EXHIBIT 2
AGREEMENT AND PLAN
OF
REORGANIZATION
DATED AS OF OCTOBER 2, 2000,
AMONG
PINNACLE GLOBAL GROUP, INC.,
XXXXXXX XXXXXX XXXXXX INC.
AND
CUMMER/XXXXXX HOLDINGS, INC.
CUMMER/XXXXXX SECURITIES, INC.
CUMMER/XXXXXX CAPITAL PARTNERS, INC.
AND
CUMMER/XXXXXX CAPITAL ADVISORS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") dated as of
October 2, 2000, among Pinnacle Global Group, Inc., a Texas corporation ("PGG"),
and Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation and a wholly owned
subsidiary of PGG ("SMH"), both of which are together referred to in this
Agreement as the "PGG Parties," and Cummer/Xxxxxx Holdings, Inc., a Texas
corporation ("CMH"), Cummer/Xxxxxx Securities, Inc. a Texas corporation and a
wholly owned subsidiary of CMH ("CMS"), Cummer/Xxxxxx Capital Partners, Inc., a
Texas corporation and a wholly owned subsidiary of CMH ("CMCP"), and
Cummer/Xxxxxx Capital Advisors, Inc., a Texas corporation and a wholly owned
subsidiary of CMCP ("CMCA"), all of which are collectively referred to in this
Agreement as the "C/M Parties";
W I T N E S S E T H
WHEREAS, the parties to this Agreement (the "Parties") wish to effect a
business combination in which PGG will acquire all of the issued and outstanding
capital stock of CMCA from CMCP, and SMH will acquire all of the issued and
outstanding capital stock of CMS from CMH, in each case solely in exchange for
shares of voting stock of PGG, in two related transactions, each of which is
intended to separately qualify as a "reorganization" under Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, the Parties agree that:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this Agreement:
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"Acquired Subsidiaries" means CMS and CMCA, together.
"Acquired Subsidiary Contracts" had the meaning specified in Section
3.16.
"Acquired Subsidiary Interim Financial Statements" has the meaning
specified in Section 3.8.
"Acquired Subsidiary SEC Filings" has the meaning specified in Section
3.7.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control
with another Person with the terms "control" and "controlled" meaning for
purposes of this definition, the power to direct the management and
policies of a Person, directly or indirectly, whether through the
ownership of voting securities or partnership or other ownership interests,
or by contract or otherwise; provided, however, that the Xxxxxxx Agency,
and each of Cummer and Xxxxxx, shall be deemed to be "Affiliates" of the
C/M Parties whether or not they meet the foregoing affiliation criteria.
"Agency Services Agreement" means the Office and Services Agreement
dated as of January 1, 1997, between CMH and the Xxxxxxx Agency, under
which CMH provides services to the Xxxxxxx Agency related to its insurance
agency activities.
"Ancillary Agreements" means the Equipment Lease Agreement, the New
Employment Agreements, the Registration Rights Agreement, the Releases, and
the various assignments, subleases and other instruments and documents
described in Section 2.4, collectively.
"Assets under Management" means assets of others under management by
an Acquired Subsidiary, but excluding any such assets managed for CMH, ISP,
or any institution, account or customer introduced to an Acquired
Subsidiary after the Closing by PGG or any Subsidiary of PGG.
"Assumed Contracts" means those Acquired Subsidiary Contracts
specifically identified in Section 3.16 of the C/M Disclosure Schedule as
contracts that are to be assigned to a C/M Selling Shareholder as part of
the Pre-Closing Distribution and that are to cease to be an obligation of
an Acquired Subsidiary after the Closing.
"Broker-Dealer Regulatory Requirements" means all Laws and all rules
and regulations of all self-regulatory organizations which regulate the
registration, licensing, reporting, control or activities of a "broker" or
"dealer", as those two terms are defined in Section 3(a) of the Exchange
Act, including the Exchange Act, the Securities Investor Protection Act,
the rules of the NASD, state securities Laws, and the rules and regulations
of state securities commissions.
"Broker-Dealer Subsidiary" means each Subsidiary of PGG that is or is
required to be registered as a broker-dealer under any Broker-Dealer
Regulatory Requirement.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in Houston, Texas are authorized or obligated to close.
"Charter Documents" means, in the case of any Party, its articles or
certificate of incorporation and bylaws, and each certificate or other
document setting forth the designation, amount and relative rights,
limitations and preferences of any class or series of its capital stock.
"Closing" has the meaning specified in Section 2.3.
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"Closing Date" means (i) the fifth Business Day immediately following
the earliest date upon or by which all conditions to the respective
obligations of the Parties set forth in Articles VII, VIII and IX shall
have been satisfied or waived, or (ii) such other date as PGG and CMH may
agree.
"Closing Date Working Capital" means the positive or negative amount
obtained by subtracting (i) those Retained Liabilities that would be
reflected as current liabilities on a combined balance sheet of the
Acquired Subsidiaries prepared as of the Closing Date in accordance with
GAAP on a consistent basis with the Latest Acquired Subsidiary Balance
Sheets, from (ii) those Retained Assets that would be reflected on such a
balance sheet as current assets.
"Closing Date Working Capital Deficit" means the amount, if any, by
which Closing Date Working Capital, as determined in accordance with
Section 10.5, shall have been less than $70,000.
"C/M Consolidated Tax Group" means the affiliated group of
corporations within the meaning of Section 1504(c) of the Code, of which
CMH is the common parent corporation, that files a consolidated Tax Return
for U.S. federal income Tax purposes, and that includes the Acquired
Subsidiaries.
"C/M Disclosure Schedule" means the Disclosure Schedule signed for
identification purposes only by the President and Chief Executive Officer
or Chief Financial Officer of CMH, that the CMH Parties have delivered to,
and which has been reviewed and accepted by, the PGG Parties on or before
the date of this Agreement, and that contains information relevant to the
representations and warranties made by the C/M Parties in Article III.
"C/M Group" means, at any date, CMH and all of its Affiliates at that
date (but excluding, after the Closing, the Acquired Subsidiaries), and
"member of the C/M Group" refers to CMH or any such Affiliate.
"C/M Group Income Taxes" means all Taxes, including federal, state and
local Taxes for which either Acquired Subsidiary is or may be directly or
indirectly liable (and including interest and penalties thereon), based on
or measured by the income or profits of either Acquired Subsidiary or the
C/M Consolidated Tax Group or any of its members.
"C/M Selling Shareholders" means CMH and CMCP, together.
"CMCA Shares" means all of the issued and outstanding shares of common
stock, $0.005 par value per share, of CMCA, all of which are owned by CMCP.
"CMS Shares" means all of the issued and outstanding shares of common
stock, $0.005 par value per share, of CMS, all of which are owned by CMH.
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"C/M Software" means and includes (i) all internally developed
software (including both the source and object codes for such software)
that is proprietary to CMH and is used in the business of either of the
Acquired Subsidiaries and (ii) all computer software, whether in customized
or pre-packaged form, that is owned by third parties, licensed to CMH or
another member of the C/M Group by a third party, and used in the business
of either of the Acquired Subsidiaries.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Contingent Reorganization Shares" means the aggregate 150,000 shares
of PGG Common Stock that may be issued by PGG to the C/M Selling
Shareholders after the Closing if a Milestone Event occurs, as contemplated
in Section 2.6, as adjusted for any stock splits, reverse stock splits,
stock dividends, reclassifications or similar events occurring after the
Closing on the Closing Date.
"Cummer" means Xxxxxxx X. Xxxxxx.
"Damages" mean all obligations, claims, liabilities, damages,
penalties, deficiencies, losses, investigations, proceedings, judgments,
fines, and reasonable costs and expenses (including reasonable costs and
expenses incurred in connection with the performance of obligations,
interest, bonding and court costs and attorneys', accountants', engineers',
consultants' and investigators' fees and disbursements) and disbursements
incurred in connection with any investigation or defense of any of the
foregoing.
"Distributable Assets" means and includes all tangible personal
property of the respective Acquired Subsidiaries, as it exists on the
Closing Date immediately before the Closing, except any tangible personal
property that may be included in the Retained Assets.
"Earn-Out Period" means the period beginning on the Closing Date and
ending on the first to occur of (i) a Milestone Event and (ii) December 31,
2001.
"EBITDA" means, for any period, net income for that period, as
determined in accordance with GAAP, plus the following expenses or charges
to the extent deducted from net income for that period: interest expense,
taxes based on or measured by income, depreciation, and amortization. For
purposes of computing EBITDA of an Acquired Subsidiary, income of an
Acquired Subsidiary shall (i) include commissions and fees earned by an
Acquired Subsidiary on business conducted for or on behalf of CMH or ISP,
determined net of any otherwise unreimbursed costs or expenses incurred by
an Acquired Subsidiary for the account or benefit of, and that are
appropriately allocable to, CMH or ISP or the operations of either of them,
and (ii) exclude any fees generated in respect of any assets under
management for any institution, account or customer introduced to an
Acquired Subsidiary after the Closing by PGG or any Subsidiary of PGG.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any Person, any trade or
business, whether or not incorporated, which together with that Person
would be deemed a single employer within the meaning of Section 4001 of
ERISA or Section 414 of the Code.
"Excess Closing Date Working Capital" means the amount, if any, by
which Closing Date Working Capital, as determined in accordance with
Section 10.5, shall have exceeded $70,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated under that Act.
"Existing Employment Agreements" means (i) the Employment Agreement
dated July 1, 1997, between Cummer and CMH and (ii) the Employment
Agreement dated July 1, 1997, between Xxxxxx and CMH, together.
"Fort Worth Lease" means the Lease Agreement dated March 1, 1998,
between CMH, as lessee, and Xxx X. Xxxxxx, as lessor, under which CMH
leases the office space at 0000 Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx, now used
by the C/M Group.
"GAAP" means United States generally accepted accounting principles
consistently applied throughout the specified period and, if applicable,
the immediately preceding comparable period.
"Governmental Entity" means any U.S. federal, state, local or foreign
court, executive office, legislature, governmental agency or ministry,
commission, or administrative, regulatory or self-regulatory authority or
instrumentality.
"Xxxxxxx Agency" means Cummer, Xxxxxxx & Xxxxxx, Inc., an insurance
agency that is an Affiliate of Cummer.
"Initial Reorganization Shares" means the aggregate 850,000 shares of
PGG Common Stock to be issued by PGG to the C/M Selling Shareholders at the
Closing in connection with the Reorganizations, as contemplated in Sections
2.1 and 2.2.
"Intercompany Agreements" means all contracts, agreements, policies,
practices and understandings, whether written or oral, between one or both
of the Acquired Subsidiaries, on the one hand, and any one or more members
of the C/M Group, on the other hand, relating to any sharing or allocation
of expenses, personnel, services or facilities, including the Tax
Allocation Agreements.
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"Intercompany Indebtedness" means, at any date, all amounts owed on
that date by an Acquired Subsidiary, or any obligation of an Acquired
Subsidiary, contingent or otherwise, on that date, to CMH or any other
member of the C/M Group, including under any Tax Allocation Agreement or
other Intercompany Agreement.
"Intercompany Receivable" means, at any date, all amounts owed on that
date to an Acquired Subsidiary by CMH or any other member of the C/M Group,
including under any Tax Allocation Agreement or other Intercompany
Agreement.
"Institutional Assets under Management" means all Assets under
Management other than Retail Assets under Management.
"ISP" means Investors Strategic Partners I, Ltd., a Texas limited
partnership of which CMCP is a general partner, and any successor entity of
Investors Strategic Partners I, Ltd.
"Investment Advisers Act" means the Investment Advisers Act of 1940,
as amended, and the rules and regulations of the SEC promulgated
thereunder.
"Investment Advisory Related Agreements" means any agreements and
arrangements of the following types to which any Person is a party or by
which it is bound, as they may have been amended, supplemented, waived or
otherwise modified: (i) written agreements and arrangements for the
performance of investment advisory, investment sub-advisory or investment
management services with respect to securities, real estate, commodities,
currencies or any other asset class for clients or on behalf of third
parties; (ii) written agreements and arrangements for the distribution of
securities of any "investment company" within the meaning of the Investment
Company Act or funds underlying variable annuities, variable life insurance
or other similar products or the maintenance of shareholder accounts for
any of the foregoing products or the marketing of investment advisory or
investment management services or the maintenance of accounts for such
services; (iii) written trust agreements, custody arrangements, transfer
agent agreements, fund administration agreements, and similar services
agreements with respect to any of the foregoing; and (iv) all other written
agreements and arrangements of a similar nature.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Latest Acquired Subsidiary Balance Sheets" has the meaning specified
in Section 3.8.
"Latest PGG Balance Sheet" has the meaning specified in Section 4.8.
6
"Law" means a law, statute, ordinance, rule, code or regulation
enacted or promulgated, or order, directive, instruction or other legally
binding guideline or policy issued or rendered by, any Governmental Entity.
"Lien" means a lien, mortgage, deed of trust, deed to secure debt,
pledge, hypothecation, assignment, deposit arrangement, easement,
preference, priority, assessment, security interest, lease, sublease,
charge, claim, adverse claim, levy, interest of other Persons, or other
encumbrance of any kind.
"Material Adverse Effect" means (i) when used with reference to the
Acquired Subsidiaries, a material adverse effect on the financial condition
of the businesses, assets, prospects or results of operations of both
Acquired Subsidiaries taken together, (ii) when used with respect to the
C/M Selling Shareholders, a material adverse effect on their ability to
perform their obligations under this Agreement or any Ancillary Document to
which either of them is to be a party, and (iii) when used with reference
to PGG, a material adverse effect on the financial condition, businesses,
assets, prospects or results of operations of PGG and its Subsidiaries
(including from and after the Closing, the Acquired Subsidiaries) taken as
a whole, or a material adverse effect on the ability of the PGG Parties to
perform their obligations under this Agreement or any Ancillary Agreement
to which either of them is to be a party.
"Milestone Event" has the meaning specified in Section 2.6.
"Xxxxxx" means Xxxxxx X. Xxxxxx.
"NASD" means the National Association of Securities Dealers, Inc.
"New Employment Agreements" means the Employment Agreements to be
entered into at the Closing between SMH and each of Cummer and Xxxxxx, as
provided in Section 2.5.
"Office Leases" means the Fort Worth Lease and the Weatherford Lease,
together.
"PGG Common Stock" means the Common Stock, $.01 par value per share,
of PGG.
"PGG Disclosure Schedule" means the Disclosure Schedule signed for
identification purposes only by the President and Chief Executive Officer
or Chief Financial Officer of PGG, that the PGG Parties have delivered to,
and which has been reviewed and accepted by, the C/M Parties on or before
the date of this Agreement, and that contains information relevant to the
representations and warranties made by the PGG Parties in Article IV.
"PGG SEC Filings" has the meaning specified in Section 4.7.
7
"PGG Stock Options" means the presently outstanding employee and
director stock options granted under PGG's stock option plan for the
purchase of an aggregate 1,012,567 shares of PGG Common Stock.
"Permitted Liens" means (i) those Liens reflected in the PGG SEC
Filings, in the case of the PGG and its Subsidiaries and their respective
assets or properties, or the Acquired Subsidiary SEC Filings, in the case
of the Acquired Subsidiaries, (ii) Liens for water and sewer charges and
current taxes not yet due and payable or being contested in good faith, and
(iii) other Liens (including mechanics', couriers', workers', repairers',
landlords', materialmen's, warehousemen's and other similar Liens) arising
in the ordinary course of business as would not in the aggregate materially
adversely affect the value of, or materially adversely interfere with the
use of, the property subject thereto.
"Person" means an individual, corporation, partnership, association,
joint stock company, limited liability company, Governmental Entity,
business trust, unincorporated organization, or other legal entity.
"Post-Closing Tax Period" means any Tax period (including that portion
of a Straddle Period) beginning after the close of business on the Closing
Date.
"Pre-Closing Distribution" means the distribution, before the Closing,
of the Distributable Assets as contemplated in clause (i) of Section 2.4.
"Pre-Closing Tax Period" means any Tax period (including that portion
of a Straddle Period) ending on or before the Closing Date.
"Registration Rights Agreement" means the Registration Rights
Agreement to be entered into at the Closing among PGG, CMH and CMCP as
provided in Section 2.5.
"Releases" means the Releases required to be delivered to the Acquired
Subsidiaries and the PGG Parties by the members of the C/M Group other than
the Acquired Subsidiaries, as provided in Section 8.4.
"Reorganizations" means the respective acquisitions by SMH of the CMS
Shares from CMH and by PGG of the CMCA Shares from CMCP, in exchange for
the Reorganization Shares, as contemplated in Sections 2.1 and 2.6.
"Reorganization Shares" means the Initial Reorganization Shares and
the Contingent Reorganization Shares, collectively.
"Retail Assets under Management" means and includes (i) all Assets
under Management in customer accounts carried by CMS as an introducing
broker and (ii) all Assets under Management attributable to customer
annuities and mutual funds not carried in
8
a brokerage account but in respect of which an Acquired Subsidiary receives
commission revenue.
"Retained Assets" means the following assets and properties of the
respective Acquired Subsidiaries, as they exist at the Closing Date
immediately before the Closing:
(i) all cash on hand or on deposit;
(ii) all accounts receivable (but excluding any Intercompany
Receivables and, subject to the provisions of Section 11.5, any accounts
receivable representing a Tax refund or benefit);
(iii) all prepaid expenses;
(iv) all rights and benefits of an Acquired Subsidiary under either
Office Lease or any Surviving Contract;
(v) all registrations, licenses, permits, and authorizations under
which the Acquired Subsidiaries now conduct their respective businesses;
and
(vi) all goodwill of the Acquired Subsidiaries, including their
customer and client lists, their telephone numbers, their corporate names,
and their value as going concerns.
"Retained Employees" means those employees of CMH identified in
Section 3.25 of the C/M Disclosure Schedule as employees who will not be
offered employment by an Acquired Subsidiary upon consummation of the
Reorganizations.
"Retained Liabilities" means the following liabilities and obligations
of the respective Acquired Subsidiaries, as they exist at the Closing Date
immediately before the Closing:
(i) accrued operating expenses incurred for the then current period
in the normal course of business of an Acquired Subsidiary, such as payroll
expense, payroll taxes, rent, utilities, phone service, maintenance service
and other similar expenses;
(ii) all then current accounts payable of an Acquired Subsidiary
arising in the ordinary course of business; and
(iii) a ratable portion (allocated on a per diem basis) of the
retention bonuses agreed to be paid by CMH to those CMH employees that are
not Retained Employees and who become employed by CMS following the Closing
as contemplated in Section 10.7.; and
(iv) all liabilities and obligations of an Acquired Subsidiary
accruing or arising after the Closing Date under the Office Leases or the
Surviving Contracts.
9
"SEC" means the Securities and Exchange Commission or any successor
agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Straddle Period" means any Tax period that includes, but does not end
on, the Closing Date.
"Subordination Agreements" means any agreement between CMS or any
Broker-Dealer Subsidiary and any other Person by which such Person
subordinates to the claims of other creditors of CMS or a Broker-Dealer
Subsidiary the payment of indebtedness that CMS or such Broker-Dealer
Subsidiary excludes from the calculation of its "aggregate indebtedness" as
defined in SEC Rule 15c3-1(c).
"Subsidiary" of a Party means an Affiliate of that Party more than 50%
of the aggregate voting power (or any other voting, membership, partnership
or joint venture equity interest in the case of a Person that is not a
corporation) of which is beneficially owned by that Party directly or
indirectly through one or more other Persons.
"Surviving Contracts" means those Acquired Subsidiary Contracts
specifically identified in Section 3.16 of the C/M Disclosure Schedule as
contracts that are not to be assigned to a C/M Selling Shareholder as part
of the Pre-Closing Distribution and that are to continue in effect after
the Closing as an obligation of an Acquired Subsidiary.
"Tax" means any tax of any kind, however denominated, including any
interest, penalties or other additions to tax that may become payable in
respect thereof or in respect of a failure to comply with any requirement
relating to any Tax Return, imposed by any U.S. federal, foreign, state or
local Governmental Entity, including all income, gross income, gross
receipts, profits, goods and services, social security, old age security,
sales and use, ad valorem, excise, franchise, business license, occupation,
real property gains, payroll and employee withholding, unemployment
insurance, real and personal property, stamp, environmental, transfer,
workers' compensation, severance, alternative minimum, windfall, and
capital taxes, and other obligations of the same or a similar nature to any
of the foregoing.
"Tax Allocation Agreements" means all contracts, agreements, policies,
practices, and intercompany procedures and understandings, whether written
or oral, between an Acquired Subsidiary and any other Person by which all
or any portion of any federal, state or local income Tax is allocated to or
shared or required to be paid by an Acquired Subsidiary.
"Taxing Authority" means any Governmental Entity responsible for the
imposition, assessment, enforcement or collection of any Tax.
10
"Tax Returns" means all Tax returns, declarations, reports, estimates,
information returns and statements required to be filed with any Taxing
Authority, or provided to any partner, shareholder, joint venturer or
member under U.S. federal, foreign, state, or local Laws (including reports
with respect to backup withholding and payments to Persons other than
Taxing Authorities), and annual tax returns on behalf of employee benefit
plans sponsored by PGG or any of its Subsidiaries or ERISA Affiliates or by
the C/M Consolidated Group or any of its members or any of their ERISA
Affiliates.
"Weatherford Lease" means the Partial Sublease Agreement dated July
30, 1998, between CMS, as sublessee, and Family Service, Inc., as
lessee/sublessor, under which CMS subleases office space in Weatherford,
Texas, and that portion of the space in such facility that CMS occupies as
tenant in sufferance.
"Working Capital Dividends" means the dividends to be declared by the
respective Acquired Subsidiaries before the Closing pursuant to clauses
(vi) and (vii) of Section 2.4 and to be paid after the Closing as provided
in, and if required by, Section 10.5.
1.2 Interpretation. Capitalized terms defined in this Agreement are
--------------
equally applicable to both their singular and plural forms. References in this
Agreement to a designated "Article" or "Section" refer to an Article or Section
of this Agreement, unless otherwise specifically indicated. All pronouns in
this Agreement shall be construed as including both genders and the neuter. In
this Agreement, "including" is used only to indicate examples, without
limitation to the indicated examples, and without limiting any generality which
precedes it.
1.3 Knowledge. When a representation and warranty in Article III is made
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to the "knowledge" of the C/M Parties, it means receipt of notice by or actual
knowledge of either Cummer or Xxxxxx, or if any such office is not held by
Cummer or Xxxxxx, the Chairman of the Board, President, Chief Financial Officer
or Chief Compliance Officer of any C/M Party. When a representation and
warranty in Article IV is made to the "knowledge" of PGG or the PGG Parties, it
means receipt of notice by or actual knowledge of the Chairman of the Board, the
President and Chief Executive Officer, the Chief Financial Officer or the Chief
Compliance Officer of either PGG or SMH.
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ARTICLE II
THE REORGANIZATIONS AND RELATED MATTERS
2.1 Sale and Exchange of Shares. On the terms and subject to the
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conditions of this Agreement:
(i) CMH agrees to sell, free of all Liens, and SMH agrees to purchase
and accept, the CMS Shares; and
(ii) CMCP agrees to sell, free of all Liens, and PGG agrees to
purchase and accept, the CMCA Shares.
2.2 Consideration. The sole consideration for the CMS Shares shall be up
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to a maximum 600,000 shares of PGG Common Stock, of which (i) 510,000 shares
shall be issued to CMH at the Closing and (ii) 90,000 shares shall be issued to
CMH if and when a Milestone Event occurs as contemplated in Section 2.6. The
sole consideration for the CMCA Shares shall be up to a maximum 400,000 shares
of PGG Common Stock, of which (i) 340,000 shares shall be issued to CMCP at the
Closing and (ii) 60,000 shares shall be issued to CMCP if and when a Milestone
Event occurs as contemplated in Section 2.6.
2.3 The Closing. The respective sales and purchases of the CMS Shares and
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the CMCA Shares in exchange for the Reorganization Shares (the "Closing") shall
take place concurrently at the offices of Xxxxxx & Xxxxxx, L.L.P., 000
Xxxxxxxxx, Xxxxxxx, Xxxxx at 10:00 a.m. local time on the Closing Date. At the
Closing:
(i) CMH shall deliver to SMH the certificates evidencing the CMS
Shares, duly endorsed in blank or accompanied by duly executed stock
powers, and in proper form for registration in the name of SMH, against
delivery by PGG of the Initial Reorganization Shares required by Section
2.1 to be exchanged therefor; and
(ii) CMCP shall deliver to PGG the certificates evidencing the CMCA
Shares, duly endorsed in blank or accompanied by duly executed stock
powers, and in proper form for registration in the name of PGG, against
delivery by PGG of the Initial Reorganization Shares required by Section
2.1 to be exchanged therefor.
