<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6211 13-4064735
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
ONE EXCHANGE PLAZA
NEW YORK, NEW YORK 10006-3008
(212) 425-1144
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
GEORGE M.L. LABRANCHE, IV
LABRANCHE & CO INC.
ONE EXCHANGE PLAZA
NEW YORK, NEW YORK 10006-3008
(212) 425-1144
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
WITH COPIES TO:
JEFFREY M. MARKS, ESQ.
WARREN J. NIMETZ, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
TEL: (212) 318-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
- ---------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED TO BE REGISTERED UNIT PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 1/2% Senior Notes $100,000,000 100% $100,000,000 $27,800
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1999
PROSPECTUS
EXCHANGE OFFER FOR $100.0 MILLION
9 1/2% SENIOR NOTES DUE 2004 OF
[LOGO]
TERMS OF THE EXCHANGE OFFER
- - We are offering to exchange the notes that we sold in a private offering for
new registered exchange notes.
- - The exchange offer expires 5:00 p.m., New York City time, , 1999, unless
extended.
- - Tenders of outstanding notes may be withdrawn any time prior to the expiration
of the exchange offer.
- - All outstanding notes that are validly tendered and not validly withdrawn will
be exchanged.
- - We believe that the exchange of notes will not be a taxable exchange for U.S.
federal income tax purposes.
- - We will not receive any proceeds from the exchange offer.
- - The terms of the notes to be issued are identical to the outstanding notes,
except for the transfer restrictions and registration rights relating to the
outstanding notes.
WE ARE NOT MAKING AN OFFER TO EXCHANGE NOTES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.
INVESTING IN THE NOTES ISSUED IN THE EXCHANGE OFFER INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 10.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
, 1999
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................................................................................... 1
Risk Factors............................................................................................... 10
The Exchange Offer......................................................................................... 22
Use of Proceeds............................................................................................ 32
Selected Historical Consolidated Financial Data............................................................ 33
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 35
Business................................................................................................... 46
Management................................................................................................. 61
Employment Agreements and Noncompetition Agreements........................................................ 63
Incentive Awards to Our Employees.......................................................................... 65
Principal Stockholders..................................................................................... 68
Certain Transactions....................................................................................... 69
Description of Exchange Notes.............................................................................. 72
Description of Other Indebtedness.......................................................................... 110
United Stated Income Tax Considerations.................................................................... 112
Plan of Distribution....................................................................................... 112
Legal Matters.............................................................................................. 113
Experts.................................................................................................... 113
Where You Can Find Additional Information.................................................................. 113
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. THIS
PROSPECTUS INCLUDES SPECIFIC TERMS OF THE NOTES WE ARE OFFERING, AS WELL AS
INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU
TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE EXCHANGE OFFER
On August 24, 1999, we issued $100,000,000 aggregate principal amount of
9 1/2% Senior Notes due 2004 to Salomon Smith Barney Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation in a private offering. These initial
purchasers placed the notes with institutional investors in transactions exempt
from the registration requirements of the Securities Act of 1933 pursuant to
Section 4(2) of, and Regulation S under, the Securities Act and applicable state
securities laws.
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
When we issued the initial notes, we entered into a Registration Rights
Agreement in which we agreed to use our reasonable best efforts to complete an
exchange offer for the initial notes on or prior to December 22, 1999.
THE EXCHANGE OFFER
Under the terms of the exchange offer, you are entitled to exchange the
initial notes for registered exchange notes with substantially identical terms.
You should read the discussion under the heading "Description of the Exchange
Notes" for further information regarding the exchange notes. As of this date,
there are $100.0 million aggregate principal amount of the initial notes
outstanding. The initial notes may be tendered only in integral multiples of
$1,000.
RESALE OF EXCHANGE NOTES
We believe that the exchange notes issued in the exchange offer may be
offered for resale, resold or otherwise transferred by you without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that:
- you are acquiring the exchange notes in the ordinary course of your
business;
- you are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of the exchange notes; and
- you are not an "affiliate" of ours.
If any of the foregoing are not true and you transfer any exchange note
without delivering a prospectus meeting the requirements of the Securities Act
or without an exemption from the registration requirements of the Securities
Act, you may incur liability under the Securities Act. We do not assume or
indemnify you against that liability.
If you are a broker-dealer and receive exchange notes for your own account
in exchange for initial notes that you acquired as a result of market making or
other trading activities, you must acknowledge that you will deliver a
prospectus meeting the requirements of the Securities Act upon any resale of the
exchange notes. A broker-dealer may use this prospectus in connection with an
offer to resell, resale or other transfer of the exchange notes. We will take
steps to ensure that the issuance of the exchange notes will comply with state
securities or "blue sky" laws.
1
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE INITIAL NOTES
If you do not exchange your initial notes for exchange notes, subject to
some exceptions, you will no longer be able to require us to register the
initial notes under the Securities Act. In addition, you will not be able to
offer or sell the initial notes unless:
- they are registered under the Securities Act (and we will have no
obligation to register them, except for some limited exceptions), or
- you offer or sell them under an exemption from the requirements of, or in
a transaction not subject to, the Securities Act.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999 unless we decide to extend the expiration date.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will accrue interest at 9 1/2% per year, beginning on the
last date we paid interest on the initial notes exchanged. We will pay interest
on the exchange notes on February 15 and August 15 of each year.
CONDITIONS TO THE EXCHANGE OFFER
We will proceed with the exchange offer, so long as:
- the exchange offer does not violate any applicable law or applicable
interpretation of law of the staff of the Securities and Exchange
Commission;
- no litigation materially impairs our ability to proceed with the exchange
offer; and
- we obtain all governmental approvals we deem necessary for the exchange
offer.
PROCEDURES FOR TENDERING INITIAL NOTES
If you wish to accept the exchange offer, you must:
- complete, sign and date the letter of transmittal, or a facsimile of it,
and
- send the letter of transmittal and all other documents required by it,
including the initial notes to be exchanged, to Firstar Bank, N.A., as
exchange agent, at the address set forth on the cover page of the letter
of transmittal. Alternatively, you can tender your initial notes by
following the procedures for book-entry transfer, as described in this
document.
GUARANTEED DELIVERY PROCEDURE
If you wish to tender your initial notes and you cannot get your required
documents to the exchange agent by the expiration date, you may tender your
initial notes according to the guaranteed delivery procedure described under the
heading "The Exchange Offer--Guaranteed Delivery Procedure."
WITHDRAWAL RIGHTS
You may withdraw the tender of your initial notes at any time prior to 5:00
p.m., New York City time, on the expiration date of the exchange offer. To
withdraw, you must send a written or facsimile transmission notice of withdrawal
to the exchange agent at its address set forth herein under "The Exchange
Offer--Exchange Agent" by 5:00 p.m., New York City time, on the expiration date.
2
<PAGE>
ACCEPTANCE OF INITIAL NOTES AND DELIVERY OF EXCHANGE NOTES
If all the conditions to the exchange offer are satisfied or waived, we will
accept any and all initial notes that are properly tendered in the exchange
offer prior to 5:00 p.m., New York City time, on the expiration date. We will
deliver the exchange notes promptly after the expiration date.
TAX CONSIDERATIONS
We believe that the exchange of initial notes for exchange notes will not be
a taxable exchange for federal income tax purposes. You should consult your tax
adviser about the tax consequences of the exchange as they apply to your
individual circumstances.
EXCHANGE AGENT
Firstar Bank, N.A. is serving as exchange agent for the exchange offer.
FEES AND EXPENSES
We will bear all expenses related to consummating the exchange offer and
complying with the Registration Rights Agreement.
OUR COMMON STOCK OFFERING
Simultaneously with the initial note offering, we converted our firm from
partnership to corporate form and completed an initial public offering of
10,500,000 shares of our common stock at an initial public offering price of $14
per share. We received net proceeds of approximately $134.7 million in our
common stock offering.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. We used the proceeds from the sale of the initial notes to redeem some
limited partnership and membership interests and to repay certain subordinated
indebtedness as part of the reorganization of our firm from partnership to
corporate form.
LABRANCHE & CO INC.
Founded in 1924, our subsidiary, LaBranche & Co., is one of the oldest and
largest specialist firms on the New York Stock Exchange. In 1998, the stocks for
which we acted as specialist accounted for approximately 14.2% of the dollar
volume of common stock traded on the NYSE, constituting one of the largest
market shares among specialist firms. As of June 30, 1999, we acted as
specialist in 280 common stock listings, including 47 of the S&P 500 and five of
the 30 companies comprising the Dow Jones Industrial Average. Our five Dow
stocks are AT&T, Chevron, Exxon, Merck and Minnesota Mining & Manufacturing.
All trading of securities on the NYSE is conducted through an auction
process managed by the specialist for each security. The specialist is a
broker-dealer who is granted the franchise by the NYSE to conduct the auction in
particular stocks and is assigned the role to maintain a fair and orderly market
in its specialist stocks. As of June 30, 1999, there were 29 specialist units as
compared with 39 at December 31, 1994. The substantial majority of trades in
NYSE-listed stocks takes place on the floor of the NYSE and is handled by
specialist firms. Specialist firms generate revenues by executing trades, either
as agent or principal, in their specialist stocks.
Our business has grown considerably during the past five years. The total
annual share volume on the NYSE of stocks for which we act as specialist has
increased from approximately 3.4 billion in 1994
3
<PAGE>
to nearly 20.0 billion in 1998, representing a compound annual growth rate of
55.4%. During the same period, our annual revenues increased from $29.9 million
to $126.4 million, representing a compound annual growth rate of 43.4%. We have
accomplished our growth both internally and through selective acquisitions.
Since the March 1997 implementation of a new NYSE allocation process which
allows listing companies to make the final selection of their specialist, we
have added 43 new common stock listings to our firm. In addition, we have
acquired three specialist operations since 1997, adding 131 new common stock
listings to our firm.
Our revenues are primarily driven by the volume of trading on the NYSE. The
NYSE is currently the largest securities market in the world. The market
capitalization of all U.S. shares listed on the NYSE at December 31, 1998 was
approximately $10.9 trillion, representing approximately 80% of the market
capitalization of all shares publicly traded on U.S. national markets. The
NYSE's average daily trading volume increased from 291.4 million shares in 1994,
to 673.6 million shares in 1998, representing a compound annual growth rate of
23.3%. We believe that this increase in NYSE trading volume is due to a number
of factors including:
- an increase in the amount of funds invested in equity securities;
- an increase in the number of NYSE-listed stocks; and
- an increase in the use of computerized trading strategies.
We believe that several changes under consideration by the NYSE, including
longer trading days and trading in decimals, if enacted, will likely contribute
to additional growth in NYSE trading volume.
We believe our success is due to our:
- leading position in the specialist market;
- diverse and high quality specialist stocks;
- strong market-making skills;
- innovative customer-oriented services; and
- recent acquisitions.
Our strategies for growing our revenues and profits are to:
- aggressively pursue new listings;
- participate in the consolidation of the specialist industry by making
selective acquisitions; and
- increase our capital base and our access to capital.
On a pro forma basis, we generated $137.9 million of revenue and $81.3
million of EBITDA in 1998 and $103.5 million of revenue and $61.8 million of
EBITDA for the first six months of 1999.
PRINCIPAL EXECUTIVE OFFICE
Our headquarters are located at One Exchange Plaza, New York, New York 10006
(telephone number (212) 820-0400).
4
<PAGE>
REORGANIZATION AND RELATED TRANSACTIONS
LaBranche & Co Inc. is a recently formed holding corporation, and our assets
consist solely of our ownership interests in our two subsidiaries, LaBranche &
Co. and LaB Investing Co. L.L.C. LaBranche & Co. is a limited partnership, and
LaB Investing Co. L.L.C. is the general partner of LaBranche & Co. The
reorganization of our firm from partnership to corporate form, as illustrated
below, was effected through the transactions summarized below. All these
transactions were completed simultaneously with the completion of our initial
note offering and our common stock offering.
[LOGO]
- The members of LaB Investing Co. L.L.C. exchanged their membership
interests in LaB Investing Co. L.L.C. for an aggregate of 34,816,334
shares of our common stock. In addition to receiving a portion of those
shares, three members of LaB Investing Co. L.L.C. also received an
aggregate of $9.0 million in cash as part of the exchange. We thus became
the sole member of LaB Investing Co. L.L.C., and LaB Investing Co. L.L.C.
continues to be the general partner of LaBranche & Co.
- The limited partners of LaBranche & Co., other than Mill Bridge, Inc.,
exchanged their limited partnership interests in LaBranche & Co. for an
aggregate of $66.2 million in cash, 558,666 shares of our common stock and
subordinated indebtedness of $350,000.
- Mill Bridge, Inc., a subsidiary of Van der Moolen Holding NV, received
$90.0 million from us in exchange for its limited partnership interest in
LaBranche & Co., including $74.0 million in cash and a note for $16.0
million. In addition, we repaid $5.0 million of subordinated debt to an
affiliate of Van der Moolen.
- As a result of the above transactions, we became the sole limited partner
of LaBranche & Co., which continues to operate as a broker-dealer and a
NYSE specialist firm.
- We granted (1) options to purchase an aggregate of 1,200,000 shares of our
common stock to our executive officers and (2) restricted stock units for
1,059,000 shares of our common stock to employees who are not managing
directors, in each case under our Equity Incentive Plan.
5
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
<TABLE>
<S> <C>
Securities Offered............ $100,000,000 principal amount of 9 1/2% Senior Notes due
2004.
Maturity...................... August 15, 2004.
Interest Payment Dates........ February 15 and August 15, commencing on February 15, 2000.
Sinking Fund.................. None.
Ranking....................... The exchange notes are senior obligations of LaBranche & Co
Inc. and will rank equally with our existing and future
other unsecured senior indebtedness. They will rank senior
in right of payment to all of our current and future
subordinated indebtedness for borrowed money, except secured
indebtedness that expressly provides that it is senior to
the exchange notes.
We may issue additional senior indebtedness subject to
certain limitations. At June 30, 1999, on a pro forma basis,
our total consolidated indebtedness would have been $162.5
million. For more details, see "Description of Exchange
Notes."
Optional Redemption........... The exchange notes will be redeemable, at any time, in whole
or in part, at a price equal to 100% of the principal amount
plus accrued and unpaid interest, if any, to the date of
redemption plus a make-whole premium, as described under
"Description of Exchange Notes--Optional Redemption."
Change of Control............. If we sell substantially all of our assets or experience
specific kinds of changes of control, we must offer to
repurchase the exchange notes at a price in cash equal to
101% of their principal amount, plus accrued and unpaid
interest, if any, to the date of purchase.
Covenants..................... The exchange notes will be issued under an indenture with
Firstar Bank, N.A. The indenture contains certain covenants
that, among other things, limits our ability to:
- borrow money;
- pay dividends on our stock or purchase our stock;
- make investments in certain subsidiaries;
- engage in transactions with stockholders and
affiliates;
- create liens on our assets; and
- sell assets or engage in mergers and consolidations.
For more details, see "Description of Exchange
Notes--Certain Covenants."
Use of Proceeds............... We will not receive any cash proceeds from the issuance of
the exchange notes. We used the proceeds from the sale of
the initial notes to redeem some limited partnership and
membership interests and to repay certain subordinated
indebtedness as part of the reorganization of our firm from
partnership to corporate form.
</TABLE>
RISK FACTORS
For a discussion of certain risk factors that should be considered by
prospective investors in connection with an investment in the exchange notes,
see "Risk Factors."
6
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary historical consolidated financial data set forth below for the
years ended December 31, 1996, 1997 and 1998 have been derived from our
consolidated financial statements, which have been audited by Arthur Andersen
LLP, independent public accountants, and are included elsewhere in this
prospectus. The summary historical consolidated financial data set forth below
for the years ended December 31, 1994 and 1995 have been derived from our
consolidated financial statements, audited by Arthur Andersen LLP, independent
public accountants, which are not included elsewhere in this prospectus. The
summary historical financial data set forth below for the six months ended June
30, 1998 and 1999 have been derived from our unaudited consolidated financial
statements. In our opinion, such unaudited data include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The results of operations for
the six months ended June 30, 1999 are not necessarily indicative of results to
be expected for any future period. The summary historical consolidated financial
data set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which are
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Net gain on principal transactions............... $ 23,406 $ 26,290 $ 37,113 $ 47,817 $ 95,048 $ 40,825 $ 78,666
Commissions...................................... 5,995 7,736 10,180 15,186 26,576 10,412 17,885
Other............................................ 465 3,147 2,643 4,637 4,787 902 6,942
--------- --------- --------- --------- --------- --------- ---------
Total revenues............................... $ 29,866 $ 37,173 $ 49,936 $ 67,640 $ 126,411 $ 52,139 $ 103,493
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary and unincorporated business taxes..... $ 20,725 $ 26,254 $ 32,783 $ 47,732 $ 91,635 $ 37,718 $ 79,349
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER DATA:
Number of our common stock listings................ 122 125 132 202 284 207 280
Total share volume on the NYSE of our specialist
stocks (in billions)............................. 3.4 4.0 5.6 10.9 20.0 7.5 12.9
Total dollar volume on the NYSE of our specialist
stocks (in billions)............................. $ 112.3 $ 133.3 $ 201.4 $ 476.7 $ 950.4 $ 326.6 $ 657.8
NYSE average daily trading share volume (in
millions)........................................ 291.4 346.1 412.0 526.9 673.6 620.8 801.5
Ratio of earnings to fixed charges (A)............. 26.10 32.83 20.02 10.69 9.04 9.27 13.90
</TABLE>
- ------------------------
(A) For puposes of this ratio, earnings represent pre-tax income plus limited
partners' interest in earnings of subsidiary and fixed charges. Fixed
charges represent interest expensed and capitalized, as well as amortized
premiums, discounts and capitalized expenses related to indebtedness.
Historically, we have operated as a partnership and have distributed all of
our income after unincorporated business taxes to our managing directors as
compensation and to our partners. As of August 24, 1999, we reorganized our firm
from partnership to corporate form and redeemed limited partnership and
membership interests. As a corporation, we include payments to managing
directors as part of compensation and benefits. Therefore, historical income
before managing directors' compensation, limited partners' interest in earnings
of subsidiary and unincorporated business taxes understates our expected
operating costs after August 24, 1999. See "--Reorganization and Related
Transactions" and "--Summary Pro Forma Consolidated Financial Data." As a
partnership, we generally had not been subject to U.S. federal, state and local
income taxes, apart from unincorporated business taxes. As a consequence of our
reorganization to a corporation, we are subject to U.S. federal, state and local
income taxes.
7
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The pro forma consolidated statement of operations data set forth below for
the year ended December 31, 1998 and the six months ended June 30, 1999 give
effect to (1) our July 1998 acquisition of substantially all of the assets of
Fowler, Rosenau & Geary, LLC and (2) the reorganization of our firm from
partnership to corporate form and the related transactions. The pro forma
consolidated statement of operations for the six months ended June 30, 1999 and
for the year ended December 31, 1998 presents our results as if the
reorganization and related transactions had occurred on January 1, 1998.
Additionally, the pro forma consolidated statement of operations for the year
ended December 31, 1998 presents our results as if the acquisition of Fowler,
Rosenau had occurred on January 1, 1998. The pro forma consolidated balance
sheet data as of June 30, 1999 give further effect to (1) the reorganization and
related transactions as if they occurred on June 30, 1999, (2) our initial note
offering, (3) the application of the net proceeds of our initial note offering,
(4) the sale by us of 10,500,000 shares of common stock in our common stock
offering, after deducting the underwriting discounts and offering expenses
payable by us, and (5) the application of the net proceeds from our common stock
offering. The pro forma consolidated financial information has been prepared by
our management and is not necessarily indicative of the results that would have
been achieved had the above-described transactions occurred on the dates
indicated or that may be achieved in the future.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------------- -----------------------
<S> <C> <C> <C> <C>
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ----------- ---------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Net gain on principal transactions................... $ 95,048 $ 98,736 $ 78,666 $ 78,666
Commissions.......................................... 26,576 33,963 17,885 17,885
Other................................................ 4,787 5,151 6,942 6,942
---------- ----------- ---------- -----------
Total revenues................................... 126,411 137,850 103,493 103,493
---------- ----------- ---------- -----------
Expenses:
Employee compensation and benefits................... 13,921 40,445(A) 11,299 33,000(A)
Lease of exchange memberships........................ 6,568 7,064 4,165 4,165
Interest............................................. 3,577 14,535(B) 2,195 7,469(B)
Exchange, clearing and brokerage fees................ 2,898 3,233 1,997 1,997
Amortization of intangibles.......................... 2,526 6,863( (D) 1,693 3,431(D)
Other operating expenses............................. 5,286 6,281 2,795 2,795
---------- ----------- ---------- -----------
Total operating expenses......................... 34,776 78,421 24,144 52,857
---------- ----------- ---------- -----------
Income before managing directors' compensation, limited
partners interest in earnings of subsidiary and
provisions for income taxes.......................... 91,635 59,429 79,349 50,636
Managing directors' compensation....................... 58,783 --(E) 48,214 --(E)
---------- ----------- ---------- -----------
Income before limited partners' interest in earnings of
subsidiary and provision for
income taxes......................................... 32,852 59,429 31,135 50,636
Limited partners' interest in earnings of subsidiary... 26,292 --(F) 21,054 --(F)
---------- ----------- ---------- -----------
Income before provision for income taxes............... 6,560 59,429 10,081 50,636
Provision for income taxes............................. 3,900 27,638(G) 3,789 23,024(G)
---------- ----------- ---------- -----------
Net income............................................. $ 2,660 $ 31,791 $ 6,292 $ 27,612
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
EBITDA................................................. $ 81,321(H) $ 61,780(H)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------
<S> <C> <C>
HISTORICAL PRO FORMA
---------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments.............................................. $ 38,063 $ 116,063(B)(I)(J)
Working capital.............................................................. 123,698 201,698(B)(I)(J)
Total assets................................................................. 346,101 553,888(B)(I)(J)
Total long-term indebtedness (K)............................................. 51,158 162,508(B)
Limited partners' interest in subsidiary..................................... 37,094 --(I)
Members' capital/stockholders' equity........................................ 95,569 229,100(I)(J)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, 1999
<S> <C>
PRO FORMA
---------------------
OTHER DATA:
Ratio of total debt to EBITDA (K)(L)......................................................... 1.32
Ratio of net debt to EBITDA (K)(L)(M)........................................................ 0.38
Ratio of EBITDA to total interest expense.................................................... 8.27
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
PRO FORMA PRO FORMA
--------------------- -------------------
<S> <C> <C>
Ratio of earnings to fixed charges (N)...................................... 4.81 7.36
</TABLE>
- ------------------------
(A) Employee compensation and benefits was adjusted to reflect managing
directors' compensation based on authorized revised compensation policies
which were implemented at the time of the reorganization.
(B) Reflects pro forma repayment of $5.0 million of subordinated liabilities
owed to a limited partner and reverses the related interest expense.
Reflects our initial note offering, the issuance of a $16.0 million note and
$350,000 of subordinated indebtedness and the related interest expense.
(C) Reflects the pro forma pre-acquisition amortization of intangibles for the
six months ended June 30, 1998 related to the Fowler, Rosenau acquisition.
(D) Reflects pro forma amortization of intangibles related to redemption of
limited partners' interests.
(E) Managing directors' compensation was adjusted to reverse the actual amounts
previously recorded.
(F) Reflects reversal of limited partners' interest in earnings of subsidiary.
(G) Reflects federal, state and local income taxes at an estimated effective tax
rate of approximately 44%.
(H) EBITDA means net income (loss) before interest expense, taxes, depreciation
and amortization. EBITDA is not a generally accepted accounting principles
measure and may not be comparable to similarly titled items of other
companies. You should not consider EBITDA as an alternative to net income
(loss) or any other generally accepted accounting principles measure of
performance as an indicator of our operating performance or as a measure of
liquidity. EBITDA does not represent funds available for management's
discretionary use because certain future cash expenditures are not reflected
in the EBITDA presentation. Some investors use these data as an indicator of
a company's ability to service debt.
(I) Reflects the redemption of limited partnership interests for $164.4 million,
comprised of $140.2 million in cash, a $16.0 million note, $350,000 of
subordinated indebtedness and $7.8 million in common stock. Reflects
redemption of membership interests for $9.0 million in cash.
(J) Reflects net proceeds of $134.7 million received upon completion of our
common stock offering.
(K) Excludes subordinated liabilities related to contributed exchange
memberships.
(L) Calculated on an annualized basis.
(M) Net debt means total debt less cash and short-term investments.
(N) For purposes of this ratio, earnings represent pre-tax income plus fixed
charges. Fixed charges represent interest expensed and capitalized, as well
as amortized premiums, discounts and capitalized expenses related to
indebtedness.
9
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU DECIDE TO MAKE
AN INVESTMENT IN THE EXCHANGE NOTES. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
ARE NOT THE ONLY ONES THAT OUR COMPANY FACES. ADDITIONAL RISKS AND UNCERTAINTIES
NOT PRESENTLY KNOWN TO US MAY ALSO ADVERSELY IMPACT OUR BUSINESS OPERATIONS.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT OUR COMPANY AND OUR
INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS DESCRIBED IN THIS SECTION AND
ELSEWHERE IN THIS PROSPECTUS. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES
AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
IF YOU DO NOT PARTICIPATE IN THE EXCHANGE OFFER, YOU WILL CONTINUE TO BE SUBJECT
TO TRANSFER RESTRICTIONS.
If you do not exchange your initial notes for exchange notes pursuant to the
exchange offer, you will continue to be subject to the restrictions on transfer
of your initial notes. We do not intend to register the initial notes under the
Securities Act. To the extent initial notes are tendered and accepted in the
exchange offer, the trading market, if any, for the initial notes would be
adversely affected. See "The Exchange Offer."
A LIQUID TRADING MARKET FOR THE EXCHANGE NOTES MAY NOT DEVELOP.
There has not been an established trading market for the exchange notes.
Although each initial purchaser has informed us that it currently intends to
make a market in the exchange notes, it has no obligation to do so and may
discontinue any such market making at any time without notice. The initial notes
were offered and sold only to qualified institutional buyers and to persons
outside the United States and were are subject to restrictions on transfer.
The initial notes were designated as eligible for trading in the PORTAL
Market. However, we did not apply for listing of the initial notes and do not
intend to apply for listing of the exchange notes, on any securities exchange or
for quotation through the National Association of Securities Dealers Automated
Quotation System.
The liquidity of any market for the exchange notes will depend upon the
number of holders of the exchange notes, our performance, the market for similar
securities, the interest of securities dealers in making a market in the
exchange notes and other factors. A liquid trading market may not develop for
the exchange notes.
WE WILL HAVE SIGNIFICANT INDEBTEDNESS AND INTEREST PAYMENT OBLIGATIONS.
We are highly leveraged. On a pro forma basis, after giving effect to our
initial note offering, our common stock offering, our incurrence of $16.4
million of other indebtedness, the reorganization of our firm from partnership
to corporate form and our use of the proceeds, at June 30, 1999, we would have
had $162.5 million of consolidated outstanding debt. Our total consolidated
debt, as a percentage of capitalization, would have been 41.5%. These
calculations of debt exclude subordinated liabilities related to contributed
exchange memberships. We may also need to incur additional debt in the future
for working capital or to complete acquisitions, even though our principal
credit facility imposes some limits on our ability to do so. Our high level of
indebtedness could have important consequences to you, which include the
following:
- our ability to obtain additional financing to fund our growth strategy,
working capital, capital expenditures, debt service requirements or other
purposes may be impaired;
10
<PAGE>
- our ability to use operating cash flow in other areas of our business will
be limited because we must dedicate a substantial portion of these funds
to make principal and interest payments;
- we may not be able to compete with others who are not as highly leveraged;
and
- our substantial degree of leverage may limit our flexibility to adjust to
changing market conditions, changes in our industry and economic
downturns.
Our ability to pay interest on the exchange notes and to satisfy our other
debt obligations will depend upon our future operating performance and our
ability to obtain additional debt or equity financing. Prevailing economic
conditions and financial, business and other factors, many of which are beyond
our control, will affect our ability to make these payments. If in the future we
cannot generate sufficient cash from operations to make scheduled payments on
the notes or to meet our other obligations, we will need to refinance the
exchange notes, obtain additional financing or sell assets. We cannot assure you
that our business will generate cash flow, or that we will be able to obtain
funding, sufficient to satisfy our debt service requirements.
The exchange notes will be effectively subordinated to our existing and
future secured indebtedness to the extent of the assets securing such
indebtedness. In addition, because we, LaBranche & Co Inc., are a recently
formed holding company with no operations of our own, we are dependent on
distributions from LaBranche & Co. and LaB Investing Co. L.L.C. to pay interest
and principal on our debt. The exchange notes will be effectively subordinated
to all of the indebtedness of LaBranche & Co. and LaB Investing Co. L.L.C.,
including subordinated debt. This structural subordination may adversely affect
our ability to service our debt and could result in insolvency or other
circumstances that could adversely affect our ability to satisfy our payment
obligations with respect to the exchange notes. On a pro forma basis, after
giving effect to our initial note offering and our use of the proceeds, at June
30, 1999, LaBranche & Co. would have had $46.5 million of outstanding debt.
LaBranche & Co. also has the ability to borrow $100.0 million under an agreement
relating to a revolving credit facility with The Bank of New York which was
originally entered into in June of 1998 and increased and extended in June 1999
(the "Credit Agreement").
Further, LaBranche & Co. is a broker-dealer and a specialist regulated by
the Securities and Exchange Commission and the NYSE. Such regulations include
strict rules regarding capital requirements and approval requirements for
withdrawal of capital from, and in some cases, other distributions by, the
broker-dealer. These regulations could prevent us from obtaining funds necessary
to satisfy our obligations to pay interest on or repay our indebtedness,
including the exchange notes. See "--We are subject to net capital requirements"
and "Business--Operations--Regulatory Matters" for a discussion of our net
capital requirements.
OUR ABILITY TO TAKE CERTAIN ACTIONS MAY BE RESTRICTED BY THE TERMS OF OUR
INDEBTEDNESS.
The covenants in our existing debt agreements, including the Credit
Agreement, the note purchase agreements relating to LaBranche & Co.'s existing
senior subordinated indebtedness and the indenture governing the notes, and any
future financing agreements, may adversely affect our ability to finance future
operations or capital needs or to engage in other business activities. These
covenants limit or restrict our ability and the ability of our subsidiaries to:
- incur additional debt;
- pay dividends and make distributions;
- repurchase our securities;
- make certain investments;
- create liens on our assets;
11
<PAGE>
- transfer or sell assets;
- enter into transactions with affiliates;
- issue or sell stock of subsidiaries; or
- merge or consolidate.
In addition, the Credit Agreement and the note purchase agreements relating
to LaBranche & Co.'s existing senior subordinated indebtedness also require
LaBranche & Co. to comply with certain financial ratios. LaBranche & Co.'s
ability to comply with these ratios may be affected by events beyond our or its
control. If any of the covenants in our Credit Agreement, the note purchase
agreements or the indenture are breached, or if LaBranche & Co. is unable to
comply with required financial ratios, it may be in default under the Credit
Agreement or the note purchase agreements and we may be in default under the
indenture. A significant portion of our indebtedness then may become immediately
due and payable. We are not certain whether we would have, or be able to obtain,
sufficient funds to make these accelerated payments, including payments on the
exchange notes. Compliance with the covenants is also a condition to borrowings
under the Credit Agreement on which LaBranche & Co. relies to fund its
liquidity. See "Description of Notes" and "Description of Other Indebtedness."
WE ARE REQUIRED TO TAKE CERTAIN ACTIONS UPON THE OCCURRENCE OF A CHANGE OF
CONTROL.
Upon the occurrence of a change of control, we will be required to offer to
repurchase all outstanding exchange notes at a price equal to 101% of their
principal amount, together with accrued and unpaid interest, if any, to the date
of repurchase. Certain important corporate events, such as leveraged
recapitalizations that would increase our level of indebtedness, would not
constitute a change of control. If a change of control were to occur, it is
possible that we would not have sufficient funds to repurchase the exchange
notes owned by holders seeking to accept our offer or that restrictions in the
Credit Agreement or the note purchase agreements relating to LaBranche & Co.'s
existing senior subordinated indebtedness will not allow such repurchases.
Furthermore, a change of control will most likely trigger a default under the
Credit Agreement and the note purchase agreements. To the extent we do not have
sufficient funds to meet our repurchase obligations and any other obligations in
respect of the Credit Agreement and the note purchase agreements, we would
necessarily seek third-party financing. However, it is possible that we will not
be able to obtain such financing.
THE EXCHANGE NOTES MAY BE SUBJECT TO FRAUDULENT TRANSFER STATUTES.
Under federal or state fraudulent transfer laws, a court could avoid all or
a portion of our obligations to the holders of the exchange notes, subordinate
our obligations to the holders of the exchange notes to our other existing and
future indebtedness, the effect of which would be to entitle the other creditors
to be paid in full before any payment could be made on the exchange notes, and
take other action detrimental to the holders of the exchange notes, including,
in certain circumstances, invalidating the exchange notes if it were to find
that,
- we issued the initial notes with the intent of hindering, delaying or
defrauding current or future creditors or at the time the initial notes
were issued, we
- (A) received less than fair consideration or reasonably equivalent value
for incurring the indebtedness represented by the initial notes and
- (B)(1) were insolvent or were rendered insolvent by reason of the
issuance of the initial notes, (2) were engaged, or about to engage, in a
business or transaction for which our assets were unreasonably small or
(3) intended to incur, or believed (or should have believed) we would
12
<PAGE>
incur, debts beyond our ability to pay as the debts mature (as all of the
foregoing terms are defined in or interpreted under the fraudulent
transfer statutes).
We cannot assure you that, in that event, any repayment on the exchange
notes would ever be recovered by the holders of the exchange notes.
The definition of insolvency for purposes of the foregoing considerations
varies among jurisdictions depending upon the federal or state law that is being
applied. However, we generally would be considered insolvent at the time we
incur the indebtedness constituting the initial notes if the fair market value
(or fair saleable value) of our assets is less than the amount required to pay
our total existing debts and liabilities (including the probable liability on
contingent liabilities) as they become absolute or matured or we are incurring
debts beyond our ability to pay as the debts mature. We cannot assure you as to
what standard a court would apply in order to determine whether we were
"insolvent" as of the date the initial notes were issued, or that, regardless of
the method of valuation, a court would not determine that we were insolvent on
that date. Nor can we assure you that a court would not determine, regardless of
whether we were insolvent on the date the initial notes were issued, that the
payments constituted fraudulent transfers on another ground. To the extent that
proceeds from the sale of the initial notes were used to repurchase limited
partnership interests of LaBranche & Co., to repay indebtedness of LaBranche &
Co. or to make a distribution to a limited partner of LaBranche & Co. or a
member of LaB Investing Co. L.L.C. in respect of a limited partnership interest
or a membership interest, a court may find that we did not receive fair
consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the initial notes.
Based upon financial and other information currently available to us, our
management believes that the initial notes were incurred for proper purposes and
in good faith and that we were solvent and continue to be solvent after issuing
the initial notes, will continue to have sufficient capital for carrying on our
business and will be able to pay our debts as they mature. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
WE MAY HAVE INSUFFICIENT CAPITAL IN THE FUTURE AND MAY BE UNABLE TO SECURE
ADDITIONAL FINANCING
WHEN WE NEED IT.
Our business depends on the availability of adequate capital. We cannot be
sure that we will have sufficient capital in the future or that additional
financing will be available on a timely basis, or on terms favorable to us.
Historically, we have satisfied these needs with internally generated funds, our
bank credit facilities and the issuance of subordinated debt. We currently
anticipate that the net proceeds from our initial note offering and our common
stock offering, together with our available cash resources and credit
facilities, will be sufficient to meet our anticipated working capital,
regulatory capital and capital expenditure requirements through the end of 2000.
We may, however, need to raise additional funds to:
- increase the capital available to us for our inventory positions;
- support more rapid expansion;
- acquire complementary businesses; or
- respond to unanticipated capital requirements.
We may be required to obtain this additional financing on short notice as a
result of rapid, unanticipated developments, such as a steep market decline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity."
13
<PAGE>
OUR REVENUES MAY DECREASE DUE TO CHANGES AFFECTING THE ECONOMY, SUCH AS
INCREASES IN INTEREST RATES OR INFLATION, OR CHANGES AFFECTING THE SECURITIES
MARKETS, SUCH AS DECREASED VOLUME OR LIQUIDITY.
We recently experienced a substantial increase in the revenues we earn from
our specialist activities. An adverse change affecting the economy or the
securities markets could result in a decline in market volume or liquidity. This
would result in lower revenues from our specialist activities. Our recent
increase in revenues was caused primarily by significant increases in the volume
of trading on the NYSE and favorable conditions in the securities markets. The
current favorable business environment will not continue indefinitely. For more
details about the factors which have contributed to increases in volume on the
NYSE, see "Business--Industry Background--Recent Trends in NYSE Trading and the
Specialist's Role."
SUSTAINED DECLINES IN PRICE LEVELS OF SECURITIES COULD CAUSE US TO INCUR LOSSES.
Adverse changes in the economy and the securities markets could lead to
lower price levels of securities. Sustained declines in these price levels may
result in:
- losses from declines in the market value of securities held in our
inventory;
- the failure of buyers and sellers of securities to fulfill their
settlement obligations; and
- increases in claims and litigation.
TRADING THROUGH NYSE SPECIALISTS COULD BE REPLACED BY ALTERNATIVE TRADING
SYSTEMS WHICH COULD REDUCE
OUR REVENUE.
Alternative trading systems could reduce the levels of trading of
NYSE-listed stocks executed through specialists. This, in turn, could have an
adverse effect on our revenues. Over the past few years, a number of alternative
trading systems have developed or emerged which may compete with specialists by
increasing trading in NYSE-listed stocks off the NYSE trading floor in
over-the-counter markets. In the future, similar new systems may continue to be
developed and placed in operation. For more information regarding trading off
the NYSE trading floor and alternative trading systems, see "Business--Industry
Background--Recent Trends in NYSE Trading and the Specialist's Role."
COMPETITION FROM NASDAQ FOR NEW LISTINGS COULD ADVERSELY AFFECT NYSE TRADING
VOLUME AND, IN TURN,
REDUCE OUR REVENUES.
Nasdaq continues to grow and gain in popularity, attracting companies which
might otherwise have listed on the NYSE. If more companies decide to be quoted
on Nasdaq as opposed to listing their stocks on the NYSE, or if companies choose
to delist using recently relaxed delisting procedures, trading volume on the
NYSE could be adversely affected. This, in turn, could adversely affect our
trading revenue. In recent years, many high technology companies have opted to
be quoted on Nasdaq, even though many of them would have qualified for NYSE
listing. In addition, the SEC recently approved a revision to NYSE Rule 500
which makes it easier for a company to delist its shares from the NYSE. The
original rule required supermajority shareholder approval before a listed
company could delist from the NYSE. Under the recently approved amendment of
Rule 500, a company can delist from the NYSE if it obtains the approval of a
majority of the company's board of directors and the company's audit committee.
The company would then provide its 35 largest shareholders with written notice
of the proposed delisting and allow a 20-40 day waiting period to elapse.
14
<PAGE>
OUR QUARTERLY RESULTS MAY FLUCTUATE SIGNIFICANTLY.
Our revenues may fluctuate significantly based on factors relating to the
securities markets. These factors include:
- a decrease in trading volume on the NYSE;
- volatility in the equity securities markets; and
- changes in the value of our securities positions.
For example, in the third quarter of 1998, compared to the second quarter of
1998, we experienced a decline in revenues primarily due to a decline in our net
trading gains from principal transactions conducted as part of our specialist
activities. Our net trading gains from principal transactions decreased during
this period primarily because the price levels of many of our specialist stocks
declined.
Our cost structure does not decline if we experience quarterly reductions in
our revenues. As a result, if market conditions cause our revenues to decline,
we may be unable to adjust our cost structure on a timely basis and we could
suffer losses.
RISKS ASSOCIATED WITH OUR TRADING TRANSACTIONS COULD RESULT IN TRADING LOSSES.
A majority of our specialist-related revenues are derived from trading by us
as principal. We also operate a proprietary trading desk separately from our
NYSE specialist operations, which represented 1.8% of our total revenues in
1998. We may incur trading losses relating to these activities since each
primarily involves the purchase, sale or short sale of securities for our own
account. In any period, we may incur trading losses in a significant number of
our specialist stocks for a variety of reasons, including price declines of our
specialist stocks, lack of trading volume in our specialist stocks and the
required performance of our specialist obligations. From time to time, we have
large position concentrations in securities of a single issuer or issuers
engaged in a specific industry. In general, because our inventory of securities
is marked to market on a daily basis, any downward price movement in these
securities will result in a reduction of our revenues and operating profits.
Although we have adopted risk management policies, we cannot be sure that
these policies have been formulated properly to identify or limit our risks.
Even if these policies are formulated properly, we cannot be sure that we will
successfully implement these policies. As a result, we may not be able to manage
our risks successfully or avoid trading losses.
NYSE SPECIALIST RULES MAY REQUIRE US TO MAKE UNPROFITABLE TRADES OR TO REFRAIN
FROM MAKING PROFITABLE TRADES.
When we trade as principal, we attempt to derive a profit from the
difference between the prices at which we buy and sell securities. Our role as a
specialist, at times, requires us to make trades that adversely affect our
profitability. In addition, as a specialist, we are at times required to refrain
from trading for our own account in circumstances in which it may be to our
advantage to trade. For example, we may be obligated to act as a principal when
buyers or sellers outnumber each other. In those instances, we may take a
position counter to the market, buying or selling shares to support an orderly
market in the affected stocks. In order to perform these obligations, we hold
varying amounts of securities in inventory. In addition, specialists generally
may not trade for their own account when public buyers are meeting public
sellers in an orderly fashion and may not compete with public orders at the same
price. By having to support an orderly market, maintain inventory positions and
refrain from trading under some favorable conditions, we are subjected to a high
degree of risk. Additionally, the NYSE periodically amends its rules and may
make the rules governing our activities as a specialist more stringent or may
implement changes which could adversely affect our trading revenues. For more
15
<PAGE>
information regarding the rules which govern our activities as a specialist, see
"Business--Operations-- NYSE Rules Governing Our Specialist Activities."
OUR SUCCESS DEPENDS ON OUR ABILITY TO ACCURATELY PROCESS AND RECORD OUR
TRANSACTIONS, AND ANY FAILURE TO DO SO COULD SUBJECT US TO LOSSES.
Our specialist activities require us to accurately record and process a very
large number of transactions on a daily basis. Any failure or delay in recording
or processing transactions could cause substantial losses for brokers, their
customers and/or us and could subject us to claims for losses. We rely on our
staff to operate and maintain our information and communications systems
properly, and we depend on the integrity and performance of those systems. Our
recording and processing of trades is subject to human and processing errors.
Moreover, extraordinary trading volume or other events could cause our
information and communications systems to operate at an unacceptably low speed
or even fail. Any significant degradation or failure of our information systems
or any other systems in the trading process could cause us to fail to complete
transactions or could cause brokers who place trades through us to suffer delays
in trading.
OUR MANAGEMENT INFORMATION SYSTEMS MAY FAIL AND INTERRUPT OUR BUSINESS.
Any information or communication systems failure or decrease in information
or communications systems performance that causes interruptions in our
operations could have an adverse effect on our business, financial condition
and/or operating results. Our systems may fail as a result of:
- hardware or software failure; or
- power or telecommunications failure.
Although we have established a back-up disaster recovery center in Hoboken,
New Jersey, it may not be effective in preventing an interruption of our
business.
WE DEPEND ON THE NYSE AND CLEARING AND DEPOSITORY INSTITUTIONS TO EFFECT TRADES,
AND THEIR FAILURE TO PERFORM COULD SUBJECT US TO LOSSES.
We are dependent on the proper and timely function of complex information
and communications systems maintained and operated by or for the NYSE and
clearing and depository institutions. Failures or inadequate or slow performance
of any of those systems could adversely affect our ability to operate and
complete trades. The failure to complete trades on a timely basis could subject
us to losses and claims for losses of brokers and their customers.
OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO UPGRADE OUR INFORMATION AND
COMMUNICATIONS SYSTEMS, AND ANY FAILURE TO DO SO COULD HARM OUR BUSINESS AND
PROFITABILITY.
The development of complex communications and new technologies, including
Internet-based technologies, may render our existing information and
communications systems outdated. In addition, our information and communications
systems must be compatible with those of the NYSE. As a result, if the NYSE
upgrades its systems, we will need to make corresponding upgrades. Our future
success will depend on our ability to respond to changing technologies on a
timely and cost-effective basis. We cannot be sure that we will be successful in
upgrading our information and communications systems on a timely or
cost-effective basis. Our failure to do so could have an adverse effect on our
business, financial condition and/or operating results.
The NYSE's ability to develop information and communications systems and
complex computer and other technology systems has been instrumental in its
recent growth and success. We are dependent on the continuing development of
technological advances by the NYSE, a process over which we have no control. If
the NYSE for any reason is unable to continue its recent history of
computer-related and
16
<PAGE>
other technological developments and advances, it could have an adverse effect
on the success of the NYSE, including its ability to grow, to manage its trading
volumes or to attract new listings. Any such developments can be expected to
adversely affect our operations, financial condition and operating results.
IF WE LOSE THE SERVICES OF OUR KEY PERSONNEL OR CANNOT HIRE ADDITIONAL QUALIFIED
PERSONNEL, OUR BUSINESS WILL BE HARMED.
Our future success depends on the continued service of key employees,
particularly George M.L. LaBranche, IV (Michael LaBranche), our Chairman, Chief
Executive Officer and President. The loss of the services of any of our key
personnel or the inability to identify, hire, train and retain other qualified
personnel in the future could have an adverse effect on our business, financial
condition and/or operating results. We have entered into employment agreements
with Mr. LaBranche and other key employees. We also maintain "key person" life
insurance policies on Mr. LaBranche and other key employees. Competition for key
personnel and other highly qualified management, trading, compliance and
technical personnel is intense. We cannot assure you that we will be able to
attract new or retain currently employed highly qualified personnel in the
future. See "Management--Employment Agreements and Noncompetition Agreements."
In connection with our initial note offering, our common stock offering and
the reorganization of our firm from partnership to corporate form, our managing
directors received substantial amounts of our common stock in exchange for their
interests in LaB Investing Co. L.L.C. Because the shares of common stock were
received in exchange for membership interests, ownership of the shares is not be
dependent upon the continued employment of those managing directors. In
addition, employees who are not managing directors received grants of stock
options and restricted stock units. The steps we have taken to encourage the
continued service of these individuals, who include key senior personnel in our
specialist activities, after our initial note offering and our common stock
offering may not be effective. For a description of the compensation plan for
our employees implemented after our initial note offering and our common stock
offering, see "Management--Executive Compensation" and "Incentive Awards to Our
Employees."
WE DEPEND SIGNIFICANTLY ON REVENUES FROM OUR SPECIALIST ACTIVITIES FOR A SMALL
GROUP OF LISTED COMPANIES, AND THE LOSS OF ANY OF THEM COULD REDUCE OUR
REVENUES.
Historically, a small number of listed companies have accounted for a
significant portion of our revenues from our specialist trading activities. The
loss of any of these listed companies could have an adverse effect on our
revenues. For the years ended December 31, 1997 and 1998, transactions in our 10
most actively traded specialist stocks accounted for approximately 35.0% and
39.0% of our total revenues, respectively. For the six months ended June 30,
1999, our revenues from transactions in our 10 most actively traded specialist
stocks accounted for approximately 36.0% of our total revenues. We cannot assure
you that we will be able to retain these or other listed companies. We can lose
these listed companies if they cease to be traded on the NYSE as a result of
being acquired or otherwise delisted. In addition, if the NYSE were to determine
that we have failed to fulfill our obligations as specialist for a listed
company, our registration as a specialist for that listed company could be
cancelled or suspended.
WE DEPEND ALMOST ENTIRELY ON OUR SPECIALIST ACTIVITIES, AND IF THEY FAIL TO GROW
AS ANTICIPATED, IT WOULD HARM OUR REVENUES.
We derive substantially all of our revenues from specialist activities. If
demand for our specialist services fails to grow, grows more slowly than we
currently anticipate, or declines, our revenues would
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be adversely affected. We expect our specialist activities to continue to
account for substantially all of our revenues for the foreseeable future. Our
future success will depend on:
- continued growth in the volume of trading and the number of listings on
the NYSE;
- our ability to be chosen as specialist for additional listing companies;
- our ability to respond to regulatory and technological changes; and
- our ability to respond to changing demands in the marketplace.
WE ARE SUBJECT TO INTENSE COMPETITION FOR NEW LISTINGS, AND OUR PROFITABILITY
WILL SUFFER IF WE DO NOT
COMPETE EFFECTIVELY.
We cannot be sure that we will be able to compete effectively with current
or future competitors. Our failure to compete effectively would have an adverse
effect on our profitability. We obtain all of our new listings on the NYSE by
going through an allocation process. Under this process either a committee of
the NYSE or the listing company chooses the specialist. The competition for
obtaining new listing companies is intense. We expect competition to continue
and to intensify in the future. Some of our competitors may have significantly
greater financial and other resources than we have and may have greater name
recognition. These competitors may be able to respond more quickly to new or
evolving opportunities and listing company requirements. They may also be able
to undertake more extensive promotional activities to attract new listing
companies. In addition, the specialist industry has recently been consolidating.
The combined companies resulting from this consolidation may have a stronger
capital base. This trend has intensified the competition in our industry.
Finally, the NYSE retains the ability to name new specialist firms.
WE MAY HAVE DIFFICULTY SUCCESSFULLY MANAGING OUR GROWTH.
Since 1994, we have experienced significant growth in our business
activities and the number of our employees. We cannot assure you that we will be
able to manage our growth successfully. Our inability to do so could have an
adverse effect on our business, financial condition and/or operating results.
The growth of our business has increased the demands upon our management and
operations and we expect it to continue to do so in the future. This growth has
required, and will continue to require, us to increase our investment in
management personnel, financial and management systems and controls, and
facilities. In the absence of continued revenue growth, the costs associated
with our expected growth would cause our operating margins to decline from
current levels. The scope of procedures for assuring compliance with applicable
rules and regulations has changed as the size and complexity of our business has
increased. In response, we have implemented formal compliance procedures which
are regularly updated. Our future operating results will depend on our ability
to continue:
- to improve our systems for operations, financial control, and
communication and information management;
- to refine our compliance procedures and enhance our compliance oversight;
and
- to recruit, train, manage and retain our employees.
YEAR 2000 COMPLIANCE PROBLEMS COULD CAUSE OUR TRADING-RELATED COMMUNICATIONS AND
PROCESSING SYSTEMS TO FAIL, WHICH COULD RESULT IN LOSSES.
We may discover Year 2000 compliance problems that will require substantial
revisions. If we fail to fix our trading-related communications or data
processing systems or to fix or replace third-party software, hardware or
services on a timely basis, we could suffer a loss in revenues and our business,
financial condition and/or operating results could be adversely affected.
Moreover, our failure to
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address adequately Year 2000 compliance issues in our main trading-related,
communications or data processing systems could result in litigation which could
be a costly and time-consuming process. In addition, we cannot be sure that
third-party software, hardware or services incorporated into our computer
systems will not need to be revised or replaced. This could be time-consuming
and expensive.
In addition, we cannot assure you that the NYSE, trading counterparties,
governmental agencies, utility companies, third-party service providers,
including clearing agencies and depositories, and others outside our control,
particularly other broker-dealers, will be Year 2000 compliant. The failure by
any of these entities to be Year 2000 compliant could result in a systemic
failure beyond our control, including:
- a loss or reduction in our trading volume;
- limitations on our ability to effectively engage in specialist activities;
or
- prolonged telecommunications or electrical failure.
The occurrence of any systemic failure, including those listed above, could
prevent us from engaging in specialist activities and could have an adverse
effect on our business, financial condition and/or operating results.
We have made an assessment of the Year 2000 readiness of our trading-related
communications and data processing systems. For more information regarding our
Year 2000 readiness, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000."
THE FAILURE BY US OR OUR EMPLOYEES TO COMPLY WITH APPLICABLE LAWS AND
REGULATIONS COULD RESULT IN SUBSTANTIAL FINES AND OTHER PENALTIES.
The securities industry is subject to extensive regulation under both
federal and state laws. In addition, the SEC, the NYSE, other self-regulatory
organizations, commonly referred to as SROs, and state securities commissions
require strict compliance with their respective rules and regulations. Failure
to comply with any of these laws, rules or regulations could result in serious
adverse consequences. We and our officers and employees may be subject in the
future to claims arising from acts in contravention of these laws, rules and
regulations. An adverse ruling against us and/or our officers and other
employees as a result of any of these claims could result in us and/or our
officers and other employees being required to pay a substantial fine or
settlement. It could also result in the suspension or revocation of our
registration with the SEC as a broker-dealer or our suspension or expulsion as a
member of the NYSE. If this occurred, we would be unable to operate our
business.
THE REGULATORY ENVIRONMENT IN WHICH WE OPERATE MAY CHANGE, MAKING IT DIFFICULT
FOR US TO REMAIN IN COMPLIANCE.
The regulatory environment in which we operate is subject to change which we
cannot predict. It may be difficult for us to comply with new or revised
legislation or regulations imposed by the SEC, other U.S. or foreign
governmental regulatory authorities and SROs, including the NYSE. Failure to
comply would have an adverse effect on our business, financial condition and/or
operating results. Changes in the interpretation or enforcement of existing laws
and rules by the SEC, these governmental authorities, SROs and the NYSE could
also have an adverse effect on our business, financial condition and/or
operating results.
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WE CANNOT PREDICT THE EFFECT A PROPOSED PUBLIC OFFERING BY THE NYSE WOULD HAVE
ON OUR BUSINESS.
The NYSE announced that it is considering offering shares of its capital
stock to the public. We are unable to predict what effect, if any, such an
offering would have on our business and the specialist industry.
FAILURE TO COMPLY WITH NET CAPITAL REQUIREMENTS MAY RESULT IN THE REVOCATION OF
OUR REGISTRATION WITH THE SEC OR OUR EXPULSION FROM THE NYSE.
The SEC, the NYSE and various other regulatory agencies have stringent rules
with respect to the maintenance of minimum levels of capital by securities
brokers-dealers as well as specialist firms. Failure to maintain compliance with
required minimum capital levels may subject us to suspension or revocation of
registration by the SEC and suspension or expulsion as a member of the NYSE and
other regulatory bodies. If this occurred, we would be unable to operate our
business. In addition, a change in these capital rules, the imposition of new
capital rules or any unusually large requirement or charge against our
regulatory capital could limit any of our operations that require the intensive
use of capital. These rules could also restrict our ability to withdraw capital
from LaBranche & Co. Any limitation on our ability to withdraw capital from
LaBranche & Co. could limit our ability to receive distributions from LaBranche
& Co. and LaB Investing Co. L.L.C., which, in turn, could limit our ability to
pay cash dividends, repay debt and repurchase shares of our outstanding stock. A
substantial market decline, a significant operating loss or any unusually large
requirement or charge against regulatory capital could adversely affect our
ability to expand or even maintain our present levels of business, which could
have an adverse effect on our business, financial condition and/or operating
results. See "Business-- Regulatory Matters."
EMPLOYEE MISCONDUCT IS DIFFICULT TO DETECT AND DETER AND COULD RESULT IN LOSSES.
There have been a number of highly publicized cases involving fraud, stock
manipulation or other misconduct by employees in the financial services industry
in recent years, and we run the risk that employee misconduct could occur.
Misconduct by employees could include binding us to transactions that exceed
authorized limits or present unacceptable risks, or hiding from us unauthorized
or unsuccessful activities, which, in either case, may result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use or disclosure of confidential information, which could result in regulatory
sanctions and serious reputational or financial harm. It is not always possible
to deter employee misconduct and the precautions we take to prevent and detect
this activity may not be effective in all cases.
WE ARE SUBJECT TO RISK RELATING TO LITIGATION AND POTENTIAL SECURITIES LAWS
LIABILITY.
Many aspects of our business involve substantial risks of liability. A
specialist is exposed to substantial risks of liability under federal and state
securities laws, other federal and state laws and court decisions, as well as
rules and regulations promulgated by the SEC and the NYSE. We are also subject
to the risk of litigation and claims that may be without merit. We could incur
significant legal expenses in defending ourselves against such lawsuits or
claims. An adverse resolution of any future lawsuits or claims against us could
have an adverse effect on our business, financial condition and/or operating
results.
COUNTERPARTIES MAY FAIL TO PAY US.
As a specialist of listed stocks, the majority of our securities
transactions are conducted as principal with broker-dealer counterparties
located in the United States. The NYSE and the clearing houses monitor the
credit standing of the counterparties with which we conduct business. However,
we
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cannot assure you that any of these counterparties will not default on their
obligations. If any do, our business, financial condition and/or operating
results could be adversely affected.
SOME OF OUR EXECUTIVE OFFICERS ARE IN A POSITION TO CONTROL MATTERS REQUIRING A
STOCKHOLDER VOTE.
Our managing directors own approximately 75.6% of our outstanding common
stock. These stockholders have entered into a stockholders' agreement under
which they have agreed, among other things, that their shares of our common
stock will be voted, for as long as they own their shares, as directed by a
majority vote of Michael LaBranche, our Chairman, Chief Executive Officer and
President, James G. Gallagher and Alfred O. Hayward, Jr., each an executive
officer and director. Accordingly, these individuals have the ability to control
all matters requiring approval by our stockholders. These matters include the
election and removal of directors and the approval of any merger, consolidation
or sale of all or substantially all of our assets. In addition, they are able to
dictate the management of our business and affairs. This concentration of
ownership could have the effect of delaying, deferring or preventing a change in
control, a merger or consolidation, a takeover or another business combination.
The interests of these individuals may differ from the interests of holders of
the notes.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the issuance of the initial notes pursuant to a purchase
agreement dated as of August 18, 1999 by and among us and the initial purchasers
(the "Purchase Agreement"), the initial purchasers and their respective
assignees became entitled to the benefits of the Registration Rights Agreement
dated as of August 24, 1999 by and among us and the initial purchasers (the
"Registration Rights Agreement").
The Registration Rights Agreement requires us to file the registration
statement of which this prospectus is a part for a registered exchange offer
relating to an issue of new notes identical in all material respects to the
initial notes but containing no restrictive legend. Under the Registration
Rights Agreement, we are required to:
- file the registration statement not later than 45 days following the date
of original issuance of the initial notes (the "Issue Date");
- use our reasonable best efforts to cause the registration statement to be
declared effective by the SEC not later than 90 days after the Issue Date;
- keep the exchange offer open for not less than 20 business days (or longer
if required by applicable law) after the date that notice of the exchange
offer is mailed to holders of the initial notes;
- use our reasonable best efforts to consummate the exchange offer not later
than 120 days after the Issue Date;
- mail, or cause to be mailed, to each holder of record entitled to
participate in the exchange offer a copy of the prospectus forming part of
the exchange registration statement, together with an appropriate letter
of transmittal and related documents;
- utilize the services of a depositary for the exchange offer with an
address in the Borough of Manhattan, The City of New York;
- permit holders to withdraw validly tendered notes at any time prior to the
close of business, New York time, on the last business day on which the
exchange offer shall remain open; and
- otherwise comply in all material respects with all applicable laws, rules
and regulations.
The exchange offer being made hereby, if commenced and consummated within
the time periods described in this paragraph, will satisfy those requirements
under the Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, all initial notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the expiration date will be
accepted for exchange. Exchange notes of the same class will be issued in
exchange for an equal principal amount of outstanding initial notes accepted in
the exchange offer. Initial notes may be tendered only in integral multiples of
$1,000. This prospectus, together with the letter of transmittal, is being sent
to all record holders of initial notes as of , 1999. The exchange
offer is not conditioned upon any minimum principal amount of initial notes
being tendered in exchange. However, our obligation to accept initial notes for
exchange is subject to certain conditions as set forth herein under
"--Conditions."
Initial notes will be deemed accepted when, as and if the Trustee has given
oral or written notice to the exchange agent. The exchange agent will act as
agent for the tendering holders of initial notes for the purposes of receiving
the exchange notes and delivering them to the holders.
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Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to other issuers, we believe that the exchange notes issued in
the exchange offer may be offered for resale, resold or otherwise transferred by
each holder without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that:
- the holder is not a broker-dealer who acquires the exchange notes directly
from us for resale pursuant to Rule 144A under the Securities Act or any
other available exemption under the Securities Act;
- the holder is not our "affiliate", as that term is defined in Rule 405
under the Securities Act; and
- the exchange notes are acquired in the ordinary course of the holder's
business and the holder is not engaged in, and does not intend to engage
in, a distribution of the exchange notes and has no arrangement or
understanding with any person to participate in a distribution of the
exchange notes.
By tendering the initial notes in exchange for exchange notes, each holder,
other than a broker-dealer, will represent to us that:
- any exchange notes to be received by it will be acquired in the ordinary
course of its business;
- it is not engaged in, and does not intend to engage in, a distribution of
the exchange notes and has no arrangement or understanding to participate
in a distribution (within the meaning of the Securities Act) of the
exchange notes; and
- it is not our affiliate, as defined in Rule 405 under the Securities Act,
or if it is our affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable.
If, prior to consummation of the exchange offer, an initial purchaser holds
any notes acquired by it and having, or that are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, or any other holder of notes is not entitled to participate in the
exchange offer, we, upon the request of that initial purchaser or any holder
shall, simultaneously with the delivery of the exchange notes in the exchange
offer, issue and deliver to that initial purchaser and any such holder, in
exchange (the "private exchange") for such notes held by that initial purchaser
and any such holder, a like principal amount of our debt securities that are
identical in all material respects to the exchange notes (the "private exchange
notes") (and that are issued pursuant to the same indenture as the exchange
notes). The private exchange notes will bear the same CUSIP number as the
exchange notes.
If a holder of initial notes is engaged in or intends to engage in a
distribution of the exchange notes or has any arrangement or understanding with
respect to the distribution of the exchange notes to be acquired pursuant to the
exchange offer, the holder may not rely on the applicable interpretations of the
staff of the SEC and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives exchange notes for its own account
in the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
This prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer to satisfy their prospectus delivery obligations
under the Securities Act in connection with resales of exchange notes for their
own accounts. We have agreed that we will keep the registration statement of
which this prospectus is a part effective for a period of up to six months or
such earlier
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date as each participating broker-dealer shall have notified us in writing that
it has resold all exchange notes acquired in the exchange offer. See "Plan of
Distribution."
As soon as practicable after the close of the exchange offer, we will:
- accept for exchange all registrable notes validly tendered and not validly
withdrawn as part of the exchange offer; and
- deliver to the Trustee for cancellation all registrable notes so accepted
for exchange and cause the Trustee to authenticate and deliver promptly to
each holder of registrable notes, exchange notes or private exchange
notes, as the case may be, equal in principal amount to the securities of
such holder so accepted for exchange.
In the event that:
a) we are not permitted to effect the exchange offer because the exchange
offer is not permitted by applicable law or SEC policy;
b) the exchange offer is not completed within 120 days of the Issue Date;
c) any holder of any private exchange notes so requests in writing to us
within 30 days after the consummation of the exchange offer; or
d) in the case of any holder that participates in the exchange offer, the
holder does not receive exchange notes on the date of the exchange that
may be sold without restriction under state and federal securities laws
(other than due solely to the status of such holder as our affiliate
within the meaning of the Securities Act):
then we shall:
1) promptly deliver to the holders and the trustee written notice of the
filing of a shelf registration statement under the Registration Rights
Agreement;
2) use our reasonable best efforts to file with the SEC an initial shelf
registration statement for an offering to be made on a continuous basis
under Rule 415 covering all of the registrable notes not exchanged in the
exchange offer and exchange notes as to which paragraph (d) above is
applicable, on or before the 45(th) day after the occurrence of any one
of the events specified in the Registration Rights Agreement and
summarized above which gives rise to our obligation to file a shelf
registration statement; and
3) use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or before
the 45(th) day after the initial shelf registration filing date.
We will, in the event that a shelf registration statement is filed, provide
to each holder of the initial notes copies of the prospectus that is a part of
the shelf registration statement, notify each holder when the shelf registration
statement has become effective and take certain other actions as are required to
permit unrestricted resales of the exchange notes. A holder that sells initial
notes pursuant to the shelf registration statement will be required to be named
as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with its sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to that holder (including certain indemnification rights and obligations).
We will pay additional interest if:
1. we fail to file the exchange offer registration statement by the 45(th)
day after the Issue Date;
2. the exchange offer registration statement is not declared effective by
the Securities and Exchange Commission by the 90th day after the Issue
Date;
3. we fail to consummate the exchange offer by 120(th) day after the Issue
Date;
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4. the exchange offer registration statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
exchange notes in accordance with and during the periods specified in the
Registration Rights Agreement;
5. we fail to file a shelf registration statement by the 45(th)day
following the date of the occurrence of one of the events specified in
the Registration Rights Agreement which gives rise to our obligation to
file a shelf registration statement;
6. the shelf registration statement is not declared effective by the
Securities and Exchange Commission by the 45(th) day following the
initial shelf registration filing date; or
7. the shelf registration statement is declared effective and thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities (described below) in accordance with and during the
periods specified in the Registration Rights Agreement.
Each event described above is a "Registration Default." The term "Transfer
Restricted Securities" means each initial note, or exchange note, until:
- the date on which the initial note has been exchange by a person other
than a broker-dealer for a new note in the exchange offer;
- following the exchange by a broker-dealer in the exchange offer of an
initial note for an exchange note, the date on which the exchange note is
sold to a purchaser who receives from the broker-dealer on or prior to the
date of sale a copy of the exchange offer prospectus;
- the date on which the initial note has been effectively registered under
the Securities Act and disposed of under the shelf registration statement;
or
- the date on which the initial note is publicly sold under Rule 144 under
the Securities Act.
If a Registration Default occurs, we will be obligated to pay, as liquidated
damages, additional interest on the initial notes equal to 0.25% per annum of
the aggregate principal amount of the initial notes held by such holder, during
the 90-day period immediately following the occurrence of the first Registration
Default. The amount of the additional interest will increase by an additional
0.25% per annum at the beginning of each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum aggregate amount of
additional interest equal to 1.00% per annum. Following the cure of all
Registration Defaults, the accrual of additional interest will cease.
Upon completion of the exchange offer, subject to certain exceptions,
holders of initial notes who do not exchange their initial notes for exchange
notes in the exchange offer will no longer be entitled to registration rights
and will not be able to offer or sell their initial notes, unless the initial
notes are subsequently registered under the Securities Act (which, subject to
certain limited exceptions, we will have no obligation to do), except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. See "Risk Factors--If you do not participate
in the exchange offer, you will continue to be subject to transfer
restrictions."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "expiration date" shall mean , 1999 (20 business days
following the commencement of the exchange offer), unless the exchange offer is
extended if and as required by applicable law, in which case the term
"expiration date" shall mean the latest date to which the exchange offer is
extended.
In order to extend the expiration date, we will notify the exchange agent of
any extension by oral or written notice and may notify the holders of the
initial notes by mailing an announcement or by means of a press release or other
public announcement prior to 9:00 A.M., New York City time, on the next business
day after the previously scheduled expiration date.
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We reserve the right to delay acceptance of any initial notes, to extend the
exchange offer or to terminate the exchange offer and not permit acceptance of
initial notes not previously accepted if any of the conditions set forth herein
under "--Conditions" shall have occurred and shall not have been waived by us
(if permitted to be waived), by giving oral or written notice of such delay,
extension or termination to the exchange agent. We also reserve the right to
amend the terms of the exchange offer in any manner deemed by us to be
advantageous to the holders of the initial notes. If any material change is made
to terms of the exchange offer, the exchange offer shall remain open for a
minimum of an additional five business days, if the exchange offer would
otherwise expire during such period. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice of the delay to the exchange agent. If the exchange offer is
amended in a manner determined by us to constitute a material change, we will
promptly disclose the amendment in a manner reasonably calculated to inform the
holders of the initial notes of the amendment including providing public
announcement, or giving oral or written notice to the holders of the initial
notes. A material change in the terms of the exchange offer could include, among
other things, a change in the timing of the exchange offer, a change in the
exchange agent, and other similar changes in the terms of the exchange offer.
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, amendment or termination of the exchange
offer, we will have no obligation to publish, advertise, or otherwise
communicate any such public announcement.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will accrue interest payable in cash at 9 1/2% per annum,
from the later of:
- the last interest payment date on which interest was paid on the initial
notes surrendered in exchange therefor; or
- if the initial notes are surrendered for exchange on a date subsequent to
the record date for an interest payment date to occur on or after the date
of such exchange and as to which interest will be paid, the date of such
interest payment.
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder of initial notes must complete,
sign and date the letter of transmittal, and mail or otherwise deliver the
letter of transmittal or facsimile, or an agent's message, together with the
initial notes and any other required documents, to the exchange agent prior to
5:00 p.m., New York City time, on the expiration date. In addition:
- certificates for the initial notes must be received by the exchange agent
along with the letter of transmittal;
- a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of the initial notes, if such procedure is available, into
the exchange agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility" or "DTC") pursuant to the procedure for
book-entry transfer described below, must be received by the exchange
agent prior to the expiration date; or
- the holder must comply with the guaranteed delivery procedures described
below.
THE METHOD OF DELIVERY OF INITIAL NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR
HAND-DELIVERY SERVICE. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR INITIAL NOTES SHOULD BE SENT TO US.
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Delivery of all documents must be made to the exchange agent at its address
set forth below. Holders of initial notes may also request their respective
brokers, dealers, commercial banks, trust companies or nominees to tender
initial notes for them.
The term "agent's message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the exchange agent and forming a part of
a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering initial notes that are the subject of the Book-Entry
Confirmation that the participant has received and agrees to be bound by the
terms of the letter of transmittal, and that we may enforce this agreement
against the participant.
The tender by a holder of initial notes will constitute an agreement between
such holder and us in accordance with the terms and subject to the conditions
set forth herein and in the letter of transmittal.
Only a holder of initial notes may tender the initial notes in the exchange
offer. The term "holder" for this purpose means any person in whose name initial
notes are registered on our books or any other person who has obtained a
properly completed bond power from the registered holder.
Any beneficial owner whose initial notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on his or her behalf. If the beneficial owner wishes
to tender on his or her own behalf, such beneficial owner must, prior to
completing and executing the letter of transmittal and delivering his or her
initial notes, either make appropriate arrangements to register ownership of the
initial notes in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor" institution within the meaning of Rule 17Ad-15
under the Exchange Act (each, an "Eligible Institution"), unless the initial
notes tendered pursuant thereto are tendered:
- by a registered holder (or by a participant in DTC whose name appears on a
security position listing as the owner) who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal and the exchange notes are
being issued directly to such registered holder (or deposited into the
participant's account at DTC); or
- for the account of an Eligible Institution.
If the letter of transmittal is signed by the recordholder(s) of the initial
notes tendered thereby, the signature must correspond with the name(s) written
on the face of the initial notes without alteration, enlargement or any change
whatsoever. If the letter of transmittal is signed by a participant in DTC, the
signature must correspond with the name as it appears on the security position
listing as the holder of the initial notes.
If the letter of transmittal is signed by a person other than the registered
holder of any initial notes listed therein, those initial notes must be endorsed
or accompanied by bond powers and a proxy that authorize such person to tender
the initial notes on behalf of the registered holder, in each case as the name
of the registered holder or holders appear on the initial notes.
If the letter of transmittal or any initial notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal.
27
<PAGE>
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed letter of transmittal accompanied by initial
notes, or a timely confirmation received of a book-entry transfer of initial
notes into the exchange agent's account at DTC with an agent's message, or a
notice of guaranteed delivery from an Eligible Institution is received by the
exchange agent. Issuances of exchange notes in exchange for initial notes
tendered pursuant to a notice of guaranteed delivery by an Eligible Institution
will be made only against delivery of the letter of transmittal and any other
required documents, and the tendered initial notes or a timely confirmation
received of a book-entry transfer of initial notes into the exchange agent's
account at DTC with the exchange agent.
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of the tendered initial notes will be determined by us
in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all initial notes not properly
tendered or any initial notes which, if accepted, would, in our opinion or that
of our counsel, be unlawful. We also reserve the absolute right to waive any
conditions of the exchange offer or irregularities or defects in tender as to
particular initial notes. Our interpretation of the terms and conditions of the
exchange offer (including the instructions in the letter of transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of initial notes must be cured within such time as we
will determine. None of us, the exchange agent and any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of initial notes, and none of them shall incur any liability for failure
to give such notification. Tenders of initial notes will not be deemed to have
been made until such irregularities have been cured or waived. Any initial notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost by the exchange agent to the tendering holders of such initial
notes, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
In addition, we reserve the right in our sole discretion, subject to the
provision of the Indenture, to:
- purchase or make offers for any initial notes that remain outstanding
subsequent to the expiration date or, as set forth under "--Expiration
Date; Extensions; Amendments; Termination," to terminate the exchange
offer in accordance with the terms of the Registration Rights Agreement;
and
- to the extent permitted by applicable law, purchase initial notes in the
open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
exchange offer.
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
all initial notes properly tendered will be accepted, promptly after the
expiration date, and the exchange notes will be issued promptly after acceptance
of the initial notes. See "--Conditions" below. For purposes of the exchange
offer, initial notes shall be deemed to have been accepted as validly tendered
for exchange when, as and if we have given oral or written notice thereof to the
exchange agent.
In all cases, issuance of exchange notes for initial notes that are accepted
for exchange pursuant to the exchange offer will be made only after timely
receipt by the exchange agent of certificates for such initial notes or a timely
Book-Entry Confirmation of such initial notes into the exchange agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
letter of transmittal and all other required documents. If any tendered initial
notes are not accepted for any reason set forth in the terms and conditions of
the exchange offer or if initial notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
initial
28
<PAGE>
notes will be returned without expense to the tendering holder as promptly as
practicable after the expiration or termination of the exchange offer. In the
case of initial notes tendered by the book-entry transfer procedures described
below, the non-exchanged initial notes will be credited to an account maintained
with the Book-Entry Transfer Facility.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the initial notes at the Book-Entry Transfer Facility for purposes of the
exchange offer within two business days after the date of this prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of initial notes by causing the
Book-Entry Transfer Facility to transfer such initial notes into the exchange
agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of initial notes may be effected through book-entry transfer into the
exchange agent's account at the Book-Entry Transfer Facility, an agent's message
or the letter of transmittal or facsimile thereof with any required signature
guarantees and any other required documents must, in any case, be transmitted to
and received by the exchange agent at one of the addresses set forth below under
"--Exchange Agent" on or prior to the expiration date or the guaranteed delivery
procedures described below must be complied with. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in the
prospectus to deposit of initial notes shall be deemed to include the Book-Entry
Transfer Facility's book-entry delivery method.
GUARANTEED DELIVERY PROCEDURE
If a registered holder of the initial notes desires to tender the notes, and
the notes are not immediately available, or time will not permit the holder's
initial notes or other required documents to reach the exchange agent before the
expiration date, or the procedures for book-entry transfer cannot be completed
on a timely basis and an agent's message delivered, a tender may be effected if:
1. the tender is made through an Eligible Institution;
2. prior to the expiration date, the exchange agent receives from such
Eligible Institution a properly completed and duly executed letter of
transmittal or facsimile thereof and notice of guaranteed delivery,
substantially in the form provided by us, by facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder of the
initial notes and the amount of initial notes tendered, stating that the
tender is being made thereby and guaranteeing that within five business
days after the expiration date, the certificates for all physically
tendered initial notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
letter of transmittal will be deposited by the Eligible Institution with
the exchange agent; and
3. the certificates for all physically tendered initial notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by the letter of transmittal are received by
the exchange agent within five business days after the expiration date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of initial notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time on the
business day prior to the expiration date at the
29
<PAGE>
address set forth below under "--Exchange Agent" and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must:
1. specify the name of the person having tendered the initial notes to be
withdrawn (the "Depositor");
2. identify the initial notes to be withdrawn, including, if applicable,
the registration number or numbers and total principal amount of such
initial notes;
3. be signed by the Depositor in the same manner as the original signature
on the letter of transmittal by which such initial notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to permit the Trustee with respect to
the initial notes to register the transfer of such initial notes into the
name of the Depositor withdrawing the tender;
4. specify the name in which any such initial notes are to be registered,
if different from that of the Depositor; and
5. if the initial notes have been tendered pursuant to the book-entry
procedures, specify the name and number of the participant's account at
DTC to be credited, if different than that of the Depositor.
All questions as to the validity, form and eligibility, time of receipt of
such notices will be determined by us, whose determination shall be final and
binding on all parties. Any initial notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the exchange offer. Any
initial notes that have been tendered for exchange and that are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder (or, in the case of initial notes tendered by book-entry transfer, such
initial notes will be credited to an account maintained with the Book-Entry
Transfer Facility for the initial notes) as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn initial notes may be re-tendered by following one of the procedures
described under "--Procedures for Tendering" and "--Book-Entry Transfer" above
at any time on or prior to the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, initial notes will not
be required to be accepted for exchange, nor will exchange notes be issued in
exchange for any initial notes, and we may terminate or amend the exchange offer
as provided herein before the acceptance of such initial notes if:
1. because of any change in law, or applicable interpretations thereof by
the SEC, we determine that we are not permitted to effect the exchange
offer;
2. an action or proceeding is commenced or threatened that would materially
impair our ability to proceed with the exchange offer; or
3. not all government approvals that we deem necessary for the consummation
of the exchange offer have been received.
We have no obligation to, and will not knowingly, permit acceptance of
tenders of initial notes:
- from our affiliates within the meaning of Rule 405 under the Securities
Act;
- from any other holder or holders who are not eligible to participate in
the exchange offer under applicable law or interpretations by the SEC; or
- if the exchange notes to be received by such holder or holders of initial
notes in the exchange offer, upon receipt, will not be tradable by such
holder without restriction under the Securities
30
<PAGE>
Act and the Exchange Act and without material restrictions under the "blue
sky" or securities laws of substantially all the states of the United
States.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
initial notes, as reflected in our accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by us. The costs of the exchange offer and the unamortized expenses
related to the issuance of the initial notes will be amortized over the term of
the exchange notes.
EXCHANGE AGENT
Firstar Bank, N.A. has been appointed as exchange agent for the exchange
offer. Questions and requests for assistance and requests for additional copies
of this prospectus or of the letter of transmittal should be directed to the
exchange agent addressed as follows:
By Mail, Overnight Mail or Courier:
Firstar Bank, N.A.
425 Walnut Street,
Corporate Trust Services, 6(th) Floor
Cincinnati, OH 45202
ATTN: Keith Maurmeier
Facsimile Transmission: (513) 632-5511
Confirm by Telephone: (513) 632-4843
FEES AND EXPENSES
We will pay the expenses of soliciting tenders under the exchange offer. The
principal solicitation for tenders pursuant to the exchange offer is being made
by mail; however, additional solicitations may be made by telegraph, telephone,
telecopy or in person by our officers and regular employees.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We, however, will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection
therewith. We may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the prospectus, letters of transmittal and related documents to the
beneficial owners of the initial notes, and in handling or forwarding tenders
for exchange.
The expenses to be incurred in connection with the exchange offer will be
paid by us, including fees and expenses of the exchange agent and Trustee and
accounting, legal, printing and related fees and expenses.
We will pay all transfer taxes, if any, applicable to the exchange of
initial notes pursuant to the exchange offer. If, however:
- certificates representing exchange notes or initial notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the initial notes tendered; or
- if tendered initial notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- if a transfer tax is imposed for any reason other than the exchange of
initial notes pursuant to the exchange offer,
then the amount of any such transfer taxes, whether imposed on the registered
holder or any other persons, will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or
31
<PAGE>
exemption therefrom is not submitted with the letter of transmittal, the amount
of the transfer taxes will be billed directly to the tendering holder.
USE OF PROCEEDS
There will be no cash proceeds payable to us from the issuance of the
exchange notes under the exchange offer. In consideration for issuing the
exchange notes as contemplated in this prospectus, we will receive initial notes
in like principal amount, the terms of which are identical in all material
respects to the exchange notes. The initial notes surrendered in exchange for
the exchange notes will be retired and canceled and cannot be reissued.
Accordingly, the issuance of the exchange notes will not result in any increase
in our indebtedness. The proceeds received from the sale of the initial notes
were used to redeem some limited partnership interests in LaBranche & Co.,
redeem membership interests in LaB Investing Co. L.L.C. and repay some
subordinated indebtedness.
32
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for the years ended
December 31, 1996, 1997 and 1998 and as of December 31, 1997 and 1998 have been
derived from our consolidated financial statements, which have been audited by
Arthur Andersen LLP, independent public accountants, and are included elsewhere
in this prospectus. The selected consolidated financial data set forth below for
the years ended December 31, 1994 and 1995 and as of December 31, 1994, 1995 and
1996 have been derived from our consolidated financial statements, audited by
Arthur Andersen LLP, independent public accountants, which are not included
elsewhere in this prospectus. The selected consolidated financial data set forth
below for the six months ended June 30, 1998 and 1999 and as of June 30, 1999
have been derived from our unaudited consolidated financial statements. In our
opinion, such unaudited data include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the information set
forth therein. The results of operations for the six months ended June 30, 1999
are not necessarily indicative of results to be expected for any future period.
The selected consolidated financial data set forth below should be read in
conjunction with the consolidated financial statements and related notes thereto
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which are included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUES:
Net gain on principal transactions................. $ 23,406 $ 26,290 $ 37,113 $ 47,817 $ 95,048 $ 40,825 $ 78,666
Commissions........................................ 5,995 7,736 10,180 15,186 26,576 10,412 17,885
Other.............................................. 465 3,147 2,643 4,637 4,787 902 6,942
--------- --------- --------- --------- --------- --------- ---------
Total revenues................................... 29,866 37,173 49,936 67,640 126,411 52,139 103,493
--------- --------- --------- --------- --------- --------- ---------
EXPENSES:
Employee compensation and benefits................. 4,496 5,167 5,723 8,108 13,921 5,229 11,299
Severance.......................................... -- 650 5,375 300 -- -- --
Lease of exchange memberships...................... 2,049 2,113 2,468 3,727 6,568 2,777 4,165
Interest........................................... 90 116 331 1,566 3,577 1,494 2,195
Exchange, clearing and brokerage fees.............. 1,336 1,557 1,514 2,042 2,898 1,360 1,997
Amortization of intangibles........................ -- -- -- 737 2,526 834 1,693
Occupancy.......................................... 151 156 435 465 1,121 415 725
Communications..................................... 283 367 495 709 964 432 538
Legal and professional fees........................ 124 194 170 620 916 265 466
Other.............................................. 612 599 642 1,634 2,285 1,615 1,066
--------- --------- --------- --------- --------- --------- ---------
Total expenses before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and unincorporated
business taxes................................. 9,141 10,919 17,153 19,908 34,776 14,421 24,144
--------- --------- --------- --------- --------- --------- ---------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary and unincorporated business taxes..... 20,725 26,254 32,783 47,732 91,635 37,718 79,349
Managing directors' compensation................... 15,128 16,895 23,235 30,008 58,783 23,725 48,214
--------- --------- --------- --------- --------- --------- ---------
Income before limited partners' interest in
earnings of subsidiary and unincorporated
business taxes................................... 5,597 9,359 9,548 17,724 32,852 13,993 31,135
Limited partners' interest in earnings of
subsidiary....................................... 2,754 7,046 9,638 14,354 26,292 10,848 21,054
--------- --------- --------- --------- --------- --------- ---------
Income before unincorporated business taxes........ 2,843 2,313 (90) 3,370 6,560 3,145 10,081
Unincorporated business taxes...................... 734 1,179 1,602 1,881 3,900 1,900 3,789
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).................................. $ 2,109 $ 1,134 $ (1,692) $ 1,489 $ 2,660 $ 1,245 $ 6,292
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and short term investments........... $ 9,481 $ 8,971 $ 16,479 $ 17,989 $ 25,822 $ 38,063
Working capital........................... 32,110 32,855 27,694 62,562 104,250 123,698
Total assets.............................. 52,522 65,177 78,918 157,754 272,201 346,101
Total long-term indebtedness (1).......... 750 1,150 2,919 31,423 48,073 51,158
Limited partners' interest in
Subsidiary.............................. 11,773 14,227 12,129 20,724 37,574 37,094
Members' capital.......................... 20,123 18,270 13,735 37,658 77,093 95,569
</TABLE>
- ------------------------
(1) Excludes subordinated liabilities related to contributed exchange
memberships.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH THE FINANCIAL STATEMENTS AND THE NOTES TO
SUCH STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT EXPECTATIONS, ASSUMPTIONS,
ESTIMATES AND PROJECTIONS ABOUT US AND OUR INDUSTRY. THESE FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, AS MORE FULLY DESCRIBED IN THE "RISK FACTORS" SECTION
AND ELSEWHERE IN THIS PROSPECTUS. WE UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY
ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES
AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
OVERVIEW
Founded in 1924, our subsidiary, LaBranche & Co. is one of the oldest and
largest specialist firms on the New York Stock Exchange. Our business has grown
considerably during the past five years. We have accomplished this growth both
internally and through selective acquisitions. Our revenues increased from $29.9
million in 1994 to $126.4 million in 1998, representing a compound annual growth
rate of 43.4%. During the same period, we increased the number of our common
stock listings from 122 to 284.
REVENUES
Our revenues consist primarily of net gains earned from principal
transactions in securities for which we act as specialist, and commissions
revenue earned from specialist activities. Net gain on principal transactions
represents trading gains net of trading losses and transaction fees, and are
earned by us when we act as principal buying and selling our specialist stocks.
These revenues are primarily affected by changes in share volume and
fluctuations in price in our specialist stocks. Share volume for our specialist
stocks has historically been driven by general trends in NYSE trading volume, as
well as factors particularly affecting our listed companies, including increased
merger and acquisition activity, stock splits, greater frequency of company news
releases (i.e., earnings guidance and reports), heightened research analyst
coverage and investor sentiment. Commissions revenue consists of commissions we
earn when acting as agent to match buyers and sellers for limit orders executed
by us on behalf of brokers after a specified period of time; we do not earn
commissions when we match market orders. Commissions revenue is primarily
affected by share volume of the trades executed by us as agent. Other revenue
consists of proprietary trading revenue and short-term interest income. In 1998,
net gain on principal transactions represented 75.2% of our total revenues,
commissions revenue represented 21.0% of our total revenues, and other revenue
represented 3.8% of our total revenues. For the first six months of 1999, net
gain on principal transactions represented 76.0% of our total revenues,
commissions revenue represented 17.3% of our total revenues, and other revenue
represented 6.7% of our total revenues.
EXPENSES
Our largest operating expense is compensation and benefits. Employee
compensation and benefits primarily consist of salaries and wages and
profitability-based compensation. Profitability-based compensation includes
compensation and benefits paid to managing directors, trading professionals and
other employees based on our profitability and the employee's overall
performance.
Historically, a large portion of the compensation payments to our managing
directors has not been presented as part of operating expenses. The aggregate
amount of these compensation payments has generally approximated LaB Investing
Co. L.L.C.'s interest in the income of LaBranche & Co., before managing
directors' compensation. Generally, these payments of compensation have been
allocated
35
<PAGE>
among our managing directors based on their respective percentage interests in
the profits of LaB Investing Co. L.L.C. As a corporation, we will include
payments to managing directors in employee compensation and benefits expense.
Therefore, historical income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and unincorporated business taxes
understates our expected operating costs after our initial note offering and our
common stock offering.
REORGANIZATION
We incurred indebtedness of approximately $116.4 million through our initial
note offering and the simultaneous issuance of subordinated indebtedness to
redeem some limited partnership interests in LaBranche & Co. and some membership
interests in LaB Investing Co. L.L.C. and to repay subordinated indebtedness. As
a result of this increased indebtedness, our interest expense following the
reorganization and related issuances of indebtedness is higher than historical
levels.
The redemption of the limited partners' interests was accounted for as a
step acquisition under the purchase method of accounting. The pro forma excess
of purchase price over the limited partners' capital accounts of $127.3 million
was allocated to intangible assets. Accordingly, amortization of intangible
assets is expected to increase in the future.
INCOME TAXES
As a partnership, we were generally not subject to U.S. federal, state and
local income taxes, apart from the 4% New York City unincorporated business tax.
As part of our restructuring to a corporation, we are subject to U.S. federal,
state and local income taxes. For information on our pro forma effective tax
rate as a corporation, see the pro forma consolidated information included
elsewhere in this prospectus.
ACQUISITIONS
In the third quarter of 1998, we acquired substantially all the assets of
Fowler, Rosenau & Geary, LLC (or "Fowler, Rosenau"). The acquisition was
accounted for under the purchase method and the excess of cost over estimated
fair value of the net assets acquired, totaling $25.8 million, was allocated to
goodwill. The results of the specialist operations formerly conducted by Fowler,
Rosenau have been included in our consolidated financial statements since July
1, 1998.
In August 1997, we admitted Ernst & Company (or "Ernst") as a limited
partner in connection with our acquisition of the specialist operations of
Ernst. At that time, we also acquired the specialist operations conducted by
individual specialists at the firms of Homans & Co. (or "Homans") and Ware &
Keelips, Inc. (or "Ware & Keelips"). In connection with these transactions, we
also hired as specialists and admitted as members of LaB Investing Co. L.L.C.
several individuals who had previously worked as specialists for Ernst, Homans
and Ware & Keelips. These transactions were accounted for under the purchase
method and the excess of cost over estimated fair value of the net assets
acquired, totaling $17.2 million, was allocated to goodwill. The results of
these specialist operations have been included in our consolidated financial
statements since August 1, 1997.
In July 1997, Thomas Shanley, James Stack and Mark Soltz, formerly
specialists on behalf of Stern Bros., LLC (or "Stern"), were admitted as members
of LaB Investing Co. L.L.C. In connection with their admission, Messrs. Shanley,
Stack and Soltz contributed capital to LaB Investing Co. L.L.C. which was, in
turn, contributed to LaBranche & Co. This transaction was accounted for under
the purchase method and the excess of cost over estimated fair value of the net
assets acquired, totaling $7.8 million, was allocated to goodwill. The results
of these specialist operations have been included in our consolidated financial
statements since July 1, 1997.
36
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data for the
periods indicated as a percentage of total revenues:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
REVENUES:
Net gain on principal transactions.......................... 74.3% 70.7% 75.2% 78.3% 76.0%
Commissions................................................. 20.4 22.5 21.0 20.0 17.3
Other....................................................... 5.3 6.8 3.8 1.7 6.7
--------- --------- --------- --------- ---------
Total revenues............................................ 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
EXPENSES:
Employee compensation and benefits.......................... 11.5 12.0 11.0 10.0 10.9
Severance................................................... 10.8 0.4 -- -- --
Lease of exchange memberships............................... 4.9 5.5 5.2 5.3 4.0
Interest.................................................... 0.7 2.3 2.8 2.9 2.1
Exchange, clearing and brokerage fees....................... 3.0 3.0 2.3 2.6 2.0
Amortization of intangibles................................. -- 1.1 2.0 1.6 1.6
Occupancy................................................... 0.9 0.7 0.9 0.8 0.7
Communications.............................................. 1.0 1.0 0.8 0.8 0.5
Legal and professional fees................................. 0.3 0.9 0.7 0.5 0.5
Other....................................................... 1.3 2.5 1.8 3.1 1.0
--------- --------- --------- --------- ---------
Total expenses before managing directors' compensation,
limited partners' interest in earnings of subsidiary and
unincorporated business taxes............................. 34.4 29.4 27.5 27.6 23.3
Income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and
unincorporated business taxes............................. 65.6 70.6 72.5 72.4 76.7
Managing directors' compensation.............................. 46.5 44.4 46.5 45.5 46.6
--------- --------- --------- --------- ---------
Income before limited partners' interest in earnings of
subsidiary and unincorporated business taxes.............. 19.1 26.2 26.0 26.9 30.1
Limited partners' interest in earnings of subsidiary.......... 19.3 21.1 20.8 20.8 20.3
--------- --------- --------- --------- ---------
Income (loss) before unincorporated business taxes.......... (0.2) 5.0 5.2 6.1 9.8
Unincorporated business taxes................................. 3.2 2.8 3.1 3.6 3.7
--------- --------- --------- --------- ---------
Net income (loss)........................................... (3.4)% 2.2% 2.1% 2.5% 6.1%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
REVENUES
Total revenues increased 98.5% to $103.5 million for the six months ended
June 30, 1999, from $52.1 million for the same period in 1998, principally due
to the increase in revenue from net gain on principal transactions. Net gain on
principal transactions increased 92.7% to $78.7 million for the six months ended
June 30, 1999, from $40.8 million for the same period in 1998. This increase was
primarily due to an increase in share volume of our specialist stocks traded on
the NYSE. This increase, in turn, was primarily due to the Fowler, Rosenau
acquisition, under which we became the specialist for 76 additional common stock
listings, and was due also to increased share volume as
37
<PAGE>
principal in our existing specialist stocks traded on the NYSE. Our share volume
as principal increased 97.3% to 4.5 billion shares for the six months ended June
30, 1999, from 2.3 billion shares for the same period in 1998.
Commissions revenue increased 71.8% to $17.9 million for the six months
ended June 30, 1999, from $10.4 million for the same period in 1998. This
increase was due to an increase in share volume in which we acted as agent. This
increase, in turn, was primarily due to the increase in the number of our common
stock listings due to the Fowler, Rosenau acquisition, and was also due to
increased share volume in our existing specialist stocks traded on the NYSE. The
share volume executed by us as agent in our specialist stocks increased 73.6% to
2.0 billion shares for the six months ended June 30, 1999, from 1.1 billion
shares for the same period in 1998.
Other revenue increased 669.6% to $6.9 million for the six months ended June
30, 1999, from $902,000 for the same period in 1998. This increase was primarily
due to net gains in proprietary trading of non-specialist securities.
EXPENSES
Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
67.4% to $24.1 million for the period ended June 30, 1999 from $14.4 million for
the same period in 1998.
Employee compensation and related expenses increased 116.1% to $11.3 million
for the six months ended June 30, 1999, from $5.2 million for the same period in
1998. Our number of employees increased to 161 as of June 30, 1999, from 107 as
of June 30, 1998, primarily due to the Fowler, Rosenau acquisition. As a
percentage of total revenues, employee compensation increased to 10.9% of total
revenues for the six months ended June 30, 1999, from 10.0% of total revenues
for the same period in 1998.
Lease of exchange membership expense increased 50.0% to $4.2 million for the
six months ended June 30, 1999, from $2.8 million for the same period in 1998.
This increase was due to the increase in the number of leased memberships from
32 to 44, primarily resulting from the Fowler, Rosenau acquisition, and was also
due to an increase in the average annual leasing cost of the memberships from
approximately $180,000 to $192,000 per membership. As a percentage of total
revenues, lease of exchange memberships expense decreased to 4.0% for the six
months ended June 30, 1999, from 5.3% for the same period in 1998.
Interest expense increased 46.9% to $2.2 million for the six months ended
June 30, 1999, from $1.5 million for the same period in 1998. This increase was
primarily due to an increase in outstanding subordinated indebtedness of $15.0
million on June 30, 1998.
Exchange, clearing and brokerage fees consist primarily of fees paid by us
as a specialist to the NYSE and to clearing houses. Fees paid by us to the NYSE
include primarily fees based on the volume of transactions executed as principal
and as agent, as well as a flat annual fee. Exchange, clearing and brokerage
fees expense increased 46.8% to $2.0 million for the six months ended June 30,
1999, from $1.4 million for the same period in 1998. This increase was primarily
attributable to an increase in share volume.
Amortization of intangibles increased 103.0% to $1.7 million for the six
months ended June 30, 1999, from $834,000 for the same period of the prior year.
Amortization of intangibles increased as a result of the Fowler, Rosenau
acquisition.
Occupancy expense consists primarily of rent on our premises, including our
executive offices and our space on the NYSE floor, and depreciation on leasehold
improvements. Occupancy expense
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increased 74.7% to $725,000 for the six months ended June 30, 1999, from
$415,000 for the same period in 1998. This increase was primarily the result of
the expansion of our business.
Communications expense consists primarily of data retrieval and information
services and telephone and data lines. Communications expense increased 24.5% to
$538,000 for the six months ended June 30, 1999, from $432,000 for the same
period in 1998. This increase was the result of additional telephone, data
retrieval and informational services utilized due to the growth of our business.
Legal and professional fees increased 75.8% to $466,000 for the six months
ended June 30, 1999, from $265,000 for the same period in 1998.
Other expenses decreased 34.0% to $1.1 million for the six months ended June
30, 1999, from $1.6 million for the same period in 1998. This was the result of
payments made to Fowler, Rosenau in 1998 under a profit sharing arrangement for
trading in a specialist stock. This arrangement was terminated when we acquired
Fowler, Rosenau in July 1998.
Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated business taxes increased 110.4% to
$79.3 million for the six months ended June 30, 1999, from $37.7 million for the
same period in 1998.
Managing directors' compensation increased 103.2% to $48.2 million for the
six months ended June 30, 1999, from $23.7 million for the same period in 1998
as a result of the increased profitability of the firm.
Unincorporated business tax expense increased 99.4% to $3.8 million for the
six months ended June 30, 1999, from $1.9 million for the same period in 1998 as
a result of increased profitability of the firm.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Total revenues increased 86.9% to $126.4 million for 1998 from $67.6 million
for 1997, due primarily to the increase in revenue from net gain on principal
transactions. Net gain on principal transactions increased 98.8% to $95.0
million for 1998, from $47.8 million for 1997. This increase was primarily due
to an increase in share volume. This increase in share volume, in turn, was
primarily due to increased share volume as principal in our existing specialist
stocks traded on the NYSE, and was also due to the increase in the number of our
common stock listing due to the Fowler, Rosenau acquisition. Our share volume as
principal increased 134.4% to 5.9 billion shares for 1998, from 2.5 billion
shares for 1997.
Commissions revenue increased 75.0% to $26.6 million for 1998 from $15.2
million for 1997. This increase was due to an increase in share volume in which
we acted as agent. This increase, in turn, was primarily due to increased share
volume in our existing specialist stocks traded on the NYSE, and was also due to
the increase in the number of our common stock listings due to the Fowler,
Rosenau acquisition. The share volume executed by us as agent in our specialist
stocks increased 70.6% to 2.9 billion shares for 1998, from 1.7 billion shares
for 1997.
Other revenue increased 3.2% to $4.8 million for the twelve months ended
December 31, 1998, from $4.6 million for the same period in 1997. This increase
was primarily due to net gains in proprietary trading of non-specialist
securities.
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EXPENSES
Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
74.7% to $34.8 million for 1998, from $19.9 million for 1997.
Employee compensation and related expenses increased 71.7% to $13.9 million
for 1998, from $8.1 million for 1997. Our number of employees increased to 152
as of December 31, 1998, from 95 as of December 31, 1997, primarily due to the
Fowler, Rosenau acquisition. As a percentage of total revenues, employee
compensation decreased to 11.0% of total revenues for 1998, from 12.0% of total
revenues for 1997.
Severance expense was $0 in 1998 and $300,000 in 1997. We incurred severance
expense during 1997 as a result of a subsequent change in the retirement package
of one of our senior managing directors who retired in 1996.
Lease of exchange membership expense increased 76.2% to $6.6 million for
1998, from $3.7 million for 1997. This increase was due to the increase in the
number of leased memberships from 32 to 44, resulting from the Fowler, Rosenau
acquisition, and due to an increase in the average annual leasing cost of the
memberships from approximately $150,000 to $180,000 per membership. As a
percentage of total revenues, lease of exchange memberships expense decreased to
5.2% for 1998, from 5.5% for 1997.
Interest expense increased 128.4% to $3.6 million for 1998, from $1.6
million for 1997. This increase was primarily due to an increase in outstanding
subordinated indebtedness to $48.1 million at December 31, 1998 from $31.4
million at December 31, 1997.
Exchange, clearing and brokerage fees expense increased 41.9% to $2.9
million for 1998, from $2.0 million for 1997. This increase was primarily
attributable to an increase in share volume.
Amortization of intangibles increased 242.7% to $2.5 million for 1998, from
$737,000 for 1997. Amortization of intangibles increased due to the Fowler,
Rosenau acquisition. In addition, amortization of intangibles arising from the
Ernst and Stern acquisitions was incurred for the full year of 1998 and was only
incurred during the second half of 1997.
Occupancy expense increased 141.1% to $1.1 million for 1998, from $465,000
for 1997. This increase was primarily the result of the leasing of additional
office space.
Communications expense increased 36.0% to $964,000 for 1998, from $709,000
for 1997. This increase was the result of additional telephone, data retrieval
and informational services utilized due to the growth of our business.
Legal and professional fees increased 47.7% to $916,000 for 1998, from
$620,000 for 1997. This increase was primarily the result of increased legal and
accounting fees due to the Fowler, Rosenau acquisition and consulting services
we obtained to comply with data processing testing required by the NYSE in
anticipation of the acquisition.
Other expenses increased 39.8% to $2.3 million for 1998, from $1.6 million
for 1997. This was the result of payments made to Fowler, Rosenau in 1998 under
a profit sharing arrangement for trading in a specialist stock. This contractual
arrangement was terminated when we acquired Fowler, Rosenau in July 1998.
Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated business taxes increased 92.0% to
$91.6 million for 1998, from $47.7 million for 1997.
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Managing directors' compensation increased 95.9% to $58.8 million for 1998,
from $30.0 million for 1997 as a result of the increased profitability of the
firm.
Unincorporated business tax expense increased 107.3% to $3.9 million in
1998, from $1.9 million for 1997 as a result of the increased profitability of
the firm.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Total revenues increased 35.5% to $67.6 million for 1997 from $49.9 million
for 1996, principally due to the increase in revenue from principal
transactions, net. Net gain on principal transactions increased 28.8% to $47.8
million for 1997, from $37.1 million for 1996. This increase was primarily due
to an increase in share volume of our specialist stocks traded on the NYSE. This
increase, in turn, was due to our acquisitions of Ernst and Stern, under which
we became the specialist for 55 additional common stock listings, and was also
due to increased share volume as principal in our existing specialist stocks
traded on the NYSE. Our share volume as principal increased 106.3% to 2.5
billion shares for 1997, from 1.2 billion shares for 1996.
Commissions revenue increased 49.2% to $15.2 million for 1997, from $10.2
million for 1996. This increase was primarily due to increased share volume in
which we acted as an agent. This increase, in turn, resulted from the increase
in number of common stock listings due to the Stern and Ernst acquisitions, and
was also due to increased share volume in our existing specialist stocks traded
on the NYSE. The share volume executed by us as agent in our specialist stocks
increased 45.5% to 1.7 billion shares for 1997, from 1.2 billion shares for
1996.
Other revenue increased 75.4% to $4.6 million for 1997, from $2.6 million
for 1996. This increase was primarily due to net gains in proprietary trading of
non-specialist securities.
EXPENSES
Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
16.1% to $19.9 million for 1997, from $17.2 million for 1996.
Employee compensation and related expenses increased 41.7% to $8.1 million
for 1997, from $5.7 million for 1996. Our number of employees increased to 95 on
December 31, 1997 from 61 on December 31, 1996 primarily due to the Ernst and
Stern acquisitions. As a percentage of total revenues, employee compensation
increased to 12.0% of total revenues for 1997, from 11.5% of total revenues for
1996.
Severance expense decreased 94.4% to $300,000 in 1997 from $5.4 million in
1996. This decrease was due to the retirement of two of our senior managing
directors in 1996.
Lease of exchange membership expense increased 51.0% to $3.7 million for
1997, from $2.5 million for 1996. This increase was due to the increase in the
number of leased memberships from 20 to 32, resulting from the Ernst and Stern
acquisitions, and was also due to the increase in the average annual leasing
cost of the memberships from approximately $132,000 to $150,000 per membership.
As a percentage of total revenues, lease of exchange membership expense
increased to 5.5% for the twelve months ended December 31, 1997, from 4.9% for
the same period in 1996.
Interest expense increased 373.1% to $1.6 million for 1997, from $331,000
for 1996. This increase was primarily due to an increase in outstanding
subordinated indebtedness to $31.4 million at December 31, 1997 from $2.9
million at December 31, 1996.
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Exchange, clearing and brokerage fees expense increased 34.9% to $2.0
million for 1997, from $1.5 million for 1996. This increase was primarily
attributable to an increase in share volume.
Amortization of intangibles was $737,000 for 1997 and $0 for 1996.
Amortization of intangibles for 1997 resulted from the Ernst and Stern
acquisitions.
Occupancy expense increased 6.9% to $465,000 for 1997, from $435,000 for
1996.
Communications expense increased 43.2% to $709,000 for 1997, from $495,000
for 1996.
Legal and professional fees increased 264.7% to $620,000 for 1997, from
$170,000 for 1996. This increase was primarily the result of increased legal
fees incurred in connection with the Stern and Ernst acquisitions.
Other expenses increased 154.5% to $1.6 million for 1997, from $642,000 for
1996. This was the result of payments made to Fowler, Rosenau beginning in the
third quarter of 1997 under a profit sharing arrangement for trading in a
specialist stock. This contractual arrangement was terminated when we acquired
Fowler, Rosenau in July 1998.
Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated taxes increased 45.6% to $47.7
million for 1997, from $32.8 million for 1996.
Managing director compensation increased 29.2% to $30.0 million for 1997,
from $23.2 million for 1996 as a result of the increased profitability of the
firm.
Unincorporated business tax expense increased 17.4% to $1.9 million for
1997, from $1.6 million for 1996 as a result of the increased profitability of
the firm.
LIQUIDITY
Prior to our initial note offering and our common stock offering we had
financed our business primarily through partners' capital and the issuance of
subordinated indebtedness. As of June 30, 1999, we had $346.1 million in assets,
$38.1 million of which consisted of cash and short-term investments, which
primarily consist of reverse repurchase agreements payable on short notice. As
of December 31, 1998, we had $272.2 million in assets, $25.8 million of which
consisted of cash and short-term investments.
During 1999, we increased and extended our line-of-credit with The Bank of
New York to $100.0 million. Amounts outstanding under The Bank of New York
credit facility would be secured by our inventory in our specialist stocks and
would bear interest at The Bank of New York's broker loan rate. To date, we have
not utilized this facility. The credit facility matures on June 23, 2000. In
addition, we have outstanding letter of credit agreements with U.S. Trust
Company aggregating approximately $1.6 million, collateralized by a Treasury
bill with a face value of $1.5 million and a cash balance of approximately
$171,000.
As of June 30, 1999, our subordinated debt totaled $51.2 million (excluding
subordinated liabilities related to contributed exchange memberships). Of this
amount, $35.0 million represented senior subordinated debt placed through
several note purchase agreements. Of this $35.0 million, $20.0 million matures
on September 15, 2002 and bears interest at an annual rate of 8.2%, payable on a
quarterly basis; and $15.0 million matures on June 3, 2008 and bears interest at
an annual rate of 7.7%, payable on a quarterly basis. These notes are senior to
all other subordinated notes. Subordinated debt totaling $16.2 million
represents junior subordinated debt placed with limited partners and their
family members, and employees of the firm. This debt has maturities ranging from
the second half of 1999 through 2000, and bears interest at an annual rate of
10.0%, payable on a quarterly basis. The agreements relating to the junior
subordinated debt generally have automatic rollover provisions which
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extend the maturities for an additional year, unless the lender provides notice
at least seven months prior to maturity. Concurrently with our initial note
offering and our common stock offering, we repaid $5.0 million of the junior
subordinated debt as part of the reorganization of our firm from partnership to
corporate form.
Concurrently with our initial note offering and our common stock offering,
we paid $149.2 million to acquire some limited partnership interests in
LaBranche & Co. and some membership interests in LaB Investing Co. L.L.C., as
part of the reorganization of our firm from partnership to corporate form. At
approximately the same time as our initial note offering and our common stock
offering, we issued a $16.0 million note as partial payment for the acquisition
of a limited partnership interest. The note will be repayable as to $6.0 million
on the first anniversary of issuance, $5.0 million on the second anniversary of
issuance and $5.0 million on the third anniversary of issuance, and bears
interest at the annual rate of 9.5%. LaBranche & Co. also entered into a
$350,000 cash subordinated loan agreement, bearing interest at an annual rate of
8.0%, as payment for the acquisition of a limited partnership interest. In
addition, we repaid $1.1 million in indebtedness owed in connection with our
retirement plans, which amount has been accrued in the historical consolidated
statement of financial condition.
As a broker-dealer, we are subject to regulatory requirements intended to
ensure the general financial soundness and liquidity of broker-dealers and
requiring the maintenance of minimum levels of net capital, as defined in SEC
Rule 15c3-1. We are required to maintain minimum net capital, as defined,
equivalent to the greater of $100,000 or 1/15 of aggregate indebtedness, as
defined. NYSE Rule 326(c) also prohibits a broker-dealer from repaying
subordinated borrowings, paying cash dividends, making loans to any parent,
affiliates or employees, or otherwise entering into transactions which would
result in a reduction of our total net capital to less than 150% of our required
minimum capital. Moreover, broker-dealers, including us, are required to notify
the SEC prior to repaying subordinated borrowings, paying dividends and making
loans to any parent, affiliates or employees, or otherwise entering into
transactions which, if executed, would result in a reduction of 30% or more of
their excess net capital (net capital less minimum requirement). The SEC has the
ability to prohibit or restrict such transactions if the result is detrimental
to the financial integrity of the broker-dealer. At June 30, 1999, we had net
capital of $100.0 million, which was $96.8 million in excess of our required net
capital of $3.2 million.
The NYSE generally requires members registered as specialists to establish
that they can meet, with their own net liquid assets, a minimum dollar amount
which is the greater of $1,000,000 or 25% of their position requirement. As of
December 31, 1998, due to the market share represented by our specialist book,
the NYSE mandated that, notwithstanding the general rule, we maintain minimum
net liquid assets of the greater of $90.0 million or 120% of the position
requirement, adjusted by the amount of the position requirement for any new
stock allocated to us as specialist. The position requirement is the ability to
assume positions in our specialist stocks, of 30,000 shares of each S&P 500
common stock, 22,500 shares in all other common stocks, 4,500 shares in each
convertible preferred stock and 1,800 shares in each nonconvertible preferred
stock for which we act as a specialist. "Net liquid assets" for a specialist who
also engages in transactions other than specialist activities is based upon its
excess net capital as determined in accordance with SEC Rule 15c3-1. As of June
30, 1999, our NYSE minimum required dollar amount of net liquid assets was $91.5
million compared to actual net liquid assets of approximately $116.3 million.
Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.
We currently anticipate that net proceeds from our initial note offering,
our common stock offering and the additional contemplated indebtedness, together
with our available cash resources and credit facilities, will be sufficient to
meet our anticipated working capital, regulatory capital and capital expenditure
requirements through the end of 2000.
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MARKET RISK
A majority of our specialist related revenues are derived from trading by us
as principal. We also operate a proprietary trading desk separately from our
NYSE specialist operations, which represented 1.8% of our total revenues in
1998. These activities involve primarily the purchase, sale or short sale of
securities for our own account. These activities are subject to a number of
risks, including risks of price fluctuations and rapid changes in the liquidity
of markets. In any period, we may incur trading losses in our specialist stocks
for a variety of reasons, including price declines of our specialist stocks,
lack of trading volume in our specialist stocks and the performance of our
specialist obligations. From time to time, we have large position concentrations
in securities of a single issuer or issuers engaged in a specific industry. In
general, because our inventory of securities is marked to market on a daily
basis, any downward price movement in these securities will result in a
reduction of our revenues and operating profits.
We have developed a risk management process which is intended to balance our
ability to profit from our specialist activities with our exposure to potential
losses. In addition, we have trading limits relating to our proprietary trading
desk. For a full description of our risk management procedures and the limits
placed on our proprietary trading desk, please see "Business--Risk Management"
and "--Our Proprietary Trading."
Although we have adopted risk management policies, we cannot be sure that
these policies have been formulated properly to identify or limit our risks.
Even if these policies are formulated properly, we cannot be sure that we will
successfully implement these policies. As a result, we may not be able to manage
our risks successfully or avoid trading losses.
YEAR 2000
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish between 21st century dates
and 20th century dates. As a result, computer systems and/or software used by
many companies and governmental agencies, including computers involved in the
securities industry, may need to be upgraded to comply with such Year 2000
requirements. Otherwise, these systems could suffer system failure or
miscalculations that would disrupt normal business activities. Significant
uncertainty exists concerning the potential effects associated with the failure
to achieve compliance with the Year 2000 requirements.
We have made an assessment of the Year 2000 readiness of our
trading-related, communications and data processing systems. We participated in
the Securities Industry Association "streetwide" testing during the period of
February through April 1999. We believe that our main trading-related and
clearing systems are currently Year 2000 compliant. In addition, the NYSE has
assured us that their information and communications systems are Year 2000
compliant. We require vendors of material hardware and software components of
our information technology systems to provide oral assurances of their Year 2000
compliance. We intend to enforce these assurances from third parties to the
fullest extent permitted by law.
We cannot be sure that we will not discover Year 2000 compliance problems
that will require substantial revisions. In addition, we cannot be sure that
third-party software, hardware or services incorporated into our computer
systems will not need to be revised or replaced. This could be time-consuming
and expensive. If we fail to fix our trading-related, communications or data
processing systems or to fix or replace third-party software, hardware or
services on a timely basis, our business, financial condition and/or operating
results could be adversely affected. Moreover, our failure to address Year 2000
compliance issues adequately in our main trading-related, communications or data
processing systems could result in litigation which could be a costly and
time-consuming process.
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<PAGE>
In addition, we cannot assure you that the NYSE, trading counterparties,
governmental agencies, utility companies, third-party service providers,
including clearing houses and others outside our control, particularly other
broker-dealers, will be Year 2000 compliant. We believe that, in the worst case
scenario, the failure by any of these entities to be Year 2000 compliant would
induce a systemic failure beyond our control resulting in, among other things:
- a loss or reduction in our trading volume;
- limitations on our ability to effectively engage in specialist activities;
or
- a prolonged telecommunications or electrical failure.
The occurrence of any systemic failure, including those listed above, could
prevent us from engaging in specialist activities and could have an adverse
effect on our business, financial condition and/or operating results.
We have devised a contingency plan in the event of a Year 2000 system
related failure. After the close of business on December 31, 1999, we will back
up our entire system creating a second backup system. Our staff will process
December 31, 1999 trades during the period between January 1, 2000 through the
open of trading on January 3, 2000, giving us 48 hours to resolve any potential
problems prior to the start of trading on January 3, 2000.
The total cost of our Year 2000 project is currently estimated to be
approximately $150,000. Costs related to the project are expensed as incurred,
and we have incurred approximately $125,000 of such costs as of June 30, 1999.
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BUSINESS
OVERVIEW
Founded in 1924, our subsidiary, LaBranche & Co. is one of the oldest and
largest specialist firms on the New York Stock Exchange. As a NYSE specialist,
our role is to maintain, as far as practicable, a fair and orderly market in our
specialist stocks. In doing so, we provide a service to our listed companies,
and to the brokers, traders and their respective customers who trade in our
specialist stocks. We believe that, as a result of our commitment to providing
high quality specialist services, we have developed a strong reputation among
our constituencies, including investors, members of the Wall Street community
and our listed companies.
Our business has grown considerably during the past five years. Our revenues
increased from approximately $29.9 million in 1994 to $126.4 million in 1998,
representing a compound annual growth rate of 43.4%. We have accomplished our
growth both internally and through selective acquisitions. For example, since
the NYSE implemented its new specialist allocation process in March 1997, we
were selected by 43 new listed companies, resulting from 67 listing interviews.
In addition, we have acquired three specialist operations since 1997, adding 131
new common stock listings to our firm. During the past five years, we have also
increased the scope of our business, as illustrated by the following data
obtained from the NYSE:
- the annual dollar volume on the NYSE of stocks for which we acted as
specialist increased to $950.4 billion in 1998, as compared to $112.3
billion in 1994. Based on these dollar volumes, we were the largest
specialist firm in 1998 as compared to the sixth largest in 1994;
- the annual share volume on the NYSE of stocks for which we act as
specialist increased to 20.0 billion in 1998, as compared to 3.4 billion
in 1994. Based on these share volumes, we were the second largest
specialist firm in 1998 as compared to the fourth largest in 1994; and
NYSE Average Daily Trading Volume from 1984 to 1998
(Share Volume in millions)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NYSE AVERAGE DAILY TRADING VOLUME FROM 1984 TO 1998
<S> <C> <C>
1984 91.2
1985 109.2
1986 141.0
1987 188.9
1988 161.5
1989 165.5
1990 156.8
1991 178.9
1992 202.3
1993 264.5
1994 291.4
1995 346.1
1996 412.0
1997 526.9
1998 673.6
</TABLE>
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<PAGE>
- the total number of our common stock listings increased to 280 as of June
30, 1999, as compared to 122 as of December 31, 1994. Based on the number
of our common stock listings, we were the third largest specialist firm as
of both of these dates. In addition, we act as specialist for 71 other
listed securities.
Our listed companies include:
- 47 of the S&P 500 companies; and
- five of the 30 companies comprising the Dow Jones Industrial Average. Our
five Dow stocks are AT&T, Chevron, Exxon, Merck and Minnesota Mining &
Manufacturing.
INDUSTRY BACKGROUND
THE NYSE
The NYSE is currently the largest securities market in the world. The market
capitalization of all U.S. shares listed on the NYSE increased from
approximately $4.4 trillion at December 31, 1994 to approximately $10.9 trillion
at December 31, 1998, representing a compound annual growth rate of 25.0%. The
number of companies listed on the NYSE increased from 2,570 at the end of 1994
to 3,114 at the end of 1998.
The NYSE's average daily trading volume increased from 91.2 million shares
in 1984 to 673.6 million shares in 1998, as illustrated by the following graph:
Trading on the NYSE takes place through open bids to buy and open offers to
sell made by NYSE members, acting as principal or as agent for institutions or
individual investors. Buy and sell orders meet directly on the trading floor
through an auction process, and prices are determined by the interplay of supply
and demand in that auction. In order to buy and sell securities on the NYSE, a
person must first be accepted for membership in the NYSE. The number of
memberships, or seats, is presently limited to 1,366, and the price of a
membership depends on supply and demand. Based on recent transfers of
memberships, the market price of a membership on the NYSE is over $2.0 million.
To become a member, each prospective applicant must also pass an examination
covering NYSE rules and regulations.
NYSE members are generally categorized based upon the activities in which
they engage on the trading floor, such as specialists or brokers. The largest
single membership group is floor brokers, which consists of both commission
brokers and independent brokers. Commission brokers are employed by
broker-dealer firms that are members of the NYSE and earn salaries and
commission. Independent floor brokers are brokers who independently handle
orders for other broker-dealers and financial institutions.
THE SPECIALIST
All trading of securities on the NYSE is conducted through an auction
process. The auction process for each security is managed by the specialist for
that security. The specialist is a broker-dealer who applies for and, if
accepted, is assigned the role to maintain a fair and orderly market in its
specialist stocks. The number of specialist units on the NYSE, many of which are
organized as private partnerships, has decreased from 39 at December 31, 1994 to
29 at June 30, 1999. Of these, the three largest specialist units as ranked by
their number of specialist stocks were responsible for approximately 41.0% of
the average daily trading volume (measured by dollar volume) in 1998.
A specialist firm is granted the franchise by the NYSE in a particular stock
to conduct the auction in that security. Specialist firms conduct their auctions
at specific trading posts located on the floor of the NYSE. Because the
specialist firm runs the auction in its specialist stocks, it knows of all bids
and offers in those stocks and gathers orders to price its stocks appropriately.
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Specialist firms compete for the original listing of stocks through an
allocation process organized by the NYSE. As part of this allocation process,
companies seeking a listing may select a specialist firm in one of two ways.
Under the first method, the NYSE's allocation committee selects the specialist
firm based on specific criteria. Under the second method, available since March
1997, the listing company requests that the allocation committee select three to
five potential specialist firms suitable for the stock, based on criteria
specified by the listing company. The listing company then has the opportunity
to meet with each specialist firm identified by the allocation committee. Within
one week after meeting the competing specialist firms, the listing company must
select a specialist firm. Currently, substantially all of the companies seeking
a listing on the NYSE are opting to make the final choice of their own
specialist firm under the second allocation method.
When assigned a particular stock, the specialist firm agrees to specific
obligations. The specialist firm's role is to maintain, as far as practicable,
trading in the stock that will be fair and orderly. This implies that the
trading will have reasonable depth and price continuity, so that, under normal
circumstances, a customer may buy or sell stock in a manner consistent with
market conditions. A specialist firm helps market participants achieve price
improvement in their trades because the best bids and offers are discovered
through the auction process. In performing its obligations, the specialist firm
is exposed to all transactions that occur in each of its specialist stocks on
the NYSE floor. In any given transaction, the specialist firm may act as:
- an auctioneer by setting opening prices for its specialist stocks and by
matching the highest bids with the lowest offers, permitting buyers and
sellers to trade directly;
- a facilitator bringing together buyers and sellers who do not know of each
other in order to execute a trade which would not otherwise occur;
- an agent for broker-dealers who wish to execute transactions as instructed
by their customers. Typically, these orders are limit orders entrusted to
the specialist at prices above or below the current market price; or
- a principal using its own capital to buy or sell stocks for its own
account.
The specialist firm's decision to buy or sell shares of its specialist
stocks as principal for its own account may be based on obligation or
inclination. For example, the specialist firm may be obligated to buy or sell
its specialist stock to counter short-term imbalances in the prevailing market,
thus helping to maintain a fair and orderly market in that stock. At other
times, the specialist firm may be inclined to buy or sell the stock as principal
based on attractive opportunities. The specialist firm may trade at its election
so long as the trade will contribute to a fair and orderly market. In
actively-traded stocks, the specialist firm continually buys and sells its
specialist stocks at varying prices throughout each trading day. The specialist
firm's goal and expectation is to profit from differences between the prices at
which it buys and sells these stocks. In fulfilling its specialist obligations,
however, the specialist firm may, at times, be obligated to trade against the
market, adversely impacting the profitability of the trade. In addition, the
specialist firm's trading practices are subject to a number of restrictions, as
described in "--Operations-NYSE Rules Governing Our Specialist Activities."
RECENT TRENDS IN NYSE TRADING AND THE SPECIALIST'S ROLE
Specialist firms generate revenues by executing trades, either as agent or
principal, in their specialist stocks. Accordingly, the specialist firms'
revenues are primarily driven by the volume of trading on the NYSE. This volume
has increased significantly in recent years. The increase in trading volume has
resulted from a number of factors, including:
- an increase in the number of households investing in stocks;
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- an increase in the amount of assets managed through retirement plans,
mutual funds, annuity and insurance products, index funds and other
institutional investment vehicles;
- the increased popularity and use of computerized trading, hedging and
other derivative strategies;
- an increase in NYSE-listed stocks due to:
- IPOs and spin-offs;
- transfers from Nasdaq and the American Stock Exchange; and
- an increase in listings of foreign companies;
- higher equity portfolio turnover by individuals and institutional
investors as a result of lower commission rates and other transaction
costs;
- an increase in on-line trading;
- trading in smaller price increments;
- an increase in the market capitalization of growth stocks; and
- an increase in the amount of shares traded due to stock splits and stock
dividends.
These factors have, in turn, been influenced by a strong U.S. economy, low
interest rates and low levels of inflation. In addition, the NYSE is considering
the following changes:
- longer trading days;
- trading in decimals; and
- trading of foreign stocks in ordinary form side by side with their
American depository receipts (ADRs).
These changes are being considered for implementation within the next 18
months. We believe that, if instituted, these changes will likely contribute to
additional growth in NYSE trading volume.
The majority of trades in NYSE-listed stocks take place through NYSE
specialist firms. In 1998, specialist firms handled approximately 84.1% of
trades in NYSE-listed stocks. Trades in NYSE-listed stocks are also generally
effected as follows:
- some stocks are listed on multiple exchanges, such as regional exchanges,
and trades take place on those exchanges;
- NYSE members may trade NYSE stocks that were listed after April 26, 1979
off the NYSE in the over-the-counter market. Approximately 70.0% of the
NYSE-listed stocks may be traded by NYSE members over-the-counter; and
- non-NYSE members may trade NYSE-listed stocks off of the NYSE in
over-the-counter markets.
Technological advances have contributed to the increased trading through
alternative trading systems (ATSs), such as electronic communications networks
(ECNs) and crossing systems. While the first ECN was created in 1969, most of
the others currently in operation were started in the past few years. These
systems electronically facilitate the matching of buy and sell orders that are
entered by their network members. If a match does not occur, some ATSs will
forward unfilled orders to other ATSs or to exchanges such as the NYSE. Some of
these networks also allow limited negotiation between members to facilitate a
match. These ATSs generally limit trades over their systems to their members,
who are typically large financial institutions, well-capitalized traders or
brokerage firms. Additionally, some ATSs are being developed to facilitate
trading by retail investors. In April 1999, the
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SEC ruled that these networks are allowed, and in specified cases are required,
to register and become subject to regulation as stock exchanges. To date, only
one of these networks has applied to register as a stock exchange.
The percentage of annual trading of listed stocks on the NYSE has ranged
from 82.8% to 84.1% for the past five years. It is unclear, however, how the
alternative trading methods and new technologies just described or that may be
developed will affect the percentage of trading in listed stocks conducted on
the NYSE. The NYSE has indicated that it is studying the possibility of
embracing electronic communications network technology to expand trading. ATSs
may be developed, organized and operated by large brokerage houses and
investment banks with greater capital, better access to technology and direct
access to investors. As a result, these parties may be well positioned to direct
trading to these networks. These alternative trading methods may account for a
growing percentage of the trading volume of NYSE-listed stocks.
The accelerating growth of trading volume and the increase in stock prices
on the NYSE in the 1990s has increased the demands upon specialists. In order to
fulfill their obligations, specialists are required to execute a greater number
of trades in a shorter period of time with greater price volatility. In
addition, specialists are called upon to take larger positions in their
specialist stocks. These factors have led to a consolidation of specialist units
in the past five years. The number of specialist units on the NYSE decreased
from 39 at December 31, 1994 to 29 at June 30, 1999. We believe that the
specialist market is becoming increasingly dominated by a number of large,
better-capitalized specialist firms which are able to provide an enhanced level
of service.
LABRANCHE'S COMPETITIVE POSITION
We are committed to providing the highest quality service to our various
constituencies. We believe our success is based on the following factors:
- LEADING POSITION IN THE SPECIALIST MARKET. We have a long-standing
reputation as one of the leading specialist firms on the NYSE. We have
successfully grown our business and improved our services through widely
varying market conditions. As of December 31, 1998:
- trading in the stocks for which we acted as specialist during 1998
accounted for 14.2% of the dollar volume on the NYSE. Based on this
percentage, we were the largest specialist firm on the NYSE; and
- trading in the stocks for which we acted as specialist during 1998
accounted for 12.7% of the share volume on the NYSE. Based on this
percentage, we were the second largest specialist firm on the NYSE.
- DIVERSE AND HIGH QUALITY SPECIALIST STOCKS. Our listed companies operate
in a variety of industries including financial services, media, oil and
gas, retail, technology and telecommunications. Many of our listed
companies are leaders in their respective fields. We believe that acting
as specialist in the stocks of industry leaders will benefit us as these
leading companies continue to expand their businesses through internal
growth and acquisitions.
- STRONG MARKET-MAKING SKILLS. We utilize our strong market-making skills to
actively trade as principal in our specialist stocks. We believe that we
significantly improve liquidity in our specialist stocks, particularly
during periods of market volatility. In 1998, approximately 30.4% of our
trades were as principal as compared to an average of approximately 25.3%
for all NYSE specialists.
- INNOVATIVE CUSTOMER-ORIENTED SERVICES. We are committed to providing our
listed companies a high level of service, in addition to our specialist
functions on the trading floor. We provide our listed companies with
detailed reports on the trading activity of their stocks. We also maintain
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frequent contact with a majority of our listed companies to discuss the
trading in their stock. In addition, we were the first specialist firm to:
- host an annual listed company conference;
- publish a company newsletter; and
- commission customer satisfaction surveys from our listed companies.
- RECENT ACQUISITIONS. Since 1997, we have acquired the following three
specialist operations, solidifying our position as one of the leading NYSE
specialist firms:
- Fowler, Rosenau & Geary, LLC (July 1998);
- Ernst, Homans, Ware & Keelips (August 1997); and
- a portion of the specialist operations of Stern Bros., LLC (July 1997).
We have effectively employed our capital resources and skilled personnel to
maximize the synergies created through consolidation. In doing so, we have
succeeded in growing each of these acquired operations and enhancing their
profitability.
LABRANCHE GROWTH STRATEGY:
Our objective is to continue the growth in our revenues and profits by
pursuing the following strategies:
- AGGRESSIVELY PURSUE NEW LISTINGS. We have been and will continue to be
aggressive in positioning ourselves in the NYSE allocation process.
Between March 1997, when the NYSE adopted the new allocation procedure,
and June 30, 1999, we participated in 67 selection pools for listed
companies and were chosen by management of the listed companies in 43 of
them. Recently, we were selected as specialist by Pepsi Bottling Group and
Fox Entertainment, as these companies completed two of the six largest
initial public offerings in the United States measured in dollars. In
addition, Viacom chose us as specialist in 1999 when it transferred its
listing to the NYSE, the largest transfer to the NYSE measured by market
capitalization.
- ACTIVELY PARTICIPATE IN THE CONSOLIDATION OF THE SPECIALIST INDUSTRY
THROUGH SELECTIVE ACQUISITIONS. We intend to take advantage of the
consolidation trend in the specialist industry by selectively pursuing
acquisitions of other specialist operations. Largely due to our three
recent acquisitions, we have more than doubled the number of our common
stock listings from 122 at December 31, 1994 to 280 at June 30, 1999. We
gained valuable experience through these transactions by effectively
integrating the operations of other specialist firms with those of our
own. We believe this experience will help us to:
- identify and attract acquisition candidates; and
- successfully integrate operations we may acquire.
In addition, we believe that the ability to offer our publicly traded common
stock as part of the purchase price for acquisitions will further help us in
attracting acquisition candidates.
- INCREASE OUR CAPITAL BASE AND EXPAND ACCESS TO CAPITAL. As a result of our
initial note offering and our common stock offering, we have a more
permanent capital base. We intend to proceed to strengthen our capital
base to meet the increasing demands imposed by the current marketplace.
For example, after our initial note offering and our common stock offering,
our working capital increased from $123.7 million to $201.7 million. In
selecting a specialist firm, listed companies often focus on the capital
resources of the specialist, especially more recently as trading volumes
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have increased. We believe that a more permanent and stronger capital base
will help us to continue our active capital utilization, thereby enhancing
our reputation as an active specialist and helping us attract more new
listings.
RECENT ACQUISITIONS
In July 1998, we acquired substantially all the assets of Fowler, Rosenau &
Geary, LLC, including its right to act as a specialist on the NYSE. In
connection with the acquisition, the inactive members of Fowler, Rosenau were
admitted to LaBranche & Co. as limited partners and the active members of
Fowler, Rosenau became members of LaB Investing Co. L.L.C. The former members of
Fowler, Rosenau acquired an aggregate interest in LaBranche's future profits
equal to 22.4% at that time. In connection with this acquisition and with the
approval of the NYSE, we became the specialist firm for an additional 76 common
stock listings, including Chevron, Merck, Minnesota Mining & Minerals and
Schlumberger.
In August 1997, we admitted Ernst & Company as a limited partner in
connection with our acquisition of the specialist operations of Ernst. At that
time, we also acquired the specialist operations conducted by individual
specialists at the firms of Homans and Ware & Keelips. In connection with these
transactions, we also hired as specialists, and admitted as members of LaB
Investing Co. LLC., several individuals who had been employed as specialists by
Ernst, Homans and Ware & Keelips. At the time of its admission as a limited
partner, Ernst acquired an interest in LaBranche & Co.'s future profits equal to
7.2% at that time. In connection with our acquisition of these specialist
operations and with the approval of the NYSE, we became the specialist firm for
an additional 36 common stock listings, including Exxon and Compaq.
In July 1997, Thomas Shanley, James Stack and Mark Soltz, formerly
specialists on behalf of Stern Bros., LLC, were admitted as new members of LaB
Investing Co. L.L.C. In connection with their admission as members, Messrs.
Shanley, Stack and Soltz contributed capital to LaB Investing Co. L.L.C. which
was, in turn, contributed to LaBranche & Co. In connection with this acquisition
and with the approval of the NYSE, we became the specialist firm for an
additional 19 common stock listings.
OPERATIONS
NYSE RULES GOVERNING OUR SPECIALIST ACTIVITIES
Under the NYSE rules, a specialist has a duty to maintain, as far as
practicable, a fair and orderly market in its specialist stocks. In order to
fulfill its obligations, the specialist must at times trade for its own account,
even when it may adversely affect the specialist's profitability. In addition,
under some circumstances, the specialist is prohibited from making trades as
principal in its specialist stocks. The specialist's obligations are briefly
described below.
REQUIREMENT TO TRADE AS PRINCIPAL. A specialist must buy and sell securities
as principal when necessary to minimize an actual or reasonably anticipated
short-term imbalance between supply and demand in the auction market. The
specialist must effect these transactions when their absence could result in an
unreasonable lack of continuity and/or depth in their specialist stocks. The
specialist is not expected to act as a barrier in a rising market or a support
in a falling market, but must use its own judgment to try to keep such price
increases and declines equitable and consistent with market conditions.
A specialist must make firm and continuous two-sided quotations that are
timely and that accurately reflect market conditions. In making these
quotations, the specialist's transactions are
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calculated to contribute to the maintenance of price continuity with reasonable
depth. Following is an illustration of how a specialist acts as principal to
maintain price continuity:
The most recent sale in a listed stock was $50, the best public bid (to buy)
on the specialist's book is $49 3/4, and the best public offer (to sell) on
the book is $50 1/4. A broker who wants to buy 100 shares at the market in
this instance without a specialist would purchase at $50 1/4, the offer
price. Similarly, a broker seeking to sell 100 shares without a specialist
would receive $49 3/4, the bid price. The specialist, who is expected to
provide reasonable price continuity, in this case might narrow the quote
spread by offering or bidding for stock for its own account. In this
instance, the broker who wants to buy 100 shares might buy at $50 1/16 from
the specialist, as opposed to buying the same amount of shares from the best
offer of $50 1/4, thereby offering price improvement to the customer. In the
next trade, a broker willing to sell 100 shares might sell to the specialist
at $50, as opposed to selling to the best available bid of $49 3/4, again
achieving price improvement for the customer.
TRADING RESTRICTIONS. In trading for its own account, the specialist must
avoid initiating a market-destabilizing transaction. All purchases and sales
must be reasonably necessary to permit the specialist to maintain, as far as
practicable, a fair and orderly market in its specialist stocks. In addition,
the specialist must comply with the following trading requirements:
- A specialist must first satisfy a customer's market buy order (an order to
buy at the prevailing market price) before buying any stock for its own
account. Similarly, a specialist must first satisfy a customer's market
sell order (an order to sell at the prevailing market price) before
selling any stock for its own account.
- A specialist must first satisfy a customer's limit order held by it before
buying or selling at the same price for its own account. A limit order is
an order either to buy only at or below a specified price, or to sell only
at or above a specified price. A specialist may not have priority over any
customer's limit order. A specialist, however, may buy or sell at the same
price as a customer limit order as long as that limit order is executed
first.
- If a public buyer wants to buy at a particular price and a seller wants to
sell at the same price, the buyer and seller trade directly with each
other, and the specialist should not interfere in the transaction.
- The specialist does not charge commissions for trades in which it acts as
a principal.
- Except in some circumstances in less active markets, the specialist may
not, without permission from an NYSE official, initiate destabilizing
trades for its own account which cause the stock price to rise or fall.
- Any transactions by the specialist for its own account must be effected in
a reasonable and orderly manner in relation to the condition of the
general market, the market in the particular stock and the adequacy of the
specialist's position to the immediate and reasonably anticipated needs of
the market.
In addition, the specialist cannot be in a control relationship with any of
its listed companies. This means a specialist may not acquire more than 5% of
any common or preferred issue of its specialist stocks and may not own 10% or
more of any common or preferred stock. A specialist should not hold any position
as an officer or director or receive payments or loans or engage in business
transactions with any of its listed companies.
RISK MANAGEMENT
Because our specialist activities expose our capital to significant risks,
managing these risks is a constant priority for us. Our central role in the
auction process helps us to reduce risks by enabling us
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to incorporate up-to-date market information in the management of our inventory,
subject to our specialist obligations. In addition, we have developed a risk
management process which is designed to balance our ability to profit from our
specialist activities with our exposure to potential losses. Our risk management
process includes as participants our executive operating committee, our floor
management committee, our floor team captains and our specialists. These
parties' roles are described as follows:
EXECUTIVE OPERATING COMMITTEE. Our executive operating committee is
composed of Michael, LaBranche, Vincent J. Flaherty, Alfred O. Hayward, Jr.,
Michael J. Naughton, James G. Gallagher and John O. Pickett. This committee is
responsible for approving all risk management policies and trading guidelines
for particular specialist stocks, after receiving input and proposals by the
floor management committee. In addition, our executive operating committee
reviews all unusual situations reported to it by our floor management committee.
FLOOR MANAGEMENT COMMITTEE. Our floor management committee is composed of
Messrs. Flaherty Hayward, Naughton, Gallagher and Pickett. This committee is
responsible for formulating and overseeing our overall risk management policies
and risk guidelines for each of our specialist stocks. In arriving at these
policies and guidelines, our floor management committee considers the advice and
input of our floor team captains. Our floor management committee meets with all
floor team captains no less than once a month to review and, if necessary,
revise the risk management policies for our company as a whole and/or for
particular specialist stocks. In addition, a member of our floor management
committee is always available on the trading floor to review and assist with any
unusual situations reported by a captain. Our floor management committee reports
to our executive operating committee about each of these situations.
FLOOR TEAM CAPTAINS. We have seven floor team captains who monitor the
activities of our specialists throughout the trading day from various positions
at our trading posts. The captains observe trades and constantly review trading
positions in real-time through our information systems. In addition, the
captains are readily available to assist our specialists in determining when to
deviate from our policies and guidelines to react to any unusual situations or
market conditions. The captains must report these unusual situations to
management, including any deviations from our policies and guidelines. Captains
meet with each specialist at least once a week to evaluate the specialist's
adherence to our risk management policies and guidelines. Captains also meet
among themselves at least twice weekly to review risk policies and guidelines
and, if appropriate, make new recommendations to the floor management committee.
SPECIALISTS. Our specialists conduct auctions based upon the conditions of
the marketplace. In doing so, specialists should observe our risk management
policies and guidelines as much as practicable. Specialists must immediately
notify a captain of any unusual situations or market conditions requiring a
deviation from our policies and guidelines.
We rely heavily on our information systems in conducting our risk
management. Management members and captains must constantly monitor our
positions and transactions in order to mitigate our risks and identify
troublesome trends as they occur. We have invested substantial capital in
real-time, on-line systems which give management instant access to specific
trading information at any time during the trading day, including:
- our aggregate long and short positions;
- the various positions of any one of our trading professionals;
- our overall position in a particular stock;
- capital and profit-and-loss information on an aggregate, per specialist or
per issue basis; and
- average position size.
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CIRCUIT BREAKER RULES. The NYSE has instituted certain circuit breaker
rules intended to halt trading in all NYSE-listed stocks in the event of a
severe market decline. The circuit breaker rules impose temporary halts in
trading when the Dow Jones Industrial Average drops a certain number of points.
Circuit breaker levels are set quarterly at 10, 20 and 30 percent of the Dow
Jones Industrial Average closing values of the previous month, rounded to the
nearest 50 points.
LISTED COMPANY SERVICES
We are committed to providing our listed companies with a high level of
service, in addition to our specialist functions on the trading floor. We have a
Corporate Relations Department, consisting of five full-time employees and one
independent consultant devoted to serving our listed companies. The most
important function of the Corporate Relations Department is to provide current
information to the listed companies. Upon request, our Corporate Relations
Department provides our listed companies with the following reports:
- daily reports on the trading results of their stock;
- real-time data regarding intra-day trading activity in their stock; and
- weekly, monthly and yearly reports which analyze short and long term
trading trends in their stock.
In addition to providing trading information, we help to educate our listed
companies on general market trends. We organize annual educational conferences
that review trends in the securities industry and NYSE trading. We also publish
for and distribute to our listed companies a periodic newsletter that reviews
market trends. Finally, we survey our specialist companies annually on the
quality of our services, and use the information obtained in these surveys to
continually improve our services.
NYSE MEMBERSHIPS
NYSE memberships are granted only to individuals, and each individual
specialist must own or lease an NYSE membership. We have 48 specialists, each of
whom owns or leases a membership under the following arrangements:
- 10 memberships are owned directly by 10 of our specialists;
- four are owned by specialists and were financed by us, or by Fowler,
Rosenau prior to the Fowler, Rosenau acquisition; and
- 34 are leased by 34 of our specialists from other individual members, and
we pay and guarantee the lease payments.
OUR INFORMATION AND COMMUNICATIONS SYSTEMS AND THE NYSE'S SUPER-DOT SYSTEM
As a self-clearing broker-dealer, we have made significant investments in
our trade processing systems. Our use of and dependence on technology have
allowed us to maintain our significant growth over the past several years. In
addition to using consultants who primarily service the specialist industry, we
have an in-house information technology staff. We currently clear an average of
33,000 principal trades per day. We do not clear trades for third parties. Our
information systems send and receive data from the NYSE through a dedicated data
feed.
Our systems enable us to monitor, on a real-time basis, our profits and
losses along with our trading positions. The NYSE supplies us with specialist
position reporting system terminals both on the trading floor and in our
offices. These terminals allow us to monitor our trading profits and losses as
well as our positions. We have also developed software that allows us to monitor
these items in the event that the NYSE-provided systems fail.
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We have established a back-up disaster recovery center in Hoboken, NJ in the
event of a local disaster. The back-up system operates as a mirror image of our
primary computer system in New York City as we have a direct connection between
the two sites which we utilize to back-up all data on an hourly basis. On a
regular basis, we test both systems to assure that they are fully operational.
In executing trades on the NYSE, we receive electronic orders from the
Super-DOT system, an order routing system operated by the NYSE. The Super-DOT
System is designed to handle individual orders of up to 100,000 shares and is
essentially an electronic broker. Orders that originate through the Super-DOT
system are routed directly to us through our computer system at the NYSE. When
we receive an order from the Super-DOT system, we conduct the same auction
process and we are subject to the same obligations as with any other order.
Our information technology staff has developed software which enables our
corporate relations staff and our specialists to share information with each
other regarding upcoming company and industry conferences. In addition, we
monitor each of our specialist stocks intra-day to see if there are any
significant price and/or volume variances of which we should alert the listed
company. This has proven to be a valuable customer service tool.
OUR PROPRIETARY TRADING
In 1995, we initiated a proprietary trading program, seeking to leverage our
trading and market experience. Our strategy is short-term oriented, and most of
our positions are intra-day and not held overnight. Four of our traders focus
primarily on stocks listed on the NYSE. A fifth trader focuses entirely on
listed futures and options on both United States Treasury obligations and
Eurodollars. In 1998, we derived less than 2.0% of our revenues from our
proprietary trading and we have averaged less than 3.0% over the past three
fiscal years; in the first six months of 1999, we derived approximately 4.7% of
our revenues from our proprietary trading. Our proprietary trading desk utilizes
a Windows NT based trade reporting system which captures all trades executed by
the trading desk and marks all positions to market. We are not permitted to
trade in stocks for which we act as specialist.
We have taken the following actions to manage the risks associated with our
proprietary trading:
- for 1999, we have limited our capital commitment for our proprietary
trading to an aggregate maximum of $22.0 million per day and overnight
positions of up to $13.5 million per day;
- each of our proprietary traders have specific trading limits, which may
not be exceeded without the approval of executive management. Our most
experienced trader may invest up to $12.0 million per day and may hold
overnight positions up to $1.5 million. Each of our other traders have
daily investment limits of $5.0 million or less and overnight investment
limits of $3.0 million or less, depending on their experience;
- the positions of our futures and options traders are monitored by an
in-house model that measures potential intra-day risk as well as actual
dollar exposure; and
- one of our managing directors who is not involved in our proprietary
trading program serves as the risk manager for that program. He oversees
all of our proprietary trading and has the authority to instruct the
proprietary trading desk to liquidate positions or otherwise reduce risk.
He reports directly to Michael LaBranche, our Chairman, Chief Executive
Officer and President.
SPECIALIST COMPANIES
As of June 30, 1999, we acted as specialist for 280 common stocks listed on
the NYSE. Our listed companies operate in a variety of industries including
financial services, media, oil and gas, retail, technology and
telecommunications. They ranged in market capitalization from some of the
smallest on the NYSE to some of its largest and well-known corporations. We also
represent 44 foreign listings on
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the NYSE. The following is a list of our top 50 listed companies in terms of
market capitalization as of June 30, 1999 in order of their respective global
market capitalization:
<TABLE>
<S> <C>
Lucent Technologies Kroger
Exxon Household International
AT&T Suntrust Banks
Merck Lowes Companies
SBC Communications CVS
Glaxo Wellcome Istituto Bancario San Paolo di
Torino Istituto Mobiliare Italiano
Tyco International Equant
SmithKline Beecham Firstar
Chevron Fox Entertainment Group
ING Groep Bestfoods
Medtronic Australia & New Zealand
MediaOne Group Banking Group
The Gap TNT Post Group
Taiwan Semiconductor Computer Sciences Corporation
Manufacturing Capital One Financial
Compaq Tribune Company
TOTAL Fina PPG Industries
Minnesota Mining & Conseco
Manufacturing Circuit City Stores
Schlumberger Comerica
Koninklijke Philips Electronics Archer-Daniels Midland
ABN AMRO Holding Bank of Ireland Group
The News Corporation Public Service Enterprise Group
Viacom Entergy
US West Dollar General
Atlantic Richfield
National Australia Bank
Royal PTT Nederland
</TABLE>
MARKETING
It is a priority for our management to proactively identify potential
listing companies before the allocation process begins. We contact these
companies and commence our marketing efforts upon determining that they are
considering listing on the NYSE. Our marketing efforts typically consist of
members of our management group visiting with the companies that are considering
listing on the NYSE and describing our services. We also provide written
literature describing our operations, our listed companies, our 75-year history
as a specialist firm and our industry in general.
REGULATORY MATTERS
GENERAL
The securities industry in the United States, including all broker-dealers,
is subject to extensive regulation under both federal and state laws. In
addition, the SEC and the NYSE require strict compliance with their rules and
regulations. As a matter of public policy, regulatory bodies are charged with
safeguarding the integrity of the securities and other financial markets and
with protecting the interests of investors participating in those markets.
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As a broker-dealer, we are subject to regulations concerning operational and
financial aspects of our business. We are subject to extensive registration
requirements with various government entities and self-regulatory organizations,
commonly referred to as SROs, with which we must comply before we can conduct
our business. We are also subject to laws, rules and regulations forcing us to
comply with financial reporting requirements, trade practices, capital structure
requirements, and record retention requirements governing the conduct of our
directors, officers and employees. Failure to comply with any of these laws,
rules or regulations could result in censure, fine, the issuance of
cease-and-desist orders or the suspension or disqualification of our directors,
officers or employees, and other adverse consequences, which could have an
adverse effect on our business.
As a NYSE specialist firm, we are under constant review by the NYSE on all
aspects of our operations and financial condition. As part of the price
discovery mechanism implemented by the NYSE, every specialist transaction is
published immediately on the tape and is broadcast worldwide. The NYSE also
employs sophisticated monitoring and stringent rules approved by the SEC. The
NYSE's Market Surveillance Division examines specialists' trading in all stocks,
every trading day, including specialists' decisions to trade or to not trade as
principal.
NET CAPITAL REQUIREMENTS
As a broker-dealer, we are subject to SEC Rule 15c3-1, which requires
minimum net regulatory capital. We are required to maintain minimum net capital,
as defined, equivalent to the greater of $100,000 or 1/15 of our aggregate
indebtedness, as defined. At June 30, 1999, our net capital, as defined by this
rule, was approximately $100.0 million and exceeded minimum requirements by
approximately $96.8 million.
The NYSE also requires members registered as specialists to establish that
they can meet, with their own net liquid assets, a minimum dollar amount which
is the greater of $1,000,000 or 25% of their position requirement. As of
December 31, 1998, due to the market share represented by our specialist book,
the NYSE mandated that, notwithstanding the general rule, we maintain minimum
net liquid assets of the greater of $90.0 million, adjusted by the amount of the
position requirement for any new stock allocated to us as specialist or 120% of
the position requirement. Our position requirement is the ability to assume
positions in stock in which we are registered, of 30,000 shares of each S&P 500
common stock, 22,500 shares in all other common stocks, 4,500 shares in each
convertible preferred stock and 1,800 shares in each nonconvertible preferred
stock in which we are a specialist. "Net liquid assets" for a specialist firm
that also engages in transactions other than specialist activities is based upon
its excess net capital as determined in accordance with SEC Rule 15c3-1. As of
June 30, 1999, our NYSE minimum required dollar amount of net liquid assets was
$91.5 million compared to actual net liquid assets of approximately $116.3
million.
Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.
COMPETITION
We obtain each of our new listings on the NYSE by participating in an
allocation process. As part of this process, either the allocation committee of
the NYSE or the listing company chooses the specialist firm. We compete with
other specialist firms based on a number of factors, including:
- the strength of our capital base;
- our willingness to commit our own capital and trade for our own account
while conducting our specialist operations; and
- the ancillary services we offer our specialist companies, such as
providing information on the trading activities in their stocks.
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The following is a list of the top ten specialist units as of June 30, 1999,
based on their number of common stock listings:
- Spear, Leeds & Kellogg
- Fleet Specialists, Inc.
- LaBranche & Co.
- Wagner, Stott, Mercator LLC
- Robb Peck McCooey Specialist Corp.
- Bear/Hunter Specialists, LLC
- Henderson Bros., Inc.
- CMJ Partners LLC
- MJ Meehan & Co., LLC
- Fagenson & Co.
The competition for obtaining new listed companies is intense. We expect
competition to continue and intensify in the future. Some of our competitors may
have significantly greater financial resources than we have and may also have
greater name recognition. These competitors may be able to respond more quickly
to new or evolving opportunities and listed company requirements. They may also
be able to undertake more extensive promotional activities to attract new
listing companies. In addition, the specialist industry has recently been
consolidating. The combined companies resulting from the consolidation may have
a stronger capital position. This trend has intensified the competition in our
industry. We cannot be sure that we will be able to compete effectively with our
current or future competitors. We also cannot be sure that the competitive
pressures we face will not have an adverse effect on our business, financial
condition and/or operating results.
NYSE-listed stocks may be traded:
- by NYSE members over-the-counter as long as the stocks were listed after
April 26, 1979. Approximately 70.0% of the NYSE-listed stocks may be
traded by NYSE members over-the counter; and
- by non-NYSE members over-the-counter.
Technological advances have also contributed to the recent emergence of
trading through alternative trading systems, such as electronic communication
networks and crossing systems. In April 1999, the SEC ruled that alternative
trading systems can apply and, in specified cases, are required to register as
stock exchanges, subject to regulation as a stock exchange. This would enable
NYSE members to trade all NYSE-listed stocks on these networks, regardless of
when the stocks were originally listed. These networks may be developed,
organized and operated by large brokerage houses and investment banks with
greater capital, better access to technology and direct access to investors. As
a result, these parties may be well-positioned to direct trading to these
networks. These alternative trading systems may adversely affect the trading of
NYSE-listed stock through specialists on the NYSE. That, in turn, would have an
adverse effect on our business.
The NYSE faces competition from Nasdaq for new listings. Nasdaq continues to
grow and gain in popularity, attracting companies which might otherwise have
listed on the NYSE. In recent years in particular, many high technology
companies have opted to be quoted on Nasdaq, even though many of them would have
qualified for NYSE listing. If more companies decide to be quoted on Nasdaq as
opposed to listing their stocks on the NYSE, trading volume on the NYSE could be
adversely affected.
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EMPLOYEES
As of June 30, 1999, we had 161 full-time employees, including 36 managing
directors, with:
- 48 specialists, including 34 managing directors;
- five traders in our proprietary trading department;
- 85 trading assistants;
- five Corporate Relations Department employees; and
- 18 management, administration and finance staff, including two managing
directors.
Our employees are not covered by a collective bargaining agreement. We have
never experienced an employment-related work stoppage. We consider our employee
relations to be good.
Following our reorganization and the completion of our initial note offering
and our common stock offering, three of our managing directors retired from our
firm.
PROPERTIES
Currently, our main offices are located at One Exchange Plaza, New York New
York. We lease approximately 23,500 square feet at this location. In 1999, our
lease payment will total $684,000. This lease expires in 2008. We also lease two
trading posts on the floor of the NYSE.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
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MANAGEMENT
OUR EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of LaBranche & Co Inc., and their ages
and positions, are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Michael LaBranche............................... 44 Chairman, Chief Executive Officer and President
James G. Gallagher.............................. 52 Executive Vice President and Director
Alfred O. Hayward, Jr........................... 51 Executive Vice President and Director
S. Lawrence Prendergast......................... 58 Executive Vice President, Finance and Director
Vincent J. Flaherty............................. 54 Senior Vice President, Floor Operations
Michael J. Naughton............................. 53 Senior Vice President, Specialist Operations
</TABLE>
MICHAEL LABRANCHE has been our Chairman and Chief Executive Officer and a
member of our executive committee since our inception in June 1999 and our
President since August 1999. Mr. LaBranche has served as Chief Executive Officer
of LaBranche & Co. since 1996 and has been a specialist with LaBranche & Co.
since 1977. Mr. LaBranche has served on the management committee and executive
operating committee of LaBranche & Co. since 1988 and as the chairman of the
executive operating committee of LaBranche & Co. since 1996. He currently is a
Governor of the NYSE and is a member of the NYSE's Market Performance Committee.
JAMES G. GALLAGHER has been our Executive Vice President and a director and
a member of our executive committee since our inception. Mr. Gallagher has
served as the Executive Vice President and a member of the executive operating
committee of LaBranche & Co. since 1998. Prior to July 1998, Mr. Gallagher was a
specialist and managing partner with Fowler, Rosenau since 1980. Mr. Gallagher
is currently a NYSE Senior Floor Official. Mr. Gallagher has also served for six
years as a NYSE Floor Governor.
ALFRED O. HAYWARD, JR. has been our Executive Vice President and a director
and member of our executive committee since our inception. Mr. Hayward has been
a specialist with LaBranche & Co. since 1983 and was appointed to the executive
operating committee of LaBranche & Co. in 1994. He currently sits on the NYSE
Arbitration Panel and is involved with NYSE education programs. Mr. Hayward has
served as a NYSE Floor Official and has also served as the Chairman of the
Allocation Committee.
S. LAWRENCE PRENDERGAST has been our Executive Vice President, Finance and a
director since July 1999. Prior to July 1999, Mr. Prendergast was the Chairman
and CEO of AT&T Investment Management Corp. since May 1997. Prior to 1997, Mr.
Prendergast was the Vice President and Treasurer of AT&T for 14 years. Mr.
Prendergast currently is a director of AT&T Investment Management Corp., a money
management subsidiary of AT&T.
VINCENT J. FLAHERTY has been our Senior Vice President since our inception.
Mr. Flaherty has been a specialist with LaBranche & Co. since 1997. Prior to
joining our specialist firm, Mr. Flaherty was the managing partner of Homans,
which he joined in 1963.
MICHAEL J. NAUGHTON has been our Senior Vice President since our inception.
Mr. Naughton has been a specialist with LaBranche & Co. since 1979 and was
appointed to the executive operating committee of LaBranche & Co. in 1990.
BOARD COMMITTEES
The audit committee of our board of directors will be established as soon as
practicable and will review, act on and report to our board of directors with
respect to various auditing and accounting matters, including the recommendation
of our auditors, the scope of our annual audits, fees to be paid to our
auditors, the performance of our independent auditors and our accounting
practices. The audit committee will be comprised solely of independent
directors.
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The compensation committee of our board of directors will be established as
soon as practicable and will recommend, review and oversee salaries, bonuses,
benefits and equity incentives for our employees, consultants and directors. The
compensation committee will also administer our incentive compensation plans.
The compensation committee will be comprised of a majority of independent
directors.
DIRECTOR COMPENSATION
We intend to elect two non-employee directors as soon as practicable. It is
anticipated that non-employee directors will receive an annual retainer,
attendance fees for board and committee meetings plus options to purchase our
common stock. Our employee directors will not receive any additional
compensation for serving on our board or any committee of our board.
EXECUTIVE COMPENSATION
Historically, our managing directors have all been members of LaB Investing
Co. L.L.C., the general partner of LaBranche & Co. The aggregate amount of
compensation received by all our managing directors generally approximated LaB
Investing Co. L.L.C.'s interest in LaBranche & Co.'s income before managing
directors' compensation. These payments of compensation have been allocated
among our managing directors based on the managing directors' respective
percentage interests in the profits of LaB Investing Co. L.L.C. Following our
initial note offering and our common stock offering, we conduct business in
corporate form. As a result, we believe that historical data does not provide a
meaningful basis for evaluating anticipated executive compensation following our
initial note offering and our common stock offering.
The following table sets forth the annual salary we intend to pay during
fiscal 1999 our Chief Executive Officer and our four other executive officers
named under "--Our Executive Officers and Directors" (the "Named Executive
Officers") who acted as executive officers during fiscal 1998. The Named
Executive Officers will also be entitled to participate in our Annual Incentive
Plan. Under this plan, a compensation pool of up to 30% of our pre-tax income
will be set aside for our managing directors and other employees. The amounts
payable under the Annual Incentive Plan to the Named Executive Officers will be
dependent on our operating results and upon the overall performance of the Named
Executive Officers, as determined by the compensation committee of our board of
directors. In addition, the Named Executive Officers will be entitled to
participate in our Equity Incentive Plan. Our Annual Incentive Plan and Equity
Incentive Plan are described below under "Incentive Awards to Our Employees."
<TABLE>
<CAPTION>
ANNUAL SALARY
NAME AND PRINCIPAL POSITION YEAR (1)
- ---------------------------------------------------------------------------------------- --------- ----------------
<S> <C> <C>
Michael LaBranche....................................................................... 1999 $ 250,000
Chairman, Chief Executive Officer and President
James G. Gallagher...................................................................... 1999 250,000
Executive Vice President
Alfred O. Hayward, Jr................................................................... 1999 250,000
Executive Vice President
Vincent J. Flaherty..................................................................... 1999 250,000
Senior Vice President, Floor Operations
Michael J. Naughton..................................................................... 1999 250,000
Senior Vice President, Specialist Operations
</TABLE>
- ------------------------
(1) The actual salary paid to the Named Executive Officers will be a prorated
portion of these amounts for fiscal 1999.
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The following table sets forth the number of shares issuable upon the
exercise of options granted to our executive officers under our Equity Incentive
Plan upon completion of our common stock offering. These options have an
exercise price of $14, the initial public offering price, and are not currently
exercisable.
<TABLE>
<CAPTION>
SHARES UNDERLYING
NAME OPTIONS
- ---------------------------------------------------------------------------------------- ------------------------
<S> <C>
Michael LaBranche....................................................................... 500,000
James G. Gallagher...................................................................... 250,000
Alfred O. Hayward, Jr................................................................... 100,000
S. Lawrence Prendergast................................................................. 200,000
Vincent J. Flaherty..................................................................... 50,000
Michael J. Naughton..................................................................... 100,000
</TABLE>
EMPLOYMENT AGREEMENTS AND NONCOMPETITION AGREEMENTS
As part of the reorganization of our firm from partnership to corporate
form, our managing directors, all of whom are members of LaB Investing Co.
L.L.C., exchanged their membership interests in LaB Investing Co. L.L.C. for
shares of our common stock. We have entered into employment agreements, pledge
agreements and agreements regarding noncompetition and other covenants with all
members who continue as managing directors after our common stock offering,
including each managing director who is a member of our board of directors or is
an executive officer. We have also entered into an employment agreement and
noncompetition agreement with our Executive Vice President, Finance. The
material terms of the employment, noncompetition and pledge agreements are
described below. You should refer to the exhibits that are a part of the
registration statement for copies of the forms of these agreements. See
"Available Information."
THE EMPLOYMENT AGREEMENTS
Each employment agreement, other than the employment agreement with our
Executive Vice President, Finance, has an initial term of three to five years,
requires the managing director to devote his or her entire working time to our
business and affairs and is terminable on 90 days' notice by either party. The
employment agreement with our Executive Vice President, Finance, has an initial
term of one year, requires him to devote his time as is reasonable necessary for
him to perform his duties and responsibilities and is terminable on 30 days'
notice by either party.
THE NONCOMPETITION AGREEMENTS
Each noncompetition agreement contains the following provisions:
CONFIDENTIALITY. Each managing director and each executive officer is
required to protect and use "confidential information" in accordance with the
restrictions which we place on its use and disclosure.
NONCOMPETITION. During employment and until the later of 12 months
following termination of employment with us or the fifth anniversary of our
common stock offering, a managing director or executive officer may not:
- form, or acquire a 5% or greater ownership, voting or profit participation
interest in, any competitive enterprise; or
- associate with any competitive enterprise and in connection with such
association engage in, or directly or indirectly manage or supervise
personnel engaged in, any business activity that is related to his or her
activities with us.
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For this purpose, a "competitive enterprise" is any business enterprise that
engages in activity, or owns or controls a significant interest in an entity
that engages in activity that competes, directly or indirectly, with any
activity in which we are engaged. These activities include, without limitation,
specialist services and/or securities brokerage, sales, lending, custody,
clearance, settlement or trading.
NONSOLICITATION. During employment and until the later of 12 months
following termination of employment with us or the fifth anniversary of our
common stock offering, a managing director or executive officer may not,
directly or indirectly:
- solicit any of our listed companies;
- interfere with or damage any relationship between us and any of our listed
companies or prospective allocated companies; or
- solicit any of our employees to apply for, or accept employment with, any
competitive enterprise.
TRANSITION ASSISTANCE. The noncompetition agreements also provide that each
managing director and each executive officer will take all actions and do all
things reasonably requested by us during a 90-day transition period following
termination of employment to maintain the business, goodwill and business
relationships in which or with which he or she was previously involved on our
behalf.
LIQUIDATED DAMAGES. If a managing director breaches the noncompetition or
nonsolicitation provisions of the noncompetition agreement before the later of
12 months following termination of employment with us or the fifth anniversary
of the date of the completion of our common stock offering, then he or she will
be liable for liquidated damages in an amount equal to 75% of the aggregate
value of the common stock and cash received by that managing director from us in
exchange for his or her membership interest in LaB Investing Co. L.L.C. The
noncompetition agreement with our Executive Vice President, Finance does not
provide for the payment of liquidated damages.
THE PLEDGE AGREEMENTS
Under each managing director's pledge agreement, the liquidated damages
obligations under each noncompetition agreement are secured by a pledge of
common stock with an initial value equal to 100% of the liquidated damages
amount. The pledge agreement will terminate with respect to a managing director
on the earliest to occur of:
- the death of the managing director;
- the fifth anniversary of the date of the completion of our common stock
offering; or
- payment in cash or other satisfaction by the managing director of all
liquidated damages incurred.
NONEXCLUSIVITY AND ARBITRATION
The liquidated damages and pledge arrangements discussed above are not
exclusive of any injunctive relief to which we may be entitled for a breach of a
covenant against competition or solicitation. Prior to and after the expiration
of the pledge agreements, we will be entitled to all available remedies for a
breach of the noncompetition agreements. The employment and noncompetition
agreements generally provide that any disputes thereunder will be resolved by
binding arbitration.
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<PAGE>
INCENTIVE AWARDS TO OUR EMPLOYEES
THE EQUITY INCENTIVE PLAN
The following is a description of the material terms of the LaBranche & Co
Inc. Equity Incentive Plan, which became effective prior to the closing of our
common stock offering. You should, however, refer to the exhibits that are a
part of the registration statement relating to our common stock offering for a
copy of the Equity Incentive Plan. See "Available Information."
Immediately prior to the closing of our common stock offering, we granted
(1) options to purchase an aggregate of 1,200,000 shares of our common stock at
the initial public offering price to our executive officers and (2) restricted
stock units for 1,059,000 shares of common stock to our employees who are not
managing directors. Subject to continuing service with the firm and certain
other conditions, the initial grant of options will generally become exercisable
in three equal annual installments commencing on the first anniversary of the
date of the grant and restricted stock units will generally vest in three equal
annual installments commencing on the third anniversary of the grant date.
TYPES OF AWARDS. The Equity Incentive Plan provides for grants of options
to purchase shares of common stock, including options intended to qualify as
incentive stock options ("ISOs") (within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended), and options which do not qualify as
ISOs ("NQSOs"), restricted shares of our common stock, restricted stock units,
the value of which is tied to shares of our common stock and other equity-based
awards related to our common stock.
AVAILABLE SHARES. A maximum of 4,687,500 shares of our common stock has been
reserved for issuance under the Equity Incentive Plan. The number, class and
exercise price per share will be adjusted proportionately or as otherwise
appropriate to reflect any increase in, decrease in, or exchange of the
outstanding shares of our common stock through merger, consolidation,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend or similar corporate transaction. These shares may be authorized but
unissued shares of our common stock or issued shares of our common stock held in
our treasury or otherwise acquired for the purposes of the Equity Incentive
Plan. New awards may be granted under the Equity Incentive Plan with respect to
shares of our common stock covered by any award that terminates or expires by
its terms (by cancellation or otherwise) or with respect to shares of our common
stock that are withheld or surrendered to satisfy a recipient's income tax or
other withholding obligations or tendered to pay the purchase price of any
award.
The maximum number of shares of our common stock with respect to which
options, restricted stock, restricted stock units or other equity-based awards
may be granted under the Equity Incentive Plan during any calendar year to any
employee may not exceed 500,000 shares, subject to adjustment upon certain
corporate transactions (as described above).
ELIGIBILITY. Awards under the Equity Incentive Plan may be granted to any
of our directors, officers, managing directors or other employees, including any
prospective employee, and to any of our advisors or consultants selected by the
compensation committee of our board of directors.
ADMINISTRATION. The Equity Incentive Plan, currently administered by our
board of directors, will be administered by the compensation committee of our
board of directors once the compensation committee is established. The
compensation committee will have full discretion and authority to make awards
under the Equity Incentive Plan, to apply and interpret the provisions of the
Equity Incentive Plan and to take such other actions as may be necessary or
desirable in order to carry out the provisions of the Equity Incentive Plan. The
determinations of the compensation committee on all matters relating to the
Equity Incentive Plan and the options, restricted stock, restricted stock units
and other equity-based awards granted thereunder will be final, binding and
conclusive.
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STOCK OPTIONS. The compensation committee may grant ISOs and NQSOs in such
amounts and subject to such terms and conditions as it may determine. The
exercise price of an option granted under the Equity Incentive Plan will not be
less than the fair market value of our common stock on the date of grant (as
determined under the plan). Unless sooner terminated or exercised, options will
generally expire ten years from the date of grant. Payment for shares acquired
upon the exercise of an option may be made (as determined by the compensation
committee) in cash and/or such other form of payment as may be permitted from
time to time, which may include previously-owned shares of our common stock or
pursuant to a broker's cashless exercise procedure. Except as otherwise
permitted by the compensation committee, no option may be exercised more than 30
days after termination of the optionee's service (or, if the optionee's service
is terminated by reason of disability or death, one year thereafter). If an
optionee's employment is terminated for cause, options held by such optionee,
immediately terminate. An optionee will not have any of the rights of a
stockholder with respect to shares subject to an option until the issuance of
such shares.
RESTRICTED STOCK. The compensation committee may grant restricted shares of
our common stock in amounts, and subject to terms and conditions (such as time
vesting and/or performance-based vesting criteria) as it may determine.
Generally, prior to vesting, the recipient will have the rights of a stockholder
with respect to the restricted stock, subject to any restrictions and conditions
as the compensation committee may include in the award agreement.
RESTRICTED STOCK UNITS. The compensation committee may grant restricted
stock units, the value of which is tied to shares of our common stock, in
amounts, and subject to terms and conditions, as the compensation committee may
determine. Recipients of restricted stock units have only the rights of our
general unsecured creditors and no rights as a stockholder until the common
stock referenced by the restricted stock units is delivered to the recipient.
OTHER EQUITY-BASED AWARDS. The compensation committee may grant other types
of equity-based awards related to our common stock under the Equity Incentive
Plan, including the grant of unrestricted shares of our common stock and stock
appreciation rights, in amounts and subject to terms and conditions as the
compensation committee may determine. These awards may involve the transfer of
actual shares of common stock or the payment in cash or otherwise of amounts
based on the value of shares of our common stock.
CHANGE IN CONTROL. The compensation committee may provide, in any award
agreement, for provisions relating to a "change in control" of us or any of our
subsidiaries or affiliates, including, without limitation, the acceleration of
the exercisability of, or the lapse of restrictions with respect to, the award.
NONASSIGNABILITY. Except to the extent otherwise provided in an award
agreement or approved by the compensation committee with respect to NQSOs, no
award granted under the Equity Incentive Plan will be assignable or transferable
other than by will or by the laws of descent and distribution and all awards
will be exercisable during the life of a recipient only by the recipient or his
or her legal representative.
AMENDMENT AND TERMINATION. The Equity Incentive Plan may be amended or
terminated at any time by our board of directors, subject, however, to
stockholder approval in the case of certain material amendments, such as an
increase in the number of shares available under the Equity Incentive Plan or a
change in the class of individuals eligible to participate in the Equity
Incentive Plan.
U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description
of the material U.S. federal income tax consequences generally arising with
respect to awards granted under the Equity Incentive Plan.
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<PAGE>
The grant of an option will have no income tax consequences to the recipient
or to us. Upon the exercise of an option, other than an ISO, the recipient
generally will recognize ordinary income equal to the excess of the fair market
value of the shares of common stock subject to the option on the date of
exercise over the exercise price for such shares (i.e., the option spread), and
we generally will be entitled to a corresponding tax deduction in the same
amount. Upon the sale of the shares of our common stock acquired pursuant to the
exercise of an option, the recipient will recognize capital gain or loss equal
to the difference between the selling price and the sum of the exercise price
plus the amount of ordinary income recognized on the exercise.
A recipient generally will not recognize ordinary income upon the exercise
of an ISO (although, on exercise, the option spread is an item of tax preference
income potentially subject to the alternative minimum tax, and we will not
receive any deduction. If the stock acquired upon exercise of an ISO is sold or
otherwise disposed of within two years from the grant date or within one year
from the exercise date, then gain realized on the sale generally is treated as
ordinary income to the extent of the ordinary income that would have been
realized upon exercise if the option had not been an ISO, and we generally will
be entitled to a corresponding deduction in the same amount. Any remaining gain
is treated as capital gain.
If the shares acquired upon the exercise of an ISO are held for at least two
years from the grant date and one year from the exercise date and the recipient
is employed by us at all times beginning on the grant date and ending on the
date three months prior to the exercise date, then all gain or loss realized
upon the sale will be capital gain or loss and we will not receive any
deduction.
In general, an individual who receives an award of restricted stock will
recognize ordinary income at the time such award vests in an amount equal to the
difference between the value of the vested shares and the purchase price for
such shares, if any, and we generally will be entitled to a deduction in an
amount equal to the ordinary income recognized by the recipient at such time.
The recipient of an award of restricted stock units generally will recognize
ordinary income upon the issuance of the shares of common stock underlying such
restricted stock units in an amount equal to the difference between the value of
such shares and the purchase price for such units and/or shares, if any, and we
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the recipient at such time.
With respect to other equity based awards, upon the payment of cash or the
issuance of shares or other property that is either not restricted as to
transferability or not subject to a substantial risk of forfeiture, the
participant will generally recognize ordinary income equal to the cash or the
fair market value of shares or other property delivered, less any amount paid by
the participant for such award. Generally, we will be entitled to a deduction in
an amount equal to the ordinary income recognized by the participant.
THE ANNUAL INCENTIVE PLAN
The board of directors adopted, effective upon the closing of our common
stock offering, the LaBranche & Co Inc. Annual Incentive Plan. Our managing
directors and other employees selected by the compensation committee of our
board of directors will be eligible to participate in the Annual Incentive Plan.
Under this plan, a compensation pool of up to 30% of our pre-tax income, or such
lesser percentage determined by the compensation committee, will be set aside
for our managing directors and other employees selected by the compensation
committee to participate in this plan. In determining the 30% compensation pool,
the compensation expenses relating to the grant of restricted stock units at the
time of our common stock offering will be deducted. Under the plan, no
individual participant may receive more than 25% of the compensation pool for
any fiscal year. The amounts payable under the Annual Incentive Plan to our plan
participants will be reviewed on an annual basis and will be based on such
factors and considerations as the compensation committee deems
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appropriate in individual cases and on our operating results and the overall
performance of these participants. An award made by the compensation committee
to our managing directors and other employees is completely discretionary. The
Annual Incentive Plan may be amended or terminated at any time by our board of
directors.
PRINCIPAL STOCKHOLDERS
The following table presents information about the beneficial ownership of
our common stock by:
- each person known to beneficially own more than 5.0% of the outstanding
shares of common stock;
- each of our directors;
- each named executive officer;
- and all executive officers and directors as a group.
All persons listed have sole voting and investment power with respect to their
shares unless otherwise indicated. Unless otherwise indicated, the address of
the beneficial owners is: c/o One Exchange Plaza, New York, New York, 10006.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock issuable pursuant to
options, to the extent such options are currently exercisable or convertible
within 60 days of September 29, 1999, are treated as outstanding for computing
the percentage of the person holding such securities but are not treated as
outstanding for computing the percentage of any other person.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENTAGE OF SHARES
OF BENEFICIAL OWNER(1) OWNED BENEFICIALLY OWNED
- ------------------------------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
Michael LaBranche........................................................ 3,500,994 7.6%
James G. Gallagher....................................................... 2,287,100 5.0
Alfred O. Hayward, Jr.................................................... 1,908,068 4.2
S. Lawrence Prendergast.................................................. -0- 0.0
Vincent J. Flaherty...................................................... 2,087,926 4.6
Michael J. Naughton...................................................... 1,958,066 4.3
All executive officers and directors as a group.......................... 11,742,154 25.6
</TABLE>
- ------------------------
(1) Each of our managing directors, including all our executive officers, has
entered into a stockholders' agreement, the terms of which are described
under "Certain Transactions-- Reorganization and Related
Transactions--Stockholders' Agreement." Messrs. LaBranche, Gallagher and
Hayward beneficially own an aggregate of 7,696,262 shares of common stock,
constituting approximately 16.8% of the outstanding shares of common stock.
As a result of the stockholders' agreement, Messrs. LaBranche, Gallagher and
Hayward, acting together as a group, may be deemed to beneficially own an
aggregate of 34,686,343 shares of common stock (including the 7,696,262
shares beneficially owned by them individually), constituting approximately
75.6% of the outstanding shares of common stock. Each of Messrs. LaBranche,
Gallagher and Hayward disclaims beneficial ownership of any and all shares
of common stock held by any person or entity other than him.
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CERTAIN TRANSACTIONS
REORGANIZATION AND RELATED TRANSACTIONS
REORGANIZATION
Concurrently with our initial note offering and our common stock offering,
we completed a number of transactions in order to effect the reorganization of
our firm from partnership to corporate form. These transactions are summarized
below:
- The 36 members of LaB Investing Co. L.L.C. exchanged their membership
interests in LaB Investing Co. L.L.C. which represented a 69.8% interest
in the profit of LaBranche & Co. for an aggregate of 34,816,334 shares of
our common stock. In addition to receiving a portion of those shares,
three members of LaB Investing Co. L.L.C. also received an aggregate of
$9.0 million in cash as part of their exchange. All members who have
remained employed by us following our common stock offering only received
shares of our common stock, and no cash, in the reorganization. We thus
became the sole member of LaB Investing Co. L.L.C., and LaB Investing Co.
