EXHIBIT 99.1
===============================================================================
AGREEMENT AND
PLAN OF MERGERS,
MEMBER INTEREST PURCHASE
AND REORGANIZATION
OF
▇▇▇▇▇▇▇ & COMPANY LLC
===============================================================================
Dated as of August 29, 2001
TABLE OF CONTENTS
Page
ARTICLE I THE ▇▇▇▇▇▇▇ MERGER........................................2
1.1. The ▇▇▇▇▇▇▇ Merger..........................................2
1.2. ▇▇▇▇▇▇▇ Effective Time......................................3
1.3. Effects of the ▇▇▇▇▇▇▇ Merger...............................3
1.4. Effects on ▇▇▇▇▇▇▇'▇ Capital Stock..........................3
ARTICLE II THE MTI MERGER............................................4
2.1. The MTI Merger..............................................4
2.2. MTI Effective Time..........................................4
2.3. Effects of the MTI Merger...................................4
2.4. Effects on MTI's Capital Stock..............................4
ARTICLE III THE ▇▇▇▇▇▇▇▇ MERGER.......................................5
3.1. The ▇▇▇▇▇▇▇▇ Merger.........................................5
3.2. ▇▇▇▇▇▇▇▇ Effective Time.....................................5
3.3. Effects of the ▇▇▇▇▇▇▇▇ Merger..............................5
3.4. Effects on ▇▇▇▇▇▇▇▇'▇ Capital Stock.........................5
ARTICLE IV THE RINTELS MERGER........................................6
4.1. The Rintels Merger..........................................6
4.2. Rintels Effective Time......................................6
4.3. Effects of the Rintels Merger...............................6
4.4. Effects on Rintels' Capital Stock...........................6
ARTICLE V THE KLOBUCHAR MERGER......................................7
5.1. The Klobuchar Merger........................................7
5.2. Klobuchar Effective Time....................................7
5.3. Effects of the Klobuchar Merger.............................8
5.4. Effects on Klobuchar's Capital Stock........................8
ARTICLE VI THE ▇▇▇▇▇▇ MERGER.........................................9
6.1. The ▇▇▇▇▇▇ Merger...........................................9
6.2. ▇▇▇▇▇▇ Effective Time.......................................9
6.3. Effects of the ▇▇▇▇▇▇ Merger................................9
6.4. Effects on ▇▇▇▇▇▇'▇ Capital Stock...........................9
ARTICLE VII THE BJC MERGER...........................................10
7.1. The BJC Merger.............................................10
-i-
TABLE OF CONTENTS
(continued)
Page
7.2. BJC Effective Time.........................................10
7.3. Effects of the BJC Merger..................................10
7.4. Effects on BJC's Capital Stock.............................10
ARTICLE VIII THE MASC MERGER..........................................11
8.1. The MASC Merger............................................11
8.2. MASC Effective Time........................................11
8.3. Effects of the MASC Merger.................................11
8.4. Effects on MASC's Capital Stock............................11
ARTICLE IX THE ▇▇▇▇▇▇ MERGER........................................12
9.1. The ▇▇▇▇▇▇ Merger..........................................12
9.2. ▇▇▇▇▇▇ Effective Time......................................12
9.3. Effects of the ▇▇▇▇▇▇ Merger...............................13
9.4. Effects on Claude's Capital Stock..........................13
ARTICLE X THE ▇▇▇▇▇ INTEREST PURCHASE..............................14
10.1. Purchase and Sale..........................................14
10.2. Purchase Price.............................................14
10.3. Closing Deliveries by ▇▇▇▇▇................................14
ARTICLE XI GENERAL PROVISIONS APPLICABLE TO THE MERGERS AND
THE ▇▇▇▇▇ INTEREST PURCHASE..............................14
11.1. Adjustments to Exchange Ratios.............................14
11.2. Fractional Shares..........................................14
11.3. Articles of Incorporation, By-Laws and Officers and
Directors of the Surviving Corporations....................15
11.4. Further Assurances.........................................15
11.5. Surrender of Certificates..................................15
11.6. Escrow.....................................................16
11.7. No Further Ownership Rights in Target Company
Capital Stock..............................................17
11.8. Lost, Stolen or Destroyed Certificates.....................17
11.9. Withholding Rights.........................................18
11.10. Taking of Necessary Action; Further Action.................18
11.11. Closing....................................................18
11.12. Effect on Operating Agreement..............................18
11.13. Cash Payments..............................................18
-ii-
TABLE OF CONTENTS
(continued)
Page
ARTICLE XII REPRESENTATIONS AND WARRANTIES of THE TARGET
SHAREHOLDERS WITH RESPECT TO THE TARGET COMPANIES........19
12.1. Several Representations of the Target Shareholders.........19
12.2. Organization, Standing and Power; Subsidiaries;
Ownership of Company Member Interests......................21
12.3. Capital Structure..........................................22
12.4. Authority; No Conflicts....................................22
12.5. Target Company Financial Statements........................23
12.6. Absence of Certain Changes.................................23
12.7. Absence of Undisclosed Liabilities.........................24
12.8. Litigation.................................................24
12.9. Restrictions on Business Activities........................24
12.10. Compliance With Laws and Orders............................24
12.11. Properties.................................................25
12.12. Intellectual Property......................................25
12.13. Taxes......................................................27
12.14. Employee Benefit Plans.....................................28
12.15. Employee Matters...........................................31
12.16. Interested Party Transactions..............................32
12.17. Insurance..................................................32
12.18. Regulatory Matters.........................................32
12.19. Target Company Material Contracts..........................33
12.20. State Takeover Statutes....................................35
12.21. Bank Accounts, Letters of Credit and Powers of Attorney....35
12.22. Brokers' and Finders' Fees.................................35
12.23. Books and Records..........................................35
12.24. Representations Complete...................................35
ARTICLE XIIA REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇..................37
12A.1. Organization, Standing and Power...........................37
12A.2. Title to ▇▇▇▇▇ Member Interests............................37
12A.3. Authority; No Conflicts....................................37
12A.4. Investment Representations.................................37
12A.5. Government Consents........................................37
-iii-
TABLE OF CONTENTS
(continued)
Page
12A.6. Investment Purpose.........................................38
12A.7. Accredited Investor........................................38
ARTICLE XIII REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS
WITH RESPECT TO THE COMPANY..............................39
13.1. Organization, Standing and Power; Subsidiaries.............39
13.2. Capital Structure..........................................39
13.3. Authority; No Conflicts....................................40
13.4. Financial Statements.......................................41
13.5. Absence of Certain Changes.................................41
13.6. Absence of Undisclosed Liabilities.........................42
13.7. Litigation.................................................42
13.8. Restrictions on Business Activities........................42
13.9. Compliance With Laws and Orders............................42
13.10. Properties.................................................43
13.11. Company Intellectual Property..............................44
13.12. Taxes......................................................45
13.13. Employee Benefit Plans.....................................47
13.14. Employee Matters...........................................49
13.15. Interested Party Transactions..............................50
13.16. Insurance..................................................50
13.17. Regulatory Matters.........................................51
13.18. Company Material Contracts.................................51
13.19. Assets.....................................................53
13.20. Investment Securities......................................53
13.21. Derivative Instruments.....................................54
13.22. State Takeover Statutes....................................54
13.23. Bank Accounts, Letters of Credit and Powers of Attorney....54
13.24. Brokers' and Finders' Fees.................................54
13.25. Books and Records..........................................54
13.26. Representations Complete...................................54
ARTICLE XIV REPRESENTATIONS AND WARRANTIES OF PARENT.................55
14.1. Organization, Standing and Power...........................55
14.2. Capital Structure..........................................55
-iv-
TABLE OF CONTENTS
(continued)
Page
14.3. Authority; No Conflicts....................................56
14.4. SEC Documents; Financial Statements........................56
14.5. Litigation.................................................57
14.6. Broker's and Finders' Fees.................................57
14.7. Operations of the Merger Subs..............................57
14.8. Form S-3 Eligibility.......................................57
14.9. Disclosure.................................................57
ARTICLE XV Covenants and Additional Agreements......................58
15.1. Conduct of Business of the Target Companies................58
15.2. Conduct of Business of the Company.........................58
15.3. Conduct of Parent..........................................61
15.4. No Solicitations...........................................61
15.5. Access to Information; Confidentiality.....................62
15.6. Regulatory and Other Approvals.............................62
15.7. Notice and Cure............................................63
15.8. Fulfillment of Conditions..................................63
15.9. Existing Shareholders' Agreements..........................64
15.10. Updating of Disclosure Schedules...........................64
15.11. Voting.....................................................64
ARTICLE XVI ADDITIONAL AGREEMENTS....................................64
16.1. Registration Requirements..................................64
16.2. Blue Sky Filings...........................................67
16.3. Affiliate Agreements.......................................67
16.4. Capital Requirements.......................................67
16.5. Resale of Shares of Parent Common Stock....................67
16.6. Parent Right of First Refusal..............................68
16.7. Parent Approval of Sales...................................68
ARTICLE XVII EMPLOYMENT MATTERS.......................................69
17.1. Employees; Employee Benefit Matters........................69
ARTICLE XVIII TAX MATTERS..............................................70
18.1. Pre-Closing Tax Covenants..................................70
18.2. Post-Closing Tax Covenants and Indemnity...................71
-v-
TABLE OF CONTENTS
(continued)
Page
ARTICLE XIX CONDITIONS TO CLOSING....................................75
19.1. Conditions to the Obligations of Parent and
the Merger Subs............................................75
19.2. Conditions to the Obligations of the Company and ▇▇▇▇▇.....78
ARTICLE XX SURVIVAL; INDEMNIFICATION................................79
20.1. Survival...................................................79
20.2. Indemnification............................................80
20.3. Limitation of Liability; Disposition of Escrow Fund........81
20.4. Notice of Claims...........................................81
20.5. Defense of Third Party Claims..............................82
20.6. Payment; Set-Off...........................................82
20.7. Exclusive Remedy...........................................82
ARTICLE XXI TERMINATION; EFFECT OF TERMINATION.......................83
21.1. Termination................................................83
21.2. Effect of Termination......................................84
ARTICLE XXII FEES AND EXPENSES........................................84
22.1. Payment of Expenses........................................84
22.2. Target Shareholders........................................84
ARTICLE XXIII DEFINITIONS..............................................84
23.1. Definitions................................................84
23.2. Table of Definitions.......................................88
ARTICLE XXIV MISCELLANEOUS............................................92
24.1. Press Releases.............................................92
24.2. Integration................................................93
24.3. Assignment and Binding Effect..............................93
24.4. Waiver.....................................................93
24.5. Notices....................................................93
24.6. Amendment..................................................94
24.7. Governing Law..............................................94
24.8. Third Party Beneficiaries..................................94
24.9. Performance................................................94
24.10. Severability...............................................94
24.11. Extensions.................................................95
-vi-
TABLE OF CONTENTS
(continued)
Page
24.12. Section Headings; Interpretation...........................95
24.13. Exhibits; Disclosure Schedule..............................95
24.14. Post-Signing Losses Disputes...............................95
24.14. Post-Signing Losses Disputes...............................95
24.15. Counterparts...............................................95
-vii-
EXHIBITS
Exhibit A -- Forms of Management Continuity and Stockholder Agreements
1. Form of Management Continuity and Stockholder Agreement
for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
3. Form of Management Continuity and Stockholder Agreement
for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
3. Form of Management Continuity and Stockholder Agreement
for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
4. Form of Management Continuity and Stockholder Agreement
for ▇▇▇ ▇. ▇▇▇▇▇▇▇
5. Form of Management Continuity and Stockholder Agreement
for ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
6. Form of Management Continuity and Stockholder Agreement
for ▇▇▇▇▇ ▇. ▇▇▇▇▇
7. Form of Management Continuity and Stockholder Agreement
for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit B -- Directors and Officers of each Surviving Corporation as of the
Effective Time
Exhibit C -- Parent Trading Policies
Exhibit D -- Form of Company Affiliate Agreement
Exhibit E -- Form of Section 19.1(a) Certificate
Exhibit F -- Target Shareholder and ▇▇▇▇▇ Counsel and Form of Opinion
Exhibit G -- Form of Opinion of ▇▇▇▇▇ & Lardner
Exhibit H -- List of Individual Resignations
Exhibit I -- List of Trustee Resignations
Exhibit J -- Form of Orderly Distribution and Lock-Up Agreement
Exhibit K -- Form of Opinion of Parent Counsel
Exhibit L -- Form of Escrow Agreement
SCHEDULES
Schedule 1 -- Target Shareholders
Schedule 2 -- Target Company and Company Affiliates
Schedule 15.2(b)(ii) -- Permitted Distributions
Schedule 16.4 -- Treatment of Capital Requirement Reserve
Schedule 19.1(d) -- Identified Third Party Consents
Schedule 20.2(a) -- Existing Claims/Litigation
Schedule 20.2(b) -- Pre-Execution Reorganization Transactions
AGREEMENT AND PLAN OF MERGERS, MEMBER INTEREST
PURCHASE AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGERS, MEMBER INTEREST PURCHASE AND
REORGANIZATION (this "Agreement"), dated as of August 29, 2001, is being
entered into by and among E*TRADE Group, Inc., a Delaware corporation
("Parent"), Longcount Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Longcount Merger Sub"), MTI Acquisition
Corp., an Illinois corporation and a wholly-owned subsidiary of Parent ("MTI
Merger Sub"), ▇▇▇▇▇▇▇▇ Acquisition Corp., an Illinois corporation and a
wholly-owned subsidiary of Parent ("▇▇▇▇▇▇▇▇ Merger Sub"), ▇▇▇▇ ▇▇▇▇▇▇▇
Acquisition Corp., an Illinois corporation and a wholly-owned subsidiary of
Parent ("Rintels Merger Sub"), Klobuchar Acquisition Corp., an Illinois
corporation and a wholly-owned subsidiary of Parent ("Klobuchar Merger Sub"),
▇▇▇▇▇▇ Acquisition Corp., an Illinois corporation and a wholly-owned subsidiary
of Parent ("▇▇▇▇▇▇ Merger Sub"), ▇▇▇▇▇ Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("▇▇▇▇▇ Acquisition"), BJC
Acquisition Corp., an Illinois corporation and a wholly-owned subsidiary of
Parent ("BJC Merger Sub"), MASC Acquisition Corp., an Illinois corporation and
a wholly-owned subsidiary of Parent ("MASC Merger Sub"), ▇▇▇▇▇▇ Acquisition
Corp., an Illinois corporation and a wholly-owned subsidiary of Parent ("▇▇▇▇▇▇
Merger Sub" and, together with Longcount Merger Sub, MTI Merger Sub, ▇▇▇▇▇▇▇▇
Merger Sub, Rintels Merger Sub, Klobuchar Merger Sub, ▇▇▇▇▇▇ Merger Sub, BJC
Merger Sub and MASC Merger Sub, the "Merger Subs"), ▇▇▇▇▇▇▇ & Company LLC, an
Illinois limited liability company (the "Company"), ▇▇▇▇▇▇▇ & Company, a
Delaware corporation ("▇▇▇▇▇▇▇"), Market Traders, Inc., an Illinois corporation
("MTI"), ▇▇▇▇▇▇▇▇ Investments Inc., an Illinois corporation ("▇▇▇▇▇▇▇▇"), ▇▇▇▇
▇. Inc., an Illinois corporation ("Rintels"), Klobuchar, Inc., an Illinois
corporation ("Klobuchar"), ▇▇▇▇▇▇, Inc., an Illinois corporation ("▇▇▇▇▇▇"),
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C., a Delaware limited liability company
("▇▇▇▇▇"), BJC Investments Inc., an Illinois corporation ("BJC"), MASC, Inc.,
an Illinois corporation ("MASC"), ▇▇▇▇▇▇ Inc., an Illinois corporation
("▇▇▇▇▇▇" and, together with ▇▇▇▇▇▇▇, MTI, Chestler, Rintels, Klobuchar,
Pelech, BJC and MASC, the "Target Companies") and all of the shareholders of
the Target Companies set forth on Schedule 1 and the signature pages to this
Agreement (the "Target Shareholders"). Capitalized terms used in this Agreement
and not otherwise defined have the meanings ascribed to them in Section 23.1
hereof.
RECITALS
A. The Company is a registered broker-dealer in the business of providing
securities brokerage and trading services and effecting transactions in
securities and financial products on U.S. stock exchanges and markets,
including on The Chicago Stock Exchange, Incorporated (the "CHX").
B. On the date hereof and at the Effective Time, the Target Companies and
▇▇▇▇▇ own and will own, respectively, beneficially and of record 100% of the
issued and outstanding member interests of the Company.
C. As a result of the member interest purchase from ▇▇▇▇▇ and the various
mergers and reorganization transactions contemplated by this Agreement,
pursuant to the terms and on the conditions contained in this Agreement, all of
the member interests of the Company owned by ▇▇▇▇▇ will be purchased by ▇▇▇▇▇
Acquisition and each Merger Sub will be merged with and into the Target Company
specified in this Agreement, resulting in Parent acquiring ▇▇▇▇▇'▇ member
interests in the Company and 100% of the issued and outstanding shares of
capital stock of each Target Company thereby indirectly acquiring 100% of the
issued and outstanding member interests of the Company.
D. The respective Boards of Directors, Boards of Managers and/or other
comparable governing bodies, as the case may be, of each of Parent, the Merger
Subs, ▇▇▇▇▇ Acquisition, the
Company, the Target Companies and ▇▇▇▇▇ have determined that the acquisition of
the Company by Parent through the acquisition of ▇▇▇▇▇'▇ member interests in
the Company (the "▇▇▇▇▇ Interest Purchase") and the mergers of the Merger Subs
with and into the Target Company specified in this Agreement (hereinafter
referred to as the "Mergers") in accordance with the laws of the State of
Illinois, and, with respect to the ▇▇▇▇▇ Interest Purchase and the ▇▇▇▇▇▇▇
Merger (as defined in Section 1.1), the State of Delaware, and subject to the
terms and conditions of this Agreement, is advisable and in the best interests
of Parent, each Merger Sub, ▇▇▇▇▇ Acquisition, the Company, each Target Company
and ▇▇▇▇▇, as the case may be, and their respective shareholders, members
and/or owners, as the case may be, and have, where appropriate or required,
approved this Agreement, the Mergers and/or the ▇▇▇▇▇ Interest Purchase.
E. Pursuant to the Mergers, among other things, the outstanding shares of
capital stock and/or member interests or other equity securities of each of the
Target Companies, as the case may be, shall be converted into the right to
receive the consideration specified in this Agreement.
F. Pursuant to the ▇▇▇▇▇ Interest Purchase, among other things, ▇▇▇▇▇
Acquisition shall purchase all of ▇▇▇▇▇'▇ member interests in the Company for
the consideration specified in this Agreement.
G. The parties intend that for U.S. federal income tax purposes each of
the Mergers will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Code and the ▇▇▇▇▇ Interest Purchase will be treated as a
taxable purchase by Parent of ▇▇▇▇▇'▇ member interest in the Company.
H. Certain officers and employees of the Company have executed and
delivered to Parent, Management Continuity and Stockholder Agreements
(collectively, the "Management Continuity Agreements") substantially in the
forms attached hereto as Exhibit A, that by their terms will take effect as of
the Effective Time and supersede any and all prior agreements between such
individual and the Company relating to the employment (or termination of
employment) of such individual, which prior agreements shall have no further
force or effect.
I. Parent, each Merger Sub, ▇▇▇▇▇ Acquisition, the Company, each Target
Company, ▇▇▇▇▇ and the Target Shareholders, desire to make certain
representations and warranties, covenants and agreements in connection with the
Mergers and the ▇▇▇▇▇ Interest Purchase and also to set forth the terms and
conditions of the Mergers, the ▇▇▇▇▇ Interest Purchase and the reorganization
of the Company, all as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally bound do hereby
agree as follows:
ARTICLE I
THE ▇▇▇▇▇▇▇ MERGER
1.1. The ▇▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇▇ Effective Time (as defined in
Section 1.2), upon the terms and subject to the conditions of this Agreement,
Longcount Merger Sub shall be merged with and into ▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇
Merger") in accordance with the provisions of the Delaware General Corporation
Law (the "DGCL"). ▇▇▇▇▇▇▇ shall be the surviving corporation in the ▇▇▇▇▇▇▇
Merger ("▇▇▇▇▇▇▇ Surviving Corporation"). As a result of the ▇▇▇▇▇▇▇ Merger,
all of the respective outstanding shares of capital stock of ▇▇▇▇▇▇▇ and
Longcount Merger Sub shall be converted or cancelled in the manner provided in
Section 1.4.
2
1.2. ▇▇▇▇▇▇▇ Effective Time. At the Closing (as defined in Section
11.11), a certificate of merger (the "▇▇▇▇▇▇▇ Certificate of Merger") shall be
duly prepared and executed by ▇▇▇▇▇▇▇ Surviving Corporation and thereafter
delivered to the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") for filing, as provided in Section 251 of the DGCL, on, or
as soon as practicable after, the Closing Date (as defined in Section 11.11).
The ▇▇▇▇▇▇▇ Merger shall become effective at the time (but not prior to the
Closing Date) of the filing of the ▇▇▇▇▇▇▇ Certificate of Merger with the
Delaware Secretary of State, or at such later time as may be agreed by Parent
and ▇▇▇▇▇▇▇ and stated in the ▇▇▇▇▇▇▇ Certificate of Merger (the date and time
of such filing (or stated later time, if any) being referred to herein as the
"▇▇▇▇▇▇▇ Effective Time").
1.3. Effects of the ▇▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇▇ Effective Time,
the effects of the ▇▇▇▇▇▇▇ Merger shall be as provided in the applicable
provisions of the DGCL.
1.4. Effects on ▇▇▇▇▇▇▇'▇ Capital Stock. At the ▇▇▇▇▇▇▇ Effective
Time, by virtue of the ▇▇▇▇▇▇▇ Merger and without any action on the part of
Parent, Longcount Merger Sub, ▇▇▇▇▇▇▇ or the holders of any of the following
securities:
(a) Capital Stock of Longcount Merger Sub. Each issued and
outstanding share of the common stock, par value $1.00 per share, of Longcount
Merger Sub ("Longcount Merger Sub Common Stock") shall be converted into and
become one fully paid and nonassessable share of common stock, par value $1.00
per share, of ▇▇▇▇▇▇▇ Surviving Corporation ("▇▇▇▇▇▇▇ Surviving Corporation
Common Stock"). Each certificate representing outstanding shares of Longcount
Merger Sub Common Stock shall at the ▇▇▇▇▇▇▇ Effective Time represent an equal
number of shares of ▇▇▇▇▇▇▇ Surviving Corporation Common Stock and ▇▇▇▇▇▇▇
Surviving Corporation shall become a wholly-owned subsidiary of Parent. Each
stock certificate representing shares of Longcount Merger Sub Common Stock
shall continue to evidence ownership of such shares of ▇▇▇▇▇▇▇ Surviving
Corporation Common Stock without any further action on the part of any party
hereto.
(b) Cancellation of Treasury Stock and ▇▇▇▇▇▇▇ Capital Stock Owned by
Parent and Longcount Merger Sub. All shares of ▇▇▇▇▇▇▇ Capital Stock that are
owned by ▇▇▇▇▇▇▇ as treasury stock and any shares of ▇▇▇▇▇▇▇ Capital Stock
owned by Parent or Longcount Merger Sub automatically shall be cancelled and
retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion of ▇▇▇▇▇▇▇ Capital Stock. Each issued and outstanding
share of ▇▇▇▇▇▇▇ Capital Stock (other than shares to be cancelled in accordance
with Section 1.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of ▇▇▇▇▇▇▇ Capital
Stock in the manner provided in Section 11.5 (i) an amount in cash equal to
Nine Million Four Hundred Twelve Thousand Four Hundred Dollars ($9,412,400)
divided by the total number of shares of ▇▇▇▇▇▇▇ Capital Stock then outstanding
and (ii) subject to the provisions of Section 11.6, a number of shares of
common stock, par value $0.01 per share of Parent (the "Parent Common Stock")
(or, in the case of a lost, stolen or destroyed certificate, upon delivery of
an affidavit and, if required, bond, in the manner provided in Section 11.8),
equal to the ▇▇▇▇▇▇▇ Exchange Ratio. For purposes of this Agreement, the term
"▇▇▇▇▇▇▇ Exchange Ratio" means, subject to adjustment in accordance with
Section 11.1, the ratio that results from dividing (x) Seventy-Two Million Two
Hundred Forty Thousand One Hundred Seventy Dollars ($72,240,170) by (y) the
product of (1) the Average Pre-Closing Price of Parent Common Stock and (2) the
total number of shares of ▇▇▇▇▇▇▇ Capital Stock outstanding.
All such shares of ▇▇▇▇▇▇▇ Capital Stock shall no longer be outstanding and
shall be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of ▇▇▇▇▇▇▇ Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive
3
the ▇▇▇▇▇▇▇ Exchange Ratio per share of ▇▇▇▇▇▇▇ Capital Stock, upon the
surrender of such certificate in accordance with Section 11.5, without
interest.
ARTICLE II
THE MTI MERGER
2.1. The MTI Merger. At the MTI Effective Time (as defined in Section
2.2), upon the terms and subject to the conditions of this Agreement, MTI
Merger Sub shall be merged with and into MTI ("MTI Merger") in accordance with
the provisions of the Illinois Business Corporation Act (the "IBCA"). MTI shall
be the surviving corporation in the MTI Merger ("MTI Surviving Corporation").
As a result of the MTI Merger, all of the respective outstanding shares of
capital stock of MTI and MTI Merger Sub shall be converted or cancelled in the
manner provided in Section 2.4.
2.2. MTI Effective Time. At the Closing, articles of merger (the "MTI
Articles of Merger") shall be duly prepared and executed by MTI Surviving
Corporation and thereafter delivered to the Secretary of State of the State of
Illinois (the "Secretary of State") for filing, as provided in Section 11.25 of
the IBCA, on, or as soon as practicable after, the Closing Date. The MTI Merger
shall become effective at the time (but not prior to the Closing Date) of the
filing of the MTI Articles of Merger with the Secretary of State, or at such
later time as may be agreed by Parent and MTI and stated in the MTI Articles of
Merger (the date and time of such filing (or stated later time, if any) being
referred to herein as the "MTI Effective Time").
2.3. Effects of the MTI Merger. At the MTI Effective Time, the
effects of the MTI Merger shall be as provided in the applicable provisions of
the IBCA.
2.4. Effects on MTI's Capital Stock. At the MTI Effective Time, by
virtue of the MTI Merger and without any action on the part of Parent, MTI
Merger Sub, MTI or the holders of any of the following securities:
(a) Capital Stock of MTI Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of MTI Merger Sub ("MTI
Merger Sub Common Stock") shall be converted into and become one fully paid and
nonassessable share of common stock, no par value per share, of MTI Surviving
Corporation ("MTI Surviving Corporation Common Stock"). Each certificate
representing outstanding shares of MTI Merger Sub Common Stock shall at the MTI
Effective Time represent an equal number of shares of MTI Surviving Corporation
Common Stock and MTI Surviving Corporation shall become a wholly-owned
subsidiary of Parent. Each stock certificate representing shares of MTI Merger
Sub Common Stock shall continue to evidence ownership of such shares of MTI
Surviving Corporation Common Stock without any further action on the part of
any party hereto.
(b) Cancellation of Treasury Stock and MTI Capital Stock Owned by
Parent and MTI Merger Sub. All shares of MTI Capital Stock that are owned by
MTI as treasury stock and any shares of MTI Capital Stock owned by Parent or
MTI Merger Sub automatically shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Conversion of MTI Capital Stock. Each issued and outstanding
share of MTI Capital Stock (other than shares to be cancelled in accordance
with Section 2.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of MTI Capital Stock
in the manner provided in Section 11.5 (i) an amount in cash equal to Four
Million Thirty Four Thousand Dollars ($4,034,000) divided by the total number
of shares of MTI Capital Stock then outstanding and (ii) subject to the
provisions of Section 11.6, a number of shares of Parent Common
4
Stock (or, in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit and, if required, bond, in the manner provided in
Section 11.8), equal to the MTI Exchange Ratio. For purposes of this Agreement,
the term "MTI Exchange Ratio" means, subject to adjustment in accordance with
Section 11.1, the ratio that results from dividing (x) Thirty Million Nine
Hundred Sixty Thousand Nine Hundred Fifty Dollars ($30,960,950) by (y) the
product of (1) the Average Pre-Closing Price of Parent Common Stock and (2) the
total number of shares of MTI Capital Stock outstanding.
All such shares of MTI Capital Stock shall no longer be outstanding and shall
be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of MTI Capital Stock shall
cease to have any rights with respect thereto, except the right to receive the
MTI Exchange Ratio per share of MTI Capital Stock, upon the surrender of such
certificate in accordance with Section 11.5, without interest.
ARTICLE III
THE ▇▇▇▇▇▇▇▇ MERGER
3.1. The ▇▇▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇▇▇ Effective Time (as defined
in Section 3.2), upon the terms and subject to the conditions of this
Agreement, ▇▇▇▇▇▇▇▇ Merger Sub shall be merged with and into ▇▇▇▇▇▇▇▇ (the
"▇▇▇▇▇▇▇▇ Merger") in accordance with the provisions of the IBCA. ▇▇▇▇▇▇▇▇
shall be the surviving corporation in the ▇▇▇▇▇▇▇▇ Merger ("▇▇▇▇▇▇▇▇ Surviving
Corporation"). As a result of the ▇▇▇▇▇▇▇▇ Merger, all of the respective
outstanding shares of capital stock of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Merger Sub shall
be converted or cancelled in the manner provided in Section 3.4.
3.2. ▇▇▇▇▇▇▇▇ Effective Time. At the Closing, articles of merger (the
"▇▇▇▇▇▇▇▇ Articles of Merger") shall be duly prepared and executed by ▇▇▇▇▇▇▇▇
Surviving Corporation and thereafter delivered to the Secretary of State for
filing, as provided in Section 11.25 of the IBCA, on, or as soon as practicable
after, the Closing Date. The ▇▇▇▇▇▇▇▇ Merger shall become effective at the time
(but not prior to the Closing Date) of the filing of the ▇▇▇▇▇▇▇▇ Articles of
Merger with the Secretary of State, or at such later time as may be agreed by
Parent and ▇▇▇▇▇▇▇▇ and stated in the ▇▇▇▇▇▇▇▇ Articles of Merger (the date and
time of such filing (or stated later time, if any) being referred to herein as
the "▇▇▇▇▇▇▇▇ Effective Time").
3.3. Effects of the ▇▇▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇▇▇ Effective Time,
the effects of the ▇▇▇▇▇▇▇▇ Merger shall be as provided in the applicable
provisions of the IBCA.
3.4. Effects on ▇▇▇▇▇▇▇▇'▇ Capital Stock. At the ▇▇▇▇▇▇▇▇ Effective
Time, by virtue of the ▇▇▇▇▇▇▇▇ Merger and without any action on the part of
Parent, ▇▇▇▇▇▇▇▇ Merger Sub, ▇▇▇▇▇▇▇▇ or the holders of any of the following
securities:
(a) Capital Stock of ▇▇▇▇▇▇▇▇ Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of ▇▇▇▇▇▇▇▇ Merger Sub
("▇▇▇▇▇▇▇▇ Merger Sub Common Stock") shall be converted into and become one
fully paid and nonassessable share of common stock, no par value per share, of
▇▇▇▇▇▇▇▇ Surviving Corporation ("▇▇▇▇▇▇▇▇ Surviving Corporation Common Stock").
Each certificate representing outstanding shares of ▇▇▇▇▇▇▇▇ Merger Sub Common
Stock shall at the ▇▇▇▇▇▇▇▇ Effective Time represent an equal number of shares
of ▇▇▇▇▇▇▇▇ Surviving Corporation Common Stock and ▇▇▇▇▇▇▇▇ Surviving
Corporation shall become a wholly-owned subsidiary of Parent. Each stock
certificate representing shares of ▇▇▇▇▇▇▇▇ Merger Sub Common Stock shall
continue to evidence ownership of such shares of ▇▇▇▇▇▇▇▇ Surviving Corporation
Common Stock without any further action on the part of any party hereto.
5
(b) Cancellation of Treasury Stock and ▇▇▇▇▇▇▇▇ Capital Stock Owned
by Parent and ▇▇▇▇▇▇▇▇ Merger Sub. All shares of ▇▇▇▇▇▇▇▇ Capital Stock that
are owned by ▇▇▇▇▇▇▇▇ as treasury stock and any shares of ▇▇▇▇▇▇▇▇ Capital
Stock owned by Parent or ▇▇▇▇▇▇▇▇ Merger Sub automatically shall be cancelled
and retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion of ▇▇▇▇▇▇▇▇ Capital Stock. Each issued and outstanding
share of ▇▇▇▇▇▇▇▇ Capital Stock (other than shares to be cancelled in
accordance with Section 3.4(b)) will be converted automatically into the right
to receive, upon surrender of the certificate representing such share of
▇▇▇▇▇▇▇▇ Capital Stock in the manner provided in Section 11.5 (i) an amount in
cash equal to One Million seven Hundred Thousand Dollars ($1,700,000) divided
by the total number of shares of ▇▇▇▇▇▇▇▇ Capital Stock then outstanding and
(ii) subject to the provisions of Section 11.6, a number of shares of Parent
Common Stock (or, in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit and, if required, bond, in the manner provided in
Section 11.8), equal to the ▇▇▇▇▇▇▇▇ Exchange Ratio. For purposes of this
Agreement, the term "▇▇▇▇▇▇▇▇ Exchange Ratio" means, subject to adjustment in
accordance with Section 11.1, the ratio that results from dividing (x) Thirteen
Million Forty Seven Thousand Five Hundred Dollars ($13,047,500) by (y) the
product of (1) the Average Pre-Closing Price of Parent Common Stock and (2) the
total number of shares of ▇▇▇▇▇▇▇▇ Capital Stock outstanding.
All such shares of ▇▇▇▇▇▇▇▇ Capital Stock shall no longer be outstanding and
shall be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of ▇▇▇▇▇▇▇▇ Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive the ▇▇▇▇▇▇▇▇ Exchange Ratio per share of ▇▇▇▇▇▇▇▇ Capital Stock, upon
the surrender of such certificate in accordance with Section 11.5, without
interest.
ARTICLE IV
THE RINTELS MERGER
4.1. The Rintels Merger. At the Rintels Effective Time (as defined in
Section 4.2), upon the terms and subject to the conditions of this Agreement,
Rintels Merger Sub shall be merged with and into Rintels (the "Rintels Merger")
in accordance with the provisions of the IBCA. Rintels shall be the surviving
corporation in the Rintels Merger ("Rintels Surviving Corporation"). As a
result of the Rintels Merger, all of the respective outstanding shares of
capital stock of Rintels and Rintels Merger Sub shall be converted or cancelled
in the manner provided in Section 4.4.
4.2. Rintels Effective Time. At the Closing, articles of merger (the
"Rintels Articles of Merger") shall be duly prepared and executed by Rintels
Surviving Corporation and thereafter delivered to the Secretary of State for
filing, as provided in Section 11.25 of the IBCA, on, or as soon as practicable
after, the Closing Date. The Rintels Merger shall become effective at the time
(but not prior to the Closing Date) of the filing of the Rintels Articles of
Merger with the Secretary of State, or at such later time as may be agreed by
Parent and Rintels and stated in the Rintels Articles of Merger (the date and
time of such filing (or stated later time, if any) being referred to herein as
the "Rintels Effective Time").
4.3. Effects of the Rintels Merger. At the Rintels Effective Time,
the effects of the Rintels Merger shall be as provided in the applicable
provisions of the IBCA.
4.4. Effects on Rintels' Capital Stock. At the Rintels Effective
Time, by virtue of the Rintels Merger and without any action on the part of
Parent, Rintels Merger Sub, Rintels or the holders of any of the following
securities:
6
(a) Capital Stock of Rintels Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of Rintels Merger Sub
("Rintels Merger Sub Common Stock") shall be converted into and become one
fully paid and nonassessable share of common stock, no par value per share, of
Rintels Surviving Corporation ("Rintels Surviving Corporation Common Stock").
Each certificate representing outstanding shares of Rintels Merger Sub Common
Stock shall at the Rintels Effective Time represent an equal number of shares
of Rintels Surviving Corporation Common Stock and Rintels Surviving Corporation
shall become a wholly-owned subsidiary of Parent. Each stock certificate
representing shares of Rintels Merger Sub Common Stock shall continue to
evidence ownership of such shares of Rintels Surviving Corporation Common Stock
without any further action on the part of any party hereto.
