Exhibit 10.261
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Purchase Agreement
by and among
The Xxxxxxx Xxxxxx Corporation,
a Delaware corporation,
CS Capital Markets & Co.,
a Delaware corporation,
Schwab Associates & Co.,
a Delaware corporation,
UBS Securities LLC,
a Delaware limited liability company,
and
UBS Americas Inc.,
a Delaware corporation
Dated As Of August 31, 2004
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Purchase Agreement
This Purchase Agreement (this "Agreement") is dated as of August 31, 2004,
by and among The Xxxxxxx Xxxxxx Corporation, a Delaware corporation ("Parent"),
CS Capital Markets & Co., a Delaware corporation ("GP"), Schwab Associates &
Co., a Delaware corporation ("LP" and together with Parent and GP collectively,
"Sellers"), UBS Securities LLC, a Delaware limited liability company
("Purchaser") and UBS americas Inc., a Delaware corporation ("Purchaser II").
Certain capitalized terms have the meanings given to such terms in Article X.
Recitals
Whereas, GP, LP and SoundView Technology Corporation, a Delaware
corporation ("Saturn Sub") indirectly wholly owned by SoundView Technology
Group, Inc., a Delaware corporation (the "Company"), are collectively the sole
owners of all of the partnership interests outstanding (the "Partnership
Interests") of Schwab Capital Markets L.P., a New Jersey limited partnership
("CCM");
Whereas, Parent is the sole owner of all of the outstanding capital stock
(the "Company Common Stock") of the Company;
Whereas, Purchaser wishes to purchase from GP and LP, and Sellers wish to
sell to Purchaser, the Partnership Interests owned by GP and LP in accordance
with the provisions set forth herein;
Whereas, Purchaser II wishes to purchase from Parent, and Parent wishes to
sell to Purchaser II, the Company Common Stock in accordance with the provisions
set forth herein; and
Whereas, as an inducement to Purchaser to enter into this Agreement, Parent
on behalf of itself and its Affiliates is agreeing to enter into the Order
Handling Services Agreement (as defined herein) and the Options Order Business
Agreement (as defined herein) effective as of the Closing.
Now Therefore, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
Article I
Purchase and Sale of CCM and the Company
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, at the Closing, (a) GP and LP shall sell, assign, transfer and convey to
Purchaser or its designees, and Purchaser or its designees shall purchase and
acquire from GP and LP, the Partnership Interests
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owned by GP and LP, free and clear of all Liens and (b) Parent shall sell,
assign, transfer and convey to Purchaser II or its designees, and Purchaser II
or its designees shall purchase and acquire from Parent, the Company Common
Stock, free and clear of all Liens.
1.2 Order Handling Services Agreement. At or prior to the Closing, Parent,
Xxxxxxx Xxxxxx & Co., Inc., a California corporation ("CS&Co."), and Purchaser
will enter into (a) an Equity Order Handling Agreement substantially in the form
attached hereto as Exhibit A (the "Order Handling Services Agreement") and (b)
an Options Order Handling Agreement substantially on the terms set forth in
Exhibit B hereto (the "Options Order Business Agreement"). Between the date
hereof and the Closing, the parties shall negotiate in good faith to produce a
more fulsome agreement for the flow of options orders and, if no such more
fulsome agreement is produced, then Exhibit B shall be the Options Order
Business Agreement and the parties shall perform their respective obligations
thereunder.
1.3 Purchase Price. In consideration of the sale of the Partnership
Interests and the Company Common Stock as contemplated herein, at the Closing,
Purchaser and Purchaser II agree to pay to Sellers in cash the aggregate amount
of $265 million (the "Purchase Price").
1.4 Allocation of Purchase Price.
(a) Sellers and Purchaser (on behalf of itself and Purchaser II) agree
to allocate the Purchase Price among the Partnership Interests and the
Company Common Stock in accordance with the fair market value of such
Partnership Interests and the Company Common Stock consistent with the
matters set forth in Section 1.4 of the Disclosure Schedule. If Sellers
disagree with respect to the matters set forth in footnote 1 to Section 1.4
of the Disclosure Schedule, Sellers shall notify Purchaser of such
disagreement and the reasons for so disagreeing, in which case Sellers and
Purchaser shall attempt to resolve the disagreement. To the extent Sellers
and Purchaser cannot agree with respect to such matters, such matters shall
be determined by PricewaterhouseCoopers or such other independent
accounting firm as shall be mutually agreed, whose decision shall be final
and binding and whose expenses shall be shared equally by Sellers and
Purchaser. The allocation of the Purchase Price made pursuant to this
Section 1.4 is known as the "Purchase Price Allocation".
(b) The parties hereto agree to report the allocation of the total
Purchase Price in a manner consistent with the Purchase Price Allocation
(as adjusted to reflect adjustments to the Purchase Price made pursuant to
this Agreement) and agree to act in accordance with the Purchase Price
Allocation (as adjusted to reflect adjustments to the Purchase Price made
pursuant to this Agreement) in the preparation and filing of all Tax
Returns and in the course of any Tax audit, Tax review or Tax litigation
relating thereto; provided that neither Sellers nor Purchaser will be
obligated to appeal or litigate any challenge to such Purchase Price
Allocation by a Governmental Entity.
(c) The parties will promptly inform one another of any challenge by
any Governmental Entity to the Purchase Price and agree to consult and keep
one another informed with respect to the status of, and any discussion,
proposal or submission with respect to, such challenge.
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1.5 License Agreement. At or prior to the Closing, Purchaser and Sellers
shall enter into a License Agreement providing for the matters set forth in the
term sheet in Section 1.5 of the Disclosure Schedule (the "License Agreement").
1.6 Transition Services Agreement. At or prior to the Closing, Purchaser
and Sellers shall enter into a Transition Services Agreement (the "Transition
Services Agreement") providing for (a) the matters set forth in the term sheet
in Section 1.6 to the Disclosure Schedule (including the methodology for
allocating costs for the provision of such services and the time period during
which such services must be provided), (b) all such other matters that are
reasonably necessary for Sellers and their Affiliates to provide to Purchaser
for Purchaser to operate the Business following the Closing in all material
respects as it was conducted by Sellers and their Affiliates on the Balance
Sheet Date and prior to the Closing so as to provide as seamless a transition of
the Business and the Company Business from Sellers and their Affiliates to
Purchaser as is reasonably practicable for the duration of the Transition
Services Agreement and (c) all such other matters that are reasonably necessary
for Purchaser to provide to Sellers and their Affiliates for Seller and their
Affiliates to continue their businesses that historically have needed an
interaction with the Business or the Company Business (other than the Business
and the Company Business) in all material respects as it was conducted by
Sellers and their Affiliates prior to the Closing so as to provide as seamless a
transition for Sellers and their Affiliates as is reasonably practicable for the
duration of the Transition Services Agreement, taking into account the existence
of the Order Handling Services Agreement and the Options Order Business
Agreement. Without limiting the generality of the foregoing, Sellers shall use
their reasonable commercial efforts to retain the services of employees used or
to be used by Sellers or their Affiliates to perform the services to be
performed pursuant to the Transition Services Agreement (other than any
employees of the Business or the Company Business) (the "Transition Services
Employees") and to maintain any of their operational systems necessary to
maintain the Business for the duration of the Transition Services Agreement in
connection with the provision of the services thereunder, and Purchaser shall
use its reasonable commercial efforts to keep employed the employees necessary
for Purchaser or its Affiliates to perform the services to be performed pursuant
to the Transition Services Agreement.
Article II
The Closing
2.1 Closing. The consummation of the purchase and sale transactions
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held as soon as practicable, and in any event not later than two (2) Business
Days after the satisfaction or waiver of each of the conditions set forth in
Article VII hereof (other than the conditions that by their nature are to be
satisfied at the Closing but subject to the fulfillment or waiver of those
conditions) or at such other time as the parties hereto may agree. The Closing
shall take place at the offices of Xxxxxxxx & Xxxxxxxx LLP, or at such other
location as the parties hereto may agree in writing. The date on which the
Closing occurs is sometimes referred to herein as the "Closing Date." The
Closing of the purchases and sales contemplated herein shall be deemed effective
as of the close of business on the Closing Date.
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2.2 Execution and Delivery.
(a) At the Closing, GP and LP shall deliver to Purchaser assignments
of the Partnership Interests owned by GP and LP duly executed by GP and LP.
Such instruments and documents shall be sufficient to convey all of
Sellers' interests in the Partnership Interests, free and clear of all
Liens.
(b) At the Closing, Parent shall deliver to Purchaser II stock
certificates representing the Company Common Stock, together with stock
powers duly executed in blank by Parent. Such instruments and documents
shall be sufficient to convey all of Sellers' interest in the Company
Common Stock, free and clear of all Liens.
(c) At the Closing, in consideration of the purchase of the
Partnership Interests and Company Common Stock, Purchaser and Purchaser II
shall pay to Sellers an aggregate sum equal to the Purchase Price by wire
transfer of immediately available funds in the amounts and to the accounts
specified in writing, at least 3 Business Days prior to Closing, by Parent
to Purchaser.
(d) Sellers agree that they will from time to time after the Closing,
at no cost to Purchaser or Purchaser II, execute and deliver such further
documents as Purchaser or Purchaser II may prepare and reasonably request
in order to effectively sell, transfer and convey the Partnership Interests
to Purchaser and the Company Common Stock to Purchaser II.
Article III
Representations and Warranties of the Business
Except as specifically disclosed in the correlative Section in the
Disclosure Schedule, Sellers, jointly and severally, represent and warrant to
Purchaser and Purchaser II as of the date hereof and as of the Closing as
follows:
3.1 Corporate Organization, Standing and Power. Each of Sellers is a
corporation duly organized, validly existing and in good standing under the Laws
and Regulations of its jurisdiction of organization. CCM is a limited
partnership duly organized and validly existing under the Laws and Regulations
of the State of New Jersey. Pebble LLC is a limited liability company duly
organized and validly existing under the Laws and Regulations of the State of
Delaware. CCM and each of its Subsidiaries has the requisite power to carry on
the Business as now being conducted by it and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would, individually or in the aggregate, have a
Business Material Adverse Effect. Sellers have furnished or made available to
Purchaser prior to the date of this Agreement a true and correct copy of the
Agreement of Limited Partnership of CCM (as amended by the First Amendment
thereto, the "Partnership Agreement") and the certificate or articles of
incorporation, partnership agreement or operating agreement, each as applicable,
and bylaws, and any other charter or organizational documents, of CCM and its
Subsidiaries, and each such document in the form so furnished or made available
to Purchaser is in full force and effect. None of CCM or any of its Subsidiaries
is in violation of any of the provisions of its organizational documents.
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3.2 Capitalization.
(a) All of the outstanding shares of capital stock and voting
securities or other interests of each Subsidiary of CCM are owned, directly
or indirectly, by CCM and are duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Liens. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements or obligations of
any character relating to the issued or unissued capital stock or other
securities of any such Subsidiary.
(b) GP is the sole general partner of CCM. LP holds a limited
partnership interest in CCM. Saturn Sub holds a preferred limited
partnership interest in CCM. LP and Saturn Sub are the sole limited
partners of CCM. The Partnership Agreement and the Conveyance Agreement,
dated January 2004, relating to Saturn Sub's preferred limited partnership
interest, each as furnished to Purchaser, accurately and completely set
forth all the terms of the Partnership Interests, including the attendant
rights and obligations of GP, LP and Saturn Sub. The Partnership Interests
have been validly issued and each of GP, LP and Saturn Sub owns its
partnership interests in CCM free and clear of all Liens. There are no
outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements
or obligations of any character relating to the Partnership Interests.
(c) Except as set forth in Section 3.2(c) of the Disclosure Schedule,
none of CCM or any of its Subsidiaries (i) owns, or has any contract or
other obligation to acquire, any equity securities or other securities of
or ownership interest in any Person or any direct or indirect equity or
ownership interest in any other business or (ii) has any contract or other
obligation to provide funds to, or make any investment in, any Person.
There is no funding obligation of CCM or any of its Subsidiaries with
respect to a third party investment or other interest that has not been
satisfied, except as specifically reflected on the Combined Financial
Statements.
(d) Upon delivery by Sellers of all the Partnership Interests at
Closing, good and valid title to the Partnership Interests, free and clear
of all Liens, other than those resulting only from Purchaser's ownership,
will pass to Purchaser.
3.3 Authority; No Violation.
(a) Each of Sellers has full corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which it
is a party, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each of the
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved and adopted by each
of Sellers and no additional corporate or shareholder authorization or
consent is required in connection with the execution, delivery or
performance by Sellers of this Agreement or any of the Ancillary
Agreements. This Agreement has been duly and validly executed and delivered
by each of Sellers. Assuming due authorization, execution and delivery of
this Agreement by Purchaser and Purchaser II, this Agreement constitutes
the valid and binding obligation of each of Sellers, enforceable against
each of Sellers in accordance with its terms. Assuming due
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authorization, execution and delivery of each of the Ancillary Agreements
by Purchaser or any its Affiliates that is a party to the relevant
agreement, each of the related Ancillary Agreements, when executed and
delivered, will constitute, the valid and binding obligation of each of
Sellers, enforceable against each of Sellers in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or any of the
Ancillary Agreements by each of Sellers nor the consummation by each of
Sellers of the transactions contemplated hereby or thereby, nor compliance
by each of Sellers with any of the terms or provisions hereof or thereof,
will (i) violate any provision of the Partnership Agreement, or the
certificates of incorporation or bylaws or other charter or organizational
documents of each of CCM, any of its Subsidiaries or Sellers or any of
their Affiliates or (ii) assuming that the consents and approvals
specifically referred to in Section 3.4 (as to clause (x) with respect to
Governmental Entities and as to clause (y) with respect to Governmental
Entities and non-Governmental Entities) are duly obtained, (x) violate any
Laws and Regulations applicable to any of Sellers, CCM or any of their
Subsidiaries or any of their respective properties or assets or
(y) violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result
in the termination of or a right of termination or cancellation under,
accelerate the performance required by or rights or obligations under, or
result in the creation of any Lien upon any of the respective properties or
assets of Sellers, CCM or any of their respective Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, contract, or other
instrument or obligation to which any of Sellers, CCM or any of their
respective Subsidiaries is a party, or by which they or any of their
respective properties, assets or business activities may be bound or
affected, except (in the case of clauses (ii) (x) (other than with respect
to Governmental Orders) and (y) above) for such violations, conflicts,
breaches, defaults or the loss of benefits which, either individually or in
the aggregate, would not be a Business Material Adverse Effect.
3.4 Consents and Approvals. Except for (i) any approvals or filings
required by the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the consent or approval of the NASD, (iii) the
consent or approval of the AMEX, (iv) the consent or approval of the Pacific
Stock Exchange and (v) the consents, notices and approvals set forth in
Section 3.4 of the Disclosure Schedule, no consents or approvals of any
Governmental Entity or any third party are necessary in connection with (A) the
execution and delivery by each of Sellers of this Agreement and the Ancillary
Agreements and (B) the consummation by each of Sellers of the transactions
contemplated hereby and thereby.
3.5 Financial Statements. (a) Section 3.5(a) of the Disclosure Schedule
sets forth the following unaudited condensed combined financial statements of
CCM and the Company and their Subsidiaries (collectively, the "Combined
Financial Statements"): (i) the unaudited condensed combined balance sheet of
CCM and the Company and their Subsidiaries (the "Combined Balance Sheet") as of
June 30, 2004 (the "Balance Sheet Date") and (ii) the related unaudited
condensed combined statement of operations and statements of cash flows for the
six (6) months then ended. Subject to the absence of notes, the Combined
Financial Statements have been prepared in accordance with GAAP consistently
applied, and reflect all adjustments necessary to present fairly, and fairly
present in all material respects, the consolidated financial condition and
operating results and cash flows of CCM and the Company
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and their Subsidiaries at the date and for the period indicated therein.
All adjustments were of a normal and recurring nature. Section 3.5(b) of the
Disclosure Schedule sets forth unaudited combined statement of income of "Schwab
SoundView Capital Markets", including CCM and the Company and their Subsidiaries
for the six (6) months ended June 30, 2004 on a management-reporting basis (the
"Management Reports"), based on the books and records of CCM and the Company and
their Subsidiaries and the Options Business of CS&Co., excluding the centralized
corporate function expense and reflecting the other adjustments set forth
therein. Section 3.5(c) of the Disclosure Schedule sets forth statements
detailing all the centralized corporate function expense and other adjustments
necessary to reconcile the Combined Financial Statements to the Management
Reports for the six (6) month period ended June 30, 2004. The CCM Financial
Statements have been prepared in accordance with GAAP consistently applied and
fairly present in all material respects the consolidated financial condition and
operating results and cash flows of CCM and its Subsidiaries at the date and for
the period indicated therein. The books and records of CCM are true and complete
in all material respects. The books and records of the Company are true and
complete in all material respects. Section 3.5(d) of the Disclosure Schedule
sets forth the unaudited statement of operating results of the Electronic
Program Trading business of CCM for the six (6) month period ended June 30, 2004
and the unaudited statement of operating results of the Options Business of
CS&Co. for the six (6) month period ended June 30, 2004 including all revenues
and costs associated with the operations of such divisions in accordance with
the method described therein.
3.6 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date and except as otherwise reflected in
the Combined Financial Statements, the Business has been conducted, in all
material respects, in the ordinary course consistent with past practice and
there has not occurred:
(i) any change, event or condition that, individually or in the
aggregate, is a Business Material Adverse Effect;
(ii) except as set forth in Section 3.6(a)(ii) of the Disclosure
Schedule, any acquisition, sale or transfer of any material asset of
CCM or its Subsidiaries;
(iii) any change in the accounting methods or practices
(including any change in depreciation or amortization policies or
rates) materially affecting the assets of CCM or any of its
Subsidiaries, except as have been required by a change in GAAP;
(iv) except as set forth in Section 3.6(a)(iv) of the Disclosure
Schedule, any declaration, setting aside, or payment of a dividend or
other distribution with respect to the Partnership Interests;
(v) the entry into any material contract related to CCM or its
Subsidiaries, other than in the ordinary course of business consistent
with past practice, or any material amendment or termination of, or
default under, any contract related to CCM or its Subsidiaries;
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(vi) any amendment or change to the certificate of incorporation
or bylaws or agreement of limited partnership or other charter
documents of CCM or any of its Subsidiaries;
(vii) any material change in the risk management, execution and
hedging policies, procedures or practices of CCM or its Subsidiaries,
or any material failure to comply with such policies, procedures and
practices;
(viii) any material election related to CCM or its Subsidiaries
with respect to taxes or material changes in tax accounting methods;
(ix) any agreement by any of Sellers or by CCM or any of its
Subsidiaries to do any of the things described in the preceding
clauses (i) through (viii) (other than negotiations with Purchaser and
its representatives regarding the transactions contemplated by this
Agreement);
(x) any change from the Management Reports in the manner in which
the earnings of the Business and the Company Business are recorded
(including line items) in CCM's and the Company's financial
statements; or
(xi) any other matter that would be prohibited by Section 5.2 if
Section 5.2 applied to the period following the Combined Financial
Statements.
(b) Except as permitted by this Agreement, since the Balance Sheet
Date, none of Sellers and none of CCM or any of their respective
Subsidiaries has, except as required by applicable Laws and Regulations,
(x) increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer or director of CCM
other than compensation increases in the ordinary course of business
consistent with past practice or (y) granted any severance or termination
pay to, entered into any contract to make or grant any severance or
termination pay to, or paid any bonus other than the bonuses paid on August
20, 2004 under the CCM bonus plan to the extent of the accrual on the
Balance Sheet therefor, bonuses paid on August 6, 2004 under the Parent
corporate bonus plan to the extent of the accrual on the Balance Sheet
therefor, bonuses required under agreements in effect as of the Balance
Sheet Date to any employee of CCM to the extent such agreements are set
forth in Section 3.10(a) of the Disclosure Schedule and termination pay to
the extent and in the amounts set forth in Section 3.10(a) of the
Disclosure Schedule and any termination pay for which Sellers (and not CCM
or any of its Subsidiaries) are fully responsible.
3.7 Undisclosed Liabilities. Except as set forth in Section 3.7 of the
Disclosure Schedule, there are no obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) related to CCM other than (i) those
to the extent set forth or adequately provided for in the Combined Financial
Statements, and (ii) those to the extent incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date which,
individually or in the aggregate, have not had a Business Material Adverse
Effect.
3.8 Legal Proceedings. Except as set forth in Section 3.8 of the Disclosure
Schedule (none of which matters would have a Business Material Adverse Effect),
none of Sellers and none of CCM or any of its Subsidiaries is a party to any,
and there is no pending or,
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to the Knowledge of Sellers, any threatened, Legal Proceeding relating to CCM or
any of its Subsidiaries. The reserves for litigation set forth in the Combined
Balance Sheet have been established in accordance with the FAS 5 requirements of
accruing estimable and probable matters. There is no injunction, order, judgment
or decree imposed upon any Seller, CCM or their respective Subsidiaries related
to CCM or any of its Subsidiaries.
3.9 Taxes and Tax Returns.
(a) (i) All federal, state, foreign and, to the Knowledge of Sellers,
local Tax Returns required to be filed by CCM or any of its Subsidiaries
with any Tax authority have been filed; (ii) all such Tax Returns are
correct and complete in all material respects; (iii) all Taxes of CCM and
its Subsidiaries that are due and payable with respect to the periods
covered by such Tax Returns have been paid, other than Taxes which are
being contested in good faith and are adequately reserved against or
provided for (in accordance with GAAP) in the Combined Financial
Statements; and (iv) neither CCM nor any of its Subsidiaries has any
material liability for Taxes for any current or prior tax periods in excess
of the amount reserved or provided for in the Combined Financial Statements
(but excluding, for this purpose only, any liability reflected thereon for
deferred taxes to reflect timing differences between tax and financial
accounting methods).
(b) Section 3.9(b) of the Disclosure Schedule identifies all pending
audits or examinations with respect to Taxes involving CCM or any of its
Subsidiaries.
(c) Except as set forth in Section 3.9(c) of the Disclosure Schedule,
there are no disputes pending with respect to, or claims or assessments
asserted in writing for any material amount of Taxes for which CCM or any
of its Subsidiaries could be liable, or otherwise involving CCM or any of
its Subsidiaries, nor has CCM or any of its Subsidiaries given or been
requested in writing to give any currently effective waivers extending the
statutory period of limitation applicable to any Tax return for any period
with respect to Taxes.
(d) Neither CCM or any of its respective Subsidiaries (i) is a party
to a Tax allocation or Tax sharing agreement related to the Business (other
than an agreement solely among members of a group the common parent of
which is Parent) or (ii) has any liability for the Taxes of any person
(other than any of the Company or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
(e) Proper and accurate amounts have been withheld (and timely paid to
the appropriate Governmental Entity) from the employees, customers and any
other applicable payees of CCM and its Subsidiaries related to the Business
for all periods through the date hereof in compliance with all tax
withholding provisions of applicable federal, state, local and foreign laws
(including, without limitation, income, social security and employment tax
withholding for all types of compensation, back-up withholding and
withholding on payments to non-United States persons).
(f) Each of CCM and its Subsidiaries in connection with the conduct of
the Business is in compliance with all applicable rules and regulations
regarding the solicitation,
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collection and maintenance of any forms, certifications and other
information required in connection with federal, state, local or foreign
tax withholding or reporting. None of CCM or its Subsidiaries takes custody
of customer assets for information reporting purposes other than
(i) temporary custody for escheat purposes, (ii) directives of the Office
of Foreign Assets Control, and (iii) pursuant to attachment proceedings and
other court orders.
3.10 Employee Benefit Plans.
(a) Section 3.10(a) of the Disclosure Schedule sets forth a list of
all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all other
employee benefit or compensation arrangements, agreements (oral or
written), guarantees (oral or written), perquisite programs or payroll
practices, including, without limitation, any such arrangements or payroll
practices providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation,
bonus pay, incentive pay, stock options (including those held by directors,
employees, and consultants), hospitalization insurance, medical insurance,
life insurance, scholarships or tuition reimbursements, that cover any
employees of CCM or its Subsidiaries or otherwise are related to CCM or its
Subsidiaries or to which contributions must be made thereunder for current
or former directors, officers, employees or consultants related to CCM or
its Subsidiaries (the "Business Employee Benefit Plans"), other than those
that are not material to CCM or its Subsidiaries. Section 3.10(a) of the
Disclosure Schedule separately identifies each Business Employee Benefit
Plan that is sponsored or maintained by CCM or any of its Subsidiaries, or
which covers only employees of CCM or its Subsidiaries.
(b) None of the Business Employee Benefit Plans is a "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA (a "Business Multiemployer
Plan"). None of CCM or any of its Subsidiaries or Parent has withdrawn or
expects to withdraw in a complete or partial withdrawal from any Business
Multiemployer Plan, nor has any of them incurred or expects to incur any
liability due to the termination or reorganization of a Business
Multiemployer Plan.
(c) None of the Business Employee Benefit Plans is a "single employer
plan," as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA. No liability has been incurred under Section 4062 of
ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed
under Section 4042 of ERISA that could result in a material liability to
CCM or its Subsidiaries. None of CCM or any of its Subsidiaries maintains,
or is required, either currently or in the future, to provide medical
benefits to employees, former employees or retirees of CCM or its
Subsidiaries after their termination of employment, other than pursuant to
applicable Laws and Regulations.
(d) Each Business Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto,
received a favorable determination letter from the IRS covering all tax
Laws and Regulations changes prior to the Economic Growth and Relief
Reconciliation Act of 2001 or has applied for such favorable letter during
the applicable remedial amendment period and, to the Knowledge of Sellers,
nothing has occurred with respect to the operation of any such Business
Employee Benefit Plan that would
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cause the loss of such qualification or exemption or the imposition on CCM
or its Subsidiaries or the Purchaser of any material liability, penalty or
tax under ERISA or the Code.
(e) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under
any of the Business Employee Benefit Plans to any funds or trusts
established thereunder or in connection therewith have been made by the due
date thereof, other than a failure to make contributions that is not
material and has been fully corrected. None of the Business Employee
Benefit Plans provides or promises post-employment medical or life benefits
to any employee or former employee of CCM or its Subsidiaries.
(f) There has been no violation of ERISA or the Code with respect to
the filing of applicable reports, documents and notices regarding the
Business Employee Benefit Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of required reports, documents
or notices to the participants or beneficiaries of the Business Employee
Benefit Plans which could result in any material liability to CCM or its
Subsidiaries.
(g) None of CCM or any of its Subsidiaries, the officers of CCM or its
Subsidiaries or the Business Employee Benefits Plans which are subject to
ERISA, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject CCM or its Subsidiaries or any
officer of CCM or its Subsidiaries or the Purchaser to any material tax or
penalty on prohibited transactions imposed by such Section 4975 or to any
material liability under Section 502(i) or (1) of ERISA.
(h) Except as set forth in Section 3.10(h) of the Disclosure Schedule,
none of CCM or any of its Subsidiaries is a party to any contract,
agreement or other arrangement related to CCM or its Subsidiaries which
would reasonably be expected to result in the payment of money or any other
property or rights or accelerate or provide any other rights or benefits,
to any current or former employee related to CCM or its Subsidiaries (or
other current or former service providers thereto) that would not have been
required but for the transaction provided for herein.
(i) True, correct and complete copies of the following documents, with
respect to each of the Business Employee Benefit Plans maintained by CCM or
its Subsidiaries, have been delivered or made available to Purchaser by
Sellers : (i) all Business Employee Benefit Plans and related trust
documents, and amendments thereto; (ii) the most recent Forms 5500 and
(iii) summary plan descriptions. Descriptions of all other Business
Employee Benefit Plans (all of which are being retained by Sellers) have
been delivered or made available to Purchaser by Sellers.
(j) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Knowledge of Sellers, threatened, against
the Business Employee Benefit Plans, the assets of any of the trusts under
such plans or the plan sponsor or the plan administrator, or against any
fiduciary of the Business Employee Benefit Plans with respect to
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the operation of such plans (other than routine benefit claims) which could
result in any material liability to Purchaser or CCM or its Subsidiaries.
