UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 31, 2000
Waddell & Reed Financial, Inc.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 001-13913 51-0261715
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
6300 Lamar Avenue, Overland Park, KS 66202
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (913) 236-2000
N/A
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 31, 2000, Legend Group Holdings, LLC, a
wholly-owned subsidiary of Waddell & Reed Financial, Inc. (the "Company"),
acquired all of the issued and outstanding shares of common stock of each
of Freemark Investment Management, Inc., Legend Financial Corporation,
Advisory Services Corporation, Performance Management Group, Inc., Service
Management Advisory Corporation and The Legend Group, Inc. (collectively,
"The Legend Group") for an aggregate purchase price of $57,979,749.99, and
a contingent obligation to pay not more than $14,000,000 over a three-year
period. Subject to certain conditions contained in the Purchase Agreement,
an additional amount may be due pursuant to the terms of the Purchase
Agreement on or before April 30, 2000. However, the total aggregate
purchase price paid for The Legend Group shares shall not exceed
$75,000,000. The Legend Group is a mutual fund distribution and retirement
planning business based in Palm Beach Gardens, Florida. The shares were
purchased in a private transaction from Philip C. Restino, Mark J.
Spinello, Glenn T. Ferris, David L. Phillips and certain trusts for the
benefit of certain members of Mr. Restino's family (collectively, the
"Sellers"). Prior to the acquisition, there were no material relationships
between the Sellers and the Company or any of its affiliates or any of its
directors or officers or any associate of any of them. The purchase price
was determined through arm's length negotiations. The Purchase Agreement is
included herein as Exhibit 2.1. A copy of the Company's press release is
incorporated herein by reference from the Company's Current Report on Form
8-K for an event dated February 28, 2000. The foregoing description of the
acquisition is qualified in its entirety by reference to such Exhibits.
The funds used to consummate the acquisition were provided
to Legend Group Holdings, LLC in the form of a capital contribution made by
the Company. The Company obtained $47,000,000 for such capital contribution
from its existing Credit Agreement dated as of October 14, 1999 by and
among the Company, the Lender's party thereto and The Chase Manhattan Bank.
The remaining funds came from the Company's cash and cash equivalents.
The Company currently intends to operate The Legend Group as
an affiliated group of subsidiaries.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired. The financial statements
of The Legend Group for the periods specified in Rule 3-05(b) of
Regulation S-X will be filed by amendment to this Current Report on
Form 8-K as soon as practicable, but not later than sixty days
after the date on which this Current Report on Form 8-K is required
to be filed.
(b) Pro Forma Financial Information.
The Pro Forma financial statements of the Legend Group required
pursuant to Article 11 of Regulation S-X will be filed by amendment
to this Current Report on Form 8-K as soon as practicable, but not
later than sixty days after the date on which this Current Report
on Form 8-K is required to be filed.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of February 28, 2000, among
Waddell & Reed Financial, Inc., Freemark Investment Management,
Inc., Legend Financial Corporation, Advisory Services Corporation,
Performance Management Group, Inc., Service Management Advisory
Corporation, The Legend Group, Inc., Philip C. Restino, Restino
Family Trust, 01/02/94 Trust FBO John J. Restino, 01/02/94 Trust
FBO Robert R. Restino, Mark J. Spinello, Glenn T. Ferris and David
L. Phillips.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
WADDELL & REED FINANCIAL, INC.
Date: April 14, 2000 By: /s/ Daniel C. Schulte
Name: Daniel C. Schulte
Title: Vice President, General Counsel
and Secretary
INDEX TO EXHIBITS
Exhibit No. Exhibit
2.1 Agreement and Plan of Merger, dated as of February
28, 2000, among Waddell & Reed Financial, Inc.,
Freemark Investment Management, Inc., Legend
Financial Corporation, Advisory Services Corporation,
Performance Management Group, Inc., Service
Management Advisory Corporation, The Legend Group,
Inc., Philip C. Restino, Restino Family Trust,
01/02/94 Trust FBD John J. Restino, 01/02/94 Trust
FBO Robert R. Restino, Mark J. Spinello, Glenn T.
Ferris and David L. Phillips.
99.1(1) Financial Statements of Business Acquired.
99.2(1) Pro Forma Financial Information.
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(1) To be filed as soon as practicable, but no later than sixty days
after the date on which this Current Report on Form 8-K is required
to be filed.
PURCHASE AGREEMENT
by and among
WADDELL & REED FINANCIAL, INC.
FREEMARK INVESTMENT MANAGEMENT, INC.
LEGEND FINANCIAL CORPORATION
ADVISORY SERVICES CORPORATION
PERFORMANCE MANAGEMENT GROUP, INC.
SERVICE MANAGEMENT ADVISORY CORP.
THE LEGEND GROUP, INC.
PHILIP C. RESTINO
RESTINO FAMILY TRUST
01/02/94 TRUST FBO JOHN J. RESTINO
01/02/94 TRUST FBO ROBERT R. RESTINO
MARK J. SPINELLO
GLENN T. FERRIS
AND
DAVID L. PHILLIPS
Dated as of: February 28, 2000
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions....................................................1
ARTICLE II
PURCHASE AND SALE; CLOSING; RELATED MATTERS
Section 2.1. Purchase and Sale.............................................14
Section 2.2. Purchase Price................................................14
Section 2.3. The Closing...................................................18
Section 2.4. Further Assurances............................................18
Section 2.5. Transfer Taxes................................................19
Section 2.6. Substitution..................................................19
Section 2.7. [Reserved]....................................................19
Section 2.8. Continuing Obligations of WRF.................................19
Section 2.9. Deliveries at the Closing.....................................19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 3.1. Organization of the Legend Companies
and Related Matters; Capitalization......20
Section 3.2. Authority; No Violation; Consents.............................21
Section 3.3. Financial Statements; Liabilities.............................22
Section 3.4. Compliance with Applicable Law................................23
Section 3.5. Books and Records.............................................24
Section 3.6. Ineligible Persons............................................24
Section 3.7. Assets Under Management.......................................24
Section 3.8. Title.........................................................25
Section 3.9. Legend Companies Contracts....................................25
Section 3.10. Technology and Intellectual Property.........................25
Section 3.11. Legal Proceedings............................................29
Section 3.12. Taxes and Tax Returns........................................29
Section 3.13. Insurance....................................................31
Section 3.14. Labor and Employment Matters.................................31
Section 3.15. Benefit Plan Obligations.....................................31
Section 3.16. No Broker....................................................33
Section 3.17. Absence of Changes...........................................33
Section 3.18. Competition; Conflicts.......................................33
Section 3.19. No Pooled Products...........................................33
Section 3.20. Environmental................................................33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WRF
Section 4.1. Organization..................................................35
Section 4.2. Authority; No Violation; Consents.............................35
Section 4.3. No Actions, Suits or Proceedings..............................36
Section 4.4. No Broker.....................................................36
Section 4.5. Ineligible Persons............................................36
Section 4.6. Investment Intent.............................................36
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business...........................................37
Section 5.2. Contract Consents.............................................38
Section 5.3. Confidentiality and Announcements.............................38
Section 5.4. Expenses......................................................39
Section 5.5. Covenants of WRF..............................................39
Section 5.6. Access; Certain Communications................................39
Section 5.7. Regulatory Matters; Third Party Consents......................39
Section 5.8. Insurance.....................................................40
Section 5.9. Notification of Certain Matters...............................40
Section 5.10. No Solicitation..............................................40
Section 5.11. Delivery of Governmental Documents...........................41
Section 5.12. Change of Name...............................................41
Section 5.13. Employees and Employee Benefits..............................41
Section 5.14. Permitted Transferees........................................42
Section 5.15. Delivery of Financial Statements.............................42
Section 5.16. LMG Agreements...............................................43
Section 5.17. Certain Domain Names.........................................43
Section 5.18. Withheld Consent.............................................43
Section 5.19. Termination of Options.......................................44
Section 5.20. Certain Expenses.............................................44
Section 5.21. Director and Officer Liability...............................44
Section 5.22. Employment Agreements........................................44
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1. Conditions to Each Party's Obligations........................45
Section 6.2. Conditions to WRF's Obligations...............................45
Section 6.3. Conditions to the Sellers' Obligations........................47
ARTICLE VII
INDEMNIFICATION
Section 7.1. Obligations of the Sellers....................................49
Section 7.2. Obligations of WRF............................................49
Section 7.3. Procedure.....................................................49
Section 7.4. Notice of Non-Third Party Claims..............................51
Section 7.5. Handling of Claims............................................51
Section 7.6. Survival of Indemnity.........................................51
Section 7.7. Limitation on Indemnification.................................51
Section 7.8. Indemnity Payments and Interest...............................52
Section 7.9. Exclusive Remedy..............................................52
Section 7.10. Right of Set-Off.............................................52
ARTICLE VIII
TAX MATTERS
Section 8.1. Tax Returns...................................................53
Section 8.2. Liability for Taxes...........................................53
Section 8.3. Procedures Related to Tax Claims..............................54
Section 8.4. Survival of Tax Claims and Section 3.12 Representations.......55
Section 8.5. Exclusive Remedy..............................................55
Section 8.6. Interim Closing of the Books..................................55
Section 8.7. Characterization of Tax Indemnification Payments..............55
Section 8.8. Form; Discounting.............................................55
Section 8.9. Indemnity Payments............................................55
Section 8.10. Right of Set-Off.............................................56
ARTICLE IX
TERMINATION/SURVIVAL
Section 9.1. Termination...................................................57
Section 9.2. Effect of Termination.........................................57
Section 9.3. Survival of Representations and Warranties and Covenants......58
ARTICLE X
MISCELLANEOUS
Section 10.1. Amendments; Waiver...........................................59
Section 10.2. Entire Agreement.............................................59
Section 10.3. Specific Performance; Injunctive Relief......................59
Section 10.4. Interpretation...............................................59
Section 10.5. Severability.................................................60
Section 10.6. Notices......................................................60
Section 10.7. Binding Effect; Persons Benefitting; No Assignment...........61
Section 10.8. Counterparts.................................................61
Section 10.9. Governing Law................................................61
Section 10.10. Jurisdiction; Waiver of Jury Trial and Certain Damages......62
Section 10.11. No Third Party Beneficiary..................................62
ANNEX I Shares Being Sold and Purchased; Purchase Price Percentages
ANNEX II Form of Employment Agreement
ANNEX III Form of Release
ANNEX IV Form of Opinion of Counsel to the Legend Companies
and the Sellers
ANNEX V Form of Opinion of Counsel for WRF
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of February 28, 2000 (this
"Agreement"), by and among Waddell & Reed Financial, Inc., a Delaware
corporation ("WRF"), Freemark Investment Management, Inc., a Delaware
corporation ("FIM"), Legend Financial Corporation, a Delaware corporation
("LFC"), Advisory Services Corporation, a Nevada corporation ("ASC"),
Performance Management Group, Inc., a Delaware corporation ("PMG"), Service
Management Advisory Corp., a Delaware corporation ("SMAC") and The Legend
Group, Inc., a Delaware corporation ("LGI" and, together with FIM, LFC,
ASC, PMG and SMAC, the "Legend Parent Companies"), Philip C. Restino, an
individual, Restino Family Trust, a trust ("RFT"), 01/02/94 Trust FBO John
J. Restino, a trust ("JJR"), 01/02/94 Trust FBO Robert R. Restino, a trust
("RRR"), Mark J. Spinello, an individual, Glenn T. Ferris, an individual,
and David L. Phillips, an individual.
RECITALS:
WHEREAS, the Sellers together hold all of the capital stock
of the Legend Parent Companies; and
WHEREAS, the Sellers desire to sell to WRF or a Wholly
Owned Subsidiary of WRF and WRF desires to purchase or cause a Wholly Owned
Subsidiary to purchase from the Sellers all of the capital stock of the
Legend Parent Companies;
NOW, THEREFORE, in consideration of and premised upon the
various representations, warranties, covenants and other agreements and
undertakings of the parties contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. (a) For all purposes in this
Agreement, the following terms shall have the respective meanings set forth
in this Section 1.1 (such definitions to be equally applicable to both the
singular and plural forms of the terms herein defined):
"AANN" means the Asset Allocation Neural Network, a neural
network based artificial intelligence asset allocation program developed
and owned by the Legend Companies.
"Acquired Businesses" means any assets or related group of
assets that, if acquired with associated goodwill and other intangibles,
would constitute a business or businesses acquired by the Legend Companies
after the Closing Date that are similar or complementary in nature to the
Transferred Businesses and the financial results of which WRF and a
Majority in Interest of the Sellers agree will be included in the
calculation of EBITDA for purposes of the Contingent Payments.
"Advisers Act" means the Investment Advisers Act of 1940,
as amended, and all rules and regulations of the SEC thereunder.
"Affiliate" means any corporation, partnership, entity or
other Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with, the Person specified.
"Applicable Law" means any statute, law, ordinance, rule,
public administrative interpretation, regulation, order, writ, injunction,
directive, judgment, decree or other requirement of any Governmental
Authority applicable, as the case may be, to WRF, the Legend Companies, the
Sellers or any of their respective properties, assets, officers, directors,
members, partners, employees or duly authorized agents, as the context may
require.
"Base Fees Amount" means an amount, expressed in Dollars,
equal to the sum of the values obtained by multiplying the net asset value
of the account of each investment advisory services client and each
custodial services client of any of the Legend Companies as of the date of
this Agreement, times the applicable Fee Multiple.
"Business Day" means any day other than a Saturday, a
Sunday or a day on which banks in the City of New York or the city of
Miami, Florida are generally closed for regular banking business.
"Closing" means the completion of the transactions
contemplated by Section 2.1 of this Agreement.
"Closing Adjustment" If the Closing Fees Amount is greater
than or equal to the product of .95 times the Base Fees Amount, then the
Closing Adjustment means zero. If the Closing Fees Amount is less than the
product of .95 times the Base Fees Amount, then the Closing Adjustment
means the amount, expressed in Dollars, equal to the product of (i) .63
times (ii) the product of (x) $61,000,000, times (y) a fraction, the
numerator of which is the difference between (A) the product of .95 times
the Base Fees Amount and (B) the Closing Fees Amount, and the denominator
of which is the Base Fees Amount.
"Closing Date" means the date of the Closing.
"Closing Fees Amount" means the Base Fees Amount (x) minus
the amount, expressed in Dollars, equal to the sum of the values obtained
by multiplying the net asset value of the account of each investment
advisory services client and each custodial services client of any of the
Legend Companies as of the date of this Agreement who has terminated or
withdrawn all of the assets from such account between the date of this
Agreement and the Closing Date or, to the knowledge of the Sellers or the
Legend Companies, has expressed an intention to do so, times the applicable
Fee Multiple (y) plus the amount, expressed in Dollars, equal to the sum of
the values obtained by multiplying the net asset value of the account of
each new investment advisory services client or custodial services client
of any of the Legend Companies who has opened an account with any of the
Legend Companies between the date of this Agreement and the Closing Date,
times the applicable Fee Multiple.
"Code" means the Internal Revenue Code of 1986, as amended.
"EBITDA" means, with respect to any period, the combination of
(i) Net Income of the Legend Companies and
the Acquired Businesses for such period, plus
(ii) the amount which, in the determination
of Net Income of the Legend Companies and the Acquired Businesses for such
period, has been deducted for (A) Interest Expense, (B) total federal,
state, local and foreign income, value added and similar taxes and (C)
depreciation and amortization expense, plus
(iii) the amount of any negative adjustments to
Net Income of the Legend Companies and the Acquired Businesses in such
period attributable to changes in GAAP applicable to the Legend Companies
and the Acquired Businesses taking effect after the date of this Agreement,
plus
(iv) an amount equal to any reduction in actual
EBITDA of the Legend Companies in excess of $10,000 attributable to any
contract or agreement (or in excess of $50,000, in the aggregate,
attributable to two or more contracts or agreements) entered into by a
Legend Company with WRF or any of its Affiliates after the Closing Date,
but only to the extent such contract or agreement is not on terms at least
as favorable as could have been obtained in an arm's length transaction,
minus
(v) .0876 times the amount of any cash
or other assets contributed by WRF or any of its Affiliates (other than the
Legend Companies) to any of the Legend Companies or the Acquired Businesses
to cover any deficiencies (provided that such deficiencies do not result
from dividends declared and paid by the Legend Companies or from loans,
advances or other transactions with WRF or any of its Affiliates to the
extent such loans, advances or other transactions are not on terms at least
as favorable as could have been obtained in an arm's length transaction or
would not have been entered into other than with WRF or any of its
Affiliates at the request of WRF or its Affiliates) in the operating cash
flows necessary to meet current cash requirements of the Legend Companies
or the Acquired Businesses during such period multiplied by, for the
calendar year in which such cash or other assets were contributed by WRF or
any of its Affiliates (other than the Legend Companies) to any of the
Legend Companies or the Acquired Businesses, a fraction the numerator of
which is the number of days remaining in such year after the date on which
such cash or other assets were contributed and the denominator of which is
365; minus
(vi) the amount of any positive adjustments to
Net Income of the Legend Companies and the Acquired Businesses in such
period attributable to changes in GAAP applicable to the Legend Companies
and the Acquired Businesses taking effect after the date of this Agreement;
minus
(vii) an amount equal to the product of .0876
times the amount invested by WRF or its Affiliates in acquiring capital
stock or assets of the Acquired Businesses acquired in such period
multiplied by, for the calendar year in which the Acquired Business was
acquired, a fraction the numerator of which is the number of days remaining
in such year after the date on which the Acquired Businesses was acquired
and the denominator of which is 365, minus
(viii) the amount of any after-tax goodwill
expenses of the Legend Companies, the Acquired Businesses or WRF or any of
its Affiliates in such period relating to the acquisition of any of the
Acquired Businesses; minus
(ix) any gain or plus any loss attributable to
the disposition of any assets of the Legend Companies after the Closing or
the Acquired Businesses after the acquisition of such Acquired Businesses;
each such adjustment being determined in accordance with GAAP, with no
further adjustments except as may be agreed in writing from time to time
between WRF and a Majority in Interest of the Sellers.
"Employment Agreements" means the employment agreements
between each of the persons whose name is set forth on Annex II hereto, one
of the Legend Companies and WRF, substantially in the form of Annex II
hereto.
"Encumbrance" means any lien, pledge, security interest,
claim, charge, easement, limitation, commitment, encroachment, restriction
or encumbrance of any kind or nature whatsoever.
"Environmental Claim" means any complaint, notice,
directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
governmental agency, office or other authority, or any third party,
involving violations of Environmental Laws or Environmental Releases of
Hazardous Materials (i) from any assets, properties or businesses of the
Company or its Subsidiaries; (ii) from properties or businesses adjoining
any of the Real Property; or (iii) from or onto any facilities which
received Hazardous Materials generated by the Company or its Subsidiaries.
"Environmental Laws" means all applicable laws relating to
the protection of the environment, to human health and safety, to natural
resources or to any use, sale, manufacture, treatment, generation,
processing, storage, disposal, abatement, existence, Environmental Release,
threatened Environmental Release, transportation or handling of any
Hazardous Materials, including, without limitation, (i) CERCLA, the
Resource Conservation and Recovery Act, and the Occupational Safety and
Health Act, and (ii) all other governmental requirements pertaining to
reporting, licensing, permitting, investigation or remediation of
Environmental Releases or threatened Environmental Releases of Hazardous
Substances into the air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport or handling of Hazardous Substances.
"Environmental Release" or "Environmentally Released" means
any releasing, disposing, discharging, injecting, spilling, leaking,
leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land,
soil, surface water, ground water or air, or otherwise entering into the
environment.
"Equity Securities" means capital stock or other equity
interests of any Person or any securities convertible into or exchangeable
for capital stock or other equity interests or any other rights, warrants
or options to acquire any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and all rules and regulations of the Department of
Labor thereunder.
"Extraordinary Expenses" and "Extraordinary Revenues" mean
items of expense or loss or revenue or gain that are unusual in nature,
infrequent in occurrence and significant in amount such as severance
payments in excess of the Legend Companies' and the Acquired Businesses'
standard policy, payments or receipts of settlements, judgements or
arbitration awards in respect of disputed claims and legal actions and gain
or loss on sales of investment assets or investment advisory contracts;
provided, however, that Extraordinary Expenses shall not include items of
expense or loss arising from errors and omissions of care and attention to
its clients by the Legend Companies and the Acquired Businesses in the
professional conduct of its investment advisory business.
"Fee Multiple" means: with respect to a custodial services
account, 0.44%; with respect to a SAM Select account, 1.04%; with respect
to a Strategic Asset Management service account, 1.07%; with respect to an
Asset Management Account, 1.10%; with respect to a Freemark Account, 0.70%;
and with respect to a PAM account, 0.45%.
"Furniture, Fixtures and Equipment" means all furniture,
fixtures and equipment located at any Operating Site.
"GAAP" means, with respect to any Person, generally
accepted accounting principles as used in the United States of America as
in effect at the time any applicable financial statements were prepared or
any act requiring the application of GAAP was performed, applied on a
consistent basis.
"Governmental Authority" means any nation, state,
territory, province, county, city or other unit or subdivision thereof or
any entity, authority, agency, department, board, commission,
instrumentality, court or other judicial body authorized on behalf of any
of the foregoing to exercise legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
governmental or non-governmental self-regulatory organization of which any
of the Legend Companies was or is a member or to whose regulations any of
the Legend Companies was or is subject.
"Governmental Documents" means all reports and registration
statements filed, or required to be filed, by law, by contract or
otherwise, by an entity pursuant to the authority of any Governmental
Authority.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Materials" means any substance that: (i) is or
contains asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum or petroleum-derived substances or wastes, or radon
gas, or (ii) requires investigation, removal or remediation under any
applicable Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" thereunder.
"Immediate Family" means, with respect to any individual,
(a) such individual's spouse, parents, siblings and children, (b) any
spouse, parent, sibling or child of any Person specified in clause (a)
above and (c) estates, trusts, partnerships and other entities and legal
relationships of which a majority in interest of the beneficiaries,
members, owners, investors or participants at all times in question are,
directly or indirectly, one or more of the Persons described above and/or
such individual.
"Indemnifiable Claim" means any Loss for which a Person is
entitled to indemnification under this Agreement.
"Indemnified Party" means a Person entitled to the benefits
of indemnification hereunder.
"Indemnifying Party" means a Person obligated to provide
indemnification hereunder.
"Interest Expense" means interest expense after giving
effect to payments made or received under interest rate protection
agreements, as determined in accordance with GAAP.
"Investment Company Act" means the Investment Company Act
of 1940, as amended, and all rules and regulations of the SEC thereunder.
"IRS" means the Internal Revenue Service.
"KPMG" means KPMG Peat Marwick LLP.
"LAC" means Legend Advisory Corporation, a New York
corporation.
"Lease" means any real estate lease or sublease, with
respect to any Leased Property.
"Leased Properties" means all leasehold interests of any of
the Legend Companies in real property.