(b) Cancellation of Treasury Stock and Rintels Capital Stock Owned by
Parent and Rintels Merger Sub. All shares of Rintels Capital Stock that are
owned by Rintels as treasury stock and any shares of Rintels Capital Stock
owned by Parent or Rintels Merger Sub automatically shall be cancelled and
retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Rintels Capital Stock. Each issued and outstanding
share of Rintels Capital Stock (other than shares to be cancelled in accordance
with Section 4.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of Rintels Capital
Stock in the manner provided in Section 11.5 (i) an amount in cash equal to One
Million Nine Hundred Thousand Dollars ($1,900,000) divided by the total number
of shares of Rintels Capital Stock then outstanding and (ii) subject to the
provisions of Section 11.6, a number of shares of Parent Common Stock (or, in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit and, if required, bond, in the manner provided in Section 11.8),
equal to the Rintels Exchange Ratio. For purposes of this Agreement, the term
"Rintels Exchange Ratio" means, subject to adjustment in accordance with
Section 11.1, the ratio that results from dividing (x) Fourteen Million Five
Hundred Eighty-Two Thousand Five Hundred Dollars ($14,582,500) by (y) the
product of (1) the Average Pre-Closing Price of Parent Common Stock and (2) the
total number of shares of Rintels Capital Stock outstanding.
All such shares of Rintels Capital Stock shall no longer be outstanding and
shall be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of Rintels Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive the Rintels Exchange Ratio per share of Rintels Capital Stock, upon the
surrender of such certificate in accordance with Section 11.5, without
interest.
ARTICLE V
THE KLOBUCHAR MERGER
5.1. The Klobuchar Merger. At the Klobuchar Effective Time (as
defined in Section 5.2), upon the terms and subject to the conditions of this
Agreement, Klobuchar Merger Sub shall be merged with and into Klobuchar (the
"Klobuchar Merger") in accordance with the provisions of the IBCA. Klobuchar
shall be the surviving corporation in the Klobuchar Merger ("Klobuchar
Surviving Corporation"). As a result of the Klobuchar Merger, all of the
respective outstanding shares of capital stock of Klobuchar and Klobuchar
Merger Sub shall be converted or cancelled in the manner provided in Section
5.4.
5.2. Klobuchar Effective Time. At the Closing, articles of merger
(the "Klobuchar Articles of Merger") shall be duly prepared and executed by
Klobuchar Surviving Corporation and
7
thereafter delivered to the Secretary of State for filing, as provided in
Section 11.25 of the IBCA, on, or as soon as practicable after, the Closing
Date. The Klobuchar Merger shall become effective at the time (but not prior to
the Closing Date) of the filing of the Klobuchar Articles of Merger with the
Secretary of State, or at such later time as may be agreed by Parent and
Klobuchar and stated in the Klobuchar Articles of Merger (the date and time of
such filing (or stated later time, if any) being referred to herein as the
"Klobuchar Effective Time").
5.3. Effects of the Klobuchar Merger. At the Klobuchar Effective
Time, the effects of the Klobuchar Merger shall be as provided in the
applicable provisions of the IBCA.
5.4. Effects on Klobuchar's Capital Stock. At the Klobuchar Effective
Time, by virtue of the Klobuchar Merger and without any action on the part of
Parent, Klobuchar Merger Sub, Klobuchar or the holders of any of the following
securities:
(a) Capital Stock of Klobuchar Merger Sub. Each issued and
outstanding share of the common stock, no par value per share, of Klobuchar
Merger Sub ("Klobuchar Merger Sub Common Stock") shall be converted into and
become one fully paid and nonassessable share of common stock, no par value per
share, of Klobuchar Surviving Corporation ("Klobuchar Surviving Corporation
Common Stock"). Each certificate representing outstanding shares of Klobuchar
Merger Sub Common Stock shall at the Klobuchar Effective Time represent an
equal number of shares of Klobuchar Surviving Corporation Common Stock and
Klobuchar Surviving Corporation shall become a wholly-owned subsidiary of
Parent. Each stock certificate representing shares of Klobuchar Merger Sub
Common Stock shall continue to evidence ownership of such shares of Klobuchar
Surviving Corporation Common Stock without any further action on the part of
any party hereto.
(b) Cancellation of Treasury Stock and Klobuchar Capital Stock Owned
by Parent and Klobuchar Merger Sub. All shares of Klobuchar Capital Stock that
are owned by Klobuchar as treasury stock and any shares of Klobuchar Capital
Stock owned by Parent or Klobuchar Merger Sub automatically shall be cancelled
and retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Klobuchar Capital Stock. Each issued and
outstanding share of Klobuchar Capital Stock (other than shares to be cancelled
in accordance with Section 5.4(b)) will be converted automatically into the
right to receive, upon surrender of the certificate representing such share of
Klobuchar Capital Stock in the manner provided in Section 11.5 (i) an amount in
cash equal to One Million Five Hundred Seventy Seven Thousand Dollars
($1,577,000) divided by the total number of shares of Klobuchar Capital Stock
then outstanding and (ii) subject to the provisions of Section 11.6, a number
of shares of Parent Common Stock (or, in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit and, if required, bond, in
the manner provided in Section 11.8), equal to the Klobuchar Exchange Ratio.
For purposes of this Agreement, the term "Klobuchar Exchange Ratio" means,
subject to adjustment in accordance with Section 11.1, the ratio that results
from dividing (x) Twelve Million One Hundred Three Thousand Four Hundred
Seventy-Five Dollars ($12,103,475) by (y) the product of (1) the Average
Pre-Closing Price of Parent Common Stock and (2) the total number of shares of
Klobuchar Capital Stock outstanding.
All such shares of Klobuchar Capital Stock shall no longer be outstanding and
shall be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of Klobuchar Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive the Klobuchar Exchange Ratio per share of Klobuchar Capital Stock, upon
the surrender of such certificate in accordance with Section 11.5, without
interest.
8
ARTICLE VI
THE ▇▇▇▇▇▇ MERGER
6.1. The ▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇ Effective Time (as defined in
Section 6.2), upon the terms and subject to the conditions of this Agreement,
▇▇▇▇▇▇ Merger Sub shall be merged with and into ▇▇▇▇▇▇ (the "▇▇▇▇▇▇ Merger") in
accordance with the provisions of the IBCA. ▇▇▇▇▇▇ shall be the surviving
corporation in the ▇▇▇▇▇▇ Merger ("▇▇▇▇▇▇ Surviving Corporation"). As a result
of the ▇▇▇▇▇▇ Merger, all of the respective outstanding shares of capital stock
of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Merger Sub shall be converted or cancelled in the manner
provided in Section 6.4.
6.2. ▇▇▇▇▇▇ Effective Time. At the Closing, articles of merger (the
"▇▇▇▇▇▇ Articles of Merger") shall be duly prepared and executed by ▇▇▇▇▇▇
Surviving Corporation and thereafter delivered to the Secretary of State for
filing, as provided in Section 11.25 of the IBCA, on, or as soon as practicable
after, the Closing Date. The ▇▇▇▇▇▇ Merger shall become effective at the time
(but not prior to the Closing Date) of the filing of the ▇▇▇▇▇▇ Articles of
Merger with the Secretary of State, or at such later time as may be agreed by
Parent and ▇▇▇▇▇▇ and stated in the ▇▇▇▇▇▇ Articles of Merger (the date and
time of such filing (or stated later time, if any) being referred to herein as
the "▇▇▇▇▇▇ Effective Time").
6.3. Effects of the ▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇ Effective Time, the
effects of the ▇▇▇▇▇▇ Merger shall be as provided in the applicable provisions
of the IBCA.
6.4. Effects on ▇▇▇▇▇▇'▇ Capital Stock. At the ▇▇▇▇▇▇ Effective Time,
by virtue of the ▇▇▇▇▇▇ Merger and without any action on the part of Parent,
▇▇▇▇▇▇ Merger Sub, ▇▇▇▇▇▇ or the holders of any of the following securities:
(a) Capital Stock of ▇▇▇▇▇▇ Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of ▇▇▇▇▇▇ Merger Sub
("▇▇▇▇▇▇ Merger Sub Common Stock") shall be converted into and become one fully
paid and nonassessable share of common stock, no par value per share, of ▇▇▇▇▇▇
Surviving Corporation ("▇▇▇▇▇▇ Surviving Corporation Common Stock"). Each
certificate representing outstanding shares of ▇▇▇▇▇▇ Merger Sub Common Stock
shall at the ▇▇▇▇▇▇ Effective Time represent an equal number of shares of
▇▇▇▇▇▇ Surviving Corporation Common Stock and ▇▇▇▇▇▇ Surviving Corporation
shall become a wholly-owned subsidiary of Parent. Each stock certificate
representing shares of ▇▇▇▇▇▇ Merger Sub Common Stock shall continue to
evidence ownership of such shares of ▇▇▇▇▇▇ Surviving Corporation Common Stock
without any further action on the part of any party hereto.
(b) Cancellation of Treasury Stock and ▇▇▇▇▇▇ Capital Stock Owned by
Parent and ▇▇▇▇▇▇ Merger Sub. All shares of ▇▇▇▇▇▇ Capital Stock that are owned
by ▇▇▇▇▇▇ as treasury stock and any shares of ▇▇▇▇▇▇ Capital Stock owned by
Parent or ▇▇▇▇▇▇ Merger Sub automatically shall be cancelled and retired and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(c) Conversion of ▇▇▇▇▇▇ Capital Stock. Each issued and outstanding
share of ▇▇▇▇▇▇ Capital Stock (other than shares to be cancelled in accordance
with Section 6.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of ▇▇▇▇▇▇ Capital
Stock in the manner provided in Section 11.5 (i) an amount in cash equal to
Five Hundred Eighty Nine Thousand Six Hundred Dollars ($589,600) divided by the
total number of shares of ▇▇▇▇▇▇ Capital Stock then outstanding and (ii)
subject to the provisions of Section 11.6, a number of shares of Parent Common
Stock (or, in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit and, if required, bond, in the manner provided in
Section 11.8), equal to the ▇▇▇▇▇▇ Exchange Ratio. For purposes of this
Agreement, the term "▇▇▇▇▇▇ Exchange Ratio" means, subject to adjustment
9
in accordance with Section 11.1, the ratio that results from dividing (x) Four
Million Five Hundred Twenty-Five Thousand One Hundred Eighty Dollars
($4,525,180) by (y) the product of (1) the Average Pre-Closing Price of Parent
Common Stock and (2) the total number of shares of ▇▇▇▇▇▇ Capital Stock
outstanding.
All such shares of ▇▇▇▇▇▇ Capital Stock shall no longer be outstanding and
shall be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of ▇▇▇▇▇▇ Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive the ▇▇▇▇▇▇ Exchange Ratio per share of ▇▇▇▇▇▇ Capital Stock, upon the
surrender of such certificate in accordance with Section 11.5, without
interest.
ARTICLE VII
THE BJC MERGER
7.1. The BJC Merger. At the BJC Effective Time (as defined in Section
7.2), upon the terms and subject to the conditions of this Agreement, BJC
Merger Sub shall be merged with and into BJC (the "BJC Merger") in accordance
with the provisions of the IBCA. BJC shall be the surviving corporation in the
BJC Merger ("BJC Surviving Corporation"). As a result of the BJC Merger, all of
the respective outstanding shares of capital stock of BJC and BJC Merger Sub
shall be converted or cancelled in the manner provided in Section 7.4.
7.2. BJC Effective Time. At the Closing, articles of merger (the "BJC
Articles of Merger") shall be duly prepared and executed by BJC Surviving
Corporation and thereafter delivered to the Secretary of State for filing, as
provided in Section 11.25 of the IBCA, on, or as soon as practicable after, the
Closing Date. The BJC Merger shall become effective at the time (but not prior
to the Closing Date) of the filing of the BJC Articles of Merger with the
Secretary of State, or at such later time as may be agreed by Parent and BJC
and stated in the BJC Articles of Merger (the date and time of such filing (or
stated later time, if any) being referred to herein as the "BJC Effective
Time").
7.3. Effects of the BJC Merger. At the BJC Effective Time, the
effects of the BJC Merger shall be as provided in the applicable provisions of
the IBCA.
7.4. Effects on BJC's Capital Stock. At the BJC Effective Time, by
virtue of the BJC Merger and without any action on the part of Parent, BJC
Merger Sub, BJC or the holders of any of the following securities:
(a) Capital Stock of BJC Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of BJC Merger Sub ("BJC
Merger Sub Common Stock") shall be converted into and become one fully paid and
nonassessable share of common stock, no par value per share, of BJC Surviving
Corporation ("BJC Surviving Corporation Common Stock"). Each certificate
representing outstanding shares of BJC Merger Sub Common Stock shall at the BJC
Effective Time represent an equal number of shares of BJC Surviving Corporation
Common Stock and BJC Surviving Corporation shall become a wholly-owned
subsidiary of Parent. Each stock certificate representing shares of BJC Merger
Sub Common Stock shall continue to evidence ownership of such shares of BJC
Surviving Corporation Common Stock without any further action on the part of
any party hereto.
(b) Cancellation of Treasury Stock and BJC Capital Stock Owned by
Parent and BJC Merger Sub. All shares of BJC Capital Stock that are owned by
BJC as treasury stock and any
10
shares of BJC Capital Stock owned by Parent or BJC Merger Sub automatically
shall be cancelled and retired and shall cease to exist and no consideration
shall be delivered in exchange therefor.
(c) Conversion of BJC Capital Stock. Each issued and outstanding
share of BJC Capital Stock (other than shares to be cancelled in accordance
with Section 7.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of BJC Capital Stock
in the manner provided in Section 11.5 (i) an amount in cash equal to Two
Hundred Thousand Dollars ($200,000) divided by the total number of shares of
BJC Capital Stock then outstanding and (ii) subject to the provisions of
Section 11.6, a number of shares of Parent Common Stock (or, in the case of a
lost, stolen or destroyed certificate, upon delivery of an affidavit and, if
required, bond, in the manner provided in Section 11.8), equal to the BJC
Exchange Ratio. For purposes of this Agreement, the term "BJC Exchange Ratio"
means, subject to adjustment in accordance with Section 11.1, the ratio that
results from dividing (x) One Million Five Hundred Thirty-Five Thousand Dollars
($1,535,000) by (y) the product of (1) the Average Pre-Closing Price of Parent
Common Stock and (2) the total number of shares of BJC Capital Stock
outstanding.
All such shares of BJC Capital Stock shall no longer be outstanding and shall
be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of BJC Capital Stock shall
cease to have any rights with respect thereto, except the right to receive the
BJC Exchange Ratio per share of BJC Capital Stock, upon the surrender of such
certificate in accordance with Section 11.5, without interest.
ARTICLE VIII
THE MASC MERGER
8.1. The MASC Merger. At the MASC Effective Time (as defined in
Section 8.2), upon the terms and subject to the conditions of this Agreement,
MASC Merger Sub shall be merged with and into MASC (the "MASC Merger") in
accordance with the provisions of IBCA. MASC shall be the surviving corporation
in the MASC Merger ("MASC Surviving Corporation"). As a result of the MASC
Merger, all of the respective outstanding shares of capital stock of MASC and
MASC Merger Sub shall be converted or cancelled in the manner provided in
Section 8.4.
8.2. MASC Effective Time. At the Closing, articles of merger (the
"MASC Articles of Merger") shall be duly prepared and executed by MASC
Surviving Corporation and thereafter delivered to the Secretary of State for
filing, as provided in Section 11.25 of the IBCA, on, or as soon as practicable
after, the Closing Date. The MASC Merger shall become effective at the time
(but not prior to the Closing Date) of the filing of the MASC Articles of
Merger with the Secretary of State, or at such later time as may be agreed by
Parent and MASC and stated in the MASC Articles of Merger (the date and time of
such filing (or stated later time, if any) being referred to herein as the
"MASC Effective Time").
8.3. Effects of the MASC Merger. At the MASC Effective Time, the
effects of the MASC Merger shall be as provided in the applicable provisions of
the IBCA.
8.4. Effects on MASC's Capital Stock. At the MASC Effective Time, by
virtue of the MASC Merger and without any action on the part of Parent, MASC
Merger Sub, MASC or the holders of any of the following securities:
(a) Capital Stock of MASC Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of MASC Merger Sub ("MASC
Merger Sub Common Stock")
11
shall be converted into and become one fully paid and nonassessable share of
common stock, no par value per share, of MASC Surviving Corporation ("MASC
Surviving Corporation Common Stock"). Each certificate representing outstanding
shares of MASC Merger Sub Common Stock shall at the MASC Effective Time
represent an equal number of shares of MASC Surviving Corporation Common Stock
and MASC Surviving Corporation shall become a wholly-owned subsidiary of
Parent. Each stock certificate representing shares of MASC Merger Sub Common
Stock shall continue to evidence ownership of such shares of MASC Surviving
Corporation Common Stock without any further action on the part of any party
hereto.
(b) Cancellation of Treasury Stock and MASC Capital Stock Owned by
Parent and MASC Merger Sub. All shares of MASC Capital Stock that are owned by
MASC as treasury stock and any shares of MASC Capital Stock owned by Parent or
MASC Merger Sub automatically shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Conversion of MASC Capital Stock. Each issued and outstanding
share of MASC Capital Stock (other than shares to be cancelled in accordance
with Section 8.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of MASC Capital Stock
in the manner provided in Section 11.5 (i) an amount in cash equal to Seventy
Eight Thousand Eight Hundred Dollars ($78,800) divided by the total number of
shares of MASC Capital Stock then outstanding and (ii) subject to the
provisions of Section 11.6, a number of shares of Parent Common Stock (or, in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit and, if required, bond, in the manner provided in Section 11.8),
equal to the MASC Exchange Ratio. For purposes of this Agreement, the term
"MASC Exchange Ratio" means, subject to adjustment in accordance with Section
11.1, the ratio that results from dividing (x) Six Hundred Four Thousand Seven
Hundred Ninety Dollars ($604,790) by (y) the product of (1) the Average
Pre-Closing Price of Parent Common Stock and (2) the total number of shares of
MASC Capital Stock outstanding.
All such shares of MASC Capital Stock shall no longer be outstanding and shall
be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of MASC Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive the MASC Exchange Ratio per share of MASC Capital Stock, upon the
surrender of such certificate in accordance with Section 11.5, without
interest.
ARTICLE IX
THE ▇▇▇▇▇▇ MERGER
9.1. The ▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇ Effective Time (as defined in
Section 9.2), upon the terms and subject to the conditions of this Agreement,
▇▇▇▇▇▇ Merger Sub shall be merged with and into ▇▇▇▇▇▇ (the "▇▇▇▇▇▇ Merger") in
accordance with the provisions of the IBCA. ▇▇▇▇▇▇ shall be the surviving
corporation in the ▇▇▇▇▇▇ Merger ("▇▇▇▇▇▇ Surviving Corporation"). As a result
of the ▇▇▇▇▇▇ Merger, all of the respective outstanding shares of capital stock
of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Merger Sub shall be converted or cancelled in the manner
provided in Section 9.4.
9.2. ▇▇▇▇▇▇ Effective Time. At the Closing, articles of merger (the
"▇▇▇▇▇▇ Articles of Merger") shall be duly prepared and executed by ▇▇▇▇▇▇
Surviving Corporation and thereafter delivered to the Secretary of State for
filing, as provided in Section 11.25 of the IBCA, on, or as soon as practicable
after, the Closing Date. The ▇▇▇▇▇▇ Merger shall become effective at the time
(but not prior to the Closing Date) of the filing of the ▇▇▇▇▇▇ Articles of
Merger with the Secretary of State, or at such later
12
time as may be agreed by Parent and ▇▇▇▇▇▇ and stated in the ▇▇▇▇▇▇ Articles of
Merger (the date and time of such filing (or stated later time, if any) being
referred to herein as the "▇▇▇▇▇▇ Effective Time").
9.3. Effects of the ▇▇▇▇▇▇ Merger. At the ▇▇▇▇▇▇ Effective Time, the
effects of the ▇▇▇▇▇▇ Merger shall be as provided in the applicable provisions
of the IBCA.
9.4. Effects on Claude's Capital Stock. At the ▇▇▇▇▇▇ Effective Time,
by virtue of the ▇▇▇▇▇▇ Merger and without any action on the part of ▇▇▇▇▇▇,
▇▇▇▇▇▇ Merger Sub, ▇▇▇▇▇▇ or the holders of any of the following securities:
(a) Capital Stock of ▇▇▇▇▇▇ Merger Sub. Each issued and outstanding
share of the common stock, no par value per share, of ▇▇▇▇▇▇ Merger Sub
("▇▇▇▇▇▇ Merger Sub Common Stock") shall be converted into and become one fully
paid and nonassessable share of common stock, no par value per share, of ▇▇▇▇▇▇
Surviving Corporation ("▇▇▇▇▇▇ Surviving Corporation Common Stock"). Each
certificate representing outstanding shares of ▇▇▇▇▇▇ Merger Sub Common Stock
shall at the ▇▇▇▇▇▇ Effective Time represent an equal number of shares of
▇▇▇▇▇▇ Surviving Corporation Common Stock and ▇▇▇▇▇▇ Surviving Corporation
shall become a wholly-owned subsidiary of Parent. Each stock certificate
representing shares of ▇▇▇▇▇▇ Merger Sub Common Stock shall continue to
evidence ownership of such shares of ▇▇▇▇▇▇ Surviving Corporation Common Stock
without any further action on the part of any party hereto.
(b) Cancellation of Treasury Stock and ▇▇▇▇▇▇ Capital Stock Owned by
Parent and ▇▇▇▇▇▇ Merger Sub. All shares of ▇▇▇▇▇▇ Capital Stock that are owned
by ▇▇▇▇▇▇ as treasury stock and any shares of ▇▇▇▇▇▇ Capital Stock owned by
Parent or ▇▇▇▇▇▇ Merger Sub automatically shall be cancelled and retired and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(c) Conversion of ▇▇▇▇▇▇ Capital Stock. Each issued and outstanding
share of ▇▇▇▇▇▇ Capital Stock (other than shares to be cancelled in accordance
with Section 9.4(b)) will be converted automatically into the right to receive,
upon surrender of the certificate representing such share of ▇▇▇▇▇▇ Capital
Stock in the manner provided in Section 11.5 (i) an amount in cash equal to
Seventy Eight Thousand Eight Hundred Dollars ($78,800) divided by the total
number of shares of ▇▇▇▇▇▇ Capital Stock then outstanding and (ii) subject to
the provisions of Section 11.6, a number of shares of Parent Common Stock (or,
in the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit and, if required, bond, in the manner provided in Section 11.8),
equal to the ▇▇▇▇▇▇ Exchange Ratio. For purposes of this Agreement, the term
"▇▇▇▇▇▇ Exchange Ratio" means, subject to adjustment in accordance with Section
11.1, the ratio that results from dividing (x) Six Hundred Four Thousand Seven
Hundred Ninety Dollars ($604,790) by (y) the product of (1) the Average
Pre-Closing Price of Parent Common Stock and (2) the total number of shares of
▇▇▇▇▇▇ Capital Stock outstanding.
All such shares of ▇▇▇▇▇▇ Capital Stock shall no longer be outstanding and
shall be cancelled and retired automatically and shall cease to exist, and each
holder of a certificate representing any such shares of ▇▇▇▇▇▇ Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive the ▇▇▇▇▇▇ Exchange Ratio per share of ▇▇▇▇▇▇ Capital Stock, upon the
surrender of such certificate in accordance with Section 11.5, without
interest.
13
ARTICLE X
THE ▇▇▇▇▇ INTEREST PURCHASE
10.1. Purchase and Sale. ▇▇▇▇▇ agrees to sell to ▇▇▇▇▇ Acquisition,
and ▇▇▇▇▇ Acquisition agrees to purchase from ▇▇▇▇▇, all of the member
interests and other equity or voting securities of the Company owned by ▇▇▇▇▇
(the "▇▇▇▇▇ Member Interests") upon the terms and subject to the conditions set
forth in this Agreement.
10.2. Purchase Price. Subject to the provisions of Section 11.1, the
aggregate purchase price for the ▇▇▇▇▇ Member Interests is (a) an amount in
cash equal to Four Hundred Twenty-Nine Thousand Four Hundred Dollars ($429,400)
and (b) subject to the provisions of Section 11.6, a number of shares of Parent
Common Stock that results from dividing (x) Three Million Two Hundred
Ninety-Five Thousand Six Hundred Forty-Five Dollars ($3,295,645) by (y) the
Average Pre-Closing Price of Parent Common Stock (the amounts in clauses (a)
and (b) being hereinafter referred to as the "▇▇▇▇▇ Member Interest Purchase
Amount").
10.3. Closing Deliveries by ▇▇▇▇▇. At the Closing, ▇▇▇▇▇ will deliver
or cause to be delivered to Parent and ▇▇▇▇▇ Acquisition:
(a) a member interest transfer agreement, duly executed by ▇▇▇▇▇ in
form and substance reasonably satisfactory to Parent; and
(b) the opinions, certificates and other documents required to be
delivered pursuant to Article XIX.
ARTICLE XI
GENERAL PROVISIONS APPLICABLE TO THE
MERGERS AND THE ▇▇▇▇▇ INTEREST PURCHASE
For the avoidance of doubt, the parties to this Agreement agree that
the provisions of this Article XI shall apply to all of the Mergers and, to the
extent specified, the ▇▇▇▇▇ Interest Purchase.
11.1. Adjustments to Exchange Ratios. Each Exchange Ratio and the
▇▇▇▇▇ Member Interest Purchase Amount shall be appropriately adjusted to
reflect the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Parent Common Stock
or such Target Company's shares of Target Company Capital Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or such Target Company's shares of Target Company Capital Stock
occurring after the date hereof and prior to the applicable Target Company
Effective Time or the completion of the ▇▇▇▇▇ Interest Purchase, as the case
may be, and of any increase in the number of shares of such Target Company's
shares of Target Company Capital Stock outstanding resulting from any failure
the representation and warranty with respect to such Target Company contained
in Section 12.3 of this Agreement to be correct on the date hereof or by any of
the Target Companies to comply with its covenants contained in this Agreement,
so as to provide Parent the same economic effect as contemplated by this
Agreement prior to such stock split, reverse split, stock dividend,
reorganization, recapitalization, like change or increase.
11.2. Fractional Shares. No fraction of a share of Parent Common
Stock will be issued in the Mergers or the ▇▇▇▇▇ Interest Purchase, but in lieu
thereof ▇▇▇▇▇ and each of the holders of any shares of any Target Company
Capital Stock who would otherwise be entitled to a fraction of a share of
14
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by ▇▇▇▇▇ or such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the Average Pre-Closing Price of Parent
Common Stock.
11.3. Articles of Incorporation, By-Laws and Officers and Directors
of the Surviving Corporations. The articles or certificates of incorporation,
as the case may be, of each of the Target Companies that is a corporation, as
in effect immediately prior to their respective Effective Times, shall be the
articles or certificates of incorporation, as the case may be, of the relevant
Surviving Corporation until thereafter amended as provided by law and such
articles or certificates of incorporation, as the case may be. The bylaws of
each Merger Sub that is a corporation as in effect immediately prior to their
respective Target Company Effective Times shall be the bylaws of the relevant
Surviving Corporation until thereafter amended as provided by law, the articles
or certificates of incorporation of the relevant Surviving Corporation, as the
case may be, and such bylaws. From and after the applicable Target Company
Effective Time, the directors and officers of each Surviving Corporation shall
be as set forth under the name of the applicable Surviving Corporation on
Exhibit B attached hereto, until their respective successors are duly elected
or appointed and qualified or until their earlier death, resignation or removal
in accordance with such Surviving Corporation's articles or certificates of
incorporation and bylaws.
11.4. Further Assurances. Each party hereto shall execute such
further documents and instruments and take such further actions as may
reasonably be requested by one or more of the other parties hereto to
consummate the Mergers and the ▇▇▇▇▇ Interest Purchase, to vest each Surviving
Corporation with full title to all assets, properties, rights, approvals,
immunities and franchises of the applicable Merger Sub and Target Company, to
vest Blair Acquisition with full title to the ▇▇▇▇▇ Member interests and/or to
otherwise effect the purposes of this Agreement.
11.5. Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent or another institution
selected by Parent and reasonably acceptable to the Company shall act as
exchange agent (the "Exchange Agent") for the Mergers and the ▇▇▇▇▇ Interest
Purchase.
(b) Parent to Provide Shares of Parent Common Stock and Cash. Prior
to the Effective Time, Parent shall deposit with the Exchange Agent for
exchange and delivery in accordance with this Agreement, through such
reasonable procedures as Parent may adopt, (i) subject to Section 11.6, the
shares of Parent Common Stock issuable pursuant to this Agreement in exchange
for all shares of Target Company Capital Stock outstanding immediately prior to
the Effective Time and the shares of Parent Common Stock issuable to ▇▇▇▇▇ in
connection with the ▇▇▇▇▇ Interest Purchase and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares, if any,
pursuant to Section 11.2 and any dividend or distribution to which ▇▇▇▇▇ or the
holders of shares of Target Company Capital Stock may be entitled pursuant to
Section 11.5(d).
(c) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause to be mailed or otherwise delivered to each holder of record of a
certificate or certificates (the "Certificates"), which immediately prior to
the applicable Target Company Effective Time represented outstanding shares of
Target Company Capital Stock, whose shares were converted into the right to
receive shares of Parent Common Stock (and cash in lieu of fractional shares,
if any) pursuant to this Agreement, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon receipt of the Certificates by the Exchange
Agent, and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii)
15
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock (and cash in lieu
of fractional shares, if any). Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, and such other documents
as may reasonably be requested by the Exchange Agent or such other agent or
agents, subject to Section 11.6, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of Parent Common Stock and a cash payment in lieu of any
fractional shares which such holder has the right to receive pursuant to
Section 11.2 and any dividends or other distributions pursuant to Section
11.5(d), and the Certificate so surrendered shall forthwith be canceled. Until
so surrendered, each outstanding Certificate that, prior to the applicable
Target Company Effective Time, represented shares of the applicable Target
Company Capital Stock will be deemed from and after such Target Company
Effective Time, for all purposes, other than the payment of dividends, to
evidence the ownership of the number of full shares of Parent Common Stock into
which such shares of Target Company Capital Stock shall have been so converted
and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 11.2 and any dividends or other
distributions pursuant to Section 11.5(d). On the Closing Date, upon receipt of
a duly executed member interest transfer agreement from ▇▇▇▇▇ in form and
substance reasonably satisfactory to Parent, and such other documents as may
reasonably be requested by the Exchange Agent, subject to Section 11.6, Parent
shall cause the Exchange Agent to deliver the ▇▇▇▇▇ Member Interest Purchase
Amount to ▇▇▇▇▇.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions with respect to shares of Parent Common Stock with a record
date on or after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender 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, cash in the
amount of any such dividends or other distributions with a record date after
the Effective Time theretofore payable (but for the provisions of this Section
11.5(d)) with respect to such shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued by the Exchange Agent in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance of the shares of Parent Common Stock that the
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the Person requesting such exchange will have paid
to Parent or any agent designated by it any transfer or other taxes required by
reason of the issuance of a check in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Any shares of Parent Common Stock and/or cash held
by the Exchange Agent for delivery pursuant to this Section 11.5 and unclaimed
at the end of six months after the Effective Time shall be delivered or paid to
Parent, upon demand, and any holders of Certificates who have not theretofore
complied with this Section 11.5 shall (subject to abandoned property, escheat
and other similar laws) thereafter look only to Parent, as general creditors,
for payment of their claim for the consideration to be delivered to them in the
Mergers. Notwithstanding anything to the contrary in this Section 11.5, none of
the Exchange Agent, Parent, the Surviving Corporations or any party hereto
shall be liable to any Person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
16
11.6. Escrow. Notwithstanding the provisions of Section 11.5 and
subject to adjustment pursuant to Section 19.1(a) of this Agreement, Parent
will deposit with the Escrow Agent a number of shares of Parent Common Stock
equal to the quotient of (a) Seventeen Million Three Hundred Fifty Thousand
Dollars ($17,350,000) divided by (b) the Average Pre-Closing Price of Parent
Common Stock (the "Escrow Shares") to be held and disbursed by the Escrow Agent
in accordance with the Escrow Agreement. For purposes of this Agreement and any
Collateral Documents, the term Escrow Shares shall include the shares referred
to in the immediately preceding sentence and any additional shares of Parent
Common Stock to be deposited with the Escrow Agent pursuant to Section 19.1(a)
of this Agreement, if any. ▇▇▇▇▇ and each Target Shareholder will be deemed,
without any action on the part of ▇▇▇▇▇ or such Target Shareholder, to have
received and deposited with the Escrow Agent pursuant to the Escrow Agreement a
number of Escrow Shares representing ▇▇▇▇▇'▇ or such Target Shareholder's
proportionate interest in the Escrow Shares (the proportionate interest of
▇▇▇▇▇ and each of the Target Shareholders in the Escrow Shares being
hereinafter referred to as such Person's "Escrow Percentage"). All shares of
Parent Common Stock to be received by ▇▇▇▇▇ and the Target Shareholders in
connection with the ▇▇▇▇▇ Interest Purchase and the Mergers, as the case may
be, other than the Escrow Shares will be distributed to ▇▇▇▇▇ and the Target
Shareholders pursuant to the relevant Sections of Articles I through X and
Section 11.5 of this Agreement. ▇▇▇▇▇'▇ and each Target Shareholder's Escrow
Percentage will be determined based on (i) the number of shares of Parent
Common Stock issuable hereunder to ▇▇▇▇▇ or such Target Shareholder, as the
case may be, divided by (ii) the aggregate number of shares of Parent Common
Stock issuable hereunder to ▇▇▇▇▇ and all of the Target Shareholders in the
aggregate. The Escrow Shares will be represented by a certificate registered in
the name of the nominee of the Escrow Agent (with ▇▇▇▇▇ and each Target
Shareholder being the beneficial owner of ▇▇▇▇▇'▇ or such Target Shareholder's
Escrow Percentage). To the extent that any dividend or distribution, or other
transaction, with respect to the Escrow Shares results in a liability for Tax,
such Tax liability will be that of ▇▇▇▇▇ and the Target Shareholders (in
proportion to ▇▇▇▇▇'▇ or each Target Shareholder's Escrow Percentage), and not
of Parent or ▇▇▇▇▇ Acquisition or of any Surviving Corporation. Any and all
voting rights with respect to the Escrow Shares will be exercisable by ▇▇▇▇▇ or
the Target Shareholders, as the case may be, or their authorized agent as of
the Effective Time. Parent, the Company, the Merger Subs, ▇▇▇▇▇ Acquisition,
the Target Companies, the Target Shareholders and ▇▇▇▇▇ hereby agree and
acknowledge that the Escrow Shares will be treated as transferred to and owned
by the Target Shareholders and ▇▇▇▇▇ as of the Effective Time and at all times
thereafter for all Tax purposes. The Escrow Shares will be used to satisfy
indemnity claims made by Parent pursuant to Section 18.2(d) and Section 20.2 of
this Agreement.
11.7. No Further Ownership Rights in Target Company Capital Stock.
All shares of Parent Common Stock issued (and cash in lieu of fractional shares
paid pursuant to Section 11.2 and any dividends or other distributions pursuant
to Section 11.5(d)) upon the surrender for exchange of shares of Target Company
Capital Stock in accordance with the terms of this Agreement shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares
of Target Company Capital Stock, and there shall be no further registration of
transfers on the records of any Target Company or any Surviving Corporation of
any shares of Target Company Capital Stock and the stock ledger of each Target
Company will be closed. If, after the Effective Time, Certificates are
presented to Parent or any Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Agreement.
11.8. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock (and cash in lieu of any fractional shares pursuant to
Section 11.2) as may be required pursuant to this Agreement; provided, however,
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be
17
made against Parent, the Company, ▇▇▇▇▇ Acquisition, any Surviving Corporation
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
11.9. Withholding Rights. Parent, ▇▇▇▇▇ Acquisition and each
Surviving Corporation shall be entitled to deduct and withhold from any
payments made pursuant to this Agreement such amounts as Parent and such
Surviving Corporation are required to deduct and withhold with respect to any
such payment under the Code or any provision of state or local tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to ▇▇▇▇▇ or the Target
Shareholders, as the case may be, in respect of which such deduction and
withholding was made by Parent, ▇▇▇▇▇ Acquisition and such Surviving
Corporation.
11.10. Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest any Surviving Corporation or
▇▇▇▇▇ Acquisition, as the case may be, with full right, title and possession to
all assets, property, rights, privileges, powers and franchises of a Target
Company and/or a Merger Sub or the ▇▇▇▇▇ Member Interests, as the case may be,
the officers and directors of such Surviving Corporation or ▇▇▇▇▇ Acquisition,
as the case may be, are fully authorized in the name of and on behalf of each
of the constituent corporations to the applicable Merger and/or ▇▇▇▇▇, as the
case may be, or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
11.11. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ Chance
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on a date and at
a time to be specified by the parties, which shall in no event be later than
10:00 a.m., local time, on the fifth business day following the satisfaction
or, if permissible, waiver, of the conditions set forth in Article XIX of this
Agreement, or on such other date, time and place as the parties may mutually
agree (the "Closing Date"). At the Closing there shall be delivered to Parent,
the Merger Subs, ▇▇▇▇▇ Acquisition, the Target Companies, the Target
Shareholders and ▇▇▇▇▇, the certificates and other documents and instruments
required to be delivered under Article XIX of this Agreement.
