AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is dated as of this
18th day of January, 2001, by and between XXXXXXXXX & CO INC., a Delaware
corporation ("PURCHASER"), and XXXX XXXX XXXXXXX FINANCIAL SERVICES, INC., a
Delaware corporation ("TARGET"). Purchaser and Target are referred to
collectively herein as the "PARTIES."
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Target and Purchaser have
approved the acquisition of Target by Purchaser through a merger of Target with
and into Purchaser (the "MERGER"), upon the terms and subject to the conditions
set forth in this Agreement, whereby each issued and outstanding share of common
stock, par value $0.10 per share, of Target (collectively, the "TARGET SHARES")
held by the holders of Target Shares (the "STOCKHOLDERS") will be exchanged for
(i) 98.778 shares of common stock, par value $.01 per share, of Purchaser
("PURCHASER COMMON STOCK") and (ii) shares of Series A Preferred Stock, par
value $.01 per share, of Purchaser ("PURCHASER SERIES A PREFERRED STOCK") having
an aggregate liquidation preference of $1,426.53 (subject to adjustment as
herein provided);
WHEREAS, the parties intend for the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and for this Agreement to constitute a "plan of
reorganization" within the meaning of Section 368(a) of the Code and the
Treasury Regulations promulgated thereunder; and
WHEREAS, the Parties desire to set forth certain representations, warranties
and covenants made by each to the other as an inducement to the execution and
delivery of this Agreement and to set forth certain additional agreements
related to the transactions contemplated hereby;
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS
In this Agreement, the following words and phrases shall have the meanings
hereinafter set forth:
"ADJUSTED NET BOOK VALUE" in respect of Target as of the Closing Date shall
mean the amount of the Stockholders Equity (as defined below) of Target as of
the Closing Date adjusted by subtracting from such amount the following amounts
(determined as of the Closing Date):
(i) the aggregate liquidation value ($2,664,000 as of November 24, 2000)
of any then outstanding shares of Target Preferred Stock;
(ii) 53% (estimated at $995,676 as of November 24, 2000) of the
additional expense of accelerating the full vesting of any then unvested
Target Options;
(iii) 53% (estimated at $6,954,346 as of November 24, 2000) of the
additional expense of Target's accelerated payment of all amounts (including
those attributable to retiree medical and long-term care insurance benefits)
payable under the Target SERPs;
(iv) the unamortized portion of the goodwill associated with exchange
memberships (estimated at $2,909,392 as of November 24, 2000);
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(v) the unamortized portion of the goodwill associated with franchise
rights (estimated at $3,022,881 as of November 24, 2000);
(vi) the unamortized portion of the goodwill associated with specialist
stocks (other than those described in clauses (vii) and
(viii) below)(estimated at $2,942,478 as of November 24, 2000);
(vii) 53% (estimated at $561,640 as of November 24, 2000) of the
unamortized portion of the goodwill associated with specialist stocks-FBM;
(viii) 53% (estimated at $115,455 as of November 24, 2000) of the
unamortized portion of the goodwill associated with specialist
stocks-FSI/Xxxxxx/RPM Joint Account;
(ix) 53% of the "amount of unfunded liabilities" (within the meaning of
Section 4001(a)(18) of ERISA and the regulations thereunder) with respect to
the Target Pension Plan, actuarially determined on a termination basis as of
the Closing Date (with such liabilities taking into account any benefits
projected to accrue for service during the 15-day period following the
Closing Date) by Target's actuary and agreed to by Purchaser's actuary using
the assumptions and methods specified in Schedule A; and
(x) the Stockholders Equity of REMCO, assuming for this purpose the
capitalization of any intercompany payables owed by REMCO to Target or to
any of the other Subsidiaries of Target ($7,215,302 as of November 24,
2000); and
(xi) 53% of the aggregate amount of benefits payable under the Deferred
Compensation Plan (not including interest);
and by adding to such amount the following amounts (in the case of clauses
(xii) and (xiii), determined as of the Closing Date):
(xii) the amount of any stock option compensation payable included in
Target's accrued liabilities (assuming for this purpose the acceleration of
the full vesting of any then unvested Target Options)(estimated at
$18,375,189 as of November 24, 2000;
(xiii) the amount of any surplus with respect to the Target Pension Plan,
actuarially determined on a termination basis in accordance with
clause (ix) above, and after taking into account applicable income taxes
(computed at a tax rate of 47%), excise tax under Code Section 4980, and any
use by Purchaser of such surplus to fund any Purchaser Plan;
(xiv) 53% of the aggregate amount of the benefits payable under the
Deferred Compensation Plan (not including interest);
(xv) $7,600,000 (subject to equitable adjustment in the event any
currently outstanding Target Options are exercised between the date hereof
and the Closing Date); and
PROVIDED, HOWEVER, that (to avoid duplication) with respect to clauses
(i) through (xi), the items in such clauses shall not be deducted to the extent
that Stockholders Equity as of the Closing Date already reflects the deduction
of the amounts of the items in such clauses (and the creation of related
deferred tax assets, in the case of any item for which only 53% would be
deducted), and that with respect to clauses (xii) through (xiii), the items in
such clauses shall not be added to the extent that Stockholders Equity as of the
Closing Date already reflects the addition of the amounts of the items in such
clauses (and the creation of related deferred tax liabilities, in the case of
any item for which only 53% would be added).
For purposes of the determination of Adjusted Net Book Value, "STOCKHOLDERS
EQUITY" shall mean the final recorded stockholders equity of Target and its
Subsidiaries or REMCO and its Subsidiaries, as the case may be, as of the
Closing Date, determined in accordance with GAAP and with the historical
practices of Target in preparing the Financial Statements (in the case of
Target, $105,203,581 as of
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November 24, 2000, and in the case of REMCO, $7,215,302 as of November 24,
2000), and in the case of Target, reflecting all transactions that are to take
place on the Closing Date and that are recorded in Target's books as of the
Closing Date.
"ADJUSTED NET BOOK VALUE DEFICIENCY" shall have the meaning given such term
in SECTION 3.4(b)(i) hereof.
"AFFILIATE" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Person specified.
"AFFILIATE LETTER" shall have the meaning given such term in
SECTION 9.1(aa) hereof.
"AFFILIATED GROUP" shall mean any affiliated group within the meaning of
Section 1504 of the Code or any similar group defined under a similar provision
of state, local or foreign law, including, but not limited to, any combined,
consolidated or unitary group.
"AGREEMENT" shall mean this Agreement and Plan of Merger.
"AMEX" shall mean American Stock Exchange, Inc.
"AUDITED BALANCE SHEET" shall mean the audited balance sheet of Target as of
April 28, 2000, and the notes thereto, contained in the Financial Statements.
"AUDITED BALANCE SHEET DATE" shall mean April 28, 2000.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or legal
holiday under the Federal laws of the United States or the State of New York.
"CAUSE" shall mean, with respect to any employee of Purchaser or any of its
Affiliates: (i) a breach of any material term of employment or any other written
agreement between, and executed by each of, such employee and Purchaser or any
of its Affiliates which breach is not cured by such employee within twenty
(20) days of his or her receipt of written notice thereof; (ii) such employee's
willful material violation of any firm policy disclosed to him or her in writing
by Purchaser or such Affiliate (including in respect of hedging or confidential
information), as in effect from time to time, which violation is not cured by
such employee within twenty (20) days of receipt of written notice thereof;
(iii) such employee's conviction of, or pleading NOLO CONTENDERE to, a felony
crime; or (iv) such employee becoming subject to any "statutory
disqualification" within the meaning of Section 3(a)(39) of the Exchange Act.
"CBOE" shall mean Chicago Board of Options Exchange, Inc.
"CERTIFICATE OF MERGER" shall have the meaning given such term in
SECTION 2.3 hereof.
"CHOSEN COURTS" shall have the meaning given such term in SECTION 12.5
hereof.
"CLOSING" shall have the meaning given such term in SECTION 2.2 hereof.
"CLOSING DATE" shall have the meaning given such term in SECTION 2.2 hereof.
"CLOSING VALUE" shall have the meaning given such term in SECTION 2.7(b)
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONTRACTS" shall have the meaning given such term in SECTION 4.13 hereof.
"DGCL" shall mean the Delaware General Corporation Law.
"DOL" shall mean the U.S. Department of Labor.
"DEFERRED COMPENSATION PLAN" shall have the meaning given such term in
SECTION 2.9 hereof.
"DISSENTING SHARES" shall have the meaning given such term in
SECTION 2.5(c) hereof.
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"EFFECTIVE TIME" shall have the meaning given such term in SECTION 2.4(a)
hereof.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit
Plan (as defined in ERISA Section 3(1)), or (e) any other material retirement,
bonus, incentive, profit-sharing, savings, change in control, employment,
consulting, collective bargaining, dependent care, employee assistance,
post-retirement welfare, retention, vacation, severance, disability or death
benefit plan, program, agreement, arrangement or understanding (whether or not
written).
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EQUITY PERCENTAGE" shall mean, in respect of any individual Stockholder or
Option Holder, or group of Stockholders or Option Holders, the fraction of which
the numerator is the aggregate number of Target Shares or shares of Target
Common Stock underlying Target Options held by such Stockholder, Option Holder
or group of Stockholders or Option Holders immediately prior to the Effective
Time and of which the denominator is the aggregate number of Target Shares and
shares of Target Common Stock underlying Target Options outstanding immediately
prior to the Effective Time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall have the meaning given such term in SECTION 4.17(b)
hereof.
"ESCROW AGENT" shall mean the escrow agent appointed pursuant to the Escrow
Agreement.
"ESCROW AGREEMENT" shall have the meaning given such term in SECTION 3.2
hereof.
"ESCROW EXPENSES" shall have the meaning given such term in SECTION 3.4(a)
hereof.
"ESCROW SHARES" means the shares of Purchaser Series A Preferred Stock to be
delivered by Purchaser to the Escrow Agent pursuant to SECTIONS 3.2 and 3.3
hereof.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"FINAL ADJUSTED NET BOOK VALUE" shall have the meaning given such term in
SECTION 3.4(a) hereof.
"FINANCIAL STATEMENTS" shall have the meaning given such term in
SECTION 4.8(a) hereof.
"FOURTH SERIES PREFERRED STOCK" shall have the meaning given such term in
SECTION 4.6 hereof.
"GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
"GOOD REASON" means, with respect to any employee of Purchaser or any of its
Affiliates (i) Purchaser or any of its Affiliates has delegated to another or
others a material portion of such employee's duties or responsibilities, other
than for Cause or disability, including, in the case of Xxxxxx X. Xxxxxx, his
removal from the office of Chief Executive Officer of XxXxxxxxx, or if he ceases
to be a member of the board of directors of Purchaser for any reason other than
his death, disability, voluntary resignation from such board or removal for
"cause" (within the meaning of applicable Delaware law), or (ii) Purchaser's or
any of its Affiliates' breach of any material term of any written agreement
between, and executed by each of, such employee and Purchaser or any of its
Affiliates, which breach is not cured by Purchaser or such Affiliate within
twenty (20) days of its receipt of written notice thereof.
"GOVERNMENTAL ENTITY" shall mean any court, self-regulatory organization,
administrative or regulatory agency or commission or other U.S., federal, state,
local, municipal or foreign government or governmental body, official, authority
or instrumentality.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
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"INDEMNIFICATION AGREEMENT" shall have the meaning given such term in
SECTION 9.1(y) hereof.
"INDEPENDENT FIRM" shall mean such nationally recognized independent
certified public accounting firm as shall be mutually agreed upon by Purchaser
and the Representatives within 10 Business Days after the event which gives rise
to the need to refer any question to such firm pursuant to the terms hereof.
"IRS" shall mean the U.S. Internal Revenue Service.
"KNOWLEDGE" shall mean, with respect to a Person, the actual knowledge of
such Person after due investigation, including the knowledge of such Person's
directors and officers.
"XXXXXXXXX" shall mean XxXxxxxxx & Co. LLC, a New York limited liability
company of which Purchaser is the sole member.
"LIABILITIES" or "LOSSES" shall mean any and all losses, claims, damages,
deficiencies, obligations, assessments, judgments, fines, penalties, costs or
expenses, whether accrued or unaccrued, absolute, direct or indirect, contingent
or otherwise, including, without limitation, attorneys' fees, all costs of
investigation and defense, including defense of a claim ultimately determined to
be without merit.
"LIENS" shall mean all liens, charges, security interests, pledges, rights
or claims of others, restraints on transfer or other encumbrances of any nature
whatsoever.
"MATERIAL ADVERSE CHANGE" shall mean a change or a development which
results, or is reasonably likely to result, in a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, a material
adverse effect on the financial condition, business, liabilities (including
contingent liabilities) or results of operations of such Person and its
Subsidiaries taken as a whole.
"MEMBERSHIPS" shall have the meaning given such term in SECTION 4.13 hereof.
"MERGER" shall mean the merger of Target with and into Purchaser as
contemplated by this Agreement.
"MERGER CONSIDERATION" shall have the meaning given such term in
SECTION 2.5(a) hereof.
"MULTIEMPLOYER PLAN" has the meanings set forth in ERISA Section 3(37),
ERISA Section 4001(a)(3) and Code Section 414(f) and shall be deemed to include
any plan that is subject to ERISA Section 4063 or 4064.
"NASD" shall mean National Association of Securities Dealers, Inc.
"NET LIQUID ASSETS" shall have the same meaning as set forth in NYSE
Rule 104.20.
"NYSE" shall mean New York Stock Exchange, Inc.
"OLD CERTIFICATES" shall have the meaning given such term in SECTION 2.7(a)
hereof.
"OPTION AMENDMENT" shall have the meaning given such term in SECTION 2.7(e)
hereof.
"OPTION HOLDERS" shall mean those individuals who have been granted Target
Options that are outstanding and unexercised immediately prior to the Effective
Time.
"PARTIES" shall have the meaning given such term in the Recitals hereto.
"PBGC" shall mean Pension Benefit Guaranty Corporation.
"PERSON" shall mean an individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or other
entity, or a government or any agency or political subdivision thereof.
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"PRE-CLOSING TAX PERIOD" shall have the meaning given such term in
SECTION 10.4(a) hereof.
"PREFERRED AMOUNT" shall have the meaning given such term in
SECTION 3.4(b)(i) hereof.
"PROPERTY TAXES" shall have the meaning given such term in
SECTION 10.4(c)(i) hereof.
"PUBLIC REPORTS" shall have the meaning given such term in SECTION 5.8
hereof.
"PURCHASER" shall mean XxXxxxxxx & Co Inc.
"PURCHASER COMMON STOCK" shall have the meaning given such term in the
Recitals hereto.
"PURCHASER OPTION" shall have the meaning given such term in SECTION 2.7(e)
hereof.
"PURCHASER PERMITS" shall have the meaning given such term in SECTION 5.5
hereof.
"PURCHASER PLANS" shall have the meaning given such term in SECTION 5.17(a)
hereof.
"PURCHASER SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock, par value $.01 per share, of Purchaser.
"REMCO" shall mean XXXX XXXX XxXXXXX Real Estate Management Corp., a New
York corporation and a wholly-owned Subsidiary of Target, or any successor to
the assets and liabilities of such corporation.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning given such term in
SECTION 9.1(i) hereof.
"REGISTRATION STATEMENT" shall have the meaning given such term in
SECTION 8.2 hereof.
"REPRESENTATIVES" shall mean Xx. Xxxxxx X. Xxxx, Xx. and Xx. Xxxxxx X.
Xxxxxx or their respective duly appointed successors pursuant to the terms of
this Agreement and the RPM Stockholder Agreements and the Indemnification
Agreement.
"REQUISITE STOCKHOLDER APPROVAL" shall have the meaning given such term in
SECTION 4.2 hereof.
"RETENTION BONUS POOL" shall have the meaning given such term in
SECTION 2.8 hereof.
"RPM STOCKHOLDER AGREEMENT" shall have the meaning given such term in
SECTION 9.1(j) hereof.
"RPMCC" shall mean XXXX XXXX XxXXXXX Clearing Corporation, a New York
corporation and a wholly-owned subsidiary of Target.
"RPMSC" shall mean XXXX XXXX XxXXXXX Specialist Corporation, a New York
corporation and a wholly-owned subsidiary of Target.
"SCHEDULES" shall mean the various schedules provided for herein.
"SEC" shall mean the Securities and Exchange Commission of the United
States.
"SECURITIES ACT" shall have the meaning given such term in SECTION 5.8
hereof.
"SERIES A PREFERRED STOCK CERTIFICATE OF DESIGNATION" shall mean the
Certificate of the Designations, Powers, Preferences and Rights of the Purchaser
Series A Preferred Stock, to be filed by Purchaser on the Closing Date, as set
forth in SECTION 2.2 hereof.
"STOCKHOLDERS" shall mean the holders of Target Shares immediately prior to
the Effective Time, each referred to individually herein as a "Stockholder." The
Stockholders and their ownership of Target Shares as of the date hereof are set
forth on SCHEDULE 4.6 hereto.
"STRADDLE PERIOD" shall have the meaning given such term in SECTION 10.4(c)
hereof.
"SUBSIDIARY" shall mean, with respect to any entity, any corporation,
limited liability company or other entity of which securities or other ownership
interests having ordinary voting power to elect a
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majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by such entity.
"TARGET" shall mean XXXX XXXX XxXXXXX Financial Services, Inc., together
with its predecessors.
"TARGET BENEFIT PLANS" shall have the meaning given such term in
SECTION 4.17(b) hereof.
"TARGET COMMON STOCK" shall mean the common stock of Target, $0.10 par value
per share.
"TARGET MEETING" shall have the meaning given such term in SECTION 8.1
hereof.
"TARGET OPTION" shall have the meaning given such term in SECTION 2.7(e)
hereof.
"TARGET PENSION AMENDMENT" shall mean an amendment to the Target Pension
Plan, and the taking of such actions as are necessary to comply with
Section 204(h) of ERISA (including the notice requirements thereunder) or other
applicable law, to terminate any and all future benefit accruals under the
Target Pension Plan.
"TARGET PENSION PLAN" shall mean the Xxxx Xxxx XxXxxxx Pension Plan and
Trust, as amended.
"TARGET PERMITS" shall have the meaning given such term in SECTION 4.4
hereof.
"TARGET PREFERRED STOCK" shall have the meaning given such term in
SECTION 4.6 hereof.
"TARGET PROFIT SHARING PLAN" shall mean the Xxxx Xxxx XxXxxxx Profit Sharing
Plan and Trust, as amended.
"TARGET SERPS" shall mean (i) the Supplemental Retirement Plan for Xxxxxx X.
Xxxxxx, as amended, (ii) the Supplemental Retirement Plan for Xxxxxx X. Xxxx, as
amended, (iii) the Supplemental Retirement Plan for Xxxxxxxxx X. Xxxxxxxx, as
amended, (iv) the Supplemental Retirement Plan for Xxxxxx X. Xxxxxxxxx, as
amended, and (v) any other supplemental executive retirement plan or arrangement
maintained or entered into by Target or any of its Affiliates.
"TARGET SHARES" shall have the meaning given such term in the Recitals
hereto.
"TARGET TERMINATION FEE" shall have the meaning given such term in
SECTION 11.3 hereof.
"TAX" or "TAXES" shall mean any and all federal, state, local, foreign and
other taxes, levies, fees, imposts, duties and charges of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith or with respect thereto), including, without limitation, taxes imposed
on, or measured by, income, franchise, profits, or gross receipts, and also
sales, use, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, and gains taxes.
"TAX RETURN" shall mean returns, reports, information statements, and other
documentation (including any additional or supporting material) filed, or
required to be filed, in connection with the calculation, determination,
assessment or collection of any Tax.
"THIRD SERIES PREFERRED STOCK" shall have the meaning given such term in
SECTION 4.6 hereof.
"UNAUDITED BALANCE SHEET" shall mean the unaudited balance sheet of Target
as of November 24, 2000 contained in the Financial Statements.
"UNAUDITED BALANCE SHEET DATE" shall mean November 24, 2000.
