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EXHIBIT 10.1
EXECUTION COPY
CONTRIBUTION AGREEMENT
FOR THE FORMATION OF
JHFSC ACQUISITION CORP.
OCTOBER 4, 1996
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CONTRIBUTION AGREEMENT
TABLE OF CONTENTS
Preliminary Statement.............................................................................................1
1. Definitions.....................................................................................1
2. Contribution of the Shares......................................................................6
2.01 Contribution of Shares and Additional Share Agreement..................................6
2.02 Contributions by Xxx and SCP...........................................................6
2.03 Contribution by Employee Investors.....................................................7
2.04 Further Assurances.....................................................................7
2.05 Shareholder Agreement..................................................................7
2.06 Closing................................................................................7
3. Representations of Xxxxxxx with Respect to Xxxxxxx and the Shares...............................8
3.01 Organization...........................................................................8
3.02 Title to Shares........................................................................8
3.03 Authority..............................................................................8
3.04 Enforceability; No Violation..........................................................8
3.05 Brokers................................................................................9
3.06 Purchase for Investment................................................................9
4. Representations of Xxxxxxx with Respect to the Company..........................................9
4.01 Organization and Qualification........................................................10
4.02 No Violation..........................................................................10
4.03 Capitalization........................................................................10
4.04 Subsidiaries..........................................................................10
4.05 Financial Statements..................................................................11
4.06 Absence of Undisclosed Liabilities....................................................11
4.07 Absence of Certain Material Changes...................................................11
4.08 Title to Assets.......................................................................13
4.09 Real Estate...........................................................................13
4.10 Intentionally Omitted.................................................................14
4.11 Intellectual Property.................................................................14
4.12 Contracts.............................................................................14
4.13 Compliance with Laws..................................................................15
(i)
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4.14 Certain Employee Matters..............................................................17
4.15 Employee Benefit Plans................................................................17
4.16 [Intentionally Omitted]...............................................................21
4.17 Litigation............................................................................21
4.18 [Intentionally Omitted]...............................................................22
4.19 Transactions with Interested Persons..................................................22
4.20 Brokerage Clients.....................................................................22
4.21 Investment Advisory Clients...........................................................23
4.22 Investment Fund Clients...............................................................23
5. Representations of Newco.......................................................................24
5.01 Organization and Authority............................................................24
5.02 Authorization.........................................................................24
5.03 Capitalization of Newco...............................................................25
5.04 Regulatory Approvals..................................................................25
5.05 Actions or Proceedings................................................................25
5.06 Investment Representation.............................................................25
5.07 Financing Commitments.................................................................25
5.08 New Company; No Liabilities...........................................................26
5.09 Solvency..............................................................................26
5.10 Brokers...............................................................................27
5.11 No Agreement..........................................................................27
6. Covenants......................................................................................27
6.01 Covenants of Xxxxxxx with Respect to the Company......................................27
6.02 Covenants of Xxxxxxx with Respect to Closing..........................................29
6.03 Covenants of Newco with Respect to the Closing........................................30
6.04 Tax Matters...........................................................................30
6.05 Confidentiality.......................................................................30
6.06 Non-Competition.......................................................................32
6.07 12b-1 Funds...........................................................................33
6.08 Sutro Litigation Escrow...............................................................33
6.09 Public Announcements..................................................................33
6.10 Further Action........................................................................33
6.11 Reconciliation of Accounts............................................................33
6.12. Pursuit of Rights.....................................................................34
6.13. Compliance with Section 15(f).........................................................34
6.14. Further Cooperation...................................................................34
(ii)
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7. Conditions to Obligations of Newco.............................................................34
7.01 Continued Truth of Representations and Warranties of Xxxxxxx;
Compliance with Obligations...........................................................34
7.02 Governmental and Third Party Approvals................................................35
7.03 Adverse Proceedings...................................................................35
7.04 Opinion of Counsel....................................................................35
7.05 Closing Deliveries....................................................................35
7.06 Financing.............................................................................36
7.07 Approval of Fund Trustees or Directors................................................36
7.08 Approval of Fund Shareholders.........................................................36
7.09 Execution of the Fund Agreements......................................................37
7.10 Transitional Services Agreement.......................................................37
7.11 Tax Matters Agreement.................................................................37
7.12 No Material Adverse Effect............................................................37
8. Conditions to Obligations of Xxxxxxx...........................................................37
8.01 Continued Truth of Representations and Warranties of Newco;
Compliance with Covenants and Obligations.............................................37
8.02 Corporate Proceedings.................................................................37
8.03 Governmental and Third Party Approvals................................................37
8.04 Adverse Proceedings...................................................................37
8.05 Opinion of Counsel....................................................................38
8.06 Tax Matters Agreement.................................................................38
8.07 Additional Share Agreement............................................................38
8.08 Newco Shareholder Agreements..........................................................38
8.09 Managements' Obligations..............................................................38
8.10 Closing Deliveries....................................................................38
8.11 Repayment of Commercial Paper Facility................................................39
8.12 Xxxxxxxxx Contribution Agreement......................................................39
9. Indemnification................................................................................40
9.01 Survival..............................................................................40
9.02 Indemnification by Xxxxxxx............................................................40
9.03 Special Indemnification with Respect to Certain Matters...............................41
9.04 Indemnification by Newco..............................................................41
9.05 Minimum Indemnification...............................................................42
9.06 Maximum Indemnification for Certain Losses............................................42
9.07 Notice and Opportunity to Defend......................................................42
9.08 Contribution..........................................................................44
(iii)
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9.09 Exclusive Remedy......................................................................44
9.10 Determination of Loss.................................................................44
9.11 Effect of Indemnification.............................................................45
10. Termination of Agreement.......................................................................45
10.01 Termination by Lapse of Time..........................................................45
10.02 Termination by Agreement of the Parties...............................................45
10.03 Availability of Remedies at Law.......................................................46
11. Restriction On Use of Certain Names............................................................46
12. Agreement to Satisfy Certain Liabilities and Advances..........................................47
13. Notices........................................................................................47
14. Successors and Assigns.........................................................................48
15. Entire Agreement; Amendments; Attachments......................................................49
16. Severability...................................................................................49
17. Expenses.......................................................................................49
18. Governing Law..................................................................................50
19. Section Headings...............................................................................50
20. Counterparts...................................................................................50
(iv)
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Exhibits
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A Additional Share Agreement
B Terms of Shareholder Agreement
C Xxx Commitment Letter
C-1 SCP Commitment Letter
D Performance Milestones
E Terms of Transitional Services Agreement
F Tax Matters Agreement
G Xxxxxxxxx Contribution Agreement
Schedules
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1. Active Subsidiaries
3.05 Brokers
4.04 Subsidiaries
4.06 Absence of Undisclosed Liabilities
4.07 Absence of Certain Material Changes
4.08 Title to Assets
4.09 Real Estate
4.11 Intellectual Property
4.12 Contracts
4.14 Certain Employee Matters
4.15 Employee Benefit Plans
4.17 Litigation
4.19 Transactions with Interested Persons
4.20 Brokerage Clients
4.21 Investment Advisory Clients
5.10 Brokers
6.02 Resigning Directors
6.06 Non-Competition
Exhibits and Schedules have been omitted from this Agreement. The
Registrant Agrees to furnish supplementally a copy of such Exhibits and
Schedules to the Commission upon request.
(v)
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CONTRIBUTION AGREEMENT
Contribution Agreement (the "Agreement") made as of the 4th day of
October, 1996 by and between JHFSC Acquisition Corp., a Delaware corporation
("Newco"), Xxxx Xxxxxxx Subsidiaries, Inc., a Delaware corporation ("Xxxxxxx"),
Xxxxxx X. Xxx Equity Fund III, L.P., a Delaware limited partnership ("Xxx"), and
SCP Private Equity Partners, L.P., a Delaware limited partnership ("SCP").
PRELIMINARY STATEMENT
1. Xxxxxxx owns all of the issued and outstanding shares of the common
stock, no par value (the "Common Stock"), of Xxxx Xxxxxxx Freedom Securities
Corporation, a Massachusetts corporation (the "Company").
2. Xxxxxxx desires to contribute 100% of the issued and outstanding
shares of the Company (the "Shares") to Newco in exchange for (i) 4.999% of the
issued and outstanding capital stock of Newco on the Closing Date (the "Xxxxxxx
Newco Shares") and (ii) one hundred and eighty million dollars ($180,000,000),
subject to reduction, dollar for dollar, by the amount of any dividend or
distribution upon the equity securities of the Company made pursuant to Section
6.01(a)(iii);
3. As provided in Section 2.2, Xxx and SCP desire to contribute an
aggregate of $50,000,000 to the capital of Newco (which amount may be reduced to
the extent that certain employees and members of management of the Company and
its Subsidiaries (the "Employee Investors") contribute more than $25,000,000 to
the capital of Newco;
4. The Employee Investors intend to contribute at least $25,000,000 to
the capital of Newco; and
5. The Parties hereto intend for the transactions contemplated by this
Agreement to be governed by Section 351 of the Code.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, all capitalized
words or expressions used in this Agreement (including the Schedules and
Exhibits annexed hereto) shall have the meanings specified in this Article 1
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
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"ACTIVE SUBSIDIARY" means any of the Subsidiaries of the Company listed
on SCHEDULE 1 attached hereto.
"ADDITIONAL SHARE AGREEMENT" means the Agreement attached hereto as
EXHIBIT A.
"ADVISERS ACT" means the Investment Advisers Act of 1940, as amended.
"AFFILIATE" means, when used with respect to any Person at any time,
(a) each Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such specified Person at such time, (b)
each Person who is or has been within two years prior to the time in question an
officer, director or direct or indirect beneficial holder of at least 5% of any
class of the outstanding capital stock of such specified Person, and (c) each
Person of which such specified Person or an affiliate (as defined in clauses (a)
or (b) above) thereof shall, directly or indirectly, beneficially own at least
5% of any class of outstanding capital stock or other evidence of beneficial
interest at such time.
"AGREEMENT" means this Contribution Agreement (together with all
Exhibits and Schedules hereto) as from time to time assigned, supplemented,
modified, amended, or restated or as the terms hereof may be waived.
"BUSINESS DAY" means any day, excluding Saturday, Sunday and any other
day on which commercial banks in Boston, Massachusetts are authorized or
required by law to close.
"CHARTER" means the Certificate of Incorporation, Articles of
Incorporation or articles of organization or other organizational document of a
corporation, as amended and restated through the date hereof.
"CLAIM" means an action, suit, proceeding, hearing, investigation,
litigation, complaint, claim or demand.
"CODE" means the Internal Revenue Code of 1986, and the regulations
thereunder, published Internal Revenue Service rulings, and court decisions in
respect thereof, all as the same shall be in effect at the time.
"COMMISSION" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"COMMON STOCK" means the common stock of the Company, no par value per
share.
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"COMPANY" means Xxxx Xxxxxxx Freedom Securities Corporation, a
Massachusetts corporation, and its successors and assigns.
"CONTRIBUTION DOCUMENTS" means this Agreement, the Additional Share
Agreement, the Shareholder Agreement, the Transitional Services Agreement and
the Tax Matters Agreement.
"EMPLOYEE INVESTOR" means those employees and members of the management
of the Company and its Subsidiaries who agree prior to the Closing Date to
contribute, in the aggregate, at least $25,000,000 to the capital of Newco.
"EQUITY SECURITY" shall have the meaning given to such term in Section
3(a)(ii) of the Exchange Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.
"ERISA AFFILIATE" means, for purposes of Title IV of ERISA, any trade
or business, whether or not incorporated, that together with the Company or any
Subsidiary of the Company, would be deemed to be a "single employer" within the
meaning of Section 4001 of ERISA, and, for purposes of the Code, any member of
any group that, together with the Company or any Subsidiary of the Company, is
treated as a "single employer" for purposes of Section 414 of the Code.
"ERISA LIABILITIES" means any Liability, loss, cost or expense incurred
by the Company or any Subsidiary and arising out of any breach of a
representation or warranty included in Section 4.15.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and any
similar or successor federal statute, and the rules and regulations and
interpretations of the Commission thereunder, all as the same shall be in effect
at the time.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board.
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"XXXXXXX" means Xxxx Xxxxxxx Subsidiaries, Inc., a Delaware
corporation, and its successors and assigns.
"XXXXXXX NEWCO SHARES" means 4.999% of the issued and outstanding
shares of capital stock of Newco on the Closing Date.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended, and any similar or successor federal statute, and the rules and
regulations and interpretations of the Commission thereunder, all as the same
shall be in effect at the time.
"IRS" means the Internal Revenue Service and any similar or successor
agency of the federal government administering the Code.
"XXX" means Xxxxxx X. Xxx Equity Fund III, L.P., a Delaware limited
partnership, and its successors and assigns.
"LIABILITIES" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others (other than the Company
or any of its Subsidiaries), including any agreement to purchase or otherwise
acquire the obligations of others or any agreement, contingent or otherwise, to
furnish funds for the purchase of goods, supplies or services for the purpose of
payment of the obligations of others.
"LIEN" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, encumbrance, any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing, except for any Lien arising by operation of law.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
operations, assets, liabilities, or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, (b) the ability of Xxxxxxx to
perform in any material respect its obligations under any of the Contribution
Documents, (c) the validity or enforceability of any of the Contribution
Documents or the rights and remedies of Newco thereunder.
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"NEWCO" means JHFSC Acquisition Corp., a Delaware corporation, and its
successors and assigns.
"NEWCO COMMON STOCK" means the common stock, no par value per share, of
Newco.
"OFFICER'S CERTIFICATE" means a certificate signed in the name of a
corporation by its President, Chief Executive Officer, Treasurer, Chief
Financial Officer, or, if so specified, the Clerk or Secretary, acting in his or
her official capacity.
"PERSON" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor thereto.
