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AGREEMENT AND PLAN OF MERGER
dated as of September 10, 2000
by and between
The Goldman Sachs Group, Inc.
and
SLK LLC
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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RECITALS.................................................................................................. 1
ARTICLE I
Certain Definitions; Interpretation
1.01 Certain Definitions..................................................................................2
1.02 General Rules of Interpretation......................................................................9
ARTICLE II
The Merger
2.01 The Merger...........................................................................................9
2.02 Closing.............................................................................................10
2.03 Tax Treatment of the Merger.........................................................................10
2.04 Organization of NewCo...............................................................................10
ARTICLE III
Consideration; Exchange; Employee Incentives
3.01 Merger Consideration................................................................................10
3.02 Exchange Procedures.................................................................................11
3.03 Withdrawn Member and Managing Director Subordinated Debt Election...................................12
3.04 Election Procedures.................................................................................13
3.05 Restricted Stock Units Awards.......................................................................13
3.06 Incremental Liquidity Gain..........................................................................14
3.07 Adjustments to Prevent Dilution.....................................................................14
ARTICLE IV
Actions Pending the Effective Time
4.01 Forbearances of the Company.........................................................................15
4.02 Forbearances of Acquiror............................................................................18
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ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules................................................................................18
5.02 Standard............................................................................................18
5.03 Representations and Warranties with Respect to the Company..........................................19
5.04 Representations and Warranties with Respect to the Partnership......................................34
5.05 Representations and Warranties of Acquiror..........................................................34
5.06 Representations Regarding NewCo.....................................................................37
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts.............................................................................37
6.02 Access; Information.................................................................................38
6.03 No Rights Triggered.................................................................................38
6.04 Regulatory Applications.............................................................................38
6.05 Regulatory Compliance...............................................................................39
6.06 Performance Ranking.................................................................................39
6.07 Notification of Certain Matters.....................................................................39
6.08 Public Announcements................................................................................40
6.09 Fee Agreements......................................................................................40
6.10 Private Placement...................................................................................40
6.11 Employee Benefits...................................................................................41
6.12 Indemnification of Members and Employees............................................................41
ARTICLE VII
TAX MATTERS
7.01 Tax Representations.................................................................................41
7.02 Covenants...........................................................................................43
7.03 Termination of Tax Sharing Agreements...............................................................45
7.04 Seller Tax Indemnification..........................................................................45
7.05 Exclusivity.........................................................................................47
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7.06 Survival of Obligations.............................................................................47
7.07 Agreed Tax Treatment................................................................................47
ARTICLE VIII
Conditions to Consummation of the Merger
8.01 Conditions to Each Party's Obligation to Effect the Merger..........................................47
8.02 Conditions to Obligations of the Company............................................................48
8.03 Conditions to Obligations of Acquiror and NewCo.....................................................48
ARTICLE IX
Indemnification
9.01 Indemnification.....................................................................................50
9.02 Notice and Defense of Claims........................................................................52
9.03 Survival of Representations and Warranties..........................................................53
ARTICLE X
Termination
10.01 Termination.........................................................................................53
10.02 Effect of Termination and Abandonment...............................................................54
ARTICLE XI
Miscellaneous
11.01 Entire Understanding; No Third-Party Beneficiaries..................................................55
11.02 Waiver; Amendment...................................................................................55
11.03 Expenses............................................................................................55
11.04 Notices.............................................................................................55
11.05 Additional Provisions...............................................................................56
11.06 Counterparts........................................................................................56
11.07 Governing Law; Enforcement; Waiver of Jury Trial....................................................57
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Annex 1 Members
Annex 2 Partners
Annex 3 Form of Member Agreement
Annex 4 Form of Custody Agreement
Annex 5 Intentionally Omitted
Annex 6 Retention RSUs
Annex 7 SLK RSUs
Annex 8 Acquiror Subordinated Note
Note: Certain of these annexes have been omitted from this Exhibit 2.1 pursuant
to Item 601(b)(2) of Regulation S-K. The Registrant hereby agrees to furnish
supplementally a copy of any omitted annex to the SEC upon request.
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AGREEMENT AND PLAN OF MERGER, dated as of September 10, 2000,
by and between The Goldman Sachs Group, Inc. ("Acquiror") and SLK LLC (the
"Company").
RECITALS
A. The Company. The Company is a New York limited
liability company having its principal place of business in New York, New York.
Annex 1 lists the names and profit and loss allocations of all the members of
the Company (each, a "Member", and collectively, the "Members").
B. The Partnership. Spear, Leeds & Kellogg, L.P. (the
"Partnership") is a New York limited partnership having its principal place of
business in New York, New York. The Company is the sole general partner of the
Partnership. Annex 2 lists the names and profit and loss allocations of all
partners of the Partnership (each, a "Partner" and collectively, the
"Partners").
C . Acquiror. Acquiror is a Delaware corporation, having
its principal place of business in New York, New York.
D. The Merger. Subject to the terms and conditions
contained in this Agreement, the Company and Acquiror intend to effect the
merger (the "Merger") of a direct or indirect wholly owned subsidiary of
Acquiror that will be organized as a New York limited liability company
("NewCo") with and into the Company, with the Company being the limited
liability company surviving such merger.
E. Supplemental Agreements. Each of the Members
identified as such in Annex 1 will, prior to Closing, enter into an instrument
substantially in the appropriate form of Annex 3, in which each Member will have
adopted and consented to this Agreement and the transactions contemplated hereby
(each, a "Member Agreement") and to the Supplemental Members Agreement which is
attached as an Annex to the Member Agreement (the "Supplemental Members
Agreement"). (The Member Agreements and the Supplemental Members Agreement
referred to in this Recital E, together with the Custody Agreements and the
counterparts to the Acquiror Shareholders Agreement to be executed by the
Members pursuant to Section 2(e) of the Member Agreement, are referred to
collectively as the "Supplemental Agreements".)
F. SLK Investing Co. The Members directly or indirectly
holding all of the partnership interests in SLK Investing Co. will agree
simultaneously herewith to cause SLK Investing Co. to transfer all of the Class
A limited partnership interest it owns in the Partnership to Acquiror or its
designee at the Effective Time.
NOW, THEREFORE, in consideration of the premises, and of the
mutual covenants, representations, warranties and agreements contained herein
and in the Supplemental Agreements, the parties agree as follows:
<PAGE> 7
ARTICLE I
CERTAIN DEFINITIONS; INTERPRETATION
1.01 Certain Definitions. The following terms are used in
this Agreement and the Supplemental Agreements with the meanings set forth
below:
"Acquiror" has the meaning assigned in the preamble to this
Agreement.
"Acquiror Common Stock" means the Common Stock, par value
$0.01 per share, of Acquiror.
"Acquiror Financial Statements" shall have the meaning
assigned in Section 5.05(d).
"Acquiror Party" means each of Acquiror, its respective
directors, officers, employees, agents and controlling persons, and
each of the heirs, executors, successors and assigns of any of the
foregoing and, without duplication, the Surviving LLC (effective at the
Effective Time).
"Acquiror Shareholders Agreement" means the Shareholders'
Agreement, dated May 7, 1999, among Acquiror and the other parties
named therein.
"Acquiror Subordinated Notes" has the meaning assigned in
Section 3.03.
"Affiliate" means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified person. For
the purposes of this definition, (a) "control" when used with respect
to any specified person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and (b) the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this agreement, as amended or modified from
time to time in accordance with Section 11.02.
"business day" means any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by
law or executive order to close.
"Cash Consideration" has the meaning assigned in Section
3.01(a).
"Cash Pool Amount" means $2.1 billion reduced by the sum of
(A) any amount of the Withdrawn Member Amount that is exchanged for
cash or Acquiror Subordinated Notes pursuant to Section 3.03 and (B)
any amount paid by Acquiror pursuant to Section 8.03(g) to acquire all
of the outstanding Class A limited partnership interests of the
Partnership and
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(C) any charitable contribution, but in no event in excess of
$100,000,000, the Members may cause the Company or the Partnership to
make after the date hereof.
"CBOE" means the Chicago Board Options Exchange, Incorporated.
"CFTC" means the United States Commodity Futures Trading
Commission.
"Chosen Courts" has the meaning set forth in Section 11.07(a).
"Clearing Agreement" has the meaning assigned in Section
5.03(h).
"Closing" and "Closing Date" have the meanings assigned in
Section 2.02.
"Closing Stock Price" has the meaning assigned in Section
3.06.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulation thereunder.
"Company" has the meaning assigned in the preamble to this
Agreement.
"Company Membership Interests" means the membership interests
in the Company.
"Compensation Plans" has the meaning assigned in Section
5.03(o).
"Confidentiality Agreement" means the letter agreement, dated
March 6, 2000, between the Partnership and the Acquiror.
"Consideration Percentage" means, with respect to any Member,
a percentage on a schedule previously agreed to by the Company and
Acquiror. The Company may deliver to Acquiror a revised schedule
changing the Consideration Percentage of any Member or Members if
necessary to reflect any changes in capital at least five (5) days
prior to the Closing.
"Constitutive Documents" means, with respect to any person,
such person's articles or certificate of incorporation and by-laws,
limited liability company agreement or operating agreement, partnership
agreement or other constitutive documents.
"Contract" means, with respect to any person, any agreement,
indenture, undertaking, debt instrument, contract, lease,
understanding, arrangement, or commitment to which such person or any
of its Subsidiaries is a party or by which any of them may be bound or
to which any of their properties may be subject.
"Custodian" has the meaning assigned in the form of Custody
Agreement.
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"Custody Agreements" means, collectively, a Custody Agreement
to be entered into by each of the Members and each other person who
will receive Acquiror Common Stock in the Merger or by election
pursuant to Section 3.03, in substantially the form of Annex 4.
"Disclosure Schedule" has the meaning assigned in Section
5.01.
"Effective Time" has the meaning assigned in Section 2.01(e).
"Election Deadline" has the meaning assigned in Section 3.04.
"Employees" has the meaning set forth in Section 5.03(o).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has, with respect to any person, the meaning
assigned in Section 5.03(o).
"ERISA Plans" has the meaning assigned in Section 5.03(k).
"Excess Shares" shall mean , initially, that number of shares
of Acquiror Common Stock equal to the quotient derived by dividing (I)the
product of (A) the amount by which the Closing Stock Price exceeds $128.025,
times (B) the Stock Pool Amount, times (C) 0.27 by (II) the Closing Stock Price,
provided, that, if the sale price of shares of Acquiror Common Stock sold
pursuant to Section 3.05 is different from the Closing Stock Price, such number
shall be adjusted so as to enable the Members to receive net proceeds (without
regard to income taxes payable in respect of such sales) not less than the
product described in clause (I) above (it being understood that if, at the time
of any sales of shares of Acquiror Common Stock during the same tax year as the
Closing, the sale price(s) of the shares is less than the Closing Stock Price,
then the number of Excess Shares shall be adjusted appropriately to reflect the
reduction in the capital gains tax payable as a result of the Merger after
taking into account any capital loss on any sale of shares of Acquiror Common
Stock (whether usable or not) at a price below the Closing Stock Price, in each
case assuming a 27% effective tax rate.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Financial Statements" has the meaning assigned in Section
5.03(g).
"Focus Report" has the meaning assigned in Section 5.03(g).
"Foreign Plans" has the meaning assigned in Section 5.03(o).
"Governmental Authority" means any court, administrative
agency or commission or other federal, state, local or foreign
governmental authority or instrumentality.
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"Indemnified Party" has the meaning assigned in Section
9.02(a).
"Indemnifying Party" has the meaning assigned in Section
9.02(a).
"Intellectual Property" has the meaning assigned in Section
5.03(h).
"Investment Advisers Act" means the Investment Advisers Act of
1940, as amended, and the rules and regulations thereunder.
"Investment Company Act" means the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
"IRS" means the United States Internal Revenue Service.
"Lien" means a charge, mortgage, pledge, security interest,
restriction (other than a restriction on transfer arising under
Securities Laws), claim, lien, or encumbrance of any nature whatsoever,
except for liens incurred in the ordinary course of business in respect
of Taxes for which adequate reserves have been established.
"Limited Partnership Interest" means an ownership interest in
the Partnership held by the limited partners of the Partnership.
"Litigation" has the meaning assigned in Section 5.03(j).
"Losses" has the meaning assigned in Section 9.01(a).
"Managing Director Subordinated Note" means the subordinated
and secured demand notes substantially all of which are held by
current/retired Managing Directors (as such term is used in the
Offering Memorandum), or related entities, and are included within the
caption "Junior Subordinated Debt" set forth in the Capitalization
section of the Offering Memorandum, having a principal amount not in
excess of $210 million as of the date hereof.
"Material Adverse Effect" means, with respect to Acquiror, the
Company or the Surviving LLC, respectively, an effect or change that,
individually or in the aggregate with other such effects or changes, is
both material and adverse with respect to the respective financial
condition, results of operations, assets, business or management of
Acquiror and its Subsidiaries, the Company and its Subsidiaries, or the
Surviving LLC and its Subsidiaries, as applicable, and in each case
taken as a whole.
"Material Contract" has the meaning assigned in Section
5.03(h).
"Member" and "Members" have the meaning assigned in the
Recitals.
"Member Agreement" has the meaning assigned in the Recitals.
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"Merger" has the meaning assigned in the Recitals.
"Merger Certificate" has the meaning assigned in Section
2.01(e).
"Merger Consideration" has the meaning assigned in Section
3.01(a).
"NewCo" has the meaning assigned in the Recitals.
"NYSE" means the New York Stock Exchange, Inc.
"Offering Memorandum" has the meaning assigned in Section
5.03(y).
"Operating Agreement" means the Amended and Restated Operating
Agreement of SLK LLC, dated as of August 1, 2000, as amended from time
to time.
"Order" has the meaning assigned in Section 8.01(b).
"Owner" means a Member or Partner, as applicable, and "Owners"
means the Members and Partners collectively.
"Partner" and "Partners" have the meaning assigned in the
Recitals.
"Partnership" has the meaning assigned in the Recitals.
"Partnership Agreement" means the Spear, Leeds & Kellogg
Amended and Restated Articles of Partnership, dated as of January 1, 2000.
"Partnership Interest" means an ownership interest in the
Partnership.
"Pension Plan" has, with respect to any person, the meaning
assigned in Section 5.03(o).
"person" means any individual, bank, corporation, limited
liability company, partnership, joint venture, association, joint-stock
company, business trust, governmental entity, or unincorporated
organization.
"Plans" has the meaning assigned in Section 5.03(o).
"Pre-Closing Period" has the meaning assigned in Section
7.02(b).
"Pre-Closing Taxes" has the meaning assigned in Section
7.02(b).
"Previously Disclosed" has the meaning assigned in Section
5.01.
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"Regulatory Orders" has the meaning assigned in Section
5.03(j).
"Reports" has the meaning assigned in Section 5.03(f).
"Retention RSUs" has the meaning assigned in Section 3.05.
"Rights" means, with respect to any person, any Contracts,
securities or obligations convertible into or exercisable or
exchangeable for, or giving any person any right to subscribe for or
acquire, or any options, calls or commitments relating to, or any
equity interest in or equity 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 or other equity
interest in such person.
"SEC" means the United States Securities and Exchange
Commission.
"SEC Documents" has the meaning assigned in Section 5.05(d).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Securities Laws" means, collectively, the Securities Act, the
Exchange Act, the Investment Advisers Act, the Investment Company Act,
the Commodity Exchange Act, as amended, and any other federal, state,
local or foreign securities, derivatives or commodity laws.
"Self-Regulatory Organization" means the National Association
of Securities Dealers, Inc., the American Stock Exchange, the National
Futures Association, the CBOE, the Chicago Board of Trade, the NYSE,
any Self-Regulatory Organization Previously Disclosed with respect to
Section 5.03(f) and any other similar federal, state or foreign
self-regulatory body or organization having jurisdiction over the
Company or Acquiror (as the case may be), any of their respective
Subsidiaries or Affiliates or any of their respective business
operations.
"Share Premium" is the sum of (i) the difference between the
principal amount of the Managing Director Subordinated Notes exchanged
for Acquiror Common Stock and the aggregate value of any Acquiror
Common Stock received in exchange therefor and (ii) the difference
between the Withdrawn Member Amount exchanged for Acquiror Common Stock
and the aggregate value of any Acquiror Common Stock received in
exchange therefor, in each case, using $128.025 as the value of each
share of Acquiror Common Stock.
"SLK Representative" means any person designated by the
Company in writing by notice to Acquiror prior to the Effective Time.
"SLK RSUs" has the meaning assigned in Section 3.05.
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"Stock Consideration" has the meaning assigned in Section
3.01(a).
"Stock Pool Amount" means 34,368,287 shares of Acquiror Common
Stock reduced by the number of shares of Acquiror Common Stock elected
to be issued in respect of any Managing Director Subordinated Notes or
the Withdrawn Member Amount; provided, however, that the first 390,549
shares of Acquiror Common Stock that represent any Share Premium paid
on Managing Director Subordinated Notes or in respect of the Withdrawn
Member Amount shall not reduce the Stock Pool Amount.
"Subsidiary" has the meaning assigned in Rule 1-02 of
Regulation S-X of the SEC.
"Supplemental Members Agreement" has the meaning assigned in
the Recitals.
"Supplemental Agreements" has the meaning assigned in the
Recitals.
"Surviving LLC" has the meaning assigned in Section 2.01(a).
"Tax Returns" means any return (including, without limitation,
information returns, annual reports or other returns in respect of any
Compensation Plan), declaration, report, claim for refund, information
return or statement relating to any Tax, together with all schedules or
attachments thereto, and including any amendments of any of the
foregoing.
"Tax" or "Taxes" means all taxes, charges, fees, levies or
other assessments, however denominated and whether imposed by a taxing
authority within or without the United States, 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,
custom duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority.
"Third Party Claim" has the meaning assigned in Section
9.02(a).
"Third-Party Intellectual Property Rights" has the meaning
assigned in Section 5.03(s).
"Withdrawn Member" shall have the meaning ascribed to such
term in the Operating Agreement.
"Withdrawn Member Amount" means the sum of the Shares (as such
term is defined in the Operating Agreement) of all Withdrawn Members
determined in accordance with the Operating Agreement and all
predecessor agreements, which shall not exceed $165,000,000.
"Withdrawn Member Interest" has the meaning assigned in
Section 3.03.
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1.02 General Rules of Interpretation. When a reference
is made in this Agreement to "Recitals", "Sections", "Annexes" or "Schedules",
such reference shall be to a Recital of, or Annex or Schedule to, this
Agreement unless otherwise indicated. The table of contents and 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". References herein to "transactions contemplated by this Agreement"
shall be deemed to include a reference to each transaction contemplated by or
provided for in this Agreement and any documents or agreements, including the
Supplemental Agreements, entered into in connection herewith. No rule of
construction 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 include
an undertaking by such party to cause its Subsidiaries, and to use its
reasonable best efforts to cause its other Affiliates, to take all necessary
and appropriate action in connection therewith.
ARTICLE II
THE MERGER
2.01 The Merger. At the Effective Time, the Merger shall
occur and in furtherance thereof:
(a) Structure and Effects of the Merger. NewCo shall
merge with and into the Company, and the separate legal existence of
NewCo shall thereupon cease. The Company shall be the surviving limited
liability company in the Merger (sometimes hereinafter referred to as
the "Surviving LLC") and shall continue to be governed by the laws of
the State of New York, and the separate legal existence of the Company
with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. The Merger shall have the
effects specified in Section 1004 of the New York Limited Liability
Company Law.
(b) Certificate of Limited Liability Company. The
Certificate of Limited Liability Company of the Surviving LLC shall be
the Certificate of Limited Liability Company of the Company as in
effect immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and applicable law.
(c) Operating Agreement. The operating agreement of the
Surviving LLC shall be the operating agreement of the Company as in
effect immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and applicable law.
(d) Manager. The initial manager of the Surviving LLC
shall be the manager of NewCo immediately prior to the Effective Time.
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(e) Effective Time. The Merger shall become effective
upon the filing, by the offices of the Secretary of State of the State
of New York, of a certificate of merger (the "Merger Certificate") in
accordance with applicable law and the issuance of a certificate of
merger by the Secretary of State of New York, or at such later date and
time as may be set forth in such Merger Certificate (the "Effective
Time"). The parties shall use their reasonable best efforts to cause
the Merger to become effective as soon as is reasonably practicable,
but in any event on a date that is not later than three business days
after the last of the conditions set forth in Article VIII shall have
been satisfied or waived in accordance with the terms of this Agreement
(other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the satisfaction or waiver of those
conditions).
2.02 Closing. The closing of the Merger (the "Closing")
shall take place at 9:00 a.m. at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, New York, or at such other place as the parties shall agree,
on the date on which the Effective Time shall occur (the "Closing Date").
2.03 Tax Treatment of the Merger. The parties intend that
for U.S. federal income tax purposes the Merger be treated as a taxable purchase
by Acquiror of the Company Membership Interests owned by the Members including
Withdrawn Member Interests (and subordinated debt owned by former Managing
Directors of the Company) in exchange for cash and Acquiror Common Stock. For
these purposes, and all other U.S. federal income tax purposes, the parties
agree that the Acquiror Common Stock subject to the Transfer Restrictions (as
defined in the Member Agreements) and received by the Members in the Merger
shall be valued for all U.S. federal income tax purposes at 100% of the mean of
the high and low of the trading price of the Acquiror Common Stock on the
Closing Date.
2.04 Organization of NewCo. Before the Effective Time,
Acquiror will (a) organize NewCo as a New York limited liability company solely
for the purpose of this transaction that will have no material assets and
liabilities and will be treated, for federal income tax purposes, as a
disregarded entity or partnership and (b) cause NewCo to become a party to this
Agreement, to be evidenced by the execution by it of a supplement to this
Agreement and delivery thereof to Acquiror and the Company.
ARTICLE III
CONSIDERATION; EXCHANGE; EMPLOYEE INCENTIVES
3.01 Merger Consideration. At the Effective Time,
automatically and without any action on the part of any party, Member or other
person:
(a) Outstanding Company Membership Interests. Subject to
the terms and conditions set forth in this Agreement, all Company
Membership Interests that are outstanding and owned by a Member
immediately prior to the Effective Time shall become
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and be converted into the right to receive (i) an amount in cash equal
to the Consideration Percentage of such Member multiplied by the Cash
Pool Amount (the "Cash Consideration"), and (ii) a number of shares of
Acquiror Common Stock equal to the Consideration Percentage of such
Member multiplied by the Stock Pool Amount (the "Stock Consideration"
and, collectively with the Cash Consideration, the "Merger
Consideration"), subject to adjustment as provided in paragraph (c) of
this Section 3.01.
(b) Outstanding NewCo Membership Interests. The
membership interests of NewCo outstanding immediately prior to the
Effective Time shall be converted into an identical number of
Membership Interests in the Surviving LLC.
(c) Fractional Shares. Notwithstanding any other
provision in this Agreement, no fractional shares of Acquiror Common
Stock and no certificates or scrip therefor, or other evidence of
ownership thereof, will be issued in the Merger or otherwise hereunder;
instead, Acquiror shall pay to each holder of Company Membership
Interests who otherwise would be entitled to a fractional share of
Acquiror Common Stock an amount in cash (without interest) determined
by multiplying such fraction by $128.025.
(d) Rights as Members. At the Effective Time, holders of
Company Membership Interests shall have no rights as members of the
Company or otherwise with respect to their ownership therein other than
the right to receive their allocated share of the Merger Consideration
provided for in this Article III.
(e) Merger Consideration Payment. The Stock Consideration
shall be paid to the Members as provided for herein and held in custody
pursuant to the Custody Agreements. It is a condition to any Member
receiving the Member's allocated share of the Merger Consideration that
the Member execute and deliver a Member Agreement and a Custody
Agreement.
3.02 Exchange Procedures.
(a) Delivery of Merger Consideration. Acquiror will:
(1) prior to the Effective Time, cause to be delivered to
each Member any necessary or appropriate transmittal materials for use
in paying the Merger Consideration to such Member on the Closing Date.
(2) promptly thereafter cause to be delivered to the
Custodian on behalf of each Member certificates representing the Stock
Consideration into which such Member's Company Membership Interests
have been converted and shall on the Closing Date deliver by wire
transfer to each Member the cash that such Member is entitled to
receive pursuant to the provisions of this Article III in respect of
the Cash Consideration, fractional shares and dividends or
distributions; provided that certificates representing Acquiror Common
Stock will not be issued to or on behalf of, and such wire transfer
will not be made to, any Member
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<PAGE> 17
until the Member has properly completed and returned any transmittal
materials delivered by Acquiror pursuant to Section 3.02(a)(1) and has
executed and delivered to Acquiror a Custody Agreement.
(b) Registration of Acquiror Stock. All Acquiror Common
Stock to be delivered on behalf of a Member will be registered in the name of
the Custodian or its nominee and all checks to be issued to a Member will be
made out in the name of such Member.
(c) No Interest. No interest will be paid on any
consideration provided for in this Article III, including the Merger
Consideration, cash in lieu of fractional shares or dividends or distributions
on any of the preceding.
(d) No Rights Until Surrender. No dividends or other
distributions on Acquiror Common Stock will be paid in respect of any Acquiror
Common Stock deliverable on behalf of a Member as a result of the Merger until
the Custodian is properly entitled to receive certificates representing such
Acquiror Common Stock in accordance with this Section 3.02, and no Member will
be eligible to vote such Acquiror Common Stock until the Custodian becomes so
entitled. After the Custodian becomes entitled to receive certificates in
accordance with this Section 3.02, the Member will also be entitled to receive
dividends or distributions with a record date after the Effective Time that have
become payable on the Acquiror Common Stock represented thereby, without
interest.
3.03 Withdrawn Member and Managing Director Subordinated
Debt Election. Each Withdrawn Member with a Share (as such term is defined in
the Operating Agreement) (a "Withdrawn Member Interest") and/or any person that
holds a Managing Director Subordinated Note may make an election to exchange
such Withdrawn Member Interest and/or Managing Director Subordinated Note for:
(a) a subordinated note, substantially in the form set
forth in Annex 8 (an "Acquiror Subordinated Note"),
of like principal amount plus cash in an amount equal
to all accrued and unpaid interest as of the date of
the exchange;
(b) (A) that number of shares of Acquiror Common Stock
equal to the quotient of (i) the product of 1.5
multiplied by the sum of the dollar amount of such
Withdrawn Member Interest and/or of the principal
amount of the Managing Director Subordinated Note, as
applicable, being exchanged for Acquiror Common Stock
divided by (ii) $128.025 and (B) cash in an amount
equal to all accrued and unpaid interest as of the
date of the exchange; or
(c) cash in an amount equal to the dollar amount of such
Withdrawn Member Interest and/or the principal amount
of the Managing Director Subordinated Note, plus cash
in an amount equal to all accrued and unpaid interest
thereon as of the date of the exchange.
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<PAGE> 18
In the event that a person entitled to make the foregoing
election fails to do so prior to the Election Deadline, such person shall only
be entitled to receive in exchange for such Withdrawn Member Interest and/or
Managing Director Subordinated Note, cash in an amount equal to the dollar
amount of such Withdrawn Member Interest and/or the principal amount, of the
Managing Director Subordinated Note, plus cash in an amount equal to all accrued
and unpaid interest thereon as of the date of the exchange.
3.04 Election Procedures. Each person entitled to make the
election referred to in Section 3.03 above shall (i) make the election by
written notice delivered to Acquiror not earlier than the twentieth business day
after the date hereof and no later than the twenty-fifth business day after the
date hereof, subject to the Company's ability to extend for an additional 10
business days (the "Election Deadline") and (ii) at the time of such election,
execute and deliver to Acquiror a retired member agreement (to the extent such
person does not sign a Member Agreement) which shall contain terms substantially
identical to the terms contained in the Member Agreement, except that such
retired member agreement shall not contain the terms set forth in Sections 1
(except with respect to termination), 2(a), 2(e), 3(i), 5 through 13 and 22 of
the Member Agreement. Any election may be revoked until the Election Deadline by
written notice to the Acquiror received prior to such Election Deadline, at
which time such election shall be irrevocable. In the event that either a
Withdrawn Member or a holder of a Managing Director Subordinated Note fails to
make the election referred to in Section 3.03 by the Election Deadline with
respect to a Withdrawn Member Interest or a Managing Director Subordinated Note,
then the Company shall (i) in the case of a Withdrawn Member Interest, redeem
such amount in accordance with the terms of the Operating Agreement, and (ii) in
the case of a Managing Director Subordinated Note, have such note redeemed by
the Company, in each case, effective as of the Effective Time. In connection
therewith, the Company agrees to take, or cause to be taken, all necessary steps
to redeem pursuant to the terms thereof, as of the Effective Time, all
outstanding Withdrawn Member Interests or Managing Director Subordinated Notes
not subject to an effective election (it being understood that Section 3.03 and
3.04 will not result in a duplication of amounts owed to Withdrawn Members or
holders of Managing Director Subordinated Notes). Shares of Acquiror Common
Stock and Acquiror Subordinated Notes issued pursuant to this Article III shall
be issued at or promptly after the Effective Time consistent with the payment of
the Merger Consideration pursuant to Section 3.02.
3.05 Restricted Stock Units Awards. Effective as of the
Effective Time, Acquiror shall grant to certain employees (which may include
Members who may or may not be employees) of the Company or its Subsidiaries who
remain employed by the Company or its Subsidiaries through the Effective Time in
substantially the same capacity as on the date of this Agreement and become
employees of Acquiror or one of its Subsidiaries an aggregate of 5,467,682
Acquiror restricted stock units, as such may be equitably adjusted pursuant to
the terms of Section 3.07, having the terms set forth in Annex 6 (the "Retention
RSUs"). In addition, effective as of the Effective Time, Acquiror shall grant to
employees of the Company or any of its Subsidiaries who remain employed by the
Company or such Subsidiary through the Effective Time and become employees of
Acquiror or one of its Subsidiaries an aggregate of 1,562,195 Acquiror
restricted stock units, as such may be equitably adjusted pursuant to the terms
of Section 3.07, having the terms set forth in Annex 7 (the
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<PAGE> 19
"SLK RSUs"). Acquiror and the Company shall mutually agree prior to the
Effective Time on which employees shall be granted SLK RSUs and the number of
SLK RSUs to be granted to each such employee. The Company shall consult with
Acquiror regarding which employees should be granted Retention RSUs and the
number of Retention RSUs that should be granted to each such employee, and after
such consultation the Company shall determine, with Acquiror's written consent
(which shall not be unreasonably withheld), which employees shall receive the
Retention RSUs and how many Retention RSUs are allocated to each such employee.
Moreover, Acquiror shall have no obligation to issue Retention RSUs or SLK RSUs
to any employee who has not executed and delivered to Acquiror an agreement in
form and substance approved by Acquiror imposing on such employee
confidentiality, noncompetition and nonsolicitation obligations comparable to
those contained in Annex 3. The issuance and delivery of Retention RSUs and SLK
RSUs shall be conditioned upon the recipient's executing and delivering to
Acquiror a custody agreement in the form customarily used by Acquiror for
recipients of restricted stock units. All Retention RSUs and SLK RSUs shall be
granted pursuant to the Acquiror 1999 Stock Incentive Plan. All material
communications by the Company in respect of the grant of Retention RSUs and SLK
RSUs shall be approved in advance by Acquiror.
3.06 Incremental Liquidity Gain. In the event that the
closing per share price of Acquiror Common Stock on the trading day immediately
preceding the Closing Date (the "Closing Stock Price") exceeds $128.025,
Acquiror shall as promptly as reasonably practicable following the Closing Date,
file a registration statement on an appropriate form under the Securities Act of
1933 to register the resale of the Excess Shares. Acquiror will use reasonable
best efforts to cause such registration statement to become effective as soon as
reasonably practicable. The Excess Shares shall be sold through Goldman, Sachs &
Co. in such manner as Goldman, Sachs & Co. shall determine in its sole
discretion. The Members whose Excess Shares are included in the registration
statement shall pay all of their and Acquiror's out-of-pocket expenses incurred
in connection with the preparation and filing of the registration statement and
the resale of the Excess Shares. Acquiror may delay any such filing,
effectiveness or offering if Acquiror in good faith believes that such filing,
effectiveness or offering would interfere with a proposed corporate transaction
(including an acquisition or disposition) or offering of securities by Acquiror
or any stockholder or require Acquiror to disclose material, nonpublic
information and will use reasonable best efforts to effect such filing,
effectiveness or offering once such transaction or offering is completed or
abandoned or such information is disclosed.
3.07 Adjustments to Prevent Dilution. In the event that
Acquiror changes the number of shares of Acquiror Common Stock, or securities
convertible or exchangeable into or exercisable for shares of Acquiror Common
Stock, issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
extraordinary distribution or other similar transaction, the Stock
Consideration, the number of Retention RSUs, the number of SLK RSUs, and
references to $128.025 where used as a calculation element or reference price
shall be equitably adjusted so as to give effect to the intended purpose of this
Agreement.
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<PAGE> 20
ARTICLE IV
ACTIONS PENDING THE EFFECTIVE TIME
4.01 Forbearances of the Company. Until the Effective
Time, except as Previously Disclosed or as expressly contemplated by this
Agreement or any Supplemental Agreement, without the prior written consent of
Acquiror, the Company will, and the Company will cause its Subsidiaries to,
conduct the business of the Company and its Subsidiaries in the ordinary and
usual course and, to the extent consistent therewith, shall use reasonable best
efforts to preserve intact their business organizations and assets and maintain
their rights, franchises and existing relations with clients, customers,
suppliers, employees and business associates. In addition, without Acquiror's
written consent (which shall not be unreasonably withheld) the Company will not,
and will cause its Subsidiaries and its Subsidiaries' employees, members,
partners, agents and other representatives not to:
(a) Ordinary Course. Engage in any new activities or
lines of business or take any action reasonably likely to have an
adverse effect upon the ability of the Company to perform any of its
obligations under this Agreement.
(b) Equity Interests. Issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional equity
interests of the Company or any of its Subsidiaries or any Rights in
respect thereof or permit any transfers or dispositions of any equity
interests in the Company, or any of its Subsidiaries from and after the
date of this Agreement; provided, that (i) the Partnership shall be
permitted to issue additional Class C limited partnership interests and
(ii) First Options of Chicago Inc. shall be permitted to issue
additional shares of Class A Preferred Stock, in each case, in the
ordinary and usual course of business consistent with past practice.
(c) Distributions, Etc. Make, declare, pay or set aside
for payment any dividend on or in respect of, or declare or make any
distribution on, any shares of capital stock or equity interests of the
Company or any of its Subsidiaries, other than distributions from
Subsidiaries to the Company or a wholly owned Subsidiary of the
Company, or directly or indirectly adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital
stock or equity interests; provided, that the Company shall be
permitted to make distributions to its Members (i) in an amount not to
exceed $116,503,000 (including $50 million reserved for such purposes)
in respect of Taxes accrued as of June 30, 2000, (ii) in an amount not
to exceed $35,134,000 in respect of distributions available as of
January 1, 2000, (iii) in an amount not to exceed $26,689,000 in
respect of distributions available as of June 30, 2000, (iv) in amounts
necessary to permit Members to pay the aggregate net U.S. federal,
state and local income taxes imposed on them with respect to the net
earnings of the Company during the period commencing on July 1, 2000
and ending immediately prior to the Effective Time (after taking into
account Tax credits and other available Tax assets and any prior
distributions to fund such Taxes and not including any Taxes payable as
the result of sales or other dispositions requiring the recognition of
unrealized gains reflected on the June
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<PAGE> 21
30, 2000 Financial Statements (including the "short-against the box"
positions)), (v) in an amount with respect to each Member and taking
into account any amounts previously paid to such Member (other than the
distributions described in clauses (i) through (iv) and (vi) through
(ix) of this subsection (c)) since June 30, 2000, not to exceed 4% of a
Member's average capital account balance (as such amount is calculated
on a monthly basis in the ordinary and usual course of the Company's
business, but excluding any net income earned after June 30, 2000) for
the period from July 1, 2000 and ending immediately prior to the
Effective Time, (vi) of customary bi-weekly draws, in amounts per
Member consistent with past practice and in the ordinary and usual
course of business, (vii) for purposes of making charitable
contributions not in excess of $100,000,000, as contemplated by clause
(C) of the definition of Cash Pool Amount, (viii) of two percent (2%)
charitable giving draws of not more than $68,000 in the aggregate for
all Members and (ix) as previously disclosed on Schedule 5.03(g);
provided, however, that the Tax rates and taxable income used for
purposes of these computations are not inconsistent with any Tax
Returns filed by the Partnership or the Company, the Financial
Statements and any other available financial information, and provided,
further, that the manner in which the effective Tax rate is computed is
subject to Acquiror's reasonable approval and is based upon the highest
applicable U.S. federal, state and local rates applicable to
individuals.
(d) Compensation; Employment Agreements; Etc. Enter into,
amend, modify or renew any employment, consulting, severance or similar
contracts with any director, officer, employee or Member, or grant any
salary, wage or other compensation increase or increase any employee
payment or benefit (including incentive or bonus payments), except (1)
for normal individual increases in compensation to persons other than
Directors or Managing Directors in the ordinary course of business
consistent with past practice, (2) for other changes that are required
by applicable law, (3) to satisfy contractual obligations existing as
of the date hereof that have been previously made available to
Acquiror, and (4) for employment arrangements for, or grants of awards
(other than any ownership interest in the Company or any of its
Subsidiaries, or Rights with respect thereto) to, newly hired employees
of the Company (other than officers or directors) or any of its
Subsidiaries in the ordinary course of business consistent with past
practice.
(e) Benefit Plans. Enter into, establish, adopt or amend
or communicate in writing or orally any intention to take such action,
or grant any waiver with respect to, any pension, retirement, equity
option, equity purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of
any current of former director, officer, employee or Owner, except (1)
for non-material items in the ordinary and usual course of business or
by the transactions to be effected by this Agreement or (2) as may be
required (i) by applicable law or (ii) to satisfy contractual
obligations existing on the date hereof that have been Previously
Disclosed and accrued on the Financial Statements, or take any action
to accelerate the funding, vesting or exercisability of options,
restricted membership interest awards or other compensation or benefits
payable thereunder.
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<PAGE> 22
(f) Dispositions. Initiate, solicit or otherwise
encourage, directly or indirectly, any (i) enquiries or the making of
any proposal or offer with respect to a merger, consolidation or
similar transaction involving the Company or any of its Subsidiaries,
or any purchase of membership interests or securities of the Company or
any of its Subsidiaries, or otherwise participate in or facilitate any
effort or attempt to make or effectuate such an offer or proposal
including, without limitation, by engaging in any discussions or
negotiations or providing any confidential information or data to, any
person making such other offer or proposal; and (ii) except for sales,
transfers, mortgages, encumbrances or other dispositions of securities
or other investments or assets in the ordinary course of business
consistent with past practice, sell, transfer, mortgage, encumber or
otherwise dispose of or discontinue (1) any material amount of assets
or properties or (2) any material business or operations.
(g) Acquisitions. Except for the purchase of securities
or other investments or assets in the ordinary course of business
consistent with past practice, acquire any assets, business, or
properties of any other entity.
(h) Governing Documents. Amend the Constitutive Documents
of the Company or any of its Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in
its accounting principles, practices or methods, other than as may be
required by generally accepted accounting principles or applicable law
or regulation.
(j) Contracts. Without limiting the applicability of
Section 4.01(d) or (e), enter into or terminate any material contract
(other than a material contract which expires by its terms) or amend,
modify or waive in any respect any of its existing material contracts
or its rights thereunder other than in the ordinary course of business
consistent with past practice.
(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 $1,000,000 and which is not reasonably
likely to establish an adverse precedent or basis for subsequent
claims, actions, proceedings or settlements.
(l) Adverse Actions. Knowingly take any action that is
reasonably likely to result in (1) any of its representations or
warranties set forth in this Agreement being or becoming untrue at any
time at or prior to the Effective Time (after giving effect to Section
5.02) or (2) any of the conditions set forth in Article VIII not being
satisfied, except, in either case, as may be required by applicable law
or regulation.
(m) Indebtedness. Incur any indebtedness for borrowed
money (other than any indebtedness with a final maturity less than 12
months from the date of its issuance incurred in the ordinary course of
business consistent with past practice) or issue any debt obligations
that would be considered Managing Director Subordinated Notes.
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<PAGE> 23
(n) Commitments. Agree, commit to or enter into any
agreement to take any of the actions referred to in Section 4.01(a)
through (m).
4.02 Forbearances of Acquiror. Until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of the Company, Acquiror will not, and will cause each of its
Subsidiaries not to, knowingly take any action reasonably likely to result in
(1) any of its representations and warranties set forth in this Agreement being
or becoming untrue at any time at or prior to the Effective Time (after giving
effect to Section 5.02) or (2) any of the conditions set forth in Article VIII
not being satisfied except, in either case, as may be required by applicable law
or regulation. In addition, Acquiror shall not declare, make or pay any
extraordinary dividend or other extraordinary distribution on Acquiror Common
Stock, whether in cash or otherwise (which shall not include any quarterly cash
dividends in the ordinary and usual course of business) unless an equitable
adjustment is made to the Stock Consideration and the calculation element or
reference price of $128.025.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 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 (a) in response to an express informational requirement contained in or
requested by a provision hereof or (b) as an exception to one or more
representations or warranties contained in Section 5.03, 5.04, 5.05 and 7.01.
Information set forth in a party's Disclosure Schedule, whether in response to
an express informational requirement or as an exception to one or more
representations, warranties or covenants, as applicable, in each case that is
contained (or incorporated by reference) in a correspondingly enumerated portion
of such Disclosure Schedule or as disclosed in the Offering Memorandum, is
described herein as "Previously Disclosed".
5.02 Standard. No representation or warranty contained in
Section 5.03, 5.04, 5.05 and 7.01 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 should
have been disclosed as an exception to one or more representations or
warranties, unless such fact, event or circumstance, whether individually or
taken together with all other facts, events or circumstances that should have
been so disclosed (whether or not as exceptions) with respect to such
representation or warranty contained in Section 5.03, 5.04, 5.05 or 7.01, has
had or is reasonably likely to have a Material Adverse Effect with respect to
the Company (in the case of Section 5.03 and Section 7.01), the Partnership (in
the case of Section 5.04 and Section 7.01), Acquiror (in the case of Section
5.05); provided, that this Section 5.02 will not apply to, and will not limit
breaches of, the first sentence of Section 5.03(a), Section 5.03(b), the last
two sentences of the first paragraph of Section 5.03(c), Section 5.03(d), the
last two sentences of Section 5.03(g)(1), Section 5.03(g)(3)(B), the first
sentence of Section 5.04(a), Section 5.04(b), the
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<PAGE> 24
first sentence of Section 5.05(a), Section 5.05(b), the last sentence of
5.05(d)(1), 5.05(d)(2)(B), 5.05(d)(3) and the last sentence of Section 5.05(e);
and provided, further, that this Section 5.02 will not apply in determining
whether indemnification is available under Article VII or Article IX hereof.
5.03 Representations and Warranties with Respect to the
Company. Except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, the Company hereby
represents and warrants to, and agrees with, Acquiror as follows:
(a) Organization, Standing and Authority. The Company has
been duly organized and is validly existing as a limited liability
company in good standing under the laws of the State of New York. The
Company is duly qualified to do business and is in good standing in the
States of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified. The Company and each of its
Subsidiaries has the requisite power and authority and has in effect
all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry
on its business as it is now conducted. The Company has delivered to
Acquiror a true and complete copy of its articles of organization and
operating agreement, which are the only Constitutive Documents of the
Company.
(b) Membership Interests. Annex 1 is an accurate and
complete list of the Members of the Company and is an accurate and
complete list of their respective ownership interests in all material
respects. As of the date of this Agreement, the Company has no Company
Membership Interests reserved for issuance and no obligation to admit
any other person as a Member. All the outstanding Company Membership
Interests are duly authorized and validly issued and were not issued in
violation of any subscriptive or preemptive rights. There are no other
Company Membership Interests authorized, issued or outstanding and
there are no preemptive rights or any outstanding Rights of the Company
or any of its Subsidiaries of any character relating to the issued or
unissued securities of the Company (including those relating to the
issuance, sale, purchase, redemption, conversion, exchange, redemption,
voting or transfer thereof). Since June 30, 2000 and until the date
hereof, no dividend or other distribution has been paid on or in
respect of the Company Membership Interests other than (i) as would
have been permitted under Section 4.01(c)(iv), (v) and (vi) had this
Agreement been in effect at such time or (ii) as Previously Disclosed
on Schedule 5.03(b).
Immediately after Effective Time, Acquiror shall own all of
the Membership Interests of the Company.
(c) Subsidiaries. The Company has Previously Disclosed a
list of all its Subsidiaries, including the states or foreign
jurisdictions in which such Subsidiaries are organized and, if any of
such Subsidiaries is not wholly owned by the Company or one or more of
its Subsidiaries, the percentage owned by the Company or each such
Subsidiary and the names, addresses and type and percentage ownership
by any other person. No equity interests in any
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<PAGE> 25
of the Company's Subsidiaries are or may become required to be issued
(other than to the Company or a wholly owned Subsidiary of the Company)
by reason of any Rights with respect thereto. There are no Contracts or
outstanding claims assessed against the Company by which any of the
Company's Subsidiaries is or may be bound to sell or otherwise issue
any equity interests, and there are no Contracts relating to the rights
of the Company to vote or to dispose of such equity interests. All of
the equity interests in each of the Company's Subsidiaries have been
duly authorized and validly issued and, to the extent applicable, are
fully paid and nonassessable and are subject to no subscriptive or
preemptive rights or Rights and are owned by the Company or one of its
Subsidiaries free and clear of any Liens other than those Liens created
by the existence of the Constitutive Documents. Each of the Company's
Subsidiaries is in good standing under the laws of the jurisdiction in
which it is organized, and is duly qualified to do business and in good
standing in each jurisdiction where its ownership or leasing of
property or the conduct of its business requires it to be so qualified.
The Company is the sole general partner of the Partnership and
(including the Float (as such term is defined in the Partnership
Agreement)), has the right to 98.942% of the Partnership's profits,
free and clear of all Liens other than those Liens created by the
existence of the Constitutive Documents, and is responsible for 100% of
the Partnership's losses, and no other person has any interest, legal,
beneficial or otherwise in such Partnership Interest. At the Closing
Date, the Company shall have the right to 100% of the Partnership's
profits. Upon the consummation of the Merger, the Surviving LLC will
continue to own, beneficially and of record, such Partnership Interest,
free and clear of all Liens other than those Liens created by the
existence of the Constitutive Documents.
The Company has Previously Disclosed a true and complete list
of all equity securities (other than those issued by a Subsidiary) it
or a Subsidiary of the Company holds or controls as of the date of this
Agreement involving, in the aggregate, ownership or control of 5% or
more of any class of the issuer's voting securities or 25% or more of
the issuer's equity. The Company has Previously Disclosed a list of all
corporations (and any other entities or joint undertakings treated as a
partnership for any Tax purpose), limited liability companies, joint
ventures or similar entities, in which it owns or controls a 5% or more
interest, directly or indirectly, and the nature and amount of each
such interest.
(d) LLC Action. The Company has the requisite power and
authority, and has taken all limited liability company action
necessary, (1) to authorize the execution and delivery of and
performance of its obligations under this Agreement and (2) to approve
and adopt the Merger and in accordance herewith, to consummate the
Merger and the transactions contemplated by this Agreement. Without
limiting the foregoing, any action of the Members of the Company
required to approve or adopt this Agreement and the transactions
contemplated by this Agreement has been duly taken in accordance with
the requirements of the New York State Limited Liability Company Law
and the Operating Agreement. No further action of the Members or
Managers of the Company is required in order to consummate the Merger
and, except for the execution and delivery of documents referred to
herein that are contemplated to be entered into at or prior to Closing,
the transactions contemplated by this Agreement. As of the Closing, no
Member will have any
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<PAGE> 26
dissenter's or similar rights with respect to the Merger. This
Agreement has been duly executed and delivered on behalf of the Company
and constitutes the valid and legally binding agreement of the Company,
enforceable in accordance with its terms except as the enforceability
hereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of
equity.
(e) No Defaults. Subject to the receipt of Previously
Disclosed required regulatory approvals, and the filing of the Merger
Certificate, the execution, delivery and performance of this Agreement
and the consummation by the Company of the transactions contemplated by
this Agreement, do not and will not (1) conflict with or constitute a
breach or violation of, or a default under, or cause or allow the
acceleration or creation of any right, obligation or Lien (with or
without the giving of notice, passage of time or both) pursuant to any
law, rule or regulation or any judgment, decree, order, or any
governmental or non-governmental permit, license, franchise or
privilege or any Contract of it or any of its Affiliates or to which it
or any of its Affiliates or its or their properties is subject or
bound, (2) constitute a breach or violation of, or a default under, the
Constitutive Documents of the Company or any of its Subsidiaries, or
(3) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental or non-governmental
permit, license, franchise or privilege or the consent or approval of
any other party to any such Contract.
(f) Reports. The Company and its Subsidiaries have timely
filed all reports, registrations, statements and other filings (other
than those relating to Taxes or Tax Returns), together with any
amendments required to be made with respect thereto, that were required
to be filed by the Company or any of its Subsidiaries since December
31, 1998 with (1) the SEC or the CFTC, (2) any other applicable
Governmental Authorities (other than taxing authorities) or (3) any
Self-Regulatory Organization (all such reports and statements,
including the financial statements, exhibits and schedules thereto,
being collectively referred to herein as the "Reports"), including
without limitation, all reports, registrations, statements and filings
required under the Securities Laws. Each of the Reports, when filed,
complied (or, if filed after the date hereof, will comply) as to form
with all applicable statutes, rules, regulations and orders (whether or
not enforced or promulgated by the Governmental Authority with which
they were filed) and did not (or will not) contain any untrue statement
of a material fact or omit to state any 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.
(g) Financial Statements.
(1) The Company has delivered to Acquiror copies of each of
the audited consolidated statements of financial condition of the Partnership
(including all related notes and schedules thereto) as of September 30, 1998 and
1999, and the audited consolidated statements of income, changes in partner's
capital and cash flows of the Partnership (including any related notes
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and schedules thereto) for the fiscal years ended September 30, 1997, 1998 and
1999, and the unaudited consolidated financial statements of the Partnership as
of, and for the fiscal quarters ended, June 30, 1999 and 2000 and the unaudited
unconsolidated financial statements of each of the Subsidiaries of the
Partnership that are registered as broker-dealers under Section 15 of the
Exchange Act contained in the Financial and Operational Combined Uniform Single
Reports (each, a "Focus Report") for the fiscal quarters ended June 30, 1999 and
2000 (collectively, the "Financial Statements"). Each of the statements of
financial condition included in the Financial Statements fairly presents in all
material respects the consolidated financial position of the Partnership (or, in
the case of the Focus Reports, of the relevant Subsidiary on an unconsolidated
basis) as of its date, and each of the statements of income and changes in
owners' capital and cash flows or equivalent statements included in the
Financial Statements fairly presents in all material respects the consolidated
results of operations, changes in owners' capital and changes in cash flows, as
the case may be, of the Partnership (or, in the case of the Focus Reports, of
the relevant Subsidiary on an unconsolidated basis) for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end
adjustments and footnote disclosure), 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 unaudited statements may not
include notes). As of the Closing Date, the only asset of the Company will be
its general partnership interest in the Partnership, and the Company will not,
except as Previously Disclosed, engage (and will not, except as Previously
Disclosed, have engaged since the date hereof) in any business other than owning
such general partnership interest, and the Company shall have no liabilities
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than those directly arising from the Company's ownership of such general
partnership interest and the Company shall not have transferred any liabilities
to the Partnership or any other Subsidiary.
(2) There are no liabilities as of the date hereof of the
Partnership or any of its Subsidiaries of any kind whatsoever that are required
to be disclosed on the balance sheet, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances known to the Company or any of its
Subsidiaries which could reasonably be expected to result in such a liability,
other than:
(A) liabilities reflected or reserved
against in the Financial Statements; and
(B) liabilities arising, in the ordinary
course of business consistent with past practice,
after the date of the most recent statement of
financial condition included in the Financial
Statements that are not and could not reasonably be
expected to be materially adverse to the Company or
its Subsidiaries.
(3) Since September 30, 1999, (A) the Company and its
Subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice and (B) there has not occurred any change,
occurrence or event, and no change, occurrence or event has
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become reasonably likely, which has had, or is reasonably likely to have, a
Material Adverse Effect with respect to the Company.
(4) The pricing of securities and loans held in the Company's
and its Subsidiaries' trading accounts or securities portfolios and reflected in
the financial statements contained in the Focus Report for the quarter ended
June 30, 2000 is consistent with past practices.
(h) Contracts.
(1) The Company has Previously Disclosed, and
delivered true and complete copies of, each of the following
Contracts to which it or any of its Subsidiaries is a party,
by which it or any of its Subsidiaries is bound, or to which
its or any of its Subsidiaries' properties are subject (other
than trading commitments with customers or counterparties to
purchase or sell securities in the ordinary course of business
and consistent with past practice):
(A) the real property leases relating to its
(i) 220,000 square feet lease for 120 Broadway, New
York, New York and (ii) 90,000 square feet lease for
its Jersey City, New Jersey location;
(B) any joint venture, shareholder or other
similar agreement or arrangement or any options,
rights or obligations to acquire from any person any
capital stock, voting securities or equity interests
or Rights or securities convertible into or
exchangeable for capital stock, voting securities or
equity interests of such person;
(C) any Contract entered into within the
last three (3) years relating to the acquisition or
disposition of any material business or operations
(whether by merger, sale of stock, sale of assets or
otherwise);
(D) any Contract providing for existing or
future borrowing of money or payment of the deferred
purchase price of property in excess of $10,000,000
(in either case, whether incurred, assumed,
guaranteed or secured by any asset) (other than
borrowings with a maturity of less than one (1)
year);
(E) any application, license, franchise or
other Contract relating to any trademark and
trademark rights, tradename and tradename rights,
service mark and service mark rights, service name
and service name rights, copyright and copyright
rights or patent and patent rights (collectively, the
"Intellectual Property");
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<PAGE> 29
(F) any Contract providing for exclusive
dealing or that limits the freedom of the Company or
any of its Affiliates to compete in any line of
business or with any person or in any area;
(G) any Contract, other than this Agreement
and the Supplemental Agreements, between the Company
or any of its Subsidiaries and (i) an Owner or any
"associates" or members of the "immediate family" (as
such terms are respectively defined in Rule 12b-2 and
Rule 16a-1 of the Exchange Act) of an Owner, (ii) any
other Affiliate of the Company or of an Owner, (iii)
any person 5% or more of whose outstanding voting
securities are directly or indirectly owned,
controlled or held with power to vote by the Company
or any Affiliate of the Company or of an Owner or
(iv) any officer of the Company or any Affiliate of
the Company or of an Owner or any "associates" or
members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of
the Exchange Act) of any such Owner; or
(H) other than the Supplemental Agreements,
any Member agreement, voting agreement, voting trust
agreement or similar Contract involving the interests
of the Company or any of its Subsidiaries.
The Company has made available its forms of
agreements relating to the clearing of futures or securities
transactions, the custody of assets or the extension of credit
(a "Clearing Agreement"). Each Clearing Agreement entered into
by the Company or any of its Subsidiaries is not modified in
any material respect from such form of Clearing Agreement that
has been made available.
Each contract required to be disclosed or made available in
respect of this Section 5.03(h) is referred to as a "Material
Contract".
(2) Each Material Contract is a valid and binding
agreement of the Company (and/or its Subsidiaries party
thereto (and/or its Affiliates in the case of clause (F)
above)) and, with respect to any such of the Company and its
Subsidiaries (and/or its Affiliates in the case of clause (F)
above), is in full force and effect, and none of the Company,
any of its Subsidiaries (and/or its Affiliates in the case of
clause (F) above) or, as of the date hereof, to the knowledge
of the Company or any of its Subsidiaries (and/or its
Affiliates in the case of clause (F) above), any other party
thereto is in default under any such Contract and there has
not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default (to
the knowledge of the Company or any of its Subsidiaries with
respect to any event relating to a party other than the
Company or its Subsidiaries).
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<PAGE> 30
(i) Properties; Securities.
(1) Except as reflected or reserved against in the
Financial Statements, each of the Company and its Subsidiaries
has good and marketable title to, or in the case of leased
property, has valid leasehold interests in all property and
assets purported to be owned or leased by it (whether real or
personal, tangible or intangible, and including investment
securities and other investments) reflected in the Financial
Statements or acquired after the date thereof, except for
property and assets sold or transferred since such date in the
ordinary course of business consistent with past practices.
None of such property or assets (except property or assets
sold or transferred since such date in the ordinary course of
business consistent with past practices) is subject to any
Liens (including Tax-related Liens), except:
(A) Liens incurred in the ordinary
course of business consistent with past practice;
(B) Liens securing liabilities which,
in each case, are disclosed or reserved against in
the Financial Statements;
(C) Liens for Taxes not yet due or
payable or being contested in good faith (and, in
either case, for which adequate accruals or reserves
have been established in the Financial Statements);
(D) Mechanics or materialmen liens and
similar liens arising by operation of law; or
(E) Liens which do not materially
detract from the value or materially interfere with
any current use of such property or assets.
(2) To the knowledge of the Company and its
Subsidiaries, all buildings and all fixtures, equipment, and
other property and assets used but not owned by the Company or
any of its Subsidiaries 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 by general
equity principles.
(3) Each of the Company and its Subsidiaries has a
"security entitlement" (as defined in the Uniform Commercial
Code) in all securities or investments held or purported to be
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 past
practices to secure obligations of each of the Company or any
of its Subsidiaries. Such securities are valued on the books
of the Company and its Subsidiaries in accordance with
generally accepted accounting principles.
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<PAGE> 31
(4) All Managing Director Subordinated Notes, by
their terms, are redeemable by the Company at a price equal to
the principal amount thereof, plus accrued interest, if any,
through the date of such redemption without penalty.
(j) Litigation; Regulatory Action. Except as Previously
Disclosed, no litigation, proceeding or investigation ("Litigation")
before or by any court, arbitrator, mediator or Governmental Authority
is pending against the Company or any of its Subsidiaries, and, to the
knowledge of the Company or any of its Subsidiaries, no such Litigation
has been threatened, and there is no existing condition, situation or
set of circumstances known to the Company or any of its Subsidiaries
which could reasonably be expected to result in such litigation;
neither the Company nor any of its Subsidiaries, or any of their
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, any Self-Regulatory
Organization or any Governmental Authority (including the SEC, the CFTC
and the Federal Trade Commission) charged with the supervision or
regulation of broker-dealers, securities underwriting or trading, stock
exchanges, commodities exchanges, alternative trading systems or the
supervision or regulation of the Company or any of its Subsidiaries
(collectively, "Regulatory Orders"). There is no Litigation involving
the Company, and to the Company's knowledge there are no claims,
disputes or Litigation involving any Member or former Member, related,
in each case, to the ownership of the membership interests of the
Company.
(k) Compliance with Laws. Each of the Company and its
Subsidiaries, and their respective Owners, managers, directors,
officers and employees:
(1) in the conduct of its businesses has been and is
in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, and with the applicable
rules of all Self-Regulatory Organizations including without
limitation, (w) all applicable regulatory net capital
requirements, including SEC Rule 15c3-1 and, as applicable,
the "early warning" and "expansion-contraction" capital
requirements in NYSE Rules 325 and 326, the liquid net assets
requirements of NYSE Rule 104.20 and the capital requirements
of any futures exchanges; (x) all rules and regulations
relating to the maintenance and preservation of books and
records; and (y) the provisions of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and
regulations promulgated thereunder;
(2) has and has had 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 and operate their
businesses as presently conducted; all such permits, licenses,
authorizations, orders, franchises and approvals are in full
force and effect and, to the Company's and its Subsidiaries'
knowledge, no suspension or cancellation of any of them is
threatened or reasonably likely; and all such filings,
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<PAGE> 32
applications and registrations are current and do not need to
be amended in any material respect;
(3) since January 1, 1997, except as disclosed on the
Partnership's or its Affiliates' most recent Form BD filed
with the SEC, the Partnership has received no written
notification or communication (or, to the Company's and its
Subsidiaries' knowledge, any other communication) from any
Governmental Authority or Self-Regulatory Organization (A)
asserting that any of them is not in compliance with any of
the statutes, rules, regulations, or ordinances which such
Governmental Authority or Self-Regulatory Organization
enforces, or has otherwise engaged in any unlawful business
practice except such assertions that were resolved to the
satisfaction of such Governmental Authority or Self-Regulatory
Organization and did not result in a material change to the
operations or practices of the Company or such Subsidiary, (B)
threatening to revoke any license, franchise, permit, seat on
any stock or commodities exchange, or governmental
authorization, (C) requiring any of them (including any of the
Company's or its Subsidiaries' Owners, managers, directors,
officers or controlling persons) to enter into a cease and
desist order, agreement, or memorandum of understanding (or
requiring the board of directors (or similar body) thereof to
adopt any resolution or policy) or (D) restricting or
disqualifying the activities of the Company or any of its
Subsidiaries (except for restrictions generally imposed by
rule, regulation or administrative policy on brokers or
dealers generally); and the Company has delivered true and
complete copies of each such written notification or
communication to Acquiror;
(4) is not the subject of any pending or aware of any
threatened investigation, review, disciplinary proceedings or
unresolved issues raised by any Governmental Authority or
Self-Regulatory Organization against or with respect to the
Company, any of its Subsidiaries or any Owner, manager,
officer, director or employee thereof;
(5) in the conduct of its business with respect to
employee benefit plans subject to Title I of ERISA or Section
4975 of the Code ("ERISA Plans"), has not (A) engaged in any
conduct which would subject it or them to liability under
Sections 405, 406, 409, 502(i) or 502(l) of ERISA or Section
4975 of the Code or (B) engaged in any conduct that could
constitute a crime or violation listed in Section 411 of ERISA
which could preclude such person from providing services to
any ERISA Plan;
(6) is not, nor is any Affiliate of any of them,
subject to a "statutory disqualification" as defined in
Section 3(a)(39) of the Exchange Act; is not 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 under Section 15, or
municipal securities dealer, government securities broker or
government securities dealer under Section 15, Section 15B or
Section 15C of the Exchange Act; is not, nor are any of their
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<PAGE> 33
"principals" (as defined in Section 8a(2) of the Commodity
Exchange Act), subject to any of the provisions of Section 8a
that would permit the CFTC, subject to the terms of such
section, to refuse to register or to suspend or revoke the
registration of any of them or their respective principals;
and, to the Company's knowledge, there is no current
investigation, whether formal or informal, or whether
preliminary or otherwise, that is reasonably likely to result
in, any such censure, limitations, suspension or revocation;
and
(7) has not acted as an underwriter of any
securities.
(l) Registrations.
(1) The Company has previously made available each
registration of the Company and any of its Affiliates as a
broker-dealer, a registered representative or a sales person
(or in a similar capacity) with the SEC, the securities or
commodities commission or similar authority of any state or
foreign jurisdiction or any Self-Regulatory Organization; each
such registration is in good standing (to the extent such
concept is applicable) and in full force and effect; and no
other such registrations are required in order to permit them
to own and operate their businesses as presently conducted.
(2) Other than as previously made available, none of
the Company or its Affiliates, nor any of their respective
Owners, directors, managers, officers and employees, is
required to be registered as an investment adviser, investment
company, commodity trading advisor, commodity pool operator,
futures commission merchant, insurance agent, or transfer
agent under any United States federal, state, local or foreign
statutes, laws, rules or regulations (including any of the
Securities Laws).
(m) Specialist Securities. On the date hereof, the
Partnership and certain of its Subsidiaries act as the Self-Regulatory
Organization specialist unit for each security Previously Disclosed.
Except as Previously Disclosed, the Company has no reason to believe
and has not been advised that it may be required to cease acting as the
Self-Regulatory Organization specialist unit for any of such
securities, nor has it agreed to act as the Self-Regulatory
Organization specialist unit for any other security, nor will it so
agree without the prior written approval of Acquiror. The Company will
use its best efforts to retain its status as the Self-Regulatory
specialist unit for each security Previously Disclosed.
(n) No Brokers. None of the Company or its Subsidiaries,
or any of their respective Affiliates, has employed any broker or
finder, or incurred any brokers or finders commissions or fees, in
connection with the transactions contemplated hereby.
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<PAGE> 34
(o) Compensation Plans; ERISA Matters.
(1) The Company has Previously Disclosed a list of
all significant employment, consulting, benefit and
compensation plans, contracts, policies or arrangements and
descriptions of any unwritten plans, policies or arrangements
covering current or former Members or employees or consultants
of the Company or any of its Subsidiaries (the "Employees")
and current or former Partners of the Partnership or as to
which the Company or any of its Subsidiaries could have,
directly or indirectly, any liability, including, but not
limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred compensation, stock
option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans and any applicable "change in
control" or similar provisions in any plan, contract or
arrangement (the "Compensation Plans"). True and complete
copies of all Compensation Plans, including, but not limited
to, any trust instruments and insurance contracts forming a
part of any Compensation Plans, and all amendments thereto
have been provided or made available to Acquiror. No
Compensation Plan provides for any benefit based in whole or
in part on the value of any Membership Interest or equity
interest owned by the Company or any of its Subsidiaries. For
purposes of this paragraph (1), a Compensation Plan is deemed
significant if (i) it covers fifty (50) or more individuals or
(ii) it requires annual contributions or payments by the
Company or any of its Subsidiaries or provides annual benefits
aggregating an amount equal to or in excess of $1,000,000.
(2) All employee benefit plans covering Employees
(the "Plans"), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan which is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code, has received a
favorable determination letter from the Internal Revenue
Service with respect to "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), and the Company is not aware of any
circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending
or, to the knowledge of the Company threatened, litigation
relating to the Plans, and there is no existing condition,
situation or set of circumstances known to the Company or any
of its Subsidiaries which could reasonably be expected to
result in such litigation. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any
Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject the Company or
any Subsidiary to a tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA in an amount which
would be material.
(3) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or
any of its Subsidiaries with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained
by any of them, or the
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<PAGE> 35
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 (an "ERISA Affiliate"). Neither the
Company, any of its Subsidiaries nor an ERISA Affiliate has
contributed to a Pension Plan that is a "multiemployer plan",
within the meaning of Section 3(37) of ERISA, at any time on
or after September 26, 1980 or could have liability in respect
of any such plan. 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 Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof or will
be required to be filed in connection with the transactions
contemplated by this Agreement.
(4) All contributions required to be made under the
terms of any Compensation Plan have been timely made or have
been reflected on the Financial Statements. Neither any
Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA and no ERISA Affiliate has an outstanding
funding waiver. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security
to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(5) Under each Pension Plan which is a
single-employer plan, as of the last day of the most recent
plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on
the basis of the actuarial assumptions contained in the Plan's
most recent actuarial valuation), did not exceed the then
current value of the assets of such Plan, and there has been
no adverse change in the financial condition of such Plan
since the last day of the most recent plan year.
(6) Neither the Company nor any of its Subsidiaries
has any obligations for retiree health, life or other benefits
under any Compensation Plan.
(7) The consummation of the transactions contemplated
by this Agreement, either alone or in conjunction with any
other event, will not (x) entitle any Employees to severance
pay, (y) accelerate the time of payment or vesting or trigger
any payment or funding (through a grantor trust or otherwise)
of compensation or benefits under, increase the amount payable
or trigger any other material obligation pursuant to, any of
the Compensation Plans or (z) result in any payments under,
any of the Compensation Plans which would constitute a
"parachute payment" to any "disqualified individual" as those
terms are defined in Section 280G of the Code; provided, that
the representations of this paragraph (7) shall not apply with
respect to any awards, payments, compensation and benefits to
be paid or made pursuant to this Agreement or other agreements
related to the transactions to be effected hereby.
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<PAGE> 36
(8) All Compensation Plans covering current or former
non-U.S. employees or otherwise maintained outside the U.S.
for U.S. employees are in substantial compliance with
applicable local law ("Foreign Plans"). The Company and its
Subsidiaries have no unfunded liabilities with respect to any
Foreign Plan that are not properly reflected on the Financial
Statements;
(9) There has been no amendment to, written
interpretation, communication or announcement by the Company
or any of its affiliates relating to, or change in employee
participation or coverage under, any Compensation Plan, which
would significantly increase the expense of maintaining such
Compensation Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year; and
(p) Labor Relations. Each of the Company 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, without limitation, the
Immigration Reform and Control Act, the Worker Adjustment and
Retraining Notification Act, any such laws respecting employment
discrimination, 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 the Company or
its Subsidiaries is engaged in any unfair labor practice (within the
meaning of the National Labor Relations Act). As of the date hereof,
there is no unfair labor practice complaint pending or, to the
knowledge of the Company, threatened against any of the Company or its
Subsidiaries before the National Labor Relations Board. Neither the
Company nor any of its Subsidiaries is a party to, or is bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of a proceeding as of
the date hereof asserting that the Company or any such Subsidiary has
committed an unfair labor practice (within the meaning of the National
Labor Relations Act) or seeking to compel it or such Subsidiary to
bargain with any labor organization as to wages and conditions of
employment, nor is there any strike or other labor dispute involving
the Company or any of its Subsidiaries, pending or, to the best of the
Company's knowledge, threatened, nor is it aware of any activity
involving the Company's or any of its Subsidiaries' employees seeking
to certify a collective bargaining unit or engaging in any other
organization activity.
(q) Insurance. The Company and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts
as is in accordance with industry practices. Copies of all insurance
policies and related documents have been made available to Acquiror.
(r) Accounting Controls. Each Subsidiary of the Company
that is registered as a broker-dealer has adopted recordkeeping systems
that comply with the requirements of Section 17 of the Exchange Act and
the rules and regulations promulgated thereunder and
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<PAGE> 37
the rules of all Self-Regulatory Organizations having jurisdiction, and
maintains its records in accordance therewith. Each of the Company and
its Subsidiaries has devised and maintained systems of internal
accounting controls sufficient to provide reasonable assurances that
(1) all transactions are executed in accordance with management's
general or specific authorization; (2) all transactions are recorded as
necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles consistently
applied with respect to broker-dealers, if applicable, or any other
criteria applicable to such statements; (3) access to the property and
assets of the Company and its Subsidiaries is permitted only in
accordance with management's general or specific authorization; and (4)
the recorded amounts for items is compared with the actual levels at
reasonable intervals and appropriate action is taken with respect to
any differences.
(s) Proprietary Rights. The Company and its Subsidiaries
exclusively own or have the perpetual and exclusive right to use
Intellectual Property material to the conduct of their business, and
all of these have been Previously Disclosed; and such ownership or
right to use such Intellectual Property is free and clear of any Liens,
and no other person has the right to use such Intellectual Property.
Except as Previously Disclosed: (A) neither the Company nor any of its
Subsidiaries is, or will be as a result of the execution and delivery
of this Agreement or the performance of its obligations under this
Agreement, in violation of any licenses, sublicenses and other
agreements as to which the Company or any such Subsidiary is a party
and pursuant to which the Company or any such Subsidiary is authorized
to use any third-party patents, trademarks, service marks, copyrights,
trade secrets, computer software or other proprietary rights
(collectively, "Third-Party Intellectual Property Rights") nor shall
such agreements be subject to termination or material modification by
reason thereof; (B) no claims with respect to (I) the Intellectual
Property or (II) Third-Party Intellectual Property Rights are currently
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened by any person; (C) neither the Company nor any of its
Subsidiaries knows of any valid grounds for any bona fide claims (I) to
the effect that the Company or its Subsidiaries is infringing, or has
infringed, any Third-Party Intellectual Property Rights; (II) against
the use of the Intellectual Property or Third-Party Intellectual
Property Rights by the Company or any of its Subsidiaries as currently
conducted; (III) challenging the ownership, validity or enforceability
of any Intellectual Property; or (IV) challenging the license or
legally enforceable right to the use of the Third-Party Intellectual
Rights by the Company or any of its Subsidiaries; and (D) to the
knowledge of the Company or any of its Subsidiaries, there is no
unauthorized use, infringement or misappropriation of any of the
Intellectual Property by any third party, including any employee or
former employee of the Company or any of its Subsidiaries.
(t) Affiliate Transactions. There is no indebtedness
between the Company or any of its Subsidiaries, on the one hand, and
any Owner, officer, manager, director or Affiliate (other than the
Company or any of its Subsidiaries) of the Company or the Partnership,
on the other, other than usual and customary advances made in the
ordinary course of business; no such Owner, officer, manager, director
or Affiliate provides or causes to be provided any assets, services
(other than services as an officer, director or employee) or
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<PAGE> 38
facilities to the Company or any of its Subsidiaries; neither the
Company nor any of its Subsidiaries provides or causes to be provided
any assets, services or facilities to any such Owner, officer, manager,
director or Affiliate (other than as reasonably necessary for them to
perform their duties as officers, directors or employees); neither the
Company nor any of its Subsidiaries beneficially owns, directly or
indirectly, any investment in or issued by any such officer, manager,
director or Affiliate; and no such Owner, officer, manager, director or
Affiliate has any direct or indirect ownership interest in any person
with which the Company or any of its Subsidiaries competes or has a
business relationship other than an ownership interest that represents
less than five percent of the outstanding equity interests in a
publicly traded company.
(u) Clearing Activities. Each of the Company and its
Subsidiaries have taken reasonable steps to manage risk in its clearing
business including performing due diligence with respect to the
c