EXHIBIT 2
EXECUTION COPY
AMENDED AND RESTATED
PURCHASE AGREEMENT
dated as of
June 11, 1999
among
SPEAR, LEEDS & XXXXXXX SPECIALISTS LLC,
THE SELLING MEMBERS LISTED ON THE
SIGNATURE PAGES HERETO
AND THE MEMBERS' REPRESENTATIVE
relating to the purchase and sale
of
100% of the membership interests in
Equitrade Partners, LLC
TABLE OF CONTENTS
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Page
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ARTICLE I.
DEFINITIONS
SECTION 1.1. Definitions......................................................1
ARTICLE II.
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale................................................7
SECTION 2.2. Purchase Price...................................................7
SECTION 2.3. Closing..........................................................8
SECTION 2.4. Closing Date Balance Sheet.......................................9
SECTION 2.5. Final Closing Date Balance Sheet................................10
SECTION 2.6. Supplemental Closing Payments...................................11
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER INDIVIDUALS
SECTION 3.1. Limited Liability Existence and Power...........................12
SECTION 3.2. Authorization...................................................12
SECTION 3.3. Governmental Authorization......................................12
SECTION 3.4. Non-Contravention...............................................13
SECTION 3.5. Regulatory Filings..............................................13
SECTION 3.6. Capitalization..................................................14
SECTION 3.7. Ownership of Interests..........................................14
SECTION 3.8. Ownership and Lease of NYSE Seats...............................14
SECTION 3.9. Subsidiaries....................................................15
SECTION 3.10. Financial Statements...........................................15
SECTION 3.11. No Undisclosed Material Liabilities............................15
SECTION 3.12. Intercompany Accounts..........................................15
SECTION 3.13. Material Contracts.............................................16
SECTION 3.14. Litigation.....................................................17
SECTION 3.15. Compliance with Laws and Court Orders; No Defaults.............18
SECTION 3.16. Properties.....................................................18
SECTION 3.17. Intellectual Property..........................................19
SECTION 3.18. Licenses and Permits...........................................19
SECTION 3.19. [Intentionally Omitted.].......................................19
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SECTION 3.20. Receivables....................................................19
SECTION 3.21. Disclosure by Seller...........................................20
SECTION 3.22. Finders' Fees..................................................20
SECTION 3.23. Employees......................................................20
SECTION 3.24. Labor Matters..................................................23
SECTION 3.25. Receivables....................................................23
SECTION 3.26. Accredited Investor; No Distribution...........................24
SECTION 3.27. Organizational Documents.......................................24
SECTION 3.28. Year 2000 Compliance...........................................24
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE RSF GROUP
SECTION 4.1. Authorization...................................................24
SECTION 4.2. Governmental Authorization......................................24
SECTION 4.3. Non-Contravention...............................................25
SECTION 4.4. Capitalization..................................................25
SECTION 4.5. Ownership of Interests..........................................25
SECTION 4.6. Intercompany Accounts...........................................26
SECTION 4.7. Litigation......................................................26
SECTION 4.8. [Intentionally Omitted.]........................................26
SECTION 4.9. Disclosure by Seller............................................26
SECTION 4.10. Finders' Fees...................................................27
SECTION 4.11. Accredited Investor; No Distribution............................27
SECTION 4.12. No Actual Knowledge of Misrepresentations.......................27
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF NDB AND SHD
SECTION 5.1. Corporate Existence and Power...................................27
SECTION 5.2. Corporate Authorization.........................................27
SECTION 5.3. Governmental Authorization......................................28
SECTION 5.4. Non-Contravention...............................................28
SECTION 5.5. Capitalization..................................................28
SECTION 5.6. Ownership of Interests..........................................28
SECTION 5.7. Ownership and Lease of NYSE Seats...............................29
SECTION 5.8. Litigation......................................................29
SECTION 5.9. [Intentionally Omitted.]........................................29
SECTION 5.10. Intercompany Accounts...........................................29
SECTION 5.11. Disclosure by Seller............................................30
SECTION 5.12. Finders' Fees...................................................30
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 6.1. Existence and Power.............................................30
SECTION 6.2. Authorization...................................................30
SECTION 6.3. Governmental Authorization......................................31
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SECTION 6.4. Non-Contravention...............................................31
SECTION 6.5. Finders' Fees...................................................31
SECTION 6.6. Litigation......................................................31
ARTICLE VII.
COVENANTS OF THE SELLERS
SECTION 7.1. Conduct of the Company..........................................32
SECTION 7.2. Access to Information...........................................33
SECTION 7.3. Notices of Certain Events.......................................34
SECTION 7.4. Noncompetition..................................................34
SECTION 7.5. No Transfer of Seller Interests.................................35
SECTION 7.6. Material Agreements.............................................35
SECTION 7.7. No Transfer of Promissory Notes.................................36
SECTION 7.8. Transfer of Seats...............................................36
SECTION 7.9. Set-Off.........................................................36
ARTICLE VIII.
COVENANTS OF THE BUYER AND THE SELLERS
SECTION 8.1. Reasonable Best Efforts.........................................36
SECTION 8.2. Certain Filings.................................................37
SECTION 8.3. Public Announcements............................................37
SECTION 8.4. Intercompany Accounts...........................................37
ARTICLE IX.
TAX MATTERS
SECTION 9.1. Tax Definitions.................................................37
SECTION 9.2. Tax Representations.............................................39
SECTION 9.3. Post-Closing Tax Filings and Covenants..........................40
SECTION 9.4. Other Tax Matters...............................................42
SECTION 9.5. Cooperation on Tax Matters......................................42
SECTION 9.6. Tax Indemnification.............................................43
SECTION 9.7. Audits..........................................................46
SECTION 9.8. Allocation of Purchase Price....................................47
SECTION 9.9. Purchase Price Adjustment.......................................47
SECTION 9.10. Survival........................................................48
ARTICLE X.
CONDITIONS TO CLOSING
SECTION 10.1. Conditions to Obligations of the Buyer and Sellers.............48
SECTION 10.2. Conditions to Obligations of the Buyer.........................48
SECTION 10.3. Conditions to Obligation of Sellers............................51
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ARTICLE XI.
SURVIVAL; INDEMNIFICATION
SECTION 11.1. Survival.......................................................53
SECTION 11.2. Indemnification................................................54
SECTION 11.3. Procedures.....................................................55
SECTION 11.4. Indemnification Limits; Notices to Seller Individuals..........56
ARTICLE XII.
TERMINATION
SECTION 12.1. Grounds for Termination........................................57
SECTION 12.2. Effect of Termination..........................................58
ARTICLE XIII.
MEMBERS' REPRESENTATIVE
SECTION 13.1. Appointment; Acceptance........................................58
SECTION 13.2. Authority......................................................58
SECTION 13.3. Actions........................................................59
SECTION 13.4. Effectiveness..................................................60
SECTION 13.5. Indemnification; Fees and Expenses.............................60
SECTION 13.6. Successor......................................................60
SECTION 13.7. Survival of Authorizations.....................................60
ARTICLE XIV.
MISCELLANEOUS
SECTION 14.1. Notices........................................................61
SECTION 14.2. Amendments and Waivers.........................................62
SECTION 14.3. Expenses.......................................................63
SECTION 14.4. Successors and Assigns.........................................63
SECTION 14.5. Governing Law..................................................63
SECTION 14.6. Counterparts; Third Party Beneficiaries........................63
SECTION 14.7. Confidentiality................................................63
SECTION 14.8. Entire Agreement...............................................63
SECTION 14.9. Waiver of Rights...............................................64
SECTION 14.10. Arbitration....................................................64
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SCHEDULES AND EXHIBITS
Schedule I Sellers; Premium
Schedule II Capital Accounts
Schedule III NYSE Specialist Securities
Schedule IV Membership Allocations
Schedule V Balance Sheet
Schedule 3.6 Company Securities
Schedule 3.7 Ownership of Interests
Schedule 3.8 NYSE Seats Owned or Leased by the Company
Schedule 3.11 Liabilities
Schedule 3.12 Intercompany Balances
Schedule 3.13 Material Contracts
Schedule 3.14 Litigation
Schedule 3.15 Compliance With laws; No Defaults
Schedule 3.18 Permits
Schedule 3.23(a) Company Benefit Plans
Schedule 3.23(f) Violations of ERISA
Schedule 3.23(h) Pending Actions Against Company Benefit Plans
Schedule 3.23(i) Maintenance of Company Benefit Plans; Liability
of Fiduciaries
Schedule 3.24(a) Labor/Collective Bargaining Agreements
Schedule 3.24(b) Representation by Labor Organizations
Schedule 3.25 Specialist Securities (Exceptions)
Schedule 4.5 Ownership of Interests
Schedule 4.6 Intercompany Accounts
Schedule 5.7 NYSE Seats Owned by the Company
Schedule 5.8 Litigation
Schedule 5.10 Intercompany Balances
Schedule 9.2 Tax Returns
Schedule 9.2(c) Tax Jurisdictions
Exhibit A Matters to be Covered by Opinions of Counsel
Exhibit B Form of Promissory Notes
Exhibit C Form of NDB Release
Exhibit D Form of Seller Individual Release
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AMENDED AND RESTATED PURCHASE AGREEMENT
AMENDED AND RESTATED AGREEMENT dated as of June 11, 1999 among
Spear, Leeds & Xxxxxxx Specialists LLC, a New York limited liability company
(the "Buyer"), the selling members listed on the signature pages hereto (each, a
"Seller" and collectively, the "Sellers") and the Members' Representative (as
defined below).
The parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms, as used
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herein, have the following meanings:
"Adjusted Purchase Price" means an amount equal to the sum of
the Adjusted NDB Group Purchase Price plus the Adjusted Seller Individuals
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Purchase Price.
"Adjusted NDB Group Purchase Price" means an amount determined
in the same manner as the NDB Group Purchase Price; provided, however, that in
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performing such calculation, all references in Section 2.2(b) to the Closing
Date Balance Sheet shall be deemed to be references to the Final Closing Date
Balance Sheet.
"Adjusted Seller Individuals Purchase Price" means an amount
determined in the same manner as the Seller Individuals Purchase Price;
provided, however, that in performing such calculation, all references in
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Section 2.2(c) to the Closing Date Balance Sheet shall be deemed to be
references to the Final Closing Date Balance Sheet.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Aggregate Company's Intangibles" means the sum of the
following three line items on any balance sheet of the Company: "Purch Xxxxxx
List-RSF Spec", "Covenant Not to Compete" and "Goodwill".
"Balance Sheet Date" means March 31, 1999.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by law or
executive order to close.
"Capital Accounts" means the "GAAP Capital Accounts" under the
Operating Agreement.
"Closing Date" means the date of the Closing.
"Company" means Equitrade Partners, LLC, a Delaware limited
liability company and its predecessor, Equitrade Partners, L.P., a New York
partnership.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"8% Subordinated Loan" means the $5,000,000 principal amount
8% Subordinated Loan of NDB to the Company.
"Estimated NDB Group Purchase Price" means the NDB Group
Purchase Price estimated as of the Closing Date based on the Closing Date
Balance Sheet to be paid in accordance with the terms of Section 2.2(b).
"Estimated Purchase Price" means an amount equal to the sum of
the Estimated NDB Group Purchase Price plus the Estimated Seller Individuals
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Purchase Price.
"Estimated Seller Individuals Purchase Price" means the Seller
Individuals Purchase Price estimated as of the Closing Date based on the Closing
Date Balance Sheet to be paid in accordance with the terms of Section 2.2(c).
"Federal Funds Rate" means, on any one day, the rate per annum
equal to the weighted average (rounded upwards, if necessary, to the nearest
1/100th of 1%) of the rate on overnight federal funds transactions with members
of the Federal Reserve System only arranged by federal funds brokers, as
published as of such day by the Federal Reserve Bank of New York, or, if such
rate is not so published, the average of the quotations for such day on such
transactions received by the Buyer (or an Affiliate of the Buyer) from three
funds brokers of recognized standing selected by the Buyer (or an Affiliate of
the Buyer).
"GAAP" means United States generally accepted accounting
principles consistently applied.
"Governmental Entity" means any United States federal, state,
county, local, municipal or foreign government, court, administrative agency or
commission or other governmental or other regulatory or self-regulatory
authority or agency or any arbitration tribunal or other non-governmental
authority with, in the case of such arbitration tribunal or non-governmental
authority, the ability to issue decisions that are legally binding on the
Company or the Buyer or any Seller, as applicable.
"Green Note" means the $900,000 principal amount 7% note
payable by Xxxxx Xxxxx to NDB.
"Indebtedness" means as to any Person (i) long or short term
indebtedness for borrowed money; (ii) long or short term
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indebtedness for the deferred purchase price of property or services; (iii)
obligations and liabilities secured by a Lien upon property owned by such
Person, whether or not owing by such Person and even though such Person has not
assumed or become liable for the payment thereof; (iv) obligations and
liabilities directly or indirectly guaranteed by such Person; (v) obligations or
liabilities created or arising under any conditional sales contract or other
title retention agreement with respect to property used and/or acquired by such
Person, even though the rights and remedies of the lessor, seller and/or lender
thereunder are limited to repossession of such property; (vi) obligations under
capitalized leases; (vii) all liabilities in respect of letters of credit,
acceptances and similar obligations created for the account of such Person;
(viii) net liabilities of such Person under interest rate cap agreements,
interest rate swap agreements, foreign currency exchange agreements and other
hedging agreements or arrangements; (ix) accrued dividends on the capital stock
of such Person (including, without limitation, on the common stock or preferred
stock of such Person); (x) any liability of such Person which is past due; and
(xi) any accrued interest on any obligation, liability or other indebtedness set
forth in clauses (i) to (x) above.
"Intellectual Property Right" means any trademark, service
xxxx, trade name, invention, patent, trade secret, copyright, know-how
(including any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property right.
"Interests" means the aggregate Membership Interests
constituting 100% of the outstanding ownership interests in profits and losses
and capital of the Company.
"Letter Agreements" means, collectively, (i) the letter
agreement dated December 31, 1998, among Xxxxxx X. Xxxxxxxxx, Xxxxxxx Xxxxxx,
Xxxxxx X. Xxxxxxx, Xx., Xxxxxx X. Xxxxxxx, Xx. and Xxxx X. Xxxxxxx, and (ii) the
letter agreement dated December 31, 1998, among Xxxxx X. Xxxxx, III, Xxxxxxx
Xxxxxx, Xxxxxx X. Xxxxxxx, Xx., Xxxxxx X. Xxxxxxx, Xx. and Xxxx X. Xxxxxxx.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on
the financial condition, business, assets, results of operations, properties or
prospects of the Company.
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"Membership Interest" means, with respect to each Seller, the
ownership and profit and loss percentage of the Company set forth opposite its
name on Schedule 3.6 hereto or such other percentage as may be specified in
writing to the Buyer prior to the Closing so long as the aggregate Membership
Interests constitute 100% of the Interests in profits and losses and capital of
the Company.
"1934 Act" means the Securities Exchange Act of 1934, and the
rules and regulations promulgated thereunder.
"NDB" means National Discount Brokers Group, Inc., a Delaware
corporation, which is a Seller under this Agreement.
"NDB Group" means, collectively, NDB and SHD, Xxxxxxx Xxxxxxx,
Xxxxxx Xxxxxxxxx and Xxxx Xxxxx.
"NYSE" means the New York Stock Exchange, Inc.
"Operating Agreement" means the Amended and Restated Operating
Agreement of the Company, dated as of December 31, 1998, as in effect on the
date hereof.
"Permitted Liens" means conditional sales contracts on
equipment used by the Company in the ordinary course of business consistent with
past practice.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a Governmental Entity.
"RSF Group" means Xxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxx, III,
Xxxxxxx Xxxxxx and Xxxxxx X. Xxxxxxx, Xx., collectively.
"SEC" means the Securities and Exchange Commission.
"Secured Demand Notes" means, collectively, (i) that certain
Secured Demand Note and Collateral Agreement, dated March 23, 1992 between the
Company and Sherwood Securities Corp. and (ii) that certain Secured Demand Note
Collateral Agreement having a maturity date of February 28, 1998, by The
Sherwood Group, Inc., and any related agreements.
"Securities Act" means the Securities Act of 1933, and the
rules and regulations promulgated thereunder.
"Seller Individual" means each Seller other than the NDB
Group.
"Settlement Date" means the fifth Business Day following (i)
the date of delivery to the Sellers of the Final Closing Date Balance Sheet or
(ii) if the Final Closing Date Balance Sheet is subject to dispute pursuant to
Section 2.5, the date of the resolution of such dispute by the Buyer and the
4
Sellers or the date of the determination of the independent accounting firm
selected by the Buyer and the Sellers pursuant to such Section.
"6% Subordinated Loan" means the $22,000,000 principal amount
6% Subordinated Loan of NDB to the Company.