"PRINCIPAL SUBSIDIARY" means any one or more of Freedom Capital
Management, Corporation, Sutro and Co. Incorporated, Xxxxxx Xxxxxxx Incorporated
and Xxxx Xxxxxxx Clearing Corp.
"SCP" means SCP Private Equity Partners, L.P., a Delaware limited
partnership, and its successors and assigns.
"SECURITIES ACT" means the Securities Act of 1933, and any similar or
successor federal statute, and the rules, regulations and interpretations of the
Commission thereunder, all as the same shall be in effect at the time.
"SHAREHOLDER AGREEMENT" means the Agreement incorporating the terms set
forth on EXHIBIT B hereto among the shareholders of Newco.
"SHARES" means the outstanding shares of Common Stock of the Company.
"SUBSIDIARY" means, any Person of which the Company (or other specified
Person) shall own directly or indirectly through a Subsidiary, a nominee
arrangement or otherwise at least a majority of the outstanding capital stock
(or other shares of beneficial interest) presently entitled to vote generally or
at least a majority of the partnership, joint venture or similar interests, or
in which the Company (or other specified Person) is a general partner or joint
venturer without limited liability.
"TRANSITIONAL SERVICES AGREEMENT" means the Agreement to be entered
into between the Company and Xxxxxxx on the Closing Date containing the terms
set forth on EXHIBIT E.
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The following additional terms shall have the meanings set forth in the
section references.
Term Section Where Defined
---- ---------------------
Brokerage Clients 4.20
Brokerage Contracts 4.20
Newco Common Stock 2.01
Closing 2.01
Closing Date 2.01
Company Reports 4.13
Definitive Financing Agreements 6.03(b)
Financial Statements 4.05
Xxxxxxx Newco Shares Preliminary Statement
Investment Clients 4.20
Investment Contracts 4.20
Investment Fund 4.20
Investment Fund Clients 4.20
Investment Fund Client Financial Statements 4.20
License 11
Most Recent Financial Statements 4.05
Plan 4.15
Solvent 5.09
Tax Matters Agreement 6.04
2. CONTRIBUTION OF THE SHARES
2.01 CONTRIBUTION OF SHARES AND ADDITIONAL SHARE AGREEMENT.
Subject to and upon the terms and conditions of this Agreement, at the closing
of the transactions contemplated hereby (the "Closing"), Xxxxxxx shall
contribute to Newco the Shares in exchange for the Xxxxxxx Newco Shares and one
hundred eighty million dollars ($180,000,000) in immediately available funds
(the "Cash Boot"). At the time of such contribution, Xxxxxxx shall deliver to
Newco certificates evidencing the Shares duly endorsed in blank or with stock
powers duly executed by Xxxxxxx. At the time of such contribution, Newco and
Xxxxxxx shall enter into an Additional Share Agreement in the form of EXHIBIT A
hereto.
2.02 CONTRIBUTIONS BY XXX AND SCP. Subject to and upon the
terms and conditions set forth in separate commitment letters previously
delivered to Newco, copies of
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which are attached as EXHIBITS C AND C-1, respectively, at the Closing Xxx and
SCP shall contribute to the capital of Newco the amounts set forth in SCHEDULE
2.02 and shall be entitled to receive in consideration thereof the number of
shares of Newco Common Stock set forth on SCHEDULE 2.02. The amounts contributed
by Xxx and SCP and the shares of Newco Common Stock shall be reduced dollar for
dollar to the extent the Employee Investors contribute in excess of $25,000,000
to the Company. Xxx and SCP are parties to this Agreement solely to evidence
their obligations under this Section 2.02 and Section 6.09, and shall have no
liability, obligation, commitment or benefit under any other provision of this
Agreement.
2.03 CONTRIBUTION BY EMPLOYEE INVESTORS. Subject to and upon
the terms and conditions of this Agreement, at the Closing the Employee
Investors shall contribute to the capital of Newco at least $25,000,000 and
shall be entitled to receive in consideration thereof the number of shares of
Newco Common Stock set forth on SCHEDULE 2.02. The number of shares of Newco
Common Stock will be increased to the extent the Employee Investors contribute
to the Company more than $25,000,000 so that the shares of Newco Common Stock
held by the Employee Investors when aggregated with the Newco Common Stock held
by Xxx and SCP are equal to ninety-five and one one-thousandth percent (95.001%)
of the outstanding shares of Newco Common Stock.
2.04 FURTHER ASSURANCES. At any time and from time to time
after the Closing, at Newco's request and without further consideration, Xxxxxxx
shall promptly execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take all such other action as Newco
may reasonably request, more effectively to transfer, convey and assign to
Newco, and to confirm Newco's title to, all of the Shares. At any time and from
time to time after the Closing, at Xxxxxxx'x request and without further
consideration, Newco shall promptly execute and deliver such instruments of
sale, transfer, conveyance, assignment and confirmation, and take such action as
Xxxxxxx shall reasonably request, more effectively to transfer, convey and
assign to Xxxxxxx, and to confirm Xxxxxxx'x title to, all of the Xxxxxxx Newco
Shares.
2.05 SHAREHOLDER AGREEMENT. At the Closing each stockholder of
Newco shall enter into a Shareholder Agreement in a form reasonably acceptable
to Hancock, Lee, SCP and a representative of the Employee Investors
incorporating the terms set forth on EXHIBIT B hereto.
2.06 CLOSING. The Closing shall take place at the offices of
Xxxxxxxx, Xxxxxxx & Xxxxxxx, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 at
10:00 a.m., Boston Time, on the first Business Day on which all of the
conditions in Sections 7 and 8 have been
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satisfied or at such other place, time or date as may be mutually agreed upon in
writing by the parties. The date on which the Closing occurs is referred to
herein as the Closing Date.
3. REPRESENTATIONS OF XXXXXXX WITH RESPECT TO XXXXXXX AND THE
SHARES.
Xxxxxxx, represents and warrants to Newco as follows:
3.01 ORGANIZATION. Xxxxxxx is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Xxxxxxx has all requisite power and authority (corporate or otherwise) to
execute and deliver the Contribution Documents to which it is a party and to
consummate the transactions contemplated thereby.
3.02 TITLE TO SHARES. Xxxxxxx has good and marketable title to
the Shares, free and clear of any and all covenants, conditions, restrictions,
voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever.
3.03 AUTHORITY. Xxxxxxx has the full right, power and
authority to enter into this Agreement and the Contribution Documents to which
it is a party and Xxxxxxx has full right, power and authority to transfer,
convey and contribute to Newco at the Closing the Shares. The execution by
Xxxxxxx of the Contribution Documents to which it is a party and the performance
by Xxxxxxx of all of its obligations thereunder have been duly authorized by all
requisite corporate action on behalf of Xxxxxxx, and, upon consummation of the
Contribution and exchange contemplated hereby, Newco will acquire from Xxxxxxx
good and marketable title to the Shares, free and clear of all covenants,
conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever except as provided
for under the Shareholder Agreement or any other agreement to which Newco is a
party.
3.04 ENFORCEABILITY; NO VIOLATION. This Agreement and each
Contribution Document to which Xxxxxxx is a party has been duly executed and
delivered by Xxxxxxx and is enforceable against Xxxxxxx in accordance with its
terms. The execution by Xxxxxxx of the Contribution Documents to which it is a
party and the performance by Xxxxxxx of its obligations thereunder will not
violate the provisions of (i) any applicable federal or state law or (ii)
Xxxxxxx'x Charter or By-Laws, or (iii) any provision of, and will not result in
default or acceleration of any obligation under, any contract, agreement, order,
judgment or decree to which Xxxxxxx or any of its Affiliates is party, or to
which any property of Xxxxxxx or any of its Affiliates is subject where such
violation, or default or acceleration would have a Material Adverse Effect.
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3.05 BROKERS. Except as set forth on SCHEDULE 3.05 hereto,
no broker or finder has acted for Xxxxxxx or any of its Affiliates in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of Xxxxxxx or any of its Affiliates.
3.06 PURCHASE FOR INVESTMENT. Xxxxxxx hereby represents
and warrants to Newco as follows with respect to Newco Common Stock to be
received by Xxxxxxx:
(a) Xxxxxxx is acquiring the Xxxxxxx Newco
Shares for its own account for purposes of investment, and Xxxxxxx has no
present intention of selling such securities except in compliance with federal
securities laws or any applicable state securities laws;
(b) in acquiring the Xxxxxxx Newco Shares,
Xxxxxxx is not relying upon any information other than the results of Xxxxxxx'x
own independent investigation, the representations and warranties contained
herein and the consummation of the transactions contemplated herein in
accordance with this Agreement;
(c) Xxxxxxx (or its representatives) has had an
opportunity to ask questions of and receive answers from the officers or
representatives of Newco concerning the Xxxxxxx Newco Shares, the terms and
conditions of its acquisition of such securities and all such questions have
been answered to the full satisfaction of Xxxxxxx;
(d) Xxxxxxx has the knowledge and experience in
financial and business matters such that it is capable of evaluating the merits
and risks of its investment in Newco;
(e) Xxxxxxx is able to bear the economic risks
of an investment in Newco; and
(f) Xxxxxxx is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act.
4. REPRESENTATIONS OF XXXXXXX WITH RESPECT TO THE COMPANY
Xxxxxxx represents and warrants to Newco as follows with
respect to the Company:
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4.01 ORGANIZATION AND QUALIFICATION. The Company and each of
its Principal Subsidiaries is a corporation, validly existing and in good
standing under the laws of the state of its incorporation. The Company and each
of its Principal Subsidiaries has all requisite power and authority to conduct
its business as such business is currently conducted. The copies of the
Company's and each of its Principal Subsidiaries' Charter and By-Laws, as
amended to date and made available to Newco's counsel prior to the Closing, are
true, complete and correct. The Company and each of its Principal Subsidiaries
is qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the conduct of its business would require such
qualification, except where the failure to be so qualified would neither
significantly interfere with the ability of the Company or any of its Principal
Subsidiaries to conduct their respective businesses substantially as currently
conducted nor significantly diminish the value of the Company and its
Subsidiaries, taken as a whole.
4.02 NO VIOLATION. Assuming the accuracy of the
representations and warranties of Newco hereunder, that all necessary regulatory
or third party consents are obtained prior to Closing, and that all Liabilities
owed to Xxxxxxx and its Affiliates are repaid in accordance with Section 12, the
consummation by Xxxxxxx of the transactions contemplated hereby will not violate
the provisions of (i) the Charter or By-Laws of the Company or its Principal
Subsidiaries, or (ii) any provision of, or result in a default or acceleration
of any material obligation under, or result in any change in the material rights
or obligations of the Company or any Principal Subsidiary of the Company under,
any agreement or other contract required to be identified on SCHEDULE 4.12
hereto.
4.03 CAPITALIZATION. The Company's authorized capital stock
consists of 1,000 shares of Common Stock, no par value, of which 1,000 shares
are issued and outstanding, all of which are owned beneficially and of record by
Xxxxxxx. Except for the rights of Newco hereunder, there are no outstanding
options, warrants, rights or agreements of any kind for the issuance or sale of,
or outstanding securities convertible into or exchangeable for, any additional
shares of Common Stock or any other Equity Security of the Company.
4.04 SUBSIDIARIES. SCHEDULE 4.04 attached hereto sets forth
for each Subsidiary of the Company (a) the name of the Subsidiary, (b) its
jurisdiction of incorporation, and (c) the name of each holder (other than the
Company or one of its Subsidiaries) of any Equity Securities of such Subsidiary,
and the percentage of outstanding Equity Securities held by such holder. There
are no outstanding options, warrants, rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into or exchangeable
for, any additional Equity Securities of any Subsidiary. Except as set forth on
SCHEDULE 4.04, and except for securities held in the trading accounts or any
similar proprietary account of the
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Company or any Principal Subsidiary in the ordinary course of business, neither
the Company nor any Principal Subsidiary owns any Equity Securities issued by
any other Person or is a general partner in any partnership.
4.05 FINANCIAL STATEMENTS. There have been made available to
Newco the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated statements of financial condition,
income, changes in stockholder's equity and cash flows as of and for the fiscal
years ended December 31, 1994 and December 31, 1995, for the Company and its
Subsidiaries (the "Audited Financial Statements"); and (ii) unaudited
consolidated statements of financial condition, income, changes in stockholder's
equity, and cash flows (the "Most Recent Financial Statements") as of and for
the seven (7) months ended July 31, 1996 for the Company and its Subsidiaries.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Company and
its Subsidiaries as of such dates and the results of operations of the Company
and its Subsidiaries for such periods, subject, in the case of the Most Recent
Financial Statements to normal year-end adjustments (which will not be material
individually or in the aggregate) and the absence of footnotes and other
presentation items.
4.06 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
on Schedule 4.06 or reflected in the Financial Statements, there are no
liabilities of the Company or any of its Subsidiaries except for (i) liabilities
which have arisen in the ordinary course of business of the Company and its
Subsidiaries since the date of the Audited Financial Statements,(ii) liabilities
which, when added to the Net Out of Balance Account (as defined in this Section
4.06) do not exceed $250,000 in the aggregate, and (iii) liabilities which,
because of their contingent nature (but without regard to their materiality),
would not be required to be reflected in the Financial Statements in accordance
with GAAP. No "out of balance" or other similar reconciliation condition exists
with respect to the financial records of the Company or any of its Subsidiaries
or the account of any client of the Company or any of its Subsidiaries (whether
or not such account is maintained by the Company or any of its Subsidiaries)
except where the sum of the Net Out of Balance Account plus liabilities
described in clause (ii) above does not exceed $250,000. The term "Net Out of
Balance Account" means the net amount, if any, by which the net amount owed by
the Company or any Subsidiary to customers with respect to account imbalances
exceeds the net amount, if any, owed by customers to the Company and its
Subsidiaries on account of such imbalances.
