in Section 6.1(a) or
6.1(b); or
(e) by Prudential, upon written notice to Wachovia, if (A) there has
been a material misrepresentation or breach of warranty or covenant or
agreement made or to be performed by or on the part of Wachovia pursuant to
this Agreement, (B) such misrepresentation or breach has not or cannot be
cured within a period of 120 days following the delivery of written notice
to Wachovia of such misrepresentation or breach by Prudential, and (C) the
effect of such misrepresentation or breach is to prevent the satisfaction
of any condition specified in Section 6.2(a) or 6.2(b).
Section 10.2 Termination After Closing. If the Closing occurs, this
Agreement shall continue to remain in full force and effect until (i) the
Parties mutually agree in writing to terminate this Agreement, or (ii) the
Company is dissolved in accordance with the terms of the LLC Agreement. In
addition, except as otherwise expressly provided in Section 10.3, (A) the rights
and obligations of a Party hereunder shall be terminated at the time such Party
shall no longer beneficially own, whether by itself or through the Initial
Member or one or more Permitted Transferees, any Interests in the Company, and
(B) the rights and obligations of any Person as a Member of the Company shall
terminate when such Person shall have ceased to be a Member of the Company.
Section 10.3 Effect of Termination. If this Agreement is terminated
in whole or with respect to any Person in accordance with Section 10.1 or 10.2,
no covenants, agreements, representations or warranties contained herein shall
survive the termination of this Agreement except (x) Article 12 (other than
Section 12.2), (y) those provisions that by their express terms survive such
termination and (z) in the case of a termination pursuant to Section 10.2,
Article 7 (and, to the extent set forth in Section 7.1, the representations and
warranties referred to therein); provided, however, that no termination of this
Agreement shall release a breaching Party from any liability for any breach of
this Agreement.
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ARTICLE 11
FAIR MARKET VALUE
Section 11.1 Appraised Value of the Company and Acquired Retail
Brokerage Business.
(a) Except as otherwise provided in this Agreement, all determinations
of Appraised Value of the Company or an Acquired Retail Brokerage Business
shall be determined in accordance with the procedures set forth in this
Article 11.
(b) The Parties shall by mutual agreement select a nationally
recognized investment bank that is not an Affiliate of either Party or the
Company to determine Appraised Value. The fees and expenses of such
investment bank shall be shared by the Parties equally. The Parties will
instruct the Appraiser to complete the valuation as quickly as possible,
but in any event within 20 Business Days of its engagement, to conform its
valuation to the definition of "Appraised Value" set forth in this
Agreement, and to state the Appraised Value as a number and not a range.
The valuation of such investment bank shall be binding upon the Parties.
(c) If the Parties do not mutually agree upon an investment bank
within 15 Business Days of the initial inquiry to establish the Appraised
Value, then within 5 Business Days of such 15th Business Day, each Party
shall engage its own investment bank that is not an Affiliate of either
Party to perform a valuation as an Appraiser. Each Party will instruct its
Appraiser to complete the valuation as quickly as possible, but in any
event within 20 Business Days of its engagement, to conform its valuation
to the definition of "Appraised Value" set forth in this Agreement, and to
state the Appraised Value as a number and not a range. Each Party will pay
the fees and expenses of the Appraiser it selected.
(d) If the lower Appraised Value is 15% or less lower than the higher
Appraised Value, then the Appraised Value of the Company or the Acquired
Retail Brokerage Business, as the case may be, will be the average of the
two Appraised Values.
(e) If the lower Appraised Value is more than 15% lower than the
higher Appraised Value, then within 5 Business Days of the date that the
second of the two Appraised Values was determined, the two investment banks
will select, and the Parties will jointly engage, a third investment bank
that is not an Affiliate of either Party or the Company. The third
investment bank will be instructed by the Parties to complete its valuation
within 15 Business Days of the date of its engagement, to determine the
valuation in accordance with the definition of "Appraised Value" set forth
in this Agreement, and to state the Appraised Value as a number and not a
range. The value of the Appraised Company will be the average of the two
Appraised Values that are closest together, with the third Appraised Value
being disregarded. The fees and expenses of the third investment bank shall
be shared by the Parties equally. The valuations of such investment banks
or such average, as the case may be, shall be binding on the Parties.