2.4 Actions in Contemplation of Closing. On the Closing Date, immediately
-----------------------------------
before the Closing:
(i) CMS shall transfer to CMH, as a dividend on the CMS Shares, all
of its tangible assets and properties except for those Retained Assets
owned by CMS;
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(ii) CMCA shall transfer to CMCP, as a dividend on the CMCA Shares,
all of its tangible assets and properties except for those Retained Assets
owned by CMCA;
(iii) CMH will (or, as applicable, will cause CMCP to) contribute to
the capital of each of the Acquired Subsidiaries any and all Intercompany
Indebtedness of each of the Acquired Subsidiaries (net of any Intercompany
Receivables of each of the Acquired Subsidiaries) as of the Closing Date;
(iv) CMH shall assume and agree to timely and fully perform all
debts, liabilities and obligations, whether fixed or contingent, known or
unknown, of CMS existing at the Closing Date, except for those liabilities
and obligations included in the Retained Liabilities;
(v) CMCP shall assume and agree to timely and fully perform all
liabilities and obligations of CMCA existing at the Closing Date, whether
fixed or contingent, known or unknown, except for those liabilities and
obligations included in the Retained Liabilities;
(vi) CMS shall declare a dividend on the CMS Shares, payable after
the Closing as provided in Section 10.5 to CMH as the holder of record of
the CMS Shares on the Closing Date, equal to that portion, if any, of the
Excess Closing Date Working Capital, if any, attributable to CMS;
(vii) CMCA shall declare a dividend on the CMCA Shares, payable after
the Closing as provided in Section 10.5 to CMCP as the holder of record of
the CMCA Shares on the Closing Date, equal to that portion, if any, of the
Excess Closing Date Working Capital, if any, attributable to CMCA;
(viii) CMH shall assign to SMH all right, title and interest of CMH in
and to the Fort Worth Lease, and SMH shall agree to assume and perform all
obligations of the lessee arising or accruing after the Closing Date under
the Fort Worth Lease;
(ix) CMH shall assign to CMS all right, title and interest of CMH in
and to the Agency Services Agreement;
(x) all Tax Allocation Agreements shall be terminated as to both
Acquired Subsidiaries without any further liability thereunder on the part
of either of the Acquired Subsidiaries; and
(xi) all Intercompany Agreements shall be terminated as to both
Acquired Subsidiaries without any further liability thereunder on the part
of either Acquired Subsidiary.
The Distributable Assets to be distributed to CMH and CMCP in the Pre-
Closing Distribution shall be conveyed by the Acquired Subsidiaries to CMH and
CMCP "AS IS, WHERE IS, WITH ALL
13
FAULTS," without recourse or warranty of any kind, and without any
representations made by an Acquired Subsidiary with respect to the Distributable
Assets or title thereto.
2.5 Other Actions at Closing. In addition to the Pre-Closing Distribution
------------------------
and the consummation of the Reorganizations, the following actions shall take
place at the Closing;
(i) CMH shall deliver to the PGG Parties resignations, to be
effective as of the Closing Date, of all officers and directors of the
respective Acquired Subsidiaries;
(ii) both of the Existing Employment Agreements shall be amended so
that each is consistent with the New Employment Agreements;
(iii) SMH shall enter into an Employment Agreement with Cummer in
substantially the form of Exhibit A attached to this Agreement;
(iv) SMH shall enter into an Employment Agreement with Xxxxxx in
substantially the form of Exhibit B attached to this Agreement;
(v) PGG, CMH and CMCP shall enter into a Registration Rights
Agreement in substantially the form of Exhibit C attached to this
Agreement; and
(vi) SMH and CMH shall enter into an Equipment Lease Agreement in
substantially the form of Exhibit D attached to this Agreement.
2.6 Issuance of Contingent Reorganization Shares. If any of the following
--------------------------------------------
events (each, a "Milestone Event") occurs before the expiration of the Earn-Out
Period (and, in the case of the events described in clauses (i), (ii) and (iii)
below, before the date or for the period therein specified), then the C/M
Selling Shareholders shall be entitled to receive, and PGG shall issue to them,
the Contingent Reorganization Shares:
(i) by March 31, 2001, Institutional Assets under Management shall
have reached $82.957 million;
(ii) by March 31, 2001, Retail Assets under Management shall have
reached $256.364 million;
(iii) for the fiscal quarter ending March 31, 2001, the combined
operating expenses of the Acquired Subsidiaries (as determined in
accordance with GAAP and consistently with the August 24, 2000 pro forma
financial analysis attached as an exhibit to the minutes of the meeting of
the Board of Directors of PGG held on such date, but excluding goodwill
amortization and clearing and settlement charges), shall have been less
than $400,000;
14
(iv) the combined EBITDA of the Acquired Subsidiaries (or from the
operations formerly conducted by them if they are subsequently merged or
liquidated into, or if their operations are subsequently assimilated into
the operations of, another Subsidiary of PGG) shall have been greater than
$956,000 for the fiscal year ending December 31, 2001; or
(v) the Board of Directors of PGG determines to issue the Contingent
Reorganization Shares to the C/M Selling Shareholders.
In the case of a Milestone Event described in clauses (i), (ii) or (iii)
above, PGG shall issue the Contingent Reorganization Shares on or before May 5,
2001. In the case of the Milestone Event described in clause (iv) above, PGG
shall issue the Contingent Shares on or before April 10, 2002. In the case of
the Milestone Event described in clause (v) above, PGG shall issue the
Contingent Reorganization Shares within ten Business Days following the date the
Board of Directors of PGG shall have authorized the issuance thereof.
If no Milestone Event occurs before the expiration of the Earn-Out Period,
then PGG shall have no obligation to issue the Contingent Reorganization Shares,
and such shares shall resume the status of unissued and unreserved shares of PGG
Common Stock.
If at any time before the expiration of the Earn-Out Period, an Acquired
Subsidiary is merged or liquidated into, or its operations are merged or
assimilated into those of, another Subsidiary of PGG, then from that time
forward, and unless and until a Milestone Event occurs or the Earn-Out Period
expires, separate profit and loss accounts shall be maintained, and separate
financial statements shall be prepared, for the operations formerly conducted by
such Acquired Subsidiary, to the extent necessary or appropriate to allow the
Parties to determine the occurrence of a Milestone Event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE C/M PARTIES
The C/M Parties jointly and severally represent and warrant to the PGG
Parties that:
3.1 Organization of C/M Parties. Each C/M Party is a corporation duly
---------------------------
organized, validly existing and in good standing under the Laws of the State of
Texas. Each C/M Party has full authority and corporate power to conduct its
business as it is currently being conducted and, in the case of the Acquired
Subsidiaries, to continue to conduct its current business following consummation
of the Reorganizations. Each Acquired Subsidiary is duly qualified to do
business, and in good standing, in each jurisdiction where the nature of its
properties or business requires such qualification. CMH has delivered to the
PGG Parties true, correct and complete copies of the Charter Documents of each
C/M Party.
15
3.2 Authority Relative to this Agreement. Each C/M Party has the
------------------------------------
requisite corporate power and authority to enter into and perform its
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the Reorganizations have been duly authorized by the
Board of Directors of each C/M Party, and no other corporate proceedings on the
part of any C/M Party are necessary to authorize this Agreement or the
consummation of the Reorganizations. After the Closing, the C/M Selling
Shareholders intend to continue to engage in one or more businesses, and no
approval of either or both of the Reorganizations is required by the
shareholders of CMH. This Agreement has been duly executed and delivered by
each C/M Party. Assuming the valid authorization, execution and delivery of
this Agreement by each PGG Party, this Agreement is a valid and binding
obligation of each C/M Party, enforceable against each of them in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other Laws relating to or affecting
creditors' rights generally or by equitable principles.
3.3 No Violations. Neither the execution, delivery or performance of this
-------------
Agreement by the C/M Parties, the Pre-Closing Distribution, the Working Capital
Dividends, or the consummation of the Reorganizations will:
(i) constitute a breach or violation of or default under the Charter
Documents of any C/M Party, or, assuming the obtainment of the consents and
approvals described in clauses (i) and (ii) of Section 3.4 and that the PGG
Parties perform their obligations under Section 10.12, any Law applicable
to any of the C/M Parties; or
(ii) except as accurately reflected in Section 3.3 of the C/M
Disclosure Schedule, violate or conflict with or result in a breach of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under or result in the termination of, or
accelerate the performance by, or result in a right of termination under,
or result in the creation of any Lien upon the assets or properties of any
C/M Party under, any contract, indenture, loan document, license, permit,
order, decree or instrument to which any C/M Party is a party or by which
any of them or their assets or properties are bound.
3.4 Consents and Approval. No consent, order, approval, waiver,
---------------------
authorization of, or registration, application, declaration or filing with, any
Person is required with respect to any C/M Party in connection with the
execution and delivery of this Agreement, the Pre-Closing Distribution, the
Working Capital Dividends, or the consummation of the Reorganizations, except
for:
(i) consents, authorizations, approvals, filings or exemptions in
connection with the applicable provisions of all Broker-Dealer Regulatory
Requirements;
(ii) the consents of the other parties to all Investment Advisory
Related Agreements to which CMCA is a party;
(iii) the consent of the lessor under the Fort Worth Lease;
16
(iv) the consents and approvals described on Section 3.4 of the C/M
Disclosure Schedule; and
(v) other cases, considered individually and in the aggregate, in
which any failure to make such registration, application, declaration or
filing or to obtain any such consent, order, approval, waiver or other
authorization is not reasonably likely to have a Material Adverse Effect on
the Acquired Subsidiaries or the C/M Parties.
3.5 Capitalization of Acquired Subsidiaries. The authorized capital stock
---------------------------------------
of CMS consists of 10,000,000 shares of common stock, $0.005 par value, of which
1,000 shares (constituting the CMS Shares) are issued and outstanding and owned
and held of record and beneficially by CMH, and no shares are held by CMS as
treasury shares. The authorized capital stock of CMCA consists of 10,000,000
shares of common stock, $0.005 par value, of which 6,000 shares (constituting
the CMCA Shares) are issued and outstanding and owned and held of record and
beneficially by CMCP, and no shares are held by CMCA as treasury shares. All of
the issued and outstanding shares of common stock of each Acquired Subsidiary
are duly and validly issued, fully paid and nonassessable, and were issued free
of preemptive rights, in compliance with any rights of first refusal, and in
compliance with all Laws. No subscription, warrant, option, convertible
security, stock appreciation or other right (contingent or other) to purchase or
acquire any shares of any class of capital stock of either Acquired Subsidiary
is authorized or outstanding and there is not outstanding any commitment of an
Acquired Subsidiary to issue any shares, warrants, options or other such rights,
or, except as specifically contemplated in this Agreement with respect to the
Pre-Closing Distribution and the Working Capital Dividends, to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets. Neither Acquired Subsidiary has any contingent or other obligation to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or, except as specifically contemplated in this Agreement, to
pay any dividend or make any other distribution in respect thereof. Neither
Acquired Subsidiary is a party to any voting agreement, voting trust or similar
agreement or arrangement relating to its capital stock or any agreement or
arrangement relating to or providing for registration rights with respect to its
capital stock.
3.6 No Subsidiaries. Except as may be included in the Distributable
---------------
Assets, and except as described in Section 3.6 of the C/M Disclosure Schedule,
neither Acquired Subsidiary, directly or indirectly, has any equity investment
in any corporation, limited liability company, partnership or joint venture or
other business entity.
3.7 SEC Filings. Each Acquired Subsidiary has filed all forms, reports
-----------
and documents required to be filed by it with the SEC, and CMH has made
available to the PGG Parties true and complete copies of (i) CMS' Annual Reports
filed with the SEC pursuant to SEC Rule 17a-5(d) for the years ended December
31, 1997, 1998 and 1999, and (ii) all other reports, statements and registration
statements (including Form ADVs and Form BDs, and all amendments thereto) filed
by either Acquired Subsidiary with the SEC since the respective dates of
organization of the Acquired Subsidiaries (collectively, the "Acquired
Subsidiary SEC Filings"). The Acquired Subsidiary SEC Filings, including all
financial statements or schedules included in them, (i) comply in all material
17
respects with the requirements of the Exchange Act, and (ii) did not at the time
of filing (or if amended, supplemented or superseded by a later filing, on the
date of the later filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
3.8 Financial Statements. CMH has delivered to the PGG Parties the
--------------------
unaudited separate-company balance sheets and statements of operations and
stockholders' equity of the respective Acquired Subsidiaries at August 31, 2000
and for the eight months then ended (the "Acquired Subsidiary Interim Financial
Statements"). The balance sheets and statements of operations, stockholders'
equity and cash flows of CMS and CMCA, respectively, included in the Acquired
Subsidiary SEC Filings, and the Acquired Subsidiary Interim Financial
Statements, respectively, fairly present in all material respects the financial
position of the respective Acquired Subsidiaries at their respective dates and
the respective results of operations of the respective Acquired Subsidiaries for
the respective periods then ended, in accordance with GAAP, subject, in the case
of the Acquired Subsidiary Interim Financial Statements, to (i) the exclusion of
a statement of cash flows, (ii) year-end adjustments (which consist of normal
recurring accruals), and (iii) the absence of explanatory footnote disclosures
required by GAAP. The respective unaudited separate-company balance sheets of
the Acquired Subsidiaries at August 31, 2000 included in the Acquired Interim
Financial Statements are herein together called the "Latest Acquired Subsidiary
Balance Sheets."
3.9 Absence of Certain Changes. Except as set forth in Section 3.9 of the
--------------------------
C/M Disclosure Schedule, since August 31, 2000, the Acquired Subsidiaries have
conducted their businesses only in the ordinary course, consistent with past
practice, there has not occurred a Material Adverse Effect or any event that
could reasonably be expected to result in a Material Adverse Effect on the
Acquired Subsidiaries, and neither Acquired Subsidiary has, and, in the case of
clause (xi) below of this Section 3.9, no C/M Party has:
(i) amended its Charter Documents;
(ii) issued, sold or delivered, or agreed to issue, sell or deliver,
any capital stock, bonds or other securities, or granted or agreed to grant
any options, warrants or other rights calling for the issue, sale or
delivery of its securities;
(iii) borrowed or agreed to borrow any funds or incurred or become
subject to any absolute or contingent obligation or liability, except
Intercompany Indebtedness and trade accounts payable and accrued operating
expenses incurred in the ordinary course of business since August 31, 2000;
(iv) paid any obligation or liability other than Intercompany
Indebtedness, current liabilities reflected in the Latest Acquired
Subsidiary Balance Sheets and current liabilities incurred since August 31,
2000, in the ordinary course of business;
18
(v) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind in respect of its
capital stock (other than as contemplated herein with respect to the
Distributable Assets and the Working Capital Dividends, and other than
other dividends paid or distributions made to a Selling C/M Shareholder),
or purchased, redeemed or otherwise acquired, or agreed to purchase or
redeem or otherwise acquire, directly or indirectly, any of its outstanding
capital stock;
(vi) sold, transferred or otherwise disposed of, or, except as
contemplated herein with respect to the Distributable Assets and the
Working Capital Dividends, agreed to sell, transfer or otherwise dispose
of, any of its assets, properties or rights, other than in the ordinary
course of business, or cancelled or otherwise terminated, or agreed to
cancel or otherwise terminate, any debts or claims;
(vii) entered into or agreed to enter into any agreement or
arrangement granting any preferential right to purchase any of its assets,
properties or rights, or requiring any consent of any party to the transfer
or assignment of any such asset, property or right;
(viii) suffered any material casualty Damages, destruction or physical
losses, or waived or surrendered any rights of value which are material;
(ix) made or permitted any amendment or termination of any material
contract, agreement or license to which it is a party or by which it or any
of its assets or properties are subject;
(x) made, directly or indirectly, any accrual or arrangement for or
payment of bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer, director or employee of
an Acquired Subsidiary;
(xi) except for normal merit raises in the case of individual
employees, granted any general pay increases to its employees or agents, or
adopted any new or made any increase in any existing profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan for or with any of its employees or agents;
(xii) incurred or become subject to any material claim or liability
for any Damages or alleged Damages for actual or alleged negligence or
other tort or breach of contract; or
(xiii) made or agreed to make any capital expenditures.
3.10 No Undisclosed Liabilities. Except as disclosed in the Latest
--------------------------
Acquired Subsidiary Balance Sheets or in Section 3.10 of the C/M Disclosure
Schedule, neither Acquired Subsidiary has any liabilities or obligations, known
or unknown, fixed or contingent, other than (i) those arising since August 31,
2000 in the ordinary course of business and consistent with past practice, (ii)
liabilities and obligations arising after the date of this Agreement without
violation of Section 5.2, or
19
(iii) liabilities and obligations that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect on the
Acquired Subsidiaries.
3.11 Properties. Each Acquired Subsidiary has good and marketable title to
----------
the properties and assets reflected in the Latest Acquired Subsidiary Balance
Sheets (other than properties and assets disposed of in the ordinary course of
business since August 31, 2000, which, in the aggregate, are not material), free
of all Liens except Permitted Liens.
3.12 Taxes and Tax Returns. Except as described in Section 3.12 of the C/M
---------------------
Disclosure Schedule:
(i) all Tax Returns required to be filed with any Taxing Authority
by or on behalf of the C/M Consolidated Group or either Acquired Subsidiary
have been duly filed on a timely basis in accordance with all applicable
Laws;
(ii) at the time of their filings all such Tax Returns were complete
and correct;
(iii) all Taxes required to be paid by the C/M Consolidated Group or
either Acquired Subsidiary on or before the date of this Agreement have
been paid, and the reserves for Taxes of the Acquired Subsidiaries
reflected in the Latest Acquired Subsidiary Balance Sheets are adequate to
cover all Taxes that have not been paid, but which under GAAP were
accruable, through the date of the Latest Acquired Subsidiary Balance
Sheets;
(iv) there are no Liens for Taxes upon any assets of the Acquired
Subsidiaries, except Liens for Taxes not yet due for current Tax periods
ending after the date of this Agreement;
(v) there are no outstanding deficiencies, assessments or written
proposals for the assessment of Taxes proposed, asserted or assessed
against the C/M Consolidated Group or either Acquired Subsidiary, and, to
the knowledge of the C/M Parties, no grounds exist for any such assessment
of Taxes;
(vi) neither Acquired Subsidiary is an obligor on, and none of its
assets have been financed directly or indirectly by, any tax exempt bonds;
(vii) neither Acquired Subsidiary is now, or has been during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a real
property holding corporation within the meaning of Section 897(c)(2) of the
Code;
(viii) neither Acquired Subsidiary has filed a consent under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to
any disposition of its assets;
20
(ix) no extension of the statute of limitations on the assessment of
any Taxes has been granted to or applied for by the C/M Consolidated Group
or either Acquired Subsidiary;
(x) neither Acquired Subsidiary (x) is a party to any Tax sharing or
allocation agreement (other than the Tax Allocation Agreements), (y) has
been a member of a consolidated, combined or unitary group (other than the
C/M Consolidated Group) for purposes of filing Tax Returns, and (z) has any
liability for the Taxes of any other Person (other than the other members
of the C/M Consolidated Group) as a transferee or successor, by contract or
otherwise;
(xi) at December 31, 1999, the U.S. federal income tax basis of CMH
in the CMS Shares was $2,698,078, and the U.S. federal income tax basis of
CMCP in the CMCA Shares was $280,000; and
(xii) none of the Tax Returns of either Acquired Subsidiary or the C/M
Consolidated Group are the subject of an audit or examination by a
Governmental Entity.
3.13 Litigation. Except as disclosed in Section 3.13 of the C/M Disclosure
----------
Schedule, there is no suit, action, investigation or proceeding pending or, to
the knowledge of the C/M Parties, threatened against either Acquired Subsidiary
at Law or in equity before or by any Governmental Entity or before any
arbitrator or mediator of any kind, that is reasonably likely to have a Material
Adverse Effect on the Acquired Subsidiaries, and there is no judgment, decree,
injunction, rule or order of any Governmental Entity, arbitrator or mediator to
which either Acquired Subsidiary is subject. No C/M Party has knowledge of any
grounds on which any suit, action, investigation or proceeding of the nature
referred to in this Section 3.13 might be commenced with any reasonable
likelihood of success.
3.14 Environmental Matters. Neither Acquired Subsidiary has ever owned,
---------------------
leased or occupied any real property other than office space leased under the
Office Leases. The business conducted by each Acquired Subsidiary at those
locations has consisted of only the operations of a securities broker-dealer,
investment banking activities, the purchase and sale of securities for their own
account and the accounts of their customers, investment advisory services and
ancillary activities. No environmental Permits are required for either of the
Acquired Subsidiaries to operate their businesses as now or previously
conducted, and each Acquired Subsidiary is and has been in compliance with all
applicable environmental Laws.
3.15 Employee Benefit Plans. Section 3.15 of the C/M Disclosure Schedule
----------------------
accurately sets forth each retirement, pension, bonus, stock purchase, profit
sharing, stock option, deferred compensation, severance or termination pay,
insurance, medical, hospital, dental, vision care, drug, sick leave, disability,
salary continuation, unemployment benefits, vacation, incentive or other
compensation plan or arrangement or other employee benefit which is maintained,
or otherwise contributed to or required to be contributed to, by any C/M Party
or any ERISA Affiliate of a C/M
21
Party (the "CMH Employee Plans"). Each C/M Party has complied, and currently is
in compliance, both as to form and operation, in all material respects, with the
terms of each CMH Employee Plan and all applicable provisions of ERISA and each
other Law or regulation imposed or administered by any Governmental Entity with
respect to each of the CMH Employee Plans. Except as set forth in Section 3.15
of the C/M Disclosure Schedule, neither Acquired Subsidiary has at any time
maintained, adopted, established, contributed to or been required to contribute
to, otherwise participated in or been required to participate in, or had any
liability with respect to, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA. All contributions to, and payments from, each CMH
Employee Plan which may have been required to be made in accordance with the
terms of any such CMH Employee Plan and, where applicable, the Laws which govern
such CMH Employee Plan, have been made in a timely manner. All material reports,
Tax Returns and similar documents with respect to any CMH Employee Plan required
to be filed with any Governmental Entity or distributed to any CMH Employee Plan
participant have been duly filed on a timely basis or distributed. There are no
pending investigations by any Governmental Entity involving or relating to a CMH
Employee Plan, no threatened (to the knowledge of the C/M Parties) or pending
claims (except for claims for benefits payable in the normal operation of the
CMH Employee Plans), suits or proceedings against any CMH Employee Plan or
asserting any rights or claims to benefits under any CMH Employee Plan which
could give rise to a liability of an Acquired Subsidiary, nor, to the knowledge
of the C/M Parties, are there any facts that could give rise to any liability of
an Acquired Subsidiary in the event of any such investigation, claim, suit or
proceeding. No notice has been received by any C/M Party of any complaints or
other proceedings of any kind involving either Acquired Subsidiary or any of the
employees of any of either Acquired Subsidiary (or any other member of the C/M
Group) before any Governmental Entity relating to any CMH Employee Plan. The
assets of each CMH Employee Plan are at least equal to the liabilities of such
CMH Employee Plan.
3.16 Material Contracts. Section 3.16 of the C/M Disclosure Schedule lists
------------------
and identifies as either a Surviving Contract or an Assumed Contract, all
written or oral executory contracts, agreements and commitments (collectively,
the "Acquired Subsidiary Contracts") to which an Acquired Subsidiary is a party
or by which it is bound, including the following:
(i) all employment, consulting or personal service agreements or
contracts with any present or former officer, director or employee of an
Acquired Subsidiary;
(ii) all loan or credit agreements, and all bonds, debentures,
promissory notes or other instruments of indebtedness, relating to the
borrowing of money by an Acquired Subsidiary;
(iii) all guaranty, suretyship or similar arrangements under which an
Acquired Subsidiary has guaranteed or is otherwise contingently or
secondarily liable for any indebtedness, liability or obligation of any
Person;
22
(iv) all leases or subleases of real or personal property used in
the conduct of business of an Acquired Subsidiary;
(v) all contracts or agreements committing an Acquired Subsidiary
to make a capital expenditure;
(vi) all contracts between CMS and each broker or dealer which
clears transactions for CMS or to which CMS transmits customer funds or
securities in connection with transactions in which CMS acts as an
introducing broker or dealer;
(vii) all Subordination Agreements pertaining to indebtedness of
CMS;
(viii) all contracts, agreements, agreements in principle, letters of
intent and memoranda of understanding which call for or contemplate the
future disposition (including restrictions on transfer and rights of first
offer or refusal) or acquisition of (or right to acquire) any interest in
any business enterprise, and all contracts, agreements and commitments
relating to the future disposition of any of the assets or properties of an
Acquired Subsidiary other than in the ordinary course of business;
(ix) all contracts, agreements with or commitments to any Person
(other than standard indemnification provisions contained in underwriting
agreements entered into in the ordinary course of business) containing any
provision or covenant relating to any indemnification or holding harmless
by an Acquired Subsidiary;
(x) all contracts, agreements and undertakings with any
Governmental Entity or other Person that contain any provision or covenant
limiting (x) the ability of an Acquired Subsidiary to engage on any line of
business, to compete with any Person, to do business with any Person or in
any location or to employ any Person or (y) the ability of any Person to
compete with or obtain products or services from an Acquired Subsidiary;
(xi) all outstanding proxies, powers of attorney or similar
delegations of authority granted by an Acquired Subsidiary to any other
Person; and
(xii) all Intercompany Agreements.