11.12. Effect on Operating Agreement. The parties to this Agreement
hereby agree that, on or prior to the Closing Date, to the extent required,
they shall execute an amendment to the Operating Agreement (the "Operating
Agreement Amendment") in form and substance reasonably satisfactory to the
parties hereto to give effect to the Mergers, the ▇▇▇▇▇ Interest Purchase and
the other transactions contemplated by this Agreement. Prior to the date of the
Operating Agreement Amendment, each of the Target Shareholders and ▇▇▇▇▇ shall
cause the Company to have in effect a Code Section 754 election for the taxable
year including the Closing.
11.13. Cash Payments. The respective cash payments to be delivered to
▇▇▇▇▇ and each of the Target Shareholders on the Closing Date pursuant to the
terms and provisions of this Agreement shall be made by Parent by wire transfer
to the accounts designated by ▇▇▇▇▇ and each Target Shareholder. ▇▇▇▇▇ and each
Target Shareholder shall designate the account to which such payment is to be
made at least three (3) Business Days prior to the Closing Date by delivering
all necessary information relating to the account to Parent on or prior to such
third Business Day.
18
ARTICLE XII
REPRESENTATIONS AND WARRANTIES OF THE TARGET
SHAREHOLDERS WITH RESPECT TO THE TARGET COMPANIES
Except as disclosed in the documents delivered by the Target
Shareholders to Parent prior to the execution and delivery of this Agreement
and referring to the representations and warranties in this Agreement with
respect to the Target Company of which the Target Shareholder or Target
Shareholders, as the case may be, is a shareholder or owner as set forth on
Schedule 1 (each a "Target Company Disclosure Schedule" and, together the
"Target Company Disclosure Schedules"), any exception so disclosed in a Target
Company Disclosure Schedule to specifically identify the Section of this
Agreement to which such exception relates, including through the use of
specific cross references, each of the Target Shareholders (jointly and
severally if such Target Company has more than one Target Shareholder, except
that the representations and warranties set forth in Section 12.1 are made
severally and not jointly by each of the Target Shareholders as to themselves
and not as to any other Target Shareholder) represent and warrant with respect
to the Target Company set forth next to their respective names on Schedule 1
(and as to no other Target Company), to Parent and the applicable Merger Sub
with which that Target Company is being merged pursuant to this Agreement as
follows:
12.1. Several Representations of the Target Shareholders.
(a) Capacity. Such Target Shareholder has the legal capacity to enter
into this Agreement and the Collateral Documents to which he or she is a party
and to perform his or her obligations hereunder and thereunder.
(b) Validity and Execution of Agreements. This Agreement and each of
the Collateral Documents to which such Target Shareholder is a party have been
duly executed and delivered by such Target Shareholder and, assuming due
authorization, execution and delivery by Parent, each Merger Sub and the other
parties hereto or thereto, constitute the valid and binding obligation of such
Target Shareholder, enforceable against such Target Shareholder in accordance
with their respective terms, except as such enforcement may be limited by (i)
the effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or relating to
the rights of creditors generally, or (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
(c) Ownership of Target Company Capital Stock. The shares of, or
other ownership interests in, the applicable Target Company Capital Stock
listed on Schedule 12.1(c) of the applicable Target Company Disclosure Schedule
opposite such Target Shareholder's name (i) are owned on the date of this
Agreement legally, beneficially and of record by such Target Shareholder; (ii)
will be owned legally, beneficially and of record immediately prior to the
Closing by such Target Shareholder, free and clear of any Liens; and (iii)
constitute all of the Target Company Capital Stock owned legally, beneficially
or of record by such Target Shareholder. Such Target Shareholder has not
granted to any Person any rights (including without limitation proxy rights or
options with respect to any shares or units of Target Company Capital Stock)
and such Target Shareholder is not a party to any voting trust or other
agreement or understanding with respect to such Target Company Capital Stock.
Such Target Shareholder has no claim against his or her respective Target
Company or any of its officers, directors or other shareholders or members or
other Person with respect to the issuance of any Target Company Capital Stock.
Such Target Shareholder has not commenced nor intends to commence a voluntary
case or
19
other proceeding, and no involuntary case or other proceeding has been
commenced against such Target Shareholder seeking liquidation or other relief
with respect to its debts under any bankruptcy, insolvency or other similar
law.
(d) No Conflicts. Neither the execution and delivery of this
Agreement nor any of the Collateral Documents to which such Target Shareholder
is a party, nor the performance by such Target Shareholder of the transactions
contemplated hereby or thereby, will (i) violate or constitute a default, or
require notice and/or consent under, any mortgage, indenture, deed of trust,
lease, contract, agreement, license or other instrument, permit, concession,
franchise, judgment, order, decree or ruling to which such Target Shareholder
is a party or by which such Target Shareholder's assets or properties are
bound; (ii) violate any Laws and Regulations applicable to such Target
Shareholder; or (iii) result in the creation of any Lien upon any Target
Company Capital Stock owned by such Target Shareholder.
(e) No Government Proceedings. During the past ten years, such Target
Shareholder has not been the subject of any governmental proceeding, or, to the
knowledge of such Target Shareholder, material investigation or inquiry
involving any Governmental Entity (as defined in Section 12.4(c)) including,
without limitation, the Securities and Exchange Commission (the "SEC"), the
National Association of Securities Dealers, Inc. or its wholly owned subsidiary
NASD Regulation, Inc. (together, the "NASD"), the CHX or any other federal or
state regulatory authority having jurisdiction over the business activities of
such Target Shareholder, such Target Shareholder's Target Company or the
Company and has not been indicted or convicted of any felony. Such Target
Shareholder has not been the subject of any order, judgment, or decree of any
court of competent jurisdiction, permanently or temporarily enjoining him or
her from, or otherwise limiting his or her participation in, the following
activities: (i) acting as an investment adviser, underwriter, broker or dealer
in securities, or engaging in or continuing any conduct or practice in
connection with such activity; (ii) engaging in any type of business practice;
or (iii) engaging in any activity in connection with the purchase or sale of
any security or in connection with any violation of federal or state securities
laws.
(f) Investment Representations. Such Target Shareholder understands
and acknowledges that the shares of Parent Common Stock being acquired by such
Target Shareholder pursuant to this Agreement are not registered under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), or any applicable state securities law, and
that such shares of Parent Common Stock may not be transferred or sold except
pursuant to the registration provisions of the Securities Act or pursuant to an
applicable exemption therefrom and pursuant to applicable state securities laws
and regulations, and that the shares of Parent Common Stock being issued to
such Target Shareholder pursuant to this Agreement and in connection with the
transactions contemplated hereby will bear appropriate legends to that effect.
(g) Interests in Other Broker Dealers. Schedule 12.1(g) of the
applicable Target Company Disclosure Schedule contains a true and complete list
of any broker-dealer or bank (other than the applicable Target Company) five
percent (5%) or more of the outstanding shares of common stock or other equity
interests of which is owned by such Target Shareholder and, to such Target
Shareholders' knowledge, in the aggregate, by all Target Shareholders of the
applicable Target Company.
(h) Government Consents. Except for the consents, actions and filings
described in Section 12.4(c) and Section 13.3(c) of this Agreement, the
execution, delivery and performance of this Agreement by such Target
Shareholder does not require any consent from, action by or in respect of, or
filing with, any court or Governmental Entity.
(i) Investment Purpose. The shares of Parent Common Stock being
received by such Target Shareholder pursuant to this Agreement and in
connection with the transactions contemplated
20
hereby are being acquired for such Target Shareholder's own account, for the
purpose of investment and without a view to the distribution or resale of such
shares of Parent Common Stock or any interest therein to the public in
violation of the Securities Act. Such Target Shareholder has such knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in shares of Parent Common Stock and is
capable of bearing the economic risk of such investment. Such Target
Shareholder has been provided, to its satisfaction, the opportunity to ask
questions concerning the terms and conditions of the offering and sale of the
shares of Parent Common Stock and issuance of the Parent Common Stock pursuant
to this Agreement, has had all such questions answered to its satisfaction and
has been supplied all additional information deemed necessary by it to verify
the accuracy of the information furnished to such Target Shareholder.
(j) Accredited Investor. Such Target Shareholder is an "accredited
investor" under Rule 501 of Regulation D of the Securities Act.
12.2. Organization, Standing and Power; Subsidiaries; Ownership of
Company Member Interests.
(a) The Target Company and each of its Subsidiaries is a corporation
or limited liability company, as the case may be, duly organized or formed, as
the case may be, validly existing and in good standing under the laws of its
jurisdiction of organization or formation, as the case may be. The Target
Company and each of its Subsidiaries has the corporate or limited liability
company power, as the case may be, to own, use and lease its assets and
properties and to carry on its business as now being conducted and is duly
qualified or licensed as a foreign corporation or limited liability company, as
the case may be, to do business and is in good standing in each jurisdiction
where the nature of its business or the ownership, leasing or operation of its
assets and properties render such qualification, license or good standing
necessary, except in such jurisdictions where the failure to be so qualified or
licensed as a foreign corporation or limited liability company, as the case may
be, and in good standing would not have a Material Adverse Effect on the Target
Company. Schedule 12.2(a) of the applicable Target Company Disclosure Schedule
lists all of the states or other jurisdictions where the Target Company or any
of its Subsidiaries are qualified or licensed as a foreign corporation or
limited liability company, as the case may be.
(b) Schedule 12.2(b) of the applicable Target Company Disclosure
Schedule sets forth a true and complete list of the Target Company's
Subsidiaries. The Target Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. All of the
outstanding shares of capital stock, voting and equity securities of each of
the Target Company's Subsidiaries are owned, directly or indirectly, by the
Target Company and are duly authorized, validly issued, fully paid and
nonassessable, and those shares of capital stock, voting and equity securities
of each of the Target Company's Subsidiaries are free and clear of all Liens.
There are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable, exercisable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued capital stock or
other securities of any such Subsidiary, or otherwise obligating the Target
Company or any such Subsidiary to issue, transfer, sell, purchase, redeem or
otherwise acquire any such securities.
(c) The member interests in the Company listed on Schedule 12.2(c) of
the applicable Target Company Disclosure Schedule opposite the applicable
Target Company's name (i) are owned on the date of this Agreement legally,
beneficially and of record by the Target Company; (ii) will be owned legally,
beneficially and of record immediately prior to the Closing by such Target
Company, free and clear of any Liens; and (iii) constitute all of the member
interests, voting and equity securities of
21
the Company owned legally, beneficially or of record by such Target Company.
The Target Company has not granted to any Person any rights (including without
limitation proxy rights or options with respect to any member interests or
other equity securities of the Company) and the Target Company is not a party
to any voting trust or other agreement or understanding with respect to such
member interests or other equity securities of the Company. The Target Company
has no claim against the Company or any of its officers, directors or other
members, equity security holders or other Person with respect to the issuance
of any member interests or other equity securities of the Company.
12.3. Capital Structure. The capitalization of the Target Company is
set forth on Schedule 12.3 of the applicable Target Company Disclosure
Schedule. There are no other authorized or outstanding shares or classes of
capital stock, member interests or voting or equity securities carrying voting
rights or economic interests with respect to the Target Company and no
outstanding commitments to issue any shares of capital stock, member interests
or other voting or equity securities. All outstanding shares, member interests
or other voting or equity securities, as the case may be, of the Target Company
are duly authorized, validly issued, fully paid and non-assessable and are free
and clear of any Liens, and are not subject to preemptive rights or rights of
first refusal or any agreement to which the Target Company or such Target
Shareholder is a party or by which it is bound. The Target Company has not
authorized or issued, and does not have, any options, warrants, calls, rights,
commitments or agreements of any character to which the Target Company or such
Target Shareholder is a party or by which it is bound obligating the Target
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of capital stock or any
member interests or other voting or equity securities, as the case may be, of
the Target Company or obligating the Target Company to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. Except for
this Agreement, there are no contracts, commitments or agreements relating to
voting, purchase or sale of the Target Company's capital stock, member
interests or other voting or equity securities between or among the Target
Company and any of its shareholders or members, as the case may be. All
outstanding shares, member interests and other voting or equity securities of
the Target Company constituting Target Company Capital Stock were issued in
compliance with all applicable federal and state securities laws.
12.4. Authority; No Conflicts.
(a) Assuming the filings and approvals described in clauses (i)
through (iii) of Section 12.4(c) (collectively, the "Target Company Approvals")
and the Company Approvals (as defined in Section 13.3(c)) are made or obtained
(as the case may be), the Target Company has all requisite corporate or limited
liability company power and authority, as the case may be, to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
member action, as the case may be, on the part of the Target Company. This
Agreement has been duly executed and delivered by the Target Company and
constitutes the legal, valid and binding obligation of the Target Company,
enforceable against the Target Company in accordance with its terms, except as
such enforcement may be limited by (i) the effect of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement, moratorium or other
laws affecting or relating to the rights of creditors generally, or (ii) the
rules governing the availability of specific performance, injunctive relief or
other equitable remedies and general principles of equity, regardless of
whether considered in a proceeding in equity or at law.
(b) Assuming the Target Company Approvals and the Company Approvals
are made or obtained (as the case may be), the execution, delivery and
performance of this Agreement by the Target Company does not, and the
consummation of the transactions contemplated hereby do not and will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or
22
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under, (i) any provision of the
certificate or articles of incorporation, bylaws, or other comparable
organizational documents, each as amended, of the Target Company or any of its
Subsidiaries; (ii) any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument, permit, concession, franchise,
judgment, order, decree or ruling to which the Target Company or any of its
Subsidiaries is a party or by which the Target Company's or any of its
Subsidiaries' assets or properties are bound; or (iii) any Laws and Regulations
applicable to the Target Company or any of its Subsidiaries or any of their
respective properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission,
self-regulatory organization ("SRO") or other regulatory body or other foreign
or domestic governmental or quasi-governmental authority or instrumentality
(each of the foregoing, a "Governmental Entity"), is required by or with
respect to the Target Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement, the performance of the Target
Company's obligations hereunder or the consummation of the transactions
contemplated hereby, except for (i) the filing of the articles or certificate
of merger, as the case may be, with respect to the Merger of the Target
Company; (ii) such notices, applications, consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal or state securities laws or the applicable securities
laws or SRO rules and regulations of any foreign country in connection with the
Merger of the Target Company; (iii) the notification requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made would not prevent, or materially
alter or delay, any of the transactions contemplated by this Agreement.
12.5. Target Company Financial Statements.
(a) The Target Company has furnished to Parent true and complete
copies of the consolidated unaudited balance sheet as of July 31, 2001 and the
consolidated unaudited statements of operations, shareholders' equity and cash
flows for the period ended July 31, 2001 for the Target Company and its
Subsidiaries (collectively, the "Target Company Financial Statements")
(b) The Target Company Financial Statements were prepared in
accordance with GAAP applied on a basis consistent with that of preceding
accounting periods except that they do not include notes and are subject to
normal year-end adjustments. All of the Target Company Financial Statements (i)
were prepared in accordance with the books of account and other financial
records of the Target Company and (ii) fairly present in all material respects
the financial condition of the Target Company and its Subsidiaries as of the
respective dates thereof.
12.6. Absence of Certain Changes. Since December 31, 2000, the Target
Company and its Subsidiaries have conducted their respective businesses in the
ordinary course consistent with past practice and there has not occurred: (i) a
Material Adverse Effect with respect to the Target Company; (ii) any
acquisition, sale or transfer of any asset or property of the Target Company or
any of its Subsidiaries, other than in the ordinary course of business and
consistent with past practice or any impairment, damage, destruction, loss or
claim not covered by insurance, or condemnation or other taking adversely in
any respect any of the Target Company's or any of its Subsidiaries' tangible
assets; (iii) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Target Company
or any revaluation by the Target Company of any of its or any of its
Subsidiaries' assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares or member interests,
as the case may be, of the Target Company, or any direct or indirect
redemption, purchase or other acquisition by the Target Company of any of its
shares of capital
23
stock, any member interests or other voting or equity securities; (v) any
contract entered into by the Target Company or any of its Subsidiaries, other
than in the ordinary course of business and as made available to Parent, or any
amendment or termination of, or default under, any contract to which the Target
Company or any of its Subsidiaries is a party or by which it or any of their
respective assets or properties is bound; (vi) any amendment or change to the
articles or certificate of incorporation or bylaws or other comparable
organizational documents of the Target Company or any of its Subsidiaries;
(vii) any increase in or modification of the compensation or benefits payable
or to become payable by the Target Company or any of its Subsidiaries to any of
their respective directors, officers or employees, other than (in the case of
non-executive officer employees) in the ordinary course of business consistent
with past practice; (viii) any change in the risk management and hedging
policies, procedures or practices of the Target Company or any of its
Subsidiaries, or any failure to comply with such policies, procedures and
practices; or (ix) any negotiation or agreement by the Target Company or any of
its Subsidiaries to do any of the things described in the preceding clauses (i)
through (viii) (other than negotiations with Parent and its Representatives (as
defined in Section 15.4) regarding the transactions contemplated by this
Agreement).
12.7. Absence of Undisclosed Liabilities. There are no Liabilities
against, relating to or affecting the Target Company, any of its Subsidiaries
or any of their respective assets and properties.
12.8. Litigation. There is no private or governmental action, suit,
proceeding, arbitration, or, to the knowledge of the applicable Target
Shareholder or Target Shareholders, claim, inquiry, examination, inspection or
investigation pending by or before any Governmental Entity, agency, SRO, court
or tribunal, foreign or domestic or, to the knowledge of the applicable Target
Shareholder or Target Shareholders, threatened against the Target Company or
any of its Subsidiaries or any of their respective properties or assets or any
of their respective officers or directors (in their capacities as such). There
is no judgment, decree or order against the Target Company or any of its
Subsidiaries, or any of their respective directors or officers (in their
capacities as such). Neither the Target Company nor any of its Subsidiaries is
the plaintiff in any such proceeding and neither the Target Company nor any of
its Subsidiaries is contemplating commencing legal action against any other
Person.
12.9. Restrictions on Business Activities. There is no agreement,
judgment, injunction, order, ruling or decree binding upon or, to the knowledge
of the applicable Target Shareholder or Target Shareholders, threatened with
respect to the Target Company or any of its Subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or impairing any
current or currently proposed business practice of the Target Company or any of
its Subsidiaries, any acquisition of property or assets by the Target Company
or any of its Subsidiaries or the conduct of business by the Target Company or
any of its Subsidiaries as currently conducted or as proposed to be conducted
by the Target Company or any of its Subsidiaries or the properties or assets
used in their respective businesses. Neither the Target Company nor any of its
Subsidiaries currently engages in any activities other than holding member
interests or other voting or equity securities of the Company.
12.10. Compliance With Laws and Orders.
(a) The Target Company and each of its Subsidiaries has complied in
all material respects with all applicable Laws and Regulations, and is not in
violation in any material respect of, and has not received any notices of
violation with respect to, any Laws and Regulations in connection with the
conduct of its business or the ownership or operation of its business, assets
and properties.
(b) The Target Company and each of its Subsidiaries has obtained and
currently holds all licenses, permits, certificates, franchises and other
authorizations (collectively, the "Authorizations") necessary for the ownership
or use of its assets and properties and the conduct of its
24
business. The Target Company and each of its Subsidiaries has complied in all
material respects with, and is not in violation in any material respect of, any
Authorization.
12.11. Properties.
(a) Schedule 12.11(a) of the applicable Target Company Disclosure
Schedule contains a true, complete and correct list (designating the relevant
owners, lessors and lessees) of (i) all real property owned, leased or
subleased by the Target Company and its Subsidiaries and (ii) all equipment,
fixtures, stock exchange membership interests and other personal property
owned, leased, subleased or managed by the Target Company and its Subsidiaries.
A copy of all real and personal property leases and deeds of the Target Company
and its Subsidiaries have been delivered and made available to Parent by the
Target Company or its Target Shareholders.
(b) With respect to real property, if any, leased by the Target
Company and its Subsidiaries or otherwise made available to the Target Company
or its Subsidiaries for their use, the Target Company and its Subsidiaries have
the right to quiet enjoyment of such real property for the full term of each
such lease or similar agreement (and any renewal option related thereto), and
the leasehold or other interest of the Target Company or its Subsidiaries in
such real property is not subject or subordinate to any Lien (or if
subordinate, a non-disturbance agreement has been obtained by the Target
Company or its Subsidiaries from the holder of the Lien). The Target Company
and its Subsidiaries are in compliance with all terms of each such lease or
similar agreement, if any, and, to the knowledge of the applicable Target
Shareholder or Target Shareholders, the other party or parties thereto are not
in default of its or their obligations thereunder nor does any such party have
the right to terminate prior to its scheduled expiration the term of any lease
or similar agreement.
(c) Neither the whole nor any part of any real property leased, used
or occupied by the Target Company or its Subsidiaries is subject to any pending
suit for condemnation or other taking by any public authority, and, to the
knowledge of the applicable Target Shareholder or Target Shareholders, no such
condemnation or other taking is currently threatened or contemplated. The
properties leased or subleased by the Target Company and its Subsidiaries are
sufficient to conduct the operations of the Target Company and its Subsidiaries
as currently conducted, and the foregoing personal properties are in sound
operating condition and repair, normal wear and tear excepted. There has not
been any interruption of the operations of the Target Company or its
Subsidiaries due to inadequate maintenance of any such properties.
(d) The Target Company and its Subsidiaries own outright and have
good and marketable fee or leasehold title to all of their respective assets
and properties, in each case free and clear of any Lien. The Target Company and
its Subsidiaries have all necessary assets, equipment and properties to engage
in the business as currently conducted by the Target Company and its
Subsidiaries.
12.12. Intellectual Property.
(a) The Target Company and its Subsidiaries own, or are licensed or
otherwise possess legally enforceable and unencumbered rights to use all
patents, trademarks, trade names, service marks, domain names, database rights,
copyrights, and any applications therefor, maskworks, net lists, technology,
know-how, trade secrets, inventory, ideas, algorithms, processes, computer
software programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material ("Intellectual
Property") that are used or currently proposed to be used by the Target Company
and its Subsidiaries in their respective businesses as currently conducted or
as currently proposed to be conducted by the Target Company and its
Subsidiaries. Neither the Target Company nor any Subsidiary has (i) licensed
any of its Intellectual Property in source code form to any
25
party; (ii) entered into any exclusive agreements relating to its Intellectual
Property; or (iii) entered into any arrangements or agreements that could cause
an encumbrance or impairment of their Intellectual Property rights.
(b) Schedule 12.12(b) of the applicable Target Company Disclosure
Schedule lists (i) all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered and
unregistered copyrights, and maskworks included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any application for such issuance and
registration has been filed; (ii) all material licenses, sublicenses and other
agreements as to which the Target Company or any Subsidiary is a party and
pursuant to which any Person is authorized to use any Intellectual Property
(excluding commercially available, off-the-shelf software); and (iii) all
material licenses, sublicenses and other agreements as to which the Target
Company or any Subsidiary is a party and pursuant to which the Target Company
or any Subsidiary is authorized to use any third-party patents, trademarks or
copyrights, including software ("Third Party Intellectual Property Rights"),
which are incorporated in, are, or form a part of any product or service of the
Target Company or any Subsidiary (excluding commercially available, off-the-
shelf software). No royalties or other continuing payment obligations are due
in respect of Third Party Intellectual Property Rights.
(c) There is and has been no unauthorized use, disclosure,
infringement or misappropriation of any material Intellectual Property rights
of the Target Company or any of its Subsidiaries, or any Intellectual Property
right of any third party to the extent licensed by or through the Target
Company or any of its Subsidiaries, by any third party, including any employee
or former employee of the Target Company or any of its Subsidiaries. Neither
the Target Company nor any of its Subsidiaries has entered into any agreement
to indemnify any other Person against any charge of infringement of any
Intellectual Property.
(d) None of the Target Company or its Subsidiaries is, nor will any
of them be, as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to any Intellectual Property or Third
Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks, copyrights and
domain names held by the Company and its Subsidiaries are valid and subsisting.
Neither the Target Company nor any of its Subsidiaries (i) has been named as a
party in any suit, action or proceeding which involves a claim of infringement
of any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party or (ii) has brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. The marketing, licensing and sale of the products and services of the
Target Company and its Subsidiaries does not infringe any patent, trademark,
service ▇▇▇▇, copyright, or other proprietary right of any third party and has
not resulted from the misappropriation of any trade secret of any third party.
(f) The Target Company has secured valid written assignments, from
all consultants and employees who contributed to the creation or development of
Intellectual Property, of the rights to such contributions that the Target
Company or any Subsidiary does not already own by operation of law and the
Target Company and its Subsidiaries have obtained waiver of any moral rights
existing in such contributions.
(g) Neither the Target Company nor any of its Subsidiaries is
infringing or has misappropriated any Intellectual Property of any other
Person. No claim is pending, anticipated or has
26
been made to such effect that has not been resolved and none of the Target
Company or any of its Subsidiaries has received notice that it is infringing or
has misappropriated any Intellectual Property of any other Person.
(h) The Target Company and its Subsidiaries have taken reasonable
steps consistent with prevailing industry practice to protect and preserve the
confidentiality of all Intellectual Property not otherwise protected by patents
or copyrights ("Confidential Information"). All use, disclosure or
appropriation of Confidential Information owned by the Target Company or any of
its Subsidiaries by or to a third party has been pursuant to the terms of a
written agreement between the Target Company and such third party. All use,
disclosure or appropriation by the Target Company and its Subsidiaries of
Confidential Information not owned by the Target Company or any such Subsidiary
has been pursuant to and in accordance with the terms of a written agreement
between the Target Company and the owner of such Confidential Information, or
is otherwise lawful.
12.13. Taxes.
(a) The Target Company and each of its Subsidiaries has timely filed
all Tax Returns required to be filed. All such Tax Returns were true, correct,
and complete in all material respects. All Taxes owed by any of the Target
Company and its Subsidiaries (whether or not shown on any Tax Return) have been
paid within the time and in the manner prescribed by law. None of the Target
Company and its Subsidiaries currently is the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of the Target Company and its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no liens or security interests on any of the
assets of any of the Target Company and its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Each of The Target Company and its Subsidiaries has timely
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) Neither such Target Shareholder nor a director or officer (or
employee responsible for Tax matters) of any of the Target Company and its
Subsidiaries expects any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax liability of any of the Target Company and its Subsidiaries
either (A) claimed or raised by any authority in writing or (B) as to which any
of Target Shareholders and the directors and officers (and employees
responsible for Tax matters) of the Target Company and its Subsidiaries has
knowledge. Section 12.13(c) of the applicable Target Company Disclosure
Schedule lists all jurisdictions in which federal, state, local, and foreign
Tax Returns are filed with respect to any of the Target Company and its
Subsidiaries and indicates those Tax Returns that have been audited or that are
currently the subject of audit, and Target Shareholder has delivered or
otherwise made available to Parent correct and complete copies of all income
and franchise Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Target Company and its Subsidiaries
since January 1, 1998.
(d) Section 12.13(d) of the applicable Target Company Disclosure
Schedule accurately sets forth, as of December 31, 2000, the tax basis and
capital account of the Target Company in its Company membership interest, and
the tax basis of each Target Shareholder in the shares of Target Company
Capital Stock held by such Target Shareholder.
(e) No power of attorney currently in force has been granted by the
Target Company or any of its Subsidiaries with respect to any Tax matter.
27
(f) None of the Target Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency. (g) None of the Target Company
and its Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations. None of the Target Company and its Subsidiaries is
required to include in income any adjustment pursuant to Code Section 481(a) by
reason of a change in accounting method. None of the Target Company and its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 162(m) or
280G. None of the Target Company and its Subsidiaries has been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). Each
of the Target Company and its Subsidiaries has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
None of the Target Company and its Subsidiaries is a party to any Tax
allocation, Tax sharing or Tax indemnity agreement. None of the Target Company
and its Subsidiaries (i) has been a member of an affiliated group (within the
meaning of Code Section 1504 or any similar provision of state, local, or
foreign law) filing a consolidated Tax Return, or (ii) has any liability for
the Taxes of any Person (other than any of the Target Company and its
Subsidiaries) under Treasury Regulation ss. 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise. None of the Target Company and its Subsidiaries has a material item
of income or gain reported for financial reporting purposes in a pre-Closing
period which is required to be included in taxable income for a post-Closing
period.
(h) The Target Company and its Subsidiaries have not received a Tax
Ruling or entered into a Closing Agreement with any Tax authority that could
have a continuing adverse effect upon the Target Company and its Subsidiaries
after the Closing Date. The term "Tax Ruling" shall mean a written ruling of a
Taxing authority relating to Taxes. The term "Closing Agreement" shall mean a
written and legally binding agreement with a Taxing Authority relating to
Taxes.
(i) The Target Company and its Subsidiaries have established (and
until the Closing Date will maintain) on their respective books and records
accruals adequate to pay all Taxes not yet due and payable in accordance with
generally accepted accounting principles.
(j) The Target Company has validly elected to be an "S corporation"
(within the meaning of Code Section 1361(a)(1)) for federal income tax
purposes, and has maintained its status as an "S corporation" at all times
after December 31, 1990 or, if later, the date of its formation and prior to
the Closing Date. The Target Company has validly elected to be an "S
corporation" in all state and local jurisdictions where it would, absent such
an election, be subject to corporate income or franchise tax as of the date of
its formation and has maintained its status as an "S corporation" in such
jurisdictions at all times thereafter. No state of facts exists or existed
which presents or presented a material risk that the Target Company's status as
an "S corporation" is or was subject to termination or revocation. The Target
Company has no subchapter C earnings and profits as of the Closing Date.
12.14. Employee Benefit Plans.
(a) Schedule 12.14(a) of the applicable Target Company Disclosure
Schedule lists, with respect to the Target Company, each Subsidiary of the
Target Company and any trade or business (whether or not incorporated) which is
treated as a single employer with the Company (an "ERISA Affiliate") within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
28
ERISA, (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), whether
written or oral, and whether or not subject to ERISA, maintained by,
contributed to, or sponsored by the Target Company or any ERISA Affiliate, (ii)
any other supplemental retirement, severance, sabbatical, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements maintained by,
contributed to, or sponsored by the Target Company or any ERISA Affiliate,
(iii) all other bonus, pension, profit sharing, savings, deferred compensation
or incentive plans, programs or arrangements maintained by, contributed to, or
sponsored by the Target Company or any ERISA Affiliate, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to employees or
former employees of the Target Company or any ERISA Affiliate, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, of the Target Company or any ERISA Affiliate, or relating
to, any present or former employee, consultant or director of the Target
Company (together, the "Target Company Employee Plans").
(b) The Target Company has provided or otherwise made available to
Parent a copy of each of the Target Company Employee Plans and related plan
documents (including trust documents, insurance policies or contracts, employee
booklets, summary plan descriptions, amendments and other authorizing
documents, and any material employee communications relating thereto, if
applicable) and has, with respect to each of the Target Company Employee Plans
which is subject to ERISA reporting requirements, provided copies of the Form
5500 reports, financial statements and actuarial reports filed for the last
three plan years. Any of the Target Company Employee Plans intended to be
qualified under Section 401(a) of the Code has obtained from the Internal
Revenue Service a favorable determination letter as to its qualified status
under the Code (which has not been revoked, modified or limited). The Target
Company has also furnished Parent with a copy of the most recent Internal
Revenue Service determination letter issued with respect to each such Target
Company Employee Plan, and nothing has occurred since the issuance of each such
letter which could reasonably be expected to adversely affect the tax-qualified
status of any of the Target Company Employee Plans subject to Code Section
401(a).
(c) (i) None of the Target Company Employee Plans that is a "welfare
benefit plan" as defined in Section 3(1) of ERISA (i) provides for continuing
benefits or coverage for any participant or beneficiary or covered dependent of
a participant after such participant's termination of employment, except to the
extent required by law or (ii) are "multiple employer welfare arrangements"
within the meaning of Section 3(40) of ERISA. None of the Company, each
Subsidiary of the Target Company nor any ERISA Affiliate maintains or has any
obligation to contribute to any "voluntary employee beneficiary association"
within the meaning of Section 501(c)(9) of the Code or other funding
arrangement for the provision of welfare benefits. There has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code with respect to any Target Company Employee Plan other
than a transaction that is exempt under a statutory or administrative
exemption. Each of the Target Company Employee Plans has been administered in
all material respects in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), and the Target Company and each Subsidiary of
the Target Company or ERISA Affiliate have performed all obligations required
to be performed by them under, and are not in default under or violation of,
the terms of any Target Company Employee Plans. Neither the Target Company nor
any ERISA Affiliate is subject to any liability or penalty under Sections 4976
through 4980 of the Code or Title I of ERISA with respect to any of the Target
Company Employee Plans. All contributions, premiums and other payments required
by law required to be made by the Target Company or any Subsidiary or ERISA
Affiliate to any Target Company Employee Plan have been made on or before their
due dates and the amounts accrued in the Target Company Financial Statements
for contributions to each Target Company Employee Plan for the current plan
years have been determined in accordance with generally accepted accounting
principles consistently applied. With respect to each
29
Target Company Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the thirty (30) day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA has
occurred. Each Target Company Employee Plan which provides medical, dental,
health or long-term disability benefits is fully insured and claims with
respect to any participant or covered dependent under such Target Company
Employee Plan could not result in any uninsured liability to the Target
Company, any Subsidiary or the Parent. Each Target Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent or the Target Company
other than liability for administrative expenses typically incurred in a
termination event. With respect to each Target Company Employee Plan subject to
ERISA as either an employee pension plan within the meaning of Section 3(2) of
ERISA or an employee welfare benefit plan within the meaning of Section 3(1) of
ERISA, the Target Company has prepared in good faith and timely filed all
requisite governmental reports (which were true and correct in all material
respects as of the date filed) and has properly and timely filed and
distributed or posted all material notices and reports to employees required to
be filed, distributed or posted with respect to each such Target Company
Employee Plan. No suit, arbitration, administrative proceeding, action or other
litigation has been brought, or to the knowledge of the Target Company is
threatened, against or with respect to any such Target Company Employee Plan,
including any audit or examination by the IRS or United States Department of
Labor. No Target Company Employee Plan exists which could result in the payment
of money or any other property or rights, or accelerate or provide any other
rights or benefits, to any current or former employee of the Company or any
Subsidiary (or other current or former service provider thereto) that would not
have been required but for the transactions provided for herein, and none of
the Company or any Subsidiary, nor any of their respective affiliates, is a
party to any plan, program, arrangement or understanding that would result,
separately or in the aggregate, in the payment (whether in connection with any
termination of employment or otherwise) of any "excess parachute payment"
within the meaning of Section 280G of the Code with respect to a current or
former employee of, or current or former independent contractor to, any of the
Company or any Subsidiary. Neither the Target Company nor any ERISA Affiliate
is a party to, or has ever been a party to, or has made any contribution to or
otherwise incurred any obligation under, any "multiemployer plan" as defined in
Section 3(37) of ERISA. Neither the Target Company nor any Subsidiary or ERISA
Affiliate currently maintains, sponsors, participates in or contributes to, nor
has it within the last seven (7) years maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(d) With respect to each Target Company Employee Plan, the Target
Company and each of its Subsidiaries have complied (except to the extent that
any such failure to comply would not have a Material Adverse Effect on the
Target Company) with (i) the applicable health care continuation and notice
provisions of Sections 601 through 608 of ERISA and Section 4980B of the Code
("COBRA") and the regulations thereunder, (ii) the applicable requirements of
the Family Medical and Leave Act of 1993 and the regulations thereunder, and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996.
(e) There has been no amendment to, or written interpretation or
announcement (whether or not written) by the Target Company or any ERISA
Affiliate relating to, or change in participation or coverage under, any Target
Company Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal year.
(f) No employee of the Target Company or any of its Subsidiaries has
elected to defer (i) the receipt of any cash payable to such employee or (ii)
the issuance of any securities of the Target Company to such employee.
30
(g) No plan other than a Target Company Employee Plan is or will be
directly or indirectly binding on Parent, the Company or any affiliate of
Parent or the Company, by virtue of the transactions contemplated hereby.
Parent, and its affiliates, including on and after the Closing, the Target
Company and any Subsidiary of the Target Company, shall have no liability for,
under, with respect to or otherwise in connection with any plan, which
liability arises under ERISA or the Code, by virtue of the Target Company or
any such Subsidiary being aggregated in a controlled group or affiliated
service group with any ERISA Affiliate for purposes of ERISA or the Code at any
relevant time prior to the Closing.
(h) Neither the Target Company nor any Subsidiary has agreed or
otherwise committed to, whether in writing or otherwise, to increase or improve
the compensation, benefits or terms and conditions of employment or service of
any director, officer, employee or consultant.