"LEC" means Legend Equities Corporation, a Delaware
corporation.
"Legend Companies" means, collectively, the Legend Parent
Companies and the Legend Subsidiaries.
"Legend Companies Assets" means all assets of each of the
Legend Companies or their Affiliates relating to the conduct of the Legend
Companies' businesses including, but not limited to, all of the Equity
Securities of each of the Legend Companies, the Legend Companies Contracts,
Furniture, Fixtures and Equipment, Intellectual Property, Leased
Properties, Records, Software, Technology Systems and any other assets of
the Legend Companies relating to the Transferred Businesses.
"Legend Companies Contract" means any written account
agreement, administrative services agreement, mutual fund distribution
services agreement, custodial services agreement, investment advisory
agreement or sub-advisory agreement or partnership or limited liability
company agreement or insurance agency appointment agreement to which any of
the Legend Companies is a party at any relevant date and any lease, license
or other agreement relating to the use by any of them of any Furniture,
Fixtures and Equipment, Intellectual Property, Software and Technology
Systems, together with all amendments and supplements thereto, and all
rights and interests of it arising thereunder or in connection therewith.
"Legend Subsidiaries" means, collectively, LEC, LAC, LIA,
LNC and LSC.
"LIA" means LEC Insurance Agency, Inc., a Texas corporation.
"LIBOR" means, with respect to any month, the London
interbank offered rate for deposits in the currency in which the fund is
denominated having a maturity of one month, which appears on Telerate Page
3750 as of 11:00 a.m., London time on the first London business day of each
month. "Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"LMG" means Legend Management Group, Inc., a Nevada
corporation.
"LMG Agreements" means, collectively, each agreement,
whether written or oral, between LMG, on the one hand, and any one or more
of the Legend Companies, on the other.
"LNC" means Legend National Corporation, a New York
corporation.
"Loss" means any and all monetary claims, losses,
liabilities, costs, penalties, fines and expenses (including reasonable
attorneys', accountants', consultants' and experts' fees and expenses),
damages, monetary obligations to third parties, expenditures, monetary
judgments or awards payable or due to any other party that are imposed upon
or otherwise incurred or suffered by the relevant Person.
"LSC" means Legend Services Corporation, a Delaware
corporation.
"Majority in Interest of the Sellers" means sellers
representing in excess of 50% of the Purchase Price, as set forth on Annex
I hereto.
"Material Adverse Effect" means a material adverse effect
on the business, assets, revenues or financial condition of the Legend
Companies or the Transferred Businesses, taken as a whole, excluding any
such material adverse effect which arises or results from general market or
conditions in the financial industry.
"NASD" means NASD Regulation, Inc., a subsidiary of the
National Association of Securities Dealers, Inc.
"Net Income" means net income or loss after giving effect
to deduction of or provision for all operating expenses, all taxes and
reserves (including reserves for deferred taxes) and all other proper
deductions, all as determined in accordance with GAAP, provided that in any
event there shall be added back any overhead costs of any of the Legend
Companies (including, for example and without limitation, professional
salaries of personnel of the Legend Companies who devote substantial time
to the management of the business of WRF or its Affiliates (other than the
Transferred Businesses and the Acquired Businesses after the Closing Date)
allocated to WRF or any of its Affiliates (other than the Transferred
Businesses and the Acquired Businesses)) and there shall be excluded:
(i) any restoration of any contingency reserve,
except to the extent that provision for such reserve was made out of income
during such period;
(ii) any net gain arising from the collection of
the proceeds of any insurance policy;
(iii) the impact of any write-up of any asset;
(iv) any other Extraordinary Expenses and
Extraordinary Revenues and any other non-cash or non-recurring gains or losses;
(v) all management or similar fees charged to the
Legend Companies by WRF or its Subsidiaries;
(vi) any overhead costs of WRF or its
Subsidiaries (including, for example and without limitation, professional
salaries of personnel of WRF or its Subsidiaries who devote substantial
time to the management of the Transferred Businesses or the Acquired
Businesses after the Closing Date) allocated to the Legend Companies,
except to the extent such overhead costs relate to the replacement of
services previously provided by any one or more of the Sellers.
"Net Working Capital" means, with respect to the Legend
Companies, the difference between the current assets of the Legend
Companies (excluding any deferred tax assets or claims for refunds or tax
credits) and all current liabilities of the Legend Companies as the same
would be reflected on a balance sheet of the Legend Companies prepared in
accordance with GAAP and consistent with the Balance Sheets, provided,
however, that there shall be added as a liability of the Legend Companies
an amount equal to $1,000,000; and provided, further, however, that any
investments in mutual funds set forth on Schedule 3.1(b) by the Legend
Companies shall be ignored for the purposes of calculating their Net
Working Capital; and provided, further, however, that cash equivalents
(other than investments in mutual funds) shall not be less than $950,000.
"Operating Sites" means all offices at which any of the
Legend Companies conducts the Transferred Business at any time relevant
hereunder.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice.
"Permitted Encumbrances" means all Encumbrances which are:
(1) Encumbrances set forth on Schedule 1.1(b);
(2) statutory liens for Taxes or assessments that are not
yet due and payable;
(3) matters which would be shown on an accurate survey and
any other defect or exception which would be disclosed by a search
of title, which in each case does not materially impair the use,
operation, value or marketability of the asset to which it relates;
(4) liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen and other like liens arising in the
Ordinary Course of Business for sums not yet due and payable; or
(5) other liens or imperfections on assets which
individually or in the aggregate do not exceed $10,000 and do not
materially detract from the value of or materially impair the
existing use of the assets affected by such liens or imperfections.
"Person" means any individual, corporation, company,
limited liability company, partnership (limited or general), joint venture,
association, trust or other entity.
"Pooled Product" means each vehicle for collective
investment (in whatever form of organization, including in the form of a
corporation, company, limited liability company, partnership (limited or
general), association, trust or other entity and including each separate
portfolio of any of the foregoing).
"Records" means all records and original documents in the
possession of the Legend Companies which pertain to or have been or are
utilized by the Legend Companies to administer, reflect, monitor, evidence
or record information respecting the business or conduct of the Legend
Companies, including, without limitation, (1) all such records maintained
on electronic or magnetic media, or in the electronic database system of
the Legend Companies, and (2) all such records and original documents
respecting the Legend Companies Contracts and Distribution Agreements as
necessary to comply with any Applicable Law, including, without limitation,
any and all records kept in accordance with, or documents filed pursuant
to, any Securities Laws.
"Release" means the release by each of the persons whose
name is set forth on Annex II hereto, substantially in the form of Annex
III.
"SEC" means the Securities and Exchange Commission.
"Securities Laws" means the Securities Act of 1933, as
amended; the Securities Exchange Act of 1934, as amended; the Investment
Company Act; the Advisers Act; the published rules and regulations of the
SEC promulgated thereunder; the securities or "blue sky" laws of any state
or territory of the United States; the rules and regulations of NASD
Regulation Inc.; and the comparable laws, rules and regulations in effect
in any other country.
"Seller" means, individually, either Philip C. Restino, RFT,
JJR, RRR, Mark J. Spinello, Glenn T. Ferris or David L. Phillips, as the
context may require, and "Sellers" means any two or more of them
collectively, as the context may require.
"Shares" means shares of common stock of each of the Legend
Parent Companies.
"Subsidiary" means, when used with respect to any Person
which is not a natural person, any corporation, association, partnership,
limited liability company or other business entity a majority of the voting
or similar power of which is at the time owned by such Person or by one or
more Subsidiaries of such Person.
"Tax Return" means any report, return, document,
declaration or other information or document (including any attachments or
amendments to any of the foregoing) required to be supplied to any taxing
authority or jurisdiction (foreign or domestic) with respect to Taxes.
"Taxes" means any and all taxes, charges, fees, levies,
duties or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, service use, value added, license, net
worth, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by any taxing authority (whether domestic or foreign including,
without limitation, any state, local or foreign government or any
subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest,
penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such taxes, charges, fees, levies, duties or other
assessments.
"Transfer" means sell, transfer, assign, convey, lease
and/or deliver (other tenses of the term have similar meaning) or sale,
transfer, assignment, conveyance, lease and/or delivery, as indicated by
the context (other than to WRF or a Wholly Owned Subsidiary of WRF).
"Transfer Event"means (i) a Transfer of substantially all
of the assets of (a) WRF or (b) the Legend Companies plus the Acquired
Businesses (other than to WRF or a Wholly Owned Subsidiary of WRF), (ii)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act) is or becomes the beneficial owner of more than
50% of the total voting equity interests in WRF or the Legend Companies
(other than, in the case of the Legend Companies, WRF or a Wholly Owned
Subsidiary of WRF) or (iii) the merger or consolidation of WRF or the
Legend Companies with or into any Person (other than, in the case of the
Legend Companies, WRF or a Wholly Owned Subsidiary of WRF) unless
immediately following such merger or consolidation more than 50% of the
surviving company's issued and outstanding Equity Securities are held by
the holders of WRF's or the Legend Companies', as the case may be, issued
and outstanding Equity Securities immediately prior to such merger or
consolidation.
"Transferred Businesses" means the businesses currently
conducted by the Legend Companies.
"Voting Debt" shall mean indebtedness having general voting
rights and debt convertible into securities having such rights.
"Wholly Owned Subsidiary" means, when used with respect to
any Person which is not a natural person, any corporation, association,
partnership, limited liability company or other business entity 100% of the
voting or similar power of which is at the time owned by such Person or by
one or more Wholly Owned Subsidiaries of such Person.
(b) The following terms shall have the
meaning specified in the indicated section of this Agreement:
Term Section
---- -------
Accounting Firm............................Section 2.2(e)
Adjusted Closing Payment...................Section 2.2(a)
Adjusted HoldBack Amount...................Section 2.2(b)
Agreement..................................Opening Paragraph
ASC........................................Opening Paragraph
Balance Sheets.............................Section 3.3(a)
Base Salary................................Annex II
Calculation Statement......................Section 2.2(e)
Claims.....................................Annex III
Closing Payment............................Section 2.2(a)
Content....................................Section 3.10(a)
Contingent Payment.........................Section 2.2(a)
Contingent Payment Statement...............Section 2.2(i)
Copyrights.................................Section 3.10(a)
Date Data..................................Section 3.10(o)
Designated Accounting Firm.................Section 2.2(e)
EBITDA Minimum Amounts.....................Section 2.2(g)
ERISA Affiliate............................Section 3.15(a)
Estimated Net Working Capital Certificate..Section 2.2(c)
FIM........................................Opening Paragraph
Final Net Working Capital Certificate......Section 2.2(d)
Financial Statements.......................Section 3.3(a)
FIRPTA Certificate.........................Section 6.2(k)
HoldBack Amount............................Section 2.2(b)
Intellectual Property......................Section 3.10(a)
Legend Cafeteria Plan......................Section 5.13(b)
Legend Companies Intellectual Property.....Section 3.10(b)
Legend Parent Companies....................Opening Paragraph
LFC........................................Opening Paragraph
LGI........................................Opening Paragraph
License Agreements.........................Section 3.10(b)
Non-Third Party Claim......................Section 7.4
Patents....................................Section 3.10(a)
Payor......................................Section 2.5
Permits....................................Section 3.4(a)
Plan.......................................Section 3.15(a)
PMG........................................Opening Paragraph
Post-Closing Straddle Period...............Section 8.2(d)
Pre-Closing Period.........................Section 8.2(a)
Pre-Closing Straddle Period................Section 8.2(a)
PTC........................................Opening Paragraph
Purchase Price.............................Section 2.2(a)
Purchase Price Percentage..................Section 2.2(i)
RFT........................................Opening Paragraph
Sellers' Basket............................Section 7.7
Significant Asset Sale.....................Section 2.2(g)
Significant Assets.........................Section 2.2(g)
SMAC.......................................Opening Paragraph
Software...................................Section 3.10(a)
Straddle Period............................Section 8.2(a)
Stub Balance Sheet.........................Section 5.15(b)
Stub Financial Statements..................Section 5.15(b)
Tax Claim..................................Section 8.3(a)
Third Party Claim..........................Section 7.3(a)
Trade Secrets..............................Section 3.10(a)
Trademarks.................................Section 3.10(a)
Transfer Event Election....................Section 2.2(h)
Transfer Event Election Amount.............Section 2.2(h)
Transfer Taxes.............................Section 2.5
Transferred Employees......................Section 5.13(a)
WRF........................................Opening Paragraph
WRF Basket.................................Section 7.7
WRF Medical Plan...........................Section 5.13(b)
Year 1 EBITDA..............................Section 2.2(f)(i)
Year 1 Contingent Payment..................Section 2.2(f)(i)
Year 2 EBITDA..............................Section 2.2(f)(ii)
Year 2 Contingent Payment..................Section 2.2(f)(ii)
Year 2000 Compliant/Year 2000 Compliance...Section 3.10(o)
Year 3 EBITDA..............................Section 2.2(f)(iii)
Year 3 Contingent Payment..................Section 2.2(f)(iii)
1999 Balance Sheet.........................Section 5.15(a)
1999 Financial Statements..................Section 5.15(a)
ARTICLE II
PURCHASE AND SALE; CLOSING; RELATED MATTERS
Section 2.1. Purchase and Sale. Upon the terms and subject
to the conditions of this Agreement, each of the Sellers hereby agrees to
sell to WRF, free and clear of all Encumbrances, and WRF hereby agrees to
purchase from each of the Sellers, the number of Shares of each of the
Legend Parent Companies set forth opposite such Seller's name on Annex I
hereto and to pay such Seller the aggregate consideration set forth
therefor in Section 2.2(a). The aggregate number of such Shares being
purchased by WRF hereunder shall be 100% of the issued and outstanding
Shares and WRF shall not be obligated to purchase any Shares unless it is
obligated to purchase all such Shares.
Section 2.2. Purchase Price.
(a) The aggregate purchase price for all of the
Shares shall be $61,000,000 (the "Closing Payment"), as adjusted pursuant
to Sections 2.2(c), (d) and (e) hereof (the "Adjusted Closing Payment"),
and the contingent right to receive the contingent payments described in
Section 2.2(f) below (each a "Contingent Payment" and, together with the
Adjusted Closing Payment, the "Purchase Price"), provided, however, that
the aggregate amount of the Contingent Payments shall not exceed
$14,000,000.
(b) At the Closing, WRF shall pay 95% of the
Adjusted Closing Payment (as adjusted pursuant to Section 2.2(c) hereof) to
the Sellers and shall retain 5% of the Adjusted Closing Payment (as
adjusted pursuant to Section 2.2(c) hereof) (the "Hold-Back Amount"). As
soon as practicable but in no event later than three Business Days after
the determination of adjustments to the Hold-Back Amount pursuant to
Sections 2.2(d) and 2.2 (e) hereof, WRF shall pay 100% of the Hold-Back
Amount, as so adjusted (the "Adjusted Hold-Back Amount") to the Sellers.
(c) On the day immediately prior to the Closing Date,
the Sellers shall deliver to WRF a certificate (the "Estimated Net Working
Capital Certificate") setting forth a good faith estimate of the Net
Working Capital of each of the Legend Companies as of the close of business
on the Closing Date. The Closing Payment shall be increased by the amount
of the estimated Net Working Capital of the Legend Companies set forth on
the Estimated Net Working Capital Certificate.
(d) On or before the 30th day following the Closing
Date (or, if such day is not a Business Day, then the next Business Day),
the Sellers shall deliver to WRF a certificate (the "Final Net Working
Capital Certificate") setting forth the Net Working Capital of the Legend
Companies as of the close of business on the Closing Date. If the Net
Working Capital of the Legend Companies as of the close of business on the
Closing Date as reflected in the Final Net Working Capital Certificate
exceeds the estimated Net Working Capital of the Legend Companies as of the
Closing Date set forth on the Estimated Net Working Capital Certificate,
then the Hold- Back Amount shall be increased by the amount of such excess.
If the estimated Net Working Capital of the Legend Companies as of the
close of business on the Closing Date as reflected in the Estimated Net
Working Capital Certificate exceeds the Net Working Capital of the Legend
Companies as of the close of business on the Closing Date set forth on the
Final Net Working Capital Certificate, then the Hold-Back Amount will be
decreased by the amount of such excess, and if the amount of such excess is
greater than the Hold-Back Amount, Philip C. Restino agrees to be jointly
and severally liable, and each other Seller shall be severally liable pro
rata in proportion to such Seller's Purchase Price Percentage, to pay to
WRF any such deficiency.
(e) On or before the 30th day following the Closing
Date (or, if such day is not a Business Day, then the next Business Day),
the Sellers shall cause to be prepared and delivered to WRF a statement
(the "Calculation Statement") derived from the books and records of the
Legend Companies setting forth in reasonable detail the Sellers'
calculation of the Closing Adjustment. WRF and its representatives shall
have the right to review the work papers, schedules, memoranda and other
documents and information prepared or reviewed (or caused to be prepared or
reviewed) by the Sellers in connection with the preparation of the
Calculation Statement and to communicate with the persons who conducted
such preparation or review on behalf of the Sellers. Within 10 days after
the delivery of the Calculation Statement to WRF, WRF shall notify the
Sellers of any objection to the Calculation Statement, specifying any such
objection in reasonable detail. If WRF does not notify the Sellers of any
objection within such period, WRF shall be deemed to have agreed to the
Calculation Statement as prepared by the Sellers and the Calculation
Statement as prepared by the Sellers shall be final and binding. If WRF and
the Sellers agree on the resolution of any such objection, the Calculation
Statement (with any such changes as may be agreed) shall be final and
binding. WRF and the Sellers agree to negotiate in good faith to attempt to
resolve any such objections, provided that WRF and a Majority in Interest
of the Sellers shall each have the right, at any time, by written notice,
to unilaterally terminate all negotiations with respect to such objections
or changes. Not later than ten Business Days after either WRF or a Majority
in Interest of the Sellers shall have terminated such negotiations, all
such disputed matters shall be submitted for resolution to a certified
public accounting firm of national standing (an "Accounting Firm") mutually
acceptable to WRF and a Majority in Interest of the Sellers or, if WRF and
a Majority in Interest of the Sellers are unable to agree on a single
Accounting Firm, each shall select an Accounting Firm and such Accounting
Firms shall, by mutual agreement, select a third Accounting Firm (the
"Designated Accounting Firm"). WRF and the Sellers shall use reasonable
efforts to cause the report of the Designated Accounting Firm to be
rendered within 10 days of its selection, and the Designated Accounting
Firm's determination of the Closing Adjustment shall be final and binding.
The fees and expenses of the Accounting Firms shall be shared equally by
the Sellers, on the one hand, and WRF on the other hand.
(f) The Sellers shall have the right to receive the
following Contingent Payments, provided, however, that the aggregate amount
of the Contingent Payments shall not exceed $14,000,000:
(i) If EBITDA for the period commencing on the
Closing Date and ending on December 31, 2000 ("Year 1 EBITDA"), on an
annualized basis, is greater than $6,600,000, WRF shall deliver to the
Sellers a payment (the "Year 1 Contingent Payment") in an amount equal to
the product of 3.75 times the amount of such excess; provided, however,
that the Year 1 Contingent Payment shall not exceed $4,000,000;
(ii) If EBITDA for the twelve month period
commencing on January 1, 2001 and ending on December 31, 2001 ("Year 2
EBITDA") is greater than $7,580,000, WRF shall deliver to the Sellers a
payment (the "Year 2 Contingent Payment") in an amount equal to the product
of 3.25 times the amount of such excess; provided, however, that the Year 2
Contingent Payment shall not exceed the sum of (A) $5,000,000 plus (B) the
excess, if any, of $4,000,000 over the amount of the Year 1 Contingent
Payment; and
(iii) If EBITDA for the twelve month period
commencing on January 1, 2002 and ending on December 31, 2002 ("Year 3
EBITDA") is greater than $8,280,000, WRF shall deliver to the Sellers a
payment (the "Year 3 Contingent Payment") equal to the product of 2.75
times the amount of such excess; provided, however, that the Year 3
Contingent Payment shall not exceed the excess of (A) $14,000,000 over (B)
the sum of the Year 1 Contingent Payment and the Year 2 Contingent Payment.
(g) (i) In the event that, during the period
commencing on the Closing Date and ending on December 31, 2002, WRF
Transfers or causes the Legend Companies to Transfer in one transaction or
a related series of transactions, any business or any asset or related
group of assets of the Legend Companies or the Acquired Businesses
("Significant Assets") that if Transferred with associated goodwill and
other intangibles would constitute a business of the Legend Companies or
the Acquired Businesses or a significant portion of any such business (a
"Significant Asset Sale"), Section 2.2(f) shall be adjusted as follows: (A)
The $6,600,000 amount provided in Section 2.2(f)(i), (B) the $7,580,000
amount provided in Section 2.2(f)(ii) and (C) the $8,280,000 amount
provided in Section 2.2(f)(iii) (the "EBITDA Minimum Amounts") for the
remainder of the year in which the Significant Asset Sale occurs (on a pro
rata basis based on the number of days remaining in such year after the
Significant Asset Sale) and each applicable year thereafter shall be
reduced by multiplying each such amount by a fraction (x) the numerator of
which is EBITDA for the twelve month period preceding the month in which
the Significant Asset Sale occurs, less the EBITDA attributable to the
applicable Significant Assets Transferred for the twelve month period
preceding the month in which the Significant Asset Sale occurs and (y) the
denominator of which is EBITDA for the twelve month period preceding the
month of the Significant Asset Sale.
(ii) WRF shall give the Sellers notice of its
determination of EBITDA attributable to the Significant Assets involved in
a Significant Asset Sale at least five (5) business days prior to such
event. Such notice shall include sufficient information as may be
reasonably necessary for the Sellers to review the determination of WRF of
EBITDA attributable to such Significant Assets. Within thirty (30) days of
the receipt of such notice, a Majority in Interest of the Sellers must give
WRF notice of any objection to such determination. If a timely notice is
given by Sellers to WRF, the Sellers may include such objection in
connection with the procedure set forth in Section 2.2(i).
(h) If the Sellers receive notice from WRF pursuant
to Section 2.8 hereof of an impending Transfer Event expected to occur, or
if a Transfer Event occurs, between the Closing Date and December 31, 2002,
WRF agrees that, by written notice to WRF from a Majority in Interest of
the Sellers not less than 10 days following the earlier of notice to the
Sellers of such impending Transfer Event or the occurrence of a Transfer
Event, Sellers may, in their sole discretion, elect (the "Transfer Event
Election") to receive an amount equal to the product of .75 times the
excess of $14,000,000 over the amount of the Contingent Payments actually
made between the Closing Date and the date such Transfer Event occurs (the
"Transfer Event Election Amount"). Payment of the Transfer Event Election
Amount shall be made by WRF as soon as practicable, but not less than 30
days, after the occurrence of such Transfer Event. The Sellers agree that
payment by WRF of the Transfer Event Election Amount shall be deemed to
constitute performance in full and discharge by WRF of its obligation under
this Agreement to make the Contingent Payments. In the event that any
Transfer Event notified to the Sellers by WRF pursuant to Section 2.8
hereof is not consummated or does not occur, any Transfer Event Election
made with respect to such Transfer Event shall be null and void and WRF
shall be under no obligation to pay the Transfer Event Election Amount. If
the Sellers receive notice from WRF pursuant to Section 2.8 hereof of an
impending Transfer Event expected to occur between the Closing Date and
December 31, 2002 and do not timely make a Transfer Event Election, all of
WRF's obligations under this Agreement to make the Contingent Payments
under this Agreement shall cease upon the occurrence of the Transfer Event
and the assumption in connection therewith by WRF's successor in interest
to this Agreement of WRF's obligations hereunder to make the Contingent
Payments.
