EXHIBIT 99.D
DRAGON
Settlement Agreement
Settlement Agreement, dated as of March 20, 2003 (the "Agreement"), by
and among President and Fellows of Harvard College ("Harvard University"),
Harvard Management Company, Inc. ("Harvard Management"), Xxxxxx Xxxxxxx
("Xxxxxxx" and, collectively with Harvard University and Harvard Management, the
"Harvard Parties"), and Xxxxxxxxx Dragon Fund, Inc. ("Dragon").
R E C I T A L S:
- - - - - - - -
WHEREAS, Dragon is a closed-end management investment company
registered under the 1940 Act (as defined below);
WHEREAS, Harvard University is the Beneficial Owner (as defined below)
of approximately 14.0% of the outstanding shares of common stock of Dragon;
WHEREAS, Harvard Management is wholly controlled by Harvard University
and is the investment advisor to Harvard University's endowment, and Xxxxxxx is
a vice-president of Harvard Management and manages that portion of Harvard
University's endowment that is invested in Dragon; and
WHEREAS, the parties wish to set forth their understanding and
agreement with respect to the settlement of the Current Litigation (as defined
below) and related matters.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Certain Defined Terms. For purposes of this Agreement:
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
"Affiliate" and "Associate" shall have the respective meanings set
forth in Rule 12b-2 promulgated by the SEC (as defined below) under the 1934
Act.
"Beneficial Owner" and "Beneficially Own" shall have the meanings as
set forth in Rule 13d-3 promulgated by the SEC (as defined below) under the 1934
Act.
"Current Litigation" shall mean the matter pending in the United States
District Court for the District of Maryland, Northern Division (Case No. JFM
03-CV-275), captioned "Xxxxxxxxx China World Fund, Inc., Xxxxxxxxx Dragon Fund,
Inc., and Xxxxxxxxx Asset Management Ltd., plaintiffs, v. President and Fellows
of Harvard College, Harvard Management Company, Inc., and Xxxxxx Xxxxxxx,
defendants",
including the claims, counterclaims and affirmative defenses that have been
asserted therein.
"Other Settlement Agreements" shall mean, collectively, (i) that
certain settlement agreement dated the date hereof between the Harvard Parties
and Xxxxxxxxx China World Fund, Inc. and (ii) that certain settlement agreement
dated the date hereof between the Harvard Parties and TAML, in each case as the
same may be amended and in effect from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
"TAML" shall mean Xxxxxxxxx Asset Management Ltd.
Section 2. Authority and Enforceability.
(a) Each of the Harvard Parties represents and warrants as follows:
(i) such party has all requisite power and authority to execute
and deliver the Agreement and to perform its obligations hereunder;
(ii) the execution, delivery and performance of the Agreement by
such party has been duly authorized by all necessary action on the part of such
party;
(iii) the Agreement has been duly and validly executed and
delivered by such party and (assuming the due authorization, execution and
delivery thereof by the other parties hereto) constitutes the legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms, subject to general principles of equity, statutory limitations
and judicially-imposed public policy constraints; and
(iv) the execution and delivery by such party of the Agreement and
the performance by such party of its obligations hereunder will not conflict
with, constitute a default under or violate (A) any of the terms, conditions or
provisions of the organizational documents of such party (if such party is not a
natural person), (B) any of the terms, conditions or provisions of any material
document, agreement or other instrument to which such party is a party or by
which it is bound, or (C) any judgment, writ, injunction, decree, order or
ruling of any court or governmental authority binding on such party.
(b) Dragon represents and warrants as follows:
(i) it has all requisite power and authority to execute and
deliver the Agreement and to perform its obligations hereunder;
(ii) the execution, delivery and performance of the Agreement by
Dragon has been duly authorized by all necessary action on the part of Dragon;
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(iii) the Agreement has been duly and validly executed and
delivered by Dragon and (assuming the due authorization, execution and delivery
thereof by the other parties hereto) constitutes the legal, valid and binding
obligation of Dragon, enforceable against Dragon in accordance with its terms,
subject to general principles of equity, statutory limitations and
judicially-imposed public policy constraints; and
(iv) the execution and delivery by Dragon of the Agreement and the
performance by Dragon of its obligations hereunder will not conflict with,
constitute a default under or violate (A) any of the terms, conditions or
provisions of the organizational documents of Dragon, (B) any of the terms,
conditions or provisions of any material document, agreement or other instrument
to which Dragon is a party or by which it is bound, or (C) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on Dragon.
Section 3. Dragon.
(a) (i) Each of the Harvard Parties hereby withdraws any and all
demands, requests or notices that it has made to Dragon, including, but not
limited to, those set forth in the letter from Harvard University (and signed on
its behalf by Harvard Management), dated January 28, 2003, and all shareholder
proposals for the 2003 Annual Meeting of Shareholders of Dragon (the "2003
Dragon Meeting") and promptly shall take any and all actions reasonably
requested by Dragon or its representatives, or which the Harvard Parties
reasonably consider otherwise to be necessary, to effectuate such withdrawal.
(ii) Dragon agrees that no matter other than the re-election of
directors shall be presented to shareholders by the Board of Directors of Dragon
at the 2003 Dragon Meeting, except other matters required to be presented to
shareholders under applicable law. Dragon hereby represents and warrants that,
as of the date hereof, it has no reason to believe that any other matter will be
presented to shareholders at the 2003 Dragon Meeting or that applicable law will
require the presentation of any such matter to shareholders at the 2003 Dragon
Meeting. Each of the Harvard Parties hereby represents and warrants to Dragon
that, as of the date hereof, such Harvard Party intends to vote all of the
shares of common stock of Dragon Beneficially Owned by it in favor of the
re-election of the directors nominated by the Board of Directors of Dragon at
the 2003 Dragon Meeting and that it is not aware, and has no reasonable
suspicion, of any fact, matter or thing that would require, cause or influence
it to vote in any contrary manner, including abstaining or refraining from
voting such shares. In the event that each of the Harvard Parties does not vote
all of the shares of common stock of Dragon Beneficially Owned by it in favor of
the re-election of directors nominated by the Board of Directors of Dragon at
the 2003 Dragon Meeting (and without limiting any right or remedy to which
Dragon may be entitled at law or in equity arising out of any breach of the
representation and warranty contained in the immediately preceding sentence),
Dragon, but not the Harvard Parties, shall automatically (and without further
action by any party hereto) be released from any and all further obligations
under this Agreement (including, for the avoidance of doubt, those contained in
Section 7 hereof).
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(b) Dragon shall commence, on or prior to April 30, 2003, a tender
offer (the "Initial Tender Offer") to purchase fifteen percent (15%) of Dragon's
outstanding shares of common stock, for cash, at a price equal to ninety-two and
one-half percent (92.5%) of the net asset value per share as of the date such
offer expires.
