TABLE OF CONTENTS

 

		Page
ARTICLE I THE MERGERS		3
Section 1.1	The Mergers	3
Section 1.2	Closing	3
Section 1.3	Effective Time	3
Section 1.4	Effects of the Mergers	4
Section 1.5	Articles of Incorporation, Certificate of Incorporation and Bylaws upon Effective Time	4
Section 1.6	Directors upon Effective Time	5
Section 1.7	Officers upon Effective Time	6
Section 1.8	Location of Headquarters of Holding Company	7
ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES		7
Section 2.1	Conversion of Capital Stock and Towers Perrin RSUs	7
Section 2.2	Consideration Elections for Eligible Towers Perrin Shares	12
Section 2.3	Proration	14
Section 2.4	Deferred Stock Units, Employee Stock Purchase Plan; Restricted Stock Units; Other Watson Wyatt Awards	16
Section 2.5	Exchange of Certificates and Book-Entry Shares; Redemptions	18
Section 2.6	Withholding Rights	23
Section 2.7	Dissenters’ Rights	24
Section 2.8	Transfer Restrictions – Restricted Holding Company Stock	25
Section 2.9	Further Assurances	28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TOWERS PERRIN		28
Section 3.1	Organization, Standing and Power	28
Section 3.2	Capital Stock	29
Section 3.3	Subsidiaries	31
Section 3.4	Authority	31
Section 3.5	No Conflict; Consents and Approvals	32
Section 3.6	Financial Statements	33
Section 3.7	Properties	34
Section 3.8	Certain Information	35
Section 3.9	Absence of Certain Changes or Events	35
Section 3.10	Litigation	35
Section 3.11	Compliance with Laws	36
Section 3.12	Benefit Plans	36

 

 

TABLE OF CONTENTS ( continued )
		Page
Section 3.13	Labor Matters	38
Section 3.14	Environmental Matters	39
Section 3.15	Taxes	39
Section 3.16	Contracts	40
Section 3.17	Insurance	42
Section 3.18	Intellectual Property	42
Section 3.19	State Takeover Statutes	42
Section 3.20	Brokers	42
Section 3.21	Opinion of Financial Advisor	43
Section 3.22	No Additional Representations	43
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WATSON WYATT		43
Section 4.1	Organization, Standing and Power	43
Section 4.2	Capital Stock	44
Section 4.3	Subsidiaries	46
Section 4.4	Authority	46
Section 4.5	No Conflict; Consents and Approvals	47
Section 4.6	SEC Reports; Financial Statements	48
Section 4.7	Properties	49
Section 4.8	Certain Information	49
Section 4.9	Absence of Certain Changes or Events	50
Section 4.10	Litigation	50
Section 4.11	Compliance with Laws	50
Section 4.12	Benefit Plans	51
Section 4.13	Labor Matters	53
Section 4.14	Environmental Matters	53
Section 4.15	Taxes	53
Section 4.16	Contracts	54
Section 4.17	Insurance	56
Section 4.18	Intellectual Property	56
Section 4.19	State Takeover Statutes	56
Section 4.20	Brokers	57
Section 4.21	Opinion of Financial Advisor	57
Section 4.22	No Additional Representations	57
ARTICLE V COVENANTS		57
Section 5.1	Conduct of Business	57
Section 5.2	No Solicitation	61
Section 5.3	Stockholder Meetings	66
Section 5.4	The Joint Proxy Statement/Prospectus; Registration Statement	66
Section 5.5	Access to Information; Confidentiality	67
Section 5.6	Reasonable Best Efforts	68
Section 5.7	Takeover Laws	70

 

ii

 

TABLE OF CONTENTS ( continued )

 

		Page
Section 5.8	Notification of Certain Matters	70
Section 5.9	Indemnification, Exculpation and Insurance	71
Section 5.10	Public Announcements	73
Section 5.11	Plan of Reorganization	73
Section 5.12	Control of Other Party’s Business	74
Section 5.13	Financial Statements	75
Section 5.14	Towers Perrin RSUs and Restricted Class A Holding Company Stock	76
Section 5.15	Vesting, Forfeiture and Reallocation of Restricted Class A Holding Company Stock	77
Section 5.16	Listing Application	79
Section 5.17	Employee Benefits	79
Section 5.18	Conduct of Business by Holding Company, Merger Subsidiaries	80
Section 5.19	Annual Bonus Payments	80
Section 5.20	Towers Perrin Initial Public Offering	82
ARTICLE VI CONDITIONS PRECEDENT		83
Section 6.1	Conditions to the Obligations of Towers Perrin and Watson Wyatt	83
Section 6.2	Conditions to the Obligations of Watson Wyatt	84
Section 6.3	Conditions to the Obligations of Towers Perrin	86
Section 6.4	Frustration of Closing Conditions	87
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER		87
Section 7.1	Termination	87
Section 7.2	Effect of Termination	89
Section 7.3	Fees and Expenses	90
Section 7.4	Amendment or Supplement	92
Section 7.5	Extension of Time; Waiver	93
ARTICLE VIII GENERAL PROVISIONS		93
Section 8.1	Nonsurvival of Representations and Warranties	93
Section 8.2	Notices	93
Section 8.3	Certain Definitions	95
Section 8.4	Interpretation	99
Section 8.5	Entire Agreement	99
Section 8.6	No Third Party Beneficiaries	99
Section 8.7	Governing Law	100
Section 8.8	Submission to Jurisdiction	100
Section 8.9	Assignment; Successors	100
Section 8.10	Enforcement	100
Section 8.11	Currency	101
Section 8.12	Severability	101
Section 8.13	Waiver of Jury Trial	101

 

iii

 

TABLE OF CONTENTS ( continued )
		Page
Section 8.14	Counterparts	101
Section 8.15	Facsimile Signature	101
Section 8.16	No Presumption Against Drafting Party	101

 

Exhibits

 

EXHIBIT A-1:  Towers Perrin Voting Agreement

 

EXHIBIT A-2:  Watson Wyatt Voting Agreement

 

EXHIBIT B:  Certificate of Incorporation of Surviving Watson Wyatt

 

EXHIBIT C:  Indenture

 

EXHIBIT D-1:  Towers Perrin Form of Monthly Statement of Income and Expense

 

EXHIBIT D-2:  Watson Wyatt Form of Monthly Statement of Income and Expense

 

INDEX OF DEFINED TERMS

 

Definition		Location
Acquisition Proposal		7.3(e)(i), 5.2(h)(i)
Acquisitions		5.1(c)
Action		3.10
Adverse Recommendation Change		5.2(b)
Affiliate		8.3(a)
Agreement		Preamble
Alternative Acquisition Agreement		5.2(b)
Amended and Restated Holding Company Bylaws		1.5(b)
Amended and Restated Holding Company Charter		1.3(a)
Amended Charter Effective Time		1.3(b)
Bankruptcy and Equity Exception		3.4(a)
Book-Entry Shares		2.5(b)(ii)
Business Day		8.3(b)
Cause		5.15(f), 2.8(g)(ii)
CEO		1.7(c)
Certificates		2.5(b)(iv)
Class A Holding Company Stock		2.1(d)
Class B Restricted Holding Company Stock		2.1(a)(i)(D)
Class B-1 Restricted Holding Company Stock		2.1(a)(i)(A)
Class B-2 Restricted Holding Company Stock		2.1(a)(i)(B)
Class B-3 Restricted Holding Company Stock		2.1(a)(i)(C)
Class B-4 Restricted Holding Company Stock		2.1(a)(i)(D)
Class R Cash and Notes Pool		2.3(a)(iii)
Class R Cash Consideration		2.1(a)(ii)(A)
Class R Election		2.2(b)
Class R Election Deadline		2.2(b)
Class R Election Form		2.2(a)

 

iv

 

Class R Election Shareholders		2.2(c)
Class R Note Consideration		2.1(a)(ii)(B)
Class R Number		2.3(a)(i)
Class R Proration Factor		2.3(a)(ii)(A)
Class R Restricted Holding Company Stock		2.1(a)(ii)
Class S Cash Consideration		2.1(a)(iii)
Class S Cash Pool		2.3(b)(i)
Class S Election		2.2(d)(i)(B)
Class S Election Deadline		2.2(d)(i)(B)
Class S Election Form		2.2(d)(i)(A)
Class S Election Offer		2.2(d)(i)(A)
Class S Number		2.3(c)(i)
Class S Offeree		2.2(d)(i)
Class S Proration Factor		2.3(c)(ii)(A)
Class S Restricted Holding Company Stock		2.1(a)(iii)
Closing		1.2
Closing Date		1.2
Code		Recitals
Confidentiality Agreement		5.5
Continuing Director		2.8(f)
Contract		3.5(a)
control		8.3(c)
Control Test		8.3(d)
Credit Agreement		8.3(e)
Custodian		8.3(f)
Custodian Agreement		5.14(g)
Deferral Plans		2.4(e)
Deferred Shares		2.4(e)
Delaware Merger Sub		Preamble
Delaware Merger Sub Board		Recitals
Delaware Secretary of State		1.3(a)
DGCL		1.1(b)
Dissent Failure		2.7(b)
Dissenting Share Merger Consideration		2.7(c)
Dissenting Towers Perrin Shareholder		2.7(b)
Dissenting Towers Perrin Shares		2.7(b)
Effective Time		1.3(c)
Environmental Laws		3.14(b)(i)
ERISA		3.12(a)
Exchange Act		1.6(c)
Exchange Agent		2.5(a)
Exchange Fund		2.5(a)
Fast Mover Awards		8.3(g)
Final Class R Cash and Notes Consideration		2.3(b)(ii)
Final Class R Election Shortfall		2.3(b)(iii)
Final Exchange Ratio		8.3(h)
Final Transaction Value Per Towers Perrin Share		8.3(i)
Final Watson Wyatt Stock Price		8.3(j)
Foreign Antitrust Laws		3.5(b)
Forfeited Share Registration Statement		5.14(h)
Forfeited Towers Perrin RSU Shares		5.15(c)
Fully Diluted Towers Perrin Shares		8.3(k)
Fully Diluted Watson Wyatt Shares		8.3(l)
GAAP		3.6(a)
Governmental Entity		3.5(b)
Guaranteed RSU Holder		8.3(p)

 

v

 

Guaranteed Towers Perrin Award Holder		8.3(m)
Guaranteed Towers Perrin Awards		8.3(n)
Guaranteed Towers Perrin RSUs		8.3(o)
Holding Company		Preamble
Holding Company Board		Recitals
Holding Company ESPP Rights		2.4(b)
Holding Company UK and Irish Purchase Rights		2.4(d)
HSR Act		3.5(b)
Indebtedness		5.1(f)
Indemnified Persons		5.9(b)(ii)
Indenture		2.1(a)(ii)(B)
Interim Class R Cash and Notes Consideration		2.2(d)(ii)(A)
Interim Class R Election Shortfall		2.2(d)(ii)(B)
Interim Exchange Ratio		8.3(q)
Interim Watson Wyatt Stock Price		8.3(r)
IRS		3.12(a)
Joint Proxy Statement/Prospectus		3.8
knowledge		8.3(s)
Law		2.8(g)(ii)(A)
Liens		3.2(b)
Merger Consideration		2.1(d)
Merger Subsidiaries		Preamble
Mergers		Recitals
NASDAQ		4.5(b)
NOI		5.19(b)(ii)
Non-US Towers Perrin Plans		3.12(f)
Non-US Watson Wyatt Plans		4.12(f)
Note		2.1(a)(ii)(B)
NYSE		8.3(t)
Outside Date		7.1(b)(i)
Parties		Recitals
Party		Recitals
PBCL		1.1(a)
PBGC		3.12(d)
Pending Offering Periods		2.4(b)
Pennsylvania Department of State		1.3(a)
Pennsylvania Merger Sub		Preamble
Pennsylvania Merger Sub Board		Recitals
Permitted Family Members		2.8(c)
Permitted Liens		3.7
Person		8.3(u)
Potential Class R Participant		2.2(a)
President-COO		1.7(c)
Redemption Date		2.1(a)(ii)
Registration Statement		3.8
Reorganization		Recitals
Representatives		5.2(a)
Requisite Regulatory Approvals		6.1(c)
Restricted Class A Holding Company Stock		8.3(v)
Restricted Holding Company Stock		8.3(w)
SEC		2.5(a)
Securities Act		4.6(a)
Significant Subsidiary		8.3(x)
Subsidiary		8.3(y)
Superior Proposal		5.2(h)(ii)
Surviving Corporations		1.1(b)

 

vi

 

Surviving Towers Perrin		1.1(a)
Surviving Watson Wyatt		1.1(b)
Takeover Laws		3.19
Tax Returns		3.15(d)
Taxes		3.15(d)
Towers Perrin		Preamble
Towers Perrin Articles of Merger		1.3(a)
Towers Perrin Balance Sheet		3.6(b)
Towers Perrin Board		Recitals
Towers Perrin Book-Entry Shares		2.5(b)(i)
Towers Perrin Bylaws		3.1(b)
Towers Perrin CEO		5.19(a)(i)
Towers Perrin Charter		3.1(b)
Towers Perrin Class R Election Shares		2.1(a)(ii)
Towers Perrin Class S Election Shares		2.1(a)(iii)
Towers Perrin Common Stock		Recitals
Towers Perrin Continuing Employee		2.8(g)(i)
Towers Perrin Credit Agreement		8.3(aa)
Towers Perrin Disclosure Letter		Article III
Towers Perrin Environmental Permits		3.14(b)(ii)
Towers Perrin ERISA Affiliate		3.12(d)
Towers Perrin Expenses		7.3(e)(iii)
Towers Perrin Financial Statements		3.6(a)
Towers Perrin Indemnified Person		5.9(b)(i)
Towers Perrin Indemnified Persons		5.9(b)(i)
Towers Perrin Intellectual Property		3.18
Towers Perrin Interim Financial Statements		5.13(b)
Towers Perrin IPO		5.20
Towers Perrin Letter of Transmittal		2.5(b)(i)
Towers Perrin Material Adverse Effect		3.1(a)
Towers Perrin Material Contract		3.16(a)
Towers Perrin Merger		Recitals
Towers Perrin Merger Consideration		2.1(a)
Towers Perrin Minority Interest Businesses		3.3(a)
Towers Perrin Permits		3.11
Towers Perrin Plans		3.12(a)
Towers Perrin Real Property Lease		3.16(a)(v)
Towers Perrin RSU		8.3(bb)
Towers Perrin RSU Award Agreement		5.14(a)
Towers Perrin RSU Holder		8.3(cc)
Towers Perrin RSU Triggering Event		5.14(a)
Towers Perrin Shareholder		2.5(b)(iii)
Towers Perrin Shareholder Approval		3.4(a)
Towers Perrin Shareholder Meeting		3.8
Towers Perrin Shares		2.1(a)
Towers Perrin Stock Consideration		2.1(a)(i)
Towers Perrin Stock Election Shares		2.1(a)(i)
Towers Perrin Termination Fee		7.3(b)
Towers Perrin Voting Agreement		Recitals
Towers Perrin Warrants		3.2(a)
Transaction Award Agreement		5.14(c)
Transfer		8.3(z)
Trustee		2.1(b)
UK and Irish Pending Offering Periods		2.4(d)
Valid Class R Election		2.1(a)(ii)
Valid Class S Election		2.1(a)(iii)