SECTION 1.2 REFERENCE TO THIS AGREEMENT; INTERPRETATION
Numbered or lettered articles, sections and subsections herein contained
refer to articles, sections and subsections of this Agreement unless otherwise
expressly stated. The words "herein," "hereof,"
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"hereunder," "hereby," "this Agreement" and other similar references shall be
construed to mean and include this Agreement and the Schedules and Exhibits
referenced herein and all amendments thereof and supplements thereto unless the
context shall clearly indicate or require otherwise. The use of the words
"include," "including" and derivations thereof in this Agreement shall be deemed
to have the phrase "without limitation" attached thereto unless otherwise
expressly stated. Any reference in this Agreement to statutes or laws shall
include all amendments, modifications or replacements of the specific section
and provisions concerned and all rules and regulations promulgated thereunder,
unless the context requires otherwise.
ARTICLE II
THE MERGER; REPRESENTATIVES; CLOSING DATE
SECTION 2.1 THE MERGER
On and subject to the terms and conditions of this Agreement, the Merger
will take place at the Effective Time in accordance with the DGCL. Purchaser
shall be the corporation surviving the Merger.
SECTION 2.2 CLOSING
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at the offices of Fulbright & Xxxxxxxx L.L.P., 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, commencing at 10:00 a.m. local time on the
third Business Day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the Parties will take at the
Closing itself) or such other date and place as the Parties may mutually
determine (the "CLOSING DATE").
SECTION 2.3 DELIVERIES AT THE CLOSING
At the Closing, (i) Target and/or the Stockholders shall deliver to
Purchaser the various certificates, instruments, and documents referred to in
SECTION 9.1 below, (ii) Purchaser shall deliver to Target and/or the
Stockholders the various certificates, instruments, and documents referred to in
SECTION 9.2 below, (iii) Purchaser shall file with the Secretary of State of the
State of Delaware a duly executed Series A Preferred Stock Certificate of
Designation, substantially in the form attached hereto as EXHIBIT A;
(iv) Target and Purchaser shall file with the Secretary of State of the State of
Delaware a duly executed Certificate of Merger in substantially the form
attached hereto as EXHIBIT B (the "CERTIFICATE OF MERGER"), (v) Purchaser shall
deliver to the Stockholders the aggregate Merger Consideration described in
SECTION 2.5(b) below (less the Escrow Shares) in the manner provided in
SECTION 2.7 below, (vi) the Stockholders shall deliver certificates evidencing
the Target Shares to Purchaser and (vii) Purchaser shall deliver the Escrow
Shares to the Escrow Agent in accordance with SECTIONS 3.2 and 3.3 hereof.
SECTION 2.4 EFFECTS OF THE MERGER
(a) GENERAL. The Merger shall become effective at such time as Target and
Purchaser file the Certificate of Merger with the Secretary of State of the
State of Delaware or at such later time as specified in the Certificate of
Merger (the "EFFECTIVE TIME"). The Merger shall have the effect set forth in the
DGCL.
(b) From and after the Effective Time, the separate corporate existence of
Purchaser with its purpose, object, rights, privileges, powers, certificates and
franchises, shall continue unimpaired by the Merger. At the Effective Time, the
separate corporate existence of Target shall cease, and Purchaser shall succeed
to all the properties and assets of Target and to all debts, choses in action
and other
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interests due or belonging to Target and shall be subject to, and responsible
for, all debts, liabilities and duties of Target with the effects provided by
the applicable provisions of the DGCL.
(c) CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Purchaser in effect at and as of the Effective Time, as amended pursuant to the
Series A Preferred Stock Certificate of Designation, shall remain its
certificate of incorporation without any modification or amendment as a result
of the Merger.
(d) BYLAWS. The bylaws of Purchaser in effect at and as of the Effective
Time shall remain its bylaws without any modification or amendment as a result
of the Merger.
(e) DIRECTORS AND OFFICERS. The directors and officers of Purchaser in
office at and as of the Effective Time shall continue as directors and officers
of Purchaser (retaining their respective positions and terms of office), except
that Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxx, Xx. shall be appointed as new Class I
and Class II directors, respectively, of Purchaser.
SECTION 2.5 MERGER CONSIDERATION; CONVERSION OF OUTSTANDING TARGET SHARES
(a) For the purposes of this SECTION 2.5, the shares of Purchaser Common
Stock and Purchaser Series A Preferred Stock to be received by the Stockholders
in connection with the Merger are referred to in the aggregate as the "MERGER
CONSIDERATION."
(b) Except as provided in SECTION 2.6 hereof, but subject to the provisions
set forth in SECTIONS 3.2 and 3.3 hereof and the indemnification obligations of
the Stockholders set forth in ARTICLE X hereof, at the Closing, by virtue of the
Merger and without any action on the part of the Stockholders, each Target Share
outstanding immediately prior to the Effective Time shall be surrendered in
exchange for 98.778 shares of Purchaser Common Stock, and shares of Purchaser
Series A Preferred Stock having an aggregate liquidation preference of
$1,426.53.
(c) Notwithstanding anything in this Agreement to the contrary, Target
Shares outstanding immediately prior to the Effective Time and held by a
Stockholder who has demanded appraisal for such Target Shares in accordance with
Section 262 of the DGCL ("DISSENTING SHARES"), shall not be converted into the
right to receive the Merger Consideration as provided in SECTION 2.5(b).
Instead, such Stockholder shall be entitled to receive payment of the appraised
value of his Dissenting Shares in accordance with the provisions of Section 262
of the DGCL unless and until such Stockholder fails to perfect or withdraws or
otherwise loses his right to appraisal and payment under the DGCL. If, after the
Effective Time, any such Stockholder fails to perfect or withdraws or loses his
right to appraisal, his Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive the Merger
Consideration, if any, to which such Stockholder is entitled, without interest
or dividends thereon, upon the surrender, in the manner provided in SECTION 2.7
hereof, of the certificate(s) which formerly represented his Target Shares.
Target shall give Purchaser prompt notice of any demands received by Target for
appraisal of Target Shares and, prior to the Effective Time, Purchaser shall
have the right to participate in all negotiations and proceedings with respect
to such demands. Prior to the Effective Time, Target shall not, except with the
prior written consent of Purchaser, make any payment with respect to, or settle
or offer to settle, any such demands.
(d) Except as otherwise provided in SECTIONS 2.5(c) and 2.7 hereof, as of
and after the Effective Time, no holder of any certificate that immediately
before the Effective Time represented Target Shares shall have any rights as a
holder of Target Shares, other than to receive the Merger Consideration in
accordance with the terms hereof.
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SECTION 2.6 CANCELLATION OF TARGET CAPITAL STOCK OWNED AS TREASURY STOCK
At the Effective Time, all shares of Target capital stock, if any, that are
owned directly or indirectly by Target as treasury stock shall be canceled
without any consideration being payable therefor.
SECTION 2.7 EXCHANGE OF CERTIFICATES
(a) EXCHANGE PROCEDURES. At the Closing, each holder of record of a
certificate or certificates which immediately prior thereto represented issued
and outstanding Target Shares ("OLD CERTIFICATES") shall surrender such Old
Certificates, in exchange for certificates representing that number of duly
authorized whole shares of Purchaser Common Stock and whole or fractional shares
of Purchaser Series A Preferred Stock issuable to such holder in accordance with
SECTION 2.5, plus an amount of cash equal to the aggregate amount payable in
lieu of fractional shares of Purchaser Common Stock in accordance with
SECTION 2.7(b) hereof. Until so surrendered, the Old Certificates shall
represent, from and after the Effective Time, solely the right to receive the
Merger Consideration specified in SECTION 2.5, except as otherwise provided in
this SECTION 2.7. Old Certificates surrendered to Purchaser shall be canceled.
(b) NO FRACTIONAL SHARES. No fractional shares of Purchaser Common Stock
and no certificates or scrip therefor, or other evidence of ownership thereof,
will be issued upon the surrender for exchange of the Old Certificates. In lieu
of any such fractional share of Purchaser Common Stock, each holder of Target
Shares who would otherwise have been entitled to a fraction of a share of
Purchaser Common Stock upon consummation of the Merger shall be paid, upon
surrender of the Old Certificates, cash (rounded to the nearest whole cent),
without interest, in an amount equal to the product of (i) such fraction
multiplied by (ii) the volume-weighted average sales price per share of the
Purchaser Common Stock during the 20 consecutive trading days ending on and
including the second trading day immediately preceding the Closing Date, as
reported by Bloomberg Information Systems, Inc. (the "CLOSING VALUE").
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. Notwithstanding any
other provision of this Agreement, no dividends or other distributions declared
or made after the Effective Time on Purchaser Common Stock or Purchaser
Series A Preferred Stock shall be paid to any Person holding an Old Certificate
evidencing Target Shares until such Old Certificate is surrendered for exchange
as provided herein. Subject to the effect of applicable laws, following
surrender of any such Old Certificate by any holder thereof, there shall be paid
to the holder of such surrendered Old Certificate, without interest (i) at the
time of such surrender, the amount of dividends or other distributions declared
and made with a record date after the Effective Time which theretofore became
payable with respect to the Purchaser Common Stock or Purchaser Series A
Preferred Stock, as applicable, represented thereby and not paid, less the
amount of any withholding taxes which may be required thereon, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to the time of such surrender and
a payment date subsequent to the time of such surrender payable with respect to
the Purchaser Common Stock or Purchaser Series A Preferred Stock, as applicable,
represented thereby, less the amount of any withholding taxes which may be
required thereon.
(d) CLOSING OF TARGET TRANSFER BOOKS. From and after the Effective Time,
the stock transfer books of Target shall be closed and no further transfer of
Target Shares shall thereafter be made. If, after the Effective Time, Old
Certificates are presented to Purchaser, they shall be canceled and exchanged
for the Merger Consideration as provided in SECTION 2.5 hereof and this
SECTION 2.7.
(e) ASSUMPTION OF OPTIONS. Immediately prior to the Effective Time, Target
and each Option Holder shall enter into an amendment substantially in the form
annexed hereto as EXHIBIT C (an "OPTION AMENDMENT") of the agreement pursuant to
which such Option Holder was granted his option
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to purchase shares of Target Common Stock (each, a "TARGET OPTION"). Each Target
Option which is outstanding and unexercised immediately prior to the Effective
Time shall be converted at the Effective Time into an option (a "PURCHASER
OPTION") to purchase 98.778 shares of Purchaser Common Stock per share of Target
Common Stock underlying such Target Option.
SECTION 2.8 RETENTION BONUS POOL
Effective as of the Effective Time, Purchaser shall establish a bonus pool
(the "RETENTION BONUS POOL") in an amount equal to $9,000,000, which shall be
paid by Purchaser to the employees listed on SCHEDULE 2.8 as bonus compensation
on the third anniversary of the Closing Date. The portion of the Retention Bonus
Pool payable to each such employee shall be determined by the majority vote of a
committee consisting of Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxx, Xx. and Xxxxxxx
XxXxxxxxx (or, in each case, the successor appointed by such individual), which
determination shall be final, binding and conclusive on Purchaser and each such
employee. Notwithstanding the foregoing provisions of this SECTION 2.8, (i) any
such employee whose employment with Purchaser or one of its Affiliates is
terminated for Cause or who voluntarily terminates his employment for reasons
other than Good Reason shall no longer be eligible to participate in the
Retention Bonus Pool, and (ii) any payment out of the Retention Bonus Pool shall
be subject to the limitations on such payments set forth in the Series A
Preferred Stock Certificate of Designation.
SECTION 2.9 DEFERRED COMPENSATION PLAN
Effective as of the Effective Time, Purchaser shall succeed to Target's
liabilities and obligations under the Deferred Compensation Plan in
substantially the form attached hereto as EXHIBIT D to be adopted by Target on
or before the Closing Date (the "DEFERRED COMPENSATION PLAN").
SECTION 2.10 REPRESENTATIVES
Xxxxxx X. Xxxx, Xx. and Xxxxxx X. Xxxxxx, acting unanimously, are hereby
constituted and appointed as the true and lawful agents and attorneys-in-fact of
the Stockholders (the "REPRESENTATIVES") with full power to appoint a substitute
or substitutes to act hereunder, with respect to all matters arising in
connection with the transactions contemplated hereby with full power and
authority to execute and deliver for and on behalf of the Stockholders all such
contracts, consents and other documents in connection therewith as the
Representatives may deem necessary or advisable (including the Escrow Agreement)
and to do and perform any and all acts and things whatsoever necessary or
advisable in the premises as fully as the Stockholders might or could do. The
Representatives shall have no liability for any actions taken or omitted by them
in the performance of their duties as Representatives unless in respect of such
actions or omissions they shall be finally adjudged by an arbitrator or court of
competent jurisdiction to have acted in bad faith or to have been grossly
negligent. Each Stockholder shall indemnify (pro rata based on his, her or its
Equity Percentage) each of the Representatives and hold each of them harmless
from all liabilities, losses, costs and expenses (including reasonable
attorneys' fees in respect of the investigation and defense of claims) which may
be incurred by him in connection with the performance of his duties as a
Representative, except to the extent, if any, that such liabilities, losses,
costs and expenses shall be finally adjudged by an arbitrator or court of
competent jurisdiction to have resulted from the bad faith or gross negligence
of such Representative.
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ARTICLE III
NET BOOK VALUE DETERMINATIONS;
ESCROWS; POST-CLOSING ADJUSTMENT
SECTION 3.1 ESTIMATED ADJUSTED NET BOOK VALUE FOR CLOSING PURPOSES
Target shall estimate the amount of its Adjusted Net Book Value as of the
Closing Date and shall deliver to Purchaser, at least three, but not more than
five, Business Days prior to the Closing Date, a written statement reflecting
Target's calculation of its estimated Adjusted Net Book Value prepared in a
manner consistent with the definition of Adjusted Net Book Value set forth in
SECTION 1.1 hereof.
SECTION 3.2 ADJUSTED NET BOOK VALUE ESCROW
At the Closing, 5% of the shares of Purchaser Series A Preferred Stock which
would otherwise be delivered to each Stockholder at the Closing shall be
deposited by Purchaser with the Escrow Agent at the Closing and thereafter shall
be held by the Escrow Agent pursuant to the escrow agreement in substantially
the form attached hereto as EXHIBIT E (the "ESCROW AGREEMENT") for the purpose
of providing for the respective obligations of the Stockholders to return shares
of Purchaser Series A Preferred Stock to Purchaser pursuant to SECTION 3.4(b)
hereof
SECTION 3.3 INDEMNITY ESCROW
At the Closing, shares of Purchaser Series A Preferred Stock having an
aggregate liquidation preference equal to the sum of (a) 10% of the value of the
aggregate Merger Consideration received at the Closing (assuming, for this
purpose, that the value of the Purchaser Common Stock is equal to its Closing
Value and that the value of the Purchaser Series A Preferred Stock is equal to
$1,000 per share), and (b) an amount equal to the product of (i) the aggregate
Equity Percentage of the Stockholders and (ii) $20,000,000, shall be deposited
by Purchaser with the Escrow Agent at the Closing and thereafter shall be held
by the Escrow Agent pursuant to the Escrow Agreement for the purpose of
providing for the respective indemnification obligations of the Stockholders
pursuant to SECTIONS 10.2 and 10.4 hereof.
SECTION 3.4 POST-CLOSING ADJUSTMENT TO MERGER CONSIDERATION
(a) Within fifteen (15) Business Days after the Closing, Purchaser shall
deliver to the Representatives its calculation of Target's Adjusted Net Book
Value as of the Closing Date (the "FINAL ADJUSTED NET BOOK VALUE") and related
supporting documentation. Within fifteen (15) Business Days after their receipt
of Purchaser's Final Adjusted Net Book Value calculation, the Representatives
shall have the right to object in writing thereto, setting forth a specific
description of their objections. If the Representatives do not so object during
such period, they shall be deemed to have agreed, for and on behalf of the
Stockholders, to Purchaser's Final Adjusted Net Book Value calculation. If the
Representatives do object to Purchaser's calculation of Target's Final Adjusted
Net Book Value and Purchaser and the Representatives cannot mutually agree on
the Final Adjusted Net Book Value calculation within ten (10) Business Days of
Purchaser's receipt of the Representatives' objection, the dispute shall be
promptly submitted to the Independent Firm. The Independent Firm shall be
directed to resolve such dispute within twenty (20) Business Days after
submission of the dispute by Purchaser and the Representatives. The decision of
the Independent Firm shall be final and binding upon the Stockholders and
Purchaser, and the Independent Firm's fees, costs and expenses ("ESCROW
EXPENSES") shall be paid by Purchaser but shall be borne pro rata by the
Stockholders (through the Escrow Agreement) and Purchaser based on the relative
amounts by which the Representatives' (on behalf of the Stockholders) and
Purchaser's respective calculations of the Final Adjusted Net Book Value vary
from that of the Independent Firm.
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(b) Based upon the Final Adjusted Net Book Value, as finally determined
pursuant to Section 3.4(a) hereof, the following post-Closing deliveries shall
be made, as applicable:
(i) If the aggregate liquidation preference of the shares of Purchaser
Series A Preferred Stock delivered to the Stockholders at the Closing
pursuant to SECTION 2.5(b) hereof (prior to the application of SECTIONS 3.2
and 3.3 hereof (the "PREFERRED AMOUNT") exceeds the Final Adjusted Net Book
Value, the Escrow Agent shall deliver to Purchaser, pursuant to and in
accordance with the Escrow Agreement, shares of Purchaser Series A Preferred
Stock with an aggregate liquidation preference equal to the sum of such
excess (the "ADJUSTED NET BOOK VALUE DEFICIENCY") and the Stockholders'
share of Escrow Expenses, if any. In the event the aggregate liquidation
preference of the shares of Purchaser Series A Preferred Stock delivered by
Purchaser to the Escrow Agent pursuant to SECTION 3.2 hereof exceeds the sum
of the amount of the Adjusted Net Book Value Deficiency and the
Stockholders' share of Escrow Expenses, if any, the shares of Purchaser
Series A Preferred Stock representing such excess shall be delivered by the
Escrow Agent to the Stockholders pursuant to and in accordance with the
Escrow Agreement. In the event the amount of the Adjusted Net Book Value
Deficiency and the Stockholders' share of Escrow Expenses, if any, exceeds
the aggregate liquidation preference of the shares of Purchaser Series A
Preferred Stock delivered to the Escrow Agent pursuant to SECTION 3.2
hereof, the Representatives, for and on behalf of the Stockholders, shall be
required to deliver to Purchaser shares of Purchaser Series A Preferred
Stock having an aggregate liquidation preference equal to such excess;
(ii) If the Final Adjusted Net Book Value is equal to the Preferred
Amount, there shall be no post-Closing delivery to Purchaser pursuant to
this SECTION 3.4(b), other than for the Stockholders' share of Escrow
Expenses, if any, and the Escrow Agent shall deliver to the Stockholders,
pursuant to and in accordance with the Escrow Agreement, all shares of
Purchaser Series A Preferred Stock delivered by Purchaser to the Escrow
Agent pursuant to SECTION 3.2 hereof.
(iii) If the Final Adjusted Net Book Value exceeds the Preferred Amount,
(A) the Escrow Agent shall deliver to the Stockholders, pursuant to and in
accordance with the Escrow Agreement, all the shares of Purchaser Series A
Preferred Stock delivered by Purchaser to the Escrow Agent pursuant to
SECTION 3.2 hereof, less the amount of the Stockholders' share of Escrow
Expenses, if any, and (B) Purchaser shall issue and deliver to each of the
Stockholders additional shares of Purchaser Series A Preferred Stock having
an aggregate liquidation preference equal to the product of (x) the amount
of such excess and (y) such Stockholder's Equity Percentage as a percentage
of the aggregate Equity Percentage of all the Stockholders.