(k) All Business Employee Benefit Plans subject to ERISA or the Code
have been maintained and administered, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code,
respectively (including rules and regulations thereunder) and other
applicable federal and state Laws and Regulations and all employees related
to CCM or its Subsidiaries required to be included as participants by the
terms of such plans have been properly included, except to the extent that
any failure to so include such employees would not subject the Purchaser or
any of its Affiliates or CCM or its Subsidiaries to any material liability.
3.11 Employee Matters.
(a) CCM and its Subsidiaries are in compliance with all applicable
Laws and Regulations respecting the employment of employees and the
engagement of leased employees, consultants and independent contractors,
including, without limitation, all Laws and Regulations regarding
discrimination and/or harassment, affirmative action, terms and conditions
of employment, wage and hour requirements (including, without limitation,
the proper classification, compensation and related withholding with
respect to employees, leased employees, consultants and independent
contractors), leaves of absence, reasonable accommodation of disabilities,
occupational safety and health, workers' compensation and employment
practices, except for such noncompliance as would not, individually or in
the aggregate, have a Business Material Adverse Effect. None of CCM or any
of its Subsidiaries is a party to any collective bargaining agreement or
other labor union contract in connection with the conduct of the Business;
nor to the Knowledge of Sellers are there any activities or proceedings of
any labor union to organize any employees related to CCM.
(b) Except as set forth in Section 3.11(b) of the Disclosure Schedule,
none of Sellers or any of its Affiliates, including CCM or any of its
Subsidiaries, has any employment agreement, minimum compensation promise or
guarantee, leased employee agreement, consultant agreement or independent
contractor agreement (in each case, whether written or unwritten) with any
of the officers, directors, employees of CCM or its Subsidiaries or any
other person providing service to CCM or its Subsidiaries.
(c) As of the time of execution and delivery of this Agreement, to the
Knowledge of Sellers (without a duty of due inquiry), no employee whose
termination would be material to CCM or its Subsidiaries intends to
terminate his or her employment with CCM or its Subsidiaries.
(d) As of the time of execution and delivery of this Agreement, to the
Knowledge of Sellers (without a duty of due inquiry), no employee whose
termination would be material to CCM or its Subsidiaries is in violation in
any respect of any term of any employment or services contract, patent
disclosure agreement, noncompetition agreement, or any restrictive covenant
to a former employer which would reasonably be expected to impede the right
of any such employee to be employed or engaged in the Business.
- 12 -
3.12 Compliance with Applicable Laws and Regulatory Matters.
(a) Except as set forth in Section 3.12(a) of the Disclosure Schedule
(none of which matters would have a Business Material Adverse Effect), CCM
and its Subsidiaries have complied with all applicable Laws and
Regulations, and are not in violation of, and have not received any notices
of violation with respect to, any Laws and Regulations in connection with
the conduct of the Business or the ownership or operation of CCM, except
for such noncompliance and violations as would not have, individually or in
the aggregate, a Business Material Adverse Effect. The reserves for
regulatory matters set forth in the Combined Balance Sheet have been
established in accordance with the FAS 5 requirements of accruing estimable
and probable matters.
(b) Set forth on Section 3.12(b)(i) of the Disclosure Schedule are all
material licenses, permits, certificates, franchises and other
authorizations related to the Business (collectively, the "Authorizations")
held by CCM or its Subsidiaries, which Authorizations constitute all
Authorizations necessary for the conduct of the Business. CCM and its
Subsidiaries have complied with, and are not in violation of, any
Authorization, except where such noncompliance or violation would not,
individually or in the aggregate, have a Business Material Adverse Effect.
Except as would not be material to CCM, all such Authorizations are in full
force and effect and there are no proceedings pending or, to the Knowledge
of Sellers, threatened that seek the revocation, cancellation, suspension
or adverse modification thereof. Set forth on Section 3.12(b)(ii) of the
Disclosure Schedule is a list of all Authorizations, listed by individual,
held by each employee of CCM and its Subsidiaries.
(c) Section 3.12(c) of the Disclosure Schedule sets forth a
description of each Governmental Order applicable to CCM, and no such
Governmental Order, individually or in the aggregate, has had or could
reasonably be expected to have a Business Material Adverse Effect.
(d) Section 3.12(d) of the Disclosure Schedule sets forth all
Governmental Entities with which CCM and its Subsidiaries are required in
connection with the conduct of the Business as a broker dealer to be
registered; and none of CCM or any of its Subsidiaries, by virtue of its
activities as a broker dealer in connection with the conduct of the
Business, is required to be registered in or to obtain a license or similar
authorization from any other Governmental Entity. CCM and its Subsidiaries
and each of their respective employees, agents, associated persons or
contractors related to CCM or its Subsidiaries who are required to be
registered as a broker-dealer, investment adviser, a registered
representative or other applicable regulatory category with the SEC, the
securities commission of any state or foreign jurisdiction or any SRO are
duly registered as such and such registrations are in full force and
effect, except for failures to register that would not be material.
(e) Except as set forth on Section 3.12(e) of the Disclosure Schedule,
no activities of CCM or its Subsidiaries could result in any of them being
required to be registered as an exchange or transfer agent, a clearing
agency, a municipal securities dealer, a government securities dealer, a
futures commission merchant, a commodity trading adviser or a commodity
pool operator.
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(f) None of CCM or any of its Subsidiaries in connection with the
conduct of the Business is subject to registration as an investment company
under the Investment Company Act or as an investment adviser under the
Investment Advisers Act, or similar Laws and Regulations of any foreign
Governmental Entity.
(g) To the Knowledge of Sellers, there are no facts or circumstances
that would (i) cause the NASD or any other required federal or state
regulatory agency or other Governmental Entity not to approve the transfer
of control and ownership of Partnership Interests to Purchaser; or
(ii) cause the NASD or any federal or state regulatory agency or other
Governmental Entity to revoke or restrict the Authorizations to operate as
a broker-dealer after the change in ownership and control of CCM and its
Subsidiaries contemplated by this Agreement.
(h) None of CCM or any of its Subsidiaries in connection with the
conduct of the Business is subject to any cease-and-desist or other order
or enforcement action issued by, or party to any written agreement, consent
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive
by, or has been ordered to pay any civil penalty by, or is a recipient of
any supervisory letter from, or has adopted any board or member resolutions
at the request or suggestion of, any regulatory authority or other
Governmental Entity related to CCM or any of its Subsidiaries (each, a
"Business Regulatory Agreement"), nor have any of CCM or its Subsidiaries
been advised in writing or, to the Knowledge of Sellers, in any other
manner, by any regulatory authority or Governmental Entity that it is
considering issuing or requesting such a Business Regulatory Agreement nor
is there any pending or, to the Knowledge of Sellers threatened, regulatory
investigation related to CCM or its Subsidiaries. To the Knowledge of
Sellers, none of the Sellers or any of their respective associated persons
(as defined in Section 3(a)(21) of the Securities Exchange Act) related to
CCM or any of its Subsidiaries has been convicted within the past ten years
of any felony or misdemeanor described in Section 15(b)(4) of the
Securities Exchange Act, or is, by reason of any misconduct, permanently or
temporarily enjoined from acting in the capacities, or engaging in the
activities, described in Section 15(b)(4)(C) of the Securities Exchange
Act. No such Person has been or is subject to a "statutory
disqualification" with respect to membership or participation in, or
association with a member of, a self-regulatory organization, described in
Section 3(a)(39) of the Securities Exchange Act or has been or is subject
to the imposition by a SRO of special supervision or other special
requirements as prerequisites for maintaining any securities license or
regulation.
(i) None of CCM or any of its Subsidiaries has received any notice
from a competent authority alleging that in connection with the conduct of
the Business, CCM or its Subsidiaries has failed to comply with any
applicable data or consumer protection Laws and Regulations, nor has CCM or
its Subsidiaries received any claim from any individual seeking
compensation for breaches of applicable data and consumer protection Laws
and Regulations in connection with the conduct of the Business.
(j) To the Knowledge of Sellers, there are no facts or circumstances
that would require any of them to give notice to any customers, consumers
or other similarly situated individuals, pursuant to California Civil Code
Sections 1798.29, et seq., or any similar Laws and
- 14 -
Regulations of any other state, of any actual or perceived data security
breaches related to CCM or its Subsidiaries.
(k) Each of CCM and its Subsidiaries has filed all reports,
registration statements and other documents, together with any amendments
required to be made with respect thereto, that it was required to file with
any Governmental Entity and has paid all fees and assessments due and
payable in connection therewith. No statements made in any such reports,
registration statements, other documents or amendments were, at the time
they were made, false or misleading with respect to any material fact. No
delay in filing any such reports has not been remedied except where such
failure to remedy would not be material.
(l) Each of CCM and its Subsidiaries has adopted and implemented an
anti-money laundering policy and a customer identification program that
comply with the requirements of applicable Laws and Regulations.
(m) Sellers have devised and maintained systems of internal controls
with respect to CCM and its Subsidiaries sufficient to be in material
compliance with the requirements of the Securities Exchange Act and the
NASD.
(n) CCM maintains "know your customer" policies and procedures and
obtains information concerning customers sufficient to know the "essential
facts" concerning its customers as required under the USA Patriot Act and
the rules of SROs.
(o) CCM has conducted and is conducting periodic internal audits,
inquiries or reviews with respect to compliance by CCM and its Subsidiaries
with selected NASD rules and internal guidelines and policies of Sellers
and its Affiliates and of CCM and its Subsidiaries and no such audit,
inquiry or review or, to the Knowledge of Sellers, any audit, inquiry or
review performed by any Governmental Entity with respect to CCM or any of
its Subsidiaries, has revealed any information with respect to CCM or its
Subsidiaries that, individually or in the aggregate, would have a Business
Material Adverse Effect.
(p) None of CCM or its Subsidiaries holds any position in OTC
derivatives.
3.13 Material Contracts.
(a) Except for the contracts set forth in Section 3.13(a) of the
Disclosure Schedule (collectively, the "Material Contracts"), none of CCM
or any of its Subsidiaries is a party to or bound by any of the following:
(i) any contract or agreement entered into other than in the
ordinary course of business consistent with past practice for the
acquisition of the securities of or any material portion of the assets
of any other Person or entity or any investment in any other Person;
(ii) any contract or agreement for the purchase of services in
excess of $250,000;
- 15 -
(iii) any contract, agreement or instrument in excess of $250,000
that expires or may be renewed at the option of any Person other than
CCM or any of its Subsidiaries so as to expire more than one year
after the date of this Agreement;
(iv) any material contract with any independent contractor or
consultant (or similar arrangement) which is not cancelable without
penalty and without more than thirty (30) days' notice;
(v) any trust indenture, mortgage, promissory note, loan
agreement or other contract, agreement or instrument for the borrowing
of money, any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP, in each case, where CCM or any of
its Subsidiaries is a lender, borrower or guarantor;
(vi) any contract or agreement limiting the freedom of CCM or any
of its Subsidiaries or any of their respective employees to engage in
any line of business or to compete with any other Person;
(vii) any contract or agreement with Sellers or any of their
Affiliates;
(viii) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect
to, the obligations, liabilities (whether accrued, absolute,
contingent or otherwise) or indebtedness of any other Person other
than those entered into in the ordinary course of business;
(ix) any material agreement which would be terminable other than
by CCM or any of its Subsidiaries or under which a payment or
performance obligation would arise or be accelerated, in each case as
a result of the consummation of the transactions contemplated by this
Agreement;
(x) any alliance, cooperation, joint venture, stockholders'
partnership or similar agreement;
(xi) any broker, distributor, dealer, agency, sales promotion,
market research, market consulting or advertising agreement involving
in excess of $250,000;
(xii) any material research, development, sales representative,
marketing or reseller agreement, or any service, support or
maintenance agreement related to the business or technology of CCM or
any of its Subsidiaries;
(xiii) any agreement, option or commitment or right with, or held
by, any third party to acquire, use or have access to any assets or
properties, or any interest therein, of CCM or any of its
Subsidiaries;
(xiv) any outbound license, sublicense or development agreement
or other material agreement or any material inbound license,
sublicense or development agreement or other material agreement that
affects or relates to the Intellectual Property, including, without
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limitation, any material agreement pursuant to which any person or
entity is authorized to use or has an ownership or security interest
in any Intellectual Property;
(xv) any "soft dollar" contract, arrangement or agreement,
whether written or oral;
(xvi) any material contract or agreement which would require any
consent or approval of a counterparty as a result of the consummation
of the transactions contemplated by this Agreement; and
(xvii) any other contract the loss or presence of which would,
individually or in the aggregate, have a Business Material Adverse
Effect or that involves a payment or obligation that exceeds $250,000
annually or $500,000 in the aggregate or contains any obligation of
CCM the failure of which to satisfy would have a Business Material
Adverse Effect.
(b) CCM and its Subsidiaries have performed all of the obligations
required to be performed by them and are entitled to all accrued benefits
under, and are not alleged to be in default in respect of, each Material
Contract to which CCM or any of its Subsidiaries is a party or by which CCM
or any of its Subsidiaries is bound, except in each case as would not,
individually or in the aggregate, have a Business Material Adverse Effect.
Each of the Material Contracts is in full force and effect, without
amendment (other than as disclosed in Section 3.13(b) of the Disclosure
Schedule), and there exists no default or event of default or event,
occurrence, condition or act, with respect to CCM or any of its
Subsidiaries or, to Knowledge of Sellers, with respect to any other
contracting party, which, with the giving of notice, the lapse of time or
the happening of any other event or condition, would become a default or
event of default under any Material Contract, except, as would not,
individually or in the aggregate, be material to CCM. True, correct and
complete copies of all Material Contracts have been furnished or made
available to Purchaser.
3.14 Assets. CCM, the Company and their Subsidiaries own, lease or have the
right to use all the properties and assets used or held for use in the conduct
of the Business and the Company Business or otherwise reflected in the Combined
Balance Sheet (all such properties and assets being referred to as the "Entity
Assets"). The Entity Assets constitute all the assets (other than real estate
assets) used or held for use in the conduct of (i) the Business and necessary
for Purchaser to operate the Business as currently conducted by Sellers and its
Affiliates and (ii) other than with respect to employees, real estate leases,
leasehold improvements and any assets the parties hereto have specifically
agreed to exclude pursuant to any other provision of this Agreement, the Company
Business and necessary for Purchaser and Purchaser II to operate the Company
Business as currently conducted by Sellers and its Affiliates. CCM, the Company
and their Subsidiaries have good title to, or in the case of leased or subleased
Entity Assets, valid and subsisting leasehold interests in, all of the Entity
Assets, free and clear of all Liens, except for Permitted Liens, and immediately
following the Closing, such entities will have good title to, or in the case of
leased or subleased Entity Assets, valid and subsisting leasehold interests in,
all of the Entity Assets, free and clear of all Liens, except for Permitted
Liens. Section 3.14 of the Disclosure Schedule contains a true, complete and
correct list (designating the relevant lessors or sublessors) of all real
property and improvements used in the Business or the Company Business
- 17 -
and either leased or subleased by CCM, the Company or any of their Subsidiaries
or otherwise made available for their use.
3.15 Environmental Liability. There are no legal, administrative, arbitral
or other proceedings, claims or actions or any private environmental
investigations or remediation activities or governmental investigations of any
nature that would be reasonably likely to result in the imposition on CCM or any
of its Subsidiaries of any liability or obligation arising under common law or
under any local, state or federal environmental statute, regulation or
ordinance, including CERCLA, pending or, to the Knowledge of Sellers, threatened
against CCM or any of its Subsidiaries, which liability or obligation would be
material to CCM. To the Knowledge of Sellers, there is no reasonable basis for
any such proceeding, claim, action or investigation. None of CCM or any of its
Subsidiaries is subject to any agreement, order, judgment or decree by or with
any court, governmental authority, regulatory agency or third party imposing any
liability or obligation with respect to the foregoing. CCM is and has been in
compliance with all applicable Laws and Regulations and Authorizations relating
to the environment, human health and safety, hazardous substances and waste
material ("Environmental Laws"), and there are no liabilities under any
Environmental Laws with respect to the Business, other than failures to comply
or liabilities that would not, individually or in the aggregate, have a Business
Material Adverse Effect or otherwise materially adversely affect Purchaser. None
of CCM or its Subsidiaries has received any notice from any Governmental Entity
during the past five years relating to or alleging a material violation of any
Environmental Law. None of CCM or its Subsidiaries has any indemnification
obligation with any Person with respect to Environmental Laws.
3.16 Insurance. CCM and its Subsidiaries have in full force and effect the
insurance coverage with respect to the Business set forth in Section 3.16 of the
Disclosure Schedule. There is no material claim related to CCM pending under any
of such policies as to which coverage has been questioned, denied or disputed by
the underwriters of such policies or bonds. All premiums due and payable under
all such policies have been paid and, CCM and its Subsidiaries are otherwise in
compliance in all material respects with the terms of such policies. Sellers
have no Knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.
3.17 Intellectual Property.
(a) Section 3.17(a) of the Disclosure Schedule lists all Intellectual
Property registered or filed in the name of CCM or its Subsidiaries, which
CCM or any of its Subsidiaries owns exclusively (except as owned
exclusively by Parent or its other Affiliates as set forth on Schedule
3.17(a)) and all Proprietary Software that is necessary or material to the
current or proposed conduct of the Business. Section 3.17(a) of the
Disclosure Schedule lists all Legal Proceedings before any Governmental
Entity (including the United States Patent and Trademark Office or
equivalent authority anywhere in the world) related to any of such
Intellectual Property or related to any Proprietary Software whatsoever. No
claim is currently pending or, to the Knowledge of Sellers threatened,
challenging the ownership, validity, registerability, enforceability,
infringement or use of, or licensed right to use, any Intellectual
Property. The Intellectual Property listed in Section 3.17(a) of the
Disclosure Schedule is valid, subsisting and enforceable (but as to
Intellectual Property applications thereon that are not fully issued, only
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that they are subsisting). To the Knowledge of Sellers, there is no valid
basis to challenge the ownership or enforceability of any Intellectual
Property, the validity, registerability, use of or the licensed right to
use any Intellectual Property (provided that this sentence shall not limit
or qualify the foregoing sentence). The Business IP is not subject to any
outstanding order, judgment, decree or agreement adversely affecting CCM's
and its Subsidiaries' (or Purchaser's following the Closing) use thereof or
rights thereto. None of CCM or its Subsidiaries has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation or other conflict with respect to any Intellectual
Property other than as set forth in agreements provided to Purchaser for
its review. No commercially material Intellectual Property owned by CCM or
any of its Subsidiaries is omitted from Schedule 3.17(a).
(b) Section 3.17(b) of the Disclosure Schedule lists each item of
software included in the Intellectual Property and developed by or for CCM
and its Subsidiaries or the Business (the "Proprietary Software") that is
necessary or material to the current or proposed conduct of the Business.
All Proprietary Software does not, to the Knowledge of Sellers, contain any
"time bombs," "Trojan horses," "back doors," "trap doors," "worms,"
viruses, or other devices or effects that (A) enable or assist any person
to access without authorization the Proprietary Software, or (B) otherwise
significantly adversely affect the functionality of the Proprietary
Software. Except as set forth on Section 3.17(b) of the Disclosure
Schedule, to the Knowledge of Sellers, the Proprietary Software does not
contain any shareware, open source code, or other software the use of which
requires disclosure or licensing of the Proprietary Software. Sellers shall
have made available to Purchaser for hiring all personnel necessary to use,
maintain, revise and operate the Proprietary Software as currently
maintained, revised and operated.
(c) Except as set forth on Section 3.17(c) of the Disclosure Schedule,
CCM and its Subsidiaries (i) own all right, title and interest in and to
each item of Intellectual Property, free and clear of any Liens other than
Permitted Liens, or (ii) are a licensee of Intellectual Property pursuant
to a contract that is a valid and binding obligation of CCM and its
Subsidiaries and, to the Knowledge of Sellers, the other parties thereto
and is in full force and effect. Except as set forth on Section 3.17(c) of
the Disclosure Schedule, each material item of Intellectual Property shall
be owned by Purchaser or immediately available for use by Purchaser on
substantially identical terms and conditions immediately following the
Closing, without any requirement for any consent from any third party or
any affirmative act by Purchaser (e.g., notice to any third party).
(d) Section 3.17(d) of the Disclosure Schedule lists each license or
other agreement or authorization pursuant to which CCM and its Subsidiaries
provided or agreed to provide (whether or not such agreement is contingent)
a license, nonassertion agreement, covenant not to xxx, enforcement right
or any similar right, agreement or grant to any third party with respect to
any Business IP. No such agreement operates to grant rights in or to or
create any limitation (including by way of nonassertion) or encumbrance
upon Intellectual Property owned or controlled by any entity which becomes
an affiliate of CCM or any of its Subsidiaries other than those provided to
Purchaser for its review. Except as set forth on Section 3.17(d) of the
Disclosure Schedule, no other person or entity has any rights to any
Business IP, and, to the Knowledge of Sellers, no person or entity is
infringing, violating or misappropriating any of the Intellectual Property.
- 19 -
(e) Section 3.17(e) of the Disclosure Schedule identifies each
license, nonassertion agreement, covenant not to xxx or agreement pursuant
to which CCM and its Subsidiaries use Intellectual Property in the
operation of the Business that is owned by a party other than CCM or any of
its Subsidiaries. During the preceding twenty-four (24) months, all
royalties and other payments due from CCM or any of its Subsidiaries under
such licenses or agreements have been paid when due.
(f) Except as set forth on Section 3.17(f) of the Disclosure Schedule,
in the operation of the Business, CCM and its Subsidiaries are not, and
shall not be as a result of the execution and delivery of this Agreement or
the performance of their obligations under this Agreement (assuming receipt
of any consent or approval set forth in Section 3.4 of the Disclosure
Schedule), in material breach of any license, sublicense or other agreement
or any term or condition thereof, pursuant to which CCM or any of its
Subsidiaries grant or are granted any license to the Intellectual Property
and all such licenses, sublicenses and other agreements are valid and
enforceable and no party thereto has given CCM or its Subsidiaries notice
of its intention to cancel, terminate, change the scope of rights under, or
fail to renew, and no party is in material breach or has repudiated any
material provision thereof. To the Knowledge of Sellers, to the extent that
Intellectual Property is sublicensed to CCM and/or its Subsidiaries by a
third person, the sublicensed rights of CCM and/or its Subsidiaries shall
continue in full force and effect even if the principal third person
license terminates or is otherwise modified for any reason. To the
Knowledge of Sellers, the Intellectual Property provided or otherwise made
available to CCM and its Subsidiaries pursuant to such licenses,
sublicenses or other agreements is valid, subsisting and enforceable and is
not subject to any outstanding Governmental Order adversely affecting CCM's
or its Subsidiaries' use thereof or their rights thereto.
(g) Except as set forth on Section 3.17(g) of the Disclosure Schedule,
to the extent that any Intellectual Property has been developed or created
for or on behalf of CCM or any of its Subsidiaries, or the Business, by any
Person other than CCM or any of its Subsidiaries, CCM or any of its
Subsidiaries has a written agreement with such Person with respect thereto
transferring or otherwise conferring to the foregoing all right, title and
interest in and to the Intellectual Property by operation of Laws and
Regulations or by valid assignment. To the extent internally developed, CCM
and its Subsidiaries have followed standard business practices in
developing the Intellectual Property, including requiring each employee or
contractor to execute a written agreement in which such employee or
contractor assigns or otherwise confers to the foregoing all right, title
and interest in and to such Intellectual Property. All Proprietary
Software, including each of its constituent parts, is owned exclusively by
CCM and its Subsidiaries, and is not derived from and does not incorporate
or otherwise use as a basis any Intellectual Property not owned exclusively
by CCM and its Subsidiaries. Without limiting the foregoing provisions of
this Section 3.17(g), modification of the Proprietary Software requires no
Person's consent other than CCM or its Subsidiaries.
(h) CCM and its Subsidiaries have taken reasonable steps in accordance
with normal industry practice and in light of the nature of the particular
item of Intellectual Property to protect the proprietary nature of each
item of Intellectual Property, and to maintain in confidence all trade
secrets and other material confidential information that CCM and its
Subsidiaries own or use in connection with the Business ("Business
Confidential Information"). To the Knowledge of Sellers, there has been no
misappropriation of any
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Business Confidential Information by any third party. Except as set forth
on Section 3.17(h) of the Disclosure Schedule, none of CCM or any of its
Subsidiaries has placed in escrow or otherwise disclosed the source code or
documentation for any of the Proprietary Software. To the Knowledge of
Sellers, none of the current employees of CCM and its Subsidiaries has any
patents issued or applications pending for any device, process, design or
invention of any kind now used or needed by CCM and/or its Subsidiaries in
the furtherance of its business, which patents or applications have not
been assigned to CCM and/or its Subsidiaries. CCM and its Subsidiaries have
no Knowledge that any of their employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any Governmental Order, that would interfere with
the use of such employee's best efforts to promote the interests of CCM and
its Subsidiaries or that would conflict with the Business as conducted by
Sellers or proposed to be conducted. Neither the execution nor delivery of
this Agreement nor the carrying on of the Business by the employees of CCM
and its Subsidiaries will, to the Knowledge of Sellers, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute
a default under any contract, covenant or instrument under which any of
such employees is now obligated. To the Knowledge of Sellers, it is not and
will not be necessary to utilize in the Business any inventions of any of
the employees of CCM or any of its Subsidiaries (or people they currently
intend to hire) made prior to or outside the scope of their employment with
CCM and its Subsidiaries.
(i) The conduct of the Business, and the Proprietary Software, do not,
and have not, infringed or violated, or constituted a misappropriation of,
any intellectual property rights of any person or entity; provided that the
foregoing representation is given to the Knowledge of Sellers as concerns
patent rights. Section 3.17(i) of the Disclosure Schedule lists any
complaint, claim, notice or other communication (x) received in oral form
by any partner, officer or employee of, CCM or any of its Subsidiaries, or
(y) received in written form by CCM or any of its Subsidiaries, expressly
or impliedly alleging the conduct of the Business, or the Proprietary
Software, constitutes any infringement, violation or misappropriation of
the intellectual property of any third party, or otherwise challenging the
right of CCM or any of its Subsidiaries or any licensee or sublicensee of
CCM or any of its Subsidiaries to own or use any Intellectual Property, or
challenging the validity, scope or enforceability of any Intellectual
Property or the right of CCM or any of its Subsidiaries to license others
to use or sublicense any Intellectual Property. Sellers have made available
to Purchaser complete and accurate copies of all written documentation in
the possession of Sellers relating to any such complaint, claim, notice,
threat or other communication.
(j) Section 3.17(j) of the Disclosure Schedule sets forth a list of
all Internet domain names and their expiration dates currently licensed or
owned by CCM (collectively, the "Domain Names"). CCM has, and after the
Closing will have, a current registration of each Domain Name and the right
to continue to conduct the Business as currently conducted under the Domain
Names.
(k) None of the officers, directors or employees of Sellers, CCM or
any of their respective Affiliates owns or holds rights (whether current or
contingent) under any Intellectual Property and CCM has all right, title
and interest in the Intellectual Property obtained through transactions
involving any officers, directors or employees of Sellers, CCM or any of
their respective Affiliates.
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(l) Except as set forth on Section 3.17(l) of the Disclosure Schedule,
the Intellectual Property included in the Entity Assets constitute all the
intellectual property necessary for, used in, or held for, the current or
proposed conduct of the Business, and neither Parent nor any of its
Affiliates (other than CCM or its Subsidiaries) owns any intellectual
property necessary to, used in or held for the current or proposed conduct
of the Business.