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(f) Notwithstanding the foregoing, the Tangible Book Value of the
Company and the Cost Basis Price for purposes of Section 9.3 shall be
calculated in good faith by the Company based on the Company's financial
statements for the then-most recently ended fiscal quarter and its internal
accounting records, including its record of capital accounts maintained
pursuant to Article 3 of LLC Agreement. The Company shall make reasonably
available to Wachovia and Prudential and their respective accountants all
relevant books and records, work papers (including accountants' work
papers) and other supporting documentation relating to the determination of
the Tangible Book Value of the Company and the Cost Basis Price. If
Prudential or Wachovia believes that the Company's determination of the
Tangible Book Value or the Cost Basis Price has not been determined in
accordance with the Company's books and records and the requirements of the
definition thereof (including that the Tangible Book Value of the Company
be determined in accordance with GAAP), Prudential or Wachovia, as the case
may be, shall be entitled to deliver, within 10 days of the receipt of the
Company's determination, a written objection to such determination (or to
any aspect of the financial statements upon which such determination was
based), setting forth in reasonable detail the basis for such objection and
the adjustment to Tangible Book Value or the Cost Basis Price, as the case
may be, which Prudential or Wachovia, as the case may be, believes should
be made in order for such determination to be consistent with the
definition of Tangible Book Value or Cost Basis Price, as the case may be.
The Parties shall use their good faith efforts to promptly resolve any such
objections. If the Parties shall not have resolved all such objections on
or prior to the 20th day after receipt thereof (or of the latest arriving
objection if both Parties submitted objections), then the Parties shall
submit any remaining objections to the CPA Firm; provided that if Ernst &
Young is then retained, or has been retained in the preceding 12-month
period, by either Party, the CPA Firm shall not be Ernst & Young, and the
Parties shall mutually agree on another nationally recognized firm of
independent public accountants to act as the CPA Firm; provided further
that if the Parties are unable to agree on such other nationally recognized
firm of independent public accountants, the CPA Firm shall be determined in
accordance with Section 2.5(d). The CPA Firm shall, acting as experts in
accounting and not as arbitrators and only with respect to the remaining
disputed items, determine whether any adjustment is required to the
Company's determination of Tangible Net Worth or Cost Basis Price, as the
case may be, to cause such determination to be consistent with the
applicable definition thereof set forth in this Agreement. The Parties
shall request the CPA Firm to render its determination within 30 days. Such
determination shall be binding on the Parties solely for purposes of
determining the Put/Call Price pursuant to Section 9.3 of this Agreement.
The fees and expenses of the CPA Firm shall be shared equally by the
Parties.
Section 11.2 Other Appraised Values.
(a) Except as otherwise provided in this Agreement, all determinations
of Appraised Value or other values not specified in Section 11.1 shall be
determined in accordance with the procedures set forth in this Section
11.2.
(b) The Parties shall negotiate in good faith to mutually agree upon
the Appraised Value or other value of the asset or other item in question.
If the Parties fail to so
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mutually agree within 30 days after the initial request by either Party for
the determination of such Appraised Value or other value, the Parties shall
abide by the procedures of Section 11.1.
Section 11.3 Access to Information. The Parties shall use their
reasonable efforts to, and the Company shall, provide each investment bank
selected to perform an appraisal pursuant to Section 9.4 or this Article 11 with
access at all reasonable times to the accounting records and other records of
the Company or the Acquired Retail Brokerage Business (including any Subsidiary
thereof), as the case may be, and afford such investment bank a meaningful
opportunity to discuss such information about the business and operations
thereof as such investment bank reasonably requires to make a reasonably
informed determination of Appraised Value. The Company or the relevant Party
will prepare a cash flow analysis and projections and such other assistance in
the form as such investment bank may reasonably request, copies of which will be
provided to each Party. The officers of the Company or the relevant Party shall
hold meetings at which such investment bank may ask questions regarding the
Company; provided that each Party (or their representatives) shall be invited to
attend any such meeting.