CMH has delivered to the PGG Parties a true and correct copy of each
Acquired Subsidiary Contract and each Office Lease. Each Acquired Subsidiary
Contract is in full force and effect and constitutes a legal, valid and binding
obligation of the Acquired Subsidiary that is a party to it, and, to the
knowledge of the C/M Parties, of each other Person that is a party to it.
Except as set forth in Section 3.16 of the C/M Disclosure Schedule, neither
Acquired Subsidiary is, and to the knowledge of the C/M Parties, no other party
to any Acquired Subsidiary Contract is, in violation or breach of or in default
under such Acquired Subsidiary Contract, or with or without notice or lapse of
time or both, would be in violation or breach of or in default under any such
Acquired Subsidiary Contract,
23
except for any violation, breach or default which, individually or in the
aggregate, could not result in a Material Adverse Effect on the Acquired
Subsidiaries. Each Office Lease is in full force and effect and constitutes a
legal, valid and binding obligation of CMH, or such other of the C/M Parties
which is a party thereto, and, to the knowledge of the C/M Parties, the lessor
thereunder. Neither CMH nor a lessor under an Office Lease is in violation or
breach of or in default under an Office Lease. Except as set forth in Section
3.16 of the C/M Disclosure Schedule, no Acquired Subsidiary Contract provides
that any party thereto other than an Acquired Subsidiary may terminate such
Acquired Subsidiary Contract by reason of the execution of this Agreement or the
consummation of the Reorganizations. Except for the Intercompany Agreements,
neither C/M Selling Shareholder is a party to any contract or agreement (i) the
benefits of which inure to the benefit of, or the obligations of which are
performable by, an Acquired Party or (ii) which relates to the business or
operations conducted by an Acquired Subsidiary.
3.17 Governmental Licenses and Permits; Compliance with Laws. Neither
-------------------------------------------------------
Acquired Subsidiary has received notice of any revocation or modification of
any licence, certification, tariff, permit, registration, exemption, approval or
other authorization by any Governmental Entity, the revocation or modification
of which has had or is reasonably likely to have a Material Adverse Effect on
the Acquired Subsidiaries. The conduct of the businesses of the Acquired
Subsidiaries complies with all applicable Laws, except for violations or
failures to comply, if any, that, individually or aggregate, are not reasonably
likely to have a Material Adverse Effect on the Acquired Subsidiaries.
3.18 Broker-Dealer Matters. Except as set forth in Section 3.18 of the C/M
---------------------
Disclosure Schedule, and except to the extent that any inaccuracy in the
following representations and warranties is not reasonably likely to result in a
Material Adverse Effect on the Acquired Subsidiaries:
(i) CMS is registered as a broker-dealer with the SEC and under all
applicable state Laws that require it to be so registered, and such
registrations are in full force and effect;
(ii) each Affiliate of CMS, and each officer, employee, consultant,
agent or independent contractor of CMS or any such Affiliate, who is
required by reason of the nature of his employment by CMS or such Affiliate
to be registered as a broker-dealer, broker-dealer agent, registered
representative or sales person with the SEC or the securities commission of
any state or any self-regulatory body or other Governmental Entity, is duly
registered or appointed as such, and such registration or appointment is in
full force and effect;
(iii) neither CMH nor, to the knowledge of the C/M Parties and with
the exception of the Xxxxxxx Agency, any Affiliate or "associated person"
(within the meaning of the Exchange Act) of CMS, is ineligible pursuant to
Section 15(b) of the Exchange Act to serve as a broker-dealer or as an
associated person to a registered broker-dealer;
(iv) CMS is a member organization in good standing of the NASD, the
Securities Investor Protection Corporation, and such other organizations in
which its membership is required in order to conduct its business as now
conducted;
24
(v) CMS is, and has been since its inception, in compliance with all
Broker-Dealer Regulatory Requirements relating to its maintenance of
minimum net capital and its compliance with a maximum indebtedness-to-net-
capital ratio under SEC Rule 15c3-1, its maintenance of reserves under SEC
Rule 15c3-1, the filing of quarterly and annual reports under Section 17 of
the Exchange Act and Rule 17a-5 thereunder, and all other Broker-Dealer
Regulatory Requirements;
(vi) in connection with its broker-dealer activities, CMS meets, and
has met since its inception, all requirements specified in SEC Rule 15c3-
3(k)(2) for exemption from all possession, control and reserve requirements
under SEC Rule 15c3-3; and
(vii) all Subordination Agreements pertaining to indebtedness of CMS
comply with all requirements of Appendix D to SEC Rule 15c3-1.
No C/M Party other than CMS is or is required to be registered as a broker-
dealer with the SEC or under any applicable state Law.
3.19 Investment Advisor Matters. No C/M Party other than CMCA (i) is or is
--------------------------
required to be registered as an investment adviser under the Investment Advisers
Act or (ii) is a party to any Investment Advisory Related Agreements. CMCA is
registered as an investment adviser under the Investment Advisors Act and all
applicable state Laws that require it to be so registered, and such
registrations are in full force and effect. Each Affiliate of CMCA, and each
officer, employee, consultant, agent or independent contractor of CMCA or any
such Affiliate, who is required by reason of the nature of his employment by
CMCA or such Affiliate to be registered as an investment advisor or investment
advisor representative with the SEC, the securities commission of any state or
any self-regulatory body or other Governmental Entity, is duly registered or
appointed as such, and such registration or appointment is in full force and
effect.
3.20 No Investment Company. Neither Acquired Subsidiary is, or may be
---------------------
deemed to be, an investment company under the Investment Company Act. Neither
Acquired Subsidiary has any Investment Advisory Related Agreements with, or
provides investment advisory services to, any investment company within the
meaning of the Investment Company Act.
3.21 Investment Advisory Related Agreements. CMH has delivered to the PGG
--------------------------------------
Parties true and correct lists of the clients, including the name of each client
and the net asset value of the assets managed for each client as of an indicated
date, which lists collectively constitute a complete list of such clients, for
whom services are provided under each Investment Advisory Related Agreement to
which CMCA is a party; provided, however, that with respect to annuities, mutual
funds and insurance package products, such lists do not contain the name of each
customer but rather the name of the company which holds the assets. To the best
knowledge of the C/M Parties, each such Investment Advisory Related Agreement
has been validly executed by each party thereto and is in full force and effect
and constitutes a legal, valid and binding obligation of CMCA and of each other
Person that is a party to it; except to the extent that such Investment Advisory
Related
25
Agreements have been breached by their "deemed assignment" to the PGG Parties
without the prior consent of each such other party to such Investment Advisory
Related Agreement.
3.22 Material Customers. Section 3.22 of the C/M Disclosure Schedule
------------------
accurately sets forth the name and net assets under management at December 31,
1999 and August 31, 2000, for each customer or client of an Acquired Subsidiary
(a "Material Customer") that at either of such dates accounted for five percent
or more of the total nets assets under management by the Acquired Subsidiaries
at each of those dates. No Material Customer has notified any C/M Party that it
will or intends to cease doing business, or substantially decrease the amount of
business it does, with an Acquired Subsidiary, and, to the knowledge of the C/M
Parties, no Material Customer is now experiencing, or has experienced during
2000, any material financial difficulties that could reasonably be expected to
adversely affect such customer's relationship with an Acquired Subsidiary.
3.23 Bank Accounts. Section 3.23 of the C/M Disclosure Schedule lists each
-------------
bank, trust company or similar institution with which either Acquired Subsidiary
maintains an account or safe deposit box, and accurately identifies each such
account or safe deposit box by its number or other identification and the names
of all individuals authorized to draw thereon or have access thereto.
3.24 Officers and Directors. Section 3.24 of the C/M Disclosure Schedule
----------------------
accurately lists by name and title all officers and directors of each Acquired
Subsidiary.
3.25 Employees. Neither Acquired Subsidiary currently has any employees.
---------
Section 3.25 of the C/M Disclosure Schedule lists each employee of the C/M
Selling Shareholders and sets forth with respect to each such employee, (i) his
or her position and years of service with a C/M Selling Shareholder, (ii) his or
her salary, bonus and other compensation for 1999 and the first eight months of
2000, and (iii) whether he or she will continue to be employed by CMH after the
Closing. No employee of a C/M Party, other than a Retained Employee, has
notified any C/M Party that he or she is leaving the employ of a C/M Selling
Shareholder or that he or she does not intend to be employed by an Acquired
Subsidiary upon and following the consummation of the Reorganizations.
3.26 Transactions with Affiliates: Except for the Intercompany Agreements
----------------------------
as set forth in Section 3.26 of the C/M Disclosure Schedule, no Affiliate of
CMH:
(i) is a party to or has any interest in any contract or agreement
with either Acquired Subsidiary;
(ii) has any outstanding loan to or receivable from either Acquired
Subsidiary; or
(iii) has any ownership interest (other than a stock ownership
interest representing less than 1% of the outstanding stock of any
corporation which is publicly traded), directly, indirectly, or
beneficially, in any client or customer of or supplier to either Acquired
Subsidiary.
26
3.27 Brokers. No broker, finder or investment banker is entitled to any
-------
brokerage, finder's or other fee or commission in connection with this Agreement
or the Reorganizations based upon arrangements made by or on behalf of any C/M
Party.
3.28 Investment Intent. Each C/M Selling Shareholder is an "accredited
-----------------
investor" within the meaning of Regulation D under the Securities Act. Each C/M
Selling Shareholder will be acquiring its Reorganization Shares solely for its
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution thereof, except that (i) following the Closing, CMCP may
distribute its Reorganization Shares to CMH and (ii) after the expiration of the
lock-up period specified in Section 10.9, CMH may make an in-kind distribution
of all or part of the Reorganization Shares to its shareholders. Neither C/M
Selling Shareholder is a party to any agreement or other arrangement for the
disposition of any Reorganization Shares. Each C/M Selling Shareholder (i) is
able to bear the economic risk of an investment in any Reorganization Shares to
be acquired by it pursuant to this Agreement, (ii) can afford to sustain a total
loss of that investment, (iii) has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the proposed investment in any Reorganization Shares the C/M Selling Shareholder
is to receive in connection with the Reorganizations, (iv) has had an adequate
opportunity to ask questions and receive answers from the officers of PGG
concerning any and all matters relating to the transactions contemplated by this
Agreement, including the background and experience of the current and proposed
officers and directors of PGG and the plans for the operations of the business
of PGG, and (v) has asked all questions of the nature described in preceding
clause (iv), and all those questions have been answered to its satisfaction.
Notwithstanding the representations made by the C/M Parties in this Section
3.28, PGG agrees to permit a sale or transfer of Reorganization Shares upon its
obtaining satisfactory assurances that the sale or transfer may be made without
registration under the Securities Act and related rules and regulations (and all
applicable state securities laws and regulations), including receipt by PGG of
an opinion to such effect from counsel reasonably satisfactory to PGG, or
compliance by the proposed seller or transferor with the requirements of Rule
144(k) or Rule 144A under the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF
THE PGG PARTIES
The PGG Parties jointly and severally represent and warrant to the C/M
Parties that:
4.1 Organization of PGG Parties. Each PGG Party is a corporation duly
---------------------------
organized, validly existing and in good standing under the Laws of the State of
Texas. Each PGG Party has full authority and corporate power to conduct its
business as it is currently being conducted and as to be
27
conducted following consummation of the Reorganizations. Each PGG Party is duly
qualified to do business, and in good standing, in each jurisdiction where the
nature of its properties or business requires such qualification. The PGG
Parties have delivered to CMH true, correct and complete copies of the Charter
Documents of each PGG Party.
4.2 Authority Relative to this Agreement. Each PGG Party has the
------------------------------------
requisite corporate power and authority to enter into and perform its
obligations under this Agreement. The execution and delivery of this Agreement,
the consummation of the Reorganizations, and the issuance and delivery of the
Reorganization Shares upon consummation of the Reorganizations, have been duly
authorized by the respective Boards of Directors of the PGG Parties, and no
other corporate proceedings on the part of either PGG Party are necessary to
authorize this Agreement, the issuance and delivery of the Reorganization Shares
or the consummation of the Reorganizations. This Agreement has been duly
executed and delivered by each PGG Party. Assuming the valid authorization,
execution and delivery of this Agreement by each C/M Party, this Agreement is a
valid and binding obligation of each PGG Party, enforceable against each PGG
Party in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, motorium or other Laws relating to or
affecting creditors' rights generally or by equitable principles.
4.3 No Violations. Neither the execution, delivery and performance of
-------------
this Agreement by the respective PGG Parties, the issuance and delivery by PGG
of the Reorganization Shares in connection with the Reorganizations, or the
consummation of the Reorganizations will:
(i) constitute a breach or violation of or default under the Charter
Documents of either PGG Party or any of the PGG Subsidiaries or, assuming
the obtainment of the consents and approvals described in clause (i) of
Section 4.4, any Law applicable to either PGG Party or any of the PGG
Subsidiaries; or
(ii) except as accurately reflected in Section 4.3 of the PGG
Disclosure Schedule, violate or conflict with or result in a breach of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under or result in the termination of, or
accelerate the performance by, or result in a right of termination under,
or result in the creation of any Lien upon the assets or properties of PGG
or any of its Subsidiaries under, any contract, indenture, loan document,
license, permit, order, decree or instrument to which PGG or any of its
Subsidiaries is a party or by which any of them or their assets or
properties are bound.
4.4 Consents and Approval. No consent, order, approval, waiver or
---------------------
authorization of, or registration, application, declaration or filing with, any
Person is required with respect to either PGG Party or any Subsidiary of PGG in
connection with the execution and delivery of this Agreement, the issuance of
the Reorganization Shares or the consummation of the Reorganizations, except
for:
28
(i) consents, authorizations, approvals, filings or exemptions in
connection with the applicable provisions of all Broker-Dealer Regulatory
Requirements;
(ii) the consents and approvals described on Section 4.4 of the PGG
Disclosure Schedule; and
(iii) other cases, considered individually and in the aggregate, in
which any failure to make such registration, application, declaration or
filing or to obtain any such consent, order, approval, waiver or other
authorization is not reasonably likely to have a Material Adverse Effect on
PGG.
4.5 PGG Capitalization. The authorized capital stock of PGG consists of
------------------
(i) 100 million shares of PGG Common Stock and (ii) 10 million shares of
Preferred Stock, $.10 par value, of PGG ("PGG Preferred Stock"). At October 2,
2000, 14,452,551 shares of PGG Common Stock, and no shares of PGG Preferred
Stock, were issued and outstanding, 1,012,567 shares of PGG Common Stock were
reserved for issuance upon exercise of the PGG Stock Options, and 797,961 shares
of PGG Common Stock were held by PGG as treasury shares. All of the issued and
outstanding shares of PGG Common Stock are duly and validly issued, fully paid
and nonassessable, and were issued free of preemptive rights, in compliance with
any rights of first refusal, and in compliance with all Laws. Except for the
PGG Stock Options, no subscription, warrant, option, convertible security, stock
appreciation or other right (contingent or other) to purchase or acquire any
shares of any class of capital stock of PGG or any of its Subsidiaries is
authorized or outstanding, and there is not outstanding any commitment of PGG or
any of its Subsidiaries to issue any shares, warrants, options or other such
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets. Except as described in Section 4.5 of the
PGG Disclosure Schedule, neither PGG nor any of its Subsidiaries has any
contingent or other obligation to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof. PGG is not a party, and has no
knowledge that any PGG shareholders are parties, to any voting agreement, voting
trust or similar agreement or arrangement relating to PGG's capital stock or,
except as described in Section 4.5 of the PGG Disclosure Schedule, any agreement
or arrangement relating to or providing for registration rights with respect to
its capital stock.
Upon their issuance in accordance with this Agreement, the Reorganization
Shares will be duly authorized, validly issued, fully paid and nonassessable.
At the Closing Date, the Contingent Reorganization Shares will be duly reserved
for issuance.
4.6 PGG Subsidiaries. Each Subsidiary of PGG is a corporation duly
----------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full authority and corporate power to
conduct its business as presently being conducted. Each Subsidiary of PGG is
duly qualified to do business, and in good standing, in each jurisdiction where
the nature of its properties or business requires such qualification. All of
the outstanding shares of capital stock of each Subsidiary of PGG are validly
issued, fully paid and nonassessable and are owned of record and
29
beneficially by PGG or a wholly owned direct or indirect Subsidiary of PGG, free
and clear of all Liens. There are no outstanding subscriptions, options,
warrants, calls, rights, convertible securities, obligations to make capital
contributions or advances, voting trust arrangements, shareholders' agreements
or other agreements, commitments or understandings relating to the issued and
outstanding capital stock of any Subsidiary of PGG.
4.7 SEC Filings. The PGG Parties have filed all forms, reports and
-----------
documents required to be filed by them with the SEC since January 1, 1997, and
PGG has made available to the C/M Parties true and complete copies of (i) the
Annual Reports on Form 10-K of PGG and its predecessor issuer for the years
ended December 31, 1997, 1998 and 1999, (ii) all Annual Reports filed with the
SEC by each Broker-Dealer Subsidiary pursuant to SEC Rule 17a-5(d) for the years
ended December 31, 1997, 1998 and 1999, (iii) all other reports (including
Current Reports on Form 8-K), statements and registration statements filed by
PGG and its predecessor issuer with the SEC since December 31, 1999 and (iv) all
Form BDs, and all amendments thereto, filed by each broker-dealer or investment
advisory Subsidiary since January 1, 1997 (collectively, the "PGG SEC Filings").
The PGG SEC Filings, including all financial statements or schedules included in
them, (i) comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time of their filing (or if amended, supplemented or superseded by a later
filing, on the date of the later filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.8 PGG Financial Statements. The consolidated balance sheets and
------------------------
consolidated statements of operations, stockholders' equity and cash flows of
PGG and its Subsidiaries included in the PGG SEC Filings fairly present in all
material respects the consolidated financial position of PGG and its
Subsidiaries at their respective dates and the consolidated results of
operations of PGG and its Subsidiaries for the respective periods then ended, in
accordance with GAAP, subject, in the case of unaudited interim financial
statements, to (i) year-end adjustments (which consist of normal recurring
accruals) and (ii) the absence of explanatory footnote disclosures required by
GAAP. PGG's unaudited consolidated balance sheet at June 30, 2000 included in
the PGG SEC Filings is herein called the "Latest PGG Balance Sheet."
4.9 Absence of Certain Changes. Except as set forth in Section 4.9 of the
--------------------------
PGG Disclosure Schedule, since June 30, 2000, PGG and its Subsidiaries have
conducted their businesses only in the ordinary course, consistent with past
practice, there has not occurred a Material Adverse Effect on PGG, or any event
that could reasonably be expected to result in a Material Adverse Effect on PGG.
4.10 No Undisclosed Liabilities. Except as disclosed in the Latest PGG
--------------------------
Balance Sheet or in Section 4.10 of the PGG Disclosure Schedule, PGG and its
Subsidiaries have no liabilities or obligations, known or unknown, fixed or
contingent, other than (i) those arising since June 30, 2000 in the ordinary
course of business and consistent with past practice, (ii) liabilities and
obligations arising after the date of this Agreement without violation of
Section 6.2, or (iii) liabilities and
30
obligations that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect on PGG.
4.11 PGG Properties. PGG and its Subsidiaries have good and marketable
--------------
title to the properties and assets reflected in the Latest PGG Balance Sheet
(other than properties and assets disposed of in the ordinary course of business
since June 30, 2000, which, in the aggregate, are not material), free of all
Liens except Permitted Liens.
4.12 Taxes and Tax Returns. Except as described in Section 4.12 of the PGG
---------------------
Disclosure Schedule:
(i) all Tax Returns required to be filed with any Taxing Authority
by or on behalf of PGG or any of its Subsidiaries have been duly filed on a
timely basis in accordance with all applicable Laws;
(ii) at the time of their filings all such Tax Returns were complete
and correct;
(iii) all Taxes required to be paid by PGG or any of its Subsidiaries
on or before the date of this Agreement have been paid, and the reserves
for Taxes reflected in the Latest PGG Balance Sheet are adequate to cover
all Taxes that had not been paid, but which under GAAP were accruable,
through the date of the Latest PGG Balance Sheet;
(iv) there are no Liens for Taxes upon any assets of PGG or any of
its Subsidiaries, except Liens for Taxes not yet due for current Tax
periods ending after the date of this Agreement;
(v) there are no outstanding deficiencies, assessments or written
proposals for the assessment of Taxes proposed, asserted or assessed
against PGG or any Subsidiary of PGG, and, to the knowledge of the PGG
Parties, no grounds exist for any such assessment of Taxes;
(vi) neither PGG nor SMH is an investment company within the meaning
of Section 368(a)(2)(F) of the Code;
(vii) neither PGG nor any of its Subsidiaries is an obligor on, and
none of its assets have been financed directly or indirectly by, any tax
exempt bonds;
(viii) neither PGG nor any of its Subsidiaries is now, or has been
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, a real property holding corporation within the meaning of Section
897(c)(2) of the Code;
31
(ix) neither PGG nor any of its Subsidiaries has filed a consent under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of its assets;
(x) no extension of the statute of limitations on the assessment of
any Taxes has been granted to or applied for by PGG or any Subsidiary of
PGG;
(xi) none of the Tax Returns of PGG or any of its Subsidiaries are the
subject of an audit or examination by a Governmental Entity.
4.13 Litigation. Except as disclosed in Section 4.13 of the PGG Disclosure
----------
Schedule, there is no suit, action, investigation or proceeding pending or, to
the knowledge of the PGG Parties, threatened against PGG or any of its
Subsidiaries at Law or in equity before or by any Governmental Entity or before
any arbitrator or mediator of any kind, that is reasonably likely to have a
Material Adverse Effect on PGG, and there is no judgment, decree, injunction,
rule or order of any Governmental Entity, arbitrator or mediator to which PGG or
any PGG Subsidiary is subject that is reasonably likely to have a Material
Adverse Effect on PGG. Neither PGG Party has knowledge of any grounds on which
any suit, action, investigation or proceeding of the nature referred to in this
Section 4.13 might be commenced with any reasonable likelihood of success.
4.14 Governmental Licenses and Permits; Compliance with Laws. Except as
-------------------------------------------------------
described in the PGG SEC Filings or Section 4.14 of the PGG Disclosure Schedule,
neither PGG nor any of its Subsidiaries has received notice of any revocation or
modification of any licence, certification, tariff, permit, registration,
exemption, approval or other authorization by any Governmental Entity, the
revocation or modification of which has had or is reasonably likely to have a
Material Adverse Effect on PGG. The conduct of the business of PGG and its
Subsidiaries complies with all applicable Laws, except for violations or
failures to comply, if any, that, individually or aggregate, are not reasonably
likely to have a Material Adverse Effect on PGG.
4.15 Broker-Dealer Matters. Neither PGG nor any Subsidiary of PGG other
---------------------
than the Broker-Dealer Subsidiaries is or is required to be registered as a
broker-dealer under any Broker-Dealer Regulatory Requirement. Except as set
forth in Section 4.15 of the PGG Disclosure Schedule, and except to the extent
that any inaccuracy in the following representations and warranties is not
reasonably likely to result in a Material Adverse Effect on PGG:
(i) each Broker-Dealer Subsidiary is registered as a broker-dealer
with the SEC and under all applicable state Laws that require it to be so
registered, and such registrations are in full force and effect;
(ii) each Affiliate of each Broker-Dealer Subsidiary, and each
officer, employee, consultant, agent or independent contractor or each
Broker-Dealer Subsidiary or any such Affiliate, who is required by reason
of the nature of his employment by such Broker-Dealer Subsidiary or such
Affiliate to be registered as a broker-dealer, broker-dealer agent,
registered
32
representative or sales person with the SEC or the securities commission of
any state or any self-regulatory body or other Governmental Entity, is duly
registered or appointed as such, and such registration or appointment is in
full force and effect;
(iii) no Broker-Dealer Subsidiary nor, to the knowledge of the PGG
Parties, any Affiliate or "associated person" (within the meaning of the
Exchange Act) of any Broker-Dealer Subsidiary, is ineligible pursuant to
Section 15(b) of the Exchange Act to serve as a broker-dealer or as an
associated person to a registered broker-dealer;
(iv) each Broker-Dealer Subsidiary is a member organization in good
standing with the NASD, the Securities Investor Protection Corporation, and
such other organizations in which its membership is required in order to
conduct its business as now conducted;
(v) each Broker-Dealer Subsidiary is, and has been since it
inception, in compliance with all Broker-Dealer Regulatory Requirements
relating to its maintenance of minimum net capital and its compliance with
the maximum indebtedness-to-net-capital ratio under SEC Rule 15c3-1, its
maintenance of reserves under SEC Rule 15c3-1, the filing of quarterly and
annual reports under Section 17 of the Exchange Act and Rule 17a-5
thereunder, and all other Broker-Dealer Regulatory Requirements;
(vi) in connection with its broker-dealer activities, each Broker-
Dealer Subsidiary meets, and has met since its inception, all requirements
specified in SEC Rule 15c3-3(k)(2) for exemption from all possession,
control and reserve requirements under SEC Rule 15c3-3; and
(vii) All Subordination Agreements pertaining to indebtedness of a
Broker-Dealer Subsidiary comply with all requirements of Appendix D to SEC
Rule 15c3-1.