(c) Any post-Closing delivery of shares of Purchaser Series A Preferred
Stock required to be made by either Purchaser or the Representatives (on behalf
of the Stockholders) pursuant to SECTION 3.4(b) hereof shall be made within five
(5) Business Days after the final determination of the Final Adjusted Net Book
Value pursuant to SECTION 3.4(a) hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TARGET
As a material inducement to Purchaser to enter into this Agreement, Target
represents and warrants to Purchaser as of the date hereof and, subject to the
delivery by Target to Purchaser of new Schedules on or before the Closing Date
pursuant to the provisions of SECTION 6.6 hereof, as of the Closing Date that:
SECTION 4.1 CORPORATE EXISTENCE AND POWER
Each of Target and its Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction set
forth opposite its name on SCHEDULE 4.1 and has all
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corporate power required to own, lease and operate its properties and to carry
on its business as now conducted. Each of Target and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except where a
failure or failures to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Target. Target has heretofore made
available to Purchaser or its agents true and complete copies of its and each of
its Subsidiaries' certificate of incorporation and by-laws as currently in
effect.
SECTION 4.2 CORPORATE AUTHORIZATION
The execution, delivery and performance by Target of this Agreement and the
other documents contemplated hereby to which it is or will be a party and the
consummation by Target of the transactions contemplated hereby are within
Target's corporate power and authority and have been duly authorized by all
necessary corporate action, subject to the affirmative vote of holders of a
majority of the issued and outstanding Target Shares for the purpose of
approving the Merger and this Agreement, as required by the DGCL (the "REQUISITE
STOCKHOLDER APPROVAL"). The Requisite Stockholder Approval is the only vote of
the holders of any of Target's capital stock necessary to approve the Merger,
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Target and constitutes, and each other document
contemplated hereby will be duly executed by Target and, when so executed and
delivered, will constitute, a valid and binding agreement of Target, enforceable
against it in accordance with their respective terms and conditions, except as
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or by general principles of equity,
whether considered in a proceeding in equity or at law.
SECTION 4.3 GOVERNMENTAL CONSENTS AND APPROVALS
Except as set forth on SCHEDULE 4.3, the execution, delivery and performance
by Target of this Agreement and the consummation of the Merger by Target require
no action by or in respect of, or filing with, any Governmental Entity, other
than any filings or registrations with, or authorizations, consents or approvals
of, Governmental Entities, the failure or failures of which would not,
individually or in the aggregate, have a Material Adverse Effect on Target and
could not materially adversely affect the ability of Target to consummate the
Merger.
SECTION 4.4 GOVERNMENTAL AUTHORIZATIONS, REGULATORY MATTERS AND ACCOUNT
DOCUMENTATION
Each of Target and its Subsidiaries has obtained all registrations,
qualifications, licenses, permits, franchises, orders or approvals of any
Governmental Entity or regulatory authority as are necessary under applicable
laws for Target and each of its Subsidiaries to own their respective properties
and conduct their respective businesses (collectively, "TARGET PERMITS"), and
all such Target Permits are in full force and effect, and no proceeding is
pending, or to the Knowledge of Target, RPMSC or RPMCC, threatened to revoke or
limit any Target Permit, except where the failure or failures to obtain any such
Target Permit or to keep it in full force and effect or the revocation(s) or
limitation(s) of any such Target Permit would not, individually or in the
aggregate, have a Material Adverse Effect on Target. RPMCC is and has been a
duly registered broker-dealer with the SEC and NASD and in the states where such
registration is required under the securities laws of such states, except where
the failure to do so would not have a Material Adverse Effect on Target. RPMSC
is and has been duly registered as a NYSE specialist. Except where the failure
to do so would not have a Material Adverse Effect on Target, the employees of
RPMSC are in compliance in all respects with all federal and state laws and NYSE
and SEC rules regulating broker-dealers and specialists or requiring
registration, licensing or qualification as a broker-dealer or specialist, and
the employees of RPMCC are in compliance in all respects with all federal and
state laws and NYSE, AMEX, CBOE, NASD and SEC rules regulating broker-dealers or
requiring registration, licensing or qualification as a broker-dealer.
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Each of Target and its Subsidiaries is a member in good standing and has all
material licenses and authorizations in self-regulatory or trade organizations
or registered clearing agencies required to permit the operation of its business
as presently conducted. Target has made available to Purchaser a true, correct
and complete copy of each of RPMSC's and RPMCC's Form BD, as amended to date,
filed with the appropriate self-regulatory or trade organizations. RPMCC has in
its files for substantially all of its existing customer accounts all material
applications, certificates, agreements and other material documentation
necessary in connection with the current and historical level and type of
trading or other activities engaged in within such accounts.
SECTION 4.5 NON-CONTRAVENTION
Except for those consents obtained or waived and except as set forth on
SCHEDULE 4.5, the execution, delivery and performance by Target of this
Agreement and the other documents contemplated hereby and the consummation by
Target of the Merger do not and will not: (a) contravene or conflict with the
certificate of incorporation or by-laws of Target or any of its Subsidiaries;
(b) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to Target or any of its Subsidiaries; (c) constitute a default under
or give rise to a right of termination, cancellation, acceleration, loss of any
material benefit or cause of action for damages upon breach under any agreement,
contract, license or other instrument binding upon Target or any of its
Subsidiaries, or any license, franchise, permit or other similar authorization
held by Target or any of its Subsidiaries; or (d) result in the creation or
imposition of any Lien on any asset of Target or of any of its Subsidiaries or
on any Target Shares, except, in the cases of clauses (b), (c) and (d), as could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Target.
SECTION 4.6 CAPITALIZATION
As of the date of this Agreement, the authorized capital stock of Target
consists of 200,050 shares of Target Common Stock, and 79,067 shares of
preferred stock, par value $0.10 per share (the "TARGET PREFERRED STOCK"),
including 35,491 shares of Third Series Preferred Stock, par value $0.10 per
share ("THIRD SERIES PREFERRED STOCK") and 22,276 shares of Fourth Series
Preferred Stock, par value $1.00 per share ("FOURTH SERIES PREFERRED STOCK"). As
of the date hereof, 70,100 Target Shares are issued and outstanding, 14,887
shares of Third Series Preferred Stock are issued and outstanding and 11,753
shares of Fourth Series Preferred Stock are issued and outstanding. Prior to the
Closing, all shares of Target Preferred Stock will be redeemed. All the issued
and outstanding Target Shares have been duly authorized, are validly issued,
fully paid and nonassessable and are held of record by the Stockholders as set
forth in SCHEDULE 4.6 hereto. Except as set forth herein and other than
44,191 shares of Target Common Stock held in treasury, there are no shares of
capital stock or other voting securities of Target issued or outstanding. Except
as set forth on SCHEDULE 4.6 hereto, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other contracts or commitments that could require Target to
issue, sell or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to Target.
SECTION 4.7 SUBSIDIARIES; JOINT VENTURES
Except as set forth in SCHEDULE 4.7 hereto, Target owns all the issued and
outstanding capital stock of each of its Subsidiaries (each of which is set
forth on SCHEDULE 4.7) free and clear of all Liens. None of Target's
Subsidiaries has any outstanding options or warrants to purchase its capital
stock or has issued any other securities exercisable or convertible into shares
of capital stock of such Subsidiary. Except as set forth in SCHEDULE 4.7 hereto
and except for equity interests that RPMSC and RPMCC own in connection with the
conduct of their respective specialist and clearing businesses, neither Target
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nor any of its Subsidiaries, directly or indirectly, owns any equity interests
in any Person that is not a Subsidiary of Target or of such Subsidiary.
SECTION 4.8 FINANCIAL STATEMENTS
(a) Target has delivered to Purchaser (i) true and complete copies of the
audited balance sheets of Target and each of its Subsidiaries as of April 28,
2000, April 30, 1999 and April 28, 1998 and the related audited statements of
operations, stockholders' equity and cash flows for the fiscal years then ended
and (ii) true and complete copies of the unaudited balance sheet of Target and
each of its Subsidiaries as of November 24, 2000, and the related statements of
operations and cash flows for the period from April 29, 2000 until November 24,
2000 (collectively, the "FINANCIAL STATEMENTS").
(b) The Financial Statements are in accordance with the books and records of
Target and its Subsidiaries in all material respects, have been prepared in
accordance with GAAP and present fairly in all material respects as of their
respective dates the financial condition and results of operations of Target and
its Subsidiaries; PROVIDED, HOWEVER, that the unaudited Financial Statements are
subject to normal year-end adjustments and lack footnotes and other presentation
items. As of the Unaudited Balance Sheet Date, there were no liabilities of
Target or any of its Subsidiaries of any kind whatsoever that were required by
GAAP to be reflected on the Unaudited Balance Sheet, whether accrued,
contingent, absolute, known, unknown, determined, determinable or otherwise, and
to the Knowledge of Target, RPMSC or RPMCC, there was no existing condition,
situation or set of circumstances which could reasonably have been expected to
result in such a liability, except for liabilities (i) reflected or reserved
against in said Unaudited Balance Sheet, (ii) disclosed on SCHEDULE 4.10, or
(iii) arising in the ordinary course of business after the date of said
Unaudited Balance Sheet that were not and could not reasonably have been
expected to have a Material Adverse Effect on Target.
(c) Since the Unaudited Balance Sheet Date, there has been no Material
Adverse Change in Target, whether as a result of any legislative or regulatory
change, revocation of any Target Permit or right to do business, fire,
explosion, accident, casualty, labor trouble, riot, condemnation, act of God, or
otherwise, other than as a result of changes, occurrences or events affecting
the securities industry as a whole.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES
Except as set forth on SCHEDULE 4.9 or SCHEDULE 6.1 hereto, since the
Unaudited Balance Sheet Date, Target and each of its Subsidiaries has conducted
business in the ordinary course in all material respects and there has not been:
(a) any repurchase, redemption or other acquisition by Target or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, Target or any of its Subsidiaries; (b) any
amendment of any term of any outstanding capital stock of Target or any of its
Subsidiaries; (c) any change in any method of accounting or accounting practice
by Target or any of its Subsidiaries, except for any such change required by
reason of a concurrent change in GAAP or disclosed in the Financial Statements;
or (d) any (i) grant of any severance or termination pay to any current or
former director, officer or employee of Target or any of its Subsidiaries,
(ii) entering into of any written employment, severance, termination, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any current, former or prospective director, officer or employee
of Target or any of its Subsidiaries, (iii) increase in benefits payable under
any existing severance or termination pay policies or employment agreements, or
(iv) increase in compensation, bonus or other benefits payable to any director,
officer or employee of Target or any of its Subsidiaries, other than in the
ordinary course of business or as permitted by the proviso to SECTION 6.1(b).
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SECTION 4.10 NO UNDISCLOSED LIABILITIES
As of the date of any of the balance sheets included in the Financial
Statements, except for liabilities (i) reflected or reserved against in such
balance sheets or the notes thereto, if any, (ii) disclosed on SCHEDULE 4.10, or
(iii) arising in the ordinary course of business, neither Target nor any of its
Subsidiaries incurred any liabilities or obligations of any nature, whether or
not accrued, known or unknown, contingent or otherwise, which, if known, was
required by GAAP to be reflected on a consolidated balance sheet of Target
(including any notes thereto) as of any such date.
SECTION 4.11 LITIGATION
Except as set forth in SCHEDULE 4.11 hereto, there are no suits, actions,
proceedings or investigations pending or, to the Knowledge of Target, RPMSC and
RPMCC threatened against Target, any of its Subsidiaries or any of their
respective properties before any court or arbitrator or any Governmental Entity,
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect on Target. Neither Target nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree. To
the Knowledge of Target, RPMSC and RPMCC, there are no facts, events or
circumstances now in existence that reasonably could be expected to give rise to
any actions, suits, claims, proceedings or investigations that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
upon Target or the transactions contemplated hereby.
SECTION 4.12 COMPLIANCE WITH LAWS
Neither Target nor any of its Subsidiaries is in violation of any federal,
state, local or foreign law, ordinance or regulation or any order, judgment,
injunction, decree or other requirement of any court, arbitrator or Governmental
Entity, including laws relating to Taxes, labor and employment practices, and
Target has received no written notice of any violation of any laws related to
health and safety, zoning, pollution or protection of the environment, except
for violations which, individually or in the aggregate, could not be reasonably
expected to result in a Material Adverse Effect on Target. During the last three
years, except as set forth on SCHEDULE 4.12 hereto, neither Target nor any of
its Subsidiaries has received notice of, and there has not been any citation,
fine or penalty imposed against Target or any of its Subsidiaries for, any such
violation or alleged violation.
SECTION 4.13 CONTRACTS AND OTHER AGREEMENTS
SCHEDULE 4.13 lists all contracts, agreements, arrangements and
understandings to which Target or any of its Subsidiaries is a party, whether
written or oral, requiring aggregate annual payments by Target or any of its
Subsidiaries in excess of $90,000 (collectively, the "CONTRACTS"). Included
among the Contracts are ten (10) A-B-C agreements with respect to NYSE
memberships registered in the names of nominees of RPMSC and one (1) A-B-C
agreement with respect to an NYSE membership registered in the name of a nominee
of RPMCC (collectively, the "MEMBERSHIPS"). Each of the Contracts set forth on
SCHEDULE 4.13 is valid, in full force and effect, binding upon Target or its
Subsidiary, as the case may be, and to the Knowledge of Target, binding upon the
other parties thereto in accordance with its terms, and Target or each such
Subsidiary is not in material default under any of them. To the Knowledge of
Target, no other party to any Contract is in material default thereunder and no
condition exists that, with notice or lapse of time or both, would constitute a
material default thereunder. True and complete copies of all Contracts listed in
SCHEDULE 4.13 have been previously delivered or made available to Purchaser or
its agents.
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SECTION 4.14 PROPERTIES
(a) Target or one of its Subsidiaries owns and has good title to or has a
valid leasehold interest in, or valid contract rights to use, all tangible
assets and properties used in and material to its business, free and clear of
any Lien, except for (i) the Liens reflected on the Unaudited Balance Sheet,
(ii) assets and properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the Unaudited Balance Sheet Date,
(iii) Liens securing the liens of materialmen, carriers, landlords and like
persons, all of which are not yet due and payable, (iv) Liens arising under
equipment leases with third parties entered into in the ordinary course of
business, or (v) other imperfections of title or encumbrances that, individually
or in the aggregate, do not materially impair, and could not reasonably be
expected to materially impair, the current use and operation of the assets or
properties to which they relate. Neither Target nor any of its Subsidiaries has
received notice that any of such assets and properties is in violation in any
material respect of any existing law or any building, zoning, health, safety or
other ordinance, code or regulation.
(b) Other than REMCO and its Subsidiaries, neither Target nor any of its
Subsidiaries owns any real property. Each lease or agreement under which Target
or any of its Subsidiaries is a lessee or lessor of any property, real or
personal, is a valid and binding agreement of Target or such Subsidiary and, to
the Knowledge of Target, the other party thereto. No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
material default or event of default by Target or any of its Subsidiaries under
any such lease or agreement or, to the Knowledge of Target, by any other party
thereto. Target's or its Subsidiary's possession of such property has not been
disturbed and no claim has been asserted, whether in writing, or, to the
Knowledge of Target, oral, against Target or such Subsidiary materially adverse
to its rights in such leasehold interests.
(c) All items of machinery and equipment used by Target and its Subsidiaries
are in good operating condition and repair, normal wear and tear excepted, are
usable in the ordinary course of business, and are adequate and suitable for the
uses to which they are being put and conform in all material respects to all
applicable laws, ordinances, codes, rules, regulations and authorizations
relating to their construction, use and operation, in all cases other than as
would result, individually or in the aggregate, in a Material Adverse Effect on
Target.
SECTION 4.15 INTELLECTUAL PROPERTY
Target or one of its Subsidiaries, as applicable, either owns all right,
title and interest in and to, or possesses the right to use, all the patents,
patent applications, patent licenses, software (other than generally available
pre-packaged "off-the-shelf" software), licenses, trade names, trademarks,
copyrights, service marks, trademark registrations and applications, service
xxxx registrations and applications, and copyright registrations and
applications, trade secrets and technology ("INTELLECTUAL PROPERTY") used in the
conduct of their respective businesses. No claim of infringement or
misappropriation of patents, trademarks, trade names, service marks, copyrights
or trade secrets of any other Person has been made nor, to the Knowledge of
Target, threatened against Target or any of its Subsidiaries. To Target's
Knowledge, neither Target nor any of its Subsidiaries is infringing or
misappropriating any patents, trademarks, trade names, service marks, copyrights
or trade secrets of any other Person. Except as set forth on SCHEDULE 4.15 and
without limiting any other provisions hereof, neither Target nor any of its
Subsidiaries has granted any license, franchise or permit to any Person to use
any of the Intellectual Property of Target or any of its Subsidiaries.
SECTION 4.16 FINDER'S FEES
Except as set forth in SCHEDULE 4.16, there is no investment banker, broker,
finder or other financial intermediary which has been retained by, or is
authorized to act on behalf of, Target who is
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entitled to any fee or commission from Target or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
SECTION 4.17 EMPLOYEES; EMPLOYEE BENEFITS
(a) SCHEDULE 4.17(a) sets forth a list of each employee (active or
otherwise, including any individual on the payroll of Target or any of its
Subsidiaries) of each of Target and its Subsidiaries, Target has previously
provided Purchaser with a true and complete list, as of the date hereof, of each
such employee's salary, including bonus, for the fiscal year ended April 28,
2000 (based on payroll periods ending with said fiscal year) and current annual
salary, excluding bonus, for the year ending April 30, 2001.
(b) SCHEDULE 4.17(b) contains a list of each employee benefit plan
(including any "employee benefit plan" as defined in Section 3(3) of ERISA,
whether or not subject to ERISA), and any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, restricted stock, savings, change in control,
employment, consulting, collective bargaining, dependent care, employee
assistance, fringe benefit, medical, dental, post-retirement welfare, retention,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other material plan, agreement, arrangement or understanding
(whether or not written) established, sponsored, maintained or contributed to by
Target, any of its Subsidiaries or any other entity that would be deemed a
"single employer" with Target or any of its Subsidiaries (an "ERISA AFFILIATE"),
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA on
behalf of any current or former employee, director, stockholder, beneficiary or
other personnel or with respect to which Target or any Subsidiary has any actual
or contingent liability (all of the foregoing being herein called the "TARGET
BENEFIT PLANS"). Target has delivered to Purchaser true and complete copies of
all contracts, plan documents, amendments, summary plan descriptions and other
material items governing or describing each Target Benefit Plan and any related
insurance, trust or other funding arrangement. With respect to each Target
Benefit Plan which is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA, Target has delivered to Purchaser, WHERE APPLICABLE, true
and complete copies of: (i) the most recent annual report (5500 series) filed
with the IRS or the DOL, including schedules thereto, (ii) the most recent
balance sheet and financial statement, (iii) the most recent determination
letter issued by the IRS, (iv) the two most recent actuarial valuation reports
and (v) any private letter ruling, opinion or determination letter, prohibited
transaction exemption or other communication received by or furnished to the
IRS, DOL or PBGC and any application therefor which has been withdrawn.
(c) Each Target Benefit Plan is maintained and administered, in all material
respects, in accordance with its terms and in compliance with applicable law,
including ERISA and the Code. Except as set forth on SCHEDULE 4.17(c), no event
has occurred and, to the Knowledge of Target, there exists no condition or set
of circumstances, which, individually or in the aggregate, could reasonably be
expected to result in any material liability in connection with any Target
Benefit Plan.
(d) All contributions, insurance premiums, benefits and other payments to or
under each Target Benefit Plan required with respect to all periods prior to the
Closing will have been or will be made prior to the Closing or will be made or
fully accrued for purposes of the Final Adjusted Net Book Value calculation.
Except with regard to liabilities that are satisfied in full prior to the
Closing and as set forth on SCHEDULE 4.17(d), none of Target and its
Subsidiaries and ERISA Affiliates have any unfunded liabilities pursuant to any
Target Benefit Plan that is an "employee pension plan" within the meaning of
Section 3(2) of ERISA, but is not intended to be qualified under Section 401(a)
of the Code. With respect to each Target Benefit Plan, (i) no application,
proceeding or other matter is pending before the IRS, DOL, PBGC or any other
Governmental Entity, (ii) no action, suit, proceeding or claim (other than
routine claims for benefits) is pending or, to the Knowledge of Target,
threatened, and (iii) to the Knowledge of Target, no facts exist which could
give rise to an action, suit,
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proceeding or claim which, if asserted, could reasonably be expected to result
in a material liability for Target or any of the Subsidiaries or the plan
assets.