 

vii

 

Watson Wyatt		Preamble
Watson Wyatt Balance Sheet		4.6(c)
Watson Wyatt Board		Recitals
Watson Wyatt Book-Entry Shares		2.5(b)(ii)
Watson Wyatt Bylaws		4.1(b)
Watson Wyatt CEO		5.19(b)(i)
Watson Wyatt Certificate of Merger		1.3(a)
Watson Wyatt Charter		4.1(b)
Watson Wyatt Common Stock		Recitals
Watson Wyatt Credit Agreement		8.3(dd)
Watson Wyatt Disclosure Letter		Article IV
Watson Wyatt DSU		2.4(a)
Watson Wyatt DSU Shares		2.4(a)
Watson Wyatt Environmental Permits		4.14(b)
Watson Wyatt Equity Plans		4.2(a)
Watson Wyatt ERISA Affiliate		4.12(d)
Watson Wyatt ESPP		8.3(ee)
Watson Wyatt Expenses		7.3(e)(ii)
Watson Wyatt Financial Statements		4.6(b)
Watson Wyatt Indemnified Person		5.9(b)(ii)
Watson Wyatt Indemnified Persons		5.9(b)(ii)
Watson Wyatt Intellectual Property		4.18
Watson Wyatt Interim Financial Statements		4.6(b)
Watson Wyatt Letter of Transmittal		2.5(b)(ii)
Watson Wyatt Material Adverse Effect		4.1(a)
Watson Wyatt Material Contract		4.16(a)
Watson Wyatt Merger		Recitals
Watson Wyatt Merger Consideration		2.1(d)
Watson Wyatt Minority Interest Businesses		4.3(a)
Watson Wyatt Permits		4.11
Watson Wyatt Plans		4.12(a)
Watson Wyatt Preferred Stock		4.2(a)
Watson Wyatt Real Property Leases		4.16(a)(v)
Watson Wyatt SEC Documents		4.6(a)
Watson Wyatt Shares		2.1(d)
Watson Wyatt Stockholder		2.5(b)(iv)
Watson Wyatt Stockholder Approval		4.4(a)
Watson Wyatt Stockholder Meeting		3.8
Watson Wyatt Termination Fee		7.3(c)
Watson Wyatt UK and Irish Plans		8.3(ff)
Watson Wyatt Voting Agreement		Recitals

 

viii

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of June 26, 2009, among Watson Wyatt Worldwide, Inc., a Delaware corporation (“ Watson Wyatt ”), Towers, Perrin, Forster & Crosby, Inc., a Pennsylvania corporation (“ Towers Perrin ” ), Jupiter Saturn Holding Company, a Delaware corporation (“ Holding Company ”), Jupiter Saturn Pennsylvania Inc., a Pennsylvania corporation (“ Pennsylvania Merger Sub ”), and Jupiter Saturn Delaware Inc., a Delaware corporation (“ Delaware Merger Sub ” and together with Pennsylvania Merger Sub, the “ Merger Subsidiaries ”).  Capitalized terms that are used but are not otherwise defined herein shall have the meanings set forth in Section 8.3.

 

RECITALS

 

WHEREAS, Holding Company is owned 50% each by Watson Wyatt and Towers Perrin, and each of Delaware Merger Sub and Pennsylvania Merger Sub is a wholly-owned subsidiary of Holding Company;

 

WHEREAS, the Boards of Directors of Watson Wyatt, Towers Perrin, Holding Company, Delaware Merger Sub and Pennsylvania Merger Sub (each, a “ Party ” and collectively, the “ Parties ”) have approved, and deem it advisable and in the best interests of their respective companies and stockholders, to consummate the business combination transactions (collectively, the “ Reorganization ”) provided for herein, pursuant to which Towers Perrin and Watson Wyatt will each become a wholly-owned direct subsidiary of Holding Company through simultaneous mergers of (i) Delaware Merger Sub with and into Watson Wyatt (the “ Watson Wyatt Merger ”) and (ii) Pennsylvania Merger Sub with and into Towers Perrin (the “ Towers Perrin Merger ” and together with the Watson Wyatt Merger, the “ Mergers ”);

 

WHEREAS, upon completion of the Mergers, (i) 50% of the outstanding common stock of Holding Company will be owned by the holders of shares of common stock of Watson Wyatt, par value $0.01 per share (the “ Watson Wyatt Common Stock ”) outstanding immediately prior to the Effective Time (as defined below) and (ii) 50% of the outstanding common stock of Holding Company will be owned by the holders of common stock of Towers Perrin, par value $0.50 per share (the “ Towers Perrin Common Stock ”) and Towers Perrin RSUs outstanding immediately prior to the Effective Time;

 

WHEREAS, the Board of Directors of Watson Wyatt (the “ Watson Wyatt Board ”) has (i) determined that it is in the best interests of Watson Wyatt and its stockholders, and declared it advisable, to enter into this Agreement; (ii) approved and adopted this Agreement and approved the execution, delivery and performance by Watson Wyatt of this Agreement and the consummation of the transactions contemplated hereby, including the Watson Wyatt Merger and (iii) resolved to recommend to Watson Wyatt’s stockholders that they approve and adopt this Agreement;

 

WHEREAS, the Board of Directors of Towers Perrin (the “ Towers Perrin Board ”) has (i) determined that it is in the best interests of Towers Perrin, its shareholders and other constituencies, and declared it advisable, to enter into this Agreement; (ii) approved and adopted this Agreement and approved the execution, delivery and performance by Towers Perrin of this

 

 

Agreement and the consummation of the transactions contemplated hereby, including the Towers Perrin Merger; and (iii) resolved to recommend to Towers Perrin’s shareholders that they approve and adopt this Agreement;

 

WHEREAS, the Board of Directors of Holding Company (the “ Holding Company Board ”) has (i) determined that it is in the best interests of Holding Company and its stockholders, and declared it advisable, to enter into this Agreement; (ii) approved and adopted this Agreement and approved the execution, delivery and performance by Holding Company of this Agreement and the consummation of the transactions contemplated hereby, including the Mergers and (iii) authorized the proper officers of Holding Company to vote the shares of Delaware Merger Sub and Pennsylvania Merger Sub held by Holding Company to approve and adopt this Agreement;

 

WHEREAS, the Board of Directors of Delaware Merger Sub (the “ Delaware Merger Sub Board ”) has (i) determined that it is in the best interests of Delaware Merger Sub and its sole stockholder, and declared it advisable, to enter into this Agreement, (ii) approved and adopted this Agreement and approved the execution, delivery and performance by Delaware Merger Sub of this Agreement and the consummation of the transactions contemplated hereby, including the Watson Wyatt Merger and (iii) resolved to recommend to its sole stockholder that it approve the Watson Wyatt Merger and approve and adopt this Agreement;

 

WHEREAS, the Board of Directors of Pennsylvania Merger Sub (the “ Pennsylvania Merger Sub Board ”) has (i) determined that it is in the best interests of Pennsylvania Merger Sub, its sole shareholder and other constituencies, and declared it advisable, to enter into this Agreement, (ii) approved and adopted this Agreement and approved the execution, delivery and performance by Pennsylvania Merger Sub of this Agreement and the consummation of the transactions contemplated hereby, including the Towers Perrin Merger and (iii) resolved to recommend to its sole shareholder that it approve the Towers Perrin Merger and approve and adopt this Agreement;

 

WHEREAS, each of the Parties intends that, for federal income tax purposes, the Mergers qualify as an exchange under Section 351 of the Internal Revenue Code of 1986, as amended (including the rules and regulations promulgated thereunder, the “ Code ”), or as reorganizations within the meaning of Section 368(a) of the Code;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, (i) as a condition and inducement to Watson Wyatt’s willingness to enter into this Agreement, each of the executive officers and directors of Towers Perrin are entering into an agreement  (the “ Towers Perrin Voting Agreement ”), in substantially the form attached as Exhibit A-1 hereto, pursuant to which each such Person has agreed, among other things, to vote the Towers Perrin Shares (as defined below) held by such Person in favor of the approval and adoption of this Agreement and (ii) as a condition and inducement to Towers Perrin’s willingness to enter into this Agreement, certain executive officers and each director of Watson Wyatt are entering into an agreement (the “ Watson Wyatt Voting Agreement ”), in substantially the form attached as Exhibit A-2 hereto, pursuant to which each such Person has agreed, among other things, to vote the Watson Wyatt Shares (as defined below) held by such Person in favor of the approval and adoption of this Agreement; and

 

2

 

WHEREAS, each of the Parties hereto desires to make certain representations, warranties, covenants and agreements in connection with the Reorganization and also to prescribe certain conditions to the Reorganization as specified herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, each of the Parties hereto hereby agrees as follows:

 

ARTICLE I
THE MERGERS

 

Section 1.1         The Mergers .  Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time:

 

(a)           Pennsylvania Merger Sub shall be merged with and into Towers Perrin pursuant to the Towers Perrin Merger, in accordance with the Pennsylvania Business Corporation Law (the “ PBCL ”).  Following the Towers Perrin Merger, the separate corporate existence of Pennsylvania Merger Sub shall cease, and Towers Perrin shall continue as the surviving corporation in the Towers Perrin Merger (“ Surviving Towers Perrin ”) and a wholly-owned subsidiary of Holding Company.

 

(b)           Delaware Merger Sub shall be merged with and into Watson Wyatt pursuant to the Watson Wyatt Merger, in accordance with the Delaware General Corporation Law (the “ DGCL ”).  Following the Watson Wyatt Merger, the separate corporate existence of Delaware Merger Sub shall cease, and Watson Wyatt shall continue as the surviving corporation in the Watson Wyatt Merger (“ Surviving Watson Wyatt ” and, together with Surviving Towers Perrin, the “ Surviving Corporations ”) and a wholly-owned subsidiary of Holding Company.

 

Section 1.2         Closing .  The closing of the Mergers (the “ Closing ”) shall take place at 10:00 a.m., New York City time, as soon as practicable but in no event later than the second Business Day (as defined below) following the satisfaction or, to the extent permitted by applicable Law (as defined below), waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by applicable Law, waiver of those conditions), at the offices of Milbank, Tweed, Hadley & McCloy LLP, One Chase Manhattan Plaza, New York, New York, unless another date, time or place is agreed to in writing by Watson Wyatt and Towers Perrin.  The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date ”.

 

Section 1.3         Effective Time .

 

(a)           Upon the terms and subject to the provisions of this Agreement, as soon as practicable following the Closing, (i) the certificate of incorporation of Holding Company shall be amended and restated in a form consistent with this Agreement, agreed to by Watson Wyatt and Towers Perrin and approved by the Watson Wyatt Board and the Towers Perrin Board prior to the mailing of the Joint Proxy Statement/Prospectus (the “ Amended and Restated Holding

 

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Company Charter ”), and Holding Company shall cause the Amended and Restated Holding Company Charter to be executed in accordance with the relevant provisions of the DGCL and filed with the Secretary of State of the State of Delaware (the “ Delaware Secretary of State ”), and shall make any and all other filings or recordings required under the DGCL in connection therewith, (ii) concurrently with the filings described in clauses (i) and (iii), Pennsylvania Merger Sub and Towers Perrin shall cause articles of merger providing for the Towers Perrin Merger (the “ Towers Perrin Articles of Merger ”) to be executed and filed with the Department of State of the Commonwealth of Pennsylvania (the “ Pennsylvania Department of State ”), as provided in the relevant provisions of the PBCL, and shall take such other and further actions as may be required by applicable Law to make the Towers Perrin Merger effective and (iii) concurrently with the filings described in clauses (i) and (ii), Delaware Merger Sub and Watson Wyatt shall cause a certificate of merger providing for the Watson Wyatt Merger (the “ Watson Wyatt Certificate of Merger ”) to be executed and filed with the Delaware Secretary of State, as provided in the relevant provisions of the DGCL, and shall take such other and further actions as may be required by applicable Law to make the Watson Wyatt Merger effective.

 

(b)           The Amended and Restated Holding Company Charter shall become effective at such time as Watson Wyatt and Towers Perrin shall agree in writing (which time shall be no later than the second (2nd) Business Day after the Closing Date) and shall, in accordance with the DGCL, specify in the Amended and Restated Holding Company Charter (the “ Amended Charter Effective Time ”).

 

(c)           The Watson Wyatt Certificate of Merger and the Towers Perrin Articles of Merger shall specify that the Watson Wyatt Merger and the Towers Perrin Merger, respectively, shall become effective at such time as Watson Wyatt and Towers Perrin shall agree in writing (which time shall be no later than the second (2nd) Business Day after the Closing Date, and shall be at least one minute after the Amended Charter Effective Time) (such time, the “ Effective Time ”).

 

Section 1.4         Effects of the Mergers .  The Towers Perrin Merger shall have the effects set forth in this Agreement and in the relevant provisions of the PBCL, and the Watson Wyatt Merger shall have the effects set forth in this Agreement and in the relevant provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) all the property, rights, privileges, powers and franchises of Towers Perrin and Pennsylvania Merger Sub shall vest in Surviving Towers Perrin, and all debts, liabilities and duties of Towers Perrin and Pennsylvania Merger Sub shall become the debts, liabilities and duties of Surviving Towers Perrin, and (ii) all the property, rights, privileges, powers and franchises of Watson Wyatt and Delaware Merger Sub shall vest in Surviving Watson Wyatt, and all debts, liabilities and duties of Watson Wyatt and Delaware Merger Sub shall become the debts, liabilities and duties of Surviving Watson Wyatt.