4.16 No Investment Company. Neither PGG nor any Subsidiary of PGG is, or
---------------------
may be deemed to be, an investment company under the Investment Company Act.
Neither PGG nor any Subsidiary of PGG provides investment advisory services to
any investment company within the meaning of the Investment Company Act.
4.17 Investment Advisor Matters. Neither PGG nor any Subsidiary of PGG is
--------------------------
or is required to be registered as an investment advisor under the Investment
Advisors Act or under any applicable state Laws. Neither PGG nor any Subsidiary
of PGG is a party to any Investment Advisory Related Agreement.
4.18 Transactions with Affiliates: Except as set forth in the PGG SEC
----------------------------
Filings or Section 4.18 of the PGG Disclosure Schedule, no Affiliate of PGG:
(i) is a party to or has any interest in any contract or agreement
with PGG or any of its Subsidiaries;
33
(ii) has any outstanding loan to or receivable from PGG or any of its
Subsidiaries; or
(iii) has any ownership interest (other than a stock ownership
interest representing less than 1% of the outstanding stock of any
corporation which is publicly traded), directly, indirectly, or
beneficially, in any customer of or supplier to PGG or any of its
Subsidiaries.
4.19 No Brokers. No broker, finder or investment banker is entitled to any
----------
brokerage, finder's or other fee or commission in connection with this Agreement
or the Reorganizations based upon arrangements made by or on behalf of either
PGG Party.
4.20 Investment Intent. Each PGG Party is an "accredited investor" within
-----------------
the meaning of Regulation D under the Securities Act. Each PGG Party will be
acquiring the CMS Shares or the CMCA Shares, as the case may be, solely for its
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution thereof. Neither PGG Party is a party to any agreement or
other arrangement for the disposition of any of the CMS Shares or the CMCA
Shares. Each PGG Party (i) is able to bear the economic risk of an investment
in the CMS Shares or CMCA Shares, as the case may be, to be acquired by it
pursuant to this Agreement, (ii) can afford to sustain a total loss of that
investment, (iii) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in the CMS Shares or the CMCA Shares, as the case may be, the PGG
Party is to receive in connection with the Reorganizations, (iv) has had an
adequate opportunity to ask questions and receive answers from the officers of
the C/M Parties concerning any and all matters relating to the transactions
contemplated by this Agreement, and (v) has asked all questions of the nature
described in the preceding clause (iv), and all those questions have been
answered to its satisfaction. Each PGG Party acknowledges that the CMS Shares
and the CMCA Shares may not be sold, transferred, or otherwise disposed of
without registration under the Securities Act or an exemption therefrom.
ARTICLE V
COVENANTS OF THE C/M PARTIES
PENDING CLOSING
The C/M Parties agree that pending the Closing:
5.1 Conduct of Business. Each Acquired Subsidiary shall conduct its
-------------------
operations according to its ordinary and usual course of business, and shall use
its commercially reasonable efforts to preserve intact its business
organization, keep available the services of its officers and employees and
maintain normal business relationships with customers, clients and others having
business relationships with it. CMH shall confer on a regular and frequent
basis with one or more designated
34
representatives of PGG to report on operational matters of materiality and to
report the general status of ongoing operations of the Acquired Subsidiaries.
CMH shall notify PGG of:
(i) any unexpected material emergency or other material change in
the normal course of business of either Acquired Subsidiary;
(ii) any significant development in any regulatory proceedings,
governmental complaints, investigations or hearings (or communication
indicating that any may be contemplated) involving an Acquired Subsidiary
and which could have a Material Adverse Effect on the Acquired
Subsidiaries; and
(iii) any matter or event which comes to the knowledge of C/M Party
and which makes or could make any representation and warranty made
concerning the C/M Parties in Article III untrue or inaccurate.
CMH shall keep PGG fully informed of such events and permit representatives
of PGG access to all materials prepared in connection with such events.
5.2 Forbearance by CMH Parties. The Acquired Subsidiaries shall not, the
--------------------------
other C/M Parties shall not cause or permit an Acquired Subsidiary to, and, in
the case of clause (vi) below, no C/M Party shall:
(i) amend its Charter Documents;
(ii) issue any shares of its capital stock or securities convertible
into or exchangeable for shares of its capital stock, or enter into any
agreement or commitment for the issuance or purchase of any such shares or
securities;
(iii) split, combine or reclassify any outstanding shares of its
capital stock;
(iv) except as contemplated in this Agreement with respect to the
Pre-Closing Distribution and the Working Capital Dividends, declare, pay or
set aside for payment any dividend or other distribution in respect of any
outstanding shares of its capital stock;
(v) incur or permit Acquired Subsidiary to incur any indebtedness
for borrowed money, except for Intercompany Indebtedness;
(vi) increase the compensation levels of its officers or employees
(other than for regularly scheduled increases for employees in the normal
course of business in connection with periodic personnel reviews) or grant
any general salary increases;
(vii) enter into any material lease agreements or other long-term
commitments;
35
(viii) acquire or negotiate for the acquisition of any business either
directly or indirectly;
(ix) sell or agree to sell all or substantially all, or any material
portion, of its assets (except in connection with the Pre-Closing
Distribution and Working Capital Dividends), or merge or consolidate, or
permit either Acquired Subsidiary to merge or consolidate with any other
Entity; or
(x) take any of the other actions or permit to occur any of the
other events specified in Section 3.9 which are within the control of the
C/M Parties.
5.3 Access and Information. The C/M Parties shall give PGG and its
----------------------
representatives access during normal business hours to all the properties,
books, contracts, commitments and records of the Acquired Subsidiaries so that
the PGG Parties may have full opportunity to make such investigation of the
Acquired Subsidiaries as they shall reasonably request in advance. The C/M
Parties will furnish PGG all information concerning the Acquired Subsidiaries
required for inclusion in any application, filing, statement or notice made by
PGG to, or filed or joined in by PGG with, any Government Entity in connection
with this Agreement or the Reorganizations. None of the information furnished
to the PGG Parties under this Section 5.3, shall, at the date furnished, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
5.4 Supplemental Information. The CM Parties shall furnish PGG copies of
------------------------
the interim monthly financial statements of each Acquired Subsidiary as soon as
practicable but in any event within 30 days after the end of each month,
together with any information ordinarily prepared in connection with such
financial statements. All such financial statements shall be prepared in
conformity with GAAP, shall present fairly in all material respects, in
accordance with GAAP, the financial position of the respective Acquired
Subsidiaries at the end of the periods covered thereby and the consolidated
results of their operations for the periods covered thereby, subject to year-end
adjustments (consisting of normal recurring accruals) and the omission of
explanatory footnote materials required by GAAP.
5.5 Confidentiality. Except for information required or appropriate for
---------------
inclusion in any application, filing, statement or notice to be filed by a C/M
Party with any Governmental Entity as contemplated in Section 5.3, all
information and data furnished to the C/M Parties by a PGG Party under this
Agreement, whether furnished orally or in writing, shall be received, held and
treated confidentially by the C/M Parties, and none of such information shall be
used in any manner for the benefit of a C/M Party or for the benefit of any
business controlled by it. As soon as practicable after any termination of this
Agreement, the C/M Parties shall return to the PGG Parties, and shall cause
their representatives to return to the PGG Parties, respectively, all documents
(and all copies thereof) obtained from them under this Agreement.
36
5.6 Consummation of Reorganizations. The C/M Parties shall use their best
-------------------------------
efforts to perform and fulfill all conditions and obligations on their part to
be performed and fulfilled under this Agreement, to the end that the
Reorganizations shall be consummated.
ARTICLE VI
PGG COVENANTS PENDING CLOSING
The PGG Parties agree that pending the Closing:
6.1 Conduct of PGG's Business. PGG and its Subsidiaries shall conduct
-------------------------
their operations according to their ordinary and usual course of business, and
shall use their best efforts to preserve intact their business organizations,
keep available the services of their officers and employees and maintain normal
business relationships with customers, clients and others having business
relationships with them.
6.2 Forbearance by PGG. PGG shall not:
------------------
(i) amend its Charter Documents;
(ii) split, combine or reclassify any outstanding shares of PGG
Common Stock;
(iii) declare, pay or set aside for payment any dividend or other
distribution in respect of any outstanding shares of PGG Common Stock; or
(iv) sell or agree to sell all or substantially all, or any material
portion, of its assets or the assets of any Subsidiary of PGG, or to merge
or consolidate, or cause or permit any Subsidiary of PGG to merge or
consolidate, with any other entity (except another Subsidiary of PGG).
6.3 Access and Information. PGG shall give the C/M Parties and their
----------------------
representatives full access during normal business hours to all the properties,
books, contracts, commitments and records of PGG and its Subsidiaries so that
the C/M Parties may have full opportunity to make such investigation of PGG and
its Subsidiaries as they shall reasonably request in advance. PGG will furnish
the C/M Parties all information concerning PGG and its Subsidiaries required for
inclusion in any application, filing, statement or notice made by any C/M Party
to, or filed or joined in by any C/M Party with, any Governmental Entity in
connection with this Agreement or the Reorganizations. None of the information
furnished to a C/M Party under this Section 6.3 shall, at the date furnished,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
37
6.4 Supplemental Information. PGG shall, within five days following each
------------------------
such filing, furnish the C/M Parties with a copy of each Current Report on Form
8-K, each Quarterly Report on Form 10-Q and each Annual Report on Form 10-K
filed by PGG with the SEC. PGG shall also furnish the C/M Parties copies of
PGG's interim monthly consolidated financial statements as soon as practicable
but in any event within 35 days after the end of each month, together with any
information ordinarily prepared in connection with such financial statements.
All financial statements included in each such Quarterly Report on Form 10-Q and
Annual Report on Form 10-K shall be prepared in conformity with GAAP, shall
present fairly in all material respects, in accordance with GAAP, the
consolidated financial position of PGG and its Subsidiaries at the end of the
periods covered thereby and the results of their consolidated operations for the
periods covered thereby, subject, in the case of unaudited interim financial
statements, to year-end adjustments (consisting of normal recurring accruals)
and the omission of explanatory footnote materials required by "GAAP" means
United States generally accepted accounting principles as in effect from time to
time.
6.5 Listing of Reorganization Shares. PGG shall use its best efforts to
--------------------------------
cause the Reorganization Shares to be listed in the Nasdaq National Market tier
of the Nasdaq Stock Market, and if such listing has not occurred on of before
the Closing, PGG shall continue to use its best efforts to cause such listing
following the Closing.
6.6 Confidentiality. Except for information required or appropriate for
---------------
inclusion in any application, filing, statement or notice to be filed by a PGG
Party with any Governmental Entity as contemplated in Section 6.3, all
information and data furnished by the C/M Parties to the PGG Parties under this
Agreement shall be received, held and treated confidentially by the PGG Parties,
and none of such information shall be used in any manner for the benefit of PGG
or any of its Subsidiaries or for the benefit of any business controlled by it
or them. As soon as practicable after any termination of this Agreement, the
PGG Parties shall return to CMH, and shall cause their representatives to return
to CMH, all documents (and all copies thereof) obtained from the C/M Parties
under this Agreement.
6.7 Consummation of Reorganizations. The PGG Parties shall use their best
-------------------------------
efforts to perform and fulfill all conditions and obligations on their part to
be performed and fulfilled under this Agreement, to the end that the
Reorganizations shall be consummated.
ARTICLE VII
MUTUAL CONDITIONS
The respective obligations of all Parties to consummate the Reorganizations
are subject to the fulfillment of each of the following conditions on or before
the Closing Date:
7.1 No Adverse Proceedings. No order entered or Law promulgated or
----------------------
enacted by any Governmental Entity shall be in effect which would prevent
consummation of the Reorganizations, and no proceeding brought by a Governmental
Entity or any other Person shall have been commenced
38
and be pending which seeks to restrain, enjoin, prevent or materially delay or
restructure the Reorganizations.
7.2 Broker-Dealer Regulatory Requirements. All consents, authorizations,
-------------------------------------
approvals, filings or exemptions required under all applicable Broker-Dealer
Regulatory Requirements in connection with the Reorganizations shall have been
obtained or filed, as applicable, and not rescinded or adversely modified.
7.3 Advisory Contract Consents. Belmont Trust Company, Investment
--------------------------
Advisory Services, Inc., Vista Analytics and Sea Cap Investment Advisors, Inc.
shall have consented, in compliance with the Investment Advisers Act, to the
deemed assignment of the applicable Investment Advisory Related Agreements.
7.4 Other Third Party Consents. The lessor under the Fort Worth Lease
--------------------------
shall have consented to its assignment to SMH as herein contemplated, and all
other required third-party consents shall have been obtained.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PGG PARTIES
The respective obligations of the PGG Parties to consummate the
Reorganizations are subject to the fulfillment of each of the following
conditions on or before the Closing Date:
8.1 Representations True at Closing. The PGG Parties shall not have
-------------------------------
discovered any material error, misstatement or omission in the representations
and warranties made by the C/M Parties in Article III; the representations and
warranties made by the C/M Parties in Article III shall be deemed to have been
made again as of the time of the Closing, and shall then be true in all material
respects; each C/M Party shall have performed and complied with all agreements
and conditions required to be performed or complied with by it at or prior to
the Closing; and the PGG Parties shall have received certificates, each dated
the Closing Date, of the President or a Vice President of CMH, to the effect set
forth in this Section 8.1.
8.2 No Adverse Changes. Since the date of this Agreement, no event shall
------------------
have occurred which has had or could be reasonably expected to have a Material
Adverse Effect on the Acquired Subsidiaries or the C/M Selling Shareholders.
8.3 Opinion of CMH Counsel. The PGG Parties shall have received an
----------------------
opinion, dated the Closing Date, of Xxxxxxx, Xxxxx, Xxxxxxxx & Xxxxx, L.L.P.,
counsel to the C/M Parties, in the form attached as Exhibit F to this Agreement.
39
8.4 Releases. The PGG Parties and the Acquired Subsidiaries shall have
--------
received a Release, in the form attached as Exhibit E to this Agreement, from
Cummer, Xxxxxx and each member of the C/M Group other than the Acquired
Subsidiaries.
8.5 NASD Compliance Audit. The PGG Parties shall be reasonably satisfied
---------------------
that no material issues have been or will be raised by the NASD in connection
with the compliance audit of CMS now being conducted by the NASD.
8.6 Employees. Except for Retained Employees and each of Cummer and
---------
Xxxxxx, no key employee of a C/M Selling Shareholder shall have indicated he or
she will not accept employment by CMS upon the Closing as contemplated in
Section 10.7.
ARTICLE IX
CONDITIONS TO C/M PARTIES OBLIGATIONS
The respective obligations of the C/M Parties to consummate the
Reorganizations are subject to the fulfillment of each of the following
conditions on or before the Closing Date:
9.1 PGG Representations True at Closing. CMH shall not have discovered
-----------------------------------
any material error, misstatement or omission in the representations and
warranties made by the PGG Parties in Article III, the representations and
warranties made by the PGG Parties in Article III shall be deemed to have been
made again as of the time of the Closing, and shall then be true in all material
respects; each PGG Party shall have performed and complied with all agreements
and conditions required to be performed or complied with by it at or prior to
the Closing; and the C/M Parties shall have received certificates, each dated
the Closing Date, of the President or Vice President of PGG, to the effect set
forth in this Section 9.1.
9.2 No Adverse PGG Changes. Since the date of this Agreement, no event
----------------------
shall have occurred which could reasonably be expected to have a Material
Adverse Effect on PGG.
9.3 Opinion of PGG's Counsel. The CMH Parties shall have received an
------------------------
opinion, dated the Closing Date, of Xxxxxx & Xxxxxx, L.L.P., counsel to the PGG
Parties, in the form attached as Exhibit G to this Agreement.
40
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 Consents and Approvals. All Parties shall use their best efforts to
----------------------
obtain before the Closing, all consents and approvals listed and disclosed in
Section 3.3 or 3.4 of the C/M Disclosure Schedule or the corresponding sections
of the PGG Disclosure Schedule
10.2 Publicity. No Party other than PGG or CMH shall issue any press
---------
release or public announcement pertaining to the Reorganizations. PGG and CMH
shall consult with each other concerning any such press release or public
announcement and shall use their best efforts to agree on its text before its
public dissemination and before making any filings with any Governmental Entity
or national securities exchange with respect to any such press release or public
announcement. In cases where PGG and CMH are unable to agree on a press release
or public announcement, the Party proposing it will not issue or make it unless
the proposing Party is required to do so by Law or by any listing agreement
with, or rules of, any national securities exchange (including the Nasdaq Stock
Market), in which case the Party so obligated shall use its reasonable efforts
to provide a copy of the press release or public announcement to the other Party
before its filing or public dissemination.
10.3 Expenses. Each PGG Party shall pay its own costs and expenses
--------
incurred in connection with the Reorganizations, and the C/M Selling
Shareholders shall pay all costs and expenses of the C/M Parties in connection
with the Reorganizations, in each case whether or not the Reorganizations are
consummated. No such expenses shall be charged to or paid by an Acquired
Subsidiary.
10.4 Conveyance Taxes. The Parties shall cooperate in the preparation of
----------------
all Tax Returns, questionnaires, applications or other documents regarding any
real property transfer tax, any stock transfer or stamp tax, or any other
similar transfer or conveyance taxes which become payable in connection with the
Reorganizations or the Pre-Closing Distribution, all of which shall be payable
by the C/M Selling Shareholders. This Section 10.4 does not apply or extend to
any federal, state, or local income Tax.
10.5 Determination and Payment of Working Capital Dividends. The amount of
------------------------------------------------------
the Working Capital Dividends shall be determined and paid, and, if applicable,
the amount of the Pre-Closing Distribution shall be adjusted, as provided in
this Section 10.5.
On or before 30 Business Days following the Closing Date, CMH shall
calculate, and shall deliver to the PGG Parties a written statement certified by
the chief financial officer of CMH (the "Settlement Statement") setting forth,
the amount of the Closing Date Working Capital and the amount of the Excess
Closing Date Working Capital or the Closing Date Working Capital Deficit, as the
case may be. The PGG Parties will grant CMH reasonable access to the books and
records of the Acquired Subsidiaries after the Closing for the purposes of
allowing CMH to calculate Closing Date Working Capital, and the C/M Selling
Shareholders will grant the PGG Parties reasonable
41
access to the books and records of the C/M Selling shareholders after the
Closing for the purpose of allowing the PGG Parties to verify Closing Date
Working Capital. The Settlement Statement shall be final and binding on the PGG
Parties and the Acquired Subsidiaries unless, within ten Business Days following
the date of delivery of the Settlement Statement, PGG notifies CMH in writing
(an "Objection Notice") that the PGG Parties and the Acquired Subsidiaries do
not accept as correct the amount of any calculation reflected in the Settlement
Statement. If PGG timely delivers an Objection Notice, then PGG and CMH shall
respectively instruct PricewaterhouseCoopers LLP and Xxxxxx, Xxxxxxx & Xxxxxxx,
L.L.P. to attempt to reach mutual agreement as to each disputed calculation made
in the Settlement Statement. All calculations mutually agreed to by the two
accounting firms within ten Business Days after the matter has been referred to
them shall be final and binding on all Parties. If within ten Business Days
after the matter has been referred to the two accounting firms, they have not
reached agreement as to all disputed calculations, then the two accounting firms
shall be respectively instructed by PGG and CMH to designate a third accounting
firm of nationally recognized standing, which (acting as experts and not as
arbitrators) shall be instructed to make, as soon as practicable after the
matter is referred to them, all calculations which remain in dispute, and the
determination of the third accounting firm shall be final and binding on all
Parties.
Once the amount of the Closing Date Working Capital has been finally
determined under the preceding provisions of this Section 10.5:
(i) if there is Excess Closing Date Working Capital, the Acquired
Subsidiaries, out of their own funds and not with any funds advanced by or
borrowed from PGG or any other Subsidiary of PGG, shall pay to the
respective C/M Selling Shareholders the respective Working Capital
Dividends declared by them pursuant to clauses (vi) and (vii) of Section
2.4; and
(ii) if there is a Closing Date Working Capital Deficit, the C/M
Selling Shareholders shall pay to the Acquired Subsidiaries, as a post-
closing adjustment of the amount of the Pre-Closing Distribution, the
amount of the Closing Date Working Capital Deficit.
Payments required by this Section 10.5 shall be made in cash within two
Business Days after the amounts and recipients thereof have been finally
determined under this Section 10.5, by wire transfer of immediately available
funds.
The fees of all accounting firms engaged to make any calculations under
this Section 10.5 shall be paid by (i) CMH if the effect of all disputed
calculations made by the accounting firms results in adjustments in favor of the
Acquired Subsidiaries by $7,000 or more in comparison to the adjustments that
would have been made had PGG and the Acquired Subsidiaries accepted the
Settlement Statement or (ii) by PGG in all other cases.
42
10.6 Qualified Retirement Plans. In this Section 10.6:
--------------------------
(i) the "CMH Plan" means the Cummer/Xxxxxx Holdings, Inc. 401(k)
Plan; and
(ii) the "PGG Plan" means the Pinnacle Global Group, Inc. 401(k)
Plan.
The CMH Plan shall fully vest as of the Closing Date the account balances
of all C/M Group employees who are participants in the CMH Plan ("Participating
Employees"), and the C/M Parties shall take all such actions, if any, as may be
necessary to provide for the distribution to or on behalf of the Participating
Employees of their vested account balances. The C/M Parties shall use their
best efforts to permit each Participating Employee to elect prior to the Closing
Date (contingent on the consummation of the Reorganizations) a direct rollover
of his or her rolloverable account balance in the CMH Plan to the PGG Plan. The
PGG Plan shall accept the direct rollover, as provided in Section 401(a)(31) of
the Code, from the CMH Plan.
10.7 Hiring of Employees. Immediately upon the Closing, CMS shall, and the
-------------------
PGG Parties shall cause CMS to, offer employment to all employees of the C/M
Parties, at the same rate of compensation at which such employees are now being
compensated by CMH, except for the Retained Employees and Cummer and Xxxxxx, who
shall be employed by SMH upon the terms and for the compensation set forth in
the New Employment Agreements.
10.8 Compensation of Retained Employees. CMH shall compensate each
----------------------------------
Retained Employee for services performed by such Retained Employee for an
Acquired Subsidiary following the Closing at the same rate of compensation (as
set forth in Section 3.25 of the C/M Disclosure Schedule) at which such Retained
Employee was being compensated by CMH prior to the Closing. On each payroll
date for a Retained Employee, PGG will reimburse CMH for CMH's compensation of
such Retained Employee for such post-Closing services until the earlier to occur
of (i) termination of such Retained Employee's employment with CMH, (ii)
December 31, 2000, or (iii) such earlier date as mutually agreed upon in writing
by CMH and PGG.
10.9 Lock-Up Agreements. Each C/M Selling Shareholder agrees that for a
------------------
period of one year following the Closing Date such C/M Selling Shareholder will
not, without the prior written consent of the Board of Directors of PGG, sell,
offer to sell, solicit an offer to buy, contract to sell, grant any option to
purchase, distribute or otherwise transfer any shares of PGG Common Stock or any
securities convertible into or exercisable for shares of PGG Common Stock. The
foregoing shall not, however, prohibit CMCP from distributing its Reorganization
Shares to CMH at any time during such one-year period.
10.10 Name Changes. As soon as practicable after the Closing, but no later
------------
than thirty days after the Closing Date, CMH shall, and shall cause each member
of the C/M Group, other than CMH, that is an entity and whose name contains the
surname of either Xxxxxx or Xxxxxx, to change its name to one not containing
either of those surnames. Following the Closing, CMH shall use its best efforts
to change its name to one not containing the surname of either Xxxxxx or Xxxxxx.
43
10.11 Future Brokerage Business. The C/M Parties agree that for so long
-------------------------
after the Closing as (i) CMH or other members of the C/M Group shall require
prime brokerage services in connection with the operation of their respective
businesses, and (ii) such services are offered by SMH on competitive terms, the
C/M Parties shall direct all of their prime brokerage business to SMH unless (a)
the Boards of Directors, or equivalent governing bodies, of such C/M Parties
determine, based upon a written opinion of counsel (a copy of which shall have
been provided to PGG), that such activities by the C/M Parties constitute a
breach of fiduciary duty owed by such C/M Parties to such business and (b) such
C/M Parties shall have given advance written notice to the PGG Parties of their
intention to direct their prime brokerage business elsewhere. The provisions of
this Section 10.11 shall remain in effect for a period of five years after the
Closing Date.
