AGREEMENT
This AGREEMENT (the "Agreement") is entered into as of the 9th day of
February, 1999, by and among First Security Corporation, a Delaware corporation
("FSC"), First Security Capital Markets, Inc., a Utah corporation ("FSCMI"), Xxx
Xxxxxx Acquisition Corporation, a Utah corporation ("VKAC"), and Xxx Xxxxxx &
Company, a California corporation (the "Company"), in connection with the
acquisition of the Company by FSC (the "Acquisition") pursuant to the terms and
conditions of the Amended and Restated Agreement and Plan of Merger, dated
December 16, 1998 (the "Merger Agreement"). FSC, FSCMI, VKAC and the Company are
also referred to herein, individually, as a "party", and collectively, as the
"parties". Unless otherwise indicated herein, all capitalized terms used herein
without definition shall have the meaning given them in the Merger Agreement.
WHEREAS, Xxxxxx Xxxxxx and Xxxx Xxxxxxx, each a managing director of
the Company, have asserted certain claims (the "Claims") against the Company as
more fully described in that certain AMENDED VERIFIED COMPLAINT attached hereto
as Exhibit A (the "Complaint"); and
WHEREAS, Xx. Xxxxxx and Xx. Xxxxxxx (each, a "plaintiff" and
collectively, the "plaintiffs") assert (1) that each has a contractual right to
a "special bonus," consisting of (a) 6,000 fully-paid shares of Company
preferred stock, and (b) additional shares in the amount necessary to bring each
of Xx. Xxxxxx'x and Xx. Xxxxxxx'x equity holdings in the Company to three
percent (3%) of the total issued and outstanding shares of Company stock, or a
total aggregate equity participation in the Company of six percent (6%), and (2)
that such "special bonus" will vest upon the consummation of the Acquisition;
and
WHEREAS, the Company disputes certain assumptions relied on by the
plaintiffs in the Complaint; and
WHEREAS, disclosure of the claims asserted by the plaintiffs may
represent a breach of the Company's representations and warranties contained in
Sections 3.4(b), 4.3, 4.7, 4.9, 4.10 and 6.1 of the Merger Agreement; and
WHEREAS, the continuing accuracy of the Company's representations and
warranties is a condition to the obligation of FSC, FSCMI and VKAC to close the
Acquisition under the Merger Agreement; and
WHEREAS, FSC, FSCMI and VKAC each agree to proceed to closing
notwithstanding such possible breach; and
WHEREAS, the parties desire to set forth their agreement with respect
to the risk of loss associated with the plaintiffs' Claims and with respect to
other similar claims, if any, which may in the future be raised by other holders
of Nonvested Options, as such term is defined in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
respective representations, warranties covenants, agreements and conditions set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. FSC, FSCMI and VKAC hereby agree to proceed to Closing
notwithstanding any possible present or future breaches by the Company of
Sections 3.4(b), 4.3, 4.7, 4.9, 4.10 and 6.1 with respect to, and only with
respect to, plaintiffs' Claims or other similar claims, if any, which may in the
future be raised by other holders of Nonvested Options.
2. In consideration of the agreement by FSC, FSCMI and VKAC to proceed
to Closing, the Company hereby agrees that FSC shall be entitled to
indemnification against any and all Losses (as defined in the Merger Agreement)
asserted against or paid by the Company, or the surviving entity of the Merger
or the subsequent merger of FSCMI with and into the Company, relating to the
Claims or other claims relating to the negotiation, settlement and payment for
Nonvested Options. Each of the parties hereby agrees that any such Losses shall
be charged against the Holdback shares under Section 10.1(b) of the Merger
Agreement which shall be the sole and exclusive remedy of FSC and its affiliates
for any Losses suffered as a result of the Claims or other claims related to the
negotiation, settlement and payment for Nonvested Options.
3. The parties agree that any indemnification for the Claims or for
other claims relating to the negotiation, settlement and payment for Nonvested
Options shall be for the entire amount of any Losses suffered by the Company or
FSC or their affiliates with respect to such Losses without regard to the
$1,000,000 threshold requirement (the "Basket") provided for in Section 10.1(b)
of the Merger Agreement. The parties further agree that any such Losses shall
not be included in calculating the one million dollar ($1,000,000) Basket but
shall count toward the ten million dollar ($10,000,000) aggregate liability cap
provided for in Section 10.1(b) of the Merger Agreement.
4. This Agreement shall be construed in accordance with, and governed
by the substantive laws of, the State of California, without reference to
principles governing choice or conflicts of laws.
5. This Agreement constitutes the entire agreement and understanding of
the parties with respect to the subject matter hereof. It may be amended only by
a written instrument executed by all parties hereto.
6. Any number of counterparts of this Agreement may be signed and
delivered and each shall be considered an original and together they shall
constitute one agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
FIRST SECURITY CORPORATION
By: /s/ Xxxxxx X. Xxxxx
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Its: President
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FIRST SECURITY CAPITAL MARKETS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Its: President
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XXX XXXXXX ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
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Its: President
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XXX XXXXXX & COMPANY
By: /s/ Xxxx Xxxxx
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Its: Vice President and General Counsel
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