EXECUTION COPY
STOCK PURCHASE AGREEMENT
by and between
AXA FINANCIAL, INC.
and
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
Dated as of September 14, 2005
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION...................................................................1
Section 1.1 Definitions..............................................................................1
Section 1.2 Rules of Construction...................................................................11
ARTICLE II PURCHASE AND SALE; CLOSING............................................................................12
Section 2.1 Purchase and Sale of Shares..............................................................12
Section 2.2 Purchase Price...........................................................................12
Section 2.3 The Closing..............................................................................12
Section 2.4 Adjustment of Purchase Price.............................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING SELLER......................................................15
Section 3.1 Organization of Seller; Authority........................................................15
Section 3.2 Authorization; Enforceability............................................................15
Section 3.3 No Conflict..............................................................................15
Section 3.4 Litigation...............................................................................16
Section 3.5 Brokers' Fees............................................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND THE SUBSIDIARIES.............................16
Section 4.1 Organization of the Company and its Subsidiaries; Authority..............................17
Section 4.2 No Conflict..............................................................................17
Section 4.3 Capitalization of the Company............................................................17
Section 4.4 Capitalization of the Subsidiaries; Other Interests......................................18
Section 4.5 Financial Statements; Undisclosed Liabilities............................................18
Section 4.6 Absence of Certain Changes...............................................................19
Section 4.7 Contracts................................................................................19
Section 4.8 Intellectual Property and Technology Systems.............................................21
Section 4.9 Litigation...............................................................................22
Section 4.10 Employee Benefit Plans...................................................................23
Section 4.11 Taxes....................................................................................24
Section 4.12 Environmental Matters....................................................................26
Section 4.13 Compliance with Laws.....................................................................27
Section 4.14 Permits..................................................................................28
Section 4.15 Insurance................................................................................28
Section 4.16 Labor Relations..........................................................................28
Section 4.17 Bank Accounts............................................................................28
Section 4.18 Real Property; Leases....................................................................28
Section 4.19 Personal Property........................................................................29
Section 4.20 Derivative Instruments...................................................................30
Section 4.21 Investment Advisory Activities...........................................................30
Section 4.22 Books and Records........................................................................31
Section 4.23 No Other Representations or Warranties...................................................31
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ARTICLE V REPRESENTATIONS AND WARRANTIES RELATING TO BUYER.......................................................31
Section 5.1 Organization of Buyer; Authority.........................................................31
Section 5.2 Authorization; Enforceability............................................................31
Section 5.3 No Conflict..............................................................................32
Section 5.4 Litigation...............................................................................32
Section 5.5 Brokers' Fees............................................................................32
Section 5.6 Financial Ability........................................................................33
Section 5.7 Investment Representation................................................................33
Section 5.8 Accredited Investor......................................................................33
ARTICLE VI COVENANTS.............................................................................................33
Section 6.1 Conduct of Business......................................................................33
Section 6.2 Access...................................................................................36
Section 6.3 Third-Party Approvals....................................................................37
Section 6.4 Regulatory Filings.......................................................................37
Section 6.5 Employee and Benefit Matters.............................................................38
Section 6.6 Intercompany Accounts....................................................................40
Section 6.7 Seller Marks.............................................................................40
Section 6.8 Books and Records........................................................................41
Section 6.9 Transitional Support.....................................................................42
Section 6.10 Client Consents; Compliance with Investment Company Act Section 15.......................44
Section 6.11 Further Assurances.......................................................................45
Section 6.12 Non-Competition: Non-Solicitation........................................................45
Section 6.13 Insurance................................................................................46
Section 6.14 Inactive Entities........................................................................46
Section 6.15 Company Trust............................................................................46
ARTICLE VII TAX MATTERS..........................................................................................47
Section 7.1 Section 338(h)(10) Election..............................................................47
Section 7.2 Tax Returns and Payments.................................................................48
Section 7.3 Indemnity................................................................................50
Section 7.4 Limitations on Indemnities; Additional Indemnities; Relationship With General
Indemnity................................................................................51
Section 7.5 Buyer Refunds; Tax Benefits..............................................................52
Section 7.6 Seller Refunds...........................................................................52
Section 7.7 Amended Tax Returns......................................................................52
Section 7.8 Contests.................................................................................52
Section 7.9 Cooperation and Exchange of Information..................................................53
Section 7.10 Conveyance Taxes.........................................................................53
Section 7.11 Timing of Certain Payments...............................................................54
Section 7.12 Miscellaneous............................................................................54
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ARTICLE VIII CONDITIONS TO OBLIGATIONS...........................................................................55
Section 8.1 Conditions to the Obligations of the Parties.............................................55
Section 8.2 Conditions to the Obligations of Buyer...................................................55
Section 8.3 Conditions to the Obligations of Seller..................................................56
ARTICLE IX INDEMNIFICATION.......................................................................................57
Section 9.1 Survival.................................................................................57
Section 9.2 Indemnification Obligations..............................................................57
Section 9.3 Indemnification Procedure................................................................59
Section 9.4 Tax Matters..............................................................................61
Section 9.5 Exclusive Remedy.........................................................................61
ARTICLE X TERMINATION............................................................................................61
Section 10.1 Termination..............................................................................61
Section 10.2 Effect of Termination....................................................................62
ARTICLE XI MISCELLANEOUS.........................................................................................63
Section 11.1 Notices..................................................................................63
Section 11.2 Assignment...............................................................................64
Section 11.3 Rights of Third Parties..................................................................64
Section 11.4 Expenses.................................................................................64
Section 11.5 Counterparts.............................................................................64
Section 11.6 Entire Agreement.........................................................................64
Section 11.7 Disclosure Schedule......................................................................64
Section 11.8 Amendments, Supplements, Etc.............................................................65
Section 11.9 Publicity................................................................................65
Section 11.10 Severability.............................................................................65
Section 11.11 Waiver...................................................................................65
Section 11.12 Specific Performance.....................................................................65
Section 11.13 Applicable Law...........................................................................66
Section 11.14 Waiver of Jury Trial.....................................................................66
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of September 14, 2005 (this
"Agreement"), is entered into by and between AXA FINANCIAL, INC., a Delaware
corporation ("Seller"), and XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED,
a Delaware corporation ("Buyer").
RECITALS
WHEREAS, Seller owns all of the issued and outstanding capital stock
(the "Shares") of The Advest Group, Inc., a Delaware corporation (the
"Company");
WHEREAS, the Company is engaged in the business of financial services
in securities brokerage, trading, investment banking, asset management and other
related services; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, all of the Shares on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions. As used herein, the following terms shall
have the following meanings:
"Accounting Principles" means GAAP applied on a consistent basis
without giving effect or regard to any item of income, expense, deduction,
accrual, write-down or other adjustments relating to any actions taken or to be
taken as a result of or pursuant to the transactions contemplated by this
Agreement.
"Acquired Competing Business" has the meaning provided such term in
Section 6.12(b).
"Acquisition Documents" has the meaning provided such term in Section
9.1.
"Adjustment Date" has the meaning provided such term in Section
2.4(d).
"Advest" has the meaning provided such term in Section 4.5(a).
"Advest Deferred Compensation Plans" means the AE Plan, The Advest
Group, Inc. Financial Advisor Nonqualified Deferred Compensation Plan, effective
as of January 1, 2003, and The Advest Group, Inc. Nonqualified Executive
Post-Employment Income Plan, effective as of October 1, 1993.
"Advest Thrift Plan" means The Advest Group, Inc. Thrift Plan, amended
and restated effective as of November 1, 2002.
"AE Plan" means The Advest Group, Inc. Restated and Amended Account
Executive Nonqualified Defined Benefit Plan, effective as of October 1, 1992.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with, such specified Person through one or more intermediaries or otherwise. For
the purposes of this definition, "control" means, where used with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have correlative meanings.
"Agreement" has the meaning provided such term in the preamble to this
Agreement.
"Allocation Schedule" has the meaning provided such term in Section
7.1(a).
"Annual Financial Statements" has the meaning provided such term in
Section 4.5(a).
"August Balance Sheet" means the audited consolidated balance sheet of
the Company and its Subsidiaries as of August 31, 2005 to be prepared by Seller
pursuant to Section 2.4(a).
"August Statement of Tangible Net Book Value" means the statement
setting forth the calculation of Tangible Net Book Value of the Company and its
Subsidiaries as of August 31, 2005 to be prepared by Seller pursuant to Section
2.4(a)(ii).
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by Law to be closed in The City of
New York or a federal holiday in the United States.
"Buyer" has the meaning provided such term in the preamble to this
Agreement.
"Buyer Approvals" has the meaning provided such term in Schedule 5.3.
"Buyer Indemnified Parties" has the meaning provided such term in
Section 9.1(b).
"Buyer Offer" has the meaning provided such term in Section 6.12(b).
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"Buyer's Accountants" means Deloitte & Touche LLP, independent
accountants of Buyer.
"Capital Markets Business" means the business of the capital markets
unit of the Company consisting of operations relating to the trading of equity
and fixed income securities; underwriting of government, agency,
mortgage-backed, and corporate securities; public finance activities; syndicate
participations; proprietary analyst research; and merger and acquisition
financial advisory services. "Capital Markets Business" shall not include the
business or operations conducted by the Private Clients Business or by Boston
Advisers Inc., or the business formerly conducted by Advest Trust Company.
"CFTC" means the United States Commodity Futures Trading Commission.
"Claim Notice" has the meaning provided such term in Section 9.3(a).
"Client" means each Investment Company, Separate Account Client and
Wrap Fee Account.
"Client Contracts" means (i) each investment advisory agreement
between the Company or a Subsidiary and a Company Fund, (ii) each investment
advisory agreement between the Company or a Subsidiary and each Separate Account
Client, and (iii) each investment management agreement to which the Company or a
Subsidiary is a party related to a Wrap Fee Account, in the case of each of
clauses (ii) or (iii) having assets under management exceeding $10,000,000.
"Closing" has the meaning provided such term in Section 2.3(a).
"Closing Date" has the meaning provided such term in Section 2.3(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning provided such term in the recitals to this
Agreement.
"Company Employees" has the meaning provided such term in Section
6.5(a).
"Company Fund" has the meaning provided such term in Section 4.21(a).
"Company Plans" has the meaning provided such term in Section 4.10(a).
"Company Rights" has the meaning provided such term in Section 4.8(a).
"Company Tenant" has the meaning provided such term in Section
4.18(d).
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"Company Trust" means the Advest Trust business of Frontier Trust
Company, FSB, which business was formerly a Subsidiary of the Company prior to
its merger with Frontier Trust Company, FSB in 2004.
"Competing Business" has the meaning provided such term in Section
6.12(a).
"Confidentiality Agreement" means that certain confidentiality
agreement, dated as of June 14, 2005, as amended by a letter agreement dated as
of July 14, 2005, by and between Xxxxxxx Xxxxx & Co., Inc. and Seller.
"Contract" means any written (and, to the extent Known by Seller,
oral) note, bond, mortgage, indenture, agreement, lease, license, contract or
other commitment, obligation or understanding to which a Person is a party or by
which a Person or its assets or properties are bound, but excluding any Company
Plan.
"Controlled Group Liability" has the meaning provided such term in
Section 4.10(e).
"Deductible" has the meaning provided such term in Section 9.2(b)(i).
"Derivative Instrument" means (a) each transaction (i) that is a rate
swap transaction, swap option, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option, credit protection
transaction, credit swap, credit default swap, credit default option, total
return swap, credit spread transaction, repurchase transaction, reverse
repurchase transaction, buy/sell-back transaction, securities lending
transaction, weather index transaction or forward purchase or sale of a
security, commodity or other financial instrument or interest (including any
option with respect to any of these transactions) or (ii) that is a type of
transaction that is similar to any transaction referred to in clause (i) above
that is currently entered into in the financial markets and which is a forward,
swap, future, option or other derivative on one or more rates, currencies,
commodities, equity securities or other equity instruments, debt securities or
other debt instruments, economic indices or measures of economic risk or value,
or other benchmarks against which payments or deliveries are to be made, and (b)
any combination of these transactions.
"Disclosure Schedule" means the Disclosure Schedule, dated as of the
date hereof, delivered by Seller to Buyer in connection with this Agreement.
"Dollars" and "$" mean the lawful currency of the United States.
"Elections" has the meaning provided such term in Section 7.1(a).
"Employer Contract" has the meaning provided such term in Section
4.7(a)(iv).
4
"Environmental Law" means any Law relating to the environment, natural
resources, or the protection thereof or relating to Hazardous Materials,
including the Occupational Safety and Health Act of 1970.
"ERISA" has the meaning provided such term in Section 4.10(a).
"ERISA Affiliate" has the meaning provided such term in Section
4.10(e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Excluded Services" has the meaning provided such term in Section
6.9(a).
"Existing Stock" has the meaning provided such term in Section 6.7(b).
"Federal Election" has the meaning provided such term in Section
7.1(a).
"Financial Statements" has the meaning provided such term in Section
4.5(a).
"Fund Board" has the meaning provided such term in Section 4.21(a).
"GAAP" means accounting principles generally accepted in the United
States.
"Governmental Authority" means any federal, state, local or foreign
government or any subdivision, agency, instrumentality, authority,
Self-Regulatory Organization, department, commission, board or bureau thereof or
any federal, state, local or foreign court, tribunal or arbitrator.
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, toxic mold and polychlorinated biphenyls and (b) any other chemicals,
materials or substances defined or regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Included Services" has the meaning provided such term in Section
6.9(b).
"Indebtedness" means, without duplication, (a) all indebtedness for
borrowed money or for the deferred purchase price of property or services (other
than trade liabilities and accrued expenses incurred in the ordinary course of
business and payable in accordance with customary practices), whether or not
evidenced by a writing, which would be required under GAAP to be reflected as a
liability on a balance sheet, (b) any other indebtedness that is evidenced by a
note, bond, debenture, draft or similar instrument, (c) all indebtedness created
5
under financing or capital leases, (d) all indebtedness in respect of
acceptances issued or created, (e) notes payable and drafts accepted
representing extensions of credit, (f) all indebtedness secured by any Lien on
any property, (g) all outstanding amounts owed under letters of credit and any
other agreements relating to the borrowing of money or extension of credit and
(h) any guarantee with respect to indebtedness for borrowed money of another
Person.
"Independent Accounting Firm" has the meaning provided such term in
Section 2.4(c)(ii).
"Interim Advisory Agreements" has the meaning provided such term in
Section 6.10(b).
"Interim Financial Statements" has the meaning provided such term in
Section 4.5(a).
"Investment Company" means any investment company within the meaning
of the Investment Company Act, including any entity that would be an investment
company but for Section 3(c) thereof, that is sponsored, organized or advised
(but not sub-advised) by the Company or one of its Subsidiaries (including the
Company Funds).
"Investment Company Act" means the United States Investment Company
Act of 1940, as amended, and the rules and regulations of the SEC promulgated
thereunder.
"IRS" means the United States Internal Revenue Service.
"IT" has the meaning provided such term in Section 6.9(a).
"IT Assets" has the meaning provided such term in Section 4.8(c).
"Knowledge" (including the word "Known" and the phrase "to the
Knowledge of" and words or phrases of similar import) means, with respect to
Seller, the actual knowledge of the individuals set forth in Exhibit A after
having made inquiry of the individuals listed in Exhibit B, and, with respect to
Buyer, the actual knowledge of the individuals set forth in Exhibit C.
"Law" means any applicable statute, writ, law, rule, regulation,
ordinance, order, judgment, injunction, award, determination or decree of a
Governmental Authority, in each case as in effect on and as interpreted on the
date of this Agreement.
"Leased Real Property" has the meaning provided such term in Section
4.18(a).
"Lien" means any charge, pledge, option, mortgage, deed of trust,
hypothecation or security interest, claim (including claims arising from any
change-of-control provisions in a Contract), encumbrance, burden, title defect,
title retention agreement, easement, encroachment, voting trust agreement,
option, right of first offer, negotiation or refusal, lien or other similar
restrictions or limitations.
6
"Limited Uses" has the meaning provided such term in Section 6.7(b).
"Losses" means all monetary fines, penalties, judgments, settlements,
awards, costs, and expenses (including reasonable out-of-pocket fees and
expenses of counsel, consultants, experts and other professionals fees incurred
for investigation, defense or settlement), liabilities, losses, claims and
damages; provided that Losses shall not include any special, punitive,
exemplary, incidental, consequential or indirect damages, lost profits or any
non-monetary losses; provided, further that, notwithstanding the preceding
proviso, in the case of Third-Party Claims for which indemnification is required
pursuant to the terms of this Agreement, Losses shall be deemed to include all
forms of monetary damages incurred with respect to such Third-Party Claims.
"Manual" has the meaning provided such term in Section 6.9(a).
"Material Adverse Effect" means any circumstance, change or effect
(excluding any change, circumstance or effect to the extent such change,
circumstance or effect relates to or results from the Capital Markets Business;
except to the extent Seller shall have failed to comply in all material respects
with the obligations set forth in the final paragraph of Section 6.1) that (a)
is or is reasonably likely to be materially adverse to the business, operations,
assets, liabilities or financial condition of the Company and its Subsidiaries,
taken as a whole, or (b) that prevents or materially impedes the ability of
Seller to complete the transactions contemplated herein, but shall exclude any
circumstance, change or effect resulting or arising from (i) any change in
general economic conditions in the industries or markets in which the Company or
its Subsidiaries operate, except to the extent such change disproportionately
affects (relative to other industry participants) the Company and its
Subsidiaries, taken as a whole; (ii) seasonal reductions in revenues and/or
earnings of the Company or its Subsidiaries in the ordinary course of their
respective businesses; (iii) the loss of any employees, brokers, financial
advisors, consultants, customers or customer assets following the announcement
of this Agreement or the transactions contemplated hereby; (iv) national or
international political conditions, including any engagement in hostilities,
whether or not pursuant to the declaration of a national emergency or war, or
the occurrence of any military or terrorist attack occurring prior to, on or
after the date of this Agreement, except to the extent such condition
disproportionately affects (relative to other industry participants) the Company
and its Subsidiaries, taken as a whole; (v) proposed or adopted legislation or
any other proposal or enactment by any Governmental Authority, except to the
extent such proposal or enactment disproportionately affects (relative to other
industry participants) the Company and its Subsidiaries, taken as a whole; (vi)
changes in accounting requirements or principles or the interpretation thereof;
and (vii) the entry into or announcement of this Agreement, actions contemplated
by this Agreement, or the consummation of the transactions contemplated hereby.
Any determination as to whether any circumstance, change or effect has a
Material Adverse Effect shall be made only after taking into account all
effective insurance coverages, third-party indemnifications and Tax benefits
with respect to such circumstance, change or effect.
7
"Material Contracts" has the meaning provided such term in Section
4.7(a).
"MSRB" means the Municipal Securities Rulemaking Board.
"NASD" means the National Association of Securities Dealers, Inc.
"NFA" means the National Futures Association.
"Non-Federal Elections" has the meaning provided such term in Section
7.1(a).
"NYSE" means The New York Stock Exchange, Inc.
"Organizational Documents" means any charter, certificate of
incorporation, articles of association, bylaws, operating agreement or similar
formation or governing documents and instruments.
"Outside Date" has the meaning provided such term in Section 10.1(d).
"Parent" means the common parent of the consolidated group that
includes Seller, the Company and the Subsidiaries listed on Section 4.11(r) of
the Disclosure Schedule.
"Parties" means Seller and Buyer.
"Permits" means all authorizations, licenses, identification numbers,
permits, certificates, orders, consents, approvals, and registrations and other
similar authorizations required under Law.