(c) (i) On or before March 26, 2003, Dragon shall file an application
with the SEC for an exemptive order (the "Exemptive Order") under the 1940 Act
which will permit Dragon to conduct the tender offers contemplated by this
Section 3(c). The application shall request an Exemptive Order granting
exemptions to the extent necessary from, without limitation, Sections 5(a)(2),
17(a)(1), 17(a)(2) and 23(c)(2) of the 1940 Act and Rule 13e-4 promulgated
pursuant to Section 13(e) of the 1934 Act. Specifically, such application will
request exemptive relief to permit Dragon to conduct occasional, non-periodic,
in-kind tender offers (including satisfaction of tenders by distribution of
portfolio securities to persons who are "affiliated" with Dragon, as defined by
Section 2(a)(3)(A) of the 0000 Xxx) in each case for up to twenty percent (20%)
of the total number of Dragon's then outstanding shares of common stock at a
price equal to ninety-five percent (95%) of the net asset value per share as of
the date such offer expires. Such application will further state that any pro
rata in-kind distribution in satisfaction of a tender will not include (A)
securities that, if distributed, would be required to be registered under the
Securities Act of 1933, as amended, (B) securities issued by entities in
countries that restrict or prohibit the holdings of securities by non-residents
other than through qualified investment vehicles, or whose distribution as
contemplated herein is otherwise contrary to applicable local laws, rules or
regulations, and (C) certain portfolio assets, such as derivative instruments or
repurchase agreements, that involve the assumption of contractual obligations,
require special trading facilities, or can only be traded with the counterparty
to the transaction. Dragon shall promptly (and, in any event, within 45 days)
respond to any comments received from the SEC with a view to causing the
Exemptive Order to be granted as soon as practicable; provided, however, that
under no circumstances shall Dragon be required by this Agreement to amend such
application to request exemptive relief from Rule 23c-3 under the 1940 Act, if
the effect of the request or grant of such relief is to determine that Dragon
is, or to cause Dragon to be, an interval fund. Dragon shall make reasonable
efforts designed to cause the Exemptive Order to be granted as soon as possible
(regardless of whether necessary shareholder approvals have been obtained), and,
if the Exemptive Order is not granted on or before March 26, 2004, shall make
reasonable efforts designed to cause the Exemptive Order to be granted as soon
as possible thereafter (even after such time as Dragon has conducted, or
determined to conduct, one or more tender offers pursuant to Section 3(d)
hereof); provided, however, that Dragon shall not be required to attempt to
cause the Exemptive Order to be granted at any time at which the Exemptive Order
Condition (as defined in Section 3(e) hereof) would have been satisfied if the
Exemptive Order had been issued at such time. Dragon shall agree to any terms
and/or conditions reasonably requested by the SEC in respect of the Exemptive
Order, but shall not be required to agree to any terms and/or conditions that
would cause the Exemptive Order to be issued on terms or conditions not
substantially similar to the relief sought as described in this Section 3(c)(i).
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(ii) If the SEC issues the Exemptive Order on or before March 26,
2004, then, subject to the terms and conditions of the Exemptive Order, Dragon
shall, as soon as reasonably practicable after the issuance of the Exemptive
Order (but not later than three (3) months after the date of such issuance),
commence a tender offer (the "First Exemptive Order Tender Offer") for twenty
percent (20%) of Dragon's outstanding shares of common stock at a price equal to
ninety-five percent (95%) of the net asset value per share as of the date such
offer expires, with payment for any shares purchased to be made in kind through
a pro rata distribution of Dragon's portfolio securities with readily available
market quotations held by Dragon at such date.
(iii) Notwithstanding Section 3(c)(ii) hereof, Dragon shall not be
required to conduct the First Exemptive Order Tender Offer if the total number
of shares of Dragon's outstanding common stock tendered into the Initial Tender
Offer is less than or equal to twenty percent (20%) of the total number of
shares of Dragon stock outstanding at the time that the Initial Tender Offer was
commenced.
(iv) Dragon shall, within one (1) year after the completion of the
First Exemptive Order Tender Offer, commence another tender offer (the "Second
Exemptive Order Tender Offer") on terms which are substantially identical in all
material respects to those on which the First Exemptive Order Tender Offer was
conducted; provided, however, that Dragon shall not be required to commence such
Second Exemptive Order Tender Offer if:
(A) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds twenty percent (20%),
but is less than or equal to twenty-six percent (26%), of the total number
of shares of Dragon common stock outstanding at the time that the Initial
Tender Offer was commenced, and (II) the total number of shares of Dragon's
outstanding common stock tendered into the First Exemptive Order Tender
Offer is less than or equal to forty-five percent (45%) of the total number
of shares of Dragon common stock outstanding at the time that the First
Exemptive Order Tender Offer was commenced;
(B) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds twenty-six percent
(26%), but is less than or equal to thirty percent (30%), of the total
number of shares of Dragon common stock outstanding at the time that the
Initial Tender Offer was commenced, and (II) the total number of shares of
Dragon's outstanding common stock tendered into the First Exemptive Order
Tender Offer is less than or equal to forty percent (40%) of the total
number of shares of Dragon common stock outstanding at the time that the
First Exemptive Order Tender Offer was commenced;
(C) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds thirty percent (30%),
but is less than or equal to thirty-five percent (35%), of the total number
of shares of
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Dragon common stock outstanding at the time that the Initial Tender Offer
was commenced, and (II) the total number of shares of Dragon's outstanding
common stock tendered into the First Exemptive Order Tender Offer is less
than or equal to thirty-five percent (35%) of the total number of shares of
Dragon common stock outstanding at the time that the First Exemptive Order
Tender Offer was commenced;
(D) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds thirty-five percent
(35%), but is less than or equal to sixty percent (60%), of the total
number of shares of Dragon common stock outstanding at the time that the
Initial Tender Offer was commenced, and (II) the total number of shares of
Dragon's outstanding common stock tendered into the First Exemptive Order
Tender Offer is less than or equal to thirty percent (30%) of the total
number of shares of Dragon common stock outstanding at the time that the
First Exemptive Order Tender Offer was commenced; or
(E) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds sixty percent (60%),
and (II) the total number of shares of Dragon's outstanding common stock
tendered into the First Exemptive Order Tender Offer is less than or equal
to twenty-five percent (25%) of the total number of shares of Dragon common
stock outstanding at the time that the First Exemptive Order Tender Offer
was commenced.
(v) Dragon shall, within one (1) year after the completion of the
Second Exemptive Order Tender Offer, commence another tender offer (the "Third
Exemptive Order Tender Offer") on terms which are substantially identical in all
material respects to those on which the First Exemptive Order Tender Offer and
the Second Exemptive Tender Offer were conducted; provided, however, that Dragon
shall not be required to commence such Third Exemptive Order Tender Offer if:
(A) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds twenty percent (20%),
but is less than or equal to twenty-six percent (26%), of the total number
of shares of Dragon common stock outstanding at the time that the Initial
Tender Offer was commenced, (II) the total number of shares of Dragon's
outstanding common stock tendered into the First Exemptive Order Tender
Offer is less than or equal to fifty percent (50%) of the total number of
shares of Dragon common stock outstanding at the time that the First
Exemptive Order Tender Offer was commenced, and (III) the total number of
shares of Dragon's outstanding common stock tendered into the Second
Exemptive Order Tender Offer is less than or equal to seventy percent (70%)
of the total number of shares of Dragon common stock outstanding at the
time that the Second Exemptive Order Tender Offer was commenced;
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(B) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds twenty-six percent
(26%), but is less than or equal to thirty percent (30%), of the total
number of shares of Dragon common stock outstanding at the time that the
Initial Tender Offer was commenced, (II) the total number of shares of
Dragon's outstanding common stock tendered into the First Exemptive Order
Tender Offer is less than or equal to fifty percent (50%) of the total
number of shares of Dragon common stock outstanding at the time that the
First Exemptive Order Tender Offer was commenced, and (III) the total
number of shares of Dragon's outstanding common stock tendered into the
Second Exemptive Order Tender Offer is less than or equal to sixty percent
(60%) of the total number of shares of Dragon common stock outstanding at
the time that the Second Exemptive Order Tender Offer was commenced;
(C) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds thirty percent (30%),
but is less than or equal to thirty-five percent (35%), of the total number
of shares of Dragon common stock outstanding at the time that the Initial
Tender Offer was commenced, (II) the total number of shares of Dragon's
outstanding common stock tendered into the First Exemptive Order Tender
Offer is less than or equal to fifty percent (50%) of the total number of
shares of Dragon common stock outstanding at the time that the First
Exemptive Order Tender Offer was commenced, and (III) the total number of
shares of Dragon's outstanding common stock tendered into the Second
Exemptive Order Tender Offer is less than or equal to fifty percent (50%)
of the total number of shares of Dragon common stock outstanding at the
time that the Second Exemptive Order Tender Offer was commenced;
(D) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds thirty-five percent
(35%), but is less than or equal to sixty percent (60%), of the total
number of shares of Dragon common stock outstanding at the time that the
Initial Tender Offer was commenced, (II) the total number of shares of
Dragon's outstanding common stock tendered into the First Exemptive Order
Tender Offer is less than or equal to fifty percent (50%) of the total
number of shares of Dragon common stock outstanding at the time that the
First Exemptive Order Tender Offer was commenced, and (III) the total
number of shares of Dragon's outstanding common stock tendered into the
Second Exemptive Order Tender Offer is less than or equal to thirty-five
percent (35%) of the total number of shares of Dragon common stock
outstanding at the time that the Second Exemptive Order Tender Offer was
commenced; or
(E) (I) the total number of shares of Dragon's outstanding common
stock tendered into the Initial Tender Offer exceeds sixty percent (60%) of
the total number of shares of Dragon common stock outstanding at the time
that the Initial Tender Offer was commenced, (II) the total number of
shares of Dragon's
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outstanding common stock tendered into the First Exemptive Order Tender
Offer is less than or equal to fifty percent (50%) of the total number of
shares of Dragon common stock outstanding at the time that the First
Exemptive Order Tender Offer was commenced, and (III) the total number of
shares of Dragon's outstanding common stock tendered into the Second
Exemptive Order Tender Offer is less than or equal to thirty percent (30%)
of the total number of shares of Dragon common stock outstanding at the
time that the Second Exemptive Order Tender Offer was commenced.