(e) With respect to each funded Target Benefit Plan that is an "employee
pension plan" within the meaning of Section 3(2) of ERISA, (i) such plan is, and
has been since its inception, qualified under Section 401(a) of the Code, and
its related trust is, and has been since its inception, exempt from federal
income taxation under Section 501(a) of the Code, (ii) a favorable IRS
determination letter is currently in effect and, since the date of such letter,
such plan has not been amended or operated in a manner which, in either
instance, would adversely affect its qualified status, and no event has occurred
which has caused or could reasonably be expected to cause the loss of such
status, and (iii) except as set forth on SCHEDULE 4.17(e), there has been no
termination or partial termination of such plan within the meaning of
Section 411(d)(3) of the Code.
(f) None of Target, its Subsidiaries, nor their ERISA Affiliates (or any of
their respective predecessors) contribute to, participate in or in any way,
directly or indirectly, have any actual or contingent liability with respect to
(i) any "Multiemployer Plan" or (ii) any plan which is not a Target Benefit Plan
but is subject to Title IV of ERISA.
(g) Except as set forth on Schedule 4.17(g) and except with regard to the
Target Pension Plan, none of the Target Benefit Plans is subject to the
requirements of Section 302 or Title IV of ERISA or Section 412 of the Code.
With respect to each Target Benefit Plan, no "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA and Section 412 of the Code), has
been or could be expected to be incurred, whether or not waived, and no excise
or other taxes have been or could be expected to be incurred or are due and
owing with respect to such plan. With respect to each Target Benefit Plan that
is or has been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code, all assets of such plan as of the Closing Date can be
liquidated immediately thereafter without penalty or charge and converted into
fixed income short-term securities. No security under Section 401(a)(29) of the
Code has been or could be expected to be required with respect to any Target
Benefit Plan. No "reportable event" within the meaning of Section 4043(b) of
ERISA has occurred or will occur or is continuing with respect to any Target
Benefit Plan, and the consummation of the transactions contemplated by this
Agreement will not constitute or directly or indirectly result in a reportable
event. All premiums due to PBGC by Target, its Subsidiaries and their ERISA
Affiliates have been paid on a timely basis. All records, data and information
maintained in connection with the Target Pension Plan and the Target Profit
Sharing Plan are true, complete and accurate in all material respects.
(h) With respect to each Target Benefit Plan that is an "employee benefit
plan" within the meaning of Section 3(3) of ERISA or which is a "plan" within
the meaning of Section 4975(e) of the Code, there has occurred no transaction
with respect to which Target, its Subsidiaries or any ERISA Affiliate will have
any liability, direct or indirect, and which is prohibited by Section 406 of
ERISA or which, to the Knowledge of Target, constitutes a "prohibited
transaction" under Section 4975(c) of the Code and the consummation of the
transactions contemplated by this Agreement will not result in such a
"prohibited transaction."
(i) Target, its Subsidiaries and their ERISA Affiliates have complied in all
material respects with the provisions of Section 4980B of the Code with respect
to each Target Benefit Plan which is a "group health plan" within the meaning of
Section 5001(b)(1) of the Code. Except as set forth on SCHEDULE 4.17(i) and
except with regard to plans, contracts, policies and arrangements that are or
will be terminated prior to the Closing (and with respect to which all
liabilities and obligations will be satisfied in full prior to the Closing),
none of Target, its Subsidiaries nor their ERISA Affiliates maintains,
contributes to, or is obligated under any plan, contract, policy or arrangement
providing health or death benefits (whether or not insured) to current or former
employees or other personnel beyond the termination of their employment or other
services (other than pursuant to Section 4980B of
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the Code). Except as set forth on SCHEDULE 4.17(i) and except with regard to
Target Benefit Plans that are or will be terminated prior to the Closing (and
with respect to which all liabilities and obligations will be satisfied in full
prior to Closing), no fact, circumstance or condition exists that would prevent
Target's unilateral amendment or termination (without participant's consent) of
any Target Benefit Plan that is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA.
(j) Except as set forth in SCHEDULE 4.17(j), the consummation of the
transactions contemplated by this Agreement will not (either alone or in
conjunction with another event, such as a termination of employment or other
services) result in any employee or other person receiving severance or
additional compensation which would not otherwise be payable absent the
consummation of the transaction contemplated by this Agreement or cause the
acceleration of the time of payment or vesting of any award or entitlement or
forgiveness of indebtedness under any Target Benefit Plan.
SECTION 4.18 TAXES
(a) All material Tax Returns required to be filed by or on behalf of Target
or any of its Subsidiaries, or any Affiliated Group of which Target or any of
its Subsidiaries is or was a member have been (or, prior to the Closing Date,
will be) timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns were required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, complete and correct in all material respects.
(b) All Taxes due and payable by or on behalf of Target or any of its
Subsidiaries or any Affiliated Group of which Target or any of its Subsidiaries
is or was a member or in respect of their income, assets or operations, have
been (or, prior to the Closing Date, will be) fully and timely paid (except to
the extent any failure to pay Taxes would not, individually or collectively,
have a Material Adverse Effect on Target), and adequate reserves or accruals for
Taxes of Target and its Subsidiaries have been provided in the books and records
of Target and its Subsidiaries in accordance with GAAP with respect to any
period for which Tax Returns have not yet been filed or for which Taxes are not
yet due and owing (except to the extent any failure to establish reserves or
accruals would not, individually or collectively, have a Material Adverse Effect
on Target). Target and its Subsidiaries have made all required estimated Tax
payments since the Audited Balance Sheet Date to avoid any underpayment penalty.
(c) Except as set forth in SCHEDULE 4.18(c), neither Target nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not limited to, any applicable statute of limitations), and no power of
attorney of Target or any of its Subsidiaries with respect to any Tax matter is
currently in force.
(d) Target and its Subsidiaries have complied in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have duly and timely withheld from employee salaries,
wages and other compensation and have paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.
(e) Purchaser has received or had access to complete copies of (A) all U.S.
federal, state, local and foreign income or franchise Tax Returns of Target and
its Subsidiaries relating to the Tax periods ended in April 1997, 1998 and 1999
and thereafter and (B) any audit report issued within the last three years
relating to Taxes due from or with respect to Target or any of its Subsidiaries,
or its income, assets or operations. SCHEDULE 4.18(e) sets forth any income or
franchise Tax Returns filed by or on behalf of Target or any of its Subsidiaries
which have been examined by any taxing authority.
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(f) SCHEDULE 4.18(f) lists all types of Taxes paid and Tax Returns filed by
or on behalf of Target or any of its Subsidiaries relating to the Tax periods
ended in April 1997, 1998 and 1999 and thereafter in connection with an entity
or group of which Target or its Subsidiaries is or has been a member of an
Affiliated Group for any Tax purpose. No written claim has been made by a taxing
authority in a jurisdiction where Target or any of its Subsidiaries does not
file Tax Returns that Target or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction.
(g) Except as set forth in SCHEDULE 4.18(g), there are no audits or
investigations by any taxing authority or proceedings in progress, nor has
Target or any of its Subsidiaries received any written notice from any taxing
authority that it intends to conduct such an audit or investigation. No issue
has been raised by a U.S. federal, state, local or foreign taxing authority in
any current or prior examination which, by application of the same or similar
principles, would reasonably be expected to result in a proposed deficiency for
any subsequent Tax period.
(h) Except set forth on SCHEDULE 4.18(h) hereto, none of Target, its
Subsidiaries or any other Person (including any of the Stockholders) on behalf
of and with respect to Target or its Subsidiaries has (A) filed a consent
pursuant to Section 341(f) of the Code, (B) agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by Target or any of its Subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of
Target or its Subsidiaries, (C) executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law with respect to Target or its
Subsidiaries, or (D) requested any extension of time within which to file any
Tax Return of Target or any of its Subsidiaries, which Tax Return has since not
been filed prior to the end of the extension period.
(i) Except as set forth on SCHEDULE 4.18(i), no property owned by Target or
any of its Subsidiaries is (A) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (B) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (C) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code.
(j) Neither Target nor any of its Subsidiaries is a party to any Tax sharing
or similar agreement or arrangement (whether or not written) with any Person
other than Target or any of its Subsidiaries.
(k) Except as set forth in SCHEDULE 4.18(k), there is no contract,
agreement, plan or arrangement covering any person that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible by Target or any of its Affiliates by reason
of Section 280G or 162(m) of the Code.
(l) Neither Target nor any of its Subsidiaries is subject to any private
letter ruling of the IRS or comparable rulings of other taxing authorities.
(m) Neither Target nor any of its Subsidiaries has ever been a member of any
Affiliated Group of corporations for any Tax purposes other than an Affiliated
Group of which Target is or was the parent. Except as set forth in
SCHEDULE 4.18(m), neither Target nor any of its Subsidiaries owns any interest
in any entity that is treated as a partnership for U.S. federal income Tax
purposes or would be treated as a pass-through, transparent or disregarded
entity for any Tax purpose.
SECTION 4.19 LABOR MATTERS
Neither Target nor any of its Subsidiaries is a party to or otherwise bound
by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor
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organization, nor, as of the date hereof, is Target or any of its Subsidiaries
the subject of any proceeding asserting that it has committed an unfair labor
practice or is seeking to compel it to bargain with any labor union or labor
organization nor, as of the date of this Agreement, is there pending or, to the
Knowledge of Target, threatened, any material labor strike, dispute, walkout,
work stoppage, slow-down or lockout involving Target or any of its Subsidiaries.
SECTION 4.20 BANK ACCOUNTS
SCHEDULE 4.20 contains a true, correct and complete list, as of the date
hereof, of the names, locations and account information of all banks, trust
companies, savings and loan associations and other financial institutions at
which Target and its Subsidiaries maintain safe deposit boxes or accounts of any
nature (other than brokerage accounts maintained in the ordinary course of
business).
SECTION 4.21 REPURCHASE OF TARGET PREFERRED STOCK
Target has the right to repurchase the Target Preferred Stock prior to the
Closing as contemplated by this Agreement.
SECTION 4.22 INSURANCE
Target has made available to Purchaser copies of all insurance agreements
and policies maintained by Target and its Subsidiaries or on which Target or any
of its Subsidiaries is listed as a beneficiary or additional insured and the
type and amounts of coverage thereunder. SCHEDULE 4.22 sets forth a list of all
such agreements and policies. All such agreements and policies are with
reputable insurers and cover such risks and in such amounts as are reasonably
necessary in the context of the business operations of Target and its
Subsidiaries. Such agreements and policies are in full force and effect, and
none of Target, its Subsidiaries, and, to the Knowledge of Target, any other
party thereto is in material default with respect to its obligations thereunder.
SECTION 4.23 RELATED PARTY TRANSACTIONS
Except as set forth on SCHEDULE 4.23 hereto, no current or former officer or
director (including, to the Knowledge of Target, their respective family
members), employee, stockholder or any associate (as defined in the rules
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), of Target or any of its Subsidiaries is presently, or, in the last three
years has been, (a) except for ordinary course compensation and benefits for
services rendered to Target or any of its Subsidiaries, a party to any
transaction or transactions with Target or such Subsidiary involving an amount
in excess of $50,000, individually, or $200,000 in the aggregate, other than on
an arms-length basis (including, without limitation, any contract, agreement or
other arrangement providing for the furnishing of services by, or rental of real
or personal property from, or otherwise requiring payments to, any such officer
or director (including, to the Knowledge of Target, their respective family
members), employee, stockholder or associate), or (b) to the Knowledge of
Target, the direct or indirect owner of an interest in any corporation, firm,
association or business organization which is a present, direct competitor of
Target or any of its Subsidiaries, except with respect to holdings of less than
1% of the capital stock of a publicly traded corporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Target to enter into this Agreement, Purchaser
hereby represents and warrants to Target as of the date hereof and, subject to
the delivery by Purchaser to Target of new
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Schedules on or before the Closing Date pursuant to the provisions of
SECTION 7.5 hereof, as of the Closing Date that:
SECTION 5.1 CORPORATE EXISTENCE AND POWER
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all corporate powers
and all material licenses, authorizations, consents and approvals of or from all
Governmental Entities required to own, lease and operate its properties and to
carry on its business as now conducted. Purchaser is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property leased or owned by it or the nature of its
activities makes such qualification necessary, except where a failure or
failures to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser. Purchaser's certificate of incorporation
and by-laws as filed with the SEC as exhibits to Purchaser's Registration
Statement on Form S-1 (File No. 333-81079) have not been amended since the
effective date of such Registration Statement.
SECTION 5.2 CORPORATE AUTHORIZATION
The execution, delivery and performance by Purchaser of this Agreement and
the other documents contemplated hereby to which it is or will be a party and
the consummation by Purchaser of the transactions contemplated hereby are within
Purchaser's corporate power and authority and have been duly authorized by all
necessary corporate action. The approval or authorization of the stockholders of
Purchaser is not required in order for Purchaser to (a) execute this Agreement
and each such other document contemplated hereby or (b) consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and constitutes, and each such other document
contemplated hereby will be duly executed and delivered by Purchaser and, when
so executed and delivered, will constitute, a valid and binding agreement of
Purchaser, enforceable against it in accordance with their respective terms and
conditions, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity, whether considered in a proceeding in equity or at law.
SECTION 5.3 CAPITALIZATION
The authorized capital stock of Purchaser consists of 200,000,000 shares of
Purchaser Common Stock, of which, as of September 30, 2000, 48,675,352 shares
were issued and outstanding and no shares are held in treasury, and
(ii) 10,000,000 shares of Purchaser preferred stock, of which no shares are
issued and outstanding. The shares of Purchaser Common Stock and Purchaser
Series A Preferred Stock to be issued in connection with the Merger, when issued
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable. Except as disclosed in Purchaser's Public Reports, there are
no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to Purchaser. The Board of
Directors of Purchaser has authorized the issuance of Purchaser Series A
Preferred Stock pursuant to the Series A Preferred Stock Certificate of
Designation.
SECTION 5.4 GOVERNMENTAL CONSENTS AND APPROVALS
Except as set forth on SCHEDULE 5.4 hereto, the execution, delivery and
performance by Purchaser of this Agreement and the consummation of the Merger by
Purchaser require no action by or in respect of, or filing with, any
Governmental Entity, other than any filings or registrations with, or
authorizations, consents or approvals of, Governmental Entities, the failure or
failures of which would not, individually or in the aggregate, have a Material
Adverse Effect on Purchaser and would not materially adversely affect the
ability of Purchaser to consummate the Merger.
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SECTION 5.5 REGULATORY MATTERS
Purchaser and each of its Subsidiaries has obtained all registrations,
qualifications, licenses, permits, franchises, orders or approvals of any
Governmental Entity or regulatory authority as are necessary under applicable
laws for Purchaser and each of its Subsidiaries to own their respective
properties and conduct their respective businesses (collectively, "PURCHASER
PERMITS"), and all such Purchaser Permits are in full force and effect, and no
proceeding is pending, or to the Knowledge of Purchaser and its Subsidiaries,
threatened to revoke or limit any Purchaser Permit, except where the failure or
failures to obtain any such Purchaser Permit or to keep it in full force and
effect or the revocation(s) or limitation(s) of any Purchaser Permit would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser.
XxXxxxxxx is and has been duly registered as a broker-dealer with the SEC, NASD
and in the states where such registration is required under the securities laws
of such states in order to conduct its business as presently conducted and is
and has been duly registered as a NYSE specialist. Except where the failure to
do so would not have a Material Adverse Effect on Purchaser, the employees of
XxXxxxxxx are in compliance in all respects with all federal and state laws and
NYSE rules regulating broker-dealers and specialists or requiring registration,
licensing or qualification as a broker-dealer or specialist. Each of Purchaser
and its Subsidiaries is a member in good standing and has all material licenses
and authorizations in self-regulatory or trade organizations or registered
clearing agencies required to permit the operation of its business as presently
conducted.
SECTION 5.6 NON-CONTRAVENTION
Except for those consents obtained or waived, the execution, delivery and
performance by Purchaser of this Agreement and the other documents contemplated
hereby and the consummation by Purchaser of the Merger do not and will not:
(a) contravene or conflict with the certificate of incorporation or by-laws of
Purchaser or any of its Subsidiaries; (b) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Purchaser or any of
its Subsidiaries; (c) constitute a default under or give rise to a right of
termination, cancellation, acceleration, loss of any material benefit or cause
of action for damages upon breach under any agreement, contract, license or
other instrument binding upon Purchaser or any of its Subsidiaries, or any
license, franchise, permit or other similar authorization held by Purchaser or
any of its Subsidiaries, or (d) result in the creation or imposition of any Lien
on any asset of Purchaser or any of its Subsidiaries, except, in the case of
clauses (b), (c) and (d), as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser.
SECTION 5.7 FINDER'S FEES
Except for Xxxxxxxxx, Xxxxxx & Xxxxxxxx or its successors, there is no
investment banker, broker, finder or other financial intermediary which has been
retained by, or is authorized to act on behalf of, Purchaser or any of its
Subsidiaries who is entitled to any fee or commission from Purchaser or any of
its Subsidiaries upon consummation of the transactions contemplated by this
Agreement.
SECTION 5.8 FILINGS WITH THE SEC
Purchaser has made available to Target copies of its annual report on
Form 10-K for the year ended December 31, 1999, and its quarterly reports on
Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000, each in the form (including exhibits and amendments thereto)
filed with the SEC (collectively, together with all of Purchaser's voluntary
filings with the SEC, the "PUBLIC REPORTS") and each of which was timely filed
with the SEC. Each of the Public Reports has complied with the Securities Act of
1933, as amended (the "SECURITIES ACT") or the Exchange Act, as applicable, in
all material respects. None of the Public Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make
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the statements made therein, in light of the circumstances under which they were
made, not misleading. There is no contract or other document of a character
required to be described in, or required to be filed as an exhibit to, the
Public Reports (including any such contract or document entered into or created
since the date of the last Public Report) which has not been so described or
filed as an exhibit. Purchaser has made all filings with the SEC that it has
been required to make under the Securities Act and the Exchange Act.
SECTION 5.9 FINANCIAL STATEMENTS
The financial statements included in the Public Reports (including the
related notes and schedules) are in accordance with the books and records of
Purchaser in all material respects, have been prepared in accordance with GAAP
and present fairly in all material respects the financial condition of Purchaser
and its Subsidiaries on a consolidated basis as of such dates and the results of
operations of Purchaser and its Subsidiaries on a consolidated basis for such
periods; PROVIDED, HOWEVER, that the interim statements are subject to normal
year-end adjustments and lack footnotes and other presentation items. As of
September 30, 2000, there were no liabilities of Purchaser or any of its
Subsidiaries of any kind whatsoever that were required to be disclosed on the
balance sheet included in its Form 10-Q for the quarter ended September 30,
2000, whether accrued, contingent, absolute, known, unknown, determined,
determinable or otherwise, and to the Knowledge of Purchaser and its
Subsidiaries, there was no existing condition, situation or set of circumstances
which could reasonably have been expected to result in such a liability, except
for liabilities (i) reflected or reserved against in said balance sheet, or
(ii) arising in the ordinary course of business after the date of said balance
sheet that were not and could not reasonably have been expected to have a
Material Adverse Effect on Purchaser.
SECTION 5.10 EVENTS SUBSEQUENT TO PURCHASER'S MOST RECENT PUBLIC REPORT
Except as set forth in SCHEDULE 5.10, since September 30, 2000, there has
not been any Material Adverse Change in Purchaser, other than changes,
occurrences or events affecting the securities industry as a whole. Except as
set forth in SCHEDULE 5.10, since September 30, 2000, (a) the business of
Purchaser and each of its Subsidiaries has been conducted in the ordinary course
and consistent with past practice in all material respects and (b) no event has
occurred or fact or circumstance arisen that, individually or taken together
with all other events, facts and circumstances, has had or is reasonably likely
to have a Material Adverse Effect on Purchaser, other than changes, occurrences
or events affecting the securities industry as a whole.