3.18 Information Technology.
(a) All electronic data processing, information, record keeping,
communications, telecommunications, hardware, third party software,
networks, peripherals, portfolio trading and computer systems, including
any outsourced systems, services, or processes, computers, computer
software, firmware, middleware, servers, workstations, routers, hubs,
switches, data communications lines, and all other information technology
equipment, and all associated documentation and Intellectual Property which
are material to the conduct of the Business or the electronic program
trading business of CCM are collectively referred to as "Technology
Systems." Within the preceding twelve (12) months, there has not been any
material malfunction, default, or failure with respect to any of the
Technology Systems that has not been remedied or replaced in all material
respects. The Technology Systems as they will be transferred to Purchaser
pursuant to this Agreement or provided pursuant to the Transition Services
Agreement are sufficient to support the information technology needs of the
Business. Sellers shall have made available to Purchaser for hiring all
personnel necessary to use, maintain, revise and operate the Technology
Systems transferred to Purchaser pursuant to this Agreement as currently
used, maintained, revised and operated.
(b) Technology Systems are either owned by, licensed or leased to, or
otherwise properly utilized pursuant to written authorization to CCM or any
of its Subsidiaries. No action will be necessary as a result of the
transactions effected by this Agreement to authorize, permit, or otherwise
enable use of the Technology Systems to continue to the same extent and in
the same manner that such Technology Systems have been used in the
preceding twelve (12) months. CCM and its Subsidiaries are not in breach of
any obligation owed under such licenses or leases.
(c) Section 3.18(c) of the Disclosure Schedule lists all the material
third party agreements, licenses, and leases related to the Technology
Systems, including without limitation, all material maintenance and support
contracts for the Technology Systems.
(d) Except as disclosed in Section 3.18(d) of the Disclosure Schedule,
(i) the Technology Systems (for a period of 18 months prior to the Closing
Date) have not suffered a material unplanned disruption; (ii) except for
ongoing payments due under relevant third party agreements, the Technology
Systems are free from any material charge, mortgage or security interest;
and (iii) access to business critical parts of the Technology Systems is
not shared with any third party.
(e) Details of the disaster recovery and business continuity
arrangements for CCM are disclosed in Section 3.18(e) of the Disclosure
Schedule. The material disaster recovery and business continuity
arrangements for CCM are consistent with industry practice.
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(f) None of CCM or any of its Subsidiaries has received notice of or
is aware of any material circumstances including, without limitation, the
execution of this Agreement, which would enable any third party to
terminate any of CCM's or any of its Subsidiaries' material agreements or
arrangements relating to the Technology Systems.
(g) There are no material agreements with third parties for Technology
Systems that would terminate on the consummation of the transactions
contemplated by this Agreement or are otherwise not assignable without
consent from any third party or without payment of any associated cost,
fee, charge, or penalty.
(h) [Intentionally Omitted].
(i) None of CCM or any of its Subsidiaries has received notice of or
is aware of any claim or action alleging that the Technology Systems, or
CCM's use of the Technology Systems, in any way violate any non-disclosure
and/or non-use agreement, nor constitute an infringement or other violation
of any copyright, trade secret, trademark, service xxxx, patent, invention,
proprietary information, or other rights of any third party.
3.19 Interests of Officers, Directors and Employees. None of the officers,
directors or employees of Sellers, CCM, any of their respective Subsidiaries or
any of their respective Affiliates has any material interest in any property,
real or personal, tangible or intangible used in the Business.
3.20 Order Flow.
(a) [Intentionally Omitted].
(b) [Intentionally Omitted].
(c) Section 3.20(c) of the Disclosure Schedule sets forth a true and
complete summary of commissions associated with trades executed by
individual traders employed by CCM in 2003 and the first two calendar
quarters of 2004.
(d) Capitalized terms used in this Section 3.20 and not otherwise
defined herein shall have the meaning set forth in the (i) Order Handling
Agreement, when such term is used with respect to equity securities, or
(ii) Options Order Business Agreement, when such term is used with respect
to options.
3.21 Broker's Fees. Except for Xxxxxxxxx & Co., none of Sellers has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement.
3.22 Business Information. The representations or warranties made by
Sellers herein or in any schedule hereto, including the Disclosure Schedule, or
certificate furnished by Sellers pursuant to this Agreement do not contain any
untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
- 23 -
Article IIIA
Representations and Warranties of the Company
Except as specifically disclosed in the correlative Section in the
Disclosure Schedule, Sellers, jointly and severally, represent and warrant to
Purchaser and Purchaser II as of the date hereof and as of the Closing as
follows:
3A.1 Corporate Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
and Regulations of the State of Delaware. The Company and each of its
Subsidiaries has the requisite power to carry on the Company Business as now
being conducted by it and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would, individually or in the aggregate, have a Company Material
Adverse Effect. Sellers have furnished or made available to Purchaser II prior
to the date of this Agreement a true and correct copy of the certificate or
articles of incorporation, partnership agreement or operating agreement, each as
applicable, and bylaws, and any other charter or organizational documents, of
the Company and its Subsidiaries, and each such document in the form so
furnished to Purchaser II is in full force and effect. None of the Company or
any of its Subsidiaries is in violation of any of the provisions of its
organizational documents.
3A.2 Capitalization.
(a) The authorized capital stock of the Company consists of:
500,000,000 shares of common stock, par value $0.01 per share, of which
25,000,000 are issued and outstanding, all of which are duly authorized,
validly issued, fully paid, nonassessable and owned, free and clear of all
Liens, by Parent; 75,000,000 shares of Class B common stock, par value
$0.01 per share; and 30,000,000 shares of preferred stock, par value $0.001
per share. There are no shares of Class B common stock or preferred stock
outstanding. There are no bonds, debentures, notes or other indebtedness or
securities of the Company that have the right to vote (or that are
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth above, no shares of capital stock or other voting securities of the
Company are issued, reserved for issuance or outstanding. There are no
outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements
or obligations of any character relating to the issued or unissued capital
stock or other securities of the Company or any of its Subsidiaries.
(b) Section 3.2(b) of the Disclosure Schedule lists each direct and
indirect Subsidiary of the Company. All of the outstanding shares of
capital stock and voting securities or other interests of each Subsidiary
of the Company, including Saturn Sub, are owned, directly or indirectly, by
the Company and are duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(c) Except as set forth in Section 3.2(c) of the Disclosure Schedule,
none of the Company or any of its Subsidiaries (i) owns, or has any
contract or other obligation to acquire, any equity securities or other
securities of or ownership interest in any Person or any direct or indirect
equity or ownership interest in any other business or (ii) has any contract
or
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other obligation to provide funds to, or make any investment in, any
Person. There is no funding obligation of the Company or any of its
Subsidiaries with respect to a third party investment or other interest
that has not been satisfied, except as specifically reflected on the
Combined Financial Statements.
(d) Upon delivery by Parent of the Company Common Stock at Closing,
good and valid title to the Company Common Stock, free and clear of all
Liens, other than those resulting only from Purchaser II's ownership, will
pass to Purchaser II.
3A.3 No Violation. Neither the execution and delivery of this Agreement or
any of the Ancillary Agreements by each of Sellers nor the consummation by each
of Sellers of the transactions contemplated hereby or thereby, nor compliance by
each of Sellers with any of the terms or provisions hereof or thereof, will
(i) violate any provision of the certificates of incorporation or bylaws or
other charter or organizational documents of each of the Company or any of its
Subsidiaries or any of their Affiliates or (ii) assuming that the consents and
approvals specifically referred to in Section 3.4 (as to clause (x) with respect
to Governmental Entities and as to clause (y) with respect to Governmental
Entities and non-Governmental Entities) are duly obtained, (x) violate any Laws
and Regulations applicable to any of Sellers, the Company or any of their
Subsidiaries or any of their respective properties or assets or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by or
rights or obligations under, or result in the creation of any Lien upon any of
the respective properties or assets of Sellers, the Company or any of their
respective Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement,
contract, or other instrument or obligation to which any of Sellers, the Company
or any of their respective Subsidiaries is a party, or by which they or any of
their respective properties, assets or business activities may be bound or
affected, except (in the case of clauses (ii) (x) (other than with respect to
Governmental Orders) and (y) above) for such violations, conflicts, breaches,
defaults or the loss of benefits which, either individually or in the aggregate,
would not be a Company Material Adverse Effect.
3A.4 [Intentionally Omitted].
3A.5 [Intentionally Omitted].
3A.6 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date and except as otherwise reflected in
the Combined Financial Statements, the Company Business has been conducted,
in all material respects, in the ordinary course consistent with past
practice and there has not occurred:
(i) any change, event or condition that, individually or in the
aggregate, is a Company Material Adverse Effect;
(ii) except as set forth in Section 3.6(a)(ii) of the Disclosure
Schedule, any acquisition, sale or transfer of any material asset of
the Company or its Subsidiaries;
- 25 -
(iii) any change in the accounting methods or practices
(including any change in depreciation or amortization policies or
rates) materially affecting the assets of the Company or any of its
Subsidiaries, except as have been required by a change in GAAP;
(iv) except as set forth in Section 3.6(a)(iv) of the Disclosure
Schedule, any declaration, setting aside, or payment of a dividend or
other distribution with respect to the Company Common Stock;
(v) the entry into any material contract related to the Company
or its Subsidiaries, other than in the ordinary course of business
consistent with past practice or any material amendment or termination
of, or default under, any contract related to the Company or its
Subsidiaries;
(vi) any amendment or change to the certificate of incorporation
or bylaws or agreement of limited partnership or other charter
documents of the Company or any of its Subsidiaries;
(vii) any material change in the risk management, execution and
hedging policies, procedures or practices of the Company or its
Subsidiaries, or any material failure to comply with such policies,
procedures and practices;
(viii) any material election related to the Company or its
Subsidiaries with respect to taxes or material changes in tax
accounting methods;
(ix) any agreement by any of Sellers or by the Company or any of
its Subsidiaries to do any of the things described in the preceding
clauses (i) through (viii) (other than negotiations with Purchaser and
its representatives regarding the transactions contemplated by this
Agreement);
(x) any change from the Management Reports in the manner in which
the earnings of the Business and the Company Business are recorded
(including line items) in CCM's and the Company's financial
statements; or
(xi) any other matter that would be prohibited by Section 5.2 if
Section 5.2 applied to the period following the Combined Financial
Statements.
(b) Except as permitted by this Agreement, since the Balance Sheet
Date, none of Sellers and none of the Company or any of their respective
Subsidiaries has, except as required by applicable Laws and Regulations,
(x) increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer or director of the
Company other than compensation increases in the ordinary course of
business consistent with past practice or (y) granted any severance or
termination pay to, entered into any contract to make or grant any
severance or termination pay to, or paid any bonus other than the bonuses
paid on August 20, 2004 under the Company bonus plan to the extent of the
accrual on the Balance Sheet therefor, bonuses paid on August 6, 2004 under
the Parent corporate bonus plan to the extent of the accrual on the Balance
Sheet therefor, bonuses required under agreements in effect as of the
Balance Sheet Date to any employee of the Company to the extent such
agreements are set forth in Section 3.10(a) of the Disclosure Schedule and
termination pay to the
- 26 -
extent and in the amount set forth in Section 3.10(a) of the Disclosure
Schedule and any termination pay for which Sellers and not the Company or
any of its Subsidiaries are fully responsible.
3A.7 Undisclosed Liabilities. Except as set forth in Section 3.7 of the
Disclosure Schedule, there are no obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) related to the Company other than
(i) those to the extent set forth or adequately provided for in the Combined
Financial Statements, and (ii) those to the extent incurred in the ordinary
course of business consistent with past practice since the Balance Sheet Date
which, individually or in the aggregate, have not had a Company Material Adverse
Effect.
3A.8 Legal Proceedings. Except as set forth in Section 3.8 of the
Disclosure Schedule, none of Sellers and none of the Company or any of its
Subsidiaries is a party to any, and there is no pending or, to the Knowledge of
Sellers, any threatened, Legal Proceeding relating to the Company or any of its
Subsidiaries. The reserves for litigation set forth in the Combined Balance
Sheet have been established in accordance with the FAS 5 requirements of
accruing estimable and probable matters. There is no injunction, order, judgment
or decree imposed upon any Seller, the Company or their respective Subsidiaries
related to the Company or any of its Subsidiaries.
3A.9 Taxes and Tax Returns.
(a) (i) All federal, state, foreign and, to the Knowledge of Sellers,
local Tax Returns required to be filed by or with respect to the Company or
any of its Subsidiaries with any Tax authority have been filed; (ii) all
such Tax Returns are correct and complete in all material respects;
(iii) all Taxes of the Company or any of its Subsidiaries that are due and
payable with respect to the periods covered by such Tax Returns have been
paid, other than Taxes which are being contested in good faith and are
adequately reserved against or provided for (in accordance with GAAP) in
the Combined Financial Statements; and (iv) neither the Company nor any of
its Subsidiaries has any material liability for Taxes for any current or
prior tax periods in excess of the amount reserved or provided for in the
Combined Financial Statements (but excluding, for this purpose only, any
liability reflected thereon for deferred taxes to reflect timing
differences between tax and financial accounting methods). As of December
31, 2002, the Company and its Subsidiaries had a net operating loss
carryforward of $80,804,938. Such net operating loss carryforward is due to
expire as set forth on Section 3.9(a) of the Disclosure Schedule and is not
subject to a limitation under Section 382 of the Code that is more
restrictive than the limitation that will apply under Section 382 as a
result of the transactions contemplated by this Agreement (based on the
Purchase Price Allocation set forth in Section 1.4 hereof).
(b) Section 3.9(b) of the Disclosure Schedule identifies all pending
audits or examinations with respect to Taxes involving the Company or any
of its Subsidiaries.
(c) Except as set forth in Section 3.9(c) of the Disclosure Schedule,
there are no disputes pending with respect to, or claims or assessments
asserted in writing for any material amount of Taxes for which the Company
or any of its Subsidiaries could be liable, or otherwise involving the
Company or any of its Subsidiaries, nor has Parent, the Company or any
- 27 -
of their respective Subsidiaries given or been requested in writing to give
any currently effective waivers extending the statutory period of
limitation applicable to any Tax return for any period with respect to
Taxes.
(d) Except as set forth in Section 3.9(d) of the Disclosure Schedule,
none of the Company or any of its Subsidiaries has been required to include
in income any adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by the Company, Parent or
any of their respective Subsidiaries, and the IRS has not initiated or
proposed any such adjustment or change in accounting method (including,
without limitation, any method for determining reserves for bad debts
maintained by the Company or any of its Subsidiaries). Neither the Company
nor any of its respective Subsidiaries (i) is a party to a Tax allocation
or Tax sharing agreement or (ii) has any liability for the Taxes of any
person under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract,
or otherwise.
(e) Proper and accurate amounts have been withheld (and timely paid to
the appropriate Governmental Entity) from the employees, customers and any
other applicable payees of the Company and its Subsidiaries for all periods
through the date hereof in compliance with all tax withholding provisions
of applicable federal, state, local and foreign laws (including, without
limitation, income, social security and employment tax withholding for all
types of compensation, back-up withholding and withholding on payments to
non-United States persons).
(f) Each of the Company and its Subsidiaries is in compliance with all
applicable rules and regulations regarding the solicitation, collection and
maintenance of any forms, certifications and other information required in
connection with federal, state, local or foreign tax withholding or
reporting. None of the Company or its Subsidiaries takes custody of
customer assets for information reporting purposes other than (i) temporary
custody for escheat purposes, (ii) directives of the Office of Foreign
Assets Control, and (iii) pursuant to attachment proceedings and other
court orders.
(g) None of the Company or any of its respective Subsidiaries has been
a party to any "reportable transaction" within the meaning of Treasury
Regulations Section 1.6011-4(b), any "confidential corporate tax shelter"
within the meaning of Treasury Regulations Section 1.6111-2, or any
"potentially abusive tax shelter" within the meaning of Treasury
Regulations Section 1.6112-1(b).
(h) Except as set forth in Section 3.9(h) of the Disclosure Schedule,
none of the Company of any of its Subsidiaries is a party to any plan,
program, agreement, arrangement, practice, policy or understanding that
would result, separately or in the aggregate, in the payment or provision
(whether in connection with any termination of employment or otherwise) of
any "excess parachute payment" within the meaning of Section 280G of the
Code with respect to a current or former employee or current or former
consultant or contractor as a result of the transactions contemplated
hereby.
(i) Except as set forth in Section 3.9(i) of the Disclosure Schedule,
none of the Company or its respective Subsidiaries is a party to any
contract, agreement, plan or
- 28 -
arrangement covering any person that could give rise to the payment of any
amount that would not be deductible by reason of Section 162(m) of the
Code.
3A.10 Employee Benefit Plans.
(a) Section 3.10(a) of the Disclosure Schedule sets forth a list of
all "employee benefit plans," as defined in Section 3(3) of ERISA, and all
other employee benefit or compensation arrangements, agreements (oral or
written), guarantees (oral or written), perquisite programs or payroll
practices, including, without limitation, any such arrangements or payroll
practices providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation,
bonus pay, incentive pay, stock options (including those held by directors,
employees, and consultants), hospitalization insurance, medical insurance,
life insurance, scholarships or tuition reimbursements, that cover any
employees of the Company or its Subsidiaries or otherwise are related to
the Company or its Subsidiaries or to which contributions must be made
thereunder for current or former directors, officers, employees or
consultants related to the Company or its Subsidiaries (the "Company
Employee Benefit Plans"), other than those that are not material to the
Company or its Subsidiaries. Section 3.10(a) of the Disclosure Schedule
separately identifies each Company Employee Benefit Plan that is sponsored
or maintained by the Company or any of its Subsidiaries, or which covers
only employees related to the Company or its Subsidiaries.
(b) None of the Company Employee Benefit Plans is a "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA (a "Company Multiemployer
Plan"). None of the Company or any of its Subsidiaries or Parent has
withdrawn or expects to withdraw in a complete or partial withdrawal from
any Company Multiemployer Plan, nor has any of them incurred or expects to
incur any liability due to the termination or reorganization of a Company
Multiemployer Plan.
(c) None of the Company Employee Benefit Plans is a "single employer
plan," as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA. No liability has been incurred under Section 4062 of
ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed
under Section 4042 of ERISA that could result in a material liability to
the Company or its Subsidiaries. None of the Company or any of its
Subsidiaries maintains, or is required, either currently or in the future,
to provide medical benefits to employees, former employees or retirees of
the Company or its Subsidiaries after their termination of employment,
other than pursuant to applicable Laws and Regulations.
(d) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto,
received a favorable determination letter from the IRS covering all tax
Laws and Regulations changes prior to the Economic Growth and Relief
Reconciliation Act of 2001 or has applied for such favorable letter during
the applicable remedial amendment period and, to the Knowledge of Sellers,
nothing has occurred with respect to the operation of any such Company
Employee Benefit Plan that would cause the loss of such qualification or
exemption or the imposition on the Company or its Subsidiaries or the
Purchaser II of any material liability, penalty or tax under ERISA or the
Code.
- 29 -
(e) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans to any funds or trusts
established thereunder or in connection therewith have been made by the due
date thereof, other than a failure to make contributions that are not
material and have been fully corrected. None of the Company Employee
Benefit Plans provides or promises post-employment medical or life benefits
to any employee or former employee of the Company or its Subsidiaries.
(f) There has been no violation of ERISA or the Code with respect to
the filing of applicable reports, documents and notices regarding the
Company Employee Benefit Plans with the Secretary of Labor or the Secretary
of the Treasury or the furnishing of required reports, documents or notices
to the participants or beneficiaries of the Company Employee Benefit Plans
which could result in any material liability to the Company or its
Subsidiaries.
(g) None of the Company or any of its Subsidiaries, the officers of
the Company or its Subsidiaries or the Company Employee Benefits Plans
which are subject to ERISA, any trusts created thereunder or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section 4975 of the Code) or any
other breach of fiduciary responsibility that could subject the Company or
its Subsidiaries or any officer of the Company or its Subsidiaries or the
Purchase II to any material tax or penalty on prohibited transactions
imposed by such Section 4975 or to any material liability under
Section 502(i) or (1) of ERISA.
(h) Except as set forth in Section 3.10(h) of the Disclosure Schedule,
none of the Company or any of its Subsidiaries is a party to any contract,
agreement or other arrangement related to the Company or its Subsidiaries
which would reasonably be expected to result in the payment of money or any
other property or rights or accelerate or provide any other rights or
benefits, to any current or former employee related to the Company or its
Subsidiaries (or other current or former service providers thereto) that
would not have been required but for the transaction provided for herein.
(i) True, correct and complete copies of the following documents, with
respect to each of the Company Employee Benefit Plans maintained by the
Company or its Subsidiaries, have been delivered or made available to
Purchaser II by Sellers: (i) all Company Employee Benefit Plans and related
trust documents, and amendments thereto; (ii) the most recent Forms 5500
and (iii) summary plan descriptions. Descriptions of all other Company
Employee Benefit Plans (all of which are being retained by Sellers) have
been delivered or made available to Purchaser II by Sellers.
(j) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Knowledge of Sellers, threatened, against
the Company Employee Benefit Plans, the assets of any of the trusts under
such plans or the plan sponsor or the plan administrator, or against any
fiduciary of the Company Employee Benefit Plans with respect to the
operation of such plans (other than routine benefit claims) which could
result in any material liability to Purchaser II or the Company or its
Subsidiaries.
- 30 -
(k) All Company Employee Benefit Plans subject to ERISA or the Code
have been maintained and administered, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code,
respectively (including rules and regulations thereunder) and other
applicable federal and state Laws and Regulations and all employees related
to the Company or its Subsidiaries required to be included as participants
by the terms of such plans have been properly included, except to the
extent that any failure to so include such employees would not subject the
Purchaser II or any of its Affiliates or the Company or its Subsidiaries to
any material liability.
3A.11 Employee Matters.
(a) The Company and its Subsidiaries are in compliance with all
applicable Laws and Regulations respecting the employment of employees and
the engagement of leased employees, consultants and independent
contractors, including, without limitation, all Laws and Regulations
regarding discrimination and/or harassment, affirmative action, terms and
conditions of employment, wage and hour requirements (including, without
limitation, the proper classification, compensation and related withholding
with respect to employees, leased employees, consultants and independent
contractors), leaves of absence, reasonable accommodation of disabilities,
occupational safety and health, workers' compensation and employment
practices, except for such noncompliance as would not, individually or in
the aggregate, have a Company Material Adverse Effect. None of the Company
or any of its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract in connection with the conduct of
the Company Business; nor to the Knowledge of Sellers are there any
activities or proceedings of any labor union to organize any employees
related to the Company.
(b) Except as set forth in Section 3.11(b) of the Disclosure Schedule,
none of Sellers or any of its Affiliates, including the Company or any of
its Subsidiaries, has any employment agreement, minimum compensation
promise or guarantee, leased employee agreement, consultant agreement or
independent contractor agreement (in each case, whether written or
unwritten) with any of the officers, directors, employees of the Company or
its Subsidiaries or any other person providing service to the Company.
(c) As of the time of execution and delivery of this Agreement, to the
Knowledge of Sellers (without a duty of due inquiry), no employee whose
termination would be material to the Company or its Subsidiaries intends to
terminate his or her employment with the Company or its Subsidiaries.
(d) As of the time of execution and delivery of this Agreement, to the
Knowledge of Sellers (without a duty of due inquiry), no employee whose
termination would be material to the Company or its Subsidiaries is in
violation in any respect of any term of any employment or services
contract, patent disclosure agreement, noncompetition agreement, or any
restrictive covenant to a former employer which would reasonably be
expected to impede the right of any such employee to be employed or engaged
in the Company Business.
- 31 -
3A.12 Compliance with Applicable Laws and Regulatory Matters.
(a) Except as set forth in Section 3.12(a) of the Disclosure Schedule
(none of which matters would have a Company Material Adverse Effect), the
Company and its Subsidiaries have complied with all applicable Laws and
Regulations, and are not in violation of, and have not received any notices
of violation with respect to, any Laws and Regulations in connection with
the conduct of the Company Business or the ownership or operation of the
Company, except for such noncompliance and violations as would not have,
individually or in the aggregate, a Company Material Adverse Effect. The
reserves for regulatory matters set forth in the Combined Balance Sheet
have been established in accordance with the FAS 5 requirements of accruing
estimable and probable matters.
(b) Set forth on Section 3.12(b)(i) of the Disclosure Schedule are all
material licenses, permits, certificates, franchises and other
authorizations related to the Company Business (collectively, the "Company
Authorizations") held by the Company or its Subsidiaries, which Company
Authorizations constitute all Company Authorizations necessary for the
conduct of the Company Business. The Company and its Subsidiaries have
complied with, and are not in violation of, any Company Authorization,
except where such noncompliance or violation would not, individually or in
the aggregate, have a Company Material Adverse Effect. Except as would not
be material to the Company, all such Company Authorizations are in full
force and effect and there are no proceedings pending or, to the Knowledge
of Sellers, threatened that seek the revocation, cancellation, suspension
or adverse modification thereof. Set forth on Section 3.12(b)(ii) of the
Disclosure Schedule is a list of all Company Authorizations, listed by
individual, held by each employee of the Company and its Subsidiaries.
(c) Section 3.12(c) of the Disclosure Schedule sets forth a
description of each Governmental Order applicable to the Company, and no
such Governmental Order, individually or in the aggregate, has had or could
reasonably be expected to have a Company Material Adverse Effect.
(d) Section 3.12(d) of the Disclosure Schedule sets forth all
Governmental Entities with which the Company and its Subsidiaries are
required in connection with the conduct of the Company Business as a broker
dealer to be registered; and none of the Company or any of its
Subsidiaries, by virtue of its activities as a broker dealer in connection
with the conduct of the Company Business, is required to be registered in
or to obtain a license or similar authorization from any other Governmental
Entity. The Company and its Subsidiaries and each of their respective
employees, agents, associated persons or contractors related to the Company
or its Subsidiaries who are required to be registered as a broker-dealer,
investment adviser, a registered representative or other applicable
regulatory category with the SEC, the securities commission of any state or
foreign jurisdiction or any SRO are duly registered as such and such
registrations are in full force and effect, except for failures to register
that would not be material.
(e) Except as set forth on Section 3.12(e) of the Disclosure Schedule,
no activities of the Company or its Subsidiaries could result in any of
them being required to be registered as an exchange or transfer agent, a
clearing agency, a municipal securities dealer, a government securities
dealer, a futures commission merchant, a commodity trading adviser or a
commodity pool operator.
- 32 -
(f) None of the Company or any of its Subsidiaries in connection with
the conduct of the Company Business is subject to registration as an
investment company under the Investment Company Act or as an investment
adviser under the Investment Advisers Act, or similar Laws and Regulations
of any foreign Governmental Entity.
(g) To the Knowledge of Sellers, there are no facts or circumstances
that would (i) cause the NASD or any other required federal or state
regulatory agency or other Governmental Entity not to approve the transfer
of control and ownership of the Company Common Stock to Purchaser II; or
(ii) cause the NASD or any federal or state regulatory agency or other
Governmental Entity to revoke or restrict the Company Authorizations to
operate as a broker-dealer after the change in ownership and control of the
Company and its Subsidiaries contemplated by this Agreement.
(h) None of the Company or any of its Subsidiaries in connection with
the conduct of the Company Business is subject to any cease-and-desist or
other order or enforcement action issued by, or party to any written
agreement, consent agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or has been ordered to pay any civil penalty by,
or is a recipient of any supervisory letter from, or has adopted any board
or member resolutions at the request or suggestion of, any regulatory
authority or other Governmental Entity related to the Company or any of its
Subsidiaries (each, a "Company Regulatory Agreement"), nor have any of the
Company or its Subsidiaries been advised in writing or, to the Knowledge of
Sellers, in any other manner by any regulatory authority or Governmental
Entity that it is considering issuing or requesting such a Company
Regulatory Agreement nor is there any pending or, to the Knowledge of
Sellers, threatened, regulatory investigation related to the Company or any
of its Subsidiaries. To the Knowledge of Sellers, none of the Sellers or
any of their respective associated persons (as defined in Section 3(a)(21)
of the Securities Exchange Act) related to the Company or its Subsidiaries
has been convicted within the past ten years of any felony or misdemeanor
described in Section 15(b)(4) of the Securities Exchange Act, or is, by
reason of any misconduct, permanently or temporarily enjoined from acting
in the capacities, or engaging in the activities, described in Section
15(b)(4)(C) of the Securities Exchange Act. No such Person has been or is
subject to a "statutory disqualification" with respect to membership or
participation in, or association with a member of, a self-regulatory
organization, described in Section 3(a)(39) of the Securities Exchange Act
or has been or is subject to the imposition by a SRO of special supervision
or other special requirements as prerequisites for maintaining any
securities license or regulation.