4.07 ABSENCE OF CERTAIN MATERIAL CHANGES. Except as otherwise
disclosed in SCHEDULE 4.07 attached hereto, and except for changes occurring in
the ordinary course in the
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securities business conducted by the Company or any of its Subsidiaries, since
July 31, 1996, there has not been, or the Company or any Subsidiary has not
entered into:
(a) any event which has occurred on or before the date of this
Agreement which has had, or is reasonably likely to have, a Material Adverse
Effect;
(b) any Lien placed on any of the Company's or any of its
Principal Subsidiaries' properties or assets which remains in existence on the
date hereof, except for Liens arising in the ordinary course of business and
except where such lien would neither significantly interfere with the ability of
the Company or any of its Principal Subsidiaries to conduct their respective
businesses substantially as currently conducted nor significantly diminish the
value of the Company and its Subsidiaries taken as a whole;
(c) any sale, lease, assignment, transfer or other
disposition, or any agreement or other arrangement for the sale, lease,
assignment, transfer or other disposition, of any part of the Company's or any
of its Principal Subsidiaries' properties or assets, other than (i) fixed assets
or other capital expenditures made in the ordinary course of business, or (ii)
the sale of any property or assets which would not significantly interfere with
the ability of the Company or any of its Principal Subsidiaries to conduct their
respective businesses substantially as currently conducted;
(d) any damage, destruction or loss, whether or not covered by
insurance, which would either significantly interfere with the ability of the
Company or any of its Principal Subsidiaries to conduct their respective
businesses substantially as currently conducted, or significantly diminish the
value of the Company and its Subsidiaries, taken as a whole;
(e) any declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, any Equity Security
of the Company or any of its Subsidiaries (other than a dividend or distribution
to the Company or a Subsidiary), or any direct or indirect redemption, purchase
or other acquisition by the Company or any of its Subsidiaries of any of its own
Equity Securities, or any issuance by the Company or any of its Subsidiaries of
any Equity Security;
(f) any allegation in writing of unfair labor practices
involving the Company or any of its Principal Subsidiaries; any change in the
employment contracts of or compensation payable or to become payable by the
Company or any of its Principal Subsidiaries to any of its officers, directors,
or employees who are listed on SCHEDULE 4.14(B) hereto, or any change in bonus
payment or arrangement made to or with any of such officers,
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directors, or employees, other than in each case changes in compensation and
bonuses made in the ordinary course of business; or any material change in
coverage or benefits available under any Plan described in Section 4.15 that
significantly increase the costs to the Company and its Subsidiaries of
providing the benefits under such Plans;
(g) obligations or liabilities exceeding $100,000 in the
aggregate incurred by the Company or any of its Principal Subsidiaries with
respect to any loan, advance or commitment from any bank, financial institution
or institutional lender, other than such obligations and liabilities
contemplated by this Agreement or incurred pursuant to agreements in existence
on such date or any intercompany Liabilities between (i) the Company and any
Subsidiary or (ii) the Company or its Subsidiaries and Xxxxxxx or any of its
Affiliates;
(h) contracts, licenses, leases or agreements entered into by
the Company or any of its Subsidiaries which are to be performed in whole or in
part after the Closing Date and which obligate the Company or any of its
Subsidiaries for more than $250,000 in any one case; or
(i) any recapitalization or reorganization of the Company or
any of its Principal Subsidiaries.
4.08 TITLE TO ASSETS. Each of the Company and its Subsidiaries
has good and marketable title to, or a valid leasehold interest in, all of the
property and assets shown on the statement of financial condition contained in
the Most Recent Financial Statements, except (i) as otherwise set forth in the
Most Recent Financial Statements, (ii) for properties and assets disposed of in
the ordinary course of business since the date of the such statement, (iii) for
liens incurred in the ordinary course of business, and (iv) as set forth on
SCHEDULE 4.08. The assets reflected in the statement of financial condition
included in the Most Recent Financial Statements constitute all properties and
assets which are material to the conduct of the businesses of the Company and
its Principal Subsidiaries as currently conducted.
4.09 REAL ESTATE.
(a) Except as set forth on SCHEDULE 4.09 attached hereto,
neither the Company nor any Subsidiary owns any real estate.
(b) SCHEDULE 4.09 lists the lease or other contractual
obligation under which any real property is leased or subleased by or to any of
the Company and its Subsidiaries and which obligate the Company or any of its
Subsidiaries to make annual base rental payments in excess of $100,000 (the
"Leases"). With respect to each Lease;
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(i) correct and substantially complete copies
thereof have been made available to Newco;
(ii) each Lease is a legal, valid, binding
obligation enforceable against such of the Company and its Subsidiaries as are
parties thereto and, to Xxxxxxx'x knowledge, enforceable against the other party
thereto, and is in full force and effect; and
(iii) neither the Company nor any Principal
Subsidiary, is in breach or default, nor has any event occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder, except, in each case, for
such Leases the termination of which would neither interfere significantly with
the ability of the Company or any of its Principal Subsidiaries to conduct their
respective businesses substantially as currently conducted, nor significantly
diminish the value of the Company and its Subsidiaries, taken as a whole.
4.10 INTENTIONALLY OMITTED.
4.11 INTELLECTUAL PROPERTY. SCHEDULE 4.11 lists all trade and
product names, trademarks and trademark applications and service marks that are
used in the businesses of the Company and its Principal Subsidiaries. Neither
the Company nor any Subsidiary has registered any such trade and product names,
trademarks and trademark applications or service marks. SCHEDULE 4.11 lists all
agreements pursuant to which the Company or any of its Principal Subsidiaries
licenses computer software, except for such licenses the termination of which
would neither significantly interfere with the ability of the Company and its
Principal Subsidiaries to conduct their respective businesses substantially as
currently conducted nor significantly diminish the value of the Company and its
Subsidiaries, taken as a whole. Except as set forth on SCHEDULE 4.11, there are
no written claims or demands of any other Person and no proceedings pending or
threatened in writing which challenge the right of the Company or any of its
Principal Subsidiaries rights to use the names and marks listed on SCHEDULE
4.11.
4.12 CONTRACTS. Except for contracts, commitments, leases,
licenses, plans and agreements (i) listed in SCHEDULE 4.12 and leases set forth
on SCHEDULE 4.09 attached hereto, or (ii) entered into in the securities
business conducted by the Company or any of its Subsidiaries, neither the
Company nor any of its Principal Subsidiaries is a party to or subject to:
(a) any collective bargaining or the like, or any contract or
agreement with any labor union;
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(b) any contract or agreement concerning a partnership or
joint venture with one or more Persons;
(c) any non-competition agreement or other contract or
agreement containing covenants limiting the Company's or any of its Principal
Subsidiaries' freedom to compete in any line of business or in any location or
with any Person;
(d) any note or bond issued by the Company or any
Subsidiary, any loan agreement, indenture, or debenture, or any document or
agreement evidencing a capitalized lease obligation in excess of $250,000 owed
to any Person;
(e) any agreement of guaranty (except for guarantees
constituting endorsements in the ordinary course of business), indemnification,
or other similar commitment with respect to the obligations or liabilities of
any other Person (other than lawful indemnification provisions contained in the
Charters and By-Laws of the Company and its Subsidiaries, or any indemnification
or guaranty in favor of the Company or any of its Subsidiaries);
(f) any agreement (other than an employment contract)
which is not terminable by the Company or a Subsidiary without penalty upon not
less than sixty (60) days notice and which entails an aggregate commitment of
the Company or any Subsidiary in excess of $250,000; provided, however, that
this Section 4.12(f) shall not be deemed to apply to or require disclosure of
any contract or agreement (i) between the Company and one of its Subsidiaries or
between any two Subsidiaries of the Company, or (ii) which will terminate at
Closing with no liability thereafter of the Company or any of its Subsidiaries.
Except as listed in SCHEDULE 4.12, none of the Company or any Principal
Subsidiary of the Company, is in default under any such contract, commitment,
plan, lease, license or agreement listed on SCHEDULE 4.12 (a "default" being
defined for purposes hereof as an actual default or event of default or the
existence of any fact or circumstance which would, upon receipt of notice or
passage of time, or both, constitute a default), except where such default would
neither significantly interfere with the ability of the Company or any of its
Principal Subsidiaries to conduct their respective businesses substantially as
now conducted nor significantly diminish the value of the Company and its
Subsidiaries, taken as a whole.
4.13 COMPLIANCE WITH LAWS.
(a) The Company and each Active Subsidiary possesses such
licenses, permits, franchises, orders, approvals, accreditations, written
waivers and other authorizations
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(the "Licenses") as are necessary to conduct their respective businesses as
currently conducted, except where the failure to possess the same would neither
interfere significantly with the ability of the Company or any such Active
Subsidiary to conduct their respective businesses substantially as currently
conducted, nor significantly diminish the value of the Company and its
Subsidiaries, taken as a whole. The Company and each Active Subsidiary is in
material compliance with the terms and conditions of all such Licenses.
(b) The Company and each Active Subsidiary has conducted and
is conducting its business in compliance with applicable federal or state laws,
statutes, regulations, rules or orders or other requirements of any
governmental, regulatory or administrative agency or authority or court or other
tribunal relating to it, except for such acts of non-compliance the correction
(including any regulatory sanctions) of which would neither interfere
significantly with the ability of the Company and its Principal Subsidiaries to
conduct their respective businesses substantially as currently conducted nor
significantly diminish the value of the Company and its Subsidiaries taken as a
whole. Neither the Company nor any of its Active Subsidiaries, nor to the
knowledge of Xxxxxxx, any employee is now charged with any material violation of
any applicable federal or state law, statute, regulation, rule, order or
requirement relating to any of the foregoing in connection with the businesses
of the Company and its Active Subsidiaries, except for such violations the
correction (including any regulatory sanctions) of which would neither interfere
significantly with the ability of the Company and its Principal Subsidiaries to
conduct their respective businesses substantially as currently conducted nor
significantly diminish the value of the Company and its Subsidiaries taken as a
whole.
(c) The Company and its Active Subsidiaries have filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that were required to be filed with the Commission
and any other applicable federal or state authorities, except where the failure
to so file does not subject the Company or any Subsidiary to any material
liability or penalty, and except for reports required to be filed as a result of
the transactions contemplated by this Agreement (all such reports and statements
are collectively referred to herein as the "COMPANY REPORTS"). As of their
respective date, the Company Reports complied with applicable federal or state
statutes, rules or regulations except where the failure to comply with such
statutes, rules and regulations would neither interfere significantly with the
ability of the Company and its Principal Subsidiaries to conduct their
respective businesses substantially as currently conducted nor significantly
diminish the value of the Company and its Subsidiaries taken as a whole. Except
as set forth on SCHEDULE 4.13, as of the date of this Agreement, none of
Xxxxxxx, the Company or any of its Principal Subsidiaries is a party to any
assistance agreement, supervisory agreement, memorandum of
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understanding, consent order, cease and desist order, or condition of any
regulatory order or decree or similar action (other than exemptive orders) with
or by, the Commission.
4.14 CERTAIN EMPLOYEE MATTERS. There has previously been
delivered to Newco a list of the top fifty (50) employees of the Company and its
Subsidiaries for 1995, based on compensation reported on Form W-2 for that year,
together with the gross compensation paid to each. SCHEDULE 4.14(a) hereto lists
each Person with whom the Company or any Subsidiary has a written employment
contract or agreement covering any portion of 1996, and to whom the Company is
obligated to pay base compensation at a rate in excess of $200,000 per year.
4.15 EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION OF PLANS.
SCHEDULE 4.15 attached hereto lists and identifies with
respect to the Company and its Subsidiaries each:
(1) "Employee Pension Benefit Plan" (as such term is
defined in Section 3(2) of ERISA) which is not a Multiemployer Plan;
(2) "Multiemployer Plan" (as such term is defined in
Section 3(37) or 4001(a)(3) of ERISA);
(3) "Employee Welfare Benefit Plan" (as such term is
defined in Section 3(3) of ERISA); and
(4) Stock purchase, option or bonus plan, restricted
stock, stock appreciation right or similar equity-based plan, deferred
compensation, severance pay, incentive, plan, policy or arrangement ("Other
Plans"),
which is, or was within five (5) years prior to the Closing Date, maintained or
contributed to by the Company or any Subsidiary or under which the Company or
any Subsidiary has any liability or contingent liability (individually a "Plan"
and collectively, the "Plans"). Xxxxxxx agrees to indemnify Newco with respect
to any liability incurred by the Company or any Subsidiary in connection with
any Employee Pension Benefit Plan, Multiemployer Plan or Other Plan maintained
by Xxxxxxx or any of its ERISA Affiliates (other than the Company and any
Subsidiary).
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(b) REPRESENTATIONS APPLICABLE TO ALL EMPLOYEE PENSION
BENEFIT PLANS.
Except as set forth on SCHEDULE 4.15:
(1) Each Plan which is intended to be "qualified" under
Section 401(a) of the Code is and has been at all times so qualified, and the
trusts maintained thereunder are and have been at all times exempt from taxation
under Section 501(a) of the Code. There have been no amendments to any such
Plans that raised significant issues regarding the compliance of such Plan with
the Code which are not the subject of a determination letter issued with respect
thereto by the Internal Revenue Service. No event has occurred that will or
might reasonably be expected to give rise to disqualification of any such Plan
under the Code. The Plans do not pay any tax under Section 511 of the Code.
(2) No Plan has incurred any "accumulated funding
deficiency" (as described in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, nor has there been any failure to make by its due date a
required installment under Section 302(e) of ERISA or Section 412(m) of the Code
with respect to any Plan.
(c) REPRESENTATIONS APPLICABLE TO ALL TITLE IV PLANS.
Except as set forth on SCHEDULE 4.15:
(1) With respect to each Plan, no liability under Title
IV of ERISA has been incurred since the effective date of ERISA that has not
been satisfied in full, and which, when added to all other ERISA Liabilities,
would exceed $100,000 in the aggregate and no condition exists that presents a
risk of incurring a liability under Title IV, other than liability for PBGC
premiums which have been paid when due and other than liabilities which, when
added to other ERISA Liabilities, would not exceed $100,000 in the aggregate.