(d) (i) If the Exemptive Order is not issued by the SEC on or before
March 26, 2004 (or is issued on such terms, and/or subject to such conditions,
that are not substantially similar to the relief sought as described in Section
3(c)(i) hereof), then Dragon and each of the Harvard Parties agree to meet and
consult with one another during the period commencing on March 27, 2004 and
expiring on May 26, 2004 (the "Consultation Period") in an effort to explore
mutually agreeable means by which the Harvard Parties may dispose of any
remaining shares of Dragon common stock held by them. Without limitation, during
the Consultation Period, Dragon and the Harvard Parties shall discuss (but shall
be under no obligation to agree upon) the possibility of the Harvard Parties
selling any remaining shares of Dragon common stock held by them into the open
market and/or Dragon identifying a buyer for such shares.
(ii) If (A) Dragon and each of the Harvard Parties have not
reached an agreement with respect to the matters referred to in Section 3(d)(i)
hereof by May 26, 2004, and (B) the Exemptive Order has not been issued by that
date (or has been issued on such terms, and/or subject to such conditions, that
are not substantially similar to the relief sought as described in Section
3(c)(i) hereof), then, on or before June 16, 2004, Dragon may, at its sole
discretion, determine to conduct another tender offer (the "First Discretionary
Tender Offer") to be commenced by September 30, 2004, to purchase fifteen
percent (15%) of Dragon's outstanding shares of common stock, for cash, at a
price equal to ninety-two and one-half percent (92.5%) of Dragon's net asset
value per share as of the date such offer expires; provided, however, that if
(1) Dragon does not publicly announce its determination on or before June 16,
2004 to conduct the First Discretionary Tender Offer and (2) either (a) at that
time the Harvard Parties Beneficially Own in excess of two and one-half percent
(2.5%) of the total number of the then outstanding shares of Dragon common stock
or (b) the total number of shares of Dragon's outstanding common stock tendered
into the Initial Tender Offer was in excess of twenty percent (20%) of the total
number of shares of Dragon stock outstanding at the time that the Initial Tender
Offer was commenced, then (X) notwithstanding Section 4 hereof, the Harvard
Parties shall be permitted to acquire shares of Dragon common stock to the
extent that their collective Beneficial Ownership of shares of Dragon common
stock remains less than ten percent (10%) of the total number of outstanding
shares of Dragon common stock, (Y) the obligations of and limitations on the
Harvard Parties arising under Section 5 hereof shall be terminated and (Z) the
obligations and limitations on each of the parties hereto arising under Section
6 hereof with respect to Dragon shall be terminated.
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(iii) If Dragon does conduct the First Discretionary Tender Offer,
then on or before June 16, 2005, Dragon may, at its sole discretion, determine
to conduct another tender offer (such tender offer, and any tender offer
conducted pursuant to Section 3(d)(iv) hereof, a "Subsequent Discretionary
Tender Offer") to be commenced by September 30, 2005 (or, in the case of any
Subsequent Tender Offer conducted pursuant to Section 3(d)(iv) hereof, to be
commenced by September 30 of the then current year) on terms which are
substantially identical in all material respects to those on which the First
Discretionary Tender Offer was conducted; provided, however, that if (1) Dragon
does not publicly announce its determination on or before June 16, 2005 (or, in
the case of any Subsequent Tender Offer conducted pursuant to Section 3(d)(iv)
hereof, on or before June 16 of the then current year) to conduct a Subsequent
Discretionary Tender Offer and (2) at that time the Harvard Parties Beneficially
Own in excess of two and one-half percent (2.5%) of the total number of the then
outstanding shares of Dragon common stock, then (X) notwithstanding Section 4
hereof, the Harvard Parties shall be permitted to acquire shares of Dragon
common stock to the extent that their collective Beneficial Ownership of shares
of Dragon common stock remains less than ten percent (10%) of the total number
of outstanding shares of Dragon common stock, (Y) the obligations of and
limitations on the Harvard Parties arising under Section 5 hereof shall be
terminated and (Z) the obligations and limitations on each of the parties hereto
arising under Section 6 hereof with respect to Dragon shall be terminated.
(iv) With respect to any calendar year after 2005, if Dragon has
conducted a Subsequent Discretionary Tender Offer in the previous calendar year,
then on or before June 16 of the then current year, Dragon may, at its sole
discretion, determine to conduct another Subsequent Discretionary Tender Offer;
provided, however, that if (1) Dragon does not publicly announce its
determination on or before June 16 of the then current year to conduct such a
Subsequent Discretionary Tender Offer and (2) at that time the Harvard Parties
Beneficially Own in excess of two and one-half percent (2.5%) of the total
number of the then outstanding shares of Dragon common stock, then (X)
notwithstanding Section 4 hereof, the Harvard Parties shall be permitted to
acquire shares of Dragon common stock to the extent that their collective
Beneficial Ownership of shares of Dragon common stock remains less than ten
percent (10%) of the total number of outstanding shares of Dragon common stock,
(Y) the obligations of and limitations on the Harvard Parties arising under
Section 5 hereof shall be terminated and (Z) the obligations and limitations on
each of the parties hereto arising under Section 6 hereof with respect to Dragon
shall be terminated.