"Permitted Liens" means (a) Liens for Taxes, impositions, assessments,
fees, rents or other governmental charges levied or assessed or imposed not yet
delinquent or being contested in good faith by appropriate proceedings (for
which, to the extent required under GAAP, adequate reserves have been made), (b)
statutory Liens (including materialmen's, warehousemen's, mechanic's,
repairmen's, landlord's, and other similar Liens) arising in the ordinary course
of business consistent with past practice securing payments not yet delinquent
or being contested in good faith by appropriate proceedings, (c) the rights of
lessors and lessees under leases, and the rights of third parties under any
agreement, executed in the ordinary course of business consistent with past
practice, (d) the rights of licensors and licensees under licenses executed in
the ordinary course of business, (e) restrictive covenants, easements, zoning
restrictions, survey exceptions, utilities easements and defects, imperfections
or irregularities of title or Liens, if any, as would not reasonably be expected
to, in any material respect, have an adverse effect on or interfere with the
current use of the real property, (f) purchase money Liens and Liens securing
rental payments under capital lease arrangements, (g) preferential purchase
rights and other similar arrangements with respect to which consents or waivers
are obtained for this transaction or as to which the time for asserting such
rights has expired at the Closing Date without an exercise of such rights, (h)
restrictions on transfer with respect to which consents or waivers are obtained
for this transaction, (i) transfer restrictions imposed on equity securities by
securities Laws, (j) Liens set forth in Section 1.1 of the Disclosure Schedule
and (k) Liens created by Buyer, or its successors and assigns.
8
"Person" means any individual, firm, corporation, partnership, limited
liability company, incorporated or unincorporated association, joint venture,
joint stock company, Governmental Authority or other entity of any kind.
"Policies" has the meaning provided such term in Section 4.15.
"Private Clients Business" means the business of the private clients
unit of the Company consisting of providing securities brokerage, trading,
advisory and other services to retail and institutional investors through its
network of retail sales offices.
"Proprietary Information" has the meaning provided such term in
Section 6.4(a).
"Proprietary Rights" has the meaning provided such term in Section
4.8(a).
"Purchase Price" has the meaning provided such term in Section 2.2.
"Representatives" means, as to any Person, its officers, directors,
employees, counsel, accountants, financial advisers and consultants.
"Restricted Period" has the meaning provided such term in Section
6.12(a).
"Review Period" has the meaning provided such term in Section 2.4(b).
"Reviewing Accountants" has the meaning provided such term in Section
7.1(a).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Self-Regulatory Organization" means the NASD, the MSRB, the NFA, each
national securities exchange in the United States and each other commission,
board, agency or body, whether United States or foreign, that is charged with
the supervision or regulation of brokers, dealers, securities underwriting or
trading, stock exchanges, commodity exchanges, investment companies or
investment advisers, or to the jurisdiction of which the Company or any of its
Subsidiaries is otherwise subject.
"Seller" has the meaning provided such term in the preamble to this
Agreement.
9
"Seller Account" has the meaning provided such term in Section
2.3(c)(i).
"Seller Approvals" has the meaning provided such term in Section 3.3.
"Seller Marks" has the meaning provided such term in Section 6.7(a).
"Seller's Accountants" means PricewaterhouseCoopers LLP, independent
accountants of Seller.
"Separate Account Client" means those Persons identified as clients in
the current records relating to assets under management of the Company and its
Subsidiaries other than Investment Companies and Wrap Fee Accounts.
"Services Agreement" has the meaning provided such term in Section
6.9(a).
"Shares" has the meaning provided such term in the recitals to this
Agreement.
"Subsidiary" shall mean any corporation, partnership, limited
liability company, joint venture or other entity in which the Company (a) owns,
directly or indirectly, more than fifty percent (50%) of the outstanding voting
securities, equity securities, profits interest or capital interest or (b) is
entitled to elect at least a majority of the board of directors, board of
managers or similar governing body.
"Survival Period" has the meaning provided such term in Section
9.1(a).
"Tangible Net Book Value" means the total consolidated shareholders'
equity of the Company and its Subsidiaries, less goodwill and intangible assets
related to the value of the distribution system reflected on the August Balance
Sheet.
"Target Tangible Net Book Value" means an amount equal to
$175,000,000.
"Tax Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or imposition of any Tax.
"Tax Claim" has the meaning provided such term in Section 7.8(a).
"Tax Reserve" has the meaning provided such term in Section
6.1(c)(ii).
"Tax Returns" means any report, return or other filing required to be
filed with any Tax Authority, including any disclosure statements required under
Treasury regulations section 1.6011-4(a) and any registration forms or
informational returns required pursuant to section 6111 of the Code, and
including any amendments thereto.
"Taxes" means any income, gross receipts, license, employment, excise,
stamp, customs, capital stock, franchise, profits, withholding, social security,
unemployment, disability, property, sales, use, transfer, value added, net
worth, capital gains, payroll, alternative minimum or other tax imposed by a
Governmental Authority, including any interest, penalties and additions to tax
imposed with respect thereto.
10
"Tenant Leases" has the meaning provided such term in Section 4.18(a).
"Third-Party Claim" has the meaning provided such term in Section
9.3(a).
"Transition Period" has the meaning provided such term in Section
6.7(b).
"United States" and "U.S." mean United States of America.
"Wrap Fee Accounts" means those Persons who receive investment advice
from the Company or its Subsidiaries pursuant to arrangements with wrap sponsors
(as contemplated under Rule 204-3 of the Investment Advisers Act of 1940, as
amended).
Section 1.2 Rules of Construction.
(a) All article, section, schedule and exhibit references used in this
Agreement are to articles, sections, schedules and exhibits to this Agreement
unless otherwise specified. The schedules and exhibits attached to this
Agreement constitute a part of this Agreement and are incorporated herein for
all purposes.
(b) If a term is defined as one part of speech (such as a noun), it
shall have a corresponding meaning when used as another part of speech (such as
a verb). Terms defined in the singular have the corresponding meanings in the
plural, and vice versa. Unless the context of this Agreement clearly requires
otherwise, words importing the masculine gender shall include the feminine and
neutral genders and vice versa. The term "includes" or "including" shall mean
"including without limitation." The words "hereof," "hereto," "hereby,"
"herein," "hereunder" and words of similar import, when used in this Agreement,
shall refer to this Agreement as a whole and not to any particular section or
article in which such words appear.
(c) Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified. Whenever any
action must be taken hereunder on or by a day that is not a Business Day, then
such action may be validly taken on or by the next day that is a Business Day.
(d) The Parties acknowledge that each Party and its attorney has
reviewed this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party, or any similar rule
operating against the drafter of an agreement, shall not be applicable to the
construction or interpretation of this Agreement.
(e) The captions in this Agreement are for convenience only and shall
not be considered a part of or affect the construction or interpretation of any
provision of this Agreement.
11
(f) All references to currency herein shall be to, and all payments
required hereunder shall be paid in, Dollars.
(g) All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
ARTICLE II
PURCHASE AND SALE; CLOSING
Section 2.1 Purchase and Sale of Shares. At the Closing, upon the
terms and subject to the conditions set forth in this Agreement, Seller shall
sell, assign, transfer and convey to Buyer, and Buyer shall purchase and acquire
from Seller, the Shares, free and clear of any Liens (other than restrictions on
transfer which arise under applicable securities Laws).
Section 2.2 Purchase Price. Subject to the terms and conditions of
this Agreement, and in consideration of the transactions described in this
Agreement, the purchase price for the Shares shall be Four Hundred Million
Dollars ($400,000,000) (the "Purchase Price").
Section 2.3 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxx Xxxxxxxxxx LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New York time,
on the third (3rd) 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 which by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) or such other date as Buyer and Seller may mutually agree in writing
(the "Closing Date").
(b) At the Closing, Seller shall deliver the following documents and
deliverables to Buyer:
(i) certificates representing the Shares, duly endorsed in
blank for transfer or accompanied by stock powers duly endorsed in
blank and with all appropriate stock transfer tax stamps affixed; and
(ii) all other documents and instruments required to be
delivered by Seller on or prior to the Closing Date pursuant to
Section 8.2.
(c) At the Closing, Buyer will deliver the following documents and
deliverables to Seller:
(i) an amount equal to the Purchase Price by wire transfer
of immediately available funds to an account or accounts specified by
Seller in writing no less than three (3) Business Days prior to the
Closing Date (the "Seller Account"); and
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(ii) all other documents and instruments required to be
delivered by Buyer on or prior to the Closing Date pursuant to Section
8.3.
Section 2.4 Adjustment of Purchase Price. The Purchase Price shall be
subject to adjustment after the Closing as specified in this Section 2.4.
(a) As promptly as practicable, but in any event within seventy-five
(75) calendar days following the date of this Agreement, Seller shall deliver to
Buyer (i) the August Balance Sheet, which shall be prepared in accordance with
the Accounting Principles, together with the report of Seller's Accountants
stating that the August Balance Sheet fairly presents the consolidated financial
position of the Company and its Subsidiaries as of the date thereof and (ii) the
August Statement of Tangible Net Book Value, which shall be derived from the
amounts set forth on the August Balance Sheet.
(b) As promptly as practicable, but in any event within forty-five
(45) Business Days from the date of Buyer's receipt of the August Balance Sheet
and the August Statement of Tangible Net Book Value (the "Review Period"), Buyer
may review the August Balance Sheet and the August Statement of Tangible Net
Book Value.
(c) Disputes.
(i) Subject to clause (ii) of this Section 2.4(c), the
August Balance Sheet and the August Statement of Tangible Net Book
Value delivered by Seller to Buyer shall be final, conclusive and
binding on the Parties.
(ii) Buyer may dispute any amounts reflected on the August
Balance Sheet or the August Statement of Tangible Net Book Value, but
only on the basis that the amounts reflected on (i) the August Balance
Sheet were not arrived at in accordance with the Accounting Principles
or were arrived at based on mathematical or clerical error or (ii) the
August Statement of Tangible Net Book Value were arrived at based on
mathematical or clerical error; provided, however, that Buyer shall
have notified Seller and Seller's Accountants in writing of each
disputed item, specifying the estimated amount thereof in dispute and
setting forth, in reasonable detail, the basis for such dispute, prior
to the expiration of the Review Period. In the event of such a
dispute, Seller's Accountants and Buyer's Accountants shall attempt to
reconcile their differences, and any resolution by them as to any
disputed amounts shall be final, conclusive and binding on the
Parties. If Seller's Accountants and Buyer's Accountants are unable to
reach a resolution with such effect within twenty (20) Business Days
after the receipt by Seller and Seller's Accountants of Buyer's
written notice of dispute, then Seller's Accountants and Buyer's
Accountants shall submit to Seller's Chief Executive Officer and
Buyer's Head of Global Private Client Business, respectively, the
items remaining in dispute for resolution. If Seller and Buyer are
unable to reach resolution of all of such disputed items within ten
(10) Business Days after such submission by Seller's and Buyer's
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Accountants of such items, then Seller and Buyer shall submit the
remaining disputed items for resolution to Ernst & Young LLP (or, if
such firm shall decline or is unable to act or is not, at the time of
such submission, independent of Seller and Buyer, to another
independent accounting firm of international reputation mutually
acceptable to Seller and Buyer) (either Ernst & Young LLP or such
other accounting firm being referred to herein as the "Independent
Accounting Firm"), which shall, within thirty (30) Business Days after
such submission, determine and report to Seller and Buyer upon such
remaining disputed items, and such report shall be final, conclusive
and binding on Seller and Buyer. With respect to each disputed line
item, such determination, if not in accordance with the position of
either Buyer or Seller, shall not be in excess of the higher, nor less
than the lower, of the amounts advocated by Seller in the August
Balance Sheet or the August Statement of Tangible Net Book Value or
Buyer in its written notice of dispute to Seller with respect to each
disputed line item. The fees and disbursements of the Independent
Accounting Firm shall be allocated between Seller and Buyer based on
the degree to which the Independent Accounting Firm accepts the
respective positions of the Parties, which allocation shall be made
based in accordance with the calculation methodology described in
Exhibit D.
(d) Purchase Price Adjustment. The August Balance Sheet and the August
Statement of Tangible Net Book Value, after giving effect to the adjustments, if
any, made thereto pursuant to Section 2.4(c), shall be deemed final for the
purposes of this Agreement upon the earliest of (x) the failure of Buyer to
notify Seller of a dispute within the Review Period in accordance with this
Section 2.4, (y) the resolution of all disputes, pursuant to Section 2.4(c)(ii),
by Seller's Accountants and Buyer's Accountants or Seller and Buyer, as the case
may be, and (z) the resolution of all disputes, pursuant to Section 2.4(c)(ii),
by the Independent Accounting Firm. Within three (3) Business Days of the August
Balance Sheet and the August Statement of Tangible Net Book Value being deemed
final (such date, the "Adjustment Date"), a Purchase Price adjustment shall be
made as follows:
(i) in the event that the Target Tangible Net Book Value
exceeds the Tangible Net Book Value reflected on the August Statement
of Tangible Net Book Value (after giving effect to adjustments, if
any, pursuant to Section 2.4(c)), then the Purchase Price by Buyer at
Closing shall be adjusted downward in an amount equal to such excess
or, to the extent the Adjustment Date is a date following the Closing
Date, Seller shall pay on the Adjustment Date the amount of such
excess to Buyer by wire transfer in immediately available funds to an
account or accounts specified by Buyer in writing, and
(ii) in the event that the Tangible Net Book Value reflected
on the August Statement of Tangible Net Book Value (after giving
effect to adjustments, if any, pursuant to Section 2.4(c)) exceeds the
Target Tangible Net Book Value, then the Purchase Price payable by
Buyer at Closing shall be adjusted upward in an amount equal to such
excess or, to the extent the Adjustment Date is a date following the
Closing Date, Buyer shall pay on the Adjustment Date the amount of
such excess to Seller by wire transfer in immediately available funds
to the Seller Account;
14
provided, however, that no adjustment to the Purchase Price shall be made based
on any event, change or circumstance occurring after the date of the August
Balance Sheet, including any results from the operation of the business of the
Company and its Subsidiaries from such date until the Closing Date.
(e) Interest on Payments. Any payments required to be made by Seller
or Buyer pursuant to Section 2.4(d) shall bear interest from the Closing through
the date of payment at the rate of interest publicly announced by JPMorgan Chase
Bank, N.A. or any successor thereto in New York, New York from time to time as
its prime rate from the Closing to the date of each payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Except as otherwise disclosed to Buyer in a schedule delivered to
Buyer by Seller prior to the execution of this Agreement (the "Disclosure
Schedule") (it being understood that disclosure in one section shall be deemed
to be disclosure for any other section as to which the applicability is
reasonably apparent from the face of the disclosure), Seller hereby represents
and warrants to Buyer as follows:
Section 3.1 Organization of Seller; Authority. Seller is a
corporation, duly organized, validly existing and in good standing under the
Laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as currently being conducted.
Section 3.2 Authorization; Enforceability. Seller has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
all obligations to be performed by it hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by all requisite corporate action on the part of
Seller and its stockholders. This Agreement has been duly and validly executed
and delivered by Seller, and, assuming the due authorization, execution and
delivery of this Agreement by Buyer, this Agreement constitutes a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar Laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity.
Section 3.3 No Conflict. The execution and delivery of this Agreement
by Seller and the consummation of the transactions contemplated hereby by
Seller, assuming all required filings, consents, approvals, authorizations and
notices set forth on Section 3.3 of the Disclosure Schedule (collectively, the
"Seller Approvals") have been made, given or obtained, do not and shall not:
15
(a) violate or conflict with any Organizational Document of Seller;
(b) violate or conflict with, in any material respect, any Law
applicable to Seller or any of its assets, properties or businesses or require
any filing with, consent, approval or authorization of, or notice to, any
Governmental Authority; or
(c) (i) conflict with, result in any breach of, constitute a default
(or event which after notice or lapse of time or both, would become a default)
under, or require any consent under any Contract to which Seller is a party or
by which Seller may be bound, (ii) result in the termination of any such
Contract, (iii) result in the creation of any Lien upon any of the Shares or any
of the properties or assets of the Company or its Subsidiaries or (iv)
constitute an event which, after notice or lapse of time or both, would result
in any such breach, termination or creation of a Lien upon any of the Shares;
except in the case of clause (c) above, as would not reasonably be expected to
have a Material Adverse Effect or have a material adverse effect on Seller or on
the ability of Seller to enter into and perform its obligations under, and to
consummate the transactions contemplated by, this Agreement.
Section 3.4 Litigation. There is no (i) lawsuit or action before any
Governmental Authority pending or, to the Knowledge of Seller, threatened by any
Person against Seller or (ii) order or unsatisfied judgment from any
Governmental Authority binding upon Seller that, in the case of both clauses (i)
and (ii), would reasonably be expected to prevent or materially impede the
ability of Seller to complete the transactions contemplated by this Agreement.
There is no order or unsatisfied judgment from any Governmental Authority
binding upon Seller that has, has had or would reasonably be expected to have an
adverse effect on any Subsidiary or the Company that would be material to the
Company and its Subsidiaries, taken as a whole, or would reasonably be expected
to materially delay the consummation of the transaction contemplated by this
Agreement or prevent or materially impede the ability of Seller to complete the
transactions contemplated by this Agreement.
Section 3.5 Brokers' Fees. No broker, finder, investment banker or
other Person is entitled to any brokerage fee, finders' fee or other commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by, or on behalf of, Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND THE SUBSIDIARIES
Except as otherwise disclosed in the Disclosure Schedule (it being
understood that disclosure in one section shall be deemed to be disclosure for
any other section as to which the applicability is reasonably apparent from the
face of the disclosure), Seller hereby represents and warrants to Buyer as
follows:
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Section 4.1 Organization of the Company and its Subsidiaries;
Authority. The Company and each Subsidiary is duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its organization and
has the requisite corporate, partnership or limited liability company authority
and power to own or lease its assets and to conduct its business as currently
being conducted. The Company and each Subsidiary is duly licensed or qualified
in each jurisdiction in which the ownership or operation of its assets or the
character of its activities is such as to require it to be so licensed or
qualified, except where the failure to be so licensed or qualified would not
reasonably be expected to have a Material Adverse Effect.
Section 4.2 No Conflict. The execution and delivery of this Agreement
by Seller and the consummation of the transactions contemplated hereby by Seller
(assuming all of the Seller Approvals have been made, given or obtained) do not
and shall not:
(a) violate or conflict with any Organizational Document of the
Company or its Subsidiaries;
(b) violate or conflict with, in any material respect, any Law
applicable to the Company or its Subsidiaries or any of their respective assets,
properties or businesses or require any filing with, consent, approval or
authorization of, or notice to, any Governmental Authority; or
(c) (i) conflict with, result in any breach of, constitute a default
(or event which after notice or lapse of time or both, would become a default)
under, or require any consent under any Contract to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
may be bound, (ii) result in the termination of any such Contract, (iii) result
in the creation of any Lien under any Contract on any of the properties or
assets of the Company or its Subsidiaries or (iv) constitute an event which,
after notice or lapse of time or both, would result in any such breach,
termination or creation of a Lien on any of the properties or assets of the
Company or its Subsidiaries;
except in the case of clause (c) above, as would not reasonably be expected to
have a Material Adverse Effect.
Section 4.3 Capitalization of the Company.
(a) The Shares constitute all of the issued and outstanding shares of
capital stock of the Company and have been duly authorized and are validly
issued, fully paid and non-assessable and have not been issued and were not
issued in violation of any preemptive or other similar right. Seller has good
and valid title to, owns of record and owns beneficially, the Shares, free and
clear of any Liens other than Liens that are set forth on Section 4.3 of the
Disclosure Schedule and other than restrictions on transfer which arise under
applicable securities Laws.
(b) There are no outstanding options, warrants, rights or other
securities convertible into or exchangeable or exercisable for equity securities
of the Company, any other commitments, arrangements, agreements or rights
providing for the issuance or sale of additional equity interests or the
repurchase, redemption or other acquisition of equity interests of the Company,
and there are no agreements of any kind which may obligate the Company to issue,
purchase, redeem or otherwise acquire any of its equity interests. There are no
voting agreements, proxies or other similar agreements or understandings with
respect to the equity interests of the Company.
17
Section 4.4 Capitalization of the Subsidiaries; Other Interests.
(a) Section 4.4(a) of the Disclosure Schedule sets forth each of the
Company's directly and indirectly owned Subsidiaries, each of which is a United
States person within the meaning of Section 7701(a)(30) of the Code. Section
4.4(a) of the Disclosure Schedule sets forth the designation, par value and the
number of authorized, issued and outstanding shares of capital stock or
membership interests for each Subsidiary and the number and percentage ownership
interest of the Company (if direct) or of the Company's Subsidiary (if indirect)
in each such Subsidiary. All of the outstanding shares of capital stock or
membership interests of each Subsidiary (i) are duly authorized and are validly
issued, fully paid and non-assessable and have not been issued and were not
issued in violation of any preemptive or other similar right and (ii) are owned
of record and beneficially by the Company or its Subsidiary set forth on Section
4.4(a) of the Disclosure Schedule, in each case, free and clear of any Lien
other than Permitted Liens or restrictions on transfer which arise under
applicable securities Laws.
(b) There are no outstanding options, warrants, rights or other
securities convertible into or exchangeable or exercisable for equity interests
of the Subsidiaries, any other commitments, arrangements, rights or agreements
providing for the issuance or sale of additional equity interests or the
repurchase, redemption or other acquisition of equity interests of the
Subsidiaries, and there are no agreements of any kind which may obligate the
Subsidiaries to issue, purchase, redeem or otherwise acquire any of their
respective equity interests. There are no voting agreements, proxies or other
similar agreements or understandings with respect to the equity interests of the
Subsidiaries.
(c) Neither the Company nor any Subsidiary owns any investment
(whether equity or debt) in any corporation, partnership, limited liability
company, joint venture, business, trust or other Person other than investments
held by the Company or its Subsidiaries for the account of clients or as part of
their ordinary course securities trading activities and interests held in the
Subsidiaries.
Section 4.5 Financial Statements; Undisclosed Liabilities.
(a) Section 4.5(a) of the Disclosure Schedule sets forth (i) the
unaudited consolidated balance sheet, together with the related unaudited
consolidated statement of income, for the Company and its Subsidiaries as of and
for the year ended December 31, 2004; (ii) the audited balance sheet, together
with the related audited statement of income for Advest, Inc. ("Advest") as of
and for the year ended December 31, 2004 (the financial statements referred to
in clauses (i) and (ii), the "Annual Financial Statements"); and (iii) the
unaudited consolidated balance sheet, together with the related unaudited
consolidated statement of income, for the Company and its Subsidiaries as of and
for the six (6) month period ended June 30, 2005 (the "Interim Financial
Statements" and, together with the Annual Financial Statements, the "Financial
Statements"). The Financial Statements, and all Focus reports filed by Advest
with the SEC during and as of the periods covered by the Financial Statements
(and in the case of Focus reports, through the month ended July 31, 2005), have
been prepared based on the books and records of the Company or Advest, as
applicable, have been prepared in accordance with GAAP (except as otherwise
required by the rules and regulations of the SEC or any Self-Regulatory
Organization in the case of the Focus reports or as indicated in the notes to
the Financial Statements) consistent with past practice, and fairly present in
all material respects the financial condition and results of operations of the
Company or Advest, as applicable, as of the respective dates thereof or for the
respective periods set forth therein.
18
(b) Except (i) as reflected or adequately reserved against in the
Financial Statements, (ii) liabilities which have been incurred since June 30,
2005 in the ordinary course of business consistent with past practice and (iii)
as set forth on Section 4.5(b) of the Disclosure Schedule, there are no
liabilities or obligations, secured or unsecured (whether absolute, accrued,
contingent or otherwise), matured or unmatured that would have a Material
Adverse Effect.
Section 4.6 Absence of Certain Changes. Except as set forth on Section
4.6 of the Disclosure Schedule, from December 31, 2004 until the date of this
Agreement, (a) there has not been any Material Adverse Effect, (b) the business
of the Company and each Subsidiary has been conducted, in all material respects,
only in the ordinary course of business consistent with past practice, (c) there
has not been any material change in accounting methods, policies or practice,
except as required by Law or GAAP and (d) there has not been any express or
deemed election or settled or compromised liability with respect to material
Taxes of the Company or any Subsidiary.
Section 4.7 Contracts.
(a) Section 4.7(a) of the Disclosure Schedule contains a true and
complete list of the following Contracts in effect on the date of this Agreement
to which the Company or any Subsidiary is a party (the "Material Contracts"):
(i) except for any intercompany Indebtedness that will be
cancelled or converted to equity prior to Closing in accordance with
Section 6.6 and the extension of margin loans in the ordinary course
of business, each Contract for Indebtedness, involving an outstanding
obligation in excess of $1,000,000;
(ii) each Contract involving a remaining commitment to pay
capital expenditures with respect to its business in excess of
$1,000,000;
(iii) each Contract for lease or sublease of personal
property involving aggregate payments in excess of $1,000,000 in any
calendar year;
19
(iv) (A) each employment Contract (1) for a non-broker
employee involving aggregate payments in excess of $125,000 in any
calendar year and (2) for the fifty (50) highest revenue producing
broker employees for the year ended December 31, 2004, (B) each
Contract providing retention, severance or guaranteed aggregate bonus
payments in excess of $125,000 individually or $500,000 in the
aggregate (except by operation of the severance plans of the Company
or any of its Subsidiaries, generally), in each case that have not
been paid in full as of the date of this Agreement, (C) each Contract
with a former employee for consulting services providing for payments
in excess of $500,000 in any calendar year and (D) each contract for
compensation or benefits between any of Seller or its Affiliates
(other than the Company and its Subsidiaries), on the one hand, and
any employee of the Company or any of its Subsidiaries, on the other
hand (each of (A), (B), (C) and (D) being an "Employer Contract");
(v) except as contemplated in Section 6.9, each material
Contract between Seller or a Seller Affiliate (other than the Company
and its Subsidiaries), on the one hand, and the Company or any
Subsidiary, on the other hand, that obligates Seller or such Seller
Affiliate to provide technical or other corporate resource support
services to the Company or any Subsidiary;
(vi) each Contract that provides for a material limitation
on the ability of the Company, Advest or Boston Advisors, Inc. to (A)
compete in any line of business or with any Person or (B) hire any
employees or consultants, in any geographic area during any period of
time after the Closing that cannot be terminated by the Company or any
Subsidiary upon thirty (30) days or less notice without payment of
penalty in excess of $200,000;
(vii) each material Contract requiring the Company or any
Subsidiary to deal exclusively with any Person or any Person to deal
exclusively with the Company or any Subsidiary that cannot be
terminated by the Company or any Subsidiary upon thirty (30) days or
less notice without payment of penalty in excess of $200,000;
(viii) any Contract involving the acquisition or disposition
(by merger, consolidation, acquisition or sale of stock or assets or
otherwise) of any interest in, or any amount of property or assets of,
any Person or business during the past three years that is, in each
case, material to the Company and its Subsidiaries, taken as a whole;
(ix) any Contract providing for future payments or the
acceleration or vesting of payments in excess of $500,000 as a result
of the consummation of the transactions contemplated hereby;
(x) any Contract relating to any investments listed on
Section 4.4(c) of the Disclosure Schedule that is material to the
Company and its Subsidiaries, taken as a whole;
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(xi) any Contract including any indemnification obligations
of the Company or any Subsidiary, other than Contracts entered into in
the ordinary course of business or any such obligations that are not
material to the Company and its Subsidiaries, taken as a whole; and
(xii) all other Contracts, whether or not made in the
ordinary course of business, that are material to the Company and its
Subsidiaries, taken as a whole, or the absence of which would have a
Material Adverse Effect.
(b) True and complete copies of all Material Contracts have been made
available to Buyer.
(c) Each Material Contract (i) is in full force and effect and (ii)
represents the legal, valid and binding obligation of the Company or its
Subsidiary that is party thereto and, to the Knowledge of Seller, represents the
legal, valid and binding obligation of the other parties thereto, in each case
enforceable in accordance with its terms. Except as set forth on Section 4.7(c)
of the Disclosure Schedule, neither the Company nor any Subsidiary and, to the
Knowledge of Seller, no other party, is in material breach of any Material
Contract, and none of Seller, the Company or any Subsidiary has received any
written or, to the Knowledge of Seller, oral notice of termination or breach of
any Material Contract. To the Knowledge of Seller, no condition or event exists
which, with the giving of notice or the passage of time, or both, would
constitute a violation or default of any material term of a Material Contract by
the Company or any Subsidiary.
Section 4.8 Intellectual Property and Technology Systems.
(a) Except as set forth on Section 4.8(a) of the Disclosure Schedule,
(i) the Company or a Subsidiary is the sole owner of, or has a valid license to,
all U.S. and foreign trademarks, service marks, trade names, corporate names,
trade secrets, domain names, patents and copyrights (collectively, "Proprietary
Rights"), material to the conduct of its business and the businesses of its
Subsidiaries as currently conducted (such Proprietary Rights owned by or
licensed to the Company or a Subsidiary, subject to such exception,
collectively, the "Company Rights"), (ii) neither the Company nor its
Subsidiaries have received any written claim or allegation from any Person in
respect of the Company Rights which challenges the validity or enforceability of
any such Company Rights, (iii) to the Knowledge of Seller, neither the Company
nor any Subsidiary is in violation or infringement of any Proprietary Rights of
any other Person, (iv) neither the Company nor any Subsidiary has received any
written claim or allegation of such a violation or infringement of any
Proprietary Rights of any Person, and (v) to the Knowledge of Seller, no Person
is infringing or otherwise violating any Company Rights.
(b) Section 4.8(b) of the Disclosure Schedule contains a complete and
accurate list of all registered Proprietary Rights owned by the Company or a
Subsidiary. To the Knowledge of Seller, the Company Rights are valid, subsisting
and enforceable, and none are subject to any outstanding order, judgment, decree
or agreement that would have a materially adverse effect on the Company's or its
Subsidiaries' use thereof or its/their rights thereto. The Company and its
Subsidiaries have taken all reasonable measures to protect the confidentiality
of all trade secrets that are owned or used by the Company or its Subsidiaries,
the disclosure of which could reasonably be expected to have a Material Adverse
Effect, and since January 1, 2005, to the Knowledge of Seller, no such trade
secrets have been used or disclosed to any Person except pursuant to a valid
non-disclosure and/or license agreement which has not been breached in respect
of the confidentiality of any such trade secret.
21
(c) To the Knowledge of Seller, except as set forth on Section 4.8(c)
of the Disclosure Schedule, upon consummation of the transactions contemplated
by this Agreement, the Company or a Subsidiary will own or have a license to use
all material computers, computer software, programs, databases, firmware,
middleware, servers, workstations, routers, hubs, switches, data communications
lines, and other information technology equipment ("IT Assets") and Company
Rights that are currently used by the Company and its Subsidiaries in their
business, except insofar as such IT Assets or Company Rights are contemplated to
be provided or made available to the Company or a Subsidiary pursuant to Section
6.9 below. The Company and its Subsidiaries have taken commercially reasonable
steps to provide for the back-up and recovery of the data and information
critical to the conduct of its/their business.
Section 4.9 Litigation.
(a) Except as set forth on Section 4.9(a) of the Disclosure Schedule,
there is no lawsuit, action or proceeding before any Governmental Authority that
is pending or, to the Knowledge of Seller, threatened by any Person against the
Company, any Subsidiary, a Company Fund or the Company Trust that (i) has, has
had or would reasonably be expected to have an adverse effect on any Subsidiary
or the Company that is material to the Company and its Subsidiaries, taken as a
whole, or (ii) would reasonably be expected to prevent or materially impede the
ability of Seller to complete the transactions contemplated by this Agreement.
There is no order or unsatisfied judgment from any Governmental Authority that
(i) has, has had or would reasonably be expected to have an adverse effect on
any Subsidiary or the Company that is material to the Company and its
Subsidiaries, taken as a whole, or (ii) would reasonably be expected to prevent
or materially impede the ability of Seller to complete the transactions
contemplated by this Agreement.
(b) Except as set forth on Section 4.9(b) of the Disclosure Schedule,
to the Knowledge of Seller, (i) neither the Company, any Subsidiary, a Company
Fund nor the Company Trust has been the subject of any investigation by any
Governmental Authority since September 1, 2003, and (ii) neither the Company,
any Subsidiary, a Company Fund nor the Company Trust has been the subject of any
inquiry or enforcement action by the general counsel's office or the division of
enforcement of any Governmental Authority since September 1, 2003.
22
Section 4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the Disclosure Schedule contains a list of all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other employee
compensation and fringe benefit plans or arrangements (including all deferred
compensation, bonus, incentive and stock compensation plans but not including
any employment Contract or any Contract providing retention, severance or
guaranteed aggregate bonus payments, which is not an Employer Contract)
maintained or contributed to by the Company or any Subsidiary for the benefit of
their employees (collectively, the "Company Plans"). With respect to each
Company Plan, true and complete copies of the following documents have been
furnished to Buyer or were made available for inspection by Buyer prior to the
date hereof, to the extent in each case that such documents exists: (i) current
plan documents, plan amendments, and any other documents that establish the
existence of the plan or arrangement, including any funding instruments; (ii)
current summary plan descriptions and summaries of material modifications, if
any; (iii) the most recent tax qualified determination letters, if any, received
from (or applications pending with) the Internal Revenue Service; and (iv) the
most recent Form 5500 Annual Reports and, to the Knowledge of Seller, the most
recent financial statements and actuarial valuations prepared by third-party
actuaries in connection with such plans. With respect to employees of the
Company or any Subsidiary, Seller has no express or implied commitment to (i)
create, incur liability with respect to or cause to exist any other employee
benefit plan, program or arrangement, (ii) increase levels of compensation or
benefits to any individual, (iii) enter into any contract or agreement to
provide compensation or benefits to any individual or (iv) modify, change or
terminate any Company Plan (other than as provided in this Agreement).
(b) Each Company Plan has been administered in compliance with its
terms and with the requirements of ERISA and the Code except, in each case, for
any noncompliance which would not reasonably be expected to have an adverse
effect on any Subsidiary or the Company that is material to the Company and its
Subsidiaries, taken as a whole. The IRS has issued a favorable determination
letter with respect to each Company Plan intended to qualify under Section
401(a) of the Code and the related trust that has not been revoked, and, to the
Knowledge of Seller, there are no existing circumstances, and no events have
occurred, that could adversely affect the qualified status of any such Company
Plan or the related trust. No Company Plan is subject to Title IV of ERISA or
the minimum funding requirement of Section 302 of ERISA or Section 412 of the
Code.
(c) To the Knowledge of Seller, there are no investigations or
termination proceedings by any Governmental Authority or involving any Company
Plan, nor has there occurred any nonexempt "prohibited transaction" (within the
meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any
Company Plan, except, in each case, for any noncompliance which would not
reasonably be expected to have an adverse effect on any Subsidiary or the
Company that is material to the Company and its Subsidiaries, taken as a whole.
23
(d) No Company Plan is a "multiemployer plan" (as defined in Section
3(37) of ERISA).
(e) There does not now exist, nor do any circumstances exist that
could reasonably be expected to result in, any Controlled Group Liability
except, in each case, for any circumstances which would not reasonably be
expected to have an adverse effect on any Subsidiary or the Company that is
material to the Company and its Subsidiaries, taken as a whole. Without limiting
the generality of the foregoing, neither the Company, its Subsidiaries, nor any
entity that, together with the Company or any Subsidiary of the Company, would
be treated as a single employer under Section 414 of the Code (an "ERISA
Affiliate"), has engaged in any transaction described in Section 4069 or Section
4204 or 4212 of ERISA. For purposes hereof, "Controlled Group Liability" means
any and all liabilities (a) under Title IV of ERISA, (b) under the minimum
funding requirements of Section 302 of ERISA or Section 412 of the Code, (c)
under Section 4971 of the Code and (d) as a result of a failure to comply with
the continuation coverage requirements of Section 601 et seq. of ERISA and
Section 4980B of the Code.
(f) Except as set forth on Section 4.10(f) of the Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any material payment
(including severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of the Company or any Subsidiary
under any Company Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Company Plan or (iii) result in any acceleration of
the time of payment or vesting of any material benefits.
(g) None of the Company Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Subsidiary.
(h) To the Knowledge of Seller, Section 4.10(h) of the Disclosure
Schedule lists the 2005 annual salary rate, 2004 bonus and targeted 2005 bonus,
the date of employment and a description of the position of each current
salaried employee, officer, director, consultant or agent who is employed or
otherwise engaged by the Company or any Subsidiary with annual base compensation
in excess of $100,000.
Section 4.11 Taxes. Except as set forth on Section 4.11 of the
Disclosure Schedule:
(a) all material Tax Returns required to be filed by or on behalf of,
or including, the Company or any Subsidiary (including the consolidated federal
income Tax Return of Parent and any state, local or foreign income Tax Return
that includes or should include the Company or any Subsidiary on a consolidated,
combined or unitary basis) have been timely filed (taking into account
extensions) with the appropriate Tax Authority and such Tax Returns were true
and complete in all material respects;
24
(b) all material Taxes shown as due on such Tax Returns (or otherwise
due) have been timely paid in full;
(c) there are no Liens (other than Permitted Liens) on any of the
assets of the Company or its Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax;
(d) there are no written claims, actions or proceedings pending or, to
the Knowledge of Seller, threatened for the assessment or collection of any
material Taxes against the Company or any Subsidiary;
(e) any power of attorney granted with respect to any matter relating
to Taxes of the Company or any Subsidiary has been terminated or will be
terminated prior to Closing;
(f) (i) Section 4.11(f) of the Disclosure Schedule lists all material
income, franchise and similar Tax Returns (federal, state, local and foreign)
filed with respect to each of the Company and its Subsidiaries for taxable
periods ended on or after December 31, 2001, and indicates all such material Tax
Returns that are currently the subject of audit, and (ii) Seller has made
available to Buyer correct and complete copies of all material (A) federal,
state and foreign income, franchise or similar Tax Returns (in the case of any
consolidated, combined or unitary Tax Returns that include entities other than
the Company and its Subsidiaries by way of pro forma Tax Returns of the Company
and its Subsidiaries) with respect to the Company or any Subsidiary for taxable
periods ended on or after December 31, 2001 and (B) examination reports relating
to and statements of deficiencies assessed against or agreed to by the Company
or any Subsidiary for taxable periods ended on or after December 31, 2001.
(g) none of the material Tax Returns of the Company or any Subsidiary
is now under audit or examination by any Tax Authority and neither the Company
nor any Subsidiary is a party to any litigation relating to Taxes;
(h) there are no agreements or waivers providing for an extension of
time with respect to the assessment or collection of any material Tax of the
Company or any Subsidiary;
(i) neither the Company nor any Subsidiary is currently the
beneficiary of any extension of time within which to file any material Tax
Return, nor is any written request for such an extension pending;
(j) no written claim has been made by any Tax Authority in a
jurisdiction where the Company or any Subsidiary does not file a Tax Return that
it is or may be subject to taxation in that jurisdiction;
(k) no Closing Agreement pursuant to Section 7121 of the Code (or any
similar provision under requirements of Law) has been entered into that is
binding on the Company or any of the Subsidiaries with respect to any taxable
period after August 31, 2005;
25
(l) neither the Company nor any Subsidiary is a party to any written
Tax allocation or sharing agreement;
(m) the Company and its Subsidiaries have complied, in all material
respects, with all Laws relating to the withholding of Taxes and information
reporting with respect to Taxes;
(n) since the acquisition of the Company by The MONY Group Inc.,
neither the Company nor any Subsidiary has been a member of an affiliated or
consolidated group for Tax purposes other than a group of which The MONY Group
Inc., Seller or Parent is the parent, and, to the Knowledge of Seller, prior to
the acquisition of the Company by The MONY Group Inc., neither the Company nor
any Subsidiary was a member of any such group other than a group of which the
Company was the parent;
(o) neither the Company nor any Subsidiary has constituted a
"distributing corporation" or a "controlled corporation" in any distribution of
stock intended to qualify under Section 355(a) of the Code within the two (2)
year period ending on the date of this Agreement;
(p) neither the Company nor any Subsidiary has engaged in any "listed
transaction" as defined in Treasury regulation section 1.6011-4(b)(2), and
neither the Company nor any Subsidiary has promoted, marketed, offered to sell,
sold or advised in respect of any "listed transaction";
(q) set forth on Section 4.11(q) of the Disclosure Schedule is a list
of transactions with respect to which the Company or any of its Subsidiaries
filed a statement pursuant to Treasury regulations section 1.6011-4, and to the
Knowledge of Seller such list reflects all transactions the Company or its
Subsidiaries were required to file a statement with respect to; and
(r) (i) Seller, the Company and each Subsidiary listed on Section
4.11(r) of the Disclosure Schedule are members of an "affiliated group" within
the meaning of Section 1504(a) of the Code and Parent is the "common parent" of
such affiliated group, (ii) Parent has filed, or will file prior to the Closing,
a consolidated U.S. federal income Tax Return with the Company and each of its
Subsidiaries listed on Section 4.11(r) of the Disclosure Schedule as members for
the taxable year ending December 31, 2004, and (iii) Parent is eligible to make
an election under Section 338(h)(10) of the Code with respect to the Company and
each of the Subsidiaries listed on Section 4.11(r) of the Disclosure Schedule,
provided, that no representation is made in respect of any comparable election
under foreign, state or local Tax Law.
Section 4.12 Environmental Matters.
(a) Except as set forth on Section 4.12(a) of the Disclosure Schedule
or as would not reasonably be expected to have a Material Adverse Effect, the
Company and its Subsidiaries are in compliance with all Environmental Laws.
26
(b) To the Knowledge of Seller, except as set forth on Section 4.12(b)
of the Disclosure Schedule, (i) the Company and each Subsidiary possess all
material Permits necessary under Environmental Laws for it to own its assets and
operate its business as currently conducted, (ii) all such material Permits are
in full force and effect, and (iii) except as would not reasonably be expected
to have an adverse effect on any Subsidiary or the Company that is material to
the Company and its Subsidiaries, taken as a whole, there are no lawsuits or
other proceedings pending or threatened before any Governmental Authority that
seek the revocation, cancellation, suspension or adverse modification of such
Permits.
(c) Except as set forth on Section 4.12(c) of the Disclosure Schedule
or as would not reasonably be expected to have an adverse effect on any
Subsidiary or the Company that is material to the Company and its Subsidiaries,
taken as a whole, (i) there are no lawsuits or actions under Environmental Laws
before any Governmental Authority pending or, to the Knowledge of Seller,
threatened by any Person against the Company or any Subsidiary and (ii) there is
no order or unsatisfied judgment from any Governmental Authority under
Environmental Laws that would reasonably be expected to have a Material Adverse
Effect.
(d) To the Knowledge of Seller, Hazardous Materials are not present
at, on, under or emanating to or from any of the real property owned, leased or
subleased by the Company or its Subsidiaries, or during the Company's ownership
or occupancy of such property, on any property formerly owned, leased, used or
occupied by the Company, except as would not reasonably be expected to have an
adverse effect on any Subsidiary or the Company that is material to the Company
and its Subsidiaries, taken as a whole.
(e) Except as set forth in this Section 4.12, Seller makes no
representation or warranty whatsoever relating to any environmental matters
(including Hazardous Materials and Environmental Law).
Section 4.13 Compliance with Laws. Except with respect to matters set
forth on Section 4.13 of the Disclosure Schedule, the Company, its Subsidiaries,
the Company Funds and the Company Trust are currently in compliance with all
applicable Laws, except, in each case, for any noncompliance which would not
reasonably be expected to have an adverse effect on any Subsidiary or the
Company that is material to the Company and its Subsidiaries, taken as a whole.
Except with respect to matters set forth on Section 4.13 of the Disclosure
Schedule, to the Knowledge of Seller, during the period from September 1, 2003
until the date hereof, the Company, its Subsidiaries, the Company Funds and the
Company Trust have been operating in compliance with (i) all applicable
securities, insurance and investment-related Laws in a manner that was
reasonable at the time when compared to the compliance standards and practices
of the entities set forth in Exhibit K, considered as a whole, and (ii) all
other applicable Laws, except in the case of clause (ii) for any noncompliance
that would not reasonably be expected to have an adverse effect on any
Subsidiary or the Company that is material to the Company and its Subsidiaries,
taken as a whole.
27
Section 4.14 Permits. Except with respect to Permits necessary under
Environmental Laws (as to which certain representations and warranties are made
pursuant to Section 4.12), the Company, its Subsidiaries and the Company Funds
and the Company Trust possess all Permits necessary for them to own their assets
and operate their businesses as currently conducted, except where the failure to
possess such Permits would not reasonably be expected to have an adverse effect
on any Subsidiary or the Company that is material to the Company and its
Subsidiaries, taken as a whole. To the Knowledge of Seller, (a) all such Permits
are in full force and effect and (b) there are no lawsuits or other proceedings
pending or threatened in writing before any Governmental Authority that seek the
revocation, cancellation, suspension or adverse modification thereof, except as
would not reasonably be expected to have an adverse effect on any Subsidiary or
the Company that is material to the Company and its Subsidiaries, taken as a
whole.
Section 4.15 Insurance. Section 4.15 of the Disclosure Schedule sets
forth a summary description of all material policies of property, fire and
casualty, product liability, workers' compensation and other insurance held by
or for the benefit of the Company or its Subsidiaries as of the date of this
Agreement (the "Policies"). There are no open claims with respect to the
Policies, and to the Knowledge of Seller, no event or circumstance exists that
could give rise to a claim under any Policy.
Section 4.16 Labor Relations. As of the date of this Agreement, none
of the Company and its Subsidiaries (a) is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any of its Subsidiaries and, to the Knowledge of Seller, there are no
organizational campaigns, petitions or other unionization activities focusing on
persons employed by the Company or any of its Subsidiaries which seek
recognition of a collective bargaining unit and (b) is not subject to any
strikes, material slowdowns or material work stoppages pending or, to the
Knowledge of Seller, threatened in writing between the Company or any of its
Subsidiaries and any group of their respective employees, except, in each case,
as would not reasonably be expected to have an adverse effect on any Subsidiary
or the Company that is material to the Company and its Subsidiaries, taken as a
whole.
Section 4.17 Bank Accounts. To the Knowledge of Seller, neither the
Company nor any of its Subsidiaries maintains any bank account outside of the
United States.
Section 4.18 Real Property; Leases.
(a) Section 4.18(a)(i) of the Disclosure Schedule contains a true,
correct and complete list of (i) all leases, subleases and other occupancy
agreements relating to the real property of the Company or its Subsidiaries
listed in Section 4.18(a)(ii) of the Disclosure Schedule (the "Leased Real
Property") and (ii) with respect to each of the Leased Real Properties, all
existing leases, subleases, licenses, other occupancy agreements, estoppel
certificates and nondisturbance agreements to which the Company or any of its
Subsidiaries is a party as lessor or lessee thereunder or by which the Company
or any of its Subsidiaries is bound as lessor or lessee thereunder, and all
amendments, modifications, extensions and supplements thereto (collectively, the
"Tenant Leases"), regardless of whether the terms thereof have commenced. To the
Knowledge of Seller, Section 4.18(a)(iii) of the Disclosure Schedule contains,
in all material respects, a true, correct and complete list of each location at
which the Company or any of its Subsidiaries leases or subleases real property.
Except as set forth in Section 4.18(a)(iv) of the Disclosure Schedule, neither
the Company nor any Subsidiary owns any real property.
28
(b) Except as set forth on Section 4.18(b) of the Disclosure Schedule,
to the Knowledge of Seller, with respect to each lease or sublease relating to
any of the real property leased or subleased by Company or its Subsidiaries, (i)
such lease or sublease is legal, valid, binding, enforceable and in full force
and effect and (ii) there exists no material default under any such lease or
sublease by the Company or any Subsidiary which has not been cured and there has
not occurred any event that (with the lapse of time or the giving of notice or
both) would constitute a material default on the part of the Company or any of
its Subsidiaries under any such lease or sublease.
(c) Except as would not reasonably be expected to have an adverse
effect on any Subsidiary or the Company, all Leased Real Property is in good
operating condition, subject to normal wear and tear and normal industry
practice with respect to maintenance.
(d) Except as set forth in Section 4.18(d)(i) of the Disclosure
Schedule, no tenant under any Tenant Lease for which the Company or a Subsidiary
(each a "Company Tenant") is the lessee has paid rent more than one month in
advance or is in arrears of rents or other payments due under the Tenant Leases
and no security deposits held under the Tenant Leases have been applied. To the
Knowledge of Seller, except in each case as would not reasonably be expected to
have an adverse effect on the Company or any Subsidiary in any material respect,
(x) no Company Tenant is in default and there has not occurred any event that
(with the lapse of time or the giving of notice or both) would constitute a
default under any Company Tenant's Tenant Lease. Except as otherwise set forth
in Section 4.18(d)(ii) of the Disclosure Schedule, all leasing, brokerage,
finder and other similar fees and commissions which are due and payable by the
Company with respect to the Tenant Leases for Company Tenants have been paid in
full.
Section 4.19 Personal Property. Except as set forth on Section 4.19 of
the Disclosure Schedule or as would not reasonably be expected to have an
adverse effect on any Subsidiary or the Company that is material to the Company
and its Subsidiaries, taken as a whole, the Company and each Subsidiary has (a)
good and marketable title to all of the personal property purported to be owned
by it, (b) good and marketable title to the lessee interest in all personal
property purported to be leased by it and (c) full right to hold and use all of
the personal property used in or necessary to its businesses, each as currently
conducted, and in each case, free and clear of all Liens except for Permitted
Liens. Except for assets or properties required to provide support services
pursuant to Section 6.9, as of the Closing Date, there will be no material
assets or properties that are used in or necessary for the conduct of the
business of the Company or any Subsidiary as presently conducted that are owned,
leased or otherwise held by Seller or any Affiliate of Seller (other than the
Company and its Subsidiaries).
29
Section 4.20 Derivative Instruments. As of the date of this Agreement,
each Derivative Instrument, whether entered into for the account of the Company
or one of its Subsidiaries (which term, for purposes of this Section 4.20, does
not include any Investment Company or other collective investment vehicle) or on
a solicited basis for the account of a customer of the Company or one of its
Subsidiaries, was entered into in the ordinary course of business and in
accordance with applicable Laws and accounting standards and, to the Knowledge
of Seller, in accordance with prudent business practice and with counterparties
believed to be financially responsible at the time. The Company and each of its
Subsidiaries have duly performed all of their respective obligations under each
such Derivative Instrument to the extent that such obligations to perform have
accrued, and there are no breaches, violations or defaults of such by the
Company or any of its Subsidiaries and, to the Knowledge of Seller, there are no
breaches, violations or defaults or allegations or assertions of such by any
other party thereunder, except, in each case, as would not reasonably be
expected to have an adverse effect on any Subsidiary or the Company that is
material to the Company and its Subsidiaries, taken as a whole.
Section 4.21 Investment Advisory Activities. Except, in each case, as
would not reasonably be expected to have an adverse effect on any Subsidiary or
the Company that is material to the Company and its Subsidiaries, taken as a
whole:
(a) each of the Investment Companies (or the trust or corporation of
which it is a series) that is registered or required to be registered under the
Investment Company Act (a "Company Fund") is governed by a board of trustees or
directors (a "Fund Board") that satisfies the fund governance standards as
defined in clauses (7)(i) through (vii) of Rule O-1 under the Investment Company
Act;
(b) to the Knowledge of Seller, the Fund Boards operate in conformity
with the requirements and restrictions of the Investment Company Act;
(c) the Company and its Subsidiaries have managed or sub-advised and,
to the extent applicable, operated each Company Fund (which, for purposes of
this Section 4.21(c), shall include Company Funds that are sub-advised by the
Company or any of its Subsidiaries) in compliance with its respective
objectives, policies and restrictions, including those set forth in the
applicable prospectus and registration statement, if any, for that Company Fund;
and
(d) each material Client Contract (i) has been duly authorized,
executed and delivered by the Company or its Subsidiary, as the case may be;
(ii) is a valid and legally binding agreement, enforceable against the Company
or its Subsidiary which is a party thereto, and, to the Knowledge of Seller,
each other party thereto; and (iii) complies in all respects with applicable
Law. Neither the Company nor any Subsidiary is in material breach of any such
material Client Contract.
30
Section 4.22 Books and Records. The books of account, minute books,
stock record books and other records of the Company and each Subsidiary are
complete and correct in all material respects and, have been maintained in
accordance with practices that are generally applicable to Seller and its
subsidiaries. Complete and accurate copies of all minute books of the Company
and Advest Inc. for the past five (5) years have been made available to Buyer.
Section 4.23 No Other Representations or Warranties.
(a) Notwithstanding anything to the contrary herein, it is the
explicit intent of each Party, and the Parties hereby agree, that none of Seller
or any of its Affiliates or Representatives has made or is making any
representation or warranty whatsoever, express or implied, written or oral,
including any implied representation or warranty as to the condition,
merchantability, usage, suitability or fitness for any particular purpose with
respect to the Shares, the Company and its Subsidiaries, their assets, or any
part thereof, except those representations and warranties contained in this
Agreement, and without in any way limiting the foregoing, Seller makes no
representation or warranty to Buyer with respect to any financial projections,
forecasts, budgets or the adequacy of future capital expenditures relating to
the Company or its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES RELATING TO BUYER
Except as otherwise disclosed to Seller in a schedule delivered to
Seller by Buyer prior to the execution of this Agreement (it being understood
that disclosure in one section shall be deemed to be disclosure for any other
section as to which the applicability is reasonably apparent from the face of
the disclosure), Buyer hereby represents and warrants to Seller as follows:
Section 5.1 Organization of Buyer; Authority. Buyer is a corporation,
duly organized, validly existing and in good standing under the Laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Buyer is a registered broker and dealer as defined in Sections
3(a)(4) and 3(a)(5) of the Exchange Act.
Section 5.2 Authorization; Enforceability. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
all obligations to be performed by it hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by all requisite corporate action on the part of
Buyer. This Agreement has been duly and validly executed and delivered by Buyer,
and, assuming the due authorization, execution and delivery of this Agreement by
Seller, this Agreement constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar Laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
31
Section 5.3 No Conflict. The execution and delivery of this Agreement
by Buyer and the consummation of the transactions contemplated hereby by Buyer,
assuming all required filings, consents, approvals authorizations and notices
set forth on Schedule 5.3 (collectively, the "Buyer Approvals") have been made,
given or obtained, does not and shall not:
(a) violate or conflict with any Organizational Document of Buyer;
(b) violate or conflict with, in any material respect, any Law
applicable to Buyer or any of its assets, properties or businesses or require
any filing with, consent, approval or authorization of, or notice to, any
Governmental Authority; or
(c) (i) conflict with, result in any breach of, constitute a default
(or event which after notice or lapse of time or both, would become a default)
under, or require any consent under any Contract, to which Buyer is a party or
by which Buyer may be bound, (ii) result in the termination of any such
Contract, (iii) result in the creation of any Lien (other than Permitted Liens)
upon any of the properties or assets of Buyer or (iv) constitute an event which,
after notice or lapse of time or both, would result in any such breach,
termination or creation of a Lien upon any of the properties or assets of Buyer;
except in the case of clause (c) above, as would not reasonably be expected to
have a material adverse effect on Buyer or the ability of Buyer to enter into
and perform its obligations under, and to consummate the transactions
contemplated by, this Agreement.
Section 5.4 Litigation. There is no material lawsuit or action before
any Governmental Authority (or investigation or inquiry by any Governmental
Authority, in each case, with respect to which written notice has been received)
pending or, to the Knowledge of Buyer, threatened by any Person against Buyer
that has, has had or would reasonably be expected to have a material adverse
effect on the ability of Buyer to perform its obligations under this Agreement
or would reasonably be expected to prevent or materially impede the ability of
Buyer to complete the transactions contemplated by this Agreement. There is no
order or unsatisfied judgment from any Governmental Authority binding upon Buyer
that has, has had or would reasonably be expected to materially delay
consummation of the transactions contemplated by this Agreement or prevent or
materially impede the ability of Buyer to complete the transactions contemplated
by this Agreement.
Section 5.5 Brokers' Fees. No broker, finder, investment banker or
other Person is entitled to any brokerage fee, finders' fee or other commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by, or on behalf, of Buyer.
32
Section 5.6 Financial Ability. Buyer has cash or cash equivalents on
hand sufficient to fund the consummation of the transactions contemplated by
this Agreement and satisfy all other costs and expenses arising in connection
therewith.
Section 5.7 Investment Representation. Buyer is purchasing the Shares
for its own account with the present intention of holding the Shares for
investment purposes and not with a view to or for sale in connection with any
public distribution of the Shares in violation of any federal or state
securities Laws. Buyer acknowledges that the Shares have not been registered
under applicable federal and state securities Laws and that the Shares may not
be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of unless such transfer, sale, assignment, pledge, hypothecation or
other disposition is registered under applicable federal and state securities
Laws or pursuant to an exemption from registration under applicable federal and
state securities Laws.
Section 5.8 Accredited Investor. Buyer (a) is an "accredited investor"
as such term is defined in Rule 501(a) under the Securities Act and (b) has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Shares.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business. Seller covenants and agrees that,
except as described on Section 6.1 of the Disclosure Schedule, from the date
hereof until the Closing, neither the Company nor any Subsidiary shall conduct
its business other than in the ordinary course and consistent with the Company's
and such Subsidiary's past practice. Without limiting the generality of the
foregoing, except as described on Section 6.1 of the Disclosure Schedule, as
expressly contemplated by this Agreement or as consented to by Buyer in writing,
(a) Seller shall cause the Company and each Subsidiary to operate its business
in the ordinary course and consistent with the Company's and such Subsidiary's
past practice; (b) Seller shall cause each of the Company and its Subsidiaries
to use its commercially reasonable efforts to (i) preserve intact its business,
including its material Permits and its relationship with customers, suppliers
and others having business relationships with the Company or any Subsidiary,
(ii) exercise (but only after written notice to Buyer and following either (A)
Buyer's failure to provide a written response within ten (10) Business Days
following such notice or (B) receipt of Buyer's prior written approval) any
rights of renewal pursuant to the terms of any lease or sublease of real
property or any Contract described in Section 6.1(c)(x) that, in each case, by
their terms would otherwise expire; provided that any failure to comply with the
obligations contained in this clause (ii) from the date of this Agreement until
ten (10) Business Days following such date shall not constitute a breach or
violation of such obligations, (iii) not engage in any practice, take any
action, fail to take any action or enter into any transaction which would cause
a failure of the conditions set forth in Section 8.2(a), (iv) not terminate the
employment of (A) any employee listed in Exhibit E or (B) any employee whose
Employer Contract is listed on Section 4.7(a)(iv)(A)(2) of the Disclosure
33
Schedule, except for good reason after reasonable consultation with Buyer and
(c) Seller shall cause the Company and each of its Subsidiaries not to:
(i) amend, restate or otherwise change its Organizational
Documents;
(ii) make any distribution or declare, pay or set aside any
dividend (in cash or property) with respect to, or split, combine,
redeem, reclassify, purchase or otherwise acquire, directly or
indirectly, any equity interests or shares of capital stock of, or
other equity or voting interest in, the Company or any Subsidiary, or
make any other changes in the capital structure of the Company or any
Subsidiary; provided that Seller may cause the Company to distribute
cash to Seller in an amount equal to the reserves for current Taxes
payable and contingent Taxes (the "Tax Reserve") on the August Balance
Sheet, such reserves with respect to current Taxes to be used by
Seller to satisfy payment obligations under Section 7.2(b); provided,
further, however, that if the August Balance Sheet is not finalized
prior to Closing, Buyer shall pay Seller an amount equal to the Tax
Reserve promptly upon finalization of the August Balance Sheet in lieu
of any distribution by the Company to Seller with respect to such
reserve;
(iii) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (A) any equity interest or capital
stock of the Company or any Subsidiary, (B) any equity rights in
respect of, security convertible into, exchangeable for or evidencing
the right to subscribe for or acquire either (x) any equity interest
or shares of capital stock of the Company or any Subsidiary or (y) any
securities convertible into, exchangeable for, or evidencing the right
to subscribe for or acquire any shares of the capital stock of, or
other equity or voting interest in, the Company or any Subsidiary, (C)
any instruments of Indebtedness (other than in the Company's or such
Subsidiary's ordinary course of business consistent with past
practice) or (D) any Derivative Instruments (other than in the
Company's or such Subsidiary's ordinary course of business consistent
with past practice);
(iv) materially change its accounting methods, policies or
practices, except as required by applicable Law or GAAP;
(v) except as required pursuant to Law, an existing Company
Plan or Contract, (A) make or agree to make any material increase in
wages, salaries, compensation, pension or other fringe benefits or
perquisites payable to any director, officer or employee, including
any investment professional, (B) grant or agree to grant any severance
or termination pay or enter into any Contract to make or grant any
severance or termination pay, or pay or agree to pay any bonus or
other incentive compensation to any director, officer or employee,
including any investment professional, (C) grant or agree to grant or
accelerate the time of vesting or payment of any benefits or awards
under a Company Plan or other equity interests of the Company or any
Subsidiary, (D) loan (other than margin loans within a brokerage
account in the Company's or such Subsidiary's ordinary course of
business consistent with the past practice or loans to newly hired
brokers), amend any loan, or advance money or other property to any
employee, (E) establish, adopt, amend, modify or terminate any Company
Plan in any material respect or (F) enter into or materially amend any
employment, consulting, service or similar contracts (other than
agreements for newly hired employees in the Company's or such
Subsidiary's ordinary course of business consistent with past practice
with an annual base and incentive compensation opportunity not to
exceed $250,000);
34
(vi) other than in the ordinary course of business
consistent with past practice, acquire or dispose of, whether by
purchase, merger, consolidation or sale, lease, pledge or other
encumbrance of stock or assets or otherwise, any interest in any (A)
corporation, partnership or other Person or (B) assets comprising a
business or any other property or assets, in a single transaction or
in a series of transactions;
(vii) other than in the ordinary course of business
consistent with past practice, sell, assign, pledge, dispose of,
transfer, lease, license, guarantee or encumber, or authorize the
sale, pledge, disposition, transfer, lease, license, guarantee or
encumbrance of, any amount of property or assets;
(viii) liquidate, dissolve, recapitalize or otherwise wind
up its business or any portion thereof;
(ix) other than in the ordinary course of business
consistent with past practice, (A) incur, create, assume or otherwise
become liable for any Indebtedness, (B) make any material loans or
advances of borrowed money or material capital contributions to, or
material investments in, any other Person or (C) assume or guarantee
the obligations of any other Person that are material to the Company;
(x) enter into any Contract pursuant to which the Company or
any Subsidiary will make, or is reasonably expected to make, payments
of more than $500,000 in the aggregate per annum or $1,000,000 over
the life of such Contract, other than any Contract that can be
terminated by the Company or any Subsidiary upon thirty (30) days or
less notice without payment of penalty in excess of $200,000;
(xi) enter into, become subject to, amend, terminate or
modify in any material respect any Contract of the type described in
Section 4.7;
(xii) make or incur any capital expenditure requiring
payments in excess of $1,000,000 individually or $2,000,000 in the
aggregate;
(xiii) pay, discharge, settle or satisfy any material claim,
action, proceeding, liability or other obligation or waive any
material rights or material claims in respect of the business; or
35
(xiv) commit or agree, whether or not in writing, to do, or
to authorize, any of the foregoing.
Notwithstanding anything contained in this Agreement, Seller may (and may permit
the Company and its Subsidiaries to) (1) reduce, change, limit or terminate the
operations of the Capital Markets Business (including any winding-up of such
business and the sale of assets relating thereto) or take such other actions or
measures in connection with any of the foregoing with respect to the Capital
Markets Business or (2) terminate the employment of any employee of the Company
or any Subsidiary who renders all or substantially all of his or her services to
the Capital Markets Business (other than those employees whose names are set
forth in Exhibit F); provided that Seller shall not (i) allow the gross trading
position of the trading portfolios of the Capital Markets Business to exceed
their levels as of the date hereof or (ii) take any of the actions described in
clause (1) or (2) above that would adversely effect the Private Clients Business
in any material manner unless Buyer shall have furnished its prior written
consent, which consent shall not be unreasonably withheld or delayed.
Section 6.2 Access. From the date hereof through the Closing, upon the
prior request of Buyer, Seller shall afford to Buyer and its authorized
Representatives reasonable access, during normal business hours and in such
manner as not to unreasonably interfere with normal operation of the business of
the Company and its Subsidiaries, to the properties, books, contracts, records
and appropriate officers and employees of the Company and its Subsidiaries, and
shall furnish such authorized Representatives with all financial and operating
data and other information concerning the affairs of the Company and its
Subsidiaries as Buyer and such Representatives may reasonably request; provided
that neither Buyer nor its Representatives shall be permitted to collect or
analyze any environmental samples (including building materials, indoor and
outdoor air, surface and ground water, and surface and subsurface soils) without
the prior written consent of Seller, which consent may be withheld by Seller in
its sole discretion. Seller shall have the right to have a Representative
present at all times during any such inspections, interviews and examinations.
Additionally, Buyer shall hold, and shall cause its Affiliates and
Representatives to hold, in confidence all such information on the terms and
subject to the conditions contained in the Confidentiality Agreement and shall
use (and shall cause its Affiliates and Representatives to use) such information
solely for the purpose of considering the transactions contemplated hereby and
not for any other commercial purpose (including soliciting or inducing any
customer of the Company or any Subsidiary to establish an account, transfer an
account or make any investment with or through Buyer or any of its Affiliates or
Representatives). Notwithstanding the foregoing, Buyer shall have no right of
access to, and Seller shall have no obligation to provide to Buyer, information
relating to (a) bids received from others in connection with the transactions
contemplated by this Agreement and information and analysis (including financial
analysis) relating to such bids, (b) any information the disclosure of which,
after consultation with legal counsel, Seller reasonably believes would
jeopardize any privilege available to Seller, the Company or any Subsidiary or
any Seller Affiliate relating to such information or (c) any information the
disclosure of which, after consultation with legal counsel, Seller reasonably
believes would result in a violation of Law.
36
Section 6.3 Third-Party Approvals. Buyer and Seller shall (and shall
each cause their respective Affiliates to) use commercially reasonable efforts
to obtain all material consents and approvals of third parties that any of
Buyer, Seller or their respective Affiliates are required to obtain in order to
consummate the transactions contemplated hereby and maintain such consents in
full force and effect once obtained. Seller shall, and shall cause the Company,
to reasonably cooperate with Buyer in obtaining the consent of any party to the
Contracts set forth on Section 4.8(c) of the Disclosure Schedule whose consent
is required under such Contracts in connection with the consummation of the
transaction contemplated hereby; provided that Seller shall have no liability in
the event that such consents are not obtained so long as Seller shall have
complied with its obligations under this sentence.
Section 6.4 Regulatory Filings. From the date of this Agreement until
the Closing:
(a) Each of Buyer and Seller shall, and shall cause their respective
Affiliates to, (i) as promptly as practicable (and, with respect to any
continuance of membership submission with the NYSE and any filing pursuant to
the HSR Act, in no event later than twenty (20) Business Days after the date
hereof), make or cause to be made all filings required of such party or any of
its Affiliates under any Laws (including the rules and regulations of any
Governmental Authority) with respect to the transactions contemplated by this
Agreement and to pay any fees due of it in connection with such filings, as
promptly as is reasonably practicable, and in any event, (ii) cooperate with the
other Party and furnish all information in such Party's possession that is
necessary in connection with such other Party's filings, (iii) use commercially
reasonable efforts to cause the expiration of the notice or waiting periods
under the HSR Act and any other Laws (including the rules and regulations of the
applicable Governmental Authority) with respect to the transactions contemplated
by this Agreement as promptly as is reasonably practicable, (iv) promptly inform
the other Party of any communication from or to, and any proposed understanding
or agreement with, any Governmental Authority in respect of such filings, (v)
consult and cooperate with the other Party in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments and opinions made or
submitted by or on behalf of any Party in connection with all meetings, actions
and proceedings with Governmental Authorities relating to such filings, (vi)
comply, as promptly as is reasonably practicable, with any requests received by
such Party or any of its Affiliates under the HSR Act and any other Laws for
additional information, documents or other materials, (vii) use commercially
reasonable efforts to resolve any objections as may be asserted by any
Governmental Authority with respect to the transactions contemplated by this
Agreement and (viii) use commercially reasonable efforts to contest and resist
any action or proceeding instituted (or threatened in writing to be instituted)
by any Governmental Authority challenging the transactions contemplated by this
Agreement as violative of any Law. If a Party intends to participate in any
meeting with any Governmental Authority with respect to such filings, it shall
give the other Party reasonable prior notice of, and an opportunity to
participate in, such meeting. Without limiting any of Seller's obligations
contained in this Section 6.4, Buyer shall coordinate, and assume primary
37
responsibility for managing, any required continuance of membership or other
application, notice filing or other required submission (each in respect of the
transactions contemplated by this Agreement) with or to (i) the NYSE, (ii) the
NASD, (iii) any state securities commission or other authority and (iv) any
other applicable Self-Regulatory Organization. In connection with any such
continuance of membership or other application, notice filing, or other required
submission, Buyer shall (i) permit Seller and its counsel to review forms of all
materials to be submitted in connection therewith in advance, (ii) consider in
good faith the views of Seller and its counsel with respect thereto and (iii)
provide Seller and its counsel with copies of all materials submitted in
connection therewith and all correspondence from the applicable Governmental
Authority or Self-Regulatory Organization with respect thereto; provided,
however, that to the extent that any such materials contain information that
Buyer, in good faith, deems to be proprietary or competitively sensitive in
nature ("Proprietary Information"), Buyer shall not be required to provide any
portion of such materials which contains Proprietary Information to any Person
other than Seller's internal legal counsel and outside legal counsel and such
Persons shall not further disclose such materials to any other Person (except to
the extent required by Law); provided further that prior to any such disclosure
to Seller's outside legal counsel, such counsel shall acknowledge in writing
that it is bound by the terms and conditions of the Confidentiality Agreement as
if it were a Party thereto.
(b) In connection with any such filings, Buyer shall cooperate in good
faith with Governmental Authorities and undertake promptly any and all action
reasonably required to complete lawfully the transactions contemplated by this
Agreement, including proffering and consenting to a governmental order providing
for the sale or other disposition, or the holding separate, of particular
assets, categories of assets or lines of business, either of the Company's or
the Subsidiaries' or of Buyer or any of its Affiliates, except to the extent
such assets or lines of business are material in relation to the Company and its
Subsidiaries, taken as a whole. The entry by any Governmental Authority of a
governmental or regulatory order permitting the consummation of the transactions
contemplated hereby but requiring any of the assets or lines of business of
Buyer or its Affiliates (other than assets or lines of business that are
material in relation to the Company and its Subsidiaries, taken as a whole), to
be held separate thereafter (including the business and assets of the Company
and its Subsidiaries) shall not be deemed to be a failure to satisfy any of the
conditions set forth in Article VIII.
Section 6.5 Employee and Benefit Matters.
(a) For at least one (1) year following the Closing, Buyer shall
provide or cause to be provided to the individuals who, immediately prior to the
Closing, are employees of the Company or any Subsidiary, and following the
Closing, continue to be employees of Buyer or any of its subsidiaries ("Company
Employees"), the same base salary and opportunity to earn a similar bonus
provided immediately prior to the Closing by the Company to each Company
Employee and employee benefits that are comparable in the aggregate to those
provided to similarly situated employees of Buyer. The preceding sentence shall
not preclude Buyer or its subsidiaries at any time following the Closing from
terminating the employment of any Company Employee. Buyer shall honor or shall
cause its subsidiaries to honor, and nothing contained herein shall be construed
to limit, the rights and obligations of the Company, any of its Subsidiaries and
any current or former employee or other personnel (and, where applicable, the
dependents and beneficiaries of any such employees or other personnel) under
each Company Plan.
38
(b) Each Company Employee shall be given credit for all service with
the Company and its Subsidiaries and their respective predecessors under any
plans or arrangements providing vacation, sick pay, severance or retirement
benefits maintained by Buyer or any of its subsidiaries in which such Company
Employees participate for purposes of eligibility and vesting to the extent past
service was recognized for such Company Employees under the comparable plans of
the Company or any Subsidiary immediately prior to the Closing. Notwithstanding
the foregoing, nothing in this Section 6.5(b) shall be construed to require
crediting of service that would result in (i) duplication of benefits, (ii)
service credit for benefit accruals under a defined benefit pension plan, (iii)
service credit under a newly established plan for which prior service is not
taken into account, (iv) employer contributions for any 401(k) plan or defined
contribution or benefit plan or (v) service credit under any equity compensation
plan or (vi) service credit for purposes of eligibility and vesting under any
retiree medical plan or other retiree welfare plan.
(c) Buyer shall or shall cause its subsidiaries, to the extent
possible under the applicable contract, agreement or arrangement, (i) to waive
all limitations as to pre-existing conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Company Employees under any welfare benefit plans, programs or arrangements
offered by Buyer to the extent that such conditions, exclusions or waiting
periods did not apply to a Company Employee under the applicable welfare benefit
plans of the Company or a Subsidiary prior to the Closing and (ii) for the plan
year in which the Closing Date occurs, to credit each Company Employee with any
co-payments and deductibles paid prior to any such change in satisfying any
applicable deductible or out-of-pocket requirements after such change.
(d) Prior to the Closing, Seller shall cause the Company to take all
actions reasonably necessary to terminate the Advest Thrift Plan effective
immediately prior to the Closing, including adopting resolutions of the
Company's Board of Directors.
(e) Prior to the Closing Date, Buyer shall establish and maintain the
retention plan described in Exhibit G. The aggregate amount payable pursuant to
such retention plan shall not be less than the amount set forth in Exhibit G,
subject to participants meeting the retention and other requirements of such
retention plan. Such retention plan shall be effective upon the Closing and
contingent on the occurrence thereof.
(f) Prior to the Closing Date, Seller shall cause the Company to
establish and maintain the retention plan described in Exhibit H. The aggregate
amount payable pursuant to such retention plan shall not be less than the amount
set forth in Exhibit H, subject to participants meeting the retention and other
requirements of such retention plan.
39
(g) As soon as practicable following the date hereof, but not later
than October 31, 2005, Seller shall cause the Company to amend the Advest
Deferred Compensation Plans to provide that participants shall cease to accrue
benefits and shall not receive further service credit or income credit for
purposes of computing benefits thereunder as of October 31, 2005; provided that
participants shall continue to receive earnings credit on accrued benefits in
accordance with the applicable plan. Prior to the Closing or, if earlier,
December 31, 2005, Seller shall cause the Company to amend the AE Plan to
provide that, on or as soon as practicable following June 30, 2007, the benefits
then outstanding under the AE Plan shall be paid to participants in a lump sum,
and to provide that the exception in Section 3.4(e) applicable to certain
terminations of employment occurring following a change of control of the
Company shall not apply following the Closing. The amendments described in this
Section 6.5(g) shall be conditioned upon the occurrence of the Closing and upon
the participants providing any necessary consents thereto. Neither Seller's
compliance with the covenants in this Section 6.5(g) or the consequences thereof
shall constitute a breach of any representation or warranty or give rise to
indemnification under this Agreement.
Section 6.6 Intercompany Accounts. Except as set forth on Section 6.6
of the Disclosure Schedule or otherwise contemplated by this Agreement, at or
prior to the Closing, Seller shall have caused all intercompany accounts between
the Company or its Subsidiaries, on the one hand, and Seller and its Affiliates
(except the Company and its Subsidiaries) on the other hand, to have been
converted to equity or be eliminated without the transfer of cash from the
Company and its Subsidiaries and without the Company and its Subsidiaries
incurring or retaining any liability with respect thereto.
Section 6.7 Seller Marks.
(a) Except as provided in Sections 6.7(b) and (c) below, Buyer shall
obtain no right, title, interest, license or any other right whatsoever to use
the words AXA Financial; AXA Equitable Life Insurance Company; AXA Advisors,
LLC; Alliance Capital Management, L.P.; Xxxxxxx X. Xxxxxxxxx & Co., LLC; AXA
Distributors, LLC; Frontier Trust Company; Equitable Accumulator(R); MONY Life
Insurance Company; MONY Life Insurance Company of America and U.S. Financial
Life Insurance Company, the AXA and related logos or any trademarks containing
or comprising the foregoing, or any trademark confusingly similar thereto or
dilutive thereof (collectively, the "Seller Marks"). From and after the Closing,
Buyer agrees that it shall (i) cause the Company and each Subsidiary to cease
using the Seller Marks in any manner, directly or indirectly, (ii) remove,
strike over or otherwise obliterate all Seller Marks from all assets and all
other materials owned, possessed or used by the Company or any Subsidiary and
(iii) use commercially reasonable efforts to cause any third parties using or
licensing the Seller Marks on behalf of or with the consent of the Company or
any Subsidiary, to remove, strike over or otherwise obliterate all of the Seller
Marks from all materials owned, possessed or used by such third parties. The
Parties agree, because damages would be an inadequate remedy, that Seller shall
be entitled to seek specific performance and injunctive relief as remedies for
any breach thereof in addition to other remedies available at law or in equity.
40
(b) Permitted Transitional Use. Notwithstanding Section 6.7(a), Buyer
shall, for a period of forty-five (45) Business Days after the Closing Date (the
"Transition Period"), be entitled to use the Seller Marks in connection with
such limited uses as cannot reasonably be promptly terminated, including the
uses further specified in this Section 6.7(b) ("Limited Uses"), however, for the
avoidance of doubt, the use of the Seller Marks in connection with e-mail
addresses, and as a referral or pointer to the acquired website must be ceased
as promptly as possible, and in any event within thirty (30) days following the
Closing Date. Limited Uses shall include Buyer's use of the Company's and its
Subsidiaries' existing stocks of signs, letterheads, invoice stock,
advertisements and promotional materials, inventory and other documents and
materials ("Existing Stock") containing the Seller Marks. By the close of the
Transition Period, Buyer shall have caused the Company and its Subsidiaries to
remove, delete or obliterate all of the Seller Marks from such Existing Stock,
e-mail addresses, referrals and pointers, or to cease the use of the same.
(c) Permitted Nominative Use. Notwithstanding anything to the contrary
in this Agreement, Buyer shall have the right to: (i) keep records and other
historical or archived documents containing or referencing the Seller Marks,
(ii) refer to the historical fact that the business of the Company and its
Subsidiaries was previously conducted under the Seller Marks, provided that with
respect to any such reference, Buyer shall not use the Seller Marks as
trademarks or otherwise to promote any products or services and shall make
explicit that Buyer and its Affiliates are no longer affiliated with Seller or
any of Seller's Affiliates, and (iii) use the Seller Marks as otherwise
permitted under U.S. trademark law, including for example the lawful and
non-infringing use of such marks in comparative advertising.
Section 6.8 Books and Records. From and after the Closing:
(a) Seller and its Affiliates may retain a copy of any or all of the
data room materials and other books and records relating to the business or
operations of the Company and its Subsidiaries on or before the Closing Date.
(b) Buyer shall preserve and keep a copy of all data room materials
and all books and records relating to the business or operations of the Company
and its Subsidiaries on or before the Closing Date in Buyer's possession for a
period of at least seven (7) years after the Closing Date. After such seven (7)
year period, before Buyer shall dispose of any such data room materials or books
and records of or relating to the Capital Markets Business, Buyer shall give
Seller at least forty-five (45) days prior written notice to such effect, and
Seller shall be given an opportunity, at its cost and expense, to remove and
retain all or any part of such data room materials and books and records as
Seller may select. Upon reasonable advance notice and during normal business
hours, Buyer shall provide to Seller reasonable access to such data room
materials and books and records as remain in Buyer's possession and reasonable
access to the properties and employees of the Company and its Subsidiaries in
connection with matters relating to the business or operations of the Company
and its Subsidiaries on or before the Closing Date and any disputes relating to
this Agreement.
41
Section 6.9 Transitional Support.
(a) For a period of up to six (6) months from the Closing Date, Seller
agrees that it or its Affiliates will continue to provide the support services
to the Company and its Subsidiaries that are currently provided (and on
substantially the same terms, conditions, fees (less any service credits,
rebates or fee adjustments entitled to the Company from third party vendors or
as otherwise specified in the Manual, as defined below) and levels of service,
including frequency, functionality and quality, as such services are currently
being provided to the Company and its Subsidiaries) pursuant to (i) the Manual
of Procedures Relating to Infrastructure Technology Management Services, dated
January 1, 2005 (the "Manual"), promulgated under, and including, the Services
Agreement between The Equitable Life Assurance Society of the United States and
The Advest Group, Inc., dated July 8, 2004 (the "Services Agreement"), and (ii)
any other Contract in effect as of the date of this Agreement between or among
the Seller, Company and any of their Affiliates; provided that neither Seller
nor its Affiliates will be required to provide any services referred to in
Exhibit I as "Excluded Services." For purposes hereof, support services shall
include Information Technology ("IT"), personnel, property, management,
administrative and other corporate support services and any technology updates,
enhancements, improvements or upgrades in progress as of the Closing Date. The
fees referred to in the Manual shall be appropriately adjusted for the period
after the Closing Date to reflect (i) services referred to in the Manual that
are actually provided to the Company or its Subsidiaries after the Closing Date
pursuant to this Section 6.9(a) and (ii) the time period during which each such
service is provided. If the Company no longer wishes to receive certain services
set forth in the Manual at any time during the period referred to in this
clause, the Company shall give Seller at least forty-five (45) days prior
written notice thereof, and the fees (taking into account any applicable service
credits, rebates or fee adjustments) set forth in the Manual shall be reduced
proportionally or, if such fees were already paid, a refund shall be issued to
the Company for the pro rata share of the fees for the services no longer being
provided. Prior to the expiration of such six (6) month period, Buyer may elect,
by written notice to be delivered to Seller no later than twenty (20) Business
Days prior to such expiration, to extend such service period one time for an
additional six (6) months.
(b) During the period referred to in clause (a), including any
extension thereunder, upon the reasonable request of the Company, Seller or an
Affiliate of Seller (or, with the consent of the Company, which consent shall
not be unreasonably withheld, a third party contractor engaged by Seller) will
provide the Company with the following services: (i) the services listed in
Exhibit I (referenced in such section as "Included Services"); (ii) any services
referred to in the Manual and not provided pursuant to Section 6.9(a); and (iii)
other support services currently being provided to the Company or its
Subsidiaries by a third party contractor engaged by Seller or its Affiliates,
other than the Excluded Services. In addition, Seller or one of its Affiliates
(or, with the consent of the Company, which consent shall not be unreasonably
withheld, a third party contractor engaged by Seller) will provide additional
services, which shall be similar in scope and function to those services
contemplated by the immediately preceding clauses (i), (ii) or (iii), as shall
be reasonably requested by the Company; provided that Seller shall not be
required to perform any such additional services if Seller determines, in its
reasonable business judgment, that it does not have the capability or the
resources to perform such additional services, taking into account the Company's
willingness to pay Seller's reasonable fees, costs and expenses incurred in
connection with the provision of such additional IT services. All of the
services contemplated by this Section 6.9(b) shall be performed on such terms
and subject to such conditions as shall be mutually agreed in good faith by the
Parties; provided that such terms and conditions shall include the prompt
reimbursement of Seller's and its Affiliates' reasonable costs and expenses, but
not exceed such costs and expenses, incurred in connection with the provision of
such services, based on periodic invoices therefor to be submitted by Seller to
Buyer. The Buyer shall, or shall cause the Company, to promptly reimburse the
Seller for all such costs and expenses.
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(c) If, during the initial six (6) month transition period set forth
in Section 6.9(a), the Company identifies any Proprietary Rights, other than
trademarks, service marks, trade names, domain names, and corporate names, that
(1) are owned by or exclusively licensed to Seller or its Affiliates, (2) were
used by the Company as of the date hereof, (3) are reasonably necessary for the
business of the Company as conducted at the date hereof, and (4) in the case of
Proprietary Rights that are licensed to the Seller or an Affiliate, are
sublicensable to non-Affiliates by the terms of the relevant agreement, then the
Parties shall negotiate in good faith the terms and conditions of a
non-exclusive right and license to use such Proprietary Rights after the
transitional period, or in the case of Proprietary Rights owned by the Seller or
an Affiliate, a covenant not to xxx the Company or its Affiliates, solely in
connection with the operation of the Company's business and in any event only
for so long as the Company cannot with commercially reasonable efforts procure
equivalent rights from a third party. Any such licensed rights or covenant not
to xxx (which shall, in the case of Proprietary Rights sublicensed to the
Company pursuant to this Section 6.9(c), include any indemnities provided to the
Seller and permitted to be passed through to Buyer by the terms of the relevant
agreement, whereby Seller shall not be held responsible by Buyer for any claims
on the part of Buyer under such indemnities, but shall reasonably cooperate with
Buyer on its attempts to recover under such indemnities) shall not be
sublicensable by the Company or any of its Subsidiaries or used by any entity
other than the Company or any of its Subsidiaries (or if the Company is combined
with another entity, that part of such entity represented by the Company);
provided that the Company or any of its Subsidiaries may make available its
rights under this Section 6.9(c) to any third party consultant or contractor
engaged by the Company or any of its Subsidiaries in respect of the use of such
rights in the Company's business, and such rights shall only be available to
such third party consultant or contractor for such engagement. If, in the
context of such a negotiation, the Parties are unable to agree on the terms and
conditions of such a license, the Parties shall obtain an independent commercial
valuation of the license requested by Seller, and if the independent commercial
valuation is not acceptable to both Parties, the Parties shall thereafter submit
any remaining disputes about the terms and conditions to arbitration, the
outcome of which shall be determinative. Notwithstanding the foregoing, this
Section 6.9(c) shall not apply unless the Company, despite its reasonable
efforts, is unable to obtain commercially reasonable alternatives to such
Proprietary Rights. Notwithstanding the terms of Article IX, none of the Buyer
Indemnified Parties shall have any claim against Seller or its Affiliates in
respect of a breach or alleged breach of solely the representation set forth in
the first sentence of Section 4.8(c) with respect to any matter identified by
the Company under this Section 6.9(c) with respect to which Seller and its
Affiliates have complied with their obligations under this Section 6.9(c).
43
Section 6.10 Client Consents; Compliance with Investment Company Act
Section 15.
(a) Seller shall cause the Company to use its commercially reasonable
efforts to send, within a reasonable period following the date hereof (but in
any event prior to the Closing), to each Separate Account Client and Wrap Fee
Account a consent request (which consent request, to the extent permitted under
applicable Law, may be in the form of a negative consent request) to assignment
substantially in the form attached hereto as Exhibit J to the extent required by
Law. Seller agrees to cause the Company to use its commercially reasonable
efforts to obtain the consents of each Separate Account Client, Wrap Fee Account
and Investment Company (other than Company Funds, which are addressed in Section
6.10(b)), to any assignment of the applicable Client Contract, to take effect
upon the Closing.
(b) Seller shall cause the Company to use its commercially reasonable
efforts to seek, within a reasonable period following the date hereof (but in
any event prior to the Closing), the approval by the board of directors (or
equivalent) of each Company Fund (which, for purposes of this Section 6.10(b),
shall include Company Funds that are sub-advised by the Company or any of its
Subsidiaries) acting in accordance with Section 15(c) of the Investment Company
Act and Rule 15a-4 thereunder of interim investment advisory agreements with the
appropriate Subsidiary (including, if and to the extent applicable, interim
sub-advisory agreements between Buyer, the appropriate Subsidiary and the
investment adviser to the relevant Company Fund) with respect to each Company
Fund to be effective at the Closing Date (the "Interim Advisory Agreements").
Seller agrees to cause the Company to use its commercially reasonable efforts to
obtain such approvals as may be necessary to approve the Interim Advisory
Agreements with respect to the Company Funds.
(c) With respect to each Company Fund for which each approval
contemplated in Section 6.10(b) is obtained prior to the Closing, Seller agrees
to cooperate with Buyer's efforts to cause to be prepared and filed with the SEC
proxy materials for meetings of the shareholders of such Company Fund in order
that such meetings be held within 150 days following the Closing Date, at which
the approval of the shareholders of such Company Fund will be sought for new
advisory agreements with respect to such Company Fund and for such other matters
as may be required by the Investment Company Act.
(d) For the avoidance of doubt, none of the consents contemplated in
this Section 6.10 shall be a condition to Buyer's obligation to consummate the
transactions contemplated by this Agreement.
(e) Buyer acknowledges that Seller has entered into this Agreement in
reliance upon the benefits and protections provided by Section 15(f) of the
Investment Company Act. In that regard, Buyer shall not take, or fail to take,
any action not contemplated by this Agreement that would have the effect,
directly or indirectly, of causing the requirements of any of the provisions of
Section 15(f) of the Investment Company Act not to be met in respect of this
Agreement and the transactions contemplated hereby. In addition, Buyer shall
conduct its business and shall, subject to applicable fiduciary duties to the
Investment Company, use its reasonable best efforts to conduct its business, so
as to assure that, insofar as within the reasonable control of Buyer:
44
(i) for a period of three (3) years after the Closing Date,
at least seventy-five percent (75%) of the members of the Board of
Directors or trustees of each Investment Company that is registered
under the Investment Company Act and that continues following the
Closing Date its existing or a replacement Client Contract with Buyer,
are not (A) "interested persons" of the investment adviser or
investment sub-adviser of such Investment Company after the Closing
Date, or (B) "interested persons" of the present investment adviser or
investment sub-adviser of such Investment Company; and
(ii) there is not imposed on any Investment Company an
"unfair burden" as a result of the transactions contemplated by this
Agreement, any payments in connection therewith or any arrangements or
understandings applicable thereto.
Section 6.11 Further Assurances. Subject to the terms and conditions
of this Agreement, at any time or from time to time after the Closing, at any
Party's request and without further consideration, the other Party shall execute
and deliver to such Party such other instruments of sale, transfer, conveyance,
assignment and confirmation, provide such materials and information and take
such other actions and execute and deliver such other documents as such Party
may reasonably request in order to consummate the transactions contemplated by
this Agreement.
Section 6.12 Non-Competition: Non-Solicitation.
(a) Subject to Section 6.12(b), for a period of two (2) years after
the Closing (the "Restricted Period"), neither Seller nor any of its Affiliates
shall acquire or own securities having more than twenty percent (20%) of the
outstanding voting power of any Person listed in Exhibit K (each a "Competing
Business"), other than any acquisition or ownership of such securities made on
behalf of clients in the ordinary course of Seller's or such Affiliate's
investment management business.
(b) Notwithstanding anything in this Section 6.12 to the contrary,
Seller may, during the Restricted Period, acquire control of, or merge or
consolidate with, a Person that directly or indirectly owns a Competing Business
(an "Acquired Competing Business"); provided that within thirty (30) days of the
acquisition of such Person, Seller shall provide a notice to Buyer describing in
reasonable detail such Acquired Competing Business and Buyer shall have the
exclusive right for thirty (30) days thereafter to offer to purchase such
Competing Business (a "Buyer Offer"). If Seller does not accept the Buyer Offer,
Seller shall thereafter use commercially reasonable efforts to dispose of the
Acquired Competing Business as promptly as reasonably practicable.
45
(c) For the Restricted Period, Seller and its Affiliates shall not in
any way, directly or indirectly, knowingly solicit any officers, employees,
Representatives or agents of the Company or any Subsidiary (or any officer,
employee, Representative or agent of Buyer (or any successor thereto) if such
Person was an officer, employee, Representative or agent of the Company or any
Subsidiary immediately prior to the Closing) to leave the employ of the Company,
any Subsidiary or Buyer (or any successor thereto), as the case may be, or
violate the terms of their contracts, or any employment arrangements, with the
Company or any Subsidiary; provided, however, that the foregoing shall not be
construed to prohibit or restrict (i) any general solicitation or advertisement
not specifically targeted to or reasonably expected to specifically target
officers, employees or Representatives or agents of the Company or any
Subsidiary in respect of such matters that would violate this Section 6.12(c) or
(ii) the hiring of any officers or employees of the Company or any Subsidiary in
respect of which Buyer has terminated the employment with the Company and any
Subsidiary.
(d) Seller acknowledges that the covenants of Seller set forth in this
Section 6.12 are an essential element of this Agreement and that, but for the
agreement of Seller to comply with these covenants, Buyer would not have entered
into this Agreement. Seller acknowledges that this Section 6.12 constitutes an
independent covenant that shall not be affected by performance or nonperformance
of any other provision of this Agreement by Buyer. Seller has independently
consulted with its counsel and after such consultation agrees that the covenants
set forth in this Section 6.12 are reasonable and proper. Seller agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 6.12 are inadequate and that in addition thereto Buyer shall be entitled
to seek equitable relief, including injunction and specific performance, in the
event of any such breach.
Section 6.13 Insurance. Prior to the Closing, Seller shall purchase,
if available, such "tail" insurance coverage as Buyer may request for its
existing "claims made" director and officer, crimes/fidelity and professional
liability insurance policies; provided that, with respect to the purchase of
such insurance coverage, Buyer shall promptly reimburse Seller for all insurance
premiums and costs or expenses incurred by Seller in order to obtain such
insurance coverage.
Section 6.14 Inactive Entities. Prior to the Closing, Seller shall use
commercially reasonable efforts to cause the wind-up and dissolution of Advest
Transfer Services, Inc. and Advest Mortgages, Inc.
Section 6.15 Company Trust. Prior to the Closing, the Parties shall
cooperate in good faith to determine whether the Company or any Subsidiary is
permitted to hire the employees of the Company Trust and receive the assets of
the Company Trust in connection with the consummation of the transactions
contemplated hereby; provided that in the event that any such employees are
hired or any such assets are received by the Company or any Subsidiary, no
consideration in excess of the Purchase Price shall be required to be paid
therefor. Notwithstanding any provision contained in this Agreement, none of
Buyer, the Company or the Subsidiaries shall be required to hire any employees
of the Company Trust or receive any assets of the Company Trust.
46
ARTICLE VII
TAX MATTERS
Section 7.1 Section 338(h)(10) Election.
(a) Buyer, Parent and Seller shall join in timely making an election
under Section 338(h)(10) of the Code (the "Federal Election"), and, where
eligible to do so, any comparable election under foreign, state or local Tax Law
(the "Non-Federal Elections"), with respect to the Company and its Subsidiaries
listed on Schedule 4.11(r) (collectively, the "Elections"), and shall cooperate
in the completion and timely filing of any Tax forms or other documents required
for such elections in accordance with the provisions of Section 1.338(h)(10)-1
of the Treasury regulations (or any comparable provisions of foreign, state or
local Tax Law). Buyer and Seller agree that the Purchase Price and the
liabilities of the Company and its Subsidiaries listed on Section 4.11(r) of the
Disclosure Schedule (plus other relevant items) will be allocated to the assets
of the Company and its Subsidiaries listed on Section 4.11(r) of the Disclosure
Schedule for all applicable Tax purposes in a manner consistent with Section
338(h)(10) of the Code and the Treasury regulations thereunder. Within sixty
(60) calendar days after the Closing Date, Buyer shall provide Seller with a
proposed schedule (the "Allocation Schedule") allocating all such amounts as
provided herein. The Allocation Schedule shall become final and binding on the
Parties hereto (including the Company and its Subsidiaries) sixty (60) calendar
days after Buyer provides such schedule to Seller, unless Seller objects in
writing to Buyer, specifying the basis for its objection and preparing an
alternative allocation. If Seller does object, Buyer and Seller shall in good
faith attempt to resolve the dispute within sixty (60) calendar days of written
notice to Buyer of Seller's objection. Any such resolution shall be final and
binding on the Parties hereto (including the Company and its Subsidiaries). Any
unresolved disputes shall be promptly submitted to the Reviewing Accountants for
determination, which determination shall be made within thirty (30) calendar
days of such submission. The determination of the Reviewing Accountants shall be
final and binding on the Parties hereto (including the Company and its
Subsidiaries). Buyer and Seller will each pay one-half of the fees and expenses
of the Reviewing Accountants. Buyer and Seller shall cooperate with each other
and the Reviewing Accountants in connection with the matters contemplated by
this Section 7.1, including by furnishing such information and access to books,
records, personnel and properties as may be reasonably requested. Each of the
Parties hereto (including the Company and its Subsidiaries) agrees to (a)
prepare and timely file all applicable Tax Returns, including Form 8023 and Form
8883 (and all supplements thereto) in a manner consistent with the Allocation
Schedule as finalized and (b) act in accordance with the Allocation Schedule for
all applicable Tax purposes, unless otherwise required by Law. The Parties shall
revise the Allocation Schedule to the extent necessary to reflect any
adjustments to the Purchase Price as a result of payments made after the Closing
Date. In the case of any such payment, Buyer shall propose a revised Allocation
Schedule, and the Parties hereto shall follow the procedures outlined above with
47
respect to review, dispute and resolution in respect of such revision. For
purposes of this Agreement, the "Reviewing Accountants" shall be Ernst & Young
LLP or, if such accounting firm is unwilling or unable to serve in such
capacity, then an internationally-recognized independent accounting firm to be
jointly selected and retained by Seller and Buyer; provided that, if Seller and
Buyer are unable to agree on the accounting firm to act as the Reviewing
Accountants, then each of Seller and Buyer shall cause their respective outside
accounting or auditing firm to consult with each other and jointly recommend an
internationally-recognized independent accounting firm to act as the Reviewing
Accountants, and Buyer and Seller shall jointly retain such recommended
accounting firm to serve as the Reviewing Accountants.
(b) Seller shall pay and shall indemnify Buyer for all Taxes (federal,
state, local or foreign) arising as a result of (i) the sale of assets deemed to
occur by virtue of the Elections and (ii) the liquidations deemed to occur by
virtue of the Elections. For purposes of the preceding sentence, the amount of
Taxes arising as a result of the Elections shall be equal to the difference
between (i) the Taxes that are due and payable by, or with respect to the income
or gain of, the Company and the Subsidiaries for the period in which the sale of
assets and liquidations are deemed to occur and (ii) the Taxes that would have
been due and payable by, or with respect to the income or gain of, the Company
and the Subsidiaries for such period absent the Elections.
(c) If the Federal Election is not effective as a result of an action
or omission by Parent with respect to the making of the Federal Election, or
inability of Parent to make such election, or any Non-Federal Election is not
effective as a result of an action or omission by Parent with respect to the
making of such Non-Federal Election, Seller shall indemnify and hold harmless
Buyer on a net after-Tax basis for the loss of any Tax benefits Buyer would have
realized had such election been effective, provided, that Seller shall not be
liable and shall not be required to indemnify Buyer for the failure of the
Federal Election or any Non-Federal Election to be effective as a result of an
action or omission by Buyer with respect to the making of any such Election or
inability of Buyer to make any such Election.
Section 7.2 Tax Returns and Payments.
(a) From the date of this Agreement through and after the Closing
Date, Seller shall prepare and file or otherwise furnish in proper form to the
appropriate Governmental Authority (or cause to be prepared and filed or so
furnished) in a timely manner all Tax Returns relating to the Company and the
Subsidiaries that are due on or before or relate to any taxable period ending on
or before the Closing Date (and Buyer shall do the same with respect to any
taxable period ending after the Closing Date). Tax Returns of the Company and
the Subsidiaries not yet filed for any taxable period that begins before the
Closing Date shall be prepared in a manner consistent with past practices
employed with respect to the Company and the Subsidiaries except to the extent
counsel for Seller or the Company renders a legal opinion that it is more likely
than not that such practice is erroneous. With respect to any Tax Return
required to be filed by Buyer or Seller with respect to the Company and the
Subsidiaries in respect of which the Tax liability shown on the Tax Return
exceeds $50,000 and as to which an amount of Tax is allocable to the other party
under Section 7.3(b), the filing party shall provide the other party and its
authorized representatives with a copy of such completed Tax Return (on a pro
forma basis in the case of any consolidated, combined or unitary Tax Return that
includes entities other than the Company and its Subsidiaries) and a statement
certifying the amount of Tax shown on such Tax Return that the filing party
believes is allocable to such other party pursuant to Section 7.3(b), together
48
with appropriate supporting information and schedules at least thirty (30)
Business Days prior to the due date (including any extension hereof) for the
filing of such Tax Return. If the receiving party, within fifteen (15) Business
Days after delivery of the Tax return and related statement, notifies the filing
party in writing that it objects to any items therein, the Parties shall proceed
in good faith to resolve the disputed items and, if they are unable to do so
within five (5) Business Days, the disputed items shall be submitted to and
resolved by the Reviewing Accountants prior to the due date for filing such Tax
Return. Upon resolution of all disputed items, the relevant Tax Return and
related statement shall be adjusted to reflect the resolution and shall be
binding upon the Parties (including the Company and the Subsidiaries) without
further adjustment. The fees and expenses of the Reviewing Accountants shall be
borne equally by Buyer and Seller.
(b) With respect to Tax Returns filed pursuant to Section 7.2(a)
(without regard to the $50,000 threshold described therein), (i) Seller shall
pay or cause to be paid when due and payable all Taxes shown as due on such Tax
Returns with respect to the Company and the Subsidiaries for any taxable period
ending on or before the Closing Date (subject to Seller's right to payment under
Section 7.2(c)) and (ii) Buyer shall pay or cause to be paid when due and
payable all Taxes shown as due on such Tax Returns with respect to the Company
and the Subsidiaries for any taxable period ending after the Closing Date
(subject to Buyer's right to payment under Section 7.2(d)).
(c) With respect to each Tax Return relating to the Company or any
Subsidiary filed by Seller pursuant to Section 7.2(a) (without regard to the
$50,000 threshold described therein), three (3) days prior to the due date for
filing such Tax Return, Seller shall be entitled to payment from Buyer in an
amount equal to the amount of Taxes determined under Section 7.3(b) to be
allocable to the portion of the taxable period beginning after August 31, 2005,
unless disputed items are resolved by the Reviewing Accountants hereunder later
than such date, in which case payment shall be made no later than the due date
for filing such Tax Return. In the case of Tax Returns in respect of which the
Tax liability shown exceeds $50,000, such determination shall be subject to the
review and dispute procedures provided in Section 7.2(a). In the case of Tax
Returns in respect of which the Tax liability shown is less than or equal to
$50,000, such determination shall be as reasonably determined by Seller prior to
filing, subject to the review and dispute procedures provided in Section 7.2(e).
(d) With respect to each Tax Return relating to the Company or any
Subsidiary filed by Buyer pursuant to Section 7.2(a) (without regard to the
$50,000 threshold described therein), three (3) days prior to the due date for
filing such Tax Return, Buyer shall be entitled to payment from Seller in an
amount equal to the amount of Taxes determined under Section 7.3(b) to be
allocable to the portion of the taxable period ending on August 31, 2005, unless
disputed items are resolved by the Reviewing Accountants hereunder later than
such date, in which case payment shall be made no later than the due date for
filing such Tax Return. In the case of Tax Returns in respect of which the Tax
liability shown exceeds $50,000, such determination shall be subject to the
review and dispute procedures provided in Section 7.2(a). In the case of Tax
Returns in respect of which the Tax liability shown is less than or equal to
$50,000, such determination shall be as reasonably determined by Buyer prior to
filing, subject to the review and dispute procedures provided in Section 7.2(e).
49
(e) With respect to Tax Returns filed pursuant to Section 7.2(a) in
respect of which the Tax liability shown is less than or equal to $50,000, after
the filing of any such Tax Return, the non-filing Party may by written notice to
the filing Party request and obtain a copy of such Tax Return and a statement
certifying the amount of Tax shown on such Tax Return that is allocable to the
non-filing Party under Section 7.3(b). If the non-filing Party objects in
writing to any items therein, the Parties shall proceed in good faith to resolve
the disputed items and if they are unable to do so within fifteen (15) Business
Days, the disputed items shall be submitted to and resolved by the Reviewing
Accountants within fifteen (15) Business Days of such submission. Upon
resolution of all disputed items, the relevant Tax Return and related statement
shall be adjusted to reflect such resolution and shall be binding upon the
Parties (including the Company and the Subsidiaries) without further adjustment.
The fees and expenses of the Reviewing Accountants shall be borne equally by
Buyer and Seller.
Section 7.3 Indemnity.
(a) Except as otherwise provided in Section 7.4, Seller agrees to
indemnify and hold harmless Buyer, the Company and each Subsidiary against the
following Taxes, and against any loss, damage, liability or expense, including
reasonable fees for attorneys and other outside consultants incurred in
contesting or otherwise in connection with such Taxes: (i) Taxes imposed on the
Company or any Subsidiary with respect to taxable periods ending on or before
August 31, 2005; (ii) with respect to taxable periods beginning before August
31, 2005 and ending after such date, Taxes imposed on the Company or any
Subsidiary which are allocable, pursuant to Section 7.3(b), to the portion of
such period ending on August 31, 2005; (iii) any liability imposed on the
Company or any of the Subsidiaries for the payment of any Tax (A) as a result of
being a member of a consolidated, combined, unitary or affiliated group that
includes any other person with respect to any taxable period ending on or before
the Closing Date, including any liability pursuant to Treasury regulations
section 1.1502-6, (B) by reason of any obligation in existence prior to Closing
to indemnify or otherwise assume or succeed to the liability of any other person
for Taxes, including, without limitation, a tax sharing, tax indemnity or
similar agreement, and (C) by reason of transferee or successor liability in
existence prior to Closing, whether imposed by law, contractual arrangement or
otherwise with respect to a taxable period ending on or before August 31, 2005;
and (iv) Taxes imposed on Buyer, the Company or any Subsidiary with respect to
any taxable period (or portion thereof) ending on or before August 31, 2005, as
a result of any breach of warranty or misrepresentation under Section 4.11
(without giving effect to any limitations or qualifications as to "materiality"
set forth therein).
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(b) In the case of Taxes that are payable (and refunds of Taxes that
are receivable) with respect to a taxable period that ends on the Closing Date
or that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax (or refund) that is allocable to the portion of the
period ending on August 31, 2005 shall be:
(i) in the case of Taxes (or refunds of Taxes) that are
either (x) based upon or related to income or receipts, or (y) imposed
in connection with any sale or other transfer or assignment of
property (real or personal, tangible or intangible) (other than
conveyances pursuant to this Agreement, as provided under Section
7.10), deemed equal to the amount which would be payable (or, in the
case, of refunds, receivable) if the taxable year ended on August 31,
2005 (in the case of income and similar Tax Returns filed on a
consolidated, combined or unitary basis and that include any entities
other than the Company and the Subsidiaries, determined as if the
Company and the Subsidiaries filed Tax Returns on a separate basis
from such other entities); and
(ii) in the case of Taxes imposed on a periodic basis (or
refunds thereof) with respect to the assets of the Company or any
Subsidiary or otherwise measured by the level of any item, deemed to
be the amount of such Taxes (or refunds) for the entire period (or, in
the case of such Taxes determined on an arrears basis, the amount of
such Taxes (or refunds) for the immediately preceding period),
multiplied by a fraction the numerator of which is the number of
calendar days in the period ending on August 31, 2005 and the
denominator of which is the number of calendar days in the entire
period.
Section 7.4 Limitations on Indemnities; Additional Indemnities;
Relationship With General Indemnity.
(a) With respect to Seller's indemnification obligations under Section
7.3(a): (i) Seller shall be liable for all amounts otherwise due from it equal
to the amount distributed to Seller by the Company equal to the reserves for
contingent Taxes on the August Balance Sheet and (ii) after payment of amounts
pursuant to clause (i) hereof, Seller shall not be liable for any claim unless
and until the aggregate amount due from it exceeds $2,000,000 whereupon Seller
shall be liable only for the amount in excess of $2,000,000.
(b) Seller shall be obligated to pay all amounts set forth in
paragraphs (b) and (c) of Section 7.1. Such amounts shall not be subject to any
limitations.
(c) Buyer agrees to indemnify and hold harmless Seller and its
Affiliates against any Taxes of or attributable to the Company or any of the
Subsidiaries in respect of any taxable periods (or portions thereof) beginning
after August 31, 2005 or such other amount as the Parties may agree in good
faith shall properly take into account any reduction in gain or income realized
by Seller as a result of income or gain of the Company or any of its
Subsidiaries for such taxable periods, other than Taxes for which Seller is
explicitly liable hereunder, and the Parties shall similarly take into account
any such reduction as appropriate elsewhere in this Article VII.
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Section 7.5 Buyer Refunds; Tax Benefits. If, at any time on or after
the Closing Date, Seller or any of its Affiliates receives any Tax refund,
rebate, return or similar payment or credit with respect to any Taxes paid by or
with respect to the Company or any Subsidiary for any taxable period (or portion
thereof) beginning after August 31, 2005, Seller shall promptly notify Buyer in
writing of such receipt and shall promptly remit the full amount of such payment
or credit to Buyer. Seller agrees to pay Buyer an amount equal to the net Tax
benefit directly attributable to any losses recognized by the Company or any
Subsidiary with respect to the period between August 31, 2005 and the Closing
Date to the extent such losses are utilized by Seller or its Affiliates (other
than the Company or any of its Subsidiaries) on any Tax Return filed by or with
respect to Seller or its Affiliates (other than the Company or any of its
Subsidiaries) or such other amount as the Parties may agree in good faith shall
properly take into account any increase in income or gain realized by Seller as
a result of such losses, and the Parties shall similarly take into account any
such increase as appropriate elsewhere in this Article VII.
Section 7.6 Seller Refunds. If, at any time on or after the Closing
Date, Buyer, the Company, any of the Subsidiaries, or any of their Affiliates
receives any Tax refund, rebate, return or similar payment or credit with
respect to any Taxes paid by or with respect to the Company or any of its
Subsidiaries for any taxable period (or portion thereof) ending on or before
August 31, 2005, Buyer shall promptly notify Seller in writing of such receipt
and shall promptly remit the full amount of such payment or credit to Seller,
but only to the extent that such refund, rebate, return or similar payment or
credit exceeds the amount of Taxes described in Section 7.2 paid by Buyer in
respect of such period and not indemnified by Seller pursuant to Section 7.4.
Section 7.7 Amended Tax Returns. Neither Buyer, the Company nor any
Subsidiary shall file (or permit to be filed) any amended Tax Return with
respect to the Company or any Subsidiary for any taxable period ending on or
before the Closing Date or any taxable period beginning on or before and ending
after the Closing Date without obtaining the prior written consent of Seller,
which consent shall not be unreasonably withheld.
Section 7.8 Contests.
(a) After the Closing, Buyer or Seller, as the case may be, shall
promptly notify the other Party in writing of the commencement of any audit,
examination or proceeding or of any claim or other proposed change or adjustment
of which it or any of its Affiliates has been informed in writing by any Tax
Authority which, if determined adversely to the taxpayer, may result in
liability of the other Party under this Article VII (each, a "Tax Claim")
describing in reasonable detail the nature of the Tax Claim and including copies
of any notices or other documents received from the Tax Authority; provided,
however, that the failure to timely give such notice will not affect the
indemnified party's right to indemnification under this Article VII except to
the extent the indemnifying party is materially prejudiced by such delay or
omission.
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(b) In the case of a Tax Claim that relates to taxable periods ending
on or before the Closing Date, Seller shall have the right at its expense to
participate in and control the conduct of any audit or proceeding, but only to
the extent that such audit or proceeding relates to a potential adjustment for
which Seller may be liable; Buyer also may participate in any such audit or
proceeding, but only to the extent that such audit or proceeding relates to a
potential adjustment for which Buyer may be liable. If Seller does not assume
the defense of any such audit or proceeding, Buyer may defend the same in such
manner as it may deem appropriate, provided, that Buyer may not settle or
compromise any claim in respect of such audit or proceeding without the prior
written consent of Seller.
(c) In the case of a Tax Claim that relates to a taxable period
beginning on or before and ending after the Closing Date, the Parties shall
jointly control any audit or proceeding, and there shall be no settlement with
respect thereto without the prior written consent of both such parties.
(d) In the event that issues relating to a potential adjustment for
which Seller may be liable are required to be dealt with in the same audit or
proceeding as separate issues relating to a potential adjustment for which Buyer
may be liable, Seller shall have the right, at its expense, to control the audit
or proceeding with respect to the former issues, and Buyer shall have the right,
at its expense, to control the audit or proceeding with respect to the latter
issues.
Section 7.9 Cooperation and Exchange of Information. Seller, Buyer,
the Company and its Subsidiaries shall provide each other with such cooperation,
documentation and information as any of them reasonably may request in filing
any Tax Return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
accompanying schedules, related work papers and documents relating to rulings or
other determinations by Tax Authorities. Seller and Buyer shall make their
respective employees available on a basis mutually convenient to both Parties to
provide explanations of any documents or information provided hereunder. Each of
Seller, Buyer, the Company and its Subsidiaries shall retain all Tax Returns,
together with accompanying schedules and related work papers and documents, in
its possession relating to Tax matters of the Company and its Subsidiaries for
each taxable period first ending after the Closing Date and for all prior
taxable periods until the expiration of the statute of limitations for the
taxable periods to which such Tax Returns relate, without regard to extensions
except to the extent notified by the other Party in writing of such extensions
for the respective taxable periods. Any information obtained under this Section
7.9 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in
participating in or conducting an audit or other proceeding in respect of Taxes.
Section 7.10 Conveyance Taxes. Seller and Buyer shall each be liable
for half of any real property transfer or gains, sales, use, transfer, value
added, stock transfer, and stamp Taxes, any transfer, recording, registration,
and other fees and any similar Taxes (excluding, for the avoidance of doubt,
income Taxes or Taxes on net profit or gain that arise in connection with the
sale of the Company and its Subsidiaries) which become payable in connection
with the transactions contemplated by this Agreement. Seller, after the review
and consent by Buyer, shall file such applications and documents as shall permit
any such Tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure. Buyer shall execute and
deliver all instruments and certificates necessary to enable the Sellers to
comply with the foregoing. The Parties shall cooperate in timely making all
required filings in respect of all Taxes covered by this Section 7.10.
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Section 7.11 Timing of Certain Payments. Other than in respect of
payments under Section 7.2, (i) payments between the Parties under this Article
VII shall be made within three (3) Business Days following an agreement between
the Parties that an amount is payable or within three (3) Business Days of
payment to a Tax Authority following a "determination" as defined in Section
1313(a) of the Code and (ii) payments hereunder in respect of costs or expenses
other than Taxes shall be made within five (5) Business Days after the date the
Party liable therefor has been notified of such liability for a determinable
amount and is provided with calculations or other supporting documentation
reasonably requested.
Section 7.12 Miscellaneous.
(a) Seller and Buyer agree to treat all payments made by either of
them to or for the benefit of the other (including any payments to the Company
or any Subsidiary) under this Article VII, under other indemnity provisions of
this Agreement and for any misrepresentations or breaches of warranties or
covenants as adjustments to the Purchase Price for Tax purposes, and that such
treatment shall govern for purposes hereof except to the extent that the Laws of
a particular jurisdiction provide otherwise, in which case such payments shall
be made in an amount sufficient to indemnify the relevant party on a net
after-Tax basis.
(b) Notwithstanding any provisions in this Agreement to the contrary,
the obligations of Seller to indemnify and hold harmless Buyer, the Company and
the Subsidiaries pursuant to this Article VII, and the representations and
warranties contained in Section 4.11, shall survive until the close of business
on the 60th day following the expiration of the applicable statute of
limitations with respect to the Tax liabilities in question (giving effect to
any waiver, mitigation or extension thereof).
(c) If the Closing Date occurs after December 31, 2005, provisions in
this Article VII in respect of taxable periods (or portions thereof) after
August 31, 2005 shall be applied in a manner consistent herewith in the case of
periods after December 31, 2005, and the Parties shall cooperate in good faith
with respect thereto.
(d) Except for claims arising out of fraud, any claim or cause of
action relating to Tax matters and based upon, relating to or arising out of
this Agreement, the transactions contemplated hereby or the Company or any of
its Subsidiaries must be brought in accordance with the provisions and
applicable limitations of this Article VII, which, in the absence of fraud,
shall constitute the sole and exclusive remedy of the Parties and their
successors and assigns for any such claim or cause of action.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS
Section 8.1 Conditions to the Obligations of the Parties. The
obligations of Seller and Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of the following conditions:
(a) (i) No order issued by any court of competent jurisdiction
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect, (ii) no material proceeding initiated by any Governmental
Authority of competent jurisdiction having valid enforcement authority seeking
such an order shall be pending, and (iii) no action by any Governmental
Authority shall have been taken, or any Law enacted, entered or enforced that
has not been subsequently overturned or otherwise made inapplicable to this
Agreement that prevents the consummation of the transactions contemplated by
this Agreement.
(b) (i) The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated by this Agreement shall have
expired or been terminated and (ii) the required consents, authorizations,
orders and approvals of (or notices to or filings with) any applicable
Governmental Authority shall have been obtained, given or made, other than those
in respect of which the failure to obtain, give or make, as the case may be,
would not reasonably be expected to have a Material Adverse Effect.
Section 8.2 Conditions to the Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions, any one or more of which may be
waived in writing by Buyer:
(a) The representations and warranties of Seller in this Agreement
shall be true and correct in all material respects (without regard for any
materiality or Material Adverse Effect qualifiers therein) as of the date of
this Agreement and as of the Closing with the same force and effect as though
such representations and warranties had been made at and as of such time, other
than representations and warranties that speak as of another specific date or
time prior to the date hereof (which need only be true and correct as of such
date or time), except where the failure to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Seller shall have performed or complied with, in all material
respects, all of the covenants and agreements required by this Agreement to be
performed or complied with by it at or before the Closing.
55
(c) No circumstance, change or effect shall have occurred which has
had or has, individually or in the aggregate with all other circumstances,
changes and effects, a Material Adverse Effect.
(d) Seller shall have delivered to Buyer a certificate, dated as of
the Closing Date, executed on behalf of Seller by an authorized executive
officer thereof, certifying in such detail as Buyer may reasonably request that
the conditions specified in Section 8.2(a) and Section 8.2(b) have been
fulfilled.
(e) The Buyer Approvals shall have been duly made, given or obtained
and shall be in full force and effect.
(f) Seller shall have delivered to Buyer a certificate, dated as of
the Closing Date, which complies with Section 1445 of the Code, of non-foreign
status executed in accordance with the provisions of the Foreign Investment in
Real Property Tax Act.
Section 8.3 Conditions to the Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions, any one or more of which may be
waived in writing by Seller:
(a) The representations and warranties of Buyer in this Agreement
shall be true and correct in all material respects (without regard for any
materiality or Material Adverse Effect qualifiers therein) as of the date of
this Agreement and as of the Closing with the same force and effect as though
such representations and warranties had been made at and as of such time, other
than representations and warranties that speak as of another specific date or
time prior to the date hereof (which need only be true and correct as of such
date or time), except where the failure to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Buyer to consummate the Closing.
(b) Buyer shall have performed or complied with in all material
respects all of the covenants and agreements required by this Agreement to be
performed or complied with by it at or before the Closing.
(c) Buyer shall have delivered to Seller a certificate, dated as of
the Closing Date, executed on behalf of Buyer by an authorized individual
thereof, certifying in such detail as Seller may reasonably request that the
conditions specified in Section 8.3(a) and Section 8.3(b) have been fulfilled.
(d) The Seller Approvals shall have been duly made, given or obtained
and shall be in full force and effect.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival.
(a) The representations and warranties of Seller contained in this
Agreement and any document contemplated to be delivered pursuant hereto (the
"Acquisition Documents") shall survive until the first anniversary of the
Closing (as modified by the following proviso, the "Survival Period"); provided,
however, that (i) the representations and warranties contained in Section 4.10
shall survive until the second anniversary of the Closing and (ii) the
representations and warranties contained in Section 3.5 and the second sentence
of Section 4.3(a) shall survive the Closing indefinitely. Neither the period of
survival nor the liability of Seller with respect to Seller's representations
and warranties shall be reduced by any investigation made at any time by or on
behalf of Buyer.
(b) Seller shall not have any liability for any indemnification claims
under this Article IX unless a Claim Notice is provided by Buyer, Buyer's
Affiliates or Buyer's Representatives, successors and assigns (collectively, the
"Buyer Indemnified Parties") to Seller in respect of such indemnification claim
prior to the expiration of the applicable Survival Period, if any. If a Claim
Notice has been timely given in accordance with this Agreement prior to the
expiration of the applicable Survival Period, if any, then the applicable
indemnity right shall survive as to such claim, until such claim has been
finally resolved.
Section 9.2 Indemnification Obligations.
(a) Subject to the provisions of this Article IX, Seller shall
indemnify and hold harmless the Buyer Indemnified Parties from and against all
Losses that the Buyer Indemnified Parties have actually suffered or incurred
directly as a result of:
(i) the breach of any representation or warranty made by
Seller contained in the Acquisition Documents (it being understood
that such representations and warranties shall be interpreted without
giving effect to any limitations or qualifications as to "materiality"
(including the word "material" or "Material Adverse Effect") set forth
therein except for the use of any such terms in Section 4.6(a),
4.7(a), 4.8(a), 4.8(c), 4.10(a), 4.12(b)(i) and (ii), 4.15, 4.18(a)
and 4.21(d));
(ii) the breach of any covenant or agreement by Seller
contained in the Acquisition Documents; and
(iii) any third party action, claim, suit or proceeding
(including any inquiry or investigation by or before any Governmental
Authority) to the extent arising out of or related to the ownership,
operation or conduct of the Capital Markets Business prior to the
Closing.
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To the extent that Seller's undertakings set forth in this Section 9.2(a) may be
unenforceable, Seller shall contribute the maximum amount that it is permitted
to contribute under applicable Law to the payment and satisfaction of all Losses
incurred by the Buyer Indemnified Parties.
(b) Notwithstanding anything to the contrary contained in this
Agreement:
(i) Seller shall not be liable for any claim for
indemnification pursuant to Section 9.2(a)(i) or 9.2(a)(iii), unless
and until the aggregate amount of all Losses of the Buyer Indemnified
Parties that are required to be indemnified by Seller pursuant to
Sections 9.2(a)(i) and 9.2(a)(iii) exceed $10,000,000 (the
"Deductible"), whereupon, Seller shall be liable only for the amount
of such Losses in excess of the Deductible;
(ii) no Losses may be claimed under Section 9.2(a)(i) or
Section 9.2(a)(iii) by any Buyer Indemnified Party (and Seller shall
not obligated to indemnify any Buyer Indemnified Party with respect to
such Losses) or be included in calculating the aggregate Losses set
forth in Section 9.2(b)(i), other than Losses in excess of $250,000
resulting from any single or aggregated claims arising out of the same
facts, events or circumstances; and
(iii) the maximum amount of the aggregate indemnifiable
Losses that may be recovered from Seller by any and all Buyer
Indemnified Parties arising out of or resulting from the causes set
forth in Section 9.2(a)(i) shall be limited to $40,000,000, which
indemnification shall be made as follows:
(A) the first $25,000,000 of the aggregate
indemnifiable Losses in excess of the Deductible shall be
indemnified on a dollar-for-dollar basis; and
(B) up to $30,000,000 of the aggregate
indemnifiable Losses in excess of the amount set forth in
the immediately preceding clause (A) shall be indemnified
for 50% of every dollar of such indemnifiable Losses.
(c) For the purpose of calculating the amount of any Loss for which a
Buyer Indemnified Party is entitled to indemnification under this Agreement, the
amount of each Loss shall be deemed to be an amount net of (i) any amounts
previously paid by Seller pursuant to the adjustment to the Purchase Price under
Section 2.4(d) to the extent such adjustment is in respect of such Loss, (ii)
any insurance proceeds and any indemnity, contribution or other similar payment
payable by any insurer or other third party with respect thereto and (iii) any
Tax benefit available to the Buyer Indemnified Party or its Affiliates as a
result of the incurrence or payment of such Loss. Buyer shall use commercially
reasonable efforts to commence legal or other proceedings to collect indemnity,
contribution or other payments from any such insurer or other third party. The
reasonable out-of-pocket costs and expenses (including reasonable fees and
disbursements of counsel) actually incurred by the Buyer Indemnified Parties in
pursuing any insurance proceeds or indemnity, contribution or other similar
payment from any insurer or other third party under Section 9.2(c)(i) shall
constitute additional Losses with respect to the matter for which
indemnification may be sought hereunder, except to the extent such costs and
expenses are paid or reimbursed by such insurer or other third party.
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(d) Subject to Section 9.2(c), the Buyer Indemnified Parties shall
have a duty to use commercially reasonable efforts to mitigate any Loss for
which Seller is obligated to indemnify the Buyer Indemnified Parties pursuant to
this Article IX.
(e) Seller shall be subrogated to any right of action (including any
defense or claim) which any Buyer Indemnified Party may have against any other
Person with respect to any matter giving rise to a claim for indemnification
hereunder.
Section 9.3 Indemnification Procedure. Claims for indemnification
under this Agreement shall be asserted and resolved as follows:
(a) Any Buyer Indemnified Party claiming indemnification under this
Agreement with respect to any claim asserted against the Buyer Indemnified Party
by a third party (a "Third-Party Claim") in respect of any matter that is
subject to indemnification under Section 9.2 shall promptly (i) notify Seller of
the Third-Party Claim and (ii) transmit to Seller a written notice (a "Claim
Notice") in accordance with Section 11.1 describing in reasonable detail the
nature of the Third-Party Claim and the basis of the Buyer Indemnified Party's
request for indemnification under this Agreement, together with a copy of all
papers served with respect to such claim (if any). If requested by Seller, the
Buyer Indemnified Party shall promptly provide Seller with the Buyer Indemnified
Party's reasonable good faith estimate of the amount of Losses attributable to
such Third-Party Claim. Any failure to timely provide such Claim Notice shall
not affect the right of the Buyer Indemnified Party's indemnification hereunder,
except to the extent Seller is prejudiced (including costs and expenses) by such
delay or omission.
(b) Seller shall have the right to investigate the basis of, and to
defend the Buyer Indemnified Party against, such Third-Party Claim; provided,
however, that if such Third-Party Claim is asserted by a Governmental Authority,
the Buyer Indemnified Party shall have the right to defend itself against such
Third-Party Claim in accordance with Section 9.3(c). If Seller notifies the
Buyer Indemnified Party that Seller elects to conduct such investigation and
assume the defense of the Third-Party Claim (such election to be without
prejudice to the right of Seller to dispute whether such claim is an
identifiable Loss under this Article IX), then Seller shall have the right to
defend such Third-Party Claim with counsel selected by Seller (who shall be
reasonably satisfactory to the Buyer Indemnified Party), by all appropriate
proceedings, to a final conclusion or settlement at the discretion of Seller in
accordance with this Section 9.3(b). In such circumstances, Seller shall defend
any such Third-Party Claim in good faith and have full control of such defense
and proceedings, including any compromise or settlement thereof; provided that
Seller shall not enter into any settlement agreement without the written consent
of the Buyer Indemnified Party (which consent shall not be unreasonably
withheld, conditioned or delayed); provided, further, that such consent shall
not be required if (i) the settlement agreement (other than any settlement
agreement with any Governmental Authority) contains a general release by the
third party asserting the claim to all Buyer Indemnified Parties affected by the
claim and (ii) the settlement agreement does not contain any sanction or
restriction upon the conduct of any business by the Buyer Indemnified Party or
its Affiliates. If the Buyer Indemnified Party shall withhold its consent to a
Seller proposed settlement of such Third Party Claim, then Seller may, in its
sole discretion, elect to pay the Buyer Indemnified Party the full amount of the
proposed settlement, in which case, Seller shall be relieved of any further
59
liability under this Article IX to the same extent as if such proposed
settlement had been entered into on the terms proposed by Seller. The Parties
shall cooperate, and cause their respective Affiliates to cooperate, in the
defense or prosecution of any legal or other proceeding that is the subject of
indemnification hereunder and shall promptly execute such instruments and
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith. Without limiting the
generality of the foregoing, the Buyer Indemnified Party shall take such
additional actions as reasonably requested by Seller and its counsel in
contesting any Third-Party Claim which Seller elects to contest, including the
making of any related counterclaim against the Person asserting the Third-Party
Claim or any cross complaint against any Person, and, to the extent the Buyer
Indemnified Party is entitled to indemnification hereunder with respect to such
Third-Party Claim, Seller shall reimburse the Buyer Indemnified Party for its
reasonable out-of-pocket costs and expenses (including fees and expenses of
counsel) actually incurred in taking such requested actions. The Buyer
Indemnified Party may participate in, but not control, any defense or settlement
of any Third-Party Claim controlled by Seller pursuant to this Section 9.3(b),
and the Buyer Indemnified Party shall bear its own costs and expenses with
respect to such participation.
(c) If (i) Seller shall (A) fail to notify the Buyer Indemnified Party
that Seller elects to defend the Buyer Indemnified Party pursuant to Section
9.3(b) within twenty (20) Business Days after receipt of any Claim Notice or (B)
after commencing or undertaking any such defense or settlement, fail to
prosecute or withdraw from such defense or settlement or (ii) the Buyer
Indemnified Party shall have exercised its right to defend itself against a
Third-Party Claim asserted by a Governmental Authority, then the Buyer
Indemnified Party shall have the right to defend, and be reimbursed for its
reasonable out-of-pocket costs and expenses (including fees and expenses of
counsel) actually incurred (but only if the Buyer Indemnified Party is actually
entitled to indemnification hereunder) in regard to the Third-Party Claim with
counsel selected by the Buyer Indemnified Party (who shall be reasonably
satisfactory to Seller), by all appropriate proceedings, which proceedings shall
be prosecuted diligently by the Buyer Indemnified Party. In such circumstances,
the Buyer Indemnified Party shall defend any such Third-Party Claim in good
faith and have full control of such defense and proceedings; provided that the
Buyer Indemnified Party may not enter into any compromise or settlement of such
Third-Party Claim if indemnification is to be sought hereunder, without Seller's
written consent (which consent shall not be unreasonably withheld, conditioned
or delayed). Seller may participate in, but not control, any defense or
settlement controlled by the Buyer Indemnified Party pursuant to this Section
9.3(c), and Seller shall bear its own costs and expenses with respect to such
participation.
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(d) Subject to the other provisions of this Article IX, a claim for
indemnification for any matter not involving a Third-Party Claim may be asserted
by written notice to Seller, which notice shall set forth the basis of such
claim in reasonable detail and be accompanied by evidence supporting the
assertion of such claim.
Section 9.4 Tax Matters. Anything in this Article IX to the contrary
notwithstanding, the rights and obligations of the parties with respect to
survival of tax representations, warranties and covenants and indemnification
for any and all Tax matters shall be solely governed by Section 4.11 and Article
VII and shall not be subject to the provisions of this Article IX.
Section 9.5 Exclusive Remedy.
(a) Except for claims arising under Article VII (which are addressed
in such article) and except for claims arising out of fraud, any claim or cause
of action (whether such claim sounds in tort, contract or otherwise and
including statutory rights and remedies) of Buyer or its Affiliates or
Representatives based upon, relating to or arising out of this Agreement, the
transactions contemplated hereby or the Company or any of its Subsidiaries
(including any of their respective business, operations, assets or liabilities)
must be brought by such Person in accordance with the provisions and applicable
limitations of this Article IX, which, in the absence of fraud, shall constitute
the sole and exclusive remedy of Buyer, its Affiliates and Representatives,
successors and assigns for any such claim or cause of action.
(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, NO PARTY SHALL BE
LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR INDIRECT
DAMAGES OR LOST PROFITS WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OTHER
LAW OR OTHERWISE AND WHETHER OR NOT FROM ANY OTHER PARTY'S SOLE, JOINT OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT; PROVIDED THAT,
NOTWITHSTANDING THE FOREGOING, IN THE CASE OF THIRD-PARTY CLAIMS FOR WHICH
INDEMNIFICATION IS REQUIRED PURSUANT TO THE TERMS OF THIS ARTICLE IX, BUYER
SHALL BE LIABLE FOR LOSSES ATTRIBUTED TO ALL FORMS OF MONETARY DAMAGES WITH
RESPECT TO SUCH THIRD-PARTY CLAIMS.
ARTICLE X
TERMINATION
Section 10.1 Termination. At any time prior to the Closing, this
Agreement may be terminated and the transactions contemplated hereby abandoned:
(a) by the mutual consent of Buyer and Seller as evidenced in writing
signed by each of Buyer and Seller;
(b) by Buyer, if there has been a material breach by Seller of any
representation, warranty or covenant contained in this Agreement which would
prevent the satisfaction of any condition to the obligations of Buyer at the
Closing and, if such breach is of a character that it is capable of being cured,
such breach has not been cured by Seller within forty-five (45) days after
written notice thereof from Buyer;
61
(c) by Seller, if there has been a material breach by Buyer of any
representation, warranty or covenant contained in this Agreement which would
prevent the satisfaction of any condition to the obligations of Seller at the
Closing and, if such breach is of a character that it is capable of being cured,
such breach has not been cured by Buyer within forty-five (45) days after
written notice thereof from Seller;
(d) by either Buyer or Seller:
(i) if any Governmental Authority having competent
jurisdiction has issued a final, non-appealable order, decree, ruling
or injunction (other than a temporary restraining order) or taken any
other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement; or
(ii) if the Closing has not occurred (other than through the
failure of any Party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before March
14, 2006 (the "Outside Date") or such later date as the Parties may
agree upon in writing; provided that the Outside Date may be extended
for a period of up to ninety (90) days by either Party by written
notice to the other Party if the transactions contemplated by this
Agreement shall not have been consummated as a result of the
conditions set forth in Section 8.1(b) failing to have been satisfied;
provided further the Outside Date may be extended an additional sixty
(60) days thereafter by either Party by written notice to the other
Party if the transactions contemplated by this Agreement shall not
have been consummated as a result of the conditions set forth in
Section 8.1(b) failing to have been satisfied and such extending Party
reasonably believes that such conditions could be satisfied during
such extension period.
Section 10.2 Effect of Termination. Except as otherwise set forth in
this Section 10.2, in the event of termination and abandonment of this Agreement
pursuant to Section 10.1, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any Party hereto; provided that if
this Agreement is validly terminated by a Party as a result of an intentional,
material breach of this Agreement by the non-terminating Party, then the
terminating Party shall be entitled to all rights and remedies available under
law or equity. The provisions of Article IX, this Section 10.2, Section 11.2,
Section 11.3, Section 11.7, Section 11.10, Section 11.11 and Section 11.12
hereto shall survive any termination of this Agreement. The Confidentiality
Agreement shall not be affected by a termination of this Agreement.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices, requests, claims, demands and other
communications required or permitted hereunder shall be in writing and, unless
otherwise provided in this Agreement, shall be given or made (and shall be
deemed to have been duly given or made upon receipt) by delivery in person an
internationally recognized overnight courier service, by facsimile or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties hereto at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 11.1):
(a) If to Buyer, to:
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
with a copy to:
Shearman & Sterling LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: W. Xxxxxxx Xxxxxxxx
(b) If to Seller, to:
AXA Financial, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Silver, Esq.
Executive Vice President & General Counsel
Telecopy: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: 000-000-0000
or to such other address or addresses as the Parties may from time to time
designate as to itself by like notice.
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Section 11.2 Assignment. No Party shall assign this Agreement or any
part hereof without the prior written consent of the other Party (which consent
may be granted or withheld in the sole discretion of Seller or Buyer) and such
assignment or attempted assignment without such consent shall be null and void,
except that Buyer shall be permitted to assign this Agreement or any part hereof
after the Closing without the prior written consent of Seller; provided that
Buyer remains liable for all of its obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
Parties and their respective permitted successors and assigns.
Section 11.3 Rights of Third Parties. Except for the provisions of
Article IX relating to indemnified parties, this Agreement shall be binding upon
and inure solely to the benefit of the Parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person, including any union or any
employee or former employee of Seller, any legal or equitable right, benefit or
remedy of any nature whatsoever, including any rights of employment for any
specified period, under or by reason of this Agreement.
Section 11.4 Expenses. Except as otherwise provided herein, each Party
shall bear its own expenses incurred in connection with this Agreement and the
transactions contemplated hereby whether or not such transactions shall be
consummated, including all fees of its legal counsel, financial advisers and
accountants.
Section 11.5 Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Any facsimile
copies hereof or signature hereon shall, for all purposes, be deemed originals.
Section 11.6 Entire Agreement. This Agreement (together with the
Disclosure Schedule and exhibits to this Agreement) and the Confidentiality
Agreement constitute the entire agreement among the Parties and supersede any
other undertakings and agreements, whether written or oral, that may have been
made or entered into by or among any of the Parties or any of their respective
Affiliates with respect to the subject matter hereof and thereof, including the
transactions contemplated hereby and thereby. No representations, warranties,
covenants, understandings or agreements, oral or otherwise, relating to the
transactions contemplated by this Agreement exist between Buyer, on the one
hand, and Seller or its Affiliates, on the other hand, except as expressly set
forth in this Agreement and the Confidentiality Agreement.
Section 11.7 Disclosure Schedule. Unless the context otherwise
requires, all capitalized terms used in the Disclosure Schedule shall have the
respective meanings assigned in this Agreement. No reference to or disclosure of
any item or other matter in the Disclosure Schedule shall be construed as an
admission or indication that such item or other matter is material or that such
item or other matter is required to be referred to or disclosed in the
Disclosure Schedule. No disclosure in the Disclosure Schedule relating to any
possible breach or violation of any agreement or Law shall be construed as an
admission or indication that any such breach or violation exists or has actually
occurred. The inclusion of any information in the Disclosure Schedule shall not
be deemed to be an admission or acknowledgment by Seller, in and of itself, that
such information is material to or outside the ordinary course of the business
of the Company or its Subsidiaries or required to be disclosed on the Disclosure
Schedule.
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Section 11.8 Amendments, Supplements, Etc. This Agreement may not be
amended or supplemented at any time except by (a) additional written agreements
as may mutually be determined by the Parties to be necessary, desirable or
expedient to further the purpose of this Agreement or to clarify the intention
of the Parties or (b) a waiver in accordance with Section 11.11.
Section 11.9 Publicity. The initial public announcement concerning the
transactions contemplated by this Agreement shall be a press release jointly
prepared and agreed upon by Seller and Buyer which shall also be used by
Affiliates of Buyer and Seller.
Section 11.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either Party hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the Parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
Section 11.11 Waiver. Either Party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other Party, (b) waive any inaccuracies in the representations and warranties of
the other Party contained herein or in any document delivered by the other Party
pursuant hereto or (c) waive compliance with any of the agreements of the other
Party or conditions to such Party's obligations contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby. Any waiver of any term or condition
shall not be construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement. The failure of either Party to assert any of its rights
hereunder shall not constitute a waiver of any of such rights. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
Section 11.12 Specific Performance. Each Party acknowledges and agrees
that the other Party would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their specific terms and
that any breach of this Agreement by such Party could not be adequately
compensated in all cases by monetary damages alone. Accordingly, notwithstanding
any other provision of this Agreement, in addition to any other right or remedy
to which each Party may be entitled, at law or in equity, it shall be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement by
the other Party, without posting any bond or other undertaking.
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Section 11.13 Applicable Law. This Agreement shall be governed by and
construed under the Laws of the State of New York (without regard to conflict of
law principles thereof). Each of the Parties irrevocably agrees that any legal
action or proceeding with respect to this Agreement or for recognition and
enforcement of any judgment in respect hereof shall be brought and determined in
the United States District Court for the Southern District of New York or if
such legal action or proceeding may not be brought in such court for
jurisdictional purposes, in the Supreme Court of New York. Each of the Parties
hereby (a) irrevocably submits with regard to any such action or proceeding to
the exclusive personal jurisdiction of the aforesaid courts in the event any
dispute arises out of this Agreement or any transaction contemplated hereby and
waives the defense of sovereign immunity, (b) agrees that it shall not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court or that such action is brought in an inconvenient
forum and (c) agrees that it shall not bring any action relating to this
Agreement or any transaction contemplated hereby in any court other than any New
York state or federal court sitting in New York, New York.
Section 11.14 Waiver of Jury Trial. Each of the Parties hereby waives
to the fullest extent permitted by applicable Law any right it may have to a
trial by jury with respect to any litigation directly or indirectly arising out
of, under or in connection with this Agreement or the transactions contemplated
by this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each Party as of the date first above written.
AXA FINANCIAL, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxxxxxx X. Xxxxxxx
President and Chief Executive Officer
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
By: /s/ Xxxxxx X. XxXxxx
----------------------------------------------
Xxxxxx X. XxXxxx
Vice Chairman and President of
Global Private Client Business
[Signature Page to Stock Purchase Agreement]