(i) None of the Company or any of its Subsidiaries has received any
notice from a competent authority alleging that in connection with the
conduct of the Company Business, the Company or its Subsidiaries has failed
to comply with any applicable data or consumer protection Laws and
Regulations, nor has the Company or its Subsidiaries received any claim
from any individual seeking compensation for breaches of applicable data
and consumer protection Laws and Regulations in connection with the conduct
of the Company Business.
(j) To the Knowledge of Sellers, there are no facts or circumstances
that would require any of them to give notice to any customers, consumers
or other similarly situated
- 33 -
individuals, pursuant to California Civil Code Sections 1798.29, et seq.,
or any similar Laws and Regulations of any other state, of any actual or
perceived data security breaches related to the Company or its
Subsidiaries.
(k) Each of the Company and its Subsidiaries has filed all reports,
registration statements and other documents, together with any amendments
required to be made with respect thereto, that it was required to file with
any Governmental Entity and has paid all fees and assessments due and
payable in connection therewith. No statements made in any such reports,
registration statements, other documents or amendments were, at the time
they were made, false or misleading with respect to any material fact. No
delay in filing any such reports has not been remedied except where such
failure to remedy would not be material.
(l) Each of the Company and its Subsidiaries has adopted and
implemented an anti-money laundering policy and a customer identification
program that comply with the requirements of applicable Laws and
Regulations.
(m) Sellers have devised and maintained systems of internal controls
with respect to the Company and its Subsidiaries sufficient to be in
material compliance with the requirements of the Securities Exchange Act
and the NASD.
(n) The Company maintains "know your customer" policies and procedures
and obtains information concerning customers sufficient to know the
"essential facts" concerning its customers as required under the USA
Patriot Act and the rules of SROs.
(o) The Company has conducted and is conducting periodic internal
audits, inquiries or reviews with respect to compliance by the Company and
its Subsidiaries with selected NASD rules and internal guidelines and
policies of Sellers and its Affiliates and of the Company and its
Subsidiaries and no such audit, inquiry or review or, to the Knowledge of
Sellers, any audit, inquiry or review performed by any Governmental Entity
with respect to the Company or any of its Subsidiaries, has revealed any
information with respect to the Company or its Subsidiaries that,
individually or in the aggregate, would have a Company Material Adverse
Effect.
(p) None of the Company or its Subsidiaries holds any position in OTC
derivatives.
3A.13 Material Contracts.
(a) Except for the contracts set forth in Section 3.13(a) of the
Disclosure Schedule (collectively, the "Company Material Contracts"), none
of the Company or any of its Subsidiaries is a party to or bound by any of
the following:
(i) any contract or agreement entered into other than in the
ordinary course of business consistent with past practice for the
acquisition of the securities of or any material portion of the assets
of any other Person or entity or any investment in any other Person;
- 34 -
(ii) any contract or agreement for the purchase of services in
excess of $250,000;
(iii) any contract, agreement or instrument in excess of $250,000
that expires or may be renewed at the option of any Person other than
the Company or any of its Subsidiaries so as to expire more than one
year after the date of this Agreement;
(iv) any material contract with any independent contractor or
consultant (or similar arrangement) which is not cancelable without
penalty and without more than thirty (30) days' notice;
(v) any trust indenture, mortgage, promissory note, loan
agreement or other contract, agreement or instrument for the borrowing
of money, any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP, in each case, where the Company
or any of its Subsidiaries is a lender, borrower or guarantor;
(vi) any contract or agreement limiting the freedom of the
Company or any of its Subsidiaries or any of their respective
employees to engage in any line of business or to compete with any
other Person;
(vii) any contract or agreement with Sellers or any of their
Affiliates;
(viii) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect
to, the obligations, liabilities (whether accrued, absolute,
contingent or otherwise) or indebtedness of any other Person other
than those entered into in the ordinary course of business;
(ix) any material agreement which would be terminable other than
by the Company or any of its Subsidiaries or under which a payment or
performance obligation would arise or be accelerated, in each case as
a result of the consummation of the transactions contemplated by this
Agreement;
(x) any alliance, cooperation, joint venture, stockholders'
partnership or similar agreement;
(xi) any broker, distributor, dealer, agency, sales promotion,
market research, market consulting or advertising agreement involving
in excess of $250,000;
(xii) any material research, development, sales representative,
marketing or reseller agreement, or any service, support or
maintenance agreement related to the business or technology of the
Company or any of its Subsidiaries;
(xiii) any agreement, option or commitment or right with, or held
by, any third party to acquire, use or have access to any assets or
properties, or any interest therein, of the Company or any of its
Subsidiaries;
- 35 -
(xiv) any outbound license, sublicense or development agreement
or other material agreement or any material inbound license,
sublicense or development agreement or other material agreement that
affects or relates to the Company Intellectual Property, including,
without limitation, any material agreement pursuant to which any
person or entity is authorized to use or has an ownership or security
interest in any Company Intellectual Property;
(xv) any "soft dollar" contract, arrangement or agreement,
whether written or oral;
(xvi) any material contract or agreement which would require any
consent or approval of a counterparty as a result of the consummation
of the transactions contemplated by this Agreement; and
(xvii) any other contract the loss or presence of which would,
individually or in the aggregate, have a Company Material Adverse
Effect or that involves a payment or obligation that exceeds $250,000
annually or $500,000 in the aggregate or contains any obligation of
the Company the failure of which to satisfy would have a Company
Material Adverse Effect.
(b) The Company and its Subsidiaries have performed all of the
obligations required to be performed by them and are entitled to all
accrued benefits under, and are not alleged to be in default in respect of,
each Company Material Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound, except in each case as would not, individually or in the
aggregate, have a Company Material Adverse Effect. Each of the Company
Material Contracts is in full force and effect, without amendment (other
than as disclosed in Section 3.13(b) of the Disclosure Schedule), and there
exists no default or event of default or event, occurrence, condition or
act, with respect to the Company or any of its Subsidiaries or, to
Knowledge of Sellers, with respect to any other contracting party, which,
with the giving of notice, the lapse of time or the happening of any other
event or condition, would become a default or event of default under any
Company Material Contract, except, as would not, individually or in the
aggregate, be material to the Company. True, correct and complete copies of
all Material Contracts have been furnished or made available to Purchaser
II.
3A.14 [Intentionally Omitted].
3A.15 Environmental Liability. There are no legal, administrative, arbitral
or other proceedings, claims or actions or any private environmental
investigations or remediation activities or governmental investigations of any
nature that would be reasonably likely to result in the imposition on the
Company or any of its Subsidiaries of any liability or obligation arising under
common law or under any local, state or federal environmental statute,
regulation or ordinance, including CERCLA, pending or, to the Knowledge of
Sellers, threatened against the Company or any of its Subsidiaries, which
liability or obligation would be material to the Company. To the Knowledge of
Sellers, there is no reasonable basis for any such proceeding, claim, action or
investigation. None of the Company or any of its Subsidiaries is subject to any
agreement, order, judgment or decree by or with any court, governmental
authority, regulatory agency or third party imposing any liability or obligation
with respect to the foregoing. The
- 36 -
Company is and has been in compliance with all applicable Environmental Laws,
and there are no liabilities under any Environmental Laws with respect to the
Company Business, other than failures to comply or liabilities that would not,
individually or in the aggregate, have a Company Material Adverse Effect or
otherwise materially adversely affect Purchaser II. None of the Company or its
Subsidiaries has received any notice from any Governmental Entity during the
past five years relating to or alleging a material violation of any
Environmental Law. None of the Company or its Subsidiaries has any
indemnification obligation with any Person with respect to Environmental Laws.
3A.16 Insurance. The Company and its Subsidiaries have in full force and
effect the insurance coverage with respect to the Company Business set forth in
Section 3.16 of the Disclosure Schedule. There is no material claim related to
the Company pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies have been paid and, the
Company and its Subsidiaries are otherwise in compliance in all material
respects with the terms of such policies. Sellers have no Knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
3A.17 Intellectual Property.
(a) Section 3.17(a) of the Disclosure Schedule lists all Company
Intellectual Property registered or filed in the name of the Company or its
Subsidiaries, which the Company or any of its Subsidiaries owns exclusively
(except as owned exclusively by Parent or its other Affiliates as set forth
on Schedule 3.17(a)) and all Company Proprietary Software that is necessary
or material to the current or proposed conduct of the Company Business.
Section 3.17(a) of the Disclosure Schedule lists all Legal Proceedings
before any Governmental Entity (including the United States Patent and
Trademark Office or equivalent authority anywhere in the world) related to
any of such Company Intellectual Property or related to any Company
Proprietary Software whatsoever. No claim is currently pending or, to the
Knowledge of Sellers, threatened, challenging the ownership, validity,
registerability, enforceability, infringement or use of, or licensed right
to use any Company Intellectual Property. The Company Intellectual Property
listed in Section 3.17(a) of the Disclosure Schedule is valid, subsisting
and enforceable (but as to Company Intellectual Property applications
thereon that are not fully issued, only that they are subsisting). To the
Knowledge of Sellers, there is no valid basis to challenge the ownership or
enforceability of any Company Intellectual Property, the validity,
registerability, use of or the licensed right to use, any Company
Intellectual Property (provided that this sentence shall not limit or
qualify the foregoing sentence). The Company IP is not subject to any
outstanding order, judgment, decree or agreement adversely affecting the
Company's and its Subsidiaries' (or Purchaser II's following the Closing)
use thereof or rights thereto. None of the Company or its Subsidiaries has
ever agreed to indemnify any Person for or against any interference,
infringement, misappropriation or other conflict with respect to any
Company Intellectual Property other than as set forth in agreements
provided to Purchaser II for its review. No commercially material Company
Intellectual Property owned by the Company or any of its Subsidiaries is
omitted from Schedule 3.17(a).
(b) Section 3.17(b) of the Disclosure Schedule lists each item of
software included in the Company Intellectual Property and developed by or
for the Company and its
- 37 -
Subsidiaries or the Company Business (the "Company Proprietary Software")
that is necessary or material to the current or proposed conduct of the
Company Business. All Company Proprietary Software does not, to the
Knowledge of Sellers, contain any "time bombs," "Trojan horses," "back
doors," "trap doors," "worms," viruses, or other devices or effects that
(A) enable or assist any person to access without authorization the Company
Proprietary Software, or (B) otherwise significantly adversely affect the
functionality of the Company Proprietary Software. Except as set forth on
Section 3.17(b) of the Disclosure Schedule, to the Knowledge of Sellers,
the Company Proprietary Software does not contain any shareware, open
source code, or other software the use of which requires disclosure or
licensing of the Company Proprietary Software. Sellers shall have made
available to Purchaser II for hiring all personnel necessary to use,
maintain, revise and operate the Company Proprietary Software as currently
maintained, revised and operated.
(c) Except as set forth on Section 3.17(c) of the Disclosure Schedule,
the Company and its Subsidiaries (i) own all right, title and interest in
and to each item of Company Intellectual Property, free and clear of any
Liens other than Company Permitted Liens, or (ii) are a licensee of Company
Intellectual Property pursuant to a contract that is a valid and binding
obligation of the Company and its Subsidiaries and, to the Knowledge of
Sellers, the other parties thereto and is in full force and effect. Except
as set forth on Section 3.17(c) of the Disclosure Schedule, each material
item of Intellectual Property shall be owned by Purchaser II or immediately
available for use by Purchaser II on substantially identical terms and
conditions immediately following the Closing, without any requirement for
any consent from any third party or any affirmative act by Purchaser II
(e.g., notice to any third party).
(d) Section 3.17(d) of the Disclosure Schedule lists each license or
other agreement or authorization pursuant to which the Company and its
Subsidiaries provided or agreed to provide (whether or not such agreement
is contingent) a license, nonassertion agreement, covenant not to xxx,
enforcement right or any similar right, agreement or grant to any third
party with respect to any Company IP. No such agreement operates to grant
rights in or to or create any limitation (including by way of nonassertion)
or encumbrance upon Company Intellectual Property owned or controlled by
any entity which becomes an affiliate of the Company or any of its
Subsidiaries other than those provided to Purchaser II for its review.
Except as set forth on Section 3.17(d) of the Disclosure Schedule, no other
person or entity has any rights to any Business IP, and, to the Knowledge
of Sellers, no person or entity is infringing, violating or
misappropriating any of the Company Intellectual Property.
(e) Section 3.17(e) of the Disclosure Schedule identifies each
license, nonassertion agreement, covenant not to xxx or agreement pursuant
to which the Company and its Subsidiaries use Company Intellectual Property
in the operation of the Business that is owned by a party other than the
Company or any of its Subsidiaries. During the preceding twenty-four (24)
months, all royalties and other payments due from the Company or any of its
Subsidiaries under such licenses or agreements have been paid when due.
(f) Except as set forth on Section 3.17(f) of the Disclosure Schedule,
in the operation of the Company Business, the Company and its Subsidiaries
are not, and shall not be as a result of the execution and delivery of this
Agreement or the performance of their obligations under this Agreement
(assuming receipt of any consent or approval set forth in
- 38 -
Section 3.4 of the Disclosure Schedule), in material breach of any license,
sublicense or other agreement or any term or condition thereof, pursuant to
which the Company or any of its Subsidiaries grant or are granted any
license to the Company Intellectual Property and all such licenses,
sublicenses and other agreements are valid and enforceable and no party
thereto has given the Company or its Subsidiaries notice of its intention
to cancel, terminate, change the scope of rights under, or fail to renew,
and no party is in material breach or has repudiated any material provision
thereof. To the Knowledge of Sellers, to the extent that Company
Intellectual Property is sublicensed to the Company and/or its Subsidiaries
by a third person, the sublicensed rights of the Company and/or its
Subsidiaries shall continue in full force and effect even if the principal
third person license terminates or is otherwise modified for any reason. To
the Knowledge of Sellers, the Company Intellectual Property provided or
otherwise made available to the Company and its Subsidiaries pursuant to
such licenses, sublicenses or other agreements is valid, subsisting and
enforceable and is not subject to any outstanding Governmental Order
adversely affecting the Company's or its Subsidiaries' use thereof or their
rights thereto.
(g) Except as set forth on Section 3.17(g) of the Disclosure Schedule,
to the extent that any Company Intellectual Property has been developed or
created for or on behalf of the Company or any of its Subsidiaries, or the
Company, by any Person other than the Company or any of its Subsidiaries,
the Company or any of its Subsidiaries has a written agreement with such
Person with respect thereto transferring or otherwise conferring to the
foregoing all right, title and interest in and to the Company Intellectual
Property by operation of Laws and Regulations or by valid assignment. To
the extent internally developed, the Company and its Subsidiaries have
followed standard business practices in developing the Company Intellectual
Property, including requiring each employee or contractor to execute a
written agreement in which such employee or contractor assigns or otherwise
confers to the foregoing all right, title and interest in and to such
Company Intellectual Property. All Company Proprietary Software, including
each of its constituent parts, is owned exclusively by the Company and its
Subsidiaries, and is not derived from and does not incorporate or otherwise
use as a basis any Company Intellectual Property not owned exclusively by
the Company and its Subsidiaries. Without limiting the foregoing provisions
of this Section 3A.17(g), modification of the Company Proprietary Software
requires no Person's consent other than the Company or its Subsidiaries.
(h) The Company and its Subsidiaries have taken reasonable steps in
accordance with normal industry practice and in light of the nature of the
particular item of Company Intellectual Property to protect the proprietary
nature of each item of Company Intellectual Property, and to maintain in
confidence all trade secrets and other material confidential information
that the Company and its Subsidiaries own or use in connection with their
business ("Company Confidential Information"). To the Knowledge of Sellers,
there has been no misappropriation of any Company Business Confidential
Information by any third party. Except as set forth on Section 3.17(h) of
the Disclosure Schedule, none of the Company or any of its Subsidiaries has
placed in escrow or otherwise disclosed the source code or documentation
for any of the Company Proprietary Software. To the Knowledge of Sellers,
none of the current employees of the Company and its Subsidiaries has any
patents issued or applications pending for any device, process, design or
invention of any kind now used or needed by the Company and/or its
Subsidiaries in the furtherance of its business, which patents or
applications have not been assigned to the Company and/or its Subsidiaries.
The Company and its Subsidiaries have no Knowledge that any of their
employees is obligated under any contract (including licenses,
- 39 -
covenants or commitments of any nature) or other agreement, or subject to
any Governmental Order, that would interfere with the use of such
employee's best efforts to promote the interests of the Company and its
Subsidiaries or that would conflict with the Company Business as conducted
by Sellers or proposed to be conducted. Neither the execution nor delivery
of this Agreement nor the carrying on of the Company Business by the
employees of the Company and its Subsidiaries will, to the Knowledge of
Sellers, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under any contract, covenant or
instrument under which any of such employees is now obligated. To the
Knowledge of Sellers, it is not and will not be necessary to utilize in the
Company Business any inventions of any of the employees of the Company or
any of its Subsidiaries (or people they currently intend to hire) made
prior to or outside the scope of their employment with the Company and its
Subsidiaries.
(i) The conduct of the Company Business, and the Company Proprietary
Software do not, and have not, infringed or violated, or constituted a
misappropriation of, any intellectual property rights of any person or
entity; provided that the foregoing representation is given to the
Knowledge of Sellers as concerns patent rights. Section 3.17(i) of the
Disclosure Schedule lists any complaint, claim, notice or other
communication (x) received in oral form by any partner, officer or employee
of, the Company or any of its Subsidiaries, or (y) received in written form
by the Company or any of its Subsidiaries, expressly or impliedly alleging
the conduct of the Company Business, or the Company Proprietary Software,
constitutes any infringement, violation or misappropriation of the
intellectual property of any third party, or otherwise challenging the
right of the Company or any of its Subsidiaries or any licensee or
sublicensee of the Company or any of its Subsidiaries to own or use any
Company Intellectual Property, or challenging the validity, scope or
enforceability of any Company Intellectual Property or the right of the
Company or any of its Subsidiaries to license others to use or sublicense
any Company Intellectual Property. Sellers have made available to Purchaser
II complete and accurate copies of all written documentation in the
possession of Sellers relating to any such complaint, claim, notice, threat
or other communication.
(j) Section 3.17(j) of the Disclosure Schedule sets forth a list of
all Internet domain names and their expiration dates currently licensed or
owned by the Company (collectively, the "Company Domain Names"). The
Company has, and after the Closing will have, a current registration of
each Company Domain Name and the right to continue to conduct the Company
Business as currently conducted under the Company Domain Names.
(k) None of the officers, directors or employees of Sellers, the
Company or any of their respective Affiliates owns or holds rights (whether
current or contingent) under any Company Intellectual Property and the
Company has all right, title and interest in the Company Intellectual
Property obtained through transactions involving any officers, directors or
employees of Sellers, the Company or any of their respective Affiliates.
(l) Except as set forth on Section 3.17(l) of the Disclosure Schedule,
the Company Intellectual Property included in the Entity Assets constitute
all the intellectual property necessary for, used in, or held for, the
current or proposed conduct of the Company Business, and neither Parent nor
any of its Affiliates (other than the Company or its Subsidiaries) owns any
intellectual property necessary to, used in or held for the current or
proposed conduct of the Company Business.
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3A.18 Information Technology.
(a) All electronic data processing, information, record keeping,
communications, telecommunications, hardware, third party software,
networks, peripherals, portfolio trading and computer systems, including
any outsourced systems, services, or processes, computers, computer
software, firmware, middleware, servers, workstations, routers, hubs,
switches, data communications lines, and all other information technology
equipment, and all associated documentation and Company Intellectual
Property which are material to the conduct of the Company Business are
collectively referred to as "Company Technology Systems." Within the
preceding twelve (12) months, there has not been any material malfunction,
default, or failure with respect to any of the Company Technology Systems
that has not been remedied or replaced in all material respects. The
Company Technology Systems as they will be transferred to Purchaser II
pursuant to this Agreement or provided pursuant to the Transition Services
Agreement are sufficient to support the information technology needs of the
Company Business. Sellers shall have made available to Purchaser II for
hiring all personnel necessary to use, maintain, revise and operate the
Company Technology Systems transferred to Purchaser II pursuant to this
Agreement as currently used, maintained, revised and operated.
(b) Company Technology Systems are either owned by, licensed or leased
to, or otherwise properly utilized pursuant to written authorization to the
Company or any of its Subsidiaries. No action will be necessary as a result
of the transactions effected by this Agreement to authorize, permit, or
otherwise enable use of the Company Technology Systems to continue to the
same extent and in the same manner that such Company Technology Systems
have been used in the preceding twelve (12) months. The Company and its
Subsidiaries are not in breach of any obligation owed under such licenses
or leases.
(c) Section 3.18(c) of the Disclosure Schedule lists all the material
third party agreements, licenses, and leases related to the Company
Technology Systems, including without limitation, all material maintenance
and support contracts for the Company Technology Systems.
(d) Except as disclosed in Section 3.18(d) of the Disclosure Schedule,
(i) the Company Technology Systems (for a period of 18 months prior to the
Closing Date) have not suffered a material unplanned disruption;
(ii) except for ongoing payments due under relevant third party agreements,
the Company Technology Systems are free from any material charge, mortgage
or security interest; and (iii) access to business critical parts of the
Company Technology Systems is not shared with any third party.
(e) Details of the disaster recovery and business continuity
arrangements for the Company are disclosed in Section 3.18(e) of the
Disclosure Schedule. The material disaster recovery and business continuity
arrangements for the Company are consistent with industry practice.
(f) None of the Company or any of its Subsidiaries has received notice
of or is aware of any material circumstances including, without limitation,
the execution of this Agreement, which would enable any third party to
terminate any of the Company's or any of its
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Subsidiaries' material agreements or arrangements relating to the Company
Technology Systems.
(g) There are no material agreements with third parties for Company
Technology Systems that would terminate on the consummation of the
transactions contemplated by this Agreement or are otherwise not assignable
without consent from any third party or without payment of any associated
cost, fee, charge, or penalty.
(h) None of the Company or any of its Subsidiaries has received notice
of or is aware of any claim or action alleging that the Company Technology
Systems, or the Company's use of the Company Technology Systems, in any way
violate any non-disclosure and/or non-use agreement, nor constitute an
infringement or other violation of any copyright, trade secret, trademark,
service xxxx, patent, invention, proprietary information, or other rights
of any third party.
3A.19 Interests of Officers, Directors and Employees. None of the officers,
directors or employees of Sellers, the Company, any of their respective
Subsidiaries or any of their respective Affiliates has any material interest in
any property, real or personal, tangible or intangible used in the Company
Business.
3A.20 Tail Policy. There is in existence a fully paid officers' and
directors' liability insurance policy (the "Tail Policy") satisfying all of
Parent's and its Affiliates' obligations under Section 6.8(c) of that certain
Agreement and Plan of Merger by and among Parent, Shakespeare Merger Corporation
and the Company, dated as of November 18, 2003.
Article IV Representations and
Warranties of Purchaser and Purchaser II
Each of Purchaser and Purchaser II as to itself represents and warrants to
Sellers as follows:
4.1 Corporate Organization, Standing and Power. Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the Laws and Regulations of the State of Delaware. Purchaser II is a corporation
duly organized, validly existing and in good standing under the Laws and
Regulations of the State of Delaware. Each of Purchaser and Purchaser II has the
corporate or similar power to own its properties and to carry on its business as
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be so qualified and in good
standing would constitute a Purchaser Material Adverse Effect.
4.2 Authority; No Violation.
(a) Each of Purchaser and Purchaser II has full corporate or similar
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
approved and adopted
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by each of Purchaser and Purchaser II. No other corporate or shareholder
authorization or consent is required in connection with the execution,
delivery or performance by Purchaser and Purchaser II of this Agreement or
any of the Ancillary Agreements. This Agreement has been duly and validly
executed and delivered by Purchaser and Purchaser II and (assuming due
authorization, execution and delivery by Sellers), this Agreement
constitutes a valid and binding obligation of each of Purchaser and
Purchaser II, enforceable against Purchaser and Purchaser II in accordance
with its terms. Assuming due authorization, execution and delivery by
Sellers, each of the Ancillary Agreements, when executed and delivered,
will constitute, a valid and binding obligation of Purchaser and Purchaser
II, enforceable against Purchaser and Purchaser II or their Affiliates
parties thereto in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or any of the
Ancillary Agreements by Purchaser and Purchaser II, nor the consummation by
Purchaser and Purchaser II of the transactions contemplated hereby or
thereby, nor compliance by Purchaser and Purchaser II with any of the terms
or provisions hereof, will (i) violate any provision of the certificate of
incorporation or bylaws or other charter documents of Purchaser or
Purchaser II or (ii) assuming that the consents and approvals referred to
in Section 4.3 are duly obtained, (x) violate any Laws and Regulations
applicable to Purchaser or Purchaser II or any of their Subsidiaries or any
of their respective properties or assets or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance
required by or rights or obligations under, or result in the creation of
any Lien upon any of the respective properties or assets of Purchaser or
Purchaser II or any of their Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement, contract, or other instrument or
obligation to which Purchaser and Purchaser II or any of their Subsidiaries
is a party, or by which they or any of its properties, assets or business
activities may be bound or affected, except (in the case of clause (ii)
above) for such violations, conflicts, breaches, defaults or the loss of
benefits which, either individually or in the aggregate, would not be a
Purchaser Material Adverse Effect.
4.3 Consents and Approvals. Except for (i) any approvals or filings
required by the HSR Act, (ii) the consent or approval of the NYSE and (iii) the
consents, notices and approvals set forth in Section 4.3 of the Disclosure
Schedules, no consents or approvals of any Governmental Entity or any third
party are necessary in connection with (A) the execution and delivery by
Purchaser and Purchaser II of this Agreement and (B) the consummation by
Purchaser and Purchaser II of the transactions contemplated hereby.
4.4 Financing. Each of Purchaser and Purchaser II has all funds that would
be necessary to pay on the Closing Date the Purchase Price as if only one of
them were required to pay the Purchase Price and all fees and expenses of theirs
related hereto, and has the financial capacity to perform all of its other
obligations under this Agreement.
4.5 Legal Proceedings. As of the date hereof, neither Purchaser nor
Purchaser II nor any of their Subsidiaries is a party to any, and there are no
pending or, to the knowledge of Purchaser, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Purchaser or Purchaser II or any
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of their Subsidiaries which would be a Purchaser Material Adverse Effect, nor,
to the knowledge of Purchaser and Purchaser II, is there any basis for any
proceeding, claim or any action against Purchaser or Purchaser II or any of
their Subsidiaries which would be a Purchaser Material Adverse Effect. As of the
date hereof, there is no injunction, order, judgment or decree imposed upon
Purchaser, Purchaser II or any of their Subsidiaries or the assets of Purchaser
or Purchaser II or any of their Subsidiaries which would be a Purchaser Material
Adverse Effect.
4.6 Compliance with Applicable Law and Regulatory Matters.
(a) Each of Purchaser and Purchaser II and each of their Subsidiaries
have complied with all applicable Laws and Regulations, and are not in
violation of, and have not received any notices of violation with respect
to, any Laws and Regulations in connection with the conduct of their
respective businesses or the ownership or operation of their respective
businesses, assets and properties, except for such noncompliance and
violations which would not be a Purchaser Material Adverse Effect.
(b) As of the date hereof, there are no Governmental Orders applicable
to Purchaser, Purchaser II or any of their Subsidiaries which would be a
Purchaser Material Adverse Effect.
(c) To Purchaser's and Purchaser II's management's actual knowledge,
after due inquiry, as of the date hereof, there exists no substantial
likelihood that (i) the NASD or any other required federal or state
regulatory agency or other Governmental Entity would not approve the
transfer of control and ownership of CCM and the Company to Purchaser and
Purchaser II; or (ii) the NASD or any federal or state regulatory agency or
other Governmental Entity would revoke or restrict Purchaser's Purchaser
II's Authorizations to operate as a broker-dealer after the change in
ownership and control of CCM and the Company contemplated by this
Agreement.