SECTION 5.11 LITIGATION
Except as set forth on SCHEDULE 5.11, there are no suits, claims, actions,
proceedings or investigations pending or, to the Knowledge of Purchaser,
threatened against Purchaser, any of its Subsidiaries or any of their respective
properties before any court or arbitrator or any Governmental Entity which,
individually or in the aggregate, would have a Material Adverse Effect on
Purchaser. To the Knowledge of Purchaser, there are no facts, events or
circumstances now in existence that reasonably could be expected to give rise to
any actions, suits, claims, proceedings or investigations that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect
on Purchaser or the transactions contemplated hereby.
SECTION 5.12 FAIRNESS OPINION
Xxxxxxxxx, Lufkin & Xxxxxxxx or its successor has delivered to Purchaser,
and has not withdrawn, an opinion as to the fairness of the Merger to Purchaser
from a financial point of view.
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SECTION 5.13 SUBSIDIARIES; JOINT VENTURES
Except as set forth in SCHEDULE 5.13 hereto, Purchaser owns all the issued
and outstanding capital stock of each of its Subsidiaries (each of which is set
forth in SCHEDULE 5.13) free and clear of all Liens. None of Purchaser's
Subsidiaries has any outstanding options or warrants to purchase its capital
stock or has issued any other securities exercisable or convertible into shares
of capital stock of such Subsidiary. Except as set forth in SCHEDULE 5.13
hereto, neither Purchaser nor any of its Subsidiaries, directly or indirectly,
owns any equity interests in any Person that is not a Subsidiary of Purchaser or
of such Subsidiary.
SECTION 5.14 COMPLIANCE WITH LAWS
Neither Purchaser nor any of its Subsidiaries is in violation of any
federal, state, local or foreign law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
Governmental Entity, including laws relating to Taxes, labor and employment
practices, health and safety, zoning, pollution or protection of the
environment, except for violations which, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect on
Purchaser. During the last three years, except as set forth in SCHEDULE 5.14
hereto, neither Purchaser nor any of its Subsidiaries has received notice of,
and there has not been any citation, fine or penalty imposed against Purchaser
or any of its Subsidiaries for, any such violation or alleged violation.
SECTION 5.15 RESTRICTIONS ON DIVIDENDS
Except as set forth on SCHEDULE 5.15, neither Purchaser nor any of its
Subsidiaries is a party to any contract, agreement or other arrangement that
restricts the ability of Purchaser to pay dividends on the Purchaser Series A
Preferred Stock.
SECTION 5.16 TAXES
(a) All material Tax Returns required to be filed by or on behalf of
Purchaser, any of its Subsidiaries or any Affiliated Group of which Purchaser or
any of its Subsidiaries is or was a member have been (or, prior to the Closing
Date, will be) timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns were required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, complete and correct in all material respects.
(b) All Taxes due and payable by or on behalf of Purchaser, any of its
Subsidiaries or any Affiliated Group of which Purchaser or any of its
Subsidiaries is or was a member or in respect of their income, assets or
operations, have been (or, prior to the Closing Date, will be) fully and timely
paid (except to the extent any failure to pay Taxes would not, individually or
collectively, have a Material Adverse Effect on Purchaser), and adequate
reserves or accruals for Taxes of Purchaser and its Subsidiaries in accordance
with GAAP with respect to any period for which Tax Returns have not yet been
filed or for which material Taxes are not yet due and owing (except to the
extent any failure to establish reserves or accruals would not, individually or
collectively, have a Material Adverse Effect on Purchaser). Purchaser and its
Subsidiaries have made all required estimated Tax payments for the current
taxable year to avoid any underpayment penalty.
(c) Purchaser and its Subsidiaries have complied in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have duly and timely withheld from employee salaries,
wages and other compensation and have paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.
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(d) No claim has been made by a taxing authority in a jurisdiction where
Purchaser or any of its Subsidiaries does not file Tax Returns that Purchaser or
any of its Subsidiaries is or may be subject to taxation by that jurisdiction.
(e) Except as set forth in Schedule 5.16(e), there is no contract,
agreement, plan or arrangement covering any person that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible by Purchaser or any of its Affiliates by
reason of Section 280G or 162(m) of the Code.
(f) Purchaser has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii).
SECTION 5.1 EMPLOYEE BENEFITS
(a) Each Employee Benefit Plan currently maintained or contributed to by
Purchaser (the "PURCHASER PLANS") and each related trust insurance contract or
fund complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code, except where the failure to comply would not
have a Material Adverse Effect on Purchaser, and:
(i) all contributions (including all employer contributions and employee
salary reduction contributions) that are due have been paid to each
Purchaser Plan that is an Employee Pension Benefit Plan;
(ii) each Purchaser Plan that is intended to be qualified under
Section 401(a) of the Code has received a timely determination, opinion or
notification letter from the Internal Revenue Service to the effect that it
meets the requirements of Code Section 401(a);
(iii) none of the Purchaser Plans is or has ever been subject to Title IV
or Section 302 of ERISA or Section 412 of the Code; and
(iv) except as disclosed in Public Reports filed prior to the Closing,
no event has occurred and there exists no condition or set of circumstances
in connection with the Purchaser Plans, which individually or in the
aggregate, could reasonably be expected to result in any Material Adverse
Effect on Purchaser.
(b) With respect to each Purchaser Plan that Purchaser maintains or has
maintained or to which it contributes or has been required to contribute:
(i) no action, suit, proceeding, hearing or investigation with respect
to the administration or the investment of the assets of any such Purchaser
Plan (other than routine claims for benefits) is pending, except where the
action, suit, proceeding, hearing or investigation would not have a Material
Adverse Effect on Purchaser; and
(ii) neither Purchaser nor any other entity that would be deemed a
"single employer" with Purchaser under Section 414 of the Code or
Section 4001 of ERISA has incurred any material liability to PBGC (other
than PBGC premium payments) or otherwise under Title IV of ERISA (including
any withdrawal liability) with respect to any Purchaser Plan that is an
Employee Pension Benefit Plan.
ARTICLE VI
PRE-CLOSING COVENANTS OF TARGET
SECTION 6.1 NEGATIVE COVENANTS
Except as set forth on SCHEDULE 6.1 hereto, from the date hereof until the
Closing Date, Target and its Subsidiaries shall conduct their respective
businesses in the ordinary course in all material respects. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, except
as
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set forth on SCHEDULE 6.1 hereto or as contemplated by this Agreement, without
the written consent of Purchaser (which consent shall not be unreasonably
withheld), Target shall not:
(a) adopt or propose any change in its certificate of incorporation or
by-laws or the certificate of incorporation or by-laws of any of its
Subsidiaries;
(b) (i) enter into any written contract, agreement, plan or arrangement
covering any director, officer or employee of Target or any of its
Subsidiaries that provides for the making of any payments, the acceleration
of vesting of any benefit or right or any other entitlement contingent upon
(A) the Merger, except with respect to the vesting of the Target Options in
connection with the Merger or (B) the termination of employment after the
Merger, (ii) enter into or amend in any material respect (except as required
by law) any employment, consulting or similar agreement (oral or written) to
increase the compensation payable or to become payable by it or any of its
Subsidiaries to, or otherwise materially alter its employment or consulting
relationship with, any of its or any of its Subsidiaries' officers,
directors or consultants over the amount payable as of the date hereof, or
increase the compensation payable to any other employees (other than
increases in the ordinary course of business, consistent with past practice,
which, in the aggregate s to any one person do not exceed $50,000 on an
annual basis or otherwise would not have a Material Adverse Effect on
Target) or (iii) loan or advance any money to any officer, director,
employee, shareholder or consultant of Target or any of its Subsidiaries
(other than salary advances or advances against business expenses in the
ordinary course of business and consistent with past practice which, in the
aggregate as to any individual, do not exceed $50,000 on an annual basis or
which would not have a Material Adverse Effect on Target); PROVIDED,
HOWEVER, that nothing contained in this SECTION 6.1 shall prohibit Target
from taking any action with respect to the payment of bonuses or any other
compensation to officers, directors or employees of Target or any of its
Subsidiaries so long as the obligations created upon such action are not
binding upon Purchaser or any of its Subsidiaries after the Closing and are
fully satisfied prior to the Closing;
(c) issue or propose the issuance of, or consummate, enter into
negotiations for or accept any offers for, the issuance or sale of any
shares of its capital stock or securities convertible or exchangeable into
shares of its or any of its Subsidiaries' capital stock except for the
issuance of Target Shares in connection with the exercise of existing Target
Options;
(d) change the number of shares of authorized capital stock, grant any
option, warrant, call, commitment, right or agreement of any character
relating to its authorized or issued capital stock or permit any transfers
in the ownership of any of its Subsidiaries' capital stock, except for the
issuance of Target Shares in connection with the exercise of existing Target
Options;
(e) (i) pay any dividend or make any other distribution to holders of
its capital stock (ii) split, combine or reclassify any of its capital stock
or propose or authorize the issuance of any other securities in respect of
or in lieu of or in substitution for any shares of its capital stock, or
(iii) repurchase, redeem or otherwise acquire any shares of its capital
stock, EXCEPT FOR the repurchase of Target Preferred Stock prior to the
Closing;
(f) directly or indirectly merge or consolidate with another entity;
(g) incur any additional indebtedness for borrowed money (including,
without limitation, by way of guarantee or the issuance and sale of debt
securities or rights to acquire debt securities), other than
(i) indebtedness incurred in the ordinary course of business, or
(ii) indebtedness in an amount not to exceed $150,000 in the aggregate;
(h) other than in the ordinary course of business and consistent with
present practice (i) sell, lease or otherwise dispose of any of its assets
having a book or market value in excess of $150,000 in the aggregate or that
are otherwise material, individually or in the aggregate, to the business,
results of operations or financial condition of Target or any of its
Subsidiaries, or (ii) enter into, or
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consent to the entering into of, any agreement granting a preferential right
to sell, lease or otherwise dispose of any of such assets;
(i) (i) enter into any new line of business; (ii) change its or any of
its Subsidiaries' investment, liability and risk management and other
material policies in any material respect; (iii) incur or commit to any
capital expenditures, obligations or liabilities in connection therewith,
other than capital expenditures, obligations or liabilities that do not
exceed $50,000, individually, or $150,000, in the aggregate; (iv) acquire or
agree to acquire by merging or consolidating with, or acquire or agree to
acquire by purchasing a substantial portion of the assets of, or in any
other manner, any business or Person; (v) otherwise, except as to the
acquisition of materials and supplies, services and activities in the
ordinary course of business and consistent with past practices, acquire or
agree to acquire any assets for aggregate consideration in excess of
$150,000; (vi) except in the ordinary course of business and consistent with
past practice, make any investment in any Person; or (vii) enter into any
license, technology development or technology transfer agreement with any
other Person;
(j) adopt or amend any plan that is or would be a Target Benefit Plan
which results in a material increase in Target's or any of its Subsidiaries'
benefits or compensation expense, except as may be required by applicable
law to maintain a plan's tax qualified status and except for (i) increases
in the ordinary course of business and consistent with past practice, or
(ii) the creation of obligations of Target which will be fully satisfied
prior to the Closing;
(k) terminate any of its existing insurance policies or modify in any
material respect or reduce the coverage thereunder;
(l) settle or compromise, or agree to settle or compromise, any suit or
other litigation matter or matter in an arbitration proceeding for any
material amount (after taking into account any insurance proceeds to which
Target is entitled) or otherwise on terms which could reasonably be expected
to have a Material Adverse Effect on Target; and
(m) agree or commit to do any of the foregoing.
In the event Target shall request Purchaser to consent in writing to an action
otherwise prohibited by this SECTION 6.1, Purchaser shall use all reasonable
efforts to respond in a prompt and timely fashion.
SECTION 6.2 AFFIRMATIVE COVENANTS
Notwithstanding anything to the contrary contained in SECTION 6.1 hereto,
Target shall:
(a) use its commercially reasonable efforts to perform, and cause each of
its Subsidiaries to perform, all of their respective obligations as they become
due, cause RPMSC to solicit new specialist stocks in the ordinary course of
business, maintain their respective corporate records, keep their respective
accounts receivable current, and preserve their respective business organization
and properties intact, keep available the services of their respective employees
and preserve the goodwill of their respective clients and others with whom
business relationships exist; and
(b) use its commercially reasonable efforts to maintain RPMSC's and RPMCC's
registrations in good standing with the SEC, NASD, NYSE, AMEX, CBOE, any
regional market on which they conduct business, and with the states where such
registration is required under the securities laws of such states.
SECTION 6.3 ACCESS TO FINANCIAL, OPERATING AND TECHNICAL INFORMATION
From the date hereof until the Closing, Target will give Purchaser, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access, during normal business hours, upon reasonable notice and
without unnecessary disruption of the conduct of Target's business, to the
offices, properties, books and records of Target, will furnish to Purchaser, its
counsel, financial advisors,
A-30
auditors and other authorized representatives such financial and operating data
and all other technical information as such persons may reasonably request and
will instruct Target's employees, counsel and financial advisors to cooperate
with Purchaser in its investigation of the business of Target; PROVIDED,
HOWEVER, that no investigation pursuant to this SECTION 6.3 shall affect any
representation or warranty given by Target to Purchaser hereunder. All requests
for information made pursuant to this SECTION 6.3 shall be directed to the Chief
Financial Officer of Target or such Person as may be designated by him or her.
If requested by Purchaser and at Purchaser's expense up to $100,000, Target
will, and will direct its independent accountants to, cooperate in the
preparation of an audit of Target's financial statements (other than the audit
of Target's financial statements for the year ended April 30, 2001, if
necessary) and the inclusion of such financial statements with Purchaser's
filings with the SEC, including preparation of pro forma financial statements
required for any filings with the SEC and including provision of such records,
workpapers, audit reports and consents of Target's bookkeepers and independent
accountants as reasonably may be required by Purchaser in connection therewith.
SECTION 6.4 COMPLIANCE WITH OBLIGATIONS
Prior to the Closing, each of Target and its Subsidiaries shall comply in
all material respects with (i) all applicable federal, state, local and foreign
laws, rules and regulations, (ii) all material agreements and obligations,
including its certificate of incorporation and by-laws, by which it, its
properties or its assets may be bound, and (iii) all decrees, orders, writs,
injunctions, judgments, statutes, rules and regulations applicable to it, its
properties or its assets.
SECTION 6.5 ADVICE OF CHANGES
Target will promptly advise Purchaser in writing of: (a) any notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Merger; (b) any written notice or other
communication from any Governmental Entity in connection with the Merger;
(c) any actions, suits, claims, investigations or other judicial proceedings
commenced or, to the Knowledge of Target, threatened against it which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to this Agreement or which relate to the consummation of the
Merger; (d) any event known to its executive officers occurring subsequent to
the date of this Agreement that would render any representation or warranty of
Target contained in this Agreement, if made on or as of the date of such event
or the Closing Date, untrue, inaccurate or misleading in any material respect
(other than an event so affecting a representation or warranty which is
expressly limited to a state of facts existing at a time prior to the occurrence
of such event); and (e) any Material Adverse Change in Target, other than
changes, occurrences or events affecting the securities industry as a whole. No
advice or notice pursuant to this SECTION 6.5 shall be deemed to modify any
representation, warranty, covenant, condition or indemnity given by Target to
Purchaser hereunder. Failure to give or delay in giving advice or notice under
this SECTION 6.5 shall be deemed to be a breach of this Agreement only to the
extent Purchaser is actually and materially harmed thereby.
SECTION 6.6 UPDATING OF SCHEDULES
Target undertakes to revise and update all Schedules hereto as may be
necessary from the date hereof until the Closing Date. No such Schedules
provided and revisions made to such Schedules pursuant to this Section shall be
deemed to be accepted by Purchaser, cure any breach of any representation or
warranty of Target made in this Agreement, or be considered to constitute or
give rise to a waiver by Purchaser of any condition set forth in this Agreement,
unless Purchaser specifically agrees thereto in writing or initials such revised
or updated Schedule prior to Closing. Notwithstanding the foregoing, if
Purchaser waives in writing the condition set forth in SECTION 9.1(a) hereof and
the Closing occurs, Purchaser shall thereupon be deemed to have accepted all
revisions and updates to the Schedules delivered to Purchaser by Target on or
prior to the Closing Date which are attached to the officers' certificate
described in SECTION 9.1(a) hereof, and in such event, the representations and
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warranties contained in Article IV of this Agreement shall be deemed to be
amended to the extent provided in such revisions and updates.
ARTICLE VII
PRE-CLOSING COVENANTS OF PURCHASER
SECTION 7.1 NEGATIVE COVENANTS
Except as set forth on SCHEDULE 7.1 hereto, from the date hereof until the
Closing Date, Purchaser and its Subsidiaries shall conduct their respective
businesses in the ordinary course in all material respects. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, except
as contemplated hereby, without the written consent of Target (which consent
shall not be unreasonably withheld), Purchaser shall not:
(a) (i) pay any dividend or make any other distribution to holders of its
capital stock, or (ii) repurchase, redeem or otherwise acquire any shares of its
capital stock, other than in the ordinary course of business pursuant to an
agreement or arrangement with an employee or consultant providing for the
repurchase of such employee's or consultant's shares of Purchaser Common Stock
upon the termination of his employment with Purchaser or one of its
Subsidiaries;
(b) directly or indirectly merge or consolidate with another entity if, as a
result of such merger or consolidation, the holders of Purchaser's voting power
immediately prior to such merger or consolidation own less than 50% of the
resulting or surviving entity's voting power immediately after such merger or
consolidation;
(c) sell, lease or otherwise dispose of assets as a result of which
Purchaser no longer owns a direct or indirect interest in 50% or more of the
tangible and intangible assets of Purchaser and its Subsidiaries, taken as a
whole;
(d) authorize, create (by reclassification or otherwise) or issue any class
or series of shares of stock that ranks senior to or PARI PASSU with the
Purchaser Series A Preferred Stock as to the payment of dividends or other
distributions or as to the distribution of assets on liquidation, dissolution or
winding up of Purchaser; or
(e) agree or commit to do any of the foregoing.
SECTION 7.2 AFFIRMATIVE COVENANTS
Purchaser shall:
(a) perform, and cause each of its Subsidiaries to perform, all their
respective obligations as they become due, solicit new specialist stocks in the
ordinary course of business, maintain their respective corporate records, keep
their respective accounts receivable current, and use commercially reasonable
efforts to preserve their respective business organizations and properties
intact, keep available the services of their respective employees and preserve
the goodwill of their respective clients and others with whom they have business
relationships; and
(b) use commercially reasonable efforts to maintain its and its
Subsidiaries' respective registrations and good standing with the SEC, NASD,
NYSE, AMEX, any regional market on which they conduct business, and with the
states where such registration is required under the securities laws of such
states.
SECTION 7.3 COMPLIANCE WITH OBLIGATIONS
Prior to the Closing, each of Purchaser and its Subsidiaries shall comply in
all material respects with (i) all applicable federal, state, local and foreign
laws, rules and regulations, (ii) all material agreements and obligations,
including its certificate of incorporation and by-laws, by which it, its
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properties or its assets may be bound, and (iii) all decrees, orders, writs,
injunctions, judgments, statutes, rules and regulations applicable to it, its
properties or its assets.
SECTION 7.4 ADVICE OF CHANGES
Purchaser will promptly advise Target in writing of: (a) any notice or other
written communication from any Person alleging that the consent of such Person
is or may be required in connection with the Merger; (b) any written notice or
other communication from any Governmental Entity in connection with the Merger;
(c) any actions, suits, claims, investigations or other judicial proceedings
commenced or, to the Knowledge of Purchaser, threatened against it which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to this Agreement or which relate to the consummation of the
Merger; (d) any event known to its executive officers occurring subsequent to
the date of this Agreement that would render any representation or warranty of
Purchaser contained in this Agreement, if made on or as of the date of such
event or the Closing Date, untrue, inaccurate or misleading in any material
respect (other than an event so affecting a representation or warranty which is
expressly limited to a state of facts existing at a time prior to the occurrence
of such event); and (e) any Material Adverse Change in Purchaser, other than
changes, occurrences or events affecting the securities industry as a whole. No
advice or notice pursuant to this SECTION 7.4 shall be deemed to modify any
representation, warranty, covenant, condition or indemnity given by Purchaser to
Target hereunder. Failure to give or delay in giving advice or notice under this
SECTION 7.4 shall be deemed a breach of this Agreement only to the extent
Target, the Stockholders or the Option Holders are actually and materially
harmed thereby.