(i) As promptly as practicable, but in no event
later than 90 days after December 31 of each of 2000, 2001 and 2002 (or, if
such day is not a Business Day, then the next Business Day), WRF shall
cause to be prepared and delivered to the Sellers a statement (each a
"Contingent Payment Statement") derived from the books and records of the
Legend Companies and the Acquired Businesses setting forth EBITDA for the
twelve month period ending on such December 31 and the amount of the
Contingent Payment, if any, for such twelve month period setting forth the
components thereof in reasonable detail. The Sellers and their
representatives shall have the right to review the work papers, schedules,
memoranda and other documents and information prepared or reviewed by WRF
and to communicate with the persons who conducted such preparation or
review in connection with each Contingent Payment Statement. Within 60 days
after the delivery of any Contingent Payment Statement to the Sellers, the
Sellers shall notify WRF of any objection to such Contingent Payment
Statement, specifying in reasonable detail any such objections. If none of
the Sellers notifies WRF of any objections within such period each Seller
shall be deemed to have agreed to such Contingent Payment Statement as
prepared by WRF. If WRF and a Majority in Interest of the Sellers agree on
the resolution of all such objections, such Contingent Payment Statement
(with any such changes as may be agreed) shall be final and binding. WRF
and the Sellers shall negotiate in good faith to attempt to resolve any
such objections, provided that WRF and a Majority in Interest of the
Sellers shall each have the right, at any time, to unilaterally terminate
in writing all discussions with respect to such objections or changes. Not
later than ten business days after either WRF or a Majority in Interest of
the Sellers shall have terminated such discussions, all such disputed items
shall be submitted for resolution to a certified public accounting firm of
national standing (an "Accounting Firm") mutually acceptable to WRF and a
Majority in Interest of the Sellers or if WRF and such Sellers are unable
to agree on a single Accounting Firm, each shall select an Accounting Firm
and such Accounting Firms shall, by mutual agreement, select a third
Accounting Firm (the "Designated Accounting Firm"). Each such Accounting
Firm shall be independent of and have no ongoing business relationship with
any Seller or WRF or their respective Affiliates. WRF and the Sellers shall
use reasonable efforts to cause the report of the Designated Accounting
Firm to be rendered within 30 days of its appointment, and the Designated
Accounting Firm's determination as to the appropriateness and extent of
changes (if any) to any such Contingent Payment Statement shall be
final and binding. The fees and expenses of the Accounting Firms shall be
shared equally by the Sellers on the one hand (in proportion to their
Purchase Price Percentages), and WRF on the other hand.
(j) The portion of the Purchase Price, if any,
payable on any date pursuant to Sections 2.2(b) or (k) hereof to any Seller
shall be the product of the percentage set forth opposite such Seller's
name on Annex I hereto (the "Purchase Price Percentage") times the
aggregate amount of the Purchase Price payable on such date unless WRF is
otherwise instructed in a writing from all of the Sellers delivered to WRF
not less than three Business Days prior to such date.
(k) All payments to the Sellers under this
Article II shall be made by wire transfer of immediately available funds to
an account of the applicable Seller the details of which shall have been
provided to WRF at least 3 Business Days prior to the date such payments
are due. Each Contingent Payment, if any, shall be paid within 3 Business
Days after the amount of such Contingent Payment shall have been finally
determined in accordance with the provisions of Section 2.2(i) hereof. Each
Contingent Payment to be made by WRF pursuant to Section 2.2(i) shall be
made together with interest thereon at LIBOR plus 1% from March 31 of the
year in which such Contingent Payment is due to the date immediately
preceding the date such payment is actually made.
Section 2.3. The Closing. The Closing shall take place (i)
at the office of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times
Square, New York, New York 10036- 6522 at 10:00 a.m., New York City time,
as soon as practicable after March 30, 2000 but in any event no later than
three Business Days after the last of the conditions set forth in Article
VI hereof shall be fulfilled or waived in accordance herewith (other than
those conditions which can only be fulfilled at the Closing) or (ii) at
such other time and place and/or on such other date as WRF and the Sellers
may agree.
Section 2.4. Further Assurances. The Sellers shall, from
time to time after the Closing, at the request of WRF and without further
consideration, execute and deliver further instruments of transfer and
assignment and take such other action as WRF may reasonably require to more
effectively transfer and assign to, and vest in, WRF the Shares purchased
by WRF hereunder. The Sellers and WRF shall, from time to time after the
Closing, at the request of any party and without further consideration,
take such other action as may be required to fully implement the provisions
of this Agreement required to be implemented at that time. Any out-of-
pocket expenses suffered by any of the Sellers or WRF in the course of
complying with this Section 2.4 shall be shared equally by the Sellers, on
the one hand, and WRF on the other hand.
Section 2.5. Transfer Taxes. All sales, use, transfer,
recording, ad valorem, privilege, documentary, gains, stamp, duties or
similar Taxes and fees (collectively, the "Transfer Taxes"), arising out
of, in connection with or attributable to the transactions effected
pursuant to this Agreement shall be borne and paid by the Sellers. The
Person which has primary legal responsibility for the payment of any
particular Transfer Tax (the "Payor") shall prepare and timely file all
relevant Tax Returns required to be filed in respect of such Transfer Tax,
pay the Transfer Tax shown on such Tax Return, and notify the other parties
in writing of the Transfer Tax shown on such Tax Return and how such
Transfer Tax was calculated.
Section 2.6. Substitution. WRF may substitute any Wholly
Owned Subsidiary of WRF for itself under this Article II, which shall
thereupon be treated as WRF for all purposes hereunder. WRF agrees that it
shall be jointly and severally responsible for all obligations of its
Wholly Owned Subsidiaries substituted for WRF hereunder.
Section 2.7. [Reserved]
Section 2.8. Continuing Obligations of WRF. WRF shall give
the Sellers notice of any Significant Asset Sale or Transfer Event upon the
entering into of a binding agreement providing for such Significant Asset
Sale or Transfer Event and the public announcement of the pendency of such
Significant Asset Sale or Transfer Event.
Section 2.9. Deliveries at the Closing. At the Closing, (i)
the Sellers shall deliver to WRF stock certificates representing all of the
Shares, together with stock powers duly endorsed in blank, and such other
documents, certificates and instruments as WRF shall reasonably request and
(ii) WRF shall deliver to the Sellers 95% of the Adjusted Closing Payment,
as adjusted pursuant to Section 2.2(c) hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Except as set forth in writing in a Schedule referencing
the appropriate section, subsection or clause of this Article III and
delivered to WRF prior to the date hereof, each Seller individually (and
not jointly) represents and warrants to WRF as follows:
Section 3.1. Organization of the Legend Companies and
Related Matters; Capitalization. (a) Each of the Legend Companies has been
duly incorporated and is validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of the Legend Companies has
full corporate power and authority to carry on its business as it is now
being conducted, to own, lease and operate all of its properties and
assets, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased or
operated by it makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified or licensed would
not, individually or in the aggregate, have a Material Adverse Effect. The
certificate of incorporation and by-laws of each of the Legend Companies
and any amendments thereto, complete and correct copies of each of which as
in effect on the date hereof have heretofore been delivered or made
available to WRF, have been filed with or notified to all applicable
Governmental Authorities to the extent required by all Applicable Law.
(b) All of the Shares are duly and validly
authorized, issued, outstanding, fully paid, nonassessable and owned of
record and beneficially by the Sellers. There is no Voting Debt of any of
the Legend Companies issued and outstanding. None of the Legend Companies
is subject to any obligation, contingent or otherwise, to issue any Equity
Securities or Voting Debt to any Person. Other than the Legend
Subsidiaries, none of the Legend Companies has any Subsidiaries or
Affiliates (other than Affiliates (but not Subsidiaries) not engaged in a
business or businesses similar to the Transferred Businesses). None of the
Legend Companies owns any Equity Securities other than Equity Securities
issued by one or more of the Legend Subsidiaries or short-term high quality
money market securities. None of the Shares have been issued in violation
of any Applicable Law.
(c) Schedule 3.1(c) hereto sets forth, separately
in respect of each of the Legend Companies, (i) the authorized capital
stock of each of the Legend Companies, (ii) the number of shares of capital
stock of each of the Legend Companies issued and outstanding as of the date
hereof, (iii) the number of Shares of capital stock of each of the Legend
Companies issued and held in the treasury as of the date hereof and (iv)
the number of shares of capital stock of each of the Legend Companies
reserved for issuance upon exercise of any options, warrants, calls,
pre-emptive rights, subscriptions or other rights, agreements, arrangements
or commitments of any character. Except as set forth above or below, (x)
there are no shares of capital stock of any of the Legend Companies
authorized, issued or outstanding; (y) there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of any of the Legend Companies, obligating
any of the Legend Companies to issue, transfer or sell or cause to be
issued, transferred or sold any Equity Securities or Voting Debt of, or
other equity interest in, any of the Legend Companies or securities
convertible into or exchangeable for such Equity Securities or Voting Debt,
or obligating any of the Legend Companies to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment and (z) there are no outstanding contractual
obligations of any of the Legend Companies to repurchase, redeem or
otherwise acquire any Shares or any of the capital stock of any of the
Legend Companies or to provide funds to make any investment (in the form of
a loan, capital contribution or otherwise) in any of the Legend Companies
or any other entity. Schedule 3.1(c) sets forth, separately in respect of
each of the Legend Companies, a complete schedule of each option to
purchase shares outstanding as of the date hereof, including the name of
the optionee, the number of shares of capital stock of each of the Legend
Companies, the exercise price, the date of grant and the vesting schedule.
(d) There are no voting trusts or other agreements
or understandings to which any of the Legend Companies or any of the
Sellers is a party with respect to the voting of the capital stock of any
of the Legend Companies.
(e) No instrument with respect to any indebtedness
of any of the Legend Companies contains any restriction upon (i) the
prepayment of any indebtedness of any of the Legend Companies, (ii) the
incurrence of indebtedness by any of the Legend Companies or (iii) the
ability of any of the Legend Companies to grant any lien on the properties
or assets of any of the Legend Companies.
(f) Each Seller owns, beneficially and of record,
the number of Shares set forth on Annex I hereto, free and clear of any
Encumbrances. Upon the delivery of and payment for the Shares at the
Closing as provided for in this Agreement, Buyer will acquire good and
valid title thereto, free and clear of any Encumbrances other than any
Encumbrance created by WRF or its Affiliates.
Section 3.2. Authority; No Violation; Consents.
(a) Each of the Legend Companies and such Seller,
as applicable, has full power, right and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by all
requisite action on the part of each of the Legend Companies and such
Seller, as applicable, and no other proceedings on the part of any of the
Legend Companies or such Seller are necessary to approve this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of the Legend Companies and such
Seller. Assuming the due authorization, execution and delivery of this
Agreement by WRF and the other parties hereto, this Agreement constitutes
or will constitute the legal, valid and binding obligation of the Legend
Companies and such Seller, as applicable, enforceable against each of them
in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court
of equity and by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally.
(b) Neither the execution, delivery and performance
of this Agreement by the Legend Companies or such Seller nor the
consummation by them of the transactions contemplated hereby, will (i)
violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration (which is not expressly waived) under, or the
creation of any Encumbrance (other than Permitted Encumbrances) upon any of
the Legend Companies under any of the terms, conditions or provisions of,
(x) the organizational documents of the Legend Companies or, if applicable,
such Seller, or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the
Legend Companies or such Seller is a party or by or to which it or any of
its properties may be bound or subject; or (ii) violate any Applicable Law
except, in the case of clauses (i)(y) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations or accelerations or
Encumbrances that would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) Except for (i) filings required under HSR and
(ii) filings under applicable rules and regulations of the NASD, no
material notice to, filing with, authorization of, exemption by, or consent
or approval of, any Governmental Authority that has not been obtained or
made is necessary for the consummation by the Legend Companies or such
Seller of any of the transactions contemplated by this Agreement.
Section 3.3. Financial Statements; Liabilities. (a) The
Sellers have previously delivered or caused to be delivered to WRF copies
of the audited balance sheets of each of LEC, LAC and FIM as of December 31
for the fiscal years 1997, 1998 and 1999 and the related audited statements
of income, changes in shareholders' equity and cash flows for the fiscal
years then ended, together with the related notes thereto, accompanied by
the audit report of McCurry & Ingles LLP, independent public accountants
with respect thereto (the balance sheets and the statements above being
referred to collectively as the "Financial Statements" and the December 31,
1999 balance sheets as the "Balance Sheets") and the unaudited balance
sheets of ASC as of December 31 for the fiscal years ended December 31
1997, 1998 and 1999 and the related unaudited statements of income, changes
in shareholders' equity and cash flows for the fiscal years then ended,
together with the related notes thereto. The balance sheets referred to in
the previous sentence (including the related notes) fairly present in all
material respects the financial position of each of the respective Legend
Companies as of the dates thereof, and the other Financial Statements
fairly present in all material respects (subject, in the case of the
unaudited statements, to recurring adjustments normal in nature and amount
and the addition of footnotes) the results of the operations, cash flows
and changes in shareholders' equity of each of the respective Legend
Companies for the respective fiscal periods therein set forth; and such
balance sheets and statements (including the related notes, where
applicable) have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as noted therein.
(b) Except for (i) liabilities that are fully
reflected or reserved against in the Balance Sheets, (ii) liabilities
incurred since the date of the Balance Sheets in the ordinary course of
business or which are not in the aggregate material to the business or
operations of the Legend Companies and (iii) liabilities the incurrence of
which is expressly permitted by this Agreement or authorized by WRF in
writing, each of the Legend Companies does not have any liabilities,
whether absolute, accrued, contingent or otherwise that would be required
to be reflected in the Balance Sheets. None of the Legend Companies has any
long-term liabilities.
(c) The copies of the Tax Returns of LMG for its
fiscal year ended December 31, 1998, as made available for review by the
Sellers to KPMG and the request of WRF, conformed to the Tax Returns
actually filed.
Section 3.4. Compliance with Applicable Law. (a) Such
Seller, each of the Legend Companies and each employee of each of them
holds, and has at all pertinent times held, all licenses, registrations,
franchises, permits, qualifications and authorizations (collectively,
"Permits") necessary for the lawful ownership and use of the respective
properties and assets of the Legend Companies and the conduct of their
respective businesses under and pursuant to every, and is in compliance
with each, and are not in default under any, Applicable Law relating to any
of them or any of their respective assets, properties or operations except
for those licenses, franchises, permits, qualifications and authorizations,
the absence of which, and except for those non-compliances and defaults
which, individually or in the aggregate, would not have a Material Adverse
Effect, and no Seller knows of any violations of any of the above or has
received notice asserting any such violation. All such Permits are valid
and in good standing and are not subject to any proceeding for the
suspension, modification or revocation thereof or proceedings related
thereto.
(b) Except for normal examinations conducted by any
Governmental Authority in the regular course of the business of the Legend
Companies, no Governmental Authority has at any time during the past five
years initiated or, to the Sellers' knowledge, threatened any proceeding or
investigation into the business or operations of any of them or any of
their officers, directors or employees (excluding independent contractors
not working at the Legend Companies' principal place of business other than
each OSJ (as defined in Conduct Rule 3010(a)(3) of the NASD) of each of the
Legend Companies which is registered with the SEC as a broker-dealer and
the registered principals of such OSJs with authority to carry out the
supervisory responsibilities assigned to such OSJs within the meaning of
Conduct Rule 3010(a)(4) of the NASD) or shareholders in their capacity as
such. There is no unresolved violation, deficiency, or exception by any
Governmental Authority with respect to any examination of the Legend
Companies.
(c) Each of the Legend Companies which renders
investment advisory services to investment advisory clients has at all
times since December 31, 1993 or its date of formation, whichever is later,
rendered such investment advisory services to such investment advisory
clients with whom such company is or was a party to an investment advisory
agreement or similar arrangement in material compliance with all applicable
requirements as to portfolio composition and portfolio management
including, but not limited to, the terms of such investment advisory
agreements and written instructions from such investment advisory clients
and Applicable Law.
(d) Each of the Legend Companies timely 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 Authority, in a form which was accurate and
appropriately responsive to the requirements of Applicable Law and timely
has paid all fees and assessments to the extent due and payable in
connection therewith except where the failure to so file or pay,
individually or in the aggregate, would not have a Material Adverse Effect.
(e) As of their respective dates, the Governmental
Documents of the Legend Companies complied in all material respects with
the requirements of the Securities Laws applicable to such Governmental
Documents. The Sellers have previously delivered or made available to WRF a
complete copy of each Governmental Document filed by any of the foregoing
entities since December 31, 1996 and prior to the date hereof.
Section 3.5. Books and Records. Each of the Legend
Companies has at all times since its formation maintained Records which in
all material respects accurately reflect all its transactions in reasonable
detail, and have at all times maintained accounting controls, policies and
procedures reasonably designed to provide that such transactions are
executed in accordance with its management's general or specific
authorization, as applicable, and recorded in a manner which permits the
preparation of financial statements in accordance with GAAP and applicable
regulatory accounting requirements and other account and financial data,
and the documentation pertaining thereto is retained, protected and
duplicated in accordance with applicable regulatory requirements.
Section 3.6. Ineligible Persons. None of the Legend
Companies or any "associated person" (as defined in the Advisers Act or the
Exchange Act) of any of the Legend Companies, is ineligible pursuant to
Section 203 of the Advisers Act or Section 15(b) of the Exchange Act to
serve as a registered investment adviser or broker-dealer or as an
associated person of a registered investment adviser or broker-dealer.
Section 3.7. Assets Under Management. The aggregate amount
of assets under management, administration or custody by the Legend
Companies as of December 31, 1999 and February 19, 2000, the amount of
assets under management, administration or custody by them for each client
for which they manage, administer or act as custodian of more than $1
million as of December 31, 1999 and any material fee adjustments ($50,000
or more) or net contributions or withdrawals ($500,000 or more) with
respect to any of such clients during 1999 or 2000 are accurately set forth
in Schedule 3.7 hereto, together with a brief summary of the fee or profit
allocation arrangements in effect with respect to each such client. There
are no agreements or understandings in effect pursuant to which any of the
Legend Companies has capped, waived or reimbursed or will under any
circumstances cap, waive or reimburse any or all fees or charges in excess
of $1,000 for any such agreement or understanding payable by any of its
clients.
Section 3.8. Title. The Legend Companies do not own any
real property. The Legend Companies have good and marketable title to all
Legend Companies Assets and have good and insurable leasehold interests in
the Leased Property, in each case free and clear of all Encumbrances other
than Permitted Encumbrances. The only Operating Sites are the Leased
Properties.
Section 3.9. Legend Companies Contracts. Schedule 3.9 lists
under separate headings, and the Sellers have made available to WRF copies
of: (a) each Legend Companies Contract that is not cancellable without
penalty by the Legend Company party thereto upon 90 days or less notice or
that involves the receipt or payment by the Legend Company party thereto in
any of the two prior fiscal years (or is reasonably likely to involve the
receipt of payment by the Legend Company party thereto in the current or
any future fiscal year) of an amount in excess of $50,000, (b) each Legend
Companies Contract with one or more of the Sellers or members of their
Immediate Families or entities in which any of them has greater than a 5%
equity interest, and (c) each other Legend Companies Contract material to
the Transferred Business or the governance, operations or financial
condition of the Legend Company party thereto. The Sellers have made
available to WRF copies of all sales, marketing and account solicitation
agreements and marketing arrangements of the Legend Companies. Each of
Legend Companies has duly performed all its material obligations under each
Legend Companies Contract to which it is a party, in each case, to the
extent that such obligations have accrued; and no breach or default,
alleged breach or default, or event which constitutes or would (with the
passage of time, notice or both) constitute a breach or default thereunder
has occurred, or, as a result of this Agreement or the performance by the
Legend Company party thereto of any of its covenants or obligations
hereunder, will occur except for those failures to perform or those actual
or alleged breaches or defaults which, individually or in the aggregate,
would not have a Material Adverse Effect. Except for those limits or
requirements as would not, individually or in the aggregate, have a
Material Adverse Effect, none of the Legend Companies Contracts limits the
freedom of any of the Legend Companies to compete in any line of business
or with any Person and none of the Legend Companies is subject to any
requirement of exclusive dealing with any other Person anywhere in the
world or with respect to any product.
Section 3.10. Technology and Intellectual Property.
(a) "Intellectual Property" means any United States
(federal and state) and foreign: patents and patent applications,
industrial design registrations, certificates of invention and utility
models (collectively, "Patents"); trademarks, service marks, and trademark
or service mark registrations and applications, trade names, logos,
designs, slogans, and general intangibles of like nature, together with all
goodwill related to the foregoing (collectively, "Trademarks"); Internet
domain names; copyrights, copyright registrations, renewals and
applications for copyrights, including without limitation for the Content
and the Software (collectively, "Copyrights"); Content; Software,
technology, trade secrets and other confidential information, know-how,
proprietary processes, including mask works, formulae, algorithms, models
and methodologies (collectively, "Trade Secrets"); rights of privacy and
publicity, including, but not limited to, the names, likenesses, voices and
biographical information of real persons; and all license agreements and
other agreements granting rights relating to any of the foregoing.
"Software" means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether
in source code or object code form, (ii) databases, compilations, and any
other electronic data files, including any and all collections of data,
whether machine readable or otherwise, (iii) descriptions, flow-charts,
technical and functional specifications, and other work product used to
design, plan, organize, develop, test, troubleshoot and maintain any of the
foregoing, (iv) without limitation to the foregoing, the software
technology supporting any functionality contained on Internet site(s), and
(v) all documentation, including technical, end-user, training and
troubleshooting manuals and materials, relating to any of the foregoing.
"Content" means any and all information, pictures, images, graphics, video,
audio, text and any other content or information, in whatever form and on
any media.
(b) The Legend Companies own or have the valid
right to use all material Intellectual Property as currently used in
connection with any of their respective businesses, including, without
limitation, the AANN and all of the AANN's modeling and processes and other
trade secrets related thereto, all service marks and all license agreements
and other agreements granting rights relating to any such Intellectual
Property to which any of the Legend Companies is a party or is otherwise
bound ("License Agreements") (collectively, "Legend Companies Intellectual
Property").