Section 11.4 Process. The Parties agree that, in determining
Appraised Value under this Article 11, each investment bank:
(a) will act as an expert and not as an arbitrator;
(b) may obtain or refer to any documents, information or material, and
undertake any inspections or inquiries as it determines appropriate;
(c) will provide the Parties with a draft of its determination, and
will give the Parties an opportunity to comment on the draft determination
before it is finalized; and
(d) may engage such assistance as it reasonably believes is
appropriate or necessary to make a determination.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Expenses. Except as expressly provided for herein,
each of the Parties shall pay the fees and expenses of its respective counsel,
accountants and other experts and shall pay all other fees and expenses incurred
by it in connection with the negotiation, preparation and execution of the
Transaction Documents and the consummation of the transactions contemplated by
this Agreement; provided that Prudential and Wachovia shall share, pro rata
based upon their respective Percentage Interests, (A) any fees or other amounts
required to be paid to any Person in respect of obtaining any Third Party
Approval from such Person required in order to contribute any Prudential
Contract or Wachovia Contract or any other lease, contract, agreement or other
instrument that constitutes a Contributed Asset or a Contributed Liability under
this Agreement, (B) any termination costs (including but not limited to early
termination fees, prepayment penalties and similar charges), damages or expenses
incurred as a result of the termination of any Prudential Contract or Wachovia
Contract or any other lease agreement, contract or instrument constituting a
Contributed Asset or Contributed Liability upon
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the exercise of any termination or similar right arising as a result of the
contribution of such Wachovia Contract, Prudential Contract or other lease,
contract, agreement or instrument to the Company pursuant to this Agreement, (C)
any costs or expenses of replacing any lease, contract, agreement or other
instrument terminated as referred to in clause (B) above, or (D) any recordation
fees and any real property transfer taxes payable to a Governmental Authority in
respect of the consummation of the transactions contemplated by the Real
Property Transfer Documents; provided, however, that (1) no Party shall be
responsible for any share of any payment referred to in the foregoing proviso
arising out of or relating to any license, contract, agreement or other
instrument that fails to qualify as a Contributed Asset or Contributed Liability
hereunder in accordance with Section 5.4; (2) Wachovia's share of the expenses
incurred by Prudential, its Subsidiaries and other Affiliates as described in
the foregoing in respect of any Small Contract shall (together with all
termination and similar costs paid by the Company pursuant to Section 5.4 in
respect of Small Contracts) in no event exceed the amount set forth in Schedule
5.4(b) for any single such Small Contract or the aggregate amount set forth in
Schedule 5.4(b) for all such Small Contracts; and (3) no Party shall be required
to pay any amounts referred to in this Section 12.1 that have previously been
reimbursed or contributed by such Party as a One Time Cost.
Section 12.2 Publicity. Except as provided in Schedule 8.2(g), no
press release or other public disclosure with respect to this Agreement or the
transactions contemplated hereby may be issued by any Party or its Affiliates
without the other Party's consent, which consent shall not be unreasonably
withheld or delayed by such other Party; provided, however, that if any Party is
required by Law, including the rules of any stock exchange on which such Party's
securities are listed, to issue a press release or other public disclosure with
respect to this Agreement or the transactions contemplated hereby, such Party
shall consult with the other Party as to the content of such press release or
other public disclosure before it is issued to the extent practicable in the
circumstances; provided, further, that with respect to any public disclosure
consisting of a filing with the SEC, the Party making such filing shall be
deemed to have satisfied its obligations under this Section 12.2 if it shall
have provided advance written notice to the other Party of its intention to make
such filing and shall use its reasonable best efforts to provide a copy of the
relevant sections prior to such public disclosure; provided, further that this
Section shall not apply to press releases and such other public disclosure
already agreed upon or consented to by the Parties; and provided, finally, that
nothing in this provision shall affect the Company's right to issue press
releases with respect to its operations following the Closing Date so long as
such press releases do not disclose the terms of this Agreement or the other
Transaction Documents not theretofore publicly disclosed by either of the
Parties.