(2) No steps have been taken to terminate any Plan
subject to Title IV of ERISA.
(3) No Plan has been the subject of a "reportable event"
(as described in Section 4043 of ERISA) as to which a notice would be required
to be filed with the PBGC.
(4) With respect to each Plan which is subject to Title
IV of ERISA, the present value of accrued benefits under such Plan (based upon
the actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by the Plan's actuary with
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respect to such Plan), as of its last valuation date, does not exceed the then
current value of the assets of such Plan. Since the last valuation date for each
such Plan, there have been no amendments or changes to such Plans that would
increase the amount of benefits thereunder.
(5) No Plan is a plan described in Section 4063(a) of ERISA.
(d) REPRESENTATIONS APPLICABLE TO ALL MULTIEMPLOYER PLANS.
(1) No Plan listed in SCHEDULE 4.15(a) is a Multiemployer
Plan.
(e) REPRESENTATIONS APPLICABLE TO ALL PLANS.
Except as set forth on Schedule 4.15:
(1) Each Plan complies and has been administered in form and
operation with all requirements of law and regulation applicable thereto, except
where the liability for failure to so comply or be administered, when added to
all other ERISA Liabilities, would not exceed $100,000 in the aggregate. The
Company and the Subsidiaries have performed all of their obligations under all
such Plans, except where the failure to so perform would not have given rise to
a liability which, when added to all other ERISA Liabilities, would not exceed
$100,000.
(2) There have been no acts or omissions which have given rise
to, or which could give rise to, any penalty, tax, or fine under Sections 406,
409 or 502 of ERISA, or Sections 4972, 4975, 4976, 4979 or 4980B of the Code,
for which, when added to all other ERISA Liabilities, would exceed $100,000 in
the aggregate.
(3) None of the assets of any Plan are invested in any
employer securities or employer real property.
(4) All contributions required with respect to, and premium
payments (including without limitation PBGC premium on account of) any Plan for
all periods ending prior to the Closing (including periods from the first day of
the current plan year to the Closing) will be timely made prior to the Closing
by the Company or the Subsidiaries.
(5) All required reports and descriptions of each Plan
(including IRS Form 5500 Annual Reports, Summary Annual Reports, and Summary
Plan Descriptions) have been filed and distributed in a manner that would not
result in the imposition of any material fines
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or penalties upon the Company or any of its Subsidiaries, which when added to
the other ERISA Liabilities, would exceed $100,000 in the aggregate.
(6) None of the Company or any Subsidiary has any plan or
commitment to establish any additional Plans or to amend any existing Plan.
(7) There are no actions, suits, or claims (other than routine
claims for benefits made in the ordinary course of plan administration for which
plan administrative review procedures have not been exhausted) pending or
threatened involving any Plans or the assets of such Plans.
(8) For each Plan providing benefits to current or former
employees of the Company or any of its Subsidiaries, a true and complete copy of
each of the following documents have been made available to Newco: (i) Plan
document and all amendments thereto (or when the Plan has not been reduced to
writing, a written summary of all material Plan terms); (ii) most recent Summary
Plan Description (together with each Summary of Material Modifications required
under ERISA); (iii) IRS Form 5500 Annual Report, if required under ERISA, for
the two most recent plan years, together with all schedules, financial
statements, and opinions of independent accountants; (iv) the actuarial report,
if required under ERISA, for the two most recent plan years; (v) Form PBGC-1, if
required under ERISA, for the two most recent plan years; (vi) if the Plan is
funded through a trust or any third party funding vehicle (including a voluntary
employee benefit association under section 501(c)(9) of the Code, or a "multiple
employer welfare arrangement" described in section 3(40) of ERISA), the trust or
other funding agreement, all amendments thereto, and the latest financial
statements thereof for the two most recent plan years; and (vii) the most recent
determination letter received from the Internal Revenue Service with respect to
each Plan that is intended to be qualified under section 401 of the Code.
(9) The execution and performance of this Agreement will not
(i) constitute a stated triggering event under any Plan that will result in any
payment becoming due from the Company and any Subsidiary to any present or
former officer, director, or employee of the Company or any Subsidiary, or any
dependent thereof, or (ii) accelerate the time of payment or vesting, or
increase the amount, of compensation due to any such officer, director,
employee, or dependent.
(10) Notwithstanding the representations set forth in section
4.15(e)(2), none of the Company, its Subsidiaries, or any of their officers,
directors, or employees has any liability or contingent liability under the
prohibited transaction rules of Section 4975 of the Code or section 406 of ERISA
for the acquisition, holding, or disposition of interests in the partnerships
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described in SCHEDULE 4.15(a)(4)(VIII) by any employee benefit plan maintained
or contributed to by the Company or any of its Subsidiaries, including the
Profit-Sharing Retirement Plan for Employees of Sutro & Co. Incorporated.
(11) No Plan provides benefits, including without
limitation death, medical, or severance benefits, with respect to current or
former employees or directors (or their beneficiaries) beyond their retirement
or other termination of service other than (i) coverage for benefits mandated by
applicable law, (ii) death benefits or retirement benefits under an Employee
Pension Benefit Plan, (iii) deferred compensation benefits properly accrued as
Liabilities on the Financial Statements, or (iv) benefits the full cost of which
is borne by the current or former employee or director or his beneficiaries.
(f) REPRESENTATIONS APPLICABLE TO THIRD PARTY PLANS.
None of the Company or its Subsidiaries (i) has any liability
for any non-exempt prohibited transaction (within the meaning of sections 503(b)
or 4975 of the Code or section 406 of ERISA) with respect to the assets of any
Employee Pension Benefit Plans (including plans not subject to Title I of ERISA)
established, maintained, or contributed to by entities other than the Company,
its Subsidiaries, or any ERISA Affiliate ("Third Party Plans"), (ii) has
knowledge of, or is the subject of, any governmental examination, investigation,
audit, or other inquiry regarding any Third Party Plan which is reasonably
likely to result in any liability to the Company or any of its Subsidiaries, or
(iii) has breached any fiduciary duty or obligation (under ERISA or applicable
state law) with respect to any Third Party Plan, where the consequence of a
breach of any representation or warranty, in this paragraph (f) would
significantly interfere with the ability of the Company or any of its Principal
Subsidiaries to conduct their respective businesses substantially as now
conducted, or would significantly diminish the value of the Company and its
Subsidiaries, taken as a whole.
4.16 [INTENTIONALLY OMITTED].
4.17 LITIGATION. Set forth as SCHEDULE 4.17 is a listing
of any Claims, which if adversely determined would involve a loss to the Company
or any Subsidiary (which loss shall exclude any cost of defense) in excess of
$50,000 and, which is pending, or threatened in writing, against the Company or
any Subsidiary or their respective businesses, properties or assets, or Xxxxxxx
at law or in equity, before any federal or state court or any other governmental
or administrative agency or tribunal or any arbitrator or arbitration panel.
There are no judgments or injunctions, and to Xxxxxxx'x knowledge, no orders,
rulings, charges, decrees, notices of violation or other mandates against or
affecting the Company or any Subsidiary of the Company with respect to the
properties or assets of the Company or any of
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its Subsidiaries or which seek rescission of or seek to enjoin the consummation
of any of the transactions contemplated by this Agreement.
4.18 [INTENTIONALLY OMITTED].
4.19 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth
on SCHEDULE 4.19 attached hereto, and except for transactions reflected in the
Financial Statements and employment agreements entered into in the ordinary
course of business, there exists no material contract or other material
agreement between the Company or one of its Principal Subsidiaries on the one
hand and Xxxxxxx or any of its Affiliates (other than the Company and its
Affiliates) on the other hand.
4.20 BROKERAGE CLIENTS. Each of Xxxxxx Xxxxxxx Incorporated,
Sutro and Co., Xxxx Xxxxxxx Clearing Corporation, and Xxxx Xxxxxxx Specialist,
Inc. (each a "Broker-dealer" and collectively, the "Broker-dealers") is duly
registered as a broker-dealer with the Commission under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD") and the securities
exchanges listed on SCHEDULE 4.20 hereto and is duly registered, licensed or
qualified as a broker or dealer under the laws of each jurisdiction listed on
SCHEDULE 4.20 hereto. Each Broker-dealer is and at all times since December 31,
1994 has been in compliance with the Exchange Act and the rules and regulations
thereunder applicable to it, the rules and regulations of the NASD applicable to
it (including the NASD's rules of fair practice), the rules and regulations of
the securities exchanges of which it is a member, and the laws of each
jurisdiction where it is registered as a broker or dealer, except for such
instances of non-compliance (i) that relate to a matter set forth on SCHEDULES
4.17 OR 4.20 or (ii) the correction of which would not interfere significantly
with the ability of any Broker-dealer to conduct its business substantially as
currently conducted or significantly diminish the value of the Company and its
Subsidiaries, taken as a whole. Xxxxxxx has previously made available to Newco a
complete copy of each Broker-dealer's Uniform Application for Broker-Dealer
Registration on Form BD, as amended to date, and complete copies of each
Broker-dealer's quarterly Focus Reports and annual statements of financial
condition filed since January 1, 1993. The Broker-dealers act pursuant to
written agreements and related documentation (collectively, the "Broker-dealer
Agreements") with parties to whom they provide broker dealer services. The
Broker-dealer Agreements have not been modified by any terms that are not
included in the Broker-dealer's files, and none of the Broker-dealers has
violated or is in default under, any Broker-dealer Agreement, except for such
violations or defaults that (i) relate to a matter set forth on SCHEDULES 4.17
OR 4.20 or (ii) relate to the actions of a registered representative of such
Broker-dealer where the total liability, cost and expense relating to all
actions or complaints which may be asserted at any time after the date of this
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Agreement with respect to the conduct of such registered representative do not
exceed $250,000.
4.21 INVESTMENT ADVISORY CLIENTS. Each of Xxxxxx Xxxxxxx
Incorporated, Sutro and Co. and Freedom Capital Management Corporation (each an
"Advisory Subsidiary" and collectively, the "Advisory Subsidiaries") is and at
all times since December 31, 1994 has been in compliance with the Investment
Advisers Act of 1940, as amended, (the "Advisors Act") and the rules and
regulations thereunder applicable to it, and the laws of each jurisdiction where
it is registered as an investment advisor, except for such instances of
non-compliance (i) that related to a matter set forth on SCHEDULES 4.17 OR 4.21
or (ii) the correction of which would not interfere significantly with the
ability of any Advisory Subsidiary to conduct its business substantially as
currently conducted or significantly diminish the value of the Company and its
Subsidiaries, taken as a whole. Xxxxxxx has previously made available to Newco a
complete copy of each Advisory Subsidiary's Uniform Application for Investment
Advisor Registration on Form ADV, as amended to date. The Advisory Subsidiaries
act pursuant to written advisory agreements (collectively, the "Advisory
Agreements") with parties to whom they provide investment advisory services.
Each Advisory Agreement complies as to form with the requirements of the
Advisors Act. The Advisory Agreements have not been modified by any terms, oral
or otherwise, that are not included in the Advisory Subsidiaries' files, and
none of the Advisory Subsidiaries has violated, or is in default under, any
Advisory Agreement, except for such violations or defaults (i) that relate to a
matter set forth on SCHEDULES 4.17 OR 4.21 or (ii) the correction of which would
not interfere significantly with the ability of any Advisory Subsidiary to
conduct its business substantially as currently conducted or significantly
diminish the value of the Company and its Subsidiaries, taken as a whole.
4.22 INVESTMENT FUND CLIENTS. SCHEDULE 4.22 sets forth a list
of all agreements (the "Fund Agreements") pursuant to which the Company or an
Advisory Subsidiary performs investment advisory, administration or distribution
services, for the benefit of any investment company, as defined in the
Investment Company Act of 1940, as amended for which a Subsidiary acts as
investment advisor (each such investment company, together with investment
companies for which a Subsidiary has acted as an investment adviser in the past,
referred to as an "Investment Company"). Each Investment Company is, and at all
times since its organization was, registered as an investment company under the
Investment Company Act. All outstanding shares of each such Investment Company
that are required to be registered under the Securities Act have been sold
pursuant to an effective registration statement filed thereunder or qualify for
an exemption from registration thereunder and have been qualified for sale under
applicable "blue sky" laws. No such registration statement contained, as of its
effective date, and no prospectus or other offering material used in
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connection with the sale of shares of any such Investment Company contained, as
of any date on which it was used, any untrue statement of a material fact or
omitted to state a material fact required to be stated therein in order to make
the statements therein not misleading. Each Fund Agreement complies as to form
with the requirements of the Investment Company Act and, to the knowledge of
Xxxxxxx, has been adopted in compliance with the requirements of such Act. To
the knowledge of Xxxxxxx, the Fund Agreements have not been modified by any
terms, oral or otherwise, that are not included in the Company's and the
Subsidiaries' files and none of the Company and its Subsidiaries has any
liability under any Fund Agreement, except for such violations or defaults (i)
that relate to a matter set forth on SCHEDULES 4.17 OR 4.22 or (ii) the
correction of which would not interfere significantly with the ability of any
Advisory Subsidiary to conduct its business substantially as currently conducted
or significantly diminish the value of the Company and its Subsidiaries, taken
as a whole.
Newco has been furnished the audited and unaudited financial statements listed
on SCHEDULE 4.22, (the "Investment Fund Client Financial Statements"). Each of
the Investment Fund Client Financial Statements and notes thereto has been
prepared in accordance with the generally accepted accounting principles,
applied on a consistent basis (except as otherwise disclosed therein) and fairly
presents the financial condition, results of operations, changes in the net
assets and selected per unit data as of the respective dates and for the periods
specified therein except, in the case of interim financial statements, for
normal year-end audit adjustments and the absence of footnotes.