10.12 Post Closing Capital Contribution. Immediately following the Closing,
---------------------------------
the PGG Parties shall contribute to the capital of CMS such amount as may be
necessary in order for CMS to be in compliance with the minimum net capital
requirements of SEC Rule 15c3-1.
10.13 Securities Law Matters. The C/M Selling Shareholders agree that all
----------------------
certificates representing the Reorganization Shares will be inscribed with the
following restrictive legend:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or the securities laws of any state.
Such shares may not be sold, transferred or otherwise disposed of in the
absence of such a registration unless the Company is furnished with an
opinion of counsel reasonably satisfactory to the Company to the effect that
the transfer is exempt from registration under those laws."
10.14 Rule 144 Reports. For as long as (i) either C/M Selling Shareholder
----------------
or (ii) any shareholder of CMH who may later receive Reorganization Shares upon
any distribution of Reorganization Shares by CMH to its shareholders and who is
then an "affiliate" of PGG within the meaning of SEC Rule 144, remains subject
to SEC Rule 144 with respect to the sale of shares of PGG Common Stock that may
be owned by any such Person, PGG will make available to such Person the benefit
of rules and regulations of the SEC which may permit such Person to sell shares
of PGG Common Stock without registration by:
(i) making and keeping "current public information" "available" (as
both those terms are defined in Rule 144) at all times;
(ii) timely filing with SEC in accordance with all applicable rules
and regulations, all reports and other documents (x) required of PGG for
Rule 144, as it may be amended from time to time (or any rule, regulation,
or statute replacing Rule 144) to be available and (y) required to be filed
under Section 15d of the Exchange Act even if PGG's duty to file those
reports or documents is suspended or otherwise terminated under the terms of
Section 15d; and
44
(iii) furnishing a written statement by PGG that it has complied with
the reporting requirements of the Exchange Act and Rule 144, together with
a copy of the most recent annual or quarterly report of PGG and such
reports and documents filed by PGG with the SEC as may reasonably be
requested by any such Person.
10.15 Restrictive Covenants. Each C/M Selling Shareholder agrees that
---------------------
during the five-year period beginning on the Closing Date (the "Restricted
Period"), it will not, and will not cause or permit any other member of the C/M
Group to anywhere in the United States, directly or indirectly, for its own
account, or the account of others:
(i) engage in the investment banking, merchant banking, securities
brokerage, asset management or investment advisory businesses in
competition with PGG or any of its Subsidiaries or Affiliates (the
"Restricted Businesses"), unless expressly approved by PGG;
(ii) solicit, accept or perform for hire or compensation any
services of a type currently performed by PGG or its Subsidiaries or
Affiliates for any of their clients or customers;
(iii) request or advise any client or customer of PGG or any of its
Subsidiaries or Affiliates to withdraw, reduce, cut back or cancel any of
its business with PGG or any of its Subsidiaries or Affiliates;
(iv) induce or attempt to influence any employee of PGG or any of
its Subsidiaries or Affiliates to terminate his or her employment with PGG
or any of its Subsidiaries or Affiliates;
(v) employ or cause to be employed any individuals employed by PGG
or any of its Subsidiaries or Affiliates during the Restricted Period;
(vi) disclose or communicate to any other Person the names of the
customers or clients of PGG or any of its Subsidiaries or Affiliates; or
(vii) use for its own benefit or communicate or divulge to, or use
for the benefit of, any Person any confidential information trade secrets
or other proprietary information discovered by or known to either C/M
Selling Shareholder by reason of its ownership of or prior association with
either Acquired Subsidiary.
Nothing in this Section 10.15 shall prohibit any member of the C/M Group
from:
(i) owning, managing and disposing of and for its own account those
portfolio securities and investments and other assets that will be owned by
the members of the C/M Group immediately following the Closing, and
investing for its own account any proceeds from the sale or disposition
thereof; or
45
(ii) acting as a general partner of and providing administrative or
investment management services to ISP;
provided that (x) neither the nature nor scope of the operations of ISP or
CMH shall be expanded beyond that of a private investment entity and (y) no
member of the C/M Group shall seek, solicit or accept any clients or
customers or any new partners or shareholders (exclusive of new partners or
shareholders admitted by reason of interest transfers from other partners
or shareholders) of or investments in or capital contributions to ISP or
CMH.
10.16 C/M Software. CMH hereby grants to CMS a royalty free perpetual
------------
nonexclusive license to use all C/M Software owned by CMH and an assignment of,
or a royalty free perpetual nonexclusive sublicense to use, as appropriate, all
C/M Software that is licensed to CMH.
ARTICLE XI
TAX MATTERS
11.1 Tax Returns. CMH shall cause the Acquired Subsidiaries to be
-----------
included in the consolidated federal income Tax Returns, and in any other
required state and local consolidated, affiliated, combined, unitary or other
similar group income Tax Returns of the C/M Consolidated Group for all periods
for which the Acquired Subsidiaries are required to be so included. CMH shall
timely prepare and file or cause to be prepared and filed, all Income Tax
Returns of or including either Acquired Subsidiary for all Pre-Closing Tax
Periods (other than Tax Returns for Straddle Periods) and all non-income Tax
Returns due on or before the Closing Date. PGG and the Acquired Subsidiaries
shall timely prepare and file, or cause to be prepared and filed, all non-income
Tax Returns for Pre-Closing Tax Periods that are due after the Closing Date and
all Tax Returns of the Acquired Subsidiaries for the Straddle Periods and any
Post-Closing Tax periods.
11.2 Responsibility for Taxes. CMH shall be responsible for the payment
------------------------
of all income Taxes relating to Tax Returns for Pre-Closing Tax Periods and
shall be entitled to all refunds of income Taxes relating to such Tax Returns.
Subject to Section 11.7, the PGG Parties and the Acquired Subsidiaries shall be
responsible for the payment of all Taxes relating to Tax Returns of the Acquired
Subsidiaries for all Straddle Periods and any other Post-Closing Tax Period.
11.3 Cooperation. After the Closing Date, the Parties shall provide each
-----------
other with such cooperation and information relating to the Acquired
Subsidiaries as any Party reasonably may request in filing any Tax Return (or
amended Tax Return) or refund claim, determining any Tax liability or a right to
a refund or effectuating the terms of this Agreement, including the execution
and delivery of such powers of attorney as are necessary to carry out the intent
of this Article XI. The Parties shall retain all Tax Returns, schedules, work
papers and other material documents relating thereto, until the seventh
anniversary of the Closing Date or, if later, the expiration of any relevant
statute of limitations (and, to the extent notified by any Party, any extensions
thereof), and, unless such Tax Returns and other documents are offered and
delivered to the C/M Parties or the PGG
46
Parties, as applicable, until the final determination of any Tax in respect of
such years. Any information obtained by a Party under this Section 11.3 shall be
kept confidential, except as may be otherwise necessary in connection with
filing any Tax Return (or amended Tax Return) or refund claim, determining any
Tax liability or a right to a refund, conducting or defending any audit or other
proceeding in respect of Taxes or otherwise effectuating the terms of this
Agreement. Notwithstanding the foregoing, no Party, nor any of its Affiliates,
shall be required unreasonably to prepare any document, or determine any
information not then in its possession, in response to a request under this
11.3; provided, however, no request shall be deemed unreasonable if made in
response to the request of a Taxing Authority for information or documents not
in the possession of the Party receiving the request nor otherwise reasonably
available to it.
11.4 Straddle Periods. PGG shall provide CMH with copies of each Straddle
----------------
Period Tax Return at least 30 days before its due date (giving effect to any
extensions thereto), accompanied by a statement calculating in reasonable detail
the C/M Parties' indemnification obligation pursuant to Section 11.7 (the "Tax
Indemnification Statement"). CMH shall have the right to review each such
Straddle Period Tax Return and the related Tax Indemnification Statement before
the filing of the Straddle Period Tax Return. If CMH disputes any amounts shown
due on any such Tax Returns or the amount calculated in the related Tax
Indemnification Statement, CMH and PGG shall consult and attempt to resolve in
good faith any issues arising as a result of the review of such Straddle Period
Tax Return and Tax Indemnification Statement. If CMH agrees to the Tax
Indemnification Statement amount, CMH shall pay to PGG an amount equal to the
Taxes shown on the Tax Indemnification Statement not later than three Business
Days before the due date (including any extensions thereof) for payment of Taxes
with respect to the related Straddle Period Tax Return. If CMH and PGG are
unable to resolve any dispute within 30 days after CMH's receipt of such
Straddle Period Tax Return and Tax Indemnification Statement, the dispute shall
be resolved by PricewaterhouseCoopers, acting as an expert and not as an
arbitrator (the "Independent Auditor") which shall resolve any issue in dispute
as promptly as practicable. One-half of all fees and disbursements of the
Independent Auditor shall be paid by CMH and one-half shall be paid by PGG. If
the Independent Auditor is unable to make a determination with respect to any
disputed issue before the due date (including any extensions) for the filing of
the Straddle Period Tax Return in question, PGG shall file, or shall cause to be
filed by the Acquired Subsidiaries, such Straddle Period Tax Return without such
determination having been made. Upon delivery to CMH and PGG by the Independent
Auditor of its determination, CMH shall pay to PGG any Taxes with respect to
such Straddle Period Tax Return which the Independent Auditor determined to be
the proper amount chargeable to CMH pursuant to this Section 11.4. The
determination by the Independent Auditor shall be final, conclusive and binding
on the Parties.
11.5 Refunds and Credits. Any refunds and credits of Taxes of the
-------------------
Acquired Subsidiaries or similar benefit (including any interest or similar
benefit) received from or credited thereon by the applicable Taxing Authority (a
"Tax Benefit") with respect to (i) any Pre-Closing Tax Period or (ii) Taxes for
which CMH has indemnified the PGG Parties and the Acquired Subsidiaries under
this Agreement, shall be for the account of CMH, and if received or used by the
PGG Parties or an Acquired Subsidiary, shall be paid to CMH within ten Business
Days after the PGG Parties or an
47
Acquired Subsidiary receives such refund or uses such credit. The PGG Parties
shall cause the Acquired Subsidiaries to timely file for any Tax Benefit
pursuant to this Section 11.5. Except as provided in the next sentence, any
refunds or credits with respect to any Straddle Period shall be apportioned
between CMH, on the one hand, and the Acquired Subsidiaries, on the other hand,
on the basis of an interim closing of the books. In the case of a refund or
credit attributable to any Taxes that are imposed on a periodic basis and are
attributable to a Straddle Period, other than Taxes based upon or related to
gross or net income or receipts, the allocation of such Taxes to CMH shall be
deemed to be the amount of such Taxes for that Straddle Period multiplied by a
fraction the numerator of which is the number of days in the Straddle Period
ending on the Closing Date and the denominator of which is the number of days in
the Straddle Period.
11.6 Amended Returns. Neither CMH nor any of its Affiliates shall seek any
---------------
Tax refund, or amend any Tax Return, which would have the effect of increasing
the Taxes of an Acquired Subsidiary for any Pre-Closing Tax Period; however, the
foregoing shall not apply to any amended Tax Return which may be required by
applicable Law following resolution of a Tax dispute conducted in accordance
with this Agreement. Neither PGG nor an Acquired Subsidiary, or any of their
respective Affiliates, shall amend, or take any similar action with respect to,
any Tax Return filed by CMH or any of its Affiliates with respect to any Pre-
Closing Period without the prior written consent of CMH; provided, however, that
the foregoing shall not apply to any amended Tax Return which may be required by
applicable Law following resolution of a Tax dispute conducted in accordance
with this Agreement, but in such event PGG and/or the Acquired Subsidiary will
provide a copy of the amended return to CMH.
11.7 Tax Indemnity.
-------------
(a) Income Taxes. CMH shall indemnify and hold harmless the PGG
------------
Parties and the Acquired Subsidiaries, and their respective Affiliates,
from and against all liability for (i) income Taxes attributable to the
Pre-Closing Tax Period and, in the case of any Straddle Periods, for that
portion of the Straddle Period that ends on the Closing Date, and (ii) any
liability (as a result of a Treasury Regulation (S) 1.1502-6 or otherwise)
for Taxes of the C/M Consolidated Group or any other corporation which is
or has been affiliated with CMH (other than an Acquired Subsidiary). PGG
shall indemnify and hold harmless CMH from and against all liability for
income Taxes for any Post-Closing Tax Period and, in the case of any
Straddle Period, for that part of the Straddle Period that begins after the
Closing Date.
(b) Indemnity for Non-Income Taxes. CMH shall indemnify and hold
------------------------------
harmless the PGG Parties, the Acquired Subsidiaries and their respective
Affiliates from and against all liability for non-income Taxes attributable
to any Pre-Closing Period. PGG shall indemnify and hold harmless the CMH
and its respective Affiliates from and against all liability for non-income
taxes attributable to any Post-Closing Period.
(c) Prorations. In determining the responsibility of CMH and PGG for
----------
Taxes attributable to any Straddle Period, Taxes based upon or related to
gross or net income or receipts shall be apportioned on the basis of an
interim closing of the books as of the Closing Date, and all other Taxes
shall be prorated on a daily basis.
48
11.8 Tax Claims. If a claim is made by any Taxing Authority, which, if
----------
successful, might result in an indemnity payment to PGG, an Acquired Subsidiary
or any Affiliate thereof, PGG shall promptly notify CMH in writing (a "Tax
Notice") of such claim (a "Tax Claim"). If a Tax Notice is not given to CMH
within a sufficient period of time to allow CMH effectively to contest the Tax
Claim, or in reasonable detail to apprise CMH of nature of the Tax Claim, in
each case taking into account the facts and circumstances with respect to such
Tax Claim, CMH shall have no liability for such Tax Claim to the extent that
CMH's position or defense is materially prejudiced as a result thereof.
With respect to any Tax Claim, CMH shall have the right to control and
conduct all proceedings and negotiations in connection with the Tax Claim
(including selection of counsel) and, without limiting the foregoing, may in its
sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and xxx for
a refund where applicable Law permits such refund suits or contest the Tax Claim
in any permissible manner. PGG shall take any actions reasonably necessary to
enable CMH to control and negotiate all such Tax Claims. PGG or its designee
shall have the right to participate fully in such proceedings and negotiations
(including with counsel of its choice), at its sole expense, and CMH shall
reasonably cooperate with PGG in connection with such participation. If CMH is
not permitted to assume the defense or control the conduct of such Tax Claim, no
settlement with respect to any assessment may be effected without the prior
written consent of CMH. If CMH elects not to control and conduct the
proceedings and negotiations in connection with a Tax Claim, CMH shall, within
30 days of receipt of a Tax Notice with respect to such Tax Claim (the "Tax
Notice Period"), notify PGG in writing of its intention not to control and
conduct the proceedings and negotiations in connection with such Tax Claim. In
that event, PGG may control, or cause its designee to control, and conduct such
proceedings and negotiations in such manner as it may deem appropriate, and CMH
shall have the right to participate fully in such proceedings and negotiations
(including with counsel of its choice), at its sole expense, and PGG shall
reasonably cooperate with CMH and its accountants and other representatives in
connection with such participation.
Notwithstanding the forgoing, CMH shall not be entitled to settle any Tax
Claim if the settlement would be prejudicial to the PGG Parties or an Acquired
Subsidiary for any Tax period for which CMH has not agreed to indemnify PGG or
an Acquired Subsidiary pursuant to Section 11.7, unless CMH notifies PGG in
writing of its intention to settle such Tax Claim at least twenty days prior to
the date of the proposed settlement. In that event, PGG may control, or cause
its designee to control, and conduct such proceedings and negotiations regarding
such Tax Claim in such manner as it may deem appropriate at its sole expense,
and CMH shall have the right to participate fully in such proceedings and
negotiations at its sole expense, and CMH and PGG shall reasonably cooperate
with each other and with their respective accountants and other representatives
in connection with such participation and the final resolution and settlement of
the Tax Claim.
49
ARTICLE XII
NATURE AND SURVIVAL
OF
REPRESENTATIONS AND WARRANTIES
12.1 Nature of Statements. All, but only those, statements contained in
--------------------
this Agreement or a Disclosure Schedule or certificate delivered by or on behalf
of a Party under this Agreement shall be deemed representations and warranties
made by that Party in connection with the transactions contemplated by this
Agreement.
12.2 Survival of Representations and Warranties. Regardless of any
------------------------------------------
investigation made at any time by or on behalf of any Party or of any
information any Party may have as a result of any such investigation, all
representations and warranties made by the respective Parties shall survive the
Closing and shall continue in effect for three years thereafter. If a bona fide
claim is asserted in writing before the expiration of the survival period of a
representation or warranty, that representation or warranty shall survive until
the claim is settled, adjudicated or otherwise resolved.
ARTICLE XIII
INDEMNIFICATION
The respective indemnification obligations of the Parties are:
13.1 Indemnification by the C/M Parties. The C/M Parties (other than the
----------------------------------
Acquired Subsidiaries from and after the Closing) jointly and severally agree to
pay and to indemnify and hold harmless and defend each PGG Party and its
Affiliates, and their respective successors and assigns from and against any and
all Damages caused by or arising out of or in respect of:
(i) any debt, obligation or liability of an Acquired Subsidiary,
whether fixed or contingent, known or unknown, existing at the Closing Date
or arising after the Closing Date and based on or arising out of any act or
event occurring or any condition or circumstances existing on or before the
Closing Date, except for the Retained Liabilities;
(ii) any breach or default in the performance by any C/M Party of
any covenant or agreement of a C/M Party contained in this Agreement; and
(iii) any breach of warranty or inaccurate or erroneous
representation made by a C/M Party in Article III of this Agreement.
50
13.2 Indemnification by the PGG Parties. The PGG Parties jointly and
----------------------------------
severally agree to pay and to indemnify and hold harmless and defend each C/M
Party and its Affiliates (but not either Acquired Subsidiary after the Closing),
and their respective successors and assigns from and against any and all Damages
caused by or arising out of or in respect of:
(i) any Retained Liabilities;
(ii) any breach or default in the performance by any PGG Party of
any covenant or agreement of such PGG Party contained in this Agreement;
and
(iii) any breach of warranty or inaccurate or erroneous
representation made by such PGG Party in Article IV of this Agreement.
13.3 Requests for Indemnification. If any Party (an "Indemnified Party")
----------------------------
becomes aware of a fact, circumstance, claim, situation, demand or other matter
for which it or any other Indemnified Party has been indemnified under this
Article XIII (any such item being herein called an "Indemnity Matter"), the
Indemnified Party shall give prompt written notice of the Indemnity Matter to
the Indemnifying Party, requesting indemnification therefor, specifying the
nature of and specific basis for the Indemnity Matter and the amount or
estimated amount thereof to the extent then feasible; provided, however, a
failure to give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of the Indemnifying Party are actually
materially prejudiced by such failure. The Indemnifying Party shall have the
right to assume the defense or investigation of such Indemnity Matter and to
retain counsel (who shall be reasonably satisfactory to the Indemnified Party)
and other experts to represent the Indemnified Party and shall pay the fees and
disbursements of such counsel and other experts. If within 30 days after
receipt of the request (or five days if litigation is pending) the Indemnifying
Party fails to give notice to the Indemnified Party that the Indemnifying Party
assumes the defense or investigation of the Indemnity Matter, an Indemnified
Party may retain counsel and other experts (whose fees and disbursements shall
be at the expense of the Indemnifying Party) to file any motion, answer or other
pleading and take such other action which the Indemnified Party reasonably deems
necessary to protect its interests or those of the Indemnifying Party until the
date on which the Indemnified Party receives such notice from the Indemnifying
Party. If an Indemnifying Party retains counsel and other experts, any
Indemnified Party shall have the right to retain its own counsel and other
experts, but the fees and expenses of such counsel and other experts shall be at
the expense of the Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party mutually agree to the retention of such counsel and other
experts or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same counsel would, in the opinion of
counsel retained by the Indemnifying Party, be inappropriate due to actual or
potential differing interests between them.
If requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in contesting any
Indemnity Matter which the Indemnifying Party defends, or, if appropriate and
related to the Indemnity Matter in question, in making any
51
counterclaim against the person asserting the Indemnity Matter, or any cross-
complaint against any person. No Indemnity Matter may be settled by the
Indemnified Party without the consent of the Indemnifying Party, which consent
will not be unreasonably withheld. Unless the Indemnifying Party agrees in
writing that the Damages to the Indemnified Party resulting from such settlement
are fully covered by the indemnities provided herein and that such Damages are
fully compensable in money, no Indemnity Matter may be settled without the
consent of the Indemnified Party, which consent will not be unreasonably
withheld. Except with respect to settlements entered without the Indemnified
Party's consent pursuant to the immediately preceding sentence, to the extent it
is determined that the Indemnified Party has no right under this Article XIII to
be indemnified by the Indemnifying Party, the Indemnified Party shall promptly
pay to the Indemnifying Party any amounts previously paid or advanced by the
Indemnifying Party with respect to such matters pursuant to this Article XIII.
After the delivery of a notice of an Indemnity Matter hereunder, at the
reasonable request of the Indemnifying Party, the Indemnified Party shall grant
the Indemnifying Party and its representatives full and complete access to the
books, records and properties of the Indemnified Party to the extent reasonably
related to the matters to which the notice relates. The Indemnifying Party will
not disclose to any third person (except its representatives) any information
obtained pursuant to the preceding sentence which is designated as confidential
by the Indemnified Party and which is not otherwise generally available to the
public or not already within the knowledge of the Indemnifying Party, except as
may be required by applicable law. The Indemnifying Party shall request its
representatives not to disclose any such information (unless already within its
knowledge or as may be required by applicable law). All such access shall be
subject to the normal safety regulations of the Indemnified Party, and shall be
granted under conditions which will not unreasonably interfere with the business
and operations of the Indemnified Party.
13.4 Payment in Shares. If any C/M Party is required to indemnify any PGG
-----------------
Party or its Affiliates under this Article XIII, it may, at its election,
satisfy, in whole (to the extent sufficient for the purpose) or in part, the
indemnification obligation by tendering to the Indemnified Party shares of PGG
Common Stock having an aggregate fair market value equal to the Damages required
to be indemnified against by the C/M Party. For purposes of this Section 13.4,
"fair market value" means the average of the closing bid and asked prices if the
PGG Common Stock is traded on the over-the-counter market, or the closing price
on a securities exchange (except that if there was no trading in PGG Common
Stock on the date of the payment, the closing price on the earliest preceding
day during which there was trading in the PGG Common Stock shall be used).
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 Amendment. This Agreement may be amended only by a written instrument
---------
executed by PGG on behalf of all PGG Parties and CMH on behalf of all C/M
Parties.
52
14.2 Waiver. At any time on or before the Closing Date, each of the
------
Parties may (i) extend the time for the performance of any of the obligations or
other act of any of the other Parties, (ii) waive any inaccuracies in the
representations and warranties made in this Agreement or in a Disclosure
Schedule of a Party, (iii) waive compliance with any of the agreements or
conditions of this Agreement which may be legally waived, and (iv) grant
consents under this Agreement. Any such extension, waiver or grant shall be
valid only if evidenced by a written instrument executed by the Party giving it.
Any such extension, waiver or grant on behalf of (i) the PGG Parties need only
be executed by PGG on behalf of all PGG Parties, and (ii) the C/M Parties need
only be executed by CMH on behalf of all C/M Parties.
14.3 Termination. This Agreement may be terminated at any time before the
-----------
Closing by:
(i) the mutual consent of the Boards of Directors of PGG and CMH;
(ii) by the Board of Directors of PGG or CMH if the Reorganizations
have not been consummated on or before October 31, 2000 (or any later date
which may be agreed to by the mutual written consent of the respective
Board of Directors of PGG and CMH); provided, however, that such right to
terminate this Agreement shall not be available to any Party that has
breached in any material respect its obligations under this Agreement in
any manner that has proximately contributed to the failure of the
Reorganizations to occur on or before such date, and provided, further,
that this Agreement shall be extended not more than 45 days after October
31, 2000 if (x) the Reorganizations have not been consummated as a result
of the failure to receive the approvals or consents set forth in Sections
7.2 through 7.4 and (y) the Parties are diligently pursuing such approvals
and consents.
14.4 Consequences of Termination. If this Agreement is terminated as
---------------------------
provided in Section 14.3, it shall become void and there shall be no liability
or obligation on the part of any Party or their respective officers or
directors, except that the provisions of Sections 5.6 and 6.6, shall survive
such a termination. Nothing in this Section 14.4 shall, however, relieve any
Party from any liability for any breach of this Agreement.