"SHD" means SHD Corporation, a Delaware corporation, which is
a Seller under this Agreement and is a wholly-owned subsidiary of NDB.
"SLK Loan" means the $15,000,000 principal amount 6% loan of
Spear, Leeds & Xxxxxxx, X.X. to NDB.
"Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company.
"Year 2000 Compliant" means the ability to provide specific
dates and calculate spans of dates and record, store, process and provide true
and accurate dates and calculations for dates and spans of dates within the
closed interval January 1, 1700 through December 31, 9999 (the "Interval Dates")
prior to, including and following January 1, 2000, including by: (i) recognizing
_____________, 1999 as a valid date; (ii) prior and up to December 31, 1999,
correctly processing day and date calculations within the Interval Dates; (iii)
on and after January 1, 2000, correctly processing day and date calculations
within the Interval Dates; (iv) recognizing the year 2000 as a leap year having
366 days, and correctly processing February 29, 2000 as a valid leap year date;
(v) recognizing January 1, 2001 as a valid date; (vi) employing only four-digit
year representations in components and systems owned or operated in connection
with the business of the Company; and (vii) incorporating interface programs
sufficient to translate accurately to four-digit year format (without any burden
of interpretation) any two-digit year representations included in components and
systems, including but not limited to external databases, data warehouses,
software systems and user interfaces not owned or operated in connection with
the business of the Company, which electronically or manually send data to or
receive data from components or systems used in such business.
(a)(b) Each of the following terms is defined in the Section
set forth opposite such term:
Term Section
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Allocation Statement 9.8(a)
Balance Sheet 10.2
Buyer Indemnitee 9.1, 11.2
Buyer Tax Loss 9.6(a)
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Term Section
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Closing 2.1
Closing Date Assets 9.8(a)
Closing Date Balance Sheet 2.4
COBRA 3.23(j)
Code 9.1
Company Benefit Plans 3.23(a)
Company Securities 3.6(b)
Damages 11.2(a)
DOJ 3.3
ERISA Affiliate 3.23(b)
Filings 3.5(a)
Final Closing Date Balance Sheet 2.5
Final Determination 9.1
5% Holdback Amount 2.3(c)
FTC 3.3
HSR Act 3.3
Indemnified Party 11.3
Indemnifying Party 11.3
Member Delivered Agreements 13.2(a)
Members' Representative 13.1
NDB Group Intangibles 2.2(b)
NDB Group Purchase Price 2.2(b)
Objection Period 9.6(e)
Pension Plan 3.23(c)
Permits 3.18
Pre-Closing Tax Period 9.1
Promissory Note 2.3(b)
Purchase Price 2.1
Reference Date 2.4
Resolution Period 9.6(f)
Seller Indemnitee 9.1, 11.2
Seller Individuals Intangibles 2.2(c)
Seller Individuals Purchase Price 2.2(c)
Seller's Minimum Amount 9.6(g)
Seller Tax Loss 9.6(c)
Specialist Business 2.1
Supplemental Closing 2.6
Tax 9.1
Tax Indemnification Period for Buyer Indemnitee 9.1
Tax Indemnification Period for Seller Indemnitee 9.1
Tax Return 9.1
Tax Sharing Agreements 9.1
Taxing Authority 9.1
Third Party Suit 9.6(g)
Reference to the word "knowledge" or "known" (i) with respect
to the NDB Group, means known, after due inquiry, to the chief executive
officer, chief financial officer, general counsel or controller of NDB, (ii)
with respect to any Seller Individual (other than the RSF Group), means known to
Xxxxx Xxxxx or known,
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after due inquiry, to such Seller Individual, and (iii) with respect to any
member of the RSF Group, means known to such Seller Individual.
ARTICLE II.
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. Upon the terms and subject to
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the conditions of this Agreement, each Seller agrees to sell to the Buyer, and
the Buyer agrees to purchase from such Seller, its Membership Interest at the
Closing. The aggregate purchase price (the "Purchase Price") for the Interests
shall be calculated in accordance with Section 2.2, shall be paid as provided in
Section 2.3 and shall be adjusted in accordance with Section 2.5. Upon the terms
and subject to the conditions of this Agreement, each Seller and the Buyer agree
to diligently pursue and use their reasonable commercial efforts to obtain the
approval of the NYSE for the Buyer to purchase from such Seller its Membership
Interest and for the Buyer, upon the closing (the "Closing") of the purchase and
sale of the Interests hereunder and subsequent merger, if any, of the Company
into the Buyer, to conduct the specialist business with respect to all of the
NYSE equity securities for which the Company is acting as the specialist unit
immediately prior to the Closing (the "Specialist Business"). Upon the Closing,
the Buyer will acquire 100% of the Membership Interests of the Company and no
other Person other than the Buyer will own any interest in the Company.
SECTION 2.2. Purchase Price. (a) The Purchase Price shall be
--------------
equal to the sum of the NDB Group Purchase Price plus the Seller Individuals
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Purchase Price.
(b) The aggregate purchase price to be paid for the
Membership Interests of the NDB Group at the Closing (the "NDB Group Purchase
Price") shall be equal to the sum of the following: (A) $46,657,422, which
includes the premium for the Specialist Business; plus (B) the NDB Group's
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Capital Accounts as reflected on the Closing Date Balance Sheet (minus NDB
Group's pro rata portion of Xxxx to Market-Off Floor Trading (Unrealized));
minus (C) the NDB Group's aggregate book value of intangibles in the Company
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(the "NDB Group Intangibles") (the book value of the NDB Group Intangibles being
equal to 22% of the Aggregate Company's Intangibles) on the Closing Date as
reflected on the Closing Date Balance Sheet. The NDB Group Purchase Price shall
be paid in accordance with Section 2.3(b).
(c) The aggregate purchase price to be paid for the Membership
Interests of the Seller Individuals at the Closing (the "Seller Individuals
Purchase Price") shall be equal to (A) $46,231,400, which includes the premium
for the Specialist Business; plus (B) the Seller Individuals' Capital Accounts
----
as reflected on the Closing Date Balance Sheet (minus the Seller Individuals'
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pro rata portion of Xxxx to Market Off Floor Trading
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(unrealized)) minus (C) the Seller Individuals' aggregate book value of
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intangibles (the "Seller Individuals Intangibles") (the book value of the Seller
Individuals Intangibles being equal to 78% of the Aggregate Company's
Intangibles, with the Seller Individuals Intangibles together with the NDB Group
Intangibles being equal to the Aggregate Company's Intangibles) on the Closing
Date as reflected on the Closing Date Balance Sheet. The Seller Individuals
Purchase Price shall be paid in accordance with Section 2.3(b). Each Seller
Individual hereby acknowledges and agrees that the Seller Individuals Purchase
Price (and the Estimated Seller Individuals Purchase Price) being paid to such
Seller Individual is fair consideration for the Membership Interests being sold
by such Seller Individual pursuant to this Agreement. Further, each Seller
Individual waives any of the provisions contained in the Operating Agreement
relating to the sale of his Interests. In furtherance of the foregoing, such
Seller Individual agrees that he is not entitled to receive any other amount or
consideration under, pursuant to or in accordance with the Operating Agreement
for his Interests.
SECTION 2.3. Closing.
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(a) The closing (the "Closing") of the purchase and sale of
the Interests hereunder shall take place at the offices of Xxxxxxx Xxxx &
Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as soon as possible, but in no
event later than 10 Business Days, after satisfaction of the conditions set
forth in Article X, or at such other time or place as the Buyer, NDB, on behalf
of the NDB Group, and the Members' Representative may agree.
(b) At the Closing, the Buyer shall deliver to: (i) subject
to Section 2.3(c), NDB, on behalf of the NDB Group, the Estimated NDB Group
Purchase Price in immediately available funds by wire transfer to an account
with a bank in New York City designated by NDB, by notice to the Buyer, not
later than two Business Days prior to the Closing Date; (ii) subject to Section
2.3(c), each Seller Individual an amount of cash in immediately available funds
equal to the sum of: (A) the applicable amount set forth opposite the name of
such Seller Individual on Schedule I under "Cash Premium"; plus (B) the Capital
----
Account of such Seller Individual set forth on the Closing Date Balance Sheet
(minus such Seller Individual's pro rata portion of Xxxx to Market Off Floor
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Trading (unrealized)); minus (C) the percentage of the book value of the Seller
Individuals Intangibles on the Closing Date as reflected on the Closing Date
Balance Sheet attributable to such Seller Individual which percentage is set
forth opposite the name of such Seller Individual on Schedule I under
"Percentage of Book Value of Seller Individuals Intangibles"; (iii) the Members'
Representative, on behalf of each Seller Individual, a promissory note
(substantially in the form attached to this Agreement as Exhibit B) (each, a
"Promissory Note") the principal amount of which shall be equal to the net
present value (discounted at an annual rate of 8% compounded annually over a
period of four years (or three, as
8
provided in the proviso of the last sentence of this Section 2.3(b))) of the
applicable amount set forth opposite the name of such Seller Individual on
Schedule I under "Notes Premium" and (iv) Xxxxxxx X. XxXxxxxx, Xxxxxx X. Xxxxxx,
Xxxx X. Xxxxxxxx, and Xxxxxx X. Xxxx, III, the amount set forth opposite the
name of such Seller Individual on Schedule I under "Other Payments." Each
Promissory Note shall be payable over a period of four years in equal annual
installments; provided, however, that the Promissory Note payable to Xxxxx Xxxxx
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and the Promissory Note payable to Xxxx X. Xxxxxxxx shall be payable over a
period of three years in equal annual installments.
(c) At the Closing, the Buyer shall withhold 5% of the
Estimated NDB Group Purchase Price and 5% of the portion of the Estimated Seller
Individuals Purchase Price payable pursuant to Section 2.3(b)(ii) (in the
aggregate, the "5% Holdback Amount"). The 5% Holdback Amount shall be applied to
any and all payments required to be made by NDB, on behalf of the NDB Group, or
any Seller Individual pursuant to Sections 2.5 and 2.6. On the Settlement Date,
any portion of the 5% Holdback Amount not applied pursuant to the immediately
preceding sentence shall be returned to NDB, on behalf of the NDB Group, and the
Members' Representative, on behalf of the Seller Individuals, in amounts which
have the same proportion as the payment made under Section 2.3(b)(i) has to the
payment made under Section 2.3(b)(ii). Any and all adjustments between or among
the Sellers required to be made thereafter shall be the sole responsibility of
NDB and the Members' Representative. To the extent the Buyer pays cash
constituting a portion of the 5% Holdback Amount to the Sellers on the
Settlement Date, such cash shall also include interest from the Closing Date to
the Settlement Date at the Federal Funds Rate.
SECTION 2.4. Closing Date Balance Sheet. Not later than two
--------------------------
Business Days prior to the Closing Date, the Sellers shall prepare and deliver
to the Buyer an unaudited pro forma balance sheet of the Company as of a date
not earlier than seven Business Days prior to the Closing Date (the "Reference
Date"), which balance sheet shall be prepared in accordance with GAAP and
consistent with past practice of the Company (except that such balance sheet
shall not be required to have footnotes so long as such balance sheet is only
subject to normal recurring adjustments, none of which are or could reasonably
be expected, individually or in the aggregate, to be material in amount),
together with a schedule reflecting each Seller's Capital Account, the aggregate
Xxxx to Market-Off Floor Trading (Unrealized), in each case as of the Reference
Date and a schedule of accrued and unpaid interest on the Capital Accounts of
each Seller identified in the last paragraph of Schedule 3.12 through May 31,
1999 (collectively with such balance sheet, the "Closing Date Balance Sheet").
Such Closing Date Balance Sheet will be used to calculate the Estimated Purchase
Price.
9
SECTION 2.5. Final Closing Date Balance Sheet. Not later than
--------------------------------
10 Business Days following the Closing Date, the Buyer shall prepare and deliver
to NDB, on behalf of the NDB Group, and the Members' Representative, on behalf
of the Seller Individuals, an unaudited balance sheet of the Company as of the
Closing Date, which balance sheet shall be prepared in accordance with GAAP and
consistent with past practice of the Company (except that such balance sheet
shall not be required to have footnotes so long as such balance sheet is only
subject to normal recurring adjustments, none of which were or are expected,
individually or in the aggregate, to be material in amount), together with a
schedule reflecting each Seller's Capital Account, the aggregate Xxxx to
Market-Off Floor Trading (Unrealized) and a schedule of accrued and unpaid
interest on the Capital Accounts of each Seller identified in the last paragraph
of Schedule 3.12 from June 1, 1999 through the Closing Date, in each case as of
the Closing Date (collectively with such balance sheet, the "Final Closing Date
Balance Sheet"). The Buyer shall deliver reasonably detailed calculations with
the Final Closing Date Balance Sheet showing adjustments to the Closing Date
Balance Sheet. Within 10 Business Days after receipt of such Final Closing Date
Balance Sheet, NDB, on behalf of the NDB Group, or the Members' Representative,
on behalf of the Seller Individuals, may deliver to the Buyer a notice that
explains with reasonable specificity (with reasonably detailed calculations) any
adjustments to the Final Closing Date Balance Sheet that Sellers request. Upon
prior written request of NDB or the Members' Representative made to the Buyer,
the Buyer will provide NDB and the Members' Representative with reasonable
access during normal business hours to relevant working papers used in the
preparation of the Final Closing Date Balance Sheet. If NDB or the Members'
Representative does not deliver such notice to the Buyer within such time,
Sellers shall be deemed to have waived any right to contest or otherwise adjust
the Final Closing Date Balance Sheet. If NDB or the Members' Representative
provides the notice described in the preceding sentence, Sellers and the Buyer
will use their reasonable best efforts to reach a mutual agreement on any
appropriate adjustments to be made to the Final Closing Date Balance Sheet
within 10 Business Days of the receipt of such notice. If Sellers and the Buyer
are unable to resolve any disputes within ten (10) Business Days of receipt of
notice from NDB or the Members' Representative, then such disputes shall be
referred to a nationally recognized independent certified public accounting firm
mutually agreed upon by the Buyer, NDB and the Members' Representative. The
accounting firm to which such disputes are referred shall, within twenty (20)
Business Days after such disputes shall have been referred to it deliver to
Sellers and the Buyer a written report indicating its views on the item or items
in dispute and its resolution thereof. The determination of the independent
accounting firm pursuant to the terms of this Section 2.5 shall be final and
binding on the Buyer and the Sellers in the absence of manifest error (so long
as the Buyer has complied with its obligation to provide NDB and the Members'
Representative, upon their prior written request, with reasonable
10
access during normal business hours to relevant working papers in accordance
with this Section 2.5). In the event that a dispute regarding the Final Closing
Date Balance Sheet is referred to an independent accounting firm as provided
above, the cost thereof shall be divided equally among the Seller Individuals
(to be paid by the Members' Representative), NDB Group (to be paid by NDB) and
the Buyer.
SECTION 2.6. Supplemental Closing Payments. The supplemental
-----------------------------
closing (the "Supplemental Closing") shall be held at the same place and time as
is provided in Section 2.3 hereof on the Settlement Date, or at such other place
and time and at such other time and date as may be mutually agreed upon in
writing by the Buyer, NDB and the Members' Representative. At the Supplemental
Closing, the Buyer shall pay (1) NDB, on behalf of the NDB Group, by wire
transfer of immediately available funds, the amount, if any, by which the
Adjusted NDB Group Purchase Price exceeds the amount of the Estimated NDB Group
Purchase Price, plus any accrued and unpaid interest on its Capital Account from
June 1, 1999 through the Closing Date and (2) each Seller Individual, by wire
transfer of immediately available funds, the amount, if any, by which the
Adjusted Seller Individuals Purchase Price exceeds the Estimated Seller
Individuals Purchase Price, plus any accrued and unpaid interest on the Capital
Account of any Seller identified in the last paragraph of Schedule 3.12 from
June 1, 1999 through the Closing Date. In the event that the amount of the
Estimated Purchase Price shall exceed the Adjusted Purchase Price, NDB (on
behalf of the NDB Group) and the Seller Individuals shall pay to the Buyer at
the Supplemental Closing, by wire transfer of immediately available funds, the
amount of such excess; in such event, payments by NDB and the Seller Individuals
shall be pro rata on the basis of the portion of the Purchase Price received by
the NDB Group and each respective Seller Individual, unless the adjustment is
other than pro rata as provided in a written notice from the Buyer to NDB and
the Members' Representative.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER INDIVIDUALS
Each Seller Individual (other than the RSF Group) severally
(but not jointly) as to himself or herself but not any other Seller represents
and warrants to the Buyer as of the date hereof and as of the Closing Date that:
SECTION 3.1. Limited Liability Existence and Power. The
-------------------------------------
Company is a limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and has all
limited liability company powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for those licenses, authorizations, permits, consents and
approvals, the absence of which would not,
11
individually or in the aggregate, have a Material Adverse Effect. The Company is
duly qualified to do business and is in good standing in each jurisdiction where
such qualification is necessary except for those jurisdictions where failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The Seller Individuals have heretofore delivered to the Buyer
true and complete copies of the Operating Agreement of the Company as in effect
on the date hereof.