(d) Except as would not be a Purchaser Material Adverse Effect, as of
the date hereof (i) neither Purchaser nor Purchaser II nor any of its
Subsidiaries is subject to any cease-and-desist or other order or
enforcement action issued by, or party to any written agreement, consent
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive
by, or has been ordered to pay any civil penalty by, or is a recipient of
any supervisory letter from, or has adopted any board or member resolutions
at the request or suggestion of, any regulatory authority or other
Governmental Entity that restricts the conduct of its business or that in
any manner relates to its capital adequacy, its ability to pay dividends,
its credit or risk management policies, its management, its trading
privileges or its business (each, a "Purchaser Regulatory Agreement") and
(ii) neither Purchaser nor Purchaser II nor any of its Subsidiaries has
been advised in writing or, to the actual knowledge of management of
Purchaser and Purchaser II, after due inquiry, in any other manner by any
regulatory authority or Governmental Entity that it is considering issuing
or requesting such a Purchaser Regulatory Agreement.
4.7 Broker's Fees. Neither Purchaser nor Purchaser II has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with the transactions contemplated by this
Agreement.
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4.8 Purchaser Information. The representations or warranties made by
Purchaser and Purchaser II herein or in any schedule hereto or certificate
furnished by Purchaser pursuant to this Agreement do not contain any untrue
statement of a material fact, or omit to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
Article V
Conduct Prior to the Closing Date
5.1 Conduct of the Business Prior to the Closing Date. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing Date, except as expressly
contemplated or permitted by this Agreement, Sellers shall, and shall cause CCM
and the Company and each of their respective Subsidiaries, to (a) conduct the
Business and the Company Business in the usual, regular and ordinary course
consistent with past practice, (b) use all reasonable commercial efforts
consistent with past practice and policies to preserve intact CCM's and the
Company's present business organizations, keep available the services of the
employees of CCM and the Company and their Subsidiaries (it being understood
that CCM and the Company and their Subsidiaries shall not be obligated to make
out of the ordinary course of business payments to their respective employees in
order to keep available the services of such employees) and preserve the
relationships with customers, suppliers, distributors, licensors, licensees of
CCM and the Company and their Subsidiaries, and others having significant
business dealings with CCM and the Company and their Subsidiaries, (c) use all
reasonable commercial efforts to maintain all of their existing permits,
licenses, authorizations, orders and regulatory approvals and the minimum net
capital and excess net capital necessary to conduct their businesses as
currently conducted and (d) take no action or fail to take an action which would
adversely affect or delay in any material respect the consummation of the
transactions contemplated hereby, including, without limitation, the ability of
either Purchaser or Sellers to obtain any necessary approvals of any regulatory
agency or other Governmental Entity required for the transactions contemplated
hereby. Following the date hereof until the Closing, each of CCM, the Company
and their respective Subsidiaries shall provide to Purchaser and their
Subsidiaries, promptly after the filing thereof, a copy of each report,
registration statement, other document or amendment filed with any Governmental
Entity. From the date hereof until the Closing, Parent will take all action
necessary, including funding, so that if Sellers were preparing consistent
financial statements as of the Closing, the earnings of the Business and the
Company Business as of the Closing would be consistent (including line items)
with the presentations contained in the Combined Financial Statements as of the
Closing, and would reflect the Combined Balance Sheet as of the Balance Sheet
Date as set forth in Section 3.5(a) of the Disclosure Schedule plus (i) the
movement in the combined statement of operations of CCM and the Company
consistent with Section 3.5(a) of the Disclosure Schedule, excluding the
movement in the statement of operating results of the Electronic Program Trading
business of CCM and including the movement in the statement of operating results
of the Options Business of CS&Co. as set forth in Section 3.5(d) of the
Disclosure Schedule, all prepared in a manner consistent with the operating
results in Section 3.5(d) of the Disclosure Schedule, for the period from July
1, 2004 to the Closing and (ii) any effects of activities or transactions
expressly contemplated or permitted by this Agreement. For the avoidance of
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doubt, Sellers and their Affiliates (other than CCM, the Company and their
respective Subsidiaries) will continue to fund all corporate allocations
historically funded by them and CCM, the Company and their respective
Subsidiaries will continue to fund all corporate allocations historically funded
by them.
5.2 Conduct of the Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing Date, except as set forth in Section 5.2 of the Disclosure
Schedule or except as expressly required by this Agreement, Sellers shall
conduct the Business and the Company Business in the ordinary course of business
consistent with past practice and Section 5.1 of this Agreement and shall not
do, cause or permit any of the following, or allow, cause or permit CCM, the
Company or any of their respective Subsidiaries to do, cause or permit any of
the following, without the prior written consent of Purchaser, which consent
shall not be unreasonably (in light of the purchase price to be paid hereunder
and the contemplated closing) withheld:
(a) Cause or permit any amendment, modification, alteration or
rescission of the certificate or articles of incorporation, agreement of
limited partnership bylaws or other charter or organizational documents of
CCM, the Company or any of their respective Subsidiaries;
(b) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of partnership
interests of CCM or capital stock or membership interests of the Company or
any of its or CCM's Subsidiaries or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating CCM, the Company or any of their
respective Subsidiaries to issue any such capital stock or interests;
split, combine or reclassify any shares of capital stock or equity or
partnership interests of CCM, the Company or any of their respective
Subsidiaries or declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect thereof (other than the distribution of the property of
the Company identified on Schedule 5.2(b)), or redeem, repurchase or
otherwise acquire or offer to redeem, repurchase or otherwise acquire any
security or equity or partnership interest;
(c) Transfer to any person or entity any rights in or to the
Intellectual Property or the Company Intellectual Property;
(d) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other exclusive rights of any type
or scope with respect to any of the products or technology related to the
Business or the Company Business;
(e) Other than activities inherent in the institutional sales trading,
program trading, trading, market making, order execution and institutional
research sales operations of the Business and the Company Business, sell,
lease, license or otherwise dispose of or encumber any of the properties or
assets of either CCM and its Subsidiaries or the Company and its
Subsidiaries (other than as set forth on Schedule 5.2(b));
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(f) Other than short-sales, activities and other activities inherent
in the institutional sales trading, program trading, trading, market
making, order execution and institutional research sales operations of the
Business and the Company Business, cause or permit CCM, the Company or any
of their respective Subsidiaries to (A) incur any indebtedness for borrowed
money, (B) assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other Person (except as set
forth on Section 5.2(f) of the Disclosure Schedule) or (C) cancel, release,
assign or modify any amount of indebtedness of any other person or entity;
(g) Cause or permit CCM, the Company or any of their respective
Subsidiaries to enter into any lease for real property or material
operating lease;
(h) Pay, discharge or satisfy in an amount individually or in the
aggregate in excess of $100,000 any claim, liability, action, litigation,
arbitration or proceeding (absolute, accrued, asserted or unasserted,
contingent or otherwise) related to CCM or the Company, other than (A) the
payment, discharge or satisfaction of liabilities reflected or reserved
against in the Combined Financial Statements, (B) pursuant to the
agreements listed on Section 5.2(h) of the Disclosure Schedule,
(C) pursuant to Governmental Orders entered against CCM or the Company, (D)
the discharge in the ordinary course of business consistent with past
practice of accounts payable or (E) as otherwise permitted pursuant to this
Section 5.2;
(i) Cause or permit either CCM and its Subsidiaries or the Company and
its Subsidiaries to make any capital expenditures, capital additions or
capital improvements except (i) in the ordinary course of business
consistent with past practice that do not exceed individually or in the
aggregate $250,000 and (ii) pursuant to contracts or commitments set forth
on Section 5.2(i) of the Disclosure Schedule;
(j) Materially reduce the amount of any material insurance coverage
related to CCM or the Company provided by existing insurance policies;
(k) (i) Adopt, or amend in a manner that will increase the
compensation or benefits to be provided to any director or employee of CCM,
the Company or any of their respective Subsidiaries under, any Business
Employee Benefit Plan or Company Employee Benefit Plan, respectively
(except as required by Laws and Regulations), (ii) hire or enter into any
employment agreement with any director or executive officer level employee
related to CCM, the Company or any of their respective Subsidiaries other
than in connection with the replacement of existing director or executive
officer level positions related to CCM or the Company, respectively or
(iii) other than in the ordinary course of business consistent with past
practice, increase the base salaries or wage rates of any of the employees
related to CCM, the Company or any of their respective Subsidiaries;
(l) Grant any new awards, bonuses, severance or termination pay (i) to
any director or officer related to CCM or the Company or (ii) to any other
employee related to CCM or the Company, in each case, except grants
required to be made pursuant to written or oral plans or agreements
outstanding or CCM or Company policies in effect (as described on Section
3.10(a) of the Disclosure Schedule) on the date hereof;
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(m) Commence any action, suit or proceeding related to CCM or the
Company other than (i) in the ordinary course of business consistent with
past practice, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a
valuable aspect of the Business or the Company Business, provided that it
consults with Purchaser prior to the filing of such a suit or (iii) in
respect of a breach of this Agreement;
(n) Cause or permit CCM, the Company or any of their respective
Subsidiaries to acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to either CCM and its Subsidiaries or the Company and its
Subsidiaries, or acquire or agree to acquire any equity securities of any
corporation, partnership, limited liability company, association or
business organization which securities acquired or agreed to be acquired
would constitute greater than five percent (5%) of the outstanding
securities of such entity;
(o) Other than as required by Laws and Regulations applicable to the
Business or the Company Business, make or change any material election in
respect of Taxes related to the Business or the Company Business,
respectively, adopt or change in any respect any accounting method in
respect of Taxes related to the Business or the Company Business,
respectively, enter into any material closing agreement related to the
Business or the Company Business, respectively, settle any material claim
or assessment or pay any liabilities in respect of Taxes related to the
Business or the Company Business, respectively, unless such claims,
assessments or liabilities are reflected on the Combined Balance Sheet or
their settlement or payment is inherent in the institutional sales trading,
program trading, trading, market making, order execution and institutional
research sales operations of the Business and the Company Business, or
consent to any extension or waiver of the limitation period applicable to
any material claim or assessment in respect of Taxes related to the
Business or the Company Business, respectively;
(p) Revalue any of the assets related to CCM or the Company other than
in the ordinary course of business consistent with past practice or as
required by applicable Laws and Regulations;
(q) Make any change to the accounting methods or practices related to
the Business or the Company Business, except as may be required by GAAP or
any Laws and Regulations applicable to the Business or the Company
Business, respectively or as required by Section 5.1 of this Agreement;
(r) Except as required by applicable Laws and Regulations, or written
rule, instruction or directive by a Governmental Entity: (i) materially
change the risk management, execution and hedging policies, procedures or
practices of CCM, the Company or any of their respective Subsidiaries which
are included in Section 5.2(r) of the Disclosure Schedule and were provided
to Purchaser prior to the date of this Agreement, or fail in any material
respects to comply with such policies, procedures and practices or
(ii) fail to use commercially reasonable
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means to avoid any material increase in the aggregate exposure to risk
related to the Business or the Company Business;
(s) Change Domain Names necessary or material to CCM or its
Subsidiaries or fail to renew existing Domain Name registrations necessary
or material to CCM or its Subsidiaries on a timely basis;
(t) Change Company Domain Names necessary or material to the Company
or its Subsidiaries or fail to renew existing Company Domain Name
registrations necessary or material to the Company or its Subsidiaries on a
timely basis;
(u) Enter into, amend in any material respect, extend or waive any
rights under any Material Contract or Company Material Contract; or
(v) Take or agree to take, any of the actions described in Sections
5.2(a) through (u) above.
5.3 Acquisition Proposals. Until the earlier of the termination of this
Agreement or the Closing Date, each Seller agrees that neither it nor any of its
Affiliates, nor any of its or its Affiliates' officers, directors, employees,
agents or representatives (including any investment banker, attorney or
accountant retained by any of them) will initiate or solicit, directly or
indirectly, any inquiries or the making of any proposal or offer with respect to
an Acquisition Transaction (any such inquiry, proposal or offer, an "Acquisition
Proposal") or engage in any negotiations concerning, or provide any Business
Confidential Information or Company Confidential Information or data to, or have
any discussions with, any Person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. Sellers will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted before the
date of this Agreement with respect to any Acquisition Proposal.
Article VI
Additional Agreements
6.1 Regulatory Matters.
(a) The parties hereto shall cooperate with each other and promptly
prepare and file all necessary documentation, and effect all applications,
notices, petitions and filings (including, to the extent necessary, any
notification required by the HSR Act), to obtain as promptly as practicable
all permits, consents, approvals and authorizations of all third parties
and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement. The parties hereto agree
that they will consult with each other with respect to the obtaining of all
such permits, consents, approvals and authorizations and each party will
keep the other apprised of the status of matters relating to completion of
the transactions contemplated herein. Purchaser, Purchaser II and Sellers
shall use their reasonable commercial efforts to resolve any objections
that may be asserted by any Governmental Entity with respect to this
Agreement or the transactions contemplated by this Agreement. Purchaser,
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Purchaser II and Sellers further covenant and agree, with respect to any
threatened or pending preliminary or permanent injunction or other order,
decree or ruling or statute, rule, regulation or executive order that would
adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby, to use reasonable commercial efforts to
prevent the entry, enactment or promulgation thereof, as the case may be.
(b) Purchaser (on behalf of itself and Purchaser II) and Sellers
shall, upon request, furnish each other with all information concerning
themselves, their respective Subsidiaries, directors, officers, employees
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with any statement, filing, notice, application or
other document made by or on behalf of Purchaser, Purchaser II, Sellers or
any of their respective Subsidiaries to any Governmental Entity in
connection with the transactions contemplated by this Agreement.
(c) Purchaser (on behalf of itself and Purchaser II) and Sellers shall
promptly advise each other upon receiving any communication from any
Governmental Entity whose consent or approval is required for consummation
of the transactions contemplated by this Agreement which causes such party
to believe that there is a reasonable likelihood that any such consent or
approval will not be obtained or that the receipt of any such approval will
be materially delayed.
6.2 Access to Information. Subject to the Confidentiality Agreement,
Sellers agree to provide Purchaser and Purchaser II and Purchaser's and
Purchaser II's officers, directors, employees, accountants, counsel, financial
advisors, agents and other representatives (collectively, the "Purchaser
Representatives"), from time to time prior to the earlier of the termination of
this Agreement and the period not to exceed 90 days following the Closing Date
necessary for such information and access to personnel as Purchaser (on behalf
of itself and Purchaser II) shall reasonably request with respect to the
Business and the Company Business, including the work papers of Sellers'
independent accountants. Except as required by Laws and Regulations, Purchaser
shall hold, and shall cause Purchaser's Affiliates and Purchaser Representatives
to hold, any non-public information received from Sellers, directly or
indirectly, in accordance with the Confidentiality Agreement.
6.3 Public Disclosure. Unless otherwise permitted by this Agreement,
Purchaser and Sellers shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement or any of the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld or delayed), except as may be required by
Laws and Regulations or by obligations pursuant to any listing agreement with
any national securities exchange or with the NASD, in which case the party
proposing to issue such press release or make such public statement or
disclosure shall use reasonable commercial efforts to consult with the other
party before issuing such press release or making such public statement or
disclosure.
6.4 Reasonable Commercial Efforts and Further Assurances. Each of the
parties to this Agreement shall use its reasonable commercial efforts to effect
the transactions
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contemplated hereby and to fulfill and cause to be fulfilled the conditions to
Closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting the consummation of this Agreement and the transactions contemplated
hereby.
6.5 Employees; Employee Benefit Matters.
(a) Purchaser and Purchaser II shall provide to Retained Employees (as
defined below) of CCM and the Company and their Subsidiaries following the
Closing (i) employee benefits that are no less favorable in the aggregate
than the employee benefits provided to similarly-situated employees of
Purchaser from time to time and (ii) base salaries and incentive
compensation opportunities that are no less favorable in the aggregate to
the base salaries and incentive compensation opportunities provided to
similarly-situated employees of Purchaser from time to time.
(b) Sellers shall take all action necessary to ensure that each
employee of CCM, the Company and their Subsidiaries who is not identified
on Section 6.5(b) of the Disclosure Schedule and such other employees as
Purchaser identifies to Sellers within two weeks of the date hereof, which
in the aggregate shall not be fewer than 125 employees and shall not be
significantly different in category allocations than those set forth in
Section 6.5(b) of the Disclosure Schedule (subject to such deletions as may
be made by Purchaser without any substantive change to such category
allocations and without decreasing such aggregate number of employees), is
no longer employed by CCM, the Company or their respective Subsidiaries as
of immediately prior to the Closing (such terminated employees, the
"Non-Retained Employees"). Sellers shall cause each Non-Retained Employee
to execute a release of all claims against CCM, the Company and their
Subsidiaries to the extent such a release of claims is a condition for
severance benefits under the applicable Business Employee Benefit Plan or
Company Employee Benefit Plan under an agreement between the Sellers and
such Non-Retained Employee and Sellers shall use reasonable efforts to seek
a release of Purchaser and its Affiliates of such claims, provided that
Sellers shall not be required to take any action or fail to take any action
if doing so would be adverse to Sellers or any of its Affiliates following
the Closing. Sellers shall retain all severance obligations under the
Business Employee Benefit Plans and Company Employee Benefit Plans except
to the extent Purchaser has any responsibility for the Schwab Soundview
2004 Severance Plan, subject to Section 6.5(j). Purchaser shall be
responsible for all severance obligations related to any Retained Employees
that arise as a result of the conduct of the Business or the Company
Business or the conduct of the Purchaser or Purchaser II or any of their
Affiliates following the Closing under Purchaser's applicable plans as in
effect as of the date hereof. For purposes of this Agreement, "severance"
shall include any notice or pay required to be provided in accordance with
the WARN Act Workers Adjustment and Retraining Notification Act of 1988
(the WARN Act ) or any similar state or local statute. Purchaser shall use
reasonable efforts to seek from each Retained Employee who is terminated by
Purchaser prior to the one year anniversary of the Closing and is entitled
to severance under Purchaser's severance plans a release of Sellers from
any obligation to pay severance to such employees in respect of such
termination, provided that Purchaser shall not be required to take any
action or fail to take any action if doing so would be adverse to Purchaser
or any of its Affiliates.
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(c) Purchaser shall indemnify and hold Sellers and their Affiliates
harmless from and against all claims, reasonable expenses (including
reasonable attorneys' fees), losses and liabilities relating to (A) the
Retained Employees' (as defined below) employment with the Purchaser,
Purchaser II and their Affiliates on or after the Closing Date to the
extent arising as a result of the conduct of the business or the employment
of the Retained Employees following the Closing; and (B) Purchaser's or
Purchaser II's failure to comply with all applicable Laws and Regulations
in connection with the employee selection process resulting in the
selection of the Non-Retained Employees to the extent (i) such Non-Retained
Employees are employees of CCM or any of its Subsidiaries (and not of the
Company and its Subsidiaries), (ii) such selection is not the result of the
assignment by Sellers or the Business or the Company Business prior to the
Closing of categories of people to accounts on a basis that would cause
Purchaser inadvertently to violate applicable Laws and Regulations; and
(iii) with respect to employees who have accounts, such selection is not
based on quantitative data. Sellers acknowledge that as of the date hereof
Purchaser and Purchaser II have not received any employment records or
demographic data with respect to any employees of the Company or CCM or any
of their Subsidiaries.
(d) For purposes of the employee benefit plans of Purchaser and
Purchaser II, Purchaser and Purchaser II shall credit each employee of CCM,
the Company and their Subsidiaries who was identified by Purchaser and
Purchaser II as provided in Section 6.5(b) and is an active employee
immediately following the Closing or is on short-term disability, military
or family leave and return to work at the conclusion of such leave (a
"Retained Employee") with full credit for all service that would have been
recognized by Seller or its Affiliates under the applicable Business
Employee Benefit Plans or Company Employee Benefit Plans before the Closing
Date for purposes of participation, eligibility, vesting, and benefit
accrual, except for benefit accrual under any defined benefit or
contribution pension plan; it being understood that no Retained Employee
shall be permitted to participate in the Purchaser's frozen defined benefit
plan. With respect to Purchaser's health and dental benefit plans,
Purchaser shall cause any such plan to waive any pre-existing condition
exclusions and actively-at-work requirements under such plans with respect
to the Retained Employees and their eligible dependents (to the extent
waived under the corresponding Business Employee Benefit Plan) and ensure
that any covered expenses incurred on or before the Closing Date shall be
taken into account for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions after the Closing Date to
the extent that such expenses are taken into account for similarly situated
employees of Purchaser. Sellers shall retain any obligation for payment of
long or short-term disability claims arising from disabilities of any
employees or former employees of the Business or the Company Business that
occurred prior to the Closing Date in accordance with the applicable
Business Employee Benefit Plans and Company Employee Benefit Plans.
(e) Sellers shall cause CCM, the Company and their Subsidiaries to
cease to be participating employers in any of the Business Employee Benefit
Plans and Company Employee Benefit Plans effective immediately prior to the
Closing, subject to the Closing unless such cessation is automatic under
the terms of the applicable Business Employee Benefit Plan and Company
Employee Benefit Plan. Sellers shall retain (and indemnify, defend and hold
harmless Purchaser, Purchaser II and their Affiliates and their respective
employees and directors from) all liabilities and obligations whatsoever
related to or arising from (i) any employees or former employees of CCM,
the Company, or any of their Subsidiaries who are not Retained
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Employees, including any severance or retention pay, except to the extent
otherwise provided in Section 6.5(f) and (ii) any employment agreement
entered into prior to the Closing by CCM, the Company or any of their
Subsidiaries with any employees of CCM, the Company, or any of their
Subsidiaries other than any employment agreement with any Retained Employee
that is disclosed in the Disclosure Schedule, and (iii) any other matters
for which Sellers have retained responsibility in Sections 6.5 and 6.6 of
this Agreement. Prior to the Closing, Sellers will terminate the Business
Employee Benefit Plans of CCM or any of its Subsidiaries.
(f) Following the Closing, Sellers shall retain, and none of CCM, the
Company or their Subsidiaries shall have, any liability or obligation
arising from or related to the employment, or termination of employment, of
any employee (or former employee) who is not a Retained Employee or any
liability or obligation under or related to the Business Employee Benefit
Plans or the Company Employee Benefit Plans, except for (i) the Company
Employee Benefit Plans specifically identified as such on Section 3.10(a)
of the Disclosure Schedule and (ii) the obligation to reimburse Sellers for
any amounts exceeding $550,000 owing as of the Closing to Non-Retained
Employees in respect of production-based bonuses earned during the period
beginning July 1, 2004 and ending on the Closing Date to the extent such
amounts were derived pursuant to the formulas contained in the plans set
forth in Section 6.5(f) of the Disclosure Schedule and were derived
consistent with past practice it being understood that with respect to any
pool allocations, Purchaser shall have the right to review such allocations
in advance. Following the Closing, CCM, the Company and their respective
Subsidiaries shall not have any Controlled Group Liability. For purposes of
this Agreement, "Controlled Group Liability" shall mean any liability
(i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under
Sections 412 and 4971 of the Code, and (iv) as a result of failure to
comply with the continuation coverage requirements of Section 601 et seq.
of ERISA and Section 4980B of the Code other than COBRA as set forth below.
Sellers shall be responsible for providing or discharging any and all
notifications, benefits and liabilities to employees and Governmental
Entities required by the WARN Act or by any other applicable Laws and
Regulations relating to plant closings or employee separations or other
severance pay that are required to be provided before the Closing as a
result of the transactions contemplated by this Agreement. Sellers shall
retain all obligations with respect to continued coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") (and any similar state Laws and Regulations), Section 4980B of
the Code, and Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder for all employees who are not Retained Employees, and Purchaser
shall retain all obligations under COBRA with respect to Retained
Employees.
(g) The Parent's 401(k) plan shall provide for the direct rollover or
distribution to on behalf of all employees of CCM, the Company or their
Subsidiaries of their vested account balances in accordance with such
plan's regular distribution rules for employees. The Purchaser's 401(k)
plans shall accept the direct rollover of the Retained Employees' benefit
in cash and in outstanding promissory notes from the Parent's 401(k) plan
as provided in Code Section 401(a)(31).
(h) [Intentionally Omitted.]
(i) Purchaser shall assume Sellers' aggregate liability as of the
Closing Date for the Retained Employees' vacation pay for vacation accrued
but not taken or paid by
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Sellers (reduced by any vacation taken but not accrued). Such accrued
vacation benefits shall be provided to Retained Employees in accordance
with the terms of the Purchaser's applicable vacation pay policy or plan.
(j) If a severance obligation is incurred following the Closing with
respect to any Retained Employee covered by the severance promises
described in the letters from Sellers to Xxxx Xxxxx dated December 18, 2003
and January 13, 2004 (describing a special severance program for employees
of the Company) and the Schwab Soundview Severance Plan, Sellers shall be
responsible for any amount that exceeds the severance obligation that would
be incurred as calculated under the Purchaser severance plan applicable to
such Retained Employee. Purchaser shall send Sellers a written invoice for
such excess amount, and Sellers agree to promptly remit an amount in cash
equal to the amount set forth in the invoice.
(k) Prior to the Closing, Sellers shall cause the Plan and Rabbi Trust
associated with the Deferred Compensation Plan to be cloned and shall cause
the Rabbi Trust with respect to the Retained Employee(s)to be fully funded
for the liability due to any Retained Employee under such Deferred
Compensation Plan as of the Closing. The Company shall retain liability for
the Deferred Compensation Plan for Retained Employees and shall remain the
owner of the assets in such Rabbi Trust.
(l) Prior to the fifteenth day following the date of this Agreement,
Sellers shall not, and shall cause their respective Affiliates not to,
directly or indirectly (on their own behalf or on behalf of any other
Person), hire any Person who was an employee, officer, agent, consultant or
independent contractor of CCM, the Company or any of their respective
Subsidiaries as of the date hereof, or solicit any such individual to leave
his or her employment or tenure of service with any such entity in order to
become an employee, officer, agent, consultant or independent contractor of
any Seller or its Affiliates.
(m) On and following the fifteenth day following the date hereof and
prior to the Closing, Sellers shall not, and shall cause their respective
Affiliates not to, directly or indirectly (on their own behalf or on behalf
of any other Person), hire any individual who was an employee, officer,
agent, consultant or independent contractor of CCM, the Company or any of
their respective Subsidiaries as of the date hereof, other than
Non-Retained Employees (such individuals collectively, the "Pre-Closing
Restricted Employees"), or solicit any Pre-Closing Restricted Employee to
leave his or her employment or tenure of service with any such entity in
order to become an employee, officer, agent, consultant or independent
contractor of any Seller or any of its Affiliates.
(n) On and following the Closing Date and prior to the second
anniversary of the Closing, Sellers shall not, and shall cause their
respective Affiliates not to, directly or indirectly (on their own behalf
or on behalf of any other Person), (i) hire (A) any individual set forth on
the list captioned "No-Hire Employees" furnished by Purchaser to Sellers on
or prior to the date hereof, as it may be amended and supplemented from
time to time by Purchaser as mutually agreed by the parties prior to the
Closing (such individuals collectively, the "No-Hire Employees"), or (B)
any individual solicited in violation of clause (ii) of this Section
6.5(n), or (ii) solicit (A) any No-Hire Employee, (B) any Retained
Employee, or (C) any employee of CCM, the Company or their respective
Subsidiaries who becomes an employee of any such
- 54 -
entity on or following the Closing (individuals described in clauses (A)
through (C), collectively, the "Post-Closing Restricted Employees") for
employment or retention as an employee, officer, agent, consultant or
independent contractor of any Seller or any of its Affiliates. The
placement of employment advertisements in newspapers of general
circulation, the maintenance of booths at trade and/or job recruitment
fairs and other similar activities not specifically targeted at any
Post-Closing Restricted Employee shall not be deemed a violation of this
Section 6.5(n). Further, none of Sellers or their Affiliates shall be
prohibited from soliciting for employment or retention any Post-Closing
Restricted Employee (i) who is in receipt of a notice of termination of
employment issued by CCM, the Company or any of their respective
Subsidiaries, or (ii) who contacts Sellers or their Affiliates concerning
employment opportunities prior to any solicitation of such Post-Closing
Restricted Employee by any of the Sellers or their respective Affiliates.