5. REPRESENTATIONS OF NEWCO
Newco represents and warrants to Xxxxxxx as follows:
5.01 ORGANIZATION AND AUTHORITY. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority (corporate and other) to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
5.02 AUTHORIZATION. The execution and delivery of this
Agreement by Newco and the consummation by Newco of the transactions
contemplated hereby have been duly authorized by all requisite corporate action.
This Agreement constitutes the valid and legally binding obligations of Newco,
enforceable against Newco in accordance with its terms. The execution, delivery
and performance of this Agreement and the consummation by Newco of the
transactions contemplated hereby do not and will not (a) violate the provisions
of any law, rule or regulation applicable to Newco; (b) violate the provisions
of Newco's Charter; or (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator
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applicable to Newco; except, in the case of each of (a), (b) and (c), which
violation will not have a material adverse effect upon the ability of Newco to
perform its obligations under this Agreement or its operations, assets,
liabilities or condition (financial or otherwise).
5.03 CAPITALIZATION OF NEWCO. As of the date hereof, Newco's
authorized capital stock consists of 3,000 shares of Common Stock, $.01 par
value. Immediately prior to the Closing, Newco's authorized capital stock will
consist of 12,000,000 shares of Common Stock, of which 7,500,000 shares will be
issued pursuant to the financing arrangement described in Section 5.07 (the
"Financing Arrangements"). Except as expressly contemplated by this Agreement,
and except for shares of Newco Common Stock to be issued pursuant to the
Incentive Share Program, there are outstanding no options, warrants rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into or exchangeable for, any additional Equity Securities of Newco.
5.04 REGULATORY APPROVALS. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by Newco, Xxx or SCP and which are necessary
for the consummation of the transactions contemplated by this Agreement have
been, or will be prior to the Closing Date, obtained and satisfied.
5.05 ACTIONS OR PROCEEDINGS. There is no action, suit or
proceeding to which Newco, Xxx or SCP is a party (either as a plaintiff or
defendant) pending before any court or governmental agency, authority, body or
arbitrator which seeks to restrain, prohibit, record or declare unlawful this
Agreement or materially adversely affect the right of Newco to own, operate or
control the Company or any of its subsidiaries; and Newco has not been
permanently or temporarily enjoined by any order, judgment or decree of any
court or any governmental agency, authority or body from engaging in the
businesses conducted by the Company or its subsidiaries.
5.06 INVESTMENT REPRESENTATION. Newco is acquiring the Shares
from Xxxxxxx for its own account for investment and not with a view to, or for
sale in connection with, any distribution thereof in violation of applicable
securities laws, nor with any present intention of distributing or selling the
same; and, except as contemplated by this Agreement Newco has no present or
contemplated agreement, undertaking, arrangement, obligation, liabilities or
commitment providing for the disposition thereof.
5.07 FINANCING COMMITMENTS. Newco has previously delivered to
Xxxxxxx true, accurate and complete copies of the following:
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(a) a commitment letter with respect to senior debt financing
of the transaction contemplated herein; and
(b) commitment letters from Xxxxxx X. Xxx Equity Fund III,
L.P. and SCP Private Equity Partners, L.P. relating to the purchase of an
aggregate of $50,000,000 of Newco Common Stock.
Pending the Closing, Newco shall keep in place such commitments or, in
the case of the commitment described in clause (a) above, a replacement thereof
from an institutional lender on terms no less favorable to Newco. The financing
described in clauses (a) and (b) above, taken together with not less than
$25,000,000 which is expected to be raised from the Employee Investors
(collectively the "Financing Arrangements") will be sufficient to enable Newco
to pay Xxxxxxx the Cash Consideration on the Closing Date.
5.08 NEW COMPANY; NO LIABILITIES. Newco was incorporated on
August 29, 1996 for the purpose of consummating the transactions contemplated
hereby. As of the date
hereof and as of immediately prior to the Closing,
(a) Newco's only assets are and will be cash received in
connection with the Financing Arrangements and rights under the documents and
instruments executed in connection with the transactions contemplated hereby;
(b) Newco's only liabilities are and will be its obligations
pursuant to the Financing Arrangements and its obligations under the
Contribution Documents (including without limitation, fees and expenses incurred
in connection herewith and therewith); and
(c) Newco has not, and will not have conducted any business
activities other than in connection with the negotiation and execution of the
Contribution Documents.
5.09 SOLVENCY. After giving effect to (i) the transactions
contemplated hereby, (ii) the Financing Arrangements in place on and immediately
after the Closing and (iii) the capitalization of Newco on and immediately after
the Closing, Newco will be Solvent. As used herein, "Solvent" shall mean Newco
(i) will have assets having a fair value in excess of its liabilities, (ii) will
have assets having a fair value in excess of the amount required to pay its
liabilities on existing debts as such debts become absolute and matured, and
(iii) will have, and reasonably expects to continue to have, access to adequate
capital for the conduct of its business and the ability to pay its debts from
time to time incurred in connection with the operation of its business as such
debts mature. For purposes of this paragraph, Newco includes Newco and all of
its subsidiaries on a consolidated basis.
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5.10 BROKERS. Except as set forth on SCHEDULE 5.10 with
respect to Xxxxxx Xxxxxxx Incorporated, Xxx, SCP, and their respective
Affiliates, no broker or finder has acted for Newco or its Affiliates (other
than Xxxxxxx) in connection with the Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fee or
other commission in respect of such transactions based on arrangements made by
or on behalf of Newco or any of its Affiliates (other than Xxxxxxx).
5.11 NO AGREEMENT. No agreement exists between Newco or
any shareholder of Newco or any Affiliate thereof and Xxxx Xxxxxxxxx with
respect to any reimbursement, contribution or other payment by Newco to Xx.
Xxxxxxxxx should Xx. Xxxxxxxxx be required to perform his obligations under the
Contribution Agreement attached hereto as EXHIBIT J.
6. COVENANTS.
6.01 COVENANTS OF XXXXXXX WITH RESPECT TO THE COMPANY.
Xxxxxxx hereby agrees with Newco to keep, perform and fully discharge the
following covenants and agreements with respect to the Company:
(a) INTERIM CONDUCT OF BUSINESS. From the date hereof
until the Closing, Xxxxxxx shall take no action so as to cause the Company and
its Principal Subsidiaries to operate their respective businesses other than as
going concerns consistent in all material respects with prior practice and in
the ordinary course of business. Newco acknowledges and agrees that Xxxxxxx
shall not be deemed to have breached this covenant unless an action was taken by
the Company or any Subsidiary at the specific direction or authorization of
Xxxxxxx. Without limiting the generality of the foregoing, from the date hereof
until the Closing, except for (i) transactions contemplated by this Agreement,
(ii) in the case of subparagraphs (i), (ii), (v), (viii) or (ix), transactions
entered into in the ordinary course of business consistent with past practices,
(iii) transactions that could not be reasonably anticipated to have a Material
Adverse Effect or (iv) unless expressly approved in writing by Newco, Xxxxxxx
shall not cause either the Company or any of its Subsidiaries to:
(i) enter into or amend any employment, bonus,
severance or retirement contract or arrangement, or increase
any salary or other form of compensation payable or to become
payable to any executive or employee;
(ii) purchase, lease or otherwise acquire any
real estate or any interest therein;
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(iii) declare, set aside or pay any dividend or
make any other distribution with respect to any Equity
Security; provided, however, that to the extent the Company
has cash available, Xxxxxxx may, upon five (5) Business Days'
prior notice to Newco, cause the Company to pay to Xxxxxxx a
dividend in an amount not in excess of $35,000,000, which
dividend shall reduce, dollar for dollar, the Cash Boot as
provided in Section 2.01;
(iv) merge or consolidate with or agree to merge
or consolidate with, or purchase or agree to purchase all or
substantially all of the assets of, acquire securities of or
otherwise acquire any Person;
(v) sell, lease or otherwise dispose of or agree
to sell, lease or otherwise dispose of any of its assets,
properties, rights or claims, whether tangible or intangible;
(vi) authorize for issuance, issue, sell or
deliver any of its own Equity Securities;
(vii) split, combine or reclassify any class of
Equity Security or redeem or otherwise acquire, directly or
indirectly, any of its Equity Securities;
(viii) incur any liability, guaranty or obligation
(fixed or contingent);
(ix) place or permit to be placed any Lien on any
of its assets or properties;
(x) make or authorize any amendments or changes
to its Charter or By-Laws; or
(xi) make any investment in excess of $500,000,
whether singly or in the aggregate, in property, plant and
equipment and other items of capital expenditure.
(b) ACCESS. Xxxxxxx shall use its reasonable efforts to
cause the Company and each of its Principal Subsidiaries upon reasonable notice
to give Newco and its representatives and financing sources reasonable access to
all properties, assets, books, contracts, commitments and records of the Company
and each of its Principal Subsidiaries during reasonable business hours and
shall promptly furnish Newco with such financial and operating data and other
information as to the history, ownership, Affiliates, business,
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operations, properties, assets, liabilities, or condition (financial or
otherwise) of the Company and each of its Principal Subsidiaries as Newco may
from time to time reasonably request.
6.02 COVENANTS OF XXXXXXX WITH RESPECT TO CLOSING. Xxxxxxx
agrees with Newco to keep, perform and fully discharge the following covenants
and agreements:
(a) SATISFACTION OF CONDITIONS. Xxxxxxx shall use all
commercially reasonable efforts to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 7 herein on or prior to the Closing
Date, and to cause the Closing to occur as soon as practicable.
(b) NO SOLICITATION, CONFIDENTIALITY, ETC. Xxxxxxx agrees
that, prior to the termination of this Agreement pursuant to Section 10 neither
Xxxxxxx nor anyone acting on its behalf will (i) solicit or negotiate with
respect to any inquiries or proposals relating to (x) the possible direct or
indirect acquisition of the Shares or any other Equity Security of the Company
or any Principal Subsidiary or of all or substantially all of the assets or
business of the Company or any Principal Subsidiary of the Company or (y) any
merger, consolidation, joint venture or business combination with the Company or
any Principal Subsidiary of the Company. Newco acknowledges that the prior
distribution of material regarding the Company to interested parties shall not
be deemed to violate this Section 6.02(b). Xxxxxxx shall refrain from entering
into further discussions with such parties concerning the sale of the Company or
any Principal Subsidiary of the Company to the extent otherwise prohibited by
this Section 6.02(b). Notwithstanding the provisions of this Section 6.02(b), if
Newco shall fail to satisfy one or more of the performance milestones set forth
on EXHIBIT C hereto, Xxxxxxx may, by written notice to Newco given after the
date on which such milestone was scheduled to be completed, declare this Section
6.02(b) to be terminated, after which notice this Section shall not apply to any
action taken by Xxxxxxx, its Affiliates or representatives thereafter.
(c) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Xxxxxxx
will not take any action from the date hereof to the Closing Date that would
cause any representation or warranty of Xxxxxxx contained in this Agreement to
become untrue in any material respect or cause the breach in any material
respect of any agreement hereof or covenant contained herein.
Xxxxxxx will promptly bring to the attention of Newco any facts which
come to the actual knowledge of any person named on SCHEDULE 6.02 that would
cause any of the representations and warranties of Xxxxxxx to be untrue or
materially misleading in any material respect.
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6.03 COVENANTS OF NEWCO WITH RESPECT TO THE CLOSING. Newco
hereby agrees with Xxxxxxx to keep, perform and fully discharge the following
covenants and agreements:
(a) SATISFACTION OF CONDITIONS. Newco agrees to use all
commercially reasonable efforts to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 8 herein on or prior to the Closing
Date, and to cause the Closing to occur as soon as practicable.
(b) FINANCING. Newco shall use all commercially
reasonable efforts to enter into definitive credit agreements and other
agreements (the "Definitive Financing Agreements") with respect to the Financing
Arrangements and the refinancing of any Liabilities from the Company and any of
its Subsidiaries to Xxxxxxx and its Affiliates. If a portion of the Financing
Arrangements becomes unavailable under the Definitive Financing Agreements,
regardless of the reason therefor, Newco will, upon learning thereof, promptly
so advise Xxxxxxx and use its best efforts to obtain such portion of the
Financing Arrangements from other sources. Upon request, Newco shall promptly
advise Xxxxxxx as to the progress of negotiation and finalization of the
Definitive Financing Documents.
6.04 TAX MATTERS. Xxxxxxx and Newco will enter into a Tax
Matters Agreement substantially in the form attached hereto as EXHIBIT F (the
"Tax Matters Agreement") relating to the filing of Tax Returns and other
tax-related matters.
6.05 CONFIDENTIALITY. The parties agree to observe the
following covenants with respect to confidentiality:
(a) Xxxxxxx and Newco agree that no disclosure of this
Agreement or the terms and conditions hereof shall be made to any third party
without the consent of Newco and Xxxxxxx except; (i) to directors, officers,
employees, agents, auditors or advisors of Newco and Xxxxxxx or their respective
affiliates who are provided such information in connection with the consummation
of the transactions contemplated by this Agreement, and who have been informed,
and have agreed to comply with, the disclosure restrictions contained herein;
(ii) when required by law or regulation or as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation or
administrative proceeding; (iii) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state, provincial or
federal regulatory body having or claiming to have jurisdiction over Newco and
Xxxxxxx, as the case may be, or to the United States National Association of
Insurance Commissioners or similar organizations or their successors or any
nationally recognized rating agencies; or (iv) to Persons providing financings
with respect to the
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transactions contemplated herein (including certain employees of the Company and
its Subsidiaries).
(b) For a period of two (2) years after Closing, Newco shall
hold in confidence, and shall not disclose (or permit or suffer its personnel to
disclose) to any person outside its or its Affiliates' organization, any
Confidential Information (as defined below) concerning Xxxxxxx or its
Affiliates. Newco and its personnel shall use Confidential Information only for
the purposes contemplated hereby and, unless and until the Closing occurs, shall
not use or exploit such Confidential Information for its own benefit or the
benefit of another without the prior written consent of Xxxxxxx. Newco shall
disclose Confidential Information received by it under this Agreement only to
persons within its organization who have a need to know such Confidential
Information in connection with the consummation of the transactions contemplated
by this Agreement.