(e) Notwithstanding the foregoing, if (i) the SEC issues the Exemptive
Order at any time after March 26, 2004 (and the Exemptive Order is substantially
similar to the specific relief sought as described in Section 3(c)(i) hereof)
and (ii) the Exemptive Order Condition (as defined below) is not satisfied at
the time that the Exemptive Order is issued, then: (A) Dragon's obligations, if
any, under Section 3(c) hereof shall control, (B) subject to the terms and
conditions of the Exemptive Order, Dragon shall, as soon as reasonably
practicable after the issuance of the Exemptive Order (but not later than three
(3) months after the date of such issuance), commence the First Exemptive Order
Tender
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Offer, (C) Section 3(d) hereof shall be of no further force or effect, and (D)
the obligations of and limitations on the Harvard Parties arising under Sections
4 and 5 hereof (and the obligations of each of the parties hereto arising under
Section 6 hereof with respect to Dragon) (to the extent that they have been
terminated pursuant to Section 3(d) hereof) shall be automatically restored. The
"Exemptive Order Condition" will be satisfied if a hypothetical person who is a
shareholder of Dragon as of the date hereof who has tendered all of its shares
of Dragon common stock into each tender offer conducted pursuant to this Section
3 prior to the date on which the Exemptive Order is issued (but has not
otherwise disposed of any of its shares of Dragon common stock, or acquired any
shares of Dragon common stock, after the date hereof), would have a percentage
ownership interest in Dragon at the time that the Exemptive Order is issued that
is less than or equal to 35% (thirty five percent) of such person's percentage
ownership interest in Dragon as of the date hereof (i.e. a hypothetical
shareholder with a percentage ownership interest in Dragon equal to x% of
Dragon's outstanding shares as of the date hereof would own less than or equal
to (0.35*x)% of Dragon's outstanding shares as of the date that the Exemptive
Order is issued).
(f) For the purposes of determining whether the Exemptive Order has
been issued on terms, and/or subject to conditions, that are substantially
similar to the relief sought as described in Section 3(c)(i) hereof, the parties
acknowledge and agree that: (X) (i) terms and conditions substantially similar
to those set out in Xxxxxxx Spain and Portugal Fund, Inc. (Notice of
Application, ICA Rel. No. IC-23425, 812-11110, Sept 2, 1998) or in Signature
Financial Group (no-action letter, pub. avail. Dec. 28, 1999, as such terms and
conditions may reasonably be adapted to a closed-end investment company) and
(ii) a condition to the SEC granting the Exemptive Order that Dragon obtain
shareholder approval of any element of the Exemptive Order (provided that such
element would not cause the Exemptive Order to be issued on terms or conditions
that are not substantially similar to the relief sought as described in Section
3(c)(i) hereof) shall each be considered to be substantially similar to the
terms and conditions described in Section 3(c)(i) hereof, but that (Y) a
condition to the SEC granting the Exemptive Order having the effect of
precluding Dragon from conducting a tender offer on the terms described in
Section 3(c)(ii) shall not be considered to be substantially similar to the
conditions described in Section 3(c)(i) hereof. Dragon agrees that if the SEC
requires that Dragon obtain shareholder approval as a condition to Dragon's
reliance on the Exemptive Order, then Dragon will propose shareholder approval
of the matter in question at the next annual or other meeting of shareholders of
Dragon held after the publication of the notice of application specifying a
shareholder vote as a condition to the Exemptive Order; provided that the Board
of Directors of Dragon will call a special meeting to consider the matter if the
matter would otherwise not be considered by shareholders for a period of more
than four (4) months after the publication of the notice of application for the
Exemptive Order is first published (in which case such matter will be the only
item to be considered at such special meeting, except other matters required to
be presented to shareholders under applicable law). Dragon will take all
reasonable steps that are not violative of its fiduciary duties to obtain
shareholder approval of the matter in question that an investment company could
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reasonably be expected to take in order to vigorously support the passage of
proposals recommended by the investment company's board of directors to its
shareholders. These steps shall include, without limitation, (i) adjournment of
the applicable meeting of shareholders for as long, and/or on as many occasions,
as may be necessary, consistent with applicable law, if the requisite vote has
not yet been obtained, up to the latest date possible without the necessity of
setting a new record date for the meeting; and (ii) engaging a major proxy
solicitation firm at Dragon's expense for the purpose of soliciting proxies for
approval of the Exemptive Order tender offers by the shareholders at the
applicable meeting of shareholders of Dragon, and, if sufficient votes in favor
thereof are not promptly obtained, instructing such proxy solicitation firm to
diligently attempt to obtain sufficient votes for approval of the Exemptive
Order tender offers at such meeting of shareholders of Dragon including, without
limitation, under appropriate circumstances, by contacting shareholders by
telephone and requesting that they consider granting their proxies by telephone.
If the matter is not approved by shareholders at the first meeting at which it
is proposed, the Board of Directors of Dragon will propose the matter again (i)
at the next annual meeting of shareholders of Dragon thereafter if the meeting
at which the matter was first proposed was a special meeting, or (ii) at a
special meeting called for the purpose not later than six (6) months after the
meeting at which the matter was first proposed if such meeting was an annual
meeting (in which case such matter will be the only item to be considered at
such special meeting, except other matters required to be presented to
shareholders under applicable law). Dragon will exercise the same level of
diligence in respect of seeking and promoting the passage of the matter at any
such meeting as it was required to exercise at the meeting at which the matter
was first proposed.
(g) If any of the Harvard Parties does not tender all shares of common
stock of Dragon Beneficially Owned by it into any tender offer commenced by
Dragon contemplated by this Section 3, then (i) Dragon, but not the Harvard
Parties, shall automatically (and without further action by any party hereto) be
released from any and all further obligations under this Section 3 and (ii) the
obligations and restrictions imposed on the Harvard Parties in Section 5 hereof
shall survive and continue in full force and effect in perpetuity.
(h) For the avoidance of doubt, all references in this Section 3 to
shares of Dragon common stock which are tendered into a tender offer shall mean
all such shares that have been validly tendered on the date that the applicable
tender offer expires, including any such shares that are not ultimately
purchased by Dragon pursuant to the applicable offer.
(i) Notwithstanding any other provision of this Agreement, Dragon shall
immediately be relieved of any and all obligations that it may have arising
under this Section 3 from and after the effective date of any conversion of
Dragon from closed-end to open-end status; provided, however, that if Dragon
converts to an open-end fund, it shall not impose any redemption fee or other
fee, charge, or expense in respect of any redemption of shares of Dragon
following any such conversion to open-end status other than a redemption fee of
not more than 2% imposed during a period commencing on the
11
date when Dragon first becomes an open-end investment company and ending not
more than six (6) months later.
(j) Notwithstanding any other provision of this Agreement, Dragon shall
not be required to commence, or make any determination to conduct, any tender
offer at any time pursuant to this Section 3 if, at such time, based on
information available to Dragon (including filings made with the SEC pursuant to
Section 13 of the 1934 Act), there is no "person" (as that term is defined in
the 0000 Xxx) who Beneficially Owns, holds or has investment discretion over
five percent (5%) or more of the total number of shares of Dragon common stock
outstanding at that time; provided, however, that this Section 3(j) shall not
derogate from the operation of the proviso contained in each of Section
3(d)(iii) and (iv) hereof.
(k) References in this Section 3 to shares of Dragon common stock shall
be taken to include any security into which such common stock is exchanged for,
converted into or replaced with in connection with any reorganization whatsoever
of Dragon, including any change of organizational form.
Section 4. No Share Acquisitions; Prohibited Transfers.