 

Section 1.5         Articles of Incorporation, Certificate of Incorporation and Bylaws upon Effective Time .

 

(a)           The certificate of incorporation of Holding Company shall, as of the Amended Charter Effective Time, be amended and restated in a form consistent with this Agreement, agreed to by Watson Wyatt and Towers Perrin, approved by Watson Wyatt and

 

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Towers Perrin in their capacities as stockholders of Holding Company and approved by the Watson Wyatt Board and the Towers Perrin Board prior to the mailing of the Joint Proxy Statement/Prospectus, in accordance with Section 1.3(a).

 

(b)           The bylaws of Holding Company shall, as of the Effective Time, be amended and restated in a form consistent with this Agreement, agreed to by Watson Wyatt and Towers Perrin and approved by the Watson Wyatt Board and the Towers Perrin Board prior to the mailing of the Joint Proxy Statement/Prospectus(the “ Amended and Restated Holding Company Bylaws ”).

 

(c)           The articles of incorporation of Pennsylvania Merger Sub, as in effect immediately prior to the Effective Time, shall be the articles of incorporation of Surviving Towers Perrin until thereafter amended in accordance with the provisions thereof and applicable Law, except that such articles shall be amended to reflect that the name of Surviving Towers Perrin shall be Towers Watson Pennsylvania Inc.

 

(d)           The bylaws of Towers Perrin, as in effect immediately prior to the Effective Time, shall be the bylaws of Surviving Towers Perrin until thereafter amended in accordance with the provisions thereof and applicable Law, except that such bylaws shall be amended to reflect that the name of Surviving Towers Perrin shall be Towers Watson Pennsylvania Inc., and to reflect such other amendments agreed to by Watson Wyatt and Towers Perrin before the Effective Time.

 

(e)           At the Effective Time, the certificate of incorporation of Surviving Watson Wyatt shall be amended and restated in the form attached hereto as Exhibit B .

 

(f)            The bylaws of Delaware Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of Surviving Watson Wyatt until thereafter amended in accordance with the provisions thereof and applicable Law, except that such bylaws shall be amended to reflect that the name of Surviving Watson Wyatt shall be Towers Watson Delaware Inc.

 

Section 1.6         Directors upon Effective Time .

 

(a)           The following individuals shall be the directors of Surviving Towers Perrin from the Effective Time until the earlier of their resignation or removal or until their respective successors are duly elected and qualified:

 

(i)            Mark V. Mactas; and

 

(ii)           Kevin C. Young.

 

(b)           The following individuals shall be the directors of Surviving Watson Wyatt from the Effective Time until the earlier of their resignation or removal or until their respective successors are duly elected and qualified:

 

(i)            John J. Haley; and

 

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(ii)           Walter W. Bardenwerper.

 

(c)           Watson Wyatt and Towers Perrin shall cooperate and take such action as is necessary to ensure that six (6) individuals selected by Watson Wyatt and identified in writing to Towers Perrin and six (6) individuals selected by Towers Perrin and identified in writing to Watson Wyatt , shall be the directors of Holding Company, in each case as of the Effective Time and until the earlier of his or her resignation or removal or until his or her respective successor is duly elected and qualified pursuant to the terms of the Amended and Restated Holding Company Charter and the Amended and Restated Holding Company Bylaws.  At least four (4) of the directors selected by each of Watson Wyatt and Towers Perrin shall be “independent” as defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and rules of the NYSE and NASDAQ.

 

(d)           The Parties acknowledge their intent to reduce the overall size of the Holding Company board of directors gradually after the Effective Time, to achieve a size consistent with best practices, as determined in good faith by the Holding Company board of directors from time to time.

 

Section 1.7         Officers upon Effective Time .

 

(a)           Surviving Towers Perrin Officers .  The following individuals shall become officers of Surviving Towers Perrin from the Effective Time, serving in the respective offices set forth beside each individual’s name, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified:

 

Name		Position
Mark V. Mactas		Director and President
Kevin C. Young		Director and Secretary

 

(b)           Surviving Watson Wyatt Officers .  The following individuals shall become officers of Surviving Watson Wyatt from the Effective Time, serving in the respective offices set forth beside each individual’s name, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified:

 

Name		Position
John J. Haley		Director and President
Walter W. Bardenwerper		Director and Secretary

 

(c)           Holding Company Officers .  Immediately prior to the Effective Time, Watson Wyatt and Towers Perrin shall use their reasonable best efforts to take such action as is necessary to ensure that, as of the Effective Time, the following individuals shall become officers of Holding Company from the Effective Time, serving in the respective offices set forth beside each individual’s name, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified:

 

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Name		Position
John J. Haley		Chairman of the Board of Directors and Chief Executive Officer (the “ CEO ” )
Mark V. Mactas		Deputy Chairman, President and Chief Operating Officer (the “ President-COO ” )

 

(d)           Upon and following the Effective Time:  (i) the CEO will have primary responsibility for strategy, working in conjunction with the President-COO; (ii) the President-COO will have primary profit and loss responsibility, working in conjunction with the CEO; (iii) the CEO and the President-COO will jointly manage integration in a manner which is consistent generally with their division of responsibilities; (iv) Holding Company’s Chief Financial Officer, its General Counsel, its head of investor relations, the heads of all other corporate functions of Holding Company and its Subsidiaries, and the President-COO will report to the CEO; and (v) all line-of-business leaders and geographic leaders of Holding Company and its Subsidiaries will report to the President-COO.  Notwithstanding the foregoing, the parties acknowledge that the Holding Company Board will have discretion to alter the roles and responsibilities of the Holding Company’s officers from time to time, including without limitation the CEO and President-COO.

 

Section 1.8         Location of Headquarters of Holding Company .  Watson Wyatt and Towers Perrin shall take all requisite action so that at the Effective Time, the headquarters of the business of Holding Company shall be based in New York City, New York.

 

ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

 

Section 2.1         Conversion of Capital Stock and Towers Perrin RSUs .  At the Effective Time, by virtue of the Mergers and without any action on the part of Watson Wyatt, Towers Perrin, Holding Company or the Merger Subsidiaries, or the holders of any shares of capital stock of any of the foregoing:

 

(a)           Conversion of Towers Perrin Shares and Towers Perrin RSUs .  By virtue of the Towers Perrin Merger, each share of Towers Perrin Common Stock issued and outstanding immediately prior to the Effective Time (collectively, the “ Towers Perrin Shares ”) other than (i) Towers Perrin Shares to be canceled in accordance with Section 2.1(e) and (ii) Dissenting Towers Perrin Shares (as defined below), if any, and each Towers Perrin RSU shall thereupon be converted automatically into and shall thereafter represent the right to receive the following consideration (collectively, the “ Towers Perrin Merger Consideration ”):

 

(i)            for each Towers Perrin Share that is not a Towers Perrin Class R Election Share or Towers Perrin Class S Election Share (each, as defined below) (collectively, “ Towers Perrin Stock Election Shares ”), a number of fully paid and nonassessable shares, equal

 

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to the Final Exchange Ratio, of Class B Restricted Holding Company Stock (as defined below) (collectively, the “ Towers Perrin Stock Consideration ”), which shares of Class B Restricted Holding Company Stock shall be issued as follows:

 

(A)          25% shall be shares of Class B-1 Restricted Common Stock, par value $0.01 per share (“ Class B-1 Restricted Holding Company Stock ”);

 

(B)           25% shall be shares of Class B-2 Restricted Common Stock, par value $0.01 per share (“ Class B-2 Restricted Holding Company Stock ”);

 

(C)           25% shall be shares of Class B-3 Restricted Common Stock, par value $0.01 per share (“ Class B-3 Restricted Holding Company Stock ”); and

 

(D)          25% shall be shares of Class B-4 Restricted Common Stock, par value $0.01 per share (“ Class B-4 Restricted Holding Company Stock ” ) (all shares of Class B-1 Restricted Holding Company Stock, Class B-2 Restricted Holding Company Stock, Class B-3 Restricted Holding Company Stock and Class B-4 Restricted Holding Company Stock, collectively, the “ Class B Restricted Holding Company Stock ”);

 

provided , however , that the Towers Perrin Stock Consideration in respect of all Towers Perrin Shares (other than Towers Perrin Class R Election Shares (as defined below)) then held by a holder of Towers Perrin Shares who has made a Valid Class R Election (as defined below) shall be payable entirely in the form of shares of Class B-1 Restricted Holding Company Stock;

 

(ii)           for each Towers Perrin Share with respect to which a Class R Election has been properly made pursuant to Section 2.2(b) (a “ Valid Class R Election ”)  (the Towers Perrin Shares with respect to which a Valid Class R Election is made, the “ Towers Perrin Class R Election Shares ”), a number of fully paid and nonassessable shares, equal to the Final Exchange Ratio, of Class R Restricted Common Stock, par value $0.01 per share, of Holding Company (the “ Class R Restricted Holding Company Stock ”), subject to proration in accordance with Section 2.3(a), which shares of Class R Restricted Holding Company Stock shall automatically be redeemed, out of funds legally available therefor, for the following on the first Business Day following the Effective Time (the “ Redemption Date ”):

 

(A)          an amount of cash (the “ Class R Cash Consideration ”) equal to 50% of the Final Transaction Value Per Towers Perrin Share (as defined below); and

 

(B)           a promissory note (each such note, a “ Note ”) issued by Holding Company and having the terms provided in an indenture substantially in the form attached hereto as Exhibit C , with any changes reasonably requested by the Person that will serve as Trustee under the Indenture, or the administrative agent to the Credit Agreement (as defined therein), in each case as agreed to by the parties hereto and approved by the Watson Wyatt Board and the Towers Perrin Board (the “ Indenture ”), with a principal amount equal to 50% of the Final Transaction Value Per Towers Perrin Share (collectively, the “ Class R Note Consideration ”),

 

provided , that all Notes payable to a single Person in respect of Class R Restricted Holding Company Stock may be aggregated and evidenced by a single Note;

 

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(iii)          for each Towers Perrin Share with respect to which a Class S Election (as defined below) has been properly made pursuant to Section 2.2(d) (a “ Valid Class S Election ”) (the Towers Perrin Shares with respect to which a Valid Class S Election is made, the “ Towers Perrin Class S Election Shares ”), a number of fully paid and nonassessable shares, equal to the Final Exchange Ratio, of Class S Restricted Common Stock, par value $0.01 per share, of Holding Company (the “ Class S Restricted Holding Company Stock ”), subject to proration in accordance with Section 2.3(b), which shares of Class S Restricted Holding Company Stock shall automatically be redeemed, out of funds legally available therefor, on the Redemption Date, for an amount of cash (the “ Class S Cash Consideration ”) equal to 100% of the Final Transaction Value Per Towers Perrin Share (as defined below);

 

(iv)          for each Towers Perrin RSU that is issued and outstanding immediately prior to the Effective Time and is not a Guaranteed Towers Perrin RSU, a number of fully paid and nonassessable shares, equal to the Final Exchange Ratio, of Restricted Class A Holding Company Stock; provided , that the number of shares of Restricted Class A Holding Company Stock to be received by Towers Perrin RSU Holders pursuant to this Section 2.1(a)(iv) shall be increased or decreased, pro rata for each holder based on the number of Towers Perrin RSUs that he or she holds immediately prior to the Effective Time, as necessary to ensure that the aggregate number of shares of Restricted Class A Holding Company Stock received with respect to all Towers Perrin RSUs (including the shares received with respect to Guaranteed Towers Perrin RSUs pursuant to Section 2.1(a)(v)) equals ten percent (10%) of the aggregate number of shares of Restricted Holding Company Stock and Restricted Class A Holding Company Stock that comprise the Towers Perrin Merger Consideration; and

 

(v)           for each Guaranteed Towers Perrin RSU that is issued and outstanding immediately prior to the Effective Time, a number of fully paid and nonassessable shares of Restricted Class A Holding Company Stock equal to the Final Exchange Ratio; provided , that the aggregate number of shares of Restricted Class A Holding Company Stock received with respect to the issued and outstanding Guaranteed Towers Perrin RSUs shall not exceed ten percent (10%) of the aggregate number of shares of Restricted Holding Company Stock and Restricted Class A Holding Company Stock that comprise the Towers Perrin Merger Consideration.

 

(b)           Custodian; Trustee .  The Exchange Agent shall, as of the Effective Time, deposit all of the shares of Restricted Class A Holding Company Stock to be issued pursuant to Section 2.1(a)(iv) and Section 2.1(a)(v) with the Custodian, and such shares shall be held by the Custodian in accordance with the Custodian Agreement (as defined below) and the vesting, forfeiture and reallocation provisions described in Sections 5.14 and 5.15.  In the event that Towers Perrin determines, subject to Watson Wyatt’s consent which shall not be unreasonably withheld or delayed, that Towers Perrin RSU Holders located within a particular tax jurisdiction would be subject to current tax as a result of (i) the grant of any Towers Perrin RSU or (ii) the conversion of their Towers Perrin RSUs into shares of Restricted Class A Holding Company Stock pursuant to Section 2.1(a)(iv) or Section 2.1(a)(v), then Towers Perrin may, but shall not be required to, elect to cause the Exchange Agent to deposit a portion of the shares of Restricted Class A Holding Company Stock to be received by Persons located within such jurisdiction pursuant to Section 2.1(a)(iv) or Section 2.1(a)(v) with a trustee (the “ Trustee ”) to be designated by Towers Perrin, subject to Watson Wyatt’s consent which shall not be unreasonably withheld

 

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or delayed, at any time prior to mailing the Joint Proxy Statement/Prospectus, to hold such shares and make distributions therefrom in such form and manner that will provide for a deferral of such tax.  Subject to Watson Wyatt’s consent which shall not be unreasonably withheld or delayed, Towers Perrin (i) may enter into such documentation with the Trustee as Towers Perrin deems reasonably necessary or appropriate to effect such trust arrangement and (ii) hold such Towers Perrin RSUs and/or shares of Restricted Class A Holding Company Stock and make distributions therefrom in such form and manner that will provide for deferral of such tax, and may elect to cause Holding Company to enter into any such documentation.  In the event a trust arrangement will not allow for deferral of such taxes for holders of Towers Perrin RSUs located within any particular tax jurisdiction, Towers Perrin and Watson Wyatt shall work together in good faith to determine an alternative method of structuring the grant of Towers Perrin RSUs to such holders and/or the conversion of Towers Perrin RSUs held by such holders into shares of Restricted Class A Holding Company Stock pursuant to Section 2.1(a)(iv) or Section 2.1(a)(v), in a manner that provides for deferral of such taxes.