(i) The Target Company and each Subsidiary has properly classified
for all purposes (including, without limitation, for all tax purposes and for
purposes of determining eligibility to participate in any Target Company
Employee Plan) all employees, leased employees, consultants and independent
contractors, and has withheld and paid all applicable taxes and made all
appropriate filings in connection with services provided by such persons to the
Target Company and any Subsidiary.
(j) No event has occurred and no condition exists, with respect to
any Target Company Employee Plan that could subject Parent or any of its
affiliates, or any plan maintained by Parent or any affiliate (other than an
affiliate which becomes such pursuant to the transaction contemplated by this
Agreement) thereof, to any tax, fine, penalty or other liability, that would
not have been incurred by Parent or any of its affiliates, or any such plan,
but for the transactions contemplated hereby.
12.15. Employee Matters. The Target Company and each of its
Subsidiaries are in compliance in all respects with all currently applicable
laws and regulations respecting employment, discrimination in employment,
affirmative action, terms and conditions of employment, wages, hours and
occupational safety and health, workers' compensation and employment practices,
and are not engaged in any unfair labor practice. The Target Company and each
of its Subsidiaries have withheld all material amounts required by law or by
agreement to be withheld from the wages, salaries, and other payments to
employees, and are not liable for any material arrears of wages or any material
taxes or any material penalty for failure to comply with any of the foregoing.
The Target Company is not liable for any material payment to any trust or other
fund or to any Governmental Entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and
consistent with past practice). There are no pending claims against the Target
Company or any of its Subsidiaries under any workers compensation plan or
policy or for long-term disability other than routine claims for benefits.
There are no controversies pending or, to the knowledge of the applicable
Target Shareholder, threatened between the Target Company or any of its
Subsidiaries, on the one hand, and any of their respective employees or former
employees, on the other hand, which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic.
Neither the Target Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract; nor does any of
the applicable Target Shareholders know of any activities or proceedings of any
labor union to organize any such employees. To the knowledge of the applicable
Target Shareholder or Target Shareholders, no employees of the Target Company
are in violation in any respect of any term of any employment contract, patent
disclosure agreement, noncompetition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Target Company because of the nature of the business conducted or presently
proposed to be conducted by the Target Company or to the use of trade secrets
or proprietary information of others. Neither the Target Company nor any
Subsidiary has any employment
31
agreement with any of their respective officers or other employees. As of the
date hereof, no employees (other than clerical or solely administrative
employees) of the Target Company have given notice to the Target Company, nor
is the Target Company otherwise aware, that any such employee intends to
terminate his or her employment with the Target Company. Schedule 12.15 of the
applicable Target Company Disclosure Schedule sets forth a true and correct
list of all full and part-time employees of the Target Company and its
Subsidiaries, including the position held by such employee, the date such
employee was hired, and the total compensation, including any bonuses
(including, without limitation, incentive schemes and benefits) received by
such employee per annum.
12.16. Interested Party Transactions.
(a) Except for transactions for compensation of employees, every
transaction between the Target Company and any of its "Affiliates" or their
"Associates" (as such terms are defined in the rules and regulations of the
SEC), which is currently in effect or was consummated since January 1, 1999 and
which involved the payment, or receipt, of money, benefits or other
compensation is set forth on Schedule 12.16(a) of the applicable Target Company
Disclosure Schedule. Schedule 12.16(a) of the applicable Target Company
Disclosure Schedule also lists any business arrangement, relationship or
transaction (including, without limitation, any loan) between the Target
Company or any of its Subsidiaries and any shareholder, director or officer of
the Target Company or any of its Subsidiaries or between the Target Company or
any of its Subsidiaries and any company, partnership, business trust,
association or similar organization in which a shareholder, director or officer
of the Target Company or any of its Subsidiaries has a controlling interest
(each shareholder, director and officer and any entity controlled by such
person referred to as a "Regulatory Affiliate"). For purposes of determining
who is a Regulatory Affiliate, control means the power to vote twenty-five
percent (25%) or more of any class of voting securities or other evidence of
ownership interests in such corporation, partnership, business trust,
association or similar organization, or the control of the election of a
majority of the directors or trustees (or individuals holding similar
positions) of such other entity.
(b) Schedule 2 attached to this Agreement contains a true and
complete list of all persons who may be deemed to be an Affiliate of the Target
Company.
12.17. Insurance. The Target Company previously has delivered to
Parent a complete and accurate list of all liability, property, workers'
compensation, directors' and officers' liability, "key man" life and other
insurance policies in effect that are owned by the Target Company or any of its
Subsidiaries, or under which the Target Company or any of its Subsidiaries is a
named insured. There is no claim pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and the Target Company and its Subsidiaries are
otherwise in compliance with the terms of such policies and bonds and such
policies and bonds and the coverages thereunder are in full force and effect.
The applicable Target Shareholder or Target Shareholders have no knowledge of
any threatened termination of, or premium increase with respect to, any of such
policies.
12.18. Regulatory Matters.
(a) Neither the Target Company nor any of its Subsidiaries is subject
to registration under the Investment Company Act of 1940, as amended (the "1940
Act"), or similar laws of any foreign Governmental Entity. The Target Company,
each of its Subsidiaries and each of their respective employees, agents,
associates or contractors who are required to be registered as a broker-dealer,
investment adviser, registered representative or other applicable registration
category with the SEC, the securities commission of any state or foreign
jurisdiction or any SRO are duly registered as such and such registrations are
in full force and effect. All federal, state and foreign registration
requirements
32
have been complied with and such registrations as currently filed, and all
periodic reports required to be filed with respect thereto, are accurate and
complete in all material respects.
(b) Neither the applicable Target Shareholder nor the Target Company
is aware of any facts or circumstances that would (i) cause the NASD or the CHX
to not approve the transfer of control and indirect ownership of the Company
from the Target Shareholders to Parent; (ii) cause the NASD, the CHX or any
federal or state regulatory agency or other Governmental Entity or SRO to
revoke or restrict the Company's Authorizations to operate as a broker-dealer
after the change in ownership and control of the Company contemplated by this
Agreement; (iii) cause the CHX to effect a reassignment of securities assigned
to the Company and in which the Company has privileges to act as specialist
under CHX laws and regulations; or (iv) cause Parent to be deemed to directly
or indirectly control, or be controlled by, or under common control with, an
entity that owns or has the voting power of 10% or more of the outstanding
memberships on the CHX after the change in ownership and control of the Company
contemplated by this Agreement.
(c) Neither the Target Company nor any of its Subsidiaries is subject
to any cease-and-desist or other order or enforcement action issued by, or
party to any written agreement, consent agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or has been ordered to pay any
civil penalty by, or is a recipient of any supervisory letter from, or has
adopted any board or member resolutions at the request or suggestion of, any
regulatory authority or other Governmental Entity that restricts the conduct of
its business or that in any manner relates to its capital adequacy, its ability
to pay dividends, its credit or risk management policies, its management, its
trading privileges or its business (each, a "Regulatory Agreement"), nor has
the Target Company or any of its Subsidiaries been advised in any other manner
by any regulatory authority or Governmental Entity that it is considering
issuing or requesting such a Regulatory Agreement nor is there any pending or,
to the knowledge of the applicable Target Shareholder or Target Shareholders,
threatened regulatory investigation. None of the Target Company, any of its
Subsidiaries or any of their respective associated persons (as defined in
Section 3(a)(21) of the Securities Exchange Act of 1934, as amended (the "1934
Act")) has been convicted within the past ten years of any felony or
misdemeanor described in Section 15(b)(4) of the 1934 Act, or is, by reason of
any misconduct, permanently or temporarily enjoined from acting in the
capacities, or engaging in the activities, described in Section 15(b)(4)(C) of
the ▇▇▇▇ ▇▇▇.
12.19. Target Company Material Contracts.
(a) Neither the Target Company nor any of its Subsidiaries is a party
to or bound by any of the following (collectively, the "Target Company Material
Contracts"):
(i) any contract or agreement for the acquisition of the securities
or any material portion of the assets of any other Person or entity;
(ii) any contract or agreement for the purchase of materials,
supplies, equipment or services;
(iii) any contract, agreement or instrument that expires or may be
renewed at the option of any Person other than the Target Company or its
Subsidiaries so as to expire more than one year after the date of this
Agreement;
(iv) any trust indenture, mortgage, promissory note, loan agreement
or other contract, agreement or instrument for the borrowing of money, any
currency exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with
33
GAAP, in each case, where the Target Company or any of its Subsidiaries is
a lender, borrower or guarantor;
(v) any contract or agreement for capital expenditures;
(vi) any contract or agreement limiting the freedom of the Target
Company, any of its Subsidiaries or any of their respective employees to
engage in any line of business or to compete with any other Person, or
under the constitution, laws, rules or regulations of any SRO, or any
confidentiality, secrecy or non-disclosure contract or agreement;
(vii) any contract or agreement pursuant to which the Target Company
or any of its Subsidiaries is a lessor of any machinery, equipment, motor
vehicles, office furniture, fixtures or other personal property;
(viii) any contract or agreement with any Person with whom the Target
Company or any of its Subsidiaries does not deal at arm's length;
(ix) any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other Person other than those entered
into in the ordinary course of operating a mortgage lending business;
(x) any material agreement which would be terminable other than by
the Target Company or its Subsidiaries as a result of the consummation of
the transactions contemplated by this Agreement;
(xi) any alliance, cooperation, joint venture, shareholders',
partnership or similar agreement;
(xii) any broker, distributor, dealer, agency, sales promotion,
market research, market consulting or advertising agreement;
(xiii) any research, development, sales representative, marketing or
reseller agreement, or any service, support or maintenance agreement
related to the business or technology of the Target Company;
(xiv) any agreement, option or commitment or right with, or held by,
any third party to acquire, use or have access to any assets or
properties, or any interest therein, of the Target Company;
(xv) any agreement which, if terminated, could not be readily
replaced;
(xvi) any license, sublicense or development agreement or other
agreement that affects the Intellectual Property of the Target Company or
its Subsidiaries or any Third Party Intellectual Property Rights ;
(xvii) any agreement relating to its voting or equity securities;
(xviii) any contract or agreement which would require any consent or
approval of a counterparty as a result of the consummation of the
transactions contemplated by this Agreement; or
(xix) any other contract or agreement (whether written or oral).
34
(b) Each of the Target Company and its Subsidiaries has performed all
of the obligations required to be performed by it and is entitled to all
accrued benefits under, and is not in default in respect of, each Target
Company Material Contract to which it is a party or by which it is bound. Each
of the Target Company Material Contracts is in full force and effect,
unamended, and there exists no default or event of default or event,
occurrence, condition or act, with respect to the Target Company or any of its
Subsidiaries or, to the knowledge of the applicable Target Shareholder or
Target Shareholders, with respect to any other contracting party, which, with
the giving of notice, the lapse of the time or the happening of any other event
or condition, would become a default or event of default under any Target
Company Material Contract. True, correct and complete copies of all Target
Company Material Contracts have been delivered to Parent.
12.20. State Takeover Statutes. No state takeover statute is
applicable to the Merger to which the Target Company is a party, this Agreement
or the Collateral Documents to which such Target Shareholder is a party or the
transactions contemplated hereby or thereby.
12.21. Bank Accounts, Letters of Credit and Powers of Attorney.
Schedule 12.21 of the applicable Target Company Disclosure Schedule contains a
complete and accurate list of (a) all bank accounts, lock boxes and safe
deposit boxes relating to the business and operations of the Target Company and
its Subsidiaries (including the name of the bank or other institution where
such account or box is located and the name of each authorized signatory
thereto), (b) all outstanding letters of credit issued by financial
institutions for the account of the Target Company and its Subsidiaries
(setting forth, in each case, the financial institution issuing such letter of
credit, the maximum amount available under such letter of credit, the terms
(including the expiration date) of such letter of credit and the party or
parties in whose favor such letter of credit was issued), and (c) the name and
address of each Person who has a power of attorney to act on behalf of the
Target Company or any of its Subsidiaries. The Target Company has heretofore
delivered to Parent true, correct and complete copies of each letter of credit
and each power of attorney described on Schedule 12.21 of the applicable Target
Company Disclosure Schedule.
12.22. Brokers' and Finders' Fees. The Target Company has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment bankers' fees
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
12.23. Books and Records. The minute books and other similar records
of the Target Company and its Subsidiaries as delivered to Parent prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all actions taken at all meetings and by all written consents in
lieu of meetings of the shareholders, members, the boards of directors or other
governing body and committees of the boards of directors or other governing
body of the Target Company and its Subsidiaries. The stock transfer ledgers and
other similar records of the Target Company and its Subsidiaries as delivered
to Parent prior to the execution of this Agreement contain true and complete
records, in all material respects, of all stock transfers related to the Target
Company's capital stock or other voting or equity securities. The Target
Company has delivered to Parent a true and correct copy of the certificate or
articles of incorporation or other comparable organizational documents, as
amended, and bylaws, as amended or other comparable organizational documents,
each as amended, of the Target Company and each of its Subsidiaries. Neither
the Target Company nor any of its Subsidiaries is in violation of any of the
provisions of its certificate or articles of incorporation or bylaws or other
comparable organizational documents, each as amended.
12.24. Representations Complete. None of the representations or
warranties made by such Target Shareholder herein or in any schedule hereto,
including the applicable Target Company
35
Disclosure Schedule, or certificate furnished by such Target Shareholder
pursuant to this Agreement, when all such documents are read together in their
entirety, contains or will contain at the Effective Time any untrue statement
of a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading in
any material respect.
36
ARTICLE XIIA
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇
▇▇▇▇▇ represents and warrants to Parent and ▇▇▇▇▇ Acquisition as
follows:
12A.1. Organization, Standing and Power. ▇▇▇▇▇ is a limited liability
company, duly formed, validly existing and in good standing under the laws of
the State of Delaware. ▇▇▇▇▇ has the limited liability company power to own,
use and lease its assets and properties and to carry on its business as now
being conducted.
12A.2. Title to ▇▇▇▇▇ Member Interests. The ▇▇▇▇▇ Member Interests
(i) are owned on the date of this Agreement legally, beneficially and of record
by ▇▇▇▇▇; (ii) will be owned legally, beneficially and of record immediately
prior to the Closing by ▇▇▇▇▇, free and clear of any Liens; and (iii)
constitute all of the member interests and other equity or voting securities of
the Company owned legally, beneficially or of record by ▇▇▇▇▇. ▇▇▇▇▇ has not
granted to any Person any rights (including without limitation proxy rights or
options with respect to any ▇▇▇▇▇ Member Interests) and ▇▇▇▇▇ is not a party to
any voting trust or other agreement or understanding with respect to such ▇▇▇▇▇
Member Interests.
12A.3. Authority; No Conflicts. ▇▇▇▇▇ has all requisite limited
liability company power and authority to enter into this Agreement and the
Collateral Documents to which ▇▇▇▇▇ is party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each of the Collateral Documents to which ▇▇▇▇▇ is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary limited liability action on the part of ▇▇▇▇▇. This
Agreement and the Collateral Documents to which ▇▇▇▇▇ is a party have been duly
executed and delivered by ▇▇▇▇▇ and each constitutes the legal, valid and
binding obligation of ▇▇▇▇▇, enforceable against ▇▇▇▇▇ in accordance with its
terms, except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally, or (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in
equity or at law. Neither the execution and delivery of this Agreement nor any
of the Collateral Documents to which ▇▇▇▇▇ is a party, nor the performance by
▇▇▇▇▇ of the transactions contemplated hereby or thereby, will (i) violate or
constitute a default, or require notice and/or consent under, the corporate
organizational and other governing documents of ▇▇▇▇▇ or any mortgage,
indenture, deed of trust, lease, contract, agreement, license or other
instrument, permit, concession, franchise, judgment, order, decree or ruling to
which ▇▇▇▇▇ is a party or by which ▇▇▇▇▇'▇ assets or property are bound; (ii)
violate any Laws and Regulations applicable to ▇▇▇▇▇; or (iii) result in the
creation of any Lien upon the ▇▇▇▇▇ Member Interests.
12A.4. Investment Representations. ▇▇▇▇▇ understands and acknowledges
that the shares of Parent Common Stock being acquired by ▇▇▇▇▇ pursuant to this
Agreement are not registered under the Securities Act, or any applicable state
securities law, and that such shares of Parent Common Stock may not be
transferred or sold except pursuant to the registration provisions of the
Securities Act or pursuant to an applicable exemption therefrom and pursuant to
applicable state securities laws and regulations, and that the shares of Parent
Common Stock being issued to ▇▇▇▇▇ in the ▇▇▇▇▇ Interest Purchase will bear
appropriate legends to that effect.
12A.5. Government Consents. Except for the consents, actions and
filings described in Section 12.4(c) and Section 13.3(c) of this Agreement, the
execution delivery and performance of this Agreement by ▇▇▇▇▇ does not require
any consent from, action by or in respect of, or filing with, any court or
Governmental Entity.
37
12A.6. Investment Purpose. The shares of Parent Common Stock being
received by ▇▇▇▇▇ in the ▇▇▇▇▇ Interest Purchase are being acquired for ▇▇▇▇▇'▇
own account, for the purpose of investment and without a view to the
distribution or resale of such shares of Parent Common Stock or any interest
therein to the public in violation of the Securities Act. ▇▇▇▇▇ has such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in shares of Parent Common
Stock and is capable of bearing the economic risk of such investment. ▇▇▇▇▇ has
been provided, to its satisfaction, the opportunity to ask questions concerning
the terms and conditions of the offering and sale of the shares of Parent
Common Stock and issuance of the Parent Common Stock pursuant to this
Agreement, has had all such questions answered to its satisfaction and has been
supplied all additional information deemed necessary by it to verify the
accuracy of the information furnished to ▇▇▇▇▇.
12A.7. Accredited Investor. ▇▇▇▇▇ is an "accredited investor" under
Rule 501 of Regulation D of the Securities Act.
38
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS
WITH RESPECT TO THE COMPANY
Except as disclosed in the document delivered by the Principals to
Parent prior to the execution and delivery of this Agreement and referring to
the representations and warranties in this Agreement with respect to the
Company (the "Company Disclosure Schedule"), any exception so disclosed in the
Company Disclosure Schedule to specifically identify the Section of this
Agreement to which such exception relates, including through the use of
specific cross references, each of the Principals (jointly and severally)
represent and warrant to Parent and each of the Merger Subs as follows:
13.1. Organization, Standing and Power; Subsidiaries.
(a) The Company and each of its Subsidiaries is a limited liability
company or a corporation, as the case may be, duly formed or organized, as the
case may be, validly existing and in good standing under the laws of its
jurisdiction of formation or organization, as the case may be. The Company and
each of its Subsidiaries has the limited liability company or corporate power,
as the case may be, to own, use and lease its assets and properties and to
carry on its business as now being conducted and is duly qualified or licensed
as a foreign corporation or limited liability company, as the case may be, to
do business and is in good standing in each jurisdiction where the nature of
its business or the ownership, leasing or operation of its assets and
properties render such qualification, license or good standing necessary,
except in such jurisdictions where the failure to be so qualified or licensed
as a foreign limited liability company or corporation, as the case may be, and
in good standing would not have a Material Adverse Effect on the Company.
Schedule 13.1(a) of the Company Disclosure Schedule lists all of the states or
other jurisdictions where the Company or any of its Subsidiaries are qualified
or licensed as a foreign limited liability company or corporation, as the case
may be.
(b) Schedule 13.1(b) of the Company Disclosure Schedule sets forth a
true and complete list of the Company's Subsidiaries. The Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity. All of the outstanding shares of capital stock, member
interests, voting and equity securities of each of the Company's Subsidiaries
are owned, directly or indirectly, by the Company and are duly authorized,
validly issued, fully paid and nonassessable, and those shares of capital
stock, member interests, voting and equity securities of each of the Company's
Subsidiaries are free and clear of all Liens. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable,
exercisable or convertible securities or other commitments or agreements of any
character relating to the issued or unissued capital stock or other securities
of any such Subsidiary, or otherwise obligating the Company or any such
Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire any
such securities.
13.2. Capital Structure. The capitalization of the Company is set
forth on Schedule 13.2 of the Company Disclosure Schedule. There are no other
authorized or outstanding member interests or other classes of securities
carrying voting rights or economic interests with respect to the Company and no
outstanding commitments to issue any member interests or other voting or equity
securities. All outstanding member interests set forth on Schedule 13.2 of the
Company Disclosure Schedule are duly authorized, validly issued, fully paid and
non-assessable and are free and clear of any Liens, and are not subject to
preemptive rights or rights of first refusal or any agreement to which the
Company or any Target Shareholder, Target Company, or other member of the
Company is a party or by which any of the foregoing is bound. The Company has
not authorized or issued, and does not have, any
39
options, warrants, calls, rights (including phantom unit or profit
participation rights), commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any member interests or other voting or equity
securities, as the case may be, of the Company or obligating the Company to
grant, extend, accelerate the vesting of, change the price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment or
agreement. Except for this Agreement, there are no contracts, commitments or
agreements relating to voting, purchase or sale of the Company's member
interests or other voting or equity securities between or among the Company and
any of its members or other security holders. All outstanding member interests
and other voting or equity securities of the Company were issued in compliance
with all applicable federal and state securities laws.
13.3. Authority; No Conflicts.
(a) Assuming the filings and approvals described in clauses (i)
through (vi) of Section 13.3(c) (collectively, the "Company Approvals") and the
Target Company Approvals are made or obtained (as the case may be), the Company
has all requisite limited liability company power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
limited liability company and member action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by (i) the effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or relating to
the rights of creditors generally, or (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
(b) Assuming the Company Approvals and the Target Company Approvals
are made or obtained (as the case may be), the execution, delivery and
performance of this Agreement by the Company does not, and the consummation of
the transactions contemplated hereby do not and will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under, (i) any provision
of the Operating Agreement, articles or certificate of incorporation, bylaws or
any other comparable organizational documents, each as amended, of the Company
or any of its Subsidiaries; (ii) any mortgage, indenture, deed of trust, lease,
contract, agreement, license or other instrument, permit, concession,
franchise, judgment, order, decree or ruling to which the Company or any of its
Subsidiaries is a party or by which the Company's or any of its Subsidiaries'
assets or properties are bound; or (iii) any Laws and Regulations applicable to
the Company or any of its Subsidiaries or any of their respective properties or
assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any SRO or other Governmental Entity, is required
by or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement, the performance of the Company's
obligations hereunder or the consummation of the transactions contemplated
hereby, except for (i) the filing of the articles or certificate of merger, as
the case may be, with respect to the Mergers; (ii) such notices, applications,
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal or state securities laws,
SRO rules and regulations or the securities laws of any foreign country in
connection with the Mergers; (iii) the notification requirements of the HSR
Act; (iv) the application for continuance in membership notification
requirement of Rule 1017 of the NASD; (v) the submission of information to the
Specialist Assignment and Evaluation Committee of the CHX and any other
interested CHX body; (vi) the consents, approvals,
40
orders, authorizations, registrations, declarations and filings set forth on
Schedule 13.3(c) of the Company Disclosure Schedule; and (vii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made would not prevent, or materially alter or delay, any of the
transactions contemplated by this Agreement.
13.4. Financial Statements.
(a) The Company has furnished to Parent true and complete copies of
the following consolidated financial statements of the Company and its
Subsidiaries (the "Financial Statements"):
(i) audited balance sheets as of December 31, 2000 (the "Audited
Balance Sheet"), December 31, 1999 and December 31, 1998;
(ii) audited statements of operations, members' equity and cash flows
for the periods ended December 31, 2000, December 31, 1999 and December
31, 1998;
(iii) unaudited balance sheet of the Company as of July 31, 2001 (the
"Unaudited Balance Sheet"); and
(iv) unaudited statements of operations, members' equity and cash
flows of the Company for the four months ended July 31, 2001.
(b) The Financial Statements were prepared in accordance with GAAP
applied on a basis consistent with that of preceding accounting periods except
that the unaudited Financial Statements do not include notes and are subject to
normal year-end adjustments. All of the Financial Statements (i) were prepared
in accordance with the books of account and other financial records of the
Company and (ii) fairly present in all material respects the financial
condition of the Company and its Subsidiaries as of the respective dates
thereof.
13.5. Absence of Certain Changes. Since the date of the Audited
Balance Sheet, the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with past practice and there has
not occurred: (i) a Material Adverse Effect with respect to the Company; (ii)
any acquisition, sale or transfer of any material asset or property of the
Company or any of its Subsidiaries, other than in the ordinary course of
business and consistent with past practice or any impairment, damage,
destruction, loss or claim not covered by insurance, or condemnation or other
taking adversely in any respect any of the Company's or any of its
Subsidiaries' tangible assets; (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by the Company or any revaluation by the Company of any of its or any of
its Subsidiaries' assets; (iv) any declaration, setting aside, or payment of a
distribution or dividend with respect to the member interests or other voting
or equity securities of the Company, or any direct or indirect redemption,
purchase or other acquisition by the Company of any of its member interests or
other voting or equity securities; (v) any material contract entered into by
the Company or any of its Subsidiaries, other than in the ordinary course of
business and as made available to Parent, or any amendment or termination of,
or default under, any contract to which the Company or any of its Subsidiaries
is a party or by which it or any of its assets or properties is bound; (vi) any
amendment or change to the Operating Agreement, articles or certificate of
incorporation, bylaws or any other comparable organizational documents, each as
amended, of the Company or any of its Subsidiaries; (vii) any material increase
in or modification of the compensation or benefits payable or to become payable
by the Company or any of its Subsidiaries to any of their respective directors,
officers or employees, other than (in the case of non-executive officer
employees) in the ordinary course of business consistent with past practice;
(viii) any material change in
41
the risk management policies, policies and practices relating to purchasing,
marketing, selling, pricing and hedging practices of the Company or any of its
Subsidiaries, or any failure to comply with such policies, procedures and
practices; (ix) any write down or write up (or failure to write down or write
up in accordance with GAAP consistent with past practice) of the value of any
receivables or revalued assets of the Company or any of its Subsidiaries other
than in the ordinary course of business consistent with past practice and in
accordance with GAAP; (x) any lapse or termination of or failure to renew any
material license or permit that was issued or relates to the Company or any of
its Subsidiaries or failure to renew any insurance policy that is scheduled to
expire within 45 days of the Closing Date; or (xi) any negotiation or agreement
by the Company or any of its Subsidiaries to do any of the things described in
the preceding clauses (i) through (x) (other than negotiations with Parent and
its Representatives regarding the transactions contemplated by this Agreement).
13.6. Absence of Undisclosed Liabilities. There are no Liabilities
against, relating to or affecting the Company, any of its Subsidiaries or any
of their respective assets and properties other than (i) those reflected or
reserved against on the Unaudited Balance Sheet or (ii) those incurred in the
ordinary course of business consistent with past practice since the date of the
Audited Balance Sheet and which have not had a Material Adverse Effect on the
Company.
13.7. Litigation. There is no private or governmental action, suit,
proceeding, arbitration, or, to the knowledge of the Principals, claim,
inquiry, examination, inspection or investigation pending by or before any
Governmental Entity, agency, SRO, court or tribunal, foreign or domestic or, to
the knowledge of the Principals, threatened against the Company or any of its
Subsidiaries or any of their respective properties or assets or any of their
respective officers or directors (in their capacities as such). There is no
judgment, decree or order against the Company or any of its Subsidiaries, or
any of their respective directors or officers (in their capacities as such).
Neither the Company nor any of its Subsidiaries is the plaintiff in any such
proceeding and neither the Company nor any of its Subsidiaries is contemplating
commencing legal action against any other Person.
13.8. Restrictions on Business Activities. There is no agreement,
judgment, injunction, order, ruling or decree binding upon or, to the knowledge
of the Principals, threatened with respect to the Company or any of its
Subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing any current or currently proposed business practice of
the Company or any of its Subsidiaries, any acquisition of property or assets
by the Company or any of its Subsidiaries or the conduct of business by the
Company or any of its Subsidiaries as currently conducted or as proposed to be
conducted by the Company or any of its Subsidiaries or the properties or assets
used in their respective businesses.
13.9. Compliance With Laws and Orders.
(a) The Company and each of its Subsidiaries has complied in all
material respects with all applicable Laws and Regulations, and is not in
violation in any material respect of, and has not received any notices of
violation with respect to, any Laws and Regulations in connection with the
conduct of its business or the ownership or operation of its business, assets
and properties.
(b) The Company and each of its Subsidiaries has obtained and
currently holds all Authorizations necessary for the ownership or use of its
assets and properties and the conduct of its business. The Company and each of
its Subsidiaries has complied in all material respects with, and is not in
violation in any material respect of, any Authorization.
42
(c) Schedule 13.9(c) of the Company Disclosure Schedule sets forth a
brief description of each Governmental Order applicable to the Company or any
of its Subsidiaries and no such Governmental Order has had a Material Adverse
Effect on the Company.
(d) Schedule 13.9(d) of the Company Disclosure Schedule sets forth
all Governmental Entities with which the Company or any of its Subsidiaries is
required to be registered as a broker-dealer or, with respect to SRO, is a
member or member organization, as of the date of this Agreement (a
"Broker-Dealer"); and neither the Company nor any Subsidiary, by virtue of
their respective Broker-Dealer activities, is required to be registered in or
obtain a license or similar authorization from any jurisdiction. None of the
Broker-Dealers has exceeded in any material respect the business activities
enumerated in any membership agreements or other limitations imposed in
connection with its registrations, forms (including, but not limited to, Form
BDs and FOCUS reports) and reports filed with the NASD, the CHX or any
Governmental Entity. The Company has filed all material reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that they were required to file since 1995 with any Governmental
Entity, and all other material reports and statements required to be filed by
them have been filed, including without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the United
States, any state or any Governmental Entity and the Company has paid all fees
and assessments due and payable in connection therewith. The information
contained in such registrations, forms and reports was true and complete in all
material respects as of the date of filing thereof. Each such registration is
in full force and effect on the date of this Agreement. Except for normal,
scheduled, examinations conducted by a SRO or other Governmental Entity in the
regular course of business, no SRO or Governmental Entity has initiated any
formal or informal proceeding or investigation into the business or operations
of the Company and its Subsidiaries. There is no unresolved violation,
criticism or exception by any SRO with respect to any written report or
statement relating to any examinations of the Company and its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is required to be
registered as an investment adviser, including without limitation,
registration under the Investment Advisers Act of 1940, as amended.
(f) The Company's and each of its Subsidiaries' activities do not
result in them being required to be registered as an exchange, alternative
trading system, transfer agent, a clearing agency, a municipal securities
dealer, a government securities dealer, a futures commission merchant, a
commodity trading adviser or a commodity pool operator, as such terms are
defined under applicable federal and state securities laws and regulations.
13.10. Properties.
(a) Schedule 13.10(a) of the Company Disclosure Schedule contains a
true, complete and correct list (designating the relevant owners, lessors and
lessees) of (i) all real property owned, leased or subleased by the Company and
its Subsidiaries and (ii) all material equipment, fixtures, stock exchange
membership interests and other personal property owned, leased, subleased or
managed by the Company and its Subsidiaries. A copy of all real and personal
property leases and deeds of the Company and its Subsidiaries have been
delivered and made available to Parent by the Company.
(b) With respect to real property leased by the Company and its
Subsidiaries or otherwise made available to the Company or its Subsidiaries for
their use, the Company and its Subsidiaries have the right to quiet enjoyment
of such real property for the full term of each such lease or similar agreement
(and any renewal option related thereto), and the leasehold or other interest
of the Company or its Subsidiaries in such real property is not subject or
subordinate to any Lien (or if subordinate, a non-disturbance agreement has
been obtained by the Company or its Subsidiaries from the
43
holder of the Lien). The Company and its Subsidiaries are in compliance in all
material respects with each such lease or similar agreement and, to the
knowledge of the Principals, the other party or parties thereto are not in
default of its or their obligations thereunder nor does any such party have the
right to terminate prior to its scheduled expiration the term of any lease or
similar agreement.
(c) Neither the whole nor any part of any real property leased, used
or occupied by the Company or its Subsidiaries is subject to any pending suit
for condemnation or other taking by any public authority, and, to the knowledge
of the Principals, no such condemnation or other taking is currently threatened
or contemplated. The properties leased or subleased by the Company and its
Subsidiaries are sufficient to conduct the operations of the Company and its
Subsidiaries as currently conducted, and the foregoing personal properties are
in sound operating condition and repair, normal wear and tear excepted. There
has not been any interruption of the operations of the Company or its
Subsidiaries due to inadequate maintenance of any such properties.
(d) The Company and its Subsidiaries own outright and have good fee
or leasehold title to all of their respective assets and properties, in each
case free and clear of any Lien. The Company and its Subsidiaries have all
necessary assets, equipment, stock exchange membership interests and properties
to engage in the business as currently conducted by the Company and its
Subsidiaries.
13.11. Company Intellectual Property.
(a) The Company and its Subsidiaries own, or are licensed or
otherwise possess legally enforceable and unencumbered rights to use all
material patents, trademarks, trade names, service marks, domain names,
database rights, copyrights, and any applications therefor, maskworks, net
lists, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("Company Intellectual Property") that are used or currently proposed
to be used by the Company and its Subsidiaries in their respective businesses
as currently conducted or as currently proposed to be conducted by the Company
and its Subsidiaries. Neither the Company nor any Subsidiary has (i) licensed
any of its Company Intellectual Property in source code form to any party; (ii)
entered into any exclusive agreements relating to its Company Intellectual
Property; or (iii) entered into any arrangements or agreements that could cause
an encumbrance or impairment of their Company Intellectual Property rights.
(b) Schedule 13.11(b) of the applicable Company Disclosure Schedule
lists (i) all material patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered and
unregistered copyrights, and maskworks included in the Company Intellectual
Property, including the jurisdictions in which each such Company Intellectual
Property right has been issued or registered or in which any application for
such issuance and registration has been filed; (ii) all material licenses,
sublicenses and other agreements as to which the Company or any Subsidiary is a
party and pursuant to which any Person is authorized to use any Company
Intellectual Property (excluding commercially available, off-the-shelf
software); and (iii) all material licenses, sublicenses and other agreements as
to which the Company or any Subsidiary is a party and pursuant to which the
Company or any Subsidiary is authorized to use any third-party patents,
trademarks or copyrights, including software ("Company Third Party Intellectual
Property Rights"), which are incorporated in, are, or form a part of any
product or service of the Company or any Subsidiary (excluding commercially
available, off-the-shelf software). No royalties or other continuing payment
obligations are due in respect of Company Third Party Intellectual Property
Rights.
(c) There is and has been no unauthorized use, disclosure,
infringement or misappropriation of any material Company Intellectual Property
rights of the Company or any of its
44
Subsidiaries, or any Company Intellectual Property right of any third party to
the extent licensed by or through the Company or any of its Subsidiaries, by
any third party, including any employee or former employee of the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
entered into any agreement to indemnify any other Person against any charge of
infringement of any Company Intellectual Property.
(d) None of the Company or its Subsidiaries is, nor will any of them
be, as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to any Company Intellectual Property or
Company Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks, copyrights and
domain names held by the Company and its Subsidiaries are valid and subsisting.
Neither the Company nor any of its Subsidiaries (i) has been named as a party
in any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party or (ii) has brought any action,
suit or proceeding for infringement of Company Intellectual Property or breach
of any license or agreement involving Company Intellectual Property against any
third party. The marketing, licensing and sale of the products and services of
the Company and its Subsidiaries does not infringe any patent, trademark,
service ▇▇▇▇, copyright, or other proprietary right of any third party and has
not resulted from the misappropriation of any trade secret of any third party.
(f) The Company has secured valid written assignments, from all
consultants and employees who contributed to the creation or development of
Company Intellectual Property, of the rights to such contributions that the
Company or any Subsidiary does not already own by operation of law and the
Company and its Subsidiaries have obtained waiver of any moral rights existing
in such contributions.
(g) Neither the Company nor any of its Subsidiaries is infringing or
has misappropriated any Company Intellectual Property of any other Person. No
claim is pending, anticipated or has been made to such effect that has not been
resolved and none of the Company or any of its Subsidiaries has received
written notice that it is infringing or has misappropriated any Company
Intellectual Property of any other Person.
(h) The Company and its Subsidiaries have taken reasonable steps
consistent with prevailing industry practice to protect and preserve the
confidentiality of all Company Intellectual Property not otherwise protected by
patents or copyrights ("Company Confidential Information"). All use, disclosure
or appropriation of Company Confidential Information owned by the Company or
any of its Subsidiaries by or to a third party has been pursuant to the terms
of a written agreement between the Company and such third party. All use,
disclosure or appropriation by the Company and its Subsidiaries of Company
Confidential Information not owned by the Company or any such Subsidiary has
been pursuant to and in accordance with the terms of a written agreement
between the Company and the owner of such Company Confidential Information, or
is otherwise lawful.