(a) Unless otherwise specifically agreed in writing between one or more
of the Harvard Parties, on the one hand, and Dragon, on the other hand, each of
the Harvard Parties agrees that from the date hereof and perpetually thereafter
it will not (and will not advise, assist or encourage others to), directly or
indirectly, acting individually or in concert with others, in any manner,
acquire, offer or propose to acquire, solicit an offer to sell or agree to
acquire, by purchase or otherwise, any direct or indirect beneficial interest in
any securities of Dragon (including, without limitation, any direct or indirect
interest in any rights, warrants or options to acquire, or in any securities
convertible into or exchangeable for, any securities of Dragon) or any
derivative instrument that provides the economic benefits or other indicia of
ownership of any such securities; provided, however, that it will not be
considered a violation of this Section 4(a) if (i) the Harvard Party acquires an
indirect interest in any securities of Dragon (not as a result of an investment
decision by the Harvard Party to acquire an interest in such securities) but
does not as a result become a Beneficial Owner of such securities (and does not
otherwise have investment discretion over such securities), or (ii) securities
of Dragon are acquired by an investment adviser or other person acting in a
similar capacity for a Harvard Party and (A) the Harvard Party did not know of
the planned acquisition in advance of its occurrence, (B) the Harvard Party
becomes a Beneficial Owner of the securities as a result of such acquisition,
and (C) the Harvard Party instructs the investment adviser or other person to
promptly dispose of such securities when portfolio management personnel of such
Harvard Party have actual knowledge that the acquisition has occurred; provided,
further, that each of the Harvard Parties shall apprise any person or entity
currently serving as an investment adviser, or in any similar capacity, to it,
and each person becoming an investment adviser, or beginning to act in any
similar capacity, to it during the period of four years from the date hereof, of
the obligations and restrictions of such Harvard Party arising under this
Section 4(a).
12
(b) Unless otherwise specifically agreed in writing between one or more
of the Harvard Parties, on the one hand, and Dragon, on the other hand, each of
the Harvard Parties agrees that from the date hereof and perpetually thereafter
it will not sell, transfer any interest in, or otherwise dispose of (a
"Transfer") any securities of Dragon to any transferee if, following such
Transfer, the transferee of such securities would, to the actual knowledge of
such Harvard Party (which, in the case of any Transfer where the identity of the
transferee is known to the Harvard Party, shall require such Harvard Party to
make inquiry of such transferee with respect thereto), Beneficially Own more
than five percent (5%) of the outstanding voting equity securities of Dragon;
provided, however, that the restrictions on Transfer contained in this Section
4(b) shall not apply to Transfers of securities of Dragon if the Harvard Parties
collectively Beneficially Own less than two and one-half percent (2.5%) of the
outstanding voting equity securities of Dragon at the time of such Transfer.
Section 5. Standstill. Subject to Section 3 hereof, each of the Harvard
Parties agrees that for a period of four years from and after the date hereof,
it will not (and will not advise, assist or encourage others to), directly or
indirectly, acting individually or in concert with others, in any manner:
(i) make, or in any way participate in, any shareholder proposal
or nomination with respect to Dragon, or seek to advise or influence in any
manner whatsoever any person or entity with respect to any shareholder proposal
or nomination with respect to Dragon, in each case, including, but not limited
to, any proposal relating to the election of directors, the adoption or
termination of any investment advisory contract, any change in a fundamental
policy, classification, or sub-classification, any change in structure, any
change in organizational documents, or any matter that requires a stockholder
vote, including, but not limited to, pursuant to Section 13 of the 1940 Act,
including any precatory or advisory proposal with respect to any of the
foregoing;
(ii) make, or in any way participate in, any "solicitation" of
"proxies" to vote (as such terms are used in the proxy rules of the SEC
promulgated pursuant to Section 14 of the 0000 Xxx) any securities of Dragon, or
advise or seek to influence in any manner whatsoever any person or entity with
respect to the voting of any securities of Dragon;
(iii) form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the 0000 Xxx) with respect to any voting
securities of Dragon;
(iv) otherwise act to seek to propose to Dragon or to its
management, board of directors, officers or stockholders, any merger, business
combination, restructuring, recapitalization, charter amendment or any other
change to any other organizational document, change in policy, change in
classification or subclassification, change in investment manager, or other
transaction or similar matter, or otherwise seek to control, change or influence
the management, board of directors (or
13
similar body) or the policies of Dragon, including any precatory or advisory
proposal with respect to any of the foregoing;
(v) hold any securities of Dragon with the purpose or effect of
changing or influencing control of Dragon, or in connection with or as a
participant in any transaction having that purpose or effect, including any
transaction subject to Rule 13d-3(b) under the 1934 Act;
(vi) make any request or proposal to amend, waive or terminate any
provision of this Section 5;
(vii) provide any advice or enter into any discussions,
negotiations, arrangements or understandings with any third party with respect
to any of the foregoing; or
(viii) announce an intention to take, or enter into any
arrangement or understanding with others to take, any of the actions restricted
or prohibited under clauses (i) through (vii) of this Section 5.
Section 6. Press Release; Public Statement. The Harvard Parties and Dragon
agree that immediately following the execution of this Agreement, Harvard
University, Harvard Management, and Dragon shall issue a joint press release
regarding the terms of this Agreement in the form attached as Schedule I hereto.
Except for such press release, no party hereto (or their agents, representatives
or designees) shall make any public statement (including any statement to the
media) regarding this Agreement or any of the Other Settlement Agreements or the
settlements contemplated hereby or thereby; provided, however, that the
foregoing shall not preclude (a) communications or disclosures required of a
party hereto by law, regulatory bodies with appropriate jurisdiction, or stock
exchange rules or regulations, or (b) the delivery by any party hereto (or by
TAML, on Dragon's behalf) of a copy of such press release, this Agreement or any
of the Other Settlement Agreements to any person. The parties hereto acknowledge
and agree that any communication or disclosure made pursuant to clause (a) of
the immediately preceding sentence shall not disparage any other party hereto or
this Agreement or any of the Other Settlement Agreements.
Section 7. Termination of Litigation; Covenant not to Xxx.
(a) Each of the Harvard Parties and Dragon hereby agrees to dismiss the
Current Litigation (including, for the avoidance of doubt, the claims asserted
pursuant to Section 16(b) of the 1934 Act) (the "Dismissed Claims") without
prejudice. Within three business days after the execution of this Agreement, the
parties hereto shall cause a Stipulation of Dismissal without Prejudice (or such
other appropriate document), substantially in the form attached as Schedule II
hereto, to be executed and filed with the court in the Current Litigation.
14
(b) Subject to paragraph (d) of this Section 7, each of the Harvard
Parties hereby covenants that, for a period of four years after the date hereof,
it will not initiate or cause to be initiated (or encourage or aid in the
initiation of) against Dragon or its past, present or future directors or
officers, directly or indirectly, any suit, action, or proceeding of any kind,
or participate in any such action, individually, derivatively, or as a
representative or member of a class, under any contract (express or implied),
law, statute, or regulation, federal, state or local, pertaining in any manner
whatsoever to the Dismissed Claims, or to any other claims that could have been
asserted in the Current Litigation. This Covenant Not to Xxx shall be a complete
defense to any suit, action or proceeding brought in violation of this Covenant
Not to Xxx. Nothing herein limits the right of the Harvard Parties to bring an
action to enforce this Agreement or based on an alleged material breach of this
Agreement.
(c) Subject to paragraph (d) of this Section 7, Dragon hereby covenants
that it will not initiate or cause to be initiated (or encourage or aid in the
initiation of) against any of the Harvard Parties or their respective past,
present or future directors or officers, directly or indirectly, any suit,
action, or proceeding of any kind, under any contract (express or implied), law,
statute, or regulation, federal, state or local, pertaining in any manner
whatsoever to (i) the Dismissed Claims, or any other claims that could have been
asserted in the Current Litigation, for a period of four (4) years after the
date hereof, and (ii) the claims asserted pursuant to Section 16(b) of the 1934
Act included in the Dismissed Claims, beginning on the date which is four (4)
years after the date hereof and in perpetuity thereafter. This Covenant Not to
Xxx shall be a complete defense to any suit, action or proceeding brought in
violation of this Covenant Not to Xxx. Nothing herein limits the right of Dragon
to bring an action to enforce this Agreement or based on an alleged material
breach of this Agreement.
(d) In the event of a material breach of this Agreement, the Covenants
Not to Xxx set forth in paragraphs (b) and (c) of this Section 7, as applicable,
shall not be binding on the aggrieved party.
