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EXHIBIT NO. 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE BISYS GROUP, INC.
BOSTON INSTITUTIONAL GROUP, INC.
and
THE STOCKHOLDERS OF BOSTON INSTITUTIONAL GROUP, INC.
Dated as of February 9, 2001
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 9, 2001 (this
"AGREEMENT"), by and among The BISYS Group, Inc., a Delaware corporation
("PARENT"), Boston Institutional Group, Inc., a Delaware corporation (the
"COMPANY"), and the holders of Class A Common Stock of Boston Institutional
Group, Inc. identified on the signature pages hereto (the "STOCKHOLDERS").
WHEREAS, the respective Boards of Directors of Parent and the Company
have each determined that it is advisable and in the best interests of their
respective stockholders that Parent acquire the Company pursuant to the terms
and conditions of this Agreement, and, in furtherance of such acquisition, such
Boards of Directors have approved the merger of the Company into Parent (the
"MERGER") in accordance with the terms of this Agreement and the applicable
provisions of the General Corporation Law of the State of Delaware (the "GCL")
and the Company will hold a meeting of stockholders pursuant to Section 251 of
the GCL to approve the Merger, at which meeting the Stockholders will vote their
shares of Company capital stock in favor of the Merger;
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and that
this Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368(a) of the Code; and
WHEREAS, pursuant to the Merger, each outstanding share of Company
Common Stock (as defined in Section 2.1) shall be converted into the right to
receive the Merger Consideration (as defined in Section 2.1(a)), upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined below), the Company shall merge with and into Parent in
accordance with the GCL, the separate corporate existence of the Company shall
cease, and Parent shall continue as the surviving corporation in the Merger.
Parent, in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2. Consummation of the Merger.
In order to effectuate the Merger, on the Closing Date (as defined
below), Parent and the Company shall cause a certificate of merger (the
"CERTIFICATE OF MERGER") to be filed with the Secretary of State of the State of
Delaware, in such form as required by, and executed in
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accordance with, the GCL. The Merger shall be effective as of the time of filing
of the Certificate of Merger (the "EFFECTIVE TIME").
1.3. Effects of the Merger. The Merger shall have the effects provided for in
Section 259 of the GCL.
1.4. Certificate of Incorporation of the Surviving Corporation. At and after the
Effective Time, the Certificate of Incorporation of Parent (the "PARENT
CHARTER"), as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, until amended in
accordance with the GCL.
1.5. By-Laws of the Surviving ▇▇▇▇▇▇▇▇▇▇▇.▇▇ and after the Effective Time, the
By-laws of Parent (the "PARENT BY-LAWS"), as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation, until amended
in accordance with the GCL.
1.6. Directors and Officers of the Surviving Corporation.
(a) The directors of the Surviving Corporation shall be the persons who
are directors of Parent as of the Effective Time.
(b) The officers of the Surviving Corporation shall be the persons who
are officers of Parent as of the Effective Time and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation or
By-laws of the Surviving Corporation or as otherwise provided by law.
1.7. Closing. Subject to the provisions of this Agreement, the closing of the
Merger (the "CLOSING") shall take place at 10:00 a.m., Eastern Time., at the
offices of Ropes & ▇▇▇▇, One International Place, Boston, Massachusetts on the
last business day of the month in which all of the closing conditions set forth
in Article 8 hereof are satisfied or waived, or on such other date and such
other time and place as Parent and the Company shall agree; provided, however,
that if on such date the Closing Revenues calculated as of such date are less
than ninety percent (90%) of Base Revenues, then the Company may upon written
notice to Parent delay the Closing until the earlier of: (i) the last business
day of the month in which the Closing Revenues calculated as of such date equal
at least ninety percent (90%) of Base Revenues or (ii) April 30, 2001; provided,
further, that Parent may elect not to delay the Closing as requested by the
Company pursuant to this Section 1.7, in which case the parties shall treat the
Closing Revenues as being equal to at least ninety percent (90%) of Base
Revenues. In no event shall the Closing occur later than April 30, 2001. The
date on which the Closing shall occur is referred to herein as the "CLOSING
DATE."
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
2.1. Conversion of Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of any class of
common stock of the Company ("COMPANY COMMON STOCK") or capital stock of Parent:
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(a) Company Common Stock. Subject to this Article II, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than any Dissenting Shares), shall be converted into the right to
receive that number of fully paid and non-assessable shares of common stock, par
value $.02 per share, of Parent ("PARENT COMMON STOCK") determined in accordance
with the provisions of Section 2.1(b), payable upon the surrender of the
Certificates (as defined in Section 2.2(a) and accompanying Letter of
Transmittal (as provided in Section 2.2(a)). All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
Certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of Parent Common Stock
pursuant to this Section 2.1(a) and Section 2.1, any dividends or other
distributions payable pursuant to Section 2.2(b) and any cash in lieu of
fractional shares payable pursuant to Section 2.2(c), all to be issued or paid
in consideration therefor upon the surrender of such Certificates in accordance
with Section 2.2, without interest (collectively, the "MERGER CONSIDERATION").
(b) Exchange Ratio. The aggregate number of shares of Parent Common
Stock to be issued in the Merger in exchange for all shares of outstanding
Company Common Stock shall equal the quotient obtained by dividing the Adjusted
Consideration (as defined below) by the Parent Stock Price (as defined below),
rounded up to the nearest whole share (the "PARENT STOCK AMOUNT"). The number of
shares of Parent Common Stock to be issued in the Merger in respect of each
outstanding share of Company Common Stock (the "EXCHANGE RATIO") shall be equal
to the Parent Stock Amount divided by the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time. Notwithstanding the
foregoing, the Exchange Ratio shall be appropriately adjusted to reflect fully
the effect of any stock split, reverse split, reclassification, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring after the date
hereof and prior to the Effective Time.
As used herein:
"ADJUSTED CONSIDERATION" means the Gross Consideration minus the Option
Ascribed Value.
"BASE REVENUES" means the aggregate monthly fees payable by clients of
FDI for the month ended December 31, 2000, as set forth on Schedule A hereto.
"CLOSING REVENUES" means the aggregate of the revenue amounts set forth
next to each Qualifying Client's (as defined below) name on Schedule A hereto.
For purposes of this Agreement a "QUALIFYING CLIENT" shall be each client named
on Schedule A hereto with respect to which the Company has after February 9,
2001 and prior to the Closing: (i) obtained renewals for, or new contracts to
replace, any existing FDI distribution contracts or other service contracts that
generate revenue, which existing contracts would otherwise terminate upon the
completion of the Merger, and (ii) obtained written confirmations that any other
existing FDI revenue producing contracts with such client will continue
following completion of the Merger in accordance with their terms; provided,
that in the case of each of clause (i) and (ii) such
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renewals, new contracts or written confirmations shall only be required to
provide that the contractual arrangement shall continue on substantially the
same terms as the existing contract, including, without limitation, the duration
of the existing contract (i.e., if an existing contract has a term of one year
that expires on January 31, 2002, then the new, renewed, or confirmed contract
is only required to have a term running through January 31, 2002).
Notwithstanding the foregoing, if prior to the Closing but after the Company has
obtained a renewal, new contract or written confirmation with respect to an
existing contract with a client named on Schedule A, the Company receives a
written notice stating that such client intends to terminate any such contract
or intends not to renew any such contract, then the Company shall give written
notice to the Parent of such fact and such client shall not be a Qualifying
Client. In addition, if the Company fails to obtain a renewal, new contract or
confirmation or receives a termination notice with respect to any contract with
a client named on Schedule A hereto and the reason for such failure or
termination notice is that such client has transferred or intends to transfer
the business covered by such contract to the Parent or one of its affiliates,
then such client shall be a Qualifying Client.
"CLOSING COSTS" means the reasonable fees and expenses paid or payable
by the Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Securities Inc., Ropes & Gray, Foley, ▇▇▇▇ &
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ and KPMG in connection with the transaction contemplated
hereby.
"FDI REVENUE ADJUSTMENT" means an amount determined based on the
relationship of Closing Revenues to Base Revenues, as hereinafter set forth.
(i) The FDI Revenue Adjustment shall be zero ($0) in the event
that Closing Revenues are at least 90% of Base Revenues.
(ii) If Closing Revenues are less than 90% but greater than or
equal to 75% of Base Revenues, for each 1% of shortfall from 90%, the FDI
Revenue Adjustment will be equal to $10,800,132 times the difference between 90%
and such percentage. As an illustration, if the Closing Revenues are 75% of the
Base Revenues, the FDI Revenue Adjustment would be $1,620,019.80, calculated as
follows:
$10,800,132 X (90% - 75%)
$10,800,132 X (15%)
FDI Revenue Adjustment = $1,620,019.80
Such FDI Revenue Adjustment shall be reflected as a downward adjustment in the
Gross Consideration.
"GROSS CONSIDERATION" means $36,000,000, minus the Retention Amount,
minus the Severance Amount, minus the Net Equity Adjustment, minus the Closing
Costs, and minus the FDI Revenue Adjustment.
"NET EQUITY ADJUSTMENT" means the amount, if any, by which the total
stockholders' equity of the Company as set forth in the Company's Estimated
Balance Sheet as of the Closing Date is less than $6,075,000. For purposes of
determining total stockholders' equity of the Company, any impact resulting from
(i) any employee retention and severance payments made by the Company in
connection with the transaction contemplated hereby, (ii) the payment by the
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Company of the Closing Costs and (iii) the exercise of any options to purchase
Class B Common Stock of the Company between the date hereof and the Closing,
shall be excluded, but any positive impact of the exercise price paid to the
Company prior to the Closing in connection with such option exercises shall be
included (i.e., the $6,075,000 measurement level shall not be increased by the
positive impact of the exercise price paid to the Company as a result of such
exercises, but such positive impact may be taken into account for purposes of
determining whether the $6,075,000 measurement level has been satisfied).
"OPTION ASCRIBED VALUE" means the product of (i) the Gross
Consideration multiplied by (ii) a fraction, the numerator of which is the
number of shares of Company Common Stock subject to options outstanding
immediately prior to the Effective Time which options are to be exchanged for
Substitute Options pursuant to Section 7.8 hereof and the denominator of which
is the sum of (A) the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time and (B) the number of shares of Company
Common Stock subject to options outstanding immediately prior to the Effective
Time which options are to be exchanged for Substitute Options pursuant to
Section 7.8 hereof.
"PARENT STOCK PRICE" means the average of the daily closing sales
prices of Parent Common Stock as reported in the Nasdaq National Market for the
thirty consecutive trading days ending on and including the day that is two
trading days immediately prior to the Closing Date.
"RETENTION AMOUNT" means $672,000, which represents seventy (70%)
percent of the amount budgeted by the Company for retention payments to its
employees in connection with the transaction contemplated hereby.
"SEVERANCE AMOUNT" means $1,050,000, which represents seventy (70%)
percent of total estimated severance costs.
(c) Stock Options. Outstanding options to purchase shares of Company
Common Stock shall be treated in the manner set forth in Section 7.8.
2.2. Exchange of Certificates.
(a) Exchange Procedures. On or within two business days after the
Closing Date, each Stockholder will deliver to Parent a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "CERTIFICATES") that were
converted pursuant to Section 2.1(a) into the right to receive shares of Parent
Common Stock, along with a letter of transmittal in the form of Annex A attached
hereto (a "LETTER OF TRANSMITTAL"). Upon surrender of a Certificate for
cancellation to Parent together with such Letter of Transmittal, duly executed,
each Stockholder (other than a holder of Dissenting Shares) shall be entitled to
receive in exchange therefor (A) certificates evidencing that number of whole
shares of Parent Common Stock that such holder has the right to receive in
accordance with Section 2.1(a) in respect of the shares of Company Common Stock
formerly evidenced by such Certificate, (B) any dividends or other distributions
to which such holder is entitled pursuant to Section 2.2(b), and (C) any cash in
lieu of any fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(c), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Company Common
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Stock in accordance with Section 7.11 which is not registered in the transfer
records of the Company as of the Effective Time, a certificate representing the
proper number of shares of Parent Common Stock may be issued to a transferee if
the Certificate evidencing such Company Common Stock is presented to Parent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 2.2(a). Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Common Stock will be deemed from and after the Effective Time, for all corporate
purposes, to represent only the right to receive, upon surrender, the Merger
Consideration.