SECTION 3.2. Authorization. The execution, delivery and
-------------
performance by such Seller Individual of this Agreement are within the powers of
such Seller Individual. This Agreement, when executed and delivered, constitutes
a legal, valid and binding agreement of such Seller Individual enforceable
against such Seller Individual in accordance with its terms.
SECTION 3.3. Governmental Authorization. The execution,
--------------------------
delivery and performance by such Seller Individual of this Agreement require no
action by or in respect of, or filing with, any governmental body, agency,
official, self-regulatory organization or other Governmental Entity by such
Seller Individual or the Company other than (i) review by the Federal Trade
Commission ("FTC") and the Department of Justice ("DOJ") pursuant to the
Xxxx-Xxxxx Xxxxxx Antitrust Improvement Act of 0000 (xxx "XXX Xxx") with respect
to antitrust matters and expiration or early termination of the applicable
waiting period under the HSR Act, (ii) compliance with any applicable filing and
approval requirements of the SEC and the NYSE and (iii) such other action or
filings as have been or will be taken or made by the Company or such Seller
Individual on or before the Closing Date.
SECTION 3.4. Non-Contravention. The execution, delivery and
-----------------
performance by such Seller Individual of this Agreement do not and will not (i)
violate the Operating Agreement of the Company, (ii) assuming compliance with
the matters referred to in Section 3.3, violate any law, rule, regulation,
judgment, injunction, order or decree applicable to the Company or such Seller
Individual, (iii) require any consent or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of such Seller
Individual or the Company to a loss of any benefit to which such Seller
Individual or the Company is entitled under any agreement or other instrument
binding upon such Seller Individual or the Company or any license, franchise,
permit or other similar authorization held by such Seller Individual or the
Company or (iv) result in the creation or imposition of any Lien on any asset of
the Company, except for such violations, conflicts, defaults or Liens which
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.5. Regulatory Filings. (a) Since January 1, 1997,
------------------
the Company and the Seller Individuals have filed all
12
financial reports and registrations, reports, statements, notices and other
filings required to be filed by the Company and the Seller Individuals with the
SEC, the NYSE or any other Governmental Entity, including all required
amendments or supplements to any of the above (collectively, including the
financial reports, the "Filings"), except where failure to file such financial
reports and registrations, statements, notices or other filings would not,
individually or in the aggregate, have a Material Adverse Effect.E.
(b) (i) Each Filing complied as to form and substance in
all material respects with the applicable law or regulation requiring such
Filing to be filed and did not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading and (ii) each financial report was true, complete and correct in all
material respects, and complied in all material respects with applicable
accounting principles and the regulatory requirements applicable to such report.
(c) The Company and the Seller Individuals have heretofore
delivered to the Buyer copies of all Filings made since January 1, 1997 and all
written correspondence relating to any inquiry or investigation by the SEC, the
NYSE or any other Governmental Authority or to any customer or counterparty
complaint provided to the Company and the Seller Individuals during the past
five years.
SECTION 3.6. Capitalization. (a) Schedule 3.6 sets forth, with
--------------
respect to each Seller, the percentage Membership Interest in profits and losses
and capital of the Company. As of the Balance Sheet Date, such Seller
Individual's Capital Account in the Company equaled the amount set forth
opposite such Seller Individual's name under the caption "Partner's Capital
3/31/99" on Schedule II.
(b) Except as set forth in Schedule 3.6 and after giving
effect to the execution of this Agreement, there are no outstanding (i) voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for membership or other equity interests in or voting securities of
the Company or (iii) options or other rights to acquire from the Company, or
other obligations of the Company to issue, any membership or other equity
interests in or voting securities or securities convertible into or exchangeable
for membership or other equity interests in or voting securities of the Company
(the items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). Except as set forth on Schedule 3.6 and after giving
effect to the execution of this Agreement, there are no outstanding obligations
of the Company to repurchase, redeem or otherwise acquire any Company
Securities.
13
SECTION 3.7. Ownership of Interests. Except as qualified on
----------------------
the signing date of this Agreement by the information set forth in Schedule 3.7,
but without such qualification on the Closing Date, such Seller Individual is
the record and beneficial owner of its Membership Interest, free and clear of
any Lien and any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of the Interests) other than those
restrictions imposed by the Operating Agreement, and will transfer and deliver
to the Buyer at the Closing valid, good and marketable title to its Membership
Interest free and clear of any Lien and any such limitation or restriction and,
assuming the execution and delivery of this Agreement by the parties hereto and
the due termination of the Operating Agreement in accordance with the Limited
Liability Company Act of the State of Delaware at the Closing Date (provided,
--------
however, that such termination will be effective immediately after the Closing),
-------
free and clear of any restrictions imposed by the Operating Agreement.
SECTION 3.8. Ownership and Lease of NYSE Seats. The NYSE seats
---------------------------------
owned or leased by the Company are owned or leased, as applicable, as set forth
on Schedule 3.8. At the Closing, the Company will have (i) valid, good and
marketable title to the seats owned by the Company, free and clear of any Lien
(except for lease agreements and ABC agreements disclosed in Schedule 3.8), and
(ii) valid, good and marketable leasehold interests to the seats leased by the
Company, free and clear of any Lien (except for lease agreements and ABC
agreements disclosed in Schedule 3.8).
SECTION 3.9. Subsidiaries. The Company has no Subsidiaries.
------------
SECTION 3.10. Financial Statements. The audited balance sheets
--------------------
of the Company as of December 31, 1996 and December 31, 1997 and the related
statements of income and cash flows for each of the years ended December 31,
1996 and December 31, 1997 and any subsequent financial report of the Company
filed with the SEC, the NYSE or any other Governmental Authority, and the
Balance Sheet (except for the absence of footnotes thereto so long as the
Balance Sheet is only subject to normal recurring adjustments, none of which
were or are expected, individually or in the aggregate, to be material in
amount), present fairly, and the Closing Date Balance Sheet (except for the
absence of footnotes thereto so long as the Closing Date Balance Sheet is only
subject to normal recurring adjustments, none of which were or are expected,
individually or in the aggregate, to be material in amount), will present
fairly, in all material respects, the financial position of the Company as of
the dates thereof and its results of operations and changes in financial
position for the periods then ended in conformity with GAAP and, if applicable,
in conformity with the rules and regulations of the NYSE or other applicable
Governmental Entity.
14
SECTION 3.11. No Undisclosed Material Liabilities. To the best
-----------------------------------
of such Seller Individual's knowledge, there are no liabilities of the Company
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances that could reasonably be expected to result in such a
liability, other than:
(a) liabilities provided for in the Balance Sheet or disclosed
in the notes thereto;
(b) liabilities disclosed on Schedule 3.11;
(c) liabilities in connection with short sales of securities
by the Company in stocks in which it acts as an NYSE specialist and otherwise in
the ordinary course of its business consistent with past practice; and
(d) other undisclosed liabilities which would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.12. Intercompany Accounts. Schedule 3.12 contains a
---------------------
complete list of all intercompany balances as of the Balance Sheet Date between
the Seller Individuals, on the one hand, and the Company, on the other hand.
Since the Balance Sheet Date, there has not been any accrual of liability by the
Company to such Seller Individual or other transaction between the Company and
such Seller Individual, except in the ordinary course of business of the Company
consistent with past practice or as set forth on Schedule 3.12.
SECTION 3.13. Material Contracts. (a) Except as disclosed in
------------------
Schedule 3.13, and except for the Operating Agreement and any agreements that
are (x) consistent with the ordinary course of the Company's business and past
practice and (y) terminable on not more than 30 days' notice and without the
payment of any penalty by, or any other material consequence to, the Company,
the Company is not a party to or bound by:
(i) any lease of real property providing for annual
rentals of $10,000 or more;
(ii) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets that
provides for either (A) annual payments by the Company of
$10,000 or more or (B) aggregate payments by the Company of
$20,000 or more;
(iii) any partnership, joint venture or other
similar agreement or arrangement;
(iv) any agreement relating to the acquisition or
disposition of any business (whether by merger, sale of stock,
sale of assets or otherwise);
15
(v) any agreement relating to Indebtedness
(whether incurred, assumed, guaranteed or secured by any
asset), except any such agreement with an aggregate
outstanding principal amount not exceeding $20,000 and which
may be prepaid on not more than 30 days' notice without the
payment of any penalty;
(vi) any license, franchise or similar agreement;
(vii) any agency, dealer, sales representative,
marketing or other similar agreement;
(viii) any agreement that limits the freedom
of the Company to compete in any line of business or with any
Person or in any area or that would so limit the freedom of
the Company after the Closing Date;
(ix) any agreement with (A) Sellers or any
of their Affiliates, (B) any Person directly or indirectly
owning, controlling or holding with power to vote, 5% or more
of the outstanding voting securities of Sellers or any of
their Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by Sellers or any
of their Affiliates or (D) any director or officer of Sellers
or any of their Affiliates or any "associates" or members of
the "immediate family" (as such terms are respectively defined
in Rule 12b-2 and Rule 16a-1 of the 0000 Xxx) of any such
director or officer, other than those entered into in the
ordinary course of the trading activities of the Company on
the NYSE with the Buyer or its Affiliates;
(x) any agreement with any member or officer
of the Company or with any "associate" or any member of the
"immediate family" (as such terms are respectively defined in
Rules 12b-2 and 16a-1 of the 0000 Xxx) of any such director or
officer; or
(xi) any other agreement, commitment, arrangement or
plan not made in the ordinary course of business consistent
with past practice that is material to the Company.
(b) Each agreement, contract, lease, commitment,
arrangement or plan disclosed in any Schedule to this Agreement or required to
be disclosed pursuant to this Section is a legal, valid and binding agreement of
the Company and is in full force and effect, and the Company is not nor, to the
best of the knowledge of such Seller Individual, is any other party thereto in
default or breach in any material respect under the terms of
16
any such agreement, contract, plan, lease, arrangement or commitment.
SECTION 3.14. Litigation. (a) Except as disclosed in Schedule
----------
3.14, there is no action, suit, investigation or proceeding pending against, or
to the best of the knowledge of such Seller Individual threatened against or
affecting, the Company or any of its properties before any court or arbitrator
or other Governmental Entity as to which there is a substantial likelihood of a
determination or resolution adverse to the business of the Company and which, if
so adversely determined or resolved, could reasonably be expected to have a
Material Adverse Effect.
(b) Except as disclosed in Schedule 3.14, there is no action,
suit, investigation or proceedings pending against, or to the knowledge of such
Seller Individual threatened or affecting, such Seller Individual or its assets
or properties before any court or arbitrator or other Governmental Entity that,
if adversely determined, reasonably could be expected to have a material adverse
effect on the enforceability of this Agreement, on the ability of such Seller
Individual to perform its obligations under this Agreement, or on the
consummation of the transactions contemplated in this Agreement.
SECTION 3.15. Compliance with Laws and Court Orders; No
-----------------------------------------
Defaults. Except as disclosed on Schedule 3.15: (a) the Company is not in
--------
violation of, and has not since January 1, 1994 violated, any applicable law,
rule, regulation, judgment, injunction, order or decree, including any rule of
the NYSE, except for violations which do not and would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) The Company is not in default under, and no condition
exists that with notice or lapse of time or both would constitute a default
under, any agreement or other instrument binding upon the Company or any
license, franchise, permit or similar authorization held by the Company except
for defaults or conditions which do not and would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.16. Properties. (a) Except for property and assets
----------
owned by the Company disposed of after the Balance Sheet Date in the ordinary
course of business consistent with past practice, the Company has good title to,
or in the case of leased property has valid leasehold interests in, all property
and assets (whether real or personal, tangible or intangible) reflected on the
Balance Sheet or acquired after the Balance Sheet Date. None of such property or
assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
17
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been
established on the Balance Sheet);
(iii) Liens that do not materially detract from the value or
materially interfere with any present or intended use of such
property or assets; or
(iv) Permitted Liens.
(b) Except with respect to securities held in inventory in the
ordinary course of business consistent with past practice, there are no
developments affecting any such property or assets (whether real or personal)
pending or, to the best of the knowledge of the Seller Individual threatened,
that might materially detract from the value of such property or assets or
materially interfere with any present or intended use of any such property or
assets.
(c) The property and assets owned or leased by the Company, or
that it otherwise has the right to use, constitute all of the property and
assets held for use or used in connection with the business of the Company and
are generally adequate to conduct such business as currently conducted and as
currently planned to be conducted.
SECTION 3.17. Intellectual Property. Since January 1, 1994,
---------------------
the Company has not been a defendant in any action, suit, investigation or
proceeding relating to, or otherwise has been notified of, any alleged claim or
infringement of any intellectual property rights, and such Seller Individual has
no knowledge of any other alleged infringement by the Company. The Seller
Individual has no knowledge of any continuing infringement by any other Person
of the Company's intellectual property rights. None of the Company's
intellectual property rights is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use thereof by the Company or
restricting the licensing thereof by the Company to any Person. The Company has
not entered into any agreement to indemnify any other Person against any charge
of infringement of any intellectual property rights.
SECTION 3.18. Licenses and Permits. Schedule 3.18 correctly
--------------------
describes each license, franchise, permit or other similar authorization
affecting, or relating to, the assets or business of the Company (the "Permits")
together with the name of the Governmental Entity issuing such Permit. Except as
set forth on Schedule 3.18, such Permits are valid and in full force and effect
and none of the Permits will be terminated or impaired or become terminable, in
whole or in part, as a result of the transactions contemplated hereby, except in
each case where the termination or impairment of any such Permit would not,
individually or in the aggregate, have a Material Adverse Effect.
18
SECTION 3.19. [Intentionally Omitted.]
---------------------
SECTION 3.20. Receivables. All accounts, notes receivable and
-----------
other receivables (other than receivables collected since the Balance Sheet
Date) reflected on the Balance Sheet are, and all accounts and notes receivable
arising from or otherwise relating to the business of the Company as of the
Closing Date will be, valid, genuine and fully collectible in the aggregate
amount thereof, subject to normal and customary trade discounts, less any
reserves for doubtful accounts recorded on the Balance Sheet or established in
the ordinary course thereafter. All accounts, notes receivable and other
receivables arising out of or relating to such business of the Company as of the
Balance Sheet Date have been included in the Balance Sheet or will be included
in the Closing Date Balance Sheet in accordance with GAAP.
SECTION 3.21. Disclosure by Seller. No representation or
--------------------
warranty made by such Seller in this Agreement or in any certificate furnished
by such Seller to the Buyer in connection with this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements not misleading in light of the circumstances under which
they were made. There is no fact known to such Seller which materially adversely
affects, or in the future may (so far as can be reasonably foreseen) materially
adversely affect, the financial condition, business, assets, results of
operations, properties, or prospects of the Company which has not been set forth
in this Agreement or the schedules hereto.
SECTION 3.22. Finders' Fees. There is no investment banker,
-------------
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of such Seller Individual or the Company which is or who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 3.23. Employee Plans (a) Schedule 3.23(a) sets forth
--------------
all "employee benefit plans", as defined in Section 3(3) of ERISA, and all other
employee benefit arrangements, policies or payroll practices, including, without
limitation, severance pay, sick leave, vacation pay, salary continuation for
disability, retirement, deferred compensation, bonus, stock purchase, stock
option, hospitalization, medical insurance, life insurance, tuition
reimbursement and scholarship programs maintained for the benefit of or to which
contributions are made on behalf of current or former employees of the Company
and the Subsidiaries. Such plans, policies, programs and practices shall
hereinafter be referred to as the "Company Benefit Plans".
(b) None of the Company Benefit Plans is a "multiemployer
plan", as defined in Section 3(37) of ERISA ("Multiemployer Plan"). Neither the
Company nor or any trade or business (whether or not incorporated) which is or
has ever been
19
treated as a single employer with the Company under Section 414(b), (c), (m) or
(o) of the Code ("ERISA Affiliate") has incurred any liability due to a complete
or partial withdrawal from a Multiemployer Plan or due to the termination or
reorganization of a Multiemployer Plan, except for any such liability which has
been satisfied in full, and no events have occurred and no circumstances exist
that could reasonably be expected to result in any such liability to the
Company. Neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4212 of ERISA that could result in liability to
the Company with respect to any Multiemployer Plan.