Section 12.3 Amendment or Modification. This Agreement may not be
amended or modified by the Parties, except by an instrument in writing signed by
each of the Parties.
Section 12.4 Waiver. Except as otherwise specifically provided
herein, any provision of this Agreement may only be waived at any time by an
instrument signed in writing by the Party entitled to the benefit thereof.
Except as specifically provided herein, the failure or delay of any Party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such Party
thereafter to enforce each and every such
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provision. No waiver of any breach of or non-compliance with this Agreement
shall be held to be a waiver of any other or subsequent breach or
non-compliance. Except as specifically provided herein, all remedies, either
under this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
Section 12.5 Entire Agreement. This Agreement, the Confidentiality
Agreements and the other documents and agreements contemplated hereby contain
the entire agreement between the Parties with respect to the subject matter
hereof and supersede and cancel all prior agreements, understandings,
representations and warranties, both oral and written, between the Parties with
respect thereto. There are no agreements, undertakings, representations or
warranties of any of the Parties with respect to the transactions contemplated
hereby and thereby other than those set forth herein or therein or made
hereunder or thereunder.
Section 12.6 Third-Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer, nor shall anything herein confer, on
any Person other than the Parties and their respective successors or permitted
assigns, any rights, remedies, obligations or liabilities, except that the
Company shall be, until it agrees to become a party to this Agreement on the
Closing Date as required by Section 2.4, a third-party beneficiary of any
provision of this Agreement applicable to the Company and the Indemnitees shall
be third-party beneficiaries of the provisions of Article 7 applicable to them;
provided that all Claims for indemnification by any such Indemnitee shall be
made only in the name and on behalf of such Indemnitee by a Party.
Section 12.7 Non-Assignability; Binding Effect. Except as expressly
permitted by Section 9.1 or 9.2, this Agreement shall not be assignable, in part
or in whole, by either Party without the prior written consent of the other
Party. A purported assignment of this Agreement or any of the rights, interests
or obligations hereunder not in compliance with the provisions of the Agreement
shall be null and void ab initio. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the Parties and their respective
successors and permitted assigns.
Section 12.8 Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is declared or held
illegal or invalid, in whole or in part, for any reason whatsoever, such
illegality or invalidity shall not affect the validity or enforceability of the
remainder of the Agreement, and such provision shall be deemed amended or
modified to the extent, but only to the extent, necessary to cure such
illegality or invalidity. Upon such determination of illegality or invalidity,
the Parties shall negotiate in good faith to amend this Agreement to effect the
original intent of the Parties. In any event, the invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of this Agreement, including that provision, in any
other competent jurisdiction.
Section 12.9 Injunctive Relief. The Parties acknowledge and agree
that a violation of any of the terms of Sections 8.2 or 8.3 of this Agreement
will cause the other Party and the Company irreparable injury for which an
adequate remedy at law is not available, and if any Party institutes any action
or proceeding to enforce such provisions, any Party against whom such action or
proceeding is brought hereby waives the claim or defense therein that an
adequate
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remedy at law exists. Accordingly, it is agreed that each of the Parties and the
Company will be entitled to an injunction, restraining order or other equitable
relief to prevent breaches of such provisions of this Agreement and to enforce
specifically such provisions hereof in any court of competent jurisdiction, in
addition to any other remedy to which they may be entitled at law or equity,
except as otherwise specifically provided in this Agreement.
Section 12.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
EXCEPT TO THE EXTENT THAT THE DELAWARE LIMITED LIABILITY COMPANY ACT APPLIES
WITH RESPECT TO THE COMPANY.
