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EXHIBIT 2.6
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 5, 2000 (the
"Agreement"), is made and entered into by and among ▇.▇. ▇▇▇▇▇▇▇▇ & COMPANY, a
Minnesota corporation (the "Company"), ▇▇▇▇▇▇▇▇▇.▇▇▇ GROUP, INC., a Minnesota
corporation ("Acquiror") and SCG ACQUISITION CORPORATION, a Minnesota
corporation ("MergerCo").
WHEREAS, the Board of Directors of the Company (the "Company Board") and
the Boards of Directors of each of Acquiror and MergerCo have determined
that the merger of the MergerCo with and into the Company (the "Merger"), in
accordance with the Minnesota Business Corporation Act (the "MBCA") and upon the
terms and subject to the conditions set forth in this Agreement, would be fair
to and in the best interests of their respective shareholders, and such Boards
of Directors have approved such Merger, pursuant to which shares of common
stock, par value $1.00 per share of the Company (the "Company Common Stock")
issued and outstanding immediately prior to the Effective Time will be converted
into the right to receive shares of Acquiror common stock, par value $.04 per
share ("Acquiror Common Stock").
WHEREAS, all of the outstanding capital stock of the Company is owned by
▇▇▇▇ ▇. ▇▇▇▇▇ and the Feltl 1995 Grantor Retained Annuity Trust UD July 1,
1995 (collectively, the "Shareholder").
WHEREAS, Acquiror, MergerCo, Shareholder and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
WHEREAS, Acquiror, MergerCo, Shareholder and the Company intend, by
executing this Agreement, to adopt a plan of reorganization within the meaning
of Section 368(a) of the Code and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the parties agree as follows:
1. CERTAIN DEFINITIONS; INTERPRETATION
1.1. Certain Definitions. The following terms used in this Agreement shall
have the meanings set forth below:
"Acquiror" has the meaning assigned in the preamble to this Agreement.
"Acquiror Benefit Plans" has the meaning assigned in Section
4.4(o)(1).
Exhibit 2.6-1
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"Acquiror Common Stock" has the meaning assigned in the first recital
of this Agreement.
"Acquiror ERISA Affiliate" has the meaning assigned in Section
4.4(o)(6).
"Acquiror ERISA Client" has the meaning assigned in Section 4.4(m)(7).
"Acquiror Financial Statements" has the meaning assigned in Section
4.4(g)(2).
"Acquiror Form ADV" has the meaning assigned in Section 4.4(m)(2).
"Acquiror Form BD" has the meaning assigned in Section 4.4(m)(2).
"Acquiror Forms" has the meaning assigned in Section 4.4(m)(2).
"Acquiror Insurance Policies" has the meaning assigned in Section
4.4(t).
"Acquiror SEC Documents" has the meaning assigned in Section
4.4(g)(1).
"Acquisition Proposal" has the meaning assigned in Section 5.5(b).
"Additional Merger Consideration" has the meaning assigned in Section
3.1(c).
"Additional Shares" has the meaning assigned in Section 3.2(a).
"Affiliate" means, with respect to any specified person, any other
person, directly or indirectly controlling, controlled by or under common
control with such specified person. For purposes of this definition, "control"
when used in connection with any specified person means the power to direct the
management or policies of such person, directly or indirectly, whether through
the ownership of voting securities, by Contract or otherwise; and the terms
"controlling" and "controlled" have correlative meanings to the foregoing.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 8.2.
"Articles of Merger" has the meaning assigned in Section 2.2.
"Base Merger Consideration" has the meaning assigned in Section
3.1(c).
"Broker-Dealer Subsidiaries" has the meaning assigned in Section
4.4(m)(1).
"Change in Control" has the meaning assigned in Section 3.2(g)
"Client" means any person to whom the Company provides products or
services under a Contract.
"Closing" has the meaning assigned in Section 2.2.
"Closing Date" has the meaning assigned in Section 2.2.
Exhibit 2.6-2
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning assigned in the preamble to this Agreement.
"Company Articles" means the Articles of Incorporation of the Company,
as amended.
"Company Benefit Plans" has the meaning assigned in Section 4.3(q)(1).
"Company Board" has the meaning assigned in the first recital of this
Agreement.
"Company Bylaws" means the Bylaws of the Company, as amended.
"Company Common Stock" has the meaning assigned in the first recital
of this Agreement.
"Company ERISA Affiliate" has the meaning assigned in Section
4.3(q)(6).
"Company ERISA Client" has the meaning assigned in Section 4.3(k)(7).
"Company Form ADV" has the meaning assigned in Section 4.3(k)(2).
"Company Form BD" has the meaning assigned in Section 4.3(k)(2).
"Company Forms" has the meaning assigned in Section 4.3(k)(2).
"Company Insurance Policies" has the meaning assigned in Section
4.3(v).
"Company Reports" has the meaning assigned in Section 4.3(l)(7).
"Company SEC Documents" has the meaning assigned in Section 4.3(g)(1).
"Contract" means, with respect to any Person, any agreement,
indenture, undertaking, debt instrument, contract, contractual obligation, lease
or other commitment to which such Person or any of its Subsidiaries is a party
or by which any of them is bound or to which any of their properties is subject.
"Covered Employees" has the meaning assigned in Section 5.11.
"CSE" means the Chicago Stock Exchange.
"Disclosure Schedule" has the meaning assigned in Section 4.1.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" has the meaning assigned in Section 2.2.
"Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, common law or agency
requirement with force of law relating to:
Exhibit 2.6-3
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(1) the protection or restoration of the environment, health or safety (in each
case as relating to the environment) or natural resources, or (2) the handling,
use, presence, disposal, release or threatened release of any Hazardous
Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Federal Reserve System" means the Board of Governors of the Federal
Reserve System and the Federal Reserve Banks.
"Financial Statements" has the meaning assigned in Section 4.3(g)(2).
"Governmental Authority" means any court, administrative agency or
commission or other foreign, federal, state or local governmental authority or
instrumentality.
"Hazardous Substance" means any hazardous or toxic substance, material
or waste, including those substances, materials and wastes listed in the United
States Department of Transportation Hazardous Materials Table (49 C.F.R. ss.
172.101), or by the United States Environmental Protection Agency as hazardous
substances (40 C.F.R. Part 302) and amendments thereto, or become regulated
under any applicable local, state or federal law, including petroleum compounds,
lead, asbestos and polychlorinated biphenyls.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Investment Advisors Act" means the Investment Advisers Act of 1940,
as amended, and the rules and regulations promulgated thereunder.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"▇▇▇▇▇▇▇ Agreement" has the meaning set forth in Section 4.4(e).
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Litigation" has the meaning assigned in Section 4.3(o).
"Litigation List" has the meaning assigned in Section 4.3(o).
"Material" means, with respect to any fact, circumstance, event or
thing, that such fact, circumstance, event or thing is or would reasonably be
expected to be material to (1) the financial position, results of operations,
assets, properties or business of Acquiror and its
Exhibit 2.6-4
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Subsidiaries, taken as a whole, the Company, or the Surviving Corporation, as
the case may be (other than to the extent such fact, circumstance, event or
thing is due to (x) general changes in conditions in the securities industry, or
in the global or United States economy or capital markets, or (y) changes in
applicable generally accepted accounting principles or in laws, regulations or
regulatory policies of general applicability), or (2) the ability of either
Acquiror or the Company, as the case may be, to timely perform its obligations
under this Agreement or otherwise to consummate the transactions contemplated by
this Agreement.
"Material Adverse Effect" means with respect to Acquiror, the Company,
or the Surviving Corporation, respectively, an effect that, individually or in
the aggregate, is both Material and adverse with respect to Acquiror and its
Subsidiaries, the Company or the Surviving Corporation, in each case taken as a
whole; provided that "Material Adverse Effect" shall not be deemed to include
the effects of (x) general changes in conditions in the securities industry, or
in the global or United States economy or capital markets, or (y) changes in
applicable generally accepted accounting principles or in laws, regulations or
regulatory policies of general applicability, or (z) actions or omissions of the
Company taken with the prior written consent of Acquiror.
"MBCA" has the meaning assigned in the first recital of this
Agreement.
"Merger" has the meaning assigned in the first recital of this
Agreement.
"MergerCo" has the meaning assigned in the preamble to this Agreement.
"Merger Consideration" has the meaning assigned in Section 3.1(c).
"MSRB" means the Municipal Securities Rulemaking Board.
"NASD" means the National Association of Securities Dealers, Inc.
"NYSE" means the New York Stock Exchange, Inc.
"Person" shall mean and include an individual, bank, partnership,
joint venture, limited liability company, corporation, trust, unincorporated
organization or government or any department or agency thereof
"Previously Disclosed" has the meaning assigned in Section 4.1.
"Retained Equity" has the meaning assigned in Section 4.3(h)(8).
"Rights" means, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for, redeem or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value of
which is determined in whole or in part by reference to the market price or
value of, shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
Exhibit 2.6-5
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Laws" means, collectively, the Securities Act, the
Exchange Act, the Investment Advisors Act, the Investment Company Act and any
state securities and "blue sky" laws.
"Self Regulatory Organization" means the National Association of
Securities Dealers, Inc., the NYSE, the American Stock Exchange, the MSRB or
other commission, board, agency or body that is not a Governmental Authority but
is charged with the supervision or regulation of brokers, dealers, securities
underwriting or trading, stock exchanges, commodities exchanges, insurance
companies or agents, investment companies or investment advisers, or to the
jurisdiction of which the Company is otherwise subject.
"Share" has the meaning assigned in Section 3.1(c).
"Shareholder," subject to the provisions of Section 8.8, has the
meaning described in the second recital to this Agreement.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed
to them in Rule 1-02 of SEC Regulation S-X.
"Surviving Corporation" has the meaning assigned in Section 2.1.
"Targeted Earnings" shall have the meaning set forth in Section
3.2(a)(1).
"Taxes" means all federal, state, local and foreign taxes, levies or
other assessments imposed by any taxing authority, however denominated,
including, without limitation, all net income, gross income, gross receipts
sales, use, ad valorem, goods and services, capital, transfer, franchise,
profits, license, withholding, payroll, employment, employer health, excise,
estimated, severance, stamp, occupation, property or other taxes, and custom
duties, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority.
"Tax Returns" means, collectively, all returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws.
1.2. Interpretation. When a reference is made in this Agreement to
Recitals, Sections, Exhibits, Annexes or Schedules, such reference shall be to a
Recital or Section of, or Exhibit, Annex or Schedule to, this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and are not part of this Agreement. Whenever the words "include,"
includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." No rule against the draftsperson
shall be applied in connection with the interpretation or enforcement of this
Agreement. Whenever this Agreement shall require a party to take an action, such
requirement shall be deemed to constitute an undertaking by such party to cause
its Subsidiaries, and to use its reasonable best efforts, to cause its
Affiliates, to take appropriate action in connection therewith.
Exhibit 2.6-6
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2. THE MERGER
2.1. The Merger. Upon the terms and subject to the conditions hereof, at
the Effective Time and in accordance with the provisions of the MBCA, MergerCo
shall be merged with and into the Company, whereupon the separate corporate
existence of MergerCo shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). From and after the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, immunities, powers and franchises, of a public as well as a private
nature, of MergerCo and be subject to all the liabilities, obligations and
duties of MergerCo, all as more fully described in the MBCA.
2.2. Closing; Effective Time. Subject to the provisions of Section 6, the
closing of the Merger (the "Closing") shall take place in the offices of Maun &
Simon, PLC, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, as soon as practicable but not later than 10:00 a.m. Minneapolis time on
the fourth business day after the date on which each of the conditions set forth
in Section 6 have been satisfied or waived by the party or parties entitled to
the benefit of such conditions, or at such other place, at such other time or on
such other date as MergerCo and the Company may mutually agree; provided,
however, that the Closing shall not take place prior to July 1, 2000. The date
on which the Closing actually occurs is hereinafter referred to as the "Closing
Date." At the Closing, MergerCo and the Company shall cause Articles of Merger
for the Merger (the "Articles of Merger") to be executed and filed with the
Secretary of State of the State of Minnesota in the form required by and
executed in accordance with the applicable provisions of the MBCA. The Merger
shall become effective as of the date and time of such filings or such other
time after such filings as the parties hereto shall agree to in the Articles of
Merger (the "Effective Time").
2.3. Articles of Incorporation. At the Effective Time, and without any
further action on the part of the Company or MergerCo, the Articles of
Incorporation of the Company (as amended in substantially the form of which is
set forth in Annex A hereto) shall be the Articles of Incorporation of the
Surviving Corporation and thereafter may be amended or repealed as provided by
law.
2.4. Bylaws. The Bylaws of MergerCo, as in effect immediately prior to the
Effective Time, shall become, from and after the Effective Time, the Bylaws of
the Surviving Corporation, until thereafter altered, amended or repealed as
provided therein or in the Articles of Incorporation of the Surviving
Corporation and in accordance with applicable law.
2.5. Directors and Officers. The officers of the Company immediately prior
to the Effective Time shall become, from and after the Effective Time, the
officers of the Surviving Corporation, until their successors are duly elected
or appointed or their earlier death, resignation or removal. From and after the
Effective Time, the directors of the Company shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, another person appointed by Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or their respective
designees. Each of the Company and the Shareholder agree to take such action as
is necessary to have such persons elected to the Company's Board of Directors.
Exhibit 2.6-7
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2.6. Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or MergerCo, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of the Company or MergerCo, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
3. CONVERSION OF SHARES; SHAREHOLDER APPROVAL
3.1. Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of MergerCo:
(a) Capital Stock of MergerCo. Each share of common stock of MergerCo
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the Surviving
Corporation.
(b) Treasury Stock and MergerCo-Owned Stock. Each share of Company
Common Stock that is owned by the Company and each share of Company Common Stock
that is owned by Acquiror, MergerCo or any affiliate of Acquiror or MergerCo
shall automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefore.
(c) Conversion of Company Common Stock. Except as otherwise provided
in Section 3.1(b), the outstanding shares of Company Common Stock (each, a
"Share") shall be converted into the right to receive an aggregate of 4,315,062
(which equals approximately 19.9% of the issued and outstanding shares of
Acquiror Common Stock as of March 31, 2000) shares of Acquiror Common Stock,
following the Merger (the "Base Merger Consideration") and the right to receive
Additional Shares, as set forth below (the "Additional Merger Consideration,"
together with the Base Merger Consideration, the "Merger Consideration").
(d) Cancellation and Retirement of Common Stock. Each Share converted
into the right to receive the Merger Consideration pursuant to Section 3.1(c)
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
Shares shall, to the extent such certificate represents such Shares, cease to
have any rights with respect thereto, except the right to receive Merger
Consideration applicable thereto, upon surrender of such certificate in
accordance with Section 3.3.
3.2. Additional Consideration.
(a) Within ninety (90) days following the second anniversary of the
Closing, Acquiror shall deliver to the Shareholder additional shares of Acquiror
Common Stock ("Additional Shares") based upon the future performance of the
Company determined as follows:
Exhibit 2.6-8
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(1) 2,000,000 Additional Shares shall be issued to the
Shareholder if cumulative pre-tax earnings, as hereinafter defined, of the
Company for the two (2) year period beginning on the first day of the month
immediately following the Closing equals or exceeds ninety percent (90%) of four
million dollars ($4,000,000) ("Targeted Earnings");
(2) If cumulative pre-tax earnings of the Company for such period
are less than ninety percent (90%) of Targeted Earnings, the Additional Shares
delivered to the Shareholder shall be reduced by one percent (1%) for each
percentage point by which pre-tax earnings is less than ninety percent (90%) of
Targeted Earnings, (e.g., if the Company's cumulative pre-tax earnings are
sixty-three percent (63%) of Targeted Earnings, Acquiror shall issue 1,460,000
Additional Shares); provided, however, that in accordance with the provisions
elsewhere set forth herein, in no event will the Additional Shares deliverable
to the Shareholder be less than 500,000 shares unless there are no cumulative
pre-tax earnings or there is a cumulative loss for such period, in which case
the Shareholder shall not receive any Additional Shares.
(b) The actual number of Additional Shares issued, if any, shall be
adjusted for any change in the capitalization of Acquiror resulting from a stock
dividend, stock split, reverse stock split or other recapitalization of Acquiror
in accordance with the provisions of Annex F hereof.
(c) For the purposes of this Section 3.2, the Company includes any
Subsidiary or affiliate of Acquiror which represents a successor or any
continuation of the business or businesses of the Company as they exist at the
Closing Date.
(d) For purposes of this Section 3.2 pre-tax earnings (or losses)
shall mean the net earnings or losses of the Company computed on the accrual
basis of accounting in accordance with generally accepted accounting principles
consistently applied, except that the following provisions shall govern the
computation of pre-tax earnings of the Company for purposes of this Section 3.2:
(1) pre-tax earnings shall be cumulative for the two (2) year
period beginning on the first day of the month immediately following Closing;
(2) in the Shareholder's reasonable judgment, all expenses,
amounts paid in settlement, judgments, arbitration awards, and attorneys' fees
paid or incurred in connection with claims relating to the business of the
Company prior to Closing and continuing during the period ending on the first
day of the month following the second anniversary of Closing, including a
reasonable reserve for claims that are unresolved at the end of the period for
calculating pre-tax earnings, shall be included, i.e., deducted from pre-tax
earnings;
(3) any loss, charge or expense related to the business
operations of the Company initiated by Acquiror or any of its affiliates shall
be excluded from such computation unless the Shareholder initiates or consents
in writing to the transaction giving rise to, or the payment or assumption of
the obligation to pay, such loss, charge or expense;
(4) any charge or expense for the amortization of goodwill or any
other purchase price adjustments as determined under APB Opinion Number 16
arising out of
Exhibit 2.6-9
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the fact that Acquiror has acquired the stock of the Company pursuant hereto
or otherwise, or that the consideration therefore is in excess of the fair
market value of the assets of the Company, shall be excluded from such
computation;
(5) any payments, charges or expenses for allocation of home
office, executive, general and administrative expenses or other payments,
charges or expenses of Acquiror and/or its affiliates shall be excluded from
such computation;
(6) all amounts payable to the Shareholder and to ▇▇▇▇ ▇. ▇▇▇▇▇
during the two (2) year period referenced in Section 3.2(a) shall be included
and treated as an expense in such computation whether paid or accrued as
compensation, severance pay or for a covenant not to compete and whether paid by
the Company or Acquiror or its affiliates;
(7) any interest expenses or charges of the Company shall be
excluded from such computation to the extent such expenses or charges relate to
funds loaned to the Company in excess of the net capital required by the Company
for regulatory purposes based on the assumption that the Company was a separate
corporation independent of Acquiror and continued to carry customer accounts and
securities in the same manner as it conducted its business prior to Closing;
(8) there shall be included in such computation a charge for the
cost of capital provided by Acquiror to the Company for the purpose of the net
capital required by the Company as though the Company continued to carry
customer accounts and securities in the same manner as it conducted its business
prior to Closing. For the purpose of this Section, the cost of capital shall be
equivalent to interest that would have been incurred by the Company to obtain
subordinated regulatory capital that would be required for the business of the
Company had the transaction contemplated herein not taken place at the rate most
favorable to the Company. For purposes of this Section 3.2(d)(8) and the
preceding Section 3.2(d)(7), net capital required by the Company shall be equal
to five percent (5%) of aggregate debit balances arising from customer
transactions calculated in accordance with the Alternative Standard under Rule
15c3-1 of the SEC.
(9) any and all expenses paid or incurred by the Company (other
than those expressly permitted by the above provisions) which would not have
been so paid or incurred if not for the sale of capital stock to Acquiror and
the other transactions contemplated herein shall be excluded from such
computation.
(10) except as otherwise expressly provided above, all amounts
determined in accordance with subparagraphs (1) through (10) of this Section 3.2
shall be determined in accordance with generally accepted accounting principles
consistently applied.
(e) Until the final determination of pre-tax earnings in accordance
with subsection (f) below, the Shareholder and his representatives shall have
free and unrestricted access to the financial books and records of the Company
and reasonable access to the financial books and records of Acquiror upon
written notice to Acquiror.
(f) As soon as may be practicable after the first anniversary of the
Closing, but no later than ninety (90) days thereafter, Acquiror will deliver to
the Shareholder a statement
Exhibit 2.6-10
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setting forth in reasonable detail its calculation of the cumulative net pre-tax
earnings of the Company during the first annual period. As soon as may be
practicable after the second anniversary of the Closing, but no later than
ninety (90) days thereafter, Acquiror will deliver to the Shareholder a
statement setting forth in reasonable detail its determination of the cumulative
net pre-tax earnings of the Company during such two year period and the number
of Additional Shares, if any, to be issued to the Shareholder pursuant to this
Section 3.2. which statement shall be accompanied by a certificate for the
Additional Shares as shown thereon. If within thirty (30) days after delivery of
such statement the Shareholder has not given written notice to Acquiror
disputing such statement and indicating the basis of such dispute, Acquiror
shall thereafter have no further liability to the Shareholder under this Section
3.2. In the event the Shareholder gives Acquiror such notice of dispute within
such 30-day period, the Shareholder and Acquiror will use their best efforts to
settle the dispute within 30 days after the giving of such notice. Any dispute
unresolved after such 30-day period shall be submitted to a national public
accounting firm satisfactory to the Shareholder and to Acquiror, or, in the
absence of agreement on such firm, to a panel of three public accounting firms,
one designated by the Shareholder, one designated by Acquiror and one jointly
designated by the other two firms. The decision of such accounting firm or such
panel of accounting firms, as the case may be, with respect to such dispute
shall be final and binding on the parties hereto. Acquiror shall make any
further deliveries to the Shareholder required in order to comply with such
decision within ten (10) days after such decision is rendered. If the final
decision of the accounting firm or panel results in an increase in the number of
Additional Shares being issued of more than five percent (5%), the cost of the
review process shall be paid by Acquiror. If the final decision of the
accounting firm or panel results in no Additional Shares being issued or fewer
Additional Shares being issued, the cost of the review process shall be paid by
the Shareholder. If the final decision of the accounting firm or panel results
in a number of Additional Shares being issued greater than zero but less than
five percent (5%), the cost of the review process shall be shared equally by the
Shareholder and Acquiror
(g) Notwithstanding the foregoing, the Additional Shares shall be
fully vested and immediately issued to the Shareholder if there is a "Change in
Control" of Acquiror. For this purpose, a "Change in Control" means the direct
or indirect sale of all or substantially all of the assets of Acquiror, the
merger or consolidation of Acquiror with or into another entity, whether or not
Acquiror is the surviving entity, if as a result thereof, more than fifty
percent (50%) of the outstanding stock of Acquiror or the surviving entity is
owned directly or indirectly by persons other than the owners of five percent
(5%) or more of such stock prior to this transaction, or the sale or transfer,
directly or indirectly, of more than fifty percent (50%) of the outstanding
common stock of Acquiror to a person or entity who is not a five percent (5%) or
more shareholder or an affiliate of such a shareholder immediately prior to this
transaction.
(h) Acquiror agrees, throughout the two-year period that is the
subject hereof, that it shall not, without the prior, express written consent of
the Shareholder, add expenses to the operations of the Company or remove
revenue-generating activities (such as removal of earnings on margin accounts)
from the Company.
Exhibit 2.6-11
12
3.3. Exchange of Common Stock.
(a) Exchange. At or after the Closing, the Shareholder shall surrender
all certificate(s) held by the Shareholder for Company Common Stock in
transferable form to Acquiror and shall receive in exchange therefore a
certificate or certificates for the Base Merger Consideration and the right to
receive the Additional Merger Consideration. Each certificate formerly
representing Company Common Stock shall evidence only the right to receive the
Merger Consideration pursuant to Section 3.1(c).
(b) No Further Ownership Rights in Shares Exchanged. The Merger
Consideration delivered upon the surrender for exchange of certificates
representing Shares in accordance with the terms of Section 3 shall be deemed to
have been delivered in full satisfaction of all rights pertaining to the Shares
exchanged for Acquiror Common Stock theretofore represented by such
certificates.
3.4. Retained Equity. Acquiror agrees that, in consideration for leaving
the Retained Equity in the Company, as described in Section 4.3(h)(8) below, the
Shareholder, at the end of the two-year period commencing on the Closing Date,
may, at his option, elect either of the following:
(a) within thirty (30) days of the date of the Shareholder's election,
to receive that number of shares of Acquiror Common Stock determined by dividing
$3,600,000 by the lesser of $10/share or eighty-five percent (85%) of the
then-current fair market value of such shares, based on the average closing sale
price of such shares for the 20 trading day period prior to the date of such
conversion. In no event shall the denominator be less than $5/share; or
(b) alternatively, the Shareholder may elect to receive $3,600,000 in
cash within thirty (30) days of the date of the Shareholder's election.
The total amount referred to above shall, until such amount is converted or
paid in accordance with the provisions hereof, be treated as a subordinated debt
obligation of Acquiror.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER, THE COMPANY, ACQUIROR
AND MERGERCO
4.1. Disclosure Schedules. On or prior to the date hereof, the Company has
delivered to Acquiror, and Acquiror has delivered to the Company, a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items, the disclosure of which is necessary or appropriate either (i) in
response to an express informational requirement contained in or requested by a
provision hereof, or (ii) as an exception to one or more representations or
warranties contained in Section 4.3 or 4.4, respectively, or to one or more of
its covenants contained in Section 5; provided, that (a) no such item is
required to be set forth on the Disclosure Schedule as an exception to a
representation or warranty if its absence is not reasonably likely to result in
the related representation or warranty being deemed incorrect or untrue under
the standard established in Section 4.2, and (b) the mere inclusion of an item
in a Disclosure Schedule as an exception to a representation or warranty or
covenant shall not be deemed an admission by a party that such item (or any
undisclosed item or information of comparable or greater significance)
represents a Material exception or fact, event or
Exhibit 2.6-12
13
circumstance with respect to the Company, Acquiror or MergerCo, respectively.
"Previously Disclosed" means information set forth in a Disclosure Schedule,
whether in response to an express informational requirement or as an exception
to one or more representations or warranties or covenants, in each case, that is
contained in a correspondingly enumerated portion of such Disclosure Schedule.
To the extent information is Previously Disclosed pursuant to the foregoing, the
corresponding representation, warranty or covenant shall be deemed to be
modified by such Previously Disclosed information and references herein
(including in Section 4.2) to such corresponding representation, warranty or
covenant shall be deemed to be references to such representation, warranty or
covenant as so modified.
4.2. Standard. No representation or warranty of the Company or the
Shareholder, on the one hand, or Acquiror and MergerCo, on the other, contained
in Section 4.3 or 4.4, shall be deemed untrue or incorrect, and no party hereto
shall be deemed to have breached a representation or warranty, as a consequence
of the existence of any fact, event, or circumstance that is inconsistent with
one or more representations or warranties (with such representations and
warranties being read, for purposes of this Section 4.2, without regard to
individual references to "Materiality" or "Material Adverse Effect" set forth
therein), unless such fact, event or circumstance (individually or taken
together with all other facts, events or circumstances that are inconsistent
with any representation or warranty contained in Section 4.3 or 4.4) would be
Material with respect to the Company or the Shareholder, on the one hand, or
Acquiror or MergerCo, on the other, as the case may be.
4.3. Representations and Warranties of Shareholder and the Company. Except
as Previously Disclosed in a paragraph of its Disclosure Schedule corresponding
to the relevant paragraph below, Shareholder and the Company hereby represent
and warrant to Acquiror and MergerCo as follows:
(a) Organization, Standing and Authority. The Company is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Minnesota, and is duly qualified to do business and is in
good standing in all jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified, except
where the failure to be so qualified does not have a Material Adverse Effect on
the Company.
(b) Corporate Power. The Company has the power, corporate or
otherwise, and authority to carry on its business as it is now being conducted
and to own or lease all its properties and assets.
(c) Corporate Authority and Action. The Company has the requisite
corporate power and authority, and has taken all corporate action necessary, in
order to authorize the execution and delivery of, and performance of its
obligations under, this Agreement and, subject only to receipt of the requisite
approval and adoption of this Agreement and the Merger by such number of a
majority of the outstanding shares of Company Common Stock as required by the
MBCA, to consummate the transactions contemplated by this Agreement. This
Agreement is a valid and legally binding obligation of the Company, enforceable
in accordance with its terms.
Exhibit 2.6-13
14
(d) Regulatory Filings; No Defaults.
(1) No consents or approvals of, or filings or registrations
with, any Governmental Authority, Self-Regulatory Organization or with any third
party are required to be made or obtained by the Company in connection with the
execution, delivery or performance by the Company of this Agreement, or to
consummate the Merger, except for (A) those required under the HSR Act; (B)
filings of applications or notices with the CSE, the NASD and other Previously
Disclosed securities licensing or supervisory authorities, (C) approval of the
Company's shareholders as contemplated by Section 4.3(c); (D) approval of the
CSE and consents of national securities exchanges to the transfer of ownership
of seats or memberships; and (E) the filing of Articles of Merger with the
Secretary of State of the State of Minnesota pursuant to the MBCA. As of the
date hereof, the Company is not aware of any reason why the approvals of all
Governmental Authorities or Self-Regulatory Organizations necessary to permit
consummation of the transactions contemplated by this Agreement will not be
received.
(2) Subject only to the approval by the holders of such number of
the outstanding shares of Company Common Stock as required by the MBCA, the
receipt of the regulatory approvals referred to in Section 4.3(d)(1), the
expiration of applicable waiting periods and the making of required filings
under the HSR Act and federal and state securities laws, the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (A) constitute a breach or violation of,
or a default under, or give rise to any Lien, any acceleration of remedies or
any right of termination (with or without the giving of notice, passage of time
or both) under any law, rule or regulation or any judgment, decree, order,
governmental or nongovernmental permit or license, or Contract of the Company or
to which the Company or its properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the Company Articles or the Company
Bylaws, or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental or nongovernmental permit or
license or Contract.
(e) Company Stock. The authorized capital stock of the Company
consists of 200 shares of Company Common Stock. As of the date hereof, 20 shares
of Company Common Stock were issued and outstanding. The Company has no other
authorized or outstanding shares of capital stock. The outstanding shares of
Company Common Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and are subject to preemptive rights
as set forth in the Company Articles. The Shareholder owns all of the
outstanding Company Common Stock. As of the date hereof, there are no shares of
Company Common Stock authorized and reserved for issuance, the Company does not
have any Rights issued or outstanding with respect to Company Common Stock, and
the Company does not have any commitment or plans to authorize, issue or sell
any Company Common Stock or Rights, except pursuant to this Agreement.
(f) Subsidiaries. The Company has no Subsidiaries.
(g) SEC Documents, Financial Statements.
(1) The Company has provided or made available to Acquiror copies
of each document filed by the Company with respect to the Company with the SEC
or the NASD
Exhibit 2.6-14
15
from September 30, 1996 through the date of this Agreement, including,
but not limited to, FOCUS Reports, and will promptly provide any such document
filed after the date hereof (collectively, the "Company SEC Documents"), each in
the form (including exhibits and any amendments thereto) filed with the SEC (or,
if not so filed, in the form used or circulated). As used herein, the definition
of Company SEC Documents shall specifically exclude documents filed by the
Company with the SEC or the NASD in connection with its various corporate
finance activities. As of their respective dates (and without giving effect to
any amendments or modifications filed after the date of this Agreement), each of
the SEC Documents, including the financial statements, exhibits and schedules
thereto, filed or circulated prior to the date hereof complied (and each of the
SEC Documents filed after the date of this Agreement will comply) as to form
with applicable Securities Laws and did not (or in the case of reports,
statements, or circulars filed after the date of this Agreement, will 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 made therein,
in the light of the circumstances under which they were made, not misleading.
(2) The Company has provided or made available to Acquiror copies
of its consolidated statements of financial condition or balance sheets since
September 30, 1996 and all such financial statements prepared thereafter,
including the related notes and schedules, and such statements of financial
condition fairly present the consolidated financial condition of the Company as
of the date of such statement of financial condition or balance sheet and each
of the consolidated statements of income, cash flows and changes in
shareholders' equity included therein, including any related notes and schedules
(collectively, the foregoing financial statements and related notes and
schedules are referred to as the "Financial Statements"), fairly presented (or,
in the case of statement prepared after the date of this Agreement, will fairly
present) the consolidated results of operations, cash flows and shareholders'
equity, as the case may be, of the Company for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved (except as may be
noted therein and except that such unaudited statements include no notes).
(3) Except as disclosed in the Company's Disclosure Schedule or
Financial Statements or the Company SEC Documents filed prior to the date of
this Agreement, the Company has no liability or obligation (contingent or
otherwise) that, individually or in the aggregate, is reasonably likely to have
a Material Adverse Effect on the Company.
(h) Absence of Certain Changes. Since September 30, 1999, the business
of the Company has been conducted in the ordinary and usual course, consistent
with past practice, and there has not been:
(1) any event, occurrence, development or state of circumstances
or facts which has had or is reasonably likely to have a Material Adverse Effect
on the Company;
(2) any amendment of any term of any outstanding security of the
Company or to the Company's articles of incorporation or bylaws (or similar
governing documents);
Exhibit 2.6-15
16
(3) any (A) incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money, or (B) assumption, guarantee, endorsement
or otherwise by the Company of any obligations of any other person, in each
case, other than in the ordinary and usual course of business, consistent with
past practice, and in amounts and on terms consistent with past practices,
except for indebtedness incurred or to be incurred to make the distribution to
the Shareholder permitted by Section 4.3(h)(8);
(4) any creation or assumption by the Company of any Lien on any
material asset other than in the ordinary and usual course of business
consistent with past practices;
(5) prior to or on the date hereof, any making of any loan in
excess of $100,000, or aggregate loans in excess of $250,000, advance or capital
contributions to or investment in any person, in each case, other than in the
ordinary and usual course of business consistent with past practice;
(6) any change in any accounting policies or practices by the
Company;
(7) any (A) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director, officer,
consultant, partner or employee of the Company (or any amendment to any such
existing agreement), (B) grant of any severance or termination pay to any
director, officer, consultant, partner or employee of the Company, or (C) change
in compensation or other benefits payable to any director, officer, consultant,
partner or employee of the Company, except, in each case, in the ordinary course
of business or as required by Contract or applicable law with respect to
employees of the Company; or
(8) any dividend or distribution to the Shareholder, except that
the Company may, prior to Closing, distribute to the Shareholder S corporation
dividends and distributions of all current and accumulated earnings and profits
of the Company, which were $21,172,413 as of April 30, 2000, less $3,000,000
left in the Company as equity (such $3,0000,000 amount being referred to herein
as "Retained Equity"), plus additional earnings from April 30, 2000 through the
Closing Date.
(i) Contracts.
(1) The Company has Previously Disclosed each of the following
executory Contracts to which the Company is a party, or by which any of it is
bound or to which any of its properties is subject:
(A) any lease of real property;
(B) any partnership, joint venture or other similar
agreement or arrangement, or any options or rights to acquire from any person
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities or such person, in each
case, entered into other than in the ordinary course of business;
Exhibit 2.6-16
17
(C) any agreement relating to the acquisition or disposition
of any business (whether by merger, sale of stock, sale of assets or otherwise);
(D) any indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment, outstanding as of the
date hereof, for the borrowing of money by the Company or the deferred purchase
price of property in excess of $100,000 (in either case, whether incurred,
assumed, guaranteed or secured by any asset);
(E) any agreement in force as of the date hereof that
creates future payment obligations in excess of $100,000 in the aggregate and
which by its terms does not terminate or is not terminable without penalty upon
notice of 90 days or less;
(F) any license, franchise or similar agreement material to
the Company or any agreement relating to any trade name or intellectual property
right that is material to the Company;
(G) any exclusive dealing agreement or any agreement that
limits the freedom of the Company to compete in any line of business or with any
person or in any area or that would so limit its freedom after the Effective
Date;
(H) any compensation, employment, severance, supplemental
retirement or other similar agreement or arrangement with any employee or former
employee of, or independent contractor with respect to, the Company, or any
other agreement with any current or former Affiliate of the Company; and
(I) any other Contract that is a "material contract" as
defined in Item 601(b)(10) of SEC Regulation S-K.
(2) Each Contract that has been, or is required to be, Previously
Disclosed pursuant to this Section is a valid and binding agreement of the
Company, and is in full force and effect, and the Company is not in default or
breach in any material respect under the terms of any such Contract.
(j) Contracts with Clients. The Company is in compliance with the
Material terms of each Contract with any Client, and each such Contract is in
full force and effect with respect to the applicable Client. There are no
Material disputes pending or threatened with any Client under the terms of any
such Contract or with any former Client.
(k) Registration Matters.