(c) For a period of two (2) years after the Closing, Xxxxxxx
shall hold in confidence, and shall not disclose (or permit or suffer its
personnel to disclose) to a person outside its or its Affiliates' organization,
any Confidential Information concerning Newco, the Company or any of its
Subsidiaries. Xxxxxxx shall disclose such Confidential Information only to
persons within its organization who have a need to know such Confidential
Information; provided that Xxxxxxx may disclose Confidential Information (i)
when required by law or regulation or as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation or
administrative proceeding; (ii) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state, provincial or federal
regulatory body having or claiming to have jurisdiction over Xxxxxxx or any of
its Affiliates, or to the United States National Association of Insurance
Commissioners or similar organizations or their successors or any nationally
recognized rating agency; or (iii) in connection with any Claim involving the
subject matter of this Agreement or any request for indemnification pursuant to
this Agreement.
(d) For purposes of Section 6.05(b) this Agreement,
"Confidential Information" shall mean all information regarding Xxxxxxx, the
Company or any of their respective Affiliates furnished or known by Newco prior
to, on or after the date of this Agreement. For purposes of Section 6.05(c) of
this Agreement, "Confidential Information" shall mean all information regarding
Newco, the Company and its Subsidiaries known by Xxxxxxx prior to the Closing
Date or furnished to Xxxxxxx or its Affiliates pursuant to the Shareholder
Agreement.
(e) The obligations of Newco and Xxxxxxx specified in Sections
6.05(b) and 6.05(c) above, respectively, shall not apply, and Newco and Xxxxxxx
shall have no further
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obligations, with respect to any Confidential Information to the extent that
such Confidential Information:
(i) is generally known to the public at the time
of disclosure or becomes generally known through no wrongful act on the part of
the Person charged with preserving the confidentiality of such Confidential
Information;
(ii) was known by the Person charged with
preserving the confidentiality of such Confidential Information prior to the
disclosure to such Person of the Confidential Information or was developed by
Xxxxxxx or one of its Affiliates without reference to the Confidential
Information of the Company and its Subsidiaries or was developed by the Company
or one of its Subsidiaries without reference to the Confidential Information of
Xxxxxxx and its Affiliates;
(iii) becomes known to the Person charged
with preserving the confidentiality of such Confidential Information through
disclosure by sources, other than such Person or its Affiliates or professional
advisers, having the legal right to disclose such Confidential Information;
(iv) is required to be disclosed by the Person
charged with preserving the confidentiality of such Confidential Information to
comply with applicable laws or governmental regulations; provided, that the such
Person provides prior written notice of such disclosure to the Person to which
such Confidential Information relates, and takes reasonable and lawful actions
to avoid and/or minimize the extent of such disclosure; or
(v) consists of information concerning an
account where such account was at any time prior to Closing (1) an account of
both Xxxxxxx or one of its Affiliates (other than the Company or one of its
Subsidiaries) and the Company or one of its Subsidiaries, or (2) actively
pursued as an account of Xxxxxxx or one of its Affiliates (other than the
Company or one of its Subsidiaries).
6.06 NON-COMPETITION. Xxxxxxx agrees that for a period of
two years after the Closing Date neither it nor any of its Subsidiaries shall:
(a) acquire for its own account in excess of 25% of the voting capital stock of,
or all or substantially all of the assets of, any one or more of the Persons
listed on SCHEDULE 6.06(a) attached hereto; provided that nothing herein shall
be deemed to prohibit Xxxxxxx or its Affiliates from acquiring a greater
interest in any such Person by virtue of acquiring the parent of any such
Person, where the parent is engaged primarily in the insurance or financial
services businesses, or (b) solicit to hire, hire,
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or engage as a consultant or independent contractor or in any other capacity any
of the Persons listed on SCHEDULE 6.06(b).
6.07 12B-1 FUNDS. Xxxxxxx hereby agrees that following the
Closing, the Company and its Subsidiaries shall be entitled to continue to
receive certain fees payable with respect to the sale of mutual fund interests,
until fees have been received in an amount equal to the unrecovered distribution
expenses reflected on the Financial Statements which were in the amount of
approximately $3,417,000 as of August 31, 1996 (the "12b-1 Fees"). Xxxxxxx
hereby agrees to pay to the Company the amount of such 12b-1 Fees that otherwise
would have been paid if for any reason the mutual funds have not paid such
distribution expenses on or prior to the date on which the same would otherwise
be payable.
6.08 SUTRO LITIGATION ESCROW. Newco agrees that it will
administer, at its cost and expense, the escrow account ( the "Sutro Escrow
Account") established in connection with Article VII of an agreement dated
February 28, 1986.
6.09 PUBLIC ANNOUNCEMENTS. The parties hereto agree that prior
to the Closing Date any and all general public pronouncements or other general
public communication concerning this Agreement and the transactions contemplated
herein, and the timing, manner and content of such disclosures, shall be subject
to the mutual agreement of Xxxxxxx and Newco.
6.10 FURTHER ACTION. The parties hereto agree to use their
respective best efforts to obtain the consent of mutual fund shareholders and
advisory clients to the transactions contemplated hereby and to receive an
exemptive order from the Commission with respect to mutual fund shareholder
consents not obtained by Closing.
6.11 RECONCILIATION OF ACCOUNTS. To the extent that there
exists as of the Closing any "out of balance" or similar reconciling condition
with respect to the financial records of the Company or any of its Subsidiaries
or the account of any client of the Company or any of its Subsidiaries, Newco
shall cause the Company and its Subsidiaries to use all commercially reasonable
efforts promptly after Closing to reconcile such condition, and the
administration cost and expense of doing so shall not be included as a "Loss"
for purposes of Section 9 of this Agreement.
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6.12. PURSUIT OF RIGHTS. If Xxxxxxx incurs any liability
hereunder with respect to a breach of the representation and warranty contained
in Section 4.06 hereof with respect to a Net Out of Balance Account, and such
liability relates in whole or in part to any action or omission on the part of
Wexford Clearing Services Corporation ("Wexford") with respect to any account
maintained by Wexford for the account of any customer of the Company or any
Subsidiary, the Company agrees that it will use commercially reasonable efforts
to pursue any claim which the Company or any Subsidiary may have against Wexford
arising out of such action or omission, and that any amounts received from
Wexford with respect to any such claim will be credited against amounts payable
by Xxxxxxx.
6.13. COMPLIANCE WITH SECTION 15(f). Xxxxxxx and its
Affiliates shall comply, and shall use all reasonable efforts to cause the
Investment Companies and the Boards of Trustees of the Investment Companies to
comply, at all times prior to the Closing with the requirements specified in
Section 15(f) of the Investment Company Act in order to permit Xxxxxxx to be
entitled to the benefits thereof. Newco and its Subsidiaries shall comply, and
shall use all reasonable efforts to cause the Investment Companies and the
Boards of Trustees of the Investment Companies to comply, at all times from and
after the Closing with the requirements specified in Section 15(f) of the
Investment Company Act in order to permit Xxxxxxx to be entitled to the benefits
thereof.
6.14. FURTHER COOPERATION. Each of Xxxxxxx and Newco agrees
that it will use all reasonable efforts, including making personnel and records
available upon reasonable request, to assist the other party in fulfilling its
obligations and exercising its rights hereunder.
7. CONDITIONS TO OBLIGATIONS OF NEWCO
The obligations of Newco under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of Newco;
7.01 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF
XXXXXXX; COMPLIANCE WITH OBLIGATIONS. The representations and warranties of
Xxxxxxx contained herein and in the Tax Matters Agreement shall be true in all
material respects on and as of the Closing Date as though such representations
and warranties were made on and as of such date, except (i) representations and
warranties that were made as of a specified date shall continue on the Closing
Date to be true as of the specified date, (ii) for any changes permitted by the
terms hereof or consented to in writing by Newco and (iii) as provided in
amended schedules delivered by Xxxxxxx to Newco prior to the Closing Date, if
Newco agrees to accept such amended schedules. Xxxxxxx shall have performed and
complied in all material respects with
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all terms, conditions, obligations, agreements and restrictions required by this
Agreement to be performed or complied with by Xxxxxxx prior to or at the Closing
Date. Notwithstanding the foregoing, in the event that the Closing shall not
have occurred on or before November 26, 1996, then the condition set forth in
this Section 7.01 shall be deemed to have been satisfied if the representations
and warranties of Xxxxxxx contained herein shall have been true in all material
respects as of November 26, 1996, except (i) representations and warranties that
were made as of a specific date shall continue as of November 26, 1996 to be
true as of the specified date, (ii) for any changes permitted by the terms
hereof or consented to in writing by Newco, and (iii) as provided in amended
schedules delivered to Newco prior to November 26, 1996, if Newco agrees to
accept such amended schedules no later than November 26, 1996, and the opinion
of counsel required by Section 7.04, the consents and deliveries required by
Sections 7.02 and 7.05 and the Transitional Service Agreement and the Tax
Matters Agreement required by Sections 7.10 and 7.11 shall be placed into escrow
pending the Closing and the conditions required by such Sections and Section
7.07 shall be deemed to be satisfied for all purposes of this Agreement. Newco
agrees that if amended disclosure schedules are delivered to Newco pursuant to
Section 9.01 prior to November 26, 1996, Newco must confirm to Xxxxxxx prior to
November 26, 1996 whether Newco accepts such disclosure schedules as so amended.
7.02 GOVERNMENTAL AND THIRD PARTY APPROVALS. The consents
and approvals specified on SCHEDULE 7.02 shall have been obtained.
7.03 ADVERSE PROCEEDINGS. No action or proceeding by or
before any court or other governmental body shall have been instituted or
threatened by any governmental body or person whatsoever which shall seek to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
7.04 OPINION OF COUNSEL. Newco shall have received an
opinion of Xxxx and Xxxx, counsel to Xxxxxxx, dated as of the Closing Date, in
form and content reasonably acceptable to Newco.
7.05 CLOSING DELIVERIES. Newco shall have received at or
prior to the Closing the following:
(a) the stock certificates representing the Shares duly
endorsed in accordance with Subsection 2.01 of this Agreement;
(b) certificates of Xxxxxxx'x officers evidencing
satisfaction of the conditions specified in Section 7.01;
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(c) a certificate of the Secretary of Xxxxxxx attesting
to the incumbency of Xxxxxxx'x officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents and by-laws;
(d) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the legal existence and good standing of the
Company in Massachusetts;
(e) the resignations, effective as of the Closing Date,
of all Directors and officers of the Company that are not employed thereby, so
requested by Newco at least two Business Days prior to the Closing Date; and
(f) a cross receipt executed by Newco and Xxxxxxx.
7.06 FINANCING. Financing for the transactions
contemplated hereby shall have been provided in accordance with the terms of the
Definitive Financing Agreements.
7.07 APPROVAL OF FUND TRUSTEES OR DIRECTORS. By a vote of
not less than a majority of all of the members of each Fund's Board of Trustees
or Directors and not less than a majority of all of the trustees or directors of
each Fund who are not "interested persons" of the relevant Fund, the Board of
Trustees or Directors of each Fund shall have adopted resolutions approving the
adoption of new investment advisory agreements between the Fund and Freedom
Capital Management Corporation substantially in the form to be filed with the
Funds' respective preliminary proxy materials, with changes to reflect the party
to the agreements and the duration thereof and such other changes as may be
approved by Xxxxxxx (the "Fund Agreements"). The resolutions approving each
action referred to in this Section 7.07 shall not have been amended, modified or
rescinded and shall remain in full force and effect.
7.08 APPROVAL OF FUND SHAREHOLDERS. Either (a) the
shareholders of each of the Funds, by the vote of a majority of such Fund's
outstanding voting securities, as defined in the Investment Company Act, or the
applicable class or series thereof, shall have approved the Fund Agreements or
(b) the Funds shall have received an exemptive order from the Commission
permitting the Funds to implement the Fund Agreements without prior Fund
shareholder approval for a period beginning on the Closing Date and ending on
the earlier of the 120th day after the Closing Date or the date the Fund
Shareholders approve or disapprove of the Fund Agreement.
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7.09 EXECUTION OF THE FUND AGREEMENTS. Each of the Funds shall
have duly authorized, executed and delivered the Fund Agreements.
7.10 TRANSITIONAL SERVICES AGREEMENT. Xxxxxxx shall have
executed and delivered the Transitional Services Agreement.
7.11 TAX MATTERS AGREEMENT. Xxxxxxx shall have executed and
delivered the Tax Matters Agreement to Newco.
7.12 NO MATERIAL ADVERSE EFFECT. Since the date of execution
of this Agreement, there shall have been no event or occurrence which has had,
or is reasonably
likely to have, a Material Adverse Effect.
8. CONDITIONS TO OBLIGATIONS OF XXXXXXX
The obligations of Xxxxxxx under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing by Xxxxxxx in its sole discretion:
8.01 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF
NEWCO; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of Newco in this Agreement shall be true in all material respects on
and as of the Closing Date as though such representations and warranties were
made on and as of such date, except (i) representations and warranties that were
made as of a specified date shall continue on the Closing Date to be true as of
the specified date and (ii) for any changes consented to in writing by Xxxxxxx.
Newco shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date. Newco shall
have accepted any amendments to the disclosure schedule to Sections 3 and 4 of
this Agreement delivered by Xxxxxxx to Newco prior to the Closing.
8.02 CORPORATE PROCEEDINGS. All corporate and other
proceedings required to be taken on the part of Newco to authorize or carry out
this Agreement shall have been taken.
8.03 GOVERNMENTAL AND THIRD PARTY APPROVALS. The consents and
approvals specified on SCHEDULE 7.02 shall have been obtained.