(o) Following the date of this Agreement and prior to the expiration
or termination of the Transition Services Agreement, Sellers shall not, and
shall cause their respective Affiliates not to, employ any of the
Transition Services Employees in, or reassign any Transition Services
Employees to, positions whose duties would not include the performance of
transition services pursuant to the Transition Services Agreement.
(p) Sellers agree to cooperate with and assist Purchaser and Purchaser
II in administering the Company Employee Benefit Plans, including
participating in compliance audits, preparing governmental filings and
explaining plan background and history, to the extent known by Sellers.
6.6 Outstanding Restricted Stock and Option Awards.
(a) Schedule 6.6 of the Disclosure Schedule identifies for each
employee of CCM and each of its Subsidiaries and the Company and each of
its Subsidiaries (each, an "Identified Employee") who holds restricted
shares of Parent common stock (the "Restricted Shares"), the following
information: (i) such Identified Employee's full name; (ii) the total
number of Restricted Shares granted; (iii) the total number of Restricted
Shares unvested as of July 31, 2004; and (iv) the vesting schedule for such
Restricted Shares, including the terms of any accelerated vesting covering
such Restricted Shares, a specification of those Restricted Shares that
cease to vest as of the Closing and a specification of those Restricted
Shares (the "Cash-Out Restricted Shares") for which a lump sum cash payment
equal to the fair market value of the unvested portion of the Cash-Out
Restricted Shares is due if such Identified Employee is terminated without
cause. In addition, Schedule 6.6 of the Disclosure Schedule identifies for
each Identified Employee who holds options to purchase shares of Parent
common stock (the "Options"), the following information: (i) such
Identified Employee's full name; (ii) the total number of Options granted;
(iii) the total number of Options unvested as of July 31, 2004 and the
value of each such Option, using the Sellers' Black-Scholes valuation
model; and (iv) the vesting schedule for such Options, including the terms
of any accelerated vesting covering such Options, a specification of those
Options that cease to vest as of the Closing and a specification of those
Options (the "Cash-Out Options") for which a lump sum cash payment equal to
the value of the unvested portion of the Cash-Out Options (and the amount
of such payment using the Sellers' Black-Scholes valuation model for such
Cash-Out Options) is due if such Identified Employee is terminated without
cause. Schedule 6.6 of the Disclosure Schedule identifies for each
Identified Employee who has been granted the right to receive cash which
- 55 -
vests over time (the "Cash Grants"), the following information: (i) such
Identified Employee's full name; (ii) the aggregate amount of such
Identified Employee's Cash Grant; (iii) the aggregate amount of such Cash
Grant unvested as of July 31, 2004; and (iv) the vesting schedule for such
Cash Grant. On or before the Closing, Sellers will provide Purchaser with
an updated version of Schedule 6.6 of the Disclosure Schedule with respect
to the Retained Employees as of the Closing Date.
(b) Sellers will be responsible for, and make any payments required in
respect of, all of the Restricted Shares, Cash-Out Restricted Shares,
Options, Cash-Out Options and Cash Grants (collectively, "Awards") that
have been awarded to any employee of any of CCM, the Company or any of
their respective Subsidiaries prior to the Closing, in accordance with the
applicable award agreement or plan document, except to the extent Purchaser
has determined to include within the Retained Employees any person who has
not agreed to the terms of employment offered by Purchaser. For the
avoidance of doubt, Purchaser and its Affiliates shall not be responsible
for, or make any payments required in respect of, any of the Awards that
have been awarded to any employee of any of CCM, the Company or any of
their respective Subsidiaries prior to the Closing, regardless of the
vesting schedule of such awards or the basis for the termination of such
employee, except to the extent Purchaser has determined to include within
the Retained Employees any person who has not agreed to the terms of
employment offered by Purchaser in which event Purchaser shall reimburse
Parent or make such payments as are required to such employee.
(c) Purchaser agrees to seek as part of the terms of the employment
offer an unconditional release of Sellers' obligations in Section 6.6(b)
from each employee intended to be a Retained Employee, as a condition of
continued employment following the Closing.
6.7 Restructuring.
(a) Prior to the Closing, Sellers shall take all reasonable commercial
efforts necessary to cause each of CCM, the Company and each of their
respective Subsidiaries to assign and transfer to the Sellers or one or
more of their Subsidiaries (other than CCM, the Company or any of their
respective Subsidiaries) any leases of real property and premises to which
any of CCM, the Company or any of their respective Subsidiaries may be
subject, including but not limited to the leases and other agreements
specified on Section 3.14 of the Disclosure Schedule, and to obtain in
writing the unconditional release of CCM, the Company and their respective
Subsidiaries from all liabilities in connection therewith so that none of
CCM, the Company or any of their respective Subsidiaries or Purchaser or
Purchaser II or any of their Affiliates will be responsible therefor or
subject thereto, except in connection with the subleases described in
Section 7.2(j). To the extent CCM, the Company and each of their respective
Subsidiaries are unable to obtain such releases prior to Closing, Sellers
shall continue to endeavor to do so following Closing and will indemnify
Purchaser for any damages resulting from the failure to obtain such
releases prior to Closing.
(b) Prior to the Closing, Sellers shall take all actions necessary to
terminate research coverage on all companies for which CCM, the Company or
their Subsidiaries are providing research coverage prior to the Closing,
including any required notices of termination.
- 56 -
(c) Prior to or contemporaneously with the Closing, Sellers shall
cause the Company and CCM to terminate that certain Strategic Alliance
Agreement, dated as of November 24, 2003 (together with any other agreement
related to the Perseus Agreement the "Perseus Agreement"), among the
Company, CCM and Perseus Group, LLC. Following such termination, Parent and
Purchaser shall, and shall cause their respective Affiliates and employees
to, perform and discharge, at Sellers' expense, all of the Company's
obligations pursuant to Section 17 of the Perseus Agreement.
(d) Prior to the Closing, Sellers shall cause each of CCM and its
Subsidiaries to assign and transfer to the Sellers or one or more of their
Affiliates (other than CCM, the Company or any of their respective
Subsidiaries) all the assets and liabilities related to the Electronic
Program Trading business of CCM and its Subsidiaries other than any
Intellectual Property, any Technology Systems and any Proprietary Software
related to the Electronic Program Trading business of CCM and its
Subsidiaries.
6.8 Noncompetition Agreement. At or prior to the Closing Date, Purchaser
and Sellers shall enter into a Noncompetition Agreement which shall have a
duration of five (5) years, will be substantially in the form attached hereto as
Section 6.8 of the Disclosure Schedule (the "Noncompetition Agreement").
6.9 Tax Matters.
(a) Parent Indemnity. Parent shall be liable for and shall indemnify
Purchaser and Purchaser II for (i) all Taxes attributable to, imposed on,
or for which the Company or any of its Subsidiaries may otherwise be liable
for events occurring or periods ending on or before the Closing Date and,
with respect to any taxable year or period beginning on or before and
ending after the Closing Date, the portion of such taxable year or period
ending on the Closing Date, (ii) any Transfer Taxes imposed on Parent or
CCM or the Company or their Subsidiaries with respect to the transactions
contemplated by this Agreement as set forth in Section 6.10(b), (iii) all
Taxes attributable to a breach of a representation set forth in Sections
3.9(d), 3.9(e), 3.9(f), 3A.9(a) (last sentence), 3A.9(d), 3A.9(e), 3A.9(f),
3A.9(g), 3A.9(h), or 3A.9(i), (iv) all Taxes that may become due from the
Company or any of its Subsidiaries, as a result of any such entity having
filed for any period including or preceding the Closing Date a
consolidated, combined or unitary return with a corporation pursuant to
Treas. Reg. SS 1.1502-6 or any analogous state, local or foreign law or
pursuant to any contractual obligation, or (v) any Taxes for which Parent
is liable pursuant to Section 6.10(c). Parent shall be entitled to any
refund of Taxes of the Company or any of its Subsidiaries attributable to
Taxes paid with respect to such periods, or otherwise paid by Parent
pursuant to this Section 6.9(a).
(b) Straddle Periods. For purposes of subsection (a) of this Section
6.9, whenever it is necessary to determine the liability for Taxes of the
Company or any of its Subsidiaries for a portion of a taxable year or
period that begins on or before and ends after the Closing Date, the
determination of such Taxes for the portion of the year or period ending on
or before, and the portion of the year or period beginning after, the
Closing Date generally shall be determined by assuming that the Company
and/or any of its Subsidiaries, as the case may be, had a taxable year or
period which ended at the close of the Closing Date, except that tax items
that
- 57 -
are calculated on an annual basis, such as the deduction for depreciation
or certain taxes, shall be apportioned on a pro rata time basis.
(c) Carrybacks. If Parent becomes entitled to a refund or credit of
Taxes for any period for which it is liable under Section 6.9(a) to
indemnify Purchaser and Purchaser II and such Taxes are attributable to the
carryback of losses, credits or similar items attributable to the Company
and its Subsidiaries and from a taxable year or period that begins after
the Closing Date, Parent shall promptly pay to Purchaser II the amount of
such attributable refund or credit together with any interest thereon. In
the event that any refund or credit of Taxes for which a payment has been
made pursuant to the immediately preceding sentence is subsequently reduced
or disallowed, Purchaser II shall indemnify and hold harmless Parent for
any Tax liability, including interest and penalties, assessed against
Parent by reason of the reduction or disallowance up the amount of any
payment received plus interest.
(d) Tax Returns. Parent shall file or cause to be filed when due all
Tax Returns that are required to be filed by or with respect to the Company
or any of its Subsidiaries for taxable years or periods ending on or before
the Closing Date and shall pay any Taxes due in respect of such Tax Returns
consistent with past practice, and Purchaser II shall file or cause to be
filed when due all Tax Returns that are required to be filed by or with
respect to the Company or any of its Subsidiaries for taxable years or
periods ending after the Closing Date and shall remit any Taxes due in
respect of such Tax Returns. Purchaser II shall permit Parent to review and
comment on each Tax Return for which Parent may be liable under Section
6.9(a) of this Agreement, and shall make such revisions to such Tax Returns
as are reasonably requested by Parent. Parent shall pay to Purchaser II an
amount equal to the Taxes for which Parent is liable pursuant to Section
6.9(a) but which are payable with Tax Returns to be filed by Purchaser II
pursuant to the previous sentence within 10 days prior to the due date for
the filing of such Tax Returns.
(e) Cooperation. After the Closing Date, Purchaser II and Sellers and
each of their respective Affiliates shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
preparation and filing of Tax Returns pursuant to this Section 6.9 and any
audit, litigation or other proceeding with respect to Taxes. Each party
will make available to the other, as reasonably requested, copies or
originals of all information, records or documents relating to liability
for Taxes for all periods prior to or including the Closing Date and will
preserve such information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof, and Sellers will
not destroy any such information, records or documents without first
offering, with reasonable advance written notice, to deliver such
information, records or documents to Purchaser II (at Purchaser II's
expense).
(f) No Section 338 Election. The parties shall not file an election
under Section 338 of the Code (including Section 338(h)(10) of the Code) or
any state law equivalent provision with respect to the transactions
contemplated by this Agreement.
(g) Tax Contests. Purchaser shall promptly notify Sellers in writing
upon receipt by Purchaser or any of its Affiliates (including the Company
and its Subsidiaries) of notice of any pending or threatened federal,
state, local or foreign income or franchise tax audits or assessments which
may affect the tax liabilities of the Company or any of its Subsidiaries
for
- 58 -
which Sellers would be required to indemnify Purchaser or Purchaser II
pursuant to Section 6.9(a); provided, that failure to comply with this
provision shall not affect Purchaser's right to indemnification hereunder
except to the extent such failure actually prejudiced the Sellers' ability
to defend or contest such audit or assessment. Sellers shall have the sole
right to represent the Company's or any of its Subsidiaries' interests in
any tax audit or administrative or court proceeding relating to taxable
periods ending on or before the Closing Date, and to employ counsel of its
choice at its expense. Sellers shall be entitled to participate at their
expense in the defense of any claim for Taxes for a year or period ending
after the Closing Date which may be the subject of indemnification by
Sellers pursuant to Section 6.9(a) and, with the written consent of
Purchaser and at its sole expense, may assume the entire defense of such
tax claim. Neither Purchaser nor Purchaser II nor the Company nor any of
the Company's Subsidiaries may agree to settle any tax claim for the
portion of the year or period ending on or before the Closing Date which
may be the subject of indemnification by Sellers under Section 6.9(a)
without the prior written consent of Sellers, which consent shall not be
unreasonably withheld.
(h) Survival. The obligations of the parties hereto set forth in this
Section 6.9 shall be unconditional and absolute.
(i) Certain Tax Liabilities. Notwithstanding any other provision of
this Section 6.9 to the contrary, Parent shall not be obligated to
indemnify Purchaser for any Taxes that are accrued but not yet payable as
of the Closing Date and are attributable to current operations of the
Company or any of its Subsidiaries, to the extent such current period Taxes
are incurred in the ordinary course of business and are attributable to the
tax period that begins on the Balance Sheet Date and includes the Closing
Date (which for this purpose would include, but not be limited to,
estimated income tax payments, payroll and withholding taxes and corporate
filing extension payments).
6.10 Other Tax Matters.
(a) Tax Sharing Agreement. Any tax sharing agreement between Parent or
Sellers, on the one hand, and the Company, CCM or any of their respective
Subsidiaries, on the other hand, shall be terminated as of the Closing Date
and shall have no further effect for any taxable year (whether the current
year, a future year, or a past year).
(b) Transfer Taxes. All documentary, sales, use, real property
transfer, real property gains, registration, value added, transfer, stamp,
recording and similar Taxes, fees and costs together with any interest
thereon, penalties, fines, costs, fees, additions to tax or additional
amounts with respect thereto incurred in connection with the transactions
contemplated by this Agreement ("Transfer Taxes") shall be borne by Parent.
(c) Information Reporting and Backup Withholding. Sellers shall
indemnify Purchaser and Purchaser II in accordance with Article IX hereof
to the extent that any Taxes are imposed on Purchaser, Purchaser II, any of
their Affiliates, the Company, CCM or any of their respective Subsidiaries
that are attributable to a failure by such entity to comply with any
federal, state, local or foreign Tax reporting or withholding requirement
during the 6-month period beginning on the Closing Date, if such failure is
due to the use by such entity of any procedure established by the Company,
CCM, Sellers, Parent or any of their respective
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Subsidiaries and in place as of the Closing Date for the solicitation,
collection and maintenance of any forms, certifications and other
information or otherwise is due to any form, certification or other
required information in place as of the Closing Date (or the absence of any
such form, certification or information as of the Closing Date), except to
the extent such failure is due to a change in law following the Closing or
to the extent that management of Purchaser or Purchaser II has actual
knowledge following the Closing of such failure.
(d) Partnership Taxes. Sellers shall be liable for and shall indemnify
Purchaser and Purchaser II in accordance with Article IX hereof for all
Taxes attributable to, imposed on, or for which CCM or any of its
Subsidiaries may otherwise be liable for events occurring or periods ending
on or before the Closing Date and, with respect to any taxable year or
period beginning on or before and ending after the Closing Date, the
portion of such taxable year or period ending on the Closing Date
(determined in accordance with the principles of Section 6.9(b)).
(e) Federal Tax Refund. Promptly following receipt, Purchaser shall
remit to Sellers the federal Tax refund (and any interest thereon) actually
received by the Company with respect to its request for a $10,268,997 tax
refund filed on IRS Form 1120X, for the Tax years 1997, 1998 and 1999, net
of any Tax burden on such receipt.
6.11 Jupiter. Sellers and their Affiliates shall, for the 18 month period
following the date of this Agreement, not facilitate any prospective purchaser
of the Business, the Company Business or any other businesses being sold by
Sellers in their soliciting, attempting to hire or hiring any then employee of
CCM, the Company or any of their respective Subsidiaries (other than research or
research sales employees). Sellers shall enforce any non-solicitation and
non-hire provision contained in any non-disclosure or confidentiality agreement
entered into between Sellers or their Affiliates, on one hand, and any such
prospective purchaser, on the other hand, to the extent that any non-enforcement
of such a provision contained in such an agreement is reasonably likely to be
adverse to Purchaser and Sellers are aware of any breach of such covenants.
6.12 Director and Officer Indemnification.
(a) The certificate of incorporation and bylaws of the Company shall,
and the Partnership Agreement shall, with respect to indemnification of
officers, directors, employees and agents, not be amended, repealed or
otherwise modified after the Closing in any manner that would adversely
affect the rights thereunder of the persons who at any time prior to the
Closing were identified as prospective indemnitees under the certificate of
incorporation or bylaws of the Company or Partnership Agreement in respect
of actions or omissions occurring at or prior to the Closing (including the
transactions contemplated hereby), unless such modification is required by
Laws and Regulations.
(b) Purchaser shall cause the Company and CCM to indemnify, defend and
hold harmless, the present and former officers, directors, employees and
agents of the Company, CCM or any of their respective Subsidiaries in their
capacities as such (each an "Agreed Indemnified Party") in accordance with
the certificate of incorporation and bylaws and agreement of limited
partnership, or other charter documents, of the Company, CCM and each of
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their respective Subsidiaries and any agreements or plans identified on
Section 6.12 of the Disclosure Schedule maintained by the Company, CCM and
each of their respective Subsidiaries, to the fullest extent permitted by
the terms thereof, subject to applicable Laws and Regulations, against all
losses, expenses, claims, damages and liabilities arising out of actions or
omissions occurring on or prior to the Closing. Sellers will promptly pay
to Purchaser any amounts Purchaser notifies Sellers in writing are required
to be paid pursuant to this Section 6.12(b).
(c) In the event Purchaser or any of its successors or assigns or the
Company or CCM or any of their respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Purchaser, the Company or CCM, as applicable, assume the
obligations set forth in this section or proper provision is made to retain
such liabilities or responsibilities.
(d) Purchaser II shall not, and shall cause the Company not to,
terminate the Tail Policy.
(e) The provisions of this Section 6.12 shall survive the Closing and
are intended to be for the benefit of, and shall be enforceable by, each
Agreed Indemnified Party and his or her heirs and representatives.
6.13 Parent Loan. Purchaser acknowledges that CCM owes Parent the
outstanding loan in the aggregate principal amount of $25,000,000. CCM intends
to repay such amount prior to Closing. If because of regulatory requirements or
otherwise CCM is prevented from repaying such amount, Purchaser will cause CCM
to make such repayment to Parent promptly following the receipt of regulatory
approval. Following the repayment of such amount, Purchaser will not permit CCM
to make any further drawings under such loan and Purchaser and Parent shall
cooperate to terminate such loan.
6.14 Pre-Closing Intellectual Property Transfer. Prior to the Closing (i)
Sellers shall, and shall cause their Affiliates (other than CCM and its
Subsidiaries), to transfer to CCM all of their respective right, title and
interest in and to the Intellectual Property listed on Section 3.17(a) of the
Disclosure Schedule that is indicated to be so transferred to CCM at Sellers'
expense; (ii) Sellers shall, and shall cause their Affiliates (other than the
Company and its Subsidiaries) to transfer to the Company all of their respective
right, title and interest in and to the Intellectual Property listed on Section
3.17(a) of the Disclosure Schedule and indicated to be so transferred to the
Company at Sellers' expense; (iii) Sellers shall duly submit recordation of such
transfers with the United States Patent and Trademark Office (or other
applicable office) and deliver to the Purchaser reasonable proof of such
submission, at Sellers' expense; and (iv) Sellers shall, and shall cause their
Affiliates (other than CCM, the Company and their respective Subsidiaries) prior
to Closing, or as soon as reasonably practicable thereafter, to transfer to CCM
or the Company, as the case may be, pursuant to a written agreement in a form
reasonably acceptable to the Purchaser, all of their respective rights, title,
interest and benefits in, to and under the Material Contracts and other
agreements listed on Sections 3.13(a)(xiv), 3.17 and 3.18
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of the Disclosure Schedule (but excluding those agreements addressed by Section
7.2(i), those agreements to which CCM, the Company or their respective
Subsidiaries are a party and derive all rights and benefits under such agreement
in their capacity as such, and those agreements annotated on Sections
3.13(a)(xiv), 3.17 and 3.18 of the Disclosure Schedule as not being transferred
pursuant to this transaction) to be so transferred to CCM or the Company, as the
case may be, having obtained all consents required for such transfer, and prior
to such transfer of such agreement providing the putative transferee all use,
rights and benefits under such agreement pursuant to the Transition Services
Agreement until such transfer, and retaining for itself none of the use, rights
or benefits under such agreement.
6.15 Disposition of "Schwab" Element Trademark Applications. As concerns
the trademark applications containing the "Schwab" word element listed on
Section 3.17(a) of the Disclosure Schedule, ownership of which Parent will
retain as indicated on Section 3.17(a) of the Disclosure Schedule (collectively,
the "Retained Trademark Applications"), at any time on or after the Closing,
Parent shall permit Purchaser to file in CCM's name and duly prosecute one or
more new applications for trademark registration for the non-"Schwab" elements
claimed in such Retained Trademark Applications. Parent will not cause or allow
the Retained Trademark Applications to lapse or abandon unless Purchaser directs
Parent to do so in writing, provided that Parent shall not be obligated to file
a Statement of Use or a request for extension of time to file a Statement of
Use, or submit responses to Office Actions or take other affirmative actions
concerning such Retained Trademark Applications, provided that Sellers provide
to Purchaser prompt written notice of such requirements as Sellers become aware
of them. Nothing in this Agreement or in the Ancillary Agreements shall be
deemed to transfer to Purchaser or Purchaser II any right, title, or interest in
or to any trademark containing the "Schwab" word element, and no rights to use
such trademarks are granted by Sellers under this Agreement or in the Ancillary
Agreement except as expressly set forth in the License Agreement.
6.16 Books and Records. Sellers shall ensure that prior to or at the
Closing, all books and records related to each of the Business and the Company
Business, including originals of all employment records for the Retained
Employees (including Human Resources Information System data, original
employment applications, results of background checks and credit checks,
fingerprint cards required by Laws and Regulations, results of pre-employment
drug tests and original Form I-9s), are in the possession of CCM and the
Company, respectively.
Article VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation to Effect the Transactions
Contemplated by this Agreement. The respective obligations of each party to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent
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jurisdiction preventing the consummation of the transactions contemplated
by this Agreement shall be in effect; nor shall there be any statute, rule,
regulation or order enacted, entered, or enforced which prevents or
prohibits the consummation of the transactions contemplated by this
Agreement. In the event an injunction or other order shall have been
issued, each party agrees to use its reasonable commercial efforts to have
such injunction or other order lifted.
(b) HSR Approval. The waiting period applicable to the consummation of
the transactions contemplated hereby under the HSR Act shall have expired
or been terminated.
(c) Regulatory Approval. Purchaser and Purchaser II, on the one hand,
and Sellers and its Subsidiaries, on the other, shall have timely obtained
from each Governmental Entity all approvals, waivers and consents, if any,
necessary for consummation of the purchase and sale contemplated hereby and
the Order Handling Agreement and set forth in Schedule 7.1 of the
Disclosure Schedule.
(d) Actions and Proceedings. There shall not be pending or threatened
any action, suit or proceeding by any federal or state court or
governmental entity challenging or seeking to materially restrain or
prohibit the transactions contemplated by this Agreement or the Order
Handling Agreement.
7.2 Conditions to Purchaser's Obligation To Effect The Transactions
Contemplated By This Agreement. Purchaser and Purchaser II's obligations to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Sellers set forth in this Agreement shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on such date, except to
the extent such representations and warranties are expressly made only as
of an earlier date, in which case as of such earlier date; provided that,
if any of such representations and warranties shall not be true and correct
(for this purpose disregarding any qualification or limitation as to
materiality or, a Business Material Adverse Effect or a Company Material
Adverse Effect), then the condition stated in this clause (a) shall be
deemed satisfied if and only if the cumulative effect of all inaccuracies
of such representations and warranties (for this purpose disregarding any
qualification or limitation as to materiality, Business Material Adverse
Effect or Company Material Adverse Effect) shall not be or have a Business
Material Adverse Effect or a Company Material Adverse Effect. Purchaser and
Purchaser II shall have received a certificate signed on behalf of Sellers
by an authorized officer of each Seller to the foregoing effect.
(b) Performance of Obligations. Sellers shall have performed in all
material respects its obligations required to be performed by them under
this Agreement at or prior to the Closing Date. Purchaser and Purchaser II
shall have received a certificate signed on behalf of Sellers by an
authorized officer of each Seller to the foregoing effect.
(c) Order Handling Services Agreement. Parent and CS&Co. shall have
executed and delivered to Purchaser the Order Handling Services Agreement.
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(d) Options Order Business Agreement. Parent and CS&Co. shall have
executed and delivered to Purchaser the Options Order Business Agreement.
(e) Noncompetition Agreement. Sellers shall have executed and
delivered to Purchaser the Noncompetition Agreement.
(f) License Agreement. Sellers shall have executed and delivered to
Purchaser and Purchaser II the License Agreement.
(g) Transition Services Agreement. Sellers shall have executed and
delivered to Purchaser and Purchaser II the Transition Services Agreement.
(h) No Actions or Proceedings. There shall not be pending any Legal
Proceeding by any Person that is reasonably likely to result in the
prohibition or any material limitation on the ownership, operation or
control by Purchaser or Purchaser II or any of their Affiliates of any
material portion of the Business, the Partnership Interests or the Company
Common Stock.
(i) Consents. Sellers shall have received the material
non-governmental consents that are listed on Schedule 3.4 of the Disclosure
Schedule hereof the failure of which to obtain would be material to CCM or
the Company or Purchaser or Purchaser II, including those set forth on
Schedule 7.2(i) (except to the extent that Purchaser has entered into
agreements with respect to the matters described in the agreements
specified therein with respect to the Business and the Company Business).
(j) Real Estate. Sellers shall have entered into, or shall have caused
the appropriate Subsidiaries of Parent to enter into, leases, subleases or
licenses, as applicable, of real property listed on Section 1.6 of the
Disclosure Schedule for the durations and in the manner the prices are to
be derived as set forth therein.
(k) Perseus. Prior to or contemporaneously with the Closing, the
Company and CCM shall have terminated the Perseus Agreement.
(l) Resignations. Each director and officer of each of the Company,
its Subsidiaries, CCM and its Subsidiaries shall have resigned effective as
of the Closing, unless Purchaser notifies Sellers to the contrary prior to
the Closing.
(m) Capitalization. The Company, its Subsidiaries, CCM and its
Subsidiaries shall be in compliance with any minimum regulatory capital
requirements as of the Closing Date.
(n) Opinion of Counsel. Purchaser shall have received the written
opinion of Xxxxxx Xxxx Nemerovski Xxxxxx Xxxx & Rabkin P.C., counsel to
Sellers, in form and substance reasonably satisfactory to Purchaser, with
respect to the due authorization, execution and delivery by Sellers, and
the enforceability against the Sellers of this Agreement.
7.3 Conditions to Sellers' Obligation To Effect The Transactions
Contemplated By This Agreement. Sellers' obligations to effect the transactions
contemplated by this
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Agreement shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Purchaser and Purchaser II set forth in this Agreement
shall be true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing Date as though made on such
date, except to the extent such representations and warranties are
expressly made only as of an earlier date, in which case as of such earlier
date. Sellers shall have received a certificate signed on behalf of each of
Purchaser and Purchaser II by an authorized officer of Purchaser and
Purchaser II to the foregoing effect.
(b) Performance of Obligations. Purchaser and Purchaser II shall have
performed in all material respects its obligations required to be performed
by it under this Agreement at or prior to the Closing Date. Sellers shall
have received a certificate signed on behalf of each of Purchaser and
Purchaser II by an authorized officer of Purchaser and Purchaser II to the
foregoing effect.