(c) Schedule 3.10(c)(1) sets forth for the Legend
Companies Intellectual Property a complete and accurate list of all
registrations, applications, or materially unregistered United States
(federal and state) and foreign (i) Patents, (ii) Trademarks, (iii)
Internet domain names, and (iv) registered Copyrights, indicating for each,
the applicable jurisdiction, record owner, registration number (or
application number), and date issued (or date filed). Schedule 3.10(c)(2)
sets forth a complete and accurate list of all License Agreements granting
or restricting any right to use or practice any rights in connection with
any material Intellectual Property, to which any of Legend Companies is a
party or is otherwise bound, except for those licenses for Software that
may be readily obtained in the public marketplace for less than $10,000
individually, indicating for each the title, the parties, date executed,
and the Intellectual Property covered thereby.
(d) The Legend Companies Intellectual Property owned
by the Legend Companies is solely and exclusively owned by one of the
Legend Companies free and clear of all Encumbrances (other than Permitted
Encumbrances), and one of the Legend Companies is listed in the records of
the appropriate United States, state or foreign agency as the sole owner of
record for all registrations and applications for any Legend Companies
Intellectual Property that it owns.
(e) All Legend Companies Intellectual Property had
been duly maintained, is valid and subsisting, in full force and effect,
and has not been cancelled, expired, or abandoned. There is no pending or,
to Sellers' knowledge, threatened opposition, interference or cancellation
proceeding before any court or registration authority in any jurisdiction
against the items set forth on Schedule 3.10(c)(1), or, to Sellers'
knowledge, against any Legend Companies Intellectual Property licensed to
any of the Legend Companies as set forth in Schedule 3.10(c)(2), which if
resolved adversely to any of the Legend Companies, would have a Material
Adverse Effect.
(f) Except as set forth on Schedule 3.10(f), there
are no settlements, forebearances to sue, consents, judgments, or orders or
similar obligations to which any of the Legend Companies is a party or is
otherwise bound, which (i) materially restrict the rights of any of the
Legend Companies to use any Legend Companies Intellectual Property, (ii)
materially restrict the business of any of the Legend Companies in order to
accommodate a third party's Intellectual Property rights, or (iii) permit
third parties to use any Intellectual Property which would otherwise
materially infringe any Legend Companies Intellectual Property. The Legend
Companies have not licensed or sublicensed their rights in any Legend
Companies Intellectual Property other than pursuant to the License
Agreements, and no royalties, honoraria or other fees are payable by the
Legend Companies for the use of or right to use any Legend Companies
Intellectual Property in connection with the business of any of the Legend
Companies as currently conducted, except pursuant to the License Agreements
set forth on Schedule 3.10(c)(2). The License Agreements are valid and
binding obligations of all parties thereto, and there exists no event or
condition which will result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default by any of
the Legend Companies, or, to Sellers' knowledge, by any other party under
any such License Agreement.
(g) The Legend Companies take reasonable measures
to protect the confidentiality of their Trade Secrets with respect to AANN,
including requiring employees and independent contractors having access
thereto to execute written non-disclosure agreements. To Sellers'
knowledge, no Trade Secret material to the business of any of the Legend
Companies as currently operated has been disclosed or authorized to be
disclosed to any third party, including any employee, agent, contractor or
other entity, other than pursuant to a non-disclosure agreement that
adequately protects the proprietary interests of each of the Legend
Companies in and to such Trade Secrets. To Sellers' knowledge, no party to
any non-disclosure agreement relating to its Trade Secrets is in breach
thereof.
(h) Neither the Legend Companies, nor, to Sellers'
knowledge, the employees of any of the Legend Companies, has any agreements
or arrangements with any Persons other than the Legend Companies related to
confidential information or trade secrets of such Persons or restricting
any such Person's ability to engage in business activities of any nature.
To Sellers' knowledge, the activities of the present employees of the
Legend Companies on behalf of any of the Legend Companies, do not violate
any such agreements or arrangements known to the Sellers.
(i) To Seller's knowledge, the conduct of the
business of each of the Legend Companies as currently conducted does not
materially infringe upon any Intellectual Property owned or controlled by
any third party (either directly or indirectly such as through contributory
infringement or inducement to infringe), and is not libelous, slanderous,
defamatory, violative in any way of publicity or privacy rights, or
obscene. Except as set forth in Schedule 3.10(i), there are no claims or
suits pending or, to Sellers' knowledge, threatened, and the Legend
Companies have received no notice of any third party claim or suit, (i)
alleging that its activities or the conduct of its business infringes upon
or constitutes the unauthorized use of the Intellectual Property rights of
any third party, nor alleging libel, slander, defamation, or other
violation of a personal right, or (ii) challenging the ownership, use,
validity or enforceability of any Legend Companies Intellectual Property,
in each case which if resolved adversely to the Legend Companies, would
have a Material Adverse Effect.
(j) To Seller's knowledge, no third party is
misappropriating, infringing, diluting, or otherwise violating any Legend
Companies Intellectual Property, and, no such claims are pending against a
third party by the Legend Companies.
(k) Except as set forth on Schedule 3.10(k), the
consummation of the transactions contemplated hereby will not result in the
loss or impairment of the right of the Legend Companies to own or use any
of the Legend Companies Intellectual Property nor require the consent of
any governmental authority or third party in respect of any such
Intellectual Property except for those consents the absence of which would
not have a Material Adverse Effect.
(l) To Sellers' knowledge, no current or former
director, officer or employee of any of the Legend Companies (or any of
their respective predecessors in interest) will, after giving effect to the
transactions contemplated herein, own or retain any rights in or to any of
the Legend Companies Intellectual Property.
(m) Schedule 3.10(m) sets forth a complete and
accurate list of all material Software (other than Software having an
acquisition price of less than $10,000 individually) owned, licensed,
leased, or otherwise used by the Legend Companies, and identifies which
Software is owned, licensed, leased, or otherwise used, as the case may be.
(n) The Legend Companies own or have the valid right
to use (including, without limitation, the rights to copy, distribute and
sell to any party) all material Software developed by any of the Legend
Companies, whether developed for itself (as part of its core technology or
otherwise) or on behalf of any third party.
(o) All computer hardware, firmware and software
and systems used by the Legend Companies are, to the knowledge of the
Sellers and the Legend Companies after reasonable investigation, Year 2000
Compliant. The Legend Companies have experienced no problems or failures of
any kind with respect to Year 2000 compliance and have not received any
notification from any entity that provides Date Data or processes in any
way Date Data for any of the Legend Companies of any Year 2000 Compliance
problems or failures. As used herein, "Year 2000 Compliant" and "Year 2000
Compliance" mean for all dates and times, including, without limitation,
dates and times after December 31, 1999 and in the multi-century scenario,
when used on a stand-alone system or in combination with other software or
systems: (i) the application system functions and receives and processes
dates and times correctly without abnormal results; (ii) all date-related
calculations are correct (including, without limitation, age calculations,
duration calculations and scheduling calculations); (iii) all manipulations
and comparisons of date-related data produce correct results for all valid
date values within the scope of the application; (iv) there is no century
ambiguity; (v) all reports and displays are sorted correctly; and (vi) leap
years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year).
Section 3.11. Legal Proceedings. Neither any Legend Company
or Seller nor the directors, officers or employees of any of them is a
party to any, and there are no, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature pending or, to Sellers' knowledge, threatened against any of
them or any of their respective properties or assets relating to the
Transferred Businesses, or that challenges any of the transactions
contemplated by this Agreement, and there is no injunction, order,
judgment, decree, or regulatory restriction imposed specifically upon any
of them or any of their respective properties, assets, partners, directors,
officers or employees relating to the Transferred Businesses.
Section 3.12. Taxes and Tax Returns.
(a) Each of the Legend Companies duly and timely
has filed (or has had filed on its behalf) all Tax Returns that are
required to be filed by or with respect to it, respectively, taking into
account any applicable extensions of time within which to file such
returns, and duly and timely has paid in full (or, in the case of Taxes
being contested in good faith in appropriate proceedings, made adequate
provision for in its financial statements in accordance with GAAP) all
Taxes for all periods covered by such Tax Returns (whether or not shown as
due on any Tax Return). All such Tax Returns are accurate and complete in
all material respects. With respect to any period (or portion thereof)
through the Closing Date for which Tax Returns are not yet due, each Legend
Company has (i) timely paid (or will prior to the Closing timely pay) all
required estimated Tax payments and (ii) made (or will, prior to the
Closing, make) adequate provision in its financial statements in accordance
with GAAP for all Taxes not then due and payable.
(b) There are no liens for Taxes upon any property
or assets of any of the Legend Companies, except for liens for Taxes not
yet due.
(c) Each of the Legend Companies has complied with
all law relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or
similar provisions under any foreign laws) and has, within the time and the
manner prescribed by law, paid over to the proper taxing authorities all
amounts required to be so withheld and paid over.
(d) None of the Legend Companies is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of any change in accounting method (nor has any Governmental
Authority proposed in writing any such adjustment or change in accounting
method).
(e) No federal, state, local or foreign audits,
examinations, investigations or other administrative proceedings or court
proceedings are presently pending with regard to Taxes or Tax Returns of
any of the Legend Companies. No written notification has been received by
any of the Legend Companies that such an audit, examination or other
proceeding is threatened with respect to Taxes of any of the Legend
Companies.
(f) There are no outstanding requests, agreements,
consents or waivers to extend the statutory period of limitations
applicable to the assessment of material Taxes or deficiencies against any
of the Legend Companies.
(g) No power of attorney has been granted by or
with respect to any of the Legend Companies with respect to any matter
relating to Taxes.
(h) None of the Legend Companies is a party to,
is bound by or has any obligation under any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement, and none of
the Legend Companies has any potential liability or obligation to any
person as a result of, or pursuant to, any such agreement, contract or
arrangement. None of the Legend Companies is or has ever been a member of
any affiliated group within the meaning of Section 1504(a) of the Code, or
any similar affiliated or consolidated group for tax purposes under state,
local or foreign law (other than a group that includes other Legend
Companies only). None of the Legend Companies has any liability for Taxes
of any other Person (other than another Legend Company) 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.
(i) None of the Legend Companies is a party to
any agreement, plan, contract or arrangement (whether oral or in writing)
that could result, separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code.
(j) None of the Legend Companies is or has been a
U.S. real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(ii) of
the Code.
(k) None of the Legend Companies has received
notice of any claim made by an authority in a jurisdiction where it does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction (it being understood that a so-called "nexus-questionnaire"
shall not be deemed to constitute such a claim if the nexus questionnaire
is listed on Schedule 3.12).
(l) None of the Legend Companies has waived any
statute of limitations in any jurisdiction in respect of Taxes or Tax
Returns or agreed to any extension of time with respect to a Tax assessment
or deficiency (other than any such waiver or agreement that has expired).
(m) None of the Legend Companies has filed a consent
pursuant to Section 341(f) of the Code (or any predecessor provision)
concerning collapsible corporations, or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a "subsection (f) asset" (as such term
is defined in Section 341(f)(4) of the Code) owned by any of the Legend
Companies.
Section 3.13. Insurance. Each of the Legend Companies
maintains with insurers which, to the Sellers' knowledge are reputable, the
worker's compensation, comprehensive property and casualty, liability,
errors and omissions, fidelity and other insurance described on Schedule
3.13 hereto, which insurance is, in the reasonable opinion of the Sellers,
sufficient for the operation of its business as currently conducted.
Section 3.14. Labor and Employment Matters.
(a) None of the Legend Companies is delinquent in
any material respect in payments to any of its current or former officers,
directors, employees, consultants, or agents for any wages, salaries,
commissions, bonuses, benefits, expenses or other compensation for any
services performed by them or amounts required to be reimbursed to them;
and in the event of termination of the employment of any employee of any of
the Legend Companies, none of the Legend Companies will be liable to any
such employee under any agreement in effect at the Closing for so-called
"severance pay," incentive pay, liquidated damages or any other payments or
benefits, including, without limitation, post-employment health care,
pension or insurance benefits.
(b) None of the Legend Companies has any claim made
against it by any Person before any Governmental Authority in respect of
employment with it for discrimination or harassment on account of sex, race
or other characteristic protected by law and there are no pending or, to
the Sellers' knowledge, threatened proceedings in relation thereto.
(c) Schedule 3.14(c) sets forth a true and complete
list of: the names of all directors and elected and appointed officers of
each of the Legend Companies, the number of Shares owned beneficially or of
record, or both, by each such person and the family relationships, if any,
among such persons. The Sellers have made available to WRF true and
accurate information relating to the wage rates for non-salaried and
non-executive salaried employees of each of the Legend Companies and all
labor union contracts.
Section 3.15. Benefit Plan Obligations. (a) Schedule 3.15(a)
contains a true and complete list of each compensation, commission, bonus,
deferred compensation, incentive compensation, equity purchase, equity
option, share scheme, equity-based award, severance, redundancy or
termination pay, hospitalization or other medical, accident, disability,
life or other insurance, supplemental unemployment benefits, fringe, other
welfare benefit, profit-sharing, pension, or retirement plan, program,
agreement, or arrangement, and each other employee benefit plan, program,
agreement, or arrangement (a "Plan") as of the date hereof sponsored,
maintained, or contributed to or required to be contributed to by the
Legend Companies or any ERISA Affiliate of either of them (as defined
below) for the benefit of any employee or terminated employee of the Legend
Companies or any ERISA Affiliate of any of them. For purposes of this
Agreement, "ERISA Affiliate" means any entity or Person that together with
any of the Legend Companies would be deemed a "single employer" within the
meaning of section 4001 of ERISA or would be considered as being "members"
of a controlled group of corporations within the meaning of Code section
414 with any of the Legend Companies. Each Plan may be modified or
terminated by the Legend Companies, or the applicable ERISA Affiliate,
without liability to the Legend Companies, or the applicable ERISA
Affiliate, subject only to claims filed or occurred prior to such
modification or termination and the restrictions imposed by the Code and
ERISA.
(b) None of the Legend Companies nor any ERISA
Affiliate of any of them (i) has ever maintained any Plan which has been
subject to Title IV of ERISA or any similar law of any other jurisdiction
or (ii) has ever provided or agreed to provide health care or any other
welfare benefits (as described in Section 3(1) of ERISA) to any employees
after their employment is terminated (other than as required by part 6 of
Subtitle B of title I of ERISA or any similar law of any other
jurisdiction) or has ever agreed to provide such post-termination benefits.
(c) No Plan is a "multi-employer pension plan," as
defined in section 3(37) of ERISA.
(d) Each Plan which is intended to be "qualified"
within the meaning of Code section 401(a) is so qualified and has been so
qualified during the period from its adoption to date, and each trust
maintained thereunder is exempt from taxation under Code section 501(a).
(e) There is no matter pending (other than routine
qualification determination filings, copies of which have been furnished to
WRF, or will be promptly furnished to WRF when made) with respect to any of
the Plans before any Governmental Authority. There are no pending,
threatened or anticipated actions, suits, or claims by or on behalf of any
Plan, by any employee or beneficiary covered thereunder, or otherwise
involving any such Plan (other than routine claims for benefits).
(f) All contributions required to be made with respect to
any Plan on or prior to the Closing Date have been timely made or are
reflected on the balance sheets of the Legend Companies.
(g) No Legend Company nor any ERISA Affiliate thereof, no
Plan or trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction in connection with which a Legend Company or
any ERISA Affiliate, any Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any such trust
could be subject to either a civil penalty assessed pursuant to section 409
or 502(i) of ERISA or a tax imposed pursuant to section 4975 or 4976 of the
Code.
(h) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable law,
including but not limited to ERISA and the Code.
(j) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee or officer of a Legend Company
or any ERISA Affiliate to severance pay, unemployment compensation or any
other payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
Section 3.16. No Broker. Other than PricewaterhouseCoopers
Securities, LLC, whose fees shall be paid by the Sellers, no broker, finder
or similar intermediary has acted for or on behalf of any of the Legend
Companies or any Seller, or is entitled to any broker's, finder's or
similar fee or other commission from any of the Legend Companies or any
Seller in connection with this Agreement or the transactions contemplated
hereby.
Section 3.17. Absence of Changes. Since December 31, 1999,
none of the Legend Companies have suffered any Material Adverse Effect and,
except as contemplated by this Agreement, none of the Legend Companies have
taken any action or suffered to exist any condition which, had it been
taken or suffered after the date hereof, would have been prohibited by or
in violation of Section 5.1(a) hereof.
Section 3.18. Competition; Conflicts. No Seller or any
member of the Immediate Family of such Seller serves as an officer,
director, employee, consultant, partner, member or in similar capacity of
any competitor of any of the Legend Companies or owns directly or
indirectly (other than in or through beneficial ownership of less than 5%
of the outstanding securities of a publicly traded company) any interests
in any competitor or any Person that has a material contract or agreement
(other than intercompany contracts or agreements between or among two or
more of the Legend Companies) with any of the Legend Companies. No officer
or director of any of the Legend Companies has any material interest in any
property, real or personal, tangible or intangible, including without
limitation, office space, fixtures, equipment, inventions, patents,
trademarks or trade names, used in or pertaining to the Transferred
Businesses.
Section 3.19. No Pooled Products. None of the Legend
Companies has acted or acts as the sponsor, general partner, managing
member, trustee or in any capacity similar to any of the foregoing, to or
for any Pooled Product.
Section 3.20. Environmental.
(a) Compliance with Environmental Law. Except as
set forth on Schedule 3.20(a), each of the Legend Companies has complied
and is in compliance in all material respects with all applicable
Environmental Laws pertaining to the Legend Companies Assets (including the
Real Property) and the use and ownership thereof, and to the operation of
the Transferred Businesses. To the Sellers' knowledge, no violation by any
of the Legend Companies of any applicable Environmental Law relating to any
of the properties and assets of such Legend Company or the use or ownership
thereof, or to the operation of the Transferred Businesses is being or has
been alleged. Except as set forth on Schedule 3.20(a) and for such failures
to be in possession and compliance as would not, individually or in the
aggregate, result in a Material Adverse Effect, each of the Legend
Companies is in possession of, and in compliance with, all permits,
authorizations and consents required under applicable Environmental Laws.
(b) Other Environmental Matters. (i) None of the
Legend Companies has caused or taken any action that will result in and, to
the Seller's knowledge, none of the Legend Companies is subject to, any
material liability relating to (x) the environmental conditions on, under,
or about the Real Property or other properties or assets currently or
formerly owned, leased or operated by such Legend Company or any
predecessor thereto, including without limitation, the air, soil and
groundwater conditions at such properties or (y) the past or present use,
management, handling, transport, treatment, generation, storage, disposal
or Environmental Release of any Hazardous Materials.
(ii) No Environmental Claims have been
asserted against any of the Legend Companies, or, to the knowledge of the
Sellers, any predecessor in interest, nor do the Sellers have knowledge or
written notice of any threatened or pending Environmental Claim against any
of the Legend Companies or any predecessor in interest.
(iii) WRF has been furnished with all material
information, including, without limitation, all studies, analyses, reports
and investigations, in the possession, custody or control of the Legend
Companies or their agents relating to (x) the environmental conditions on,
under or about the Real Property or other properties or assets currently or
formerly owned, leased or operated by any of the Legend Companies or any
predecessor in interest to any of them, and (y) any Hazardous Materials
used, managed, handled, transported, treated, generated, stored or
Environmentally Released by any of the Legend Companies or any other Person
on, under, about or from any of the Real Property, or otherwise in
connection with the use or operation of any of the properties and assets of
the Legend Companies or the Transferred Businesses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF WRF
Except as set forth in writing in a Schedule delivered to
the Sellers prior to the date hereof, by reference to the appropriate
section, subsection or clause hereof, WRF represents and warrants to the
Sellers as follows.
Section 4.1. Organization. WRF is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. WRF has the corporate or other requisite power and
authority to carry on its business as it is now being or is currently
proposed to be conducted.
Section 4.2. Authority; No Violation; Consents.
(a) WRF has full power, right and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly approved by all requisite action on the part of WRF and no other
proceedings on the part of WRF are necessary to approve this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by WRF. Assuming the due
authorization, execution and delivery of this Agreement by the other
parties hereto, this Agreement constitutes a legal, valid and binding
obligation of WRF, enforceable against it in accordance with its terms,
except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies
generally.
(b) Neither the execution, delivery and performance
of this Agreement by WRF nor the consummation by it of the transactions
contemplated hereby, will (i) violate, conflict with, or result in a breach
of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or the creation of
any Encumbrance upon any of the assets of WRF as of the date hereof or as
of the Closing, as applicable, under any of the terms, conditions or
provision of (x) the organizational documents of WRF or (y) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which WRF is a party or by or to which it or
any of its properties may be bound or subject or (ii) violate any
Applicable Law.
(c) Except for (i) filings required under HSR and
(ii) filings under the applicable rules of the NASD, no material notice to,
filing with, authorization of, exemption by, or consent or approval of, any
Governmental Authority which has not been obtained or made is necessary for
the consummation by WRF of the transactions contemplated by this Agreement.
Section 4.3. No Actions, Suits or Proceedings. There is no
pending action, suit or proceeding, nor, to the knowledge of WRF, has any
litigation been threatened, against WRF or any of its Subsidiaries,
properties, assets, directors, officers, employees or Affiliates before any
Governmental Authority or otherwise which questions the validity or
legality of this Agreement or of the transactions contemplated hereby, or
which seeks to prevent the consummation of the transactions contemplated
hereby.
Section 4.4. No Broker. No broker, finder or similar
intermediary has acted for or on behalf of, or is entitled to any broker's,
finder's or similar fee or other commission from, WRF or its Affiliates in
connection with this Agreement or the transactions contemplated hereby.
Section 4.5. Ineligible Persons. Neither WRF nor any
"associated person" (as defined in the Advisers Act or the Exchange Act) of
WRF, is ineligible pursuant to Section 203 of the Advisers Act or Section
15(b) of the Exchange Act to serve as a registered investment adviser or
broker-dealer or as an associated person of a registered investment adviser
or broker-dealer.