ARTICLE XV
GENERAL PROVISIONS
15.1 Non-Business Days. If the date on which any action (including the
-----------------
delivery of notices) to be taken under this Agreement falls on a day which is
not a Business Day, the action will be deemed timely taken if on the next
following Business Day.
15.2 Notices. All notices or other communications which are required or
-------
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered
53
in person or transmitted by telecopier (with receipt confirmed) to a Party at
the address or telecopy number, as applicable, set forth below (as any such
address or telecopier number may be changed from time to time by notice
similarly given):
(i) if to either PGG Party, to:
Pinnacle Global Group, Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, XX
President and Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Xx.
Telecopy No.: (000) 000-0000
(ii) if to any CMH Party, to:
Cummer/Xxxxxx Holdings, Inc.
0000 Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, President
Telecopy No.: (000) 000-0000
with copy to:
Xxxxxxx, Xxxxx, Xxxxxxxx & Xxxxx, L.L.P.
000 Xxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
15.3 Entire Agreement. This Agreement, its Exhibits, the Disclosure
----------------
Schedules, and all documents delivered under this Agreement, constitute the
entire agreement, and supersede all of the prior agreements and undertakings,
both written and oral, among the Parties, or any of them, with respect to the
subject matter of this Agreement.
54
15.4 Assignment; Binding Effect. This Agreement may not be assigned by any
--------------------------
of its Parties. Subject to the preceding sentence, this Agreement shall be
binding upon the Parties and their respective successors and assigns.
15.5 Counterparts. This Agreement may be executed in counterparts which
------------
together shall constitute a single agreement. Delivery by telephonic facsimile
transmission of a signed counterpart of this Agreement shall be effective as
delivery of a manually signed counterpart.
15.6 Governing Law; Jurisdiction. This Agreement and the rights and
---------------------------
obligations of the parties created hereby shall be governed by the internal Laws
of the State of Texas without regard to its conflict of law rules. The Parties
irrevocably consent to the non-exclusive jurisdiction of the courts of the State
of Texas in connection with any dispute between or among them arising under this
Agreement.
15.7 Severability of Provisions. If a provision of this Agreement or its
--------------------------
application to any Person or circumstance, is held invalid or unenforceable in
any jurisdiction, to the extent permitted by law, such provision or the
application of such provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable and in other jurisdictions, and the
remaining provisions of this Agreement, shall not be affected.
15.8 Joint Drafting. This Agreement and its Exhibits have been jointly
--------------
drafted by the Parties and their counsel. Neither this Agreement nor any of its
Exhibits shall be construed against any Party based on its authorship.
15.9 Captions. The article and section headings in this Agreement are for
--------
convenience only, and shall not affect the meaning or interpretation of this
Agreement.
15.10 No Third-Party Beneficiaries. There are no third-party beneficiaries
----------------------------
of this Agreement, except that the respective Affiliates of the Parties are
entitled to the benefits of the respective indemnification obligations of the
Parties under Article XIII.
[SIGNATURE PAGE FOLLOWS]
55
IN WITNESS WHEREOF, the Parties have duly executed this Agreement, all as
of the date first written above.
PGG PARTIES:
PINNACLE GLOBAL GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx XX
----------------------------------------
Xxxxxx X. Xxxxxxxx XX, President and
Chief Executive Officer
XXXXXXX XXXXXX XXXXXX INC.
By: /s/ Xxx X. Xxxxxx
----------------------------------------
Ben. X. Xxxxxx, President and
Chief Executive Officer
CMH PARTIES:
CUMMER/XXXXXX HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
CUMMER/XXXXXX SECURITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx, President
[Signature Page to the Agreement and Plan of Reorganization]
CUMMER/XXXXXX CAPITAL PARTNERS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx, President
CUMMER/XXXXXX CAPITAL ADVISORS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx, President
[Signature Page to the Agreement and Plan of Reorganization]
JOINDER
By their signatures appearing below, Xxxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx
hereby severally join in the execution of the foregoing Agreement and Plan of
Reorganization to evidence their agreement to (i) deliver the respective New
Employment Agreements to which they are to be parties as contemplated in Section
2.5 of the Agreement and Plan of Reorganization and to deliver a Release as
contemplated in Section 8.4 of the Agreement and Plan of Reorganization, in each
case upon the closing of the Reorganizations, and (ii) to be bound by and
observe and perform all restrictions and obligations imposed on the members of
the C/M Group by the Agreement and Plan of Reorganization.
/s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxx, individually
/s/ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx, individually
[Joinder to the Agreement and Plan of Reorganization]
Exhibit A
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of October
_________, 2000, between Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation (the
"Company"), and Xxxxxxx X. Xxxxxx (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company, a wholly owned subsidiary of Pinnacle Global Group,
Inc. ("Pinnacle"), desires to employ the Employee, and the Employee desires to
be so employed, on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
1. Terms and Duties. The Company shall employ the Employee under the
----------------
terms and conditions of this Agreement, for a term of three years unless
earlier terminated in accordance with the terms of this Agreement. The Employee
accepts such employment and agrees to serve the Company on a full-time basis
(except as may be otherwise permitted under Section 3(c) below) as its
President, Fixed Income Division. The Employee shall have such other duties and
responsibilities as the Board of Directors of the Company shall assign to him
for its affiliated entities during such period.
2. Compensation. During the term of this Agreement, the Company shall
------------
pay the Employee the following compensation.
(a) In consideration of the services to be rendered by the Employee
to the Company, the Company will pay to the Employee a base salary at the
rate of $________ per annum. The Employee's salary shall be payable on a
semi-monthly basis or as the Company's pay practices shall be established
or modified from time to time, but no less than once per month. Salary
payments shall be subject to all applicable federal and state withholding,
payroll and other taxes.
(b) The Employee shall be eligible for the granting of awards under
Pinnacle's 1998 Incentive Plan. The Employee shall be eligible for any
bonuses the Company may determine to pay to its key employees, provided,
however, that any such bonus, if paid, shall be at the sole and absolute
discretion of the Company; the Company may, in its discretion, pay bonuses
to some employees and not other employees (including the Employee); and, if
the Company pays any such bonuses, such bonuses shall be paid (if
applicable) after the end of the year in which they are earned.
-1-
(c) The Company agrees that it will reimburse the Employee for all
reasonable business expenses incurred by him during the term of the Employee's
employment hereunder in connection with the performance of services hereunder,
provided the Employee provides reasonable documentation supporting the expenses
according to the Company's policies relating to reimbursed expenses for its
employees.
(b) The Employee will also be entitled to participate on the same basis
with all other employees of the Company, subject to the same qualifications, in
the Company's standard employee benefits package generally available for all
other employees of the Company, including health, disability and life insurance
programs.
3. Scope.
------
(a) While the Employee is employed hereunder, he shall use his best
efforts to promote the interests of the Company consistent with his normal
duties.
(b) This Agreement is entered into as part of the acquisition
("Transaction") by Pinnacle or a Pinnacle subsidiary of the stock of
Cummer/Xxxxxx Securities, Inc. and Cummer/Xxxxxx Capital Advisors, Inc. (the
"Acquired C/M Companies"), both of which were direct or indirect wholly owned
subsidiaries of Cummer/Xxxxxx Holdings, Inc. ("CMH"). The Employee, as a
shareholder of CMH, expects to benefit from the Transaction, and part of the
valuable consideration received by Pinnacle in the Transaction consisted of the
goodwill, customer relations, vendor relations, employee relations and
confidential business information and trade secrets of the Acquired C/M
Companies. Thus, without the Employee's commitments to comply with the
requirements of this Agreement, including the non-compete covenants in this
Xxxxxxxxx 0, Xxxxxxxx and the Company would not have entered into the
Transaction, and the Employee acknowledges this.
(c) Therefore, the Employee hereby agrees that during the Employee's
employment hereunder, and for a period of two years after the Effective Date of
Termination (as that term is defined below), the Employee covenants that he
shall not in any manner, directly or indirectly, either through any form of
ownership, or as a director, officer, principal, agent, employee, employer,
advisor, consultant, partner or in any individual or representative capacity
whatsoever, either for his own benefit or for the benefit of any other person,
without first getting the written consent of the Board of Directors of Pinnacle,
compete with the Company, Pinnacle, or any of Pinnacle's subsidiaries and other
affiliated entities, subject to the exceptions stated below (the Company,
Pinnacle, and Pinnacle's subsidiaries and other affiliated entities being deemed
to constitute the "Company" for purposes of this paragraph 3). The geographical
area of these non-compete covenants shall be limited to the United States of
America. The following is a list (but is not intended to be an exhaustive list)
of acts which shall be considered violations of this Agreement: (i) engage in
the business of securities brokerage, prime brokerage, asset management, or
investment banking or providing investment advisory services; (ii) canvas,
solicit, accept or perform
-2-
any type of work performed by the Company for any of its customers; (iii)
request or advise any customer of the Company to withdraw, cut back, or cancel
any of its business with the Company; (iv) induce or attempt to influence any
employee of the Company to terminate his or her employment with the Company; (v)
disclose or communicate to any other person, firm, or corporation the names of
any customers of the Company or other knowledge of the operations and business
of the Company; (vi) employ or cause to be employed any individual employed by
the Company at any time during the term of this Agreement; (vii) request, advise
or attempt to influence any person which is a source of materials, supplies,
personnel, services, funds or information for the Company to withdraw, cancel or
cut back the sale or furnishing of such items to the Company; or (viii) use for
his own benefit or otherwise, or communicate to, divulge to, or use for the
benefit of, any other person confidential information and/or trade secrets
disclosed to, discovered by or otherwise known by the Employee through his
employment and/or association with the Company, it being the intent of the
parties that the Employee will honor such confidential information and will not,
directly or indirectly, use the confidential information in such a way as to
adversely affect the Company or the Company's business relations.
Notwithstanding the foregoing, during the term of this Agreement and for as long
thereafter as the Employee is bound by the terms of this paragraph 3(c), nothing
in this paragraph 3(c) shall prohibit the Employee from: (i) owning, managing
and disposing of and for his own account and the account of CMH and its
affiliates those portfolio securities and investments and other assets that will
be owned by CMH or its affiliates immediately following the date of this
Agreement, and investing for his own account and the account of CMH and its
affiliates any proceeds from the sale or disposition thereof; or (ii) acting as
a general partner of and providing administrative or investment management
services to Investors Strategic Partners I, Ltd., a Texas limited partnership of
which Cummer/Xxxxxx Capital Partners, Inc., a Texas corporation and a wholly
owned subsidiary of CMH serves as a general partner ("ISP"), provided that (w)
the performance of such services by the Employee does not materially detract
from the performance of his duties under this Agreement, (x) neither the nature
nor scope of the operations of ISP or CMH shall be expanded beyond that of a
private investment entity, and (y) neither CMH nor any of its affiliates shall
seek, solicit or accept any clients or customers or any new partners or
shareholders (exclusive of new partners or shareholders admitted by reason of
interest transfers from other partners or shareholders) of or investments in or
capital contributions to ISP or CMH.
(d) the Employee acknowledges that these covenants, including the time
duration and geographical area of the covenants, are reasonable and necessary to
protect the goodwill and the operations and business of the Company. The
Employee also acknowledges that he is agreeing to these covenants as part of the
Transaction, from which he expects to benefit.
(e) If the Employee violates any of these covenants, the damage to the
Company shall be irreparable. Thus, in such case the Employee agrees that the
Company can obtain
-3-
an immediate injunction, and this right of the Company is in addition to any
other remedies the Company might have. The Company shall also have the right to
require the Employee to specifically perform these covenants. If either party
files a lawsuit seeking specific performance, injunctive relief or damages for
any breach of this Agreement, the party substantially prevailing in such lawsuit
shall be entitled to recover from the other party all court costs and reasonable
attorneys' fees incurred by the prevailing party in connection with such
lawsuit.
(f) It is the express intention of the Company and the Employee to comply
with all laws which may be applicable to the covenants contained in this
Agreement. Therefore, in the event that any covenant contained in this Agreement
shall be determined by any court to be effective in any particular area or
jurisdiction only if such covenant is modified to limit its duration or scope,
such covenant may be reformed or modified by the judgment or order of such court
to reflect a lawful and enforceable duration or scope, and shall automatically
be deemed to be amended and modified with respect to that particular area or
jurisdiction so as to comply with the judgment or order of such court. All other
terms and provisions of this Agreement shall remain in full force and effect as
originally written.
(g) During any period following the termination of his employment
hereunder (by either party for any reason) during which the Employee is bound by
the terms of this paragraph 3 not to compete with the Company, if the Employee
intends to accept employment with or to provide consultation, services or other
assistance, as an owner, director, agent, consultant or contractor, to any
business entity, which might otherwise violate the covenants set forth in this
paragraph 3, the Employee shall provide written notice to the Company at least
14 calendar days in advance of commencement of the intended relationship, which
notice shall provide the name and address of, and the Employee's principal
contact with, the entity, the position to be held and nature of the
consultation, services or assistance to be provided by the Employee. During the
14-day period following receipt of such notice, the Employee and representatives
of the Company shall meet and discuss whether (i) performance of the intended
relationship would violate paragraph 3 and (ii) under the circumstances then
existing, whether the time, geographic and activities restrictions imposed by
paragraph 3 are necessary to protect the Company's protectable interests. If an
agreement is reached between the parties to reduce such time, geographic or
activities restrictions, such agreement shall be reduced to writing and signed
by the parties. If no such agreement can be reached, the Company may, if
determined by the Company in its sole discretion to be appropriate, unilaterally
reduce such time, geographic or activities restrictions and will provide to the
Employee written notice of any such reduced restrictions. In either such case,
the reduced restrictions shall become operative with respect to the covenants
contained in paragraph 3 as if specifically set forth therein in writing. The
parties agree that during the respective times that the covenants contained in
paragraph 3 are in effect, the Company may provide to any employer or
prospective employer of the Employee a copy of paragraph 3 and may request
assurances from any such employer that the covenants are being complied with.
-4-
4. Termination. The Employee's employment hereunder:
-----------
(a) shall terminate upon the death of the Employee;
(b) may be terminated at the end of six months by the Company if the
Employee becomes ill or is injured or otherwise incapacitated and such
illness, injury or incapacity shall be of such nature as to prevent him
from performing the services to be performed by him hereunder and continues
for a period of six consecutive months;
(c) may be terminated by the Chief Executive Officer or by vote of a
majority of the Board of Directors of the Company for (i) conduct on the
part of the Employee that would materially and adversely affect the
interests of the Company if he were retained as an employee of the Company
(including, but not limited to, the Employee's violation of the provisions
of paragraph 3 of this Agreement and the Employee's conviction of a felony
or any crime involving moral turpitude), and such action is not cured
within five days after Company notifies the Employee of the same; (ii)
engaging in any act which constitutes (1) a felony under the laws of the
United States or any state or territory thereof, (2) gross, willful or
wanton negligence or misconduct or (3) a breach of any fiduciary duty owed
to the Company which materially and adversely affects the Company; (iii)
misappropriation of funds or property of the Company by the Employee; (iv)
drug or alcohol abuse by the Employee in violation of Company policy or
that impedes the Employee's job performance or brings the Employee into
disrepute in the community; or (v) acts by the Employee attempting to
secure or securing any personal profit not fully disclosed to and approved
by the Board of Directors in connection with any transaction entered into
on behalf of the Company;
(d) may be terminated without cause by the vote of a majority of the
Board of Directors of the Company at any time.
5. Rights upon Termination. If the Company elects to terminate the
-----------------------
Employee's employment hereunder as provided in paragraphs 4(b), (c), or (d),
such termination shall be evidenced by a written notice from the Company to the
Employee which shall specify the date on which such termination shall become
effective, which for such purposes shall be deemed to be the "Effective Date of
Termination". The Effective Date of Termination shall be the date of death for
purposes of paragraph 4(a). In the event of the termination of the Employee's
employment hereunder pursuant to either paragraph 4(a), (b), or (c), the
Employee shall only be entitled to any compensation earned or benefits accrued
up through the Effective Date of Termination, except for those benefits provided
by federal, state, or local laws. In the event of termination without cause
pursuant to paragraph 4(d), then: (i) the Company shall promptly pay to the
Employee his then current base salary for the balance of the three (3) year term
of this Agreement; (ii) the Company shall pay the Employee the portion of any
bonus or incentive plan earned by the Employee, prorated through the date of his
termination; and (iii) the Company shall continue to provide to the Employee
health, disability, and life insurance, and such other benefits as the Employee
was receiving as an
-5-
the Employee, through the three-year term of this Agreement on the same basis as
provided prior to the termination of the Employee. Payments and the extension of
benefits under the preceding sentence shall not be construed to extend the
employment period, and the two-year period under paragraph 3 will commence upon
the Effective Date of Termination. Notwithstanding anything herein to the
contrary, if the Employee's employment ceases pursuant to any provision of this
Agreement, the Employee shall not be entitled to any additional amounts on
account of any unused or accrued vacation, except for those benefits provided by
federal, state, or local laws.
6. Prime Brokerage Business. The Employee agrees that for as long during
------------------------
the term of this Agreement as (i) ISP or any other investment partnership or
investment portfolio managed by the Employee, or of which the Employee serves as
a general partner, shall require prime brokerage services in connection with the
operation of its business and (ii) such services are offered by the Company on
competitive terms, and in order to simplify and allow the Company to monitor
compliance with all rules and regulations of the NASD and other regulatory
bodies and the internal policies and procedures of the Company concerning the
conduct and reporting of trading activities, the Employee shall use his best
efforts to direct all such prime brokerage business to the Company.
7. Notice. Any notice or other communication provided for in this
------
Agreement or contemplated hereby shall be sufficiently given if in writing and
delivered by certified mail, return receipt requested, to the party at its or
his address set forth opposite such party's signature below, or to a new address
specified by notice given as provided in this paragraph.
8. Entire Agreement. This Agreement embodies the entire agreement and
-----------------
understanding between the Company and the Employee and supersedes all prior
agreements and understandings relating to the employment and compensation of the
Employee and may only be amended by a written agreement signed by all parties
hereto.
9. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the Company and the Employee and their respective heirs, legal
representatives, successors and assigns. This Agreement shall not be assignable
in whole or in part by the Employee.
10. Partial Invalidity. If any provision of this Agreement shall be
------------------
declared to be invalid or unenforceable, in whole or in part, such invalidity
and unenforceability shall not affect the remaining provisions hereof which
shall remain in full force and effect.
[Signature Page Follows]
-6-
IN WITNESS WHEREOF, this Agreement has been duly executed by each of
the parties hereto as of the date first above written.
THE COMPANY:
XXXXXXX XXXXXX XXXXXX INC.
By:___________________________________
Xxx X. Xxxxxx, President
EMPLOYEE:
______________________________________
Xxxxxxx X. Xxxxxx
[Signature Page to the Xxxxxxx X. Xxxxxx Employment Agreement]
Exhibit B
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of __________, 2000,
between Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation (the "Company"), and
Xxxxxx X. Xxxxxx (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company, a wholly owned subsidiary of Pinnacle Global Group,
Inc. ("Pinnacle"), desires to employ the Employee, and the Employee desires to
be so employed, on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
1. Terms and Duties. The Company shall employ the Employee under the
----------------
terms and conditions of this Agreement, for a term of three years unless
earlier terminated in accordance with the terms of this Agreement. The Employee
accepts such employment and agrees to serve the Company on a full-time basis
(except as may be otherwise permitted under Section 3(c) below) as its Vice
President, Fixed Income Division. The Employee shall have such other duties and
responsibilities as the Board of Directors of the Company shall assign to him
for its affiliated entities during such period.
2. Compensation. During the term of this Agreement, the Company shall
------------
pay the Employee the following compensation:
(a) In consideration of the services to be rendered by the Employee
to the Company, the Company will pay to the Employee a base salary at the
rate of $_______ per annum. The Employee's salary shall be payable on a
semi-monthly basis or as the Company's pay practices shall be established
or modified from time to time, but no less than once per month. Salary
payments shall be subject to all applicable federal and state withholding,
payroll and other taxes.
(b) The Employee shall be eligible for the granting of awards under
Pinnacle's 1998 Incentive Plan. The Employee shall be eligible for any
bonuses the Company may determine to pay to its key employees, provided,
however, that any such bonus, if paid, shall be at the sole and absolute
discretion of the Company; the Company may, in its discretion, pay bonuses
to some employees and not other employees (including the Employee); and, if
the Company pays any such bonuses, such bonuses shall be paid (if
applicable) after the end of the year in which they are earned.
-1-
(c) The Company agrees that it will reimburse the Employee for all
reasonable business expenses incurred by him during the term of the
Employee's employment hereunder in connection with the performance of
services hereunder, provided the Employee provides reasonable documentation
supporting the expenses according to the Company's policies relating to
reimbursed expenses for its employees.
(d) The Employee will also be entitled to participate on the same
basis with all other employees of the Company, subject to the same
qualifications, in the Company's standard employee benefits package
generally available for all other employees of the Company, including
health, disability and life insurance programs.
3. Scope.
-----
(a) While the Employee is employed hereunder, he shall use his best
efforts to promote the interests of the Company consistent with his normal
duties.
(b) This Agreement is entered into as part of the acquisition
("Transaction") by Pinnacle or a Pinnacle subsidiary of the stock of
Cummer/Xxxxxx Securities, Inc. and Cummer/Xxxxxx Capital Advisors, Inc.
(the "Acquired C/M Companies"), both of which were direct or indirect
wholly owned subsidiaries of Cummer/Xxxxxx Holdings, Inc. ("CMH"). The
Employee, as a shareholder of CMH, expects to benefit from the Transaction,
and part of the valuable consideration received by Pinnacle in the
Transaction consisted of the goodwill, customer relations, vendor
relations, employee relations and confidential business information and
trade secrets of the Acquired C/M Companies. Thus, without the Employee's
commitments to comply with the requirements of this Agreement, including
the non-compete covenants in this Xxxxxxxxx 0, Xxxxxxxx and the Company
would not have entered into the Transaction, and the Employee acknowledges
this.
(c) Therefore, the Employee hereby agrees that during the Employee's
employment hereunder, and for a period of two years after the Effective
Date of Termination (as that term is defined below), the Employee covenants
that he shall not in any manner, directly or indirectly, either through any
form of ownership, or as a director, officer, principal, agent, employee,
employer, advisor, consultant, partner or in any individual or
representative capacity whatsoever, either for his own benefit or for the
benefit of any other person, without first getting the written consent of
the Board of Directors of Pinnacle, compete with the Company, Pinnacle, or
any of Pinnacle's subsidiaries and other affiliated entities, subject to
the exceptions stated below (the Company, Pinnacle, and Pinnacle's
subsidiaries and other affiliated entities being deemed to constitute the
"Company" for purposes of this paragraph 3). The geographical area of these
non-compete covenants shall be limited to the United States of America. The
following is a list (but is not intended to be an exhaustive list) of acts
which shall be considered violations of this Agreement: (i) engage in the
business of securities brokerage, prime brokerage, asset management, or
investment banking or providing investment advisory services; (ii) canvas,
solicit, accept or perform
-2-
any type of work performed by the Company for any of its customers; (iii)
request or advise any customer of the Company to withdraw, cut back, or cancel
any of its business with the Company; (iv) induce or attempt to influence any
employee of the Company to terminate his or her employment with the Company; (v)
disclose or communicate to any other person, firm, or corporation the names of
any customers of the Company or other knowledge of the operations and business
of the Company; (vi) employ or cause to be employed any individual employed by
the Company at any time during the term of this Agreement; (vii) request, advise
or attempt to influence any person which is a source of materials, supplies,
personnel, services, funds or information for the Company to withdraw, cancel or
cut back the sale or furnishing of such items to the Company; or (viii) use for
his own benefit or otherwise, or communicate to, divulge to, or use for the
benefit of, any other person confidential information and/or trade secrets
disclosed to, discovered by or otherwise known by the Employee through his
employment and/or association with the Company, it being the intent of the
parties that the Employee will honor such confidential information and will not,
directly or indirectly, use the confidential information in such a way as to
adversely affect the Company or the Company's business relations.
Notwithstanding the foregoing, during the term of this Agreement and for as long
thereafter as the Employee is bound by the terms of this paragraph 3(c), nothing
in this paragraph 3(c) shall prohibit the Employee from: (i) owning, managing
and disposing of and for his own account and the account of CMH and its
affiliates those portfolio securities and investments and other assets that will
be owned by CMH or its affiliates immediately following the date of this
Agreement, and investing for his own account and the account of CMH and its
affiliates any proceeds from the sale or disposition thereof; or (ii) acting as
a general partner of and providing administrative or investment management
services to Investors Strategic Partners I, Ltd., a Texas limited partnership of
which Cummer/Xxxxxx Capital Partners, Inc., a Texas corporation and a wholly
owned subsidiary of CMH serves as a general partner ("ISP"), provided that (w)
the performance of such services by the Employee does not materially detract
from the performance of his duties under this Agreement, (x) neither the nature
nor scope of the operations of ISP or CMH shall be expanded beyond that of a
private investment entity, and (y) neither CMH nor any of its affiliates shall
seek, solicit or accept any clients or customers or any new partners or
shareholders (exclusive of new partners or shareholders admitted by reason of
interest transfers from other partners or shareholders) of or investments in or
capital contributions to ISP or CMH.