(c) None of the Company Benefit Plans is a "single-employer
plan", as defined in Section 4001(a)(15) of ERISA ("Pension Plan"). With respect
to each Pension Plan sponsored by, or to which contributions are required of,
any ERISA Affiliate, there does not exist any accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA, whether
or not waived. Neither the Company nor any ERISA Affiliate has any outstanding
liability under Section 4062 of ERISA to the PBGC or to a trustee appointed
under Section 4042 of ERISA, and no events have occurred and no circumstances
exist that could reasonably be expected to result in any such liability to the
Company.
(d) Each of the Company Benefit Plans that are intended to
qualify under Section 401(a) of the Code, and the trusts maintained pursuant
thereto, have been determined to be exempt from federal income taxation under
Section 501 of the Code by the Internal Revenue Service (or remain within the
remedial amendment period for obtaining an initial determination of exemption
from tax), and no material event has occurred with respect to the operation of
any such Company Benefit Plans which could cause the loss of such qualification
or exemption or the imposition of any liability, penalty or tax under ERISA or
the Code.
(e) All contributions (including all employer contributions
and employee contributions) required to have been made under the Company Benefit
Plans or by law to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before the Closing
which are not yet due will have been paid or accrued by the Closing.
(f) Except as set forth in Schedule 3.23(f), there has been no
material violation of ERISA or the Code with respect to the filing of applicable
documents, notices or reports (including, but not limited to, annual reports
filed on IRS Form 5500) regarding the Company Benefit Plans with the Department
of Labor and the Internal Revenue Service, or the furnishing of such
20
required documents to the participants or beneficiaries of the Company Benefit
Plans.
(g) True, correct and complete copies of the following
documents, with respect to each of the Company Benefit Plans, have been
delivered to the Buyer: (i) the plan and its related trust document, including
any amendments thereto; (ii) the most recent IRS Forms 5500 filed with the
Internal Revenue Service; (iii) summary plan descriptions; and (iv) written
communications to employees relating to the Company Benefit Plans.
(h) Except as set forth in Schedule 3.23(h), there are no
pending actions, claims or lawsuits which have been asserted or instituted
against the Company Benefit Plans, the assets of any of the trusts under such
Company Benefit Plans or the Company Benefit Plans' sponsor or the Company
Benefit Plans' administrator, or against any fiduciary of the Company Benefit
Plans with respect to such Company Benefit Plans (other than routine benefit
claims), and neither the Company nor any ERISA Affiliate has knowledge of any
facts which could reasonably form the basis for any such actions, claims or
lawsuits.
(i) Except as set forth in Schedule 3.23(i), the Company
Benefit Plans have been maintained, in all material respects, in accordance with
their express terms and with all provisions of ERISA and the Code (including
rules and regulations thereunder) and other applicable federal and state laws
and regulations, and neither the Company, nor any "party in interest" or
"disqualified person" with respect to the Company Benefit Plans has engaged in a
"prohibited transaction", as defined in Section 4975 of the Code or Section 406
of ERISA, or taken any actions, or failed to take any actions, which could
reasonably result in any material liability under ERISA or the Code. Except as
set forth in Schedule 3.23(i), no fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any of the Company Benefit Plans,
and neither the Company nor any ERISA Affiliate has knowledge of any facts which
could reasonably form the basis for any such liability.
(j) The Company and each ERISA Affiliate that maintains a
"group health plan", as defined in Section 4980B of the Code, has complied in
all material respects with the notice and coverage continuation requirements of
Section 4980B of the Code and Section 601 of ERISA, and the regulations
thereunder ("COBRA"). None of the Company Benefit Plans provide retiree health
or life insurance benefits except as may be required by COBRA or at the expense
of the participant or the participant's beneficiary.
(k) Except as otherwise provided in this Agreement, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) result in any payment becoming due to
any current or former
21
employee of the Company, (ii) increase any benefits otherwise payable under any
of the Company Benefit Plans or (iii) result in the acceleration of the time of
payment or vesting of any benefits provided under any of the Company Benefit
Plans.
(l) The Company has no contract, plan or commitment, whether
legally binding or not, to create any additional employee benefit plan or to
modify any existing Company Benefit Plans, except with respect to changes
required by ERISA, the Code or other applicable law.
(m) There has been no mass layoff or plant closing as defined
by the Worker Adjustment and Retraining Notification Act or any similar state or
local "plant closing" law with respect to the employees of the Company.
SECTION 3.24. Labor Matters. (a) Except as set forth on
-------------
Schedule 3.24(a), the Company is not a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company.
(b) Except as set forth on Schedule 3.24(b), no employees of
the Company are represented by any labor organization. No labor organization or
group of employees of the Company has made a pending demand for recognition or
certification, and there are no representation or certification proceedings
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. There are no organizing activities involving the Company pending with
any labor organization or group of employees of the Company.
(c) There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor disputes
pending or threatened in writing against or involving the Company. There are no
unfair labor practice charges, grievances or complaints pending or threatened in
writing by or on behalf of any employee or group of employees of the Company
which, if individually or collectively resolved against the Company, could
result in a material liability.
(d) There are no complaints, charges or claims against the
Company pending or threatened in writing to be brought or filed with any public
or governmental authority, arbitrator, court or other Governmental Entity based
on, arising out of, in connection with, or otherwise relating to the employment
or termination of employment by the Company of any individual.
(e) The Company is in compliance with all laws, regulations
and orders relating to the employment of labor, including all such laws,
regulations and orders relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
22
collection and payment of withholding and/or social security taxes and any
similar employment tax except for immaterial non-compliance.
SECTION 3.25. Specialist Securities. On the date hereof, the
---------------------
Company acts as the NYSE specialist unit for each of the securities listed in
Schedule III hereto. Except as disclosed in Schedule 3.25, such Seller
Individual has no reason to believe and has not been advised that the Company
may be required to cease acting as the NYSE specialist unit for any of such
securities, nor has the Company agreed to act as the NYSE specialist unit for
any security not listed in Schedule III hereto nor will it so agree without the
prior written approval of the Buyer.
SECTION 3.26. Accredited Investor; No Distribution. Such
------------------------------------
Seller Individual is an "accredited investor" within the meaning of Rule 501(a)
under the Securities Act. Such Seller Individual is acquiring the promissory
notes forming part of the Seller Individuals Purchase Price to be received by it
pursuant to Section 2.3(b) for its own account for the purpose of investment and
not with a view to or for sale in connection with any distribution thereof in
violation of the Securities Act.
SECTION 3.27. Organizational and Other Documents. Except for
----------------------------------
the Operating Agreement, there exists no agreement, document, arrangement or
understanding concerning or relating to the relative powers or rights of Persons
in the Company by way of ownership of Interests or otherwise.
SECTION 3.28. Year 2000 Compliance. The software and hardware
--------------------
used directly or indirectly by the Company is Year 2000 Compliant (except for
software and hardware of the NYSE the use of which is incidental to the business
of specialist on the NYSE, as to which such Seller makes no representation).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE RSF GROUP
Each of Xxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxx, III, Xxxxxxx
Xxxxxx and Xxxxxx X. Xxxxxxx, Xx. severally (but not jointly) as to himself but
not any other Seller represents and warrants to the Buyer as of the date hereof
and as of the Closing Date that:
SECTION 4.1. Authorization. The execution, delivery and
-------------
performance by such Seller Individual of this Agreement are within the powers of
such Seller Individual. This Agreement, when executed and delivered, constitutes
a legal, valid and binding agreement of such Seller Individual enforceable
against such Seller Individual in accordance with its terms.
23
SECTION 4.2. Governmental Authorization. The execution,
--------------------------
delivery and performance by such Seller Individual of this Agreement require no
action by or in respect of, or filing with, any governmental body, agency,
official, self-regulatory organization or other Governmental Entity by such
Seller Individual or the Company other than (i) review by the FTC and the DOJ
pursuant to the HSR Act with respect to antitrust matters and expiration or
early termination of the applicable waiting period under the HSR Act, (ii)
compliance with any applicable filing and approval requirements of the NYSE and
(iii) such other action or filings as have been or will be taken or made by the
Company or such Seller Individual on or before the Closing Date.
SECTION 4.3. Non-Contravention. The execution, delivery and
-----------------
performance by such Seller Individual of this Agreement do not and will not (i)
violate the Operating Agreement of the Company, (ii) assuming compliance with
the matters referred to in Section 4.2, violate any applicable law, rule,
regulation, judgment, injunction, order or decree applicable to the Company or
such Seller Individual, (iii) require any consent or other action by any Person
under, constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of such Seller
Individual or the Company to a loss of any benefit to which such Seller
Individual or the Company is entitled under any agreement or other instrument
binding upon such Seller Individual or the Company or any license, franchise,
permit or other similar authorization held by such Seller Individual or the
Company or (iv) result in the creation or imposition of any Lien on any asset of
the Company, except for such violations, conflicts, defaults or Liens which
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.4. Capitalization. As of the Balance Sheet Date,
--------------
such Seller Individual's Capital Account in the Company equaled the amount set
forth opposite such Seller Individual's name under the caption " Partner's
Capital 3/31/99" on Schedule II.
SECTION 4.5. Ownership of Interests. Except as qualified on
----------------------
the signing date of this Agreement by the information set forth in Schedule 4.5,
but without such qualification on the Closing Date, such Seller Individual is
the record and beneficial owner of its Membership Interest, free and clear of
any Lien and any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of the Interests) other than those
restrictions imposed by the Operating Agreement, and will transfer and deliver
to the Buyer at the Closing valid, good and marketable title to its Membership
Interest free and clear of any Lien and any such limitation or restriction and,
assuming the execution and delivery of this Agreement by the parties hereto and
the due termination of the Operating Agreement in accordance with the Limited
Liability Company Act of the State of Delaware at the
24
Closing Date (provided, however, that such termination will be effective
immediately after the Closing), free and clear of any restrictions imposed by
the Operating Agreement.
SECTION 4.6. Intercompany Accounts. Schedule 4.6 contains a
---------------------
complete list of all intercompany balances as of the Balance Sheet Date between
the members of the RSF Group on the one hand, and the Company, on the other
hand. Since the Balance Sheet Date, there has not been any accrual of liability
by the Company to such member of the RSF Group or other transaction between the
Company and such member of the RSF Group, except in the ordinary course of
business of the Company consistent with past practice.
SECTION 4.7. Litigation. (a) Except as disclosed in Schedule
----------
3.14, to the knowledge of such Seller Individual, there is no action, suit,
investigation or proceeding pending against, or threatened against or affecting,
the Company or any of its properties before any court or arbitrator or other
Governmental Entity as to which there is a substantial likelihood of a
determination or resolution adverse to the business of the Company and which, if
so adversely determined or resolved, could reasonably be expected to have a
Material Adverse Effect.
(b) Except as disclosed in Schedule 3.14, there is no action,
suit, investigation or proceedings pending against, or to the knowledge of such
Seller Individual threatened or affecting, such Seller Individual or its assets
or properties before any court or arbitrator or other Governmental Entity that,
if adversely determined, reasonably could be expected to have a material adverse
effect on the enforceability of this Agreement, on the ability of such Seller
Individual to perform its obligations under this Agreement, or on the
consummation of the transactions contemplated in this Agreement.
SECTION 4.8. [Intentionally Omitted.]
---------------------
SECTION 4.9. Disclosure by Seller. No representation or
--------------------
warranty made by such Seller in this Agreement or in any certificate furnished
by such Seller to the Buyer in connection with this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements not misleading in light of the circumstances under which
they were made. There is no fact known to such Seller which materially adversely
affects, or in the future may (so far as can be reasonably foreseen) materially
adversely affect, the financial condition, business, assets, results of
operations, properties, or prospects of the Company which has not been set forth
in this Agreement or the schedules hereto. The Balance Sheet and the Closing
Date Balance Sheet (except for the absence of footnotes thereto so long as the
Balance Sheet or Closing Date Balance Sheet, as applicable, is only subject to
normal recurring adjustments, none of which were or are expected, individually
or in the aggregate, to be material in amount) present fairly, in
25
all material respects, the financial position of the Company as of the dates
thereof and its results of operations and changes in financial position for the
periods then ended in conformity with GAAP and, if applicable, in conformity
with the rules and regulations of the NYSE or other applicable Governmental
Entity.
SECTION 4.10. Finders' Fees. There is no investment banker,
-------------
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of such Seller Individual which is or who might be entitled to
any fee or commission in connection with the transactions contemplated by this
Agreement.
SECTION 4.11. Accredited Investor; No Distribution. Such
------------------------------------
Seller Individual is an "accredited investor" within the meaning of Rule 501(a)
under the Securities Act. Such Seller Individual is acquiring the promissory
notes forming part of the Seller Individuals Purchase Price to be received by it
pursuant to Section 2.3(b) (i) for its own account for the purpose of investment
(except as permitted under the proviso contained in Section 7.7) and (ii) not
with a view to or for sale in connection with any distribution thereof in
violation of the Securities Act.
SECTION 4.12. No Actual Knowledge of Misrepresentations. To
-----------------------------------------
the best of such Seller Individual's actual knowledge, each of the
representations and warranties set forth in Article III of this Agreement with
respect to the Company is true, correct and complete in all material respects as
of the date hereof and as of the Closing Date.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF NDB AND SHD
Each of NDB and SHD jointly and severally represents and
warrants to the Buyer as of the date hereof and as of the Closing Date that:
SECTION 5.1. Corporate Existence and Power. Each of NDB and
-----------------------------
SHD is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization.
SECTION 5.2. Corporate Authorization. The execution, delivery
-----------------------
and performance by each of NDB and SHD of this Agreement and the transactions
contemplated hereby are within the respective corporate powers of NDB and SHD
and have been (subject to approval by the board of directors of NDB) duly
authorized by all necessary corporate or other action on the part of each of NDB
and SHD. This Agreement, when executed and delivered, constitutes a legal, valid
and binding agreement of each of NDB and SHD enforceable against NDB and SHD in
accordance with its terms.
26
SECTION 5.3. Governmental Authorization. The execution,
--------------------------
delivery and performance by NDB and SHD of this Agreement and the transactions
contemplated herein require no action by or in respect of, or filing with, any
governmental body, agency, official, self-regulatory organization or any other
Governmental Entity by NDB or SHD other than (i) review by the FTC and the DOJ
pursuant to the HSR Act with respect to antitrust matters and expiration or
early termination of the applicable waiting period under the HSR Act, (ii)
compliance with any applicable filing and approval requirements of the NYSE and
(iii) such other action or filings as have been or will be taken or made by NDB
or SHD on or before the Closing Date.
SECTION 5.4. Non-Contravention. The execution, delivery and
-----------------
performance by NDB and SHD of this Agreement do not and will not (i) violate the
Operating Agreement of the Company, (ii) assuming compliance with the matters
referred to in Section 5.3, violate any applicable law, rule, regulation,
judgment, injunction, order or decree applicable to the Company, NDB or SHD,
(iii) require any consent or other action by any Person under, constitute a
default by NDB or SHD under, or to the knowledge of NDB or SHD, give rise to any
right of termination, cancellation or acceleration of any right or obligation of
NDB, SHD or the Company to a loss of any benefit to which NDB, SHD or the
Company is entitled under, any agreement or other instrument binding upon NDB,
SHD or the Company or any license, franchise, permit or other similar
authorization held by NDB, SHD or the Company or (iv) to the knowledge of NDB or
SHD, result in the creation or imposition of any Lien on any asset of the
Company, except for such violations, conflicts, defaults or Liens which would
not have a Material Adverse Effect.
SECTION 5.5. Capitalization. As of the Balance Sheet Date,
--------------
NDB's and SHD's Capital Accounts in the Company equaled the amount set forth
opposite their respective names under the caption "Partner's Capital 3/31/99" on
Schedule II.
SECTION 5.6. Ownership of Interests. Each of NDB and SHD is
----------------------
the record and beneficial owner of its Membership Interest, free and clear of
any Lien and any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of the Interests) other than those
restrictions imposed by the Operating Agreement, and will transfer and deliver
to the Buyer at the Closing valid, good and marketable title to its Membership
Interest free and clear of any Lien and any such limitation or restriction and,
assuming the execution and delivery of this Agreement by the parties hereto and
the due termination of the Operating Agreement in accordance with the Limited
Liability Company Act of the State of Delaware at the Closing Date (provided,
however, that such termination will be effective immediately after the Closing),
free and clear of any restrictions imposed by the Operating Agreement.
27
SECTION 5.7. Ownership and Lease of NYSE Seats. The NYSE seats
---------------------------------
owned by the Company are owned as set forth on Schedule 5.7. At the Closing, the
Company will have valid, good and marketable title to the such NYSE seats, free
and clear of any Lien (except lease agreements and ABC agreements disclosed in
Schedule 5.7) or other restriction or limitation.