Section 4.6. Investment Intent. WRF is purchasing the Shares
for investment purposes only for the account of WRF and its Affiliates and
not with a view toward distribution thereof.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business. (a) During the period from
the date of this Agreement and continuing through the Closing Date, except
as expressly contemplated or permitted by this Agreement or with the prior
written consent of WRF, the Legend Companies shall, and the Sellers shall
cause the Legend Companies to: (i) carry on its business in the Ordinary
Course of Business; (ii) use commercially reasonable efforts to preserve
its respective present business organization and relationships; (iii) use
commercially reasonable efforts to keep available the present services of
its employees (it being understood and agreed that the Legend Companies (x)
shall not be obligated to increase the compensation or benefits of any
Person and (y) shall not be restricted in terminating the employment of any
Person who is not named in Annex II to this Agreement, if such termination
is consistent with prudent business practice); (iv) use commercially
reasonable efforts to preserve and enhance its assets under management,
administration and custody and profitability and the goodwill and relations
of its clients and others with whom business relationships exist consistent
with past practice; (v) not enter into any business venture, contract,
agreement, understanding or any other arrangement, whether written or oral,
with any of the Sellers or Immediate Family thereof or any of their
respective Affiliates or associates; (vi) not take or fail to take any
action the taking of which or the failure of which to be taken would or
could reasonably be expected to result in any of its representations and
warranties set forth herein being or becoming untrue in any material
respect or any of their agreements herein or therein being breached in any
material respect; (vii) not amend its organizational documents; (viii) not
grant, issue or sell any security or other equity interest of which any of
the Legend Companies is the issuer; (ix) not effect any recapitalization,
leveraging of its equity, reclassification, dividend or split of equity
interests or any similar change in capitalization of any of the Legend
Companies; (x) not merge, consolidate, amalgamate, transfer all or
substantially all of its assets or engage in any similar transaction; (xi)
not enter into any agreement or understanding with respect to any of the
foregoing matters; and (xii) not make or change any Tax elections, settle
or offer to settle any material Tax controversy or file any amended Tax
Return without the written consent of WRF, which consent shall not be
unreasonably withheld.
(b) From time to time prior to the Closing Date
the Sellers shall update or cause to be updated each of the Schedules and
Annexes to this Agreement to reflect changes to the information set forth
therein occurring through a date not more than five days prior to the
Closing Date. If the Closing occurs, any such updates will be effective to
cure and correct for all provisions of Article VII any incorrectness or any
breach of any representation or warranty (whether or not material) which
would have existed by reason of Sellers' not having made such updates. For
purposes of determining the accuracy of the representations and warranties
of the Sellers contained in Article III in order to determine the
fulfillment of the condition set forth in Section 6.2(b), the Schedules and
Annexes delivered by them shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to
exclude any information contained in any subsequent supplement or amendment
thereto.
(c) The Sellers shall cause each of the Legend
Companies (x) to prepare and deliver to WRF within 15 days after the end of
each month after the date hereof and prior to the Closing Date an unaudited
balance sheet of such Legend Company as of such month- end and (y) to
prepare and deliver to WRF within 5 days after the end of each month after
the date hereof and prior to the Closing Date the related unaudited
statement of income of such Legend Company for such month, in each case
together with notes describing any significant differences between the
information therein and the requirements of GAAP.
Section 5.2. Contract Consents. As soon as reasonably
practicable, the Legend Companies shall, and the Sellers shall cause the
Legend Companies to, inform, in compliance with Applicable Law, its
investment advisory services, custodial services and mutual fund
distribution services clients of the transactions contemplated by this
Agreement and shall request such clients' written consent to the deemed
assignment of their investment advisory services, custodial services or
mutual fund distribution services agreements, as the case may be, resulting
from the consummation of the transactions contemplated by this Agreement
and use commercially reasonable efforts to obtain such consent or, in the
case of agreements which are not in writing or which either prohibit
assignment or a change in control or state by their terms that they
terminate upon assignment or a change in control, new agreements (and any
required director and investor approvals) with the appropriate Legend
Company, effective upon Closing. WRF agrees that except as required by
Applicable Law, and except in the case of agreements which prohibit
assignment or a change in control, the Legend Companies may, with respect
to clients who are not U.S. Persons (as defined for purposes of Regulation
S of the Securities Act of 1933, as amended) or who have less than $6
million in assets under management, administration or custody by the Legend
Companies as of January 31, 2000 or to the extent authorized by WRF in
writing on a case by case or class by class basis, obtain consent by (i)
requesting written consent as aforesaid, (ii) informing such client of (A)
the Legend Company's intention to consummate the transactions contemplated
by this Agreement, (B) the Legend Company's intention to continue to
provide investment advisory services, custodial services or mutual fund
distribution services, as the case may be, pursuant to the existing
investment advisory services, custodial services or mutual fund
distribution services agreements, as the case may be, with such client
after the Closing Date if such client does not terminate such investment
advisory services, custodial services or mutual fund distribution services
agreements prior to the Closing Date, and (C) that the consent of such
client will be implied if such client continues to accept such investment
advisory services, custodial services or mutual fund distribution services
for at least 30 days after receipt of such notice without termination and
(iii) not, to the knowledge of the Sellers or the Legend Companies,
receiving an oral or written indication of an intent to terminate such
investment advisory services, custodial services or mutual fund
distribution services agreements, as the case may be.
Section 5.3. Confidentiality and Announcements.
(a) None of the parties or any of their respective
Affiliates, except as otherwise required by Applicable Law (including,
without limitation, any filings with the NASD) or the terms of this
Agreement, shall disclose publicly any of the contents hereof.
(b) WRF, the Legend Companies and the Sellers
shall agree with each other as to the form and substance of any press
release related to this Agreement or the transactions contemplated hereby;
provided, however, that nothing contained herein shall prohibit any party,
following notification to the other parties if practicable, from making any
disclosure required by law.
Section 5.4. Expenses. The Sellers shall bear the direct and
indirect expenses of the Sellers and the Legend Companies, and WRF shall
bear the direct and indirect expenses of WRF, incurred in connection with
the negotiation and preparation of this Agreement and the consummation of
the transactions contemplated hereby.
Section 5.5. Covenants of WRF. During the period from the
date of this Agreement and continuing through the Closing Date, except with
the prior written consent of the Sellers, WRF shall not take any action, or
fail to take any action, that would, or could reasonably be expected to (i)
result in any of WRF's representations and warranties set forth in this
Agreement being or becoming untrue in any material respect; (ii) result in
a material violation of any provision of this Agreement; or (iii) adversely
affect or materially delay the receipt of any requisite regulatory
approvals or contract counterparty consents.
Section 5.6. Access; Certain Communications. Between the
date of this Agreement and the Closing Date, subject to Applicable Laws
relating to the exchange of information, the Sellers shall afford to WRF
and its authorized agents and representatives reasonable access, upon
reasonable prior notice and during normal business hours, to contracts,
documents and information of or relating to the assets, liabilities,
business, operations, personnel and such other aspects of the Transferred
Businesses as WRF shall reasonably request; provided, however, that such
investigations shall be conducted in a manner which does not unreasonably
interfere with the normal operations, clients and employee relations of any
of the Legend Companies. No investigation pursuant to this Section 5.6 or
otherwise shall affect or limit the representations and warranties of the
Sellers set forth herein.
Section 5.7. Regulatory Matters; Third Party Consents. (a)
The Sellers, on the one hand, and WRF, on the other hand, shall cooperate
with each other and use all commercially reasonable efforts promptly to
prepare and file all necessary documentation, to effect all applications,
notices, petitions and filings, to obtain as promptly as practicable all
permits, consents, approvals, waivers and authorizations of all third
parties and Governmental Authorities and to satisfy all conditions to the
obligations of any party to consummate the transactions contemplated by
this Agreement (it being understood that the Sellers shall be responsible
for obtaining all such approvals, waivers and consents from such parties
with whom the Legend Companies are in contractual privity). The parties
acknowledge that the obligation to obtain the approval of the NASD to the
transactions contemplated hereby is an obligation of both WRF and the
Sellers. If any required consent of or waiver by any third party (excluding
any Governmental Authority and consents of clients under investment
advisory agreements) is not obtained prior to the Closing, the Sellers or
WRF, as the case may be, each without cost, expense or liability to the
other (except as provided in Article VII hereof), shall cooperate in good
faith to seek an alternative arrangement to achieve the economic results
intended.
(b) WRF and the Sellers will have the right to
review in advance, and will consult with the other on, in each case subject
to Applicable Laws relating to the exchange of information, all the
information relating to WRF or the Sellers, as the case may be, and any of
their respective Affiliates, which appear in any filing made with, or
written materials submitted to, any third party or any Governmental
Authority in connection with the transactions contemplated by this
Agreement, provided, however, that nothing contained herein shall be deemed
to provide any party with a right to review any information provided to any
Governmental Authority on a confidential basis in connection with the
transactions contemplated hereby. The parties hereto agree that they will
consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein. The party responsible for a filing as set
forth above shall promptly deliver to the other parties evidence of the
filing of all applications, filings, registrations and notifications
relating thereto (except for any confidential portions thereof), and any
supplement, amendment or item of additional information in connection
therewith (except for any confidential portions thereof). The party
responsible for a filing shall also promptly deliver to the other parties a
copy of each material notice, order, opinion and other item of
correspondence received by such filing party from any Governmental
Authority in respect of any such application (except for any confidential
portions thereof).
Section 5.8. Insurance. At all times prior to the Closing,
the Legend Companies shall, and the Sellers will cause each of the Legend
Companies to, maintain in effect all policies of insurance maintained by
the Legend Companies on the date hereof, relating to the Transferred
Businesses, the Operating Sites and other Legend Companies Assets, or will
use its commercially reasonable efforts to procure comparable replacement
policies and maintain such replacement policies in effect.
Section 5.9. Notification of Certain Matters. At all times
prior to the Closing, each party shall give prompt notice to the other
parties of (i) the occurrence, or failure to occur, of any event or
existence of any condition that has caused or could reasonably be expected
to cause any representations or warranties made by it in this Agreement to
be untrue or inaccurate in any material respect at any time after the date
of this Agreement, up to and including the Closing Date, and (ii) any
failure on its part to comply with or satisfy, in any material respect, any
of its covenants or agreements in this Agreement and any failure of any
condition to another party's obligation to complete the transactions
contemplated hereby to be satisfied.
Section 5.10. No Solicitation. Except as permitted herein or
contemplated hereby, until the termination of this Agreement pursuant to
Section 9.1, none of the Sellers or the Legend Companies or their
respective officers, directors, employees, agents or representatives will,
directly or indirectly, solicit, encourage, assist, initiate discussions or
engage in negotiations with, provide any information to, or enter into any
agreement or transaction with, any Person relating to the possible
acquisition of any equity interests in or assets of any of the Legend
Companies by any Person other than WRF and its Controlled Affiliates.
Section 5.11. Delivery of Governmental Documents. Sellers
will deliver or cause to be delivered or by notice make available or cause
to be made available to WRF at the same time as the filing thereof a
complete copy of each Governmental Document filed after the date hereof and
prior to the Closing Date by or on behalf of any of the Legend Companies.
Section 5.12. Change of Name. Sellers expressly acknowledge
that, after the Closing, Sellers shall have no rights in the name "Legend."
Sellers agree that, prior to the Closing, they shall cause each of their
respective Affiliates (other than the Legend Companies) and each Affiliate
of the Legend Companies (other than the other Legend Companies) to change
their respective legal names (and any other name under which any of them
may be doing business) so that such names no longer include the word
"Legend" and will take all other commercially reasonable steps necessary to
assure that, at the Closing, WRF obtains an exclusive right to use the name
"Legend" and any associated names, trademarks, service marks or domain
names in connection with any business similar in nature to the Transferred
Businesses. After the Closing, neither Sellers nor any of their Affiliates
shall use the name "Legend" or any trademarks, service mark, trade name or
domain name similar thereto in any context, including, without limitation,
on signs, letterhead, purchase orders, invoices and other materials used by
any of such Persons. Neither Sellers nor any of their Affiliates shall
misappropriate, misinterpret or otherwise infringe, abuse or diminish the
value of the name "Legend."
Section 5.13. Employees and Employee Benefits. (a) As of the
Closing Date, WRF shall cause the Legend Companies or a Wholly Owned
Subsidiary of WRF to offer employment to all current employees of the
Legend Companies at substantially the same terms, conditions, salaries and
wages (including bonus) in comparable positions as those in effect
immediately prior to the Closing Date, and with the benefits set forth in
this Section 5.13. All employees of the Legend Companies who accept such
offer of employment ("Transferred Employees") shall remain employees of the
Legend Companies or become employees of a Wholly Owned Subsidiary of WRF as
of the Closing Date.
(b) As soon as practicable, the Transferred Employees shall
also be eligible to participate in the following WRF plans ("WRF Benefits
Plans"):
(1) Waddell & Reed Financial, Inc. 401(k) and Thrift Plan;
(2) Waddell & Reed Financial, Inc. Retirement Income Plan;
(3) Waddell & Reed Life Insurance Plan; and
(4) Waddell & Reed Long Term Disability Plan,
in each case as such plan may be amended from time to time. In addition,
Transferred Employees shall continue to be eligible to participate in the
Legend Group Health and Dental Insurance Plan ("Legend Medical Plan") and
the Legend Group Flexible Spending Plan ("Legend Cafeteria Plan") offered
by the Legend Companies, one or both of which may or may not be replaced in
the future by other plans of substantially the same kind and quality and,
until the Transferred Employees become eligible to participate in the
Waddell & Reed Financial, Inc. 401(k) Plan and the Waddell & Reed
Financial, Inc. Life Insurance Plan, they shall continue to participate in
the Legend Services Corporation 401(k) Profit Sharing Plan and Legend Group
Life Insurance Plan, and neither of such plans shall be frozen or
terminated until such time as the Transferred Employees become eligible to
participate in the Waddell & Reed Financial, Inc. 401(k) Plan and the
Waddell & Reed Financial, Inc. Life Insurance Plan.
(c) WRF may, in its sole discretion, replace the Legend
Medical Plan with the Waddell & Reed Group Health Plan and the Legend
Cafeteria Plan with the Waddell & Reed Cafeteria Plan but all Transferred
Employees shall receive credit under the Waddell & Reed Group Health Plan
for all deductibles paid under the Legend Medical Plan.
(d) For purposes of the WRF Benefit Plans, the Waddell &
Reed Group Health Plan and the Waddell & Reed Cafeteria Plan, all
Transferred Employees will be considered to have an "in-service" date (as
defined below) as of the Closing Date, except that, in the case of the
Waddell & Reed Financial, Inc. 401(k) and Thrift Plan, the in-service date
shall be later of the Transferred Employee's in-service date as recorded in
the Legend Services Corporation 401(k) Profit Sharing Plan or the date one
year prior to the Closing Date. For this purpose, an "in- service" date
means the first date as of which service is recognized under the WRF
Benefit Plans, the Waddell & Reed Group Health Plan or the Waddell & Reed
Cafeteria Plan (as applicable) solely for purposes of determining
eligibility to participate.
(e) Service with the Legend Companies prior to the Closing
Date shall not be counted under any WRF Benefit Plan for purposes of
determining accrual of benefits or vesting.
Section 5.14. Permitted Transferees. WRF agrees that it will
not enter into a binding agreement providing for a Transfer Event unless
the counterparty to such agreement has agreed to assume all of WRF's
obligations under this Agreement including, without limitation, all
agreements of WRF relating to the Contingent Payments.
Section 5.15. Delivery of Financial Statements. (a) The
Sellers agree to deliver or caused to be delivered to WRF as soon as
practicable, but in no event later than five days before the Closing Date,
copies of the audited combined balance sheet of the Legend Companies as of
December 31, 1999 and the related audited combined statements of income,
changes in shareholders' equity and cash flows for the fiscal year then
ended, together with the related notes thereto, accompanied by the audit
report of KPMG, independent public accountants with respect thereto (the
audited combined balance sheet and statements above being referred to
collectively as the "1999 Financial Statements" and the audited combined
balance sheet as the "1999 Balance Sheet"). The 1999 Financial Statements
shall fairly present in all material respects the combined financial
position of the Legend Companies as of the date thereof, and the combined
results of the operations, cash flows and changes in shareholders' equity
of the Legend Companies for the fiscal period therein set forth and shall
have been prepared in accordance with GAAP consistently applied throughout
the period involved except as noted therein.
(b) The Sellers agree to deliver or caused to be delivered
to WRF as soon as practicable, but in no event later than the twenty fifth
day following the Closing Date, copies of the audited combined balance
sheet of the Legend Companies as of Closing Date as of the Closing Date and
the related audited combined statements of income, changes in shareholders'
equity and cash flows for the stub period from January 1, 2000 through the
Closing Date, together with the related notes thereto, accompanied by the
audit report of KPMG, independent public accountants with respect thereto
(the audited combined balance sheet and statements above being referred to
collectively as the "Stub Financial Statements" and the audited combined
balance sheet as the "Stub Balance Sheet"). The Stub Financial Statements
shall fairly present in all material respects (subject to recurring
adjustments normal in nature and amount and the addition of footnotes) the
combined financial position of the Legend Companies as of the date thereof,
and the combined results of the operations, cash flows and changes in
shareholders' equity of the Legend Companies for the fiscal period therein
set forth; and such balance sheet and statements (including the related
notes, where applicable) have been prepared in accordance with GAAP
consistently applied throughout the period involved except as noted
therein.
(c) The Sellers agree to deliver or caused to be delivered
to WRF as soon as practicable, but in no event later than five days before
the Closing Date, copies of the unaudited balance sheet of each of LNC and
LSC as of December 31, 1999 and the related unaudited statements of income,
changes in shareholders' equity and cash flows for the fiscal year then
ended, together with the related notes thereto (the unaudited balance
sheets and statements above being referred to collectively as the "LNC and
LSC Financial Statements" and the unaudited combined balance sheets as the
"LNC and LSC Balance Sheets"). The LNC and LSC Financial Statements shall
fairly present in all material respects the financial position of LNC and
LSC as of the date thereof, and the results of the operations, cash flows
and changes in shareholders' equity of each of LNC and LSC for the fiscal
period therein set forth and shall have been prepared in accordance with
GAAP consistently applied throughout the period involved except as noted
therein.
Section 5.16. LMG Agreements. The Sellers agree that they
shall cause LMG and the Legend Companies party thereto to terminate the LMG
Agreements effective immediately prior to the Closing. WRF agrees that it
shall cause the Legend Companies to make payment of any accrued and unpaid
amounts owing to LMG from the Legend Companies as of the Closing Date
pursuant to the LMG Agreements to be paid in six equal monthly installments
commencing with the first month following the Closing.
Section 5.17. Certain Domain Names. The Sellers agree that
they shall, prior to the Closing, cause the Legend Companies to take all
steps reasonably necessary to assure that the following internet domain
names shall, as promptly as practicable, cease to be owned by LSC (and
shall not take any action to transfer such domain names to any of the other
Legend Companies): mypicante.com; myseafari.com; seafarimarine.com; and
seajewel.com.
Section 5.18. Withheld Consent. The Sellers agree that they
will cause the relevant Legend Companies to instruct their respective
employees, consultants and agents promptly to inform appropriate officers
of such Legend Companies in the event that a counterparty to a Legend
Companies Contract subject to Section 5.2 hereof orally or in writing
indicates an intention to terminate such contract or withdraw all of such
counterparty's assets or otherwise withhold their consent to the deemed
assignment of such contract resulting from the consummation of the
transactions contemplated by this Agreement.
Section 5.19. Termination of Options. Philip C. Restino
and each of the other Sellers agree to cause the applicable Legend
Companies to terminate each of the options disclosed on Schedule 3.1(c)
hereto.
Section 5.20. Certain Expenses. The Sellers and WRF agree
that the cost of the preparation of the 1999 Financial Statements, 1999
Balance Sheet, the Stub Financial Statements, the Stub Balance Sheet, the
LNC and LSC Financial Statements and the LNC and LSC Balance Sheets shall
be borne by the Sellers, up to $40,000. Any such costs in excess of $40,000
shall be borne by WRF.
Section 5.21. Director and Officer Liability. (a) WRF agrees
that it shall maintain in effect the indemnity provisions of the charter
documents of the Legend Companies from the Closing Date through the sixth
anniversary thereof in favor of the directors and officers of the
Legend Companies other than the Sellers (provided, however, that no
individual who on or prior to the Closing Date was a director or officer of
the Legend Companies shall be indemnified thereunder against any liability
or any for any expense of such individual arising by reason of his or her
willful misfeasance, bad faith, negligence or reckless disregard of the
duties in such individual's capacity or capacities as a director or officer
of the Legend Companies). The Sellers agree to indemnify and hold harmless
WRF and its Affiliates for the amount of any such indemnification not
covered by directors' and officers' insurance policies.
(b) WRF shall not make any claim against the Sellers arising
out of their actions taken in their capacity or capacities as a director or
officer of the Legend Companies, except for any claim made under this
Agreement or any claim of fraud.
Section 5.22. Employment Agreements. Each of the Sellers, on
the one hand, and WRF, on the other hand, shall use commercially reasonable
efforts to assure that the Employment Agreements will be executed and
delivered at or prior to the Closing and will be in full force and effect
as of the Closing without any breach thereof by the parties thereto.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1. Conditions to Each Party's Obligations. The
respective obligation of each party to effect the transactions contemplated
hereby shall be subject to the condition that no order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
transactions contemplated by this Agreement shall be in effect, that no
proceeding initiated by any Governmental Authority seeking to enjoin or
otherwise restrain or prohibit the consummation of the transactions
contemplated by this Agreement shall be pending and that no statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Authority which prohibits,
restricts or makes illegal consummation of the transactions contemplated
hereby including, without limitation, the failure of the parties to obtain
approval of the NASD for the transactions contemplated by this Agreement.