8.04 ADVERSE PROCEEDINGS. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body
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or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
Xxxxxxx to transfer the Shares.
8.05 OPINION OF COUNSEL. Xxxxxxx shall have received an
opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx, counsel to Newco, dated as of the
Closing Date, in form and content reasonably acceptable to Xxxxxxx.
8.06 TAX MATTERS AGREEMENT. Newco shall have entered into
a Tax Matters Agreement substantially in the form attached hereto as Exhibit F.
8.07 ADDITIONAL SHARE AGREEMENT. Newco shall have entered
into the Additional Share Agreement substantially in the form of Exhibit A
hereto.
8.08 NEWCO SHAREHOLDER AGREEMENTS. Each of the
shareholders of Newco shall have entered into a Shareholder Agreement
incorporating the terms set forth on EXHIBIT B attached hereto. Xxxxxxx shall
have been provided with copies of the Definitive Financing Documents, the
articles of incorporation and by-laws of Newco and each agreement relating to
Newco to which Newco, Xxx, SCP or Employee Investors is a party (collectively,
the "Newco Documents"), and the Newco Documents shall not be inconsistent in any
material respect with the commitment letters submitted to Xxxxxxx prior to
execution of this Agreement.
8.09 MANAGEMENTS' OBLIGATIONS. Employee Investors shall
have contributed not less than $25,000,000 to the capital of Newco in exchange
for Newco Common Stock.
8.10 CLOSING DELIVERIES. Xxxxxxx shall have received at or
prior to the Closing the following:
(a) such certificates of Newco's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 8
as Xxxxxxx shall reasonably request;
(b) a certificate of the Secretary of State of the State
of Delaware as to the legal existence and good standing (including tax) of Newco
in Delaware;
(c) a certificate of the Secretary of Newco attesting to
the incumbency of Newco's officers, the authenticity of the resolutions
authorizing the transactions contemplated
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by this Agreement, and the authenticity and continuing validity of the charter
documents and by-laws;
(d) payment of the Cash Consideration and receipt of the
Xxxxxxx Newco Shares;
(e) payment to Xxxxxxx and its affiliates (other than the
Company and its Subsidiaries) of amounts necessary to satisfy all outstanding
liabilities or advances (including interest thereon) made by Xxxxxxx or its
Affiliates (other than the Company and its Subsidiaries) to the Company or any
of its Subsidiaries as of the Closing Date;
(f) organizational documents of Newco certified by the
President of Newco;
(g) a cross receipt executed by Newco and Xxxxxxx; and
(h) a certificate of the chief financial officer of Newco
confirming that after giving effect to (i) the transactions contemplated hereby,
(ii) the Financing Arrangements in place on and immediately after the Closing,
(iii) the repayment of any indebtedness from the Company and/or any Subsidiary
to Xxxxxxx; and (iv) the capitalization of Newco on and immediately after the
Closing:
(i) the fair value and present fair value of
Newco's assets will exceed the probable liabilities of Newco;
(ii) Newco will be able to pay its probable
liabilities as they mature;
(iii) Newco will have sufficient cash flow to
enable it to pay its probable liabilities as they mature; and
(iv) Newco will not have unreasonably small
capital with which to conduct its business as now conducted and as planned to be
conducted.
8.11 REPAYMENT OF COMMERCIAL PAPER FACILITY. All
Liabilities owed by the Company or any of its Subsidiaries to Xxxxxxx or any of
its Affiliates shall have been repaid in full.
8.12 XXXXXXXXX CONTRIBUTION AGREEMENT. Xxxx Xxxxxxxxx
shall have executed and delivered to Xxxxxxx a Contribution Agreement in the
form of EXHIBIT G hereto.
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9. INDEMNIFICATION
9.01 SURVIVAL. The parties agree that the representations and
warranties contained in Sections 3, 4 and 5 shall survive the Closing until
April 1, 1998, except with respect to the representations and warranties set
forth in Sections 3.02, 4.03 and 5.03, which shall survive the Closing without
limitation. From and after the applicable period of survival with respect to
such respective representations and warranties of Xxxxxxx and Newco, neither
Xxxxxxx nor Newco nor any of their respective Affiliates shall have any
liability whatsoever with respect to any such representation or warranty, except
for breaches as to which any party shall have notified the other party in
writing prior to such date. The covenants contained in Sections 6.01, 6.02,
6.03, 6.04, 6.09 and 6.10 shall survive until the Closing, those contained in
Sections 6.05(b), 6.05(c), 6.06 and 6.07 shall survive during the periods
contemplated in those Sections, and those contained in Sections 6.05(a), 6.08,
6.11, 6.12, 6.13 and 6.14 shall survive the Closing without limit as to
duration. The obligations of Xxxxxxx and Newco under this Section 9 shall
continue without limit until they have been satisfied. The parties agree that
Xxxxxxx may amend the schedules setting forth exceptions to the representations
and warranties contained in Sections 3 and 4 to reflect any item or fact which
first becomes known to Xxxxxxx after execution of this Agreement. In such event,
Xxxxxxx shall deliver any such amended schedule to the Company as soon as
practicable after Xxxxxxx becomes aware of the need to amend such Schedule, but
in any event not less than three Business Days prior to Closing (or if Xxxxxxx
first becomes aware of an item or fact prior to Closing but less than three
Business Days prior to Closing, as soon as practicable after Xxxxxxx gains such
awareness). For the purposes of determining whether the closing condition set
forth in Section 7.01 has been satisfied, such disclosure schedules, unless
accepted by Newco, shall be read without inclusion of any such amendment, but if
Newco elects to close the transaction herein set forth, the disclosure schedules
as so amended shall be deemed the disclosure schedules for purposes of
determining whether Xxxxxxx has any liability under Section 9.02.
9.02 INDEMNIFICATION BY XXXXXXX. Xxxxxxx hereby agrees to
indemnify, defend and hold Newco, its officers, directors, employees, owners,
agents and Affiliates, harmless from and in respect of any and all Losses (as
defined in Section 9.10), arising out of or resulting from (a) any breach or
inaccuracy of any representation or warranty contained in Section 3 or 4 of this
Agreement, (b) any breach by Xxxxxxx of its obligations under the last sentence
of Section 4.15(a) or under Section 6.06 or 6.07. Notwithstanding the foregoing,
Xxxxxxx shall have no liability under this Section 9.02 with respect to any Loss
attributable to the failure to obtain any third party consent or approval other
than those set forth on SCHEDULE 7.02.
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9.03 SPECIAL INDEMNIFICATION WITH RESPECT TO CERTAIN MATTERS.
Xxxxxxx hereby agrees to indemnify, defend and hold Newco, its officers,
directors employees, owners, agents and Affiliates harmless from and in respect
of all Losses which may be incurred after the Closing Date with respect to (i)
(x) the claims set forth in County of Cuyahoga, Case Xx. 000000, Xxxxx xx Xxxxxx
Xxxxx, Xxxxxxxx Xxxxxx, Xxxx, and any other actions which may be brought on the
basis of the claims set forth in such case (the "Cuyahoga Claim"), (y) claims
which may be asserted with respect to the sale of interests in the New England
Residential Properties limited partnership, or the operation of such partnership
(the "New England Properties Claim"), or (z) claims which may be asserted with
respect to the establishment or administration of, or payments made or withheld
from, the Sutro Escrow Account, including, without limitation, any claims for
damages arising out of liabilities which were intended to be paid from the Sutro
Escrow Account and the amount payable by Sutro & Co. Incorporated with respect
to any such liabilities (the "Sutro Claim" and, together with the Cuyahoga Claim
and the New England Properties Claim, the "Special Litigation Matters"), (ii)
the Internal Revenue Service examination of the Profit-Sharing Retirement Plan
for Employees of Xxxxxx Xxxxxxx Incorporated for plan years 1992 through 1995
(including any sanction payments that may be imposed or negotiated under any
closing agreement) (the "Special Employee Benefit Matter") and (iii) the
investigation by any one or more of the New York Stock Exchange, the Commission
and the National Association of Securities Dealers, Inc. of any breach by Xxxx
Xxxxxxx Clearing Corporation of the net capital rules during the period March
29, 1996 through the date of this Agreement (the "Net Capital Matter");
provided, however, that (a) with respect to the first $2 million of Losses
related to the Special Litigation Matters, Newco shall be responsible for 50% of
such Losses, (b) with respect to Losses related to the Special Litigation
Matters in excess of $2 million but not in excess of $12 million, Newco shall be
responsible for 20% of such Losses, and (c) with respect to Losses related to
the Special Employee Benefit Matter, Newco shall be responsible for 25% of such
Losses, up to a maximum liability on the part of Newco in connection with the
Special Employee Benefit Matter of $100,000. Newco agrees that before it
releases any funds from the Sutro Escrow Account it will give prior written
notice to Xxxxxxx, setting forth the reason for such proposed release, and that
it will give Xxxxxxx a reasonable opportunity to discuss such proposed action
before such release is effected.
9.04 INDEMNIFICATION BY NEWCO. Newco hereby agrees to
indemnify, defend and hold Xxxxxxx, its officers, directors, employees,
consultants, owners, agents and Affiliates, harmless from and in respect of any
and all Losses which may be sustained or suffered by any of them (a) arising out
of or resulting from any breach or inaccuracy of any representation or warranty
contained in Section 5 of this Agreement, (b) arising out of a breach by Newco
of its covenants in Sections 6.12 and 6.13, and (c) arising out of any and all
actions, suits, claims and administrative or other proceedings of every kind and
nature
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instituted or pending against Xxxxxxx or any of its Affiliates at any time
before or after the Closing Date to the extent that such Losses (a) relate to or
arise out of or in connection with the assets, businesses, operations, conduct,
products and/or employees (including former employees) of the Company or any of
its Subsidiaries, relating to or arising out of or in connection with
occurrences after the Closing Date and (b) do not arise out of a breach or
inaccuracy of Xxxxxxx'x representations and warranties in, or a breach or
default in the performance of any warranty, covenant under, undertaking or other
agreement contained in this Agreement or any other Contribution Document.
9.05 MINIMUM INDEMNIFICATION. Notwithstanding anything to
the contrary contained herein, but subject to the last sentence of this Section
9.05, Xxxxxxx shall have no liability with respect to the indemnification
required under Section 9.02(a) unless and until the total of all claims for
Losses under that Section exceeds $1,750,000, and (b) Newco shall have no
liability with respect to the indemnification required under Section 9.04(a)
unless and until the total of all claims for Losses under that Section exceeds
$1,750,000, and then only for the amount by which such claims for indemnity or
damages exceeds $1,750,000. The foregoing limitations shall not apply with
respect to any Loss arising out of a breach of a representation or warranty
contained in Section 3.02, 3.05, 4.03, 5.03 or 5.10, or with respect to
Xxxxxxx'x obligations under Sections 9.02(b) or 9.03 or with respect to Newco's
obligations under Section 9.04(b) or (c).
9.06 MAXIMUM INDEMNIFICATION FOR CERTAIN LOSSES. In no
event shall either (a) the maximum aggregate amount payable by Xxxxxxx with
respect to the indemnification required under Section 9.02(a) and under Section
9.03 exclusive of any amount paid with respect to a breach of a representation
or warranty contained in Section 3.02 or 4.03, or (b) the maximum aggregate
amount payable by Newco under Sections 9.03 and 9.04(a), exceed $30,000,000.
9.07 NOTICE AND OPPORTUNITY TO DEFEND. Xxxxxxx and Newco
agree as follows with respect to the defense of any matter for which
indemnification is payable hereunder:
(a) Subject to the provisions of subparagraph
(b) of this Section 9.07 with respect to a matter for which indemnity is payable
under Section 9.03, if there occurs an event which a party asserts is an
indemnifiable event pursuant to Section 9.02, 9.03, or 9.04, the parties seeking
indemnification shall promptly notify the other parties obligated to provide
indemnification (collectively, the "Indemnifying Party"). If such event involves
(a) any Claim or (b) the commencement of any action, suit or proceeding by a
third person, the party seeking indemnification will give such Indemnifying
Party prompt written notice of such Claim or the
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commencement of such action, suit or proceeding, PROVIDED, HOWEVER, that the
failure to provide prompt notice as provided herein will relieve the
Indemnifying Party of its obligations hereunder only to the extent that such
failure prejudices the Indemnifying Party hereunder. In case any such action,
suit or proceeding shall be brought against any party seeking indemnification
and it shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it desires to do so, to assume the defense thereof, with counsel reasonably
satisfactory to such party seeking indemnification and, after notice from the
Indemnifying Party to such party seeking indemnification of such election so to
assume the defense thereof, the Indemnifying Party shall not be liable to the
party seeking indemnification hereunder for any attorneys' fees or any other
expenses, in each case subsequently incurred by such party, in connection with
the defense of such action, suit or proceeding. The party seeking
indemnification agrees to cooperate fully with the Indemnifying Party and its
counsel in the defense against any such action, suit or proceeding. In any
event, the party seeking indemnification shall have the right to participate at
its own expense in the defense of such action, suit or proceeding. In no event
shall an Indemnifying Party be liable for any settlement or compromise effected
without its prior consent. If, however, the party seeking indemnification
refuses its consent to a BONA FIDE offer of settlement which the Indemnifying
Party wishes to accept (which must include the unconditional release of the
parties seeking indemnification from all liability with respect to the Claim at
issue), the party seeking indemnification may continue to pursue such matter,
free of any participation by the Indemnifying Party, at the sole expense of the
party seeking indemnification. In such event, the obligation of the Indemnifying
Party to the party seeking indemnification shall be equal to the lesser of (i)
the amount of the offer or settlement which the party seeking indemnification
refused to accept plus the costs and expenses of such party prior to the date
the Indemnifying Party notifies the party seeking indemnification of the offer
of settlement and (ii) the actual out-of-pocket amount the party seeking
indemnification is obligated to pay as a result of such party's continuing to
pursue such matter.