SECTION 7.5 UPDATING OF SCHEDULES
Purchaser undertakes to revise and update all Schedules hereto as may be
necessary from the date hereof until the Closing Date. No such Schedules
provided and revisions made to such Schedules pursuant to this Section shall be
deemed to be accepted by Target, cure any breach of any representation or
warranty of Purchaser made in this Agreement, or be considered to constitute or
give rise to a waiver by Target of any condition set forth in this Agreement,
unless Target specifically agrees thereto in writing or initials such revised or
updated Schedule. Notwithstanding the foregoing, if Target waives in writing the
condition set forth in SECTION 9.2(a) hereof and the Closing occurs, Target
shall thereupon be deemed to have accepted all revisions and updates to the
Schedules delivered to Target by Purchaser on or prior to the Closing Date which
are attached to the officers' certificate described in SECTION 9.2(a) hereof,
and in such event, the representations and warranties contained in Article V of
this Agreement shall be deemed to be amended to the extent provided in such
revisions and updates.
ARTICLE VIII
ADDITIONAL PRE-CLOSING COVENANTS
SECTION 8.1 TARGET MEETING
Subject to the terms and conditions contained herein, Target shall submit
this Agreement for approval to the Stockholders at a meeting to be duly held for
this purpose by Target (the "TARGET MEETING"). Target shall take all action in
accordance with applicable federal securities laws, the DGCL and its certificate
of incorporation and bylaws necessary to duly convene the Target Meeting. Target
shall use its reasonable best efforts, subject to applicable laws, rules and
regulations, to convene the Target Meeting as soon as reasonably practicable
after the date hereof. Target shall use its reasonable best efforts, subject to
applicable laws, rules and regulations, to take all action to solicit the
Requisite Stockholder Approval. Notwithstanding any withdrawal, modification or
change in the Target board of directors' recommendation to the Stockholders,
Target agrees to hold its Target Meeting in accordance with the provisions of
this SECTION 8.1. Prior to the Closing Date, Target shall deliver to Purchaser a
letter identifying all persons who, at the time of the Target Meeting, were
affiliates of Target for purposes of Rule 145 under the Securities Act.
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SECTION 8.2 REGISTRATION STATEMENT ON FORM S-4
(a) Purchaser shall cause, and Target shall cooperate with Purchaser to
cause, to be filed as soon as reasonably practicable after the date hereof with
the SEC a Registration Statement on Form S-4 with respect to the offer and
issuance of Purchaser Common Stock and Purchaser Series A Preferred Stock in the
Merger (the "REGISTRATION STATEMENT"). Each of Purchaser and Target shall use
its reasonable best efforts to cause the Registration Statement to comply with
applicable law and rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after it is filed with the SEC. Each of Purchaser and Target shall promptly
furnish to the other all information concerning itself, its stockholders and its
affiliates that may be required or reasonably requested in connection with any
action contemplated in this SECTION 8.2. If any event relating to Purchaser or
Target occurs, or if Purchaser or Target becomes aware of any information, that
should be disclosed in an amendment or supplement to the Registration Statement,
Purchaser or Target, as applicable, shall inform the other thereof and shall
cooperate with the other in filing such amendment or supplement with the SEC,
and if appropriate, in mailing such amendment or supplement to the Stockholders.
Purchaser will notify Target promptly upon the receipt of any comments from the
SEC or its staff or any other government officials for amendments or supplements
to the Registration Statement or additional information and will supply Target
with copies of all correspondence between Purchaser or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement or the Merger. Each of Target and Purchaser and its representatives
will cooperate as requested by the other in connection with responding to any
such comments or requests.
(b) Following the execution of this Agreement, Purchaser shall prepare and
file with the NYSE listing applications for the listing of securities on NYSE
covering the shares of Purchaser Common Stock issuable in the Merger or upon
exercise of the Purchaser Options, and use its reasonable best efforts to
obtain, prior to the Effective Time, approval for the listing of such shares of
Purchaser Common Stock, subject only to official notice of issuance. Target
shall as promptly as practicable furnish Purchaser with all information
concerning Target and its Subsidiaries as may be required for inclusion in such
listing applications.
(c) Each of Purchaser and Target agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Registration Statement or any amendment or
supplement to the Registration Statement will, (i) at the time the Registration
Statement and each amendment or supplement thereto, if any, is filed with the
SEC, (ii) at the time the Registration Statement becomes effective under the
Securities Act or (iii) at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. Each of Target and Purchaser further agrees that if it
shall become aware prior to the approval of the Merger by the Stockholders of
any information that would cause any of the statements made or supplied by such
party in the Registration Statement or any amendment or supplement thereto to be
false or misleading with respect to any material fact, or to omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, to promptly inform the other party thereof
and to take the necessary steps to correct such misstatement or omission.
(d) Purchaser will advise Target, promptly after Purchaser receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the Purchaser Common Stock for offering or
sale in any jurisdiction, of the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
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SECTION 8.3 CONDUCT PRIOR TO CLOSING
Each of the Parties will use commercially reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in
ARTICLE IX, as applicable to it, and to cause the transactions contemplated by
this Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby. Neither Party shall take any action (or fail to take any
action) if such action (or failure to act) would, or could reasonably be
expected to, result in any of its representations and warranties set forth
herein being or becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in ARTICLE IX not being satisfied.
SECTION 8.4 NOTICES AND CONSENTS
Each of the Parties will give any notices to third parties, and use its
commercially reasonable efforts to obtain any third party consents, that the
other Party reasonably may request in connection with the matters referred to in
SECTION 4.5 above. Each of the Parties promptly will give any notices to, make
any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents, and approvals of governments and Governmental Entities
in connection with the matters referred to in SECTION 4.3 above. Without
limiting the generality of the foregoing, (i) Purchaser will take all actions
that may be necessary, proper, or advisable under federal and state securities
laws in connection with the offering and issuance of the Merger Consideration
pursuant to this Agreement, and (ii) each of the Parties will file any
notification and report forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act, and will make any further
filings pursuant thereto that may be necessary, proper or advisable in
connection therewith.
SECTION 8.5 FULL ACCESS
Each of Target and Purchaser will permit representatives of the other to
have full access at all reasonable times, and in a manner so as not to
unnecessarily interfere with the normal business operations of Purchaser or
Target, as the case may be, to all premises, properties, personnel, books,
records (including Tax records), contracts and documents of or pertaining to
Purchaser or Target, as the case may be. The Parties hereby confirm that each of
the letter agreements dated October 5, 2000 between Target and Purchaser
pertaining to confidentiality shall continue in full force and effect until the
Effective Time, or the termination of this Agreement pursuant to ARTICLE XI, and
thereafter as provided in said agreements.
SECTION 8.6 EXCLUSIVITY; NO OTHER OFFERS
Target shall not, nor shall Target authorize or permit any officer, director
or employee of, or any investment banker, attorney, accountant or other
representative retained by, Target to, (i) entertain, encourage, solicit or
initiate any inquiries or the making of any proposal that may reasonably be
expected to lead to any "takeover proposal" or (ii) participate in any
discussions or negotiations, or provide third parties with any information,
relating to any such inquiry or proposal. Target shall immediately advise
Purchaser of any such inquiries or proposals and shall provide Purchaser with
the terms of such proposal. As used in this SECTION 8.6, "TAKEOVER PROPOSAL"
shall mean any proposal outside the ordinary course of Target's business for a
merger or other business combination involving, directly or indirectly, Target
or for the acquisition of all or substantially all the equity interests in
Target or all or substantially all the assets of Target, other than the
transactions contemplated hereby.
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SECTION 8.7 PUBLIC ANNOUNCEMENTS
Each of Target and Purchaser will consult with the other before issuing any
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and, except as may be required by
applicable law, no such press release or public statement shall be issued
without the consent of both Target and Purchaser, which consent shall not be
unreasonably withheld or delayed.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing Date, of each of the following conditions
(any one or more of which may be waived by Purchaser, but only in a writing
signed by Purchaser):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Target contained in ARTICLE IV that are expressly qualified by
reference to materiality shall be true and correct in all respects as so
qualified, and the representations and warranties of Target contained in
ARTICLE IV that are not so qualified shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same force and
effect as if they had been made on the Closing Date (except to the extent a
representation or warranty speaks only as of an earlier date). Target shall have
provided Purchaser with a certificate executed by the Chief Executive Officer
and the Chief Financial Officer of Target, dated as of the Closing Date,
certifying compliance with this subsection (a).
(b) COVENANTS. Target shall have performed and complied with all its
covenants contained in ARTICLE VI that are expressly qualified by reference to
materiality in all respects as so qualified and with its covenants contained in
ARTICLE VI that are not so qualified in all material respects, in each case on
or before the Closing Date, and Target shall have provided Purchaser with a
certificate to such effect executed by the Chief Executive Officer and the Chief
Financial Officer of Target dated as of the Closing Date.
(c) REQUISITE STOCKHOLDER APPROVAL. Target shall have obtained the
Requisite Stockholder Approval, and such Requisite Stockholder Approval shall
not have been withdrawn.
(d) STOCKHOLDER APPROVAL OF DEFERRED COMPENSATION PLAN. Target shall have
obtained the required vote of more than 75% of the voting power of all
outstanding stock of the Target approving and adopting the Target Deferred
Compensation Plan in the manner required by Section 280(G)(5)(B) of the Code,
and such adoption shall not have been withdrawn.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "INJUNCTION")
preventing the consummation of the Merger shall be in effect. There shall not
have been any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger by any Federal or state
Governmental Entity which makes the consummation of the Merger illegal. No
statute, rule, regulation, executive order or decree shall have been enacted,
promulgated or enforced (and shall not have been repealed, superceded or
otherwise made inapplicable) by any Governmental Entity which prohibits the
consummation of the Merger (each Party agreeing to use its commercially
reasonable efforts to have any such order or decree lifted).
(f) NYSE MEMBERSHIPS. Target and its Subsidiaries collectively shall own
(through A-B-C agreements) at least 11 NYSE memberships as listed on
SCHEDULE 9.1(f), and XxXxxxxxx shall have entered into amended and restated
A-B-C agreements, amended and restated lease agreements and use
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and proceeds agreements with respect to each of the Memberships listed on
SCHEDULE 9.1(f) which, immediately prior to the Closing, are used by employees
of RPMSC, and an amended and restated A-B-C agreement with respect to the
Membership listed on Schedule 9.1(f) which, immediately prior to the Closing, is
used by an employee of RPMCC.
(g) NO MATERIAL ADVERSE CHANGE. There shall have been no Material Adverse
Change in Target since the date of this Agreement, other than changes,
occurrences or events affecting the securities industry as a whole.
(h) OPINION OF COUNSEL. Purchaser shall have received an opinion of Xxxxxx
Xxxx & Xxxxxx LLP, counsel to Target, dated the Closing Date, in form and
substance reasonably acceptable to Purchaser.
(i) REGISTRATION RIGHTS AGREEMENT. Xxxxxx X. Xxxx, Xx. and Xxxxxx X.
Xxxxxx shall have executed and delivered a registration rights agreement in
substantially the form attached as EXHIBIT F hereto (the "REGISTRATION RIGHTS
AGREEMENT").
(j) RPM STOCKHOLDER AGREEMENTS. Each of the Stockholders shall have
executed and delivered to Purchaser a stockholder agreement in substantially the
form attached as EXHIBIT G hereto (the "RPM STOCKHOLDER AGREEMENT").
(k) OPTION AMENDMENTS. Each of the Option Holders shall have executed and
delivered to Target an Option Amendment.
(l) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(m) REPAYMENT OF TARGET DEBT. All outstanding indebtedness of Target and
its Subsidiaries set forth on SCHEDULE 9.1(m) hereto shall have been repaid by
Target and its Subsidiaries, and reasonably satisfactory evidence of such
repayment shall have been furnished to Purchaser on or prior to the Closing
Date.
(n) NET LIQUID ASSETS. The Net Liquid Assets of RPMSC, as of the close of
business on the Business Day immediately preceding the Closing Date, taking into
account all payments contemplated hereby to be made by Target on the Closing
Date, shall be at least $65 million, and reasonably satisfactory evidence
thereof shall be furnished to Purchaser at the Closing.
(o) ADJUSTED NET BOOK VALUE. The Adjusted Net Book Value of Target (as
estimated pursuant to SECTION 3.1) shall be at least $85 million as of the
Closing Date, and reasonably satisfactory evidence thereof (in the form of an
update of the statement furnished to Purchaser pursuant to Section 3.1 hereof)
shall have been furnished to Purchaser prior to the Closing.
(p) FIRPTA AFFIDAVIT. Target shall have furnished Purchaser with a
certificate dated the Closing Date and sworn under penalty of perjury, to the
effect that Target is not a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(q) ESCROW AGREEMENT. The Representatives and the Escrow Agent shall have
executed and delivered to Purchaser the Escrow Agreement.
(r) SURRENDER OF CERTIFICATES. All Old Certificates shall have been
surrendered to Purchaser.
(s) REPURCHASE OF TARGET PREFERRED STOCK. All issued and outstanding
shares of Target Preferred Stock shall have been repurchased prior to the
Closing Date, and reasonably satisfactory evidence of such repurchase shall have
been furnished to Purchaser on or prior to the Closing Date. There shall be no
further liability of Target with respect to the Target Preferred Stock.
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(t) CERTAIN TARGET BENEFIT OBLIGATIONS. Target shall have furnished to
Purchaser a certificate executed by the Chief Executive Officer of Target
certifying that: (i) Target has fully satisfied all obligations and liabilities
under the Target SERPs and terminated the Target SERPs and related trusts prior
to the Closing and (ii) Target has adopted the Target Pension Amendment and has
provided timely notice of such amendment to affected participants in accordance
with Section 204(h) of ERISA.
(u) DISPOSITION OF REMCO. All of Target's interest in REMCO shall have
been distributed to Xxxxxx X. Xxxx, Xx., and reasonably satisfactory evidence
thereof shall have been provided to Purchaser on or prior to the Closing Date.
(v) CONSENTS. All material written consents, assignments, waivers or
authorizations that are required as a result of the Merger for the continuation
in full force and effect of any Contracts, set forth on SCHEDULE 4.13 hereto,
shall have been obtained without the imposition of material burdensome
conditions on Target or any of its Subsidiaries or Purchaser. Such material
consents are set forth on SCHEDULE 9.1(v) hereto.
(w) GOVERNMENTAL AUTHORIZATIONS. There shall have been obtained any and
all authorizations, permits, approvals and consents of any Governmental Entity
and regulatory authority, including the NYSE, AMEX, CBOE, SEC and NASD and the
expiration of the applicable waiting period under the HSR Act, that are
necessary so that the consummation of the Merger will be in compliance with
applicable laws, including federal and state securities laws, the failure to
comply with which would be reasonably likely to have a Material Adverse Effect
on Target or Purchaser or would be reasonably likely to adversely affect
Target's ability to consummate the transactions contemplated hereby.
(x) WAIVERS OF APPRAISAL RIGHTS. All the Stockholders shall have waived
their rights to an appraisal with respect to their Target Shares under the DGCL.
(y) INDEMNIFICATION AGREEMENT. Each of the Option Holders shall have
executed and delivered to Purchaser an indemnification agreement substantially
in the form of EXHIBIT H hereto (the "INDEMNIFICATION AGREEMENT").
(z) ADDITIONAL CLOSING DOCUMENTS. Target shall have executed and delivered
to Purchaser any other documents and instruments as Purchaser may reasonably
require in order to effectuate the transactions contemplated by this Agreement.
(aa) AFFILIATE LETTER. Target shall have delivered to Purchaser the letter
referred to in SECTION 8.1 hereof, and each of the persons referred to in such
letter shall have executed and delivered to Purchaser a letter substantially in
the form of EXHIBIT I hereto (the "AFFILIATE LETTER").
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF TARGET
The obligations of Target hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing Date, of each of the following conditions
(any one or more of which may be waived by Target, but only in a writing signed
by Target):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in ARTICLE V that are expressly qualified by
reference to materiality shall be true and correct in all respects as so
qualified, and the representations and warranties of Purchaser contained in
ARTICLE V that are not so qualified shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same force and
effect as if they had been made on the Closing Date (except to the extent a
representation or warranty speaks only as of an earlier date). Purchaser shall
have provided Target with a certificate executed by its Chief Executive Officer
and Chief Financial Officer, dated as of the Closing Date, certifying compliance
with this subsection (a).
(b) COVENANTS. Purchaser shall have performed and complied with all its
covenants contained in ARTICLE VII that are expressly qualified by reference to
materiality in all respects as so qualified and with
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all its covenants contained in ARTICLE VII that are not so qualified in all
material respects, in each case on or before the Closing Date, and Purchaser
shall have provided Target with a certificate to such effect executed by the
Chief Executive Officer and Chief Financial Officer of Purchaser, dated as of
the Closing Date.
(c) OPINION OF COUNSEL. Target shall have received an opinion of
Fulbright & Xxxxxxxx L.L.P., counsel to Purchaser, dated the Closing Date, in
form and substance reasonably acceptable to Target.
(d) REGISTRATION RIGHTS AGREEMENT. Purchaser shall have executed and
delivered the Registration Rights Agreement to each of Xxxxxx X. Xxxxxx and
Xxxxxx X. Xxxx, Xx.
(e) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(f) APPOINTMENT OF XXXXXX X. XXXXXX AS CHIEF EXECUTIVE OFFICER OF
XXXXXXXXX. Xxxxxx X. Xxxxxx shall have been appointed as Chief Executive
Officer of XxXxxxxxx, effective as of the day next succeeding the Closing Date.
(g) REQUISITE STOCKHOLDER APPROVAL. Target shall have obtained the
Requisite Stockholder Approval, and such Requisite Stockholder Approval shall
not have been withdrawn.
(h) APPOINTMENT OF XXXXXX X. XXXXXX AND XXXXXX X. XXXX, XX. AS DIRECTORS OF
PURCHASER. Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxx, Xx. shall have been appointed
as Class I and Class II directors, respectively, on the Board of Directors of
Purchaser, effective as of the day next succeeding the Closing Date.
(i) ESCROW AGREEMENT. Each of Purchaser and the Escrow Agent shall have
executed and delivered to the Representatives the Escrow Agreement.
(j) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No Injunction preventing the
consummation of the Merger shall be in effect. There shall not have been any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger by any federal or state Governmental
Entity which makes the consummation of the Merger illegal. No statute, rule,
regulation, executive order or decree shall have been enacted, promulgated or
enforced (and not repealed, superseded or otherwise made inapplicable) by any
court or Governmental Entity which prohibits the consummation of the Merger
(each Party agreeing to use its commercially reasonable efforts to have any such
order or decree lifted).
(k) GOVERNMENTAL AUTHORIZATIONS. There shall have been obtained any and
all authorizations, permits, approvals and consents of any Governmental Entity
and regulatory authority, including the NYSE, SEC, NASD, CBOE and AMEX and the
expiration of the applicable waiting period under the HSR Act, that are
necessary so that the consummation of the Merger will be in compliance with
applicable laws, including federal and state securities laws, the failure to
comply with which would be reasonably likely to have a Material Adverse Effect
on Target or Purchaser or would be reasonably likely to adversely affect
Purchaser's ability to consummate the transactions contemplated hereby.
(l) OPINION OF TAX COUNSEL. Target shall have received a written opinion,
dated as of the Closing Date, from Xxxxxx Xxxx & Xxxxxx LLP, tax counsel to the
Company, to the effect that (i) the Merger will be treated for U.S. federal
income tax purposes as a "reorganization" within the meaning of Section 368(a)
of the Code and that Target and Purchaser will each be a "party" to that
reorganization within the meaning of Section 368(b) of the Code, it being
understood that in rendering such opinion, such tax counsel shall be entitled to
rely upon customary representations provided by Target and Purchaser
substantially in the form of EXHIBITS J and K.