(b) Distributions With Respect to Unexchanged Parent Shares. No
dividends or other distributions with respect to shares of Parent Common Stock
for which the record date is after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock they are entitled to receive until the holder of such Certificate
surrenders such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
(c) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article II; and no dividend, stock
split or other change in the capital structure of Parent shall relate to any
fractional security; and such fractional interests shall not entitle the owner
thereof to vote or to any rights of a security holder. Each holder of shares of
Company Common Stock who would otherwise have been entitled to receive in the
Merger a fraction of a share of Parent Common Stock (after taking into account
all certificates surrendered by such holder) shall be entitled to receive from
Parent, in lieu thereof, a check in an amount equal to such fractional part of a
share of Parent Common Stock multiplied by the Parent Stock Price.
(d) Transfers of Ownership. Each share of Parent Common Stock will be
issued in the name of the holder of Company Common Stock set forth on the Letter
of Transmittal received from such holder unless otherwise agreed to by Parent.
(e) No Further Ownership Rights in Company Stock. At the Effective
Time, the stock transfer books of the Company shall be closed, and thereafter
there shall be no further registration of transfers on the stock transfer books
of the Company or the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to such time. If, after such time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(f) Lost, Stolen or Destroyed Certificates. Prior to the time that
Certificates are required to be delivered to Parent pursuant to Section 2.2(a),
the Company shall take such steps as are necessary to replace any lost or stolen
Certificates.
(g) Taking of Necessary Action; Further Action. Each of Parent and the
Company will take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger in accordance with this Agreement
as promptly as possible. If, at any time
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after the Effective Time, any such further action is necessary to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of the Company and
Parent immediately prior to the Effective Time are fully authorized in the name
of their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
2.3. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Common Stock that are outstanding immediately prior to the
Effective Time and which are held by the stockholders who shall not have voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such shares in accordance with
Section 262 of the GCL (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 2.1(b). Such stockholders shall be entitled to receive
payment of the appraised value of such shares held by them in accordance with
the provisions of such Section 262, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares under such Section
262 shall thereupon be deemed not to be Dissenting Shares and to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive Parent Common Stock in accordance with Section 2.1(b)
without any interest thereon, upon surrender, in the manner provided in Section
2.2, of the certificate or certificates that formerly evidenced such shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to the GCL and received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the GCL. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demand for
appraisal or offer to settle or settle any such demand.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS
The Company and each Stockholder severally, but not jointly, represents
and warrants to Parent as follows:
3.1. Organization, Power and Standing of the Company.The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Each direct or indirect subsidiary of the Company
is listed on Schedule 3.1 (each a "Subsidiary"). Each such Subsidiary has been
duly incorporated and is validly existing and in good standing under the laws of
its jurisdiction of organization. Each of the Company and the Subsidiaries has
the power and authority to own, operate or lease its respective properties and
to carry on its business in all material respects as currently conducted. Each
of the Company and its Subsidiaries is duly qualified to do business in each
jurisdiction in which the nature of the business as now being conducted by it
makes such qualification necessary, except where the
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failure to be so qualified would not result in a Material Adverse Effect (as
defined below) on the Company. The Company has heretofore delivered or made
available to the Parent true and complete copies of the charter and by-laws of
the Company and each Subsidiary, in each case as in effect on the date hereof.
In this Agreement, "MATERIAL ADVERSE EFFECT" shall mean, with respect to any
Party, a material adverse effect on the assets, financial condition, operating
results, business or prospects of such Party and its subsidiaries taken as a
whole.
3.2. Noncontravention, etc.Except as set forth on Schedule 3.2, neither the
execution, delivery or performance of this Agreement nor the consummation of the
Closing hereunder in accordance with the terms and conditions of this Agreement
does or will constitute, result in or give rise to (i) a material breach,
violation or default under any federal, state or local statute, ordinance, code,
rule or regulation, or any decree, stipulation, determination or award entered
by any federal, state or local government, regulatory or administrative agency
(or any department, bureau or division thereof) (a "GOVERNMENTAL AUTHORITY"), or
any license, franchise, consent, approval, permit or similar right granted under
any of the foregoing (any of the foregoing a "LEGAL REQUIREMENT") applicable to
the Company or any Subsidiary, (ii) a breach of or default under any charter or
by-laws provision of the Company or any Subsidiary, (iii) the imposition of any
Lien (as defined below) upon any asset of the Company or any Subsidiary or (iv)
a material breach of or default under (or the acceleration of the time for
performance of any material obligation under) any written contract, agreement,
deed, mortgage, lease, license, indenture, note, bond, or other document or
instrument to which or by which the Company or any of its Subsidiaries is
legally bound (each of the foregoing a "CONTRACTUAL OBLIGATION"). Except as set
forth in Schedule 3.2, no approval, consent, waiver, authorization or other
order of, and no declaration, filing, registration, qualification or recording
with, any Governmental Authority is required to be obtained or made by or on
behalf of the Company or any Subsidiary in connection with the execution,
delivery or performance of this Agreement and the consummation of the Merger in
accordance with the terms and conditions of this Agreement, except (i) those
which shall have been obtained or made on or prior to, and shall be in full
force and effect at, the Closing Date; (ii) the filing of the Certificate of
Merger pursuant to the GCL; or (iii) where failure to obtain such approval,
consent, waiver, authorization or other order, or to make such declaration,
filing, registration, qualification or recording will not have a Material
Adverse Effect. As used herein, "LIEN" means any mortgage, pledge, lien,
security interest, attachment or encumbrance, provided, however, that the term
"Lien" shall not include (i) statutory liens for taxes currently due and
payable, (ii) encumbrances in the nature of zoning restrictions, easements,
rights or restrictions of record on the use of real property if the same do not
materially detract from the value of the property encumbered thereby or
materially impair the use of such property in the business of the Company as
currently conducted, (iii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the premises
rented, (iv) deposits or pledges made in connection with, or to secure payment
of, worker's compensation, unemployment insurance, old age pension programs
mandated under applicable Legal Requirements or other social security, (v) liens
in favor of carriers, warehousemen, mechanics and materialmen, liens to secure
claims for labor, materials or supplies arising in the ordinary course of
business and other like liens, and (vi) restrictions on transfer of securities
imposed by applicable state and federal securities laws.
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3.3. Capitalization.
(a) The authorized capital stock of the Company consists of 850,000
shares of Class A Common Stock, par value $.01 per share, and 400,000 shares of
Class B Common Stock, par value $.01 per share. As of the date hereof, (i)
750,000 shares of Class A Common Stock are issued and outstanding and 13,500
shares of Class B Common Stock are issued and outstanding; and (ii) an aggregate
of 353,167 shares of Class B Common Stock are reserved for issuance upon
exercise of options granted pursuant to the Company's Stock Option Plans, each
of which are listed on Schedule 3.3(a) (together, the "COMPANY OPTION PLANS").
All of the outstanding shares of the Company's capital stock are, and all shares
reserved for issuance as specified above, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be, duly authorized, validly issued, fully paid and nonassessable. All of
the issued and outstanding shares of capital stock of the Company and all shares
of Company Common Stock subject to options granted under the Company Option
Plans have been offered and/or issued and/or sold by the Company in compliance
with the provisions of the Company Option Plans and applicable federal and state
securities laws. The outstanding Company Common Stock and Company Stock Options
are set forth on Schedule 3.3(a) are owned of record and beneficially by the
persons set forth thereon and represent all of the authorized, issued and
outstanding shares of capital stock of the Company. All of the outstanding
shares of capital stock of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable, and all such shares
are owned by the Company or a Subsidiary of the Company free and clear of all
liens and encumbrances of any nature. Except as set forth on Schedule 3.3(b),
there are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock. The Company's Class B Common Stock is non-voting stock and the
shares of the Company's Class A Common Stock are the only Company securities
entitled to vote on the Merger.
(b) Schedule 3.3(a) shows the name, address and number of shares of
Company Common Stock held by each stockholder of the Company and the name and
address of each holder of Company Stock Options and the number of shares of
Class B Common Stock of the Company subject to such Company Stock Options and
the vesting date thereof. Except as described under Section 3.3(a) of this
Agreement, there are no equity securities of any class of the Company or any of
its Subsidiaries or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding. Except as
described under Section 3.3(a) of this Agreement and except for options
outstanding under the Company Option Plan (each of which will be fully vested at
the Effective Time), there are no options, warrants, calls, rights, commitments
or agreements of any character to which the Company or any of its Subsidiaries
is a party, or by which the Company or any of its Subsidiaries is bound,
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of capital stock of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or accelerate the vesting of or enter into any
such option, warrant, call, right, commitment or agreement.
(c) The Company Option Plans consist of the Company's Stock Option Plan
for Key Executives (the "1994 Plan") and the Company's 1997 Incentive Stock
Option Plan for Selected Executives (the "1997 Plan" and together with the 1994
Plan, the "Plans"). The Company is, and will be at the Effective Time, in full
compliance with, and has, and shall have at the
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Effective Time, performed all of its obligations under, the Plans. Under the
terms of the Plans, the Company may arrange for each holder of an outstanding
option to receive a stock option of Parent of equivalent value in exchange for
such outstanding option. Each such outstanding option which is not so exchanged
or exercised in accordance with its terms as of the Effective Time will be
canceled as of the Effective Time and will be of no further effect.
3.4. Authority Relative to this Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by it at the Closing and
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and each
instrument required hereby to be executed and delivered at the Closing by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by Parent constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
3.5. Financial Information.The Parent has been furnished with each of the
following: (a) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997, December 31, 1998 and December 31, 1999
and the related statements of earnings and shareholders equity and cash flows
for the fiscal years then ended, accompanied by the notes thereto and the report
thereon of Ernst & Young LLP (collectively, the "AUDITED FINANCIALS" and,
together with the Interim Financials (as defined in clause (b) below), the
"FINANCIAL STATEMENTS"); and (b) the unaudited consolidated balance sheet (the
"BALANCE SHEET") of the Company and its Subsidiaries as of December 31, 2000
(the "BALANCE SHEET DATE") and related unaudited consolidated statements of
earnings and cash flows for the twelve month period then ended (collectively the
"INTERIM FINANCIALS"). The Financial Statements were prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods specified therein and present fairly, in all material respects, the
financial position and results of operations of the Company and its Subsidiaries
as of the dates and for the periods specified therein, subject in the case of
the Interim Financials to the absence of footnotes and to normal year-end
adjustments.
3.6. Agreements, Contracts and Commitments.
Set forth on Schedule 3.6 is a true and complete list of all of the
following Contractual Obligations of the Company and its Subsidiaries:
(a) all collective bargaining agreements and all written employment or
consulting agreements pursuant to which services are rendered to the Company or
any Subsidiary (other than the Company Plans (as defined below));
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(b) all Contractual Obligations under which the Company or any
Subsidiary is or will after the Closing be restricted in any material respect
from carrying on any business or other activities anywhere in the world (other
than use restrictions contained in any lease or license of real or personal
property);
(c) all Contractual Obligations to sell or otherwise dispose of any
assets except in the ordinary course of business;
(d) all Contractual Obligations between the Company or any Subsidiary
on the one hand and any Stockholder or Affiliate of the Company or such
Subsidiary on the other hand;
(e) all Contractual Obligations (including, without limitation,
partnership and joint venture agreements) under which the Company or any
Subsidiary has any liability or obligation for indebtedness for borrowed money
or constituting or giving rise to a guarantee of any liability or obligation of
any person or entity involving any such indebtedness or liability in excess of
$100,000 individually;
(f) all Contractual Obligations entered into since December 31, 1999
pursuant to which the Company or any Subsidiary incurred or may incur an
obligation to pay any amounts in excess of $100,000 in respect of
indemnification obligations, purchase price adjustment or otherwise in
connection with any (i) acquisition or disposition of assets constituting a
business or securities representing a controlling interest in any entity, (ii)
merger, consolidation or other business combination, or (iii) series or group of
related transactions or events of a type specified in subclauses (i) and (ii);
(g) all Contractual Obligations pursuant to which the Company or any
Subsidiary may be expected to perform services with a value in excess of
$100,000 per year and which cannot be canceled by the Company or such Subsidiary
within 60 days; and
(h) all Contractual Obligations pursuant to which the Company or any
Subsidiary may be obligated to pay for goods and services to be delivered or
performed in excess of $100,000 per year and, in the case of contracts for
independent research between Boston Institutional Services and vendors, which
cannot be canceled by Boston Institutional Services within 60 days.