SECTION 5.8. Litigation. (a) Except as disclosed in Schedule
----------
5.8, there is no action, suit, investigation or proceeding pending against, or
to the knowledge of NDB or SHD threatened against or affecting, the Company or
any of its properties before any court or arbitrator or other Governmental
Entity as to which there is a substantial likelihood of a determination or
resolution adverse to the business of the Company and which, if so adversely
determined or resolved, could reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Schedule 3.14, there is no action,
suit, investigation or proceedings pending against, or to the knowledge of such
Seller threatened or affecting, such Seller or its assets or properties before
any court or arbitrator or other Governmental Entity that, if adversely
determined, reasonably could be expected to have a material adverse effect on
the enforceability of this Agreement, on the ability of such Seller to perform
its obligations under this Agreement, or on the consummation of the transactions
contemplated in this Agreement.
SECTION 5.9. [Intentionally Omitted.]
---------------------
SECTION 5.10. Intercompany Accounts. Schedule 5.10 contains a
---------------------
complete list of all intercompany balances as of the Balance Sheet Date between
NDB, SHD and their Affiliates (except the Buyer and its Affiliates), on the one
hand, and the Company, on the other hand. Since the Balance Sheet Date, there
has not been any accrual of liability by the Company to NDB, SHD or any of their
Affiliates or other transaction between the Company and NDB, SHD or any of their
Affiliates (except the Buyer and its Affiliates), except in the ordinary course
of business of the Company consistent with past practice and except as disclosed
in the financial statements of the Company or the Closing Date Balance Sheet
referred to in Section 3.10.
SECTION 5.11. Disclosure by Seller. No representation or
--------------------
warranty made by such Seller in this Agreement or in any certificate furnished
by such Seller to the Buyer in connection with this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements not misleading in light of the circumstances under which
they were made. There is no fact known to such Seller which materially adversely
affects the financial condition, business, assets, results of operations,
properties, or prospects of the Company which has not been set forth in this
Agreement or the schedules hereto. The Balance Sheet and the Closing Date
Balance Sheet (except for the absence of footnotes thereto so
28
long as the Balance Sheet or Closing Date Balance Sheet, as applicable, is only
subject to normal recurring adjustments, none of which were or are expected,
individually or in the aggregate, to be material in amount) present fairly, in
all material respects, the financial position of the Company as of the dates
thereof and its results of operations and changes in financial position for the
periods then ended in conformity with GAAP and, if applicable, in conformity
with the rules and regulations of the NYSE or other applicable Governmental
Entity.
SECTION 5.12. Finders' Fees. There is no investment banker,
-------------
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of NDB or SHD who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to each Seller as of the
date hereof and as of the Closing Date that:
SECTION 6.1. Existence and Power. The Buyer is a limited
-------------------
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization.
SECTION 6.2. Authorization. The execution, delivery and
-------------
performance by the Buyer of this Agreement and the transactions contemplated
hereby are within the limited liability company powers of the Buyer and have
been duly authorized by all necessary action on the part of the Buyer. This
Agreement, when executed and delivered, constitutes a legal, valid and binding
agreement of the Buyer enforceable against the Buyer in accordance with its
terms.
SECTION 6.3. Governmental Authorization. The execution,
--------------------------
delivery and performance by the Buyer of this Agreement and the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency or official or any other Governmental Entity other
than (i) review by the FTC and the DOJ pursuant to the HSR Act with respect to
antitrust matters and expiration or early termination of the applicable waiting
period under the HSR Act, (ii) compliance with any applicable filing and
approval requirements of the NYSE and (iii) such other action or filings as have
been or will be taken or made on or before the Closing Date.
SECTION 6.4. Non-Contravention. The execution, delivery and
-----------------
performance by the Buyer of this Agreement do not and will not (i) violate the
certificate of formation, Operating Agreement or other organizational documents
of the Buyer or (ii) assuming compliance with the matters referred to in Section
6.3,
29
violate any applicable law, rule, regulation, judgment, injunction, order
or decree.
SECTION 6.5. Finders' Fees. There is no investment banker,
-------------
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of the Buyer who might be entitled to any fee or commission
from any Seller or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 6.6. Litigation. There is no action, suit,
----------
investigation or proceeding pending against, or to the best of the Buyer's
knowledge, threatened against or affecting, the Buyer before any court or
arbitrator or any Governmental Entity which seeks to enjoin or rescind the
transactions contemplated by this Agreement or otherwise prevent the Buyer from
complying with the terms and provisions of this Agreement as to which there is a
substantial likelihood of a determination or resolution adverse to the Buyer.
SECTION 6.7. Approvals and Financing. The Buyer has no reason
-----------------------
to believe it will not obtain all approvals of the NYSE required to consummate
this Agreement. The Buyer confirms to Sellers that on the date hereof it has
adequate financial resources to provide the capital required to reasonably
obtain NYSE approval on terms satisfactory to it to consummate the transactions
contemplated by this Agreement and make payments to Sellers as required by this
Agreement at the Closing.
ARTICLE VII.
COVENANTS OF THE SELLERS
Each Seller Individual (severally and not jointly) and NDB and
SHD (jointly and severally) agrees as follows:
SECTION 7.1. Conduct of the Company. (a) From the date hereof
----------------------
until the consummation of the transactions contemplated hereby, each Seller
shall cause the Company to conduct its business in the ordinary course
consistent with past practice and use its best efforts to preserve intact its
business organizations and relationships with third parties and keep available
the services of its present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the consummation of the
transactions contemplated hereby, each Seller shall cause the Company to not:
(i) make any material change in the conduct
of the business of the Company or enter into any transaction
other than in the ordinary course of business consistent with
past practice;
(ii) adopt or propose any change in its certificate of
formation or Operating Agreement or
30
issue any additional equity interests or grant any option,
warrant or right to acquire any equity interests or issue any
security convertible into or exchangeable for equity interests
or alter in any way any of its outstanding interests or make
any change in outstanding equity interests, whether by reason
of a reclassification, recapitalization or combination, equity
dividend or otherwise;
(iii) merge or consolidate with any other Person or
acquire a material amount of assets of any other Person;
(iv) except for securities held in inventory, sell,
lease, license or otherwise dispose of any material assets or
property;
(v) except in the ordinary course of business
consistent with past practice, pay, lend or advance any amount
to, or sell, transfer or lease any properties or assets to, or
enter into any agreement or arrangement with, any of its
Affiliates except as expressly permitted by this Agreement or
as has been approved in writing by the Buyer;
(vi) except as expressly required by the Operating
Agreement, redeem, retire, purchase or otherwise acquire,
directly or indirectly, any ownership interests of the Company
or any other Person or incur any Indebtedness for any reason;
(vii) except for ordinary course trading activity on
the NYSE, make, enter into, modify, amend in any material
respect or terminate any contract, lease or other agreement,
where such contract, lease or other agreement (A) entails
payments in excess of $25,000 in the aggregate or (B) has a
term in excess of 9 months;
(viii) enter into any new (or amend any existing)
employee benefit plan, program or arrangement or any new (or
amend any existing) employment, severance or consulting
agreement or grant any increase in the compensation of
officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or
commitment); or
(ix) except for interest accrued on the Capital
Accounts in the ordinary course of business (which interest
may be paid by the Company on or prior to the Closing Date) or
as otherwise expressly permitted by this Agreement, pay any
intercompany accounts (including, without limitation, those
set forth on Schedules 3.12, 4.6 and 5.10), or
31
(x) agree or commit to do any of the foregoing.
(b) Each Seller shall cause the Company to not (i) take or
agree or commit to take any action that would make any representation and
warranty of such Seller hereunder inaccurate in any material respect at, or as
of any time prior to, the Closing Date or (ii) omit or agree or commit to omit
to take any action necessary to prevent any such representation or warranty from
being inaccurate in any material respect at any such time.
SECTION 7.2. Access to Information. From the date hereof until
---------------------
the Closing Date, each Seller shall cause the Company to (i) give the Buyer, its
counsel, financial advisors, auditors and other authorized representatives full
access to the offices, properties, books and records of the Company during
normal business hours and upon reasonable prior notice, (ii) furnish to the
Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information relating
to the Company as such Persons may reasonably request and (iii) instruct the
employees, counsel and financial advisors of such Seller or the Company to
cooperate with the Buyer in its investigation of the Company, all for the
purpose of enabling the Buyer and its authorized representatives to conduct
business and financial reviews, investigations and studies of the Company. No
investigation by the Buyer or other information received by the Buyer shall
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by the Company or such Seller hereunder.
SECTION 7.3. Notices of Certain Events. Each Seller shall
-------------------------
cause the Company to promptly notify the Buyer of:
(i) any notice or other communication from
any Person alleging that the consent of such Person is or may
be required in connection with the transactions contemplated
by this Agreement;
(ii) any notice or other communication from
any governmental or regulatory agency or authority or any
other Governmental Entity in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims,
investigations or proceedings commenced or, to the best of
their knowledge threatened against, relating to or involving
or otherwise affecting such Seller or the Company that, if
pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.14 or
that relate to the consummation of the transactions
contemplated by this Agreement.
32
SECTION 7.4. Noncompetition. (a) Each Seller Individual agrees
--------------
that for a period of one (1) full year from the Closing Date, neither he nor any
of his Affiliates shall engage, either directly or indirectly, as a principal or
for his own account or solely or jointly with others, or as a stockholder in any
corporation or joint stock association, in business as a specialist (or
equivalent status), or apply for registration as a specialist, in any stock or
option in which the Company or the Buyer is engaged, either individually or
jointly with others, as a specialist (or equivalent status) at the date hereof;
provided that nothing herein shall prohibit the acquisition by such Seller
--------
Individual or any of its Affiliates of (i) less than 1% of the securities of a
publicly traded company or (ii) a diversified company having not more than 1% of
its sales (based on its latest published annual audited financial statements)
attributable to such business. Notwithstanding anything to the contrary in this
Section 7.4(a), this Section 7.4(a) shall not be construed to prohibit any
Seller Individual from engaging in business as a specialist employed by, or
otherwise acting on behalf of, the Buyer.
(b) Each of NDB and SHD agrees that for a period of one (1)
full year from the Closing Date, neither it nor any of its Subsidiaries shall
engage, either directly or indirectly, in business as a specialist, or apply for
registration as a specialist, on the New York Stock Exchange in any stock in
which the Company is engaged, as a specialist on the New York Stock Exchange at
the date hereof; provided that nothing herein shall prohibit the acquisition by
--------
NDB or any of its Subsidiaries of (i) less than 5% of the securities of a
publicly traded company or (ii) a diversified company having not more than 1% of
its sales (based on its latest published annual audited financial statements)
attributable to such business.
(c) If any provision contained in this Section shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Section, but this Section shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein. It is the intention
of the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Such Seller acknowledges that the Buyer would be irreparably harmed by any
breach of this Section and that there would be no adequate remedy at law or in
damages
33
to compensate the Buyer for any such breach. Such Seller agrees that the
Buyer shall be entitled to injunctive relief requiring specific performance by
such Seller of this Section, and such Seller consents to the entry thereof.
SECTION 7.5. No Transfer of Membership Interests. Each Seller
-----------------------------------
agrees that it shall not sell, assign, transfer, pledge, abandon or otherwise
convey any Membership Interests (including, without limitation, pursuant to or
in accordance with the Operating Agreement) other than pursuant to this
Agreement or the sale of the Membership Interests of Xxxxxxx Xxxxxxx, Xxxxxx
Xxxxxxxxx and Xxxx Xxxxx to NDB.
SECTION 7.6. Material Agreements. Each Seller agrees that it
-------------------
shall not amend, supplement, extend, refinance, replace or otherwise modify any
agreement relating to the Company in any respect (including, without limitation,
the Operating Agreement) without the prior written consent of the Buyer.
SECTION 7.7. No Transfer of Promissory Notes. Each Seller
-------------------------------
Individual agrees that it shall not sell, assign, transfer, pledge, abandon or
otherwise convey any of its interest in the promissory note issued to it
pursuant to Section 2.3(b) of this Agreement.
SECTION 7.8. Transfer of Seats. Each of the Sellers agrees to
-----------------
take all steps necessary or desirable, in the sole discretion of the Buyer, to
implement and effectuate any action requested by the Buyer with respect to the
NYSE seats and/or the lease agreements and ABC agreements relating thereto.
SECTION 7.9. Set-Off. Any obligation of the Buyer to pay any
-------
amounts to any Seller pursuant to this Agreement or otherwise shall be subject
to the Buyer's authority and right to set-off against such amounts owing to such
Seller any amounts owed by such Seller pursuant to its indemnification
obligations under Article IX or Article XI of this Agreement. Such Seller
agrees, in connection with any such set-off, to execute and deliver any
instrument, document or agreement reasonably requested by the Buyer necessary or
desirable, in the Buyer's discretion, to effectuate a set-off described in the
preceding sentence.
ARTICLE VIII.
COVENANTS OF THE BUYER AND THE SELLERS
The Buyer and the Sellers agree that:
SECTION 8.1. Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions of this Agreement, the Buyer and the Sellers shall use their
reasonable best efforts to take, or cause to be taken (and the Sellers shall
cause the Company to take), all actions and to do, or cause to be done, all
things necessary or
34
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. The Buyer and each Seller agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be reasonably necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, in the event the
Buyer determines to effectuate through a merger the transactions contemplated by
this Agreement, the Buyer and Sellers shall use their reasonable best efforts to
take, or cause to be taken (and the Sellers shall cause the Company to take),
all actions and to do, or cause to be done (and the Sellers shall cause the
Company to do), all things necessary or desirable under applicable laws and
regulations to consummate such merger, and agree to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement such merger.
SECTION 8.2. Certain Filings. The Buyer and each Seller shall
---------------
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
or self-regulatory organization or any other Governmental Entity is required, or
any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings, furnishing information as may be reasonably required in
connection therewith and seeking to timely obtain any such actions, consents,
approvals or waivers.
SECTION 8.3. Public Announcements. The parties agree to
--------------------
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated hereby
and, except as may be required by applicable law or any listing agreement with
any national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation.
SECTION 8.4. Intercompany Accounts. All intercompany accounts
---------------------
between the Sellers or their Affiliates, on the one hand, and the Company, on
the other hand, as of the Closing shall be settled in accordance with their
terms or in the ordinary course consistent with past practice, as the case may
be; provided, however, that the accrued and unpaid interest on the Capital
-------- -------
Accounts of each Seller identified in the last paragraph of Schedule 3.12 shall
-------------
be paid as set forth in Sections 2.6 and 10.2(xii).
35
ARTICLE IX.
SECTION 9.1. Tax Definitions. The following terms, as used
---------------
herein, have the following meanings:
"Buyer Indemnitee" means Buyer and any of its successors and
assigns, Affiliates, officers, directors, employees, agents and, effective upon
the Closing, the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Final Determination" means (i) any final determination of
liability in respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a period for the filing
of claims for refunds, amended returns or appeals from adverse determinations)
or (ii) the payment of Tax by the Buyer, any Seller or any of their Affiliates,
whichever is responsible for payment of such Tax under applicable law, with
respect to any item disallowed or adjusted by a Taxing Authority, provided that
such responsible party, determines that no action should be taken to recoup such
payment and the other party agrees.
"Pre-Closing Tax Period" means any Tax period ending on or
before the close of business on the Closing Date and, for a Tax period beginning
before and ending after the Closing Date, the portion of that period ending on
the close of business on the Closing Date.
"Seller Indemnitee" means any and all of the Sellers, and any
of their successors and assigns, Affiliates, officers, directors, employees, and
agents.
"Tax" means (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by the
Company, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Governmental Entity (domestic or foreign) responsible for the
imposition of any such tax (a "Taxing Authority").
"Tax Indemnification Period for Buyer Indemnitee" means any
Pre-Closing Tax Period of the Company.
36
"Tax Indemnification Period for Seller Indemnitees" means any
Tax Period (or portion thereof) that is not a Pre-Closing Tax Period and that
begins on or after the Closing Date.
"Tax Return" means any return, declaration, report, claim for
refund, information return, form or statement relating to Taxes required to be
filed with or delivered to any Taxing Authority, including any schedule or
attachment thereto, and including any amendment thereof, by or on behalf of the
Company. Any reference in this Article IX to "Tax Returns with respect to any
Pre-Closing Tax Period" shall include any estimated tax returns required to be
filed on or prior to the Closing Date.
"Tax Sharing Agreement" means a Tax sharing agreement or
arrangement (whether or not written) binding on the Company pursuant to which
the Company may be liable for the Tax of another Person or required to make a
payment to another Person with respect to a Tax detriment or a Tax benefit but
not including any operating agreement or partnership agreement of the Company.
SECTION 9.2. Tax Representations. The Sellers represent as of
-------------------
the date hereof and as of the Closing Date that:
(a) The Company has, at all times during its existence, been
treated as a partnership for federal, state, and local income tax purposes.