(d) the Employee acknowledges that these covenants, including the time
duration and geographical area of the covenants, are reasonable and necessary to
protect the goodwill and the operations and business of the Company. The
Employee also acknowledges that he is agreeing to these covenants as part of the
Transaction, from which he expects to benefit.
(e) If the Employee violates any of these covenants, the damage to the
Company shall be irreparable. Thus, in such case the Employee agrees that the
Company can obtain
-3-
an immediate injunction, and this right of the Company is in addition to any
other remedies the Company might have. The Company shall also have the right to
require the Employee to specifically perform these covenants. If either party
files a lawsuit seeking specific performance, injunctive relief or damages for
any breach of this Agreement, the party substantially prevailing in such lawsuit
shall be entitled to recover from the other party all court costs and reasonable
attorneys' fees incurred by the prevailing party in connection with such
lawsuit.
(f) It is the express intention of the Company and the Employee to comply
with all laws which may be applicable to the covenants contained in this
Agreement. Therefore, in the event that any covenant contained in this
Agreement shall be determined by any court to be effective in any particular
area or jurisdiction only if such covenant is modified to limit its duration or
scope, such covenant may be reformed or modified by the judgment or order of
such court to reflect a lawful and enforceable duration or scope, and shall
automatically be deemed to be amended and modified with respect to that
particular area or jurisdiction so as to comply with the judgment or order of
such court. All other terms and provisions of this Agreement shall remain in
full force and effect as originally written.
(g) During any period following the termination of his employment
hereunder (by either party for any reason) during which the Employee is bound by
the terms of this paragraph 3 not to compete with the Company, if the Employee
intends to accept employment with or to provide consultation, services or other
assistance, as an owner, director, agent, consultant or contractor, to any
business entity, which might otherwise violate the covenants set forth in this
paragraph 3, the Employee shall provide written notice to the Company at least
14 calendar days in advance of commencement of the intended relationship, which
notice shall provide the name and address of, and the Employee's principal
contact with, the entity, the position to be held and nature of the
consultation, services or assistance to be provided by the Employee. During the
14-day period following receipt of such notice, the Employee and representatives
of the Company shall meet and discuss whether (i) performance of the intended
relationship would violate paragraph 3 and (ii) under the circumstances then
existing, whether the time, geographic and activities restrictions imposed by
paragraph 3 are necessary to protect the Company's protectable interests. If an
agreement is reached between the parties to reduce such time, geographic or
activities restrictions, such agreement shall be reduced to writing and signed
by the parties. If no such agreement can be reached, the Company may, if
determined by the Company in its sole discretion to be appropriate, unilaterally
reduce such time, geographic or activities restrictions and will provide to the
Employee written notice of any such reduced restrictions. In either such case,
the reduced restrictions shall become operative with respect to the covenants
contained in paragraph 3 as if specifically set forth therein in writing. The
parties agree that during the respective times that the covenants contained in
paragraph 3 are in effect, the Company may provide to any employer or
prospective employer of the Employee a copy of paragraph 3 and may request
assurances from any such employer that the covenants are being complied with.
-4-
4. Termination. The Employee's employment hereunder:
-----------
(a) shall terminate upon the death of the Employee;
(b) may be terminated at the end of six months by the Company if the
Employee becomes ill or is injured or otherwise incapacitated and such
illness, injury or incapacity shall be of such nature as to prevent him
from performing the services to be performed by him hereunder and continues
for a period of six consecutive months;
(c) may be terminated by the Chief Executive Officer or by vote of a
majority of the Board of Directors of the Company for (i) conduct on the
part of the Employee that would materially and adversely affect the
interests of the Company if he were retained as an employee of the Company
(including, but not limited to, the Employee's violation of the provisions
of paragraph 3 of this Agreement and the Employee's conviction of a felony
or any crime involving moral turpitude), and such action is not cured
within five days after Company notifies the Employee of the same; (ii)
engaging in any act which constitutes (1) a felony under the laws of the
United States or any state or territory thereof, (2) gross, willful or
wanton negligence or misconduct or (3) a breach of any fiduciary duty owed
to the Company which materially and adversely affects the Company; (iii)
misappropriation of funds or property of the Company by the Employee; (iv)
drug or alcohol abuse by the Employee in violation of Company policy or
that impedes the Employee's job performance or brings the Employee into
disrepute in the community; or (v) acts by the Employee attempting to
secure or securing any personal profit not fully disclosed to and approved
by the Board of Directors in connection with any transaction entered into
on behalf of the Company;
(d) may be terminated without cause by the vote of a majority of the
Board of Directors of the Company at any time.
5. Rights upon Termination. If the Company elects to terminate the
-----------------------
Employee's employment hereunder as provided in paragraphs 4(b), (c), or (d),
such termination shall be evidenced by a written notice from the Company to the
Employee which shall specify the date on which such termination shall become
effective, which for such purposes shall be deemed to be the "Effective Date of
Termination". The Effective Date of Termination shall be the date of death for
purposes of paragraph 4(a). In the event of the termination of the Employee's
employment hereunder pursuant to either paragraph 4(a), (b), or (c), the
Employee shall only be entitled to any compensation earned or benefits accrued
up through the Effective Date of Termination, except for those benefits provided
by federal, state, or local laws. In the event of termination without cause
pursuant to paragraph 4(d), then: (i) the Company shall promptly pay to the
Employee his then current base salary for the balance of the three (3) year term
of this Agreement; (ii) the Company shall pay the Employee the portion of any
bonus or incentive plan earned by the Employee, prorated through the date of his
termination; and (iii) the Company shall continue to provide to the Employee
health, disability, and life insurance, and such other benefits as the Employee
was receiving as an
-5-
the Employee, through the three-year term of this Agreement on the same basis as
provided prior to the termination of the Employee. Payments and the extension of
benefits under the preceding sentence shall not be construed to extend the
employment period, and the two-year period under paragraph 3 will commence upon
the Effective Date of Termination. Notwithstanding anything herein to the
contrary, if the Employee's employment ceases pursuant to any provision of this
Agreement, the Employee shall not be entitled to any additional amounts on
account of any unused or accrued vacation, except for those benefits provided by
federal, state, or local laws.
6. Prime Brokerage Business. The Employee agrees that for as long during
------------------------
the term of this Agreement as (i) ISP or any other investment partnership or
investment portfolio managed by the Employee, or of which the Employee serves as
a general partner, shall require prime brokerage services in connection with the
operation of its business and (ii) such services are offered by the Company on
competitive terms, and in order to simplify and allow the Company to monitor
compliance with all rules and regulations of the NASD and other regulatory
bodies and the internal policies and procedures of the Company concerning the
conduct and reporting of trading activities, the Employee shall use his best
efforts to direct all such prime brokerage business to the Company.
7. Notice. Any notice or other communication provided for in this
------
Agreement or contemplated hereby shall be sufficiently given if in writing and
delivered by certified mail, return receipt requested, to the party at its or
his address set forth opposite such party's signature below, or to a new address
specified by notice given as provided in this paragraph.
8. Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the Company and the Employee and supersedes all prior
agreements and understandings relating to the employment and compensation of the
Employee and may only be amended by a written agreement signed by all parties
hereto.
9. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the Company and the Employee and their respective heirs, legal
representatives, successors and assigns. This Agreement shall not be assignable
in whole or in part by the Employee.
10. Partial Invalidity. If any provision of this Agreement shall be
------------------
declared to be invalid or unenforceable, in whole or in part, such invalidity
and unenforceability shall not affect the remaining provisions hereof which
shall remain in full force and effect.
[Signature Page Follows]
-6-
IN WITNESS WHEREOF, this Agreement has been duly executed by each of the
parties hereto as of the date first above written.
THE COMPANY:
XXXXXXX XXXXXX XXXXXX INC.
By:___________________________________
Xxx X. Xxxxxx, President
EMPLOYEE:
______________________________________
Xxxxxx X. Xxxxxx
[Signature Page to the Xxxxxx X. Xxxxxx Employment Agreement]
Exhibit C
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of October
___________, 2000, among Pinnacle Global Group, Inc., a Texas corporation (the
"Company"), and Cummer/Xxxxxx Holdings, Inc. ("CMH") and Cummer/Xxxxxx Capital
Partners, Inc. ("CMCP"), both of which are herein together called the
"Shareholders,"
W I T N E S S E T H:
WHEREAS, the Shareholders are this date receiving the right to receive up
to an aggregate 1,000,000 shares (the "Shares") of common stock, $.01 par value
per share ("Common Stock") of the Company in connection with the consummation of
the transactions contemplated in the Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated as of October ___, 2000, among the Company,
the Shareholders, Cummer/Xxxxxx Securities, Inc. and Cummer/Xxxxxx Capital
Advisors, Inc.; and
WHEREAS, the consummation of the transactions contemplated in the
Reorganization Agreement is conditioned upon the parties entering into this
Agreement, under which the Company grants certain registration rights with
respect to the Shares;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean (i) the Shares; and (ii) any Common
Stock issued or issuable at any time or from time to time in respect of the
Shares upon a conversion, stock split, stock dividend, recapitalization or other
similar event involving the Company.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Agreement, including, without limitation, all registration, qualification and
filing fees, exchange listing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the holders of the Registrable Securities and, except as set forth in Section
2.2, all fees and disbursements of counsel for such holders.
"Underwritten Public Offering" shall mean a public offering in which the
Common Stock is offered and sold on a firm commitment basis through one or more
underwriters, all pursuant to (i) an effective registration statement under the
Securities Act and (ii) an underwriting agreement between the Company and such
underwriters.
ARTICLE II
REGISTRATION RIGHTS
2.1 Piggyback Registration.
-----------------------
2.1.1 Subject to the terms hereof, if at any time or from time
to time (but in no event before _______________, 2001)*, the Company shall
determine to register any of its securities (except for registration
statements relating to employee benefit plans or a registration relating to
a corporate reorganization or other transaction on Form S-4, or
acquisitions or exchange offers), either for its own account or the account
of a security holder, the Company will promptly give to the holders of
Registrable Securities written notice thereof no less the 30 days prior to
the filing of any registration statement; and include in such registration
(and any related qualification under blue sky laws or other compliance),
and in the underwriting involved therein, if any, such Registrable
Securities as such holders may request in a writing delivered to the
Company within 20 days after the holders' receipt of Company's written
notice.
2.1.2 The holders of Registrable Securities may participate in
any number of registrations until all of the Shares held by holders of
Registrable Securities have been registered or until the Shares are
transferable without restriction pursuant to Rule 144 under the Securities
Act.
2.1.3 If any registration statement is an Underwritten Public
Offering, the right of holders of Registrable Securities to registration
pursuant to this Section shall be conditioned upon each such holder's
participation in such reasonable underwriting arrangements as the Company
shall make regarding the offering, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided
herein. Holders of Registrable Securities and all other shareholders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section, if the managing underwriter concludes in its reasonable judgment
that the number of shares to be registered for selling shareholders
(including the holders of Registrable Securities) would materially
adversely effect such offering, the number of Shares to be registered,
together with the
__________________
First anniversary of Closing Date.
-2-
number of shares of Common Stock or other securities held by other
shareholders proposed to be registered in such offering, shall be reduced
on a pro rata basis based on the number of Shares proposed to be sold by
the holders of Registrable Securities as compared to the number of shares
proposed to be sold by all shareholders. If any holder of Registrable
Securities disapproves of the terms of any such underwriting, it may elect
to withdraw therefrom by written notice to the Company and the managing
underwriter, delivered not less than 10 days before the effective date. The
Registrable Securities excluded by the managing underwriter or withdrawn
from such underwriting shall be withdrawn from such registration, and shall
not be transferred in a public distribution prior to 120 days after the
effective date of the registration statement relating thereto, or such
other shorter period of time as the underwriters may require.
2.1.4 The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness
of such registration whether or not the holders of Registrable Securities
have elected to include securities in such registration.
2.2 Expenses of Registration. All Registration Expenses shall be borne by
------------------------
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the holders of Registrable Securities shall
be borne by the holders of Registrable Securities.
2.3 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep the holders of Registrable Securities advised in writing
as to the initiation of each registration, qualification and compliance and as
to the completion thereof. At its expense, the Company will:
2.3.1 Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts
to cause such registration statement to become and remain effective until
the distribution described in such registration statement has been
completed;
2.3.2 Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such
underwriter may reasonably request in order to facilitate the public sale
of the shares by such underwriter, and promptly furnish to each underwriter
and the holders of Registrable Securities notice of any stop-order or
similar notice issued by the Commission or any state agency charged with
the regulation of securities, and notice of any Nasdaq or securities
exchange listing; and
2.3.3 Cause the Shares to be listed on the Nasdaq National Market
System or a securities exchange on which the Common Stock is approved for
listing.
ARTICLE III
INDEMNIFICATION
3.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify each holder of Registrable Securities, each of its officers and
directors and partners, and each person controlling such holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act,
-3-
against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to the extent such expenses, claims,
losses, damages or liabilities arise out of or are based on any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other similar document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each holder of Registrable Securities, each of
its officers and directors and partners, and each person controlling each holder
of Registrable Securities, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld) and the Company has
exercised reasonable diligence in defending the claim in such situation;
provided, further, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by a holder of Registrable Securities, such controlling
person or such underwriter specifically for use therein. Notwithstanding the
foregoing, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed with the Commission pursuant
to the applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit of any
underwriter if a copy of the final prospectus filed pursuant to such rules,
together with all supplements and addenda thereto, was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
3.2 By the Selling Shareholders. To the extent permitted by law, each
---------------------------
holder of Registrable Securities will, if securities held by such holder are
included in the securities as to which such registration, qualification or
compliance is being effected pursuant to terms hereof, indemnify the Company,
each of its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other person selling the Company's securities covered
by such registration statement, each of such person's officers and directors and
each person controlling such persons within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
a holder of Registrable Securities of any rule or regulation promulgated under
the Securities Act applicable to holders of Registrable Securities and relating
to action or inaction required of holders of Registrable Securities in
connection with any such registration, qualification or compliance, and will
reimburse the Company, such other persons, such directors, officers, persons,
underwriters or control persons for any legal or other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged
-4-
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such holder
of Registrable Securities specifically for use therein; provided, however, that
the indemnity contained herein shall not apply to amounts paid in settlement of
any claim, loss, damage, liability or expense if settlement is effected without
the consent of such holder of Registrable Securities (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the liability of such
holder of Registrable Securities under this subsection (b) shall be limited in
an amount equal to the net proceeds from the sale of the shares sold by such
holder of Registrable Securities, unless such liability arises out of or is
based on willful conduct by such holder of Registrable Securities. In addition,
insofar as the foregoing indemnity relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the Commission at the time the registration statement becomes
effective or in the final prospectus filed pursuant to applicable rules of the
Commission or in any supplement or addendum thereto, the indemnity agreement
herein shall not inure to the benefit of the Company or any underwriter, if a
copy of the final prospectus filed pursuant to such rules, together with all
supplements and addenda thereto, was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act.
3.3 Indemnification Claims. Notwithstanding the foregoing Sections 3.1
----------------------
and 3.2, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or as to which the
Indemnifying Party is asserting separate or different defenses, which defenses
are inconsistent with the defenses of the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party
shall consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party.
3.4 Contribution. If the indemnification provided for in this Article III
------------
is unavailable to an Indemnified Party in respect of any losses, claims, damages
or liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Security Holders") on the other from
the offering of the Company's securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Selling
Security Holders on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received
-5-
by the Company on the one hand and the Selling Security Holders on the other
shall be the net proceeds from the offering (before deducting expenses) received
by the Company on the one hand and the Selling Security Holders on the other.
The relative fault of the Company on the one hand and the Selling Security
Holders on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact relates to information supplied by
the Company or by the Selling Security Holders and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Selling Security Holders agree that
it would not be just and equitable if contribution pursuant to this Section were
based solely upon the number of entities from whom contribution was requested or
by any other method of allocation which does not take account of the equitable
considerations referred to above in this Section. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and liabilities
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
hereof. Notwithstanding the provisions of this Section, no Selling Shareholder
shall be required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the proceeds received by such Selling
Shareholder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
ARTICLE IV
INFORMATION
4.1 From Selling Shareholders. The holders of Registrable Securities
-------------------------
agree, with respect to any Registrable Securities included in any registration,
to furnish to the Company such information regarding such holder, the
Registrable Securities and the distribution proposed by the such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to herein.
4.2 Failure to Provide. The failure of the holder of Registrable
------------------
Securities to furnish the information requested pursuant to Section 4.2 shall
not affect the obligation of the Company to the other Selling Security Holders
who furnish such information unless, in the reasonable opinion of counsel to the
Company or the underwriters, such failure impairs or may impair the legality of
the Registration Statement or the underlying offering.
ARTICLE V
MISCELLANEOUS
5.1 Transferability. The rights conferred by this Agreement shall not be
---------------
transferable, except that CMCP may assign its rights under this Agreement with
respect to any Registrable Securities it may transfer to CMH.
5.2 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of Texas.
5.3 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or
-6-
any provision hereof, may be amended, waived, discharged or terminated upon the
written consent of the Company and the Purchaser.
5.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Shareholders, to: Cummer/Xxxxxx Holdings, Inc., 0000 Xxxxx Xxxxxx, Xxxx Xxxxx,
Xxxxx 00000, or at such other address as the Shareholders shall have furnished
to the Company in writing, or (b) if to the Company: to Pinnacle Global Group,
Inc., 0000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other address
as the Company shall have furnished to the Shareholders.
5.5 Delays or Omissions. Except as expressly provided herein, no delay or
-------------------
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
5.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
5.7 Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
5.8 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not considered in construing or
interpreting this Agreement.
[Signature Pages Follow]
-7-
THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this Agreement effective upon
the date first set forth above.
PINNACLE GLOBAL GROUP, INC.
By:__________________________________________
Xxxxxx X. Xxxxxxxx XX, President and
Chief Executive Officer
[Signature Page to the Registration Rights Agreement]
THE SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the Shareholders have signed this Agreement as of the
date first written above.
CUMMER/XXXXXX HOLDINGS, INC.
By:_____________________________________
Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
CUMMER/XXXXXX CAPITAL PARTNERS, INC.
By:_____________________________________
Xxxxxxx X. Xxxxxx, President
[Signature Page to the Registration Rights Agreement]
Exhibit D
Equipment Lease Agreement
This Equipment Lease Agreement (this "Agreement") dated as of __________,
2000, between Cummer/Xxxxxx Holdings, Inc., a Texas corporation (the "Lessor"),
and Cummer/Xxxxxx Securities, Inc., a Texas corporation (the "Lessee"),
W I T N E S S E T H:
WHEREAS, the Lessor owns the items of office furniture and equipment
described on Annex A to this Agreement (the "Equipment"); and
WHEREAS, the Lessee wishes to lease the Equipment from the Lessor, and the
Lessor is willing to lease the Equipment to the Lessee;
NOW, THEREFORE, the parties agrees as follows:
1. Lease of Equipment. On the terms and subject to the conditions of
------------------
this Agreement, the Lessor agrees to lease the Equipment to the Lessee, and the
Lessee agrees to accept and hire the Equipment from the Lessor, for the term
specified in Section 2.
2. Term. Subject to earlier termination under Section 12, the initial
----
term of the lease (the "Initial Term") shall be the three-year period beginning
on the date of this Agreement (the "Commencement Date") and ending on the third
anniversary of the Commencement Date. Unless this Agreement is terminated under
Section 12 as a result of a Termination Event, the Initial Term shall be
automatically renewed and extended for successive one-year periods (each, a
"Renewal Period"), unless one Party gives to the other, at least 60 days before
the end of the Initial Term or any Renewal Period, as applicable, a written
notice of termination. In that case, the Lease shall terminate upon the
expiration of the Initial Term or the then current Renewal Period, as the case
may be.
3. Rental. As rental for the Equipment, the Lessee shall pay to the
------
Lessor, during the term of this Agreement, the sum of $3,000 per month. Rentals
shall be payable in advance on the Commencement Date and on the first day of
each calendar month thereafter during the term of this Agreement. Rental for
the partial months during which the term of this Agreement begins and ends shall
be prorated on a daily basis.
4. Ownership of Equipment. The Equipment shall be and remain the sole
----------------------
and exclusive property of the Lessor. The Lessee shall keep the Equipment free
and clear of all liens, mortgages, security interests and encumbrances, except
those that may be placed on the Equipment by the Lessor or by persons claiming
through the Lessor.
5. Location of Equipment. The Lessee shall use the Equipment at the
---------------------
offices of the Lessee located at 0000 Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx or at its
offices in Weatherford, Texas, and the Lessee shall not change the location of
the Equipment without the written consent of the Lessor.
6. Modifications of Equipment. The Lessee will not, without the prior
--------------------------
written consent of the Lessee, make any modifications to the Equipment or affix
or install any accessory, equipment or devise on the Equipment.
7. Maintenance of Equipment. The Lessee, at its expense, shall maintain
------------------------
the Equipment in good operating order, repair, condition and appearance, and
shall protect the Equipment from deterioration, other than normal and expected
wear and tear, and damage, loss or destruction.
8. Inspection of Equipment. Upon the Lessor's request, the Lessee shall,
-----------------------
at reasonable times during normal business hours, make the Equipment available
to the Lessor or its designated representative for inspection and testing, so
that the Lessor may ascertain the condition of the Equipment.
9. Casualty Insurance. The Lessee, at its expense shall carry all risk
------------------
casualty insurance on the Equipment, insuring the Equipment for its full
replacement value against loss, damage and destruction, subject to a per
occurrence deductible of not more than $10,000. All policies insuring the
Equipment shall name the Lessor as the loss payee, and shall contain an
endorsement requiring the insurer to notify the Lessor of any cancellation or
modification of the coverage offered thereby, or any change of the loss payee
named therein, at least 30 days before the cancellation or change becomes
effective. At least once annually and upon the Lessor's request therefor made
at any time, the Lessee shall furnish to the Lessor a certificate of the carrier
issuing the policies required by this Section 9, showing such policy or policies
to be in full force and effect for the periods specified in the certificate.
All proceeds of such insurance actually paid to the Lessor shall be credited
against the Lessee's obligations under Section 10.
10. Loss or Destruction of Equipment. The Lessee shall bear the risk of
--------------------------------
loss of the Equipment from the Commencement Date. If an item of Equipment is
lost, stolen, destroyed or damaged beyond repair (an "Event of Loss"), the
Lessee shall promptly notify the Lessor of the Event of Loss. Upon an Event of
Loss, the Lessee shall have the option of (i) promptly replacing the lost,
damaged or destroyed item of Equipment with identical equipment, at the Lessee's
cost and expense, or (ii) paying to the replacement value of the lost, damaged
or destroyed item of Equipment. If the Lessee elects to replace the Equipment,
the replacement equipment shall be free and clear of all liens, encumbrances and
rights of others, shall be new, and shall have functional and operational
capabilities equal to or exceeding those of the lost or destroyed Equipment.
Any such replacement equipment shall become the property of the Lessor and shall
be deemed to be "Equipment" for all purposes hereof, whereupon the Lessor will
transfer to the Lessee, without recourse or warranty, all of the Lessors right,
title and interest in the lost or destroyed item of Equipment, and all proceeds
which may be payable under any policy or policies of insurance
-2-
insuring the Equipment against loss or casualty. There shall be no abatement of
rentals pending replacement of the Equipment.
11. Option to Purchase. At the end of the Initial Term or any Renewal
------------------
Period, the Lessee shall, upon the terms and subject to the conditions of this
Section 11, have an option (the "Purchase Option") to purchase the Equipment.
The Purchase Option must be exercised by the Lessee by a written notice to the
Lessor given at least 60 days before the expiration of the Initial Term, or if
this Agreement has been renewed and extended under Section 2, at least 60 days
before the end of the then current Renewal Period. The Purchase Option shall
not be exercisable at any time after a Termination Event has occurred. If the
Purchase Option is timely exercised, the Lessee shall purchase the Equipment,
and the Lessor shall sell the Equipment to the Lessee, on the last day of the
Initial Term (or the last day of the then current Renewal Period, as the case
may be), for a purchase price, payable in cash on the date of purchase, equal to
the "net book value" of the Equipment at that date. "Net book value" means the
aggregate amount, net of accumulated depreciation, at which the Equipment is
carried on the books of the Lessor at the date of its purchase. Any sale of the
Equipment to the Lessee upon exercise of the Purchase Option shall be made by
the Lessor on an AS IS - WHERE IS" basis, except that the Lessor shall warrant
its title to the Equipment.