Section 12.11 Submission to Jurisdiction. Each Party irrevocably
submits to the exclusive jurisdiction of (i) the Supreme Court of the State of
New York, New York County, and (ii) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each Party agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Southern District of New York
or, if such suit, action or other proceeding may not be brought in such court
for reasons of subject matter jurisdiction, in the Supreme Court of the State of
New York, New York County. Each Party irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (A) the Supreme
Court of the State of New York, New York County, or (B) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. Each Party further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such suit, action or other proceeding by the mailing of copies thereof by
mail to such Party at its address set forth in this Agreement, such service of
process to be effective upon acknowledgment of receipt of such registered mail;
provided that nothing in this Section 12.11 shall affect the right of any Party
to serve legal process in any other manner permitted by Law. The consent to
jurisdiction set forth in this Section 12.11 shall not constitute a general
consent to service of process in the State of New York and shall have no effect
for any purpose except as provided in this Section 12.11. The Parties agree that
a final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Law.
Section 12.12 Alternative Dispute Resolution.
(a) Non-Binding Mediation. Except as provided herein, no action, suit
or proceeding with respect to any dispute, claim or controversy arising out
of or relating to this Agreement may be commenced until the matter has been
submitted to a mediator for non-binding mediation. The Parties agree to
submit such dispute, claim or controversy to JAMS, or its successor, or
another forum mutually agreed upon by the Parties (the "Mediation Forum").
Either Party may commence non-binding mediation by providing to the
Mediation Forum and the other Party a written request for non-binding
mediation,
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setting forth the subject of the dispute, claim or controversy and the
relief requested. The Parties agree to cooperate with the Mediation Forum
and with one another in selecting a mediator from the Mediation Forum's
panel of neutral mediators, and in scheduling the mediation proceedings.
The Parties agree that they will participate in the non-binding mediation
in good faith, and that they will share equally in its costs. The Parties
agree that all offers, promises, conduct and statements, whether oral or
written, made in the course of the non-binding mediation by any of the
Parties, their agents, employees, experts and attorneys, and by the
mediator and any other employees of the Mediation Forum, shall be
confidential, privileged and inadmissible for any purpose, including
impeachment, in any action, suit or proceeding involving the Parties;
provided that evidence that is otherwise admissible or discoverable shall
not be rendered inadmissible or non-discoverable as a result of this
Section 12.12(a). Either Party may seek equitable relief prior to this
non-binding mediation to preserve the status quo pending the completion of
such non-binding mediation. Except for such an action, suit or proceeding
to obtain such equitable relief, neither Party may commence any other
action, suit or proceeding with respect to the matters submitted to
non-binding mediation until after the earlier to occur of the completion of
the initial mediation session or 60 days after the date of delivering the
written request for mediation. Mediation may continue after the
commencement of an action, suit or proceeding, if the Parties so desire.
The provisions of this Section 12.12(a) may be enforced by any court of
competent jurisdiction, and the Party seeking enforcement shall be entitled
to an award of all costs, fees and expenses, including attorney's fees, to
be paid by the Party against whom enforcement is ordered.
(b) Binding Arbitration Regarding Intentional Breach Determinations.
In the event that, after the 60th day after notice of Intentional Breach
was delivered pursuant to the definition thereof (or such later date as the
Party delivering such notice asserts represents the applicable cure period
thereunder), the Parties are disputing whether or not an "Intentional
Breach" has occurred and remains uncured, solely for purposes of
determining whether such a Put/Call Event has occurred and for no other
reason, such dispute as to whether an Intentional Breach has occurred and
remains uncured (the "Binding Arbitrable Dispute") shall be governed by
this Section 12.12(b). The Parties acknowledge and agree that (x) no other
questions arising under this Agreement shall be submitted to arbitration,
(y) the determination of the arbitrator in the Binding Arbitrable Dispute
shall not be binding upon, evidence of, or otherwise relevant to the
determination of any other dispute or other matter arising in connection
with the Transaction Documents, and (z) the Binding Arbitrable Dispute
shall not be subject to mediation pursuant to Section 12.12(a).