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(m) FILING OF CERTIFICATE OF DESIGNATION. Purchaser shall have submitted
and received notice of acceptance for filing of the Series A Preferred Stock
Certificate of Designation with the Secretary of State of the State of Delaware.
(n) ADDITIONAL CLOSING DOCUMENTS. Purchaser shall have executed and
delivered to Target any other documents and instruments as Target may reasonably
require in order to effectuate the transactions contemplated by this Agreement.
ARTICLE X
POST-CLOSING COVENANTS
SECTION 10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties of Target and Purchaser contained in this
Agreement, all representations and warranties of Purchaser and the Stockholders
contained in the RPM Stockholder Agreements and all representations and
warranties of Purchaser and the Option Holders contained in the Indemnification
Agreement shall survive the Closing and shall remain in full force and effect
for a period of eighteen (18) months following the Closing Date and, thereafter,
to the extent a claim is made prior to such expiration with respect to any
breach of any representation or warranty, until such claim is finally determined
or settled. Notwithstanding the foregoing, the representations and warranties
contained in SECTION 4.17 shall survive until the expiration of the statute of
limitations applicable to claims brought under ERISA, and the representations
and warranties contained in SECTION 4.18 shall survive until the expiration of
the statute of limitations applicable to the assessment and collection of any
Taxes covered by such representations, which statutes of limitations shall not
be extended or tolled by Purchaser without the Representatives' prior written
approval unless requested to do so by the relevant Governmental Entity in
connection with a proceeding relating to claims brought under ERISA or the
assessment and collection of Taxes.
SECTION 10.2 INDEMNITY BY STOCKHOLDERS AND OPTION HOLDERS
(a) Subject to the limitations of SECTION 10.5, after the Effective Time,
the Stockholders and Option Holders shall indemnify, defend and hold harmless
Purchaser, its Subsidiaries and their respective officers, directors, employees,
agents and representatives (each a "PURCHASER INDEMNIFIED PARTY") from and
against and in respect of any and all Liabilities or Losses incurred or suffered
by a Purchaser Indemnified Party, arising out of, based upon or resulting from:
(i) The misrepresentation, breach or inaccuracy of any representations
or warranties of Target contained in ARTICLE IV of this Agreement or in any
certificate or instrument furnished by or on behalf of Target pursuant
hereto; or
(ii) The failure of Target to completely perform any of its covenants,
agreements or other obligations hereunder.
(b) Subject to the limitations of SECTION 10.5 hereof, after the Effective
Time, each of the Stockholders shall indemnify, defend and hold harmless each
Purchaser Indemnified Party from and against and in respect of any and all
Liabilities or Losses incurred or suffered by such Purchaser Indemnified Party,
arising out of, based upon or resulting from the misrepresentation, breach or
inaccuracy of any of the representations or warranties of such Stockholder
contained in his RPM Stockholder Agreement.
(c) Subject to the limitations of SECTION 10.5 hereof, after the Effective
Time, each of the Option Holders shall indemnify, defend and hold harmless each
Purchaser Indemnified Party from and against and in respect of any and all
Liabilities or Losses incurred or suffered by such Purchaser Indemnified Party,
arising out of, based upon or resulting from the misrepresentation, breach or
inaccuracy of any
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of the representations or warranties of such Option Holder contained in the
Indemnification Agreement.
SECTION 10.3 INDEMNITY BY PURCHASER
Subject to the limitations of SECTION 10.5 hereof, after the Effective Time,
Purchaser shall indemnify, defend and hold harmless the Stockholders and the
Option Holders and their respective heirs, assigns and personal representatives
(each a "STOCKHOLDER INDEMNIFIED PARTY") from and against and in respect of any
and all Liabilities or Losses incurred or suffered by the Stockholder
Indemnified Parties, arising out of, based upon or resulting from:
(a) The misrepresentation, breach or inaccuracy of any of the
representations or warranties of Purchaser contained in ARTICLE V of this
Agreement, the RPM Stockholder Agreements, the Indemnification Agreement or in
any certificate or instrument furnished by or on behalf of Purchaser pursuant
hereto or thereto; or
(b) The failure of Purchaser to completely perform any of its covenants,
agreements or other obligations hereunder.
SECTION 10.4 INDEMNIFICATION FOR TAXES
(a) The Stockholders' and Option Holders' respective indemnification
obligations pursuant to this Agreement shall apply, except to the extent
reserves or accruals for Taxes are taken into account in the determination of
the Final Adjusted Net Book Value of Target, to any and all Liabilities and
Losses for Taxes imposed upon or assessed against Target or any of its
Subsidiaries or the assets thereof (i) for all Tax periods ending on or before
the Closing Date and the portion ending on the Closing Date of any Tax period
that includes (but does not end on) the Closing Date, as determined pursuant to
SECTION 10.4(C) hereof (the "PRE-CLOSING TAX PERIOD") (including, except as
otherwise provided herein, any Tax liability arising as a result of the
transactions contemplated by this Agreement, but excluding any liability for
Taxes arising as a result of any breach by Purchaser of the covenants set forth
in SECTION 10.10 hereof), (ii) arising out of, based upon or resulting from any
breach or inaccuracy of any representations or warranties contained in
SECTION 4.18(a), (b), (d), (f), (h), (j), (k) and (m) hereof; (iii) by reason of
being a successor-in-interest or transferee of another entity; and (iv) with
respect to any and all Taxes of any member of an Affiliated Group of which
Target or any of its Subsidiaries is or was a member on or prior to the Closing
Date, including by reason of the application of Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation; PROVIDED, HOWEVER, that none of the Stockholders or Option Holders
shall be required to indemnify, defend or hold harmless any Purchaser
Indemnified Party from and against any Liabilities or Losses for Taxes imposed
upon or assessed against Target or any of its Subsidiaries or the assets thereof
arising by reason of any action in respect of a Tax liability for a Tax period
ending on or before the Closing Date or a Pre-Closing Tax Period taken or not
taken after the Closing Date by Purchaser or any of its Affiliates or any
transferee of the Purchaser or any of its Affiliates, except for any action or
inaction which is consistent with the Tax Return reporting positions of
Purchaser or Target or required by applicable law, the Merger Agreement or in
connection with any audit or Tax proceeding in respect of a Tax liability for a
Tax period ending on or before the Closing Date or a Pre-Closing Tax Period (a
"PURCHASER TAX ACT").
(b) Purchaser shall indemnify the Stockholders and the Option Holders from
(i) all Liabilities and Losses for Taxes of Target's Subsidiaries for any Tax
period ending after the Closing Date, except to the extent such Tax period began
before the Closing Date, in which case Purchaser's indemnity obligation shall
apply only to that portion of any such Taxes that are not attributable to the
Pre-Closing Tax Period, and (ii) all Liabilities and Losses for Taxes
attributable to (A) a breach by Purchaser of its obligations and covenants under
SECTION 10.10 hereof or (B) a Purchaser Tax Act.
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(c) In the case of any Taxes of Target or any of its Subsidiaries that are
payable for a Tax period that includes (but does not end on) the Closing Date (a
"STRADDLE PERIOD"), the portion of such Taxes for the Pre-Closing Tax Period
shall equal:
(i) in the case of real, personal and intangible property Taxes
("PROPERTY TAXES") of Target and its Subsidiaries, the amount of such Taxes
for the Straddle Period multiplied by a fraction the numerator of which is
the number of days in the Straddle Period on or prior to the Closing Date
and the denominator of which is the number of days in the entire Straddle
Period; and
(ii) in the case of Taxes of Target and its Subsidiaries other than
Property Taxes, the amount which would be payable if the relevant Tax period
ended on the Closing Date.
SECTION 10.5 LIMITATIONS ON INDEMNITY
(a) Notwithstanding any other provisions of this Agreement, in no event
shall:
(i) (x) a Purchaser Indemnified Party or a Stockholder Indemnified Party
(each, an "INDEMNIFIED PARTY") be entitled to make any claim for
indemnification under SECTION 10.2, 10.3 or 10.4 hereof with respect to the
inaccuracy, misrepresentation or breach of any representation or warranty
contained in this Agreement, an RPM Stockholder Agreement or the
Indemnification Agreement after the date on which such representation or
warranty ceases to survive pursuant to SECTION 10.1 hereof and (y) a
Purchaser Indemnified Party be entitled to make any claim for
indemnification under SECTION 10.4 hereof after the date on which the
representations and warranties contained in SECTION 4.18 cease to survive
under SECTION 10.1;
(ii) any Purchaser Indemnified Party be entitled to indemnification
under SECTION 10.2 or 10.4 hereof until the Liabilities and Losses suffered
by all the Purchaser Indemnified Parties and for which indemnification is
available thereunder exceed $1,000,000 in the aggregate, whereupon the
Purchaser Indemnified Parties shall be entitled to claim indemnification
only for Liabilities or Losses in excess of such $1,000,000 threshold for
which indemnification is available thereunder, PROVIDED, HOWEVER, that any
Liabilities and Losses suffered by a Purchaser Indemnified Party by reason
of the breach or inaccuracy of the representation of Target set forth in
Section 4.16 hereof shall not by subject to the $1,000,000 threshold
contained in this SECTION 10.5(a)(ii), and, PROVIDED, FURTHER, that the
$1,000,000 threshold contained in this SECTION 10.5(a)(ii) shall be
increased by the amount of any refund or credit of Taxes of Target or any of
its Subsidiaries in respect of any Tax period ending on or before the
Closing Date which Purchaser or any of its Subsidiaries becomes entitled to
receive prior to the expiration of the survival periods set forth in
SECTION 10.1 hereof;
(iii) any Stockholder Indemnified Party be entitled to indemnification
under SECTION 10.3 hereof until the Liabilities and Losses suffered by all
the Stockholder Indemnified Parties and for which indemnification is
available thereunder exceed $1,000,000 in the aggregate, whereupon the
Stockholder Indemnified Parties shall be entitled to claim indemnification
only for Liabilities or Losses in excess of such $1,000,000 threshold for
which indemnification is available thereunder;
(iv) the total indemnification liability of all the Stockholders
pursuant to this Agreement exceed, in the aggregate, the aggregate
liquidation preference of the shares of Purchaser Series A Preferred Stock
deposited with the Escrow Agent pursuant to SECTION 3.3 hereof, provided,
however, that the limitation contained in this SECTION 10.5(a)(iv) shall not
be applicable with respect to any claim for fraud, willful misconduct or
intentional misrepresentation or to any claim for a breach of the
representation of Target set forth in SECTION 4.16 hereof;
(v) the total indemnification liability of all the Option Holders
pursuant to this Agreement exceed, in the aggregate, an amount equal to the
sum of (A) 10% of the sum of (x) the aggregate Closing Value of the shares
of Purchaser Common Stock for which the Purchaser Options received by the
Option Holders pursuant to SECTION 2.7(e) hereof are exercisable, plus
(y) the amount of the
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benefits payable under the Deferred Compensation Plan (not including
interest), plus (B) an amount equal to the product of (x) the aggregate
Equity Percentage of the Option Holders and (y) $20,000,000, PROVIDED,
HOWEVER, that the limitation contained in this SECTION 10.5(a)(v) shall not
be applicable with respect to any claim for fraud, willful misconduct or
intentional misrepresentation or any breach of the representation of Target
set forth in Section 4.16 hereof; and
(vi) the total indemnification liability of Purchaser pursuant to this
Agreement exceed, in the aggregate, an amount equal to the aggregate amount
of the limitations contained in SECTION 10.5(a)(iv) and (v) hereof,
provided, however, that the limitation contained in this
SECTION 10.5(a)(vi) shall not be applicable with respect to any claim for
fraud, willful misconduct or intentional misrepresentation.
(b) If any event or circumstance shall exist which would otherwise entitle
either a Purchaser Indemnified Party or a Stockholder Indemnified Party (each,
an "INDEMNITEE") to indemnification under SECTION 10.2, 10.3 or 10.4 hereof, no
Liability or Loss shall be deemed to have been incurred or sustained by the
Indemnitee to the extent of any proceeds recovered or recoverable by such
Indemnitee or any of its Affiliates from any third party (including, without
limitation, any insurance company) with respect thereto. To the extent any
Stockholder, Option Holder or Purchaser makes any indemnification payment
hereunder in respect of a Liability or Loss for which the Indemnitee has a right
to recover against a third party (including, without limitation, any insurance
company), the Stockholders, the Option Holders or Purchaser, as the case may be,
shall be subrogated to the right of the Indemnitee to seek and obtain recovery
from such third party; PROVIDED, HOWEVER, that if such Stockholder, such Option
Holder or Purchaser, as the case may be, shall be prohibited from such
subrogation, the Indemnitee shall seek recovery from such third party on such
Stockholder's, Option Holder's or Purchaser's behalf and pay such recovery to
such Stockholder, such Option Holder or Purchaser, as the case may be.
(c) In the absence of fraud or willful misconduct, after the Effective Time,
the indemnification provisions in SECTIONS 10.2, 10.3 and 10.4 hereof shall be
the exclusive remedy of Purchaser, the Stockholders and the Option Holders with
respect to the matters to which such indemnification provisions are applicable
in accordance with this Agreement, the RPM Stockholder Agreements, the
Indemnification Agreement and the other agreements and documents executed
pursuant hereto or in connection herewith.
(d) The amount of any Liability or Loss for which indemnification is
provided under this ARTICLE X shall be (i) increased to take account of any net
Tax cost incurred by the Indemnitee arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net Tax benefit realized by the Indemnitee arising from the
incurrence or payment of any such Liability or Loss. In computing the amount of
any such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize
all other items of income, gain, loss, deduction or credit before recognizing
any item arising from the receipt of any indemnity payment under this ARTICLE X
or the incurrence or payment of any indemnified Liability or Loss. Any indemnity
payment under this ARTICLE X shall be treated as an adjustment to the Merger
Consideration for Tax purposes unless a final determination, within the meaning
of Section 1313(a) of the Code (which shall include the execution of a
Form 870-AD or successor form), with respect to the Indemnitee causes any such
payment not to be treated as an adjustment to the Merger Consideration for Tax
purposes.
(e) The indemnification obligation of each Stockholder with respect to any
Liability or Loss under SECTION 10.2(a) or 10.4 hereof shall equal such
Stockholder's pro rata share of such Liability or Loss, based on such
Stockholder's Equity Percentage. Each Stockholder shall be solely liable for any
indemnification obligation under SECTION 10.2(b) hereof with respect to any
breach of such Stockholder's representations and warranties contained in his RPM
Stockholder Agreement. For
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purposes of satisfying any indemnity claim out of the shares of Purchaser
Series A Preferred Stock deposited with the Escrow Agent pursuant to
SECTION 3.3 hereof, such shares shall be valued as provided in the Escrow
Agreement.
(f) The indemnification obligation of each Option Holder with respect to any
Liability or Loss under SECTION 10.2(a) or 10.4 hereof shall equal such Option
Holder's pro rata share of such Liability or Loss, based on such Option Holder's
Equity Percentage. Each Option Holder shall be solely liable for any
indemnification obligation under SECTION 10.2(c) hereof with respect to any
breach of such Option Holder's representations and warranties contained in the
Indemnification Agreement.
(g) Except as provided in SECTION 10.5(h) hereof, the Stockholders'
indemnification obligations in respect of Liabilities or Losses described in
SECTIONS 10.2(a) and 10.4 hereof shall be satisfied solely out of the shares of
Purchaser Series A Preferred Stock deposited with the Escrow Agent pursuant to
SECTION 3.3 hereof, and each Stockholder's indemnification obligation in respect
of Liabilities and Losses described in SECTION 10.2(b) hereof shall be satisfied
solely out of the shares of Purchaser Series A Preferred Stock deposited with
the Escrow Agent pursuant to SECTION 3.3 hereof and credited to such
Stockholder's Stockholder Account (as defined in the Escrow Agreement). The
Option Holders' indemnification obligations in respect of Liabilities and Losses
described in SECTIONS 10.2(a) and 10.4 hereof shall be satisfied solely by
reduction of the aggregate amount payable to the Option Holders pursuant to the
Deferred Compensation Plan in the manner provided in the Indemnification
Agreement, and each Option Holder's indemnification obligation in respect of
Losses and Liabilities described in SECTION 10.2(c) hereof shall be satisfied
solely out of the amount payable to such Option Holder pursuant to the Deferred
Compensation Plan.
(h) If, following the Termination Date (as defined in the Escrow Agreement),
the Escrow Agent shall distribute shares of Purchaser Series A Preferred Stock
(the "DISTRIBUTED ESCROW SHARES") to the Persons entitled to receive such
distributions in accordance with the terms of the Escrow Agreement (the "ESCROW
DISTRIBUTEES"), then the Purchaser Indemnified Parties may thereafter assert
claims against the Escrow Distributees for Losses and Liabilities (1) under
SECTION 10.2(a)(i) hereof, based upon or resulting from any misrepresentation,
breach or inaccuracy of any representation or warranty contained in
SECTION 4.17 or 4.18 of this Agreement, or (2) under SECTION 10.4 hereof, in
each case to the extent that such Purchaser Indemnified Parties would otherwise
be entitled to assert such claims against the Stockholders under the provisions
of SECTIONS 10.2(a) and 10.4 hereof, subject to the limitations set forth in
this SECTION 10.5 ("POST-ESCROW TERMINATION CLAIMS"); PROVIDED that the recourse
of such Purchaser Indemnified Parties in respect of Post-Escrow Termination
Claims shall be limited solely to (A) recovery from the respective Escrow
Distributees of the Distributed Escrow Shares received by them, but only to the
extent that such Distributed Escrow Shares shall remain in the hands of the
Escrow Distributees (or, in the case of the death or incapacity of any Escrow
Distributee, in the hands of such Escrow Distributee's heirs, assigns or legal
representatives), or (B) recovery from any Escrow Distributee (or, in the case
of the death or incapacity or such Escrow Distributee, from such Escrow
Distributee's heirs, assigns or legal representatives) who shall have sold or
otherwise disposed of any Distributed Escrow Shares, of the cash or other
proceeds of such sale or disposition. For the purposes of this subsection (h),
(i) the value of any Distributed Escrow Shares shall be as provided in the
Escrow Agreement; (ii) any securities distributable in exchange for any of the
Distributed Escrow Shares by reason of stock splits or recapitalizations shall
be treated as additional Distributed Escrow Shares subject to the provisions of
this subsection (h); (iii) any securities, cash or other property distributable
with respect to any Distributed Escrow Shares by reason of cash dividends, stock
dividends, liquidations, mergers, consolidations, spin-offs, split-offs or
similar transactions shall not be treated as Distributed Escrow Shares subject
to the provisions hereof or be otherwise recoverable by any Purchaser
Indemnified Party; and (iv) in the event that Purchaser repurchases any
Distributed Escrow Shares for cash, such cash shall not be treated as proceeds
of Distributed Escrow Shares subject to the provisions of this subsection (h).
Except as expressly provided in this SECTION 10.5(h), the
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Purchaser Indemnified Parties shall have no right to recover any amounts in
respect of Post-Escrow Termination Claims against the assets, income or property
of the Escrow Distributees or any other Persons.