Section 6.2. Conditions to WRF's Obligations. The
obligations of WRF to effect the transactions contemplated hereby shall be
subject to the following conditions, any one or more of which (to the
extent legally permissible) may be waived in writing by WRF in whole or in
part:
(a) Each of the representations and warranties of
the Sellers set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent any such representation or warranty speaks as of or is limited to an
earlier date) as of the Closing Date, provided, however, that solely for
purposes of determining the satisfaction of the conditions contained in
this Section 6.2(a) and not for purposes of determining liability under
Article VII or Article VIII hereof or otherwise, no effect shall be given
to any exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and such representations and
warranties shall be deemed to be true, correct and complete in all material
respects only if the failures of such representations and warranties to be
so true, correct and complete without regard to materiality and Material
Adverse Effect exceptions do not represent in the aggregate a Material
Adverse Effect;
(b) The Sellers and the Legend Companies shall have
performed and complied in all material respects with all agreements,
covenants, obligations and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing Date;
(c) The Legend Companies shall have obtained consents
in accordance with the requirements of Section 5.2 or new contracts: (x)
with respect to investment advisory or custodial services clients
representing not less than 87% of the Base Fees Amount; and (y) with
respect to mutual fund distribution agreements, 75% by number of such
mutual fund distribution agreements;
(d) A period of not less than 30 days shall have
lapsed from the mailing date of the notification and consent request
contemplated by Section 5.2;
(e) Sellers shall have delivered or caused to be
delivered or by notice made available or caused to be made available to WRF
at the same time as the filing thereof a complete copy of each Governmental
Document filed after the date hereof and prior to the Closing Date by or on
behalf of any of the Legend Companies;
(f) Sellers shall have caused each of their
respective Affiliates and each Affiliate of the Legend Companies to change
its legal name (and any other name under which any of them may be doing
business) so that such name no longer includes the word "Legend" and shall
have taken all other steps reasonably necessary to assure that, at the
Closing, WRF will obtain an exclusive right to use the name "Legend" and
any associated names, trademarks or service marks;
(g) The Sellers shall have delivered or caused to
be delivered to WRF no later than five days before the Closing Date, copies
of the 1999 Financial Statements and the 1999 Balance Sheet and copies of
the LNC and LSC Financial Statements and the LNC and LSC Balance Sheet;
(h) The LMG Agreements shall have been terminated
effective immediately prior to the Closing;
(i) The Sellers shall have caused the Legend
Companies to take all steps reasonably necessary to assure that the domain
names set forth in Section 5.17 shall, as promptly as practicable, cease to
be owned by LMC and shall not have taken any action to transfer such domain
names to any of the other Legend Companies;
(j) Each of the Options set forth on Schedule 3.1(c)
hereto shall have been terminated;
(k) The Sellers shall have delivered to WRF a
certificate dated as of the Closing Date, confirming the satisfaction of
the conditions contained in paragraphs (a) through (j) of this Section 6.2;
(l) Each of the Employment Agreements and Releases
shall have been executed and delivered at or prior to the Closing and shall
be in full force and effect without any breach thereof by the parties
thereto;
(m) The parties hereto shall have made or obtained
all requisite regulatory notifications or approvals from Governmental
Authorities in form and substance reasonably satisfactory to WRF, provided,
however, that WRF may not waive the obligation of the parties to obtain the
approval of the NASD prior to the Closing Date;
(n) WRF shall have received from each Seller a
certificate, satisfying the provisions of Treasury Regulations Section
1.1445-2(b)(2), and otherwise in form and in substance reasonably
satisfactory to WRF, certifying that such Seller is not a foreign person,
or, in the alternative, a certificate, satisfying the provisions of
Treasury Regulations Section 1.1445- 2(c)(3), and otherwise in form and in
substance reasonably satisfactory to WRF, certifying that an interest in
each Legend Company is not a U.S. real property interest (a "FIRPTA
Certificate"). Notwithstanding anything to the contrary expressed or
implied herein, if any Seller fails to provide WRF with a FIRPTA
Certificate, WRF shall be entitled to withhold the requisite amounts in
accordance with Section 1445 of the Code; and
(o) WRF shall have received an opinion of counsel
to the Sellers and the Legend Companies dated the Closing Date, in form and
substance reasonably satisfactory to WRF to the effect set forth in Annex
IV hereto.
Section 6.3. Conditions to the Sellers' Obligations. The
obligation of the Sellers to effect the transactions contemplated hereby
shall be subject to the following conditions, any one or more of which may
be waived in whole or in part in writing (to the extent legally
permissible) for the account of all of them by a majority in interest of
them:
(a) Each of the representations and warranties of
WRF contained in this Agreement shall be true in all material respects as
of the date of this Agreement and (except to the extent any such
representation or warranty speaks as of or is limited to an earlier date)
as of the Closing Date with the same effect as though made on and as of the
Closing Date; provided, however, that solely for purposes of determining
the satisfaction of the conditions contained in this Section 6.3(a) and not
for purposes of determining liability under Article VII hereof or
otherwise, no effect shall be given to any exception in such
representations and warranties relating to materiality or Material Adverse
Effect, and such representations and warranties shall be deemed to be true,
correct and complete in all material respects only if the failure or
failures of such representations and warranties to be so true, correct and
complete without regard to materiality and Material Adverse Effect
exceptions do not represent in the aggregate a material adverse effect on
the ability of WRF to perform its obligations hereunder;
(b) WRF shall have performed and complied in all
material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with by
it at or prior to the Closing Date;
(c) WRF shall have delivered to the Sellers a
certificate, dated as of the Closing Date, from an officer of WRF
confirming the satisfaction of the conditions contained in paragraphs (a)
and (b) of this Section 6.3;
(d) The parties hereto shall have made or obtained
all requisite regulatory notifications or approvals from Governmental
Authorities in form and substance reasonably satisfactory to the Sellers,
provided, however, that the Sellers may not waive the obligation of the
parties to obtain the approval of the NASD prior to the Closing Date; and
(e) The Sellers shall have received an opinion of
counsel to WRF dated the Closing Date, in form and substance reasonably
satisfactory to a Majority in Interest of the Sellers to the effect set
forth in Annex V hereto.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Obligations of the Sellers. From and after the
Closing Date, the Sellers hereby agree to indemnify, defend and hold
harmless WRF and its employees, officers, partners and other Affiliates
from and against any and all Losses (other than Losses related to Taxes,
which shall be subject to the provisions of Article VIII of this Agreement)
which any of them may suffer, incur or sustain arising out of, or
attributable to, or resulting from (a) any inaccuracy in or breach or
nonperformance of any of the representations or warranties of the Sellers,
or any covenant or agreement of the Sellers, made in or pursuant to this
Agreement or any Related Agreement, (b) any Legend Company acting or having
acted as investment manager or investment adviser to any investment company
that is or was required to be registered under the Investment Company Act
and is not or was not so registered or exempted from such registration
requirements pursuant to Section 3(c)(1) or Section 3(c)(7) of the
Investment Company Act or (c) the actions or circumstances set forth on
Schedules 3.15(g) and 3.15(h) to this Agreement. Each Seller shall be
solely and fully responsible, subject to the limitations set forth in
Section 7.7, for any Loss arising out of, attributable to or resulting from
any inaccuracy in or breach of nonperformance of any representation or
warranty or covenant or agreement made solely by such Seller, it being
understood and agreed that any representation, warranty, covenant or
agreement made by "such Seller" or by a Seller by name shall be considered
to be made solely by each Seller with respect to himself or solely by the
named Seller. With respect to any other Loss for which the Sellers are
responsible hereunder, Philip C. Restino shall, subject to the limitation
set forth in Section 7.7, be jointly and severally liable for each such
Loss and each other Seller shall, subject to the limitations set forth in
Section 7.7, be severally liable for each such loss pro rata in proportion
to such Seller's Purchase Price Percentage.
Section 7.2. Obligations of WRF. From and after the Closing
Date, WRF shall indemnify, defend and hold harmless the Sellers from and
against any Losses which they may suffer, incur, or sustain arising out of,
attributable to or resulting from any inaccuracy in or breach or
nonperformance of any of the representations, warranties, covenants or
agreements made by WRF in or pursuant to this Agreement (it being agreed
that solely for purposes of establishing whether any matter is
indemnifiable pursuant to this Section 7.2, no effect shall be given to any
qualification regarding knowledge or materiality).
Section 7.3. Procedure. (a) Notice of Third Party Claims.
Any Indemnified Party seeking indemnification for any Loss or potential
Loss arising from a claim asserted by a third party against the Indemnified
Party (each, a "Third Party Claim") shall give written notice to the
Indemnifying Party. Written notice to the Indemnifying Party of the
existence of a Third Party Claim shall be given by the Indemnified Party
within 10 days after its receipt of a written assertion of liability from
the third party; provided, however, that the Indemnified Party shall not be
foreclosed from seeking indemnification pursuant to this Article VII by any
failure to provide timely notice of the existence of a Third Party Claim to
the Indemnifying Party except and only to the extent that the Indemnifying
Party actually incurs an incremental out-of-pocket expense or otherwise has
been materially damaged or prejudiced as a result of such delay.
(b) Defense. Except as otherwise provided herein,
the Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own
counsel (which counsel shall be reasonably satisfactory to the Indemnified
Party), any Third Party Claim. If the Indemnifying Party elects to
compromise or defend such Third Party Claim, it shall, within 30 days after
receiving notice of the Third Party Claim, notify the Indemnified Party of
its intent to do so, and the Indemnified Party shall cooperate, at the
expense of the Indemnifying Party, in the compromise of, or defense
against, such Third Party Claim. If the Indemnifying Party elects not to
compromise or defend against the Third Party Claim, or fails to notify the
Indemnified Party of its election to do so as herein provided, or otherwise
abandons the defense of such Third Party Claim, (i) the Indemnified Party
may pay (without prejudice of any of its rights as against the Indemnifying
Party), compromise or defend such Third Party Claim and (ii) the costs and
expenses of the Indemnified Party incurred in connection therewith shall be
indemnifiable by the Indemnifying Party pursuant to the terms of this
Agreement. Notwithstanding anything to the contrary contained herein, in
connection with any Third Party Claim in which the Indemnified Party shall
reasonably conclude, based upon the written advice of its counsel, that (x)
there is a conflict of interest between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such Third Party Claim,
or (y) there are specific defenses available to the Indemnified Party which
are different from or additional to those available to the Indemnifying
Party and which could be materially adverse to the Indemnifying Party, then
the Indemnified Party shall have the right to be represented by counsel
selected by it. In such an event, the Indemnifying Party shall pay the
reasonable fees and disbursements of counsel to the Indemnifying Party or
Parties and the Indemnified Party provided that the Indemnifying Party
shall not be liable for the fees and expenses of more than one counsel for
the Indemnified Parties other than local counsel. Notwithstanding the
foregoing, neither the Indemnifying Party nor the Indemnified Party may
settle or compromise any claim (unless the sole relief payable to a third
party in respect of such Third Party Claim is monetary damages that are
paid in full (subject to the Sellers' Basket or the WRF Basket, as
applicable) by the party settling or compromising such claim, the
settlement or compromise includes a complete release of the other party or
parties hereto and, in the case of a settlement or compromise by the
Indemnified Party, the Indemnifying Party has abandoned the defense of such
Third Party Claim) over the objection of the other, provided, however, that
consent to settlement or compromise shall not be unreasonably delayed or
withheld. In any event, except as otherwise provided herein, the
Indemnified Party and the Indemnifying Party may each participate, at its
own expense, in the defense of such Third Party Claim. If the Indemnifying
Party chooses to defend any claim, the Indemnified Party shall make
available to the Indemnifying Party any personnel or any books, records or
other documents within its control that are reasonably necessary or
appropriate for such defense, subject to the receipt of appropriate
confidentiality agreements.
(c) Miscellaneous. The procedures set forth in this
Section 7.3 shall not apply to any Tax Claim, which instead shall be
resolved in accordance with the procedures set forth in Article VIII. The
procedures set forth in this Section 7.3 shall apply solely with respect to
Third Party Claims and shall not be deemed to apply to, or otherwise affect
or limit, an Indemnified Party's rights under this Agreement with respect
to any claim other than a Third Party Claim.
Section 7.4. Notice of Non-Third Party Claims. Any
Indemnified Party seeking indemnification for any Loss or potential Loss
arising from a claim asserted by any party to this Agreement against the
Indemnified Party or, if the Indemnified Party is a Person specified in
Section 7.1, against the Legend Companies or any of their Affiliates or
asserted by the Indemnified Party (a "Non-Third Party Claim") shall give
written notice to the Indemnifying Party. Written notice to the
Indemnifying Party of the existence of a Non-Third Party Claim shall be
given by the Indemnified Party promptly after discovery of the potential
claim; provided, however, that the Indemnified Party shall not be
foreclosed from seeking indemnification pursuant to this Article VII by any
failure to provide timely notice of the existence of a Non-Third Party
Claim to the Indemnifying Party except and only to the extent that the
Indemnifying Party actually incurs an incremental out-of-pocket expense or
otherwise has been materially damaged or prejudiced as a result of such
delay.
Section 7.5. Handling of Claims. If the Indemnifying Party
is more than one of the Sellers, all decisions relating to such Claim made
by the Sellers constituting the Indemnifying Party shall be made in
accordance with the determination of a Majority in Interest of the Sellers
constituting such Indemnifying Party (assuming, for purposes of this
Section 7.5 only, that the aggregate amount of the Purchase Price to be
received by the Sellers constituting such Indemnifying Party constitutes
the entire Purchase Price).
Section 7.6. Survival of Indemnity. Any matter as to which a
claim has been specifically asserted in writing that is pending or
unresolved at the end of any applicable limitation period set forth in
Section 9.3 hereof shall continue to be covered by this Article VII
notwithstanding any applicable statute of limitations (which the parties
hereby waive) until such matter is finally terminated or otherwise resolved
in accordance with this Agreement and any amounts payable hereunder are
finally determined and paid.
Section 7.7. Limitation on Indemnification. No Seller shall
be required to provide any indemnification under the provisions of this
Article VII (a) unless and until the aggregate Losses of the Persons to
whom the Sellers owe such obligations hereunder exceed $200,000 (the
"Sellers' Basket") whereupon the Indemnified Parties shall be entitled to
indemnification for the aggregate cumulative amount of all such Losses in
excess of $200,000 from the Sellers or (b) after the Sellers have made
aggregate indemnification payments hereunder of not less than $15,000,000.
WRF shall not be required to provide any indemnification under the
provisions of this Article VII (c) unless and until the aggregate Losses of
the Persons to whom WRF owes such obligations hereunder exceed $200,000
(the "WRF Basket") whereupon the Indemnified Parties shall be entitled to
indemnification for the aggregate cumulative amount of all such Losses in
excess of $200,000 or (d) after WRF has made aggregate indemnification
payments hereunder of not less than $15,000,000. Notwithstanding the
foregoing, it is hereby expressly agreed that the following items shall not
be counted towards the WRF Basket or the Sellers' Basket, as applicable, or
the limitation on indemnification set forth in this Section 7.7: any
payment made by WRF under this Article VII in respect of a Loss arising
from a claim of breach or nonperformance by WRF of its obligations to make
the Contingent Payments pursuant to Section 2.2(f); any fees and expenses
of any Accounting Firm paid by WRF or the Sellers in connection with the
resolution of a dispute in the manner set forth in Sections 2.2(e) or
2.2(i); payments made by WRF to LMG pursuant to WRF's obligations set forth
in Section 5.16; payments made by WRF or the Sellers pursuant to their
respective obligations set forth in Section 5.21; or any indemnification
payments by the Sellers hereunder in respect of Losses incurred or
sustained by WRF or its Affiliates arising out of, or attributable to, or
resulting from the actions or circumstances set forth on Schedules 3.15(g)
and 3.15(h) to this Agreement.
Section 7.8. Indemnity Payments and Interest. All amounts
payable to an Indemnified Party under this Article VII shall be paid in
immediately available funds within 5 Business Days after the later of
written demand for payment by the Indemnified Party or final determination
of the amount of such Loss by a court, arbitrator or agreement of the
Indemnifying Party. All such payments shall be made to the accounts and in
the manner specified in writing by the Indemnified Party. If the
Indemnifying Party fails to pay any indemnifiable Loss suffered by an
Indemnified Party within such 5 Business Day period, then the
indemnification payment hereunder shall include interest at three-month
LIBOR plus 1% from such 5th Business Day or date of final determination
until the date of payment.
Section 7.9. Exclusive Remedy. After the Closing the sole
and exclusive remedy of any party for any inaccuracy of any representation
or warranty, or any breach of any agreement or obligation made in
connection with this Agreement and required to be performed prior to the
Closing shall, subject to Section 9.3 hereof, be the indemnification
contained in this Article VII and in Article VIII.
Section 7.10. Right of Set-Off. The Sellers agree that the
amount of any claim for indemnification asserted by WRF against any one or
more of the Sellers in respect of which a judicial determination has been
made in accordance with Section 10.10 hereof that WRF is entitled to be
indemnified under or pursuant to this Article VII may, to the extent such
amount is not timely paid by such Seller or Sellers, be subtracted by WRF
from the amount of any Contingent Payment or Transfer Event Election Amount
to which such Seller or Sellers may subsequently become entitled pursuant
to Section 2.2 (f) or (h), respectively. If such Seller or Sellers appeal
such judicial determination of the amount or validity of any such claim,
WRF agrees that it will deposit the disputed amount (up to the amount of
any Contingent Payment or Transfer Event Election Amount which is then
otherwise due and payable) with an unaffiliated third party escrow agent
reasonably acceptable to WRF and such Seller or Sellers pending final
unappealable judicial determination of such claim or abandonment of such
appeal.
ARTICLE VIII
TAX MATTERS
Section 8.1. Tax Returns. The parties agree, with respect to
any Tax Returns filed by the Legend Companies as to any period ending on or
before the Closing, to determine the income, gain, expenses, losses,
deductions, and credits of the Legend Companies in a manner consistent with
prior practices of the Legend Companies and in a manner that apportions
such income, gain, expenses, loss, deductions and credits equitably from
period to period (except to the extent that doing otherwise will not
adversely affect WRF or, for all periods ending after the Closing Date, any
of the Legend Companies); provided, however, that in all events such Tax
Returns shall be prepared in a manner consistent with Applicable Law and
without prejudice to the rights of indemnification of any party hereunder
with respect to any Tax Claim (as defined in Section 8.3 below). No amended
Tax Return may be filed by or on behalf of any of the Legend Companies with
respect to any period ending on or prior to the Closing (i) without the
written consent of WRF if such amended Tax Return will have an adverse
effect on WRF or, for all periods ending after the Closing, any of the
Legend Companies, and (ii) without the written consent of a Majority in
Interest of the Sellers, if such amended Tax Return will have an adverse
effect on any of the Legend Companies for any Pre-Closing Period or
Pre-Closing Straddle Period (as such terms are defined in Section 8.2(a)
below), such written consent not to be unreasonably withheld or delayed.
Section 8.2. Liability for Taxes.
(a) From and after the Closing, the Sellers shall
indemnify WRF, the Legend Companies and their respective Affiliates, and
hold them harmless from and against, any Loss to WRF, any Legend Company or
any of their respective Affiliates incurred by reason of or resulting from
any and all Taxes or other amounts imposed on any of the Legend Companies
or attributable to the activities of any of the Legend Companies with
respect or pursuant to (i) any taxable period of any of the Legend
Companies ending on or prior to the Closing Date (a "Pre- Closing Period"),
(ii) any taxable period of any of the Legend Companies beginning before the
Closing Date and ending after the Closing (a "Straddle Period") but only
with respect to the portion of such Straddle Period ending at the end of
the day on the Closing Date and in the manner provided in Section 8.2(d)
hereof (such portion, a "Pre-Closing Straddle Period"), (iii) a breach or
inaccuracy in any representation contained in Section 3.12 of this
Agreement or any covenant of the Sellers set forth in this Article VIII,
(iv) any Taxes imposed on any member of any group with which any Legend
Company files or has filed a Tax Return on an affiliated, consolidated,
combined or unitary basis for any Tax period beginning on or before the
Closing Date, (v) Taxes or other payments required to be made after the
Closing Date by any Legend Company to any Person under any Tax Sharing,
indemnity or allocation agreement (whether written or oral) and (vi) the
actions or circumstances set forth on Schedules 3.15(g) and 3.15(h) to this
Agreement; provided that such indemnification shall not apply or extend to
any Taxes which are properly reflected as a liability on the Net Working
Capital Certificate. Philip C. Restino shall be jointly and severally
liable for any such Taxes and each other Seller shall be severally liable
for each such Taxes pro rata in proportion to such Seller's Purchase Price
Percentage.
(b) From and after the Closing, WRF shall indemnify
the Sellers and their Affiliates (excluding the Legend Companies after the
Closing Date to the extent they would be treated as Affiliates of the
Sellers), and hold them harmless from and against, any Taxes to the Sellers
or any such Affiliates incurred by reason of or resulting from any and all
Taxes imposed on or attributable to the activities of WRF or any of the
Legend Companies with respect or pursuant to a breach of any covenant of
WRF set forth in this Article VIII.
(c) To the extent WRF receives any refund or credit
for Taxes previously paid by or on behalf of any of the Legend Companies in
respect of any Pre-Closing Period or Pre-Closing Straddle Period (other
than any refund or credit reflected in the financial records of such Legend
Company in accordance with prior practice as of the Closing Date), such
refund or credit shall be paid to each Seller in proportion to such
Seller's Purchase Price Percentage.
(d) For purposes of allocating the Taxes imposed or
attributable to any of the Legend Companies which relate to a Straddle
Period between a Pre-Closing Straddle Period and the portion of such
Straddle Period beginning immediately after the Closing (such portion, a
"Post-Closing Straddle Period"), the Taxes attributable to the Pre-Closing
Straddle Period shall be computed as if such taxable period ended at the
end of the day on the Closing Date and the Taxes attributable to the
Post-Closing Straddle Period shall be computed as if such taxable period
began on the day following the Closing Date.
Section 8.3. Procedures Related to Tax Claims.
(a) If any notice of deficiency, proposed adjustment,
adjustment, audit, examination or other administrative or court proceeding,
suit, dispute or other claim (a "Tax Claim") is delivered, sent, commenced
or initiated by any taxing authority against any Legend Company or against
any Seller in respect of any Legend Company then, to the extent such Tax
Claim will have an adverse effect on WRF or, with respect to any period
ending after the Closing, any Legend Company, the party receiving such Tax
Claim shall promptly notify the other parties.
(b) If such Tax Claim, if successful, would require
the Sellers to make an indemnity payment pursuant to Section 8.2(a) or
would cause the Sellers to otherwise be liable for any Taxes attributable
to a taxable period of any Legend Company ending on or before the Closing
Date, the Sellers shall have the right (but not the obligation), upon
timely written notice, to elect to control, defend, settle, compromise, or
contest such Tax Claim; provided, however, that, notwithstanding anything
to the contrary set forth herein, the Sellers shall (i) with respect to any
Tax Claim in excess of $100,000, retain at their own expense independent
legal or other tax counsel reasonably acceptable to WRF and (ii) consult
with WRF and shall not enter into any settlement with respect to any such
Tax Claim (other than a Tax Claim which will not have an adverse effect on
WRF or, with respect to any period ending after the Closing, any Legend
Company) without WRF's prior written consent, which shall not be
unreasonably delayed or withheld. The costs and expenses incurred in
contesting any such Tax Claim shall be borne by the Sellers. WRF and its
Affiliates (including the Legend Companies after the Closing Date) agree to
cooperate with the Sellers in pursuing such Tax Claim. The Sellers shall
reimburse WRF and/or such Affiliates for any reasonable out-of-pocket
expenses of WRF and/or such Affiliates (including, without limitation, the
fees and expenses of counsel to WRF and/or such Affiliates) incurred in
connection with such cooperation.
Section 8.4. Survival of Tax Claims and Certain
Representations. Notwithstanding any other provision of this Agreement to
the contrary, any obligations of the parties pursuant to this Article VIII
and, solely for purposes of applying the indemnity provisions of this
Article VIII, all representations and warranties contained in Section 3.12
and 3.15 shall be unconditional and absolute and shall survive until 90
days after the expiration of the applicable statute of limitations (taking
into account any applicable extensions or tollings thereof) relating to the
Taxes at issue.
Section 8.5. Exclusive Remedy. Notwithstanding any other
provision of this Agreement to the contrary, the provisions of this Article
VIII shall be the exclusive means by which any party may recover damages
from any other party with respect to any claim based on Taxes pursuant to
this Agreement.
Section 8.6. Interim Closing of the Books. The Sellers and
WRF agree that the Legend Companies shall undertake an interim Closing of
their books on the Closing Date for purposes of allocating items of income,
gain, deduction and Loss among its members.
Section 8.7. Characterization of Tax Indemnification
Payments. All amounts paid by the Sellers or WRF to another party pursuant
to this Article VIII shall be treated as adjustments to the purchase price
for all Tax purposes.