13.12. Taxes.
(a) Each of the Company and its Subsidiaries has timely filed all Tax
Returns required to be filed. All such Tax Returns were true, correct, and
complete in all material respects. All Taxes owed by any of the Company and its
Subsidiaries (whether or not shown on any Tax Return) have been paid within the
time and in the manner prescribed by law. None of the Company and its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. No
45
claim has ever been made by an authority in a jurisdiction where any of the
Company and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no liens or security
interests on any of the assets of any of the Company and its Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Each of the Company and its Subsidiaries has timely withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) No Principal or director or officer (or employee responsible for
Tax matters) of any of the Company and its Subsidiaries expects any authority
to assess any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax liability of any of the
Company and its Subsidiaries either (A) claimed or raised by any authority in
writing or (B) as to which any of the Principals and the directors and officers
(and employees responsible for Tax matters) of the Company and its Subsidiaries
has knowledge. Section 13.12(c) of the Company Disclosure Schedule lists all
jurisdictions in which federal, state, local, and foreign Tax Returns are filed
with respect to any of the Company and its Subsidiaries and indicates those Tax
Returns that have been audited or that are currently the subject of audit. The
Company has delivered or otherwise made available to the Parent correct and
complete copies of all income and franchise Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by any of the
Company and its Subsidiaries since January 1, 1998.
(d) No power of attorney currently in force has been granted by the
Company or any of its Subsidiaries with respect to any Tax matter.
(e) None of the Company and its Subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(f) None of the Company's Subsidiaries has filed a consent under Code
Section 341(f) concerning collapsible corporations. None of the Company and its
Subsidiaries is required to include in income any adjustment pursuant to Code
Section 481(a) by reason of a change in accounting method. None of the Company
and its Subsidiaries has made any payments, is obligated to make any payments,
or is a party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible under Code Section 162(m)
or 280G. Each of the Company and its Subsidiaries has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. None of the Company and its Subsidiaries is a party to any Tax
allocation, Tax sharing or Tax indemnity agreement. None of the Company and its
Subsidiaries has any liability for the Taxes of any Person (other than the
Company and its Subsidiaries) under Treasury Regulation ss. 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(g) Section 13.12(g) of the Company Disclosure Schedule accurately
sets forth, as of December 31, 2000, the capital account and membership
interests of each Member of the Company.
(h) The Company and its Subsidiaries has not received a Tax Ruling or
entered into a Closing Agreement with any Tax authority that could have a
continuing adverse effect upon the Company and its Subsidiaries after the
Closing Date.
46
(i) The Company and its Subsidiaries have established (and until the
Closing Date will maintain) on its books and records accruals adequate to pay
all Taxes not yet due and payable in accordance with generally accepted
accounting principles.
(j) The Company and each of its Subsidiaries which is a partnership,
joint venture or limited liability company has since its formation and
continues to be treated for federal and state income tax purposes as a
partnership or as an entity that is disregarded for tax purposes and not as an
association taxable as a corporation or a publicly traded partnership.
13.13. Employee Benefit Plans.
(a) Schedule 13.13(a) of the Company Disclosure Schedule lists, with
respect to the Company, each Subsidiary of the Company and any trade or
business (whether or not incorporated) which is treated as a single employer
with the Company (an "Company ERISA Affiliate") within the meaning of Section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA, (i) all employee
benefit plans (as defined in Section 3(3) of ERISA), whether written or oral,
and whether or not subject to ERISA, maintained by, contributed to, or
sponsored by the Company or any Company ERISA Affiliate, (ii) any other
supplemental retirement, severance, sabbatical, employee relocation, cafeteria
benefit (Code Section 125) or dependent care (Code Section 129), life insurance
or accident insurance plans, programs or arrangements maintained by,
contributed to, or sponsored by the Company or any Company ERISA Affiliate,
(iii) all other bonus, pension, profit sharing, savings, deferred compensation
or incentive plans, programs or arrangements maintained by, contributed to, or
sponsored by the Company or any Company ERISA Affiliate, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to employees or
former employees of the Company or any Company ERISA Affiliate, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, of the Company or any Company ERISA Affiliate, or
relating to, any present or former employee, consultant or director of the
Company (together, the "Company Employee Plans").
(b) The Company has provided or made available to Parent a copy of
each of the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions, amendments and other authorizing documents, and any material
employee communications relating thereto, if applicable) and has, with respect
to each of the Company Employee Plans which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports, financial statements
and actuarial reports filed for the last three plan years. Any of the Company
Employee Plans intended to be qualified under Section 401(a) of the Code has
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code (which has not been revoked, modified or
limited). The Company has also furnished Parent with a copy of the most recent
Internal Revenue Service determination letter issued with respect to each such
Company Employee Plan, and nothing has occurred since the issuance of each such
letter which could reasonably be expected to adversely affect the tax-qualified
status of any of the Company Employee Plans subject to Code Section 401(a).
(c) (i) None of the Company Employee Plans that is a "welfare benefit
plan" as defined in Section 3(1) of ERISA (i) provides for continuing benefits
or coverage for any participant or beneficiary or covered dependent of a
participant after such participant's termination of employment, except to the
extent required by law or (ii) are "multiple employer welfare arrangements"
within the meaning of Section 3(40) of ERISA. None of the Company, each
Subsidiary of the Company nor any Company ERISA Affiliate maintains or has any
obligation to contribute to any "voluntary employee beneficiary association"
within the meaning of Section 501(c)(9) of the Code or other funding
arrangement for the provision of welfare benefits. There has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code with respect to any Company
47
Employee Plan other than a transaction that is exempt under a statutory or
administrative exemption. Each of the Company Employee Plans has been
administered in all material respects in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and the Company and each Subsidiary
of the Company or Company ERISA Affiliate have performed all obligations
required to be performed by them under, and are not in default under or
violation of, the terms of any Company Employee Plans. Neither the Company nor
any Company ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
of the Company Employee Plans. All contributions, premiums and other payments
required by law required to be made by the Company or any Subsidiary or Company
ERISA Affiliate to any Company Employee Plan have been made on or before their
due dates and the amounts accrued in the Company Financial Statements for
contributions to each Company Employee Plan for the current plan years have
been determined in accordance with generally accepted accounting principles
consistently applied. With respect to each Company Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 of ERISA has occurred. Each Company Employee Plan
which provides medical, dental, health or long-term disability benefits is
fully insured and claims with respect to any participant or covered dependent
under such Company Employee Plan could not result in any uninsured liability to
the Company, any Subsidiary or the Parent. Each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent or the Company other
than liability for administrative expenses typically incurred in a termination
event. With respect to each Company Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an
employee welfare benefit plan within the meaning of Section 3(1) of ERISA, the
Company has prepared in good faith and timely filed all requisite governmental
reports (which were true and correct in all material respects as of the date
filed) and has properly and timely filed and distributed or posted all material
notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan. No suit, arbitration,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of the Company is threatened, against or with respect to any such
Company Employee Plan, including any audit or examination by the IRS or United
States Department of Labor. No Company Employee Plan exists which could result
in the payment of money or any other property or rights, or accelerate or
provide any other rights or benefits, to any current or former employee of the
Company or any Subsidiary (or other current or former service provider thereto)
that would not have been required but for the transactions provided for herein,
and none of the Company or any Subsidiary, nor any of their respective
affiliates, is a party to any plan, program, arrangement or understanding that
would result, separately or in the aggregate, in the payment (whether in
connection with any termination of employment or otherwise) of any "excess
parachute payment" within the meaning of Section 280G of the Code with respect
to a current or former employee of, or current or former independent contractor
to, any of the Company or any Subsidiary. Neither the Company nor any Company
ERISA Affiliate is a party to, or has ever been a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA. Neither the Company nor any
Subsidiary or Company ERISA Affiliate currently maintains, sponsors,
participates in or contributes to, nor has it within the last seven (7) years
maintained, established, sponsored, participated in, or contributed to, any
pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of
the Code.
(d) With respect to each Company Employee Plan, the Company and each
of its Subsidiaries have complied (except to the extent that any such failure
to comply would not, in the aggregate, have a Material Adverse Effect on the
Company or any of its Subsidiaries) with (i) the applicable health care
continuation and notice provisions of COBRA and the regulations thereunder,
(ii) the applicable requirements of the Family Medical and Leave Act of 1993
and the regulations
48
thereunder, and (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996.
(e) There has been no amendment to, or written interpretation or
announcement (whether or not written) by the Company or any Company ERISA
Affiliate relating to, or change in participation or coverage under, any
Company Employee Plan which would materially increase the expense of
maintaining such plan above the level of expense incurred with respect to that
plan for the most recent fiscal year.
(f) No employee of the Company or any of its Subsidiaries has elected
to defer (i) the receipt of any cash payable to such employee or (ii) the
issuance of any securities of the Company to such employee.
(g) No plan other than a Company Employee Plan is or will be directly
or indirectly binding on Parent, the Company or any affiliate of Parent or the
Company, by virtue of the transactions contemplated hereby. Parent, and its
affiliates, including on and after the Closing, the Company and any Subsidiary
of the Company, shall have no liability for, under, with respect to or
otherwise in connection with any plan, which liability arises under ERISA or
the Code, by virtue of the Company or any such Subsidiary being aggregated in a
controlled group or affiliated service group with any Company ERISA Affiliate
for purposes of ERISA or the Code at any relevant time prior to the Closing.
(h) Neither the Company nor any Subsidiary has agreed or otherwise
committed to, whether in writing or otherwise, to increase or improve the
compensation, benefits or terms and conditions of employment or service of any
director, officer, employee or consultant.
(i) The Company and each Subsidiary has properly classified for all
purposes (including, without limitation, for all tax purposes and for purposes
of determining eligibility to participate in any Company Employee Plan) all
employees, leased employees, consultants and independent contractors, and has
withheld and paid all applicable taxes and made all appropriate filings in
connection with services provided by such persons to the Company and any
Subsidiary.
(j) No event has occurred and no condition exists, with respect to
any Company Employee Plan that could subject Parent or any of its affiliates,
or any plan maintained by Parent or any affiliate (other than an affiliate
which becomes such pursuant to the transaction contemplated by this Agreement)
thereof, to any tax, fine, penalty or other liability, that would not have been
incurred by Parent or any of its affiliates, or any such plan, but for the
transactions contemplated hereby.
13.14. Employee Matters. The Company and each of its Subsidiaries are
in compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, affirmative
action, terms and conditions of employment, wages, hours and occupational
safety and health, workers' compensation and employment practices, and are not
engaged in any unfair labor practice. The Company and each of its Subsidiaries
have withheld all material amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to employees, and are not
liable for any material arrears of wages or any material taxes or any material
penalty for failure to comply with any of the foregoing. The Company is not
liable for any material payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the normal course of business and consistent with past
practice). There are no pending claims against the Company or any of its
Subsidiaries under any workers compensation plan or policy or for long-term
disability other than routine claims for benefits. There are no controversies
49
pending or, to the knowledge of the Principals, threatened between the Company
or any of its Subsidiaries, on the one hand, and any of their respective
employees or former employees, on the other hand, which controversies have or
could reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any agency, court or tribunal, foreign or
domestic. Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract; nor does any of
the Principals know of any activities or proceedings of any labor union to
organize any such employees. To the knowledge of the Principals, no employees
of the Company are in violation in any respect of any term of any employment
contract, patent disclosure agreement, noncompetition agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company because of the nature of the business
conducted or presently proposed to be conducted by the Company or to the use of
trade secrets or proprietary information of others. Neither the Company nor any
Subsidiary has any employment agreement with any of their respective officers
or other employees. As of the date hereof, no employees (other than clerical or
solely administrative employees) of the Company have given notice to the
Company, nor is the Company otherwise aware, that any such employee intends to
terminate his or her employment with the Company. Schedule 13.14 of the Company
Disclosure Schedule sets forth a true and correct list of all full and
part-time employees of the Company and its Subsidiaries, including the position
held by such employee, the date such employee was hired, and the total
compensation, including any bonuses (including, without limitation, incentive
schemes and benefits) received by such employee per annum.
13.15. Interested Party Transactions.
(a) Except for transactions for compensation of employees, every
transaction between the Company and any of its "Affiliates" or their
"Associates" (as such terms are defined in the rules and regulations of the
SEC), which is currently in effect or was consummated since the Company's
inception and which involved the payment, or receipt, of money, benefits or
other compensation is set forth on Schedule 13.15(a) of the Company Disclosure
Schedule. Schedule 13.15(a) of the Company Disclosure Schedule also lists any
business arrangement, relationship or transaction (including, without
limitation, any loan) between the Company or any of its Subsidiaries and any
shareholder, director or officer of the Company or any of its Subsidiaries or
between the Company or any of its Subsidiaries and any company, partnership,
business trust, association or similar organization in which a shareholder,
director or officer of the Company or any of its Subsidiaries has a controlling
interest (each shareholder, director and officer and any entity controlled by
such person referred to as a "Company Regulatory Affiliate"). For purposes of
determining who is a Company Regulatory Affiliate, control means the power to
vote twenty-five percent (25%) or more of any class of voting securities or
other evidence of ownership interests in such corporation, partnership,
business trust, association or similar organization, or the control of the
election of a majority of the directors or trustees (or individuals holding
similar positions) of such other entity.
(b) Schedule 2 attached to this Agreement contains a true and
complete list of all persons who may be deemed to be an Affiliate of the
Company.
13.16. Insurance. The Company previously has delivered or otherwise
made available to Parent a complete and accurate list of all liability,
property, workers' compensation, directors' and officers' liability, "key man"
life and other insurance policies in effect that are owned by the Company or
any of its Subsidiaries, or under which the Company or any of its Subsidiaries
is a named insured. There is no claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in compliance in all material respects with the terms of such
policies and bonds and such policies and bonds and the
50
coverages thereunder are in full force and effect. The Principals have no
knowledge of any threatened termination of, or premium increase with respect
to, any of such policies.
13.17. Regulatory Matters.
(a) Neither the Company nor any of its Subsidiaries is subject to
registration under the 1940 Act, or similar laws of any foreign Governmental
Entity. The Company and each of its employees, agents, associated persons or
contractors who are required to be registered as a broker-dealer, investment
adviser, a registered representative or other applicable regulatory category
with the SEC, the securities commission of any state or foreign jurisdiction or
any SRO are duly registered as such and such registrations are in full force
and effect. All federal, state and foreign registration requirements have been
complied with and such registrations as currently filed, and all periodic
reports required to be filed with respect thereto, are accurate and complete in
all material respects.
(b) Neither the Company nor any of the Principals is aware of any
facts or circumstances that would (i) cause the NASD or the CHX to not approve
the transfer of control and indirect ownership of the Company from the Target
Shareholders to Parent; (ii) cause the NASD, the CHX or any federal or state
regulatory agency or other Governmental Entity or SRO to revoke or restrict the
Company's Authorizations to operate as a broker-dealer after the change in
ownership and control of the Company contemplated by this Agreement; (iii)
cause the CHX, or any committee thereof, including the Specialist Assignment
and Evaluation Committee, to effect a reassignment of securities assigned to
the Company and in which the Company has privileges to act as specialist under
CHX laws and regulations; or (iv) cause Parent to be deemed to directly or
indirectly control, or be controlled by, or under common control with, an
entity that owns or has the voting power of 10% or more of the outstanding
memberships on the CHX after the change in ownership and control of the Company
contemplated by this Agreement.
(c) Neither the Company nor any of its Subsidiaries is subject to any
cease-and-desist or other order or enforcement action issued by, or party to
any Regulatory Agreement, nor has the Company or any of its Subsidiaries been
advised in any other manner by any regulatory authority or Governmental Entity
that it is considering issuing or requesting such a Regulatory Agreement nor is
there any pending or, to the knowledge of the Principals, threatened regulatory
investigation. None of the Company, any of its Subsidiaries or any of their
respective associated persons (as defined in Section 3(a)(21) of the ▇▇▇▇ ▇▇▇)
has been convicted within the past ten years of any felony or misdemeanor
described in Section 15(b)(4) of the 1934 Act, or is, by reason of any
misconduct, permanently or temporarily enjoined from acting in the capacities,
or engaging in the activities, described in Section 15(b)(4)(C) of the 1934
Act.
13.18. Company Material Contracts.
(a) Neither the Company nor any of its Subsidiaries is a party to or
bound by any of the following (collectively, the "Company Material Contracts"):
(i) any contract or agreement entered into other than in the ordinary
course of business consistent with past practice for the acquisition of
the securities or any material portion of the assets of any other Person
or entity;
(ii) any contract or agreement for the purchase of materials,
supplies, equipment or services in excess of $50,000 which cannot be
cancelled by the Company or such Subsidiary without penalty or further
payment and without more than 45 days' notice;
51
(iii) any contract, agreement or instrument in excess of $50,000 that
expires or may be renewed at the option of any Person other than the
Company or its Subsidiaries so as to expire more than one year after the
date of this Agreement;
(iv) any management contracts and contracts with independent
contractors or consultants (or similar arrangements) which is not
cancelable without penalty or further payment and without more than 30
days' notice;
(v) any trust indenture, mortgage, promissory note, loan agreement or
other contract, agreement or instrument for the borrowing of money, any
currency exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with
GAAP, in each case, where the Company or any of its Subsidiaries is a
lender, borrower or guarantor;
(vi) any contracts and agreements with any Governmental Entity;
(vii) any contract or agreement for capital expenditures in excess of
$50,000;
(viii) any contract or agreement limiting the freedom of the Company,
any of its Subsidiaries or any of their respective employees to engage in
any line of business or to compete with any other Person, or under the
constitution, laws, rules or regulations of any SRO, or any
confidentiality, secrecy or non-disclosure contract or agreement;
(ix) any contract or agreement in excess of $50,000 pursuant to which
the Company or any of its Subsidiaries is a lessor of any machinery,
equipment, motor vehicles, office furniture, fixtures or other personal
property;
(x) any contract or agreement with any Person with whom the Company
or any of its Subsidiaries does not deal at arm's length;
(xi) any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other Person other than those entered
into in the ordinary course of operating a broker-dealer business;
(xii) any material agreement which would be terminable other than by
the Company or its Subsidiaries as a result of the consummation of the
transactions contemplated by this Agreement;
(xiii) any alliance, cooperation, joint venture, shareholders',
partnership or similar agreement;
(xiv) any material broker, distributor, dealer, agency, sales
promotion, market research, market consulting or advertising agreement;
(xv) any material research, development, sales representative,
marketing or reseller agreement, or any service, support or maintenance
agreement related to the business or technology of the Company;
(xvi) any agreement, option or commitment or right with, or held by,
any third party to acquire, use or have access to any assets or
properties, or any interest therein, of the Company;
52
(xvii) any license, sublicense or development agreement or other
agreement that affects the Company Intellectual Property of the Company or
its Subsidiaries or any Company Third Party Intellectual Property Rights;
(xviii) any agreement relating to its member interests or other
voting or equity securities;
(xix) any contract or agreement which would require any consent or
approval of a counterparty as a result of the consummation of the
transactions contemplated by this Agreement; or
(xx) any other contract whether or not made in the ordinary course of
business, which is material to the Company, any of its Subsidiaries or the
conduct or operation of their respective businesses or the absence of
which would have a Material Adverse Effect on the Company.
(b) Each of the Company and its Subsidiaries has performed in all
material respects the obligations required to be performed by it and is
entitled to all accrued benefits under, and is not in default in any material
respect of, each Company Material Contract to which it is a party or by which
it is bound. Each of the Company Material Contracts is in full force and
effect, unamended, and there exists no material default or event of default or
event, occurrence, condition or act, with respect to the Company or any of its
Subsidiaries or, to the knowledge of the Principals, with respect to any other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or condition, would become a material default
or event of default under any Company Material Contract. True, correct and
complete copies of all Company Material Contracts have been made available to
Parent.
13.19. Assets.
(a) Either the Company or one of its Subsidiaries, as the case may
be, owns, leases or has the right to use all the material properties and assets
necessary for or used or held for use in the conduct of the business of the
Company and its Subsidiaries or otherwise owned, leased or used by the Company
or any of its Subsidiaries (all such properties and assets being referred to as
the "Assets"). Either the Company or one of its Subsidiaries, as the case may
be, has good title to, or in the case of leased or subleased Assets, valid and
subsisting leasehold interests in, all of the Assets, free and clear of all
Liens.
(b) The Assets, together with the Company Intellectual Property
constitute all the properties, assets and rights necessary for, forming a part
of, used, held or intended to be used in, and all such properties, assets and
rights are necessary in, the conduct of the business and operations of the
Company and its Subsidiaries.
(c) Immediately following the Closing, either the Company or one of
its Subsidiaries, as the case may be, shall own and possess all documents,
books, records, agreements and financial data of any sort used by the Company
or such Subsidiary in the conduct of their business or otherwise.
13.20. Investment Securities. The Company and each of its
Subsidiaries have good and marketable title to all securities held by them
(except securities sold under repurchase agreements or held in any fiduciary or
agency capacity), free and clear of all Liens, except to the extent such
securities are pledged in the ordinary course of business consistent with
prudent business practices to secure obligations of the Company and its
Subsidiaries. Such securities are valued on the books of the Company in
accordance with GAAP. From December 31, 1996 to the date hereof, neither the
Company nor any of its
53
Subsidiaries has incurred any material and unusual or extraordinary losses
(other than trading losses in the ordinary course of business) in their
respective investment portfolios.
13.21. Derivative Instruments. Neither the Company nor any of its
Subsidiaries is a party to or a beneficiary of any swaps, caps, floors,
futures, forward contracts, option arrangements or agreements or any other
derivative financial instruments, contracts or arrangements, whether entered
into for the account of the Company, any Subsidiary of the Company, any
customer or otherwise.
13.22. State Takeover Statutes. No state takeover statute is
applicable to this Agreement or the transactions contemplated hereby.
13.23. Bank Accounts, Letters of Credit and Powers of Attorney.
Schedule 13.23 of the applicable Company Disclosure Schedule contains a
complete and accurate list of (a) all bank accounts, lock boxes and safe
deposit boxes relating to the business and operations of the Company and its
Subsidiaries (including the name of the bank or other institution where such
account or box is located and the name of each authorized signatory thereto),
(b) all outstanding letters of credit issued by financial institutions for the
account of the Company and its Subsidiaries (setting forth, in each case, the
financial institution issuing such letter of credit, the maximum amount
available under such letter of credit, the terms (including the expiration
date) of such letter of credit and the party or parties in whose favor such
letter of credit was issued), and (c) the name and address of each Person who
has a power of attorney to act on behalf of the Company or any of its
Subsidiaries. The Company has heretofore delivered to Parent true, correct and
complete copies of each letter of credit and each power of attorney described
on Schedule 13.23 of the applicable Company Disclosure Schedule.
13.24. Brokers' and Finders' Fees. The Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby,
except for those of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company whose fees and expenses shall be
the responsibility of the Target Shareholders.
13.25. Books and Records. The minute books and other similar records
of the Company and its Subsidiaries as made available to Parent prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all actions taken at all meetings and by all written consents in
lieu of meetings of the shareholders, members, the boards of directors or other
governing body and committees of the boards of directors or other governing
body of the Company and its Subsidiaries. The stock transfer ledgers and other
similar records of the Company and its Subsidiaries as made available to Parent
prior to the execution of this Agreement contain true and complete records, in
all material respects, of all transfers related to the Company's member
interests and other equity securities. The Company has made available to Parent
a true and correct copy of the certificate or articles of incorporation or
other comparable organizational documents, as amended, and bylaws, as amended,
and any other charter or organizational documents, each as amended, of the
Company and each of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its operating
agreement, certificate or articles of incorporation or bylaws or other
comparable organizational documents, each as amended.
13.26. Representations Complete. None of the representations or
warranties made by the Principals herein or in any schedule hereto, including
the applicable Company Disclosure Schedule, or certificate furnished by the
Principals pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the
54
statements contained herein or therein, in the light of the circumstances under
which made, not misleading in any material respect.
ARTICLE XIV
Representations and Warranties of PARENT.
Except as disclosed in the Parent SEC Documents (as defined in
Section 14.4) and the document delivered by Parent to the Target Shareholders,
Target Companies and the Company prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
with respect to Parent (the "Parent Disclosure Schedule"), any exception so
disclosed in the Parent Disclosure Schedule to specifically identify the
Section of this Agreement to which such exception relates, including through
the use of specific cross references, Parent represents and warrants to the
Target Shareholders, the Target Companies and the Company as follows:
14.1. Organization, Standing and Power. Parent and each of the Merger
Subs and ▇▇▇▇▇ Acquisition is a corporation or limited liability company, as
the case may be, duly organized or formed, as the case may be, validly existing
and in good standing under the laws of its jurisdiction of organization or
formation, as the case may be. Parent and each of the Merger Subs and ▇▇▇▇▇
Acquisition have all requisite corporate or limited liability company, as the
case may be, power and authority to enter into this Agreement and the
Collateral Documents to which they are a party and to consummate the
transactions contemplated hereby and thereby.
14.2. Capital Structure. The authorized capital stock of Parent
consists of 600,000,000 shares of Parent Common Stock and 1,000,000 shares of
Parent's preferred stock, one share of which has been designated "Series A
Preferred Stock", par value $.01 per share ("Parent Preferred Stock"), of which
there were issued and outstanding as of the close of business on August 27,
2001, 340,652,680 shares of Parent Common Stock and one share of Parent
Preferred Stock. There are no other outstanding shares of capital stock or
voting securities, and there are a sufficient number of authorized shares of
Parent Common Stock available to satisfy all outstanding commitments to issue
any shares of Parent Common Stock pursuant to (i) the exercise of options
outstanding as of such date under Parent's 1993 Stock Option Plan and 1996
Stock Incentive Plan (collectively, the "Parent Stock Option Plans"), (ii) the
Parent's Associate Stock Purchase Plan, (iii) the terms of Articles I through X
of this Agreement, and (iv) all other outstanding capital stock issuance
obligations. All outstanding shares of Parent Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are free and clear of any
Liens other than any Liens created by or imposed upon the holders thereof, and
are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws, each as amended, of Parent
or any agreement to which Parent is a party or by which it is bound. Parent has
not issued or granted any stock appreciation rights or performance units under
the Parent Stock Option Plans or otherwise. There are no contracts, commitments
or agreements relating to voting, purchase or sale of Parent's capital stock
between or among Parent and any of its stockholders. True and complete copies
of all material agreements and instruments relating to or issued under the
Parent Stock Option Plans have been provided or made available to the Company,
the Target Shareholders and ▇▇▇▇▇ (including through the SEC's ▇▇▇▇▇ database)
and such agreements and instruments have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the form provided or made available
to the Company, the Target Shareholders and ▇▇▇▇▇. All outstanding shares of
Parent Common Stock and all options to purchase Parent Common Stock were issued
in compliance with all applicable federal and state securities laws. The shares
of Parent Common Stock to be issued pursuant to Articles I through X of this
Agreement, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and
55
non-assessable, and free and clear of any Liens other than Liens created by or
imposed upon the holders thereof.
14.3. Authority; No Conflicts.
(a) Assuming the filings and approvals described in clauses (i)
through (v) of Section 14.3(c) (collectively, the "Parent Approvals") are made
or obtained (as the case may be), the execution and delivery of this Agreement
and the Collateral Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or limited liability company, as the case may be, action on the part
of Parent, each Merger Sub and ▇▇▇▇▇ Acquisition. This Agreement and each
Collateral Agreement to which such entity is a party has been duly executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, each Merger Sub and ▇▇▇▇▇ Acquisition, enforceable against them in
accordance with its terms, except as such enforcement may be limited by (i) the
effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or relating to
the rights of creditors generally, or (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
(b) Assuming the Parent Approvals are made or obtained (as the case
may be), the execution and delivery of this Agreement and the Collateral
Documents does not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a benefit under, (i) any provision of the certificate or articles of
incorporation or bylaws or other charter or comparable organizational documents
of Parent or any of its Subsidiaries, each as amended; (ii) any mortgage,
indenture, deed of trust, lease, contract, agreement, license or other
instrument, permit, concession, franchise, judgment, order, decree or ruling to
which Parent or any of its Subsidiaries, is a party or by which Parent's or any
of its Subsidiaries' assets or properties are bound; or (iii) any Laws and
Regulations applicable to Parent or any of its Subsidiaries.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission, SRO
or other Governmental Entity, is required by or with respect to Parent or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement or any Collateral Document, the performance of Parent's, each Merger
Sub's or ▇▇▇▇▇ Acquisition's obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, except for (i)
the filing of the articles or certificate of merger, as the case may be, with
respect to the Mergers; (ii) such notices, applications, consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal or state securities laws or the securities
laws of any foreign country in connection with the Mergers; (iii) the
notification requirements of the HSR Act; (iv) the notification requirement of
Rule 1017 of the NASD; (v) the consents, approvals, orders, authorizations,
registrations, declarations and filings set forth on Schedule 14.3(c) of the
Parent Disclosure Schedule; and (vi) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made would not
prevent, or materially alter or delay, any of the transactions contemplated by
this Agreement.
14.4. SEC Documents; Financial Statements. Parent has made available
(including via the SEC's ▇▇▇▇▇ database) to the Company, the Target
Shareholders and ▇▇▇▇▇ each statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement, and other filings (including exhibits, supplements
and schedules thereto) filed with the SEC by Parent since December 31, 1998
(collectively, the "Parent SEC Documents"). As of their
56
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the 1934 Act and the Securities Act, and none
of the Parent SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which
they were made, not misleading, except to the extent corrected by a
subsequently filed Parent SEC Document. The financial statements of Parent,
including the notes thereto, included in the Parent SEC Documents (the "Parent
Financial Statements") were complete and correct in all material respects as of
their respective dates (except to the extent corrected by a subsequently filed
Parent SEC Document), complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent throughout the periods indicated (except as may be indicated
in the notes thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The
Parent Financial Statements fairly present the consolidated financial condition
and operating results of Parent and its Subsidiaries at the dates and during
the periods indicated therein (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments).
14.5. Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration, inquiry, examination, inspection or, to the
knowledge of Parent, investigation pending by or before any Governmental
Entity, agency, court or tribunal, foreign or domestic or, to the knowledge of
Parent, threatened, against Parent or any of its Subsidiaries or any of their
properties or of their officers or directors (in their capacities as such)
that, individually or in the aggregate, could reasonably be expected to
prevent, enjoin, alter or materially delay any of the transactions hereby or
could reasonably be expected to have a Material Adverse Effect. There is no
judgment, decree or order against Parent or any of its Subsidiaries, or, to the
knowledge of Parent, any of their directors or officers (in their capacities as
such) that, individually or in the aggregate, could reasonably be expected to
prevent, enjoin, alter or materially delay any of the transactions hereby or
could reasonably be expected to have a Material Adverse Effect on Parent.
14.6. Broker's and Finders' Fees. Parent has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby, except
for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. whose fees and expenses will be the responsibility
of Parent.
14.7. Operations of the Merger Subs. Each Merger Sub and ▇▇▇▇▇
Acquisition was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has not engaged in any business or activity
(or conducted any operations) of any kind, entered into any agreement or
arrangement with any Person, or incurred, directly or indirectly, any material
liabilities or obligations, in each case except in connection with its
organization or formation, the negotiation of this Agreement, the Mergers, the
▇▇▇▇▇ Interest Purchase and the transactions contemplated by this Agreement.
14.8. Form S-3 Eligibility. Parent is eligible to register the resale
of the Parent Common Stock on a registration statement on Form S-3 under the
Securities Act.
14.9. Disclosure. Parent has disclosed to the Company, the Target
Shareholders and ▇▇▇▇▇ all Material Information concerning the Parent and its
Subsidiaries. As used herein, "Material Information" means any information
known to Parent which a reasonable investor would consider important in
deciding whether to acquire securities of Parent and would be required to be
disclosed by Parent pursuant to the Securities Act or the 1934 Act, including
without limitation: (i) earnings information; (ii) material mergers,
acquisitions, tender offers, joint ventures or changes in assets; (iii)
material new products or discoveries, or developments regarding customers or
suppliers (e.g., the acquisition or loss of a major contract); (iv) changes in
control of Parent or in management of Parent or its Subsidiaries; (v) a change
in auditors or an auditor notification that Parent may no longer rely on an
auditor's audit report; (vi) material events regarding Parent's securities
(e.g., defaults on senior securities, calls of securities for redemption,
repurchase plans, stock splits or changes in dividends, changes to the
57
rights of security holders, or public or private sales of additional
securities) and (vii) regulatory inquiries or investigations which reasonably
could be expected to materially adversely affect Parent or its Subsidiaries.
ARTICLE XV
COVENANTS AND ADDITIONAL AGREEMENTS
15.1. Conduct of Business of the Target Companies. At all times
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, each of the
Target Companies agree, and the Target Shareholder or Target Shareholders of
such Target Company shall cause such Target Company (except to the extent
expressly contemplated by this Agreement or as consented to in writing by
Parent), to carry on its and its Subsidiaries' business only in, and not to
take any action except in, the ordinary course in substantially the same manner
as heretofore conducted. Without limiting the generality of the foregoing, each
of the Target Companies shall, and the Target Shareholder or Target
Shareholders of such Target Company shall cause such Target Company to, (i) pay
and to cause its Subsidiaries to pay debts and Taxes when due subject to good
faith disputes over such debts or Taxes, to pay or perform other obligations
when due; (ii) use commercially reasonable efforts to preserve intact its and
its Subsidiaries' present business organizations and reputation; (iii) use
commercially reasonable efforts to keep available the services of its and its
Subsidiaries' present executive officers and key employees; (iv) use
commercially reasonable efforts to preserve its and its Subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it or its Subsidiaries; (v) maintain
its assets and properties in good working order and condition, ordinary wear
and tear excepted; (vi) comply all in all material respects with Laws and
Regulations, self-regulatory law, ordinance, rule or regulation applicable to
the conduct of its business or the ownership or operation of its business, to
the end that its and its Subsidiaries' goodwill and ongoing businesses shall be
unimpaired at the Effective Time; (vii) not take any action or engage in any
practice or fail to take any action or engage in any practice or enter into any
transaction which would cause any representation or warranty contained in this
Agreement with respect to such Target Company to be untrue in any material
respect (if not qualified by materiality) or in any respect (if qualified by
materiality) or result in a breach in any material respect (if not qualified by
materiality) or in any respect (if qualified by materiality) of any covenant
made by or on behalf of such Target Company in this Agreement; (viii) not take
any action which could, or would reasonably be expected to, adversely affect
the Target Company's ability to qualify as an "S corporation" for federal,
state or local tax purposes; or (ix) take any action or engage in any practice
or fail to take any action or engage in any practice or enter into any
transaction that would be required to be disclosed pursuant to Section 12.6 of
this Agreement.
15.2. Conduct of Business of the Company.
(a) At all times during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, the Company agrees, and the Target Companies, the Target
Shareholders and ▇▇▇▇▇ shall cause the Company (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Parent), to
carry on its and its Subsidiaries' business only in, and not to take any action
except in, the ordinary course in substantially the same manner as heretofore
conducted. Without limiting the generality of the foregoing, the Company shall,
and the Target Companies, the Target Shareholders and ▇▇▇▇▇ shall cause the
Company to, (i) pay and to cause its Subsidiaries to pay debts and Taxes when
due subject to good faith disputes over such debts or Taxes, to pay or perform
other obligations when due; (ii) preserve intact its and its Subsidiaries'
present business organizations and reputation; (iii) use commercially
reasonable
58
efforts to keep available the services of its and its Subsidiaries' present
executive officers and key employees; (iv) use commercially reasonable efforts
to preserve its and its Subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it
or its Subsidiaries; (v) maintain its assets and properties in good working
order and condition, ordinary wear and tear excepted; (vi) comply in all
material respects with all Laws and Regulations, self-regulatory law,
ordinance, rule or regulation applicable to the conduct of its business or the
ownership or operation of its business, to the end that its and its
Subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time; (vii) not take any action or engage in any practice or fail to
take any action or engage in any practice or enter into any transaction which
would cause any representation or warranty contained in this Agreement with
respect to such Target Company to be untrue in any material respect (if not
qualified by materiality) or in any respect (if qualified by materiality) or
result in a breach in any material respect (if not qualified by materiality) or
in any respect (if qualified by materiality) of any covenant made by or on
behalf of such Target Company in this Agreement; or (viii) take any action or
engage in any practice or fail to take any action or engage in any practice or
enter into any transaction that would be required to be disclosed pursuant to
Section 13.5 of this Agreement.