Each of the Contractual Obligations listed on Schedule 3.6, as in
effect on the date hereof, shall be referred to herein collectively as
the "CONTRACTS". No breach or default in performance by the Company or
any Subsidiary under any of the Contracts has occurred and is
continuing, and no event has occurred which with notice or lapse of
time or both would constitute such a breach or default, other than any
breach or default which could not reasonably be expected to have a
Material Adverse Effect. To the knowledge of the Company, no breach or
default by any other person or entity under any of the Contracts has
occurred and is continuing, and no event has occurred which with notice
or lapse of time or both would constitute such a breach or default,
except a breach or default which has not had a Material Adverse Effect.
3.7. Change in Condition.
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Except for matters set forth in Schedule 3.7, since the Balance Sheet
Date the business of the Company and its Subsidiaries has been conducted only in
the ordinary course of business (except as otherwise required or permitted by
the terms of this Agreement) and:
(a) The Company and its Subsidiaries have not:
(i) entered into any Contractual Obligation (other than
this Agreement and agreements between the Company and
▇▇▇▇▇▇ ▇▇▇▇▇▇ Securities Inc. relating to the sale of
the Company) relating to (A) the sale of any capital
stock or equity interest in the Company, (B) the
purchase of assets constituting a business, (C) any
merger, consolidation or other business combination
or (D) any Contractual Obligation outside of the
ordinary course of business;
(ii) settled or agreed to settle any material claim,
action, cause of action or suit (in contract, tort or
otherwise), or any inquiry, proceeding or
investigation by or before any Governmental Authority
(an "ACTION");
(iii) mortgaged, pledged or subjected to any Lien any of
their assets other than (A) conditional sales or
similar security interests granted in connection with
the lease or purchase of equipment or supplies in the
ordinary course of business and (B) Liens disclosed
on Schedule 3.7; or
(iv) sold, leased, transferred or exchanged any material
property for less than the fair value thereof; and
(b) The Company and its Subsidiaries have not entered into any
Contractual Obligation to do any of the actions referred to in clause (a) above.
3.8. Compliance; Permits.
(a) The operations of the business of the Company and its Subsidiaries
are in compliance as of the date hereof in all material respects with applicable
Legal Requirements, except as set forth in Schedule 3.8. Each of the Company and
its Subsidiaries and each employee thereof has been granted all licenses,
permits, consents, approvals, franchises and other authorizations under any
Legal Requirement necessary for and material to the conduct of its business (the
"PERMITS"). Neither the Company nor any Subsidiary has received any written
notice that any Governmental Authority or other licensing authority will revoke,
cancel, rescind, materially modify or refuse to renew in the ordinary course any
of the Permits. Except as set forth on Schedule 3.8, no disciplinary proceedings
by any Governmental Authority or licensing authority are pending or, to the
Company's knowledge, threatened against the Company or any Subsidiary or any of
their employees.
(b) Boston Institutional Services, Inc. is a member in good standing of
the New York Stock Exchange and the National Association of Securities Dealers,
Inc. and is in compliance with all material rules, regulations and by-laws of
such entities.
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3.9. Environmental Matters.Except as set forth on Schedule 3.9, each of the
Company and its Subsidiaries is as of the date hereof in compliance in all
material respects with all Environmental Laws. To the knowledge of the Company,
except as set forth on Schedule 3.9, there is as of the date hereof no Action
pending or threatened against the Company or any Subsidiary in respect of (i)
noncompliance by the Company or any Subsidiary with any Environmental Laws or
(ii) the release or threatened release into the environment of any Hazardous
Substance by the Company or any Subsidiary or (iii) the handling, storage, use,
transportation or disposal of any Hazardous Substance by the Company or any
Subsidiary.
As used herein, "ENVIRONMENTAL LAWS" shall mean any federal, state or
local law as in effect as of the date hereof relating to (i) releases or
threatened releases of Hazardous Substances, and (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances; and
"HAZARDOUS SUBSTANCES" shall mean (i) substances defined in or regulated as
toxic or hazardous under the following federal statutes and their state
counterparts, as well as these statutes' implementing regulations, in each case,
as amended and as in effect as of the date: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Asbestos Hazard Emergency Response
Act, the Atomic Energy Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, and the Clean Air Act; (ii)
petroleum and petroleum products, including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas and any mixtures thereof; (iv) PCBs and (v)
asbestos.
3.10. Real and Personal Property.
Each of the Company and its Subsidiaries has valid title to all of its
material personal property, and such material personal property is not subject
to any Lien except as set forth on Schedule 3.10(a). Except as could not
reasonably be expected to have a Material Adverse Effect, (i) all leases and
licensing agreements for personal property ("PERSONALTY LEASES") leased or
licensed by the Company or any of its Subsidiaries are valid and in full force
and effect; (ii) the Company or such Subsidiary has performed in all respects
all obligations required to be performed by it under such leases; and (iii) no
event or condition exists which constitutes or, with the giving of notice or the
passage of time or both, would constitute a default by the Company or such
Subsidiary as lessee or licensee under such leases.
Neither the Company nor any Subsidiary owns any real property. Schedule
3.10 sets forth a list of all real property leased to the Company or any of its
Subsidiaries (the "REAL PROPERTY"). All leases (the "LEASES") of Real Property
leased to the Company or any of its Subsidiaries are valid and in full force and
effect. The Company or such Subsidiary has performed in all material respects
all obligations required to be performed by it under such Leases. No event or
condition exists which constitutes or, with the giving of notice or passage of
time or both, would constitute a material default by the Company or such
Subsidiary as lessee under such Lease. The Company has no knowledge of any
default by any other party to such Leases. Except as set forth on Schedule
3.10(b), no consent of any landlord is required under any of the Leases by
reason of the Merger and, to the Company's knowledge, assuming that the Company
obtains all consents set forth on Schedule 3.10(b), the Surviving Company will
retain all of the Company's rights to use and enjoy the Leases after the
Effective Time.
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3.11. No Undisclosed Liabilities.
Except as disclosed or accrued in the Financial Statements, there exist
no liabilities or obligations of any nature whatsoever (whether absolute or
contingent) in respect of the business or assets of the Company and its
Subsidiaries of the type required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles, other than
liabilities or obligations arising or incurred in the ordinary course of
business after the Balance Sheet Date.
3.12. Absence of Litigation.
As of the date hereof, there is no Action against the Company or any of
its Subsidiaries pending or, to the knowledge of the Company, threatened. There
is no Action pending or, to the knowledge of the Company, threatened which seeks
rescission of or seeks to enjoin the consummation of this Agreement or any of
the transactions contemplated hereby.
3.13. Employee Benefit Plans.
(a) Schedule 3.13 lists each material employee benefit plan, program or
policy (including, without limitation, each "employee benefit plan" within the
meaning of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) that is maintained or otherwise contributed to by the
Company or any of its Subsidiaries as of the date hereof (collectively, "COMPANY
PLANS". With respect to each of the Company Plans, the Company has delivered to
the Parent a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable, (i) any
related trust agreement, annuity contract or other funding instrument; (ii) any
summary plan description, (iii) the most recent annual Form 5500 (if applicable)
with respect to such Company Plans and (iv) if such Company Plan is intended to
be a qualified single employer plan under section 401(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"), the most recent favorable determination
letter received from the Internal Revenue Service. The Company has also
delivered to the Parent a current, accurate and complete copy of the Company
Option Plan.
(b) Each Company Plan is in compliance as of the date hereof in all
material respects with the applicable provisions, if any, of ERISA and the Code.
Each Company Plan that is intended to be qualified within the meaning of section
401(a) of the Code has received a favorable determination letter as to its
qualification. As of the date of this Agreement no "prohibited transaction" (as
such term is used in section 4975 of the Code or section 406 of ERISA) has
heretofore occurred with respect to any Company Plan. No material litigation or
administrative or other proceedings involving the Company Plans have occurred
or, to the knowledge of the Company, are threatened. The Company and its
Subsidiaries have complied with the health care continuation requirements of
section 601, et. seq. of ERISA with respect to employees and their spouses,
former spouses and dependents. The Company and its Subsidiaries have no
obligations under any Company Plan to provide health benefits to former
employees of the Company or its Subsidiaries except as specifically required by
law.
(c) Neither the Company nor any of its Subsidiaries maintains or
contributes to (nor has it in the last six years maintained or contributed to)
any employee benefit plan subject to
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Title IV of ERISA, including, without limitation any such plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA.
3.14. Labor Matters.
(a) The Company and its Subsidiaries are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and laws;
(b) There are no Actions pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened, between the Company or any of its
Subsidiaries on the one hand and any of their respective employees, consultants
or independent contractors on the other hand;
(c) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its Subsidiaries, nor does the Company or any
of its Subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and
(d) The Company has no knowledge of any labor disputes, strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of, or consultants or independent contractors to, the Company or
any of its Subsidiaries.
3.15. Intellectual Property Rights.Schedule 3.15 lists all material trade and
product names, trademarks, service marks, logos, copyrights and software
programs (including registrations and applications therefor) that are owned or
licensed by the Company or any of its Subsidiaries, other than commercially
available software programs (the "INTANGIBLES"). Schedule 3.15 also lists each
license or other Contractual Obligation under which any Intangible is licensed
by the Company or any of its Subsidiaries (the "LICENSES"). Except as disclosed
on Schedule 3.6 or Schedule 3.15, there is no license or other Contractual
Obligation under which the Company or any of its Subsidiaries is a licensor with
respect to any Intangibles. To the knowledge of the Company, (i) use by the
Company and its Subsidiaries of the Intangibles does not infringe any rights of
any third party and (ii) no activity of any third party infringes upon the
rights of the Company or its Subsidiaries with respect to any of the
Intangibles, in each case except where such infringement could not reasonably be
expected to have a Material Adverse Effect. The Company s not in breach of any
License, except where such breach could not reasonably be expected to have a
Material Adverse Effect.
3.16. Taxes.
Except as set forth on Schedule 3.16, the Company and each of its Subsidiaries
has filed in accordance with applicable law, all material Tax returns,
statements, reports and forms (collectively, "RETURNS") required to be filed
with any Taxing Authority when due (taking into account any extension of a
required filing date). Such Returns were true, complete and correct in all
material respects. The Company and each of its Subsidiaries has timely paid all
Taxes shown as due and payable on the Returns that have been filed and any other
Taxes payable by the Company with respect to items or periods covered by such
returns (whether or not shown on or reportable on such Returns) are adequately
provided for on the Financial Statements or will be adequately provided for on
the Company's Estimated and Final Balance Sheet. There is no
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action, suit, proceeding, investigation, audit or claim pending or, to the
knowledge of the Company, threatened against or with respect to it in respect of
any Tax. Neither the Company nor any of its Subsidiaries has any obligation
under any Tax sharing agreement, Tax allocation agreement or Tax indemnity
agreement or any other agreement or arrangement in respect of any Tax with any
person or entity other than the Company or its Subsidiaries. There is no Tax
lien imposed by any Taxing Authority outstanding against the assets, properties
or business of the Company or any of its Subsidiaries, other than any liens that
could not reasonably be expected to have a Material Adverse Effect.
The Financial Statements contain, and the Company's Estimated and Final Balance
Sheet will contain, adequate provision through the dates thereof for all unpaid
Taxes of the Company determined in accordance with generally accepted accounting
principles.