Section 8.8. Form; Discounting. The parties, and WRF agree
for U.S. federal, state, local and foreign tax purposes, (i) to treat all
transactions and arrangements contemplated hereunder in accordance with
their form, as set forth herein and (ii) to calculate the principal
component of the deferred contingent payments with respect to the purchase
price by discounting each such deferred contingent payment at the
applicable federal rate in effect at the Closing Date.
Section 8.9. Indemnity Payments. All amounts payable or to
be paid to the Sellers or WRF under this Article VIII shall be paid in
immediately available funds within 5 Business Days after the later of (i)
receipt of a written request from the party entitled to such payment which
demonstrates to the reasonable satisfaction of the party receiving such
request that the party providing such request is entitled to such payment
under the terms of the Agreement and (ii) the day of payment of the amount
that is the subject of the indemnity payment by the party entitled to
receive the indemnity payment. All such indemnity payments shall be made to
the accounts and in the manner specified in such written notice. If the
Indemnifying Party fails to pay any indemnifiable Loss suffered by an
Indemnified Party within such 5 Business Day period, then the
indemnification payment hereunder shall include interest at three-month
LIBOR plus 1% from such 25th Business Day until the date of payment.
Section 8.10. Right of Set-Off. The Sellers agree that the
amount of any claim for indemnification asserted by WRF against any one or
more of the Sellers under or pursuant to this Article VIII in respect of a
written claim (whether proposed or final) asserted by any third party may,
to the extent such amount is not timely paid by such Seller or Sellers, be
subtracted by WRF from the amount of any Contingent Payment or Transfer
Event Election Payment to which such Seller or Sellers may subsequently
become entitled pursuant to Section 2.2 (f) or (h), respectively. If such
Seller or Sellers dispute the amount or validity of any such claim, WRF
agrees that it will deposit the disputed amount (up to the amount of any
Contingent Payment or Transfer Event Election Payment which is then
otherwise due and payable) with an unaffiliated third party escrow agent
reasonably acceptable to WRF and such Seller or Sellers pending final
determination of such claim.
ARTICLE IX
TERMINATION/SURVIVAL
Section 9.1. Termination. (a) This Agreement may be
terminated at any time prior to the Closing as follows:
(1) by the mutual written consent of WRF
and a Majority in Interest of the Sellers;
(2) by a Majority in Interest of the Sellers,
on the one hand, or by WRF, on the other hand, if there shall have
been a breach of any of the representations and warranties set
forth in this Agreement on the part of the other, which breach
would, under Section 6.2(a) (in the case of a breach of
representation or warranty by any of the Sellers or the Legend
Companies) or Section 6.3(a) (in the case of a breach of
representation or warranty by WRF), entitle the party receiving
such representations and warranties not to consummate the
transactions contemplated hereby and which breach by its nature
cannot be cured prior to the date set forth in Section 9.1(a)(4)
below;
(3) by a Majority in Interest of the
Sellers on the one hand, or by WRF, on the other hand, if there
shall have been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of WRF (in the
case of termination by the Sellers) or on the part of any of the
Sellers or the Legend Companies (in the case of termination by
WRF), which breach shall not have been cured within 20 Business
Days following receipt by the breaching party of written notice of
such breach from the other; and
(4) at the election of WRF or a Majority
in Interest of the Sellers, if the Closing Date shall not be on or
before April 30, 2000.
Notwithstanding Section 9.1(a)(2) - (4) hereof, a party who
is in material breach of any of its obligations or representations and
warranties hereunder shall not have the right to terminate this Agreement
pursuant to Section 9.1(a)(2) - (4).
(b) The termination of this Agreement shall be
effectuated by the delivery by the party terminating this Agreement to the
other parties of a written notice of such termination. If this Agreement so
terminates, it shall become null and void and have no further force or
effect, except as provided in Section 9.2.
Section 9.2. Effect of Termination. In the event of
termination of this Agreement as provided in Section 9.1, this Agreement
(other than Sections 5.3 and 5.4) shall forthwith become void and have no
effect except that, notwithstanding anything to the contrary contained in
this Agreement, no party shall be relieved or released from any liabilities
or damages arising out of its breach of any provision of this Agreement. In
the event of termination of this Agreement, WRF and the Sellers shall
continue to honor the terms of the confidentiality agreement entered into
between WRF and the Sellers, including the return of all confidential
materials.
Section 9.3. Survival of Representations and Warranties and
Covenants. Except as provided in Sections 7.6 and 8.4, the respective
representations and warranties of the Sellers and WRF contained herein and
in the certificates of the Sellers and WRF to be delivered at the Closing,
and the right of any Person to initiate a claim under Article VII or VIII
hereof with respect to such representations and warranties, shall expire
and be terminated and extinguished 15 months from Closing Date with respect
to matters subject to Article VII (except representations relating to Taxes
and environmental matters in Sections 3.12, 3.15 and 3.20) and at the 30th
day after the expiration of the applicable statute of limitations (or any
extension thereof) with respect to matters subject to Article VIII
(including representations with respect to Taxes and environmental matters
in Sections 3.12, 3.15 and 3.20). Following the appropriate expiration date
for any representation or warranty referred to in the previous sentence,
except as provided in Sections 7.6, no party shall have any liability
whatsoever with respect to any such referenced representation or warranty
or any other claim under Article VII with respect to claims previously
asserted pursuant to Article VII hereof. Notwithstanding the foregoing, the
obligations of WRF and the Sellers set forth in Section 5.21 shall survive
until 30 days after the expiration of the applicable statute of limitations
(together with any extensions or waivers thereof) or the final judicial
determination of any claim asserted with respect to the subject matter
thereof prior to the lapse of such period, whichever is later.
ARTICLE X
MISCELLANEOUS
Section 10.1. Amendments; Waiver. Subject to compliance with
Applicable Law, this Agreement may be amended, altered or modified by
written instrument executed by WRF, the Legend Companies and the Sellers;
provided, however, that a Majority in Interest of the Sellers may waive in
writing on behalf of all the Sellers the performance by WRF of any of its
representations, warranties, covenants or other agreements and that WRF may
waive in writing the performance by any of the Sellers or the Legend
Companies of any of their respective representations, warranties covenants
or other agreements. Notwithstanding the foregoing, except as expressly
provided in this agreement (including, without limitation and for example
subsections 2.2(e),(h) and (i)) the timing and amount of any payment to
which any Person is entitled pursuant to this agreement may not be amended,
altered or modified without the written consent of such Person.
Section 10.2. Entire Agreement. This Agreement (including
Annexes, Exhibits, Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or
pursuant hereto) constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof, except as
provided herein, and supersedes all prior agreements and understandings,
written and oral, among the parties with respect to the subject matter
hereof.
Section 10.3. Specific Performance; Injunctive Relief. Each
party understands and agrees that it will be irreparably damaged in the
event this Agreement is not specifically enforced. Each party, therefore,
agrees that in the event of a breach of any material provision of this
Agreement, the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of this Agreement. Such
remedies shall, however, be cumulative and not exclusive, and shall, except
as provided in Sections 7.9 and 8.5, be in addition to any other remedy
which a party may have.
Section 10.4. Interpretation. When a reference is made in
this Agreement to a Section, Exhibit, Annex or Schedule, such reference
shall be to a Section of or Exhibit, Annex or Schedule to this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation." Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms and the singular form of
nouns and pronouns shall include the plural and vice versa. 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.
Section 10.5. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 10.6. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if (a) delivered in
person, (b) transmitted by telecopy (with confirmation), (c) mailed by
certified or registered mail (return receipt requested) or (d) delivered by
an express courier (with confirmation) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
If to WRF:
Waddell & Reed Financial, Inc.
6300 Lamar Avenue
Overland Park, KS 66202
Telecopy: (913) 236-1930
Attention: Chief Financial Officer
and
Waddell & Reed Financial, Inc.
6300 Lamar Avenue
Overland Park, KS 66202
Telecopy: (913) 236-1930
Attention: General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Telecopy: (212) 735-2000
Attention: Stephen M. Banker, Esq.
If to the Legend Companies or the Sellers:
The Legend Group
3920 RCA Blvd., Suite 2004
Palm Beach Gardens, FL 33410
Telecopy: (561) 626-6405
Attention: Philip C. Restino
and
The Legend Group
3920 RCA Blvd., Suite 2004
Palm Beach Gardens, FL 33410
Telecopy: (561) 626-6405
Attention: Mark J. Spinello
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022-2585
Telecopy: (212) 940-8776
Attention: David H. Landau, Esq.
Section 10.7. Binding Effect; Persons Benefitting; No
Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and the respective heirs, legal representatives,
estates, executors, successors and permitted assigns of the parties and
such persons. Nothing in this Agreement is intended or shall be construed
to confer upon any entity or person other than the parties hereto and their
respective heirs, legal representatives, estates, executors, successors and
permitted assigns any right, remedy or claim under or by reason of their
Agreement or any part hereof. Subject to Section 2.6 hereof, without the
prior written consent of each of the other parties hereto, this Agreement
and the rights hereunder may not be assigned by any of the parties hereto.
Section 10.8. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same agreement, it
being understood that all of the parties need not sign the same
counterpart.
Section 10.9. Governing Law. THIS AGREEMENT, THE LEGAL
RELATIONS BETWEEN THE PARTIES AND THE ADJUDICATION AND THE ENFORCEMENT
THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
Section 10.10. Jurisdiction; Waiver of Jury Trial and
Certain Damages. All actions arising under or relating to this Agreement
shall be brought exclusively in the Federal District Court for the Southern
District of New York or in any New York State Court sitting in the City of
New York and having subject matter jurisdiction over such matters, and each
of the parties hereto consents and agrees to personal jurisdiction, and
waives any objection as to the venue, of such courts for purposes of such
action. The parties to this Agreement agree to waive any right to a jury
trial as to all disputes and any right to seek punitive or consequential
damages.
Section 10.11. No Third Party Beneficiary. Nothing in this
Agreement is intended to create any third party beneficiary rights in any
person.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
WADDELL & REED FINANCIAL, INC.
By:/s/John E. Sundeen, Jr.
---------------------------------
Name: John E. Sundeen, Jr.
Title: Senior Vice President and
Chief Financial Officer
FREEMARK INVESTMENT MANAGEMENT, INC.
By:/s/Mark J. Spinello
---------------------------------
Name: Mark J. Spinello
Title: President
LEGEND FINANCIAL CORPORATION
By:/s/Philip C. Restino
---------------------------------
Name: Philip C. Restino
Title: President
ADVISORY SERVICES CORPORATION
By:/s/Glenn T. Ferris
---------------------------------
Name: Glenn T. Ferris
Title: President
PERFORMANCE MANAGEMENT GROUP, INC.
By:/s/Philip C. Restino
---------------------------------
Name: Philip C. Restino
Title: President
SERVICE MANAGEMENT ADVISORY CORP.
By:/s/Glenn T. Ferris
---------------------------------
Name: Glenn T. Ferris
Title: President
THE LEGEND GROUP, INC.
By:/s/Glenn T. Ferris
---------------------------------
Name: Glenn T. Ferris
Title: President
THE RESTINO FAMILY TRUST DATED 1/15/92
By: The Private Trust Corporation Limited
as Trustee
By:/s/Adrian Crosbie-Jones
----------------------------------
Name: Adrian Crosbie-Jones
Title: Director
By:/s/Lana E. Taylor
----------------------------------
Name: Lana E. Taylor
Title: Authorized Signatory
JOHN J. RESTINO TRUST UTD 1/1/94
By: PROSPERITY TRUST CORP., as Trustee
By:/s/Mark J. Spinello
----------------------------------
Name: Mark J. Spinello, Trustee
Title: President
ROBERT R. RESTINO TRUST UTD 1/1/94
By: PROSPERITY TRUST CORP., as Trustee
By:/s/Mark J. Spinello
----------------------------------
Name: Mark J. Spinello, Trustee
Title: President
/s/Philip C. Restino
---------------------------------
PHILIP C. RESTINO
/s/Mark J. Spinello
---------------------------------
MARK J. SPINELLO
/s/Glenn T. Ferris
---------------------------------
GLENN T. FERRIS
/s/David L. Phillips
---------------------------------
DAVID L. PHILLIPS
ANNEX I
Shares Being Sold and Purchased
Purchase Price Percentages
Name of Seller Percentage
-------------- ----------
PHILIP C. RESTINO 51.2295%
RESTINO FAMILY TRUST 32.7869%
PROSPERITY TRUST CORP., as Trustee
UDT dated 1/1/94 FBO John J. Restino 6.0656%
PROSPERITY TRUST CORP., as Trustee
UDT dated 1/1/94 FBO Robert R. Restino 6.0656%
MARK J. SPINELLO 2.0492%
GLENN T. FERRIS 1.6393%
DAVID L. PHILLIPS 0.1639%
---------
100%
FREEMARK INVESTMENT MANAGEMENT, INC.
Name of Seller Number of Shares Percentage
MARK J. SPINELLO 10 100%
--------------- ---------
Total: 10 100%
LEGEND FINANCIAL CORPORATION
Name of Seller Number of Shares Percentage
PHILIP C. RESTINO 1800 60%
RESTINO FAMILY TRUST 1200 40%
--------------- ---------
Total: 3000 100%
ADVISORY SERVICES CORPORATION
Name of Seller Number of Shares Percentage
PHILIP C. RESTINO 20 26.67%
MARK J. SPINELLO 5 6.67%
PROSPERITY TRUST CORP., as Trustee
UDT dated 1/1/94 FBO John J. Restino 14 18.67%
PROSPERITY TRUST CORP., as Trustee
UDT dated 1/1/94 FBO Robert R. Restino 14 18.67%
GLENN T. FERRIS 20 26.67%
DAVID L. PHILLIPS 2 2.67%
--------------- ---------
Total: 75 100%
PERFORMANCE MANAGEMENT GROUP, INC.
Name of Seller Number of Shares Percentage
PHILIP C. RESTINO 60 60%
RESTINO FAMILY TRUST 40 40%
--------------- ---------
Total: 100 100%
SERVICE MANAGEMENT ADVISORY CORP.
Name of Seller Number of Shares Percentage
PROSPERITY TRUST CORP., as Trustee
UDT dated 1/1/94 FBO John J. Restino 5 50%
PROSPERITY TRUST CORP., as Trustee
UDT dated 1/1/94 FBO Robert R. Restino 5 50%%
--------------- ---------
Total: 10 100%
THE LEGEND GROUP, INC.
Name of Seller Number of Shares Percentage
PHILIP C. RESTINO 100 100%
--------------- ---------
Total: 100 100%
ANNEX II
FORM OF EMPLOYMENT AGREEMENT
for each of
Michael J. Provines
Mark J. Spinello
Glenn T. Ferris
Shashi Mehrota
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of [March __, 2000] by and among [Name of Employee], an individual (the
"Employee"), Legend Advisory Corporation (the "Company"), and, solely with
respect to Section 7.8 of this Agreement, Waddell & Reed Financial, Inc., a
Delaware corporation (WRF").
WHEREAS, WRF, Freemark Investment Management, Inc., a Delaware
corporation, Legend Financial Corporation, a Delaware corporation, Advisory
Services Corporation, a Nevada corporation, Performance Management Group,
Inc., a Delaware corporation, Service Management Advisory Corp., a Delaware
corporation and The Legend Group, Inc., a Delaware corporation, Philip C.
Restino, an individual, Restino Family Trust, a trust, 01/02/94 Trust FBO
John J. Restino, 01/02/94 Trust FBO Robert R. Restino, Mark J. Spinello, an
individual, Glenn T. Ferris, an individual, and David L. Phillips, an
individual, have entered into that certain Purchase Agreement, dated as of
February 28, 2000 (the "Purchase Agreement"), pursuant to which the Sellers
have agreed to sell, transfer and convey all of their shares of the common
stock, par value $1.00 per share, of the Legend Companies, constituting all
of the issued and outstanding Shares, to WRF, and to consummate certain
other transaction set forth in the Purchase Agreement; and
WHEREAS, in contemplation of and as a condition precedent to
WRF's obligation to effect the transactions contemplated by the Purchase
Agreement, the Company, each of the Sellers and WRF desire that WRF, the
Company and the Employee enter into an employment agreement under which the
Employee shall be employed by the Company on and following the date of such
transactions (the "Commencement Date").
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual promises and agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Employee agree as follows:
ARTICLE I
EMPLOYMENT
1.1 Office. Subject to terms hereof, effective as of the
Commencement Date, the Company shall employ the Employee, and the Employee
shall be employed by the Company, as its [__________ and _______________].
1.2 Responsibilities. The Employee shall serve as
[_______________ and _______________] of the Company, subject to the
direction and supervision of and shall at all times report directly to the
Chief Operating Officer of WRF. Employee's responsibilities shall include
[_________________ and _________________].
1.3 Full-Time Commitment. The Employee hereby accepts such
employment hereunder, and agrees that he will devote all of his working
time, attention, knowledge and skills, faithfully, diligently, and to the
best of his ability in furtherance of the business of the Company and as
otherwise reasonably necessary to such employment. During the term of his
employment hereunder, the Employee will not, without the prior written
approval of WRF (which consent shall not be unreasonably withheld), accept
employment or compensation from or perform services of any nature for any
business enterprise other than the Company; provided, however, that nothing
in this Agreement shall be deemed to restrict the Employee from
volunteering for, or serving on the boards of, charitable, not-for-profit
or community organizations or, subject to the limitations imposed by the
code of ethics of WRF as in effect from time to time, for-profit
corporations so long as such activities do not unreasonably interfere with
the performance of his duties hereunder.
1.4 Certain Defined Terms. Capitalized terms appearing
herein and not separately defined herein have the meaning given to them in
the Purchase Agreement.
ARTICLE II
TERM OF EMPLOYMENT
2.1 Term. The employment of the Employee pursuant hereto
shall commence on the Commencement Date and remain in effect for an initial
term expiring at 12:01 A.M. New York time on the third anniversary of the
Commencement Date unless sooner terminated pursuant to the provisions
hereof. Such employment term is referred to herein as the "Term".
ARTICLE III
COMPENSATION OF EMPLOYEE
3.1 Salary. As compensation for his services hereunder,
Employee shall be paid a minimum base salary ("Base Salary") equal to
[_______________ ($_______)] per year from the Commencement Date through
the expiration of the Term or such higher amount per year as the Board of
Directors of the Company shall determine at any time, payable in accordance
with the regular payroll practices of WRF.
3.2 Bonus. The Company, in its sole discretion, may award
and pay to Employee an annual bonus in any year; provided, however, that
the bonus paid for the year 2000 is guaranteed to be $[______] at a
minimum.
3.3 Benefits; Other Compensation. The Employee shall be
entitled to such health, life and disability insurance benefits and such
pension, stock option plan, parking, paid vacation and other fringe
benefits as are available to other similarly situated management employees
of the Company, WRF or any subsidiary of WRF and the Employee shall be
entitled to paid vacation time consistent with past practices of the
Company prior to the date hereof.
3.4 Expenses. During the Term, the Company will reimburse
the Employee for reasonable and necessary business expenses of the Employee
for travel, meals and similar items incurred in connection with the
performance of the Employee's duties, and which are consistent with such
guidelines as shall be applicable to all similarly situated management
employees of WRF. All payments for reimbursement of such expenses shall be
made to the Employee only upon the presentation to the Company of
appropriate vouchers or receipts to the extent required by WRF's general
corporate policies.
3.5 Withholding Taxes; Deductions. The Base Salary and all
other compensation payments to the Employee under this Agreement or any
other agreement shall be subject to withholding taxes and other applicable
deductions provided by Applicable Law.
ARTICLE IV
TERMINATION
4.1 Disabling Event. Disabling Event shall mean the
Employee's death or the Employee's physical or mental disability, as
certified by a physician who is satisfactory to the Company and the
Employee or his legal representative, which renders the Employee incapable
of performing his material duties and services as an employee of the
Company and which continues for more than six consecutive months or more
than twelve months in total during any 24-month period.
4.2 Resignation. The Employee's employment hereunder shall
automatically terminate upon his Resignation during the Term. Resignation
shall mean the termination of the Employee's full-time employment with the
Company other than (a) by reason of a Disabling Event, (b) by the Employee
for Good Reason, (c) by the Company without Cause, or (d) by the Company
for Cause.
4.3 Cause. Cause shall mean any one or more of the following
events: (a) the conviction of the Employee, by a court of competent
jurisdiction, or entry of a plea of guilty or nolo contendere, of any crime
(whether or not involving the Company) which constitutes a felony in the
jurisdiction involved, (b) the Employee's embezzlement or intentional
misappropriation of any property of the Company or any of its clients, (c)
the commission by the Employee of any act that would constitute grounds for
the SEC to deny, revoke or suspend registration of the Company or its
Legend affiliates with the SEC as an investment advisor, (d) if the
Employee is an associated person of an investment advisor, the commission
by the Employee of any act that would constitute grounds for any order by
the SEC against the Employee pursuant to Section 203 of the Advisers Act,
(e) a material breach of this Agreement by the Employee, continued
insubordination or dereliction of duties or serious infractions of
regulatory compliance requirements such as the Code of Ethics of the
Company, in each case after written notice specifying in reasonable detail
the nature of the breach, insubordination or dereliction of duties or
infractions and an opportunity to cure (if such breach, insubordination,
infraction or dereliction is curable) of not less than 30 days having been
given to the Employee and the Employee having failed to cure within such
period, or (f) continued alcohol or other substance abuse or addiction that
renders the Employee incapable of satisfactorily performing his duties,
after written notice and an opportunity to cure in the first such instance
of not less than 30 days (90 days if the Employee enters an approved
rehabilitation program within such 30-day period) have been given to the
Employee and the Employee having failed to cure within such period.
4.4 Good Reason. The Employee may terminate his employment
hereunder for Good Reason (as defined below) during the 60-day period
following the 30th day after the Employee has notified the Company of the
circumstances constituting Good Reason if the Company has failed to
eliminate the circumstances constituting such Good Reason within such
30-day period. As used herein, the Employee shall have Good Reason to
terminate his or her employment with the Company in the event of (i) a
relocation of the Company's headquarters outside of the Palm Beach Gardens,
Florida area , (ii) a material, adverse diminution, at a time when the
Company would not be entitled to terminate the Employee's employment
hereunder for Cause, of the Employee's title or responsibilities from those
in effect as of the Commencement Date without the Employee's prior written
consent, (iii) the assignment to Employee, at a time when the Company would
not be entitled to terminate the Employee's employment hereunder for Cause,
of additional duties to Employee that materially diminish Employee's
overall responsibilities from those in effect at the Commencement Date
without the Employee's prior written consent, (iv) a change, at a time when
the Company would not be entitled to terminate the Employee's employment
hereunder for Cause, in reporting structure that is in effect a material,
adverse diminution in the Employee's title or responsibilities from those
in effect as of the Commencement Date, (v) a material breach by the Company
or WRF of any of its obligations to the Employee under this Agreement with
respect to the Employee or (vi) WRF or a Wholly Owned Subsidiary of WRF no
longer controlling the Company.