(b) Without limiting the generality of the foregoing, at all times
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, except as
expressly contemplated by this Agreement, the Company shall not do, cause or
permit any of the following, or allow, cause or permit any of its Subsidiaries
to do, cause or permit any of the following, in each case without the prior
written consent of Parent, which consent shall not be unreasonably withheld:
(i) Charter Documents. Cause or permit any amendment, modification,
alteration or rescission of its operating agreement, certificate or
articles of incorporation, bylaws or other comparable organizational
documents;
(ii) Dividends; Changes in Capital Stock. (w) Except as set forth on
Schedule 15.2(b)(ii), declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of
any of its voting or equity securities (other than dividends or
distributions by any wholly-owned Subsidiary of the Company to the Company
or another wholly-owned Subsidiary thereof), (x) split, combine or
reclassify or take any action with respect to any of its voting or equity
securities, issue or authorize the issuance or propose the issuance of any
other securities in respect of, in lieu of or in substitution for member
interests or other voting or equity securities, as the case may be, (y)
adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such liquidation or a merger, consolidation,
restructuring, recapitalization or other reorganization or (z) redeem,
repurchase or otherwise acquire, directly or indirectly, any of its voting
or equity securities or any option with respect thereto except from former
employees, directors and consultants in accordance with agreements
providing for the repurchase of securities in connection with any
termination of service to it or its Subsidiaries;
(iii) Options. Grant any options, appreciation rights, phantom
rights, profit participation rights or other rights to acquire securities
or accelerate, amend or change the period of exercisability or vesting of
options or other rights granted under its unit or stock plans or authorize
cash payments in exchange for any options or other rights granted under
any of such plans;
(iv) Material Contracts. (A) Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the
terms of any of its contracts, other than in the ordinary course of
business consistent with past practice, or engage in any new transaction
outside the ordinary course of business and not consistent with past
practice, and in no event shall such contract, commitment, amendment,
modification or waiver involve payments by the Company or any of its
Subsidiaries of amounts in excess of fifty thousand dollars ($50,000) or
(B) enter into any material contract or agreement which would require the
59
consent of the other party thereto as a result of a change of control of,
or merger or consolidation involving, the Company;
(v) Issuance of Securities. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any member interests, any other voting or equity securities
or securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating it to issue any such securities or other convertible
securities;
(vi) Intellectual Property. Transfer or license to any Person any
rights to the Company Intellectual Property other than the license of
non-exclusive rights to the Company Intellectual Property in the ordinary
course of business consistent with past practice or fail to renew or pay
any fees relating to any patent, trademark, service marks or any of the
Company Intellectual Property;
(vii) Exclusive Rights. Enter into or amend any agreements pursuant
to which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products or
technology;
(viii) Dispositions. Sell, lease, license, grant any security
interest in or otherwise dispose of or encumber any of its properties or
assets, except in the ordinary course of business consistent with past
practice;
(ix) Indebtedness. Except in the ordinary course of business
consistent with past practice, (A) incur any indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other Person in excess of
fifty thousand dollars ($50,000) in the aggregate or (B) voluntarily
purchase, cancel, prepay or otherwise provide for a complete or partial
discharge in advance of a scheduled repayment date with respect to, or
waive any right under, any indebtedness for borrowed money;
(x) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of fifty thousand dollars ($50,000) in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of
business, other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Financial Statements;
(xi) Capital Expenditures. Make any individual capital expenditure,
capital addition or capital improvement in excess of fifty thousand
dollars ($50,000) except pursuant to existing commitments under Company
Material Contracts;
(xii) Insurance. Reduce the amount of any insurance coverage provided
by existing insurance policies;
(xiii) Employee Benefit Plans; New Hires; Pay Increases. (A) Adopt or
amend any employee benefit or unit based or stock purchase or option plan
(except as required by law), or (B) hire any new director or
vice-president level (or the functional equivalent in the Company's
organizational structure) or executive officer level employee, pay any
special bonus or special remuneration to any employee or director or
increase the salaries or wages of its employees;
(xiv) Severance Arrangements. Grant any severance or termination pay
(A) to any director or officer or (B) to any other employee except
payments made pursuant to written plans or agreements outstanding, or
written in policies of the Company in effect, on the date hereof (in each
case furnished to Parent prior to the date of this Agreement);
60
(xv) Lawsuits. Commence any action, suit or proceeding other than (A)
in the ordinary course of business; (B) in such cases where it in good
faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided that it
consults with Parent prior to the filing of such a suit; or (C) in respect
of a breach of this Agreement;
(xvi) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets or acquire or agree to
acquire any equity securities of any corporation, partnership, limited
liability company, association or business organization;
(xvii) Transactions with Company Regulatory Affiliates. Enter into
any arrangement, relationship or transaction with a Company Regulatory
Affiliate;
(xviii) Other. Take or agree in writing or otherwise to take (A) any
of the actions described in Sections 15.2(b)(i) through (xvii) above; (B)
any action that will result in any of the conditions to the Merger as set
forth in Article XIX of this Agreement not being satisfied or in violation
of any provision of this Agreement, except, in every case, as may be
required by any applicable Laws and Regulations; or (C) any other action
that would materially adversely delay or materially adversely impair the
ability of the Company to consummate the Merger.
(c) Each of the Target Shareholders, the Target Companies and ▇▇▇▇▇
agree to cause the Company to comply with the provisions of Section 15.2(b).
15.3. Conduct of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the Company's prior written
consent, Parent shall not, and shall cause its Subsidiaries to not: (a) take
any action that will result in any of the conditions to the transactions
contemplated by this Agreement set forth in Article XIX of this Agreement not
being satisfied or in a violation of any provision of this Agreement or (b)
take any other action that would materially adversely delay or materially
adversely impair the ability of Parent or any of its Subsidiaries to consummate
the transactions contemplated by this Agreement, except, in every case, as may
be required by applicable law.
15.4. No Solicitations. None of the Target Shareholders, the Target
Companies, ▇▇▇▇▇, the Company or any of their respective Subsidiaries or
Affiliates shall, nor shall they authorize or permit any officer, director,
employee, investment banker, financial advisor, attorney, accountant or other
agent or representative (each, a "Representative") retained by or acting for or
on behalf of any Target Shareholder, any Target Company, ▇▇▇▇▇, the Company or
any of their respective Subsidiaries to, directly or indirectly, initiate,
solicit, encourage, or participate in any negotiations regarding, furnish any
confidential information in connection with, endorse or otherwise cooperate
with, assist, participate in or facilitate the making of any proposal or offer
for, or which may reasonably be expected to lead to, an Acquisition Transaction
(as defined below), by any Person, or group (a "Potential Acquiror"). The
Company, ▇▇▇▇▇ or the applicable Target Shareholder or Target Company shall
promptly inform Parent, orally and in writing, of the material terms and
conditions of any proposal or offer for, or which may reasonably be expected to
lead to, an Acquisition Transaction that it receives. Each Target Shareholder,
Target Company, ▇▇▇▇▇ and the Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted on or prior to the date of this Agreement heretofore with
respect to any Acquisition Transaction. As used in this Agreement, "Acquisition
Transaction" means any merger, consolidation or other business combination
involving a Target Company or the Company, or any acquisition in any manner of
all or a substantial portion of the equity of, or all or a substantial portion
of the assets of, a Target Company or the Company, whether for cash,
61
securities or any other consideration or combination thereof, other than
pursuant to the transactions contemplated by this Agreement.
15.5. Access to Information; Confidentiality.
(a) The Company and each of the Target Companies shall, and the
Target Shareholders and ▇▇▇▇▇ shall cause the Company and the Target Companies
shall cause their respective Target Companies to, throughout the period from
the date hereof to the Effective Time, (i) provide Parent and its Affiliates
and their respective Representatives with full access, upon reasonable prior
notice, during normal business hours to all officers, employees, agents and
accountants of the Target Companies, the Company and their respective
Subsidiaries, and their respective assets, properties, books and records, but
only to the extent that such access does not unreasonably interfere with the
business and operations of the Target Companies, the Company and their
respective Subsidiaries, and (ii) furnish promptly to such persons (x) a copy
of each report, statement, schedule and other document filed or received by
such Target Company, the Company or any of their respective Subsidiaries
pursuant to the requirements of federal or state securities laws or filed with
any other governmental or regulatory authority, and (y) all other information
and data (including, without limitation, copies of contracts, Benefit Plans and
other books and records) concerning the business and operations of the Target
Companies, the Company and their respective Subsidiaries as Parent or any of
such other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained in
this Agreement or any condition to the obligations of the parties hereto.
(b) Parent will hold, and shall cause its Affiliates and their
respective Representatives to hold, in strict confidence, unless (i) compelled
to disclose by judicial or administrative process or by other requirements of
applicable laws of governmental or regulatory authorities (including, without
limitation, in connection with obtaining the necessary approvals of this
Agreement or the transactions contemplated hereby of governmental or regulatory
authorities); provided that to the extent reasonably practicable Parent shall
provide the applicable Target Company and the Company with reasonable notice of
such compelled disclosure, or (ii) disclosed in an action or proceeding brought
by a party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning ▇▇▇▇▇, the Target
Companies, the Company and their respective Subsidiaries furnished to it by
such entities or their respective Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (w) known by Parent,
any of its Affiliates or any of their respective Representatives prior to
disclosure by ▇▇▇▇▇, the Target Company or the Company or their respective
Representatives, as the case may be, (x) in the public domain (either prior to
or after the furnishing of such documents or information hereunder) through no
fault of Parent, its Affiliates and its Representatives, (y) later acquired by
Parent, any of its Affiliates or any of their respective Representatives from
another source if Parent, such Affiliate or such Representative is not aware,
after due inquiry, that such source is under an obligation to ▇▇▇▇▇, the Target
Companies or the Company to keep such documents and information confidential or
(z) independently developed by Parent or any of its Affiliates. In the event
that this Agreement is terminated without the transactions contemplated hereby
having been consummated, upon the request of the Company, Parent will, and will
cause its Representatives to, promptly redeliver or cause to be redelivered all
copies of documents and information furnished by ▇▇▇▇▇, the Target Companies,
the Company or their respective Representatives to Parent, its Affiliates and
their Representatives in connection with this Agreement or the transactions
contemplated hereby and destroy or cause to be destroyed all notes, memoranda,
summaries, analyses, compilations and other writings related thereto or based
thereon prepared by Parent or its Representatives.
15.6. Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement, each of ▇▇▇▇▇, the Target Shareholders, the
Target Companies, the Company and Parent will
62
proceed diligently and in good faith and will use all commercially reasonable
efforts to do, or cause to be done, all things necessary, proper or advisable
to, as promptly as practicable, (i) obtain all consents, approvals or actions
of, make all filings with and give all notices to Governmental Entities or any
other public or private third parties required of Parent or any of its
Subsidiaries or the Target Shareholders, the Target Companies, ▇▇▇▇▇ or the
Company to consummate the Mergers, the ▇▇▇▇▇ Interest Purchase and the other
transactions contemplated hereby and (ii) provide such other information and
communications to such Governmental Entity or other public or private third
parties as the other party or such Governmental Entity or other public or
private third parties may reasonably request. In addition to and not in
limitation of the foregoing, each of the parties will (x) take promptly all
actions necessary to make the filings required of Parent, the Target Companies,
▇▇▇▇▇ and the Company or their Affiliates under the HSR Act and other
applicable federal and state securities laws; (y) comply at the earliest
practicable date with any request for additional information received by such
party or its Affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust Division")
pursuant to the HSR Act or the SEC, NASD or CHX under applicable federal and
state securities laws and regulations; and (z) cooperate with the other party
in connection with such party's filings under the HSR Act and applicable
federal and state securities laws and regulations and SRO rules and regulations
and in connection with resolving any investigation or other inquiry concerning
the Mergers or the other matters contemplated by this Agreement commenced by
the FTC, the Antitrust Division, state attorneys general or the SEC, NASD or
CHX.
15.7. Notice and Cure. Each of Parent, on the one hand, and the
Target Shareholders, the Target Companies, ▇▇▇▇▇ and the Company, on the other
hand, will notify the other promptly in writing of, and contemporaneously will
provide the other with true and complete copies of any and all information or
documents relating to, and will use commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance occurring after the
date of this Agreement that causes or will cause any covenant or agreement of
Parent, the Target Shareholders, the Target Companies, ▇▇▇▇▇ or the Company, as
the case may be, under this Agreement to be breached or that renders or will
render untrue any representation or warranty of Parent, the Target
Shareholders, the Target Companies, ▇▇▇▇▇ or the Company, as the case may be,
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. Each of Parent, on the one hand, and
the Target Shareholders, the Target Companies, ▇▇▇▇▇ and the Company, on the
other hand, also will notify the other promptly in writing of, and will use
commercially reasonable efforts to cure, before the Closing, any violation or
breach of any representation, warranty, covenant or agreement made by Parent,
the Target Shareholders, the Target Companies, ▇▇▇▇▇ or the Company, as the
case may be, in this Agreement, whether occurring or arising prior to, on or
after the date of this Agreement. No notice given pursuant to this Section 15.7
shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein. Notwithstanding anything to the contrary
contained in this Agreement, including without limitation Sections 15.6 and
this Section 15.7, nothing in this Agreement shall require Parent or any of its
Affiliates to divest or hold separate, or to agree to any material conditions
or restrictions with respect to the operation of, any business, division or
operating unit of Parent or any of its Affiliates or the operation of the
business of the Company following the Closing.
15.8. Fulfillment of Conditions. Subject to the terms and conditions
of this Agreement, each of Parent, the Target Shareholders, the Target
Companies, ▇▇▇▇▇ and the Company will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and neither the Target Shareholders, the Target
Companies, ▇▇▇▇▇ or the Company, on the one hand, nor Parent, on the other
hand, will, nor will they permit any of their respective Subsidiaries to, take
or fail to take any action that could be reasonably expected to result in the
nonfulfillment of any such condition.
63
15.9. Existing Shareholders' Agreements. Each of the Target
Companies, ▇▇▇▇▇ and the Company shall cause any member or shareholder
agreements, as the case may be, or other agreements or arrangements whereby the
applicable Target Company, ▇▇▇▇▇ or the Company or any employee, member or
shareholder of a Target Company, ▇▇▇▇▇ or the Company have any right of first
refusal or other contractual rights pursuant to which the applicable Target
Company, ▇▇▇▇▇, the Company or such employees, members or shareholders may have
a right to participate in or otherwise impede the transactions contemplated by
this Agreement to be terminated or modified such that any such rights shall not
exist as an impediment to the Mergers, the ▇▇▇▇▇ Interest Purchase or the other
transactions contemplated by this Agreement.
15.10. Updating of Disclosure Schedules. The Company and the Target
Shareholders may, from time to time, after the date hereof and prior to the
Closing, amend the Company Disclosure Schedules and the Target Company
Disclosure Schedules, solely to reflect events that occur after the date of
this Agreement and prior to the Closing. The information disclosed in any such
amendments is hereinafter referred to as "Post-Signing Disclosure."
15.11. Voting. Each of the Target Shareholders and ▇▇▇▇▇ agree that,
during the period from the Closing Date to the fifth anniversary of the Closing
Date, so long as they continue to own (beneficially or of record) shares of
Parent Common Stock, in connection with any matter submitted to a vote of the
stockholders of Parent they will vote all of their shares of Parent Common
Stock in the manner recommended by the Board of Directors of Parent.
ARTICLE XVI
ADDITIONAL AGREEMENTS
16.1. Registration Requirements.
(a) Obligations of Parent.
(i) As soon as reasonably practicable after the Effective Time,
Parent shall file a registration statement (the "Registration Statement")
with the SEC to effect the registration under the Securities Act of the
shares of Parent Common Stock issuable in the Mergers and the ▇▇▇▇▇
Interest Purchase (other than the Escrow Shares) (together with any shares
of Parent Common Stock issued in connection with any stock dividend,
split, combination or recapitalization on, of or with respect to shares of
Parents Common Stock issuable in the Mergers, collectively, the
"Registrable Shares"), for sale by the Target Shareholders and ▇▇▇▇▇.
Parent shall use its commercially reasonable efforts to file the
Registration Statement as soon as practicable after the Effective Time,
but in no event later than 120 days after the Effective Time. After the
Registration Statement is filed, Parent shall respond reasonably promptly
to any and all comments made by the staff of the SEC to such Registration
Statement.
(ii) Such Registration Statement shall comply in all material
respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder and shall not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein
not misleading. The financial statements of Parent included in the
Registration Statement or incorporated by reference therein will comply as
to form in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC applicable
with respect thereto. Such financial statements will be prepared in
accordance with GAAP consistently applied during the periods involved
(except as may be otherwise indicated in the financial statements or the
notes thereto or, in the case of unaudited interim statements, as
permitted by the SEC) and fairly present the financial
64
position of Parent at the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
interim statements, to immaterial year-end adjustments).
(iii) Parent shall not be required to conduct an underwritten
offering.
(iv) Parent shall have no obligation to include the Registrable
Shares owned by any Target Shareholder or ▇▇▇▇▇ in a Registration
Statement unless and until such Target Shareholder or ▇▇▇▇▇ has furnished
Parent with all information and statements about or pertaining to such
Target Shareholder or ▇▇▇▇▇ in such reasonable detail and on such timely
basis as is reasonably deemed by Parent to be necessary or appropriate for
the preparation of the Registration Statement.
(v) Parent will keep the Registration Statement effective to sell
Registrable Shares, until the earlier of (A) such date as all of the
Registrable Shares have been resold or (B) two years from the date such
Registration Statement is declared effective by the SEC (the "Registration
Period").
(vi) Parent shall prepare and file with the SEC, as promptly as is
commercially reasonably practicable, such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective during the
Registration Period, and, during such period, to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by the Registration Statement.
(vii) Parent shall furnish to each Target Shareholder and ▇▇▇▇▇ (A)
promptly after the same is prepared and filed with the SEC, one copy of
the Registration Statement and any amendment thereto and each preliminary
prospectus and each amendment or supplement thereto; (B) on the date of
effectiveness of the Registration Statement or any amendment thereto, a
notice, to each Target Shareholder and ▇▇▇▇▇, stating that the
Registration Statement or amendment has been declared effective; and (C)
such number of copies of a prospectus, including a preliminary prospectus,
and all amendments and supplements thereto and such other documents as
such Target Shareholder or ▇▇▇▇▇ may reasonably request in order to
facilitate the disposition of the Registrable Shares owned by such Target
Shareholder or ▇▇▇▇▇.
(viii) Parent shall use best efforts to cause all Registrable Shares
to be listed on each national securities exchange or quotation service on
which securities of the same class or series issued by Parent are then
listed.
(ix) With a view to making available to the Target Shareholders and
▇▇▇▇▇ the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit the Target Shareholders and ▇▇▇▇▇ to sell
Registrable Shares to the public without registration or pursuant to
registration, Parent covenants and agrees to: (A) make and keep public
information available, as those terms are understood and defined in Rule
144, until such date as all of the Registrable Shares shall have been
resold and (B) file with the SEC in a timely manner all reports and other
documents required of Parent under the Exchange Act.
(x) As promptly as practicable after becoming aware of such event,
Parent shall notify each Target Shareholder and ▇▇▇▇▇ of the happening of
any event, of which Parent has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and use commercially reasonable efforts
to promptly prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such
number of copies of such supplement or amendment to each Target
Shareholder and ▇▇▇▇▇ as such Target Shareholder or ▇▇▇▇▇ may reasonably
request.
(xi) Parent shall use commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
Registration Statement, and, if such an order is issued, to
65
obtain the withdrawal of such order as soon as practicable (including in
each case by amending or supplementing the Registration Statement) and to
notify each Target Shareholder and ▇▇▇▇▇ who holds Registrable Shares
being sold of the issuance of such order and the resolution thereof, and
if the Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Target
Shareholder and ▇▇▇▇▇ as such Target Shareholder or ▇▇▇▇▇ may reasonably
request.
(xii) Without limiting the generality of subsections (x) and (xi)
above, Parent may refuse to permit the Target Shareholders and/or ▇▇▇▇▇ to
resell any Registrable Shares pursuant to the Registration Statement at
any time; provided, however, that in order to exercise this right at any
time, Parent must notify the Target Shareholders and ▇▇▇▇▇ to the effect
that suspension of the sale of shares under the Registration Statement is
necessary because either (A) Parent has determined in good faith that such
a sale would be in violation of the requirements of the Securities Act and
the regulations promulgated by the SEC thereunder or (B) there exists at
the time material non-public information relating to Parent which, in the
reasonable opinion of Parent, should not be disclosed. Notwithstanding the
foregoing, Parent shall not under any circumstances be entitled to
exercise its right to suspend sales under this subsection until Parent has
provided the Target Shareholders and/or ▇▇▇▇▇, as the case may be, with a
certificate executed by an authorized officer of Parent stating that such
suspension is necessary in light of such potential violation or non-public
information. Parent shall not under any circumstances be entitled to
exercise its right to suspend sales under this subsection more than two
times in any twelve (12)-month period, and the period during which the
Registration Statement under this subsection may be withdrawn shall not
exceed 60 days each such time.
(b) Obligations of the Target Shareholders and ▇▇▇▇▇.
(i) Each Target Shareholder and ▇▇▇▇▇ will provide Parent all
information necessary from such Target Shareholder and ▇▇▇▇▇ to register
such shares and shall execute such documents in connection with such
registration as Parent may reasonably request. Each Target Shareholder and
▇▇▇▇▇ further agrees to furnish promptly to Parent in writing all
information required from time to time to be disclosed in order to make
the information previously furnished to Parent by each Target Shareholder
and ▇▇▇▇▇ not misleading.
(ii) Each Target Shareholder and ▇▇▇▇▇, by such Target Shareholder's
and ▇▇▇▇▇'▇ acceptance of the Registrable Shares, agrees to cooperate with
Parent as reasonably requested by Parent in connection with the
preparation and filing of the Registration Statement hereunder, unless
such Target Shareholder or ▇▇▇▇▇, as the case may be, has notified Parent
in writing of such Target Shareholder's or ▇▇▇▇▇'▇ election to exclude all
of such Target Shareholder's or ▇▇▇▇▇'▇ Registrable Shares from such
Registration Statement.
(iii) Each Target Shareholder and ▇▇▇▇▇ agrees that, upon receipt of
any notice from Parent of the happening of any event of the kind described
in Sections 16.1(a)(x) and 16.1(a)(xii), such Target Shareholder and ▇▇▇▇▇
will immediately discontinue disposition of the Registrable Shares
pursuant to the Registration Statement covering such Registrable Shares
until such Target Shareholder's or ▇▇▇▇▇'▇, as the case may be, receipt of
the copies of the supplemented or amended prospectus contemplated by
Section 16.1(a)(x) or written notice from Parent as contemplated by
Section 16.1(a)(xii) and, if so directed by Parent, such Target
Shareholder or ▇▇▇▇▇, as the case may be, shall deliver to Parent (at the
expense of Parent) or destroy (and deliver to Parent a certificate of
destruction) all copies in such Target Shareholder's or ▇▇▇▇▇'▇, as the
case may be, possession, of the prospectus covering such Registrable
Shares current at the time of receipt of such notice.
(iv) Each of the Target Shareholders agree that, during the period
from the Closing Date to the second anniversary of the Closing Date, so
long as they continue to own (beneficially or of record) shares of Parent
Common Stock issued in connection with the transactions contemplated by
this Agreement, they will comply with Parent's internal written trading
policies in effect as of the date of this Agreement and attached hereto as
Exhibit C together with any amendments thereof (the "Parent's Internal
Trading Policies"), as if they were specifically named in such policies
and without regard to whether they are employees or another class of
Person named in such policies, with respect to the resale of Parent
66
Common Stock. On and after the date which is the second anniversary of the
Closing Date, each of the Target Shareholders agree that, solely to the
extent that they are employees or another class of Person named in the
Parent's Internal Trading Policies, so long as they continue to own
(beneficially or of record) shares of Parent Common Stock issued in
connection with the transactions contemplated by this Agreement, they will
comply with all of the provisions of Parent's Internal Trading Policies
applicable to them, including without limitation those policies with
respect to resale of shares of Parent Common Stock.
(c) Expenses of Registration. Parent shall pay all Registration
Expenses (as defined below) in connection with any registration, qualification
or compliance hereunder, and the Target Shareholders and ▇▇▇▇▇ shall pay all
Selling Expenses (as defined below) and other expenses that are not
Registration Expenses relating to the Registrable Shares to be resold by the
Target Shareholders and ▇▇▇▇▇ . "Registration Expenses" shall mean all
expenses, except for Selling Expenses, incurred by Parent in complying with the
registration provisions set forth herein, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for Parent, blue sky fees and expenses and
the expense of any special audits incident to or required in connection with
any such registration. "Selling Expenses" shall mean selling commissions,
underwriting fees, expenses of counsel to the Target Shareholders and ▇▇▇▇▇ and
stock transfer taxes applicable to the Registrable Shares.
16.2. Blue Sky Filings. Parent shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the shares of Parent Common Stock in
connection with the Mergers and the ▇▇▇▇▇ Interest Purchase. Each of the Target
Shareholders, the Target Companies, ▇▇▇▇▇ and the Company shall use its best
efforts to assist Parent as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable in connection with the
issuance of the shares of Parent Common Stock in connection with the Mergers
and the ▇▇▇▇▇ Interest Purchase.
16.3. Affiliate Agreements. Schedule 2 attached hereto sets forth
those Persons who may be deemed Affiliates of the Target Companies and/or the
Company. The Company shall provide Parent with such information and documents
as Parent shall reasonably request for purposes of reviewing such list. Prior
to the Effective Time, the Target Shareholders and individuals identified on
such Schedule 2 shall, and the Target Companies and the Company shall use their
respective best efforts to obtain and, deliver or cause to be delivered to
Parent a duly executed Company Affiliate Agreement in the form attached hereto
as Exhibit D (a "Company Affiliate Agreement") on behalf of such Persons as
soon as practicable (and in any event within three business days) after the
execution hereof (to the extent not executed heretofore) and from any other
Person as soon as practicable after the date on which such Person becomes an
Affiliate of a Target Company or the Company. Parent shall be entitled to place
appropriate legends on the certificates evidencing shares of Parent Common
Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, in each of the foregoing cases in accordance
with the terms of such the Company Affiliate Agreement.
16.4. Capital Requirements. The capital requirement reserve recorded
on the Financial Statements shall be dealt with as set forth in the agreement
attached to Schedule 16.4.
16.5. Resale of Shares of Parent Common Stock. Each of the Target
Shareholders and ▇▇▇▇▇ covenant and agree that any sale of shares of Parent
Common Stock issued to such Person in connection with the transactions
contemplated by this Agreement shall be conducted through Parent or an
Affiliate of Parent which is a registered broker-dealer; provided, however,
that in conducting such sales, the costs and terms of performance offered by
Parent or an Affiliate of Parent shall be the costs and terms of performance
offered by Parent or an Affiliate of Parent to other institutional investors
for similar transactions; provided such costs and terms of performance are
competitive with the costs and terms of performance offered by agency
broker-dealers unaffiliated with any Selling Shareholder. If, at the time of
such proposed sale, neither Parent nor any of its Affiliates are registered
broker-dealers or they do not, at the time of
67
such proposed sale, offer competitive costs and terms of performance as other
agency broker-dealers, then Parent shall have the right to approve the
broker-dealer through which such sales are to be made, which approval shall not
be unreasonably withheld or delayed.
16.6. Parent Right of First Refusal. In addition to and not in
limitation of any other restrictions on sales of Parent Common Stock contained
in this Agreement or any Collateral Document, for the period from the Closing
Date to the fifth anniversary of the Closing Date, any sale or transfer by
▇▇▇▇▇ or a Target Shareholder (in such capacity as a selling shareholder, the
"Selling Shareholder") of an aggregate of 25,000 or more shares of Parent
Common Stock issued to such Selling Stockholder in connection with the
transactions contemplated by this Agreement in any 30-day period shall be
solely for cash consideration and shall be consummated only in accordance with
the following procedures:
(a) The Selling Shareholder shall first deliver to Parent a written
notice (a "Notice of Sale"), which shall: (i) state the Selling Shareholder's
intention to sell shares of Parent Common Stock to one or more Persons; if
available, the name or names of such Person or Persons, the number of shares of
Parent Common Stock; if a proposed privately negotiated sale, the purchase
price to be paid therefor and a summary of the other material terms of the
proposed sale and (ii) offer Parent the option to acquire all or a portion of
such shares of Parent Common Stock upon the terms and subject to the conditions
of the proposed sale as set forth in the Notice of Sale. Any such offer shall
remain open and irrevocable for the period set forth below (and, to the extent
such offer is accepted during such period, until the consummation of the sale
contemplated thereby). Parent shall have the right and option for a period
ending on the earlier of (i) Parent's express written rejection of the offer by
written notice to the Selling Shareholder or (ii) five (5) days after delivery
of the Notice of Sale (the "Acceptance Period") to accept all or any part of
such shares of Parent Common Stock at the purchase price and on the terms
stated in the Notice of Sale; provided, however, that if the proposed sale is a
public sale, the purchase price shall be the Closing Price of Parent Common
Stock on the date of such Notice of Sale or, if the date of such Notice of Sale
is not a Trading Day, the next Trading Day. Such acceptance shall be made by
delivering a written notice to the Selling Shareholder within the Acceptance
Period.
(b) If effective acceptance shall not have been received during the
Acceptance Period, the Selling Shareholder may sell all, but not less than all,
of the shares of Parent Common Stock so offered for sale and not so accepted by
Parent, if a privately negotiated sale, at the purchase price to the proposed
purchaser or purchasers or, if a public sale, at the current market price for
such shares at the time of such sale and on the other terms stated in the
Notice of Sale, at any time within sixty (60) days after the expiration of the
Acceptance Period (the "Open Sale Period"); provided, however, that, if
required, the proposed purchaser or purchasers have been approved by Parent in
accordance with Section 16.7 of this Agreement. To the extent the Selling
Shareholder sells the shares of Parent Common Stock so offered for sale during
the Open Sale Period, the Selling Shareholder shall promptly notify Parent as
to (i) the number of shares of Parent Common Stock, if any, that the Selling
Shareholder then owns, (ii) the number of shares of Parent Common Stock that
the Selling Shareholder has sold, (iii) the terms of such sale and (iv) if
known, the name of the owner(s) of any shares of Parent Common Stock sold. If
all of the offered shares of Parent Common Stock are not sold by the Selling
Shareholder during the Open Sale Period, the right of the Selling Shareholder
to sell such shares of Parent Common Stock shall expire and the obligations set
forth in this Section 16.6 shall be reinstated; provided, however, that at any
time during the Open Sale Period, the Selling Shareholder may terminate the
offer and reinstate the procedure provided in this Section 16.6 without waiting
for the expiration of the Open Sale Period.
16.7. Parent Approval of Sales. Notwithstanding anything to the
contrary contained in this Agreement, for the period from the Closing Date
through the date that is the fifth anniversary of the Closing Date, any
privately negotiated sale or transfer by a Selling Shareholder or one or more
Selling
68
Shareholders acting in concert to a Person and its Affiliates of (i) an
aggregate of 1,000,000 or more shares of Parent Common Stock issued to such
Selling Shareholder or Selling Shareholders in connection with the transactions
contemplated by this Agreement or (ii) a number of shares of Parent Common
Stock issued to such Selling Shareholder or Selling Shareholders in connection
with the transactions contemplated by this Agreement to any Person and its
Affiliates in one or a related series of transactions occurring within any 90
day period that together is equal to or greater than 1,000,000 shares of Parent
Common shall be subject to the prior written approval of Parent. Parent shall
have five (5) days after receipt of a Notice of Sale subject to the approval
requirement of this Section 16.7 to approve or disapprove the proposed sale or
transfer in writing. If Parent does not approve or disapprove the sale or
transfer specified in the Notice of Sale by the fifth day after receipt of the
Notice of Sale, the Selling Shareholder or Selling Shareholders, as the case
may be, seeking Parent's approval pursuant to this Section 16.7 shall deliver
an additional notice (the "Final Sale Notice") to Parent stating that the
Selling Shareholder or Selling Shareholders, as the case may be, have not
received a response from Parent pursuant to this Section 16.7. Parent's failure
to approve or disapprove the proposed sale or transfer in writing within one
day following its receipt of the Final Sale Notice shall constitute approval by
Parent of the proposed sale or transfer. Any transfer of shares of Parent
Common Stock in violation of this Section 16.7 shall be void and of no force or
effect. Notwithstanding anything to the contrary contained in this Agreement,
any Selling Shareholder or Selling Shareholders, as the case may be, may
withdraw a Notice of Sale delivered pursuant to Sections 16.6 or 16.7 at any
time prior to completion of the sale or transfer of shares of Parent Common
Stock specified in such notice.
ARTICLE XVII
EMPLOYMENT MATTERS
17.1. Employees; Employee Benefit Matters.
(a) On or before the day immediately prior to the Closing Date, the
Company shall, on terms reasonably acceptable to Parent, amend the eligibility
provisions of the ▇▇▇▇▇▇▇ & Company, LLC 401(k) Plan such that no employees of
any entity that becomes a member of the Company's controlled group on and after
the Closing as a result of the transactions contemplated by this Agreement are
eligible to participate in the ▇▇▇▇▇▇▇ & Company, LLC 401(k) Plan.
(b) To the extent permissible under the applicable provisions of the
Code and ERISA and the terms of any applicable employee benefit plans sponsored
or maintained by Parent or its Subsidiaries other than any Target Company
Employee Plan, (i) for purposes of crediting periods of service for eligibility
to participate and vesting, employees of the Company and its Subsidiaries shall
receive credit as if such service had been with Parent and (ii) individuals who
are employees of the Company or any of its Subsidiaries at the Effective Time
and who become employees of Parent or any Subsidiary thereof shall be eligible
to participate in employee benefit plans (within the meaning of ERISA Section
3(3)) maintained by Parent or any Subsidiary thereof on substantially the same
terms and conditions as apply generally to other similarly situated employees
of Parent or any of its Subsidiaries.
(c) Except to the extent specifically described on Schedule 17.1(c)
of the Company Disclosure Schedule, prior to the Effective Time, the Company
shall insure that no individual employed by the Company is party to any
agreement with the Company that would purport either: (i) to guaranty such
individual employment for any period of time or (ii) provide for the payment of
any severance or provision of any benefits to any such individual in the event
of the termination of that individual's employment. In the event that any such
agreement remains in effect at or following the
69
Effective Time, the shareholders will indemnify Parent for any costs it incurs
arising out of such agreements as provided in Article XX.
ARTICLE XVIII
TAX MATTERS.
18.1. Pre-Closing Tax Covenants.
(a) Preparation and Filing of Pre-Closing Tax Returns; Payment of
Pre-Closing Taxes. Between the date hereof and the Closing Date, the Target
Shareholders of each Target Company shall cause such Target Company and its
Subsidiaries and the Target Shareholders, the Target Companies and ▇▇▇▇▇ shall
cause the Company and its Subsidiaries to prepare and file on or before the due
date therefor all Tax Returns required to be filed by such Target Company and
its Subsidiaries and the Company and it Subsidiaries, respectively (except for
any Tax Return for which an extension has been granted as permitted hereunder),
on or before the Closing Date, and shall pay all Taxes (including estimated
Taxes) due on such Tax Returns (or due with respect to Tax Returns for which an
extension has been granted as permitted hereunder) or which are otherwise
required to be paid at any time prior to or during such period. Such Tax
Returns shall be prepared in accordance with the most recent Tax practices as
to elections and accounting methods, subject to Parent's consent (not to be
unreasonably withheld or delayed).
(b) Notification of Tax Proceedings. Between the date hereof and the
Closing Date, to the extent a Target Company, ▇▇▇▇▇ or a Target Shareholder has
knowledge of the commencement or scheduling of any Tax audit, the assessment of
any Tax, the issuance of any notice of Tax due or any ▇▇▇▇ for collection of
any Tax due or the commencement or scheduling of any other administrative or
judicial proceeding with respect to the determination, assessment, or
collection of any Tax of a Target Company or its Subsidiaries or the Company or
its Subsidiaries, such Target Company, Target Shareholder or ▇▇▇▇▇, as the case
may be, shall provide prompt notice to Parent of such matter, setting forth
information (to the extent known) describing any asserted Tax liability in
reasonable detail and including copies of any notice or other documentation
received from the applicable Tax authority with respect to such matter.
(c) Tax Election, Waivers, and Settlements. The Target Shareholder or
Target Shareholders of each Target Company shall not, and shall cause each
Target Company not to, and the Target Shareholders, the Target Companies and
▇▇▇▇▇ shall cause the Company not to, take any of the following actions with
respect to a Target Company or its Subsidiaries and the Company or its
Subsidiaries, respectively, without Parent's consent:
(i) make, revoke or amend any Tax election;
(ii) execute any waiver of restrictions on assessment or collection
of any Tax; or
(iii) enter into or amend any agreement or settlement with any Tax
authority.
(d) Termination of Existing Tax-Sharing Agreements. All Tax-sharing
agreements or similar arrangements with respect to or involving a Target
Company and its Subsidiaries or the Company and its Subsidiaries shall be
terminated with respect to the Target Company or the Company prior to the
Closing Date, and, after the Closing Date, neither Parent and its Affiliates,
on the one hand, nor the Target Company or its Subsidiaries or the Company and
its Subsidiaries, on the other,
70
shall be bound thereby or have any liability thereunder to the other party for
amounts due in respect of such agreements and arrangements.
(e) Nonforeign Affidavit. Each Target Shareholder and ▇▇▇▇▇ shall
furnish Parent an affidavit stating, under penalty of perjury, such Target
Shareholder's or ▇▇▇▇▇'▇, as the case may be, United States taxpayer
identification number and that such Target Shareholder or ▇▇▇▇▇, as the case
may be, is not a foreign person, pursuant to section 1445(b)(2) of the Code.
18.2. Post-Closing Tax Covenants and Indemnity.
(a) Tax Return Filing and Payment of Pre-Closing/Post-Closing Taxes.
(i) Parent shall prepare and timely file all Tax Returns of each
Target Company and its Subsidiaries and the Company and its Subsidiaries
for the Straddle Period (as defined in Section 18.2(b)). Parent shall pay
and discharge all Taxes shown to be due on such Tax Returns. No later than
ten business days prior to the due date of a Straddle Period Tax Return
for a Target Company or its Subsidiaries or the Company or its
Subsidiaries, the Target Shareholder or Target Shareholders of such Target
Company or the Target Shareholders and ▇▇▇▇▇, as the case may be, shall
pay to Parent the amount of Taxes shown due which is attributable to the
pre-Closing portion of the Straddle Period less estimated Tax payments
made prior to the Closing Date. The applicable Target Shareholders and
▇▇▇▇▇ shall have a reasonable opportunity to review all such Tax Returns.
The Target Shareholders of each Target Company shall prepare, and with
Parent's cooperation, timely file all Tax Returns of such Target Company
and its Subsidiaries for all pre-Closing periods which Tax Returns have
not been filed as of the Closing Date. The Target Shareholders and ▇▇▇▇▇
shall prepare, and with Parent's cooperation timely file, all Tax Returns
of the Company and its Subsidiaries for all pre-Closing periods for which
Tax Returns have not been filed as of the Closing Date. Parent shall have
a reasonable opportunity to review all such Tax Returns of the Target
Companies and their respective Subsidiaries and the Company and its
Subsidiaries. The Target Shareholder or Target Shareholders shall pay and
discharge all Taxes shown to be due on the pre-Closing Tax Returns of
their respective Target Company and its Subsidiaries and the Target
Shareholders and ▇▇▇▇▇ shall pay and discharge all Taxes shown to be due
on the pre-Closing Tax Returns of the Company and its Subsidiaries, in
each case before the same shall become delinquent and before penalties
accrue thereon except to the extent estimated Tax payments have been made
with respect to such Taxes prior to the Closing Date.
(ii) The Tax Returns referred to in the preceding paragraph shall be
prepared in a manner consistent with past practice, unless a contrary
treatment is required by an intervening change in the applicable law.
Parent or the Target Shareholders shall cause a copy of any Tax Return
that is required to be filed by it, under the preceding paragraph,
together with all relevant workpapers and other information, to be made
available to the other party for review and approval no later than 20
business days prior to the due date for the filing of such Tax Return
(taking into account proper extensions) and such approval not to be
unreasonably withheld. An exact copy of any such Tax Return filed by
Parent or the Target Shareholders and evidence of payment of such Taxes
shall be provided to the other party no later than ten business days after
such Tax Return is filed.
(iii) Notwithstanding anything to the contrary in this Agreement,
neither Parent nor the Target Shareholder or Target Shareholders of a
Target Company shall, nor shall they permit such Target Company and its
Subsidiaries nor shall they and ▇▇▇▇▇ permit the Company and its
Subsidiaries to, file any amended Tax Return relating to such Target
Company and its Subsidiaries or the Company and its Subsidiaries (or
otherwise change such Tax Returns) with respect to taxable periods ending
on or prior to the Closing Date without a written consent of the other
party if such amendment adversely affects the other party or such Target
Company and its Subsidiaries or the Company and its Subsidiaries, unless
71
required to do so by law. If any of the Target Shareholders of a Target
Company, Parent, such Target Company and its Subsidiaries or the Company
and its Subsidiaries are required by law to file an amended Tax Return for
a Target Company and its Subsidiaries or the Company and its Subsidiaries
with respect to taxable periods ending on or prior to the Closing Date,
and such amended Tax Return adversely affects such Target Company and its
Subsidiaries or the Company and its Subsidiaries tax attributes or its
position in a post-Closing period, the Target Shareholder or Target
Shareholders of such Target Company, on the one hand, and Parent, on the
other hand, shall have joint control over filing of such amended Tax
Returns.
(b) Allocation for Straddle Period. For purposes of this Agreement,
the amount of Taxes of a Target Company and its Subsidiaries and of the Company
and its Subsidiaries attributable to the pre-Closing portion of any taxable
period beginning before and ending after the Closing Date (the "Straddle
Period") shall be determined based upon a hypothetical closing of the taxable
year on such Closing Date with the Closing Date being included in the
pre-Closing portion of such Straddle Period; provided, however, real and
personal property Taxes (which are not based on income) shall be determined by
reference to the relative number of days in the pre-Closing and post-Closing
portions of such Straddle Period.
(c) Representations and Covenants of Parent Related to Tax Treatment
of the Mergers. Parent represents, warrants and covenants as follows: (i) prior
to the Mergers, Parent will own directly all of the outstanding stock of each
Merger Sub and will be in control of each Merger Sub within the meaning of Code
Section 368(c); (ii) following each Merger, Parent will hold directly all of
the outstanding shares of each Target Company, and Parent has no plan or
intention to cause any Target Company to issue additional shares of its common
stock that would result in Parent losing control of any Target Company within
the meaning of Code Section 368(c), or any warrants, options, convertible
securities, or any other type of right pursuant to which any person could
acquire stock in any Target Company which, if exercised or converted, would
result in Parent losing control of any Target Company within the meaning of
Section 368(c) of the Code; (iii) Parent has no plan or intention to reacquire
any of the Parent common stock issued in the Merger; (iv) Parent has no plan or
intention to (A) liquidate any Target Company or to merge any Target Company
with or into another corporation, or to sell or otherwise dispose of the stock
of any Target Company, except for transfers of stock to corporations controlled
by Parent, or (B) sell or otherwise dispose of or to cause any Target Company
to dispose of any of the assets of any Target Company, except for dispositions
made in the ordinary course of business or transfers described in Code Section
368(a)(2)(C); (v) following the Merger, Parent will continue each Target
Company's historic business or use a significant portion of each Target
Company's historic business assets in a business (for purposes of this
representation, continuation of the historic business of the Company and its
subsidiaries shall be considered continuation of the historic business of each
Target Company); (vi) no Merger Sub will have any liabilities assumed by any
Target Company, nor will any Merger Sub transfer to any Target Company as
assets subject to liabilities in the Merger; (vii) Parent is not an investment
company as defined in Section 368(a)(2)(F) of the Code; and (viii) the payment
of cash in lieu of fractional shares of Parent common stock is solely for the
purpose of avoiding the expense and inconvenience to Parent of issuing
fractional shares and does not represent separately bargained for
consideration.
(d) Indemnification.
(i) Subject to the limitations contained in Section 18.2(h) of this
Agreement, the Target Shareholders and ▇▇▇▇▇ agree to indemnify and hold
harmless the Indemnified Parties (as defined in Section 20.2) (including
following the Closing, the Target Companies, their Subsidiaries, the
Company and its Subsidiaries and the successors to the foregoing and their
respective shareholders, officers, directors, employees and agents),
jointly and severally, to the extent of each Target Shareholder's Escrow
72
Percentage, from and against any and all Losses (as defined in Section
20.2(a)), asserted against, or paid, suffered or incurred by any
Indemnified Party which, directly or indirectly, arise out of, result
from, are based upon or relate to: (A) the inaccuracy, untruth or
incompleteness, as of the date of this Agreement or the Effective Time, of
the representation and warranty made pursuant to Section 13.12; (B) any
Taxes imposed on the Company and its Subsidiaries or asserted against the
properties, income, or operations of the Company and its Subsidiaries for
any taxable period of the Company and its Subsidiaries ending on or prior
to the Closing Date, including the pre-Closing portion (as allocable
pursuant to Section 18.2(b)) of any Straddle Period; and (C) Taxes of
another Person claimed from the Company and its Subsidiaries as a result
of any of the Company or its Subsidiaries being included prior to the
Closing Date in a combined, consolidated or unitary tax group under
Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law) or, as a transferee or successor, by contract or
otherwise;
(ii) Subject to the limitations contained in Section 18.2(h) of this
Agreement, the Target Shareholders agree to indemnify and hold harmless
the Indemnified Parties (including following the Closing, the Target
Companies, their Subsidiaries, the Company and its Subsidiaries and the
successors to the foregoing and their respective shareholders, officers,
directors, employees and agents), severally and not jointly, from and
against any and all Losses asserted against, or paid, suffered or incurred
by any Indemnified Party which, directly or indirectly, arise out of,
result from, are based upon or relate to: (A) the inaccuracy, untruth or
incompleteness, as of the date of this Agreement or the Effective Time, of
the representation and warranty made by such Target Shareholder pursuant
to Section 12.13; (B) any Taxes imposed on the Target Shareholder's Target
Company and its Subsidiaries or asserted against the properties, income,
or operations of the Target Shareholder's Target Company and its
Subsidiaries for any taxable period of such Target Company and its
Subsidiaries ending on or prior to the Closing Date, including the
pre-Closing portion (as allocable pursuant to Section 18.2(b)) of any
Straddle Period; (C) Taxes of another Person claimed from the Target
Shareholder's Target Company and its Subsidiaries as a result of any of
the Target Company or its Subsidiaries being included prior to the Closing
Date in a combined, consolidated or unitary tax group under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law) or, as a transferee or successor, by contract or otherwise;
(D) the Target Shareholder's obligations for any Transfer Taxes pursuant
to Section 18.2(j) hereof; and (E) all Taxes imposed on Parent, any Target
Company or its Subsidiaries, or the Company or its Subsidiaries as a
result of the failure of the Merger to which such Target Shareholder's
Target Company was a party pursuant to this Agreement to qualify as a
tax-free reorganization under Section 368 of the Code (or any similar
provision of state, local, or foreign law);
(iii) Parent agrees to indemnify and hold the Target Shareholders and
▇▇▇▇▇ (and the successors to the foregoing and their respective
shareholders, officers, directors, employees and agents, if any, as the
case may be), from and against any and all Losses asserted against, or
paid, suffered or incurred by any of the Target Shareholders and/or ▇▇▇▇▇
which, directly or indirectly, arise out of, result from, are based upon
or relate to any Taxes imposed on or in respect of the operations of the
Target Companies and/or the Company for any taxable periods commencing
after the Closing Date, including the post-Closing portion (as allocable
pursuant to Section 18.2(b)) of any Straddle Period; and
(iv) The indemnification set forth in Sections 18.2(d)(i) through
18.2(d)(ii) shall be in addition to the indemnification set forth in
Section 20.2 and shall be subject to the provisions of Section 20.2(e), to
the extent specified therein and the indemnification set forth in Section
18.2(d)(i) shall be subject to the provisions of Section 20.3(b), to the
extent specified therein.
(e) Tax Contest.
(i) Parent or the applicable Indemnified Party shall notify ▇▇▇▇▇
and/or the applicable Target Shareholder or Target Shareholders in writing
within 30 calendar days of receipt of written notice
73
of any pending or threatened Tax examination, audit or other
administrative or judicial proceeding (a "Tax Contest") that could
reasonably be expected to result in an indemnification obligation under
this Section 18 of such party pursuant to this Section 18; provided,
however, that a failure to give such notice shall not affect Parent's or
such Indemnified Party's right to indemnification pursuant to Section
18.2(d) unless such failure or delay shall have materially and adversely
affected the indemnifying party's ability to defend against, settle, or
satisfy any action, suit or proceeding against it, or any damage, loss,
claim or demand for which the indemnified party is entitled to
indemnification hereunder.
(ii) If a Tax Contest relates to any pre-Closing period or to any
Taxes for which a Target Shareholder or ▇▇▇▇▇ is liable in full hereunder,
the Target Shareholder or ▇▇▇▇▇ shall at its expense control the defense
and settlement of such Tax Contest but only to the extent any proposed
adjustment does not relate to any period ending after the Closing Date. In
addition, to the extent the Target Shareholders and/or ▇▇▇▇▇, as the case
may be, do not assume the defense and settlement of any Tax Contest
referred to in the first sentence of this subclause (ii), Parent may
defend such Tax Contest in a manner it deems appropriate including, but
not limited to, settling such Tax Contest after giving ▇▇▇▇▇, the Target
Shareholder or Target Shareholders, as the case may be, five days prior
written notice setting forth the terms and conditions of such settlement.
Notwithstanding the foregoing, neither the Target Shareholder or Target
Shareholders nor ▇▇▇▇▇ shall agree to any settlement concerning Taxes for
a pre-Closing period which may adversely impact Parent, a Target Company
and its Subsidiaries or the Company and its Subsidiaries for a
post-Closing period or the Tax attributes of a Target Company and its
subsidiaries or the Company and its Subsidiaries without the prior written
consent of Parent. If a Tax Contest relates to any post-Closing period or
to any Taxes for which Parent is liable in full hereunder, Parent shall at
its own expense control the defense and settlement of such Tax Contest.
The party not in control of the defense shall have the right to be kept
fully informed of any material developments and receive copies of all
correspondence and shall have the right to observe the conduct of any Tax
Contest (through attendance at meetings) at its own expense, including
through its own counsel and other professional experts. Parent and the
Target Shareholder or Target Shareholders of a Target Company shall
jointly represent and control each Target Company and its Subsidiaries and
Parent, the Target Shareholders and ▇▇▇▇▇ shall jointly represent and
control the Company and its Subsidiaries, in each case in any Tax Contest
relating to a Straddle Period, and fees and expenses related to such
representation shall be paid equally by Parent, on the one hand, and the
Target Shareholder or Target Shareholders and ▇▇▇▇▇ (to the extent
applicable), on the other hand.
(f) Cooperation. The Target Shareholders, ▇▇▇▇▇ and Parent agree to
furnish or cause to be furnished to each other, and upon request, as promptly
as practicable, such information and assistance (including access to books and
records) as is reasonably necessary for preparation of any Tax Return, claim
for refund or audit, and the prosecution or defense of any claim, suit or
proceeding relating to any Target Company's or its Subsidiaries' or the
Company's or its Subsidiaries' Tax liability. The requesting party shall bear
all out-of-pocket costs and expenses reasonably incurred by the other party
hereto in providing such assistance.
(g) Disputes. In the event that a dispute arises between a Target
Shareholder or ▇▇▇▇▇ and Parent as to the amount of Taxes or indemnification or
any matter relating to Taxes attributable to a Target Company and its
Subsidiaries or the Company and its Subsidiaries, the parties shall attempt in
good faith to resolve such dispute, and any agreed upon amount shall be paid to
the appropriate party. If such dispute is not resolved 30 calendar days
thereafter, the parties shall submit the dispute to an independent accounting
firm mutually chosen by Parent and the Target Shareholders or Parent and ▇▇▇▇▇,
as the case may be, for resolution, which resolution shall be final, conclusive
and binding on the parties. Notwithstanding anything in the Agreement to the
contrary, the fees and expenses of the independent accounting firm in resolving
this dispute shall be borne equally by the Target Shareholder or Target
Shareholders and/or ▇▇▇▇▇, on the one hand, and Parent, on the other hand.
74
(h) Survival. The representations and warranties contained in Section
12.13 and Section 13.12 of this Agreement and this Article XVIII shall survive
until the date that is three months after the expiration of the statute of
limitations with respect to the applicable Tax (including all periods of
extension, whether automatic or permissive).
(i) Exclusive Tax Remedy. Notwithstanding anything to the contrary in
this Agreement, absent fraud, the Target Shareholders, ▇▇▇▇▇ and Parent hereby
acknowledge and agree that the sole and exclusive remedy with respect to any
and all claims relating to Taxes shall be pursuant to the provisions set forth
in this Article XVIII including any claim resulting from a breach or inaccuracy
of representations and warranties of the Target Shareholders relating to Taxes,
and to the extent there is any conflict between provisions of Article XVIII and
provisions of other Sections of the Agreement with respect to issues or claims
relating to Taxes, the provisions of this Article XVIII shall control.
(j) Transfer Taxes. Parent shall be responsible for the filing of Tax
Returns (including any documentation) with respect to all transfer,
documentation, sales, use, stamp, registration, and similar Taxes incurred in
connection with this Agreement or any transaction contemplated thereby. The
Target Shareholders shall be responsible for the amount of such Taxes.
(k) Character of Payments. To the extent permitted by applicable law,
the parties agree that any indemnification payments (and/or payments or
adjustments) made with respect to this Agreement shall be treated for all Tax
purposes as an adjustment to the purchase price.
(l) Extension following Delivery of a Claim Notice. Notwithstanding
anything herein to the contrary, any representation, warranty, covenant and
agreement relating to any Tax matter which is the subject of a claim which is
asserted in writing prior to the expiration of the applicable survival period
shall survive with respect to such claim or any dispute with respect thereto
until the final resolution thereof.
ARTICLE XIX
CONDITIONS TO CLOSING
19.1. Conditions to the Obligations of Parent and the Merger Subs.
The obligation of Parent, the Merger Subs and ▇▇▇▇▇ Acquisition to effect the
Mergers, the ▇▇▇▇▇ Interest Purchase and the other transactions contemplated by
this Agreement is subject to the fulfillment on or prior to the Closing of each
of the following conditions (all or any of which may be waived by Parent in its
sole discretion):
(a) Performance of Obligations; Representations and Warranties.
Subject to the terms and conditions set forth in this Section 19.1(a), each of
the Target Shareholders, the Target Companies, ▇▇▇▇▇ and the Company shall have
performed and complied in all material respects with all covenants and
agreements contained in this Agreement that are required to be performed or
complied with by them prior to or at the Closing, and, except as otherwise
provided below, each of the Target Shareholder's, each Principal's, the
Company's and ▇▇▇▇▇'▇ representations and warranties contained in Article XI,
XII and XIIA of this Agreement, as modified in accordance with Section 15.10,
shall be true and correct in all material respects (if not qualified by
materiality) and in all respects (if qualified by materiality) as of the
Closing Date as though made on and as of the Closing Date or (i) in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, shall have been true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of such date and (ii) solely for the purpose of this condition, in the
case of the representations and warranties made in Sections 12.6(i) and
13.5(i), shall have been true and correct in all
75
respects on and as of the date of this Agreement, and each of the Target
Shareholders, the Target Companies, ▇▇▇▇▇ and the Company shall have delivered
to Parent a certificate, dated as of the Closing Date to such effect,
substantially in the applicable form attached hereto as Exhibit E. Anything in
this Agreement to the contrary notwithstanding, for purposes of this Section
19.1(a), if, and only if, (i) (A) the Post-Signing Disclosure includes matters
that, individually or in the aggregate, have or are reasonably likely to have a
Material Adverse Effect on any Target Company or the Company or (B) the
Post-Signing Disclosure includes matters that cause any representation or
warranty contained in Article XII, Article XIIA or Article XIII of this
Agreement to fail to be true and correct as of the date of this Agreement, and
(ii) Losses (the "Post-Signing Losses") subject to indemnification pursuant to
Section 20.2(a), 20.2(b) or 20.2(c) of this Agreement resulting from such
matters disclosed in the Post-Signing Disclosures with respect to clauses (A)
and (B) of this sentence are reasonably expected to be incurred in excess of
$7,350,000, then this condition will be deemed not to be satisfied as the
result of the matters disclosed in such Post-Signing Disclosures; provided,
however, that if, upon written notification of Parent's intent not to close the
transactions contemplated by this Agreement as a result of the failure of this
condition to be satisfied, the Target Shareholders and ▇▇▇▇▇ agree, in their
sole discretion, to increase the number of Escrow Shares delivered to the
Escrow Agent pursuant to Section 11.6 of this Agreement by the amount of
Post-Signing Losses in excess of $7,350,000, then the parties agree that this
condition will be deemed satisfied notwithstanding the matters disclosed with
respect to clauses (A) and (B) of this sentence. If the parties to this
Agreement are unable to agree the amount of the Post-Signing Losses, such
amount shall be determined pursuant to Section 24.14 of this Agreement.
(b) Opinions of Counsel. Parent, ▇▇▇▇▇ Acquisition and the applicable
Merger Sub shall have received the favorable written opinions, each dated the
Closing Date, (i) from the counsel set forth opposite each Target Shareholder's
and ▇▇▇▇▇'▇ name on Exhibit F, as to the matters set forth on the attachment to
Exhibit F and (ii) from ▇▇▇▇▇ & Lardner, counsel to the Company, as to the
matters set forth on the attachment to Exhibit G, in each case, in a form
reasonably satisfactory to counsel for Parent, ▇▇▇▇▇ and/or the applicable
Merger Sub.
(c) Resignations. Parent shall have received the written resignation
of the individuals set forth on Exhibit H and the written resignation of all
trustees of all the Benefit Plans of the Company and its Subsidiaries set forth
on Exhibit I, each effective at the Effective Time.
(d) Consents. Parent shall have been furnished with evidence
satisfactory to it of the consent, approval or waiver of those Persons listed
on Schedule 19.1(d) attached hereto and all other Persons whose consent,
approval or waiver shall be required in connection with the Mergers and the
▇▇▇▇▇ Interest Purchase and the other transactions contemplated by this
Agreement under any Target Company Material Contract or Company Material
Contract. Each of such consents, approvals and waivers (i) shall be in form and
substance reasonably satisfactory to Parent, (ii) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (iii)
shall be in full force and effect.
(e) Governmental Approvals. Each of Parent, the Target Companies,
▇▇▇▇▇, the Company, the Merger Subs and ▇▇▇▇▇ Acquisition and their respective
Subsidiaries shall have timely obtained from each Governmental Entity all
approvals, non-objections, waivers and consents, if any, necessary for
consummation of or in connection with the Mergers and the other transactions
contemplated by this Agreement and no such approval, non-objection, waiver or
consent shall contain any condition that Parent reasonably determines to be
unduly burdensome or otherwise alters the benefits for which Parent bargained
in this Agreement.
(f) Injunctions, Etc. No temporary restraining order, preliminary or
permanent injunction or other order issued, enacted, promulgated, enforced or
entered by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of any of the
76
Mergers, the ▇▇▇▇▇ Interest Purchase or the other transactions contemplated by
this Agreement shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or Laws and Regulations or orders enacted, entered, enforced or deemed
applicable to any of the Mergers, the ▇▇▇▇▇ Interest Purchase or the other
transactions contemplated by this Agreement, which prevents or prohibits the
consummation of any of the Mergers, the ▇▇▇▇▇ Interest Purchase or the other
transactions contemplated by this Agreement.
(g) Good Standing Certificates. Each Target Company and the Company
shall have delivered to Parent (a) copies of the certificates or articles of
incorporation (or other comparable corporate organizational documents),
including all amendments thereto, of such company and each of its Subsidiaries
certified by the Secretary of State or the Delaware Secretary of State, as the
case may be, or other appropriate official of the jurisdiction of incorporation
or formation, (b) certificates from the Secretary of State, Delaware Secretary
of State or other appropriate official of the respective jurisdictions of
incorporation or formation to the effect that each of the Target Companies, the
Company and their respective Subsidiaries is in good standing or subsisting in
such jurisdiction, listing all charter documents of the Target Companies, the
Company and such Subsidiaries on file and attesting to its payment of all
franchise or similar Taxes, and (c) a certificate from the secretary of state
or other appropriate official in each jurisdiction in which the Target
Companies, the Company and their respective Subsidiaries are qualified or
admitted to do business to the effect that the applicable Target Company, the
Company or the applicable Subsidiary is duly qualified or admitted and in good
standing in such jurisdiction.
(h) Management Continuity Agreements. The Management Continuity
Agreements shall be in full force and effect , and none of the parties thereto
(other than Parent or the Company) shall have indicated an intention to
repudiate, terminate or challenge the enforceability of any of those
agreements.
(i) Escrow Agreement. The Escrow Agreement shall have been duly
executed and delivered by the parties thereto.
(j) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Mergers, the ▇▇▇▇▇ Interest Purchase or
the consummation of the other transactions contemplated by this Agreement under
the HSR Act shall have expired or been terminated.
(k) CHX and NASD Approval. Each of Parent, the Target Companies,
▇▇▇▇▇, the Company and their respective Subsidiaries shall have obtained from
the CHX, and any committee thereof, including the Specialist Assignment and
Evaluation Committee, and the NASD approval to continue to operate as a
broker-dealer following the change in ownership and control of the Company and
its Subsidiaries contemplated by this Agreement without a reassignment of
securities assigned to the Company in which the Company has privileges to act
as a specialist under CHX laws and regulations and without any forced
divestiture of CHX membership interests by the Company.
(l) Orderly Distribution and Lock-Up Agreement. Each of the Target
Shareholders and ▇▇▇▇▇ shall have executed and delivered to Parent a copy of
the Orderly Distribution and Lock-Up Agreement attached hereto as Exhibit J.
(m) Invoices. Parent shall have received the Invoices required to be
delivered pursuant to Section 22.1 of this Agreement.
(n) Operating Agreement Amendment. The Target Companies and ▇▇▇▇▇
shall have executed the Operating Agreement Amendment.
77
(o) ▇▇▇▇▇ Member Interest Transfer. Parent shall have received from
▇▇▇▇▇ an executed member interest transfer agreement in form and substance
reasonably satisfactory to Parent.
19.2. Conditions to the Obligations of the Company and ▇▇▇▇▇. The
obligation of the Target Shareholders, the Target Companies, the Company and
▇▇▇▇▇ to effect the Mergers, the ▇▇▇▇▇ Interest Purchase and the other
transactions contemplated by this Agreement is subject to the fulfillment at or
prior to the Closing of each of the following conditions (all of which may be
waived by the Company in its sole discretion).
(a) Performance of Obligations; Representations and Warranties.
Parent, the Merger Subs and ▇▇▇▇▇ Acquisition shall have performed and complied
in all material respects with all covenants and agreements contained in this
Agreement that are required to be performed or complied with by them prior to
or at the Closing and each of the representations and warranties of Parent
contained in this Agreement shall be true and correct, in all material respects
(if not qualified by materiality) and in all respects (if qualified by
materiality) as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties made as of a specified
date earlier than the Closing Date, shall have been true and correct in all
material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) on and as of such date and Parent shall have
delivered to the Target Shareholders, the Target Companies, the Company and
▇▇▇▇▇ a certificate dated the Closing Date executed on behalf of Parent by an
authorized signatory to such effect.
(b) Opinion of Counsel. The Target Shareholders and ▇▇▇▇▇ shall have
received the favorable written opinion, dated the Closing Date, from counsel
for Parent, as to the matters set forth on the attachment to Exhibit K in a
form reasonably satisfactory to counsel for the Target Shareholders or ▇▇▇▇▇,
as the case may be.
(c) Governmental Approvals. Each of Parent, the Target Companies,
▇▇▇▇▇, the Company, the Merger Subs and ▇▇▇▇▇ Acquisition and their respective
Subsidiaries shall have timely obtained from each Governmental Entity all
approvals, non-objections, waivers and consents, if any, necessary for
consummation of or in connection with the Mergers and the other transactions
contemplated by this Agreement and no such approval, non-objection, waiver or
consent shall contain any condition that the Company reasonably determines to
be unduly burdensome or otherwise alters the benefits for which the Company
bargained in this Agreement.
(d) Injunctions, Etc. No temporary restraining order, preliminary or
permanent injunction or other order issued, enacted, promulgated, enforced or
entered by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of any of the Mergers, the
▇▇▇▇▇ Interest Purchase or the other transactions contemplated by this
Agreement shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or Laws and Regulations or orders enacted, entered, enforced or deemed
applicable to any of the Mergers, the ▇▇▇▇▇ Interest Purchase or the other
transactions contemplated by this Agreement, which prevents or prohibits the
consummation of any of the Mergers, the ▇▇▇▇▇ Interest Purchase or the other
transactions contemplated by this Agreement.
(e) Escrow Agreement. The Escrow Agreement shall have been duly
executed and delivered by the parties thereto.
(f) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Mergers, the ▇▇▇▇▇ Interest Purchase and
the other transactions contemplated by this Agreement under the HSR Act shall
have expired or been terminated.
78
(g) CHX and NASD Approval. Each of Parent, the Target Companies,
▇▇▇▇▇, the Company and their respective Subsidiaries shall have obtained from
the CHX, and any committee thereof, including the Specialist Assignment and
Evaluation Committee, and the NASD approval to continue to operate as a
broker-dealer following the change in ownership and control of the Company and
its Subsidiaries contemplated by this Agreement without a reassignment of
securities assigned to the Company in which the Company has privileges to act
as a specialist under CHX laws and regulations and without any forced
divestiture of CHX membership interests by the Company.
ARTICLE XX
SURVIVAL; INDEMNIFICATION
20.1. Survival.
(a) Representations and Warranties of the Principals. Subject to the
provisions of Section 18.2(h), all of the representations and warranties of the
Principals and the Company contained in or made pursuant to Article XIII of
this Agreement shall survive the Closing and shall remain operative and in full
force and effect for a period of two years after the Closing Date (such period
being referred to as the "Principals' Escrow Indemnity Period"), regardless of
any investigation or statement as to the results thereof made by or on behalf
of any Person before or after the Closing. Except as otherwise provided in this
Agreement, no claim for indemnification against the Principals or the Company
for breach or violation of, or any untruth or incompleteness contained in, the
representations and warranties contained in or made pursuant to Article XIII of
this Agreement may be asserted after the expiration of the Principals' Escrow
Indemnity Period.
(b) Representations and Warranties of the Target Shareholders, the
Target Companies and ▇▇▇▇▇. Subject to the provisions of Section 18.2(h), all
of the representations and warranties of the Target Shareholders and the Target
Companies contained in or made pursuant to Article XII of this Agreement and of
▇▇▇▇▇ contained in or made pursuant to Article XIIA of this Agreement shall
survive the Closing and shall remain operative and in full force and effect
until 30 days after the expiration of all applicable statutes of limitation
(including all periods of extension, whether automatic or permissive) (such
period being referred to as the "Shareholders' Indemnity Period"), regardless
of any investigation or statement as to the results thereof made by or on
behalf of any Person before or after the Closing. Except as otherwise provided
in this Agreement, no claim for indemnification against the Target
Shareholders, the Target Companies or ▇▇▇▇▇ for breach or violation of, or any
untruth or incompleteness contained in, the representations and warranties
contained in or made pursuant to Article XII or Article XIIA of this Agreement,
as the case may be, may be asserted after the expiration of the Shareholders'
Indemnity Period.
(c) Covenants and Agreements of the Parties. Each covenant and
agreement contained in this Agreement shall survive the Closing until the date
which is 90 days following the last date on which such covenant or agreement is
to be performed or, if no such date is specified, indefinitely.
(d) Extension following Delivery of a Claim Notice. Notwithstanding
anything herein to the contrary, any representation, warranty, covenant and
agreement which is the subject of a claim which is asserted in writing prior to
the expiration of the applicable survival period shall survive with respect to
such claim or any dispute with respect thereto until the final resolution
thereof.
79
20.2. Indemnification.
(a) Subject to the limitations contained in this Article XX, the
Target Shareholders and ▇▇▇▇▇ shall, jointly and severally, to the extent of
▇▇▇▇▇'▇ and each Target Shareholder's Escrow Percentage, indemnify and hold
harmless Parent, its employees, agents, directors, officers, subsidiaries and
its affiliates and the employees, agents, directors, officers and subsidiaries
of its affiliates (the "Indemnified Parties") from and against any and all
damages, claims, losses (including loss of value), expenses, costs, obligations
and liabilities, including without limitation liabilities for all reasonable
attorneys', accountants', and experts' fees and expenses including those
incurred to enforce the terms of this Agreement or any Collateral Document
(collectively, "Losses"), asserted against, or paid, suffered or incurred by
any Indemnified Party which, directly or indirectly, arise out of, result from,
are based upon or relate to: (i) the inaccuracy, untruth or incompleteness, as
of the date of this Agreement or the Effective Time, of any representation or
warranty made or deemed to have been made by the Principals or the Company in
Article XIII of this Agreement (other than Section 13.12 which shall be dealt
with exclusively pursuant to Section 18.2); provided, however, that if any such
representation or warranty (other than those contained in Section 13.5(i)) is
qualified in any respect by materiality or Material Adverse Effect, for
purposes of this paragraph such materiality or Material Adverse Effect
qualification will in all respects be ignored; (ii) any failure by the
Principals or the Company to perform or fulfill any of its covenants or
agreements set forth in this Agreement; and (iii) the items described on
Schedule 20.2(a);
(b) Subject to the limitations contained in this Article XX, the
Target Shareholders shall, severally and not jointly, indemnify and hold
harmless the Indemnified Parties from and against all Losses asserted against,
or paid, suffered or incurred by any Indemnified Party which, directly or
indirectly, arise out of, result from, are based upon or relate to: (i) the
inaccuracy, untruth or incompleteness, as of the date of this Agreement or the
Effective Time, of any representation or warranty made or deemed to have been
made by such Target Shareholder in Article XII of this Agreement; (other than
Section 12.13 which shall be dealt with exclusively pursuant to Section 18.2);
provided, however, that if any such representation or warranty (other than
those contained in Section 12.6(i)) is qualified in any respect by materiality
or Material Adverse Effect, for purposes of this paragraph such materiality or
Material Adverse Effect qualification will in all respects be ignored; (ii) any
failure by such Target Shareholder or the applicable Target Company to perform
or fulfill any of its covenants or agreements set forth in this Agreement;
(iii) any other Loss to the extent such Loss relates to the applicable Target
Company and arises out of or is based upon or is otherwise related to actions
or omissions of such Target Company, its officers, directors and affiliates
prior to the Effective Time; (iv) any Liabilities of the applicable Target
Company; and (v) the transactions described on Schedule 20.2(b);
(c) Subject to the limitations contained in this Article XX, ▇▇▇▇▇
shall indemnify and hold harmless the Indemnified Parties from and against all
Losses asserted against, or paid, suffered or incurred by any Indemnified Party
which, directly or indirectly, arise out of, result from, are based upon or
relate to: (i) the inaccuracy, untruth or incompleteness, as of the date of
this Agreement or the Effective Time, of any representation or warranty made or
deemed to have been made by ▇▇▇▇▇ in Article XIIA of this Agreement or (ii) any
failure by ▇▇▇▇▇ to perform or fulfill any of its covenants or agreements set
forth in this Agreement; and
(d) Parent agrees to indemnify and hold the Target Shareholders and
▇▇▇▇▇ (and the successors to the foregoing and their respective shareholders,
officers, directors, employees and agents, if any, as the case may be), from
and against any and all Losses asserted against, or paid, suffered or incurred
by any Target Shareholder and/or ▇▇▇▇▇ which, directly or indirectly, arise out
of, result from, are based upon or relate to: (i) the inaccuracy, untruth or
incompleteness, as of the date of this Agreement or the Effective Time, of any
representation or warranty made by the Parent in Article XIV of this
80
Agreement; (ii) any failure by the Parent to perform or fulfill any of its
covenants or agreements set forth in this Agreement; or (iii) the operations of
the Target Companies and/or the Company for all periods occurring or commencing
after the Closing Date.
(e) For purposes of Sections 18.2(d), 20.2(a) and 20.2(b), (i) except
for any Post-Signing Disclosure arising out of the conduct of the business of
any of the Target Companies or the Company permitted pursuant to Section 15.1
or Section 15.2 of this Agreement, if the Post-Signing Disclosure includes
matters that cause any representation or warranty contained in this Agreement
to fail to be true and correct as of the date of this Agreement or as of the
Closing Date, the provisions of Section 18.2(d), 20.2(a) and 20.2(b) shall be
applied as if those matters were not included in the Disclosure Schedules and
(ii) in any other case not described in the preceding clause (i), the
applicable matter disclosed in the Post-Signing Disclosure shall be deemed
included in the applicable Sections of the Disclosure Schedule referenced in
the Post-Signing Disclosure.
20.3. Limitation of Liability; Disposition of Escrow Fund.
(a) After the Closing, the Indemnified Parties' rights to
indemnification under Section 20.2 shall be subject to the following
limitations: (i) in no event shall the aggregate amount to be paid to the
Indemnified Parties under Section 20.2(a) exceed the value of the Escrow Shares
and any cash or other property held in escrow (the "Indemnity Amount"); (ii) in
no event shall the aggregate amount to be paid to the Indemnified Parties under
Section 20.2(b) by any Target Shareholder exceed the aggregate amount of
consideration (valued, at the option of each Target Shareholder, as of the
Closing Date or, the date of such claim) received by such Target Shareholder
pursuant to this Agreement; and (iii) the Indemnified Parties shall be entitled
to recover any Loss otherwise recoverable pursuant to Section 20.2(a)(i) or
Section 20.2(a)(ii) only to the extent the aggregate of Losses otherwise
recoverable pursuant to such Sections (for this purpose aggregating all claims
against ▇▇▇▇▇ and each Target Shareholder) exceeds $1,500,000 in the aggregate
(the "Deductible Amount"); provided, that if all such Losses exceed the
Deductible Amount, the Indemnified Parties shall be entitled to recover for
such Losses only in excess of the Deductible Amount; provided, further, that no
such claim or series of related claims shall be made by the Indemnified Parties
under Section 20.2(a)(i) or Section 20.2(a)(ii) until such time as the Loss or
Losses for such claim or series of related claims exceeds $15,000 (the
"Per-Claim Hurdle"), whereupon, subject to the Deductible Amount, the
Indemnified Parties shall be entitled to recover the entire amount of such
Losses. For the avoidance of doubt, (x) the Deductible Amount and the Per-Claim
Hurdle shall apply only to indemnification claims brought pursuant to Section
20.2(a)(i) or Section 20.2(a)(ii) and shall otherwise be ignored for all
purposes and (y) in calculating the maximum amount payable by any Target
Shareholder pursuant to Section 20.2(b) all amounts previously paid or finally
determined as being payable pursuant to Section 20.2(a) shall be counted.
(b) In no event will any Target Shareholder be required to satisfy
any claims made by the Indemnified Parties pursuant to Sections 18.2(d)(i) and
20.2(a) of this Agreement other than by surrendering Escrow Shares, cash or
other property held in escrow for the account of such Target Shareholder. For
the avoidance of doubt, this Section 20.3(b) shall not apply to any other
indemnification claims brought by the Indemnified Parties pursuant to any other
provision of this Agreement.
20.4. Notice of Claims. If any of the Indemnified Parties believes
that it has suffered or incurred any Loss, it shall notify the Escrow Agent and
the applicable Target Shareholder or Target Shareholders and/or ▇▇▇▇▇, as the
case may be, promptly in writing (at the addresses set forth herein), and in
any event within the applicable time period specified in Section 18.2(h) or
Section 20.1, describing such Loss, all with reasonable particularity and
containing a reference to the provisions of this Agreement in respect of which
such Loss shall have occurred. If any legal action is instituted by a third
party with respect to which any of the Indemnified Parties intend to claim
indemnity under this Article, such
81
Indemnified Party shall promptly give written notice thereof (a "Claim Notice")
to notify the Escrow Agent and the applicable Target Shareholder or Target
Shareholders and/or ▇▇▇▇▇, as the case may be, of such legal action. In any
event, a failure or delay in notifying the Escrow Agent and the Target
Shareholder or Target Shareholders and/or ▇▇▇▇▇, as the case may be, shall not
affect the Indemnified Party's right to indemnity, except only to the extent
such failure or delay materially and adversely prejudices the ability to defend
against any legal action.
20.5. Defense of Third Party Claims. Because the right to indemnity
is limited as provided herein, except as specifically provided in Section
18.2(e) of this Agreement, the Indemnified Parties shall have the right to
conduct and control, through counsel of their own choosing, reasonably
acceptable to the applicable Target Shareholder or Target Shareholders and/or
▇▇▇▇▇, as the case may be, any third party legal action or other claim, but the
Target Shareholder or Target Shareholders and/or ▇▇▇▇▇, as the case may be,
may, at its or their election, participate in the defense thereof at its sole
cost and expense; provided, however, that if the Indemnified Parties shall fail
to defend any such legal action or other claim, then the applicable Target
Shareholder or Target Shareholders and/or ▇▇▇▇▇, as the case may be, may
defend, through counsel of its own choosing, such legal action or other claim,
and so long as it gives the Indemnified Parties at least 15 days' notice of the
terms of the proposed settlement thereof and permits the Indemnified Parties to
then undertake the defense thereof, except as set forth below, settle such
legal action or other claim and recover out of the Indemnity Amount the amount
of such settlement or of any judgment and the costs and expenses of such
defense. Neither the Indemnified Parties nor any Target Shareholder or ▇▇▇▇▇
shall compromise or settle any such legal action or other claim without the
prior written consent of the other, which consent shall not be unreasonably
withheld, except that under no circumstances shall any Indemnified Party be
required to consent to the entry of an order for injunctive or other
non-monetary relief. All costs and expenses reasonably incurred in defending
any such third party legal action or other claim, including the amount of any
settlement or of any judgment, shall be paid out of the Indemnity Amount.
20.6. Payment; Set-Off.
(a) In the event any Target Shareholder or ▇▇▇▇▇ is obligated to make
any payment to the Indemnified Parties in respect of the indemnity granted
pursuant to Section 18.2(d) or this Article XX, such Target Shareholder shall
be permitted to, in his or her discretion, satisfy such obligation either (i)
through the payment of cash or (ii) by delivering from the escrow a number of
Escrow Shares or other property of value held therein, in each case, as
calculated in accordance with the terms of the Escrow Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, in
pursuing satisfaction of indemnification claims pursuant to Section 18.2(d) and
Section 20.2(b) against any Target Shareholder Parent may set-off any such
amount due to Parent against Parent's obligations to such Target Shareholder;
including, without limitation Parent's obligation to such Target Shareholder in
connection with the matters described on Schedule 16.4 of this Agreement.
20.7. Exclusive Remedy. Except as provided in Section 18.2(i), the
parties hereto agree that the remedies provided by this Article XX shall be the
sole and exclusive remedy of Parent, the Target Shareholders and ▇▇▇▇▇
following the Closing for the subject matter covered by such indemnification
and any claim arising under this Agreement.
82
ARTICLE XXI
TERMINATION; EFFECT OF TERMINATION
21.1. Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time:
(a) by mutual written agreement of the parties hereto;
(b) by either Parent or the Company, if, the Closing shall not have
occurred on or before December 31, 2001 or such later date as the parties may
agree or as extended pursuant to Section 24.14 (provided that the right to
terminate this Agreement under this Section 21.1(b) shall not be available to
any party whose action or failure to act has been the cause of or resulted in
the failure of the Mergers to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement);
(c) by Parent, if the Principals, the Company, the Target Companies,
▇▇▇▇▇ or any of the Target Shareholders shall breach any of their
representations, warranties or obligations hereunder to an extent that would
cause the condition set forth in Section 19.1(a) not to be satisfied and such
breach shall not have been cured within ten (10) business days of receipt by
such party of written notice of such breach; provided, however, that the right
to terminate this Agreement by Parent shall not be available to Parent if
Parent is at that time in material breach of this Agreement;
(d) by the Company, if Parent shall breach any of its
representations, warranties or obligations hereunder to an extent that would
cause the condition set forth in Section 19.2(a) not to be satisfied and such
breach shall not have been cured within ten (10) business days following
receipt by Parent of written notice of such breach; provided, however, that the
right to terminate this Agreement by the Company shall not be available to the
Company where any of the Principals, the Company, the Target Companies, ▇▇▇▇▇
or any of the Target Shareholders is at that time in material breach of this
Agreement;
(e) by either the Company or Parent upon written notice to the other
party, thirty (30) days after the date on which any application, notice or
other request for approval, non-objection or consent required to be filed with
a Governmental Entity shall have been denied, objected to or withdrawn at the
request or recommendation of the Governmental Entity, unless within the thirty
(30) day period following such denial, objection or withdrawal, the parties
hereto agree to file, and have filed, with the applicable Governmental Entity,
a petition for re-hearing or an amended application, notice or other request
for approval, non-objection or consent; provided, however, that no party should
have a right to terminate this Agreement, pursuant to this Section 21.1(e) if
such denial, objection, or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth in this
Agreement;
(f) by the Company upon written notice to Parent if, in the
reasonable opinion of counsel to the Company, the cash payments to be delivered
to any Target Shareholder pursuant to the terms and provisions of this
Agreement exceed an amount relative to the aggregate value of the shares of
Parent Common Stock to be received by such Target Shareholder pursuant to the
terms and provisions of this Agreement to an extent that would cause the Merger
to which such Target Shareholder is a party pursuant to this Agreement to fail
to qualify as a tax-free reorganization within the meaning of Section 368(a) of
the Code;
83
(g) by Parent upon written notice to the Company if the Post-Signing
Losses (as finally determined pursuant to Section 24.14 of this Agreement, if
necessary) exceed Seventeen Million Three Hundred Fifty Thousand Dollars
($17,350,000); and
(h) by either Parent or the Company if any permanent injunction or
other order of a court or other competent authority preventing the consummation
of any of the Mergers or the ▇▇▇▇▇ Interest Purchase shall have become final
and nonappealable.
21.2. Effect of Termination. (a) If this Agreement is validly
terminated by either the Company or Parent pursuant to Section 21.1, this
Agreement will forthwith become null and void and there will be no liability or
obligation on the part of any of the Principals, the Company, the Target
Shareholders, ▇▇▇▇▇, the Target Companies, Parent, the Merger Subs or ▇▇▇▇▇
Acquisition (or any of their respective Representatives or affiliates), except
to the extent that such termination results from the breach by a party hereto
of any of its representations, warranties or covenants set forth in this
Agreement; provided that (a) the provisions of Section 15.5(b)
(Confidentiality), Section 22.1 (Expenses), Section 24.7 (Governing Law) and
this Section 21.2 shall remain in full force and effect and survive any
termination of this Agreement and (b) nothing herein shall relieve any party
from liability for fraud or willful breach in connection with this Agreement or
the transactions contemplated hereby.
ARTICLE XXII
FEES AND EXPENSES
22.1. Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers, brokers,
finders, agents, accountants and legal counsel) shall be paid by the party
incurring such expense. In addition, the unpaid fees and expenses of all
brokers, investment bankers, financial advisors, attorneys and accountants
engaged in connection with the preparation and negotiation of this Agreement or
the transactions contemplated hereby and whose compensation is payable by any
of the Target Companies or the Company shall be reflected on invoices (the
"Invoices") submitted to Parent on or prior to the Closing Date, which Invoices
shall include confirmation that no further compensation beyond the amount
reflected in the Invoice is or will be payable by the Company (or any of the
Surviving Corporations, as successors to the Target Companies). Any such
amounts payable by the Company shall be paid by the Company prior to any
distribution permitted pursuant to Section 15.2(b)(ii) or set forth on Schedule
15.2(b)(ii).
22.2. Target Shareholders. In no event shall Parent, the Merger Subs,
▇▇▇▇▇ Acquisition, any of the Target Companies or the Company be liable (before
or after the Closing) for any fees and expenses of the Target Shareholders
relating to the transactions contemplated by this Agreement.
ARTICLE XXIII
DEFINITIONS
23.1. Definitions. As used in this Agreement the terms set forth
below shall have the following meanings:
"Average Pre-Closing Price of Parent Common Stock" means the average
of the Closing Price of Parent Common Stock for the ten (10) consecutive
Trading Days ending on the Trading Day two days immediately prior to the
Effective Time; provided, however, that if the Average Pre-Closing Price of
84
Parent Common Stock is equal to or less than the Collar Price, then the Average
Pre-Closing Price of Parent Common Stock shall be the Collar Price.
"Benefit Plan" shall mean any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other material plan, arrangement or
understanding (whether or not written or legally binding and whether or not
subject to ERISA) providing material benefits to any current or former
employee, officer, consultant or director of the Company or any Subsidiary.
"BJC Capital Stock" shall mean the Common Stock, no par value per
share, of BJC.
"▇▇▇▇▇▇▇▇ Capital Stock" shall mean the Common Stock, no par value
per share, of ▇▇▇▇▇▇▇▇.
"▇▇▇▇▇▇ Capital Stock" shall mean the Common Stock, no par value per
share, of ▇▇▇▇▇▇.
"Closing Price of Parent Common Stock" means, for any day, the
closing sale price per share on that day of Parent Common Stock on the New York
Stock Exchange as reported in The Wall Street Journal (or, if not reported in
The Wall Street Journal, as reported by another authoritative source designated
by Parent).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collar Price" shall mean the amount of $5.0328.
"Collateral Documents" shall mean the Management Continuity and
Stockholder Agreements, the Escrow Agreement, the Orderly Distribution and
Lock-Up Agreement and any other agreement, instrument, certificate, memorandum,
schedule or other document delivered by a Person or any of its respective
directors, officers, employees or trustees pursuant to this Agreement or in
connection with the Mergers or the transactions contemplated by this Agreement.
"Control" means the possession of the power, directly or indirectly,
to direct or cause the direction of the management and policies of a Person
whether through the ownership of voting securities, by contract or otherwise.
"▇▇▇▇▇▇▇ Capital Stock" shall mean the Common Stock, par value $1.00
per share, of ▇▇▇▇▇▇▇.
"Effective Time" shall mean the last to occur of the ▇▇▇▇▇▇▇
Effective Time, the MTI Effective Time, the ▇▇▇▇▇▇▇▇ Effective Time, the
Rintels Effective Time, the Klobuchar Effective Time, the ▇▇▇▇▇▇ Effective
Time, the BJC Effective Time, the MASC Effective Time, the ▇▇▇▇▇▇ Effective
Time and the completion of the ▇▇▇▇▇ Interest Purchase.
"Environmental and Safety Laws" means any federal, state or local
laws, ordinances, codes, regulations, rules, policies and orders that are
intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other Persons, including
the public.
"Escrow Agent" shall mean a bank or trust company designated by
Parent.
85
"Escrow Agreement" shall mean an agreement substantially in the form
of Exhibit L, executed and delivered at the Closing.
"Exchange Ratio" shall mean each of the ▇▇▇▇▇▇▇ Exchange Ratio, the
MTI Exchange Ratio, the ▇▇▇▇▇▇▇▇ Exchange Ratio, the Rintels Exchange Ratio,
the Klobuchar Exchange Ratio, the ▇▇▇▇▇▇ Exchange Ratio, the BJC Exchange
Ratio, the MASC Exchange Ratio and the ▇▇▇▇▇▇ Exchange Ratio.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Income Taxes" shall mean Federal income taxes and all other state,
local and municipal Taxes based upon or computed with reference to income or
gross receipts.
"Klobuchar Capital Stock" shall mean the Common Stock, no par value
per share, of Klobuchar.
"Laws and Regulations" means all federal, state, local and foreign
and SRO laws, rules, regulations and ordinances, including, without limitation,
federal, state local, foreign and SRO laws, rules, regulations and ordinances
with respect to the business conducted by any Person and Environmental and
Safety Laws.
"Liabilities" means, without limitation, (i) all liabilities that
would be included on a balance sheet in accordance with GAAP, (ii) all amounts
whether fixed or contingent that are or may be payable to terminate all
contracts, agreements (written or oral), leases, or to pay all severance
payments under any employment agreements, including employees terminated prior
to Closing, (iii) all amounts whether fixed or contingent that are or may be
payable to discharge or satisfy any Liens, environmental claims, intellectual
property claims, litigation claims, Tax claims, employee benefit plans or
claims or any damages, whether known or unknown, that may arise out of or are
based on any fact, condition, event or circumstance that existed on or prior to
the Closing Date, (iv) all costs, expenses or other amounts that have been or
may be incurred by the Company to consummate the transactions contemplated by
this Agreement, and (v) any indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation or responsibility, either
accrued, absolute, contingent, mature, unmature or otherwise and whether known
or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated,
secured or unsecured, that may be asserted against, and/or payable by, any
Person based on any contract, agreement (written or oral), fact, condition,
event or circumstance that existed on or prior to the Closing Date; provided,
however, that for the purposes of determining the aggregate amount of
Liabilities pursuant to this Agreement, any Liability that may fall within more
than one of the categories set forth in the preceding sentence shall be counted
only once.
"Liens" shall mean any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, encumbrance, charge or other claims
of third parties of any kind, except for (a) liens for Taxes or governmental
charges or claims (i) not yet due and payable or (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor on the Financial Statements; (b)
statutory liens of landlords, lien of carriers, warehousemen's, mechanics and
materialmen's and other liens imposed by law incurred in the ordinary course of
business for sums (i) not yet due and payable and (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor on the Financial Statements; (c)
liens incurred or deposits made in connection with workers' compensation,
86
unemployment insurance and other similar types of social security programs in
each case in the ordinary course of business consistent with past practice; (d)
purchase money security interest incurred in the ordinary course of business,
consistent with past practice; and (e) easements, rights-of-way, restrictions
and other similar charges or encumbrances, in each case, which do not interfere
with the ordinary conduct of the Company's operations and do not or would not
materially detract from the value of the property to which such encumbrance
relates.
"MASC Capital Stock" shall mean the Common Stock, no par value per
share, of MASC.
"Material Adverse Effect" shall mean any circumstance, change in or
effect on any Person or any of its Subsidiaries that, individually or in the
aggregate with any other circumstance, changes in or effects on, such Person or
any of its Subsidiaries, is, or would reasonably be expected to be, materially
adverse to the assets, business, operation, condition (financial or otherwise)
or results of operations of such Person and its Subsidiaries taken as a whole;
provided, however, that none of the following, to the extent arising after the
date of this Agreement, shall constitute a Material Adverse Effect: (i) any
circumstance, change or effect affecting generally companies operating in the
broker-dealer/securities industry in the same general manner and to the same
general extent, including, without limitation, any change in the laws or
regulations affecting generally the broker-dealer/securities industry; (ii) any
circumstance, change or effect affecting generally the United States or world
equity markets or any material portion thereof; or (iii) any circumstance,
change or effect arising out of, resulting from, based upon or relating to the
announcement or pendency of the Mergers or the ▇▇▇▇▇ Interest Purchase or
compliance with the terms of, or the taking of any action required by, this
Agreement.
"MTI Capital Stock" shall mean the Common Stock, no par value per
share, of MTI.
"Operating Agreement" shall mean the Fifth Amended and Restated
Operating Agreement of ▇▇▇▇▇▇▇ & Company LLC dated January 26, 2001.
"▇▇▇▇▇▇ Capital Stock" shall mean the Common Stock, no par value per
share, of ▇▇▇▇▇▇.
"Person" shall mean any individual, corporation, partnership, limited
partnership, limited liability company, other business organization, trust,
association or entity or government agency or authority.
"Principals" shall mean all of the Target Shareholders.
"Property" means all real property leased or owned by the applicable
Target Company or its Subsidiaries or the Company or its Subsidiaries, as the
context requires, either currently or in the past.
"Rintels Capital Stock" shall mean the Common Stock, no par value per
share, of Rintels.
"Subsidiary" of any Person shall mean any corporation, partnership,
joint venture or other entity in which such Person (a) owns, directly or
indirectly, 50% or more of the outstanding voting securities or equity
interests or (b) is a general partner, but, with respect to ▇▇▇▇▇▇▇, shall not
include the Company.
"Surviving Corporation" shall mean each of the ▇▇▇▇▇▇▇ Surviving
Corporation, the MTI Surviving Corporation, the ▇▇▇▇▇▇▇▇ Surviving Corporation,
the Rintels Surviving Corporation, the Klobuchar Surviving Corporation, the
▇▇▇▇▇▇ Surviving Corporation, the BJC Surviving Corporation, the MASC Surviving
Corporation and the ▇▇▇▇▇▇ Surviving Corporation.
87
"Target Company Capital Stock" shall mean the ▇▇▇▇▇▇▇ Capital Stock,
the MTI Capital Stock, the ▇▇▇▇▇▇▇▇ Capital Stock, the Rintels Capital Stock,
the Klobuchar Capital Stock, the ▇▇▇▇▇▇ Capital Stock, the BJC Capital Stock,
the MASC Capital Stock and the ▇▇▇▇▇▇ Capital Stock.
"Target Company Effective Time" shall mean each of the ▇▇▇▇▇▇▇
Effective Time, the MTI Effective Time, the ▇▇▇▇▇▇▇▇ Effective Time, the
Rintels Effective Time, the Klobuchar Effective Time, the ▇▇▇▇▇▇ Effective
Time, the BJC Effective Time, the MASC Effective Time and the ▇▇▇▇▇▇ Effective
Time, as applicable.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall
mean any and all taxes, fees, levies, duties, tariffs, imposts, and other
charges of any kind in the nature thereof (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority, including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties, tariffs, and similar
charges.
"Tax Return" shall mean any return, declaration, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax and all federal, state,
local and foreign returns, reports and similar statements.
"Trading Day" means a day on which trading generally takes place on
the New York Stock Exchange and on which trading in Parent Common Stock has not
been halted or suspended.
23.2. Table of Definitions. In addition to the defined terms above,
the definitions of the following terms can be found in the Section of this
Agreement corresponding to such term:
88
Term Section
---- -------
"AAA" 24.14(a)
"Acceptance Period" 16.6
"Acquisition Transaction" 15.4
"Agreement" Preamble
"Antitrust Division" 15.6
"Assets" 13.19(a)
"Audited Balance Sheet" 13.4(i)
"Authorizations" 12.10(b)
"BJC" Preamble
"BJC Articles of Merger" 7.2
"BJC Effective Time" 7.2
"BJC Exchange Ratio" 7.4(c)
"BJC Merger" 7.1
"BJC Merger Sub" Preamble
"BJC Merger Sub Common Stock" 7.4(a)
"BJC Surviving Corporation" 7.1
"BJC Surviving Corporation Common Stock" 7.4(a)
"▇▇▇▇▇" Preamble
"▇▇▇▇▇ Acquisition" Preamble
"▇▇▇▇▇ Interest Purchase" Recitals
"▇▇▇▇▇ Member Interests" 10.1
"▇▇▇▇▇ Member Interest Purchase Amount" 10.2
"Broker-Dealer" 13.9(d)
"Certificates" 11.5(c)
"▇▇▇▇▇▇▇▇" Preamble
"▇▇▇▇▇▇▇▇ Articles of Merger" 3.2
"▇▇▇▇▇▇▇▇ Effective Time" 3.2
"▇▇▇▇▇▇▇▇ Exchange Ratio" 3.4(c)
"▇▇▇▇▇▇▇▇ Merger" 3.1
"▇▇▇▇▇▇▇▇ Merger Sub" Preamble
"▇▇▇▇▇▇▇▇ Merger Sub Common Stock" 3.4(a)
"▇▇▇▇▇▇▇▇ Surviving Corporation" 3.1
"▇▇▇▇▇▇▇▇ Surviving Corporation Common Stock" 3.4(a)
"CHX" Recitals
"Claim Notice" 20.4
"▇▇▇▇▇▇" Preamble
"▇▇▇▇▇▇ Articles of Merger" 9.2
"▇▇▇▇▇▇ Effective Time" 9.2
"▇▇▇▇▇▇ Exchange Ratio" 9.4(c)
"▇▇▇▇▇▇ Merger" 9.1
"▇▇▇▇▇▇ Merger Sub" Preamble
"▇▇▇▇▇▇ Merger Sub Common Stock" 9.4(a)
"▇▇▇▇▇▇ Surviving Corporation" 9.1
"▇▇▇▇▇▇ Surviving Corporation Common Stock" 9.4(a)
"Closing" 11.11
"Closing Agreement" 12.13(h)
"Closing Date" 11.11
"COBRA" 12.14(d)
"Company" Preamble
89
Term Section
---- -------
"Company Affiliate Agreement" 16.3
"Company Approvals" 13.3(a)
"Company Confidential Information" 13.11(h)
"Company Disclosure Schedules" Lead-in paragraph to
Article XIII
"Company Employee Plans" 13.13(a)
"Company ERISA Affiliate" 13.13(a)
"Company Intellectual Property" 13.11(a)
"Company Material Contracts" 13.18(a)
"Company Plans" 17.1(a)
"Company Regulatory Affiliate" 13.15(a)
"Company Third Party Intellectual Property Rights" 13.11(b)
"Confidential Information" 12.12(h)
"Deductible Amount" 20.3(a)
"Delaware Secretary of State" 1.2
"▇▇▇▇▇▇▇" Preamble
"▇▇▇▇▇▇▇ Certificate of Merger" 1.2
"▇▇▇▇▇▇▇ Effective Time" 1.2
"▇▇▇▇▇▇▇ Exchange Ratio" 1.4(c)
"▇▇▇▇▇▇▇ Merger" 1.1
"▇▇▇▇▇▇▇ Surviving Corporation" 1.1
"▇▇▇▇▇▇▇ Surviving Corporation Common Stock" 1.4(a)
"DGCL" 1.1
"ERISA" 12.14(a)
"ERISA Affiliate" 12.14(a)
"Escrow Percentage" 11.6
"Escrow Shares" 11.6
"Exchange Agent" 11.5(a)
"Final Sale Notice" 16.7
"Financial Statements" 13.4(a)
"FTC" 15.6
"Governmental Entity" 12.4(c)
"HSR Act" 12.4(c)
"IBCA" 2.1
"Indemnified Parties" 20.2(a)
"Intellectual Property" 12.12(a)
"Invoices" 22.1
"Klobuchar" Preamble
"Klobuchar Articles of Merger" 5.2
"Klobuchar Effective Time" 5.2
"Klobuchar Exchange Ratio" 5.4(c)
"Klobuchar Merger" 5.1
"Klobuchar Merger Sub" Preamble
"Klobuchar Merger Sub Common Stock" 5.4(a)
"Klobuchar Surviving Corporation" 5.1
"Klobuchar Surviving Corporation Common Stock" 5.4(a)
"Longcount Merger Sub" Preamble
"Longcount Merger Sub Common Stock" 1.4(a)
"Losses" 20.2(a)
90
Term Section
---- -------
"Management Continuity Agreements" Recitals
"MASC" Preamble
"MASC Articles of Merger" 8.2
"MASC Effective Time" 8.2
"MASC Exchange Ratio" 8.4(c)
"MASC Merger" 8.1
"MASC Merger Sub" Preamble
"MASC Merger Sub Common Stock" 8.4(a)
"MASC Surviving Corporation" 8.1
"MASC Surviving Corporation Common Stock" 8.4(a)
"Material Information" 14.9
"Mergers" Recitals
"Merger Subs" Preamble
"MTI" Preamble
"MTI Articles of Merger" 2.2
"MTI Effective Time" 2.2
"MTI Exchange Ratio" 2.4(c)
"MTI Merger" 2.1
"MTI Merger Sub" Preamble
"MTI Merger Sub Common Stock" 2.4(a)
"MTI Surviving Corporation" 2.1
"MTI Surviving Corporation Common Stock" 2.4(a)
"Notice of Sale" 16.6
"NASD" 12.1(e)
"1940 Act" 12.18(a)
"1934 Act" 12.18(c)
"Open Sale Period" 16.6
"Operating Agreement Amendment" 11.12
"Parent" Preamble
"Parent Approvals" 14.3(a)
"Parent Common Stock" 1.4(c)
"Parent Disclosure Schedule" 14.4
"Parent Financial Statements" Lead-in paragraph to
Article XIV
"Parent Preferred Stock" 14.2
"Parent Stock Option Plans" 14.2
"Parent SEC Documents" 14.4
"Parent's Internal Trading Policies" 16.1(b)(iv)
"▇▇▇▇▇▇" Preamble
"▇▇▇▇▇▇ Articles of Merger" 6.2
"▇▇▇▇▇▇ Effective Time" 6.2
"▇▇▇▇▇▇ Exchange Ratio" 6.4(c)
"▇▇▇▇▇▇ Merger" 6.1
"▇▇▇▇▇▇ Merger Sub" Preamble
"▇▇▇▇▇▇ Merger Sub Common Stock" 6.4(a)
"▇▇▇▇▇▇ Surviving Corporation" 6.1
"▇▇▇▇▇▇ Surviving Corporation Common Stock" 6.4(a)
"Per-Claim Hurdle" 20.3(a)
"Post-Signing Disclosure" 15.10
91
Term Section
---- -------
"Post-Signing Losses" 19.1(a)
"Potential Acquiror" 15.4
"Principals' Escrow Indemnity Period" 20.1(a)
"Registration Expenses" 16.1(c)
"Registration Period" 16.1(a)(v)
"Registration Statement" 16.1(a)(i)
"Registrable Shares" 16.1(a)(i)
"Regulatory Affiliate" 12.16(a)
"Regulatory Agreement" 12.18(c)
"Representative" 15.4
"Rintels" Preamble
"Rintels Articles of Merger" 4.2
"Rintels Effective Time" 4.2
"Rintels Exchange Ratio" 4.4(c)
"Rintels Merger" 4.1
"Rintels Merger Sub" Preamble
"Rintels Merger Sub Common Stock" 4.4(a)
"Rintels Surviving Corporation" 4.1
"Rintels Surviving Corporation Common Stock" 4.4(a)
"Secretary of State" 2.2
"Securities Act" 12.1(f)
"Selling Shareholder" 16.6
"SEC" 12.1(e)
"Shareholders' Indemnity Period" 20.1(b)
"SRO" 12.4(c)
"Straddle Period" 18.2(b)
"Target Companies" Preamble
"Target Company Approvals" 12.4(a)
"Target Company Disclosure Schedule" Lead-in paragraph to
Article XIII
"Target Company Employee Plans" 12.14(a)
"Target Company Financial Statements" 12.5(a)
"Target Company Material Contracts" 12.19(a)
"Target Shareholders" Preamble
"Tax Contest" 18.2(e)(i)
"Tax Ruling" 12.13(h)
"Third Party Intellectual Property Rights" 12.12(b)
"Unaudited Balance Sheet" 13.4(a)(iii)
ARTICLE XXIV
MISCELLANEOUS
24.1. Press Releases. Except as required by law, none of the parties
to this Agreement shall issue any press release or otherwise make public any
information with respect to the subject matter of this Agreement nor the
transactions contemplated hereby, without the prior written consent of each of
the other parties to this Agreement.
92
24.2. Integration. This Agreement and the agreements expressly
referred to or contemplated herein set forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby, and,
except as set forth in this Agreement, such other agreements, and the Exhibits
hereto, there are no representations or warranties, express or implied, made by
any party to this Agreement (or any of their Affiliates) with respect to the
subject matter of this Agreement. Any and all previous agreements and
understandings between or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this Agreement and the
agreements referred to or contemplated herein.
24.3. Assignment and Binding Effect. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties. All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
24.4. Waiver. Any term or provision of this Agreement may be waived
at any time by the party entitled to the benefit thereof only by a written
instrument duly executed by such party.
24.5. Notices. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by facsimile
transmission (promptly followed by a hard-copy delivered in accordance with
this Section 24.5), by reputable overnight courier service or by registered or
certified mail (return receipt requested), with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below.
If to Parent, any Merger Sub or ▇▇▇▇▇ Acquisition:
E*TRADE Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
93
If to the Company:
▇▇▇▇▇▇▇ & Company, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇
One IBM Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Target Shareholders, the Target Companies or ▇▇▇▇▇:
To the addresses set forth on the signature pages to this Agreement
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered.
24.6. Amendment. This Agreement shall not be amended, modified,
revised, supplemented or terminated orally and no waiver of compliance with any
provision hereof and no consent provided for herein shall be effective other
than by a written instrument executed by all of the parties hereto. This
Agreement may be amended upon the taking of requisite corporate action by all
of the parties hereto.
24.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO ANY DELAWARE CHOICE OF LAW PRINCIPLES.
24.8. Third Party Beneficiaries. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit
of the parties hereto, and their respective successors and assigns, and they
shall not be construed as conferring, and are not intended to confer, any
rights on any other Person.
24.9. Performance. In the event that any party hereto shall fail or
refuse to consummate the transactions contemplated by this Agreement or any
default under, or breach of, any representation, warranty or covenant of this
Agreement on the part of such party shall have occurred that results in the
failure to consummate the transactions contemplated hereby, then in addition to
the other
94
remedies provided in this Agreement, any party may seek to obtain an order of
specific performance thereof against such parties from a court of competent
jurisdiction.
24.10. Severability. If any term or other provision of this Agreement
is determined to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by
applicable law.
24.11. Extensions. At any time prior to the Effective Time, either
party may by appropriate action, in writing, extend the time for compliance by
or waive performance of any representation, warranty, agreement, condition or
obligation of the other party.
24.12. Section Headings; Interpretation. All section headings are for
convenience only and shall in no way modify or restrict any of the terms or
provisions hereof. In this Agreement, words importing the singular shall
include the plural and vice versa.
24.13. Exhibits; Disclosure Schedule. All Exhibits referred to herein
and in the Company Disclosure Schedule and the Target Company Disclosure
Schedules are intended to be and hereby are specifically made a part of this
Agreement. Each exception to a representation or warranty that is set forth in
the Company Disclosure Schedule or the Target Company Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to, a
specific individual Section of this Agreement and, except as otherwise
specifically stated with respect to such exception in such Disclosure Schedule,
relates only to such Section.
24.14. Post-Signing Losses Disputes.
(a) The parties to this Agreement shall attempt to resolve any
dispute relating to the amount of the Post-Signing Losses for the purpose of
application of Section 19.1(a) promptly by negotiation in good faith between
executives who have authority to settle the dispute. The designated executives
shall meet at a mutually acceptable time and place, and thereafter, as often as
they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other shall be
honored in a timely fashion. All negotiations conducted pursuant to this
Section 24.14 (and any of the parties' submissions in connection herewith)
shall be kept confidential by the parties and shall be treated by the parties
and their representatives as compromise and settlement negotiations under the
Federal Rules of Evidence and any similar state rules.
(b) If the amount of the Post-Signing Losses has not been resolved
within five Trading Days following the first date of the dispute, the dispute
shall be submitted to binding arbitration to the Washington, D.C. office of the
American Arbitration Association ("AAA") in accordance with the procedures set
forth in the Commercial Arbitration Rules of the AAA, revised and effective
July 1, 1996.
(c) The Commercial Arbitration Rules of the AAA, revised and
effective July 1, 1996, as modified or revised by the provisions of this
Section 24.14 shall govern any arbitration proceeding hereunder. The
arbitration shall be conducted by three arbitrators selected pursuant to Rule
13 of the Commercial Arbitration Rules, and prehearing discovery shall be
permitted if and only to the extent determined by the arbitrator to be
necessary in order to effectuate resolution of the amount of the Post-Signing
Losses. The arbitrator's decision shall be rendered within ten (10) days of the
conclusion of any hearing hereunder and the arbitrator's decision shall be
binding on the parties to this Agreement. The parties agree to use their
reasonable best efforts to resolve any dispute in accordance with the term of
this Section 24.14 prior to the date set forth in Section 21.1(b) after which
the parties may elect to not close
95
the transactions contemplated by this Agreement; provided, however, that (i)
if, notwithstanding such efforts, resolution of the dispute in accordance with
this Section occurs after such date and (ii) all other conditions to the
transactions set forth in Article XIX have been satisfied at such time, the
parties agree that such date shall be extended automatically to the earlier of
(A) the fifth Trading Day following resolution of such dispute or (B) January
31, 2002.
(d) For the purpose of application of Section 19.1(a),
notwithstanding anything in this Agreement to the contrary, in computing the
amount of Post-Signing Losses, all amounts of Losses incurred or reasonably
expected to be incurred by the Company and any Target Company as a result of
the matters disclosed in the penultimate paragraph of Schedule 13.5 of the
Company Disclosure Schedule shall be included.
24.15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.
96
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
E*TRADE GROUP, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇
---------------------------------------
Name: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Global Brokerage Officer
LONGCOUNT ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
MTI ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇▇▇▇▇▇▇▇ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
97
▇▇▇▇ ▇▇▇▇▇▇▇ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
KLOBUCHAR ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇▇▇▇▇▇ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇▇▇▇▇ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
BJC ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
98
MASC ACQUSITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇▇▇▇▇▇ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇▇▇▇▇▇▇ & COMPANY LLC
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
Manager
▇▇▇▇▇▇▇ & COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
99
MARKET TRADERS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ INVESTMENTS INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
100
KLOBUCHAR, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Principal, General Counsel
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
101
BJC INVESTMENTS INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MASC, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
President
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, INC.
By: /s/ A. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
---------------------------------------
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
President
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
102
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TRUST, DATED 4/17/1996
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Trustee
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
103
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ CHILDREN'S TRUST, DATED 4/14/99
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Trustee
720 Grove
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
104
▇▇▇▇ ▇▇▇▇▇▇▇▇ DECLARATION OF TRUST,
DATED 8/19/91
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Trustee
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ DELCARATION OF TRUST,
DATED 8/19/91
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Eugene V. Rintels
560 Ridge Road
Winnetka, IL 60093
105
ANDREW RINTELS TRUST NO. 2
By: /s/ Dennis Guy
---------------------------------------
Dennis Guy
Trustee
560 Ridge Road
Winnetka, IL 60093
DEBORAH RINTELS TRUST NO. 2
By: /s/ Dennis Guy
---------------------------------------
Dennis Guy
Trustee
560 Ridge Road
Winnetka, IL 60093
/s/ Louis A Klobuchar, Jr.
--------------------------------
Louis A Klobuchar, Jr.
20910 Laurel Drive
Barrington, IL 60010
106
/s/ Michael A. Pelech
---------------------------------
Michael A. Pelech
50 Wiltshire Drive
Lincolnshire, IL 60069
/s/ Bradley Chestler
--------------------------------
Bradley Chestler
2410 Cumberland Circle
Long Grove, IL 60047
/s/ David L. Grove
--------------------------------
David L. Grove
3414 N. Hoyne
Chicago, IL 60618
/s/ A. Claude Kemper, Jr.
--------------------------------
A. Claude Kemper, Jr.
322 Forest Street
Winnetka, IL 60093
107