(e) The parties hereto agree that the period of time between the
voluntary dismissal of the Current Litigation (as contemplated by Section 7(a)
hereof) and the commencement of a new action by an aggrieved party asserting
similar claims (as contemplated by Section 7(d) hereof) will not be counted
towards any defense based on statute of limitations, laches, or similar
time-based defenses. Notwithstanding the foregoing, there shall be no tolling
pursuant to this Section 7(e) with respect to the claims asserted in the Current
Litigation pursuant to Section 16(b) of the 1934 Act; the Harvard Parties,
however, waive any right to assert any defense based on statute of limitations,
laches or similar time-based defenses in any action brought by Dragon in the
next four (4) years pursuant to Section 7(d) hereof.
(f) During the settlement discussions that arose following the
institution of the Current Litigation, the parties acknowledged that Dragon's
claims against Harvard University under Section 16(b) of the 1934 Act raised
novel legal questions and that therefore there were issues that would have to be
litigated including, but not limited to,
15
defenses arising out of the interpretive letter issued by the staff of the SEC
to Harvard University (Harvard University, pub. avail. July 8, 1992). Taking
into account, among other things, the uncertain outcome of the Section 16(b)
claims, the benefits to be realized by Dragon pursuant to this Agreement, and
the roughly estimated range of recoverable short-swing profits if the claims
could be established, the board of directors of Dragon, including a majority of
the independent directors, concluded that it was in the best interest of Dragon
to resolve, as set forth herein, the claims in the Current Litigation arising
under Section 16(b) of the 1934 Act, subject to performance by the Harvard
Parties of their obligations under this Agreement.
Section 8. Remedies; Consent to Jurisdiction.
(a) Each party hereto hereby acknowledges and agrees that irreparable
harm would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that aggrieved parties shall be entitled to
equitable relief including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and specific
enforcement of the terms and provisions hereof, in addition to any other remedy
to which they may be entitled at law or in equity, including monetary damages.
Any requirements for the securing or posting of any bond with respect to any
such remedy are hereby waived.
(b) The parties hereto agree that any actions, suits or proceedings
arising out of or relating to this Agreement, the transactions contemplated
hereby (including the dismissal of the Current Litigation), or a new action by
an aggrieved party (as contemplated by Section 7(d) hereof), shall be brought
solely and exclusively in the United States District Court for the District of
Maryland, Northern Division (or if such federal court lacks subject matter
jurisdiction, in the courts of the State of Maryland located in Baltimore,
Maryland). The parties agree not to commence any such action, suit or proceeding
except in such courts and further agree that service of any process, summons,
notice or document by U.S. registered mail to the respective addresses set forth
in Section 11 hereof shall be effective service of process for any such action,
suit or proceeding brought against any party in any such court. The parties also
irrevocably and unconditionally waive any objection to the laying of venue of
any such action, suit or proceeding in the courts of the State of Maryland or
the United States of America located in the State of Maryland, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit or proceeding brought in such court
pursuant hereto has been brought in an inconvenient forum.
(c) Notwithstanding any other provision of this Agreement, none of the
Harvard Parties may xxx for specific performance by Dragon of any tender offer
obligation, or xxx for (or take any other action based on) an alleged breach of
this Agreement by Dragon based on Dragon's failure to conduct a tender offer,
if, at the time that such Harvard Party's cause of action with respect thereto
arises, the Harvard Parties collectively Beneficially Own five percent (5%) or
less of the total number of the then outstanding shares of Dragon common stock.
16
Section 9. Fees, Costs and Expenses. Except as expressly provided herein,
each party hereto shall pay its own fees, costs and expenses incident to this
Agreement and the transactions contemplated herein. The Harvard Parties shall be
responsible for their own legal fees and expenses with respect to the Current
Litigation and their proxy contest relating to the 2003 Dragon Meeting. Dragon
agrees that TAML shall be responsible for the legal fees and expenses incurred
by Dragon and its directors with respect to this Agreement and the Current
Litigation. Dragon agrees that TAML shall also be responsible for the legal fees
and expenses incurred by Dragon through the date hereof with respect to its
proxy contest relating to the 2003 Dragon Meeting.
Section 10. Entire Agreement; Amendments; Successors; Third Party
Beneficiaries.
(a) This Agreement and the Other Settlement Agreements contain the
entire understanding of the parties with respect to the subject matter hereof
and thereof. This Agreement and the Other Settlement Agreements supersede all
previous negotiations, representations and discussions by the parties hereto and
thereto concerning the subject matter hereof and thereof, and integrate the
whole of all of their agreements and understanding concerning same. No prior
oral representations or undertakings concerning the subject matter hereof or
thereof shall operate to amend, supersede, or replace any of the terms or
conditions set forth in this Agreement or the Other Settlement Agreements, nor
shall they be relied upon.
(b) This Agreement may be amended only by an agreement in writing
executed by the party or parties against which it is sought to be enforced.
(c) No party hereto may assign any of its respective rights or delegate
any of its respective obligations under this Agreement without the prior written
consent of the other parties hereto; provided, however, that Dragon may freely
assign its rights and delegate its obligations to the transferee of all or
substantially all of its assets, so long as such transferee agrees to be bound
by all of the obligations of Dragon hereunder (at which point such transferee
shall be deemed to have all of the rights and obligations hereunder of Dragon).
This Agreement shall be binding upon, and shall inure to the benefit of, the
parties' successors and permitted assigns.
(d) Any material breach by any party other than the Harvard Parties
under any of the Other Settlement Agreements shall be deemed a material breach
by Dragon under this Agreement.
Section 11. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or mailed by certified or registered mail, postage prepaid,
return receipt requested, or delivered to a nationally recognized next business
day courier for delivery on the next business day, or by facsimile, with the
required copy also sent as aforesaid and in any instance addressed as follows:
17
if to any of the Harvard Parties:
c/o Harvard Management Company, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Telecopy: (000) 000 0000
Attention: Xxxxxx X. Xxxxxxx/Xxxxxxx X. Xxxxxxx
if to Dragon:
Broward Financial Centre
000 X. Xxxxxxx Xxxx., Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Secretary
with a copy to:
Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxx
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx/Xxxxxx X. Xxxxxx
or such other address as shall be furnished in writing by any of the parties,
and any such notice or communication shall be deemed to have been given as of
the date so delivered personally, so mailed, so delivered to the courier
service, or so transmitted by telecopy (except that a notice of change of
address shall not be deemed to have been given until received by the addressee).
18
Section 12. Law Governing. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Maryland,
without regard to any conflict of laws provisions thereof.
Section 13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. For purposes of this
Agreement, a signature page signed and transmitted by electronic mail in pdf
form, facsimile machine or telecopier is to be treated as an original signature
and document. The signature of any party thereon, for purposes hereof, is to be
considered as an original signature, and the document transmitted is to be
considered to have the same binding effect as an original signature on an
original document.
Section 14. No Presumption Against Draftsperson. Each of the undersigned
hereby acknowledges that the undersigned fully negotiated the terms of this
Agreement, that each such party had an equal opportunity to influence the
drafting of the language contained in this Agreement and that there shall be no
presumption against any such party on the ground that such party was responsible
for preparing this Agreement or any part hereof. All prior working drafts of
this Agreement, and any notes and communications prepared in connection
therewith, shall be disregarded for purposes of interpreting the meaning of any
provision contained herein.