(c) Order Handling Services Agreement. Purchaser shall have executed
and delivered to Parent and CS&Co. the Order Handling Services Agreement.
(d) Options Order Business Agreement. Purchaser shall have executed
and delivered to Parent and CS&Co. the Options Order Business Agreement.
(e) License Agreement. Purchaser shall have executed and delivered to
Sellers the License Agreement.
(f) Transition Services Agreement. Purchaser shall have executed and
delivered to Sellers the Transition Services Agreement.
(g) Opinion of Counsel. Sellers shall have received the written
opinion of Xxxxxxxx & Xxxxxxxx LLP, counsel to Purchaser, in form and
substance reasonably satisfactory to Sellers, with respect to the due
authorization, execution and delivery by Purchaser and Purchaser II, and
the enforceability against Purchaser and Purchaser II of this Agreement.
Article VIII
Termination and Amendment
8.1 Termination. This Agreement may be terminated:
(a) by mutual consent of Sellers and Purchaser at any time prior to
the Closing Date;
(b) by either Sellers or Purchaser at any time prior to the Closing
Date if the Closing shall not have occurred on or before January 31, 2005
(provided that the right to terminate this Agreement under this Section
8.1(b) shall not be available to any party whose action or failure to act
has been the cause of or resulted in the failure to consummate the
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transactions contemplated by this Agreement by the close of business on
January 31, 2005 and such action or failure to act constitutes a breach of
this Agreement);
(c) by Sellers at any time prior to the Closing Date, if Purchaser and
Purchaser II shall not be capable of satisfying the conditions set forth in
Section 7.3 (a) and (b) of this Agreement; provided that the right to
terminate this Agreement by Sellers shall not be available to Sellers if
Sellers are at that time in material breach of this Agreement;
(d) by Purchaser at any time prior to the Closing Date, if Sellers
shall not be capable of satisfying the conditions set forth in Section 7.2
(a) and (b) of this Agreement; provided that the right to terminate this
Agreement by Purchaser shall not be available to Purchaser if Purchaser or
Purchaser II is at that time in material breach of this Agreement; and
(e) by either Sellers or Purchaser if at any time prior to the Closing
Date any permanent injunction or other order of a court or other competent
authority preventing the consummation of the transactions contemplated by
this Agreement shall have become final and nonappealable.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Purchaser, Purchaser II,
Sellers or their respective officers, directors, stockholders or Affiliates;
provided that (a) the provisions of Section 6.3 (Public Disclosure),
Section 11.7 (Governing Law), Section 8.3 (Expenses) and this Section 8.2 shall
remain in full force and effect and survive any termination of this Agreement,
(b) the Confidentiality Agreement shall continue in full force and effect, and
shall survive any termination of this Agreement, in accordance with its terms
and (c) nothing herein shall relieve any party from liability for fraud or
willful breach in connection with this Agreement or the transactions
contemplated hereby.
8.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of advisers, brokers, finders, agents,
accountants and legal counsel) shall be paid by the party incurring such
expense.
8.4 Amendment. This Agreement may not be amended or modified at any time,
except by execution of an instrument in writing signed on behalf of each of the
parties hereto.
8.5 Extension; Waiver. At any time prior to the Closing Date any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein, but any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
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Article IX
Indemnification
9.1 Survival of Representations and Warranties and Agreements. The
respective representations and warranties of Sellers and Purchaser contained in
this Agreement shall survive the Closing but shall expire on April 30, 2006;
provided, however, that, notwithstanding the foregoing, (i) the representations
and warranties set forth in Sections 3.1 (with respect to the first five
sentences only), 3.2(a), 3.2(b), 3.2(d), 3.3(a), 3.3(b)(i), 3A.1, 3A.2(a),
3A.2(b), 3A.2(d), 3A.3(i), 4.1, 4.2(a), 4.2(b)(i) and 4.4 shall survive the
Closing and continue in full force and effect indefinitely, (ii) the
representations and warranties set forth in Sections 3.17 and 3.18 shall survive
the Closing but shall expire on the fifth anniversary of the Closing Date and
(iii) the representations and warranties set forth in Sections 3.9 and 3A.9
shall survive the Closing and continue in full force and effect until 30 days
following the expiration of the statutes of limitation for the year or period at
issue (giving effect to any waiver, mitigation or extension thereof).
Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the breach or inaccuracy giving rise to such right of indemnity
shall have been given to the party against which such indemnity may be sought
prior to such time. The respective covenants and agreements of Sellers and
Purchaser contained in this Agreement (including, without limitation, the
respective indemnification obligations of Sellers and Purchaser set forth in
this Article IX) shall survive the Closing and the consummation of the
transactions contemplated by this Agreement indefinitely unless otherwise
provided by their terms.
9.2 Indemnification by Sellers.
(a) Sellers, jointly and severally, shall indemnify, defend and hold
Purchaser, Purchaser II and their Affiliates and their respective officers,
directors, employees, agents, advisers, and representatives (collectively,
the "Purchaser Indemnitees") harmless from and after the Closing Date for
the period set forth in Section 9.1 (including any extension thereof as
expressly provided for in such Section) from and against any claims,
demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies, including interest, penalties, reasonable
expenses of investigation with respect to third party claims and reasonable
attorney's fees and expenses, whether or not involving a claim by a third
party ("Damages"), incurred or suffered by any Purchaser Indemnitee to the
extent resulting or arising from or relating to: (i) any inaccuracy in any
of the representations and warranties made by Sellers in this Agreement
(for this purpose disregarding any qualification or limitation as to
materiality (such as "material", "in all material respects" and the like,
or "Business Material Adverse Effect" or "Company Material Adverse Effect")
other than the reference to "Business Material Adverse Effect" or "Company
Material Adverse Effect", as applicable, set forth in the parenthetical of
the first sentence of each of Sections 3.8, 3.12(a) and 3A.12(a)) or in the
certificate referred to in Section 7.2(a); or (ii) any breach of any
covenant or agreement of Sellers made in this Agreement, any Ancillary
Agreement (other than the Order Handling Agreement or Options Order
Business Agreement) or in the certificate referred to in Section 7.2(b).
Notwithstanding the foregoing, with respect to Damages arising under
Section 9.2(a)(i), (i) Sellers shall not be liable to indemnify any
Purchaser Indemnitees against such Damages unless and until the aggregate
amount of Damages incurred or suffered by all Purchaser Indemnitees exceeds
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$2,650,000 and then only to the extent of such excess, and (ii) Sellers'
maximum liability to the Purchaser Indemnitees for such Damages shall not
exceed $175 million.
(b) Sellers, jointly and severally, shall indemnify, defend and hold
the Purchaser Indemnitees harmless from and against any Damages, incurred
or suffered by any Purchaser Indemnitee to the extent resulting or arising
from or relating to any Company Liability, including the consolidated IPO
litigation matters . Sellers shall be entitled to the recovery of all
amounts available under the Escrow Agreement identified on Section 3.8 of
the Disclosure Schedule (the "Escrow Agreement"). Purchaser will use
reasonable commercial efforts, at Sellers' expense, to seek recovery under
the Escrow Agreement.
9.3 Indemnification by Purchaser. Purchaser shall indemnify, defend and
hold Sellers, their Affiliates (not including CCM or any of its Subsidiaries)
and their respective officers, directors, employees, agents, advisers, and
representatives (collectively, the "Seller Indemnitees") harmless from and after
the Closing Date for the period set forth in Section 9.1 (including any
extension thereof as expressly provided for in such Section) from and against
any Damages incurred or suffered by any Seller Indemnitee to the extent
resulting or arising from or relating to: (a) any inaccuracy in any of the
representations and warranties made by Purchaser in this Agreement or in the
certificate referred to in Section 7.3(a) or (b) any breach of any covenant or
agreement of Purchaser made in this Agreement, any Ancillary Agreement (other
than the Order Handling Agreement) or in the certificate referred to in Section
7.3(b). Notwithstanding the foregoing, with respect to Damages arising under
Section 9.3(a), (i) Purchaser shall not be liable to indemnify any Seller
Indemnitees against such Damages unless and until the aggregate amount of
Damages incurred or suffered by all Seller Indemnitees exceeds $2,650,000 and
then only to the extent of such excess and (ii) Purchaser's maximum liability to
the Seller Indemnitees for such Damages shall not exceed $175 million.
9.4 Indemnification Procedure.
(a) Any party seeking indemnification hereunder (the "Indemnified
Party") shall give prompt notice (a "Certificate") to the party from which
indemnification is sought (the "Indemnifying Party") of any claim for
indemnification hereunder, which notice shall specify in reasonable detail
the basis for any anticipated liability and the provisions of this
Agreement pursuant to which such Indemnified Party claims to be entitled to
indemnification hereunder. The failure to so notify the Indemnifying Party
shall not limit any of the obligations of the Indemnifying Party (except to
the extent such failure materially prejudices the Indemnifying Party).
(b) In case the Indemnifying Party shall object to the indemnification
of an Indemnified Party in respect of any claim or claims specified in any
Certificate, the Indemnifying Party shall, within ten (10) Business Days
after receipt by the Indemnifying Party of such Certificate, deliver to the
Indemnified Party a written notice to such effect and the Indemnifying
Party and the Indemnified Party shall, within the ten (10) Business Day
period beginning on the date of receipt by the Indemnified Party of such
written objection, attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims to which the
Indemnifying Party shall have so objected. If the Indemnified Party and the
Indemnifying Party shall succeed in reaching agreement on their respective
rights with respect to
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any of such claims, the Indemnified Party and the Indemnifying Party shall
promptly prepare and sign a memorandum setting forth such agreement.
(c) Claims for Damages specified in any Certificate to which an
Indemnifying Party shall not object in writing within ten (10) Business
Days of receipt of such Certificate, claims for Damages covered by a
memorandum of agreement of the nature described in Section 9.4(b) and
claims for Damages the validity and amount of which have been the subject
of a final and binding judicial determination, the time for appeal having
expired, are hereinafter referred to, collectively, as "Agreed Claims."
Within ten (10) Business Days of the determination of the amount of any
Agreed Claims, subject to the limitations of this Article IX, the
Indemnifying Party shall pay to the Indemnified Party an amount equal to
the Agreed Claim by cashier's check or wire transfer to the bank account or
accounts designated in writing by the Indemnified Party not less than one
(1) Business Day prior to such payment.
(d) Promptly after the assertion by any third party of any claim
against any Indemnified Party that in the reasonable judgment of such
Indemnified Party may result in the incurrence by such Indemnified Party of
Damages for which such Indemnified Party would be entitled to
indemnification pursuant to this Agreement, such Indemnified Party shall
deliver to the Indemnifying Party a written notice describing in reasonable
detail such claim, but any failure on the part of the Indemnified Party to
provide prompt notice shall not limit any of the obligations of the
Indemnifying Party (except to the extent such failure materially prejudices
the defense of such claim). For a period of fifteen (15) Business Days
following its receipt of the notice specified in the previous sentence, the
Indemnifying Party may, at its option, elect to assume the defense of the
Indemnified Party against such claim (and, in such event, the Indemnifying
Party shall promptly employ counsel, who shall be reasonably satisfactory
to such Indemnified Party) at such Indemnifying Party's expense. If the
Indemnifying Party elects to assume such defense, then the Indemnifying
Party shall diligently defend any such claim as if such Indemnifying Party
had 100% of the liability with respect to such claim. Any Indemnified Party
shall have the right but not the obligation to employ separate counsel in
any such action or claim and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the
Indemnifying Party unless (i) the Indemnifying Party shall have failed,
within fifteen (15) Business Days after having been notified by the
Indemnified Party of the existence of such claim as provided in the
preceding sentence, to assume the defense of such claim or to notify the
Indemnified Party in writing that it shall assume the defense of such
claim, (ii) the employment of such counsel has been specifically authorized
in writing by the Indemnifying Party, or (iii) the named parties to any
such action (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party and such Indemnified Party shall have been
advised by such counsel that there may be one or more legal defenses
available to the Indemnifying Party which are not available to, or the
assertion of which would be adverse to the interests of, the Indemnified
Party. No Indemnifying Party shall be liable to indemnify any Indemnified
Party for any settlement of such action or claim effected without the
consent of the Indemnifying Party, which consent may not be unreasonably
withheld, delayed or conditioned, it being understood that it shall be
unreasonable to withhold, delay or condition any such consent unless the
Indemnifying Party has acknowledged that it has an obligation to indemnify
the Indemnified Party with respect to such action or claim. Notwithstanding
any other provision of this Agreement, Sellers shall not settle or
compromise any claim, including any Company Liability or any Legal
Proceedings relating to CCM, the Company or any of their
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respective Subsidiaries without the prior written consent of Purchaser
unless such settlement or compromise (a) is solely for monetary amounts for
which Sellers have agreed to indemnify Purchaser Indemnitees and (b) such
settlement or compromise does not include any acknowledgement or statement
or admission of liability or statement which could reasonably be expected
to be adverse to Purchaser or its Affiliates and includes a complete and
unconditional release of the Purchaser Indemnitees. Notwithstanding
anything to the contrary contained in this Agreement, Parent shall assume,
at Parent's expense, the defense and control of all Legal Proceedings
relating to the Company or any of its Subsidiaries, regardless of whether
such Legal Proceedings are described in the Disclosure Schedule, including
the consolidated IPO litigation matters identified on Section 9.2(b) of the
Disclosure Schedule. Purchaser agrees to cooperate in all reasonable
respects in the defense of claims covered by this Section 9.4(d),
including, as required, the furnishing of books and records, personnel and
witnesses and the execution of documents, in each case as reasonably
necessary for such defense, and all out-of-pocket costs and expenses
incurred by Purchaser or Purchaser II or any of their Affiliates in
connection therewith shall be Damages paid by Sellers as incurred.
9.5 Certain Offsets; Tax Treatment of Payments. Any indemnification payment
made pursuant to this Article IX shall be (i) reduced by the amount of any
insurance proceeds actually received by the Indemnified Party with respect to
the Damages incurred or suffered by the Indemnified Party; provided that the
reduction specified in this Section 9.5 shall not be applied if to do so would
excuse any insurer from any obligation to cover any Damages and (ii) reduced by
any net Tax benefit actually realized by the Indemnified Party through a
reduction in Taxes otherwise due as a result of the Damages incurred or suffered
by the Indemnified Party (as calculated in good faith by the Indemnified Party)
and (iii) increased (on a grossed-up basis) by any net Tax cost actually imposed
on the Indemnified Party as a result of receiving such indemnification payment
(as calculated in good faith by the Indemnified Party) The parties agree to
treat any payment pursuant to this Article IX as an adjustment to the Purchase
Price for Tax purposes to the fullest extent permitted by applicable Laws and
Regulations.
9.6 Exclusive Remedy. After the Closing Date, this Article IX shall provide
the exclusive remedy for any of the matters addressed herein or other claims
arising out of this Agreement, other than for fraud and other than for the
remedies of specific performance, injunctive relief or other non-monetary
equitable remedies.
9.7 Coordination with Sections 6.9 and 6.10. Notwithstanding any other
provision of this Article IX to the contrary, but subject to Section 9.1, this
Article IX shall not apply to any indemnification with respect to Sections 6.9
or 6.10 hereof or any breach of representation or warranty set forth in Sections
3.9 and 3A.9 (Taxes and Tax Returns) which shall be governed solely by Section
6.9 and 6.10 hereof.
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Article X
Definitions
10.1 Certain Defined Terms. Unless the context otherwise requires, the
following terms, when used in this Agreement, shall have the respective meanings
specified below (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Acquisition Proposal" shall have the meaning stated in Section 5.3.
"Acquisition Transaction" shall mean a purchase, lease or other acquisition
of all or any substantial part of the assets of CCM, it being agreed that, for
purposes of this Agreement and by way of example only, a majority interest in
the Partnership Interests shall be considered a substantial part of the assets
of CCM.
"Affiliate" of a Person shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person.
"Agreed Claims" shall have the meaning stated in Section 9.4(c)
"Agreed Indemnified Party" shall have the meaning stated in Section
6.12(b).
"Agreement" shall have the meaning stated in the preamble to this document.
"AMEX" shall mean the American Stock Exchange LLC.
"Ancillary Agreements" shall mean the Order Handling Services Agreement,
the Options Order Business Agreement, the Noncompetition Agreement, the License
Agreement and the Transition Services Agreement.
"Authorizations" shall have the meaning stated in Section 3.12(b).
"Balance Sheet Date" shall have the meaning stated in Section 3.5.
"Business" shall mean the NASDAQ market-making, non-NASDAQ OTC
market-making (commonly known as Pink Sheet and Bulletin Board market-making),
systematic internalization of retail order flow (in listed and/or OTC
securities, as well as in options), stock order routing/execution, options
trading/order routing (including any receipt of payments for order flow)
institutional sales and trading (in both domestic as well as international
securities) and institutional research sales businesses of CCM and its
Subsidiaries and the options business of CS&Co. to which the unaudited statement
of operating results of the Options Business of CS&Co. included in Section
3.5(d) of the Disclosure Schedule relates.
"Business Confidential Information" shall have the meaning stated in
Section 3.17(h).
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks in New York City are authorized or obligated by Laws and
Regulations to close.
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"Business Employee Benefit Plans" shall have the meaning stated in Section
3.10(a).
"Business IP" means all Intellectual Property owned or controlled by CCM or
any of its Subsidiaries, including all Proprietary Software, or to be owned or
controlled by CCM pursuant to Section 6.14.
"Business Material Adverse Effect" shall mean any effect that (i) is, or
would be reasonably likely to be, material and adverse to the business,
operations, financial condition or results of operations of CCM or its
Subsidiaries or (ii) does, or would be reasonably likely to, prevent Sellers
from consummating the transactions contemplated by this Agreement, other than
(in the case of both clauses (i) and (ii) above) (A) any effect to the extent
resulting from events, facts or circumstances relating to the economy in
general, including market fluctuations and changes in interest rates, or to the
industry in general and not specifically relating to the Business, (B) any
effect resulting from changes in Laws and Regulations generally applicable to
entities engaged in businesses similar to the Business or (C) a Business
Operational Material Adverse Effect.
"Business Multiemployer Plan" shall have the meaning stated in Section
3.10(b).
"Business Operational Material Adverse Effect" shall mean any effect to the
extent resulting from the loss of employees or customers of the Business or the
diminution in customer order volumes, in each case resulting from the
announcement of the transactions contemplated hereby.
"Business Regulatory Agreement" shall have the meaning stated in Section
3.12(h).
"Cash-Out Options" shall have the meaning stated in Section 6.6(a).
"Cash-Out Restricted Shares" shall have the meaning stated in Section
6.6(a).
"Cash Grants" shall have the meaning stated in Section 6.6(a).
"CCM" shall mean Schwab Capital Markets L.P., a New Jersey limited
partnership.
"CCM Financial Statements" shall mean collectively: (i) the audited
consolidated financial statements of CCM and its Subsidiaries for the fiscal
year ended December 31, 2002 and (ii) the audited consolidated financial
statements of CCM and its Subsidiaries for the fiscal year ended December 31,
2003.
"CCM Order Detail" shall have the meaning stated in Section 3.20(a).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
"Certificate" shall have the meaning stated in Section 9.4(a).
"Closing" shall mean the consummation of the transactions contemplated by
this Agreement.
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"Closing Date" shall have the meaning stated in Section 2.1.
"COBRA" shall have the meaning stated in Section 6.5(f).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Combined Balance Sheet" shall have the meaning stated in Section 3.5.
"Combined Financial Statements" shall have the meaning stated in Section
3.5.
"Company" shall mean SoundView Technology Group, Inc., a Delaware
corporation.
"Company Authorizations" shall have the meaning stated in Section 3A.12(b).
"Company Business" means the business of the Company and its Subsidiaries.
"Company Business Operational Material Adverse Effect" shall mean any
effect to the extent resulting from the loss of employees or customers of the
Company Business or the diminution in customer order volumes in each case
resulting from the announcement of the transactions contemplated hereby.
"Company Common Stock" shall have the meaning stated in the Recitals.
"Company Confidential Information" shall have the meaning stated in Section
3A.17(h).
"Company Domain Names" shall have the meaning stated in Section 3A.17(j).
"Company Employee Benefit Plans" shall have the meaning stated in Section
3A.10(a).
"Company Intellectual Property" shall mean all patents, trademarks, trade
names, trade dress, service marks, other indicia of origin and all goodwill
associated therewith and symbolized thereby, domain names, databases and other
compilations of information, copyrights, mask works, net lists, technology,
know-how, trade secrets, inventions, discoveries, invention disclosures, ideas,
algorithms, processes, computer software programs and applications (in both
source code and object code form and including data and related documentation),
customer lists and supplier lists and tangible or intangible proprietary or
confidential information or material, and registrations applications, reissues,
continuations, continuations-in-part, divisions, revisions, extensions,
reexaminations, renewals, reversions and restorations in respect of the
foregoing, owned, licensed by, or otherwise used by or held for use in the
Company Business.
"Company IP" means all Company Intellectual Property owned or controlled by
the Company or any of its Subsidiaries, including all Company Proprietary
Software, or to be owned or controlled by the Company pursuant to Section 6.14.
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"Company Liability" shall mean any debts, liabilities, commitments and
obligations of any kind (whether fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not
asserted, known or unknown, determined, determinable or otherwise, whenever or
however arising (including, whether arising out of any contract or tort based on
negligence or strict liability) and whether or not the same would be required by
GAAP to be reflected in financial statements or disclosed in the notes thereto
of the Company or any of its Subsidiaries), except to the extent specifically
reflected in the Combined Balance Sheet or to the extent arising out of the
conduct of the Company Business following the Closing.
"Company Material Adverse Effect" shall mean any effect that (i) is, or
would be reasonably likely to be, material and adverse to the business,
operations, financial condition or results of operations of the Company or its
Subsidiaries or (ii) does, or would be reasonably likely to, prevent Sellers
from consummating the transactions contemplated by this Agreement, other than
(in the case of both clauses (i) and (ii) above) (A) any effect to the extent
resulting from events, facts or circumstances relating to the economy in
general, including market fluctuations and changes in interest rates, or to the
industry in general and not specifically relating to the Company Business or (B)
any effect from changes in Laws and Regulations generally applicable to entities
engaged in businesses similar to the Company Business or (C) a Company Business
Operational Material Adverse Effect.
"Company Material Contracts" shall have the meaning stated in Section
3A.13(a).
"Company Multiemployer Plan" shall have the meaning stated in Section
3A.10(b).
"Company Permitted Lien" shall mean any Lien consisting of (i) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or similar
common Laws and Regulations or statutory liens or encumbrances arising in the
ordinary course of business which are not delinquent or remain payable without
penalty, (ii) encumbrances for Taxes and other assessments or governmental
charges or levies not yet due and delinquent, and (iii) any other Liens that
individually or in the aggregate do not result in a Company Material Adverse
Effect and are not material to the value of any asset.
"Company Proprietary Software" shall have the meaning stated in Section
3A.17(b).
"Company Regulatory Agreement" shall have the meaning stated in Section
3A.12(h).
"Company Technology Systems" shall have the meaning stated in Section
3A.18(a).
"Confidentiality Agreement" shall mean the Confidentiality Agreement dated
as of July, 26, 2004, between Parent and Purchaser, as it may be amended from
time to time.
"Controlled Group Liability" shall have the meaning stated in Section
6.5(f).
"CS&Co." shall have the meaning set forth in Section 1.2.
"Damages" shall have the meaning stated in Section 9.2(a).
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"Disclosure Schedule" shall mean the document dated the date of this
Agreement delivered by Sellers to Purchaser prior to the execution and delivery
of this Agreement with references to the representations and warranties of
Sellers in this Agreement.
"Domain Names" shall have the meaning stated in Section 3.17(j).
"Environmental Laws" shall have the meaning stated in Section 3.15.
"Entity Assets" shall have the meaning stated in Section 3.14.
"ERISA" shall have the meaning stated in Section 3.10(a).
"Escrow Agreement" shall have the meaning stated in Section 9.2(b).
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" shall mean any court, administrative agency or
commission or other governmental, prosecutorial or regulatory authority or
instrumentality and any SRO.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental Entity.
"GP" shall mean CS Capital Markets & Co., a Delaware corporation.
"HSR Act" shall have the meaning stated in Section 3.4.
"Identified Employee" shall have the meaning stated in Section 6.6(a).
"Indemnified Party" shall have the meaning stated in Section 9.4(a).
"Indemnifying Party" shall have the meaning stated in Section 9.4(a).
"Intellectual Property" shall mean all patents, trademarks, trade names,
trade dress, service marks, other indicia of origin and all goodwill associated
therewith and symbolized thereby, domain names, databases and other compilations
of information, copyrights, mask works, net lists, technology, know-how, trade
secrets, inventions, discoveries, invention disclosures, ideas, algorithms,
processes, computer software programs and applications (in both source code and
object code form and including data and related documentation), customer lists
and supplier lists and tangible or intangible proprietary or confidential
information or material, and registrations, applications, reissues,
continuations, continuations-in-part, divisions, revisions, extensions,
reexaminations, renewals, reversions and restorations in respect of the
foregoing, owned, licensed by, or otherwise used by or held for use in the
Business or the electronic program trading business conducted by CCM or any of
its Subsidiaries.
"Investment Advisers Act" shall mean the Investment Advisers Act of 1940,
as amended.
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"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" with respect to Sellers shall mean actual knowledge after due
inquiry of any person with primary responsibility for the relevant matter.
"Laws and Regulations" means all federal, state, local and foreign laws,
statutes, codes, rules, regulations and ordinances, Governmental Orders and any
rules and regulations of any SRO.
"Legal Proceeding" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Entity or any arbitrator or arbitration panel.
"License Agreement" shall have the meaning stated in Section 1.5.
"Lien" shall mean any lien, claim, charge, option, encumbrance, mortgage,
pledge or security interest or other restrictions of any kind.
"LP" shall mean Schwab Associates & Co., a Delaware corporation.
"Management Reports" shall have the meaning stated in Section 3.5.
"Material Contracts" shall have the meaning stated in Section 3.13(a).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"New York Chosen Court" shall have the meaning stated in Section 11.9.
"Noncompetition Agreement" shall have the meaning stated in Section 6.8.
"Non-Retained Employees" shall have the meaning stated in Section 6.5(b).
"NYSE" shall mean the New York Stock Exchange, Inc.
"Options" shall have the meaning stated in Section 6.6(a).
"Options Order Business Agreement" shall have the meaning stated in Section
1.2.
"Order Handling Services Agreement" shall have the meaning stated in
Section 1.2.
"Parent" shall mean The Xxxxxxx Xxxxxx Corporation, a Delaware corporation.
"Partnership Agreement" shall have the meaning stated in Section 3.1.
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"Partnership Interests" shall have the meaning stated in the recitals.
"Permitted Lien" shall mean any Lien consisting of (i) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or similar
common Laws and Regulations or statutory liens or encumbrances arising in the
ordinary course of business which are not delinquent or remain payable without
penalty, (ii) encumbrances for Taxes and other assessments or governmental
charges or levies not yet due and delinquent, and (iii) any other Liens that
individually or in the aggregate do not result in a Business Material Adverse
Effect and are not material to the value of any asset.
"Perseus Agreement" shall have the meaning stated in Section 6.7(c).
"Person" shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, Governmental Entity or
other entity or organization.
"Proprietary Software" shall have the meaning stated in Section 3.17(b).
"Purchase Price" shall have the meaning stated in Section 1.3.
"Purchase Price Allocation" shall have the meaning stated in Section
1.4(a).
"Purchaser" shall mean UBS Securities LLC, a Delaware limited liability
company.
"Purchaser II" shall mean UBS Americas Inc., a Delaware corporation.
"Purchaser Material Adverse Effect" shall mean any effect that would
prevent Purchaser or Purchaser II from consummating the transactions
contemplated hereby.
"Purchaser Indemnitees" shall have the meaning stated in Section 9.2(a).
"Purchaser Regulatory Agreement" shall have the meaning stated in Section
4.6(d).
"Purchaser Representatives" shall have the meaning stated in Section 6.2.