 

(c)           Substitution of Class A Shares for Class B Shares .  In the event that Towers Perrin determines, subject to Watson Wyatt’s consent which shall not be unreasonably withheld or delayed, in its sole discretion, that holders of Towers Perrin Shares located within a particular tax jurisdiction would be subject to tax as a result of the conversion of their Towers Perrin Stock Election Shares into shares of Class B Restricted Holding Company Stock pursuant to Section 2.1(a)(i), then Towers Perrin may, but shall not be required to, (i) elect to cause a portion of the Towers Perrin Merger Consideration to be received by Persons located within such jurisdiction pursuant to Section 2.1(a)(i) to be paid in the form of freely tradable shares of Class A Holding Company Stock in lieu of an equal number of shares of Class B Restricted Holding Company Stock or (ii) elect to cause Holding Company to cause a portion of the Class B Restricted Holding Company Stock received by Persons located within such jurisdiction pursuant to Section 2.1(a)(i) to be converted, at any time following the Effective Time, into freely tradable shares of Class A Holding Company Stock, on a share-for-share basis, in either case with such portion to be determined by Towers Perrin, subject to Watson Wyatt’s consent which shall not be unreasonably withheld or delayed, and shall not exceed the amount that Towers Perrin determines is reasonably necessary to provide liquidity to holders within such jurisdiction to pay some or all of the taxes expected to be incurred as a result of the conversion of their Towers Perrin Stock Election Shares into shares of Class B Restricted Holding Company Stock pursuant to Section 2.1(a)(i).

 

(d)           Conversion of Watson Wyatt Shares .  By virtue of the Watson Wyatt Merger, each share of Watson Wyatt Common Stock issued and outstanding immediately prior to the Effective Time (such shares, collectively, the “ Watson Wyatt Shares ”), other than Watson Wyatt Shares to be canceled in accordance with Section 2.1(e), shall thereupon be converted automatically into and shall thereafter represent the right to receive one (1) fully paid and nonassessable share (such shares, collectively, the “ Watson Wyatt Merger Consideration ” and together with the Towers Perrin Merger Consideration, the “ Merger Consideration ”) of Class A Common Stock, par value $0.01 per share, of Holding Company (the “ Class A Holding Company Stock ”).  All Watson Wyatt Shares converted into the right to receive Class A Holding Company Stock pursuant to this Section 2.1(d) shall cease to be outstanding and holders of Watson Wyatt Shares shall be deemed to have received shares of Class A Holding Company Stock (without the requirement for the surrender of any Certificate (as defined below) or

 

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issuance of new certificates representing Class A Holding Company Stock), with each Certificate being deemed to represent automatically an equivalent number of shares of Class A Holding Company Stock.

 

(e)                                   Cancellation of Treasury Shares .  Each Towers Perrin Share held in the treasury of Towers Perrin immediately prior to the Effective Time, and each Watson Wyatt Share held in the treasury of Watson Wyatt immediately prior to the Effective Time, shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(f)                                     Conversion of Merger Subsidiary Shares .

 

(i)            At the Effective Time, each share of the common stock of Pennsylvania Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid and non-assessable share of common stock, par value $0.50 per share, of Surviving Towers Perrin, and Surviving Towers Perrin shall be a wholly-owned subsidiary of Holding Company.

 

(ii)           At the Effective Time, each share of the common stock of Delaware Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of Surviving Watson Wyatt, and Surviving Watson Wyatt shall be a wholly-owned subsidiary of Holding Company.

 

(g)                                  Holding Company Capital Stock .  At the Effective Time, each share of capital stock of Holding Company issued and outstanding immediately prior to the Effective Time and owned by Towers Perrin or Watson Wyatt shall be contributed to Holding Company without payment of any consideration therefor and thereupon retired.

 

(h)                                  Terms of Class B Restricted Holding Company Stock .  The Amended and Restated Holding Company Charter will specify that (i) Class B Restricted Holding Company Common Stock will automatically convert into shares of Class A Holding Company Stock on the following schedule:  (A) Class B-1 Restricted Holding Company Stock:  first (1st) anniversary of the Effective Time; (B) Class B-2 Restricted Holding Company Stock:  second (2nd) anniversary of the Effective Time; (C) Class B-3 Restricted Holding Company Stock:  third (3rd) anniversary of the Effective Time; (D) Class B-4 Restricted Holding Company Stock:  fourth (4th) anniversary of the Effective Time.  Except as provided in this Agreement (including, without limitation, Section 2.8 (Transfer Restrictions) and Section 2.5(e) (Fractional Shares)), the Amended and Restated Holding Company Charter will provide that the relative powers, preferences and participating, optional or other special rights, and the qualifications, limitations or restrictions of Class B Restricted Holding Company Stock and Class A Holding Company Stock shall be identical in all respects; and (ii) the name of Holding Company shall be “Towers Watson & Co.”

 

(i)                                      Section 1906 of the PBCL shall apply to this Agreement and the plan of merger contained herein with respect to the Towers Perrin Merger.

 

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Section 2.2         Consideration Elections for Eligible Towers Perrin Shares .

 

(a)                                   Class R Election .  Each holder of Towers Perrin Shares listed on Section 2.2 of the Towers Perrin Disclosure Letter (each, a “ Potential Class R Participant ”) shall be eligible to make a Class R Election (as defined below) with respect to the Merger Consideration that he or she will receive in connection with the Towers Perrin Merger.  The proxy card accompanying the Joint Proxy Statement/Prospectus (as defined below) to be mailed or otherwise delivered to the Potential Class R Participants will include a designated section (the “ Class R Election Form ”) wherein each Potential Class R Participant may, but shall not be obligated to, elect to designate between fifty percent (50%) and one hundred percent (100%) (each, inclusive) of the Towers Perrin Shares owned by such Potential Class R Participant as Towers Perrin Class R Election Shares.

 

(b)                                  Each Potential Class R Participant may irrevocably elect, with respect to the Towers Perrin Shares of which he or she is the record holder, to designate between fifty percent (50%) and one hundred percent (100%) (each, inclusive) of such Towers Perrin Shares as Class R Election Shares (a “ Class R Election ”).  A Class R Election will constitute a Valid Class R Election only if it satisfies each of the following conditions:  (i) such election is made by a Potential Class R Participant pursuant to a Class R Election Form that is properly completed and signed (or otherwise in form acceptable for transfer on the books of Towers Perrin) and received by the Exchange Agent at its office, by 11:00 p.m., New York City time on the Business Day designated by Towers Perrin (and reasonably acceptable to Watson Wyatt) in the Class R Election Form as the deadline for making a Class R Election (the “ Class R Election Deadline ”), which deadline shall be (A) at least forty-five (45) days after the date the Joint Proxy Statement/Prospectus is mailed to the holders of Towers Perrin Shares and (B) not later than the date of the Towers Perrin Shareholder Meeting; (ii) the number of Towers Perrin Shares with respect to which the Class R Election was made is between fifty percent (50%) and one hundred percent (100%) (each, inclusive) of the total number of Towers Perrin Shares owned by such Potential Class R Participant; (iii) such Potential Class R Participant must irrevocably commit (pursuant to the terms and conditions set forth in the Class R Election Form) to terminate his or her employment with Towers Perrin as of the Effective Time (and, for the avoidance of doubt, shall not be employed with Holding Company or either Surviving Corporation following the Effective Time), or such other date as agreed by such Potential Class R Participant, Towers Perrin and Watson Wyatt, and otherwise on such terms as may be agreed by such Potential Class R Participant, Towers Perrin and Watson Wyatt; and (iv) the Exchange Agent receives joint written instructions from Towers Perrin and Watson Wyatt indicating that the foregoing conditions have been satisfied with respect to such Class R Election.  Any Potential Class R Participant who makes a Class R Election will be entitled to revoke such election at any time during the seven (7) day period following the Class R Election Deadline, after which all Class R Elections will be final and irrevocable.  The form and contents of the Class R Election Form shall be subject to approval by Watson Wyatt, which approval shall not be unreasonably withheld or delayed.  Potential Class R Participants who fail to make a Valid Class R Election will not receive any Class R Shares and will only receive Towers Perrin Stock Consideration as Towers Perrin Merger Consideration.

 

(c)                                   Towers Perrin and Watson Wyatt shall consult with each other to determine whether any portion of the Towers Perrin Merger Consideration received by Potential

 

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Class R Participants who make Valid Class R Elections (the “ Class R Election Shareholders ” ) constitutes ordinary compensation income to the Class R Election Shareholders.  In the event that Towers Perrin and Watson Wyatt agree to treat a portion of such Towers Perrin Merger Consideration as ordinary compensation income, Towers Perrin may in its sole discretion pay, or elect to cause Holding Company to pay, an additional amount of cash to the Class R Election Shareholders to cover some or all of the incremental tax cost of such ordinary compensation income to the Class R Election Shareholders, subject to Watson Wyatt’s consent which shall not be unreasonably withheld or delayed.

 

(d)                                  Class S Election .

 

(i)            In the event of an Interim Class R Election Shortfall (as defined below), Watson Wyatt may elect, which election shall be made by providing written notice to Towers Perrin no later than ten (10) Business Days after the Class R Election Deadline, to cause Towers Perrin to offer each holder of Towers Perrin Shares who is not a Potential Class R Participant (each, a “ Class S Offeree ”) the right to make a Class S Election, in which case the following shall apply:

 

(A)          Towers Perrin shall prepare, and the Exchange Agent shall mail or deliver, a written offer (the “ Class S Election Offer ”) to each Class S Offeree, which shall contain a form of election (the “ Class S Election Form ”) pursuant to which each Class S Offeree may, but shall not be obligated to, irrevocably elect to designate up to 20% of the Towers Perrin Shares owned by such Class S Offeree as Towers Perrin Class S Election Shares and the remainder of his or her Towers Perrin Shares will continue to be Towers Perrin Stock Election Shares.  The form and contents of the Class S Election Form shall be subject to approval by Watson Wyatt, which approval shall not be unreasonably withheld or delayed.  Potential Class R Participants will not be entitled to participate in the Class S Election, if any.

 

(B)           A Class S Offeree’s election to designate his or her Towers Perrin Shares as Class S Election Shares (a “ Class S Election ”) will constitute a Valid Class S Election only if it was made by a Class S Offeree pursuant to a Class S Election Form that is properly completed and signed (or otherwise in form acceptable for transfer on the books of Towers Perrin) and received by the Exchange Agent at its office, by 11:00 p.m., New York City time on the Business Day designated by Towers Perrin in the Class S Election Form (the “ Class S Election Deadline ”), which date shall be reasonably acceptable to Watson Wyatt, as the deadline for making a Class S Election, and otherwise in accordance with the terms and conditions set forth in the instructions accompanying the Class S Election Form.  The Class S Election Deadline shall be a date that is at least twenty (20) Business Days after the date the Class S Election Form is mailed to the Class S Offerees.

 

(ii)           As used in this Section 2.2(d), the following terms have the following definitions:

 

(A)          “ Interim Class R Cash and Notes Consideration ” means the product obtained by multiplying (1) the product obtained by multiplying (x) the aggregate number of Towers Perrin Shares designated as Towers Perrin Class R Election Shares pursuant

 

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to Valid Class R Elections by (y) the Interim Exchange Ratio as of the Class R Election Deadline; by (2) the Interim Watson Wyatt Stock Price as of the Class R Election Deadline;

 

(B)           “ Interim Class R Election Shortfall ” means the amount (if any) by which $200,000,000 exceeds the Interim Class R Cash and Notes Consideration.

 

(e)                                   All Class R Election Forms and Class S Election Forms shall automatically be revoked if the Exchange Agent is notified in writing by Watson Wyatt or Towers Perrin that the Towers Perrin Merger has been abandoned.

 

(f)                                     The determination of the Exchange Agent shall be binding as to whether or not a Valid Class R Election or (as applicable) a Valid Class S Election has been properly made pursuant to this Section 2.2 with respect to Towers Perrin Shares and when elections were received by it.  The Exchange Agent shall make all computations as to the allocation and the proration contemplated by Section 2.3, and any such computation shall be conclusive and binding on the holder of Towers Perrin Shares.  The Exchange Agent may, with the mutual agreement of Watson Wyatt and Towers Perrin, make such rules as are consistent with this Section 2.2 for the implementation of the elections provided for herein as shall be necessary or desirable to effect such elections fully.

 

(g)                                  The Class R Election and the Class S Election Offer shall comply with applicable Law, including without limitation, applicable securities laws and the rules and regulations promulgated by the SEC thereunder.

 

Section 2.3         Proration .

 

(a)                                   Class R Proration .  Notwithstanding anything in this Agreement to the contrary,

 

(i)            the maximum number of Towers Perrin Shares which shall be converted into the right to receive Class R Restricted Holding Company Stock pursuant to Section 2.1(a)(ii)  (the “ Class R Number ”) in the Towers Perrin Merger shall be equal to the number of Towers Perrin Shares obtained by dividing (A) the Class R Cash and Notes Pool, by (B) the Final Transaction Value Per Towers Perrin Share, and

 

(ii)           if the number of Towers Perrin Class R Election Shares exceeds the Class R Number, then such Class R Election Shares shall be converted into the right to receive Class R Restricted Holding Company Stock and Class B-1 Restricted Holding Company Stock, in the following manner:

 

(A)          A proration factor (the “ Class R Proration Factor ”) shall be determined by dividing the Class R Number by the total number of Towers Perrin Class R Election Shares designated by Potential Class R Participants pursuant to Valid Class R Elections;

 

(B)           The number of Towers Perrin Class R Election Shares of each Potential Class R Participant to be converted into Class R Restricted Holding Company Stock, in accordance with Section 2.1(a)(ii) , shall be determined by multiplying the Class R

 

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Proration Factor by the total number of Towers Perrin Class R Election Shares of such Potential Class R Participant; and

 

(C)           The Towers Perrin Class R Election Shares of each Potential Class R Participant, other than those shares to be converted into Class R Restricted Holding Company Stock pursuant to Section 2.1(a)(ii), shall be converted into shares of Class B-1 Restricted Holding Company Stock, in accordance with the terms of Section 2.1(a)(i).

 

(iii)          As used in this Agreement, “ Class R Cash and Notes Pool ” means an amount (which shall not be less than $200,000,000) to be mutually agreed by Watson Wyatt and Towers Perrin, who shall provide joint written notice thereof to the Exchange Agent prior to the date of mailing or other distribution of the Proxy Statement/Prospectus to Watson Wyatt stockholders and Towers Perrin shareholders.  If Watson Wyatt and Towers Perrin do not agree on a different amount or no such notice is provided prior to such date and disclosed in the Joint Proxy Statement/Prospectus mailed or otherwise distributed to Watson Wyatt stockholders and Towers Perrin shareholders, then the size of the Class R Cash and Notes Pool shall be deemed to be $200,000,000.

 

(b)                                  Class S Proration .

 

(i)            “ Class S Cash Pool ” means an amount (which shall not exceed the amount of the Final Class R Election Shortfall) determined by Watson Wyatt in its sole discretion  by providing written notice to Towers Perrin and the Exchange Agent no later than the Business Day immediately prior to the Effective Time.  If no such notice is provided on or prior to the Business Day immediately prior to the Effective Time, then the size of the Class S Cash Pool shall be deemed to be equal to the Final Class R Election Shortfall.

 

(ii)           “ Final Class R Cash and Notes Consideration ” means the product obtained by multiplying (A) the product obtained by multiplying (1) the aggregate number of Towers Perrin Shares designated as Towers Perrin Class R Election Shares pursuant to Valid Class R Elections by (2) the Final Exchange Ratio; by (B) the Final Watson Wyatt Stock Price (as defined below).

 

(iii)          “ Final Class R Election Shortfall ” means the amount (if any) by which $200,000,000 exceeds the Final Class R Cash and Notes Consideration.

 

(c)                                   Notwithstanding anything in this Agreement to the contrary,

 

(i)            the maximum number of Towers Perrin Shares which shall be converted into the right to receive Class S Restricted Holding Company Stock pursuant to Section 2.1(a)(iii) (the “ Class S Number ”) in the Towers Perrin Merger shall be equal to the number of Towers Perrin Shares obtained by dividing (A) the Class S Cash Pool, by (B) the Final Transaction Value Per Towers Perrin Share, and

 

(ii)           if the number of Towers Perrin Class S Election Shares designated by Class S Offerees pursuant to Valid Class S Elections  exceeds the Class S Number, then each such Towers Perrin Class S Election Share shall be converted into the right to receive Class S

 

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Restricted Holding Company Stock and Towers Perrin Stock Consideration, in the following manner:

 

(A)          A proration factor (the “ Class S Proration Factor ”) shall be determined by dividing the Class S Number by the total number of Class S Election Shares designated by Class S Offerees pursuant to Valid Class S Elections;

 

(B)           The number of Towers Perrin Class S Election Shares of each Class S Offeree to be converted into Class S Restricted Holding Company Stock in accordance with Section 2.1(a)(iii) shall be determined by multiplying the Class S Proration Factor by the total number of Towers Perrin Class S Election Shares of such Class S Offeree; and

 

(C)           The Towers Perrin Class S Election Shares of each Class S Offeree, other than those shares to be converted into Class S Restricted Holding Company Stock in accordance with Section 2.1(a)(iii), shall be converted into Towers Perrin Stock Consideration, as if such Class S Election Shares were Towers Perrin Stock Election Shares, in accordance with the terms of Section 2.1(a)(i).

 

Section 2.4         Deferred Stock Units, Employee Stock Purchase Plan; Restricted Stock Units; Other Watson Wyatt Awards .

 

(a)                                   Watson Wyatt Deferred Stock Units .  Prior to the Effective Time, the Holding Company Board (or, if appropriate, any committee thereof) and the Watson Wyatt Board  (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide that, effective at the Effective Time, each deferred stock unit (“ Watson Wyatt DSU ”) outstanding under the Watson Wyatt Worldwide, Inc. Amended 2001 Deferred Stock Unit Plan for Selected Employees that entitles the holder thereof to shares of Watson Wyatt Common Stock (the “ Watson Wyatt DSU Shares ”) following the Effective Time (including Watson Wyatt DSU Shares that will become issuable as a result of the acceleration of vesting triggered by Closing, and performance criteria satisfaction determinations made by the Watson Wyatt Board or a committee thereof) shall be settled with a number of shares of Class A Holding Company Stock equal to the number of Watson Wyatt DSU Shares issuable with respect to such Watson Wyatt DSU pursuant to the terms thereof.

 

(b)                                  Watson Wyatt Employee Stock Purchase Plan .  Prior to the Effective Time, the Holding Company Board (or, if appropriate, any committee thereof) and the Watson Wyatt Board  (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide that, effective at the Effective Time, Holding Company shall assume the Watson Wyatt ESPP, the outstanding offering periods under the Watson Wyatt ESPP, and all outstanding purchase rights thereunder shall be converted on a one-for-one basis into rights to purchase shares of Class A Holding Company Stock (“ Holding Company ESPP Rights ”).  All Holding Company ESPP Rights shall be assumed by Holding Company, and each offering period in effect under the Watson Wyatt ESPP immediately prior to the Effective Time (such periods, the “ Pending Offering Periods ”) shall be continued until the end of such offering period in accordance with the terms of the Watson Wyatt ESPP.  From and after the Effective Time, all references to “Watson Wyatt & Company Holdings” in the Watson

 

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Wyatt ESPP and related documents shall be deemed to refer to Holding Company.  Holding Company shall continue the Watson Wyatt ESPP, as assumed by Holding Company with respect to Holding Company ESPP Rights, at least until the end of the Pending Offering Periods.  Holding Company shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Class A Holding Company Stock for issuance upon exercise of the purchase rights under the Watson Wyatt ESPP assumed in accordance with this Section 2.4(b).  Holding Company shall file with the SEC as soon as practicable, and in any event within five Business Days following the Effective Time, a registration statement on Form S-8 under the Securities Act, covering the Class A Holding Company Common Stock to be issued upon the exercise of converted purchase rights under this Section 2.4(b).  Prior to the Effective Time, Watson Wyatt shall make such amendments, if any, to the Watson Wyatt ESPP as shall be necessary to permit assumption of the Watson Wyatt ESPP in accordance with this Section 2.4(b).

 

(c)                                   Towers Perrin Restricted Stock Units .  At the Effective Time, each Towers Perrin RSU then outstanding will be settled with shares of Restricted Class A Holding Company Stock in accordance with Section 2.1(a)(iv) and Section 2.1(a)(v).

 

(d)                                  Watson Wyatt UK and Irish Plans .  Prior to the Effective Time, the Holding Company Board (or, if appropriate, any committee thereof) and the Watson Wyatt Board  (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide that, effective at the Effective Time, Holding Company shall assume the Watson Wyatt UK and Irish Plans and the outstanding offering periods thereunder, and all outstanding purchase rights thereunder shall be converted on a one-for-one basis into rights to purchase shares of Class A Holding Company Stock (“ Holding Company UK and Irish Purchase Rights ”).  All Holding Company UK and Irish Purchase Rights shall be assumed by Holding Company, and each offering period in effect under the Watson Wyatt UK and Irish Plans immediately prior to the Effective Time (such periods, the “ UK and Irish Pending Offering Periods ”) shall be continued until the end of such offering period in accordance with the terms of the UK and Irish Plans.  From and after the Effective Time, all references to “Watson Wyatt & Company Holdings” or “Watson Wyatt Worldwide, Inc.” in the Watson Wyatt UK and Irish Plans and related documents shall be deemed to refer to Holding Company.  Holding Company shall continue the Watson Wyatt UK and Irish Plans, as assumed by Holding Company with respect to Holding Company UK and Irish Purchase Rights, at least until the end of the UK and Irish Pending Offering Periods.  Holding Company shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Class A Holding Company Stock for issuance upon exercise of the purchase rights under the Watson Wyatt UK and Irish Plans assumed in accordance with this Section 2.4(d).  Prior to the Effective Time, Watson Wyatt shall make such amendments, if any, to the Watson Wyatt UK and Irish Plans as shall be necessary to permit assumption of the Watson Wyatt UK and Irish Plans in accordance with this Section 2.4(d) .

 

(e)                                   Watson Wyatt Deferred Compensation Plans .  Prior to the Effective Time, the Holding Company Board (or, if appropriate, any committee thereof) and the Watson Wyatt Board  (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide that, effective at the Effective Time, Holding Company shall assume the Watson Wyatt Senior Officers Deferred Compensation Plan, Amended and Restated effective July 1, 2008 and the Watson Wyatt Amended Voluntary Deferred Compensation Plan

 

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for Non-Employee Directors (collectively, the “ Deferral Plans ” ), and that each outstanding right to receive shares of Watson Wyatt Common Stock (“ Deferred Shares ”) outstanding following the Effective Time shall be settled with a number of shares of Class A Holding Company Stock equal to the number of Deferred Shares issuable with respect to such right pursuant to the terms thereof.

 

Section 2.5         Exchange of Certificates and Book-Entry Shares; Redemptions .

 

(a)                                   Exchange Agent .  At or prior to the filing of the Registration Statement (as defined below) with the Securities and Exchange Commission (the “ SEC ”), Watson Wyatt and Towers Perrin shall mutually appoint a bank or trust company to act as the exchange agent hereunder (the “ Exchange Agent ”).  At or prior to the Closing, Watson Wyatt and Towers Perrin shall cause Holding Company to deposit with the Exchange Agent, in trust for the benefit of the holders of Towers Perrin Shares to be converted in the Towers Perrin Merger (including the Dissenting Share Merger Consideration (as defined below)), and the holders of Watson Wyatt Shares to be converted in the Watson Wyatt Merger, for exchange, in accordance with this Article II, through the Exchange Agent, sufficient cash, Notes, shares of Restricted Holding Company Stock and shares of Class A Holding Company Stock, to make all deliveries pursuant to this Article II; provided , however , that if the Exchange Fund (as defined below) shall for any reason not include sufficient cash, Notes or shares to make all such deliveries, upon notice thereof from the Exchange Agent to Holding Company, Holding Company shall from time to time promptly deposit with the Exchange Agent sufficient cash, Notes and shares to make all such deliveries.  The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be paid for Towers Perrin Shares and the Watson Wyatt Shares pursuant to this Agreement out of the Exchange Fund, and shall deliver Class R Note Consideration, Class R Cash Consideration and Class S Cash Consideration to holders of shares of Class R Restricted Holding Company Stock and Class S Restricted Holding Company Stock issued in the Merger upon redemption of such shares on the Redemption Date. Except as contemplated by Sections 2.5(c), 2.5(e) and 2.5(i) hereof, the Exchange Fund shall not be used for any other purpose. Any cash, Notes, shares of Restricted Holding Company Stock and shares of Class A Holding Company Stock deposited with the Exchange Agent shall be collectively referred to as the “ Exchange Fund .”  Towers Perrin and Watson Wyatt shall cooperate and use their reasonable best efforts prior to Closing to ensure that Holding Company will have the funds necessary at Closing to fund the cash portion of the Exchange Fund.

 

(b)                                  Exchange Procedures; Redemption Procedures .

 

(i)            Holding Company shall instruct the Exchange Agent to mail to each Towers Perrin Shareholder (as defined below) a letter of transmittal (the “ Towers Perrin Letter of Transmittal ”), which shall specify that delivery shall be effected, and risk of loss and title to the uncertificated Towers Perrin Shares represented by book-entry (the “ Towers Perrin Book-Entry Shares ”) held by such Towers Perrin Shareholder shall pass, only upon adherence to the procedures set forth in the Towers Perrin Letter of Transmittal.  The Towers Perrin Letter of Transmittal shall be in customary form and contain such other provisions as Towers Perrin shall specify ( provided , that Watson Wyatt shall have provided its consent to such form, such consent not to be unreasonably withheld or delayed).

 

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(ii)           Holding Company shall instruct the Exchange Agent to mail to each Watson Wyatt Stockholder (as defined below) a letter of transmittal (the “ Watson Wyatt Letter of Transmittal ”), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates (as defined below) or uncertificated Watson Wyatt Shares represented by book entry (the “ Watson Wyatt Book-Entry Shares ”  and, together with the Towers Perrin Book-Entry Shares, the “ Book-Entry Shares ”) held by such Watson Wyatt Stockholder shall pass, only upon adherence to the procedures set forth in the Watson Wyatt Letter of Transmittal.  The Watson Wyatt Letter of Transmittal shall be in customary form and contain such other provisions as Watson Wyatt shall specify ( provided , that Towers Perrin shall have provided its consent to such form, such consent not to be unreasonably withheld or delayed).

 

(iii)          As used in this Section 2.5, “ Towers Perrin Shareholder ” means a holder of record, immediately prior to the Effective Time, of Towers Perrin Book-Entry Shares which were converted into the right to receive the Towers Perrin Merger Consideration with respect thereto pursuant to Section 2.1(a).

 

(iv)          As used in this Section 2.5, “ Watson Wyatt Stockholder ” means a holder of record, immediately prior to the Effective Time, of a certificate or certificates which immediately prior to the Effective Time represented outstanding Watson Wyatt Shares (the “ Certificates ”) or Watson Wyatt Book-Entry Shares, in either case which were converted into the right to receive the Watson Wyatt Merger Consideration with respect thereto pursuant to Section 2.1(c).

 

(v)           Towers Perrin Letters of Transmittal shall be mailed to each Towers Perrin Shareholder as promptly as reasonably practicable (and in no event more than ten (10) Business Days) after the later to occur of the Effective Time and (if applicable) the date of final determination of the Class R Proration Factor or Class S Proration Factor.

 

(vi)          Watson Wyatt Letters of Transmittal shall be mailed to each Watson Wyatt Stockholder as promptly as reasonably practicable (and in no event more than ten (10) Business Days) after the Effective Time.

 

(vii)         Upon delivery of a properly completed and duly executed Towers Perrin Letter of Transmittal or Watson Wyatt Letter of Transmittal (as the case may be) by the holder of one or more Towers Perrin Shares or Watson Wyatt Shares, the holder thereof shall be entitled to receive in exchange for such Towers Perrin Shares or Watson Wyatt Shares the distributions set forth in Section 2.5(c), and such Towers Perrin Shares or Watson Wyatt Shares shall forthwith be canceled.

 

(viii)        No interest shall be paid or shall accrue on any Merger Consideration, cash in lieu of fractional shares or unpaid dividends and distributions payable to holders of Certificates or Book-Entry Shares (except, with respect to Towers Perrin Shareholders who make a Valid Class R Election, interest that has accrued pursuant to the terms of any Notes issued upon the redemption of the shares of Class R Restricted Holding Company Stock payable as Towers Perrin Merger Consideration to such Towers Perrin Shareholder).

 

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(ix)                                 In the event of a transfer of ownership of Watson Wyatt Shares which is not registered in the transfer records of Watson Wyatt, the Watson Wyatt Merger Consideration payable in respect of such Watson Wyatt Shares may be paid to a transferee if the Certificate representing such Watson Wyatt Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer Taxes have been paid.

 

(x)                                    Until delivery of a properly completed and duly executed Towers Perrin Letter of Transmittal or Watson Wyatt Letter of Transmittal (as the case may be) by a Watson Wyatt Stockholder or Towers Perrin Shareholder as contemplated by this Section 2.5:

 

(A)          except as provided in Section 2.7, each Towers Perrin Book-Entry Share (which shall not include Dissenting Towers Perrin Shares) shall be deemed at any time after the Effective Time to represent only the right to receive upon such delivery the Towers Perrin Merger Consideration payable in respect of the Towers Perrin Shares formerly represented by such Towers Perrin Book-Entry Share and any dividends or other distributions to which such Towers Perrin Shareholder is entitled pursuant to Section 2.5(c), in each case, without any interest thereon (except as set forth in Section 2.5(b)(viii)); and

 

(B)           each Certificate and Watson Wyatt Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive upon such delivery the Watson Wyatt Merger Consideration payable in respect of the Watson Wyatt Shares formerly represented by such Certificate or Watson Wyatt Book-Entry Share and any dividends or other distributions to which such Watson Wyatt Stockholder is entitled pursuant to Section 2.5(c) , in each case, without any interest thereon.

 

(xi)                                 On the Redemption Date, each share of Class R Restricted Holding Company Stock shall be automatically redeemed and shall forthwith be canceled, and the holder thereof shall be entitled to receive as redemption proceeds out of funds legally available therefor:

 

(A)          the amount of Class R Cash Consideration payable upon such redemption pursuant to Section 2.1(a)(ii)(A); and

 

(B)           the Note issuable upon such redemption pursuant to, and bearing a principal amount as determined in accordance with, Section 2.1(a)(ii)(B), provided that all Notes payable to a single Person in respect of Class R Restricted Holding Company Stock may be aggregated and evidenced by a single Note.

 

(xii)                              On the Redemption Date, each share of Class S Restricted Holding Company Stock shall be automatically redeemed and shall forthwith be canceled, and the holder thereof shall be entitled to receive, as redemption proceeds out of funds legally available therefor, the amount of Class S Cash Consideration payable upon such redemption pursuant to Section 2.1(a)(iii).

 

(xiii)                           No interest shall be paid or shall accrue on any Class R Cash Consideration, Class R Note Consideration or Class S Cash Consideration (except interest that has accrued pursuant to the terms of any Notes issued upon the redemption of the shares of Class R Restricted Holding Company Stock).

 

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(c)                                   Distributions with Respect to Unexchanged Shares of Holding Company Stock .  No dividends or other distributions declared or made with respect to shares of Holding Company Stock or interest payments made with respect to Notes with a record date after the Effective Time shall be paid to the holder of any Certificate or Book-Entry Share with respect to which a properly completed and duly executed Towers Perrin Letter of Transmittal or Watson Wyatt Letter of Transmittal (as the case may be) has not been delivered to the Exchange Agent, unless and until the holder of such Certificate or Book-Entry Share shall deliver such Towers Perrin Letter of Transmittal or Watson Wyatt Letter of Transmittal.  Subject to the effect of escheat, Tax or other applicable Laws, following delivery of a Towers Perrin Letter of Transmittal or Watson Wyatt Letter of Transmittal (as the case may be) of the holder of any such Certificate or Book-Entry Share, there shall be paid to such holder:

 

(i)                                      With respect to Towers Perrin Book Entry Shares for which a properly completed and duly executed Towers Perrin Letter of Transmittal has been delivered:

 

(A)          promptly, (x) shares of Restricted Holding Company Stock issuable or payable in exchange for such Towers Perrin Book-Entry Shares ( provided , that if shares of Class R Restricted Holding Company Stock or Class S Restricted Holding Company Stock otherwise payable pursuant to this clause (A) have been redeemed for cash and Notes (in the case of Class R Restricted Holding Company Stock) or cash only (in the case of Class S Restricted Holding Company Stock), then such cash (without interest) and Notes (including any interest that had previously accrued pursuant to the terms of such Notes) shall be paid in lieu of such shares of Class R Restricted Holding Company Stock or Class S Restricted Holding Company Stock, as the case may be) and (y) the amount of dividends or other distributions (without interest) with a record date at or after the Effective Time previously paid with respect to such shares of Restricted Holding Company Stock; and

 

(B)           at the appropriate payment date, (x) the amount of dividends or other distributions with a record date at or after the Effective Time but prior to such delivery and a payment date subsequent to such delivery, payable with respect to such shares of Restricted Holding Company Stock, and (y) the amount of interest payments on such Notes with a record date at or after the Effective Time and a payment date subsequent to such delivery.

 

(ii)                                   With respect to Watson Wyatt Book-Entry Shares or Certificates for which a properly completed and duly executed Watson Wyatt Letter of Transmittal has been delivered:

 

(A)          promptly, (x) whole shares of Class A Holding Company Stock issuable or payable in exchange for such Watson Wyatt Book-Entry Shares or Certificates, and (y) the amount of dividends or other distributions (without interest) with a record date at or after the Effective Time previously paid with respect to such whole shares of Class A Holding Company Stock; and

 

(B)           at the appropriate payment date, the amount of dividends or other distributions with a record date at or after the Effective Time but prior to such delivery and a payment date subsequent to such delivery, payable with respect to such whole shares of Class A Holding Company Stock.

 

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(d)                                  Further Rights in Towers Perrin and Watson Wyatt Capital Stock .  The Merger Consideration issued or delivered upon conversion of any Towers Perrin Shares or (as applicable) any Watson Wyatt Shares in accordance with the terms hereof (including any payments pursuant to Section 2.5(c) or Section 2.5(e)) shall be deemed to have been issued or delivered in full satisfaction of all rights pertaining to such shares.  At and following the Effective Time, (i) there shall be no further registration, on the stock transfer books of Surviving Towers Perrin, of transfers of the Towers Perrin Shares that were outstanding immediately prior to the Effective Time and (ii) there shall be no further registration, on the stock transfer books of Surviving Watson Wyatt, of transfers of the Watson Wyatt Shares that were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Certificates are presented to Surviving Watson Wyatt, Holding Company or the Exchange Agent for transfer or transfer is sought for Book-Entry Shares, such Certificates or Book-Entry Shares shall be canceled and exchanged as provided in this Article II, subject to applicable Law in the case of Dissenting Towers Perrin Shares.

 

(e)                                   Fractional Shares .  Notwithstanding anything to the contrary contained in this Agreement, fractional shares of Restricted Holding Company Stock shall be issued upon the delivery of a properly completed and duly executed Towers Perrin Letter of Transmittal with respect to Towers Perrin Book-Entry Shares, and fractional shares of Restricted Class A Holding Company Stock shall be issued with respect to the Towers Perrin RSUs pursuant to Section 2.1(a)(iv) and Section 2.1(a)(v), and a pro rata portion of any dividend or distribution with respect to Restricted Holding Company Stock or Restricted Class A Holding Company Stock, as applicable, shall be payable on or with respect to any fractional share thereof, and such fractional share interests shall entitle the owner thereof to such voting and other rights as are set forth in the Amended and Restated Holding Company Charter with respect to such shares.  No certificates or scrip representing fractional shares of Class A Holding Company Stock will be issued upon the automatic conversion of shares of Class B Restricted Holding Company Stock into shares of Class A Holding Company Stock, the exchange of shares of Class B Restricted Holding Company Stock for shares of Class A Holding Company Stock, or the vesting of shares of Restricted Class A Holding Company Stock, but in lieu thereof each holder of such shares who would otherwise be entitled to a fraction of a share upon such event shall receive from Holding Company (after aggregating all fractional shares of Restricted Holding Company Stock or Class A Holding Company Stock to be received by such holder in such event) an amount of cash (rounded down to the nearest whole cent), without interest, equal to the product of such fraction multiplied by the average per-share trading price of Class A Holding Company Stock for the ten (10) consecutive trading days ending on the second trading day immediately prior to the date of such conversion, exchange or vesting (as reported in the New York City edition of The Wall Street Journal for each such trading day, or, if not reported therein, any other authoritative source to be selected by Holding Company).  Such payment shall occur as soon as reasonably practicable after the determination of the amount of cash, if any, to be paid to each person entitled to receive cash pursuant to the immediately preceding sentence, and upon such payment, all of the fractional shares to which such payment relates shall be cancelled.

 

(f)                                     Termination of Exchange Fund .  Any portion of the Exchange Fund (and any interest or other income earned thereon) that remains undistributed to the holders of Certificates or Book-Entry Shares twelve (12) months after the Effective Time shall be delivered to Holding Company, upon demand, and any holders of Certificates or Book-Entry Shares who

 

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have not theretofore complied with this Article II shall thereafter look only to Holding Company (subject to abandoned property, escheat or other similar laws), as general creditors thereof, for payment of the Merger Consideration with respect to Towers Perrin Shares or (as applicable) Watson Wyatt Shares formerly represented by such Certificate or Book-Entry Share, without interest (except for interest on Notes as set forth in Section 2.5(b)(viii)).  Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.5(a) to pay for Dissenting Towers Perrin Shares for which appraisal rights have been perfected as described in Section 2.7 shall be returned to Holding Company, upon demand.

 

(g)                                  No Liability .  None of the Parties, the Exchange Agent, or the Surviving Corporations shall be liable to any Towers Perrin Shareholder or Watson Wyatt Stockholder for any such shares of Restricted Holding Company Stock (or any Notes or cash issued upon the automatic conversion of any Class R Restricted Holding Company Stock or Class S Restricted Holding Company Stock), Class A Holding Company Stock or Restricted Class A Holding Company Stock, as the case may be (or dividends or distributions with respect thereto) or cash from the Exchange Fund properly delivered to a public official pursuant to any abandoned property, escheat or similar Law.  If any Certificates or Book-Entry Shares shall not have been exchanged prior to two (2) years after the Effective Time (or immediately prior to such earlier date on which the related Merger Consideration would escheat to or become the property of any Governmental Entity (as defined below)), any such Merger Consideration in respect thereof shall, to the extent permitted by applicable Law, become the property of Holding Company, free and clear of all claims or interest of any Person previously entitled thereto.

 

(h)                                  Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Holding Company, the posting by such person of a bond, in such reasonable amount as Holding Company may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed Certificate the Watson Wyatt Merger Consideration payable in respect of the Watson Wyatt Shares formerly represented by such Certificate and any interest payments, dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.5(c) , in each case, without any interest thereon.

 

(i)                                      Investment .  The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Holding Company, on a daily basis, and any interest or other income resulting from such investments shall be paid to Holding Company, upon demand.

 

Section 2.6         Withholding Rights .  Holding Company, Surviving Towers Perrin, the Custodian, the Trustee and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Towers Perrin Shares or otherwise pursuant to this Agreement, such amounts as Holding Company, Surviving Towers Perrin, the Custodian, the Trustee and the Exchange Agent are required to deduct and withhold with respect to such Person pursuant to the transactions contemplated by this Agreement under any applicable provision of U.S. federal, state, local or foreign Law; provided , however , that no withholding with respect to U.S. federal, state or local Taxes shall be permitted of or from any non-cash consideration payable with respect to Towers Perrin Shares unless (i) such amounts are mutually determined to be compensation income pursuant to Section 2.2(c), or (ii) the Watson Wyatt

 

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Board determines in good faith (based on advice of counsel) that as a result of a change in U.S. Law occurring after the date hereof, U.S. federal, state or local taxes are required to be withheld from any such non-cash consideration and (iii) Watson Wyatt delivers a written notice to Towers Perrin promptly upon becoming aware of such change in U.S. Law and in no event later than five (5) Business Days prior to the Closing Date (a “ Withholding Notice ”), signed by an officer of Watson Wyatt including a certification that the Watson Wyatt Board has made such determination, and including a good faith estimate of the aggregate dollar amount of such withholding and, if such withholding obligation applies with respect to less than all holders of Towers Perrin Shares, identifying, if available, the specific holders and the estimated amounts to be withheld with respect thereto.  In the event that Watson Wyatt delivers a Withholding Notice to Towers Perrin, Towers Perrin shall have the right to terminate this Agreement at any time, and upon such termination this Agreement shall forthwith become void and have no further effect and the Mergers may be abandoned with no liability or obligation on the part of Towers Perrin or Pennsylvania Merger Sub for any fees and expenses.  Holding Company, Surviving Watson Wyatt, the Custodian, the Trustee and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Watson Wyatt Shares or otherwise pursuant to this Agreement such amounts as Holding Company, Surviving Watson Wyatt, the Custodian, the Trustee and the Exchange Agent are required to deduct and withhold with respect to the making of such payment under any applicable provision of U.S. federal, state, local or foreign Law.  To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Holding Company, Surviving Towers Perrin, Surviving Watson Wyatt, the Custodian, the Trustee or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

 

Section 2.7         Dissenters’ Rights .

 

(a)           In accordance with Section 262 of the DGCL, no appraisal rights shall be available to holders of Watson Wyatt Shares in connection with the Watson Wyatt Merger.

 

(b)           Notwithstanding anything in this Agreement to the contrary, the Towers Perrin Shares issued and outstanding immediately prior to the Effective Time that are held by any holder who has not voted in favor of the Towers Perrin Merger and who has complied with all of the relevant provisions of Section 1574 of the PBCL (each, a “ Dissenting Towers Perrin Shareholder ”) shall not be converted into the right to receive Towers Perrin Merger Consideration, and such Towers Perrin Shares (the “ Dissenting Towers Perrin Shares ”) shall thereafter represent only the right to receive the payments set forth in this Section 2.7, unless and until such Dissenting Towers Perrin Shareholder shall have failed to perfect, or shall have effectively withdrawn or lost, his or her rights to appraisal under the PBCL (any of the foregoing, a “ Dissent Failure ”).  Towers Perrin shall give Holding Company and Watson Wyatt prompt notice of any demands for appraisal of Towers Perrin Shares, attempted withdrawals of such demands and any other instruments served pursuant to the PBCL relating to rights to appraisal, and Holding Company and Watson Wyatt shall have the right to participate in and direct, together with Towers Perrin, all negotiations and proceedings with respect to such demands for appraisal under the PBCL.  Towers Perrin shall not, without the prior written consent of Watson Wyatt (which consent shall not be unreasonably withheld or delayed), make any payment with respect to, settle or offer to settle, or approve any withdrawal of any such demands.

 

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(c)                                   The shares of Restricted Holding Company Stock that each Dissenting Towers Perrin Shareholder would, in the absence of his or her dissent, have been entitled to receive under Section 2.1(a)  (collectively, the “ Dissenting Share Merger Consideration ”) shall be held by the Exchange Agent pending a final resolution of the underlying dissent, and released as follows:

 

(i)            upon a Dissent Failure with respect to such Dissenting Towers Perrin Shares, all such Dissenting Towers Perrin Shares shall thereupon be converted into and become exchangeable only for the right to receive the Dissenting Share Merger Consideration held by the Exchange Agent with respect thereto; and

 

(ii)           upon payment of the fair value of such Dissenting Towers Perrin Shares, as determined in the underlying dissent proceeding pursuant to Section 1579 of the PBCL, or as agreed between Towers Perrin and such Dissenting Towers Perrin Shareholder with respect to such Dissenting Towers Perrin Shares (subject to Watson Wyatt’s consent, which shall not be unreasonably withheld or delayed), the Dissenting Share Merger Consideration held by the Exchange Agent with respect to such Dissenting Towers Perrin Shares shall be returned to Holding Company.

 

Section 2.8         Transfer Restrictions — Restricted Holding Company Stock.

 

(a)                                  The Amended and Restated Holding Company Charter shall provide that Transfers (as defined below) of shares of Restricted Holding Company Stock shall not be permitted other than in accordance with this Section 2.8.

 

(b)                                 Transfers of Notes delivered hereunder representing the Note Consideration shall not be permitted other than in accordance with Section 2.8(c) and in accordance with the Indenture.

 

(c)                                   Notwithstanding the foregoing Sections 2.8(a) and (b), the Transfer of Notes and shares of Class B Restricted Holding Company Stock delivered hereunder representing the Towers Perrin Merger Consideration shall be permitted to (i) Holding Company, (ii) any spouse, parent, grandparent, child, grandchild (including a child or grandchild by adoption and step-children), sibling, mother-in-law, father-in-law, brother-in-law or sister-in-law of the holder of such shares of Restricted Holding Company Stock or Notes (“ Permitted Family Members ”), or (iii) trusts for the benefit of Permitted Family Members; provided , in the case of any such Transfer, that (A) the transferor shall provide at least five (5) Business Days prior written notice to Holding Company of the Transfer of shares of Restricted Holding Company Stock and prior written notice of the Transfer of Notes in compliance with the Indenture and (B) (1) with respect to the Transfer of Notes, the transferee shall hold such Notes subject to the terms of the Notes, the Indenture and this Section 2.8 and (2) with respect to shares of Class B Restricted Holding Company Stock, the transferee shall hold such shares subject to the terms of the Amended and Restated Holding Company Charter and this Section 2.8.

 

(d)                                  Notwithstanding the foregoing Sections 2.8(a) and (b), with respect to any individual holding Notes and/or shares of Class B Restricted Holding Company Stock delivered hereunder representing the Towers Perrin Merger Consideration, upon such holder’s death, (i) all

 

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shares of Class B-1 Restricted Holding Company Stock, Class B-2 Restricted Holding Company Stock, Class B-3 Restricted Holding Company Stock and Class B-4 Restricted Holding Company Stock then held by him shall automatically be transferred to Holding Company in exchange for an equal number of unrestricted and freely transferable shares of Class A Holding Company Stock and (ii) nothing in this Section 2.8 shall prevent the Transfer of such Notes, Class R Restricted Holding Company Stock or Class S Restricted Holding Company Stock to his or her executors, administrators, testamentary trustees, legatees and beneficiaries.

 

(e)                                   If, prior to the fourth anniversary of the Effective Time, there occurs any merger, consolidation, reorganization, reclassification, recapitalization, stock split, or other similar change in the Class B Restricted Holding Company Stock or Notes, then any and all new, substituted or additional securities issued in exchange therefor will be immediately subject to the provisions of this Section 2.8, except as set forth in paragraph (f).

 

(f)                                     The shares of Class B Restricted Holding Company Stock delivered hereunder representing the Towers Perrin Merger Consideration shall automatically convert into unrestricted and freely transferable shares of Class A Holding Company Stock (A) immediately prior to the consummation of any of the following transactions:  (i) a consolidation or merger of Holding Company with or into any other corporation or entity in which the holders of record of Holding Company’s outstanding shares of capital stock immediately before such consolidation or merger do not, immediately after such consolidation or merger, hold (by virtue of securities issued as consideration in such transaction or otherwise) a majority of the voting power of the surviving corporation of such consolidation or merger; or (ii) any transaction, or series of related transactions in which 50% or more of Holding Company’s voting power is transferred to Persons other than the stockholders of Holding Company and their respective Affiliates immediately prior to such transaction or series of transactions; or (iii) a sale of all or substantially all of the assets of Holding Company, except to one or more Affiliates of Holding Company or (B) immediately after any change in the composition of the Holding Company Board that results in Persons other than Continuing Directors comprising a majority of the Holding Company Board.  As used herein, “ Continuing Director ” shall mean, as of any date of determination, any member of the Holding Company Board who (1) was selected as a member of the Holding Company Board pursuant to Section 1.6(c) of this Agreement or (2) was nominated for election or elected to the Holding Company Board with the approval of a majority of the Continuing Directors who were members of the Holding Company Board at the time of such nomination or election.

 

(g)                                  Towers Perrin Continuing Employees .

 

(i)            Notwithstanding the foregoing Sections 2.8(a) and (b), with respect to any individual who (A) is an employee of Towers Perrin or any of its Subsidiaries immediately prior to the Effective Time, (B) receives Class B Restricted Holding Company Stock as Towers Perrin Merger Consideration and (C) has not made a Valid Class R Election (each such individual, a “ Towers Perrin Continuing Employee ”), in the event that such Towers Perrin Continuing Employee’s employment with Holding Company and its Subsidiaries is terminated without Cause (as defined below), on or before the second anniversary of the Effective Time, then upon such termination, the shares of Restricted Holding Company Stock held by such Towers Perrin Continuing Employee shall automatically be transferred to Holding Company in exchange for shares of capital stock of Holding Company as follows: (1) each share

 

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of Class B-1 Restricted Holding Company Stock then held by such Towers Perrin Continuing Employee shall automatically be transferred to Holding Company in exchange for one unrestricted and freely transferable share of Class A Holding Company Stock; (2) each share of Class B-2 Restricted Holding Company Stock then held by such Towers Perrin Continuing Employee shall automatically be transferred to Holding Company in exchange for one share of Class B-1 Restricted Holding Company Stock; (3) each share of Class B-3 Restricted Holding Company Stock then held by such Towers Perrin Continuing Employee shall automatically be transferred to Holding Company in exchange for one share of Class B-2 Restricted Holding Company Stock; and (4) each share of Class B-4 Restricted Holding Company Stock then held by such Towers Perrin Continuing Employee shall automatically be transferred to Holding Company in exchange for one share of Class B-3 Restricted Holding Company Stock; provided , however that this Section 2.8(g)  shall not apply to the voluntary termination by any Towers Perrin Continuing Employee of his or her employment with, or a termination for Cause of any Towers Perrin Continuing Employee by, Holding Company or any of its Subsidiaries.

 

(ii)                                   Solely for purposes of this Section 2.8(g), the term “ Cause ” shall mean, with respect to any Towers Perrin Continuing Employee, any of the following, provided , that such definition shall not in any manner change or modify the terms of employment of any Towers Perrin Continuing Employee, restrict or impede the ability of Holding Company or any of its Subsidiaries to terminate the employment of any Towers Perrin Continuing Employee, or confer any rights (other than the conversion of shares as set forth herein) upon any Towers Perrin Continuing Employee with respect to the termination of his or her employment with Holding Company or any of its Subsidiaries:

 

(A)          Such Towers Perrin Continuing Employee’s commission of theft, embezzlement, any other act of dishonesty relating to his or her employment with Holding Company or any of its Subsidiaries, or any violation of any law, rule, regulation, order, judgment or decree (collectively, “ Law ”) applicable to Holding Company or any Subsidiary at which he or she was employed at the time of such violation;

 

(B)           Such Towers Perrin Continuing Employee’s conviction of, or pleading guilty or nolo contendere to, a felony or to any lesser crime having as its predicate element fraud, dishonesty, misappropriation or moral turpitude;

 

(C)           Such Towers Perrin Continuing Employee’s commission of an act or acts in the performance of his duties amounting to negligence or willful misconduct;

 

(D)          Such Towers Perrin Continuing Employee’s breach of a written policy of Holding Company or any Subsidiary at which he or she was employed at the time of such breach; or

 

(E)           Such Towers Perrin Continuing Employee’s failure to perform his or her job functions satisfactorily.

 

(h)                                  A restrictive legend shall be placed on the Notes and any certificates representing Restricted Holding Company Stock or Restricted Class A Holding Company Stock delivered hereunder indicating that such Notes and shares of Restricted Holding Company Stock

 

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and Restricted Class A Holding Company Stock are subject to restrictions on Transfer.  In addition, a notation shall be made in the appropriate records of Holding Company indicating that such Notes and shares of Restricted Holding Company Stock and Restricted Class A Holding Company Stock are subject to restrictions on Transfer and appropriate stop transfer restrictions will be issued to Holding Company’s transfer agent and the registrar for the Notes.  No Transfer of shares of Restricted Holding Company Stock, shares of Restricted Class A Holding Company Stock or Notes in violation of this Section 2.8 shall be made or recorded on the books of Holding Company, and any such Transfer shall be void and of no effect.

 

Section 2.9             Further Assurances .  If at any time after the Effective Time, Surviving Towers Perrin or (as applicable) Surviving Watson Wyatt shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in such Surviving Corporation its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of (i) in the case of Surviving Towers Perrin, either of Towers Perrin or Pennsylvania Merger Sub and (ii) in the case of Surviving Watson Wyatt, either of Watson Wyatt or Delaware Merger Sub, or (b) otherwise to carry out the purposes of this Agreement, such Surviving Corporation and its proper officers and directors or their designees shall be authorized to (i) in the case of Surviving Towers Perrin, execute and deliver, in the name and on behalf of either of Towers Perrin or Pennsylvania Merger Sub, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Towers Perrin or Pennsylvania Merger Sub and (ii) in the case of Surviving Watson Wyatt, execute and deliver, in the name and on behalf of either of Watson Wyatt or Delaware Merger Sub, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Watson Wyatt or Delaware Merger Sub, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm such Surviving Corporation’s right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of such entity, and otherwise to carry out the purposes of this Agreement.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TOWERS PERRIN

 

Except as set forth in the corresponding section or subsection of the disclosure letter delivered by Towers Perrin to Watson Wyatt prior to the execution of this Agreement (the “ Towers Perrin Disclosure Letter ”) (it being agreed that disclosure of any information in a particular section or subsection of the Towers Perrin Disclosure Letter shall be deemed disclosure with respect to any other section or subsection of this Agreement to which the relevance of such information is readily apparent on its face), Towers Perrin represents and warrants to Watson Wyatt as follows:

 

Section 3.1         Organization, Standing and Power .

 

(a)           Each of Towers Perrin and its Significant Subsidiaries (as defined below) (i) is an entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business

 

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and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (iii), where the failure to be so qualified or licensed or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Towers Perrin Material Adverse Effect.  For purposes of this Agreement, “ Towers Perrin Material Adverse Effect ” means any event, change, circumstance, occurrence, effect or state of facts that (A) is or would reasonably be expected to be materially adverse to the business, assets, liabilities, condition (financial or otherwise) or results of operations of Towers Perrin and its Subsidiaries (as defined below), taken as a whole or (B) prevents the performance by Towers Perrin of its obligations under this Agreement or the consummation of the transactions contemplated hereby; provided , however , that a Towers Perrin Material Adverse Effect shall not include any event, change, circumstance, occurrence, effect or state of facts reflecting or resulting from (1) any event, change, circumstance, occurrence, effect or state of facts generally affecting the human capital, risk and financial services, reinsurance or insurance consulting services industries, (2) any event, change, circumstance, occurrence, effect or state of facts generally affecting the economy or the financial, securities or credit markets, interest rates or political or regulatory conditions, in the United States or any other jurisdiction in which Towers Perrin and its Subsidiaries have substantial business operations, (3) any outbreak or escalation of hostilities or acts of war or terrorism, (4) changes in Law or GAAP, (5) any change attributable to the negotiation, execution, announcement or pendency of this Agreement or the transactions contemplated hereby, including any litigation resulting therefrom, and (6) any failure by Towers Perrin to meet internal projections, forecasts or revenue or earnings predictions, in and of itself; provided , that, with respect to clauses (1), (2), (3) and (4), the impact of such event, change, circumstances, occurrence, effect or state of facts is not disproportionately adverse to Towers Perrin and its Subsidiaries, taken as a whole, relative to the adverse impact on Watson Wyatt and its Subsidiaries, taken as a whole.

 

(b)           Towers Perrin has previously made available to Watson Wyatt true and complete copies of Towers Perrin’s articles of incorporation (the “ Towers Perrin Charter ”) and bylaws (the “ Towers Perrin Bylaws ”) and the certificate of incorporation and bylaws (or comparable organizational documents) of each of its Significant Subsidiaries, in each case as amended through the date of this Agreement, and each as so delivered is in full force and effect.  Towers Perrin is not in violation of any provision of the Towers Perrin Charter or the Towers Perrin Bylaws.  Towers Perrin has made available to Watson Wyatt true and complete copies of the formal minutes of all meetings of Towers Perrin’s shareholders, the Towers Perrin Board and each committee of the Towers Perrin Board  held since January 1, 2006 (in each case, to the extent such formal minutes exist).

 

Section 3.2             Capital Stock .