SECTION 10.6 NOTICE AND DEFENSE OF CLAIMS
An Indemnitee shall give notice to the Representatives (on behalf of the
Stockholders and Option Holders) or Purchaser, as the case may be, promptly
after the Indemnitee has actual knowledge of any claim as to which indemnity may
be sought, PROVIDED that the failure of the Indemnitee to give notice as
provided herein shall not relieve the Stockholders, the Option Holders or
Purchaser, as the case may be, of their respective indemnification obligations
under this Agreement, except and only to the extent the Stockholders', the
Option Holders' or Purchaser's ability to defend against, mitigate or diminish
the amount of such claim is materially prejudiced by such failure. The
Representatives (on behalf of the Stockholders and Option Holders) or Purchaser,
as the case may be, shall have the right to assume the defense of any third
party claim for which indemnification is sought or any litigation resulting
therefrom, PROVIDED that the Indemnitee shall have the right to employ separate
counsel (including local counsel) to participate in the defense of any such
third party claim or litigation to which such Indemnitee is a party, but the
fees and expenses of such counsel shall be at the expense of the Indemnitee
unless (i) the employment of such counsel shall have been authorized in writing
by the Representatives or Purchaser, as the case may be, in connection with the
defense of such action, (ii) the Representatives or Purchaser, as the case may
be, shall not have employed counsel satisfactory to the Indemnitee to take
charge of the defense of such action within a reasonable time after notice of
the institution of such action, (iii) the Indemnitee shall have reasonably
concluded that there may be material defenses available to it that are different
from or additional to those available to the Representatives (on behalf of the
Stockholders and the Option Holders) or Purchaser, as the case may be, or
(iv) the use of counsel chosen by the Representatives or Purchaser, as the case
may be, to represent the Indemnitee would present such counsel with a conflict
of interest (in which case the Representatives or Purchaser, as the case may be,
shall not have the right to direct the defense of such action on behalf of the
Indemnitee), in any of which events the reasonable fees and expenses of such
counsel shall be borne by the Stockholders and the Option Holders or Purchaser,
as the case may be, as Losses and Liabilities subject to indemnification
hereunder. The Indemnitee agrees to cooperate with the Representatives or
Purchaser, as the case may be, and their counsel at the Stockholders' and the
Option Holders' or Purchaser's, as the case may be, expense and shall furnish
such information regarding itself or the claim in question as the
Representatives or Purchaser, as the case may be, may reasonably request in
writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
SECTION 10.7 TAX MATTERS
(a) TRANSFER TAXES. All recordation, sales, use, stamp, filing, transfer,
documentary or similar fees or Taxes and related costs and fees relating to the
transactions contemplated by this Agreement shall be borne by Purchaser.
(b) PREPARATION OF TAX RETURNS; PAYMENT OF TAXES. Target shall file all
Tax Returns required to be filed by it or any of its Subsidiaries on or prior to
the Closing Date and such Tax Returns shall be prepared in a manner consistent
with prior practice, unless otherwise required by applicable law. Target shall
provide Purchaser with copies of such Tax Returns at least ten (10) Business
Days prior to the filing date. Purchaser shall be responsible for filing or
causing to be filed all Tax Returns required to be filed by or on behalf of
Target after the Closing Date. The Representatives shall be given the
opportunity to review and comment on any such Tax Returns that include any
Pre-Closing Tax Period prior to their completion and Purchaser shall make any
changes to such Tax Returns reasonably requested by the Representatives. To the
extent any Taxes shown to be due on such Tax Returns are
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indemnifiable by the Stockholders and the Option Holders pursuant to this
Agreement, such Tax Returns shall be prepared in a manner consistent with prior
practice, unless otherwise required by applicable law.
(c) COOPERATION. The Representatives and Purchaser shall reasonably
cooperate, and shall cause their respective Affiliates, officers, employees,
agents, auditors and representatives reasonably to cooperate, in preparing and
filing all Tax Returns, including maintaining and making available to each other
all records necessary in connection with Taxes and in resolving all disputes and
audits with respect to all Tax periods relating to Taxes. Purchaser shall
(i) retain and maintain such records relating to any Pre-Closing Tax Periods
until the later of (x) the expiration of the applicable statute of limitations
of the relevant Tax period or (y) eight years following the due date of the Tax
Returns relating to the relevant Tax period, and (ii) allow the Representatives,
at mutually acceptable times and dates, to inspect, review and make copies of
such records from time to time, such activities to be conducted during normal
business hours.
(d) AUDITS. Purchaser and the Representatives shall promptly notify each
other in writing of any notice of which they become aware of any Tax audits of,
or assessments against, Target or any of its Subsidiaries for any Tax periods of
Target or any of its Subsidiaries beginning on or before the Closing Date. The
failure of notice of any such audit or assessment shall not relieve any Party of
its indemnification obligations under this Agreement except to the extent any
such failure actually prejudices the defense of any Tax claim. The
Representatives may, at the sole expense of the Stockholders and the Option
Holders, control the conduct of any audit or proceeding that may be the subject
of indemnification under SECTION 10.4 at such time and on such terms as they
shall deem appropriate or assume the entire defense thereof; PROVIDED, HOWEVER,
that Purchaser shall have the right, at its own expense, to consult with the
Representatives regarding any such audit or proceeding that may affect Purchaser
or any of its Subsidiaries for any period after the Closing Date and PROVIDED
FURTHER, that the Representatives shall in no event take any position in such
settlement or defense that subjects Purchaser or any of its Affiliates to any
civil fraud or any civil or criminal penalty without the prior written consent
of Purchaser, and PROVIDED FURTHER, that the Representatives and Purchaser, at
their own expense, shall jointly control any audits or proceedings with respect
to Straddle Periods. Notwithstanding the foregoing, the Representatives shall
not settle, without the prior written consent of Purchaser, which prior written
consent shall not be unreasonably withheld, any Tax claim involving a change in
the treatment of any item which would materially affect the Tax liability of
Purchaser or any of its Affiliates for a period subsequent to the Closing Date
unless the Tax claim relates to a past practice that has been finally determined
to be incorrect by the applicable taxing authority and the treatment under the
proposed settlement is expressly required by applicable tax laws (or judicial or
administrative interpretations thereof). Purchaser and its Affiliates shall have
the sole right to represent Target's Subsidiaries' interests in any Tax
proceeding relating to a Tax period beginning after the Closing Date. For the
avoidance of doubt, it is understood and agreed that costs that are at the
expense of Purchaser for purposes of this SECTION 10.7(d) shall not be deemed to
be a Liability or Loss for purposes of this ARTICLE X.
(e) TAX REPORTING. Purchaser shall report the Merger as a "reorganization"
under Section 368(a) of the Code for federal income tax purposes.
SECTION 10.8 EMPLOYEE BENEFIT MATTERS
(a) Promptly after the Closing, Purchaser shall take such steps as are
necessary to terminate the Target Pension Plan, the Target Profit Sharing Plan
and the Xxxx Xxxx XxXxxxx 401(k) Plan. The trusts maintained as art of the
Target Pension Plan, the Target Profit Sharing Plan and the Xxxx Xxxx XxXxxxx
401(k) Plan shall continue to be maintained until the final satisfaction of the
respective plan liabilities to participants and beneficiaries, which will be
completed promptly after the issuance by the IRS of favorable determination
letters with respect to the plan terminations and, with respect to the
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Target Pension Plan, consent to such termination by PBGC. Prior to the Closing,
Target shall use its reasonable best efforts to commence the termination process
for such plans, including the preparation and adoption of all necessary plan
amendments (other than with respect to the Xxxx Xxxx XxXxxxx 401(k) Plan) and
commencing the preparation of all filings and notices. To the extent permitted
by applicable law, Purchaser may eliminate ancillary life insurance coverage
under the Target Pension Plan.
(b) Purchaser shall provide the individuals who are actively employed by
Target immediately prior to the Closing and who continue in active employment
with Purchaser or any of its Subsidiaries after the Closing (the "CONTINUING
EMPLOYEES") with base compensation and employee benefits during the period of
such continued employment that are, in the aggregate, not less favorable than
the base compensation and employee benefits provided to similarly situated
employees of Purchaser or such Subsidiary, as the case may be. To the extent
service is relevant for eligibility and vesting under Purchaser's or any of its
Subsidiaries' employee benefit or welfare plans, Continuing Employees shall be
given eligibility and vesting credit (but not credit for benefit accrual
purposes) for all service with Target or any of its Subsidiaries, PROVIDED that
such credit does not result in the duplication of benefits with respect to the
same period of service. With respect to each "group health plan" (as defined in
Section 5000(b)(1) of the Code) of Purchaser or any of its Subsidiaries in which
Continuing Employees are eligible to participate, Purchaser or such Subsidiary,
as the case may be, shall: (i) cause there to be waived any pre-existing
condition or eligibility limitations (to the extent such conditions and
limitations do not apply immediately prior to the Closing under the comparable
Target Benefit Plan), and (ii) give effect, in determining any deductible and
maximum out-of-pocket limitations applicable to Continuing Employees during the
plan year in which the Closing occurs, to claims incurred and amounts paid by
Continuing Employees under the comparable plan maintained by Target during the
plan year in which the Closing occurs. This SECTION 10.8 shall not be deemed to
create any contract between Purchaser or any of its Subsidiaries and any
employee of Target or its Subsidiaries which interferes with Purchaser's and
each of its Subsidiaries right to terminate the employment of any such
individual at any time.
(c) Unless otherwise determined by Purchaser on or prior to the Closing
Date, the individuals whose names are set forth on SCHEDULE 10.8(c) hereto shall
become managing directors of XxXxxxxxx with an annual base salary of $250,000
and shall be eligible to participate in the Annual Incentive Plan of Purchaser.
SECTION 10.9 FORM S-8 REGISTRATION
Purchaser shall use its reasonable best efforts to file and effect with the
SEC within ten (10) Business Days after the Closing Date a registration
statement on Form S-8 with respect to the shares of Purchaser Common Stock
covered by the Purchaser Options.
SECTION 10.10 BUSINESS CONTINUITY
Purchaser shall (a) continue at least one significant historic business line
of Target, or use at least a significant portion of Target's historic business
assets in a business, in each case within the meaning of Treasury Regulation
Section 1.368-1(d), and (b) not take or fail to take any action which would
otherwise prevent the Merger from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
SECTION 10.11 INSURANCE AND INDEMNIFICATION
(a) Purchaser will provide each individual who served as a director or
officer of Target or any of its Subsidiaries at any time prior to the Effective
Time with liability insurance for a period of six (6) years after the Effective
Time no less favorable in coverage and amount than any applicable insurance of
Purchaser in effect as of the Effective Time, PROVIDED, HOWEVER, that if
Purchaser's existing
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liability insurance expires, or is terminated or canceled by the insurance
carrier during such six year period, Purchaser will use its best efforts to
obtain as much liability insurance (no less favorable in coverage) as can be
obtained for the remainder of such period for a premium not in excess (on an
annualized basis) of 150% of the last annual premium paid prior to the date
hereof.
(b) From and after the Effective Time, Purchaser will indemnify each
individual who served as a director or officer of Target or any of its
Subsidiaries at any time prior to the Effective Time from and against any and
all Liabilities and Losses resulting from, based on, arising out of, or relating
to the fact that such individual is or was a director or officer of Target or
any of its Subsidiaries, to the extent that any such Loss or Liability pertains
to any matter or fact arising out of any act or omission prior to or at the
Effective Time (excluding this Agreement or any of the transactions contemplated
herein), to the fullest extent such individual would have been indemnified as a
director or officer of Target or any of its Subsidiaries prior to the Effective
Time and as then permitted under applicable law, PROVIDED, HOWEVER, that nothing
contained in this SECTION 10.11 shall in any manner be deemed to affect the
indemnification obligations thereunder of any party to an RPM Stockholder
Agreement.
SECTION 10.12 NET LIQUID ASSETS
Notwithstanding any provision in this Agreement to the contrary, in the
event of RPMSC's violation of its NYSE minimum Net Liquid Assets requirement
solely by reason of any of the payments by Target contemplated by
SECTION 9.1(m), (s) and (t) on or prior to the Closing Date, such violation
shall not be deemed a breach or default of any of Target's representations,
warranties, covenants or agreements contained in this Agreement.
ARTICLE XI
TERMINATION OF AGREEMENT
SECTION 11.1 TERMINATION
This Agreement may be terminated as provided below:
(a) by mutual written consent of Target and Purchaser;
(b) by Purchaser, if it is not is in material breach of its obligations
under this Agreement, and if (i) there has been a material breach by Target of
any of its representations, warranties and covenants hereunder such that
SECTION 9.1(a) or SECTION 9.1(b) will not be satisfied or (ii) if the Closing
shall not have occurred on or before June 30, 2001, by reason of the failure of
any condition precedent under SECTION 9.1 hereof (unless the failure results
primarily from Purchaser breaching any representation, warranty or covenant
contained in this Agreement), and, in case (i), such breach has not been cured
within fifteen (15) days after notice to Target;
(c) by Target, if it is not in material breach of its obligations under this
Agreement and if (i) there has been a material breach by Purchaser of any of its
representations, warranties and covenants hereunder such that SECTION 9.2(a) or
SECTION 9.2(b) will not be satisfied, or (ii) if the Closing shall not have
occurred on or before June 30, 2001, by reason of the failure of any condition
precedent under SECTION 9.2 hereof (unless the failure results primarily from
Target breaching any representation, warranty or covenant contained in this
Agreement), and, in case (i), such breach has not been cured within fifteen
(15) days after notice to Purchaser;
(d) by Purchaser if (i) the conditions to Closing set forth in SECTIONS
9.2(e), (j) and (k) shall have been satisfied, (ii) this Agreement shall not
have been terminated by Purchaser or Target pursuant to any subsection of this
SECTION 11.1 other than this subsection (d), (iii) the Requisite Stockholder
Approval shall not have been obtained within twenty-five (25) calendar days
after the date on which the Registration Statement shall have been declared
effective by the SEC and a sufficient number of
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copies of the final prospectus contained therein shall have been delivered by
Purchaser to Target to provide for the distribution thereof to all of the
Stockholders; provided that such 25-calendar day period shall be extended to up
to 25 Business Days to the extent necessary to comply with applicable law, rules
or regulations, and (iv) such failure to obtain the Requisite Stockholder
Approval shall be solely the result of (A) a failure by Target to hold the
Target Meeting or to solicit the written consent of the Stockholders in favor of
the Merger, in either case at or prior to the end of the period referred to in
clause (iii) above (unless such failure results solely from any action or
inaction on the part of Purchaser), or (B) the failure or refusal by
Stockholders holding in the aggregate a majority of the Target Shares
outstanding on the applicable record date to approve the Merger and approve and
adopt the Merger Agreement at the Target Meeting or to execute a written consent
of Stockholders approving the Merger and approving and adopting the Merger
Agreement;
(e) by Target, by giving written notice to Purchaser prior to the Closing if
the volume-weighted average sales price of Purchaser Common Stock during any
five (5) consecutive trading days prior to the Closing, as reported by Bloomberg
Information Systems, Inc., is less than $15.00 per share; and
(f) by Purchaser, by giving written notice to Target prior to the Closing if
the volume-weighted average sales price of Purchaser Common Stock during any
twenty (20) consecutive trading days prior to the Closing, as reported by
Bloomberg Information Systems, Inc., is greater than $38.00 per share.
SECTION 11.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to SECTION 11.1
hereof, this Agreement shall forthwith become void, PROVIDED, HOWEVER, that no
termination of this Agreement shall relieve either Party from liability
resulting from a willful material breach by such Party of any of its
representations, warranties, covenants or agreements set forth herein.
SECTION 11.3 TERMINATION FEE PAYMENTS
Notwithstanding the provisions of SECTION 11.2 hereof, in the event this
Agreement is terminated by Purchaser pursuant to SECTION 11.1(d) hereof, Target
shall pay to Purchaser (or to any Subsidiary of Purchaser designated in writing
by Purchaser to Target) the amount of $10,000,000 (the "TARGET TERMINATION
FEE"). Payment of the Target Termination Fee shall be made by wire transfer of
immediately available funds on the second Business Day after such termination.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 ASSIGNMENT: SUCCESSORS AND ASSIGNS
The provisions of this Agreement shall be binding upon, and inure to the
benefit of, the respective successors, assigns, heirs, executors and
administrators of the Parties. This Agreement shall not be assignable by either
Party without the prior written consent of the other Party.
SECTION 12.2 NOTICES
All notices, requests, consents and other communications under this
Agreement shall be in writing and shall be delivered by hand, by telecopier, by
nationally recognized overnight courier, by fax or mailed by first class
certified or registered mail, return receipt requested, postage prepaid:
(a) If to Target before the Closing, at:
XXXX XXXX XxXXXXX Financial Services, Inc.
00 Xxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
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with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxx X. XxXxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
(b) If to the Stockholders or the Option Holders after the Closing, to the
Representatives at:
c/o Xxxxxx X. Xxxxxx
XxXxxxxxx & Co. LLC
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
and
c/o Xxxxxx X. Xxxx, Xx.
XxXxxxxxx & Co. LLC
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxx X. XxXxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
(c) If to Purchaser, at:
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx XxXxxxxxx
Fax: (000) 000-0000
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with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
(Or at such other address or addresses as may have been furnished in writing by
notice given pursuant to this SECTION 12.2).
Notices provided in accordance with this SECTION 12.2 shall be deemed
delivered upon personal delivery, receipt by telecopy, fax or nationally
recognized overnight courier, or 48 hours after deposit in the mail in
accordance with the above.
SECTION 12.3 ENTIRE AGREEMENT
This Agreement, together with the instruments and other documents
contemplated to be executed and delivered in connection herewith, and the
confidentiality agreements described in SECTION 8.3 hereof, contain the entire
agreement and understanding of the Parties hereto, and supersede any prior
agreements or understandings between or among them, with respect to the subject
matter hereof, including, without limitation, that certain letter of intent
dated October 10, 2000 between Target and Purchaser.
SECTION 12.4 AMENDMENTS AND WAIVERS
This Agreement may not be amended or waived (either generally or in a
particular instance and either retroactively or prospectively) except by a
written instrument signed by both Purchaser and Target, prior to the Closing,
and by Purchaser and the Representatives after the Closing; PROVIDED, HOWEVER,
that any amendment effected subsequent to Requisite Stockholder Approval will be
subject to the restrictions contained in the DGCL, to the extent applicable. No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.
SECTION 12.5 ARBITRATION
Except as expressly provided herein, any controversy, dispute or claim
arising out of or relating to this Agreement, or the breach hereof, shall be
heard and resolved by a court of the State of New York or the Federal courts of
the United States of America located in the State of New York, in each case in
the borough of Manhattan (the "CHOSEN COURTS"). The Parties hereby irrevocably
submit to the exclusive jurisdiction of the Chosen Courts in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in the Chosen Courts or
that the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in the Chosen Courts. The Parties hereby consent
to and grant the Chosen Courts exclusive jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in such
manner as may be permitted by law shall be valid and sufficient service thereof.
Notwithstanding the foregoing, however, if required by the NYSE, any
controversy, dispute or claim shall be settled by arbitration in New York, New
York, in accordance with the rules of the NYSE, and any decision or judgment
rendered in any such arbitration
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shall be final and binding on the Parties. In any court proceeding or
arbitration, each Party shall pay its own expenses and, in the case of
arbitration, the costs and forum fees of the arbitration proceeding shall be
divided equally between the Parties.
SECTION 12.6 THIRD PARTY BENEFICIARIES
Nothing in this Agreement is intended to, or shall be construed so as to
create any third party beneficiary to this Agreement or otherwise confer any
rights upon any Person that is not a Party; PROVIDED, HOWEVER, that after the
Effective Time, (a) the provisions of ARTICLE II above concerning payment of the
Merger Consideration and the conversion of Target Options are intended for the
benefit of the Stockholders and the Option Holders, respectively, (b) the
provisions in SECTION 10.3 hereof concerning indemnification are intended for
the benefit of the Persons specified therein, (c) the provisions of
SECTION 10.11 hereof concerning insurance and indemnification are intended for
the benefit of the Persons specified therein and their respective legal
representatives, (d) the provisions of SECTION 2.8 hereof concerning the
Retention Bonus Pool are intended for the benefit of the Persons specified
therein, and (e) the provisions of SECTION 2.9 hereof concerning the Deferred
Compensation Plan are intended for the benefit of the Persons eligible to
participate in the Deferred Compensation Plan.
SECTION 12.7 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
SECTION 12.8 GOVERNING LAW
This Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of Delaware, without reference to its
conflicts of laws provisions.
SECTION 12.9 EXPENSES
Except as otherwise provided in this Agreement, each of the Parties will
bear its own costs and expenses (including any legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as an instrument of the date first above written.
XXXXXXXXX & CO INC.
By: /s/ XXXXXX X.X. XXXXXXXXX, XX
---------------------------------------
Name: Xxxxxx X.X. XxXxxxxxx, XX
Title: CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
XXXX XXXX XXXXXXX FINANCIAL SERVICES, INC.
By: /s/ XXXXXX X. XXXX, XX.
---------------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: PRESIDENT
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