BENEFITS AGREEMENT
DATED AS OF
MARCH 17, 1999
BETWEEN
▇▇▇▇▇▇▇▇▇ GROUP, INC.
AND
JEF HOLDING COMPANY, INC.
BENEFITS AGREEMENT
BENEFITS AGREEMENT ("Agreement") dated as of March 17, 1999 by and between
▇▇▇▇▇▇▇▇▇ Group, Inc., a Delaware corporation ("JEFG"), and JEF Holding Company,
Inc. a Delaware corporation and a wholly owned subsidiary of JEFG ("Holding").
RECITALS
WHEREAS, the Board of Directors of JEFG has approved the business
transactions pursuant to which all the assets, businesses and Liabilities (as
defined below) of Investment Technology Group, Inc., a Delaware corporation and
approximately 80.5% owned subsidiary of JEFG ("ITGI"), and ITGI's subsidiaries
will be separated from all other assets, businesses and Liabilities of JEFG, on
the terms and subject to the conditions set forth herein and in the Ancillary
Agreements (as defined below);
WHEREAS, concurrently herewith, JEFG and ITGI are entering into an Agreement
and Plan of Merger (the "MERGER AGREEMENT"), pursuant to which (x) ITGI will
merge (the "MERGER") with and into JEFG and (y) all outstanding shares of common
stock, par value $0.01 per share, of ITGI (the "ITGI COMMON STOCK") will be
canceled or converted into the right to receive shares of common stock, par
value $0.01 per share, of JEFG (the "JEFG COMMON STOCK") in the manner set forth
in the Merger Agreement;
WHEREAS, prior to the Distribution (defined below) and Merger (x) JEFG will
transfer to Holding (or to JEFCO, defined herein, prior to the time JEFCO
becomes a subsidiary of Holding in connection with the Contribution, defined
below), and Holding and JEFCO will accept from JEFG, all of the Assets of JEFG
other than JEFG's ownership interest in capital stock of ITGI (the
"CONTRIBUTION"), and JEFG will assign to Holding (or to JEFCO, as appropriate),
and Holding and JEFCO will assume from JEFG, all of the Holding Liabilities (as
defined herein) (individually, the "ASSUMPTION" and together with the
Contribution, collectively, the "TRANSFERS"), and (y) following the Transfers
and the satisfaction of all conditions set forth in Section 2.02 of this
Agreement, all of the common stock of Holding, par value $0.0001 per share
("HOLDING COMMON STOCK"), will be distributed (the "DISTRIBUTION") to JEFG's
stockholders at the rate of one share of Holding Common Stock for each share of
JEFG Common Stock outstanding as of April 20, 1999, or such other date as is
designated by JEFG's Board of Directors as the record date for determining the
stockholders of JEFG entitled to receive the Distribution (the "Record Date");
WHEREAS, (i) pursuant to the Merger, the name of ▇▇▇▇▇▇▇▇▇ Group, Inc. (as
the surviving corporate entity in the Merger) will be changed to Investment
Technology Group, Inc. and (ii) following the consummation of the Distribution
and the Merger, the name of JEF Holding Company, Inc. will be changed to
▇▇▇▇▇▇▇▇▇ Group, Inc.;
WHEREAS, it is intended that the Distribution not be taxable to JEFG or its
stockholders pursuant to Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, prior to the Distribution, ITGI will declare and, subject to the
approval and adoption of the Merger Agreement and the Merger by the stockholders
of JEFG and ITGI and the satisfaction or waiver of all other conditions to the
Merger as set forth in the Merger Agreement, pay a cash dividend in an amount
equal to $4.00 per share to all holders of ITGI Common Stock, including JEFG
(the "SPECIAL ITGI CASH DIVIDEND");
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NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. Capitalized terms used herein without
definition have the meanings given to them in the Distribution Agreement. As
used herein, the following terms have the following meanings:
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"HOLDING EMPLOYEE" means (i) any person who was an employee immediately
prior to the Effective Time of any member of the JEFG Group (other than any
member of the ITGI Group), including any such employee who is absent from work
at the Effective Time on account of sick leave, short-term or long-term
disability or leave of absence, but excluding any such employee designated by
Holding and ITGI as remaining an employee of a member of the JEFG Group
following the Effective Time; (ii) any employee of any member of the Holding
Group (whether before or after the Effective Time); and (iii) any former
employee of any member of the JEFG Group (other than any member of the ITGI
Group).
"HOLDING GROUP" means Holding and its subsidiaries.
"ITGI GROUP" means ITGI and its subsidiaries.
"JEFG EMPLOYEE" means (i) any employee of any member of the ITGI Group,
including any such employee who is absent from work on account of sick leave,
short-term or long-term disability or leave of absence; (ii) any person who was
an employee immediately prior to the Effective Time of any other member of the
JEFG Group and who is designated by Holding and ITGI as remaining an employee of
a member of the JEFG Group following the Effective Time; and (iii) any former
employee of any member of the ITGI Group.
"JEFG GROUP" means JEFG and its subsidiaries, excluding any member of the
Holding Group.
ARTICLE II
EMPLOYEES AND ALLOCATION OF LIABILITIES
Section 2.01. ALLOCATION OF EMPLOYEE LIABILITIES.
(a) As of the Effective Time, Holding shall assume, retain and be liable for
all wages, salaries, welfare, pension, incentive compensation and other
employee-related liabilities and obligations ("Employee Liabilities") with
respect to Holding Employees, except as specifically provided otherwise in this
Agreement. JEFG shall assume, retain and be liable for Employee Liabilities with
respect to JEFG Employees, except as specifically provided otherwise in this
Agreement.
Section 2.02. OFFER OF EMPLOYMENT; BENEFIT PLAN COVERAGE.
(a) Holding shall offer all Holding Employees (other than those described in
clause (iii) of the definition thereof) employment with the Holding Group as of
the Effective Time. As of the Effective Time, all such Holding Employees shall
cease to be employees of the JEFG Group.
(b) Holding Employees shall not continue to be participants in benefit plans
maintained by the JEFG Group on or after the Effective Time and, instead, shall
be eligible to participate in applicable Holding plans, as determined by
Holding, as of the Effective Time. Holding shall treat service of each Holding
Employee with the JEFG Group before the Effective Time as if such service had
been with
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Holding for purposes of determining eligibility to participate, eligibility for
benefits, benefit forms and vesting under plans maintained by Holding.
Section 2.03. ADMINISTRATION. Holding and JEFG shall each make its
appropriate employees and data regarding employee benefit coverage available to
the other at such reasonable times as may be necessary for the proper
administration by the other of any and all matters relating to employee benefits
and worker's compensation claims affecting its employees. Prior to the Effective
Time and for any period of time during which Holding is administering any
employee benefit plans for the benefit of JEFG Employees, ITGI shall continue to
pay to Holding such amounts for administrative services as it was paying for
such purpose as of the date of execution of this Agreement.
ARTICLE III
PROFIT SHARING, EMPLOYEE STOCK OWNERSHIP
AND PENSION PLANS
Section 3.01. PROFIT SHARING PLAN.
(a) As of the Effective Time, the ▇▇▇▇▇▇▇▇▇ Group, Inc. Employees' Profit
Sharing Plan (the "JEFG PSP") shall be transferred to and maintained by, and all
liability relating thereto shall be assumed by, Holding. Prior to the Effective
Time, JEFG will amend the JEFG PSP to fully vest the accounts of all
participants who are active employees on December 31, 1998 as of that date and
to provide for the cessation of further benefit accruals in the plan by JEFG
Employees as of December 31, 1998. JEFG shall reimburse Holding for any
contribution made subsequent to the end of the plan year of the JEFG PSP ending
November 30, 1998 to the extent that such contribution is allocated to JEFG
Employees, including any such contribution allocated to JEFG Employees for the
month of December of 1998. Such reimbursement by JEFG shall be made to Holding
no later than 30 days following the date on which Holding makes the contribution
to the JEFG PSP for the year ending November 30, 1998. Contributions to the JEFG
PSP for the plan year ending November 30, 1998 shall be based on calendar year
1998 combined profits of Holdings and ITGI.
(b) As soon as practical following the date the final contribution for the
plan year ending November 30, 1998 is made to the JEFG PSP, and except as
provided below, assets of the JEFG PSP equal to the aggregate account balances
of the JEFG Employees under the JEFG PSP (including contributions accrued
through December 31, 1998) shall be transferred to, at ITGI's election, (x) a
defined contribution plan and trust (the "ITG PSP") maintained by a member of
the JEFG Group intended to be qualified under Sections 401 and 501 of the Code
and providing for salary reduction contributions pursuant to Section 401(k) of
the Code or (y) the ITGI ESOP (as defined below). The transfer to the ITGI PSP
shall be made in cash or notes evidencing plan loans to JEFG Employees and the
transfer to the ITGI ESOP shall be made in JEFG common stock or Holdings common
stock. Any outstanding balances of plan loans to JEFG Employees shall be
transferred with the underlying accounts. The account balances of the JEFG
Employees shall be valued as of the date immediately preceding the date on which
the transfer is made, which value shall include the earnings, gains and losses,
appreciation and depreciation of the investment funds in which the accounts are
invested through the date immediately preceding the date on which the transfer
is made. Notwithstanding any provision of this Agreement to the contrary,
Holding and the JEFG PSP shall remain responsible for providing any unpaid
benefits accrued under the JEFG PSP for former JEFG Employees who have
outstanding plan loans from the JEFG PSP as of the date of transfer of the
account balances, and neither JEFG nor ITGI shall be responsible for any
administrative expenses relating thereto.
(c) Pending the transfer of assets to the ITG PSP, Holding will administer
the JEFG PSP in accordance with the terms of the plan, ERISA and the Code, and
will make distributions to JEFG Employees on the basis of their employment
status with the JEFG Group. In addition, pending the transfer of assets to the
ITG PSP, JEFG Employees shall have the ability to direct the investment of
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their accounts under the JEFG PSP in the same manner as they had immediately
prior to the Effective Time. Loans from the JEFG PSP to JEFG Employees which are
outstanding during the period from January 1, 1999 through the date of transfer
of assets to the ITG PSP shall be serviced by having ITGI make applicable
payroll deductions which shall be forwarded to Holding, as plan administrator,
for payment to the JEFG PSP. As soon as practicable after the date hereof,
Holding will provide to ITGI a list of such plan loans to JEFG Employees
outstanding as of December 15, 1998, including the outstanding loan balances as
of December 31, 1998 and a list of the remaining scheduled loan repayments for
each such JEFG Employee. Holding and ITGI shall jointly administer the loan
provisions of the JEFG PSP as applied to the JEFG Employees for the period from
January 1, 1999 through the date of transfer of assets to the ITG PSP.
Section 3.02. EMPLOYEE STOCK OWNERSHIP PLAN.
(a) As of the Effective Time, the ▇▇▇▇▇▇▇▇▇ Group, Inc. Employee Stock
Ownership Plan (the "JEFG ESOP") shall be transferred to and maintained by, and
all liability relating thereto shall be assumed by, Holding. Prior to the
Effective Time, JEFG will amend the JEFG ESOP to provide that all participants
who are active employees on December 31, 1998 shall be fully vested in their
accounts as of the Effective Time. Participation in the JEFG ESOP by JEFG
Employees shall continue until the Effective Time.
(b) Following the date of consummation of the Transactions, the parties
hereto currently expect that the Holding Common Stock held by the JEFG ESOP for
the account of JEFG Employees will be exchanged to the extent possible for JEFG
Common Stock held for the account of Holding Employees and that the exchange
will occur within approximately ninety days after the Effective Time. Unless the
parties hereto mutually agree otherwise, the price at which any such exchange
shall occur shall be based upon the average respective closing prices of JEFG
Common Stock and Holding Common Stock for the ten trading days ending on the
date before the day on which the exchange occurs. Any remaining JEFG Common
Stock held in the accounts of Holding Employees shall be sold at such time or
times as is deemed prudent under ERISA and the cash proceeds received from such
sale shall be credited to such accounts.
(c) As soon as practical following the Effective Time, an employee stock
ownership plan and trust (the "ITG ESOP") shall be established by a member of
the JEFG Group intended to be qualified under Sections 401 and 501 of the Code
and assets of the JEFG ESOP equal to the aggregate account balances of the JEFG
Employees under the JEFG ESOP shall be transferred to the ITG ESOP. The transfer
shall be made in cash, Holding Common Stock and JEFG Common Stock according to
the investment of each JEFG Employee's account as of the date on which the
transfer is made. The account balances of the JEFG Employees shall be valued as
of the date on which the transfer is made, which value shall include the
earnings, gains and losses, appreciation and depreciation of the investments in
which the accounts are invested through the date on which the transfer is made.
Pending the transfer of the assets to the ITGI ESOP, Holding will administer the
JEFG ESOP in accordance with the terms of the plan, ERISA and the Code, and will
make distributions to JEFG Employees at such time as their employment might
terminate with the JEFG Group.
Section 3.03. PENSION PLAN. As of the Effective Time, the ▇▇▇▇▇▇▇▇▇ Group,
Inc. Employees Pension Plan (the "JEFG Pension Plan") shall be transferred to
and maintained by, and all liability relating thereto shall be assumed by,
Holding. JEFG Employees shall participate in the JEFG Pension Plan and accrue
benefits under the plan through February 15, 1999. Prior to the Effective Time,
JEFG will amend the JEFG Pension Plan in the manner set forth in Exhibit A.
Holding shall submit the JEFG Pension Plan, as amended as set forth in Exhibit
A, to the Internal Revenue Service for a determination as to its qualification
under Section 401(a) of the Code as soon as possible following the date hereof,
but in no event later than March 15, 1999. As soon as practicable following
receipt by Holding of a favorable determination letter from the Internal Revenue
Service with respect to the
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JEFG Pension Plan, as amended in the manner set forth in Exhibit A and including
the provision for lump sum distributions to JEFG Employees, JEFG Employees shall
be allowed to receive distributions, including lump sum distributions, of their
entire benefit under the JEFG Pension Plan in accordance with the terms of the
JEFG Pension Plan, as amended as set forth in Exhibit A. Following the Effective
Time and the receipt by Holdings of the favorable Internal Revenue Service
determination letter referred to above and approximately two weeks prior the
date benefits are expected to be payable to all JEFG Employees from the JEFG
Pension Plan, JEFG will pay to the JEFG Pension Plan an amount, computed as set
forth below, in order to pay for the underfunding of the JEFG Pension Plan
allocable to JEFG Employees for benefits accrued through December 31, 1998.
First, the lump sum equivalent of all benefits accrued as of January 1, 1999
under the JEFG Pension Plan, as amended as set forth in Exhibit A, will be
calculated for all participants using a discount rate equal to 5.25%, compounded
annually (the GATT interest rate for November, 1998) and the mortality table
described in Rev. Rul. 95-6. The "JEFG Liability Percentage" will then be
determined by dividing the aggregate lump sum value of the accrued benefits, as
so computed as of January 1, 1999, of the JEFG Employees by the total of the
aggregate lump sum value of all such accrued benefits as so computed for all
participants. The amount of the payment which JEFG is required to make to the
JEFG Pension Plan pursuant to this Section 3.03(a) will be the total of the
following: (i) the total benefit due the JEFG Employees, calculated as of the
date of actual distribution (using the GATT interest rate in effect for November
of the plan year immediately prior to the year benefits are actually distributed
and the mortality table described in Rev. Rul. 95-6), less (ii) the actual value
of the assets of the JEFG Pension Plan as of the last day of the month in which
the determination letter referred to above is received from the Internal Revenue
Service (as such value is reported by the trustee of the JEFG Pension Plan)
multiplied by the JEFG Liability Percentage, less (iii) the amount of the
benefits accrued by JEFG Employees between January 1, 1999 and February 15,
1999, determined as set forth in clause (i) above, plus (iv) interest for 30
days on such resulting amount (the clause (i) amount less the amounts of clauses
(ii) and (iii)) at the GATT interest rate in effect at the time of such
calculation. Holding shall administer the payment of such distributions in
accordance with the terms of the JEFG Pension Plan, ERISA and the Code. The
entire accrued benefit under the JEFG Pension Plan of each JEFG Employee who is
actively employed on December 31, 1998 shall be fully vested as of December 31,
1998. In the event the Internal Revenue Service, as a condition to issuing a
favorable determination letter, requires Holding to revise the amendment set
forth in Exhibit A so as to modify the distribution provisions to JEFG
Employees, including any modification that would eliminate the payment of lump
sum distributions to JEFG Employees prior to the time they separate from service
with JEFG, distributions shall be made to JEFG Employees only in accordance with
the JEFG Pension Plan as it may be amended to secure the favorable determination
letter.
Section 3.04. ASSUMPTION OF LIABILITIES UPON TRANSFER OF PLAN ASSETS;
FILINGS.
(a) Effective on the date of the transfer of assets of the JEFG PSP and the
JEFG ESOP to the ITG PSP and/or the ITG ESOP, (i) JEFG and its applicable
benefit plan shall assume all liabilities to pay benefits in connection with the
transferred assets, and (ii) Holding shall have no further liability to pay
benefits with respect to the assets and liabilities that are transferred. On and
after the date of such transfer, the JEFG Group shall have no liability with
respect to Holding's pension, employee stock ownership and profit sharing plans,
and Holding shall have no liability with respect to JEFG's employee stock
ownership and profit sharing plans.
(b) Holding and JEFG shall make the appropriate filings required under the
Code or ERISA in connection with the transfers described in this Article III in
a timely manner. The parties agree that the transfers described in Sections 3.01
and 3.02 shall be made in accordance with Section 414(l) of the Code.
(c) JEFG shall submit to the Internal Revenue Service requests for favorable
determination letters with respect to the tax-qualified status of the ITG PSP,
if adopted, and the ITG ESOP as soon as
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practicable after the Effective Time, and JEFG shall make such amendments to the
plans as may be required by the Internal Revenue Service in order for JEFG to
receive favorable determination letters with respect to the plans.
ARTICLE IV
STOCK OPTION AND OTHER EQUITY-BASED COMPENSATION PLANS
Section 4.01. EMPLOYEE STOCK OPTION PLANS. Holding shall be responsible
for all liabilities relating to stock options granted by JEFG prior to the
Effective Time.
Section 4.02. CAP AND EMPLOYEE STOCK PURCHASE PLANS.
(a) JEFG shall accelerate vesting in the matching contributions to its
Employee Stock Purchase Plan and distribute the JEFG Common Stock in this plan
to participants prior to the Effective Time. Holding shall be responsible for
all liability under the JEFG Employee Stock Purchase Plan.
(b) The disposition of the nonqualified deferred compensation plan of JEFG
(the "Capital Accumulation Plan for Key Employees") shall be as described in the
Unanimous Written Consent of the Board of Directors of JEFG adopted as of
January 13, 1999 (a copy of which is attached as Exhibit B).
ARTICLE V
OTHER EMPLOYEE PLANS
Section 5.01. WELFARE BENEFIT PLANS.
(a) As of the Effective Time, Holding shall assume all liability under
and with respect to all welfare benefit plans maintained by JEFG, including,
without limitation, medical, health, disability, accident, life insurance,
death, dental and other benefit plans or arrangements and such plans shall
be transferred to, and maintained by, Holding. Effective January 1, 1999,
ITGI established welfare benefit plans for eligible JEFG Employees, which
provide medical, health, disability, accident, life insurance, death, dental
or other benefits.
(b) (i) JEFG shall be liable for all employee health (including,
without limitation, medical and dental), life insurance (including, without
limitation, disability waiver of premium claims and any other life insurance
disability claims) and long-term disability claims, and any other welfare
benefit claims, and any expenses related thereto, ("Welfare Claims") that
are incurred on or after January 1, 1999 with respect to JEFG Employees and
their beneficiaries and dependents.
(ii) Holding shall be liable for all Welfare Claims that are incurred
on, after or before the Effective Time with respect to Holding
Employees and their beneficiaries and dependents.
(iii) If either party pays any welfare benefit claims that are a
liability of the other party, the responsible party shall reimburse
the paying party for all such payments.
(c) For purposes of this Section 5.01, a health benefit claim is
incurred when the medical services are rendered, and a life insurance claim
is incurred when the covered person dies. A claim for a hospital admission
shall be deemed to have been incurred on the date of admission to the
hospital and shall continue for the duration of that period of hospital
confinement; costs for all services provided during that period of hospital
confinement shall be included in the claim. A long-term disability claim
shall be deemed to have been incurred on the date the condition causing the
disability rendered the employee disabled, as determined by the committee or
plan administrator making the determination; costs for all long-term
disability benefits relating to the claim shall be included in the claim.
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(d) Holding shall be liable for any health care continuation
obligations under Section 4980B of the Code and Section 601 through 608 of
ERISA with respect to Holding Employees and former Holding Employees and
persons who are "qualified beneficiaries" (as that term is used in Section
4980B of the Code) of such employees.
(e) The Distribution shall not be considered an event entitling any
employee to salary continuation or other severance benefits.
Section 5.02. VACATION PAY AND SIMILAR ITEMS. Holding shall assume or
retain liability for all unpaid vacation pay, sick pay and personal leave
accrued by Holding Employees as of the Effective Time. JEFG shall assume or
retain liability for all unpaid vacation pay, sick pay and personal leave
accrued by JEFG Employees as of the Effective Time.
ARTICLE VI
HOLDING REPRESENTATIONS
Holding represents to JEFG as follows:
Section 6.01. ANNEX A hereto contains a true and complete list of "all
employee benefit plans" as defined in Section 3(3) of ERlSA, and each other
plan, arrangement or policy relating to stock options, stock purchases,
compensation, deferred compensation, severance, fringe benefits and other
employee benefits which are maintained or contributed to by any member of the
JEFG Group or as to which any member of the JEFG Group has any direct or
indirect, actual or contingent liability, other than plans, arrangements or
policies maintained by the ITGI Group (such JEFG Group plans, arrangements and
policies, the "Benefit Plans"), and copies of such plans, arrangements, policies
and related relevant materials have been made available to ITGI.
Section 6.02. No member of the Holding Group or JEFG Group has incurred,
or is reasonably likely to incur, any material liability under Title IV of ERISA
(other than for PBGC insurance premiums, all of which have been paid when due).
All contributions to any "employee benefit plan" (as defined in Section 3(3) of
ERISA) required to be made by any member of the JEFG Group or the Holding Group
in accordance with the terms of such plan and, when applicable, Section 302 of
ERISA or Section 412 if the Code, have been timely made.
Section 6.03. Each member of the JEFG Group and each Benefit Plan are in
compliance in all material respects with the applicable provisions of ERISA and
the Code. Each Benefit Plan intended to qualify under Section 401 of the Code is
so qualified. With respect to all Benefit Plans, there are no audits,
investigations or claims pending or, to the knowledge of Holding, threatened
(other than routine claims for benefits). There have been no nonexempt
prohibited transactions under the Code or ERISA with respect to any Benefit
Plans. With respect to all Benefit Plans that are welfare plans (as defined in
ERISA Section 3(1)), such plans have complied in all material respects with the
COBRA continuation coverage requirements of Code Section 4980B. No member of the
JEFG Group has any liability with respect to any plans providing benefits with
respect to employees employed outside the United States.
Section 6.04. The consummation of the transactions contemplated by the
Distribution Agreement and this Agreement will not result in JEFG being liable
to any individual for severance pay.
ARTICLE VII
INDEMNIFICATION
Section 7.01. HOLDING INDEMNIFICATION OF THE JEFG GROUP. On or after the
Effective Time, Holding shall indemnify, defend and hold harmless each member of
the JEFG Group, and each of their respective directors, officers, employees and
agents (the "JEFG Indemnitees") from and against any and all claims, costs,
damages, losses, liabilities and expenses (including, without limitation,
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reasonable expenses of investigation and reasonable attorneys fees and expenses
in connection with any and all Actions or threatened Actions) (collectively,
"Indemnifiable Losses") incurred or suffered by any of the JEFG Indemnitees and
arising out of, or due to or otherwise in connection with (x) any of the
employee benefit liabilities and obligations assumed or retained by Holding
pursuant to this Agreement or (y) the failure of Holding or any member of the
Holding Group to pay, perform or otherwise discharge, any of the employee
benefit liabilities and obligations assumed or retained, and representations and
agreements made, by Holding pursuant to this Agreement.
Section 7.02. JEFG INDEMNIFICATION OF HOLDING. On and after the Effective
Time, JEFG shall indemnify, defend and hold harmless Holding, and each of its
respective directors, officers, employees and agents (the "Holding Indemnitees")
from and against any and all Indemnifiable Losses incurred or suffered by any of
the Holding Indemnitees and arising out of, or due to or otherwise in connection
with (x) any of the employee benefit liabilities and obligations assumed or
retained by JEFG pursuant to the Agreement or (y) the failure of JEFG or any
member of the JEFG Group to pay, perform or otherwise discharge, any of the
employee benefit liabilities and obligations assumed or retained, and agreements
made, by JEFG pursuant to this Agreement.
Section 7.03. INSURANCE AND THIRD PARTY OBLIGATIONS. No insurer or any
other third party shall be (a) entitled to a benefit it would not be entitled to
receive in the absence of the foregoing indemnification provisions, (b) relieved
of the responsibility to pay any claims to which it is obligated or (c) entitled
to any subrogation rights with respect to any obligation hereunder.
ARTICLE VIII
INDEMNIFICATION PROCEDURES
Section 8.01. NOTICE AND PAYMENT OF CLAIMS. If any JEFG or Holding
Indemnitee (the Indemnified Party") determines that it is or may be entitled to
indemnification by a party (the "Indemnifying Party") under Article VII (other
than in connection with any Action or claim subject to Section 8.02), the
Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. After the Indemnifying Party shall
been notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 90 days after receipt of
such notice, pay the Indemnified Party such amount in cash or other immediately
available funds (or reach agreement with the Indemnified Party as to a mutually
agreeable alternative payment schedule) unless the Indemnifying Party objects to
the claim for indemnification or the amount thereof. If the Indemnifying Party
does not give the Indemnified Party written notice objecting to such claim and
setting forth the grounds therefor within the same 90 day period, the
Indemnifying Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount.
Section 8.02. NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. Promptly following
the earlier of (a) receipt of notice of the commencement by a third party of any
Action against or otherwise involving any Indemnified Party or (b) receipt of
information from a third party alleging the existence of a claim against an
Indemnified Party, in either case, with respect to which indemnification may be
sought pursuant to this Agreement (a "Third-Party Claim"), the Indemnified Party
shall give the Indemnifying Party written notice thereof. The failure of the
Indemnified Party to give notice as provided in this Section 8.02 shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent that the Indemnifying Party is prejudiced by such failure to give
notice. Within 90 days after receipt of such notice, the Indemnifying Party may
(a) by giving written notice thereof to the Indemnified Party, acknowledge
liability for and at its option elect to assume the defense of such Third-Party
Claim at its sole cost and expense or (b) object to the claim of indemnification
set forth in
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the notice delivered by the Indemnified Party pursuant to the first sentence of
this Section 8.02; provided that if the Indemnifying Party does not within the
same 90 day period give the Indemnified Party written notice objecting to such
claim and setting forth the grounds therefor or electing to assume the defense,
the Indemnifying Party shall be deemed to have acknowledged, as between the
parties hereto, its liability for such Third-Party Claim. Any contest of a Third
Party Claim as to which the Indemnifying Party has elected to assume the defense
shall be conducted by attorneys employed by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party; provided that the Indemnified
Party shall have the right to participate in such proceedings and to be
represented by attorneys of its own choosing at the Indemnified Party's sole
cost and expense. Notwithstanding the foregoing, (i) the Indemnifying Party
shall not be entitled to assume the defense of any Third-Party Claim (and shall
be liable to the Indemnified Party for the reasonable fees and expenses incurred
by the Indemnified Party in defending such Third-Party Claim) if there are one
or more legal defenses available only to the Indemnified Party that conflict, in
one or more significant substantive respects, with those available to the
Indemnifying Party with respect to such Third-Party Claim and (ii) if at any
time after assuming the defense of a Third-Party Claim an Indemnifying Party
shall fail to prosecute or shall withdraw from the defense of such Third-Party
Claim, the Indemnified Party shall be entitled to resume the defense thereof
with counsel selected by such Indemnified Party and the Indemnifying Party shall
be liable for the reasonable fees and expenses of counsel incurred by the
Indemnified Party in such defense. The Indemnifying Party may settle, compromise
or discharge a Third-Party Claim, provided, the Indemnifying Party shall have
obtained the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld. If, after receipt of notice of a Third-Party
Claim, the Indemnifying Party does not undertake to defend such Third-Party
Claim within 90 days of such notice, the Indemnified Party may, but shall have
no obligation to, contest any lawsuit or action with respect to such Third-Party
Claim and the Indemnifying Party shall be bound by the results obtained with
respect thereto by the Indemnified Party. Indemnification shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnifiable Loss is incurred.
The parties agree to render to each other such assistance as may reasonably be
requested in order to ensure the proper and adequate defense of any Third-Party
Claim. The remedies provided in this Article VIII shall be cumulative and shall
not preclude assertion by any Indemnified Party of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
Section 8.03. CONTRIBUTION. To the extent that any indemnification
provided for in Section 7.01 or 7.02 is unavailable to an Indemnified Party or
is insufficient in respect of any of the Indemnifiable Losses of such
Indemnified Party, then the Indemnifying Party, in lieu of, or in addition to,
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Indemnifiable
Losses (i) in such proportion as is appropriate to reflect the relative benefits
received by such Indemnifying Party on the one hand and the Indemnified Party on
the other hand from the transaction or other matter which resulted in the
Indemnifiable Losses or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
fault of the Indemnifying Party on the one hand and of the Indemnified Party on
the other hand in connection with the action, inaction, statements or omissions
that resulted from such Indemnifiable Losses as well as any other relevant
equitable considerations.
ARTICLE IX
MISCELLANEOUS
Section 9.01. NOTICES. All notices and communications under this Agreement
shall be in writing and any communication or delivery hereunder shall be deemed
to have been duly given when received
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addressed as follows:If to JEFG, to:
Investment Technology Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
If to Holding, to:
▇▇▇▇▇▇▇▇▇ Group, Inc.
JEF Holding Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Such notices shall be deemed received (i) as of the date of delivery by hand
delivery, (ii) one business day after such notice is given to a national
overnight delivery service or (iii) five business days after placed in the
United States mail, provided such mail is sent by certified mail with return
receipt requested. Either party may, by written notice so delivered to the other
party, change the address to which delivery of any notice shall thereafter be
made.
Section 9.02. AMENDMENT AND WAIVER. This Agreement may not be altered or
amended, nor may rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver and
by ITGI. No waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this Agreement, in
any one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision, condition, right or remedy or as
a waiver of any other term, provision or condition of this Agreement.
Section 9.03. ENTIRE AGREEMENT. This Agreement, together with the
Distribution Agreement, constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof, superseding all negotiations,
prior discussions and prior agreements and understandings relating to such
subject matter. To the extent that the provisions of this Agreement are
inconsistent with the provisions of the Distribution Agreement, the provisions
of this Agreement shall prevail.
Section 9.04. PARTIES IN INTEREST. Neither of the parties hereto may
assign its rights or delegate any of its duties under this Agreement without the
prior written consent of each other party and of ITGI. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and
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their respective successors and permitted assigns. Nothing contained in this
Agreement, express or implied, is intended to confer any benefits, rights or
remedies upon any person or entity other than members of the JEFG Group and
Holding, and the JEFG Indemnitees and Holding Indemnitees and their respective
successors and assigns under Articles VII and VIII hereof.
Section 9.05. FURTHER ASSURANCES AND CONSENTS. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto will use its reasonable efforts to (i) execute and deliver such further
instruments and documents and take such other actions as any other party may
reasonably request in order to effectuate the purposes of this Agreement and to
carry out the terms hereof and (ii) take, or cause to be taken, all actions, and
to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable efforts to obtain any
consents and approvals and to make any filings and applications necessary or
desirable in order to consummate the transactions contemplated by this
Agreement.
Section 9.06. SEVERABILITY. The provisions of this Agreement are severable
and should any provision hereof be void, voidable or unenforceable under any
applicable law, such provision shall not affect or invalidate any other
provision of this Agreement, which shall continue to govern the relative rights
and duties of the parties as though such void, voidable or unenforceable
provision were not part hereof.
Section 9.07. EXPRESS THIRD-PARTY BENEFICIARY. Prior to the Merger, ITGI
is an express third party beneficiary of this Agreement and shall be entitled to
enforce the provisions hereof as if a party hereto.
Section 9.08. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of New York, without
regard to the conflicts of law rules of such state.
Section 9.09. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
Section 9.10. DISPUTES. Resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes in connection with claims by
third parties shall be exclusively governed by and settled in accordance with
provisions identical to those set forth in Section 11.10 of the Distribution
Agreement, which Section is hereby incorporated by this reference.
Section 9.11. Holding will provide to ITGI, as soon as practicable
following its request, any information reasonably needed by ITGI relating to any
of the employee benefit plans referred to in this Agreement. In addition, as
soon as practicable following the Effective Time Holding will provide to ITGI
copies of all domestic relations orders received with respect to JEFG Employees
in connection with the JEFG ESOP, the JEFG PSP and the JEFG Pension Plan.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
▇▇▇▇▇▇▇▇▇ GROUP, INC.
BY /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive
Vice President and CFO
JEF HOLDING COMPANY, INC.
BY /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Secretary and
General Counsel
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