(b) Notwithstanding the provision of subparagraph (a) of this
Section 9.07, Xxxxxxx and Newco agree as follows with respect to the defense of
the Net Capital Matter, Special Litigation Matters and the Special Employee
Benefit Matter. Newco shall control the defense of any Special Litigation Matter
until such time as the aggregate Losses with respect to all Special Litigation
Matters are reasonably likely to exceed $2 million. Thereafter, Xxxxxxx shall
have the right to assume the control of the defense of such Special Litigation
Matters as Xxxxxxx elects to control in its sole discretion. Xxxxxxx shall also
have the right to assume the control of the defense of the Special Employee
Benefit Matter and the Net Capital Matter. With respect to the Special
Litigation Matters and the Special Employee Benefit Matter, the party which does
not control the defense thereof may participate in such defense at its own cost.
Xxxxxxx and Newco agree that their mutual consent shall be required
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for any settlement of any of the Special Litigation Matters which includes
aggregate Losses with respect to any Special Litigation Matter exceeding
$500,000 or any settlement of the Special Employee Benefit Matter which includes
aggregate Losses with respect thereto which are reasonably likely to be less
than $400,000. Xxxxxxx shall be entitled to settle without Newco's consent the
Special Employee Benefit Matter if the aggregate Losses with respect thereto are
reasonably likely to exceed $400,000. Xxxxxxx shall have the right to approve
the settlement of the Net Capital Matter, without Newco's approval, if such
settlement involves only a monetary penalty. Newco also agrees that it will
agree to liquidate Xxxx Xxxxxxx Clearing Corporation if so requested as part of
the settlement of the Net Capital Matter. If settlement of the Net Capital
Matter involves other than a monetary penalty and liquidation of Xxxx Xxxxxxx
Clearing Corporation, the approval of each of Xxxxxxx and Newco shall be
required, which shall not be unreasonably withheld. Xxxxxxx shall be entitled to
settle without Newco's consent any of the Special Litigation Matters if the
aggregate Losses with respect to all Special Litigation Matters are reasonably
likely to exceed $12 million.
9.08 CONTRIBUTION. If the indemnification provided for in
Section 9.02 or 9.04 as the case may be, of this Agreement is unavailable to a
party seeking indemnification in respect to any Losses, then the Indemnifying
Party, in lieu of indemnifying such party seeking indemnification, shall have an
obligation to contribute, and shall contribute, to the amount paid or payable by
such party seeking indemnification as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party, on the one hand, and the party seeking indemnification, on the other
hand, in connection with the actions which resulted in such Losses, as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and the parties seeking indemnification shall be determined
by reference to, among other things, whether any action in question, including
any breach or inaccuracy of any representation or warranty, relates to
information supplied by the Indemnifying Party or the parties seeking
indemnification and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it will not be just and equitable if contribution
pursuant to the preceding provisions of this Section 9.08 were determined by any
method of allocation which does not take into account the equitable
considerations referred to in such provisions. No Person guilty of fraudulent
misrepresentation shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
9.09 EXCLUSIVE REMEDY. The parties hereto agree that, except
as provided in Section 10.3, and except for the obligations of the parties under
Section 6.05 and under the Tax Matters Agreement, the indemnification provided
by this Section 9 shall be an Indemnified Party's sole and exclusive remedy
against an Indemnifying Party for the recovery of any Loss under this Agreement
or the transactions contemplated by this Agreement.
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9.10 DETERMINATION OF LOSS. The term "Loss" or "Losses" shall
mean any and all losses, damages, costs and expenses of any kind and nature
whatsoever (including without limitation, interest and penalties, reasonable
expenses of investigation and court costs, reasonable attorneys' fees and
disbursements and the reasonable fees and disbursements of other professionals)
which may be sustained or suffered by a party hereto with respect to an event or
matter for which an Indemnifying Party is obligated to provide indemnity
hereunder. With respect to Losses consisting of amounts which the Company or any
of its Subsidiaries pays in defense of any Special Litigation Matter, the
Special Employee Benefit Matter or the Net Capital Matter, the term Loss shall
include only amounts paid from and after the Closing Date; provided that Xxxxxxx
agrees that it will not cause the Company or any of its Subsidiaries to
accelerate such payments prior to the Closing Date. Losses shall be calculated
net of any insurance proceeds actually received by the Company or any of its
Subsidiaries with respect to the event or occurrence giving rise to
indemnification, and the Company shall use, or shall cause its Subsidiaries to
use, commercially reasonable efforts to pursue any insurance recovery which may
be available with respect to any matter for which indemnification is sought
under this Section 9. Losses shall also be calculated on an after-tax basis,
such that indemnification payments shall be net of the present value of any tax
benefit to the recipient (Newco or Xxxxxxx) of such payments with respect to the
Loss which gave rise to such indemnification, and shall be increased by the
amount, if any, of tax payable by the recipient on account of the receipt of
such payments, it being the intent of the parties that the purpose of the
indemnification provisions of this Section 9 is to hold harmless the indemnified
party from the after tax economic effect of any Loss (subject to the limitations
contained in Sections 9.05 and 9.06).
9.11 EFFECT OF INDEMNIFICATION. Newco and Xxxxxxx agree that
should either party be required to provide indemnity pursuant to this Article 9,
such amount shall be deemed for tax reporting purposes to be an adjustment to
the consideration provided under Section 2.01.
10. TERMINATION OF AGREEMENT
10.01 TERMINATION BY LAPSE OF TIME. This Agreement shall
terminate at 5:00 p.m., Boston Time, on November 26, 1996, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of Newco and Xxxxxxx; provided, however, that if the
Commission shall fail to grant exemptive relief on or before November 26, 1996
permitting Xxxxxxx and Newco to consummate the transaction contemplated herein
without first obtaining the approval of the Funds shareholders, then the date on
which this Agreement shall terminate shall automatically be extended to December
31, 1996. In addition, if Newco fails to achieve a performance milestone set
forth on EXHIBIT D
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hereto, Xxxxxxx may terminate the Agreement by written notice given by Newco
after the date on which such milestone was to have been performed, and prior to
the date of such performance. Upon request, Xxxxxxx shall be provided with such
evidence as it may reasonably request of the completion of such milestones.
10.02 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement
may be terminated by the mutual written agreement of the parties hereto.
10.03 AVAILABILITY OF REMEDIES AT LAW. In the event of such
termination pursuant to this Section 10, Newco shall have no further obligation
or liability to Xxxxxxx under this Agreement, and Xxxxxxx shall have no further
obligation or liability to Newco under this Agreement except for a breach of
Sections 6.02(b), 6.05 and 17 of this Agreement which shall survive the Closing
without limitation.
11. RESTRICTION ON USE OF CERTAIN NAMES
(a) Newco acknowledges that, prior to the Closing Date,
Xxxxxxx and its Affiliates (other than the Company and its Subsidiaries) have,
and after the Closing Date such Persons will continue to have, the absolute and
exclusive proprietary right to all names, marks, trade names and trademarks
(collectively, "Names") incorporating "Xxxx Xxxxxxx" or using any Xxxx Xxxxxxx
logo, by itself or in combination with any other Name, and that none of the
rights thereto or goodwill represented thereby or pertaining thereto are being
transferred hereby or in connection herewith or being acquired as a result of
the transactions contemplated hereby; provided, however, that Newco shall not
have any liability to Xxxxxxx if during the twelve month period commencing on
the Closing Date Newco or its Affiliates make incidental or accidental use of
names incorporating "Xxxx Xxxxxxx" or use any Xxxx Xxxxxxx logo, but only to the
extent that Newco is attempting in good faith to discontinue the use of such
name and logo and discontinues any particular use promptly after becoming aware
of the same. On the Closing Date Newco shall cause the Company and each of its
Subsidiaries to change its corporate name so as to exclude the "Xxxx Xxxxxxx"
name or any confusingly similar name.
(b) Xxxxxxx acknowledges and agrees that, from and after the
Closing Date, Newco and its Affiliates shall have the absolute and exclusive
proprietary right to all Names incorporating "Freedom", "Xxxxxx Xxxxxxx" or
"Sutro", or using the Freedom, Xxxxxx Xxxxxxx or Sutro logos, by themselves or
in combination with any other Name, and that no right in such Names shall be
retained by Xxxxxxx or any of its Affiliates. From and after the Closing Date,
Xxxxxxx will cause the Freedom, Xxxxxx Xxxxxxx or Sutro funds they manage to
change their name to exclude the "Freedom," "Xxxxxx Xxxxxxx" or "Sutro" names,
as applicable, and Xxxxxxx will not, nor will it permit any of its Affiliates
to, use the name
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"Freedom", "Xxxxxx Xxxxxxx" or "Sutro", or any name or phrase containing such
names, or any confusingly similar names, or the Freedom, Xxxxxx Xxxxxxx or Sutro
logos. Notwithstanding the foregoing, Xxxxxxx'x Affiliates may, for a period
ending April 30, 1998, continue to use the "Freedom" name in one or more trust
instruments executed in connection with mutual funds its Affiliates sells or
manages, and in proxy statements and regulatory filings made with respect to
such funds; provided that in no event shall Xxxxxxx use or permit such funds to
xxx the "Freedom" name in any advertising, marketing or promotional efforts
(except to the extent necessary to identify a trust incorporating "Freedom" in
its name).
(c) If, after the Closing Date, Newco or any of its Affiliates
shall prepare any general advertisement to the effect that the Company and/or
one or more of its Subsidiaries are affiliated with Newco and not Xxxxxxx or its
Affiliates, Xxxxxxx shall have the right to review, comment upon and consent to
(which shall not be unreasonably withheld) such advertisement not less than five
Business Days prior to its first use.
12. AGREEMENT TO SATISFY CERTAIN LIABILITIES AND ADVANCES. Newco
agrees and covenants that it will pay, at or prior to the Closing, to Xxxxxxx
the amount necessary to satisfy as of the Closing Date all outstanding
liabilities and advances (including interest thereon) made by Xxxxxxx or its
Affiliates (other than the Company and its Subsidiaries) to the Company or any
of its Subsidiaries. Xxxxxxx agrees and covenants that it will pay, at or prior
to the Closing, to the Company or its Subsidiaries, as applicable, the amount
necessary to satisfy all outstanding liabilities and advances (including
interest thereon) made by the Company or its Subsidiaries, as applicable, to
Xxxxxxx as of the Closing Date.
13. NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if delivered personally or sent
by facsimile, federal express, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties may have
given notice:
To Newco: JHFSC Acquisition Corp.
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxx X. Xxxxxxx
With copies to: Xxxxxx Xxxxxxx Incorporated
One World Financial Center
000 Xxxxxxx Xxxxxx
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EXECUTION COPY
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxx X. XxXxx, Esq.
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxx Xxxxxx, Esq.
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxx X. Xxxx, Esq.
To Xxxxxxx: Xxxx Xxxxxxx Mutual Life
Insurance Company
000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxx, Vice Chairman
and Chief Investment Officer
With a copy to:
Xxxx Xxxxxxx Mutual Life
Insurance Company
000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Second Vice President and Counsel
Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: 617-526-5000
Attn: Xxxxxxx X. Carp, Esq.
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EXECUTION COPY
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date of personal delivery or facsimile transmission
(with telephone confirmation), or (b) one Business Day after being sent, if sent
by federal express, or (c) three Business Days after being sent, if sent by
registered or certified mail.
14. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
Newco, on the one hand, and Xxxxxxx, on the other hand, may not assign their
respective obligations hereunder without the prior written consent of the other
party; provided, however, that Newco may grant a security interest in its rights
under Section 9 hereof to any Person who provides financing for the transactions
described herein. Any assignment in contravention of this provision shall be
void. No assignment shall release Newco or Xxxxxxx from any obligation or
liability under this Agreement.
15. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS
(a) This Agreement and all Schedules hereto represent the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and supersede all prior oral and written and all
contemporaneous oral negotiations, commitments and understandings between such
parties, except that this Agreement shall not supersede the Confidentiality
Agreement, dated the date hereof, among Xxxxxxx, Xxx and SPC. The parties, may
amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by Newco and Xxxxxxx.
(b) If the provisions of any Schedule to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Schedules attached hereto or to be attached
hereafter are hereby incorporated as integral parts of this Agreement.
16. SEVERABILITY
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
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17. EXPENSES
Each of Newco and Xxxxxxx shall pay all fees and expenses
(including, without limitation, legal, accounting and financial advisory and/or
investment banking fees and expenses) incurred by such party in connection with
the transactions contemplated hereby. Xxxxxxx shall cause the Company to advance
all expenses associated with soliciting the approval of Fund Shareholders
described in Section 7.08, and if the transaction herein contemplated is
consummated, half of such solicitation expenses shall be borne by Xxxxxxx and
half by Newco. Except as set forth in the preceding sentence with respect to
expenses associated with securing approval of the Fund Shareholders, the Company
and its Subsidiaries shall be responsible for all expenses that they incurred in
connection with the transactions contemplated by this Agreement.
18. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
19. SECTION HEADINGS
The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.
20. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall be one
and the same document.
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CONTRIBUTION AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal) Newco:
ATTEST: JHFSC ACQUISITION CORP.
/s/ Xxxxx Xxxxxx By: /s/ Xxxx X. Xxxxxxxxx
----------------------------- -------------------------------------
Secretary Name: Xxxx X. Xxxxxxxxx
Title: President
Xxxxxxx:
(Corporate Seal) XXXX XXXXXXX SUBSIDIARIES, INC.
ATTEST:
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: Treasurer
-----------------------------
Secretary
Xxx:
XXXXXX X. XXX EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, General Partner
By: THL Equity Trust III, General Partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
-S1-
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CONTRIBUTION AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
SCP:
SCP PRIVATE EQUITY PARTNERS, L.P.
By: /s/ Xxxxxx X. Plum
-------------------------------------
Name: Xxxxxx X. Plum
Title: General Partner
-S2-