Section 15. Enforceability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that the parties would have executed
the remaining terms, provisions, covenants and restrictions without including
any of such which may be hereafter declared invalid, void or unenforceable. In
addition, the parties agree to use their best efforts to agree upon and
substitute a valid and enforceable term, provision, covenant or restriction for
any such term, provision, covenant or restriction that is held invalid, void or
unenforceable by a court of competent jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused the same to be executed by its duly authorized
representative, as of the date first above written.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By: /s/ Xxxx X. Xxxxx
-----------------------------------------
Name: Xxxx X. Xxxxx
Title: Deputy Treasurer
HARVARD MANAGEMENT COMPANY, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------------
Name: Xxxx X. Xxxxx
Title: Authorized Signatory
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Authorized Signatory
/s/ Xxxxxx Xxxxxxx
--------------------------------------------
Xxxxxx Xxxxxxx
20
XXXXXXXXX DRAGON FUND, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
SCHEDULE I
FORM OF PRESS RELEASE
FORM OF PRESS RELEASE
FOR IMMEDIATE RELEASE
Media Contacts: Xxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxxx Investments, Tel: (000) 000-0000
Xxxxxx Xxxxxxx, Harvard Management, Tel: (000) 000-0000
-----------------------------------------------------------------------------------
HARVARD UNIVERSITY, XXXXXXXXX CHINA WORLD FUND, INC.,
XXXXXXXXX DRAGON FUND, INC. AND
XXXXXXXXX ASSET MANAGEMENT LTD.
SETTLE LAWSUIT
HARVARD UNIVERSITY WITHDRAWS
ITS XXXXXXXXX CHINA WORLD SHAREHOLDER PROPOSALS
AND SUPPORTS XXXXXXXXX CHINA WORLD'S
OPEN-ENDING PROPOSAL WITH AN IN-KIND DISTRIBUTION FEATURE
HARVARD UNIVERSITY WITHDRAWS
ITS XXXXXXXXX DRAGON SHAREHOLDER PROPOSALS;
XXXXXXXXX DRAGON TO MAKE CASH TENDER OFFER FOR
15% OF ITS OUTSTANDING SHARES AT 92.5% OF NET ASSET VALUE PER SHARE
XXXXXXXXX DRAGON
TO SEEK AUTHORITY TO MAKE IN-KIND TENDER OFFERS
Fort Lauderdale, Florida and Boston, Massachusetts, March [__], 2003 - Xxxxxxxxx
China World Fund, Inc. (NYSE: TCH), a closed-end management investment company
("China World"), Xxxxxxxxx Dragon Fund, Inc. (NYSE: TDF), a closed-end
management investment company ("Dragon"), Xxxxxxxxx Asset Management Ltd., the
investment advisor to each of the funds ("Templeton"), and President and Fellows
of Harvard College ("Harvard University") announced today that they had reached
agreements that will result in, among other things, the dismissal of their
litigation claims against each other and the withdrawal of Harvard University's
shareholder proposals for the funds' upcoming annual meetings. Also, Harvard
will now support the Board's proposal to open-end China World with an in-kind
distribution feature, and Dragon will make a tender offer to be commenced on or
prior to April 30, 2003, and may, pursuant to its settlement with Harvard, make
additional tender offers in the future.
DISMISSAL OF LAWSUIT
The three settlement agreements announced today (between China World and
Harvard, Dragon and Harvard, and Templeton and Harvard, respectively) will
result in the dismissal without prejudice of the lawsuit originally brought in
January 2003 by China World, Dragon and Templeton in the United States District
Court for the District of Maryland, Northern Division,
against Harvard University, Harvard Management Company, Inc., which is an
investment advisor to Harvard University, and Xxxxxx Xxxxxxx, an officer of
Harvard Management (collectively, "Harvard"), as well as the dismissal without
prejudice of the counterclaims brought by Harvard against the funds, their
respective directors and Templeton. The parties have also entered into covenants
not to xxx each other with respect to the claims that were made or could have
been made in the litigation absent a breach of the settlement agreements.
END OF PROXY CONTEST
As part of the settlements, Harvard has agreed to withdraw all of its
shareholder proposals for the respective upcoming 2003 Annual Meetings of
Shareholders of China World and Dragon. Harvard also will not solicit proxies
from shareholders for the China World 2003 Annual Meeting and will not vote any
proxies previously received.
CONVERSION OF CHINA WORLD TO AN OPEN-END FUND
Harvard announced that it intends to support the Board of Directors' proposal at
the 2003 Annual Meeting calling for the open-ending of China World, with an
in-kind distribution feature described below.
If shareholders approve the open-ending proposal, the in-kind distribution
feature will provide the fund the option of meeting large redemption requests
through a pro rata, in-kind distribution of its portfolio investments by making
an election pursuant to Rule 18f-1 under the Investment Company Act of 1940 and
adopting related procedures. This will allow the fund to minimize the potential
adverse impact of large redemption requests on the fund's net asset value per
share. Small redemption requests (generally in amounts less than $250,000 in any
ninety-day period) will be paid in cash by the fund.
Harvard also announced that, if and when China World open-ends, Harvard will
redeem all of its shares of the fund within 30 days after conversion, and that
under the settlement it will take its redemption proceeds through a pro rata,
in-kind distribution of portfolio investments. As a result, the fund will avoid
having to sell significant portfolio assets to raise cash to meet Harvard's
redemption request - thus limiting the potential adverse effect on the fund's
net asset value per share.
China World announced that if conversion to an open-end fund is approved by
shareholders, the open-end fund would assess a redemption fee, not in excess of
two percent, on all redemptions or exchanges of shares made within six months
following the effective date of the conversion except on any redemptions of
shares purchased after the conversion.
Representatives of Harvard and China World also have agreed to discuss, prior to
conversion, steps China World might take to minimize any adverse effect on the
net asset value per share of the fund resulting from a need to sell portfolio
securities of the fund to raise cash to satisfy redemption requests.
2
DRAGON TENDER OFFERS
Dragon announced that as part of its settlement with Harvard, it has agreed to
take the following actions:
o April 2003 cash tender offer - The Board of Directors of Dragon approved
the making of a cash tender offer to be commenced on or prior to April 30,
2003, for 15% of the fund's outstanding shares at 92.5% of net asset value
per share as of the date the offer expires. Previously, the Board of
Directors had approved an April 2003 cash tender offer for not less than
10% of the fund's outstanding shares at not less than 90% of net asset
value per share.
o In-kind tender offers - Dragon also will apply to the Securities and
Exchange Commission ("SEC") for an exemption allowing the fund to make
occasional, non-periodic tender offers, each for up to 20% of Dragon's
outstanding shares at a price equal to 95% of net asset value per share as
of the date the offer expires, to be paid entirely in kind through a pro
rata distribution of marketable portfolio securities. The fund will not
apply, however, for interval fund status. Subject to certain conditions,
the settlement requires the fund to commence such an in-kind tender offer
for 20% of the fund's shares within three months after obtaining the SEC
exemption. Dragon may also be required under the settlement to conduct, on
substantially identical terms, up to two additional in-kind tender offers
under certain circumstances. There is no assurance that the SEC will grant
the exemption, nor is it possible to predict the date when an exemption
might be granted.
o Additional cash tender offers - If the SEC does not grant the exemption for
in-kind tender offers by May 26, 2004, the settlement provides that Dragon
may, but is not obligated to, conduct an additional cash tender offer, and
possibly later follow-on cash tender offers, each for 15% of the fund's
outstanding shares at a price of 92.5% of net asset value per share as of
the date the offer expires. Under certain circumstances, if Dragon does not
conduct these tender offers, Harvard will be relieved of its obligation to
refrain from making shareholder proposals and taking other actions with
respect to the fund, as described below.
Harvard announced that it intends to tender all of the shares it then owns into
each tender offer described above that is commenced.
The Dragon settlement agreement provides that Dragon will not be obligated to
commence in-kind tender offers or additional cash tender offers under certain
circumstances or conditions. These relate to, among other things, the number of
shares tendered by shareholders into preceding tender offers as well as the
beneficial ownership percentages of the fund's shareholders.