(i) The Party initiating the Binding Arbitrable Dispute
shall first give written notice of the Binding Arbitrable Dispute to
the other Party, describing such Binding Arbitrable Dispute in
reasonable detail. Representatives of each Party, who have full
authority to settle the Binding Arbitrable Dispute on behalf of such
Party, shall meet at a mutually agreeable time and place within 10
days of the date of such notice in order to attempt to resolve the
Binding Arbitrable Dispute in good faith. If the Binding Arbitrable
Dispute is not resolved by negotiation within five days of such
meeting, either Party shall have the right to
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submit the Binding Arbitrable Dispute to the Mediation Forum for
binding arbitration.
(ii) A Binding Arbitral Dispute shall be resolved by
arbitration in New York, New York, before a sole arbitrator, pursuant
to the Comprehensive Arbitration Rules and Procedures of JAMS (or the
applicable rules and procedures of the Mediation Forum, if the
Mediation Forum is not JAMS) as then in effect or as otherwise agreed
to by the Parties. If the Parties cannot agree upon the selection of
an arbitrator, such arbitrator shall be an arbitrator appointed by the
Mediation Forum from its panel of neutral arbitrators; provided that
such arbitrator shall be a retired judge or an attorney with at least
15 years experience and experience as an arbitrator of large
commercial cases.
(iii) The Parties shall use their reasonable best efforts to
cause the arbitration to be completed, and to cause the arbitrator to
render an award (which shall include an allocation of all of the costs
of the arbitration, including the fees of the arbitrator and the
reasonable attorneys' fees of the prevailing Party, against the Party
who did not prevail), as soon as practicable and in any case not later
than 60 days after the submission of the Binding Arbitrable Dispute.
The arbitration award shall be in writing, shall state the reasons for
such award and shall be final and binding upon the Parties and may be
enforced in any court of competent jurisdiction.
Section 12.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
Section 12.14 Notices. All communications hereunder shall be in
writing and shall be deemed to have been duly given if signed by the respective
Persons giving them (and in the case of any corporation, the signature shall be
by an appropriate officer thereof) and delivered by hand, or sent by registered
mail, return receipt requested, or nationally recognized courier, or by
facsimile to the following addresses:
If to Wachovia:
Wachovia Corporation
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxx, Xx.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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With a copy to:
Wachovia Corporation
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
General Counsel
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
And a copy (which copy shall not constitute notice) to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxx, Esq.
Xxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to Prudential:
The Prudential Insurance Company of America
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
And a copy (which copy shall not constitute notice) to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
By written notice to the other Party, any Party may change the address to which
notices shall be directed.
Section 12.15 Counterparts. This Agreement may be executed in any
number of counterparts, and delivered by facsimile or otherwise, each of which
shall be deemed an original of this Agreement and all of which together shall
constitute one and the same instrument.
Section 12.16 Interpretation. Captions, headings and titles
contained in this Agreement, Exhibits and the Schedules are for reference
purposes only and shall not affect in
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any way the meaning or interpretation of this Agreement, Exhibits or the
Schedules. When a reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article or Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The words
"herein," "hereof," "hereunder" and words of similar import shall be deemed to
refer to this Agreement as a whole, including the Exhibits and Schedules hereto,
and not to any particular provision of this Agreement. Any pronoun shall include
the corresponding masculine, feminine and neuter forms. Inclusion of information
in the Schedules hereto shall not be construed as an admission of liability
under any applicable Law or that such information contained therein is (x)
material to the business, operations, assets, liabilities, financial condition
or results of operations of a Party or its Subsidiaries or of any of the
Contributed Businesses or (y) a representation or warranty that a potential
consequence will occur as described.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date and year first above written.
WACHOVIA CORPORATION
By /s/ Xxxxxx X. XxXxxxxx, Xx.
-----------------------------
Name: Xxxxxx X. XxXxxxxx, Xx.
Title: Senior Executive Vice President
PRUDENTIAL FINANCIAL, INC.
By /s/ Xxxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxx
Title: Authorized Representative