As used herein, "TAX" and, with correlative meaning, "TAXES" mean 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 by the Company or any of its Subsidiaries, 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 or any
penalty, addition to tax or additional amount due from, or in respect of the
Company or any of its Subsidiaries, as the case may be, imposed by any
governmental authority (a "TAXING AUTHORITY") responsible for the imposition of
any such tax (domestic or foreign).
3.17. Insurance. Schedule 3.17 is a true and accurate list as of the date hereof
of all material policies or binders of insurance covering the operations of the
Company and its Subsidiaries. The Company has delivered or made available to the
Parent true and accurate copies of all such policies or binders as in effect on
the date hereof. To the knowledge of the Company, the Company is not in any
default with respect to its obligations under any of such policies.
3.18. Broker-Dealer Matters. Each of the Subsidiaries listed on Schedule 3.18
(the "BD SUBSIDIARIES"), is duly registered under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") as a broker-dealer with the Securities and
Exchange Commission (the "SEC") and is in compliance in all material respects
with the applicable provisions of the Exchange Act and the applicable rules and
regulations thereunder. Each BD Subsidiary is a member of the National
Association of Securities Dealers, Inc. (the "NASD") and is in compliance in all
material respects with all applicable rules and regulations of the NASD. Each BD
Subsidiary is duly registered as a broker-dealer under, and is in compliance in
all material respects with, the applicable laws of all jurisdictions in which it
is required to be so registered (the "STATE LAWS"). Each BD Subsidiary has made
available to the Parent a correct and complete copy of its Uniform Application
for Broker-Dealer Registration on Form BD, reflecting all amendments thereto
filed with the SEC to the date hereof (each, a "BD"), correct and complete
copies of the Uniform Application for Securities Industry Registration or
Transfer on Form U-4, as filed by each current employee of each BD Subsidiary
(each, a "U-4"), and correct and complete copies of each report filed since
January 1, 1999 with the SEC, the NASD or any state securities agency relating
to its broker-dealer activities. Schedule 3.18 sets forth a complete list of the
identities of each current principal and registered representative of each BD
Subsidiary and their respective series licenses, all of which are in full force
and effect and not subject to any pending or, to the
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knowledge of the Company, threatened action to terminate or suspend such
licenses. Each BD and each U-4 are in compliance in all material respects with
the applicable requirements of the Exchange Act and the rules and regulations
thereunder, the applicable requirements of the by-laws of the NASD and the State
Laws, except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule 3.18, no
disciplinary proceedings by any Governmental Authority are pending or, to the
Company's knowledge, threatened against the Company or any BD Subsidiary or any
such principal or representative.
3.19. Restrictions on Business Activities. Except for this Agreement and except
as could not reasonably be expected to have a Material Adverse Effect, there is
no agreement, judgment, injunction, order or decree binding upon the Company or
any of its Subsidiaries that could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of the Company or any of
its Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted.
3.20. Interested Party Transactions. Except as set forth on Schedule 3.20 and
except as has been entered into on an arm's length basis in the ordinary course
of business, no shareholder, officer or director of the Company or any of its
Subsidiaries has any interest in (i) any contract, arrangement or understanding
with, or relating to, the business or operations of the Company or any
Subsidiary (other than bona fide compensation arrangements), (ii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness with the Company or any Subsidiary, or (iii) any property (real,
personal or mixed), tangible or intangible, used or currently intended to be
used in, the business or operations of the Company or any Subsidiary.
3.21. Brokers. No broker, finder or investment banker (other than ▇▇▇▇▇▇ ▇▇▇▇▇▇
Securities Inc., whose brokerage, finder's or other fee and expenses will be
paid by the Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries.
3.22. Schedule A Relationships. The clients of FDI set forth on Schedule A
hereto are the only existing clients with whom FDI has client contracts that are
subject to termination upon a change of control of the Company as mandated by
law or any other contractual provision requiring the consent or approval of the
client in order for the contractual relationship to continue following
consummation of the Merger.
3.23. Miscellaneous. The representations and warranties made by the Company
contained in this Agreement, including the disclosure schedules attached hereto,
taken as a whole do not contain any untrue statement of a material fact or omit
to state any material fact necessary, in the light of the circumstances under
which they were made, in order to make statements herein not misleading.
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ARTICLE IV
ADDITIONAL
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder, severally, but not jointly, hereby represents and
warrants to Parent, as to itself, severally and not jointly, as follows:
4.1. Authority and Capacity Relative to Agreement. Such Stockholder has all
requisite power, authority and legal capacity to enter into and perform each of
his or her obligations hereunder.
4.2. Execution and Performance of Agreement; Validity and Binding Nature The
execution and delivery of this Agreement, and the performance by such
Stockholder of the terms of this Agreement and the transactions contemplated
hereby, will not result in a material breach of any of the terms of, or
constitute a material violation or default under, any statute or contract,
indenture or other instrument by which such Stockholder or any of his or her
respective properties are bound, and no consent, approval, authorization or
order of any court or governmental authority is required in connection with the
execution and delivery of this Agreement by such Stockholder and the performance
by such Stockholder of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Stockholder and, together with the other documents and agreements to be executed
by such Stockholder in connection herewith, constitutes the legal, valid and
binding obligations of such Stockholder, enforceable against such Stockholder in
accordance with their respective terms, except to the extent that enforceability
may be limited by bankruptcy, receivership, moratorium, conservatorship,
reorganization or other laws of general application affecting the rights of
creditors generally or by general principles of equity. Such Stockholder has the
legal right and authority to vote the shares of Company Common Stock held of
record by him or her in favor of the execution, delivery and performance of this
Agreement and the consummation of the Merger in accordance with the provisions
hereof.
4.3. Stock of the Company. The number of shares of Company Common Stock and
Company Stock Options beneficially owned by such Stockholder is identified on
Schedule 3.3(a) beside the respective Stockholder's name. Except as set forth on
Schedule 4.3, the shares of Company Common Stock and Company Stock Options
beneficially owned by such Stockholder are owned free and clear of all liens,
claims, options, encumbrances or restrictions whatsoever. Such Stockholder has
the full legal right and power and all authorizations and approvals required by
law or otherwise to make the representations, warranties and agreements set
forth in this Agreement. Except with respect to the shares of the Company Common
Stock and Company Stock Options identified on Schedule 3.3(a) beside his or her
name, such Stockholder has no outstanding claim against the Company or any right
whatsoever with respect to any shares of the capital stock of the Company,
including without limitation any other option, warrant or other right to acquire
shares of the capital stock of the Company or any securities, options or other
instruments convertible or exchangeable into shares of capital stock of the
Company. Except as set forth on Schedule 4.3, such Stockholder is not a party to
any stockholders agreement, buy-sell agreement or similar agreement or
arrangement with respect to the Company Common Stock, Company Stock Options or
other equity interest in the Company.
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4.4. Additional Representations and Covenants of Stockholders. Except to the
extent contemplated by the Registration Rights Agreement (hereinafter defined)
and the registration of the Stockholders' Parent Common Stock as contemplated
thereby:
(a) Such Stockholder understands that the issuance of the shares of
Parent Common Stock pursuant to this Agreement is intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
by reason of Section 4(2) thereof based, in part, upon the representations,
warranties and agreements of such Stockholder contained in this Agreement.
(b) Such Stockholder understands that neither the Securities and
Exchange Commission (the "SEC") nor any state securities commission has approved
the Parent Common Stock or passed upon or endorsed the merits of an investment
therein or confirmed the accuracy or adequacy of any information provided by
Parent to the Stockholders or the accuracy or adequacy of any of the
representations, warranties and agreements of Parent contained herein.
(c) Such Stockholder is acquiring Parent Common Stock solely for his or
her own account for investment and not with a view to resale or distribution
thereof, in whole or in part, except pursuant to an effective registration
statement. Such Stockholder has no agreement or arrangement, formal or informal,
written or oral, with any person to sell or transfer or otherwise dispose of all
or any part of the Parent Common Stock, and has no present plans to enter into
any such agreement or arrangement.
(d) Such Stockholder did not become aware of the offer and sale of
Parent Common Stock through or as a result of any form of general solicitation
or general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
other media in connection with the offer and sale of Parent Common Stock
contemplated hereby and is not purchasing Parent Common Stock through or as a
result of any seminar or meeting to which such Stockholder was invited.
(e) Such Stockholder meets the requirements of at least one of the
categories of an "accredited investor", as defined in Rule 501(a) promulgated
under the Securities Act and as set forth in the form of Accredited Investor
Certification attached hereto as Annex B. In connection with the closing of the
transactions contemplated by this Agreement, such Stockholder, unless listed on
Schedule 4.4(e), shall certify to Parent, in the form of the certification set
forth in Annex B, as to which category (or categories) of accredited investor is
applicable to such Stockholder.
(f) Such Stockholder, or such Stockholder together with its purchaser
representative, if any, has such knowledge and experience in financial, tax, and
business matters in general, and investments in securities in particular, so as
to enable such Stockholder to evaluate the merits and risks of an investment in
Parent Common Stock and to make an informed investment decision with respect
thereto.
(g) Such Stockholder recognizes that he or she must bear the economic
risks of the investment in Parent Common Stock indefinitely, because none of the
Parent Common Stock may be sold, transferred, hypothecated or otherwise disposed
of unless such Parent Common
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Stock is registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available, and that legends shall
be placed on the certificates representing Parent Common Stock issuable stating
that the shares represented thereby have not been registered under the
Securities Act or applicable state securities laws, and appropriate notations
thereof will be made in Parent's stock books.
(h) Such Stockholder has adequate means of providing for his or her
current financial needs and foreseeable contingencies and has no need for
liquidity of his or her investment in Parent Common Stock for an indefinite
period of time. Such Stockholder's overall commitment to investments which are
not readily marketable is not excessive in view of his or her net worth and
financial circumstances and the receipt of the Parent Common Stock will not
cause such commitment to become excessive.
(i) Such Stockholder is not relying on Parent or any of its employees
or agents with respect to the legal, tax, economic and related considerations of
an investment in Parent Common Stock, other than as expressly contained in the
representations and warranties of Parent contained in Article V hereof. There
has been delivered to such Stockholder copies of this Agreement, Section 262 of
the GCL pertaining to dissenter's rights, Parent's Annual Report on Form 10-K
for the Fiscal Year Ended June 30, 2000, Parent's 2000 Annual Report to
Stockholders, Parent's Proxy Statement for its Annual Meeting held on November
16, 2000, Parent's Quarterly Report on Form 10-Q for the quarter ended September
30, 2000 (collectively, the "Parent Information"). Each Stockholder has read and
fully understands the Parent Information.
(j) Such Stockholder, or such Stockholder together with his or her
purchaser representative, if any, (i) has had the opportunity to obtain all
information requested by him or her for the purpose of verifying the Parent
Information or for any other purpose related hereto and (ii) has had the
opportunity to meet with representatives of Parent and to have them answer any
questions and provide such additional information regarding the terms and
conditions of the transactions contemplated hereby, the information with respect
to Parent included in the Parent Information and the business and prospects of
Parent deemed relevant by such Stockholder, all of which questions have been
answered and all of which requested information has been provided to the full
satisfaction of such Stockholder.
(k) In evaluating the suitability of an investment in Parent, and in
deciding to enter into this Agreement, such Stockholder has not relied upon any
representation or other information (whether oral or written) other than as set
forth in the representations and warranties of Parent contained in Article V of
this Agreement and in the Parent Information. No oral or written representations
have been made, or oral or written information furnished, to such Stockholder or
such Stockholder together with his or her purchaser representative, if any, in
connection with the offer and sale of Parent Common Stock that are in any way
inconsistent with the representations and warranties of Parent contained herein
or any of the information contained in the Parent Information.
(l) Except as described in Schedule 4.4(l), such Stockholder has no
material beneficial interest, directly or indirectly, in any person, firm,
corporation, partnership or other entity which is or within the past two years
has been a supplier of any goods or services to the
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Company (each, a "Vendor"), including, without limitation, any Vendor, or from
which the Company has received fees, including, without limitation, any
Customer, other than as the beneficial owner of 1% or less of the voting
securities of a publicly held corporation. The nature and amount of any such
beneficial interest is disclosed in Schedule 4.4(l).
(m) Such Stockholder is familiar with the business, historical
financial performance and prospects of the Parent, including the risks
associated therewith.
(n) Such Stockholder, if an individual person, is not required to
obtain any spousal consent in connection with the transactions contemplated
hereby or has obtained such consent.
4.5. Representations and Warranties True; No Misleading Statements. All of the
representations and warranties set forth in this Article IV shall be true and
correct as of the Effective Time as if made at that time. The representations
and warranties made in this Article IV or other document specifically referred
to in this Article IV and delivered by such Stockholder pursuant hereto do not
contain any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company and the Stockholders as
follows:
5.1. Organization and Qualification. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
Parent has the power and authority to own, operate or lease its respective
properties and to carry on its business in all material respects as currently
conducted. Parent is duly qualified to do business in each jurisdiction in which
the nature of the business as now being conducted by it makes such qualification
necessary, except where the failure to be so qualified could not reasonably be
expected to result in a Material Adverse Effect. Parent has heretofore delivered
or made available to the Stockholders true and complete copies of the
Certificate of Incorporation and by-laws of Parent, in each case as in effect on
the date hereof.
5.2. Capitalization.
(a) The authorized capital stock of Parent consists of 160,000,000
shares of Parent Common Stock. As of February 6, 2001, 57,273,141 shares of
Parent Common Stock were outstanding.
(b) All of the shares of Parent Common Stock to be issued in the Merger
have been duly authorized by all necessary corporate action and will be, when
issued in accordance with this Agreement, duly authorized, validly issued, fully
paid and nonassessable.
5.3. Authority Relative to this Agreement. Parent has all necessary corporate
power and authority to execute and deliver this Agreement and each instrument
required hereby to be executed and delivered by it at the Closing and to perform
its obligations hereunder and to
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consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and each instrument required hereby to be executed and delivered
at the Closing by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly and validly
executed and delivered by Parent and, assuming the due authorization, execution
and delivery by the Company and the Stockholders, constitutes the legal, valid
and binding obligation of Parent, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and by general equitable
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law).
5.4. Noncontravention, etc. Neither the execution, delivery or performance of
this Agreement nor the consummation of the Closing hereunder in accordance with
the terms and conditions of this Agreement does or will constitute, result in or
give rise to (i) a material breach, violation or default under any Legal
Requirement applicable to Parent, (ii) a breach of or default under any charter
or by-laws provision of Parent, (iii) the imposition of any Lien upon any asset
of Parent or (iv) a material breach of or default under (or the acceleration of
the time for performance of any material obligation under) any, any written
contract, agreement, deed, mortgage, lease, license, indenture, note, bond, or
other document or instrument to which or by which the Parent is legally bound,
such as which would have a Material Adverse Effect on Parent. No approval,
consent, waiver, authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any Governmental Authority is
required to be obtained or made by or on behalf of Parent in connection with the
execution, delivery or performance of this Agreement and the consummation of the
Merger in accordance with the terms and conditions of this Agreement, except (i)
those which shall have been obtained or made on or prior to, and shall be in
full force and effect at, the Closing Date; (ii) the filing of the Certificate
of Merger pursuant to the GCL; or (iii) where failure to obtain such approval,
consent, waiver, authorization or other order, or to make such declaration,
filing, registration, qualification or recording will not have a Material
Adverse Effect on Parent.
5.5. SEC Filings; Financial Statements.
(a) Parent has timely filed and made available to the Company all
forms, reports, schedules, statements and other documents required to be filed
by Parent with the SEC under the Securities Exchange Act of 1934 (the "EXCHANGE
ACT") since July 1, 1999 (collectively, the "PARENT SEC REPORTS"). The Parent
SEC Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Exchange Act, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Parent SEC Reports or necessary in order to make the statements in such Parent
SEC Reports, in light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries are required to file any forms,
reports, schedules, statements or other documents with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act.
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(b) Each of the consolidated financial statements (including, in each
case, any related notes), contained in the Parent SEC Reports, including any
Parent SEC Reports filed after the date of this Agreement until the Closing,
complied, as of its respective date, in all material respects with all
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and fairly presented, in all material respects, the consolidated
financial position of Parent and its subsidiaries as at the respective dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
5.6. Registration Statement. The information supplied by Parent for inclusion in
the registration statement on Form S-3 covering the shares of Parent Common
Stock to be issued in connection herewith (the "REGISTRATION STATEMENT") shall
not at the time the Registration Statement is declared effective by the SEC
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Registration Statement shall comply in all material respects as
to form and substance with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and the rules and regulations thereunder.
Notwithstanding the foregoing, Parent makes no representation or warranty with
respect to any information supplied by the Company which is contained in any of
the foregoing documents. Parent is eligible to register the shares of Parent
Common Stock for resale by the Stockholders on a registration statement on Form
S-3 under the Securities Act.
5.7. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent.
5.8. [RESERVED].
5.9. No Undisclosed Liabilities. Except as disclosed or accrued in the financial
statements contained in the Parent SEC Reports, there exist no liabilities or
obligations of any nature whatsoever (whether absolute or contingent) in respect
of the business or assets of the Parent and its consolidated subsidiaries of the
type required to be reflected in financial statements prepared in accordance
with generally accepted accounting principles, other than liabilities or
obligations arising or incurred in the ordinary course of business after June
30, 2000 or such liabilities or obligations as would not result in a Material
Adverse Effect on Parent.
5.10. Miscellaneous. The representations and warranties made by Parent contained
in this Agreement do not contain any untrue statement of a material fact or omit
to state any material fact necessary, in the light of the circumstances under
which they were made, in order to make statements herein not misleading.
5.11. Tax-Free Reorganization.
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(a) The fair market value of the Parent Common Stock and other
consideration received by each Stockholder and each other Company stockholder
will be approximately equal to the fair market value of the Company Common Stock
surrendered in the Merger.
(b) At least 50 percent of the value of the Company stockholders'
proprietary interests in the Company will be preserved as a proprietary interest
in Parent received in exchange for Company stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) a distribution with respect to, or a
redemption or acquisition of, the stock of Company is made by Company or a
person related to Company for consideration that would be treated as other
property or money received in the exchange for purposes of Section 356 of the
Internal Revenue Code (or would be so treated if the redeeming Company
stockholder had also received Parent stock in exchange for Company stock owned
by the Company stockholder); (ii) Parent or a person related to Parent acquires
stock of the Company for consideration other than Parent stock; or (iii) a
redemption or acquisition of Parent stock issued in the Merger is made by Parent
or a person related to Parent for consideration other than Parent stock. Any
reference to Parent or to the Company includes a reference to any successor or
predecessor of such corporation, except that the Company is not treated as a
predecessor of Parent. A corporation will be treated as related to another
corporation if they are both members of the same affiliated group within the
meaning of Section 1504 of the Internal Revenue Code (without regard to the
exceptions in Section 1504(b)) or they are related as described in Section
304(a)(2) of the Code (disregarding Treas. Reg. Section 1.1502-80(b)), in either
case whether such relationship exists immediately before or immediately after
the acquisition. Each partner of a partnership will be treated as owning or
acquiring any stock owned or acquired, as the case may be, by the partnership
(and as having paid any consideration paid by the partnership to acquire such
stock) in accordance with that partner's interest in the partnership. As used in
this representation letter, the term "partnership" shall have the meaning given
to it in Section 7701(a)(2) of the Internal Revenue Code.
(c) Parent has no present plan or intention, following the Merger, to
sell or otherwise dispose of any of the assets of the Company or any of its
subsidiaries acquired in the Merger, except for dispositions of such assets in
the ordinary course of business and transfers described in Section 368(a)(2)(C)
of the Code or Treasury Regulation Section 1.368-2(k)(i); provided, that Parent
does intend to sell the Munder B-share assets after the Merger if such assets
have not been sold to a third party prior to the Closing Date.
(d) Parent will pay its expenses incurred in connection with the
Merger. Parent has not paid (directly or indirectly) and has not agreed to
assume any expenses or other liabilities, whether fixed or contingent, incurred
or to be incurred by any stockholder of the Company in connection with or as
part of the Merger or any related transactions.
(e) Following the Merger, Parent intends to continue the Company's
"historic business" or to use a significant portion of the Company's "historic
business assets" in a business (as such terms are defined in Treasury Regulation
Section 1.368-1(d)).
(f) Parent is not an investment company as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code.
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(g) Parent will not take, or cause the Company to take, any position on
any Federal, state or local income or franchise tax return, or to take any other
tax reporting position, that is inconsistent with the treatment of the Merger as
a "reorganization" within the meaning of Section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in Section 1313(a)(1) of the
Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
(h) None of the compensation to be received by any stockholder-employee
of the Company in respect of periods after the Effective Time represents
separate consideration for any of such person's Company Common Stock. None of
the Parent Common Stock that will be received by any stockholder-employee of the
Company in the Merger represents separately bargained for consideration which is
allocable to any employment agreement or arrangement (including a covenant not
to compete). The compensation paid to any stockholder-employees will be for
services actually rendered and/or for any covenant not to compete and will be
determined by bargaining at arm's-length.
(i) There is no intercorporate indebtedness existing between Parent (or
any of its subsidiaries) and the Company or any Subsidiary.
(j) The fair market value of the assets of the Company transferred to
Parent will equal or exceed the sum of the liabilities assumed by Parent plus
the amount of liabilities, if any, to which the transferred assets are subject.
(k) The Merger is being undertaken by the Parent for valid business
purposes and not for the purpose of tax avoidance, and the terms of the Merger
are the product of arm's length negotiations.
(l) Parent understands that Ropes & ▇▇▇▇ will rely on the
representations in this Section 5.11 in giving its opinion to stockholders of
the Company as to the tax consequences to them of the Merger.
ARTICLE VI
COVENANTS
6.1. Interim Operations of the Company. The Company covenants and agrees that,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, unless
Parent shall otherwise agree in writing, the Company shall conduct its business
and shall cause the businesses of its Subsidiaries to be conducted only in, and
the Company and its Subsidiaries shall not take any action except in, the
ordinary course of business and, without limiting the generality of the
foregoing, except as contemplated by this Agreement or set forth on Schedule
6.1, the Company shall not and shall not permit its Subsidiaries to, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, directly or indirectly do,
or propose to do, any of the following without the prior written consent of
Parent:
(a) enter into any transactions with any Stockholder or any other
Affiliate of the Company or it Subsidiaries (other than as contemplated by this
Agreement);
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(b) enter into any Contractual Obligation (other than as contemplated
by this Agreement or in the ordinary course of business), provided that,
Parent's consent thereto shall not be unreasonably withheld;
(c) incur any indebtedness for borrowed money or enter into any capital
lease, except in the ordinary course of business;
(d) amend the articles of incorporation or by-laws of the Company or
any Subsidiary or sell, lease or otherwise dispose of any material assets
(except (i) for sales or other dispositions of excess or old equipment in the
ordinary course of business and (ii) as may otherwise be permitted by the terms
of this Agreement);
(e) declare or pay any dividend or distribution to stockholders of the
Company or its Subsidiaries (other than inter-company dividends and
distributions from any Subsidiary to any other Subsidiary which is a parent
company or to the Company in the ordinary course of business, consistent with
past practices);
(f) make any material change in the business or operations of the
Company; provided, that the Company shall be permitted to sell its
broker-dealer, UPromise Investments, Inc. (f/k/a Premier Mutual Fund Services,
Inc.) to UPromise, Inc. pursuant to the terms of the Services Agreement between
FDI Distribution Services, Inc. and UPromise, Inc. dated September 2000;
(g) commit to make any capital expenditure in excess of $50,000 or
enter into any contract or commitment therefor;
(h) increase the compensation or benefits payable or to become payable
to the Company's or its Subsidiaries' officers or employees, other than
scheduled increases in compensation in the ordinary course of business and
consistent with past practices and payments of incentive compensation consistent
with past practices, or enter into any employment agreement with any officer or
employee of the Company or its Subsidiaries (other than as contemplated by this
Agreement);
(i) enter into any material contract or agreement (other than as
contemplated by this Agreement);
(j) enter into any lease for real property;
(k) amend or surrender any material licenses or registrations currently
held by the Company or its Subsidiaries;
(l) issue, sell, pledge, dispose of, purchase or encumber, or authorize
the issuance, sale, pledge, disposition, purchase or encumbrance of, any shares
of capital stock of any class, or any options, warrants, convertible securities
or other rights to acquire any shares of capital stock in the Company or its
Subsidiaries or any other securities, except for the issuance of shares Class B
Common Stock of the Company issuable pursuant to stock options which were
granted and are outstanding on the date hereof) or cash out any options,
warrants or other rights to acquire any shares of the capital stock of the
Company;
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(m) take any action that would adversely affect the tax or accounting
treatment of the Company's net operating losses (other than as contemplated by
this Agreement); or
(n) enter into any Contractual Obligation or make any commitment,
whether written or oral, to do any of the actions referred to in this Section
6.1.
Parent shall respond with reasonable promptness to any and all requests
by the Company or its Subsidiaries for consents for the Company or its
Subsidiaries to take any of the actions specified in this Section 6.1, and no
requested consent shall be unreasonably withheld.
6.2. Disclosure Schedules. The Company will, from time to time prior to or on
the Closing Date, by notice in accordance with this Agreement, supplement or
amend the disclosure schedules attached hereto, to include the disclosure of
information arising after the date hereof that would, if not included in the
disclosure schedule as so supplemented or amended, result in a failure to
satisfy the closing condition set forth in Section 8.2(a) hereof as of the
Effective Time. If the information contained in any such supplement or amendment
of any disclosure schedule would, in Parent's reasonable judgment, materially
and adversely affect the business of the Company or the benefits to be obtained
by Parent under this Agreement, Parent's assessment of the value of the
Company's business, or the ability of Parent to consummate the transactions
contemplated hereby, then Parent shall have the right at any time after the
delivery of such supplement or amendment and prior to the Effective Time to
terminate this Agreement; provided, however, that the termination of any one or
more distribution agreements between FDI and its investment company clients
shall not constitute grounds to terminate this Agreement (the parties
acknowledge that any such termination shall be taken into account in the
calculation of the FDI Revenue Adjustment). Provided that the disclosure
schedule which was supplemented or amended was accurate on the date hereof, such
termination shall be Parent's sole remedy relating to matters set forth in
amendments or supplements to any disclosure schedule. If Parent shall not
terminate this Agreement and the Effective Time shall occur, then any disclosure
schedule which shall have been supplemented or amended pursuant to this Section
6.2 shall at the Effective Time be deemed to be a disclosure schedule to this
Agreement as so supplemented or amended. Notwithstanding anything in this
Section 6.2 to the contrary, the delivery to Parent of any such supplement or
amendment of a disclosure schedule shall not be deemed to cure the breach by the
Company and/or the Stockholders of any representation, warranty or covenant
contained herein which was inaccurate when originally made.
6.3. Cooperation. Subject to compliance with applicable law, from the date
hereof until the Effective Time, (i) the Company shall confer on a regular and
frequent basis with one or more representatives of Parent to report operational
matters that are material and the general status of ongoing operations, (ii)
each of Parent and the Company shall promptly provide the other party or its
counsel with copies of all filings made by such party with any Governmental
Entity in connection with this Agreement, the Merger and the transactions
contemplated hereby and thereby, (iii) the Company will terminate all employment
agreements with its employees that are in effect prior to the Effective Time,
(iv) prior to the Effective Time, the Company and Parent shall use their
respective best efforts to enter into new or renewed distribution contracts and
related service agreements with existing clients of FDI on substantially the
same terms as the existing contracts, including, without limitation, the
duration of the remaining terms of the existing contracts and (v) to the extent
permitted by generally accepted accounting principles, the
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Company shall accrue on its books as of March 31, 2001 the cost of employee
retention and severance arrangements in connection with the transaction
contemplated hereby.
6.4. Munder B-share Assets. The Company will use its reasonable best efforts to
sell or cause to be sold to a third party unaffiliated to the Company on or
before the Closing Date all or such portion of the Munder B-share assets held by
the Company or any Subsidiary as will result in the elimination of the projected
unrecoverable net operating loss of the Company that is attributable to the
Munder B-share arrangements . In the event that such Munder B-share assets are
not sold to a third party on or before the Closing Date, the Company shall on or
before that date use its reasonable best efforts to obtain from the Internal
Revenue Service a consent to change the method of accounting for distributor
commissions effective for the tax year ending December 31, 2000 (the "IRS
Consent") (such change shall be from the current method of deducting such
commissions as paid to capitalizing commissions and amortizing the same over
five years as provided in Revenue Procedure 2000-38). In the event that the
Company is not able to sell the Munder B-share assets to a third party
unaffiliated with the Company and not able to obtain the IRS Consent, then, on
or before the Closing Date, the Company shall use its reasonable best efforts to
find an alternative arrangement with respect to the Munder B-share assets that
is acceptable to both Parent and the Company, which arrangement shall result in
the elimination of the projected unrecoverable net operating loss of the Company
that is attributable to the Munder B-share arrangements.
6.5. Pay-Off of Line of Credit. On the Closing Date, Parent shall make
arrangements for the pay-off of the Company's line of credit with the WarrenBank
sufficient to cause the WarrenBank to release its security interest on the
Common Stock of the Company owned by the Stockholders and to return to the
Stockholders their Certificates.
6.6. Obligation to File Registration Statement and Listing Application. Parent
shall use its best reasonable efforts to prepare a registration statement in
accordance with the terms of the Registration Rights Agreement, to file such
registration statement within 10 business days after the Closing Date, to cause
such registration statement to be effective as soon thereafter as reasonably
possible and to file within 10 business days after the Closing Date a Notice of
Listing of Additional Shares covering the shares issuable in the Merger with the
Nasdaq National Market.
6.7. Estimated and Final Balance Sheets. The Company shall deliver to Parent its
estimated unaudited balance sheet (the "ESTIMATED BALANCE SHEET") as of the
Closing Date on the Business Day immediately preceding the Closing Date together
with a certificate of the Chief Financial Officer of the Company (which
certificate shall constitute a representation and warranty of the Company and
the Stockholders for all purposes of this Agreement) stating that such balance
sheet sets forth a level of stockholders' equity that will not be less than that
shown on the Final Balance Sheet (hereinafter defined). Within 45 days of the
Closing Date, Parent shall deliver to the Stockholders an unaudited balance
sheet of the Company as of the Closing Date (the "FINAL BALANCE SHEET") together
with a Certificate of the Chief Financial Officer of the Parent stating that the
Final Balance Sheet was prepared in accordance with generally accepted
accounting principles on a basis consistent with prior periods and fairly
reflects the financial condition and stockholders' equity of the Company as of
the Closing Date, except for the absence of footnotes and normal year-end
adjustments. Within 20 days following delivery of
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the Final Balance Sheet to the Stockholders, the Stockholders may object to the
Final Balance Sheet in writing to Parent. Parent agrees to provide the
Stockholders with information as to the basis for preparing the Final Balance
Sheet. If the Stockholders object to the Final Balance Sheet, Parent and the
Stockholders shall first attempt to resolve such dispute by negotiation. If
Parent and the Stockholders are unable to resolve such dispute within twenty
days of the Stockholders' objection, Parent and the Stockholders shall appoint a
firm of certified public accountants mutually acceptable to them (the
"ARBITRATOR") to resolve such dispute. The finding of the Arbitrator shall be
binding on Parent and the Stockholders. The fees and expenses of the Arbitrator
shall be shared equally by Parent and the Stockholders.
6.8. Obligation to Provide Audited Financial Statements. The Company shall as
soon as reasonably practicable and not later than three days prior to the
Closing Date provide the Parent with the audited consolidated balance sheet of
the Company and its Subsidiaries as of December 31, 2000 and the related
statements of earnings and stockholders equity and cash flows for the fiscal
year then ended, accompanied by the notes thereto and the report thereon of the
Company's independent certified public accountant (the "Audited 2000 Financial
Statements").
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Access to Information; Confidentiality. The Company shall (and shall cause
its Subsidiaries and its and their respective officers, directors, employees,
auditors and agents to) afford to Parent and to Parent's officers, employees,
financial advisors, legal counsel, accountants, consultants and other
representatives reasonable access throughout the period prior to the Effective
Time to all of its books and records and its properties, plants and personnel,
and the Company shall (and shall cause each of its Subsidiaries to) furnish
promptly to Parent all information concerning its business, properties and
personnel as Parent may reasonably request, and each shall make available to
Parent's representatives (including attorneys, accountants and other
professionals) for discussion of the Company's business, properties and
personnel as Parent may reasonably request. Unless otherwise required by law,
each party agrees that it (and its Subsidiaries and its and their respective
representatives) shall hold in confidence all non-public information acquired in
accordance with the terms of the Non-Disclosure Agreement between Parent and the
Company (collectively the "NON-DISCLOSURE AGREEMENT").
7.2. Legal Conditions to Merger. Each of Parent and the Company will use all
reasonable best efforts to comply promptly with all legal requirements that may
be imposed with respect to the Merger (which actions shall include, without
limitation, furnishing all information required in connection with approvals of
or filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Each of Parent and the Company will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity required to be obtained or made by Parent,
the Company or any of their Subsidiaries in connection with the Merger or taking
of any action contemplated thereby or by this Agreement.
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7.3. Tax-Free Reorganization. Parent and the Company intend that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
Parent and the Company shall each use its reasonable best efforts to cause the
Merger to so qualify. Neither Parent nor the Company shall knowingly take any
action, or knowingly fail to take any action, that would be reasonably likely to
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code. Unless otherwise required by law, each of
Parent and the Company shall (i) report the merger on all Tax Returns and other
filings as a reorganization within the meaning of Section 368(a) of the Code and
(iii) not take any position or action that is inconsistent with the
characterization of the Merger as such a reorganization in any audit,
administrative proceeding, litigation or otherwise.
7.4. Affiliate Restrictions. Each Stockholder agrees that he or she will not
sell, transfer, pledge or otherwise dispose of shares of Parent Common Stock to
be issued to such Stockholder in the Merger unless (i) such sale, transfer,
pledge or other disposition has been registered under the Securities Act, (ii)
such sale, transfer, pledge or other disposition is made in conformity with the
requirements of Rule 145 under the Securities Act or (iii) in the opinion of
counsel reasonably acceptable to Parent, such sale, transfer, pledge or other
disposition is otherwise exempt from registration under the Securities Act.
7.5. Public Announcements. No press release or any public disclosure, either
written or oral, of the transactions contemplated by this Agreement shall be
made by either Parent or the Company or any officer, director or affiliate
thereof without the prior written consent of the other party, except to the
extent required by any applicable Legal Requirement.
7.6. Listing of Parent Shares. Parent shall use its reasonable best efforts to
have authorized for listing on the Nasdaq National Market the shares of Parent
Common Stock to be issued in the Merger.
7.7. Employee Benefits. Parent agrees that, as soon as reasonably practicable
following the Effective Time the Surviving Corporation and its Subsidiaries and
successors shall provide to each employee of the Company or its Subsidiaries as
of the Effective Time (the "Employees") employee plans and programs that provide
benefits that are similar to those provided to similarly situated employees of
Parent and its subsidiaries generally during such time. Until such time as the
Employees are provided with employee plans and programs in accordance with the
preceding sentence, Parent shall cause the Surviving Corporation and its
Subsidiaries to provide the Employees with the employee plans and programs
provided to such employees on the date hereof. With respect to such benefits,
service accrued by such Employees during employment with the Company and its
Subsidiaries prior to the Effective Time shall be recognized for all purposes.
7.8. Employee Stock Option Plan.
(a) Each option to acquire shares of Company Common Stock (a "Company
Stock Option") that was granted under the 1997 Plan or the 1994 Plan and which
is unexercised immediately prior to the Effective Time shall, effective as of
the Effective Time, become and represent an option to acquire the number of
shares of Parent Common Stock (a "SUBSTITUTE OPTION") determined by multiplying
(i) the number of shares of Company Stock subject to such
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Company Stock Option immediately prior to the Effective Time by (ii) the
Exchange Ratio (rounded down to the nearest whole share), at an exercise price
per share of Parent Common Stock equal to the exercise price per share of such
Company Stock Option divided by the Exchange Ratio (rounded up to the next whole
cent). After the Effective Time, each Substitute Option shall be fully vested
and shall be exercisable until the earlier of (i) the expiration of the term of
such Substitute Option (which term shall be the same as that of the Company
Stock Option converted into such Substitute Option) or (ii) thirty days from the
termination date of a holder's employment with the Parent or any of its
subsidiaries.
(b) Parent agrees to use reasonable efforts to ensure that as soon as
practicable after the Effective Time the shares of Parent Common Stock to be
issued upon exercise of the Substitute Options are registered pursuant to an
effective registration statement. Parent shall file a registration statement on
Form S-8 (or any successor or other appropriate form) with respect to the Parent
Common Stock subject to such options and Parent shall use its reasonable efforts
to maintain the effectiveness of such registration statement for so long as such
options remain outstanding.
(c) The Company shall use its best efforts to cause each holder of a
Company Stock Option to exchange such Company Stock Option for a Substitute
Option and not to exercise such Company Stock Option prior to the Effective
Time.
7.9. Consents; Conveyance Taxes. The Company shall use best efforts to obtain
all necessary consents, waivers, reaffirmations and approvals (including,
without limitation, the approvals of the New York Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc.) in connection with the Merger
under any of the Company's agreements, contracts, licenses or leases, and the
Parent shall use best efforts to assist the Company in obtaining such consents,
waivers and approvals. Schedule 7.9 attached hereto sets forth the preliminary
schedule of meetings of the Board of Directors of the investment companies for
which FDI serves as distributor. Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed at or before the Effective Time.
7.10. Directors' and Officers' Indemnification and Insurance.
(a) All rights to indemnification, advancement of litigation expenses
and limitation of personal liability existing in favor of the directors,
officers and employees of the Company and its Subsidiaries under the provisions
existing on the date hereof in the Company Charter or Company By-Laws shall,
with respect to any matter existing or occurring at or prior to the Effective
Time (including the transactions contemplated by this Agreement), survive the
Effective Time, and, as of the Effective Time, Parent and the Surviving
Corporation shall assume all obligations of the Company in respect thereof as to
any claim or claims asserted prior to or after the Effective Time.
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(b) For a period of five years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are not
materially less advantageous to former officers and directors of the Company)
only with respect to claims arising from facts or events which occurred at or
before the Effective Time.
7.11. Closing of Transfer Books. Following the date hereof through the Effective
Time, the Company agrees not to transfer or record on its stock records any
transfers of Company Common Stock other than exercises of outstanding options on
its Class B Common Stock and transfers of its Common Stock pursuant to the laws
of descent and distribution. The Stockholders agree that from and after the date
hereof through the Effective Time they will not transfer or seek to transfer any
shares of Company Common Stock except pursuant to the laws of descent and
distribution.
7.12. Agreements of Stockholders. Prior to the Effective Time, the Stockholders
agree to: (a) vote all of their shares of Company Common Stock in favor of the
Merger; (b) enter into employment and noncompetition agreements in the forms
attached hereto as Annexes C and D or, in the case of ▇▇▇▇▇▇▇ ▇▇▇▇, an Access,
Non-Solicitation and Non-Competition Agreement in the form attached hereto as
Annex G; (c) waive to the fullest extent permitted by law all dissenter's
rights, rights of appraisal or similar rights that they may have.
7.13. Net Operating Losses. None of the Company, its Subsidiaries, and the
Stockholders shall take any action that would jeopardize the ability of the
Parent to make use of the Company's net operating losses after the Effective
Time; provided, that, the Company, with approval of Parent, which approval will
not be unreasonably withheld, shall be permitted to take any actions necessary
to satisfy its obligations under Section 6.4 hereof.
7.14. Additional Agreements; Commercially Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1. Conditions to Obligation of Each Party to Effect the Merger. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Government Approvals. Any waiting period applicable to the
consummation of the Merger under any legal requirement (including without
limitation any authorization, consent, order or approval, or dedication, filing
or expiration of any waiting period) of any Governmental Entity shall have
expired or been terminated, as the case may be, and any requirements of other
jurisdictions applicable to the consummation of the Merger shall have been
satisfied;
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(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other Governmental Entity seeking
any of the foregoing be pending; and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal;
8.2. Additional Conditions to Obligations of Parent. The obligations of Parent
to effect the Merger are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (except for those representations and warranties that
are qualified by materiality standards, which shall be true and correct without
further qualification), in each case (except to the extent such representations
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date; and Parent shall have received a certificate signed on behalf
of the Company by the President or Chief Executive Officer of the Company to
such effect.
(b) Agreements and Covenants. The Company and the Stockholders shall
have performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date; and Parent shall have received a certificate signed by the President or
Chief Executive Officer of the Company to such effect.
(c) Consents Obtained. All consents, waivers, approvals, authorizations
and orders (including, without limitation, the approvals of the New York Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.)
required to be obtained, and all filings required to be made, by the Company for
the authorization, execution and delivery of this Agreement and the consummation
by it of the transactions contemplated hereby shall have been obtained and made
by the Company, except where the failure to obtain such consents, waivers,
approvals, authorizations or orders or to make such filings in the aggregate
could not reasonably be expected to have a Material Adverse Effect; provided
that the failure or inability to obtain such approvals of the New York Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. shall be
deemed for the purposes of this Section 8.2(c) to have a Material Adverse
Effect.
(d) Registration Rights. Parent shall have received an executed
counterpart of the Registration Rights Agreement in the form attached hereto as
Annex E (the "REGISTRATION RIGHTS AGREEMENT") from each Stockholder and each
holder of options on the Company's Class B Common Stock who exercises such
options prior to the Effective Time (an "EXERCISING OPTIONHOLDER").
(e) Legal Opinion. Parent shall have received from Ropes & ▇▇▇▇,
counsel to the Company, an opinion in the form set forth in Annex F.
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(f) Access and Non-Competition Agreement. Parent shall have received an
executed counterpart of the three-year Access, Non-Competition and
Non-Solicitation Agreement in the form attached hereto as Annex G from ▇▇▇▇▇▇▇
▇. ▇▇▇▇.
(g) Employment and Non-Competition Agreements. Each of the employment
agreements (each an "Employment Agreement") and non-competition agreements (each
a "Non-Competition Agreement"), in the Forms set forth in Annexes C and D,
entered into between Parent and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Rio (the "NAMED EMPLOYEES"), which have been executed
simultaneously with the execution of this Agreement, shall be in full force and
effect; provided, however, that the foregoing condition shall be deemed to be
satisfied if the Employment Agreement or Non-Competition Agreement of any of the
foregoing individuals is not in full force and effect at the Closing as a result
of death or disability. Any employment agreement between any Named Employee and
the Company or any of its Subsidiaries that is in effect prior to the Effective
Time shall be terminated at or prior to the Effective Time.
(h) Net Operating Loss Treatment. The Company shall have taken one of
the following actions: (i) the Company shall have sold all or such portion of
the Munder B-share Assets to an unaffiliated third party as will result in the
elimination of the projected unrecoverable net operating loss of the Company
that is attributable to the Munder B-share arrangements; (ii) the Company shall
have received the IRS Consent or the Parent shall be reasonably satisfied in its
sole discretion that the accounting method change to capitalizing commissions
and amortizing the same over five years as provided in Revenue Procedure 2000-38
requested in the application for such Consent will be in effect for the tax year
ending December 31, 2000; or (iii) the Company shall have effected an
alternative arrangement with respect to the Munder B-share assets that is
acceptable to both Parent and the Company, which arrangement shall result in the
elimination of the projected unrecoverable net operating loss of the Company
that is attributable to the Munder B-share arrangements.
(i) Dissenters' Rights. Holders of no more than 10% of the shares of
Class B Common Stock outstanding as of the Effective Time shall have exercised
appraisal rights under Section 262 of the GCL.
(j) Closing Revenues. The Closing Revenues, determined as of the
Closing Date, shall equal at least seventy-five percent (75%) of Base Revenues.
8.3. Additional Conditions to Obligation of the Company.The obligation of the
Company to effect the Merger is also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent contained in this Agreement shall be true and correct in
all material respects (except for those representations and warranties that are
qualified by materiality standards, which shall be true and correct without
further qualification), in each case (except to the extent such representations
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date; and the Company shall have received a certificate or
certificates signed on behalf of Parent by an officer of Parent to such effect.
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(b) Agreements and Covenants. Parent shall have performed or complied
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing Date; and the Company shall
have received a certificate signed by the chief executive officer and the chief
financial officer of Parent to such effect.
(c) Consents Obtained. All consents, waivers, approvals, authorizations
and orders required to be obtained, and all filings required to be made, by the
Company for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall have been
obtained and made by the Company, except where the failure to obtain such
consents, waivers, approvals, authorizations or orders or to make such filings
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
(d) Registration Rights. Each Stockholder and each Exercising
Optionholder shall have received an executed counterpart of the Registration
Rights Agreement from Parent.
(e) Legal Opinion. The Company shall have received from Drinker ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ LLP, counsel to Parent, an opinion in the form set forth in Annex H.
(f) Closing Revenues. The Closing Revenues, determined as of the
Closing Date, shall equal at least seventy-five percent (75%) of Base Revenues.
ARTICLE IX
TERMINATION
9.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated on or before April 30, 2001 (provided that the right to terminate
this Agreement under this Section 9.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement as a result of its
willful act or negligence has been the cause of or resulted in the failure of
the Merger to occur on or before such date);
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(d) by Parent, if the Company shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform would cause the conditions
set forth in Sections 8.2(a) or 8.2(b) to not be satisfied and which breach
shall not have been cured within 10 business days following receipt by the
Company of written notice of such breach from Parent; or
(e) by the Company, if Parent shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, which
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breach or failure to perform would cause the conditions set forth in Sections
8.3(a) or 8.3(b), to not be satisfied and which breach shall not have been cured
within 10 business days following receipt by Parent of written notice of such
breach from the Company.
9.2. Effect of Termination. In the event of the termination of this Agreement
pursuant to Section 9.1, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto or any of its affiliates,
directors, officers or stockholders except (i) that the last sentence of Section
7.1, and the provisions of Section 7.5, this Section 9.2, Section 9.3, Article X
and Article XI hereof shall survive termination, and (ii) nothing herein shall
relieve any party from liability for any willful breach hereof. The
Non-Disclosure Agreement shall survive termination of this Agreement as provided
therein.
9.3. Fees and Expenses. Except as set forth in this Section 9.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that the Company shall in
any case pay the Closing Costs. Parent agrees that at or prior to the Effective
Time, it will provide sufficient funds to the Company to permit the payment in
full of the Closing Costs.
ARTICLE X
INDEMNIFICATION
10.1. Survival of Representations and Warranties. All representations,
warranties and agreements of the Company, the Stockholders or the Parent
contained herein or in any document, certificate or other instrument required to
be delivered hereunder in connection with the transactions contemplated hereby
shall survive the Closing for the period ending on the earlier to occur of (a)
the first anniversary of the Closing Date and (b) publication of the independent
audit report on the consolidated financial statements of Parent for the fiscal
year ending on June 30, 2001 (the "SURVIVAL DATE").
10.2. Termination of Rights Hereunder. Notwithstanding any other provision
hereof, no claim may be made or lawsuit instituted by Parent, the Company, the
Stockholders or any of their affiliates, as the case may be, under the
provisions of this Article X or in any way arising in connection with this
Agreement or any representation or warranty hereunder after the Survival Date,
provided, however, that claims made in writing setting forth the nature and
amount of the claim prior to the Survival Date shall survive to the extent of
such claim until such claim is finally determined and, if applicable, paid.
10.3. Indemnification of Parent. By their execution and delivery of this
Agreement and their approval of the Merger and by their acceptance of the Merger
Consideration, each Stockholder agrees, subject to the terms and conditions set
forth herein, to severally indemnify, defend, protect, and hold harmless Parent
(an indemnified party), from and after the Closing from and against all Damages
(as defined below) (i) that result from the breach or inaccuracy of any
representation or warranty of the Company set forth in the Agreement or in any
certificate or other document delivered in connection with the transactions
contemplated by this Agreement with respect to which a claim for indemnification
is brought by an indemnified party prior to the Survival Date, or (ii) any
breach or nonfulfillment by the Company, or any noncompliance by
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the Company with, any covenant, agreement, or obligation contained herein
(hereinafter called a "CLAIM" or "CLAIMS"). Notwithstanding the foregoing, (a)
the indemnification obligations of the Stockholders pursuant to this Article X
shall apply only in the event that all Claims for Damages exceed $360,000 in the
aggregate (the "Basket"), in which case the indemnification obligations will
apply to all Claims for Damages and (b) the total maximum aggregate
indemnification liability of all Stockholders as a group for all Claims for
Damages pursuant to this Article X shall not exceed $20,450,000 (the "Cap"); and
(c) no Stockholder shall be liable with respect to a particular Claim for
Damages pursuant to this Article X in an amount in excess of such Stockholder's
Percentage Interest of the amount of such Damages; and (d) the Basket and Cap
shall not apply to Damages resulting from any breach or inaccuracy of the
representations and warranties set forth in Sections 3.3 or 3.16 herein;
provided, that the total maximum aggregate indemnification liability of all
Stockholders as a group for all breaches or inaccuracies of the representations
and warranties set forth in Sections 3.3 or 3.16 and all other Claims for
Damages under this Article X shall not exceed the value of all the shares of
Parent Common Stock received by such Stockholders in the Merger valued at the
Parent Stock Price received by such Stockholders as of the Effective Time. As
used herein, a Stockholder's "Percentage Interest" means the percentage
determined by dividing the number of shares of Parent Common Stock issued to
such Stockholder on the Closing Date by the total number of shares of Parent
Common Stock issued to all Stockholders on the Closing Date.
10.4. Indemnification of Stockholders. By its execution and delivery of this
Agreement and approval of the Merger, Parent agrees, subject to the terms and
conditions set forth herein, to indemnify, defend, protect, and hold harmless
each of the Stockholders (each an indemnified party), from and after the Closing
from and against all Damages (i) that result from the breach or inaccuracy of
any representation or warranty of Parent set forth in the Agreement or in any
certificate or other document delivered in connection with the transactions
contemplated by this Agreement with respect to which a claim for indemnification
is brought by an indemnified party prior to the Survival Date, or (ii) any
breach or nonfulfillment by Parent, or any noncompliance by Parent with, any
covenant, agreement, or obligation contained herein. Notwithstanding the
foregoing, (a) the indemnification obligations of the Parent pursuant to this
Article X shall apply only in the event that all Claims for Damages exceed
$360,000 in the aggregate, in which case the indemnification obligations will
apply to all Claims for Damages; and (b) the total maximum aggregate
indemnification liability of Parent for all Claims for Damages pursuant to this
Article X shall not exceed $20,450,000.
10.5. Matters Involving Third Parties.
(a) In the event any claim is made or suit is filed against a party
which involves or appears reasonably likely to involve a Claim for which
indemnification may be sought pursuant to Section 10.3 or 10.4 hereof, such
indemnified party will, promptly (and in any event within ten (10) business
days) after receipt of notice of any such claim, suit or proceeding, notify the
indemnifying party of the commencement thereof. The failure to so notify any
indemnifying party of the commencement of any such claim, suit or proceeding
will not relieve such indemnifying party from liability unless such failure
adversely affects the ability of such indemnifying party to defend its interests
in such claim, action or proceeding. The indemnifying party shall have the right
and shall be given the opportunity to assume and control the defense of such
claim, suit or proceeding with counsel of its choice reasonably satisfactory to
the
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indemnified party so long as (i) the indemnifying party notifies the indemnified
party in writing of its intention to assume and control such defense within 30
days after the indemnified party has given notice of such claim, and (ii) the
indemnifying party conducts the defense of such claim actively and diligently;
provided, however, that indemnified party (at indemnified party's expense) may
participate in (but not control the conduct of) all matters pertaining to the
defense or settlement of such claim, suit or proceeding. Whether or not the
indemnifying party elects to assume such defense, the indemnified party shall
not make any settlement with respect to any such claim, suit or proceeding
without the prior written consent of the indemnifying party, which consent shall
not be unreasonably withheld or delayed. The indemnified party's consent to the
settlement of any such claim, suit or proceeding by the Stockholders shall be
required and shall not be unreasonably withheld or delayed, but such consent
shall not be required if (or to the extent that) such settlement only requires
the payment of a monetary amount which the indemnifying party is able to pay and
includes a full release of claims against the indemnified party.
(b) In the event any of the conditions in clauses (i) and (ii) of
Section 10.5(a) above is or becomes unsatisfied, or if the indemnifying party
has elected not to conduct the defense of the claim, (i) the indemnified party
may defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, such claim in any manner it may deem appropriate;
provided, however, that the indemnified party may not enter into any settlement
with respect to such claim without the prior written consent of the indemnifying
party (which consent shall not be unreasonably withheld or delayed) if such
settlement would entitle, or give rise to a claim by, the indemnified party to
be paid monetary damages by the indemnifying party pursuant to this Article X,
and (ii) subject to the proviso in clause (i), the indemnifying party will
remain responsible for any damages the indemnified party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by such claim to
the fullest extent provided in this Article X.
10.6. Definition of Damages. For purposes of this Article X, the term "DAMAGES"
shall mean the amount of any loss, claim, demand, damage, deficiency,
assessment, judgment, remediation, cost or expense (including reasonable
attorneys' and experts' fees and expenses) actually incurred less the sum of any
amount recovered under an insurance policy carried by the party or parties
seeking indemnification. In the event the indemnifying party pays a claim and
the indemnified party subsequently receives insurance proceeds with respect to
such claim, the indemnified party shall pay the indemnifying party such
insurance proceeds up to the amount actually paid by the indemnifying party. The
indemnified party shall be required to use commercially reasonable efforts to
seek and obtain such insurance proceeds as quickly as practicable.
Notwithstanding anything herein to the contrary, "Damages" shall not in any
event include loss of profits or consequential damages.
10.7. Certain Other Indemnity Matters.(a)From and after the Effective Time, each
Stockholders', Parent's, and the Company's sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Article X.
In furtherance of the foregoing, each of the Stockholders, Parent and the
Company hereby, on its own behalf and on behalf of its affiliates, waives, to
the fullest extent permitted under applicable law, and agrees not to assert in
any action or proceeding of any kind, any and all rights, claims and causes of
action it or such affiliate may now or
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hereafter have against the Stockholders or Parent, as the case may be, other
than claims for indemnification asserted as permitted by and in accordance with
the provisions set forth in this Article X (including, without limitation, any
such rights, claims or causes of action arising under or based upon common law
or other Legal Requirements); provided, however, that this Section 10.7(a) shall
not constitute a waiver by any Stockholder of any claim that he or she may have
against Parent, the Company or any affiliate arising out of such Stockholder's
relationship with Parent or its affiliates as an employee, officer or director.
(b) Notwithstanding anything to the contrary contained in this
Agreement, no claim for indemnification may be asserted by any Stockholder,
Parent, the Company or any affiliate thereof against any Stockholder or Parent,
as the case may be, under this Article X with respect to any matter discovered
by or actually known to such party or any of its agents on or before the Closing
Date.
(c) Upon making any payment to an indemnified party for any
indemnification claim pursuant to this Article X, the indemnifying party shall
be subrogated, to the extent of such payment, to any rights which the
indemnified party may have against other persons or entities with respect to the
subject matter underlying such indemnification claim.
(d) The Stockholders shall have no liability under any provision of
this Agreement for any Damages to the extent that such Damages are directly and
exclusively caused by actions taken or not taken by Parent or the Company after
the Effective Time.
(e) The Stockholders may satisfy any obligation under this Article X in
cash or by delivery to Parent of shares of Parent Common Stock in an amount
equal to his or her obligation hereunder, each such share of Parent Common Stock
to be valued at the Parent Stock Price. The satisfaction of any such obligation
shall be deemed an adjustment to the Merger Consideration for tax purposes.
ARTICLE XI
GENERAL PROVISIONS
11.1. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
if and when delivered personally or by overnight courier to the parties at the
following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or the Company after Closing:
The BISYS Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Dell, Esq., Executive Vice
President and General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company prior to Closing:
Boston Institutional Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to the Stockholders, to each of:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
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11.2. Interpretations; Certain Definitions.
For purposes of this Agreement:
(a) when a reference is made in this Agreement to a section or article,
such reference shall be to a section or article of this Agreement unless
otherwise clearly indicated to the contrary;
(b) whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation";
(c) a reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto;
(d) a reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns;
(e) as used in this Agreement, any reference to any event, change or
effect being material with respect to any entity (or group of entities taken as
a whole) means such event, change or effect is materially adverse to (i) the
consolidated financial condition, businesses or results of operations or
prospects of such entity as a whole (or, if used with respect thereto, of such
group of entities taken as a whole) or (ii) the ability of such entity (or
group) to consummate the transactions contemplated by this Agreement;
(f) "affiliate" or "Affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person; including, without
limitation, any partnership or joint venture in which the first mentioned person
(either alone, or through or together with any other subsidiary) has, directly
or indirectly, an interest of 5% or more;
(g) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or
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(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(h) "business day" means any day other than a Saturday or Sunday or any
day on which banks in the State of Delaware are required or authorized to be
closed;
(i) "control" including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise; and
(j) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
11.3. Amendment. This Agreement may be amended by the parties hereto by action
taken by or on behalf of their Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
11.4. Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of any other party hereto, (b) waive any
inaccuracies in the representations and warranties of any other party hereto
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of any other party hereto
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
11.5. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.6. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
11.7. Entire Agreement, No Third Party Beneficiaries. This Agreement (including
the documents and instruments referred to herein, including the Non-Disclosure
Agreement) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both
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written and oral, among the parties, or any of them, with respect to the subject
matter hereof, and (b) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
11.8. Assignment. This Agreement shall not be assigned by operation of law or
otherwise.
11.9. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude any other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
11.10. Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
11.11. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware, without regard to
the conflict of law provisions thereof. Each of the parties hereto agrees that
any action or proceeding brought to enforce the rights or obligations of any
party hereto under this Agreement will be commenced and maintained in any court
of competent jurisdiction located in the State of Delaware. Each of the parties
hereto further agrees that process may be served upon it by certified mail,
return receipt requested, addressed as more generally provided in Section 11.1
hereof, and consents to the exercise of jurisdiction of a court of the State of
Delaware over it and its properties with respect to any action, suit or
proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby or the enforcement of any rights under this
Agreement.
11.12. Counterparts. This Agreement may be executed in two or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent and the Company have caused this Agreement
to be executed under seal as of the date first written above by their respective
officers thereunto duly authorized.
THE BISYS GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman and CEO
BOSTON INSTITUTIONAL GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman of the Board and President
STOCKHOLDERS
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Schedule A - Funds Distributor, Inc.
Revenue
Dec-00
Annex A - Letter of Transmittal
Annex B - Accredited Investor Certificate
Annex C - Form of Employment Agreement
Annex D - Form of Non-Competition Agreement
Annex E - Registration Rights Agreement
Annex F - Ropes & ▇▇▇▇ Opinion
Annex G - Access, Non-Solicitation and Non-Competition Agreement
Annex H - Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP Opinion
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