"Restricted Shares" shall have the meaning stated in Section 6.6(a).
"Retained Employee" shall have the meaning stated in Section 6.5(d).
"Retained Trademark Applications" shall have the meaning stated in Section
6.15.
"San Francisco Chosen Court" shall have the meaning stated in Section 11.9.
"Saturn Sub" shall mean SoundView Technology Corporation, a Delaware
corporation.
"SEC" shall mean the United States Securities Exchange Commission.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
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"Seller Indemnitees" shall have the meaning stated in Section 9.3.
"Sellers" shall mean Parent, GP, Saturn Sub and LP, collectively.
"Service Level Schedule" shall have the meaning stated in Section 3.20(b).
"SRO" shall mean any domestic or foreign securities, broker-dealer,
investment adviser and insurance industry self-regulatory organization.
"Subsidiary" shall mean any Person (I) of which another Person (a) owns,
directly or indirectly, fifty percent (50%) or more of the outstanding voting
securities or equity interests or (b) is a general partner or managing member or
(II) securities or other ownership interests of which having by their terms the
power to elect a majority of the board of directors of such Person or other
persons performing similar functions are owned or controlled, directly or
indirectly, by another Person.
"Tail Policy" shall have the meaning stated in Section 3A.20.
"Tax" or "Taxes" shall mean all federal, state, local, and foreign income,
excise, gross receipts, gross income, ad valorem, profits, gains, property,
capital, sales, transfer, use, value-added, stamp, documentation, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes (including estimated taxes), charges, levies or
like assessments together with all penalties and additions to tax and interest
thereon.
"Tax Returns" shall mean all federal, state, local or foreign Tax returns,
Tax reports, and declarations of estimated Tax, including without limitation,
consolidated income Tax returns.
"Technology Systems" shall have the meaning stated in Section 3.18(a).
"Transfer Taxes" shall have the meaning stated in Section 6.10(b).
"Transition Services Agreement" shall have the meaning stated in Section
1.6.
"Transition Services Employees" shall have the meaning stated in Section
1.6.
"Treasury Regulations" shall mean regulations prescribed pursuant to the
Code.
"WARN Act" shall have the meaning stated in Section 6.5(b).
Article XI
General Provisions
11.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with
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confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Sellers, to:
The Xxxxxxx Xxxxxx Corporation
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxx
Facsimile: 000-000-0000
with a copy to:
The Xxxxxxx Xxxxxx Corporation
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx XxXxxxxxx
Facsimile: 000-000-0000
and to:
Xxxxxx Xxxx Nemerovski Xxxxxx Xxxx & Rabkin,
A Professional Corporation
0 Xxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Facsimile: 000-000-0000
(b) if to Purchaser or Purchaser II, to:
UBS Securities LLC
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: F. Xxxxxx Xxxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
Xxxxxxx X. Xxxx
Facsimile No.: 000-000-0000
11.2 Interpretation. When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed
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in each case to be followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the first paragraph of this Agreement. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When a reference is made to a contract or agreement in this
Agreement it shall be deemed to include any oral or written contract or
agreement.
11.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.4 Entire Agreement. This Agreement and the documents and instruments and
other agreements specifically delivered pursuant hereto or contemporaneously
herewith, including the Exhibits, the Schedules, including the Disclosure
Schedule, constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms. No representations or warranties are
being given by any party hereto other than the representations specifically set
forth in this Agreement.
11.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations shall be assigned or delegated by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties; provided that each of Purchaser and Purchaser II may assign or delegate
any and all of its rights and obligations under this Agreement to one or more of
its Affiliates if such assignment would not materially delay the parties'
receipt of the regulatory approvals referred to in Section 3.4 or 4.3. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
11.6 Third Party Beneficiaries. This Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto and any Person to which any indemnification rights
hereunder applies any rights or remedies hereunder.
11.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to such
state's principles of conflicts of laws.
11.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any Laws and Regulations,
holding or rule of construction
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providing that ambiguities in an agreement or other document shall be construed
against the party drafting such agreement or document.
11.9 Jurisdiction.
Each Seller agrees that it shall bring any action, litigation, suit or
proceeding in respect of any claim arising out of or related to this Agreement
or the transactions contained in or contemplated by this Agreement and the
Ancillary Agreements, exclusively in the United States District Court for the
Southern District of New York (the "New York Chosen Court"), and solely in
connection with claims arising under this Agreement or the transactions that are
the subject of this Agreement or any of the Ancillary Agreements each party
hereto (i) irrevocably submits to the jurisdiction of the New York Chosen Court,
(ii) waives any objection to laying venue in any such action or proceeding in
the New York Chosen Court, (iii) waives any objection that the New York Chosen
Court is an inconvenient forum or do not have jurisdiction over any party hereto
and (iv) agrees that service of process upon such party in any such action or
proceeding shall be effective if notice is given in accordance with Section 11.1
of this Agreement. Each of Purchaser and Purchaser II agrees that it shall bring
any action, litigation, suit or proceeding in respect of any claim arising out
of or related to this Agreement or the transactions contained in or contemplated
by this Agreement and the Ancillary Agreements, exclusively in the United States
District Court for the Northern District of California, San Francisco Division
(the "San Francisco Chosen Court"), and solely in connection with claims arising
under this Agreement or the transactions that are the subject of this Agreement
or any of the Ancillary Agreements each party hereto (i) irrevocably submits to
the jurisdiction of the San Francisco Chosen Court, (ii) waives any objection to
laying venue in any such action or proceeding in the San Francisco Chosen Court,
and (iii) waives any objection that the San Francisco Chosen Court is an
inconvenient forum or do not have jurisdiction over any party hereto.
11.10 Attorneys' Fees. The prevailing party in any action, litigation, suit
or proceeding under Section 11.9 of this Agreement shall be entitled to receive
its reasonable attorneys' fees and costs and expenses incurred in such action,
litigation, suit or proceeding.
11.11 Waiver of Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY PROCEEDING, LITIGATION OR COUNTERCLAIM BASED ON, OR ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. IF THE SUBJECT MATTER OF ANY LAWSUIT IS ONE IN WHICH THE
WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY TO THIS AGREEMENT SHALL PRESENT AS
A NON-COMPULSORY COUNTERCLAIM IN ANY SUCH LAWSUIT ANY CLAIM BASED ON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. FURTHERMORE, NO PARTY TO
THIS AGREEMENT SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL
CANNOT BE WAIVED.
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11.12 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void, invalid or unenforceable, the remainder of
this Agreement shall continue in full force and effect and the application of
such provision to other persons or circumstances shall be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such illegal, void, invalid or unenforceable provision of this
Agreement with a legal, valid and enforceable provision that shall achieve, to
the extent possible, the economic, business and other purposes of such illegal,
void, invalid or unenforceable provision.
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IN WITNESS WHEREOF, Parent, GP, LP, Purchaser and Purchaser II have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
Sellers: The Xxxxxxx Xxxxxx Corporation,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxx
------------------------------
Name: Xxxxxxx Xxxxxxx
----------------------------
Its: Executive Vice President
-----------------------------
CS Capital Markets & Co.,
a Delaware corporation
By: /s/ Xxxxxxxx Xxxxxxxxx
------------------------------
Name: Xxxxxxxx Xxxxxxxxx
----------------------------
Its: Executive Vice President
-----------------------------
Co-Chief Operating Officer
-----------------------------
Schwab Associates & Co.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
----------------------------
Its: President
-----------------------------
Purchaser UBS Securities LLC,
a Delaware limited liability company
By: /s/ Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
----------------------------
Its: Managing Director, Equities
-----------------------------
By: /s/ Xxxx X. Ogurtsov
------------------------------
Name: Xxxx Xxxxxxxx
----------------------------
Its: Managing Director,
-----------------------------
UBS Investment Bank
-----------------------------
Purchaser II UBS Americas Inc.,
a Delaware corporation
By: /s/ Xxxxxx Xxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxx Xxxxxxx
----------------------------
Its: Attorney-in-Fact
-----------------------------
By: /s/ Xxxx X. Ogurtsov
------------------------------
Name: Xxxx X. Ogurtsov
----------------------------
Its: Attorney-in-Fact
-----------------------------
Exhibit List
Exhibit A Form of Order Handling Services Agreement
Exhibit B Options Order Business Agreement Term Sheet
TABLE OF CONTENTS
Page
Article I Purchase and Sale of CCM and the Company.....................................................1
1.1 Purchase and Sale............................................................................1
1.2 Order Handling Services Agreement............................................................2
1.3 Purchase Price...............................................................................2
1.4 Allocation of Purchase Price.................................................................2
1.5 License Agreement............................................................................3
1.6 Transition Services Agreement................................................................3
Article II The Closing..................................................................................3
2.1 Closing......................................................................................3
2.2 Execution and Delivery.......................................................................4
Article III Representations and Warranties of the Business...............................................4
3.1 Corporate Organization, Standing and Power...................................................4
3.2 Capitalization...............................................................................5
3.3 Authority; No Violation......................................................................5
3.4 Consents and Approvals.......................................................................6
3.5 Financial Statements.........................................................................6
3.6 Absence of Certain Changes or Events.........................................................7
3.7 Undisclosed Liabilities......................................................................8
3.8 Legal Proceedings............................................................................8
3.9 Taxes and Tax Returns........................................................................9
3.10 Employee Benefit Plans......................................................................10
3.11 Employee Matters............................................................................12
3.12 Compliance with Applicable Laws and Regulatory Matters......................................13
3.13 Material Contracts..........................................................................15
3.14 Assets......................................................................................17
3.15 Environmental Liability.....................................................................18
3.16 Insurance...................................................................................18
3.17 Intellectual Property.......................................................................18
3.18 Information Technology......................................................................22
3.19 Interests of Officers and Directors.........................................................23
3.20 Order Flow..................................................................................23
3.21 Broker's Fees...............................................................................23
3.22 Business Information........................................................................23
Article IIIA Representations and Warranties of the Company...............................................24
3A.1 Corporate Organization, Standing and Power..................................................24
3A.2 Capitalization..............................................................................24
3A.3 No Violation................................................................................25
3A.4 [Intentionally Omitted].....................................................................25
3A.5 [Intentionally Omitted].....................................................................25
3A.6 Absence of Certain Changes or Events........................................................25
3A.7 Undisclosed Liabilities.....................................................................27
3A.8 Legal Proceedings...........................................................................27
3A.9 Taxes and Tax Returns.......................................................................28
3A.10 Employee Benefit Plans......................................................................29
3A.11 Employee Matters............................................................................31
3A.12 Compliance with Applicable Laws and Regulatory Matters......................................32
3A.13 Material Contracts..........................................................................34
3A.14 [Intentionally Omitted].....................................................................36
3A.15 Environmental Liability.....................................................................36
3A.16 Insurance...................................................................................37
3A.17 Intellectual Property.......................................................................37
3A.18 Information Technology......................................................................41
3A.19 Interests of Officers and Directors.........................................................42
3A.20 Tail Policy.................................................................................42
Article IV Representations and Warranties of Purchaser and Purchaser II................................42
4.1 Corporate Organization, Standing and Power..................................................42
4.2 Authority; No Violation.....................................................................42
4.3 Consents and Approvals......................................................................43
4.4 Financing...................................................................................43
4.5 Legal Proceedings...........................................................................43
4.6 Compliance with Applicable Law and Regulatory Matters.......................................44
4.7 Broker's Fees...............................................................................44
4.8 Purchaser Information.......................................................................45
Article V Conduct Prior to the Closing Date...........................................................45
5.1 Conduct of the Business Prior to the Closing Date...........................................45
5.2 Conduct of the Business.....................................................................46
5.3 Acquisition Proposals.......................................................................49
Article VI Additional Agreements.......................................................................49
6.1 Regulatory Matters..........................................................................49
6.2 Access to Information.......................................................................50
6.3 Public Disclosure...........................................................................50
6.4 Reasonable Commercial Efforts and Further Assurances........................................50
6.5 Employees; Employee Benefit Matters.........................................................51
6.6 Outstanding Restricted Stock and Option Awards..............................................55
6.7 Restructuring...............................................................................56
6.8 Noncompetition Agreement....................................................................57
6.9 Tax Matters.................................................................................57
6.10 Other Tax Matters...........................................................................59
6.11 Jupiter.....................................................................................60
6.12 Direction and Officer Indemnification.......................................................60
6.13 Parent Loan.................................................................................61
6.14 Pre-Closing Intellectual Property Transfer..................................................61
6.15 Disposition of "Schwab" Element Trademark Applications......................................62
6.16 Books and Records...........................................................................62
Article VII Conditions Precedent........................................................................62
7.1 Conditions to Each Party's Obligation to Effect the Transactions
Contemplated by this Agreement..............................................................62
7.2 Conditions to Purchaser's Obligation To Effect The Transactions
Contemplated By This Agreement..............................................................63
7.3 Conditions to Sellers' Obligation To Effect The Transactions
Contemplated By This Agreement..............................................................64
Article VIII Termination and Amendment...................................................................65
8.1 Termination.................................................................................65
8.2 Effect of Termination.......................................................................66
8.3 Expenses....................................................................................66
8.4 Amendment...................................................................................66
8.5 Extension; Waiver...........................................................................66
Article IX Indemnification.............................................................................67
9.1 Survival of Representations and Warranties and Agreements...................................67
9.2 Indemnification by Sellers..................................................................67
9.3 Indemnification by Purchaser................................................................68
9.4 Indemnification Procedure...................................................................68
9.5 Certain Offsets; Tax Treatment of Payments..................................................70
9.6 Exclusive Remedy............................................................................70
9.7 Coordination with Sections 6.9 and 6.10.....................................................70
Article X Definitions.................................................................................71
10.1 Certain Defined Terms.......................................................................71
Article XI General Provisions..........................................................................78
11.1 Notices.....................................................................................78
11.2 Interpretation..............................................................................79
11.3 Counterparts................................................................................80
11.4 Entire Agreement............................................................................80
11.5 Assignment..................................................................................80
11.6 Third Party Beneficiaries...................................................................80
11.7 Governing Law...............................................................................80
11.8 Rules of Construction.......................................................................80
11.9 Jurisdiction................................................................................81
11.10 Attorneys' Fees.............................................................................81
11.11 Waiver of Jury Trial........................................................................81
11.12 Severability................................................................................82
FIRST AMENDMENT TO PURCHASE AGREEMENT
This First Amendment to Purchase Agreement (this "Amendment") is dated as
of October 29, 2004, by and among The Xxxxxxx Xxxxxx Corporation, a Delaware
corporation ("Parent"), CS Capital Markets & Co., a Delaware corporation ("GP"),
Schwab Associates & Co., a Delaware corporation ("LP"), UBS Securities LLC, a
Delaware limited liability company ("Purchaser"), and UBS americas Inc., a
Delaware corporation ("Purchaser II" and, collectively with Parent, GP, LP and
Purchaser, the "Parties").
RECITALS
Whereas, the Parties are parties to that certain Purchase Agreement, dated
as of August 31, 2004 (the "Purchase Agreement"), providing for, among other
things, the purchase and sale of certain partnership interests in Schwab Capital
Markets L.P., a New Jersey limited partnership, and all of the outstanding
capital stock of SoundView Technology Corporation, a Delaware corporation; and
Whereas, the Parties wish to amend the Purchase Agreement pursuant to
Section 8.4 thereof, as further provided herein.
Now Therefore, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Parties agree as follows:
1. Certain Terms. Capitalized terms used herein but not defined in this
Amendment have the meanings given to such terms in the Purchase Agreement.
2. Certain Amendments. The Purchase Agreement is hereby amended ab initio
as follows:
(a) Section 6.5(b) of the Purchase Agreement is amended to delete the
phrase "within two weeks of the date hereof" from the first sentence
thereof and to insert the phrase "prior to 5:00 p.m., Pacific time, on
September 20, 2004" in substitution therefor.
(b) Section 6.5(l) of the Purchase Agreement is amended to delete the
phrase "the fifteenth day following the date of this Agreement" therefrom
and to insert the phrase "5:00 p.m., Pacific time, on September 20, 2004"
in substitution therefor.
(c) Section 6.5(k) of the Purchase Agreements is amended and restated
as follows: "Sellers shall (i) cause all amounts credited to participant
accounts, whether vested or unvested, under the Soundview Deferred
Compensation Plan (the "Deferred Compensation Plan") to be paid in cash to
each participant without the requirement of any further employment promptly
after the termination of employment of such participant, and (ii) shall
assume all liabilities associated with the Deferred Compensation Plan, in
each case, other than for the Retained Emloyees. Within fourteen days
following the Closing Date, Sellers shall pay to Purchaser an amount equal
to the amount received by Seller upon distribution of the rabbi trust
assets with respect to Xxxx Xxxxxx. Following such payments, Sellers shall
have no obligation with respect to the Deferred Compensation Plan with
respect to the Retained Employees. Any amount owed under the Deferred
Compensation Plan that exceeds the amount paid to Purchaser pursuant to the
prior sentence shall be a Company Liability for all purposes of this
Agreement."
(d) Section 6.5(m) of the Purchase Agreement is amended to delete the
phrase "On and following the fifteenth day following the date hereof"
therefrom and to insert the phrase "Following 5:00 p.m., Pacific time, on
September 20, 2004" in substitution therefor.
(e) Section 6.7(a) of the Purchase Agreement is amended (i) to insert
the phrase "provided, however, that Sellers shall not be obligated to
endeavor to obtain releases from tenants and subtenants of Sellers or any
of their Subsidiaries (including CCM, the Company and their respective
Subsidiaries), but instead shall be obligated to endeavor to obtain
estoppel certificates from such tenants and subtenants in substantially the
form approved by Purchaser" at the end of the first sentence thereof, and
(ii) to delete the phrase "and will indemnify Purchaser for any damages
resulting from the failure to obtain such releases prior to Closing" from
the last sentence thereof.
(f) Section 6.7(b) of the Purchase Agreement is amended to insert the
following sentences at the end thereof: "Notwithstanding the previous
sentence, the parties acknowledge that following the Closing Sellers and
their Affiliates may elect to perform, at their sole risk and expense,
certain research-related services to certain research clients of the
Business. Any Damages incurred or suffered by any Purchaser Indemnitees to
the extent that they result or arise from Sellers' and their Affiliates'
performance of such services following the Closing shall constitute Company
Liabilities for all purposes of this Agreement."
(g) Section 9.2(a) of the Purchase Agreement is amended to insert the
phrase "; or (iii) any leases of real property and premises to which any of
CCM, the Company or any of their respective Subsidiaries may be subject
prior to the Closing Date, including but not limited to the leases and
other agreements specified on Section 3.14 of the Disclosure Schedule" at
the end of the first sentence thereof.
(h) Section 7.2(i) of the Purchase Agreement is amended and restated
as follows: "Sellers shall have received the material non-governmental
consents that are listed on Section 3.4 of the Disclosure Schedule hereof,
the failure of which to obtain would be material to CCM or the Company or
Purchaser or Purchaser; provided, however, that it is expressly agreed that
there is no obligation on the part of any party hereto to obtain the
consents set forth on Section 7.2(i) of the Disclosure Schedule."
3. No Other Amendments. Except for the amendments specified in Section 2 of
this Amendment, this Amendment shall not be deemed to effect any amendment,
modification or waiver of any provision of the Purchase Agreement.
4. Certain Consents and Approvals. With reference to Section 2(e) of this
Amendment, and Section 6.7(a) of the Purchase Agreement (as amended hereby),
Purchasers
- 2 -
hereby confirm that the form of estoppel certificate furnished by Sellers to
Purchasers' counsel on October 4, 2004 has been approved by Purchasers.
5. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without reference to such
state's principles of conflicts of laws.
6. Counterparts. This Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
- 3 -
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized as of the date first
above written.
The Xxxxxxx Xxxxxx Corporation,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxx
----------------------------
Name: Xxxxxxx Xxxxxxx
--------------------------
Its: EVP
---------------------------
CS Capital Markets & Co.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
--------------------------
Its: SVP
---------------------------
Schwab Associates & Co.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxx
----------------------------
Name: Xxxxxx Xxxxxx
--------------------------
Its: President
---------------------------
UBS Securities LLC,
a Delaware limited liability
company
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
--------------------------
Its: Managing Director
---------------------------
By: /s/ Xxxxx Xxxxx
----------------------------
Name: Xxxxx Xxxxx
--------------------------
Its: Executive Director
Legal & External
Affairs
---------------------------
UBS Americas Inc.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
--------------------------
Its: Attorney-in-fact
---------------------------
By: /s/ Xxxxx Xxxxx
----------------------------
Name: Xxxxx Xxxxx
--------------------------
Its: Executive Director
Legal & External
Affairs
---------------------------
Exhibit A
Equities Order Handling Agreement
The Equities Order Handling Agreement, which was executed on
October 29, 2004, has been filed as Exhibit 10.262
to the Company's Current Report on Form 10-Q
for the period ended September 30, 2004.
Exhibit B
Options Order Handling Agreement Term Sheet
____________
Asterisk (**) Indicates information omitted pursuant to a confidential treatment
request. A complete version of this exhibit has been filed separately with the
Securities and Exchange Commission.
OPTIONS ORDER HANDLING AGREEMENT ("OOHA")
Parties: UBS SECURITIES LLC, a Delaware Limited Liability Company ("UBS"),
Schwab Capital Markets L.P., a New Jersey limited partnership
("SCM," and together with UBS, the "Company"), Xxxxxxx Xxxxxx &
Co., Inc., a California corporation ("Schwab"), THE XXXXXXX
XXXXXX CORPORATION, a Delaware corporation ("Parent") (each
individually a "Party" and together the "Parties").
Term: Same as under the Equities Order Handling Agreement (the "EOHA"),
to be entered into as of the date of the consummation of the
transactions (the "Closing") contemplated by the Purchase
Agreement, of even date herewith (the "Purchase Agreement"),
between the parties hereto.
Scope: 100% of Xxxxxx'x and its Affiliates' Order Flow in options traded
on a national securities exchange ("Covered Orders") will be
routed to the Company for execution, other than the following
types of excluded orders:
- options flow from CyberTrader, Inc. from types of accounts
consistent with those in effect as of the Closing;
- U.S. Trust orders from types of accounts consistent with
those in effect today;
- an amount of Options Flow from the SIM trading desk that
does not exceed 5% of total the Options Flow from the SIM
trading desk, measured on a number of contracts basis; and
- SIM Prime Brokerage Orders (collectively, "Excluded
Orders").
Order Routing
Discretion: The Company shall have the right to route or preference options
order flow to any exchange in its reasonable discretion and to
execute options in any manner permitted by then-applicable laws
and exchange rules (including any rules that may permit execution
as principal) provided that such routing decisions and executions
are consistent with best execution practices and are made by
employing intelligent order routing technology, where
appropriate, other than where the ultimate destination is
specified by the customer.
_____________
Asterisk (**) Indicates information omitted pursuant to a confidential treatment
request. A complete version of this exhibit has been filed separately with the
Securities and Exchange Commission.
(**) (**)
Best Execution Committee: Schwab and the Company shall form an advisory committee which shall meet not less than
quarterly for the purpose of reviewing the Company's performance of best execution
standards.
Execution Quality The Company shall provide or cause a third party to provide all necessary data for Schwab
Reports: to generate 11Ac1-6 reports and such other reports as required by regulation or as
reasonably required by Schwab for oversight purposes (to the extent consistent with those
reports that are provided as of the date of the Purchase Agreement or as may be reasonably
mutually agreed).
Economics: (**)
Types of Orders: "Premium Execution Order", "Direct Execution Order", "Directed Order", "Paid Order",
"Locked or Crossed Order", "DNC Order", "Discretionary Paid Orders" shall have correlative
meanings to the definitions of such terms as defined in EOHA and shall have similar
treatment consistent with associated economic consequences.
Block Orders: The Company shall have the right to charge a reasonable market-based commission for manual
execution of Block Orders provided that the total number of manually executed contracts
for Block Orders exceeds 5% of the total number of contracts.
(**) (**)
Initial Liquidated Terms are mutatis mutandis the same as under EOHA except that payment size will be $16.5
Damages and Subsequent million in the first 3 years and $1.375 million thereafter.
Liquidated Damages:
Change of Control: Terms are mutatis mutandis the same as under EOHA except that payment size will be $16.5
million in the first 3 years and $1.375 million thereafter.
Partial Disposition of Terms are mutatis mutandis the same as under EOHA except that payment size will be pro
Accounts: rata $16.5 million in the first 3 years and $1.375 million thereafter.
Operation and Tech The Company will use commercially reasonable efforts to maintain or cause a third party to
Service Levels: use its commercially reasonable efforts to maintain at least substantially comparable
service levels as in effect prior to the date of the Purchase Agreement or such standards
as become common industry practice.
EQ Service Levels: (**)
Unusual Market Policies and procedures shall be mutually agreed between UBS and Schwab for handling
Conditions: locked, crossed, halted and fast markets, and similar unusual orders or situations
requiring intervention.
Abusive Practices: Schwab undertakes to investigate and make reasonable efforts to prevent abusive trading
practices at the request of the Company (e.g., unreasonable order cancellation fees)
including the right to cut-off from trading a specific account engaging in such abusive
practices or to require reimbursement for out-of-pocket costs to third parties should such
practices continue unabated following a reasonable notice period on a case by case basis.
Clearly Erroneous: The Company will be entitled to reject any orders transmitted by Schwab or its Affiliates
which are clearly erroneous, and will notify Schwab promptly of any such rejection.
Representations and Mutatis mutandis the same as under Sections 5.1(a) and 5.1(b)(i) of the EOHA.
Warranties:
Termination: Schwab shall have the right to terminate this agreement in the event the Company notifies
Schwab that it no longer intends to provide high quality options order routing services.
Routing Providers: (**)
Account Migration: Mutatis mutandis the same as under the EOHA.
Dispute Resolution: Mutatis mutandis the same as under the EOHA.
Unforeseen Circumstances: Mutatis mutandis the same as under the EOHA (**).
(**) (**)
Transitional Period: For the six months commencing upon the Closing, the Company and Schwab will cooperate to
seek to provide training opportunities, migration strategy planning and service support to
each other with respect to the functions of the "T4" trading ops team and such other
operational areas as may be mutually agreed, including processes for settlement, clearing
and order management and non-standard order treatment.
Ability to Perform: Schwab shall transfer all necessary technology systems, intellectual property, and any
other such assets as are currently required to operate SCM's options trading/order routing
(**) and the options business of Schwab to which the unaudited statement of operating
results of the Options Business of CS&Co. included in Section 3.5(d) of the Disclosure
Schedule (as defined in the Purchase Agreement) relates (the "Options Business"). To the
extent requested by the Company, Schwab will provide access to the Legacy system at no
charge.
Indemnification: Mutatis mutandis the same as under the EOHA.
Employees: The Company may, at its option, seek to employ strategic employees of Schwab currently
engaged in the Options Business. Following the Closing, none of Schwab or its Affiliates
shall employ, retain or hire such strategic employees without the Company's written
consent.
Confidentiality: Mutatis mutandis the same as under the EOHA. Schwab will direct inquiries concerning the
OOHA to the Company.
Governing Law: Mutatis mutandis the same as under the EOHA.
Other Provisions: To the extent other provisions of the EOHA are applicable but not expressly mentioned
herein, they shall mutatis mutandis be incorporated into the OOHA (other than Schedules A,
B, C, D, E and F and Attachment 1 thereto).
Capitalized terms used herein and not otherwise defined shall have the meaning set forth
in the EOHA. As provided for by the terms of the Purchase Agreement, this OOHA is a
binding contract between the parties, effective as of the Closing, unless expressly
superseded by an instrument in writing signed by each such party.
IN WITNESS WHEREOF, each of the Parties, intending to be legally
bound, has caused this OOHA to duly executed and delivered as of the date below.
Dated: _____________________
The Xxxxxxx Xxxxxx Corporation
By: ________________________________
Name:
Title:
Xxxxxxx Xxxxxx & Co., Inc.
By: ________________________________
Name:
Title:
UBS Securities LLC
By: ________________________________
Name:
Title:
Schwab Capital Markets L.P.
By: ________________________________
Name:
Title:
