EXHIBIT 10.12
OPERATING AGREEMENT
AGREEMENT dated November 4, 1998, between RESEARCH PARTNERS INTERNATIONAL,
INC. ("RPII"), a Delaware corporation, and XXXXXX, XXXXXXX INC. ("GBI"), a New
York corporation. As used herein, the term "RPII" shall refer to Research
Partners International, Inc. and, as appropriate, each of its operating broker
dealer subsidiaries.
RECITALS:
A. RPII and GBI are each engaged in various aspects of the securities
industry, including retail brokerage;
B. Concurrently with the execution of this Agreement, RPII and GBI (and
certain of their other affiliates) are entering into an agreement ("Merger
Agreement") providing for the merger of GBI with a subsidiary of RPII (the
"Merger");
C. RPII and GBI desire to enter into this Agreement to provide for
consolidation of certain of their operations in advance of the Merger, the
management of their operations upon effectiveness of the Merger and the
separation of their consolidated operations in the event that an agreement
providing for the Merger is not entered into or is terminated prior to the
Merger becoming effective.
IT IS AGREED:
ARTICLE I
CONSOLIDATION OF OPERATIONS
1.1 Sharing of Office Space.
(a) Upon the mutual agreement of RPII and GBI at any time after execution
of this Agreement, RPII and GBI will prepare and file with NASD Regulation, Inc.
("NASDR") (and all other regulatory agencies having jurisdiction) all documents
necessary for them to obtain the consent of NASDR (and such other regulatory
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agencies) to enable them to share office space in the New York City and Boca
Raton (Mizner), Florida offices of RPII and the Bethpage, New York office of GBI
for the purpose of the retail sale of securities.
(b) If the consents of NASDR (and such other regulatory agencies) to the
sharing of office space (collectively, the "Sharing Consents") are obtained
prior to the effective date of the Merger (the "Effective Date") or if RPII and
GBI are advised that no Sharing Consents are necessary, RPII, as soon as
practicable thereafter, will close its Great Neck, New York office and the
registered representatives at such office will be offered the opportunity to
relocate to either RPII's New York City office or GBI's Bethpage office. If the
Sharing Consents are not obtained prior to the Effective Date, RPII shall
continue to operate its Great Neck office until the Effective Date, after which
it shall be closed as promptly as practicable; provided that RPII may close its
Great Neck office prior to the Sharing Consents being obtained with the consent
of GBI and after discussion with the employees located at the Great Neck office.
(c) RPII shall close its Connecticut office as promptly as practicable
after the execution of this Agreement. Registered representatives located at the
Connecticut office will be offered the opportunity to relocate to RPII's New
York City office or, if the Sharing Consents are obtained prior to the Effective
Date, to GBI's Bethpage office.
(d) As promptly as practicable after the date the Sharing Consents are
obtained or, if RPII and GBI are advised that no Sharing Consents are necessary,
the date on which RPII and GBI receive such advice (either such date being the
"Sharing Commencement Date"), GBI shall (i) relocate the registered
representatives located in its New York City office to RPII's New York City
office and (ii) designate one or more of its supervisors to relocate to RPII's
Boca Raton (Xxxxxx) office.
1.2 Supervisory Responsibility. RPII and GBI shall jointly designate
registered representatives of GBI to become dually registered with NASDR (and
other regulatory agencies having jurisdiction) as registered representatives of
RPII and to have supervisory responsibility for the RPII New York City and Boca
Raton (Mizner) offices. All RPII and GBI registered representatives in such
offices shall report to such dually registered representatives. All RPII and GBI
registered representatives located in the GBI Bethpage office shall report to a
GBI supervisor in such office.
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1.3 Departmental Operation. Notwithstanding the provisions of Section 1.2,
until the Effective Date, all RPII registered representatives located in the
RPII New York City and Boca Raton (Mizner) offices and the GBI Bethpage office
will operate as separate departments in each of such offices and all GBI
registered representatives in such offices will similarly operate as separate
departments in each of such offices.
1.4 New Employees. From and after the Sharing Commencement Date, all newly
hired registered representatives and other employees who are to be located at
(a) RPII's New York City office shall be employees of either RPII or GBI as RPII
and GBI shall mutually agree, (b) GBI's Bethpage, New York office shall be
employees of GBI, and (c) RPII's Boca Raton (Mizner), Florida office shall be
employees of RPII.
1.5 Order Processing. From and after the Sharing Commencement Date until
the Effective Date, (a) all buy and sell orders from GBI registered
representatives shall be processed through the trading room at GBI's Bethpage
office and cleared by Bear, Xxxxxxx & Co., Inc. ("Bear Xxxxxxx") and (b) all buy
and sell orders from RPII registered representatives shall be processed through
the trading room at RPII's New York City office and cleared through Xxxxxxxx &
Co., Inc. ("Xxxxxxxx"). The parties shall make mutually satisfactory
arrangements with Bear Xxxxxxx, Xxxxxxxx or another clearing company for
clearance of trades subsequent to the Effective Date.
1.6 Revenue Allocation; Telephone Services. All revenues generated between
the Sharing Commencement Date and the Effective Date by registered
representatives of each of RPII and GBI will be allocated to and accrue for the
benefit of the firm of the generating registered representative. GBI and RPII
shall mutually agree upon a method of allocation of expenses for employees of
one firm occupying space of the other firm.
ARTICLE II
POST-MERGER OPERATIONS
2.1 Executive Committee. The Board of Directors of RPII shall appoint an
Executive Committee initially consisting of the persons named in Schedule 2.1,
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which will report to the Board of Directors of RPII and shall be responsible for
the consolidated operations of RPII on a day-to-day basis.
2.2 Operating Committee. The Board of Directors of RPII shall appoint an
Operating Committee initially consisting of the persons named or holding the
offices listed in Schedule 2.2, which shall meet on a regularly scheduled basis
to review and make recommendations with respect to all aspects of the
consolidated operations of RPII and report to the Executive Committee.
2.3 Account Overlaps.
(a) A committee consisting of Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxxx and Xxxxxx
Xxxxxxxxx (collectively, the "NGG Group") and Xxxxxxx Xxxxxxxxxx and Xxxxxx
Xxxxxxx (together, the "RB Group") will review all customer accounts which, as
of the Sharing Commencement Date, are serviced by both the NGG Group and the RB
Group and shall allocate such accounts as follows:
(i) to the NGG Group;
(ii) to the RB Group; or
(iii)to a joint account to be shared equally by the NGG Group and the
RB Group.
(b) Customer accounts other than those referred to in Section 2.3(a) which,
as of the Sharing Commencement Date, are serviced by registered representatives
of both RPII and GBI shall be awarded to one or the other of such
representatives by a committee initially consisting of Xxxx Xxxxxxxxx, Xxxxx
Xxxxxxx and Xxxxxx Xxxxxxxxx, who shall make their determination in accordance
with current policies of GBI consistently applied.
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2.4 Commission and other Compensation Arrangements.
(a) The maximum percentage of gross commissions payable to registered
representatives of RPII shall be 50%, except as follows:
(i) the NGG Group shall receive 60%;
(ii) each of Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxx shall receive 75% or
such lower payout as shall result in GBI not incurring losses as a result of his
respective activities; and
(iii)Xxxxx Xxxxxx will receive 100% of all commissions net after
allocation and deduction of expenses attributable to his activities.
(b) Notwithstanding the foregoing, the payouts to Xxxxxxx Xxxxxxx, Xxxxxxx
Xxxxxx and Xxxxx Xxxxxx shall be reduced if the payouts referred to above are
required to be disclosed in RPII's regulatory and other filings.
(c) No advance (up front) payments shall be made to any registered
representative without the consent of the Executive Committee.
(d) At least 50% of any warrants received by RPII in connection with any
investment banking or financial advisory or consulting activities shall be
allocated to RPII and up to 50% of such warrants shall be allocated to
individuals based on their involvement with the transaction, as determined by a
committee consisting of one person selected by the RB Group and one person
selected by the NGG Group (initially, Xxxxxx Xxxxxxx and Xxxxx Xxxxxxxx). If
none of the members of either group is then employed by RPII, such allocation
shall be made by the Board of Directors of RPII. Such committee or the Board, as
the case may be, may, in its discretion, make any such allocation to an
individual subject to the recipient remaining in the employ of RPII for a
specified period of time.
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(e) "Overrides" on retail commissions generated by RPII of the following
aggregate percentages shall be payable to the following categories of employees,
as determined by the Executive Committee:
Office Sales Managers 2.0%
Office Assistant Sales Managers 0.5%
Managing Directors 2.0%
Southeast Research Partners, 1.0%
Inc. ("SERP") personnel
ARTICLE III
TERMINATION PROVISIONS
3.1 Relocation of Personnel. If the Merger Agreement is terminated prior to
the Effective Date ("Termination Event"), then:
(a) RPII registered representatives who have relocated to GBI's Bethpage
office shall relocate to RPII's New York City office;
(b) GBI's supervisory personnel who have relocated to RPII's Boca Raton
(Mizner) office shall relocate to GBI's Bethpage office; and
(c) GBI's registered representatives who have relocated to RPII's New York
City office will, as promptly as possible but in no event more than 120 days
after the occurrence of the Termination Event, relocate to alternative space in
New York City as determined by GBI. During the period from the date of the
occurrence of the Termination Event until the date of such relocation, GBI may
continue to occupy such space on a month-to-month basis and shall pay RPII the
fair rental value of the space occupied and services used by the GBI registered
representatives and other personnel in RPII's New York City office.
3.2 Non-Solicitation. For a period of one year following the date of
occurrence of a Termination Event, neither RPII nor GBI, or any of their
respective directors, officers, employees or agents, will, directly or
indirectly, (a) solicit or attempt to solicit any account executive, registered
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representative or other employee of the other firm, who was employed by the
other firm on the date of this Agreement or thereafter, to leave his or her
employment at the other firm, or (b) employ any such person. If a party violates
the preceding sentence, then the duration of the restriction contained therein
shall be automatically extended for a period of one year from the date on which
such violation occurs or the date of the entry by a court of competent
jurisdiction of a final order or judgment enforcing such restriction, whichever
is later. The parties acknowledge that, in the event of a breach of the terms of
this Section 3.2, the non- breaching party's remedy at law for monetary damages
will be inadequate and that the non- breaching party will be entitled to
injunctive relief.
ARTICLE IV
GENERAL
4.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or mailed if delivered personally or by nationally
recognized courier or mailed by registered mail (postage prepaid, return receipt
requested) or by telecopy to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
If to RPII:
Research Partners International, Inc.
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Telecopier: 212/363-4284
with a copy to:
Squadron Ellenoff Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telecopier: 212/697-6686
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If to GBI:
Xxxxxx, Xxxxxxx Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx
Telecopier: 516/470-1060
with a copy to:
Gusrae Xxxxxx & Bruno
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopier: 212/809-4147
and, in either case, with a copy to:
Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
Telecopier: 212/818-8881
4.2 Amendment. This Agreement may not be amended or modified except by an
instrument in writing signed by the parties.
4.3 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
4.4 Entire Agreement. This Agreement and the Schedules hereto constitute
the entire agreement and supersede all prior agreements and undertakings, both
written and oral, between the parties with respect to the subject matter hereof
and, except as otherwise expressly provided herein, are not intended to confer
upon any other person any rights or remedies hereunder.
4.5 Benefit. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Parties.
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4.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
4.7 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which when
taken together shall constitute one and the same agreement.
4.8 Decisions. Any determination or decision to be made hereunder by a
committee or other group consisting of at least two persons, shall be made by
the majority consent of such persons, except as otherwise provided herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first written above.
RESEARCH PARTNERS INTERNATIONAL, INC.
/s/ Xxxxx X. Xxxx
By: ____________________________________
Name: Xxxxx X. Xxxx
Title: Chief Operating Officer
XXXXXX, XXXXXXX INC.
/s/ Xxxxxxx X. Xxxxxxxxxx
By:_______________________________________
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
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