STANDSTILL
As part of the three settlements, Harvard agreed not to submit any proposals for
consideration by shareholders of China World or Dragon , or any other closed-end
fund or similar investment vehicle managed by Templeton or its affiliates, or
for consideration by shareholders of Franklin Resources, Inc. (NYSE: BEN), the
parent company of Templeton, nor to encourage others to do
3
so, for a period of four years. Harvard also has agreed not at any time to
acquire additional shares of China World, Dragon or any other closed-end fund or
similar investment vehicle managed by Templeton or its affiliates.
* * * * *
The summaries of the settlements reached by Harvard and China World, Harvard and
Dragon, and Harvard and Templeton included in this press release are qualified
in their entirety by reference to the full text of the three separate settlement
agreements. Copies of the settlement agreements will be filed by China World and
Dragon with the U.S. Securities and Exchange Commission and will be available
for free at the SEC's website, xxx.xxx.xxx. The parties have agreed not to make
public statements (including to the media) regarding the settlements.
* * * * *
In connection with their 2003 annual meetings of shareholders, China World and
Dragon intend to file relevant materials with the U.S. Securities and Exchange
Commission ("SEC"), including their respective proxy statements. Because those
documents contain important information, shareholders of China World and Dragon
are urged to read them when they become available. When filed with the SEC, they
will be available for free at the SEC's website, xxx.xxx.xxx. Shareholders also
can obtain copies of these documents, when available, for free by calling China
World or Dragon at 0-000-000-0000.
China World, its directors and executive officers and certain other persons may
be deemed to be participants in China World's solicitation of proxies from its
shareholders in connection with its 2003 annual meeting of shareholders. Dragon,
its directors and executive officers and certain other persons may be deemed to
be participants in Dragon's solicitation of proxies from its shareholders in
connection with its 2003 annual meeting of shareholders. Information about their
respective directors is set forth in the proxy statement for China World's 2002
annual meeting of shareholders and for Dragon's 2002 annual meeting of
shareholders, respectively. Participants in China World's and Dragon's
respective solicitations may also be deemed to include the following executive
officers or other persons whose interests in China World or Dragon may not be
described in their respective proxy statements for China World's and Dragon's
2002 annual meetings: Xxxx Xxxxxx (President and C.E.O. - Investment
Management); Xxxxx X. Xxxxxxx (Senior Vice President and C.E.O. - Finance and
Administration); Xxxxxxx X. Xxxxxxx (Vice President); Xxxxxx X. Xxxxxxx, Xx.
(Vice President); Xxxxxx X. Xxxxx (Vice President); Xxxxxx X. Xxxxxxxx (Vice
President); Xxxxxxx X. Xxxxxxx (Vice President); Xxxxxxx X. Xxxxxxx (President,
Franklin Resources, Inc.); Xxxx X. Xxx (Vice President); Xxxxxx X. Xxxxxxx (Vice
President and Asst. Secretary); Xxxxx X. Xxxx (Vice President and Asst.
Secretary); Xxxxxxx X. Xxxxx (Vice President and Secretary); Xxxxxxx X. Xxxxxx
(Vice President - AML Compliance); Xxxxx X. Xxxxxxxxx (Treasurer and Chief
Financial Officer); and Xxxxx Xxxxxx Xxxxx (Director of Corporate Communications
- Franklin Resources, Inc.).
As of the date of this communication, none of the foregoing participants
individually, or as a group, beneficially owns in excess of 1% of China World's
common stock or 1% of Dragon's
4
common stock. Except as disclosed above, to the knowledge of China World and
Dragon, none of their respective directors or executive officers has any
interest, direct or indirect, by security holdings or otherwise, in China World
or Dragon.
Shareholders of China World or Dragon may obtain additional information
regarding the interests of the participants by reading the proxy statements of
China World and Dragon when they become available.
------------
Dragon has not commenced any tender offer referred to in this communication.
Upon commencement of any such offer, Dragon will file with the SEC a Schedule TO
and related exhibits, including the offer to purchase, letter of transmittal and
other related documents. Dragon shareholders are strongly encouraged to read
these documents when they become available because they will contain important
information about any offer. When filed with the SEC, the Schedule TO and
related exhibits will be available without charge at the SEC's website at
xxx.xxx.xxx. Any offer to purchase and related letter of transmittal, when
available, will be delivered without charge to all of Dragon's shareholders.
Dragon shareholders may also obtain copies of these documents without charge by
calling Dragon at 0-000-000-0000.
This communication is not an offer to purchase or the solicitation of an offer
to sell shares of Dragon. Any tender offer will be made only by an offer to
purchase and the related letter of transmittal. Neither the offer to purchase
shares will be made to, nor will tenders pursuant to the offer to purchase be
accepted from or on behalf of, holders of shares in any jurisdiction in which
making or accepting the offer to purchase would violate that jurisdiction's
laws.
5
SCHEDULE III
FORM OF STIPULATION OF DISMISSAL WITHOUT PREJUDICE
Form of Stipulation of Dismissal Without Prejudice
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
(Northern Division)
-------------------------------------
)
XXXXXXXXX CHINA WORLD FUND, INC., )
TEMPLETON DRAGON FUND, INC. and )
XXXXXXXXX ASSET MANAGEMENT LTD., )
)
Plaintiffs, )
)
) Civil Action No.JFM 03-CV-275
v. )
)
PRESIDENT AND FELLOWS OF HARVARD )
COLLEGE, HARVARD MANAGEMENT )
COMPANY, INC. and XXXXXX XXXXXXX, )
)
)
Defendants.)
----------------------------------- )
STIPULATION OF DISMISSAL
It is hereby stipulated and agreed, pursuant to Fed. R. Civ. P. 41(a)(1),
by and between Plaintiffs Xxxxxxxxx China World Fund, Inc., Templeton Dragon
Fund, Inc. and Xxxxxxxxx Asset Management Ltd., and Defendants President and
Fellows of Harvard College, Harvard Management Company, Inc. and Xxxxxx Xxxxxxx,
through their undersigned counsel, that this action, including all claims,
counterclaims and third-party claims, is dismissed, without prejudice and with
each party to bear its own costs.
Dated: ________________
---------------------------------------
Xxxxxxxx Xxxxxxxxx,
Federal Bar No. 00263
Xxxxxxx X. Xxxxxxx,
Federal Bar No. 04588
Xxxxx X. XxXxxxxxxx
Bar No. 015005
XXXXXXXXX XXXXXX XXXX
& XXXXXXXXX, LLP 00
Xxxxx Xxxxxxx Xxxxxx, Xxxxx
0000 Xxxxxxxxx, XX
00000-0000 (000) 000-0000
(000) 000-0000 (fax)
-and-
----------------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Xxxxxxxx Xxxxxxxx
WEIL, GOTSHAL & XXXXXX LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
(000) 000-0000 (fax)
Attorneys for Plaintiffs Xxxxxxxxx
China World Fund, Inc. and Xxxxxxxxx
Dragon Fund, Inc.
-----------------------------------
Xxxxxx X. Xxxxxxx Xx.
Xxxxxxx Xxx Xx. 0000
XXXXXXXXX XXXXXXX LLP
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Plaintiff Xxxxxxxxx
Asset Management Ltd.
2
----------------------------------
Xxxxx Xxxxxx, Jr.
XXXXX XXXXXXX LLP
0000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (fax)
-and-
Xxxxxx X. Xxxxxxx
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxx
ROPES & XXXX
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (fax)
Attorneys for Defendants President And
Fellows Of Harvard College, Harvard
Management Company, Inc. and Xxxxxx
Xxxxxxx
3