ARTICLE V
EFFECT OF TERMINATION
5.1 Cause, Resignation, or Disabling Event. (a) If the
Employee's employment is terminated (i) by the Company for Cause or (ii) by
the Employee by his Resignation, the Employee's Base Salary accrued or
payable for the year in which such termination occurs and all other
benefits shall cease at the time of such termination.
(b) If the Employee's employment is terminated by
the Company by reason of a Disabling Event, the Employee or his estate
shall be entitled to receive either, at the option of the Employee (or his
estate in the event that the Disabling Event is the Employee's death), (x)
Base Salary, as well as continued participation (or monetary cost thereof
if continued participation is not possible) in all employee welfare plans
in which the Employee participated, for the remainder of the Term, paid
periodically in accordance with the Company's regular payroll practices or
(y) a lump sum payment of such Base Salary discounted at 7% per year
payable within ten business days after notice of election from the Employee
to be paid in a lump sum, plus such continued participation or monetary
cost.
5.2 Without Cause: Good Reason. If the Employee's
employment is terminated (i) by the Company for any reason other than for
Cause, or a Disabling Event or (ii) by the Employee for Good Reason, the
Employee shall be entitled to receive continuation of base salary then in
effect for the remainder of the Term.
ARTICLE VI
NONCOMPETITION, NONSOLICITATION AND NONDISCLOSURE
6.1 Non-Competition, Non-Solicitation and Non-Disclosure.
(a) The Employee acknowledges that (i) his association with the Company has
been and is expected to continue to be critical to the success of the
Company; (ii) the business of the Company consists of designing, developing
and administering tax-deferred retirement plans primarily for employees of
not-for-profit organizations and public schools, including the provision of
broker-dealer services, custodial and investment advisory services and
insurance products (collectively, the "Business"); (iii) the restrictive
covenants and other agreements contained in this Section 6.1 are an
essential part of this Agreement; (iv) he has been fully advised by counsel
in connection with his entering into this Agreement including as to
statutory and common law regarding the enforceability of the noncompetition
and other restrictive covenants and agreements contained in this Section
6.1; and (v) such noncompetition and other restrictive covenants and
agreements are reasonable and it would not be reasonable for the Company to
enter into this Agreement without obtaining such noncompetition and other
restrictive covenants and agreements.
(b) Accordingly, as a fundamental inducement to the
Company to enter into this Agreement and in connection with the
transactions referred to in the recitals hereto, the Employee hereby
agrees, during the period beginning on the Commencement Date and continuing
until the second anniversary of the termination of his employment
hereunder, that he will not engage, other than on behalf of the Company, in
any of the activities set forth in clauses (A) through (C) below:
(A) (x) engage in the
Business for his own account (y) enter the employ of, or be
associated in any way with, render any services to, or
otherwise engage in the Business for the account of, any
other Person (other than the Company and other than services
rendered to, or for the account of, any member of the
Employee's immediate family who is not engaged in the
Business), and/or (z) become interested in any such Person
engaged in the Business in any capacity, including as a
shareholder, partner, member, proprietor or other owner,
director, officer, manager, trustee, employee, associate,
agent or consultant;
(B) solicit or induce, or
attempt to solicit or induce, whether directly or
indirectly, any Person for the purpose of (x) causing any
client to reduce the scope of or terminate its relationship
with the Company, including causing any funds with respect
to which the Company provides investment advisory services
to be withdrawn from such services, or (y) causing any
client of the Company not to engage the Company to provide
additional investment advisory or any other services
included in the Business;
(C) solicit or induce, or
attempt to solicit or induce, directly or indirectly, any
director, officer, employee or agent of, or consultant to,
the Company for the purpose of terminating its or his
relationship therewith, or hire any such director, officer,
employee, agent or consultant, or person who was an
employee, agent or consultant within the 12 months prior to
termination of Employee's employment.
Notwithstanding the provisions of this Section 6.1 (b), the
Employee may make passive investments in a competitive enterprise provided
the shares or other equity interest of such enterprise are publicly traded
and his holdings in any such competitive enterprise, together with any
holdings therein of Affiliates controlled by him, are less than five
percent (5%) of the outstanding shares or comparable interests in such
entity at the time any such investment is made.
(c) The Employee agrees that any and all currently
existing businesses of the Company and all business developed by the
Company, including by himself or any other employee or associate of the
Company, including without limitation, all investment methodologies,
models, processes, formulas and computer code, all investment advisory
contracts, fees and fee schedules, commissions, records, data, client
lists, personnel lists, agreements, trade secrets, and any other incident
of any business conducted by the Company or by him for the Company, and all
trade names, service marks and logos under which the Company does business,
and any combinations or variations thereof and all related logos, are and
shall be, as between the Employee and the Company, the exclusive property
of the Company, for its sole use. The Employee agrees that all work
performed, and all ideas, concepts, materials, products, software, cover
documentation, designs, architectures, specifications, charts, test data,
programmer's notes, deliverables, improvements, discoveries, methods,
processes, or inventions, trade secrets or other subject matter related to
the Business (collectively, "Materials") conceived, developed or prepared
by him alone, or with others, during the period of his relationship with
the Company in written, oral, electronic, photographic, optical or any
other form, are, as between the Employee and the Company, the property of
the Company and its successors or assigns, and all rights, title and
interest therein shall vest in the Company and its successors or assigns,
and all Materials shall be deemed to be works made for hire and made in the
course of his employment with the Company and the Company and its
successors or assigns having the right to obtain and to hold in their own
name, copyrights, patents, trademarks, applications, registrations or such
other protection as may be appropriate to the subject matter, and any
extensions and renewals thereof. To the extent that title to any Materials
has not or may not, by operation of law, vest in the Company and its
successors or assigns, or such Materials may not be considered works made
for hire, the Employee hereby irrevocably assigns all of his rights, title
and interest therein to the Company and its successors or assigns. The
Employee further agrees to give the Company and its successors or assigns,
or any person designated by the Company and its successors or assigns, any
assistance reasonably required to perfect or enforce the rights defined in
this Section 6.1, provided, however, that the Employee shall be reimbursed
for any reasonable expenses incurred by him in providing such assistance,
and shall be reasonably compensated for any such assistance provided after
the Employee's employment with the Company has terminated. The Employee
acknowledges that, in the course of performing services hereunder and
otherwise he has had, and will from time to time have, access to
information of a confidential or proprietary nature, as commonly and
generally understood, including without limitation, confidential or
proprietary investment methodologies, trade secrets, proprietary or
confidential plans, client identities and information, client lists,
business operations or techniques, records, data and any of the Materials
that are not matters of public record or knowledge (other than through a
breach by any Person of any confidentiality agreement with the Company)
("Proprietary Information") owned or used in the course of business by the
Company. The Employee agrees always to keep secret and not ever publish,
divulge, furnish, use or make accessible to anyone (otherwise than in the
regular business of the Company) any Proprietary Information; provided,
however, that the foregoing agreement shall not prevent Employee from
making disclosures compelled by a court or other governmental authority and
the Employee agrees to use reasonable efforts to give prior notice to the
Company of any such compelled disclosure. At the termination of the
Employee's services to the Company, all data, memoranda, client lists,
notes, programs and other papers, items and tangible media, and
reproductions thereof relating to the matters set forth in this Section
6.1(c) in the Employee's possession or control, shall be returned to the
Company and remain in its possession (except where the return of such items
shall be unreasonable or impracticable in relation to the importance or
confidentiality of such items).
(d) If for any reason a court, arbitrator or other
Governmental Authority shall determine that any portion of this Section 6.1
is unenforceable against a particular Person in particular circumstances,
the Employee hereby declares his intention that such court, arbitrator or
other Governmental Authority should not treat such portion as if it were
not part of this Agreement but rather should modify such portion so as to
be enforceable to the maximum extent possible against such Person in such
circumstances.
6.2 Remedies Upon Breach.
(a) The Employee agrees that any breach of the
provisions of Section 6.1 of this Agreement could cause irreparable damage
to the Company. The Company shall have the right (in addition to other
legal remedies) to seek an injunction or other equitable relief without the
need to post a bond to prevent any violation of the Employee's obligations
hereunder.
(b) The Employee agrees that the enforcement of
the provisions of Sections 6.1 and 6.2 hereof, are necessary to ensure the
protection and continuity of the business, goodwill and confidential
business information of the Company for the benefit of the Company and WRF.
The Employee agrees that, due to the proprietary nature of the business of
the Company, the restrictions set forth in Section 6.1 hereof are
reasonable as to duration and scope. If any provision contained in Sections
6.1 or 6.2 shall nonetheless for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of Section 6.1 or
6.2. It is the intention of the parties hereto that if any of the
restrictions or covenants contained herein is held to cover a geographic
area or to be for a length of time that is not permitted by Applicable Law,
or is in any way construed to be too broad or to any extent invalid, such
provision shall not be construed to be null, void and of no effect, but to
the extent such provision would then be valid or enforceable under
Applicable Law, such provision shall be construed and interpreted or
reformed to provide for a restriction or covenant having the maximum
enforceable geographic area, time period and other provisions as shall be
valid and enforceable under Applicable Law.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices hereunder, to be effective, shall
be in writing and shall be deemed delivered when delivered by hand, upon
confirmation of receipt by telecopy or when sent by first-class, certified
mail, postage, and fees prepaid, as follows:
(a) For notices and communications to the Company:
[Name]
c/o Waddell & Reed Financial, Inc.
6300 Lamar Avenue
Overland Park, KS 66202
Attention: Chief Operating Officer
(b) For notices and communications to the Employee:
[Name of Employee][Title]
[Address]
By notice complying with the foregoing provisions of this Section 7.1, each
party shall have the right to change the address for future notices and
communications to such party.
7.2 Modification. As of the date of this Agreement, this
Agreement (and the other agreements and documents referred to herein) shall
constitute the entire agreement between the parties hereto with regard to
the subject matter hereof, superseding all prior understandings and
agreements, whether written or oral. Any amendment or modification shall
require the written agreement of the parties.
7.3 Assignment. This Agreement and all rights hereunder are
personal to the Employee and may not, unless otherwise specifically
permitted herein, be assigned by him. If the Employee dies, payments
hereunder may be made to the Employee's estate. Notwithstanding anything
else in this Agreement to the contrary, the Company may not assign its
rights and obligations under this Agreement.
7.4 Captions. Captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope
or substance of any provision of this Agreement.
7.5 Severability. The provisions of this Agreement are
severable, and the invalidity of any provision shall not affect the
validity of any other provision. In the event that any provision of this
Agreement or the application thereof is held to be unenforceable because of
the duration or scope thereof, the parties hereto agree that the panel of
arbitrators or court making such determination shall have the power to
reduce the duration and scope of such provision to the extent necessary to
make it enforceable, and that the Agreement in its reduced form shall be
valid and enforceable to the full extent permitted by law.
7.6 Arbitration. Except for requests for injunctive relief,
specific performance or enforcement of the award of an arbitrator, all
disputes arising in connection with this Agreement shall be resolved by
binding arbitration in accordance with the applicable rules of the American
Arbitration Association. The arbitration shall be held in the State of
Florida before a single arbitrator selected in accordance with Section 12
of the American Arbitration Association Commercial Arbitration Rules who
shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with such
association's Commercial Arbitration Rules. Such arbitrator shall be
required to construe and enforce the express terms and conditions of this
Agreement and shall not be empowered to enlarge, expand or imply terms or
conditions into this Agreement, absent the mutual written agreement of the
parties. This arbitration obligation extends to any and all claims that may
arise by and between Employee and the Company, its affiliates, or their
respective officers, directors, partners, principals, employees and agents,
and their respective successors or assigns, and expressly extends to,
without limitation, claims or causes of action for wrongful termination,
impairment of ability to compete in the open labor market, breach of an
express or fiduciary duty, fraud, misrepresentation, discrimination,
harassment, defamation, slander, infliction of emotional distress,
disability, loss of future earnings, and claims under any applicable State
Constitution, the United States Constitution, and applicable state fair
employment laws, federal equal employment opportunity laws, and federal and
state statutes and regulations affecting employee and labor matters. The
award of such arbitrator shall be enforceable in any court having
jurisdiction over the parties to such arbitration.
7.7 Governing Law. This Agreement shall be construed under
and governed by the laws of the State of Florida without giving effect to
the principles of conflict of laws thereunder).
7.8 Rights and Obligations of WRF. WRF hereby guarantees
prompt payment and performance by the Company of all of its obligations
under this Agreement.
IN WITNESS WHEREOF, the parties hereto, being duly
authorized, have duly executed this Agreement as a binding contract as of
the day and year first above written.
Legend Advisory Corp.
By:
Name:
Title:
WADDELL & REED FINANCIAL, INC.
By:___________________________________
Name:
Title:
By:
[Name of Employee]
ANNEX III
Form of Release
for each of
Philip C. Restino
Restino Family Trust
01/02/94 Trust FBO John J. Restino
01/02/94 Trust FBO Robert R. Restino
Mark J. Spinello
Glenn T. Ferris
David L. Phillips
RELEASE
This release (the "Release") is executed pursuant to Section 6.2(l)
of the Purchase Agreement (the "Purchase Agreement") dated February 28,
2000 by and among Waddell & Reed Financial, Inc., Freemark Investment
Management, Inc., Legend Financial Corporation, Advisory Services
Corporation, Performance Management Group, Inc., Service Management
Advisory Corp., The Legend Group, Inc., Philip C. Restino, Restino Family
Trust, 01/02/94 Trust FBO John J. Restino, 01/02/94 Trust FBO Robert R.
Restino, Mark J. Spinello, Glenn T. Ferris, and David L. Phillips. All
capitalized terms used herein that are not defined herein shall have the
meanings specified in the Purchase Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, after consultation with counsel, [Name of
Releasor] (the "Releasor"), hereby voluntarily and knowingly releases and
forever discharges each of the Legend Companies (the "Releasees"), from all
manner of claims, rights, or causes of action of any kind or nature
whatsoever, at law or in equity, whether known or unknown, which the
Releasor or any of the Releasor's beneficiaries, heirs, executors or
administrators (collectively, the "Releasor's Affiliates") ever had or now
has, or that any one claiming through or under them may have, against or
with respect to the Releasees for, related to, connected with, or arising
out of the Releasor's status as a shareholder of one or more of the Legend
Companies prior to the Closing (collectively, the "Claims").
This Release shall not apply to any claims that the Releasor or the
Releasor's Affiliates may assert under the indemnity provisions of the
charter documents of the Releasees or pursuant to liability insurance
policies maintained by the Releasees. This Release does not constitute a
release or waiver of any of the Releasor's rights under the Purchase
Agreement.
This Release is not to be construed as an admission of liability on
the part of the Releasees. This Release may be modified only by written
agreement of the Releasor and the Releasees. The provisions of this Release
shall be severable in the event that any provision hereof (including any
provision within a single paragraph or sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. There shall exist no right in any person to claim a
beneficial interest in this Release or any rights occurring by virtue of
this Release other than the Releasor, the Releasor's Affiliates, and the
Releasees.
IN WITNESS WHEREOF, the undersigned has executed this Release on
the __ day of March, 2000.
[Name of Releasor]
ANNEX IV
FORM OF OPINION OF COUNSEL TO THE LEGEND COMPANIES AND THE SELLERS
The following substantive opinion paragraphs will be subject to the usual
and customary assumptions and limitations typical in transactions of this
nature.
For the purposes of the opinion, "Transaction Documents" shall mean the
Purchase Agreement, each Employment Agreement and the Releases; "Applicable
Contracts" shall mean those agreements or instruments which have been
identified to us as all the agreements and instruments which are material
to the business or financial condition of the Legend Companies, taken as a
whole; "Applicable Laws" shall mean those laws, rules and regulations
which, in our experience, are normally applicable to the businesses of the
type conducted by the Legend Companies or transactions of the type
contemplated by the Transaction Documents, without our having made any
special investigation as to the applicability of any specific law, rule or
regulation, and which are not the subject of a specific opinion herein
referring expressly to a particular law or laws; and "Governmental
Approval" means any consent, approval, license, authorization or validation
of, or filing, recording or registration with, any governmental authority
pursuant to the Applicable Laws. If we are not licensed to practice law in
a jurisdiction whose law is relevant to any opinion, we may assume that, to
the extent such opinion is based on the laws of such jurisdiction, the laws
of such jurisdiction are, in all material respects, identical to the laws
of the State of New York.
Each of the Legend Companies is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation (i) with full corporate power to own or lease
its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted and (ii) with full corporate power and authority to execute,
deliver and perform the Transaction Documents to which it is a party and to
consummate the transactions contemplated thereby.
Each Seller that is not an individual is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it was organized. Each Seller that is not an individual has full
power and authority to execute, deliver and perform its obligations under
each of the Transaction Documents to which he, she or it is a party and to
consummate the transactions contemplated thereby.
Each of the Transaction Documents has been duly authorized,
executed and delivered by each of the Legend Companies party thereto and
each of the Sellers party thereto, and constitutes the valid and binding
obligation of each of the Legend Companies party thereto and the Sellers
party thereto enforceable against each of the Legend Companies party
thereto and the Sellers party thereto in accordance with its terms.
There are no issued and outstanding Equity Securities of the
Legend Companies other than the Shares set forth on Annex I to the Purchase
Agreement.
Except as set forth in the Purchase Agreement: (i) none of
the Shares are subject to the rights of any Person to purchase or subscribe
for any shares of capital stock of any of the Legend Companies and (ii)
there are no outstanding options, warrants, rights, commitments, preemptive
rights or agreements of any kind for the issuance, transfer, sale or
redemption by any Legend Company of, or outstanding securities convertible
into, any security of any class, series or type of such Legend Company.
The execution and delivery by each Legend Company or Seller
of each of the Transaction Documents to which he, she or it is a party and
the performance by such Legend Company or Seller of its obligations
thereunder, each in accordance with its terms, do not (i) conflict with the
organizational documents of such Legend Company or, if such Seller is not
an individual, such Seller, or (ii) constitute a violation of, or a default
under, any Applicable Contracts or (iii) cause the creation of any security
interest or lien upon any of the property of any of the Legend Companies
pursuant to any Applicable Contracts. We do not express any opinion,
however, as to whether the execution, delivery or performance by each
Legend Company or Seller of each of the Transaction Documents to which he,
she or it is a party and the performance by such Legend Company or Seller
of its obligations under the Transaction Documents to which it is a party
will constitute a violation of, or a default under, any covenant,
restriction or provision with respect to financial ratios or tests or any
aspect of the financial condition or results of operations of any of the
Legend Companies.
Neither the execution, delivery or performance by each
Legend Company or Seller of each of the Transaction Documents to which it
is a party nor the compliance by such Legend Company or Seller with the
terms and provisions thereof will contravene any provision of any
Applicable Law.
No Governmental Approval which has not been obtained or made
is required to be made or obtained by any Legend Parent Company or any
Seller in connection with the execution, delivery or performance of the
Transaction Documents to which such Legend Parent Company or such Seller is
a party.
To our best knowledge, based solely on discussions with the
Sellers and not on any docket search or other procedures, there is no
action, suit, proceeding, governmental inquiry, investigation or other
proceeding pending or threatened against any of the Legend Parent
Companies, except those disclosed in the Purchase Agreement.
The form[s] of notices which, the Sellers have advised us,
were sent to the Legend Companies' investment advisory clients in order to
satisfy the requirements of Section 5.2 of the Purchase Agreement were
sufficient to obtain, for purposes of the provisions of the Investment
Advisers Act of 1940, as amended, or the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated under each of them,
applicable to the assignment or deemed assignment of such contracts, the
express consent or the implied consent, as applicable, of such clients or
counterparties to the deemed assignments of their Legend Companies
Contracts resulting from consummation of the transactions contemplated by
the Purchase Agreement
ANNEX V
FORM OF OPINION OF COUNSEL FOR WRF
The following substantive opinion paragraphs will be subject to the ususal
and customary assumptions and limitations typical in transactions of this
nature.
For the purposes of the opinion, "Transaction Documents" shall mean the
Purchase Agreement, each Employment Agreement and the Releases; "Applicable
Contracts" shall mean those agreements or instruments which have been
identified to us as all the agreements and instruments which are material
to the business or financial condition of WRF; "Applicable Laws" shall mean
those laws, rules and regulations which, in our experience, are normally
applicable to transactions of the type contemplated by the Transaction
Documents, without our having made any special investigation as to the
applicability of any specific law, rule or regulation, and which are not
the subject of a specific opinion herein referring expressly to a
particular law or laws; and "Governmental Approval" means any consent,
approval, license, authorization or validation of, or filing, recording or
registration with, any governmental authority pursuant to the Applicable
Laws. If we are not licensed to practice law in a jurisdiction whose law is
relevant to any opinion, we may assume that, to the extent such opinion is
based on the laws of such jurisdiction, the laws of such jurisdiction are,
in all material respects, identical to the laws of the State of New York.
WRF was incorporated and is validly existing and in good
standing under the laws of the State of Delaware.
WRF has the corporate power and authority to execute,
deliver and perform all its obligations under each of the Transaction
Documents to which it is a party. The execution and delivery by WRF of each
of the Transaction Documents to which it is a party and the consummation by
WRF of the transactions contemplated thereby has been duly authorized by
all requisite corporate action on the part of WRF. Each of the Transaction
Documents to which WRF is a party has been duly executed and delivered by
WRF.
Each of the Transaction Documents to which WRF is a party
constitutes the valid and binding obligation of WRF enforceable against WRF
in accordance with its terms.
The execution and delivery by WRF of each of the Transaction
Documents to which it is a party and the performance by WRF of its
obligations thereunder, each in accordance with its terms, do not (i)
conflict with the Certificate of Incorporation or By-laws of WRF, (ii)
constitute a violation of, or a default under, any Applicable Contracts or
(iii) cause the creation of any security interest or lien upon any of the
property of WRF pursuant to any Applicable Contracts. We do not express any
opinion, however, as to whether the execution, delivery or performance by
WRF of the Transaction Documents to which it is a party will constitute a
violation of, or a default under, any covenant, restriction or provision
with respect to financial ratios or tests or any aspect of the financial
condition or results of operations of WRF.
Neither the execution, delivery or performance by WRF of the
Transaction Documents to which it is a party nor the compliance by WRF with
the terms and provisions thereof will contravene any provision of any
Applicable Law.
No Governmental Approval, which has not been obtained or
taken and is not in full force and effect, is required to authorize, or is
required in connection with, the execution, delivery or enforceability of
any of the Transaction Documents to which WRF is a party by WRF.
To our knowledge, based solely on our discussions with
officers and other representatives of WRF, and not on any search of the
public docket records of any court, governmental agency or administrative
agency, there is no action, suit, proceeding, governmental inquiry,
investigation or other proceeding pending or threatened against WRF which
would prevent or hinder the consummation of the transactions contemplated
by the Transaction Documents or the performance by WRF of its obligations
thereunder.
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