(1) The Company is duly registered and such registrations are in
full force and effect. The Company is, and at the Effective Time will be, a
member in good standing with all required Self-Regulatory Organizations and in
compliance with all applicable rules and regulations of the Self-Regulatory
Organizations.
(2) The Company has delivered or made available to Acquiror,
true, correct and complete copies of (A) the Company's Uniform Application for
Broker-Dealer Registration on Form BD ("Company Form BD") and (B) each Uniform
Application for
Exhibit 2.6-17
18
Investment Adviser Registration filed by the Company (each, a "Company Form
ADV," and together with Company Form BD, "Company Forms"), all of the Company
Forms reflecting all amendments thereto filed with the NASD or the SEC, as the
case may be, on or prior to the date hereof. The Forms are in compliance with
the applicable requirements of the Exchange Act or the Investment Advisers Act,
as the case may be, and do 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, in light of the circumstances under which they were
made, not misleading. The Company has provided or made available true and
complete copies of all audit reports since December 31, 1996 by the SEC or the
NASD regarding the Company. Each director, officer, agent and employee of the
Company who is required to be registered as a representative, principal or agent
with the securities commission of any state or with any Self-Regulating
Organization is duly registered as such and such registration is in full force
and effect. Each registered representative and principal of the Company has at
least the minimum series license for the activities that such registered
representative or principal performs for the Company.
(3) The net capital, as such term is defined in Rule 15c3-1 under
the Exchange Act, of the Company satisfies the minimum net capital requirements
of the Exchange Act and of the laws of any jurisdiction in which the Company
conducts business, and has been sufficient to permit the Company to operate
without restriction on its ability to expand its business under NASD Conduct
Rule 3130.
(4) Except as Previously Disclosed, neither the Company nor any
"associated person" thereof (A) is subject to a "statutory disqualification" as
such terms are defined in the Exchange Act, (B) is ineligible to serve as a
broker-dealer or as an associated person to a registered broker-dealer, or (C)
is subject to a disqualification that would be a basis for censure, limitations
on the activities, functions or operations of, or suspension or revocation of
the registration of the Company as broker-dealer, municipal securities dealer,
government securities broker or government securities dealer under Section 15,
Section 15B or Section 15C of the Exchange Act and there is no reasonable basis
for, or proceeding or investigation, whether formal or informal, or whether
preliminary or otherwise, that is reasonably likely to result in, any such
censure, limitations, suspension or revocation.
(5) Except as Previously Disclosed, the Company is not required
to be registered as an investment company, investment adviser, commodity trading
advisor, commodity pool operator, futures commission merchant, introducing
broker, insurance agent, or transfer agent under any United States federal,
state, local or foreign statutes, laws, rules or regulations. The Company does
not act as the "sponsor" of a "broker-dealer-trading program," as such terms are
defined in Rule 17a-23 under the Exchange Act.
(6) Neither the Company, nor, to the knowledge of the Company
after duly inquiry, any "associated person" (as defined in the Investment
Advisers Act) thereof, as applicable, is ineligible pursuant to Section 203 of
the Investment Advisers Act to serve as an investment adviser or as an
associated person to a registered investment adviser. The Company does not
provide investment advisory, subadvisory or management services to or through
(A) any issuer or other Person that is an investment company (within the meaning
of the Investment Company Act), (B) any issuer or other Person that would be an
investment company (within the meaning of the Investment Company Act) but for
the exemptions contained in Section 3(c)(1),
Exhibit 2.6-18
19
Section 3(c)(7), the final clause of Section 3(c)(3) or the third or fourth
clauses of Section 3(c)(1) of the Investment Company Act, or (C) any issuer or
other Person that is or is required to be registered under the laws of the
appropriate securities regulatory authority in the jurisdiction in which the
issuer is domiciled (other than the United States or the states thereof), which
is or holds itself out as engaged primarily in the business of investing,
reinvesting or trading in securities.
(7) The Company does not provide investment management, advisory
or subadvisory services as a registered investment advisor to (A) an employee
benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title I of
ERISA; (B) a Person acting on behalf of such a plan; or (C) any entity whose
underlying assets are deemed, under 29 C.F.R. Section 2510.3-101, to include the
assets of such a plan by reason of such a plan's investment in such entity
(each, an "Company ERISA Client").
(l) Compliance with Laws. The Company, and, to the best of the
Company's knowledge, each of its officers and employees:
(1) is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to the conduct of its business or to the employees conducting
such business, and the rules of all Self-Regulatory Organizations applicable
thereto;
(2) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities and Self-Regulatory Organizations that are required in
order to permit them to own or lease their properties and to conduct their
business as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and are current
and, to the best of the Company's knowledge, no suspension or cancellation of
any of them is threatened or is reasonably likely and all such filings,
applications and registrations are current;
(3) except as Previously Disclosed or affirmatively made
available, has received, since January 1, 1998, no written notification or
communication (or, to the best knowledge of the Company, any other
communication) from any Governmental Authority or Self-Regulatory Organization
(A) asserting noncompliance with any of the statutes, regulations, rules or
ordinances that such Governmental Authority or Self-Regulatory Organization
enforces, (B) threatening any Material penalty or to revoke any license,
franchise, seat on any exchange, permit, or governmental authorization, (C)
requiring any of them (including any of the Company's directors or controlling
persons) to enter into a cease and desist order, agreement, or memorandum of
understanding (or requiring the board of directors thereof to adopt any
resolution or policy), or (D) restricting or disqualifying their activities
(except for restrictions imposed by rule, regulation or administrative policy on
brokers or dealers generally);
(4) except as Previously Disclosed, is not aware of any pending
or threatened investigation, review or disciplinary proceedings by any
Governmental Authority or Self-Regulatory Organization against the Company, or
any officer, director or employee thereof,
Exhibit 2.6-19
20
(5) The Company has made available to Acquiror true and correct
copies of (A) each Form G-37/G-38 filed with the MSRB since January 1, 1998, and
(B) all records required to be kept by the Company under Rule G-8(a)(xvi) of the
MSRB. Since January 1, 1998, other than as disclosed in such Forms G-37/G-38
made available to Acquiror, there have been no contributions or payments, and
there is no other information, that would be required to be disclosed by the
Company;
(6) is not subject to any cease-and-desist or other order issued
by, or a party to any written agreement, consent agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or subject to any order or directive by, a recipient of any supervisory
letter from or has adopted any board resolutions at the request of, any
Governmental Authority or Self-Regulatory Organization, or been advised since
January 1, 1998, by any Governmental Authority or Self-Regulatory Organization
that it is considering issuing or requesting any such agreement or other action
or has knowledge of any pending or threatened regulatory investigation; and
(7) since January 1, 1998, has timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were required to be filed under any applicable law,
regulation or rule, with (A) any applicable Governmental Authority, and (B) any
Self-Regulatory Organization (collectively, the "Company Reports"). As of their
respective dates, the Company Reports complied with the applicable statutes,
rules, and regulations and orders enforced or promulgated by the regulatory
authority with which they were filed.
(m) Properties; Securities.
(1) Except as Previously Disclosed and as may be reflected in the
Financial Statements dated before the date hereof, the Company has good and
marketable title, free and clear of all Liens (other than Liens for current
taxes not yet delinquent) to all of the Material properties and assets, tangible
or intangible, reflected in such financial statements as being owned by the
Company as of the dates thereof. To the best of the Company's knowledge, all
buildings and all the Material fixtures, equipment, and other property and
assets held under leases or subleases by any of the Company are held under valid
leases or subleases, enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and to general equity principles). The Company has Previously Disclosed a list
of any and all real estate owned or leased by it as of the date hereof. Except
as Previously Disclosed, the Company has good and marketable title to all
securities held by it (except securities sold under repurchase agreements or
held in any fiduciary or agency capacity), free and clear of any Lien, 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.
Such securities are valued on the books of the Company in accordance with
generally accepted accounting principles consistently applied.
(2) Except as Previously Disclosed, the Company does not hold any
equity securities for its own account involving, in the aggregate, ownership or
control of five percent (5%) or more of any class of an issuer's voting
securities or twenty-five percent (25%) or
Exhibit 2.6-20
21
more of the issuer's equity (treating subordinated debt as equity). Except as
Previously Disclosed, there are no partnerships, limited liability companies,
joint ventures or similar entities, in which the Company is a general partner,
manager, managing member or holds some other similar position or owns or
controls any interest, directly or indirectly, of five percent (5%) or more and
the nature and amount of each such interest.
(n) Taxes.
(1) The Company has made a valid S corporation election for
federal income tax election for federal income tax purposes and such election is
valid and in effect;
(2) The Company has filed, completely and correctly in all
material respects, all Tax Returns which are required by applicable law to be
filed by the Company;
(3) All Taxes shown to be due on such Tax Returns have been paid
in full;
(4) All Taxes due with respect to completed examinations have
been paid in full;
(5) No currently effective waivers of statutes of limitations
(excluding such statues that relate to years currently under examination by the
IRS) have been given by or requested with respect to any Taxes of the Company;
(6) The Company has duly paid or made provision for the payment
of all Taxes that have been incurred or are due or claimed to be due from it by
federal, state, foreign or local taxing authorities other than Taxes that are
not yet delinquent or are being contested in good faith and have not been
finally determined;
(7) The federal and state income Tax Returns of the Company have
been examined by the IRS or the relevant state taxing authorities, as the case
may be, through December 31, 1999. The federal income tax, returns of the
Company for the fiscal year ended December 31, 1996 and for all fiscal years
prior thereto are, for purposes of routine audit by the IRS, closed because of
the statute of limitations, and, to the knowledge of the Company after due
investigation, no claims for additional taxes for such fiscal years are pending.
Except as Previously Disclosed, there are no audits by, or disputes pending
between the Company and any taxing authority of which the Company has received
written notice, or claims asserted in writing by any taxing authority for, Taxes
or assessments upon the Company. In addition, (A) proper and accurate amounts
have been withheld by the Company from their employees for all prior periods in
compliance with the Tax withholding provisions of applicable federal, state and
local laws, (B) federal, state and local Tax Returns that are complete and
accurate have been filed by the Company for all periods for which Tax Returns
were due with respect to income Tax withholding, Social Security and
unemployment Taxes, (C) the amounts shown on such federal, state or local Tax
Returns to be due and payable have been paid in full, and (D) there are no Tax
liens upon any property or assets of the Company, except liens for current Taxes
not yet due;
(8) The Company has not been required to include in income any
adjustment pursuant to Section 481 of the Code by reason of a voluntary change
in accounting
Exhibit 2.6-21
22
method initiated by the Company, and the IRS has not initiated or proposed any
such adjustment or change in accounting method; and
(9) The Company is not a party to or is bound by any Tax sharing,
allocation or indemnification agreement or arrangement.
(o) Litigation. The Company has furnished Acquiror with copies of (1)
all attorney responses to the request of the independent auditors for the
Company with respect to loss contingencies as of the end of its fiscal year most
recently completed as of the date hereof and (2) a written list of all Material
legal litigation, proceedings, investigations or controversy ("Litigation")
before any court, arbitrator, mediator, Governmental Authority or
Self-Regulatory Organization to which the Company has been a party since the end
of such fiscal year ("Litigation List"). Except as disclosed in the Litigation
List, no Litigation before any court, arbitrator, mediator, Governmental
Authority or Self-Regulatory Organization that has been or would reasonably be
expected to be Material to the Company taken as a whole is pending against the
Company, and, to the knowledge of the Company, no such Litigation has been
threatened.
(p) Employees; Labor Matters.
(1) The Company is in compliance with all currently applicable
material laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including the Immigration Reform
and Control Act, the Worker Adjustment and Retraining Notification Act, any such
laws respecting employment discrimination, harassment, disability rights or
benefits, equal opportunity, plant closure issues, affirmative action, workers'
compensation, employee benefits, severance payments, labor relations, employee
leave issues, wage and hour standards, occupational safety and health
requirements and unemployment insurance and related matters. The Company is not
engaged in any unfair labor practice and there is no unfair labor practice
complaint pending or threatened against the Company before the National Labor
Relations Board. There are no charges or complaints against the Company pending
or, to the knowledge of the Company, threatened in writing, alleging sexual or
other harassment, or other discrimination, by the Company or by any of its
employees, agents or representatives.
(2) The Company is not a party to, or is bound by, any collective
bargaining agreement, Contract or other agreement or understanding with any
labor union or organization, nor has it agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified, or, to the knowledge of the Company, is seeking
certification, as representing any of the employees of any of the Company.
(q) Employee Benefit Plans.
(1) The Company has Previously Disclosed a complete list of each
employee or director benefit plan, arrangement or agreement, whether or not
written, including, without limitation, any employee welfare benefit plan within
the meaning of Section 3(l) of ERISA, any employee pension benefit plan within
the meaning of Section 3(2) of ERISA (whether or not such plan is subject to
ERISA) and any bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe
Exhibit 2.6-22
23
benefit plan, program or agreement that is sponsored, maintained or contributed
to by the Company for the benefit of current or former employees or directors or
their beneficiaries (the "Company Benefit Plans").
(2) The Company has heretofore made available to Acquiror (A)
true and complete copies of each of the Company Benefit Plans (or written
explanations of any unwritten Company Benefit Plans) as in effect on the date
hereof, (B) the three most recent Annual Reports (Form 5500 Series) and
accompanying schedules, if any; and (C) the most recent determination letter
from the IRS (if applicable) for such Company Benefit Plan.
(3) With respect to each Company Benefit Plan, the Company has
complied, and is now in compliance, in all material respects with all provisions
of ERISA, the Code and all laws and regulations applicable to such Company
Benefit Plans and each Company Benefit Plan has been administered in all
material respects in accordance with its terms. The Internal Revenue Service has
issued a favorable determination letter with respect to each Company Benefit
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Code and the related trust that has not been revoked, and, to the
knowledge of the Company, no circumstances exist and no events have occurred
that could reasonably be expected to adversely affect the qualified status of
any such plan or the related trust (except for changes in applicable law for
which the remedial amendment period has not yet expired). No Company Benefit
Plan is intended to meet the requirements of Code Section 501(c)(9).
(4) All contributions required to be made to any Company Benefit
Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Plan, for any period through the date hereof have
been timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof, have been fully reflected on the Financial
Statements. Each Company Benefit Plan, if any, that is an employee welfare
benefit plan under Section 3(l) of ERISA is either (A) funded through an
insurance company contract and is not a "welfare benefit fund" with the meaning
of Section 419 of the Code, or (B) unfunded.
(5) There is no pending or, to the knowledge of the Company,
threatened litigation relating to the Company Benefit Plans. The Company has not
engaged in a transaction with respect to any Company Benefit Plan that would
subject the Company to a Material tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA.
(6) No Company Benefit Plan is subject to Title IV or Section 302
of ERISA or Section 412 or 4971 of the Code, and the Company has not contributed
or been obligated to contribute to a "multiemployer plan" (as defined in Section
3(37) of ERISA) or a plan that has two or more contributing, but unrelated,
sponsors and that is subject to Title IV of ERISA at any time on or after
December 31, 1994. No liability under Subtitle C or D of Title IV of ERISA has
been or is reasonably expected to be incurred by the Company with respect to any
ongoing, frozen or terminated "single-employer plan," within the meaning of
Section 4001 of ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (a "Company ERISA
Affiliate"). No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has
Exhibit 2.6-23
24
not been waived has been required to be filed for any Company Benefit Plan or,
to the knowledge of the Company, by any Company ERISA Affiliate. Neither the
Company nor its Company ERISA Affiliates has provided, or is required to
provide, security to any Company Benefit Plan or any single-employer plan of a
Company ERISA Affiliate.
(7) The Company has no obligation for retiree health, life or
other welfare benefits, except for benefits and coverage required by applicable
law, including, without limitation, Section 4980B of the Code and Part 6 of
Title I of ERISA. There are no restrictions on the rights of the Company to
amend or terminate any such plan (other than reasonable and customary advance
notice requirements) without incurring any Material liability thereunder.
(8) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either standing alone or
in conjunction with any other event) will (A) result in any payment (including
severance, unemployment compensation, "excess parachute" (within the meaning of
280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any
director or any employee of the Company under any Company Benefit Plan, (B)
increase any benefits otherwise payable under any Company Benefit Plan, (C)
result in any acceleration of the time of payment or vesting of any such benefit
or (D) affect in any way the ability to amend, terminate, merge or administer
any Company Benefit Plan.
(r) Environmental Matters. The Company has Materially complied at all
times with applicable Environmental Laws; no property (including buildings and
any other structures) currently or formerly owned or operated (or which the
Company would be deemed to have owned or operated under any Environmental Law)
by the Company or in which the Company (whether as fiduciary or otherwise) has a
Lien, has been contaminated with, or has had any release of, any Hazardous
Substance in such form or substance so as to create any liability for the
Company; the Company is not subject to liability for any Hazardous Substance
disposal or contamination on any other third-party property; within the last six
years, the Company has not received any notice, demand letter, claim or request
for information alleging any violation of, or liability of the Company under,
any Environmental Law; the Company is not subject to any order, decree,
injunction or other agreement with any Governmental Authority or any third party
relating to any Environmental Law; the Company is not aware of any reasonably
likely liability relating to environmental circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead products or
polychlorinated biphenyls) involving the Company, any currently or formerly
owned or operated property (whether as fiduciary or otherwise), or any
reasonably likely liability related to any Lien held by the Company; and the
Company has made available to Acquiror copies of all environmental reports,
studies, sampling data, correspondence, filings and other environmental
information in its possession or reasonably available to it relating to the
Company or any currently or formerly owned or operated property or any property
in which the Company (whether as fiduciary or otherwise) has held a Lien.
(s) Internal Controls. The Company has devised and maintained a system
of internal accounting controls sufficient to provide reasonable assurances that
(1) transactions are executed in accordance with management's general or
specific authorizations, (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principals and to maintain accountability for assets, (3) access to
assets is
Exhibit 2.6-24
25
permitted only in accordance with management's general or specific
authorization, and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(t) Derivatives; Etc. All exchange-traded, over-the-counter or other
swaps, caps, floors, collars, option agreements, futures and forward contracts
and other similar arrangements or Contracts, whether entered into for the
Company's own account, or for the account of one or more of its customers, were
entered into (1) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (2) with counter
parties reasonably believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and are in full
force and effect. The Company, nor, to the best of the Company's knowledge, any
other party thereto, is in breach of any of its obligations under any such
agreement or arrangement. The Financial Statements disclose the value of such
agreements and arrangements on a ▇▇▇▇-to-market basis in accordance with
generally accepted accounting principles and, since March 31, 2000, there has
not been a material change in such value.
(u) Names and Trademarks. The Company has the common law right to use
the names and other intellectual property currently used by it in the conduct of
its businesses; each of such names and other intellectual property has been
Previously Disclosed; and, in the case of such names, in each state of the
United States, such right of use is free and clear of any Liens, except as
disclosed in the Financial Statements, and no other person has the right to use
such names in any such state.
(v) Insurance. The Company has Previously Disclosed all of the
insurance policies, binders, or bonds maintained by the Company ("Company
Insurance Policies"). The Company is insured with reputable insurers against
such risks and in such amounts as the management of the Company reasonably has
determined to be prudent in accordance with industry practices. All of the
Insurance Policies are in full force and effect; the Company is not in material
default thereunder; and all claims thereunder have been filed in due and timely
fashion.
(w) No Brokers. No action has been taken by the Company that would
give rise to any claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions contemplated
by this Agreement.
4.4. Representations and Warranties of Acquiror and MergerCo. Except
as Previously Disclosed in a paragraph of its Disclosure Schedule corresponding
to the relevant paragraph below, each of Acquiror and MergerCo, as the case
maybe, hereby represents and warrants to the Company as follows:
(a) Organization, Standing and Authority. Each of Acquiror and
MergerCo is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota and is duly qualified to do business
and is in good standing in all jurisdictions where
Exhibit 2.6-25
26
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified.
(b) Corporate Power. Acquiror and each of its Subsidiaries have the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets.
(c) Corporate Authority. Each of Acquiror and MergerCo has the
requisite corporate power and authority, and subject to approval of the issuance
of the Additional Shares by the shareholders of Acquiror, has taken all
corporate action necessary, in order to authorize the execution, delivery of and
performance of its obligations under, this Agreement and to consummate the
transactions contemplated by this Agreement. This Agreement is a valid and
legally binding agreement of each of Acquiror and MergerCo, enforceable in
accordance with its terms.
(d) Regulatory Approvals; No Defaults.
(1) No consents or approvals of, or filings or registrations
with, any Governmental Authority, Self-Regulatory Organization or with any third
party are required to be made or obtained by Acquiror or any of its Subsidiaries
in connection with the execution, delivery or performance by Acquiror and
MergerCo of this Agreement, or to consummate the Merger, except for (A) those
required under the HSR Act; (B) filings of applications or notices with the CSE,
the NASD and other Previously Disclosed securities licensing or supervising
authorities; (C) approval of the CSE and consents of national securities
exchanges for the transfer of ownership of seats or membership; and (D) the
filing of Articles of Merger with the Secretary of State of the State of
Minnesota pursuant to the MBCA. As of the date hereof, Acquiror is not aware of
any reason why the approvals of all Governmental Authorities or Self-Regulatory
Organizations necessary to permit consummation of the transactions contemplated
hereby will not be received.
(2) Subject only to receipt of the regulatory approvals referred
to in Section 4.4(d)(1), the expiration of applicable waiting periods and the
making of all required filings under federal and state securities laws, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any acceleration
of remedies or any right of termination (with or without the giving of notice,
passage of time or both) under, any law, rule or regulation or any judgment,
decree, order, governmental or nongovernmental permit or license, or Contract of
Acquiror or of any of its Subsidiaries or to which Acquiror or any of its
Subsidiaries or its or their properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the articles of incorporation or
bylaws (or similar governing documents) of Acquiror or any of its Subsidiaries,
or (C) require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or Contract.
(e) Acquiror Stock. The authorized capital stock of Acquiror consists
of 100,000,000 shares of capital stock, par value $.04 per share, of which
50,000,000 shares are designated as common stock (the "Acquiror Common Stock"),
and 50,000,000 shares are
Exhibit 2.6-26
27
undesignated (the "Acquiror Undesignated Stock"). As of March 31, 2000, (a)
21,575,273 shares of Acquiror Common Stock were issued and outstanding, (b) no
shares of Acquiror Undesignated Stock were issued and outstanding, (c) 1,525,000
shares of Acquiror Common Stock were reserved for issuance under Acquiror's
Stock Option Plans, and (d) 314,258 shares of Acquiror Common Stock were
reserved for issuance under Acquiror Warrants. The outstanding shares of
Acquiror Common Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive rights
(and were not issued in violation of any subscriptive or preemptive rights). As
of the date hereof, other than as set forth in Acquiror's Disclosure Schedule
and Acquiror Stock Options, the Shares to be issued pursuant to the Agreement
and Plan of Merger between and among ▇▇▇▇▇▇▇ Investments, Inc., Acquiror and SW
Acquisition, Inc. (the "▇▇▇▇▇▇▇ Agreement") and Acquiror Warrants and the
convertible notes ("Convertible Notes") which are proposed to be issued, offered
and sold pursuant to SEC registration 333-35544 filed April 25, 2000, there are
no shares of Acquiror Common Stock authorized and reserved for issuance,
Acquiror does not have any Rights issued or outstanding with respect to Acquiror
Stock, and Acquiror does not have any commitment or plans to authorize, issue or
sell any Acquiror Stock or Rights, except pursuant to this Agreement.
(f) Subsidiaries. Each of Acquiror's Subsidiaries has been duly
organized, is validly existing and in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified. Acquiror has
continuously owned all of the outstanding capital stock of MergerCo since the
initial issuance by MergerCo of its capital stock.
(g) SEC Documents; Financial Statements.
(1) Since July 7, 1999, Acquiror and each Acquiror Subsidiary has
filed all reports, registrations, and statements it was required to file with
the SEC under the Securities Act, or under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, including, but not limited to Acquiror's Annual Reports on
Form 10-K for the fiscal year ended December 31, 1999, Forms 10-Q, registration
statements, definitive proxy statements, and information statements, and
Acquiror has Previously Disclosed to the Company a draft of its Annual Report on
Form 10-K for the fiscal year ended March 31, 2000 (collectively, "Acquiror SEC
Documents"). As of their respective dates (and without giving effect to any
amendments or modification filed after the date of this Agreement) each of
Acquiror SEC Documents, including the financial statements, exhibits, and
schedules thereto, filed or circulated prior to the date hereof complied (and
each of Acquiror SEC Documents filed after the date of this Agreement will
comply) as to form with applicable Securities Laws and did not (or, in the case
of reports, statements, or circular filed after the date of this Agreement, will
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,
in the light of the circumstances under which they were made, not misleading.
(2) Each of the balance sheets included in or incorporated by
reference into Acquiror SEC Documents, including the related notes and
schedules, fairly presented (or, in the case of Acquiror SEC Documents filed
after the date of this Agreement, will fairly present) the consolidated
financial condition of Acquiror and its Subsidiaries as of the date of such
Exhibit 2.6-27
28
balance sheet and each of the statements of income, cash flows and changes in
shareholders' equity and comprehensive income included in or incorporated by
reference into Acquiror SEC Documents, including any related notes and schedules
(collectively the foregoing financial statements and related notes and schedules
are referred to as the "Acquiror Financial Statements"), fairly presented (or,
in the case of Acquiror SEC Documents filed after the date of this Agreement,
will fairly present) the consolidated results of operations, cash flows and
shareholders' equity, as the case may be, of Acquiror and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved
(except as may be noted therein and except that such unaudited statements
include no notes).
(h) Liabilities. Except as disclosed in Acquiror Financial Statements
or Acquiror SEC Documents filed prior to the date of this Agreement, none of
Acquiror or any of its Subsidiaries has any liability or obligation (contingent
or otherwise) that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on Acquiror.
(i) Absence of Certain Changes. Since March 31, 2000, the business of
Acquiror and its Subsidiaries has been conducted in the ordinary and usual
course, consistent with past practice, and except for the ▇▇▇▇▇▇▇ Agreement and
the filing of the registration statement for the issuance and sale of the
Convertible Notes, and except as Previously Disclosed, there has not been:
(1) any event, occurrence, development or state of circumstances
or facts that has had or is reasonably likely to have a Material Adverse Effect
on Acquiror.
(2) any amendment of any term of any outstanding security of
Acquiror or any of its Subsidiaries or to Acquiror or any of its Subsidiaries'
articles of incorporation or bylaws (or similar governing documents);
(3) any (A) incurrence, assumption or guarantee by Acquiror or
any of its Subsidiaries of any indebtedness for borrowed money, or (B)
assumption, guarantee, endorsement or otherwise by Acquiror of any obligations
of any other person, in each case, other than in the ordinary and usual course
of business, consistent with past practice, and in amounts and on terms
consistent with past practices;
(4) any creation or assumption by Acquiror or any of its
Subsidiaries of any Lien on any material asset other than in the ordinary and
usual course of business consistent with past practices;
(5) prior to or on the date hereof, any making of any loan in
excess of $100,000, or aggregate loans in excess of $250,000, advance or capital
contributions to or investment in any person, in each case, other than in the
ordinary and usual course of business consistent with past practice;
(6) any change in any accounting policies or practices by
Acquiror or any of its Subsidiaries; or
Exhibit 2.6-28
29
(7) any (A) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director, officer,
consultant, partner or employee of Acquiror or any of its Subsidiaries (or any
amendment to any such existing agreement), (B) grant of any severance or
termination pay to any director, officer, consultant, partner or employee of
Acquiror or any of its Subsidiaries, or (C) change in compensation or other
benefits payable to any director, officer, consultant, partner or employee of
Acquiror or any of its Subsidiaries, except, in each case, in the ordinary
course of business or as required by Contract or applicable law with respect to
employees of Acquiror or any of its Subsidiaries.
(j) Contracts.
(1) Acquiror has Previously Disclosed each of the
following executory Contracts to which either Acquiror or any of its
Subsidiaries is a party, or by which any of them is bound or to which any of
their properties is subject:
(A) any lease of real property;
(B) any partnership, joint venture or other similar
agreement or arrangement, or any options or rights to acquire from any person
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities or such person, in each
case, entered into other than in the ordinary course of business;
(C) any agreement relating to the acquisition or disposition
of any business (whether by merger, sale of stock, sale of assets or otherwise);
(D) any indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment, outstanding as of the
date hereof, for the borrowing of money by Acquiror or one of its Subsidiaries
or the deferred purchase price of property in excess of $100,000 (in either
case, whether incurred, assumed, guaranteed or secured by any asset);
(E) any agreement in force as of the date hereof that
creates future payment obligations in excess of $100,000 in the aggregate and
which by its terms does not terminate or is not terminable without penalty upon
notice of 90 days or less;
(F) any license, franchise or similar agreement material to
Acquiror or any of its Subsidiaries or any agreement relating to any trade name
or intellectual property right that is material to Acquiror or any of its
Subsidiaries;
(G) any exclusive dealing agreement or any agreement that
limits the freedom of Acquiror or any of its Subsidiaries to compete in any line
of business or with any person or in any area or that would so limit their
freedom after the Effective Date;
(H) any compensation, employment, severance, supplemental
retirement or other similar agreement or arrangement with any employee or former
employee of, or independent contractor with respect to, Acquiror or any of its
Subsidiaries, or any other agreement with any current or former Affiliate of
Acquiror; and
Exhibit 2.6-29
30
(I) any other Contract that is a "material contract" as
defined in Item 601(b)(10) of SEC Regulation S-K and that has not been filed
prior to the date hereof as an exhibit to Acquiror's SEC Documents.
(2) Each Contract that has been, or is required to be, Previously
Disclosed pursuant to this Section is a valid and binding agreement of Acquiror
or one or more of its Subsidiaries, as the case may be, and is in full force and
effect, and Acquiror or its Subsidiaries parties thereto are not in default or
breach in any material respect under the terms of any such Contract.
(k) Litigation. Except as disclosed in Acquiror's SEC Documents filed
before the date of this Agreement, no Litigation before any court, arbitrator,
mediator, Governmental Authority or Self-Regulatory Organization that has been
or would reasonably be expected to be Material to Acquiror and its Subsidiaries
taken as a whole is pending against Acquiror or any of its Subsidiaries, and, to
the best of Acquiror's knowledge, no such Litigation has been threatened.
(l) Compliance with Laws. Acquiror and each of its Significant
Subsidiaries: is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to the conduct of its businesses or to the employees
conducting such businesses in all material respects, and the rules of all
Self-Regulatory Organizations applicable thereto and has all permits, licenses,
authorizations, orders and approvals of, and has made all filings, applications
and registrations with, all Governmental Authorities and Self-Regulatory
Organizations that are required in order to permit them to own or lease their
properties and to conduct their businesses as presently conducted (all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and are current and, to the best of Acquiror's knowledge, no
suspension or cancellation of any of them is threatened or is reasonably likely
and all such filings, applications and registrations are current).
(m) Registration Matters.
(1) Each of Acquiror's Subsidiaries required to be registered as
a broker-dealer or investment advisor with the SEC, the securities commission or
similar authority of any state or any Self-Regulatory Organization
(collectively, "Broker-Dealer Subsidiaries") are duly registered and such
registrations are in full force and effect. Each Broker-Dealer Subsidiary is,
and at the Effective Time will be, a member in good standing with all required
Self-Regulatory Organizations and in compliance with all applicable rules and
regulations of the Self-Regulatory Organizations.
(2) Acquiror has delivered or made available to the Company,
true, correct and complete copies of (A) each Broker-Dealer Subsidiary's Uniform
Application for Broker-Dealer Registration on Form BD (each, "Acquiror Form BD")
and (B) each Uniform Application for Investment Adviser Registration filed by
Acquiror or any Subsidiary (each, a "Acquiror Form ADV", and together with Form
BD, "Acquiror Forms"), all of Acquiror Forms reflecting all amendments thereto
filed with the NASD or the SEC, as the case may be, on or prior to the date
hereof. Acquiror Forms are in compliance with the applicable requirements of the
Exchange Act or the Investment Advisers Act, as the case may be and do not
contain any
Exhibit 2.6-30
31
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, in
light of the circumstances under which they were made, not misleading. Acquiror
has provided or made available true and complete copies of all audit reports
since December 31, 1996 by the SEC or the NASD regarding Acquiror or its
Subsidiaries. Each director, officer, agent and employee of each Broker-Dealer
Subsidiary who is required to be registered as a representative, principal or
agent with the securities commission of any state or with any Self Regulating
Organization is duly registered as such and such registration is in full force
and effect. Each registered representative and principal of each Broker-Dealer
Subsidiary has at least the minimum series license for the activities that such
registered representative or principal performs for such Broker-Dealer
Subsidiary.
(3) The net capital, as such term is defined in Rule 15c3-1 under
the Exchange Act, of each Broker-Dealer Subsidiary satisfies the minimum net
capital requirements of the Exchange Act and of the laws of any jurisdiction in
which the Broker-Dealer Subsidiary conducts business, and has been sufficient to
permit each Broker-Dealer Subsidiary to operate without restriction on its
ability to expand its business under NASD Conduct Rule 3130.
(4) None of the Broker-Dealer Subsidiaries nor any "associated
person" thereof (a) is subject to a "statutory disqualification" as such terms
are defined in the Exchange Act, (b) is ineligible to serve as a broker-dealer
or as an associated person to a registered broker-dealer or (c) is subject to a
disqualification that would be a basis for censure, limitations on the
activities, functions or operations of, or suspension or revocation of the
registration of any Broker-Dealer Subsidiary as broker-dealer, municipal
securities dealer, government securities broker or government securities dealer
under Section 15, Section 15B or Section 15C of the Exchange Act and there is no
reasonable basis for, or proceeding or investigation, whether formal or
informal, or whether preliminary or otherwise, that is reasonably likely to
result in, any such censure, limitations, suspension or revocation.
(5) Neither Acquiror, its Subsidiaries nor any "associated
person" (as defined in the Investment Advisers Act) thereof, as applicable, is
ineligible pursuant to Section 203 of the Investment Advisers Act to serve as an
investment adviser or as an associated person to a registered investment
adviser. Neither Acquiror nor its Subsidiaries provides investment advisory,
subadvisory or management services to or through (i) any issuer or other Person
that is an investment company (within the meaning of the Investment Company
Act), (ii) any issuer or other Person that would be an investment company
(within the meaning of the Investment Company Act) but for the exemptions
contained in Section 3(c)(1), Section 3(c)(7), the final clause of Section
3(c)(3) or the third or fourth clauses of Section 3(c)(11) of the Investment
Company Act, or (iii) any issuer or other Person that is or is required to be
registered under the laws of the appropriate securities regulatory authority in
the jurisdiction in which the issuer is domiciled (other than the United States
or the states thereof), which is or holds itself out as engaged primarily in the
business of investing, reinvesting or trading in securities.
(6) Except as Previously Disclosed, neither Acquiror nor its
Subsidiaries is or is required to be registered as an investment company,
investment adviser, commodity trading advisor, commodity pool operator, futures
commission merchant, introducing broker, insurance agent, or transfer agent
under any United States federal, state, local or foreign statutes, laws, rules
or regulations. No Broker-Dealer Subsidiary acts as the "sponsor" of a
Exhibit 2.6-31
32
"broker-dealer trading program", as such terms are defined in Rule 17a-23 under
the Exchange Act.
(7) Acquiror does not provide investment management, advisory or
subadvisory services as a registered investment advisor to (A) an employee
benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title I of
ERISA; (B) a Person acting on behalf of such a plan; or (C) any entity whose
underlying assets are deemed, under 29 C.F.R. Section 2510.3-101, to include the
assets of such a plan by reason of such a plan's investment in such entity
(each, an "Acquiror ERISA Client").
(n) Employees; Labor Matters.
(1) Each of Acquiror and its Subsidiaries is in compliance with
all currently applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, including the
Immigration Reform and Control Act, the Worker Adjustment and Retraining
Notification Act, any such laws respecting employment discrimination,
harassment, disability rights or benefits, equal opportunity, plant closure
issues, affirmative action, workers' compensation, employee benefits, severance
payments, labor relations, employee leave issues, wage and hour standards,
occupational safety and health requirements and unemployment insurance and
related matters. None of Acquiror or any of its Subsidiaries is engaged in any
unfair labor practice and there is no unfair labor practice complaint pending or
threatened against Acquiror or any of its Subsidiaries before the National Labor
Relations Board. There are no charges or complaints against Acquiror or any of
its Subsidiaries pending of threatened in writing alleging sexual or other
harassment, or other discrimination, by the Company, any of its Subsidiaries or
by any of their employees, agents or representatives.
(2) Neither Acquiror nor any of its Subsidiaries is a party to,
or is bound by, any collective bargaining agreement, Contract or other agreement
or understanding with any labor union or organization, nor has it agreed to
recognize any union or other collective bargaining unit, nor has any union or
other collective bargaining unit been certified, or is seeking certification, as
representing any of the employees of Acquiror or its Subsidiaries.
(o) Employee Benefit Plans.
(1) Acquiror has Previously Disclosed a complete list of each
employee or director benefit plan, arrangement or agreement, whether or not
written, including without limitation any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, any employee pension benefit plan within
the meaning of Section 3(2) of ERISA (whether or not such plan is subject to
ERISA) and any bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe
benefit plan, program or agreement that is sponsored, maintained or contributed
to by Acquiror or any of its Subsidiaries for the benefit of current or former
employees or directors or their beneficiaries (the "Acquiror Benefit Plans").
(2) Acquiror has heretofore made available to the Company (A)
true and complete copies of each of the Acquiror Benefit Plans (or written
explanations of any
Exhibit 2.6-32
33
unwritten Acquiror Benefit Plans) as in effect on the date hereof; (B) the three
most recent Annual Reports (Form 5500 Series) and accompanying schedules, if
any; and (C) the most recent determination letter from the IRS (if applicable)
for such Acquiror Benefit Plan.
(3) With respect to each Acquiror Benefit Plan, Acquiror and its
Subsidiaries have complied, and are now in compliance, in all material respects
with all provisions of ERISA, the Code and all laws and regulations applicable
to such Acquiror Benefit Plans and each Acquiror Benefit Plan has been
administered in all material respects in accordance with its terms. The Internal
Revenue Service has issued a favorable determination letter with respect to each
Acquiror Benefit Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code and the related trust that has not been
revoked, and, to the knowledge of Acquiror, no circumstances exist and no events
have occurred that could reasonably be expected to adversely affect the
qualified status of any such plan or the related trust (except for changes in
applicable law for which the remedial amendment period has not yet expired). No
Acquiror Benefit Plan is intended to meet the requirements of Code Section
501(c)(9).
(4) All contributions required to be made to any Acquiror Benefit
Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Plan, for any period through the date hereof have
been timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof, have been fully reflected on the Financial
Statements. Each Acquiror Benefit Plan, if any, that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (A) funded through an
insurance company contract and is not a "welfare benefit fund" with the meaning
of Section 419 of the Code or (B) unfunded.
(5) There is no pending or, to the knowledge of Acquiror,
threatened litigation relating to the Acquiror Benefit Plans. Neither Acquiror
nor any of its Subsidiaries has engaged in a transaction with respect to any
Acquiror Benefit Plan that would subject Acquiror or any of its Subsidiaries to
a Material tax or penalty imposed by either Section 4975 of the Code or Section
502(i) of ERISA.
(6) No Acquiror Benefit Plan is subject to Title IV or Section
302 of ERISA or Section 412 or 4971 of the Code, and neither Acquiror nor any of
its Subsidiaries has contributed or been obligated to contribute to a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a plan that has
two or more contributing, but unrelated, sponsors and that is subject to Title
IV of ERISA at any time on or after December 31, 1994. No liability under
Subtitle C or D of Title IV of ERISA has been or is reasonably expected to be
incurred by Acquiror or any of its Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan," within the meaning of Section 4001
of ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with
Acquiror under Section 4001 of ERISA or Section 414 of the Code (an "Acquiror
ERISA Affiliate"). No notice of a "reportable event," within the meaning of
Section 4043 of ERISA, for which the 30-day reporting requirement has not been
waived has been required to be filed for any Acquiror Benefit Plan or, to the
knowledge of Acquiror, by any ERISA Affiliate. Neither Acquiror nor any of its
Subsidiaries or Acquiror ERISA Affiliates has provided, or is required to
Exhibit 2.6-33
34
provide, security to any Acquiror Benefit Plan or any single-employer plan of an
Acquiror ERISA Affiliate.
(p) Environmental Matters. Acquiror and its Subsidiaries have complied
at all times with applicable Environmental Laws; no property (including
buildings and any other structures) currently or formerly owned or operated (or
which Acquiror or any of its Subsidiaries would be deemed to have owned or
operated under any Environmental Law) by Acquiror or any of its Subsidiaries or
in which Acquiror or any of its Subsidiaries (whether as fiduciary or otherwise)
has a Lien, has been contaminated with, or has had any release of, any Hazardous
Substance in such form or substance so as to create any liability for Acquiror
or its Subsidiaries; Acquiror is not subject to liability for any Hazardous
Substance disposal or contamination on any other third-party property; within
the last six years, Acquiror and its Subsidiaries have not received any notice,
demand letter, claim or request for information alleging any violation of, or
liability of Acquiror under, any Environmental Law; Acquiror and its
Subsidiaries are not subject to any order, decree, injunction or other agreement
with any Governmental Authority or any third party relating to any Environmental
Law; Acquiror and its Subsidiaries are not aware of any reasonably likely
liability relating to environmental circumstances or conditions (including the
presence of asbestos, underground storage tanks, lead products or
polychlorinated biphenyls) involving Acquiror or one of its Subsidiaries, any
currently or formerly owned or operated property (whether as fiduciary or
otherwise), or any reasonably likely liability related to any Lien held by
Acquiror or one of its Subsidiaries; and Acquiror has made available to Acquiror
copies of all environmental reports, studies, sampling data, correspondence,
filings and other environmental information in its possession or reasonably
available to it relating to Acquiror or one of its Subsidiaries or any currently
or formerly owned or operated property or any property in which Acquiror or one
of its Subsidiaries (whether as fiduciary or otherwise) has held a Lien.
(q) Internal Controls. Acquiror and its Subsidiaries have devised and
maintained a system of internal accounting controls sufficient to provide
reasonable assurances that (1) transactions are executed in accordance with
management's general or specific authorizations, (2) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principals and to maintain accountability for
assets, (3) access to assets is permitted only in accordance with management's
general or specific authorization, and (4) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(r) Derivatives; Etc. All exchange-traded, over-the-counter or other
swaps, caps, floors, collars, option agreements, futures and forward contracts
and other similar arrangements or Contracts, whether entered into for Acquiror's
own account, or for the account of one or more of Acquiror's Subsidiaries or
their customers, were entered into (1) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory policies
and (2) with counter parties reasonably believed to be financially responsible
at the time; and each of them constitutes the valid and legally binding
obligation of Acquiror or one of its Subsidiaries, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and are in full force and effect. Neither
Acquiror nor its Subsidiaries, nor, to the best
Exhibit 2.6-34
35
of Acquiror's knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement. The Acquiror's SEC
Documents disclose the value of such agreements and arrangements on a
▇▇▇▇-to-market basis in accordance with generally accepted accounting principles
and, since December 31, 1999, there has not been a material change in such
value.
(s) Names and Trademarks. Acquiror and its Subsidiaries have the right
to use the names, service-marks, trademarks and other intellectual property
currently used by them in the conduct of their businesses; each of such names,
service-marks, trademarks and other intellectual property has been Previously
Disclosed; and, in the case of such names, service-marks and trademarks, in each
state of the United States, such right of use is free and clear of any Liens,
and no other person has the right to use such names, service-marks or trade
marks in any such state.
(t) Insurance. Acquiror has Previously Disclosed all of the insurance
policies, binders, or bonds maintained by the Company or its Subsidiaries
("Acquiror Insurance Policies"). The Company and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts as the management
of the Company reasonably has determined to be prudent in accordance with
industry practices. All of the Acquiror Insurance Policies are in full force and
effect; the Company and its Subsidiaries are not in material default thereunder;
and all claims thereunder have been filed in due and timely fashion.
(u) Brokers. No action has been taken by Acquiror that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement.
(v) Activities of MergerCo. MergerCo does not have any Subsidiaries or
material investments of any kind in any entity. MergerCo has been incorporated
on behalf of Acquiror solely for purposes of accomplishing the Merger, has not
engaged in any other business activity and has conducted its operations only as
contemplated hereby.
(w) Validity of Acquiror Common Stock. The shares of Acquiror Common
Stock to be issued to the holders of Company Common Stock as part of the Merger
Consideration will be, when issued, duly authorized, validly issued, fully paid
and nonassessable.
(x) Taxes.
(1) Acquiror and its Subsidiaries have filed, completely and
correctly in all material respects, all Tax Returns which are required by
applicable law to be filed by Acquiror or its Subsidiaries;
(2) All Taxes shown to be due on such Tax Returns have been paid
in full;
(3) All Taxes due with respect to completed examinations have
been paid in full;
Exhibit 2.6-35
36
(4) No currently effective waivers of statutes of limitations
(excluding such statutes that relate to years currently under examination by the
IRS) have been given by or requested with respect to any Taxes of Acquiror or
any of its Subsidiaries;
(5) Each of Acquiror and its Subsidiaries has duly paid or made
provision for the payment of all Taxes that have been incurred or are due or
claimed to be due from it by federal state, foreign or local taxing authorities
other than Taxes that are not yet delinquent or are being contested in good
faith and have not been finally determined.
(y) Tax Treatment. As of the date hereof, Acquiror has no reason to
believe that the Merger will not qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
5. COVENANTS
5.1. Forbearances of the Company. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of Acquiror, the Company will not:
(a) Ordinary Course. Conduct the business of the Company other than
in the ordinary and usual course, or, to the extent consistent therewith, fail
to use reasonable best efforts to preserve intact any of its business
organizations and assets and maintain its rights, franchises and existing
relations with clients, customers, correspondents, independent contractors,
suppliers, employees and business associates; or engage in any new lines of
business.
(b) Capital Stock. Issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of Company
Stock or any Rights, enter into any Contract with respect to the foregoing or
permit any additional shares of Company Stock to become subject to new grants of
employee or director stock options, other Rights or similar stock-based employee
rights.
(c) Dividends, Etc. (1) Except as permitted by Section 4.3(h)(8),
declare, pay or set aside for payment any dividend on or in respect of, or
declare or make any distribution on, any shares of its capital stock (in each
case, having record and payment dates consistent with past practice), or (2)
directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into, amend,
modify or renew any Contract regarding employment, consulting, severance or
similar arrangements with any directors, officers, employees of, or independent
contractors with respect to, the Company, or grant any salary, wage or other
increase in compensation or increase in any employee benefit (including
incentive or bonus payments), except (1) for changes that are required by
applicable law, (2) to satisfy Previously Disclosed Contracts existing on the
date hereof, or (3) for employment arrangements for, or grants of awards to,
newly hired non-executive employees in the ordinary course of business
consistent with past practice or (4) for normal individual increases in
compensation to non-officer employees in the ordinary and usual course of
business consistent with past practice.
Exhibit 2.6-36
37
(e) Benefit Plans. Enter into, establish, adopt, amend or modify any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare Contract, plan, program or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of any
directors, officers, employees of, or independent contractors with respect to,
the Company, including taking any action that accelerates the vesting or
exercisability of stock options, restricted stock or other compensation or
benefits payable thereunder, except, in each such case, as may be required by
applicable law or expressly required by the terms of Contracts Previously
Disclosed as such Contracts are in effect as of the date hereof. Notwithstanding
the foregoing, the Company shall be entitled to continue to hire/fire employees
and independent contractors in the ordinary course of its business.
(f) Dispositions. Except for sales of securities or other investments
or assets in the ordinary course of business consistent with past practice,
sell, transfer, mortgage, lease, encumber or otherwise dispose of or discontinue
any material portion of its assets, business or properties.
(g) Acquisitions. Except for the purchase of securities or other
investments or assets in the ordinary course of business consistent with past
practice, acquire a material portion of the assets of any other person.
(h) Governing Documents. Amend the Company Articles or the Company
Bylaws.
(i) Accounting Methods. Implement or adopt any change in accounting
principles, practices or methods, other than as may be required by generally
accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into, renew or terminate any material Contract or
amend or modify in any material respect, or waive any material right under, any
of its existing material Contracts.
(k) Claims. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually and in the aggregate for all such settlements, not more than
$50,000 and which could not reasonably be expected to establish an adverse
precedent or basis for subsequent settlements.
(l) Capital Expenditures. Authorize or make any capital expenditures,
other than (1) annual budgeted amounts Previously Disclosed, or (2) in the
ordinary and usual course of business consistent with past practice in amounts
not exceeding $50,000 in the aggregate.
(m) Risk Management. Except as required by applicable law or
regulation, (1) implement or adopt any change in the risk management policies,
procedures or practices of the Company, which, individually or in the aggregate
with all such other changes, would be Material, or (2) materially restructure or
change its investment securities portfolio, if any, or the manner in which such
portfolio is classified or reported.
Exhibit 2.6-37
38
(n) Tax Matters. Make or change any tax election, change any annual
tax accounting period, adopt or change any method of tax accounting, file any
amended Tax Return, enter into any -closing agreement, settle any Tax claim or
assessment, surrender or compromise any right to claim a Tax refund or consent
to any extension or waiver of the limitations period applicable to any Tax claim
or assessment, other than any of the foregoing actions that are (i) not, alone
or in the aggregate, Material and (ii) taken in the ordinary and usual course of
business, consistent with past practice.
(o) Indebtedness. (i) Other than in the ordinary course of business
consistent with past practice, (A) incur any indebtedness for borrowed money
(other than short-term indebtedness incurred to refinance existing short-term
indebtedness, and indebtedness of the Company to the Company, and indebtedness
under existing lines of credit), (B) assume, guarantee, endorse or otherwise as
an accommodation become responsible for the obligations of any other Person, (C)
make any loan or advance, or (ii) other than with respect to customary
concessions regarding margin indebtedness of brokerage clients in the ordinary
course of business consistent with past practice, and with respect to the
regularly scheduled forgiveness of loans made to employees prior to the date
hereof in connection with the hiring of such employees when and as required by
the express provisions of Previously Disclosed Contracts in full force and
effect between such employees and the Company, forgive or extinguish any
indebtedness to the Company for borrowed money or otherwise waive any rights
under any instrument or arrangement pursuant to which such indebtedness was
incurred.
(p) Commitments. Agree or commit to do, or adopt any resolutions of
its board of directors in support of, anything that would be precluded by
clauses (a) through (o).
5.2. Forbearances of Acquiror and MergerCo. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of the Company, each of Acquiror and MergerCo will not
take any action that is intended or is reasonably likely to result in (A) any of
its representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(B) any of the conditions to the Merger set forth in Section 6 not being
satisfied, or (C) a material breach of any provision of this Agreement.
5.3. Operation of the Company. The Shareholder shall, from the Closing
Date, until the Additional Shares, if any, have been finally determined, be the
principal executive officer of the Company, and Acquiror shall cause him to be
so elected. Subject to the ultimate control and responsibility of the Board of
Directors of Acquiror and the Company during such period, Shareholder shall have
the right to manage the business and affairs of the Company and shall direct the
formulation and execution of both short- and long-term corporate plans,
including, without limitation, the hiring, retention or termination of employees
and independent sales representatives, the setting of compensation and fringe
benefits of employees and independent sales representatives other than himself
and ▇▇▇▇ ▇. ▇▇▇▇▇, the expansion of the business and the making of commitments
for capital expenditures. Acquiror shall cooperate with the Shareholder in
maintaining and increasing the profitability of the Company for such purposes.
From and after the Closing Date and until final determination of the Additional
Shares, Acquiror will operate the Company as a separate Subsidiary, but this
Agreement shall not be construed as a commitment on the part of Acquiror to
invest in or make available to the Company any particular
Exhibit 2.6-38
39
amount of additional capital, or to incur any particular expense or obligation
on behalf of the Company, whether or not Acquiror is to be reimbursed by the
Company for any such expense or obligation, other than to the extent of an
amount equal to the assets and funds available to the Company immediately prior
to the Closing, as the same may be adjusted by the amount of any increase or
decrease thereof by reason of the operations of the Company from and after the
Closing.
5.4. Separate Subsidiary. From the Closing Date until the Additional
Shares, if any, have been finally determined, Acquiror will continue to operate
the Company as a separate Subsidiary and will, unless finally determined to the
contrary by a court of competent jurisdiction, allow the Company to continue to
treat sales representatives as independent contractors.
5.5. No Solicitation.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to its terms, the Shareholder and the
Company agree that they will not, or any of its or their officers, directors,
employees, representatives, agents, or affiliates, including, without
limitation, any investment banker, attorney or accountant retained by the
Company (collectively, "Representatives") to, directly or indirectly, (i)
initiate, solicit, encourage or otherwise facilitate (including by way of
furnishing information), any inquiries or the making of any proposal or offer
that constitutes, or may reasonably be expected to lead to an Acquisition
Proposal (as defined below), or (ii) enter into or maintain or continue
discussions or negotiate with any person in furtherance of such inquiries or to
obtain an Acquisition Proposal, or (iii) agree to, approve, recommend, or
endorse any Acquisition Proposal, or authorize or permit any of its or their
Representatives to take any such action and, except to the extent prohibited by
contracts existing at the date of this Agreement, the Company shall promptly
notify Acquiror of any such inquiries and proposals received by the Company or
Representatives, relating to any of such matters.
(b) For purposes of this Agreement, "Acquisition Proposal" means an
inquiry, offer or proposal regarding any of the following (other than the
transactions contemplated by this Agreement) including the Company: (i) any
merger, reorganization, consolidation, share exchange, recapitalization,
business combination, liquidation, dissolution, or other similar transaction
involving, or, any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of, all or any significant portion of the assets or twenty percent
(20%) or more of the equity securities of, the Company, in a single transactions
or series of related transactions which would reasonably be expected to
interfere with the completion of the Merger; or (ii) any tender offer or
exchange offer for twenty percent (20%) or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith,
5.6. Shareholder Approval. The Shareholder will take all action necessary
to approve this Agreement in accordance with the MBCA.
5.7. Acquiror Shareholder Meeting. If required by Regulatory Authorities,
Acquiror, acting through the Board, will as promptly as possible following the
date of this Agreement call,
Exhibit 2.6-39
40
give notice of, prepare and file with the SEC a proxy statement with respect
thereto, and convene and hold a shareholders' meeting for the purpose of
approving and authorizing the issuance of Acquiror Common Stock to be delivered
upon consummation of the Merger and such other approvals and authorizations as
are necessary to consummate the transactions contemplated herein.
5.8. Access; Information.
(a) The Company agrees that upon reasonable notice and subject to
applicable laws relating to the exchange of information, it shall afford
Acquiror and its officers, employees, counsel, accountants and other authorized
representatives, such reasonable access during normal business hours throughout
the period prior to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors), properties,
personnel (upon the prior notification to and approval of Shareholder) and to
such other information as Acquiror may reasonably request and, during such
period, it shall furnish promptly to such other party (1) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities laws, and (2) all other information
concerning the business, properties and personnel of it as the other may
reasonably request.
(b) Acquiror agrees that any information obtained pursuant to this
Section 5.8 will be treated as confidential information and not disclosed to any
person except Representatives on a need to know basis. All such information
shall be returned to the disclosing party if this Agreement is terminated for
any reason. Confidential information shall not include information available to
the public or information received from a third party lawfully in possession of
such information and under no obligation to retain such information in
confidence. No investigation by Acquiror of the business and affairs of the
Company shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement or the conditions to
consummation contained in Section 6.
(c) Acquiror agrees that the Company shall have reasonable rights of
review and approval of any information about the Company included in documents
filed with various regulatory authorities.
5.9. Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of
the Company and Acquiror agrees to use its reasonable best efforts in good faith
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or desirable, or advisable under applicable laws, so as
to permit consummation of the Merger as promptly as reasonably practicable and
otherwise to enable consummation of the transactions contemplated hereby, and
shall cooperate fully with the other party hereto to that end.
(b) Without limiting the generality of Section 5.9(a), the Company
agrees to use its reasonable best efforts to obtain the consent or approval of
all persons party to a Contract with the Company, to the extent the failure to
obtain such consent is reasonably likely to have a Material Adverse Effect on
the Company giving effect to the Merger, or is required in order to consummate
the Merger.
Exhibit 2.6-40
41
5.10. Regulatory Applications.
(a) Acquiror and the Company and Acquiror's Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement as
promptly as reasonably practicable. Each of Acquiror and the Company shall have
the right to review in advance, and to the extent practicable each will consult
with the other (subject in each case to applicable laws relating to the exchange
of information) with respect to, all material written information submitted to
any third party or Governmental Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of
Acquiror and the Company agrees to act reasonably and as promptly as
practicable. Each of Acquiror and the Company agrees that it will consult with
the other party hereto or its legal advisors with respect to the obtaining of
all material permits, consents, approvals and authorizations of all third
parties and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each of Acquiror and the Company agrees, upon request, to furnish
the other party or its legal advisors with all information concerning itself,
its Subsidiaries, in the case of Acquiror, directors, officers and shareholders
and such other matters as may be reasonably necessary or advisable in connection
with any filing, notice or application made by or on behalf of such other party
or any of its Subsidiaries, in the case of Acquiror, to any third party or
Governmental Authority.
5.11. Certain Employee Benefits. At the Effective Time, Acquiror will
provide employees of the Company who as of the Effective Time become employed by
Acquiror or any of its Subsidiaries, including the Surviving Corporation (the
"Covered Employees") with the employee benefit plans, programs and arrangements
maintained by or contributed to Acquiror or its Subsidiaries and in which
Covered Employees are eligible to participate after the Effective Time,
substantially as and on the terms set forth on Schedule 5.11 hereto. In lieu
thereof, Acquiror may elect to continue in effect the Company Benefit Plans with
respect to the Surviving Corporation. Except as set forth on Schedule 5.11, for
purposes of all Acquiror Plans, Acquiror shall, or shall cause its Subsidiaries
to, cause each such plan, program or arrangement to treat the prior service with
the Company of each Covered Employee (to the same extent such service is
recognized under any analogous plans, programs or arrangements of the Company
immediately prior to the Effective Time to the extent such a plan, program or
arrangement is in effect immediately prior to the Effective Time) as service
rendered to Acquiror or its Subsidiaries, as the case may be, solely for
purposes of eligibility to participate and for vesting thereunder (but not for
purposes of benefit accruals). Acquiror and its Subsidiaries will cause any and
all pre-existing condition limitations (to the extent such limitations did not
apply to a pre-existing condition under the Company Benefit Plans) and
eligibility waiting periods, under any health plans maintained by Acquiror or
its Subsidiaries in which Covered Employees are eligible to participate after
the Effective Time, to be waived with respect to (a) Covered Employees who,
immediately prior to the Effective Time, participated in a Company-sponsored
health plan and (b) their eligible dependents. Acquiror and its Subsidiaries
will recognize, for
Exhibit 2.6-41
42
purposes of any annual deductible and out-of-pocket limits under its health
plans, deductible and out-of-pocket expenses paid by Covered Employees and their
dependents during the calendar year in which the Effective Time occurs under the
health plans of the Company. Acquiror and its Subsidiaries shall honor, pursuant
to the terms of the applicable benefit plans, and to the extent consistent with
applicable law, all accrued employee benefit obligations to current and former
employees of the Company under such plans. Nothing in this Section 5.11 shall
prevent Acquiror from amending or terminating any benefit plans of Acquiror (or
its Subsidiaries) or any other contracts, arrangements, commitments or
understandings, in accordance with their terms and applicable law.
5.12. Tax-Free Reorganization. Neither the Company, Acquiror nor MergerCo
will, either before or after consummation of the Merger, take any action that
would cause the Merger to fail to constitute a "reorganization" within the
meaning of Section 368(a) of the Code.
5.13. Board Composition. Until the earlier of (i) five (5) years from the
Closing Date, or (ii) the date on which the Shareholder ceases to own ten
percent (10%) of the outstanding shares of Acquiror's Common Stock, Acquiror
agrees to take all steps necessary to appoint and have elected to its Board of
Directors, Shareholder and ▇▇▇▇ ▇. ▇▇▇▇▇, or two (2) nominees of the
Shareholder. Nothing in this Section 5.13 shall prohibit Shareholder or ▇▇▇▇ ▇.
▇▇▇▇▇ from serving as directors beyond the expiration of the period described
above.
5.14. Deal Warrants. Acquiror and any of its Subsidiaries hereby agree
that for a period of five (5) years from the Closing Date, Shareholder shall be
entitled to receive the same percentage of warrants received by Acquiror in
connection with corporate finance transactions as ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
5.15. Notification of Certain Matters.
(a) Each of the Shareholder, the Company and Acquiror shall give
prompt notice to the other of any fact, event or circumstance known to it that
is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in a material breach of any of
its representations, warranties, covenants or agreements contained herein.
(b) The Shareholder and the Company shall promptly notify Acquiror,
and Acquiror shall promptly notify the Company, of any written notice (or any
other communication of which the Company, on the one hand, or Acquiror, on the
other hand, becomes aware) from any person alleging that the consent of such
person is or may be required as a condition to the Merger or any notice or other
communication from any Governmental Authority or Self-Regulatory Organization in
connection with the transactions contemplated by this Agreement.
5.16. Press Releases. Each of the Company, the Shareholder and Acquiror
agrees that it will nor, without the prior approval of the other party, issue
any press release or written statement for general circulation relating to the
transactions contemplated hereby, except as otherwise required by applicable law
or regulation or the rules of any applicable Self-Regulatory Organization.
Exhibit 2.6-42
43
6. CONDITIONS TO CONSUMMATION OF THE MERGER
6.1. Conditions to Obligations of Each Party. The respective obligation of
each of the parties hereto to consummate the Merger shall be subject to the
fulfillment or written waiver by Acquiror and the Company prior to the Effective
Time of each of the following conditions:
(a) No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued since the date of this Agreement by any U.S. federal or
state court of competent jurisdiction and shall remain in effect; and no U.S.
federal or state law, statute, rule, regulation or decree that makes
consummation of the Merger illegal shall have been enacted or adopted since the
date of this Agreement and shall remain in effect.
(b) Listing. Acquiror Common Stock to be issued to holders of Company
Common Stock as a result of the Merger shall have been approved for listing on
the NASDAQ/NMS.
(c) Governmental and Regulatory Consents. All approvals and
authorizations of, filings and registrations with, and notifications to, all
Governmental Authorities and Self-Regulatory Organizations required for the
consummation of the Merger shall have been obtained or made and shall be in full
force and effect and all waiting periods required by law shall have expired.
(d) Shareholder Approval. This Agreement and the Merger shall have
been duly approved by the requisite vote of the holders of outstanding shares of
Company Common Stock entitled to vote thereon in accordance with the MBCA, and
other applicable law and the Company Articles and Company Bylaws.
(e) Authority. Federal or state Governmental Authority against
Acquiror or the Company (and no U. S. federal or state Governmental Authority
shall have overtly threatened to commence any action, suit or proceeding against
Acquiror or the Company before any U. S. federal or state court of competent
jurisdiction): (i) challenging or seeking to restrain or prohibit the
consummation of the Merger; (ii) relating to the Merger and seeking to obtain
from Acquiror or the Company or any of their Subsidiaries any damages that would
be material to Acquiror or the Company; (iii) seeking to prohibit or limit in
any material respect Acquiror's ability to vote, receive dividends with respect
to or otherwise exercise ownership rights with respect to the stock of the
Surviving Corporation; or (iv) which would materially and adversely affect the
right of the Surviving Corporation to own the assets or operate the business of
the Company.
(f) No Other Litigation. There shall not be pending before any U. S.
federal or state court of competent jurisdiction any suit, action or proceeding
commenced by any person against Acquiror in which there is a reasonable
likelihood of a judgment against Acquiror or the Company providing for an award
of damages or other relief that would have a Material Adverse Effect on Acquiror
or the Company; (i) challenging or seeking to prohibit or limit in any material
respect Acquiror's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (iii) which would
Exhibit 2.6-43
44
affect adversely the right of the Surviving Corporation to own the assets or
operate the business of the Company.
6.2. Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set
forth in Section 4.2, the representations and warranties of Acquiror and
MergerCo set forth in this Agreement shall be true and correct as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of this
Agreement or some other date shall be true and correct only as of such date),
and the Company shall have received a certificate, dated the Effective Date,
signed on behalf of Acquiror by a senior executive officer to such effect.
(b) Performance of Obligations of Acquiror. Acquiror shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and the Company shall
have received a certificate, dated the Effective Date, and signed on behalf of
Acquiror by a senior executive officer to such effect.
(c) Acquiror and Shareholder shall have executed and delivered
the Employment Agreement attached hereto as Annex B.
(d) Acquiror and ▇▇▇▇ ▇. ▇▇▇▇▇ shall have executed and delivered
the Employment Agreement attached hereto as Annex C.
(e) Acquiror shall have executed and delivered to ▇▇▇▇ ▇. ▇▇▇▇▇ a
warrant to purchase 300,000 shares of Acquiror Common Stock, the form of which
is attached hereto as Annex D.
(f) Acquiror, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ shall have executed and delivered to the Company the Voting
Agreement in the form of attached Annex E.
6.3. Conditions to Obligation of Acquiror and MergerCo. The obligation
of Acquiror and MergerCo to consummate the Merger is also subject to the
fulfillment or written waiver by Acquiror prior to the Effective Time of each of
the following conditions:
(a) Representations and Warranties. Subject to the standard set
forth in Section 4.2, the representations and warranties of the Company set
forth in this Agreement shall be true and correct as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct only as of such date) and Acquiror shall
have received a certificate, dated the Effective Date, signed on behalf of the
Company by a senior executive officer to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this
Exhibit 2.6-44
45
Agreement at or prior to the Effective Time, and Acquiror shall have received,
prior to the Effective Time, a certificate, dated the Effective Date, signed on
behalf of the Company by a senior executive officer to such effect.
(c) Third Party Consents. All consents or approvals of all
persons, other than Governmental Authorities, required for or in connection with
the execution, delivery and performance of this Agreement and the consummation
of the Merger shall have been obtained and shall be in full force and effect,
unless the failure to obtain any such consent or approval is not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
the Company or the Surviving Corporation.
(d) The Shareholder shall have executed the letter in the form
attached hereto as Annex G.
7. TERMINATION
7.1. Termination. This Agreement may be terminated, and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval thereof by shareholders of the Company:
(a) Mutual Consent. At any time prior to the Effective Time, by
the mutual consent of Acquiror and the Company.
(b) Breach. At any time prior to the Effective Time, by Acquiror
or the Company in the event of either: (1) a breach by the other party of any
representation or warranty contained herein (subject to the standard set forth
in Section 4.2), which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach, or (2)
a breach by the other party of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach and which breach
is reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the breaching party or the Surviving Corporation.
(c) Delay. At any time prior to the Effective Time, by Acquiror
or the Company in the event that the Merger is not consummated by November 30,
2000 except to the extent that the failure of the Merger then to be consummated
arises out of or results from the knowing action or inaction of the party
seeking to terminate pursuant to this Section 7.1(c).
(d) No Approval. By the Company or Acquiror in the event (1) the
approval of any Governmental Authority required for consummation of the Merger
and the other transactions contemplated by this Agreement shall have been denied
by final nonappealable action of such Governmental Authority, or such
Governmental Authority shall have requested the permanent withdrawal of any
application therefore, or (2) any approval required of Acquiror's shareholders
is not obtained.
7.2. Fees and Expenses. The Company and Acquiror shall each bear their
own fees and expenses, provided, however, that a party shall be entitled to
recover damages, including but not limited to attorney's fees and all expenses,
if it is finally determined that this Agreement was
Exhibit 2.6-45
46
terminated due to the breach of the Agreement by a party against whom the
Agreement is being enforced.
7.3. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Section 7, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (1) as set forth in Sections 7.2
and (2) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement.
8. MISCELLANEOUS
8.1. Survival. No representations, warranties, agreements and
covenants by any signatory contained in this Agreement or pursuant to an
assignment permitted by Section 8.8 shall survive the Effective Time or
termination of this Agreement if this Agreement is terminated prior to the
Effective Time; provided, however, that (a) to the extent the agreements of the
parties contained herein by their terms apply after the Effective Time, such
agreements shall survive the Effective Time, and (b) if this Agreement is
terminated prior to the Effective Time, the agreements of the parties contained
in Sections 5.8(b), 7.2, 7.3 and in this Section 8 shall survive such
termination.
8.2. Waiver, Amendment. Prior to the Effective Time, any provision of
this Agreement may be (1) waived by the party benefited by the provision, or (2)
amended or modified at any time, by an agreement in writing between the parties
hereto approved or authorized by their respective Boards of Directors and
executed in the same manner as this Agreement, except that, after approval of
the Merger by the shareholders of the Company, no amendment may be made which
under applicable law requires further approval of such shareholders without
obtaining such required further approval.
8.3. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
8.4. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
8.5. Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby.
8.6. Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given (1) on the date of
delivery, if personally delivered or telecopied (with confirmation), (2) on the
first business day following the date of dispatch, if delivered by a recognized
next-day courier service, or (3) on the third business day following the date of
mailing, if mailed by registered or certified mail (return receipt requested),
in each case to such party at its address or telecopy number set forth below or
such other address or numbers as such party may specify by notice to the parties
hereto.
Exhibit 2.6-46
47
If to Acquiror or MergerCo, to:
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
With a copy to:
Maun & Simon, PLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to the Shareholder or the Company, to:
▇.▇. ▇▇▇▇▇▇▇▇ & Company
One Financial Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P.
4200 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
8.7. Entire Understanding, No Third Party Beneficiaries. This
Agreement (together with the Disclosure Schedules) and the Confidentiality
Agreement represent the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and thereby and supersede any
and all other oral or written agreements heretofore made. Except for Section
5.8, insofar as such Section expressly provides certain rights to the persons
named therein, nothing in this Agreement, expressed or implied, is intended to
confer upon any person,
Exhibit 2.6-47
48
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
8.8. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties hereto. Subject to the foregoing and Section 8.1,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns; provided, however,
that, in his sole discretion, Shareholder may assign shares of Company Common
Stock to ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, provided that each such person, as
a condition to the receipt of any such shares, agrees to execute this Agreement
and to be bound by the terms hereof to the same extent that the Shareholder may
be bound.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed as of the day and year first above written.
▇▇▇▇▇▇▇▇▇.▇▇▇ GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Its: Chairman and CEO
----------------------------
SCG ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Its: Chairman and CEO
----------------------------
▇.▇. ▇▇▇▇▇▇▇▇ & COMPANY
By: ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Its: President
----------------------------
Subject to the provisions of Section 8.1, the Shareholder hereby agrees
to and is bound by the provisions of Sections 2.6, 4.1, 4.2, 4.3, 5.3, 5.5, 5.6,
5.14, 5.15, 7, and 8 of this Agreement.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Feltl 1995 Grantor Retained Annuity Trust UD
July 1, 1995
/s/ ▇▇▇▇ ▇▇ ▇▇▇▇▇
----------------------------------------------
By ▇▇▇▇ ▇▇ ▇▇▇▇▇
Its Trustee
Exhibit 2.6-48
49
ANNEX A
[Included in file]
Annex A-1
50
ANNEX B
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the _____ day
of July, 2000 ("Effective Date"), by and between ▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc., a
Minnesota corporation (the "Corporation"), and ▇▇▇▇ ▇. ▇▇▇▇▇ ("Employee").
WITNESSETH:
WHEREAS, the Corporation wishes to employs Employee as the President
and Chief Executive Officer of its wholly-owned subsidiary, ▇.▇. ▇▇▇▇▇▇▇▇ &
Company; and
WHEREAS, Employee and the Corporation desire to enter into this
Agreement to define their employment relationship.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Employment. As of Effective Date, the Corporation will employ Employee
as the President and Chief Executive Officer of ▇.▇. ▇▇▇▇▇▇▇▇ & Company, to
perform the duties and functions as are specified by the Corporation's Board of
Directors (with, as appropriate, Employee abstaining from the discussion thereof
and vote thereon). During the Employment Term, as hereinafter provided, Employee
shall devote his reasonable efforts and time to the business of ▇.▇. ▇▇▇▇▇▇▇▇ &
Company, in order to perform his duties in accordance with the reasonable
expectations of the Corporation's Board of Directors in accordance with the
procedures set forth above.
Employee hereby accepts such employment and, during the Employment
Term, shall devote his reasonable time, skill, energy and attention to the
business of ▇.▇. ▇▇▇▇▇▇▇▇ & Company, and shall perform his duties (as set forth
herein) in a diligent, trustworthy, loyal, businesslike and efficient manner,
all for the purpose of advancing the overall business of the Corporation.
2. Compensation.
2.1. Salary. For all services rendered by Employee pursuant to this
Agreement, the Corporation shall pay Employee an annual salary, subject to
withholding and other applicable employment taxes and other proper payroll
deductions, of One Million Dollars ($1,000,000.00). Such annual salary shall be
paid in accordance with the Company's established bimonthly pay policies and
procedures beginning as of the Effective Date.
2.2. Benefits. Employee shall be entitled to health, dental, term life
and disability insurance benefits consistent with the Corporation's current
employment policies and practices and subject to approval by the Corporation's
insurance provider. The Corporation's Board of Directors (with Employee
abstaining from the discussion pertaining thereto and the vote thereon) may from
time to time grant Employee further benefits. Employee acknowledges that he is
not entitled to any further benefits other than set forth herein or as the
Corporation's
Annex B-1
51
Board of Directors, in its sole discretion and in accordance with the procedures
set forth above, shall determine to grant Employee.
2.3. Expenses. The Corporation shall reimburse Employee for all
ordinary and necessary expenses reasonably and properly incurred and paid by
Employee in the course of performing his duties, as specified in Section 1
hereof, and consistent with the Corporation's policies in effect from time to
time with respect to travel, entertainment and other business expenses, and
subject to the Corporation's requirements with respect to the manner of
authorization and reporting of such expenses. In addition, the Corporation shall
provide Employee with a mobile phone and shall reimburse Employee for the
reasonable business expenses associated therewith. Employee shall also reimburse
Employee for parking expenses and expenses pertaining to Employee's continuing
education. The Corporation will use its best efforts to have certain of its
employees provide Employee with access to the Minneapolis Club for client
entertainment.
2.4. Commissions. Employee shall be entitled to continue to receive
commissions on his book of business consistent with the past practices of ▇.▇.
▇▇▇▇▇▇▇▇ & Company.
3. Term and Termination.
3.1. Employment Term. The "Employment Term," as that term is used
throughout this Agreement, shall be for a period of five (5) years, commencing
on the Effective Date and ending on July ___, 2005. Notwithstanding the
foregoing, this Agreement may be sooner terminated in accordance with the
provisions of Section 3.2 hereof.
3.2. Termination.
(a) Immediately for Cause. Notwithstanding anything in this
Agreement to the contrary, the Corporation may terminate Employee's employment
hereunder, and shall have no further obligation or liability to Employee: (i) if
Employee commits any fraud, misappropriation or embezzlement; (ii) if Employee
materially and repeatedly breaches any provision of this Agreement after notice
thereof; or (iii) for any act, or failure to act, of Employee, attributable to
his gross negligence or willful misconduct, which causes a material adverse
effect on the Corporation's business, condition, prospects or reputation, as
determined by the Corporation's Board of Directors in its reasonable business
judgment (with Employee abstaining from the discussion pertaining to and the
vote thereon).
In the event of any termination pursuant to this subsection,
the Corporation shall be obligated to pay Employee only those portions of his
compensation provided by Sections 2.1 and 2.3 hereof which shall accrue to
Employee up to and including the date upon which such termination becomes
effective.
(b) Immediately Due to Disability or Death. Notwithstanding
anything in this Agreement to the contrary, the Corporation may immediately
terminate Employee's employment hereunder upon Employee's disability or death.
In the event the Corporation terminates Employee's employment under this
subsection due to disability, the Corporation shall be obligated to pay Employee
those portions of his compensation provided for
Annex B-2
52
by Section 2.1 hereof, after reducing such compensation by the amount of any
disability insurance payments received by Employee under disability policies
funded by the Corporation, during the remaining period of such illness or
incapacity; provided, however, that in no event shall the Corporation's
obligation to pay Employee under this subsection extend beyond the end of the
Employment Term.
For the purposes of this Agreement, Employee shall be deemed
to be suffering from a disability if Employee, in the reasonable business
judgment of the Corporation's Board of Directors (with Employee abstaining from
the discussion pertaining thereto and the vote thereon), is unable to perform
his duties, as specified in Section 1 hereof, by reason of illness or incapacity
for a period of more than 90 days in any six-month period.
In the event the Corporation terminates Employee's employment
under this subsection due to Employee's death, the Corporation shall be
obligated to pay Employee's estate his base salary, as set forth in Section 2.1
hereof, through the end of the Employment Term.
(c) Termination by Employee. In the event Employee terminates
this Agreement, the Corporation shall be obligated to pay Employee only those
portions of his compensation provided by Section 2.1 hereof which shall accrue
to Employee up to and including the date upon which such termination becomes
effective.
3.3. Vacation. Provided that he is available to consult with the
Corporation as reasonably needed and is reasonably able to perform his duties
and obligations hereunder, Employee shall not be limited in the amount of
vacation time he takes throughout the term hereof.
4. Confidentiality and Covenant Not to Compete.
4.1. Non-Disclosure Agreement. Employee acknowledges the interest of
the Corporation in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term or thereafter,
regardless of the reason for or circumstances of termination of employment,
directly or indirectly, reveal or cause to be revealed to any person or entity
trade secrets, customer lists or other confidential business information
obtained by him as a result of his employment or relationship with the
Corporation, except when authorized in writing to do so by the Board of
Directors of the Corporation (with Employee abstaining from the discussion
pertaining thereto and the vote thereon); provided, however, that the parties
acknowledge that it is not the intent of this Section 4.1 to include within its
subject matter (i) information not proprietary to the Corporation, or (ii)
information which is in the public domain.
4.2. Covenant Not to Compete. Throughout the Employment Term (the
"Noncompete Period"), and regardless of whether this Agreement is terminated
prior to the end of the Employment Term for whatever reason, Employee shall not,
on his behalf or on behalf of or in conjunction with any other person, persons,
firm or partnership, corporation, entity or company:
Annex B-3
53
(a) compete, directly or indirectly, with the Corporation or
engage or participate, directly or indirectly, in any business or businesses
substantially similar to the business conducted by the Corporation as of the
Effective Date or as may thereafter be conducted by the Corporation at any time
during the Noncompete Period.
(b) solicit or cause to be solicited any customers of the
Corporation.
(c) recruit or cause any other person to recruit any employee of
the Corporation to any of said business or businesses.
Notwithstanding the foregoing, the foregoing provisions shall not be
applicable to Employee's activities set forth on attached Exhibit A. The
foregoing provisions shall also not be applicable if Employee's employment with
the Company is terminated as a result of Employee's death or disability;
provided, however, that such provisions shall apply in the event that Employee
recovers from a disability which caused his employment to be terminated.
5. Miscellaneous.
5.1. Remedies. The parties acknowledge that any breach, violation or
evasion by Employee of the terms of this Agreement will result in immediate or
irreparable injury or harm to the Corporation, and will cause damage to the
Corporation in an amount difficult to ascertain. Accordingly, the Corporation
shall be entitled to the remedies of injunction and specific performance, or
either of such remedies, without the need to post any bond or other security, as
well as to all other legal and equitable remedies to which the Corporation may
be entitled and recovery of any related attorneys' fees.
5.2. Notices. All notices and other communications under this
Agreement will be sufficient if written and sent by registered or certified
mail, return receipt requested, in the case of Employee, to his residence as
shown on the Corporation's records, and in the case of the Corporation, to its
offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention Chief Executive Officer; provided, however, that any notice of change
of address shall be effective only upon receipt.
5.3. Obligations and Benefits. The obligations and benefits set forth
in this Agreement shall be binding and inure to the benefit of the respective
parties hereto and their personal representatives, successors and permitted
assigns.
5.4. Assignment. The Corporation may assign its rights and delegate
its responsibilities under this Agreement to any affiliated company or to any
corporation that acquires all or substantially all of the operating assets of
the Corporation. Except as hereinbefore provided, neither the Corporation nor
Employee may assign any obligations or benefits under this Agreement.
5.5. Waiver. A waiver by the Corporation or Employee of a breach of
any provision of his Agreement by the other shall not operate or be construed as
a waiver of any subsequent breach.
Annex B-4
54
5.6. Amendment. This Agreement shall be amended only in writing,
signed by both parties.
5.7. Governing Law. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the laws of the
State of Minnesota, without giving effect to principles of conflict of laws.
5.8. Entire Agreement. This Agreement contains the entire agreement of
the parties. This Agreement supersedes any and all prior agreements between the
parties hereto, whether oral or written. All of such other agreements, whether
oral or written, are hereby null and void and of no further force and effect.
5.9. Severability. If any portion or portions of this Agreement shall
be, for any reason, invalid or unenforceable, the remaining portion or portions
shall nevertheless be valid and enforceable.
5.10. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the day and year first above written.
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc.
By:
----------------------------
Its:
------------------------
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Annex B-5
55
ANNEX C
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the _____ day of
July, 2000 ("Effective Date"), by and between ▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc., a
Minnesota corporation (the "Corporation"), and ▇▇▇▇ ▇. ▇▇▇▇▇ ("Employee").
WITNESSETH:
WHEREAS, the Corporation wishes to employ Employee as its Senior Vice
President and as the Director of Corporate Finance and Executive Vice President
of its wholly-owned subsidiary, ▇.▇. ▇▇▇▇▇▇▇▇ & Company; and
WHEREAS, Employee and the Corporation desire to enter into this Agreement to
define their employment relationship.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Employment. As of Effective Date, the Corporation will employ Employee
as its Senior Vice President and as the Director of Corporate Finance and
Executive Vice President of ▇.▇. ▇▇▇▇▇▇▇▇ & Company, to perform the duties and
functions as are specified by the Corporation's Chief Executive Officer, ▇▇▇▇▇
▇. ▇▇▇▇▇▇, and the Chief Executive Officer of ▇.▇. ▇▇▇▇▇▇▇▇ & Company,
respectively. During the Employment Term, as hereinafter provided, Employee
shall devote his full efforts and time to the business of the Corporation and
▇.▇. ▇▇▇▇▇▇▇▇ & Company in order to perform his duties in a manner consistent
with the standards for similarly situated executives in similar businesses or
enterprises and in accordance with the reasonable expectations of the
Corporation's Chief Executive Officer and the Chief Executive Officer of ▇.▇.
▇▇▇▇▇▇▇▇ & Company.
Employee hereby accepts such employment and, during the Employment
Term, shall devote his full business time, skill, energy and attention to the
business of the Corporation and ▇.▇. ▇▇▇▇▇▇▇▇ & Company, and shall perform his
duties (as set forth herein) in a diligent, trustworthy, loyal, businesslike and
efficient manner, all for the purpose of advancing the overall business of the
Corporation.
2. Compensation.
2.1. Salary. For all services rendered by Employee pursuant to this
Agreement, the Corporation shall pay Employee an annual salary, subject to
withholding and other applicable employment taxes and other proper payroll
deductions, of Two Hundred Thousand Dollars ($200,000.00). Such annual salary
shall be paid in accordance with the Corporation's established pay policies and
procedures beginning as of the Effective Date.
2.2. Signing Bonus. At the closing of the transactions which are the
subject of the Agreement and Plan of Merger, dated of even date herewith, by and
among the Corporation,
Annex C-1
56
▇.▇. ▇▇▇▇▇▇▇▇ & Company and SCG Acquisition Corporation (the "Agreement"),
Employee shall be paid a signing bonus of One Hundred Thousand Dollars
($100,000.00).
2.3. Performance Bonus. Throughout the Employment Term, subject to the
approval of ▇▇▇▇ ▇. ▇▇▇▇▇, Employee shall be entitled to receive an annual
bonus, calculated from the first day of the month following the month in which
the transactions which are the subject of the Agreement close, equal to ten
percent (10%) of the cumulative pre-tax earnings (as such term is defined in
Section 3.2 of the Agreement) of ▇.▇. ▇▇▇▇▇▇▇▇ & Company, as it is operated as a
wholly-owned subsidiary of the Corporation, and as recorded by the Corporation.
The Corporation shall promptly, but in any event within twenty (20) days, make
the bonus payments due Employee hereunder.
2.4. Benefits. Employee shall be entitled to health, dental, term life
and disability insurance benefits consistent with the Corporation's current
employment policies and practices and subject to approval by the Corporation's
insurance provider. The Corporation's Board of Directors (with Employee
abstaining from the discussion pertaining to and the vote thereon) may from time
to time grant Employee further benefits. Employee acknowledges that he is not
entitled to any further benefits other than set forth herein or as the
Corporation's Board of Directors, in its sole discretion and in accordance with
the procedures set forth above, shall determine to grant Employee.
2.5. Vacation. Employee shall be entitled, during the Employment Term,
to a vacation of four weeks per year, exclusive of time spent in business travel
and entertaining clients and prospective clients, and in addition to other
customary office holidays during which time his compensation shall be paid in
full. Employee shall be entitled to take such vacation days at any time and in
any combination; provided, however, that Employee agrees to take into
consideration the needs and exigencies of the business of the Corporation, and
shall not take such vacation days at such times or in such combinations as will
substantially impair his ability to carry out his duties hereunder. Employee
shall keep accurate records of the vacation time taken by him during each year
throughout the Employment Term and shall, upon written notice to the Corporation
prior to the end of each year throughout such term, be entitled to receive
payment for any vacation days which were unused by him during each year.
2.6. Expenses. The Corporation shall reimburse Employee for all
ordinary and necessary expenses reasonably and properly incurred and paid by
Employee in the course of performing his duties, as specified in Section 1
hereof, and consistent with the Corporation's policies in effect from time to
time with respect to travel, entertainment and other business expenses, and
subject to the Corporation's requirements with respect to the manner of
authorization and reporting of such expenses. In addition, the Corporation shall
provide Employee with a mobile phone and shall reimburse Employee for the
reasonable business expenses associated therewith. Employee shall also reimburse
Employee for parking expenses and expenses pertaining to Employee's continuing
education. The Corporation will use its best efforts to have certain of its
employees provide Employee with access to the Minneapolis Club for client
entertainment.
Annex C-2
57
2.7. Commissions. Employee shall be entitled to continue to receive
commissions on his book of business consistent with the past practices of ▇.▇.
▇▇▇▇▇▇▇▇ & Company.
3. Term and Termination.
3.1. Employment Term. The "Employment Term," as that term is used
throughout this Agreement, shall be for a period of two (2) years, commencing on
the Effective Date and ending on July ___, 2002. Notwithstanding the foregoing,
this Agreement may be sooner terminated in accordance with the provisions of
Section 3.2 hereof.
3.2. Termination.
(a) Immediately for Cause. Notwithstanding anything in this
Agreement to the contrary, the Corporation may terminate Employee's employment
hereunder, and shall have no further obligation or liability to Employee: (i) if
Employee commits any fraud, misappropriation or embezzlement; (ii) if Employee
materially and repeatedly breaches any provision of this Agreement after notice
thereof; or (iii) for any act, or failure to act, of Employee, attributable to
his gross negligence or willful misconduct, which causes a material adverse
effect on the Corporation's business, condition, prospects or reputation, as
determined by the Corporation's Board of Directors (with Employee abstaining
from the discussion pertaining to and the vote thereon) in its reasonable
business judgment.
In the event of any termination pursuant to this subsection,
the Corporation shall be obligated to pay Employee only those portions of his
compensation provided by Section 2.1 and 2.3 hereof which shall accrue to
Employee up to and including the date upon which such termination becomes
effective.
(b) Immediately Due to Disability or Death. Notwithstanding
anything in this Agreement to the contrary, the Corporation may immediately
terminate Employee's employment hereunder upon Employee's disability or death.
In the event the Corporation terminates Employee's employment under this
subsection due to disability, the Corporation shall be obligated to pay Employee
those portions of his compensation provided for by Section 2.1 hereof, after
reducing such compensation by the amount of any disability insurance payments
received by Employee under disability policies funded by the Corporation, during
the remaining period of such illness or incapacity; provided, however, that in
no event shall the Corporation's obligation to pay Employee under this
subsection extend beyond (i) the first anniversary of the date on which Employee
became disabled, or (ii) through the end of the Employment Term, whichever is
less.
For the purposes of this Agreement, Employee shall be deemed
to be suffering from a disability if Employee, in the reasonable business
judgment of the Corporation's Board of Directors (with Employee abstaining from
the discussion pertaining thereto and the vote thereon), is unable to perform
his duties, as specified in Section 1 hereof, by reason of illness or incapacity
for a period of more than 90 days in any six-month period.
In the event the Corporation terminates Employee's employment under this
subsection due to Employee's death, the Corporation shall be obligated to pay
Employee only those portions
Annex C-3
58
of his compensation provided by Sections 2.1 and 2.3 hereof which shall accrue
to Employee up to and including the date upon which Employee died.
3.3. (c) Termination by Employee. In the event Employee terminates
this Agreement, the Corporation shall be obligated to pay Employee only those
portions of his compensation provided by Section 2.1 hereof which shall accrue
to Employee up to and including the date upon which such termination becomes
effective.
4. Confidentiality.
4.1. Non-Disclosure Agreement. Employee acknowledges the interest of
the Corporation in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term, regardless of the
reason for or circumstances of termination of employment, directly or
indirectly, reveal or cause to be revealed to any person or entity the trade
secrets or other confidential business information obtained by him as a result
of his employment or relationship with the Corporation, except when authorized
in writing to do so by the Board of Directors of the Corporation (with Employee
abstaining from the discussion pertaining thereto and the vote thereon);
provided, however, that the parties acknowledge that it is not the intent of
this Section 4.1 to include within its subject matter (i) information not
proprietary to the Corporation, or (ii) information which is in the public
domain.
5. Change in Control. In the event of a Change in Control (as such
term is defined in Section 3.2(g) of the Agreement), Employee shall be paid,
upon the closing of any such Change in Control, any amounts throughout the
Employment Term to which he would be entitled pursuant to the provisions of
Section 2.1 hereof if such Change in Control had not occurred.
6. Miscellaneous.
6.1. Remedies. The parties acknowledge that any breach, violation or
evasion by Employee of the terms of this Agreement will result in immediate or
irreparable injury or harm to the Corporation, and will cause damage to the
Corporation in an amount difficult to ascertain. Accordingly, the Corporation
shall be entitled to the remedies of injunction and specific performance, or
either of such remedies, without the need to post any bond or other security, as
well as to all other legal and equitable remedies to which the Corporation may
be entitled and recovery of any related attorneys' fees.
6.2. Notices. All notices and other communications under this
Agreement will be sufficient if written and sent by registered or certified
mail, return receipt requested, in the case of Employee, to his residence as
shown on the Corporation's records, and in the case of the Corporation, to its
offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention Chief Executive Officer; provided, however, that any notice of change
of address shall be effective only upon receipt.
6.3. Obligations and Benefits. The obligations and benefits set forth
in this Agreement shall be binding and inure to the benefit of the respective
parties hereto and their personal representatives, successors and permitted
assigns.
Annex C-4
59
6.4. Assignment. The Corporation may assign its rights and delegate
its responsibilities under this Agreement to any affiliated company or to any
corporation that acquires all or substantially all of the operating assets of
the Corporation. Except as hereinbefore provided, neither the Corporation nor
Employee may assign any obligations or benefits under this Agreement.
6.5. Waiver. A waiver by the Corporation or Employee of a breach of
any provision of his Agreement by the other shall not operate or be construed as
a waiver of any subsequent breach.
6.6. Amendment. This Agreement shall be amended only in writing,
signed by both parties.
6.7. Governing Law. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the laws of the
State of Minnesota, without giving effect to principles of conflict of laws.
6.8. Entire Agreement. This Agreement contains the entire agreement of
the parties. This Agreement supersedes any and all prior agreements between the
parties hereto, whether oral or written. All of such other agreements, whether
oral or written, are hereby null and void and of no further force and effect.
6.9. Severability. If any portion or portions of this Agreement shall
be, for any reason, invalid or unenforceable, the remaining portion or portions
shall nevertheless be valid and enforceable.
6.10. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
day and year first above written.
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc.
By:
------------------------------
Its:
--------------------------
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Annex C-5
60
EXHIBIT A
The following activities are excluded from the Covenant Not to Compete in
Section 4.2 of the Employment Agreement: ▇▇▇▇▇▇▇ Securities, McAlmont
Investments, Nextrade, L.L.C. and their respective successors and assigns, and
any others as mutually agreed.
Exhibit A-1
61
ANNEX D
COMMON STOCK WARRANT
To Purchase
Shares of Common Stock of
▇▇▇▇▇▇▇▇▇.▇▇▇ GROUP, INC.
, 2000
THIS CERTIFIES THAT, is entitled to
subscribe for and purchase from ▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc., a Minnesota
corporation (the "Company") at any time after the date hereof to and including
, 2005,
( ) fully paid and nonassessable shares of the Company's common
stock, $.04 par value (the "Common Stock"), at the Purchase Price set forth
below.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability; Purchase Price. The rights represented by
this Warrant may be exercised by the holder hereof, in whole or in part (but not
as to a fractional share of stock), by written notice of exercise delivered to
the Company ten (10) days prior to the intended date of exercise and by the
surrender of this Warrant (properly endorsed if required) at the principal
office of the Company and upon payment to it by certified or bank check or wire
transfer of the purchase price for such shares.
This Warrant may not be transferred, sold, assigned or hypothecated
except by operation of law or upon receipt by the Company of an opinion of
counsel as provided by Section 8 hereof that such transfer is not in violation
of federal or state securities laws.
"Purchase Price" shall mean eighty-five percent (85%) of the
Average Daily Price of the Company. For purposes hereof, Average Daily Price
means the average of the closing sale price of one share of Common Stock as
reported on the NASDAQ/NMS for the 20 consecutive full trading days (in which
such shares are traded on the NASDAQ/NMS) ending on the Closing Date of the
Merger contemplated by the Agreement and Plan of Merger dated as of June ,
2000 by and between the Company, ▇.▇. ▇▇▇▇▇▇▇▇ & Company and SCG Acquisition
Corporation. If the Company's Common Stock is not traded on the NASDAQ/NMS but
is traded on the Nasdaq SmallCap Market or the over the counter market, the last
reported closing prices on such market shall be substituted. The Purchase Price
is subject to adjustment as hereinafter provided.
2. Issuance of Shares. The Company agrees that the shares of Common Stock
purchased hereby shall be and are deemed to be issued to the record holder
hereof as of the close of business on the date on which this Warrant shall have
been exercised by surrender of the Warrant and payment for the shares of Common
Stock. Subject to the provisions of the next succeeding paragraph, certificates
for the shares of Common Stock so purchased shall be
Annex D-1
62
delivered to the holder hereof within a reasonable time, not exceeding ten (10)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised shall also be delivered to the holder hereof within
such time.
Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of Common Stock upon exercise of
this Warrant, except in accordance with the provisions, and subject to the
limitations, of Section 8 hereof.
3. Covenants of Company. The Company covenantsand agrees that all shares
of Common Stock which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Company covenants and agrees that it will from time to time take all such action
as may be required to assure that the par value per share of the common stock is
at all times equal to or less than the then effective purchase price per share
of Common Stock issuable pursuant to this Warrant. The Company further covenants
and agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of Common Stock
to provide for the exercise of the rights represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however, subject
to the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of Common Stock or declare a dividend
payable in Common Stock, the exercise price of this Warrant in effect
immediately prior to the subdivision, combination or record date for such
dividend payable in Common Stock shall forthwith be proportionately
increased, in the case of combination or decreased, in the case of
subdivision or dividend payable in Common Stock.
(b) Upon each adjustment of the exercise price, the holder of this
Warrant shall thereafter be entitled to purchase, at the exercise price
resulting from such adjustment, the number of shares of Common Stock
obtained by multiplying the exercise price immediately prior to such
adjustment by the number of shares of Common Stock purchasable pursuant
hereto immediately prior to such adjustment and dividing the product
thereof by the exercise price resulting from such adjustment.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of Common
Stock on the day of exercise as determined in good faith by the Company.
Annex ▇-▇
▇▇
(▇) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive, upon the basis and upon the terms
and conditions specified in this Warrant and in lieu of the shares of
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions
hereof (including without limitation provisions for adjustments of the
Warrant purchase price and of the number of shares purchasable upon the
exercise of this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any such
consolidation, merger or sale unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing such assets, shall
assume by written instrument executed and mailed to the registered holder
hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
Notwithstanding any language to the contrary set forth in this Section
4(d), if an occurrence or event described herein shall take place in which the
shareholders of the Company receive cash for their shares of Common Stock and a
successor corporation or corporation purchasing assets shall survive the
transaction then, at the election of the record holder hereof, such corporation
shall be obligated to purchase this Warrant (or the unexercised part hereof)
from the record holder without requiring the holder to exercise all or part of
the Warrant. If such corporation refuses to so purchase this Warrant then the
Company shall purchase the Warrant for cash. In either case the purchase price
shall be the amount per share that shareholders of the outstanding Common Stock
shall receive as a result of the transaction multiplied by the number of shares
covered by the Warrant, minus the aggregate exercise price of the Warrant. Such
purchase shall be closed within sixty (60) days following the election of the
holder to sell this Warrant.
(e) Upon any adjustment of the Warrant purchase price, then, and in
each such case, the Company shall give written notice thereof, by first
class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company,
which notice shall state the Warrant purchase price resulting from such
adjustment and the increase or decrease, if any, in the shares of Common
Stock purchasable at such price upon the exercise of this Warrant, setting
forth
Annex D-3
64
in reasonable detail the method of calculation and the facts upon which
such calculation is based.
(f) If any event occurs as to which in the good faith determination of
the Board of Directors of the Company the other provisions of this Section
4 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the holder of this Warrant or of Common
Stock in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent
and principles, so as to protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "Common Stock" shall mean and
include the Company's presently authorized shares of Common Stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution, dissolution
or winding up of the Company; provided that the shares purchasable pursuant to
this Warrant shall include shares designated as Common Stock of the Company on
the date of original issue of this Warrant or, in the case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the Company.
7. Restricted Securities. This Warrant and the shares of Common Stock
issuable upon exercise hereof have not and will not be registered under the
Securities Act of 1933 or any state securities law. The holder hereof
acknowledges that he has acquired this Warrant and will acquire the shares of
Common Stock issuable upon exercise hereof for investment and not with a view to
the distribution of the Warrant or Common Stock. No transfer or sale on transfer
of this Warrant or the Common Stock may be made unless the Warrant or Common
Stock has been registered under the Act and applicable state securities laws or
as provided. Certificates for shares of Common Stock issuable upon exercise of
this Warrant shall reflect the foregoing restriction.
8. Transfer of Warrant or Resale of Shares. In the event the holder of this
Warrant desires to transfer this Warrant, or any Common Stock issued upon the
exercise hereof, the holder shall provide the Company with a written notice
describing the manner of such transfer and an opinion of counsel (reasonably
acceptable to the Company) that the proposed transfer may be effected without
registration or qualification under Federal or State securities laws, whereupon
such holder shall be entitled to transfer this Warrant or to dispose of shares
of Common Stock received upon the previous exercise hereof in accordance with
the notice delivered by such holder to the Company; provided, that an
appropriate legend may be endorsed on this Warrant or the certificates for such
shares respecting restrictions upon transfer thereof necessary or advisable in
the opinion of counsel satisfactory to the Company to prevent further transfers
which would be in violation of Section 5 of the Securities Act of 1933.
If, in the opinion of either of the counsel referred to in this
Section 8, the proposed transfer or disposition described in the written notice
given pursuant to this Section 8 may not be
Annex D-4
65
effected without registration or qualification of this Warrant or the shares of
Common Stock issued upon the exercise hereof, the Company shall promptly give
written notice thereof to the holder hereof, and the Company shall refuse to
transfer the Warrant or Common Stock, as the case may be.
9. Registration Rights.
(a) If at any time prior to the expiration of five (5) years from the
date hereof, the Company proposes to register under the 1933 Act (except by
a Form S-4 or Form S-8 Registration Statement or any successor forms
thereto) or qualify for a public distribution under Section 3(b) of the
1933 Act, any of its securities, it will give written notice to all Holders
of this Warrant, and any Warrant Shares of its intention to do so and, on
the written request of any such Holder given within twenty (20) days after
receipt of any such notice (which request shall specify the interest in
this Warrant or the Warrant Shares intended to be sold or disposed of by
such Holder and describe the nature of any proposed sale or other
disposition thereof), the Company will use its best efforts to cause all
such Warrant Shares, the Holders of which shall have requested the
registration or qualification thereof, to be included in such registration
statement proposed to be filed by the Company; provided, however, that
nothing herein shall prevent the Company from, at any time, abandoning or
delaying any registration. If any registration pursuant to this Section
9(a) is underwritten in whole or in part, the Company may require that the
Warrant Shares requested for inclusion pursuant to this Section 9(a) be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If a greater
number of Warrant Shares is offered for participation in the proposed
offering than in the reasonable opinion of the managing underwriter of the
proposed offering can be accommodated without adversely affecting the
proposed offering, then the amount of Warrant Shares proposed to be offered
by such Holders for registration, as well as the number of securities of
any other selling shareholders participating in the registration, shall be
proportionately reduced to a number deemed satisfactory by the managing
underwriter.
(b) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following
fees, costs, and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company is required to bear such
fees and disbursements), all internal expenses, the premiums and other
costs of policies of insurance for the benefit of the Company and/or its
directors and officers against liability arising out of the public
offering, and legal fees and disbursements and other expenses of complying
with state securities laws of any jurisdictions in which the securities to
be offered are to be registered or qualified. Fees and disbursements of
special counsel and accountants for the selling Holders, underwriting
discounts and commissions, and transfer taxes for selling Holders and any
other expenses relating to the sale of securities by the selling Holders
not expressly included above shall be borne by the selling Holders.
Annex D-5
66
(c) The Company hereby indemnifies each of the Holders of this Warrant
and of any Warrant Shares, and the officers and directors, if any, who
control such Holders, within the meaning of Section 15 of the 1933 Act,
against all losses, claims, damages, and liabilities caused by (1) any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus (and as amended or supplemented
if the Company shall have furnished any amendments thereof or supplements
thereto), any Preliminary Prospectus or any state securities law filings;
(2) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading except insofar as such losses, claims, damages, or
liabilities are caused by any untrue statement or omission contained in
information furnished in writing to the Company by such Holder expressly
for use therein; and each such Holder by its acceptance hereof severally
agrees that it will indemnify and hold harmless the Company, each of its
officers who signs such Registration Statement, and each person, if any,
who controls the Company, within the meaning of Section 15 of the 1933 Act,
with respect to losses, claims, damages, or liabilities which are caused by
any untrue statement or alleged untrue statement, omission or alleged
omission contained in information furnished in writing to the Company by
such Holder expressly for use therein.
(d) Notwithstanding anything else contained in Section 9(a) above, the
above-referenced "piggy-back" rights may not be exercised with respect to
the registration statement filed by the Company in connection with its
proposed public offering of Convertible Notes (Registration No. 333-35544).
10. Miscellaneous. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against which enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc. has caused this Warrant to be
executed by its duly authorized officer and to be dated as of ,
2000.
▇▇▇▇▇▇▇▇▇.▇▇▇ GROUP, INC.
By
---------------------------------------
Its
-----------------------------------
Annex D-6
67
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
▇▇▇▇▇▇▇▇▇.▇▇▇ GROUP, INC.
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder shares of the Common Stock, $.04 par value,
of ▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc. and herewith makes payment of $
therefore, and requests that the certificates for such shares be issued in the
name of and be delivered to
whose address is .
Dated:
------------
--------------------------------------------------
(Signature must conform in all respects to the name
of holder as specified on the face of the warrant)
---------------------------------------------------
(Address)
--------------------------------------------------
(City - State - Zip)
Annex D-7
68
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto those individuals listed on Exhibit A, attached hereto, the right
represented by the within warrant to purchase the number of shares opposite
their names on the attached Exhibit A of Common Stock, $.04 par value, of
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc. to which the within warrant relates, and appoints
attorney to transfer said right on the books of
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc., with full power of substitution in the premises.
Dated:
---------------
---------------------------------------------
(Signature as name(s) appear on Warrant)
In the presence of:
-------------------------------
-------------------------------
Annex D-8
69
ANNEX E
June , 2000
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇:
This will confirm our agreement and understanding that each of the
undersigned shareholders of ▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc. ("Stockwalk") will vote or
cause to be voted all of the voting shares of Stockwalk beneficially owned by
each of us in favor of the Agreement and Plan of Merger (the "Merger Agreement")
between and among ▇.▇. ▇▇▇▇▇▇▇▇ & Company, Stockwalk and SCG Acquisition
Corporation dated as of June , 2000 and in favor of all other shareholder
action required or presented to the shareholders of Stockwalk in connection with
the Merger Agreement, including, but not limited to, authority for the issuance
and delivery to you of the merger consideration. For the purposes hereof,
beneficial ownership shall be determined in accordance with rules of the
Securities and Exchange Commission. We acknowledge to you that each of the
undersigned has, as a director of Stockwalk, voted to approve the Merger
Agreement and all other actions necessary to consummate the transactions
contemplated thereby.
We also agree to vote our shares of Stockwalk for the election of your
two nominees to the Board of Directors of Stockwalk in furtherance of Sections
2.5 and 5.13 of the Merger Agreement. The undertaking set forth herein is
intended to qualify as a shareholder voting agreement under Section 302A.455 of
the Minnesota Business Corporation Act.
We hereby acknowledge that your agreement to enter into the Merger
Agreement and the agreements thereby contemplated, and to consummate the
transactions related thereto, is sufficient consideration for our executing this
letter and that our execution of this letter is a condition to your agreement to
enter into the Merger Agreement.
We understand and acknowledge that your execution and delivery of the
Merger Agreement is made in reliance upon the undertakings contained herein, and
that a breach of such undertakings shall constitute and provide a basis for you
to cause ▇.▇. ▇▇▇▇▇▇▇▇ & Company to terminate the Merger Agreement.
Very truly yours,
------------------------------ -------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ -------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Annex E-1
70
Additional Shares Anti-Dilution Provisions
(a) In case Acquiror shall at any time hereafter subdivide or combine the
outstanding shares of Acquiror Common Stock or declare a dividend payable in
such stock, the number of Additional Shares issuable shall thereafter be
forthwith proportionately increased, in the case of combination or decreased, in
the case of subdivision or dividend payable in shares of Acquiror Common Stock.
(b) No fractional shares of Acquiror Common Stock are to be issued
pursuant to Section 3.2, but Acquiror shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of Acquiror
Common Stock on the day of exercise as determined in good faith by Acquiror.
(c) If any capital reorganization or reclassification of the capital
stock of Acquiror, or consolidation or merger of Acquiror with another
corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of
Acquiror Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Acquiror Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provision shall be made whereby the
Shareholder shall thereafter have the right to receive, upon the basis and
upon the terms and conditions specified in Section 3.2 and in lieu of the
Additional Shares immediately theretofore receivable, such stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of Acquiror Common Stock equal
to the number of shares of such stock immediately theretofore receivable
upon the exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provisions shall be made with respect to the rights
and interests of the Shareholder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the number of
Additional Shares receivable) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities or assets thereafter
deliverable pursuant to the provisions of Section 3.2.
(d) If any event occurs as to which in the good faith determination of the
Board of Directors of Acquiror the other provisions hereof are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Shareholder under Section 3.2in accordance with the essential intent and
principles of such provision, then Acquiror's Board of Directors shall make an
adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such purchase rights as
aforesaid.
Annex D-2
71
ANNEX F
June , 2000
Board of Directors
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Gentlemen:
In connection with my acquisition of shares of common stock of
▇▇▇▇▇▇▇▇▇.▇▇▇ Group, Inc. (the "Company"), pursuant to the Agreement and Plan of
Merger dated June 6, 2000 entered into by and among ▇.▇. ▇▇▇▇▇▇▇▇ & Company, the
Company and SCG Acquisition Corporation (the "Merger Agreement"), I hereby
acknowledge and represent to you as follows:
1. I understand that the shares of common stock of the Company to be
received by me pursuant to the Merger Agreement will not be registered under the
Securities Act of 1933, as amended (the "Act"), and may not be transferred or
sold in the absence of registration under the Act or exemption therefrom. To
that end, I acknowledge that a legend in substantially the following form will
be placed upon the certificate(s) for shares of common stock of the Company to
be received by me pursuant to the Merger Agreement:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and have not
been registered under any state securities laws. These securities may not
be sold, offered for sale, or transferred in the absence of an effective
registration statement under the Act and under applicable state
securities laws, or receipt by the Corporation and its counsel of an
opinion of counsel that such transaction is exempt from registration
under the Act and under applicable state securities laws.
2. I am an "accredited investor" as that term is defined in Rule 501(a)
promulgated by the Securities and Exchange Commission under the Act and I am in
a financial position to hold the shares of the Company's common stock to be
acquired by me pursuant to the Merger Agreement indefinitely.
Sincerely,
[Shareholder]
Annex F-1