(b) Except as set forth on Schedule 9.2:
(i) all Tax Returns with respect to any
Pre-Closing Tax Period due as of the date hereof have been
filed;
(ii) as of the time of filing, the Tax
Returns with respect to any Pre-Closing Tax Period correctly
set forth all information required to be shown therein;
(iii) all Taxes shown as due and payable on
the Tax Returns that have been filed with respect to any
Pre-Closing Tax Period have been timely paid, or withheld and
remitted to the appropriate Taxing Authority;
(iv) the charges, reserves and accruals of
liabilities for Taxes with respect to the Company for any
Pre-Closing Tax Period (including any Pre-Closing Tax Period
for which no Return has yet been filed) reflected on the
Closing Date Balance Sheet (rather than in any notes thereto)
of the Company (excluding any reserve for deferred income
taxes established to reflect timing differences between book
and Tax Income) are adequate to cover such Taxes;
37
(v) all Tax Returns with respect to any
Pre-Closing Tax Period filed with respect to Tax years of the
Company through the Tax year ended December 31, 1995 have been
examined and closed or are Tax Returns with respect to which
the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired;
(vi) the Company is not delinquent in the
payment of any Tax, and has not requested any extension of
time within which to file any Tax Return with respect to any
Pre-Closing Tax Period;
(vii) the Company has not granted any
extension or waiver of the statute of limitations period
applicable to any Tax Return, which period (after giving
effect to such extension or waiver) has not yet expired;
(viii) to the best of the Sellers' knowledge
there is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened against or with
respect to the Company in respect of any Tax;
(ix) there are no requests for rulings or
determinations in respect of any Tax pending between the
Company and any Taxing Authority;
(x) there are no Liens for Taxes upon the
assets of the Company;
(xi) none of the property owned or used by
the Company is subject to a lease, other than a "true" lease
for federal income tax purposes;
(xii) none of the property owned by the
Company is "tax-exempt use property" within the meaning of
Section 168(h) of the Code;
(xiii) the Company is not a "publicly traded
partnership" as defined under Section 7704 of the Code;
(xiv) the Company is not and never has been
party to or bound by any Tax Sharing Agreement;
(xv) the Company is not and has not been a
member of an affiliated, consolidated, combined or unitary
group;
(xvi) the Company is, and on the Closing
Date will be, in possession of all books and records with
respect to tax matters pertinent to the Company;
38
(xvii) all information set forth in the
notes to the balance sheet of December 31, 1998 relating to
Tax matters is true and complete; and
(xviii) no sale of any Membership Interest
pursuant to this Agreement shall constitute the disposition of
a United States real property interest by a non-resident alien
individual or a foreign corporation for purposes of section
897 of the Code.
(c) Schedule 9.2(c) contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax is properly payable by the
Company.
SECTION 9.3. Post-Closing Tax Filings and Covenants. (a) All
--------------------------------------
Tax Returns with respect to any Pre-Closing Tax Period required to be filed
between the date hereof and the Closing Date (i) will be filed when due in
accordance with all applicable laws and (ii) as of the time of filing, will
correctly set forth all the information required to be shown therein.
(b) Sellers shall be responsible for all Taxes payable and
are entitled to all refunds and deductions for all taxable periods relating to
the Company ending on or prior to the Closing Date, except for charges, reserves
and accrual of liabilities reflected on the Closing Date Balance Sheet and
described in Section 9.2(b)(iv). Sellers and the Company shall prepare or cause
to be prepared and file or cause to be filed all Tax Returns for the Company due
prior to the Closing Date.
(c) Without the prior written consent of the Buyer, neither
Sellers nor the Company shall, to the extent it may affect or relate to the
Company for the Tax Indemnification Period for Buyer Indemnitee, make or change,
or allow any Affiliate of any Seller to make or change, any tax election, change
any annual tax accounting period, adopt or change any method of tax accounting,
file any amended Tax Return, enter into any closing agreement, settle any Tax
claim or assessment, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would have the effect of increasing the Tax liability of the Company or
any Buyer Indemnitee. Such consent of Buyer, however, shall not be unreasonably
withheld and shall take into account the past tax accounting customs and
practices of the Company.
(d) Without the prior written consent of NDB, on behalf of the
NDB Group, and the Members' Representative, on behalf of the Seller Individuals,
neither Buyer nor the Company shall, to the extent it may affect or relate to
the Company for the Tax Indemnification Period for Seller Indemnitees, make or
change, or allow any Affiliate of the Buyer or of the Company to
39
make or change, any tax election, change any annual tax accounting period, adopt
or change any method of tax accounting, file any amended Tax Return with respect
to any tax period ending within four years after the Closing Date, enter into
any closing agreement, settle any Tax claim or assessment, surrender any right
to claim a Tax refund, consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment or take or omit to take any
other action, if any such action or omission would have the effect of increasing
the Tax liability of the Company with respect to any Pre-Closing Tax Period or
any Seller Indemnitee. Such consent of NDB, on behalf of the NDB Group, and the
Members' Representative, on behalf of the Seller Individuals, however, shall not
be unreasonably withheld.
(e) The Company shall not make any payment of Taxes to any
person or any Taxing Authority, except for such Taxes as are due or payable or
have been properly estimated in accordance with applicable law as applied in a
manner consistent with past practices of Sellers or the Company.
(f) Each Seller will, on the Closing Date, provide the Buyer
with a written statement that, in form and substance, satisfies the requirements
of Treasury regulation section 1.1445-2(b)(2) and certifies that such Seller is
not a foreign person within the meaning of Code section 1445(f)(3) and Treasury
regulation section 1.1445-2(b)(2)(i).
(g) NDB and SHD will each recognize gain in an amount equal to
their gain realized for federal income tax purposes on the sale of their
respective property interests resulting from this Agreement and will pay an
amount of federal income tax on such gain equal to such gain multiplied by the
highest marginal rate of tax imposed by the Code on corporations for the taxable
year in which the sale occurs.
SECTION 9.4. Other Tax Matters. All transfer, documentary,
-----------------
sales, use, stamp, registration, value added and other such Taxes and fees
arising out of the transactions contemplated by this Agreement (including any
New York Real Estate Transfer Tax, New York City Real Property Transfer Tax and
any similar Tax imposed in other states or subdivisions) shall be borne and paid
by Sellers when due, and Sellers will, at their own expense, file all necessary
Tax returns and other documentation with respect to all such Taxes and fees,
and, if required by applicable law, the Buyer will, and will cause its
Affiliates to, join in the execution of any such Tax returns and other
documentation.
SECTION 9.5. Cooperation on Tax Matters. (a) The Buyer shall
--------------------------
prepare or cause to be prepared and file any Tax Returns due after the Closing.
Sellers shall cooperate fully in connection with the preparation and filing of
any such Tax Returns. The Buyer shall notify NDB (on behalf of the NDB Group)
40
and the Members' Representative of any amounts related to such Tax Returns that
are the responsibility of the Sellers under the provisions of this Article. If
NDB or the Members' Representative, respectively, do not object within 10
Business Days of the receipt of such notice, Sellers shall remit to the Buyer
any such amounts. If NDB or the Members' Representative gives notice to the
Buyer within 10 business days that NDB or the Members' Representative,
respectively objects to the notice, then (a) the parties shall attempt in good
faith to resolve their differences during the ten (10) business day period
following the date of delivery of the notice of objection from the Members'
Representative or NDB (the "Closing Return Resolution Period"), and (b) if the
parties fail to resolve their disagreement during the Closing Return Resolution
Period, each party shall select a representative from a nationally or regionally
recognized accounting firm, and these two individuals shall select a third such
person, and this group of three individuals shall resolve the dispute by a
determination agreed to by a majority of such group within twenty-one (21) days
after the individuals are initially identified in a writing among the parties.
Any resolution of any such dispute entered into in compliance with this
subsection (a) shall also be binding on the parties in the same manner as if a
final judgment or decree had been entered by a court of competent jurisdiction
in the amount of the determination.
Sellers and the Buyer shall cooperate fully in connection with
any audit, litigation, or other proceeding with respect to Taxes. The Buyer
shall retain for three years the records and information that are reasonably
relevant to any such audit, litigation or other proceeding.
(b) The Buyer and Sellers further agree, upon request, to
use all reasonable efforts to obtain any certificate or other document from any
governmental authority or customer of the Company or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
SECTION 9.6. Tax Indemnification. (a) Each Seller Individual
-------------------
hereby severally (but not jointly) indemnifies each Buyer Indemnitee against and
agrees to hold each Buyer Indemnitee harmless from any (x) Tax of the Company or
any successor of the Company related to the Tax Indemnification Period for Buyer
Indemnitees, except for charges, reserves and accrual of liabilities reflected
on the Closing Date Balance Sheet and described in Section 9.2(b)(iv), (y) Tax
of the Company or any successor of the Company resulting from a breach of any
provisions of this Article IX, and (z) liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and attorneys' fees and
expenses), losses, damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment, or assertion of any Tax described
41
in (x) or (y), including those incurred in the contest in good faith in
appropriate proceedings relating to the imposition, assessment or assertion of
any such Tax, and any liability as transferee. The sum of (x), (y) and (z) is
referred to herein as a "Buyer Tax Loss."
(b) Each of NDB and SHD hereby guarantees the full payment,
when due, of the obligations of the Seller Individuals provided for in Section
9.6(a) of this Agreement.
(c) The Buyer hereby indemnifies each Seller Indemnitee
against and agrees to hold each Seller Indemnitee harmless from any (x) Tax of
the Company or any successor of the Company related to the Tax Indemnification
Period for Seller Indemnitee (other than any Tax properly allocable to any
period ending on or before the Closing Date), (y) Tax of the Company or any
successor of the Company resulting from a breach of any provisions of this
Article IX, and (z) liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or incident to the
imposition, assessment, or assertion of any Tax described in (x) or (y),
including those incurred in the contest in good faith in appropriate proceedings
relating to the imposition, assessment or assertion of any such Tax, and any
liability as transferee. The sum of (x), (y) and (z) is referred to herein as a
"Seller Tax Loss", provided, however, that Buyer shall have no liability under
this Section 9.6 unless and until the aggregate of all Seller Tax Losses exceeds
the sum of $50,000 (the "Seller's Minimum Amount"), in which event Buyer shall
be liable for all Seller Tax Losses, irrespective of the Seller's Minimum
Amount.
(d) For purposes of this Section 9.6, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax related
to the portion of such Tax period ending on and including the Closing Date shall
(x) in the case of any Taxes other than gross receipts, sales, withholding, or
use Taxes and Taxes based upon or related to income, be deemed to be the amount
of such Tax for the entire Tax period multiplied by a fraction of the numerator
of which is the number of days in the Tax period ending on and including the
Closing Date and the denominator of which is the number of days in the entire
Tax period, and (y) in the case of any gross receipts, sales, withholdings or
use Taxes or Taxes based upon or related to income, be deemed equal to the
amount which would be payable if the relevant Tax period ended on and included
the Closing Date. The portion of any credits relating to a Tax period that
begins before and ends after the Closing Date shall be determined as though the
relevant Tax period ended on and included the Closing Date.
42
(e) A party (the "Indemnified Party") may assert a Claim that
it is entitled to, or may become entitled to, indemnification under this Article
IX by giving written notice of its Claim to the party or parties that are, or
may become, required to indemnify the Indemnified Party (the "Indemnifying
Party"), providing reasonable details of the facts giving rise to the Claim and
a statement of the Indemnified Party's loss in connection with the Claim, to the
extent such loss is then known to the Indemnified Party and, otherwise, an
estimate of the amount of the loss that it reasonably anticipates that it will
incur or suffer. If the Indemnifying Party does not object to the Claim during
the twenty (20) day period following the date of delivery of the Indemnified
Party's notice of its Claim (the "Objection Period"), the Claim shall be
considered undisputed and the Indemnified Party shall be entitled to recover the
amount of its Loss. The fact that a Claim is not disputed by the Indemnifying
Party shall not constitute an admission or create any inference that the
asserted Claim is valid for any purpose other than the indemnity obligation of
the Indemnifying Party as to such Claim pursuant to this Section 9.6.
(f) If the Indemnifying Party gives notice to the Indemnified
Party within the Objection Period that the Indemnifying Party objects to the
Claim, then (a) the parties shall attempt in good faith to resolve their
differences during the ten (10) business day period following the date of
delivery of the Indemnifying Party's notice of its objection (the "Resolution
Period"), and (b) if the parties fail to resolve their disagreement during the
Resolution Period, each party shall select a representative from a nationally or
regionally recognized accounting firm, and these two individuals shall select a
third such person, and this group of three individuals shall resolve the dispute
by a determination agreed to by a majority of such group within twenty-one (21)
days after the individuals are initially identified in a writing among the
parties. Any resolution of any such dispute entered into in compliance with this
Section 9.6(f) shall also be binding on the parties in the same manner as if a
final judgment or decree had been entered by a court of competent jurisdiction
in the amount of the determination.
(g) In the case of any third party suit ("Third Party Suit"),
the Indemnifying Party shall control the defense of the Third Party Suit, and
shall be fully responsible for the costs of counsel related thereto; provided,
--------
however, that the Indemnifying Party shall control the defense of the Third
-------
Party Suit only if the Indemnifying Party first admits in a writing, which
writing shall be binding on the Indemnifying Party, delivered to the Indemnified
Party that the Indemnifying Party will be obligated, pursuant to Section 9.6
hereof, to indemnify the Indemnified Party for any liability arising out of such
Third Party Suit. The Indemnifying Party shall consult with the Indemnified
Party with respect to the Third Party Suit upon the Indemnified Party's
reasonable request for consultation, and the Indemnified Party
43
may, at its expense, participate in (but not control) the defense and employ and
pay for counsel separate from the counsel employed by the Indemnified Party. All
parties shall cooperate in the defense of the Third Party Suit.
(h) If an Indemnified Party is conducting the defense of a
Third Party Suit, the Indemnified Party shall give the Indemnifying Party at
least fifteen (15) days prior written notice of any proposed settlement or
compromise, during which time the Indemnifying Party may assume the defense of
the Third Party Suit and, if it does so (or if the Indemnifying Party has
already assumed control of such Third Party Suit), the proposed settlement or
compromise may not be made without the Indemnified Party's consent, which shall
not be unreasonably withheld. If an Indemnifying Party does not so assume the
defense of the Third Party Suit, the Indemnified Party may enter into the
proposed settlement. Any settlement or compromise of any Third Party Suit by
either the Indemnifying Party or the Indemnified Party entered into in
compliance with this Section 9.6(h) shall also be binding on the other party in
the same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of the settlement or compromise.
(i) Any failure by an Indemnified Party to defend a Third
Party Suit shall not relieve the Indemnifying Party of its indemnification
obligations if the Indemnified Party gives the Indemnifying Party at least
thirty (30) days prior written notice of the Indemnified Party's intention not
to defend and affords the Indemnifying Party the opportunity to assume the
defense.
(j) The Buyer and Sellers shall jointly control the defense of
any claim that relates to Taxes payable for a Tax period that includes (but does
not end on) the Closing Date.
(k) An Indemnifying Party shall not be liable under this
Section 9.6 with respect to any Tax resulting from a claim or demand the defense
of which the Indemnifying Party was not offered the opportunity to assume as
provided under Section 9.6(g) to the extent the Indemnifying Party's liability
under this section is adversely affected as a result thereof. No investigation
by an Indemnified Party or any of its Affiliates at or prior to the Closing Date
shall relieve the Indemnifying Party of any liability hereunder.
(l) Any claim of any Buyer Indemnitee (other than the Buyer)
under this section may be made and enforced by the Buyer on behalf of such Buyer
Indemnitee. Any claim under this Section of a Seller Indemnitee related to the
NDB Group rather than a Seller Individual shall be made and enforced only by NDB
on behalf of such Seller Indemnitee. Any claim under this Section of a Seller
Indemnitee related to a Seller Individual shall be made and enforced only by the
Members' Representative on behalf of such Seller Indemnitee.
44
SECTION 9.7. Audits. (a) Buyer shall notify Sellers promptly
------
of any examinations, audits, litigation or other proceedings respecting the
Company with respect to any taxable period ending on or prior to the Closing
Date and Seller Individuals shall have the right to control the conduct of any
such examination, audit, litigation or other proceeding. Buyer shall provide, or
shall cause the Company to provide, Sellers with such assistance and
cooperation, including the execution of powers of attorney, as Sellers may
reasonably request in order to enable Sellers to exercise such control.
(b) Buyer shall have the sole right to represent the
Company in any Tax audit or administrative or court proceeding for all taxable
periods ending after the Closing Date, and to employ counsel of choice at its
own expense.
(c) Buyer and Seller shall provide timely notice to the other
party (or parties) in writing of any pending or threatened tax audit with
respect to the Company for a taxable period for which the other party may have a
liability under this Article IX. Buyer and Sellers shall furnish each other with
copies of all correspondence received from any Taxing Authority in connection
with any tax audit or information request with respect to such taxable periods.