 

(a)           The authorized capital stock of Towers Perrin consists of 350,000 shares of Towers Perrin Common Stock and no shares of preferred stock.  As of the close of business on June 25, 2009, (i) 70,319.76 shares of Towers Perrin Common Stock (excluding treasury shares) were issued and outstanding, (ii) 23,795.11 shares of Towers Perrin Common Stock were held by Towers Perrin in its treasury and (iii) no shares of Towers Perrin Common Stock were

 

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reserved for issuance pursuant to outstanding warrants to purchase Towers Perrin Shares (“ Towers Perrin Warrants ”).

 

(b)                                  All the outstanding shares of capital stock of Towers Perrin are, and all shares reserved for issuance as noted in clause (iii) above will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to any preemptive rights.  No shares of capital stock of Towers Perrin are owned by any Subsidiary of Towers Perrin.  All the outstanding shares of capital stock or other voting securities or equity interests of each Significant Subsidiary of Towers Perrin have been duly authorized and validly issued, and are fully paid, nonassessable and not subject to any preemptive rights.  All of the shares of capital stock or other voting securities or equity interests of each such Significant Subsidiary are owned, directly or indirectly, by Towers Perrin, free and clear of all pledges, claims, liens, charges, options, rights of first refusal, encumbrances and security interests of any kind or nature whatsoever (including any limitation on voting, sale, transfer or other disposition or exercise of any other attribute of ownership) (collectively, “ Liens ”).  Neither Towers Perrin nor any of its Subsidiaries has outstanding any bonds, debentures, notes or other obligations having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) with the shareholders of Towers Perrin or such Subsidiary on any matter.  Except as set forth above in Section 3.2(a), there are no outstanding (i) shares of capital stock or other voting securities or equity interests of Towers Perrin, (ii) securities of Towers Perrin or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock of Towers Perrin or other voting securities or equity interests of Towers Perrin or any of its Subsidiaries, (iii) stock appreciation rights, “phantom” stock rights, performance units, interests in or rights to the ownership or earnings of Towers Perrin or any of its Subsidiaries or other equity equivalent or equity-based award or right, (iv) subscriptions, options, warrants, calls, commitments, Contracts or other rights to acquire from Towers Perrin or any of its Subsidiaries, or obligations of Towers Perrin or any of its Subsidiaries to issue, any shares of capital stock of Towers Perrin or any of its Subsidiaries, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or other voting securities or equity interests of Towers Perrin or any of its Subsidiaries or rights or interests described in clause (iii) or (v) obligations of Towers Perrin or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such securities or to issue, grant, deliver or sell, or cause to be issued, granted, delivered or sold, any such securities.

 

(c)                                   Except for the Towers Perrin Voting Agreement and Article VI of the Towers Perrin Bylaws, there are no shareholder agreements, voting trusts or other agreements or understandings to which Towers Perrin or any of its Subsidiaries is a party or on file with Towers Perrin with respect to the holding, voting, registration, redemption, repurchase or disposition of, or that restricts the transfer of, any capital stock or other equity interest of Towers Perrin or any of its Subsidiaries.

 

(d)                                  Section 3.2(d) of the Towers Perrin Disclosure Letter sets forth a true and complete list of all holders, as of the date hereof, of outstanding shares of Towers Perrin Common Stock, and the number of shares held by each holder.  Towers Perrin has made available to Watson Wyatt true and complete copies of the forms of all outstanding Towers Perrin Warrants, and each Towers Perrin Warrant conforms in all material respects to one of

 

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such forms.  Other than the Towers Perrin Warrants, there are no other outstanding rights to purchase or receive shares of capital stock from Towers Perrin.  All Towers Perrin Warrants shall, by their terms, terminate automatically no later than the Effective Time, without any further action by the holders thereof or any other Person.

 

(e)                                   As of the Effective Time, there will not be any outstanding (i) securities of Towers Perrin or any of its Subsidiaries that are convertible into or exchangeable or exercisable for shares of capital stock of Towers Perrin or other voting securities or equity interests of Towers Perrin or any of its Subsidiaries or (ii) any other equity equivalent or equity-based award or right with respect to Towers Perrin or any of its Subsidiaries.

 

Section 3.3         Subsidiaries .

 

(a)                                   Section 3.3 of the Towers Perrin Disclosure Letter sets forth a true and complete list of each Subsidiary of Towers Perrin, including its jurisdiction of incorporation or formation, and a true and complete list of each other corporation, partnership, limited liability company or other entity that is not a Subsidiary but in which Towers Perrin, directly or indirectly, has a material equity interest (collectively, the “ Towers Perrin Minority Interest Businesses ”).  Except for the capital stock of, or other equity or voting interests in, its Subsidiaries and its interests in the Towers Perrin Minority Interest Businesses, Towers Perrin does not own, directly or indirectly, any material equity, membership interest, partnership interest, joint venture interest, or other equity or voting interest in, or any interest convertible into, exercisable or exchangeable for any of the foregoing, nor is it under any current or prospective obligation to form or participate in, provide funds to, or make any material loan, capital contribution, guarantee, or credit enhancement to, or other material investment in, any Person.

 

(b)                                  Except for Towers Perrin’s Significant Subsidiaries, none of Towers Perrin’s Subsidiaries, other than non-operating Subsidiaries, individually:

 

(i)            has assets or liabilities (contingent or direct) in excess of $40,000,000 as of December 31, 2008; or

 

(ii)           had consolidated revenues in excess of $30,000,000 for the year ended December 31, 2008.

 

Section 3.4         Authority .

 

(a)                                   Towers Perrin has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by Towers Perrin and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Towers Perrin and no other corporate proceedings on the part of Towers Perrin are necessary to approve this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Towers Perrin Merger, to the adoption and approval of this Agreement by, and the approval

 

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of the amendment of Article VI of the Towers Perrin Bylaws by, the holders of at least two-thirds of the issued and outstanding shares of Towers Perrin Common Stock issued and outstanding as of the record date for such vote (the “ Towers Perrin Shareholder Approval ”), and the filing of the Towers Perrin Articles of Merger with the Pennsylvania Department of State as required by the PBCL.  This Agreement has been duly executed and delivered by Towers Perrin and, assuming the due authorization, execution and delivery by Watson Wyatt, Holding Company and the Merger Subsidiaries, constitutes a valid and binding obligation of Towers Perrin, enforceable against Towers Perrin in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity (the “ Bankruptcy and Equity Exception ”). Neither Towers Perrin nor any of its shareholders are “interested stockholders” of Watson Wyatt, as defined in Section 203 of the DGCL.

 

(b)           The Towers Perrin Board, at a meeting duly called and held, duly adopted resolutions (i) determining that the terms of this Agreement, the Towers Perrin Merger and the other transactions contemplated hereby are fair to and in the best interests of Towers Perrin, its shareholders and other constituencies, (ii) approving and declaring advisable this Agreement and the transactions contemplated hereby, including the Towers Perrin Merger, (iii) directing that this Agreement be submitted to the shareholders of Towers Perrin for adoption and approval and (iv) resolving to recommend that Towers Perrin’s shareholders vote in favor of the adoption and approval of this Agreement, and the amendment of Article VI of the Towers Perrin Bylaws in connection therewith, which resolutions have not been subsequently rescinded, modified or withdrawn in any way except as may be permitted by Section 5.2.

 

(c)           The Towers Perrin Shareholder Approval is the only vote of the holders of any class or series of Towers Perrin’s capital stock or other securities required in connection with the consummation of the Towers Perrin Merger.  No other vote of the holders of any class or series of Towers Perrin’s capital stock or other securities is required in connection with the consummation of any of the transactions contemplated hereby to be consummated by Towers Perrin.

 

Section 3.5         No Conflict; Consents and Approvals .

 

(a)           The execution, delivery and performance of this Agreement by Towers Perrin, and the consummation by Towers Perrin of the transactions contemplated hereby, do not and will not (i) conflict with or violate the Towers Perrin Charter or (assuming the Towers Perrin Shareholder Approval is obtained) the Towers Perrin Bylaws or the equivalent organizational documents of any of Towers Perrin’s Significant Subsidiaries, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (v) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any Law applicable to Towers Perrin or any of its Significant Subsidiaries or by which any of their respective properties are bound or (iii) result in any breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would become a default), or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any bond, debenture, note, mortgage, indenture, guarantee, license, lease, or other contract, commitment, agreement, instrument, obligation,

 

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arrangement, understanding, undertaking, permit, concession or franchise, whether oral or written (each, including all amendments thereto, a “ Contract ”) to which Towers Perrin or any of its Significant Subsidiaries is a party or by which Towers Perrin or any of its Significant Subsidiaries or any of their respective properties are bound (other than Contracts pursuant to which Towers Perrin and/or any of its Subsidiaries provides services or products to any client), except in the case of clauses (ii) and (iii) above for any such conflict, breach, violation, default, loss, right or other occurrence that would not, individually or in the aggregate, reasonably be expected to have a Towers Perrin Material Adverse Effect.

 

(b)           The execution, delivery and performance of this Agreement by Towers Perrin, and the consummation by Towers Perrin of the transactions contemplated hereby, do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental or regulatory (including stock exchange) authority, agency, court commission, or other governmental body (each, a “ Governmental Entity ”), except for (i) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) and any filings required under the applicable requirements of antitrust, competition or other similar Laws of jurisdictions other than the United States or investment laws relating to foreign ownership (“ Foreign Antitrust Laws ”), (ii) the filing with the Pennsylvania Department of State of the Towers Perrin Articles of Merger as required by the PBCL, (iii) the filing with the SEC of the Registration Statement and the Joint Proxy Statement/Prospectus (as defined below) and such other reports under the Securities Act (as defined below) and the Exchange Act, as may be required in connection with this Agreement and the transactions contemplated hereby and obtaining from the SEC such orders as may be required in connection therewith, (iv) such filings as are required under U.S. state securities or “blue sky” Laws or securities Laws of jurisdictions other than the United States, (v) the filing with the Delaware Secretary of State of the Amended Holding Company Charter and (vi) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Towers Perrin Material Adverse Effect.

 

Section 3.6         Financial Statements .

 

(a)           True and complete copies of the audited consolidated balance sheet and the audited consolidated statements of operations, cash flows, and shareholders’ investment and comprehensive income/loss of Towers Perrin and its Subsidiaries as at for the fiscal years ending December 31, 2004 through 2008, together with all related notes and schedules thereto, accompanied by the reports thereon of Towers Perrin’s independent auditors (collectively referred to as the “ Towers Perrin Financial Statements ”) are attached hereto as Section 3.6(a)(i) of the Towers Perrin Disclosure Letter.  The Towers Perrin Financial Statements (i) are correct and complete in all material respects and have been prepared in accordance with the books and records of Towers Perrin and its Subsidiaries; (ii) have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto); and (iii) fairly present, in all material respects, the consolidated financial position, results of operations and cash flows of Towers Perrin and its Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein.  The unaudited condensed consolidated balance sheet and income statement for Towers Perrin and its Subsidiaries as at and

 

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for the three months ended March 31, 2009 included in the 2009 Q1 Final Financial Summary (and attached hereto as Schedule 3.6(a)(ii) of the Towers Perrin Disclosure Letter) have been prepared in all material respects in accordance with GAAP applied on a consistent basis and present fairly in all material respects the financial position and results of operations of Towers Perrin and its Subsidiaries as at the date thereof and for the period indicated therein.

 

(b)           Except as and to the extent adequately accrued or reserved against in the audited consolidated balance sheet of Towers Perrin and its Subsidiaries as at December 31, 2008 (such balance sheet, together with all related notes and schedules thereto, the “ Towers Perrin Balance Sheet ”), neither Towers Perrin nor any of its Subsidiaries has any liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, whether known or unknown, whether due or to become due and whether or not required by GAAP to be recorded or reflected in a consolidated balance sheet of Towers Perrin and its Subsidiaries or disclosed in the notes thereto, except for liabilities and obligations (i) arising out of or in connection with this Agreement and the transactions contemplated hereby or (ii) that do not have, and would not reasonably be expected to have, individually or in the aggregate, a Towers Perrin Material Adverse Effect.

 

(c)           The books of account and financial records of Towers Perrin and its Subsidiaries are true and correct in all material respects and have been prepared and are maintained in accordance with sound accounting practice.

 

(d)           To the knowledge of Towers Perrin and based solely on the annual audit performed by Towers Perrin’s outside auditors (including the audit performed for the year ended December 31, 2008) there are no significant deficiencies or material weaknesses in the design or operation of the internal controls over financial reporting of Towers Perrin or any of its Subsidiaries which are reasonably likely to adversely affect in any material respect Towers Perrin’s ability to record, process, summarize, and report financial information.  The officers of Towers Perrin have identified for Towers Perrin’s auditors and the Towers Perrin Board any fraud, whether or not material, which is known to the Chief Executive Officer, Chief Financial Officer or the General Counsel of Towers Perrin and involves management or other employees who have a significant role in Towers Perrin’s internal controls over financial reporting.

 

(e)           Towers Perrin has provided to Watson Wyatt a true and complete copy of the letter from the SEC, dated May 14, 1986, granting Towers Perrin’s application for an exemption from the registration provisions of Section 12(g) of the Exchange Act, and such exemption has not, to the knowledge of Towers Perrin, been revoked.

 

Section 3.7         Properties .  Towers Perrin or one of its Subsidiaries has good and valid title to, or in the case of leased property and leased tangible assets, a valid leasehold interest in, all of Towers Perrin’s material real properties and tangible assets, free and clear of all Liens other than (a) Liens for current taxes and assessments not yet past due or the amount or validity of which is being contested in good faith by appropriate proceedings, (b) mechanics’, workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary course of business of Towers Perrin or such Subsidiary consistent with past practice and (c) any such matters of record, Liens and other imperfections of title that do not, individually or in the aggregate, materially impair the continued ownership, use and operation of the assets to which

 

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they relate in the business of Towers Perrin and its Subsidiaries as currently conducted (“ Permitted Liens ”).  This Section 3.7 does not relate to Towers Perrin Intellectual Property, which is the subject of Section 3.18.

 

Section 3.8         Certain Information .  None of the information supplied or to be supplied by Towers Perrin for inclusion or incorporation by reference in, and which is included or incorporated by reference in, (a) the Registration Statement on Form S-4 (the “ Registration Statement ”) that will be prepared and filed with the SEC by Holding Company in connection with the registration under the Securities Act of the offering and issuance of the Notes and the shares of Restricted Holding Company Stock and Class A Holding Company Stock issuable in the Mergers, or any amendment or supplement thereto will, at the time the Registration Statement or any amendment or supplement theret