12. Termination Events. The Lessor may terminate this Agreement and the
------------------
Lease and License upon the occurrence of any one of the following events or
conditions (each a "Termination Event"):
(i) the Lessee fails to make payment of any rent when it is due, and
continuance of such failure for ten days after the Lessor gives notice of
such failure to the Lessee;
(ii) the Lessee's failure to observe or perform any of the other
covenants or agreements of the Lessee set forth in this Agreement, and
continuance of such failure for 20 days after the Lessor gives notice of
such failure to the Lessee;
(iii) a custodian, trustee or receiver is appointed for the Lessee or
the major part of the property of the Lessee, and is not discharged within
60 days after the appointment; or
(iv) a decree or order for relief by a court having jurisdiction in
respect of the Lessee is entered in an involuntary case under any
bankruptcy law or similar law for the relief of debtors, and the decree or
order remains unstayed and in effect for 60 days following its entry, or
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceedings for relief under any bankruptcy law or
similar law for the relief of debtors are instituted by or against the
Lessee, and if instituted against the Lessee, are consented to or not
dismissed within 60 days after institution.
-3-
13. Actions Upon Termination. If a Termination Event occurs and the
------------------------
Lessor elects to terminate this Agreement, the termination shall be effective as
of the date the Lessor gives the Lessee written notice of the Lessor's election
to terminate. Upon any termination of this Agreement, whether upon expiration of
the Term of this Agreement or as a result of the occurrence of a Termination
Event:
(i) the Lessor shall have the right to immediately regain possession
of the Equipment;
(ii) the Lessee, at its expense, shall appropriately pack and ship
the Equipment to the Lessor at its offices in Fort Worth, Texas.
14. Consequences of Termination. Any termination of this Agreement by the
---------------------------
Lessor as a result of a Termination Event shall be without prejudice to any
rights or remedies the Lessor may have as a result of any breach of this
Agreement by the Lessee.
15. Notices. All notices, requests, waivers, consents, and other
-------
communications under this Agreement shall be in writing, and shall be deemed to
have been given if personally delivered, or mailed first class, registered or
certified mail, postage prepaid, or sent by facsimile transmission followed by
hard copy delivered as provided above:
(i) if to the Lessor to:
Cummer/Xxxxxx Holdings, Inc.
0000 Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, President
Telecopy No.: (000) 000-0000
with copy to:
Attention: Xxxxxxxx X. Xxxxxxx
Xxxxxxx, Xxxxx, Xxxxxxxx & Xxxxx, L.L.P.
000 Xxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
if to the Lessee to:
Xxxxxxx Xxxxxx Xxxxxx Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
-4-
with copies to:
Xx. Xxxxx X. Xxxxxxxx, Xx.
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
or at such other address as shall be given in writing by any Party to the
others.
16. Assignment. This Agreement may not be assigned by any one of its
----------
Parties without the consent of all other Party.
17. Successors Bound. Subject to Section 16, this Agreement shall be
-------------------
binding upon and inure to the benefit of its Parties and their respective
successors and assigns.
18. Amendment and Waiver. This Agreement may be amended, and waivers
--------------------
under this Agreement may be granted, only by a written instrument signed by both
parties.
19. Entire Agreement. This Agreement and its Annex constitute the entire
----------------
agreement among the Parties concerning their subject matter.
20. Third-Party Beneficiaries. There are no third-party beneficiaries of
-------------------------
this Agreement.
21. Joint Drafting. This Agreement and its Schedules have been jointly
--------------
drafted by the Parties and their counsel. Neither this Agreement nor any of its
Schedules shall be construed against either Party based on its authorship.
22. Governing Law. This Agreement shall be construed under and governed
-------------
by the law of the State of Texas.
23. Counterparts and Facsimile Signature Pages. This Agreement may be
------------------------------------------
executed in counterparts, each of which shall be deemed an original, but all of
which shall constitute the same instrument.
[Signature Page Follows]
-5-
CUMMER/XXXXXX HOLDINGS, INC.:
By:______________________________________
Xxxxxxx X. Xxxxxx, President
CUMMER/XXXXXX SECURITIES, INC.
By:______________________________________
Xxxxx X. XxXxxxx, Vice President
[Signature Page to the Equipment Lease Agreement]
Exhibit E
GENERAL RELEASE
This General Release (this "Release") is made as of ________________, ____,
by the undersigned in connection with the closing of the transactions
contemplated by the Agreement and Plan of Reorganization dated as of October
___, 2000 (the "Reorganization Agreement"), among Pinnacle Global Group, Inc.
("PGG"), a Texas corporation, Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation
("SMH"), Cummer/Xxxxxx Holdings, Inc., a Texas corporation ("CMH"),
Cummer/Xxxxxx Securities, Inc., a Texas corporation ("CMS"), Cummer/Xxxxxx
Capital Partners, Inc., a Texas corporation ("CMCP"), and Cummer/Xxxxxx Capital
Advisors, Inc., a Texas corporation ("CMAC"). Words and terms and not otherwise
defined in this Release shall have the meaning set forth in the Reorganization
Agreement.
Preliminary Statement
The undersigned is an Affiliate of CMH, which will receive Reorganization
Shares as a result of the Reorganizations. The undersigned understands and
acknowledges it is a condition to the performance by the PGG Parties of their
respective obligations under the Reorganization Agreement, and thus is a
condition to the consummation of the Reorganizations, that the undersigned
execute and deliver this Release at or before the Closing, as contemplated by
the Reorganization Agreement.
Release
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the undersigned hereby
covenants and undertakes as follows for the benefit of all PGG Parties and
their respective Affiliates, including, after the Closing Date, the Acquired
Subsidiaries (collectively, the "Released Parties"):
1. Release. The undersigned, on behalf of the undersigned and each of
-------
the undersigned's Affiliates, hereby unconditionally and irrevocably releases
and forever discharges, to the fullest extent permitted by applicable Law, the
Released Parties from any and all debt, liabilities, obligations, contracts,
agreements, understandings, claims, demands, actions or causes of action, suits,
judgments or controversies of any kind whatsoever (collectively, "Claims")
against either Acquired Subsidiary, that arise out of or are based on any act or
failure to act (including any act or failure to act that constitutes ordinary or
gross negligence or reckless or willful, or wanton misconduct),
misrepresentation, omission, transaction, fact, event or other matter occurring
prior to the Closing Date (whether based on any governmental requirement or
right of action, at law or in equity or otherwise, foreseen or unforseen,
matured or unmatured, known or unknown, accrued or not accrued) (collectively,
"Pre-Closing Matters"), including without limitation: (a) claims by the
undersigned with respect to repayment of loans or indebtedness; (b) any rights,
titles and interests in, to or under any agreements, arrangements or
understandings to which the undersigned is a party; and (c) claims by the
undersigned with respect to dividends, violation of preemptive rights, or
payment of salaries or other compensation or in any way arising out of or in
connection with the undersigned's
employment with an Acquired Subsidiary prior to Closing, the cessation of that
employment at or prior to Closing, the undersigned's status as an officer,
director or stockholder of an Acquired Subsidiary or otherwise. The undersigned
further agrees not to file or bring any litigation before any Governmental
Entity on the basis of or respecting any Claim concerning any Pre-Closing Matter
against any Released Party. Notwithstanding anything to the contrary contained
in this Release, this Release shall not affect the rights of the undersigned
under the Reorganization Agreement and agreements executed in consummation of
the transactions contemplated by the Reorganization Agreement.
2. Competency. The undersigned (a) acknowledges that the undersigned
----------
fully comprehends and understands all the terms of this Release and their legal
effects and (b) expressly represents and warrants that (i) the undersigned is
competent to execute this Release knowingly and voluntarily and without reliance
on any statement or representation of any Released Party and (ii) he or she had
the opportunity to consult with an attorney of the undersigned's choice
regarding this Release.
3. Parties in Interest. This Release is for the benefit of the Released
-------------------
Parties and shall be binding on the undersigned and the undersigned's legal
representatives and Affiliates.
4. Governing Law. This Release and the rights and obligations of the
-------------
undersigned hereunder shall be governed by and construed and enforced in
accordance with the substantive laws (but not the rules governing conflict of
laws) of the State of Texas.
5. Amendment. This Release may not be clarified, modified, changed or
---------
amended except in writing and signed by the undersigned (or the undersigned's
duly authorized representatives), PGG and each Acquired Subsidiary.
6. Severability. If any provision of this Release is held to be illegal,
------------
invalid or unenforceable under present or future laws, that provision shall be
severable and this Release shall be construed and enforced as if that illegal,
invalid or unenforceable provision never comprised a part hereof, and the
remaining provisions hereof shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision, and there shall
be added automatically as part of this Release a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
IN WITNESS WHEREOF, the undersigned has executed this Release as of the
date first written above.
CMH AFFILIATE:
___________________________
2
Exhibit F
[Letterhead of Holland, Jones, Xxxxxxxx & Xxxxx, L.L.P.]
___________, 2000
Pinnacle Global Group, Inc.
Xxxxxxx Xxxxxx Xxxxxx Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Gentlemen:
We have acted as counsel to Cummer/Xxxxxx Holdings, Inc., Cummer/Xxxxxx
Securities, Inc., Cummer/Xxxxxx Capital Partners, Inc. and Cummer/Xxxxxx Capital
Advisors, Inc., all Texas corporations (collectively, the "C/M Parties"), in
connection with the Agreement and Plan of Reorganization dated as of October
___, 2000 (the "Reorganization Agreement"), among Pinnacle Global Group, Inc., a
Texas corporation ("PGG"), Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation
("SMH"), and the PGG Parties. This opinion is delivered to you pursuant to
Section 8.3 of the Reorganization Agreement. Capitalized terms used and not
otherwise defined herein have the meanings given to them in the Reorganization
Agreement.
We have examined the originals, or copies certified or otherwise identified
to our satisfaction, of (i) the Reorganization Agreement, (ii) the Charter
Documents of the respective C/M Parties, (iii) corporate records of the
respective C/M Parties, including minute books as furnished to us by the C/M
Parties, (iv) certificates of public officials and of representatives of the C/M
Parties, and (vii) such statutes and other instruments and documents as we have
deemed appropriate as a basis for the opinions hereinafter expressed.
In rendering the following opinions, we have relied on the representations
and warranties of the C/M Parties contained in the Reorganization Agreement and
in certificates of officers of the C/M Parties with respect to the accuracy of
the factual matters that form the basis for any of the opinions contained
herein. In making our examination, we have assumed, without independent
investigation, that all signatures on documents examined by us are genuine, all
documents submitted to us as originals are authentic and all documents submitted
to us as certified or photostatic copies of original documents conform to those
original documents and all those original documents are authentic. In addition,
we have assumed the due authorization, execution and delivery of all documents
referred to herein by the PGG Parties and the due authority of all
persons executing such documents except the persons executing those documents on
behalf of the C/M Parties.
On the basis of the foregoing, and subject to the assumptions, limitations
and qualifications hereinafter set forth, we are of the opinion that:
1. Each C/M Party is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and has all requisite
corporate power and authority to own and operate its properties, to lease the
properties it operates under lease and to conduct its business as currently
conducted. Each Acquired Subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction outside the State
of Texas in which the failure to so qualify would have a Material Adverse Effect
on the Acquired Subsidiaries. To our knowledge, neither Acquired Subsidiary is
in violation of any provision of its Charter Documents.
2. Each C/M Party has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Reorganization Agreement
and to complete the Reorganizations. The execution and delivery of the
Reorganization Agreement by the respective C/M Parties, and the performance by
each C/M Party of its obligations under the Reorganization Agreement, have been
duly authorized by all necessary corporate action and proceedings required under
its Charter Documents and applicable Laws.
3. The Reorganization Agreement has been duly executed and delivered by
the respective C/M Parties and constitutes the legal, valid and binding
obligation of the respective C/M Parties, enforceable against the respective C/M
Parties in accordance with the Reorganization Agreement's terms, except as
enforceability may be subject to the effects of (a) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law) and
(c) any implied covenant of good faith and fair dealing.
4. Neither the execution, delivery and performance of the Reorganization
Agreement nor the consummation of the Reorganizations do or will (a) violate,
breach or constitute a default (or an event which with notice or lapse of time
or both could become a default) under (i) any Charter Document of a C/M Party,
(ii) any Law applicable to any C/M Party or by which its property is bound, or
(iii) any material contract or agreement of any C/M Party known to us or (b)
cause or result in the loss by either Acquired Subsidiary of a material benefit
under, or give rise to the imposition of, or afford any Person the right to
obtain, any Lien upon any property or assets of either Acquired Subsidiary (or
upon any revenues, income or profits of either Acquired Subsidiary therefrom)
pursuant to any such material contract or agreement or any right of termination,
amendment, acceleration or cancellation of any material contract or agreement of
which we have knowledge.
5. No governmental approvals are required to be obtained, and no reports
or notices or filings with any Governmental Entity are required to be made, by
any C/M Party in connection with the execution, delivery or performance by the
C/M Parties of the Reorganization Agreement, the
enforcement against the C/M Parties of their respective obligations thereunder,
or the completion of the Reorganizations.
6. To our knowledge, except pursuant to the Reorganization Agreement,
there are no existing options, warrants, subscriptions or other rights to
purchase or securities convertible into or exchangeable for, the capital stock
of either Acquired Subsidiary. To our knowledge, except as disclosed pursuant to
the Reorganization Agreement, neither an Acquired Subsidiary nor either C/M
Selling Shareholder is a party to or bound by any agreement, instrument,
contract, obligation, commitment or understanding of any character, except for
the Reorganization Agreement, relating to the sale, assignment, conveyance,
encumbrance, transfer or delivery of any capital stock of either Acquired
Subsidiary or all or substantially all the assets of either Acquired Subsidiary.
7. To our knowledge, there is no pending or threatened litigation or
proceeding that (a) questions the validity of the Reorganization Agreement, or
any action taken or to be taken by any C/M Party in connection with the
Reorganization Agreement, at law or in equity, before or by any Governmental
Entity or before any arbitrator or (b) if adversely determined, would have a
Material Adverse Effect on the Acquired Subsidiaries or the C/M Selling
Shareholders.
8. Immediately prior to the Closing: (a) the authorized capital stock of
the CMS consisted of ___________ shares of common stock, par value $1 per share,
of which ___________ shares were issued and outstanding and ___________ shares
were held by the CMS as treasury shares; (b) the authorized capital stock of the
CMAC consisted of ___________ shares of common stock, par value $1 per share, of
which ___________ shares were issued and outstanding and ___________ shares were
held by the CMAC as treasury shares; (c) all such outstanding shares of common
stock of the respective Acquired Subsidiaries were (i) duly authorized and
validly issued in accordance with the applicable Law of the State of Texas and
the Charter Documents of the respective Acquired Subsidiaries, (ii) fully paid
and nonassessable, (iii) not issued in violation of any preemptive rights,
rights of first refusal or other similar rights, and (iv) to our knowledge, were
issued in compliance with the applicable provisions of federal and state
securities Laws; and (d) the respective C/M Selling Shareholders owned all the
issued and outstanding shares of capital stock of the respective Acquired
Subsidiaries free and clear, to our knowledge, of any Lien or adverse claim.
In the opinions set forth above, phrases such as "to our knowledge," "known
to us" and those with equivalent wording refer to the conscious awareness of
information by the lawyers of this Firm who have prepared this opinion, signed
this letter or been actively involved in assisting and advising the C/M Parties
in connection with the negotiation, execution and delivery of the Reorganization
Agreement and related matters, without any independent investigation by any
lawyer of this Firm.
The opinions expressed in paragraph 1 as to the qualification and good
standing of the C/M Parties as a foreign corporation are based solely on our
review of certificates of public officials of the relevant jurisdiction and
officers of the C/M Parties.
The opinions expressed in paragraph 3 above are subject to the additional
qualification that we express no opinion as to the enforceability of (a) any
severability or reformation provisions contained in the Reorganization
Agreement, (b) any provisions in the Reorganization Agreement which purport to
entitle a Party to indemnification in respect of any matter arising under any
securities laws or to the extent indemnification in respect of any matter would
otherwise be against public policy, (c) any provisions of the Reorganization
Agreement purporting to establish a right to enforce a covenant or restriction
by injunctions or restraining orders, or (d) any provisions of the
Reorganization Agreement that have the effect of prohibiting oral amendments or
waivers of any provisions of those documents.
This opinion is limited to the Laws of the State of Texas and the federal
Laws of the United States of America, each as in effect on the date hereof, and
no opinion is expressed as to any matter governed by any other Law.
This opinion and the matters addressed herein are as of the date hereof,
and we undertake no, and hereby disclaim any, obligation to advise you of any
change in any matter set forth herein occurring after the date hereof. This
opinion is being furnished to you for use solely in connection with the
transactions being consummated pursuant to the Reorganization Agreement. No
other use or distribution of this opinion may be made without our prior written
consent.
Very truly yours,
Exhibit G
[Letterhead of Xxxxxx & Xxxxxx, L.L.P.]
___________, 2000
Cummer/Xxxxxx Holdings, Inc.
Cummer/Xxxxxx Capital Partners, Inc.
0000 Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Gentlemen:
We have acted as counsel to Pinnacle Global Group, Inc., a Texas
corporation ("PGG"), and Sander Xxxxxx Xxxxxx Inc., a Texas corporation ("SMH"),
in connection with the Agreement and Plan of Reorganization dated as of October
____, 2000 (the "Reorganization Agreement"), among PGG, SMH, Cummer/Xxxxxx
Holdings, Inc., Cummer/Xxxxxx Capital Partners, Inc., and Cummer/Xxxxxx Capital
Advisors, Inc. This opinion is delivered to you pursuant to Section 9.3 of the
Reorganization Agreement. Capitalized terms used and not otherwise defined
herein have the meanings given to them in the Reorganization Agreement.
We have examined the originals, or copies certified or otherwise identified
to our satisfaction, of (i) the Reorganization Agreement, (ii) the respective
Charter Documents of the PGG Parties, (v) corporate records of the PGG Parties,
including minute books as furnished to us by the PGG Parties, (iii) certificates
of public officials and of representatives of PGG and SMH, and (iv) such
statutes and other instruments and documents as we have deemed appropriate as a
basis for the opinions hereinafter expressed.
In rendering the following opinions, we have relied on the representations
and warranties of the PGG Parties contained in the Reorganization Agreement and
in certificates of the officers of the PGG Parties with respect to the accuracy
of the factual matters that form the basis for any of the opinions contained
herein. In making our examination, we have assumed, without independent
investigation, that all signatures on documents examined by us are genuine, all
documents submitted to us as originals are authentic, and all documents
submitted to us as certified or photostatic copies of original documents conform
to those original documents and all those original documents are authentic. In
addition, we have assumed the due authorization, execution and delivery of all
Cummer/Xxxxxx Holdings, Inc.
Cummer/Xxxxxx Capital Partners, Inc.
________,2000
Page 2
documents referred to herein by the parties thereto other than the PGG Parties
and the due authority of all persons executing such documents except the PGG
Parties.
On the basis of the foregoing, and subject to the assumptions, limitations
and qualifications hereinafter set forth, we are of the opinion that:
1. Each PGG Party is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas, and has all requisite
corporate power and authority to own and operate its properties, to lease the
properties it operates under lease and to conduct its business as currently
conducted. Each PGG Party is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction outside the State of
Texas in which the failure to so qualify would have a Material Adverse Effect on
PGG. To our knowledge, neither PGG Party is in violation of any provision of its
Charter Documents.
2. Each PGG Party has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Reorganization Agreement
and to complete the Reorganizations. The execution and delivery of the
Reorganization Agreement by each PGG Party, and the performance by each of them
of their respective obligations under the Reorganization Agreement, have been
duly authorized by all necessary corporate action and proceedings required under
its Charter Documents and applicable Laws.
3. The Reorganization Agreement has been duly executed and delivered by
each PGG Party and constitutes the legal, valid and binding obligation of each
PGG Party enforceable against it in accordance with the Reorganization
Agreement's terms, except as enforceability may be subject to the effects of (a)
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
Laws affecting the enforcement of creditors' rights generally, (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (c) any implied covenant of good faith and
fair dealing.
4. Neither the execution, delivery and performance of the Reorganization
Agreement nor the consummation of the Reorganizations do or will (a) violate,
breach or constitute a default (or an event which with notice or lapse of time
or both could become a default) under (i) any Charter Document of either PGG
Party, (ii) any Law applicable to either PGG Party or by which its property is
bound, or (iii) any material contract or agreement of either PGG Party known to
us or (b) cause or result in the loss by either PGG Party of a material benefit
under, or give rise to the imposition of, or afford any Person the right to
obtain, any Lien upon any property or assets of either PGG Party (or upon any
revenues, income or profits of either PGG Party therefrom) pursuant to any such
material contract or agreement, or any right of termination, amendment,
acceleration or cancellation of any material contract or agreement of which we
have knowledge.
Cummer/Xxxxxx Holdings, Inc.
Cummer/Xxxxxx Capital Partners, Inc.
________,2000
Page 3
5. No governmental approvals are required to be obtained, and no reports
or notices or filings with any Governmental Entity are required to be made, by
either PGG Party for the execution, delivery or performance by either PGG Party
of the Reorganization Agreement, the enforcement against either PGG Party of its
obligations thereunder, or the completion of the Reorganizations.
6. To our knowledge, except as disclosed in or pursuant to the
Reorganization Agreement, there are no existing options, warrants, subscriptions
or other rights to purchase or securities convertible into or exchangeable for,
the capital stock of PGG. To our knowledge, except as disclosed in or pursuant
to the Reorganization Agreement, PGG is not a party to or bound by any
agreement, instrument, contract, obligation, commitment or understanding of any
character, except for the Reorganization Agreement itself, relating to the sale,
issuance or delivery of any capital stock of PGG or all or substantially all the
assets of PGG.
7. To our knowledge, there is no pending or threatened litigation or
proceeding that (a) questions the validity of the Reorganization Agreement, or
any action taken or to be taken by either PGG Party in connection with the
Reorganization Agreement, at law or in equity, before or by any Governmental
Entity or before any arbitrator or (b) if adversely determined, would have a
Material Adverse Effect on PGG.
8. Immediately prior to the Closing: (a) the authorized capital stock of
PGG consisted of (i) 100 million shares of common stock, $.01 par value per
share, of which __________ shares were issued and outstanding ___________ shares
were reserved for issuance upon exercise of PGG stock options, and ________
shares were held as treasury shares, and (ii) 10 million shares of preferred
stock, $.10 par value per share, none of which were issued or outstanding; and
(b) all such outstanding shares of PGG Common Stock were (i) duly authorized and
validly issued in accordance with the applicable Law of the State of Texas and
the Charter Documents of PGG, (ii) were fully paid and nonassessable, (iii) not
issued in violation of any preemptive rights, rights of first refusal, or
similar rights, and (iv) to our knowledge were issued in compliance with the
applicable provisions of federal and state securities laws.
9. The issuance of the Reorganization Shares to the C/M Shareholders
pursuant to the terms of the Reorganization Agreement has been duly authorized
by all necessary corporate action on the part of PGG, and the Reorganization
Shares, when issued in accordance with the terms of the Reorganization
Agreement, will be validly issued, fully paid and nonassessable. The Contingent
Reorganization Shares have been duly reserved for issuance.
Cummer/Xxxxxx Holdings, Inc.
Cummer/Xxxxxx Capital Partners, Inc.
________,2000
Page 4
In the opinions set forth above, phrases such as "to our knowledge," "known
to us" and those with equivalent wording refer to the conscious awareness of
information by the lawyers of this Firm who have prepared this opinion, signed
this letter or been actively involved in assisting and advising the either PGG
Party in connection with the negotiation, execution and delivery of the
Reorganization Agreement and related matters, without any independent
investigation by any lawyer of this Firm.
The opinions expressed in paragraph 1 as to the qualification and good
standing of the PGG Parties as a foreign corporations are based solely on our
review of certificates of public officials of the relevant jurisdiction and
officers of the Company.
The opinions expressed in paragraph 3 above are subject to the additional
qualification that we express no opinion as to the enforceability of (a) any
severability or reformation provisions contained in the Reorganization
Agreement, (b) any provisions in the Reorganization Agreement which purport to
entitle a Party to indemnification in respect of any matter arising under any
securities Laws or to the extent indemnification in respect of any matter would
otherwise be against public policy, (c) any provisions of the Reorganization
Agreement purporting to establish a right to enforce a covenant or restriction
by injunctions or restraining orders or, (d) any provisions of the
Reorganization Agreement that have the effect of prohibiting oral amendments or
waivers of any provisions of those documents.
This opinion is limited to the Laws of the State of Texas and the federal
Laws of the United States of America, each as in effect on the date hereof, and
no opinion is expressed as to any matter governed by any other Law.
This opinion and the matters addressed herein are as of the date hereof,
and we undertake no, and hereby disclaim any, obligation to advise you of any
change in any matter set forth herein occurring after the date hereof. This
opinion is being furnished to you for use solely in connection with the
Reorganizations being consummated pursuant to the Reorganization Agreement. No
other use or distribution of this opinion may be made without our prior written
consent.
Very truly yours,