SECTION 9.8. Allocation of Purchase Price. (a) As soon as
----------------------------
practicable after the Closing, the Members' Representative shall deliver a
schedule to the Buyer setting forth on a reasonable basis the federal income tax
basis of all of the assets, properties and business of every kind and
description, wherever located, real, personal or mixed, tangible or intangible
owned by the Company as the same shall exist on the Closing Date (the "Closing
Date Assets"). Within a reasonable amount of time thereafter, the Buyer shall
deliver to the Members' Representative a statement (the "Allocation Statement"),
setting forth the value of all of the Closing Date Assets, which shall be used
for the allocation of the Purchase Price. The Allocation Statement will not be
binding on a Seller to the extent Revenue Ruling 99-6, 1999-6 I.R.B 6, or
similar position of the Internal Revenue Service makes the Allocation Statement
not relevant to such Seller.
(b) Any adjustment made with respect to the Purchase Price
of this Agreement shall be allocated in a manner consistent with the methodology
used in preparing the Allocation Statement.
(c) The Sellers and the Buyer agree to act in accordance with
the Allocation Statement in the preparation of financial statements and filing
of all tax returns and in the course of any tax audit, tax review or tax
litigation relating thereto.
SECTION 9.9. Purchase Price Adjustment. Any amount paid by the
-------------------------
Sellers or Buyer under Section 9.6 will be treated either
45
as an adjustment to the Purchase Price or as a contribution to the Company
unless a Final Determination is inconsistent with such treatment.
SECTION 9.10. Survival. Notwithstanding anything in this
--------
Agreement to the contrary, the provisions of this Article IX shall survive for
the full period of all applicable statutes of limitations (giving effect to any
waiver, mitigation or extension thereof).
ARTICLE X.
SECTION 10.1. Conditions to Obligations of the Buyer and
------------------------------------------
Sellers. The obligations of the Buyer and each Seller to consummate the Closing
-------
are subject to the satisfaction of the following conditions:
(i) No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall
prohibit the consummation of the Closing.
(ii) All actions by or in respect of or
filings with any Governmental Entity required to permit the
consummation of the Closing shall have been taken, made or
obtained.
SECTION 10.2. Conditions to Obligations of the Buyer. The
--------------------------------------
obligations of the Buyer to consummate the Closing are subject to the
satisfaction of the following further conditions:
(i) (A) Each Seller and, where applicable,
the Company, shall have performed in all material respects all
of its obligations hereunder required to be performed by it on
or prior to the Closing Date, (B) the representations and
warranties of each Seller contained in this Agreement and in
any certificate or other writing delivered by any Seller or
the Company pursuant hereto, disregarding all qualifications
and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true at and as of the
Closing Date, as if made at and as of such date with only such
exceptions as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and
(C) the Buyer shall have received a certificate signed by each
Seller Individual (or the Members' Representative on their
behalf) and NDB (on behalf of the NDB Group) to the foregoing
effect.
(ii) There shall not be threatened,
instituted or pending any action or proceeding (including,
without limitation, an action or proceeding
46
to obtain any governmental authorization contemplated by
Sections 3.3, 4.3 and 5.3) by any Person before any court or
governmental authority or agency, domestic or foreign, (A)
seeking to restrain or prohibit the ownership or operation by
the Buyer or any of its Affiliates of the Interests or all or
any material portion of the business or assets of the Company
or of the Buyer or to compel the Buyer or any of its
Affiliates to dispose of all or any material portion of the
Interests or the business or assets of the Company or of the
Buyer, (B) seeking to impose or confirm any material
limitations on the ability of the Buyer or any of its
Affiliates effectively to exercise full rights of ownership of
the Interests, (C) seeking to require material divestiture by
the Buyer or any of its Affiliates of any Interests or (D)
otherwise imposing any condition which is material and adverse
to the Buyer, in its reasonable discretion.
(iii) There shall not be any action taken,
or any statute, rule, regulation, injunction, order or decree
proposed, enacted, enforced, promulgated, issued or deemed
applicable to the purchase of the Interests, by any court,
government or governmental authority or agency, domestic or
foreign, that, in the reasonable judgment of the Buyer could,
directly or indirectly, result in any of the consequences
referred to in clause (i) or (ii) of this Section 10.2.
(iv) No proceeding challenging this
Agreement or the transactions contemplated hereby or seeking
to prohibit, alter, prevent or materially delay the Closing
shall have been instituted by any Person before any court,
arbitrator or Governmental Entity.
(v) The Sellers shall have received all
consents, authorizations or approvals from governmental
agencies referred to in Sections 3.3, 4.3 and 5.3, in each
case in form and substance reasonably satisfactory to the
Buyer, and no such consent, authorization or approval shall
have been revoked.
(vi) The Buyer shall have received legal
opinions of Xxxxx X. Xxxxxxxx, Xx., General Counsel of NDB and
counsel to SHD, Xxxxxx X. XxXxxx, counsel to certain Seller
Individuals, Xxxxxxx X. Xxxxxxxxx, counsel to certain Seller
Individuals, and Xxxxxxx X. Xxxxxxxx, counsel to a certain
Seller Individual, dated the Closing Date covering the matters
set forth on Exhibit A. In rendering such opinion, such
counsel may rely upon certificates of public officers, upon
opinions of counsel reasonably satisfactory to the Buyer as to
matters governed by the laws of jurisdictions other than New
York and the limited
47
liability company laws of Delaware or the federal laws of the
United States of America, and upon certificates of officers of
Sellers or the Company as to matters of fact, copies of which
opinions and certificates shall be contemporaneously delivered
to the Buyer.
(vii) There shall have been no Material
Adverse Effect subsequent to the date hereof. The loss by the
Company of its registration as the specialist for any security
shall not be deemed a material adverse change unless such
security (excluding, for this purpose, BankBoston
Corporation), considered singly or in the aggregate with any
other securities as to which the Company shall have lost
registration subsequent to the date of this Agreement, shall
have accounted for more than 10% of the Company's total billed
agency share trading volume in securities during the twelve
months ended at the month end immediately prior to the date
such registration was lost.
(viii) The Buyer shall be satisfied that the
Sellers have complied with the covenant set forth in Section
7.8.
(ix) The Buyer shall have received the
Secured Demand Notes and all indebtedness in connection
therewith shall have been terminated pursuant to documentation
satisfactory to the Buyer.
(x) The Buyer shall have received all
secured demand notes payable to any Special Member (as defined
in the Operating Agreement) and the secured demand note
payable to the former wife of Xxxxx XxXxxxxx, and all
indebtedness in connection therewith shall have been
terminated pursuant to documentation satisfactory to the
Buyer.
(xi) The Buyer shall have received, (A)
prior to the date of this Agreement, a balance sheet of the
Company as of the Balance Sheet Date prepared in accordance
with GAAP and consistent with past practice of the Company,
together with a schedule reflecting each Seller's Capital
Account and the aggregate Xxxx to Market-Off Floor Trading
(Unrealized), in each case as of the Balance Sheet Date
(collectively with such balance sheet, the "Balance Sheet")
which Balance Sheet is attached hereto as Schedule V, and (B)
prior to two Business Days before the Closing Date, the
Closing Date Balance Sheet.
(xii) The Company shall have paid to each
Seller identified in the last paragraph of Schedule 3.12 cash
in an amount equal to the accrued and unpaid interest on the
Capital Accounts of each such Seller
48
from January 1, 1999 through May 31, 1999, as reflected under
"Interest Payable" on the Closing Date Balance Sheet, and
calculated in the same manner as interest on the Capital
Accounts (consistent with the Operating Agreement) reflected
in the Balance Sheet; it being understood that the assets and
the liabilities on the Closing Date Balance Sheet shall be
reduced by the aggregate amount of such cash payment.
(xiii) Upon repayment of principal and
accrued interest on the 6% Subordinated Loan and the 8%
Subordinated Loan, NDB shall have delivered to the Buyer all
instruments evidencing the repayment of such Indebtedness.
(xiv) The Buyer shall have received in cash
all principal and accrued and unpaid interest owed in
connection with the SLK Loan.
(xv) Upon repayment of principal and accrued
interest on the Green Note, NDB shall have delivered to the
Buyer all instruments evidencing the repayment of such
Indebtedness.
(xvi) NDB shall have purchased all the
Interests of the Special Members (as defined in the Operating
Agreement).
(xvii) NDB and SHD shall have duly
authorized, executed and delivered an agreement and general
release substantially in the form attached hereto as Exhibit
C. Each Seller Individual shall have duly authorized, executed
and delivered an agreement and general release substantially
in the form attached hereto as Exhibit D at least seven
Business Days prior to the Closing Date and such agreement and
general release shall not have been rescinded or terminated as
of the Closing Date.
(xviii) The Buyer shall have received all
instruments and documents it may reasonably request in
connection with this Agreement and the transactions
contemplated hereby, all in form and substance reasonably
satisfactory to the Buyer.
SECTION 10.3. Conditions to Obligation of Sellers. The
-----------------------------------
obligation of each Seller to consummate the Closing is subject to the
satisfaction of the following further conditions:
(i) (A) The Buyer shall have performed in
all material respects all of their obligations hereunder
required to be performed by them on or prior to the Closing
Date (including the delivery of the Promissory Notes and cash
to the Sellers pursuant to
49
Sections 2.2 and 2.3), (B) the representations and warranties
of the Buyer contained in this Agreement and in any
certificate or other writing delivered by the Buyer pursuant
hereto, disregarding all qualifications and exceptions
contained therein relating to materiality or Material Adverse
Effect, shall be true at and as of the Closing Date, as if
made at and as of such date with only such exceptions as could
not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect and (C) each Seller shall
have received a certificate signed by the Buyer to the
foregoing effect.
(ii) There shall not be threatened,
instituted or pending any action or proceeding by any Person
before any court or governmental authority or agency, domestic
or foreign, seeking to restrain or prohibit any Seller from
selling such Seller's Interests or the performance by a Seller
of such Seller's obligations hereunder.
(iii) There shall not be any action taken,
or any statute, rule, regulation, injunction, order or decree
proposed, enacted, enforced, promulgated, issued or deemed
applicable to the purchase of the Interests, by any court,
government or governmental authority or agency, domestic or
foreign, that, in the reasonable judgment of the Company or
the Members' Representative could, directly or indirectly,
result in any of the consequences referred to in clause (i) or
(ii) of this Section 10.3.
(iv) No proceeding challenging this
Agreement or the transactions contemplated hereby or seeking
to prohibit, alter, prevent or materially delay the Closing
shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be
pending.
(v) The Buyer shall have received all
consents, authorizations or approvals from governmental
agencies referred to in Section 6.3, in each case in form and
substance reasonably satisfactory to such Seller, and no such
consent, authorization or approval shall have been revoked.
(vi) The Buyer shall have paid in cash to
NDB all principal and accrued and unpaid interest owed in
connection with the 8% Subordinated Loan and the 6%
Subordinated Loan.
(vii) Spear, Leeds & Xxxxxxx, X.X. shall
have delivered to NDB all instruments evidencing the
50
repayment of Indebtedness in connection with the SLK Loan.
(viii) The Buyer shall have paid in cash to
NDB all principal and accrued and unpaid interest owed by
Xxxxx Xxxxx to NDB in connection with the Green Note.
(ix) Spear, Leeds & Xxxxxxx, X.X. shall have
offered membership positions with the Buyer to the applicable
Persons whose names are set forth on Schedule IV.
(x) The Buyer shall have returned to NDB the
securities pledged to support the Secured Demand Notes and
each such Secured Demand Note and the related agreements shall
have been terminated without any further liability of NDB.
(xi) The Buyer shall have returned the
securities pledged to secure the three $1,000,000 secured
demand notes payable to the Special Members (as defined in the
Operating Agreement) (one secured demand note per Special
Member) and the $500,000 secured demand note payable to the
former wife of Xxxxx XxXxxxxx and each such secured demand
note and the related agreements shall have been terminated.
(xii) NDB, on behalf of the NDB Group, and
the Members' Representative, on behalf of the Seller
Individuals, shall have received all instruments and documents
any Seller may reasonably request in connection with this
Agreement and the transactions contemplated hereby, all in
form and substance reasonably satisfactory to such Seller.
ARTICLE XI.
SECTION 11.1. Survival. The covenants, agreements,
--------
representations and warranties of the parties hereto contained in this Agreement
or in any certificate or other writing delivered pursuant hereto or in
connection herewith shall survive the Closing for a period of one year;
provided, however, that (i) the covenants and agreements contained in Section
-------- -------
7.4 shall survive for the period set forth therein, (ii) the covenants and
agreements contained in Section 7.7 shall survive for so long as the promissory
notes issued to the Seller Individuals pursuant to Section 2.3(b) of this
Agreement are outstanding, (iii) the covenants, agreements, representations and
warranties contained in Sections 3.23 and 3.24 and Article IX shall survive
until expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver, mitigation
51
or extension thereof) and (iv) the representations contained in Sections 3.7,
3.8, 4.5, 5.6 and 5.7 shall survive without limitation as to time.
Notwithstanding the preceding sentence, any covenant, agreement, representation
or warranty in respect of which indemnity may be sought under this Agreement
shall survive the time at which it would otherwise terminate pursuant to the
preceding sentence, if notice of the inaccuracy or breach thereof giving rise to
such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
SECTION 11.2. Indemnification. (a) Each Seller Individual
---------------
(other than the RSF Group) hereby severally (but not jointly) agrees to
indemnify the Buyer, any Affiliate of the Buyer, or their respective
stockholders, partners, members, directors, officers, agents, employees and
representatives, their successors and assigns and, effective upon the Closing,
the Company (the "Buyer Indemnitees") against and agree to hold each of them
harmless from any and all damages, loss, liability, cost, expense (including
without limitation reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding),
deficiency, interest, penalty, imposition, assessment or fine ("Damages")
reasonably and proximately incurred or suffered by any Buyer Indemnitee arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by such Seller Individual pursuant to this Agreement.
(b) Each member of the RSF Group hereby severally (but not
jointly) agrees:
(i) other than with respect to any representation, warranty,
covenant or agreement covered under Section 11.2(b)(ii), to indemnify the Buyer
Indemnitees against and agree to hold each of them harmless from any Damages
reasonably and proximately incurred or suffered by any Buyer Indemnitee arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by such member of the RSF Group pursuant to this Agreement;
and
(ii) with respect to any representation, warranty, covenant or
agreement contained in Article III, to indemnify any Buyer Indemnitee and hold
it harmless to the extent any Seller Individual (other than the RSF Group) is
unable (due to bankruptcy or for any other reason) to satisfy its obligations
under this Section 11.2; provided, however, that the RSF Group shall have no
-------- -------
indemnity obligations as to Sections 3.2, 3.3, 3.4, 3.5 (with respect to other
Seller Individuals), 3.7, 3.12, 3.14, 3.19, 3.21, 3.22 and 3.26. The Buyer
agrees to use its reasonable efforts to collect amounts owed by a Seller
Individual under Section 11.2(a) prior to availing itself of this Section
11.2(b)(ii), and agrees to keep each member of the RSF Group reasonably informed
of such efforts. The RSF Group shall be subrogated to the rights of an
Indemnified Party to the extent of
52
any payment made to such Indemnified Party pursuant to this Section 11.2(b)(ii).
(c) NDB and SHD hereby jointly and severally agree:
(i) other than with respect to any representation, warranty,
covenant or agreement covered under Section 11.2(c)(ii), to indemnify the Buyer
Indemnitees against and agree to hold each of them harmless from any Damages
reasonably and proximately incurred or suffered by any Buyer Indemnitee arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by NDB or SHD pursuant to this Agreement; and
(ii) with respect to any representation, warranty, covenant or
agreement contained in Article III or Article IV, to indemnify any Buyer
Indemnitee and hold it harmless to the extent any Seller Individual is unable
(due to bankruptcy or for any other reason) to satisfy its obligations under
this Section 11.2; provided, however, that NDB and SHD shall have no indemnity
-------- -------
obligations as to Section 3.2, 3.3, 3.4, 3.5 (with respect to Seller
Individuals), 3.7, 3.12, 3.14, 3.19, 3.21, 3.22, 3.26, 4.1, 4.2, 4.5, 4.7, 4.8
and 4.12. The Buyer agrees to use its reasonable efforts to collect amounts owed
by a Seller Individual under Section 11.2(a) prior to availing itself of this
Section 11.2(c)(ii), and agrees to keep NDB (on behalf of the NDB Group)
reasonably informed of such efforts. NDB (on behalf of the NDB Group) shall be
subrogated to the rights of an Indemnified Party to the extent of any payment
made to such Indemnified Party pursuant to this Section 11.2(c)(ii).
(d) The Buyer hereby agrees to indemnify each Seller, any
Affiliate of such Seller, or their respective stockholders, partners, members,
directors, officers, agents, employees and representatives (the "Seller
Indemnitees") against and agrees to hold each of them harmless from any and all
Damages reasonably and proximately incurred or suffered by any Seller Indemnitee
arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by the Buyer pursuant to this Agreement.
SECTION 11.3. Procedures. The party seeking indemnification
----------
under Section 11.2 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding,
or the existence of any liability, in respect of which indemnity may be sought
under such Section. The failure by an Indemnified Party to so notify an
Indemnifying Party will not relieve the Indemnifying Party of any
indemnification responsibility under this Article X, except to the extent, if
any, that such failure materially prejudices the ability of the Indemnifying
Party to defend such claim, suit, action or proceeding (brought by a Person not
a party to this Agreement). The Indemnifying Party
53
may in its discretion participate in and control the defense, compromise or
settlement of any such claim, suit, action or proceeding at its own expense. The
Indemnified Party shall not settle any claim, litigation or proceeding without
the consent of the Indemnifying Party, such consent not to be unreasonably
withheld.
SECTION 11.4. Indemnification Limits; Notices to Seller
Individuals.
(a) Notwithstanding any other provision of this Agreement, the
Sellers' indemnification obligations under Section 9.6 and Section 11.2 shall on
a cumulative basis be limited to an amount equal to the Purchase Price.
(b) Notwithstanding any other provision of this Agreement,
each Seller's indemnification obligations under Section 9.6 and Section 11.2
shall on a cumulative basis be limited to that share of the Purchase Price
received by it.
(c) Notwithstanding any other provision of this Agreement, the
Sellers, collectively, shall have no obligation to make any payment under
Sections 9.6 or 11.2 unless the aggregate amount to which all Buyer Indemnitees
are entitled by reason of all claims under Sections 9.6 or 11.2 exceeds $50,000;
provided, however, that the Sellers shall be obligated to make all payments
-------- -------
under Sections 9.6 and 11.2 to the extent the aggregate amount to which all
Buyer Indemnitees are entitled by reason of all claims against the Sellers under
Section 9.6 and all claims under Section 11.2 exceeds $50,000.
(d) The RSF Group's indemnification obligations pursuant to
Section 9.6 and Section 11.2 shall on a cumulative basis be limited to
$2,000,000; provided, however, that this Section 11.4(d) shall not be applicable
to any indemnification obligations arising out of or relating to the
representations and warranties contained in Section 4.5.
(e) Payments by Sellers pursuant to Section 9.6 and Section
11.2 shall be limited in the aggregate to the amount of any Damages and Buyer
Tax Loss that remain after deducting therefrom any direct tax benefit to the
Buyer and any insurance proceeds and any indemnity, contribution or other
similar payment actually received by the Buyer from any third party with respect
thereto.
(f) Except as otherwise provided in this Agreement,
indemnification for obligations related to the tax matters is covered by Article
IX.
(g) The Buyer hereby acknowledges and agrees that its
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement and the transactions contemplated hereby shall be
pursuant to the indemnification
54
provisions set forth in Articles IX and XI of this Agreement, except for
equitable relief; provided, that nothing contained herein shall limit the right
--------
of any party to exercise or enforce (i) any right of contribution available
under any law, rule or regulation from any other party; (ii) any rights under
any other agreement entered into between the parties hereto, including, without
limitation, the Promissory Notes and the letter agreements related thereto; or
(iii) any cause of action that may exist, not based upon breach of contract, for
fraud.
(h) Any notices to be given to any Seller Individual may be
given to the Members' Representative, on behalf of such Seller Individual.
ARTICLE XII.
TERMINATION
SECTION 12.1. Grounds for Termination. This Agreement may be
-----------------------
terminated at any time prior to the Closing:
(i) by mutual written agreement of NDB (on
behalf of the NDB Group), the Members' Representative and the
Buyer;
(ii) by any of NDB (on behalf of the NDB
Group), the Members' Representative or the Buyer if the
Closing shall not have been consummated on or before July 15,
1999 (as such date may be extended for 30 days by the
agreement of NDB (on behalf of the NDB Group), the Members'
Representative and the Buyer);
(iii) by any of NDB (on behalf of the NDB
Group), the Members' Representative or the Buyer if there
shall be any law or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions contemplated
hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent
jurisdiction;
(iv) by the Buyer or NDB if NDB's board of
directors does not approve this Agreement by May 20, 1999; or
(v) by NDB (on behalf of the NDB Group), the
Members' Representative or the Buyer if any condition to such
party's obligations hereunder becomes incapable of fulfillment
through no fault of such party and is not waived by such
party.
The party desiring to terminate this Agreement shall give notice of such
termination to each other party.
55
SECTION 12.2. Effect of Termination. If this Agreement is
---------------------
terminated as permitted by Section 12.1, termination shall be without liability
of any party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other parties to this Agreement;
provided, however, that if such termination shall result from the willful: (A)
-------- -------
failure of any party to fulfill a condition to the performance of the
obligations of the other party, (B) failure to perform a covenant of this
Agreement or (C) breach by any party hereto of any representation or warranty or
agreement contained herein, such party shall be fully liable for any and all
Damages incurred or suffered by the other party as a result of such failure or
breach; provided, further, that a termination pursuant to 12.1(iv) shall be
--------
deemed not to be a termination described in any of clause (A), (B) or (C) of
this sentence. The provision of Section 14.3 shall survive any termination
hereof pursuant to Section 12.1.
ARTICLE XIII.
MEMBERS' REPRESENTATIVE
SECTION 13.1. Appointment; Acceptance. By executing this
-----------------------
Agreement, each Seller Individual hereby irrevocably constitutes and appoints
Xxxxxx X. XxXxxx, Esq., and his successors, acting as hereinafter provided, as
its attorney-in-fact and agent in its name, place and stead in connection with
the transactions and agreements contemplated by this Agreement (the "Members'
Representative"), and acknowledges that such appointment is coupled with an
interest. By executing and delivering this Agreement under the heading "Members'
Representative," the person who is appointed as Members' Representative hereby
(i) accepts his appointment and authorization to act as Members' Representative
as attorney-in-fact and agent on behalf of the Seller Individuals in accordance
with the terms of this Agreement and (ii) agrees to perform its obligations
hereunder, and otherwise comply with this Article XII.
SECTION 13.2. Authority. Each Seller Individual fully and
---------
completely, without restriction:
(a) Authorizes the Members' Representative: (i) to prepare,
finalize, approve and authorize all exhibits, schedules and other attachments to
this Agreement and all other agreements and other documents delivered by the
Seller Individual pursuant to this Agreement (the "Member Delivered Agreements")
and such approval and authorization may be conclusively evidenced by the
Members' Representative and (ii) to execute and deliver, and to accept delivery,
on his behalf of such amendments as may be deemed by the Members' Representative
in its sole discretion to be appropriate under the Member Delivered Agreements.
56
(b) Agrees to be bound by all notices received and agreements
and determinations made by and documents executed and delivered by the Members'
Representative under the Member Delivered Agreements.
(c) Authorizes the Members' Representative: (i) to dispute or
to refrain from disputing and thereby accept any claim made by the Buyer under
the Member Delivered Agreements; (ii) to negotiate and settle any dispute which
may arise under, and exercise or refrain from exercising remedies available
under the Member Delivered Agreements, to sign any releases or other documents
with respect to such dispute or remedy; (iii) to waive any condition contained
in the Member Delivered Agreements; (iv) to give any and all consents under the
Member Delivered Agreements; and (v) to give such instructions and do such other
things and refrain from doing such things as the Members' Representative shall
deem appropriate to carry out the provisions of the Member Delivered Agreements.
(d) Authorizes and directs the Members' Representative to
receive any and all payments made to the Seller Individuals under this
Agreement, to invest such funds pending their disbursement in such manner as the
Members' Representative in its sole discretion deems appropriate; and to
disburse any payments due the Seller Individuals under this Agreement in
accordance with their interest, after (i) payment of any attorneys',
accountants' and brokers' and other fees and expenses incurred on behalf of the
Seller Individuals in connection with the consummation of the transactions
contemplated by this Agreement and (ii) withholding such amounts to pay costs
and expenses relating to potential disputes arising with respect to
indemnification or other obligations of the Seller Individuals under this
Agreement.
SECTION 13.3. Actions. Each Seller Individual hereby expressly
-------
acknowledges and agrees that (i) the Members' Representative is exclusively
authorized to act on its behalf, notwithstanding any dispute or disagreement
among the Seller Individuals, (ii) the Buyer and any other person or entity
shall be entitled to rely on any and all actions taken by the Members'
Representative under this Agreement and the other Member Delivered Agreements
without any liability to, or obligation to inquire of, any of the Seller
Individuals. All notices, counternotices or other instruments or designations
delivered by any Seller Individual or the Members' Representative shall not be
effective unless, but shall be effective if, signed by the Members'
Representative, and if not, such document shall have no force and effect
whatsoever hereunder and the Buyer and any other person or entity may proceed
without regard to any such document. The Buyer and any other person or entity
are hereby expressly authorized to rely on the genuineness of the signature of
the Members' Representative, and upon receipt of any writing which reasonably
appears to have been signed by the Members' Representative, the Buyer and any
other person or entity may act
57
upon the same without any further duty of inquiries to the genuineness of the
writing.
SECTION 13.4. Effectiveness. The authorization of the Members'
-------------
Representative shall be irrevocable and effective until its rights and
obligations under this Agreement terminate by virtue of the termination of any
and all of the obligations of the Seller Individuals to the Buyer under the
Member Delivered Agreements.
SECTION 13.5. Indemnification; Fees and Expenses. The Seller
----------------------------------
Individuals hereby jointly and severally agree (i) to indemnify and hold the
Members' Representative harmless from any and all liability, loss, cost, damage
or expense, including attorneys fees (reasonably incurred or suffered as a
result of the performance of its duties under this Agreement), and (ii) that the
Members' Representative shall not have any liability to the Seller Individuals
for any act or omission hereunder, except for gross negligence or willful
misconduct. The fees and expenses of the Members' Representative shall be paid
by the Seller Individuals, and the Buyer shall have no liability with respect to
such fees and expenses.
SECTION 13.6. Successor. If the Members' Representative
---------
resigns or ceases to function in its capacity as such for any reason whatsoever,
such Members' Representative shall immediately give notice to the other parties
to this Agreement. In such event, the Seller Individuals may appoint a successor
and give notice to the other parties to this Agreement; provided, however, that
if for any reason the Seller Individuals do not appoint any successor within
thirty (30) days after the Members' Representative resigns or otherwise ceases
to function, then the Buyer shall have the right to petition a court of
competent jurisdiction for the appointment of one or more successors.
SECTION 13.7. Survival of Authorizations. EACH SELLER
--------------------------
INDIVIDUAL INTENDS FOR THE AUTHORIZATIONS AND AGREEMENTS IN THE FOREGOING
SECTIONS OF THIS ARTICLE XII TO REMAIN IN FORCE AND NOT BE AFFECTED IF SUCH
SELLER INDIVIDUAL SUBSEQUENTLY BECOMES MENTALLY OR PHYSICALLY DISABLED OR
INCOMPETENT, DOES HEREBY AUTHORIZE SUCH RECORDINGS AND FILINGS HEREOF AS A
MEMBERS' REPRESENTATIVE MAY DEEM APPROPRIATE, AND DOES HEREBY DIRECT THAT NO
FILING OF ACCOUNTS OR INVENTORIES OR POSTING OF A SURETY BOND SHALL BE REQUIRED.
ARTICLE XIV.
SECTION 14.1. Notices. All notices, requests and other
-------
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given:
58
if to the Buyer, to:
Spear, Leeds & Xxxxxxx Specialists LLC
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxxxxx, Esq.
Fax: 000-000-0000
if to NDB or SHD, to:
National Discount Brokers Group, Inc.
00 Xxxxxxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: President
Fax: 000-000-0000
with a copy to:
National Discount Brokers Group, Inc.
00 Xxxxxxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
if to Xxxxxxx X. XxXxxxxx, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxxxx,
Xxxxxx X. Xxxx III, Xxxxx Xxxxxx or Xxxxx Xxxxx, to such Seller
Individual at his address set forth on Schedule I hereto with a
copy to:
XxXxxx & Xxxxx LLP
Xxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. XxXxxx, Esq.
Fax: 000-000-0000
if to Xxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxx, III or Xxxxxx X.
Xxxxxxx, Xx., to such Seller Individual at his address set forth
on Schedule I hereto with a copy to:
The Xxxxxxxxx Law Group, P.C.
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
59
Fax: 000-000-0000
if to Xxxxxxx Xxxxxx, to such Seller Individual at his address set
forth on Schedule I hereto with a copy to:
Xxxxx Xxxx & Xxxxxx XXX
0 Xxxxxxxx Xxxxx
000 Xxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
SECTION 14.2. Amendments and Waivers. (a) Any provision of
----------------------
this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party
to this Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 14.3. Expenses. All costs and expenses incurred in
--------
connection with this Agreement shall be paid by the party incurring such cost or
expense. Notwithstanding the foregoing, the Buyer and NDB shall each pay one
half of any filing fees under the HSR Act.
SECTION 14.4. Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
--------
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto except that the Buyer
may transfer or assign, in whole or from time to time in part, to one or more of
its Affiliates, the right to purchase all
60
or a portion of the Interests, but no such transfer or assignment will relieve
the Buyer of its obligations hereunder.
SECTION 14.5. Governing Law. This Agreement shall be governed
-------------
by and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such state.
SECTION 14.6. Counterparts; Third Party Beneficiaries. This
---------------------------------------
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. No provision of this Agreement is intended to confer upon
any Person other than the parties hereto any rights or remedies hereunder.
SECTION 14.7. Confidentiality. Each of the Sellers and the
---------------
Buyer agrees to maintain in strict confidence any and all information each party
learns or discovers about the other or its respective Affiliates during the
course of the negotiation, execution and delivery of this Agreement. This
Section 14.7 shall not apply to any information that is, or could reasonably be,
learned or discovered through any independent source that is not obligated to
maintain such information as confidential. Except as required by law, none of
the Sellers shall issue a press release, or make any other public disclosure,
relating to this Agreement without the prior written consent of the Buyer
(except for filing of this Agreement with the SEC and any disclosures hereof in
filings with the SEC). Except as required by law, the Buyer shall not issue a
press release, or make any other public disclosure, relating to this Agreement
without the prior written consent of NDB.
SECTION 14.8. Entire Agreement. This Agreement constitutes the
----------------
entire agreement among the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, among the parties with respect to the subject matter of this Agreement.
SECTION 14.9. Waiver of Rights. Each Seller and the Company
----------------
hereby waives to the fullest extent permitted by law the following rights,
requirements or restrictions under the Operating Agreement and laws of the State
of Delaware solely with respect to the sale of Interests in the Company by this
Agreement (i) the right to receive prior notice of such sale; (ii) the right to
purchase any Interest; (iii) the requirement of any prior approval of the
Company or any member of the Company or the Management Committee of the Company;
(iv) any restrictions on the transferability of Interests; or (v) any other
right or restriction in Delaware law or in the Operating Agreement respecting
the sale of Interests to the Buyer pursuant to this Agreement.
SECTION 14.10. Arbitration. Any controversy arising out of or
-----------
relating to this Agreement shall be submitted to and
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settled by arbitration pursuant to the Constitution and Rules of Construction of
the NYSE. All the parties hereto shall be conclusively bound by such
arbitration.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
SPEAR, LEEDS & XXXXXXX
SPECIALISTS LLC
By:
-----------------------------
Name:
Title:
NATIONAL DISCOUNT BROKERS
GROUP, INC.
By:
-----------------------------
Name:
Title:
SHD CORPORATION
By:
-----------------------------
Name:
Title:
--------------------------------
XXXXXXX X. XXXXXXXX
--------------------------------
XXXXXX X. XXXXXX
--------------------------------
XXXX X. XXXXXXXX
--------------------------------
XXXXXX X. XXXX, III
--------------------------------
XXXXX X. XXXXXX
--------------------------------
XXXXX XXXXX
63
--------------------------------
XXXXXX X. XXXXXXXXX
--------------------------------
XXXXX X. XXXXX, III
--------------------------------
XXXXXXX XXXXXX
--------------------------------
XXXXXX X. XXXXXXX, XX.
--------------------------------
XXXXXXX XXXXXXX
--------------------------------
XXXXXX XXXXXXXXX
--------------------------------
XXXX XXXXX
EQUITRADE PARTNERS, LLC
(SOLELY WITH RESPECT TO
SECTION 14.9)
By:
-----------------------------
Name:
Title:
THE MEMBERS' REPRESENTATIVE,
PURSUANT TO ARTICLE XIII
HERETO
--------------------------------
XXXXXX X. XXXXXX
64