L.L.C. continues to be the general partner of LaBranche & Co. Our common
stock received by the members of LaB Investing Co. L.L.C. is subject to
certain restrictions, as described below under "--Stockholders'
Agreement." Set forth below is the percentage interest in the profits of
LaBranche & Co. owned by each of our Named Executive Officers, as members
of LaB Investing Co. L.L.C., before giving effect to the reorganization
and the number of shares of our common stock that each of our Named
Executive Officers received upon the closing of our common stock offering:
<TABLE>
<CAPTION>
PERCENTAGE INTEREST IN NUMBER OF SHARES OF OUR
NAMED EXECUTIVE OFFICER PROFITS OF LABRANCHE & CO. COMMON STOCK RECEIVED
- ------------------------------------------------------------- ----------------------------- ------------------------
<S> <C> <C>
Michael LaBranche............................................ 5.3% 3,500,994
James G. Gallagher........................................... 3.6 2,287,100
Alfred O. Hayward, Jr........................................ 3.6 1,908,068
Vincent J. Flaherty.......................................... 5.0 2,087,926
Michael J. Naughton.......................................... 3.6 1,958,066
</TABLE>
- The 19 limited partners of LaBranche & Co., other than Mill Bridge, Inc.,
exchanged their limited partnership interests in LaBranche & Co. which
represented a 16.0% interest in the profits of LaBranche & Co. to us in
exchange for an aggregate of $66.2 million in cash, 558,666 shares of our
common stock and subordinated indebtedness of $350,000 issued to a family
member of Mr. Gallagher. The shares of our common stock received by
limited partners are subject to lock-up restrictions which prohibits the
transfer of 50% of those shares for a period of one year and the remaining
50% for a period of two years following our common stock offering.
- Mill Bridge, Inc., a subsidiary of Van der Moolen Holding NV, received
$90.0 million from us, including $74.0 million in cash and our note for
$16.0 million, in exchange for its limited partnership interest in
LaBranche & Co., which represented a 14.2% interest in the profit of
LaBranche & Co. In addition, we repaid $5.0 million of subordinated debt
to an affiliate of Van der Moolen.
- As a result of the above transactions, we became the sole limited partner
of LaBranche & Co., which will continue to be a broker-dealer and a NYSE
specialist firm.
- Immediately prior to the closing of our common stock offering, we granted
options under the Equity Incentive Plan to purchase an aggregate of
1,200,000 shares of our common stock to our executive officers. The
options have an exercise price of $14, the initial public offering price
of our common stock, and are not currently exercisable.
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<PAGE>
- Immediately prior to the closing of our common stock offering, we granted
restricted stock units under the Equity Incentive Plan for 1,059,000
shares of our common stock to employees who are not managing directors.
The restricted stock units are not yet vested.
- Prior to the closing of our common stock offering, we completely
discharged our remaining obligations under all outstanding loans received
from the LaBranche & Co. Retirement Plan by making a single lump sum
payment in the amount of $1.1 million to the plan. Since certain of our
executive officers directed the plan to lend to us a portion of the
amounts credited to their individual accounts under the plan, part of the
proceeds of our payment were allocated to those individual accounts in
accordance with the terms of the plan.
The consideration paid to the members and limited partners in connection
with the reorganization was arrived at through negotiation.
STOCKHOLDERS' AGREEMENT
We entered into a stockholders' agreement with all 36 members of LaB
Investing Co. L.L.C. who received our common stock in the reorganization, 33 of
whom remain managing directors following our common stock offering, and with the
employees who received options and restricted stock or restricted stock unit
awards in connection with the reorganization. This stockholders' agreement
contains various restrictions on the transfer of our stock by the parties to
such agreement and a voting agreement.
TRANSFER RESTRICTIONS. The stockholders' agreement prohibits the transfer
of our shares by the former members of LaB Investing Co. L.L.C. who remain
managing directors following our common stock offering for a period of three
years. Beginning on the third anniversary of our common stock offering, up to
one-third of these shares may be transferred. Beginning on the fourth
anniversary, up to an additional one-third of these shares may be transferred,
and beginning on the fifth anniversary, all of these shares may be transferred.
In addition, the former members of LaB Investing Co. L.L.C. who did not continue
as managing directors after our common stock offering are restricted from
transferring shares as follows:
- 50% of the shares will be transferable after the first anniversary of our
common stock offering; and
- all of the shares will be transferable after the second anniversary of our
common stock offering.
Notwithstanding this,
- if the stockholder is employed by us, at all times during the course of
his or her employment, he or she must retain at least 25% of the aggregate
of the shares of our common stock received in the reorganization and other
shares received under the Equity Incentive Plan or similar plans; and
- an employee may not sell shares of our common stock which are subject to a
pledge agreement, unless the requirements of the pledge agreement are
waived by us.
VOTING AGREEMENT. The shares owned by each party to the stockholders'
agreement will be voted at the general stockholder vote as directed by Messrs.
LaBranche, Gallagher and Hayward, as determined by a majority of those
individuals. These individuals will name alternates to replace them in the event
of their death or disability.
INTEREST ON CAPITAL
The members of LaB Investing Co. L.L.C. have historically contributed
capital to LaB Investing Co. L.L.C., which was, in turn, contributed to
LaBranche & Co. For 1998, the Named Executive
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<PAGE>
Officers listed below earned interest income on their capital account balance in
the amounts set forth opposite their names:
<TABLE>
<CAPTION>
CAPITAL
INTEREST
NAME INCOME
- -------------------------------------------------------------------------------------------------- --------------
<S> <C>
Michael LaBranche................................................................................. $ 428,015
James G. Gallagher................................................................................ 149,332
Alfred O. Hayward, Jr............................................................................. 274,017
Vincent J. Flaherty............................................................................... 164,400
Michael J. Naughton............................................................................... 293,061
</TABLE>
LEASE PAYMENT ON MEMBERSHIPS
Some of our Named Executive Officers have contributed the use of their NYSE
membership to LaBranche & Co. and receive lease payments from LaBranche & Co.
based on the market value of the membership. For 1998, the Named Executive
Officers listed below received payments from LaBranche & Co. in the amounts set
forth opposite their names:
<TABLE>
<CAPTION>
NAME LEASE INCOME
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Michael LaBranche................................................................................... $ 180,000
James G. Gallagher.................................................................................. 180,000
Michael J. Naughton................................................................................. 180,000
</TABLE>
INTEREST ON INDEBTEDNESS
A family member of Mr. Flaherty holds $600,000 of subordinated indebtedness
due August 31, 2000 and Mr. LaBranche's spouse holds $1.3 million of secured
subordinated indebtedness due March 2, 2000. This debt bears interest at an
annual rate of 10.0% payable on a quarterly basis. The agreements relating to
this debt have automatic rollover provisions which extend the maturities for an
additional year, unless the lender provides notice at least seven months prior
to maturity. The interest income in 1998 for Mr. Flaherty's family member was
$60,000 and the interest income in 1998 for Mr. LaBranche's spouse was $71,250.
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<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The initial notes were, and the exchange notes will be, issued under an
indenture (the "Indenture") dated as of August 24, 1999 by and among the Company
and Firstar Bank, NA., as Trustee (the "Trustee"). The following is a summary of
the material provisions of the Indenture. It does not include all of the
provisions of the Indenture. We urge you to read the Indenture because it
defines your rights. The terms of the exchange notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "TIA"). A copy of the Indenture may be
obtained from the Company.
You can find definitions of certain capitalized terms used in this
description under "--Certain Definitions." When we refer to the "Company" in
this section, we mean only LaBranche & Co Inc. and not its Subsidiaries.
OVERVIEW OF THE EXCHANGE NOTES
The exchange notes will:
- be general unsecured senior obligations of the Company;
- rank equal in right of payment with all other existing and future senior
unsecured obligations of the Company;
- rank senior in right of payment to all existing and future subordinated
indebtedness of the Company, if any;
- be effectively subordinated to all existing and future secured
indebtedness of the Company; and
- not be guaranteed by any Subsidiary of the Company and therefore will be
effectively subordinated to all existing and future indebtedness of the
Company's Subsidiaries.
As of June 30, 1999, on a pro forma basis as described in the pro forma
consolidated financial information included in this prospectus (excluding
subordinated liabilities related to contributed exchange memberships):
- the Company and its Subsidiaries would have had consolidated long-term
indebtedness of $162.5 million;
- the Company would have had long-term indebtedness of $116.0 million, none
of which would have been secured; and
- Subsidiaries of the Company would have had long-term indebtedness of $46.5
million, excluding any intercompany indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The exchange notes will be limited to $100.0 million aggregate principal
amount. The exchange notes will mature on August 15, 2004. Interest on the
exchange notes will accrue at the rate of 9 1/2% per annum and will be payable
semiannually in cash on each February 15 and August 15 to the persons who are
registered holders of the exchange notes (the "Holders") at the close of
business on the February 1 and August 1 immediately preceding the applicable
interest payment date. Interest on the exchange notes, will accrue from and
including the most recent date to which interest has been paid on the initial
notes or, if no interest has been paid on the initial notes, from and including
the date of issuance of the initial notes.
The exchange notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as paying agent and registrar for the exchange notes. The
exchange notes may be presented for registration or transfer and exchange at
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<PAGE>
the offices of the registrar, which initially will be the Trustee's corporate
trust office. The Company may change any paying agent and registrar without
notice to the Holders.
The Company will pay principal (and premium, if any) on the exchange notes
at the Trustee's corporate office in New York, New York. At the Company's
option, interest may be paid at the Trustee's corporate trust office or by check
mailed to the registered address of the Holders.
The exchange notes will not be entitled to the benefit of any mandatory
sinking fund.
OPTIONAL REDEMPTION
The Company may redeem the exchange notes, at its option, in whole or in
part at any time, at a redemption price equal to the principal amount of the
exchange notes redeemed plus the Make-Whole Premium as of the date of
redemption. The Company will also pay accrued and unpaid interest on the
exchange notes redeemed.
In the event that less than all of the exchange notes are to be redeemed at
any time, selection of the exchange notes for redemption will be made by the
Trustee either:
(1) in compliance with the requirements of the principal national securities
exchange, if any, on which the exchange notes are listed; or
(2) if the exchange notes are not then listed on a national securities
exchange, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate.
No exchange notes of a principal amount of $1,000 or less shall be redeemed
in part.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the Redemption Date to each Holder of exchange notes to
be redeemed at its registered address. If any exchange note is to be redeemed in
part only, the notice of redemption that relates to such exchange note shall
state the portion of the principal amount thereof to be redeemed. A new exchange
note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
exchange note. On and after the date of redemption, interest will cease to
accrue on exchange notes or portions thereof called for redemption as long as
the Company has deposited with the paying agent funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder will have the right
to require that the Company purchase all or a portion of such Holder's exchange
notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, thereon to the date of purchase.
Within 30 days following the date upon which the Change of Control occurs,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 60 days from the date such notice
is mailed, other than as may be required by law (the "Change of Control Payment
Date"). Holders electing to have an exchange note purchased pursuant to a Change
of Control Offer will be required to surrender the note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the exchange note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date.
If a Change of Control Offer is required to be made, there can be no
assurance that the Company will be permitted by the terms of the Credit
Agreement or other Indebtedness of the Company to
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<PAGE>
make such a Change of Control Offer or that it will have available funds
sufficient to pay the Change of Control purchase price for all the exchange
notes that might be delivered by Holders seeking to accept the Change of Control
Offer. A Change of Control may be a default under the Credit Agreement. In the
event the Company is required to purchase outstanding exchange notes pursuant to
a Change of Control Offer, the Company expects that it would seek third party
financing to the extent it does not have available funds to meet its purchase
obligations. However, there can be no assurance that the Company would be able
to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to require the purchase of exchange notes
upon a Change of Control. Restrictions in the Indenture on the ability of the
Company and the Restricted Subsidiaries to incur additional Indebtedness, to
grant liens on its property, to make Restricted Payments and to make Asset Sales
may also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require the purchase of the exchange
notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such purchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries by the management of the Company. While
such restrictions cover a wide variety of arrangements which have traditionally
been used to effect highly leveraged transactions, the Indenture may not afford
the Holders of exchange notes protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with a Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the Indenture,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the "Change of
Control" provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS
The Company will not, and will not permit any of the Restricted Subsidiaries
to, directly or indirectly, Incur any Indebtedness, other than Permitted
Indebtedness; provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
Incurrence of any such Indebtedness, the Company may Incur Indebtedness and the
Restricted Subsidiaries may Incur Acquired Indebtedness, in each case if on the
date of the Incurrence of such Indebtedness, after giving effect to the
Incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than 2.75 to 1.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any distribution, other than
dividends or distributions payable in Qualified Capital Stock of the
Company, on or in respect of shares of the Company's Capital Stock;
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<PAGE>
(b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock;
(c) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value, any Indebtedness which is
subordinated in right of payment to the exchange notes, except a payment
of interest or any principal payment at the Stated Maturity thereof;
(d) make any Investment, other than a Permitted Investment; or
(e) make compensation or consulting payments (in excess of base salaries
limited to $250,000) to managing directors and other executive officers
(as defined in Rule 3b-7 under the Exchange Act) of the Company or any of
its Restricted Subsidiaries, except to the extent authorized under the
Annual Incentive Plan or the Equity Incentive Plan or otherwise approved
by a majority of the disinterested members of the Board of Directors of
the Company or a duly authorized committee thereof who are not managing
directors or other executive officers of the Company or any of its
Affiliates;
(each of the foregoing actions set forth in clauses (a), (b), (c), (d) and (e)
being referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto:
(1) a Default or an Event of Default shall have occurred and be
continuing; or
(2) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with
the covenant described under "--Limitation, on Incurrence of
Additional Indebtedness"; or
(3) the aggregate amount of Restricted Payments, including the proposed
Restricted Payment, made subsequent to the Issue Date (the amount
expended for such purpose, if other than in cash, being the fair
market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum
of:
(A) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned from the beginning of the first full fiscal
quarter following the Issue Date and through the end of the most
recent fiscal quarter for which financial statements are
available prior to the date such Restricted Payment occurs (the
"Reference Date"), treating such period as a single accounting
period; plus
(B) 100% of the aggregate net cash proceeds received by the Company
from any Person, other than a Subsidiary of the Company, from the
issuance and sale subsequent to the Issue Date and on or prior to
the Reference Date of Qualified Capital Stock of the Company or
of other securities that have been converted into Qualified
Capital Stock of the Company; plus
(C) without duplication of any amounts included in clause (3)(B)
above, 100% of the aggregate net cash proceeds of any
contribution to the common equity capital of the Company received
by the Company from a holder of the Company's Qualified Capital
Stock,
excluding, in the case of clauses (3)(B) and (C), any net proceeds
from a sale of Qualified Capital Stock received from a Subsidiary of
the Company or applied in accordance with clause (2)(b) of the
immediately following paragraph; plus
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<PAGE>
(D) an amount equal to the lesser of:
- the sum of the fair market value of the Capital Stock of an
Unrestricted Subsidiary owned by the Company and/or the
Restricted Subsidiaries and the aggregate amount of all
Indebtedness of such Unrestricted Subsidiary owed to the
Company and each Restricted Subsidiary on the date of
Revocation of such Unrestricted Subsidiary as an Unrestricted
Subsidiary in accordance with the covenant described under
"--Limitation on Designations of Unrestricted Subsidiaries";
and
- the Designation Amount treated as a Restricted Payment pursuant
to clause (d) above with respect to such Unrestricted
Subsidiary on the date of the Designation of such Subsidiary as
an Unrestricted Subsidiary in accordance with the covenant
described under "--Limitation on Designations of Unrestricted
Subsidiaries"; plus
(E) in the case of the disposition of an Investment treated as a
Restricted Payment pursuant to clause (d) above to a Person other
than the Company or one of its Subsidiaries, an amount equal to
the lesser of:
- the amount of such Investment treated as a Restricted Payment
pursuant to clause (d) above, and
- the amount in cash received by the Company or any Restricted
Subsidiary upon such disposition; plus
(F) $10.0 million.
The provisions set forth in the immediately preceding paragraph do not
prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been
permitted on the date of declaration;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of Indebtedness of the Company or any Restricted
Subsidiary or of Capital Stock of the Company, in each case to the
extent constituting a Restricted Payment pursuant to clause (b) or
(c) of the first paragraph of this covenant either:
(a) solely in exchange for shares of Qualified Capital Stock of the
Company, or
(b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company or
of any contribution to the common equity capital of the Company
received by the Company from a holder of the Company's Qualified
Capital Stock;
(3) the defeasance, redemption, repurchase or other acquisition of
Indebtedness of the Company or any Restricted Subsidiary with the net
cash proceeds from an Incurrence of Permitted Refinancing
Indebtedness therefor; and
(4) so long as no Default or Event of Default shall have occurred and be
continuing, repurchases of Capital Stock (or options therefor) of the
Company from officers, directors, employees, consultants or former
officers, directors, employees or consultants of the Company (or any
of its Subsidiaries) pursuant to equity ownership or compensation
plans or stockholders agreements not to exceed $5.0 million in any
year.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date in accordance with clause (3) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1) and (4) of this paragraph
shall be included in the calculation.
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<PAGE>
LIMITATION ON ASSET SALES
The Company will not, and will not permit any of the Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of the Asset Sale at least
equal to the fair market value of the assets sold or otherwise
disposed of as determined in good faith by the Board of Directors of
the Company;
(2) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from the Asset Sale shall
be in the form of cash or Cash Equivalents and is received at the
time of such Asset Sale; and
(3) upon the consummation of each Asset Sale, the Company applies, or
causes such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof
either:
(a) to repay any Indebtedness of the Company to the extent secured by
a Lien pursuant to clause (a), (b), (c), (d), (e) or (h) of
"--Limitation on Liens," and effect a permanent reduction in the
availability in respect of the Indebtedness (without refinancing
the Indebtedness);
(b) to repay any Indebtedness of a Wholly Owned Restricted Subsidiary
owed to any Person other than the Company or any of its
Affiliates and effect a permanent reduction in any availability
in respect of the Indebtedness(without refinancing the
Indebtedness);
(c) to acquire Replacement Assets; or
(d) a combination of prepayment and investment permitted by the
preceding clauses (3)(a), (b) and (c).
The assumption by the transferee in an Asset Sale (and release of the Company
and its Restricted Subsidiaries of further liability) of Indebtedness for
borrowed money of the Company or any Restricted Subsidiary other than
Disqualified Capital Stock or Indebtedness subordinated in right of payment to
the exchange notes shall be deemed to be cash applied in accordance with this
covenant. The receipt by the Company or the applicable Restricted Subsidiary of
marketable securities of a company subject to and then current in its
obligations as a reporting company under Section 13 or 15 under the Exchange
Act, which are resold for cash or Cash Equivalents by the Company or the
Restricted Subsidiary within 120 days of the relevant Asset Sale and applied in
accordance with this covenant, shall be deemed to be cash received pursuant to
clause (2) above.
On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of Directors of the Company or of such Restricted Subsidiary determines
not to apply the Net Cash Proceeds relating to the Asset Sale as set forth in
clause (3) of the immediately preceding paragraph (each, a "Net Proceeds Offer
Trigger Date"), the aggregate amount of Net Cash Proceeds that have not been
applied on or before the Net Proceeds Offer Trigger Date as permitted in that
clause (3) (a "Net Proceeds Offer Amount") shall be applied by the Company to
make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 60 days following
the Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that
principal amount of exchange notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the exchange notes to be
purchased, plus accrued and unpaid interest, if any, thereon to the date of
purchase; provided that the Company may make a concurrent offer to repurchase on
a pro rata basis Indebtedness of a Wholly Owned Restricted Subsidiary or
Indebtedness of the Company ranking PARI PASSU with the exchange notes.
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If at any time any non-cash consideration received by the Company or any
Restricted Subsidiary, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration) or Cash Equivalents,
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. Pending application in accordance with this covenant, Net Cash
Proceeds may be used to repay revolving credit borrowings without reducing
commitments thereunder.
The Company may defer the Net Proceeds Offer until there is an aggregate
unutilized Net Proceeds Offer Amount equal to or in excess of $5.0 million
resulting from one or more Asset Sales or deemed Asset Sales (at which time, the
entire unutilized Net Proceeds Offer Amount, and not just the amount in excess
of $5.0 million, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and the Restricted Subsidiaries not
transferred for purposes of this covenant and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value (as determined in good faith by the Board of
Directors of the Company) of such properties and assets of the Company or the
Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their exchange notes in whole or in part in integral multiples
of $1,000 in exchange for cash. To the extent Holders properly tender exchange
notes in an amount exceeding the Net Proceeds Offer Amount, exchange notes of
tendering Holders will be purchased on a pro rata basis based on the principal
amount of exchange notes (and other Indebtedness for which a concurrent offer is
being made as permitted by this covenant) tendered. A Net Proceeds Offer shall
remain open for a period of 20 business days or such longer period as may be
required by law.
The Company will comply with the requirements of Rule 14e-l under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of exchange notes pursuant to a Net Proceeds Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
"Asset Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
LIMITATION ON DISTRIBUTIONS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(a) pay dividends or make any other distributions on or in respect of its
Capital Stock;
(b) make loans or advances or pay any Indebtedness or other obligation owed
to the Company or any other Restricted Subsidiary; or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reasons of:
(1) applicable law or regulation or NYSE regulations;
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(2) the Indenture;
(3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or
assets of the Person so acquired;
(5) agreements existing on the Issue Date to the extent and in the manner
such agreements are in effect on the Issue Date;
(6) any other agreement entered into after the Issue Date that contains
encumbrances and restrictions that are not materially more
restrictive with respect to any Restricted Subsidiary than those in
effect with respect to such Restricted Subsidiary pursuant to
agreements as in effect on the Issue Date so long as any such
restrictions expressly permit scheduled payments on the exchange
notes;
(7) customary restrictions on the transfer of any property or assets
arising under a security agreement governing a Lien permitted under
the Indenture; and
(8) any agreement governing Refinancing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above; provided,
however, that the provisions relating to such encumbrance or
restriction contained in any such Refinancing Indebtedness are not
materially more restrictive than the provisions relating to such
encumbrance or restriction contained in agreements referred to in
such clause (2), (4) or (5) and expressly permit dividends and other
distributions for scheduled payments on the exchange notes.
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company will not permit:
(a) any Restricted Subsidiary to issue any Capital Stock other than to the
Company or a Restricted Subsidiary;
(b) any Person (other than the Company or a Restricted Subsidiary) to own or
control any Capital Stock of any Restricted Subsidiary (other than
directors' qualifying shares or as may be required by law);
PROVIDED, that clauses (a) and (b) will not prohibit:
(1) any sale of 100% of the shares of the Capital Stock of any Restricted
Subsidiary owned by the Company or any Restricted Subsidiary effected
in accordance with "--Limitation on the Sale of Assets," or
(2) any sale of 100% of the shares of the Capital Stock of any Restricted
Subsidiary owned by the Company or any Restricted Subsidiary effected
in accordance with "--Merger, Consolidation and Sale of Assets."
LIMITATION ON LIENS
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon, or enter into or
otherwise become liable in respect of, a Sale and Leaseback Transaction with
respect to, any property or assets of the Company or any of the Restricted
Subsidiaries, whether owned on the
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Issue Date or acquired after the Issue Date, or any proceeds therefrom or assign
or otherwise convey any right to receive income or profit therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly subordinate
or junior in right of payment to the exchange notes, the exchange notes
are secured by a Lien on such property, assets or proceeds that is senior
in priority to such Liens; and
(2) in all other cases, the exchange notes are equally and ratably secured,
except for:
(a) Liens existing as of the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
(b) Liens on Investment Securities securing Indebtedness incurred
pursuant to clause (b) of the definition of "Permitted Indebtedness"
and Interest Swap Obligations and Currency Agreements related
thereto;
(c) Liens on Capital Stock of Subsidiaries securing a bank credit
facility of the Company and Interest Swap Obligations and Currency
Agreements related thereto;
(d) Liens securing Purchase Money Indebtedness (or Refinancing
Indebtedness in respect thereof) or Sale and Leaseback Transactions
involving Capitalized Lease Obligations, in each case Incurred
pursuant to clause (1) of the definition of "Permitted Indebtedness;"
provided, however, that:
(1) the Purchase Money Indebtedness (or Refinancing Indebtedness) or
Capitalized Lease Obligation shall not exceed the cost of the
property or assets to be acquired or which is the subject of the
Sale and Leaseback Transaction, and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary
other than the property and assets to be acquired or which is the
subject of the Sale and Leaseback Transaction, and
(2) the Lien securing any Purchase Money Indebtedness shall be
created within 90 days of such acquisition;
(e) Liens securing Acquired Indebtedness (and any Refinancing
Indebtedness in respect thereof); provided that:
(1) the Liens secured the Acquired Indebtedness at the time of and
prior to the Incurrence of the Acquired Indebtedness by the
Company or a Restricted Subsidiary and were not granted in
connection with, or in anticipation of the Incurrence of the
Acquired Indebtedness by the Company or a Restricted Subsidiary;
and
(2) the Liens do not extend to or cover any property or assets of the
Company or of any of the Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior
to the time the Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary;
(f) Liens securing the exchange notes;
(g) Liens in favor of the Company;
(h) Liens securing Refinancing Indebtedness incurred to Refinance any
Indebtedness, which Refinanced Indebtedness had been secured by a
Lien permitted under the Indenture; provided, however, that such
Liens do not extend to or cover any property or assets of the Company
or any of the Restricted Subsidiaries not securing the Indebtedness
so Refinanced; and
(i) Permitted Liens.
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MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Restricted Subsidiaries) whether as
an entirety or substantially as an entirety to any Person unless:
(1) either:
(a) the Company shall be the surviving or continuing corporation; or
(b) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or the Person which acquires by
sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and the Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity"):
(x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of
Columbia; and
(y) shall expressly assume, by supplemental indenture (in form and
substance reasonably satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the
exchange notes and the performance of every covenant of the
exchange notes, the Indenture and the Registration Rights
Agreement on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the assumption
contemplated by clause (1)(b)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness Incurred or anticipated to be
Incurred in connection with or in respect of such transaction), the
Company or such Surviving Entity, as the case may be, shall be able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "--Limitation on
Incurrence of Additional Indebtedness";
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(b)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default
or Event of Default shall have occurred or be continuing; and
(4) the Company or the Surviving Entity shall have delivered to the Trustee
an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with
the applicable provisions of the Indenture and that all conditions
precedent in the Indenture relating to such transaction have been
satisfied.
The above paragraph will not apply to a merger or consolidation between the
Company and a Restricted Subsidiary in which the Company is the surviving
company or between one or more Restricted Subsidiaries to the extent that a
Person that is a Restricted Subsidiary immediately before and after the
transaction is the surviving entity, or to the sale of substantially all of the
assets of a Restricted Subsidiary to the Company or to a Person that is a
Restricted Subsidiary immediately before and after the transaction. For purposes
of this covenant, the transfer by lease, assignment, sale or otherwise, in a
single transaction or series of transactions, of all or substantially all of the
properties or assets of one or more Restricted Subsidiaries, the Capital Stock
of which constitutes all or substantially
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all of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged, or to which such conveyance, lease or transfer is made, shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the exchange notes with the same effect as
if such surviving entity had been named as such.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES
(a) The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist
any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "Affiliate Transaction") unless the Affiliate
Transaction is on terms that are not materially less favorable than those
that would have reasonably been expected in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate
of the Company or such Restricted Subsidiary. Prior to the consummation
by the Company or any Restricted Subsidiary of any Affiliate Transactions
(or series of related Affiliate Transactions which are similar or part of
a common plan) involving aggregate payments or other property with a fair
market value in excess of:
(1) $5 million, the Company or such Restricted Subsidiary, as the case
may be, shall obtain the approval of its Board of Directors
(including a majority of the independent directors) of such
transaction or series of related transactions evidenced by a Board
Resolution stating that such Board of Directors (including a majority
of the independent directors) has determined that such transaction
complies with the foregoing provisions, and
(2) $10 million, the Company or such Restricted Subsidiary, as the case
may be, shall obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial
point of view, from an Independent Financial Advisor, and file it
with the Trustee.
(b) The restrictions set forth in paragraph (a) above shall not apply to:
(1) employment, stock option, consulting, agency or other compensation or
benefit plans, arrangements and agreements of the Company or any
Restricted Subsidiary in accordance with the Annual Incentive Plan or
the Equity Incentive Plan or as approved by a majority of the
disinterested members of the Board of Directors (or a majority of the
disinterested members of a committee thereof);
(2) reasonable fees and compensation paid to directors, and reasonable
indemnity provided on behalf of officers, directors, employees,
consultants or agents, of the Company or any Restricted Subsidiary as
determined in good faith by the Company's Board of Directors or
senior management;
(3) transactions exclusively between or among the Company and any
Restricted Subsidiaries or exclusively between or among Restricted
Subsidiaries, provided such transactions are not otherwise prohibited
by the Indenture; and
(4) Restricted Payments permitted to be made pursuant to the
"--Limitation on Restricted Payments" covenant.
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LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES
The Company may designate any Subsidiary of the Company, other than
LaBranche or a Person holding Capital Stock of LaBranche, as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or after
giving effect to such Designation; and
(b) the Company would be permitted under the Indenture to make an Investment
at the time of Designation assuming the effectiveness of the Designation
in an amount (the "Designation Amount") equal to the sum of:
(1) the fair market value of the Capital Stock of the Subsidiary owned by
the Company and/or any of the Restricted Subsidiaries on such date
and
(2) the aggregate amount of Indebtedness of the Subsidiary owed to the
Company and the Restricted Subsidiaries on that date; and
(c) the Company would be permitted to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant described
under "--Limitation on Incurrence of Additional Indebtedness" at the time
of Designation assuming the effectiveness of the Designation.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to the covenant described under "--Limitation on Restricted Payments"
for all purposes of the Indenture. The Indenture will further provide that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time:
(1) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness),
(2) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or,
(3) be directly or indirectly liable for any Indebtedness that provides
that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the
occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary (including any right to take enforcement
action against the Unrestricted Subsidiary).
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary ("Revocation"), whereupon such Subsidiary shall then constitute a
Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time and after
giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiaries outstanding
immediately following such Revocation would, if incurred at such time,
have been permitted to be incurred for all purposes of the Indenture.
All Designations and Revocations must be evidenced by an officers'
certificate of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
REPORTS TO HOLDERS
The Indenture provides that the Company will deliver to the Trustee within
15 days after the filing of the same with the Commission, copies of the
quarterly and annual reports and of the information,
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documents and other reports, if any, that the Company is required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The
Indenture further provides that, notwithstanding that the Company may not be
subject to the reporting requirements of Sections 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and Holders with such annual and quarterly reports and such
information, document and other reports specified in Section 13 and 15(d) of the
Exchange Act. The Company will also comply with the other provisions of TIA
Section314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(a) the failure to pay interest (including any additional interest payable,
under the Registration Rights Agreement) on any exchange notes when the
same becomes due and payable and the default continues for a period of 30
days;
(b) the failure to pay the principal on any exchange notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase exchange
notes tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer), whether or not such payment shall be prohibited by the
subordination provision of the Indenture;
(c) a default in the observance or performance of the covenant described
under "--Certain Covenants--Merger, Consolidation and Sale of Assets";
(d) a default in the observance or performance of any other covenant or
agreement contained in the Indenture, which default continues for a
period of 45 days after the Company receives written notice specifying
the default from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the exchange notes;
(e) a default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary (or the
payment of which is guaranteed by the Company or any Restricted
Subsidiary), whether such Indebtedness now exists or is created after the
Issue Date, which default:
(1) is caused by failure to pay principal of such Indebtedness after any
applicable grace period provided in such Indebtedness on the date of
such default (a "payment default") or
(2) results in the acceleration of such Indebtedness prior to its express
maturity,
and the aggregate principal amount of any Indebtedness to which clause (1)
or (2) applies at the relevant time, exceeds $5.0 million;
(f) one or more judgments in an aggregate amount in excess of $5.0 million
shall have been rendered against the Company or any of the Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed
for a period of 45 days after such judgment or judgments become final and
nonappealable;
(g) certain events of bankruptcy affecting the Company or any of the
Significant Subsidiaries (or any group of Subsidiaries which, taken
together, would constitute a Significant Subsidiary) pursuant to SIPA or
bankruptcy laws;
(h) LaBranche is not a specialist broker in good standing with the NYSE;
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(i) the Commission revokes the registration of LaBranche as a broker-dealer
under the Exchange Act or LaBranche fails to maintain such registration;
or
(j) the Examining Authority (as defined in Rule 15c3-1) for the Company
shall suspend (and not reinstate within 10 days) or revoke LaBranche's
status as a member organization thereof.
If an Event of Default (other than an Event of Default specified in clause
(g) above) shall occur and be continuing, the Trustee or the Holders of at least
25% in principal amount of outstanding exchange notes may declare the principal
of, and accrued interest on, all the exchange notes to be due and payable by
notice in writing to the Company and (if given by the Holders) the Trustee
specifying the respective Events of Default and that it is a "notice of
acceleration," and the same shall become immediately due and payable. If an
Event of Default specified in clause (g) above occurs and is continuing, then
all unpaid principal of, and accrued and unpaid interest on, all of the
outstanding exchange notes shall become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the exchange notes as described in the preceding paragraph, the
Holders of a majority in principal amount of the then outstanding exchange notes
may rescind and cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration;
(3) to the extent payment of such interest is lawful, if interest on
overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has
been paid;
(4) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances;
and
(5) in the event of the cure or waiver of an Event of Default of the type
described in clause (g) of the description above of Events of
Default, the Trustee shall have received an officers' certificate and
an opinion of counsel that such Event of Default has been cured or
waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the then outstanding
exchange notes may waive any existing Default or Event of Default under the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any exchange notes.
Holders of the exchange notes may not enforce the Indenture or the exchange
notes except as provided in the Indenture and under the TIA. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding exchange notes have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
The Company is required to provide an officers' certificate to the Trustee
promptly upon the Company obtaining knowledge of any Default or Event of Default
(provided that the Company shall provide such certification at least annually
whether or not it knows of any Default or Event of Default) that has occurred
and, if applicable, describe such Default or Event of Default and the status
thereof.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding exchange notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
exchange notes, except for:
(1) the rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest on the exchange notes when such
payments are due solely from the trust described below;
(2) the Company's obligations with respect to the exchange notes concerning
issuing temporary exchange notes, mutilated, destroyed, lost or stolen
exchange notes and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission or failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the exchange notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
"--Events of Default" will no longer constitute an Event of Default with respect
to the exchange notes.
In order to exercise Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accounts, to pay the principal of, premium, if any, and interest
on the exchange notes on the stated date of payment thereof or on the
applicable redemption date, as the case may be;
(b) in the case of Legal Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United Stares reasonably acceptable
to the Trustee confirming that:
(1) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling; or
(2) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance
had not occurred;
(c) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit;
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(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an officers' certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders over any other creditors of the Company or with
the intent of defeating, hindering, delaying or defrauding other
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(h) the Company shall have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and
(i) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights as expressly provided for in the Indenture) as to
all outstanding exchange notes when:
(a) either:
(1) all the exchange notes theretofor authenticated and delivered (except
lost, stolen or destroyed exchange notes which have been replaced or
paid and exchange notes for whose payment money has theretofor been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or
(2) all exchange notes not theretofor delivered to the Trustee for
cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire
Indebtedness on the exchange notes not theretofor delivered to the
Trustee for cancellation, for principal of, and premium, if any, and
interest on, the exchange notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as
the case may be;
(b) the Company has paid all other sums payable under the Indenture by the
Company; and
(c) the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, doubts or inconsistencies, so long as such change does not,
in the opinion of the Trustee, adversely affect the rights of any of the Holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other modifications and
amendments of the Indenture may be made with the consent of the
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Holders of a majority in principal amount of the then outstanding exchange notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may:
(a) reduce the amount of exchange notes whose holders must consent to an
amendment;
(b) reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any exchange notes;
(c) reduce the principal of or change or have the effect of changing the
fixed maturity of any exchange notes, or change the date on which any
exchange notes may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor;
(d) make any exchange notes payable in money other than that stated in the
exchange notes;
(e) make any change in provisions of the Indenture protecting the right of
each Holder to receive payment of principal of and interest on such
exchange notes on or after the stated due date thereof or to bring suit
to enforce such payment, or permitting Holders of a majority in principal
amount of the then outstanding exchange notes to waive Defaults or Events
of Default;
(f) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer after the
occurrence of a Change of Control or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated or modify
any of the provisions or definitions with respect thereto; or
(g) modify or change any provision of the Indenture or the related
definitions affecting the ranking of the exchange notes in a manner which
adversely affects the Holders.
GOVERNING LAW
The Indenture provides that it and the exchange notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and power vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the exchange notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the exchange notes or because of the creation of any Indebtedness represented
thereby shall be had against any Person solely as a result of their capacity as
incorporator, stockholder, officer, director, employee or controlling person of
the Company or of any successor Person thereof. Each holder, by accepting the
exchange notes, waives and releases all such liability.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. The Indenture includes the full definition of all these terms, as
well as any other terms used below for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of the Restricted
Subsidiaries or assumed by the Company or any Restricted Subsidiary in
connection with the acquisition of assets from such Person and in each case
whether or not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, merger or consolidation.
"AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"AFFILIATE TRANSACTION" has the meaning set forth under "--Certain
Covenants--Limitation on Transactions with Affiliates."
"ANNUAL INCENTIVE PLAN" means the LaBranche & Co Inc. Annual Incentive Plan
as in effect on the Issue Date or as amended from time to time as approved by a
majority of the disinterested members of the Board of Directors (or a majority
of the disinterested members of a committee thereof).
"ASSET ACQUISITION" means:
(a) an Investment by the Company or any Restricted Subsidiary in any other
Person pursuant to which such Person shall become a Restricted Subsidiary
or shall be merged with or into the Company or any Restricted Subsidiary,
or
(b) the acquisition by the Company or any Restricted Subsidiary of the
assets of any Person (other than a Restricted Subsidiary) that constitute
all or substantially all of the assets of such Person or comprises any
division or line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance, lease,
assignment or other transfer (other than the granting of a Lien in accordance
with the Indenture) for value by the Company or any of the Restricted
Subsidiaries (including any Sale and Leaseback Transaction) to any Person other
than the Company or a Restricted Subsidiary of:
(a) any Capital Stock of any Restricted Subsidiary; or
(b) any other property or assets (excluding Capital Stock) of the Company or
any Restricted Subsidiary,
provided, however, that "Asset Sale" shall not include:
(1) a transaction or series of related transactions for which the Company or
the Restricted Subsidiaries receive aggregate consideration of less than
$2.0 million;
(2) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted by the
covenant described under "--Certain Covenants-- Merger, Consolidation and
Sale of Assets";
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(3) any Restricted Payment made in accordance with the covenant described
under "--Certain Covenants--Limitation on Restricted Payments";
(4) the sale or lending of Investment Securities in the ordinary course of
business of the Company and its Restricted Subsidiaries;
(5) Sale and Leaseback Transactions involving up to $15.0 million in the
aggregate after the Issue Date; or
(6) the disposition of obsolete or worn-out equipment or entering into
operating leases for real property or equipment or subleases in respect
thereof, in each case in the ordinary course of business.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof,
"BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution
certified by the secretary or an assistant secretary of such Person to have been
duly adopted by the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations, at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means:
(a) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and
whether or not voting) of corporate stock, including each class of Common
Stock and Preferred Stock of such Person; and
(b) with respect to any Person that is not a corporation, any and all
partnership, limited liability company interests or other equity
interests of such Person.
"CASH EQUIVALENTS" means:
(a) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(b) marketable direct obligations issued by any state of the United States
of America or any political subdivision of any such state or any public
instrumentality thereof maturing within twelve months from the date of
acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's");
(c) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(d) certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$500,000,000;
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(e) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) entered into
with any bank meeting the qualifications specified in clause (d) above;
and
(f) investments in money market funds that invest substantially all their
assets in securities of the types described in clauses (a) through (e)
above.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events:
(a) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets
of the Company (determined on a consolidated basis) to any Person or
group of related Persons for purposes of Section 13(d) of the Exchange
Act (a "Group"), (whether or not otherwise in compliance with the
provisions of the Indenture);
(b) the approval by the holders of Capital Stock of the Company of any plan
or proposal for the liquidation or dissolution of the Company (whether or
not otherwise in compliance with the provisions of the Indenture);
(c) any Person or Group, other than the Permitted Holders, becomes the
beneficial owner (as defined by Section 13(d) of the Exchange Act)
directly or indirectly, of more than 35% of the total voting power of the
Capital Stock of the Company, and the Permitted Holders beneficially own,
directly or indirectly in the aggregate, a lesser percentage of the total
voting power of the Capital Stock of the Company than such Person or
Group and do not have the right or ability by voting power, contract, or
otherwise to elect or designate for election a majority of the Board of
Directors (or any analogous governing body) of the Company; or
(d) the replacement of a majority of the Board of Directors of the Company
over a consecutive 24-month period from the directors who constituted the
Board of Directors of the Company at the beginning of such period, and
such replacement shall not have been approved by a vote of at least a
majority of the Board of Directors of the Company, then still in office
who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"CHANGE OF CONTROL OFFER" has the meaning set forth under "--Change of
Control."
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth under "--Change
of Control."
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
"COMMISSION NET CAPITAL" means, at any time, the "net capital" of LaBranche
computed in accordance with Rule 15c3-1.
"COMMISSION REQUIRED NET CAPITAL" means, at any time, the minimum amount to
which Commission Net Capital must be equal pursuant to Rule 15c3-1 in order to
remain in compliance with all provisions thereof.
"COMMON STOCK" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to the Company, for any period,
the sum (without duplication) of:
(a) Consolidated Net Income; and
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(b) to the extent Consolidated Net Income has been reduced thereby;
(1) any income taxes of the Company and the Restricted Subsidiaries paid
or accrued in accordance with GAAP for such period (other than income
taxes attributable to extraordinary or nonrecurring gains or taxes
attributable to Asset Sales outside the ordinary course of business);
(2) Consolidated Interest Expense; and
(3) Consolidated Non-cash Charges, less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a
consolidated basis for the Company and the Restricted Subsidiaries in
accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to:
(a) the Incurrence or repayment of any Indebtedness of the Company or any of
the Restricted Subsidiaries (and the application of the proceeds thereof)
giving rise to the need to make such calculation and any Incurrence or
repayment of other Indebtedness (and the application of the proceeds
thereof), other than the Incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on
or prior to the Transaction Date, as if such Incurrence or repayment, as
the case may be (and the application of the proceeds thereof), occurred
on the first day of the Four Quarter Period;
(b) any Asset Sales, any disposition of assets excluded from the definition
of Asset Sale pursuant to clause (3) thereof or any Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of the Company or one of the
Restricted Subsidiaries (including any Person that becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale or other disposition during the Four
Quarter Period, provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated
Net Income") occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date as if such Asset Sale, other disposition or Asset
Acquisition (including the Incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If the Company or any of the Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the Incurrence of such guaranteed
Indebtedness as if the Company or any Restricted Subsidiary had directly
incurred or otherwise assumed such guaranteed Indebtedness; and
(c) the Reorganization.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of the "Consolidated Fixed
Charge Coverage Ratio"
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(1) interest on outstanding Indebtedness determined on a fluctuating basis
as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;
(2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor
of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date
will be deemed to have been in effect during the Four Quarter Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness determined on
a fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to the Company for any
period, the sum, without duplication, of:
(a) Consolidated Interest Expense; plus
(b) the product of:
(1) the amount of all dividend payments on any series of Preferred Stock
of the Company (other than dividends paid in Qualified Capital Stock)
paid, accrued or scheduled to be paid or accrued during such period
times; and
(2) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated federal,
state and local income tax rate of the Company, expressed as a
decimal.
"CONSOLIDATED INTEREST EXPENSES" means, with respect to the Company for any
period, the sum of, without duplication:
(a) the aggregate of the interest expense of the Company and the Restricted
Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation, whether or not
constituting interest expense in accordance with GAAP:
(1) any amortization of debt discount,
(2) the net costs under Interest Swap Obligations,
(3) any capitalized interest and
(4) the interest portion of any deferred payment obligation; and
(b) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to the Company, for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(a) after-tax gains (but not losses) from Asset Sales or reserves relating
thereto;
(b) extraordinary gains or losses;
(c) for purposes of calculating Consolidated Net Income pursuant to clause
(3) of the first paragraph of "Certain Covenants--Limitation on
Restricted Payments" only, the net income of any Person acquired in a
"pooling of interests" transaction accrued prior to the date it
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becomes a Restricted Subsidiary or is merged or consolidated with the
Company or any Restricted Subsidiary;
(d) the net income (but not loss) of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the relevant time
permitted by a contract operation of law or otherwise;
(e) any increase (but not decrease) in net income attributable to minority
interests in Restricted Subsidiaries;
(f) the net income of any Person, other than a Restricted Subsidiary, except
to the extent of cash dividends or distributions paid to the Company or
to a Restricted Subsidiary by such Person;
(g) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date;
(h) in the case of a successor to the Company by consolidation or merger or
as a transferee of the Company's assets, for purposes of calculating
Consolidated Net Income pursuant to clause (3) of the first paragraph of
"Certain Covenants--Limitation on Restricted Payments" only, any earnings
of the successor corporation prior to such consolidation, merger or
transfer of assets; and
(i) the cumulative effect of changes in accounting principles.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and the Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge that requires an accrual of or a reserve
for cash charges for any future period).
"COVENANT DEFEASANCE" has the meaning set forth under "--Legal Defeasance
and Covenant Defeasance."
"CREDIT AGREEMENT" means the Credit Agreement between LaBranche and The Bank
of New York, dated June 26, 1998, as amended.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"DEFAULT" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice of both would be, an Event of Default.
"DESIGNATION" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"DESIGNATION AMOUNT" has the meaning set forth under "--Certain
Covenants--Limitations on Designations of Unrestricted Subsidiaries."
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock that,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is mandatorily exchangeable for Indebtedness, or is redeemable, or exchangeable
for Indebtedness, at the sole option of the holder thereof on or prior to the
91st day after the final maturity date of the exchange notes.
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"EQUITY INCENTIVE PLAN" means the LaBranche & Co Inc. Equity Incentive Plan
as in effect on the Issue Date or as amended from time to time as approved by a
majority of the disinterested members of the Board of Directors (or a majority
of the disinterested members of a committee thereof).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth under "--Events of Default."
"FOUR QUARTER PERIOD" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"HOLDERS" has the meaning set forth under "--Principal, Maturity and
Interest."
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion change or otherwise),
assume, guarantee or otherwise become liable, contingently or otherwise, in
respect of such Indebtedness or other obligation on the balance sheet of such
Person. Indebtedness of any Acquired Person or any of its Subsidiaries existing
at the time such Acquired Person becomes a Restricted Subsidiary (or is merged
into or consolidated with the Company or any Restricted Subsidiary), whether or
not such Indebtedness was Incurred in connection with, as a result of, or in
contemplation of, such Acquired Person becoming a Restricted Subsidiary (or
being merged into or consolidated with the Company or any Restricted
Subsidiary), shall be deemed Incurred at the time any such Acquired Person
becomes a Restricted Subsidiary or merges into or consolidates with the Company
or any Restricted Subsidiary.
"INDEBTEDNESS" means, with respect to any Person, without duplication:
(a) all Obligations of such Person for borrowed money,
(b) all Obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(c) all Capitalized Lease Obligations of such Person;
(d) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted);
(e) all letters of credit, banker's acceptances or similar credit
transactions (including any Obligations for reimbursement in respect
thereof);
(f) guarantees and other contingent obligations in respect of Indebtedness
of any other Person referred to in clauses (a) through (e) above and
clause (h) below;
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(g) all Obligations of any other Person of the type referred to in clauses
(a) through (e) that are secured by any Lien on any property or asset of
such Person, the amount of such Obligation being deemed to be the lesser
of the fair market value of such property or asset or the amount of the
Obligation so secured;
(h) all Obligations under Currency Agreements and Interest Swap Obligations
of such Person; and
(i) all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal
to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if
any.
Notwithstanding anything to the contrary herein, "Indebtedness" shall not
include any overnight borrowings by the Company or any Restricted Subsidiary
Incurred in connection with the lending of Investment Securities which does not
constitute indebtedness under GAAP.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
"INDEPENDENT FINANCIAL ADVISOR" means a qualified accounting, appraisal or
investment banking firm of national standing that does not, and whose directors,
officers and employees and Affiliates do not, have a direct or indirect
financial interest in the Company.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any Person:
(a) any direct or indirect advance, loan or other extension of credit
(including, without limitation, a guarantee) or capital contribution to
any other Person (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others); or
(b) any purchase or acquisition by such Person of any Capital Stock (or
warrants, rights or options to purchase Capital Stock), bonds, notes,
debentures or other securities or evidences of Indebtedness issued by,
any other Person.
"INVESTMENT" shall exclude extensions of trade credit by the Company and the
Restricted Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Company or such Restricted Subsidiary, as the case
may be. If the Company or any Restricted Subsidiary sells or otherwise disposes
of any Capital Stock of any Restricted Subsidiary (the "Referent Subsidiary")
such that, after giving effect to any such sale or disposition the Referent
Subsidiary shall cease to be a Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Capital Stock of the Referent Subsidiary
not sold or disposed of.
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"INVESTMENT SECURITIES" means marketable securities of a Person (other than
an Affiliate or joint venture of the Company or any Restricted Subsidiary)
acquired by the Company or any of its Restricted Subsidiaries in the ordinary
course of its specialist or related businesses.
"ISSUE DATE" means the first date of issuance of the initial notes.
"LABRANCHE" means LaBranche & Co., a New York limited partnership, or any
other Wholly-Owned Subsidiary registered as a broker-dealer under the Exchange
Act which succeeds to the business of LaBranche & Co.
"LEGAL DEFEASANCE" has the meaning set forth under "--Legal Defeasance and
Covenant Defeasance."
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature hereof and any agreement to give
any security interest).
"MAKE-WHOLE PREMIUM" means, with respect to any exchange note on any
Redemption Date, the greater of:
(a) 1% of the principal amount of such exchange note; and
(b) the excess, if any, of,
(1) the present value at such time of the payment of the outstanding
principal amount of such exchange note on the maturity date therefor
and the remaining scheduled payments of interest on such exchange
note to the maturity date therefor, computed using a discount rate
equal to the Treasury Rate plus 0.50% per annum, over
(2) the outstanding principal amount of such exchange note.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest), received
by the Company or any of the Restricted Subsidiaries from such Asset Sale net
of:
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking
fees, sales commissions and relocation expenses);
(b) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(c) repayments of Indebtedness secured by the property or assets subject to
such Asset Sale that is required to be repaid in connection with such
Asset Sale; and
(d) appropriate amounts to be determined by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale.
"NET PROCEEDS OFFER" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"NET PROCEEDS OFFER AMOUNT" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
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"NET PROCEEDS OFFER PAYMENT DATE" has the meaning set forth under "--Certain
Covenants-- Limitation on Asset Sales."
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning set forth under "--Certain
Covenants-- Limitation on Asset Sales."
"NYSE" means the New York Stock Exchange, Inc. or any successor operator of
the New York Stock Exchange.
"NYSE NET CAPITAL" means, at any time, the "net capital" of LaBranche
computed in accordance with Rule 326(a) of the NYSE (or any successor
provision).
"NYSE REQUIRED NET CAPITAL" means, at any time, the minimum amount of NYSE
Net Capital necessary at such time in order to permit LaBranche to "expand its
business" pursuant to Rule 326(a) of the NYSE (or any successor provision).
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any indebtedness.
"PERMITTED HOLDERS" means:
(a) individually or a combination of any of the following individuals:
George M.L. LaBranche, IV, James G. Gallagher, Alfred O. Hayward, Jr.,
Vincent J. Flaherty or Michael J. Naughton;
(b) a spouse of any of the Person, referred to in clause (a) or any of his
or her lineal descendants;
(c) the trustee(s) of any trust established solely for any of the Persons
referred to in clause (a) or (b);
(d) any organization to which contributions by any of the Persons referred
to in a clause (a), (b) or (c) are deductible for federal income, estate
or gift tax purposes or any split-interest trust described in Section
4947 of the Internal Revenue Code of 1986, as amended, provided that, in
each case, such Person is a trustee or a member of the board of
directors, trustees or other governing body or group having the ultimate
authority, inter alia, to vote, dispose or direct the voting or
disposition of Capital Stock of the Company held by such Person; and
(e) a corporation of which a majority of the voting power of its outstanding
Capital Stock is beneficially owned by, or a partnership or limited
liability company of which a majority of the partnership or limited
liability company interests entitled to vote and participate in the
management of the partnership or limited liability company are
beneficially owned by, a Person described in clause (a), (b), (c) or (d).
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(a) Indebtedness under the exchange notes;
(b) Indebtedness of the Company and the Restricted Subsidiaries Incurred
pursuant to working capital facilities (including, without limitation,
the Credit Agreement) in an amount not to exceed 70% of the market value
of the Investment Securities securing such facilities constituting equity
securities listed on the NYSE or the NASDAQ National Market System, less
the amount of any permanent prepayments or reductions of commitments in
respect of any such Indebtedness made pursuant to "--Certain
Covenants--Limitation on Asset Sales";
(c) Indebtedness of the Company and the Restricted Subsidiaries outstanding
on the Issue Date (excluding Indebtedness under the Credit Agreement but
including Indebtedness owed to Mill Bridge, Inc. and Kathryn Gallagher
and other Indebtedness Incurred on the Issue Date
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pursuant to the Reorganization) reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(d) Permitted Subordinated Indebtedness Incurred after the Issue Date not to
exceed $50.0 million at any one time outstanding;
(e) Interest Swap Obligations of the Company covering Indebtedness of the
Company and Interest Swap Obligations of any Restricted Subsidiary
covering Indebtedness of such Restricted Subsidiary; provided, however,
that such Interest Swap Obligations are entered into to protect the
Company and the Restricted Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with the Indenture to the
extent the notional principal amount of such Interest Swap Obligations
does not exceed the principal amount of the indebtedness to which such
Interest Swap Obligations relates;
(f) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(g) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary for so long as the Indebtedness is held by the
Company or a Restricted Subsidiary, in each case subject to no Lien held
by a Person other than the Company or a Restricted Subsidiary, provided
that if as of any date any Person other than the Company or a Restricted
Subsidiary owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such Indebtedness shall be deemed to be Incurred on
such date and not constitute Permitted Indebtedness under this clause
(g);
(h) Indebtedness of the Company to a Restricted Subsidiary, provided that:
(1) any Indebtedness of the Company to any Restricted Subsidiary is
subordinate in right of payment to the exchange notes, and
(2) if as of any date any Person other than a Restricted Subsidiary owns
or holds any such Indebtedness or any Person holds a Lien in respect
of such Indebtedness, such date shall be deemed the date of
Incurrence of Indebtedness not constituting Permitted Indebtedness by
the Company;
(i) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar installment inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
indebtedness is extinguished within five business days of Incurrence;
(j) Indebtedness of the Company or any of the Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security
for workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of
business;
(k) Refinancing Indebtedness;
(l) Purchase Money Indebtedness and Capitalized Lease Obligations (and any
Indebtedness incurred to Refinance such Purchase Money Indebtedness or
Capitalized Lease Obligations) of the Company or any Restricted
Subsidiary not to exceed $20.0 million at any one time outstanding; and
(m) additional Indebtedness of the Company or any Restricted Subsidiary in
an aggregate principal amount not to exceed $15.0 million at any one time
outstanding.
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"PERMITTED INVESTMENTS" means:
(a) Investments by the Company or any Restricted Subsidiary in any Person
that is or will become immediately after such Investment a Restricted
Subsidiary or that will merge or consolidate into the Company or a
Restricted Subsidiary;
(b) Investments in the Company by any Restricted Subsidiary; provided that
any Indebtedness evidencing such Investment is unsecured and subordinate
to the exchange notes;
(c) Investments in cash and Cash Equivalents;
(d) loans and advances to employees, officers and directors of the Company
and the Restricted Subsidiaries in the ordinary course of business for
bona fide business purposes not in excess of $5.0 million at any time
outstanding in the aggregate;
(e) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or a Restricted Subsidiary's businesses
and otherwise in compliance with the Indenture;
(f) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(g) Investments made by the Company or the Restricted Subsidiaries as a
result of noncash consideration received in connection with an Asset Sale
made in compliance with the covenant described under "--Certain
Covenants--Limitation on Asset Sales";
(h) Investments in Investment Securities (including borrowings or loans of
Investment Securities) in the ordinary course of business of the Company
and its Restricted Subsidiaries; or
(i) additional Investments not to exceed $10.0 million at any one time
outstanding in the aggregate.
"PERMITTED LIENS" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims either:
(1) not delinquent; or
(2) contested in good faith by appropriate proceedings and as to which
the Company or any Restricted Subsidiary shall have set aside on its
books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by
law or pursuant to customary reservations or retentions of title, in each
case arising in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice
in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the
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review of such judgment shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired;
(e) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar charges or encumbrances in
respect of real property not impairing in any material respect the
ordinary conduct of the business of the Company or any Restricted
Subsidiary;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(g) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(h) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset
and set-off;
(j) leases or subleases in respect of real property or equipment granted to
others not interfering in any material respect with the ordinary conduct
of the business of the Company or any Restricted Subsidiary;
(k) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customs duties in connection with the
importation of goods; and
(l) normal and customary rights of setoff upon deposits of cash in favor of
banks or other depositary institutions.
"PERMITTED SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company
Incurred at a time when no Default or Event of Default has occurred and is
continuing:
(a) which matures at least 91 days after the final maturity date for the
exchange notes and is not prior to that time:
(1) mandatorily redeemable, or
(2) exchangeable for Indebtedness other than Permitted Subordinated
Indebtedness pursuant to a sinking fund obligation or otherwise or
upon the occurrence of any event,
(b) which has a Weighted Average Life to Maturity greater than that of the
exchange notes;
(c) which is subordinate in right of payment to the exchange notes with
payment blockage rights in favor of the Holders of the exchange notes as
set forth in the Indenture; and
(d) the proceeds of which are loaned by the Company to LaBranche pursuant to
clause (g) of the definition of Permitted Indebtedness and a subordinated
loan agreement (as defined in Appendix D to Rule 15c3-1) for use by
LaBranche for net capital purposes and properly accounted for by
LaBranche as Commission Net Capital and NYSE Net Capital; provided that
any subordination of the loan by the Company will apply only to the
extent required to permit the loan to qualify as Commission Net Capital
and NYSE Net Capital.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
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"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed such purchase price or cost.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"REDEMPTION DATE" has the meaning set forth under "Optional Redemption."
"REFERENCE DATE" has the meaning set forth under "--Certain
Covenants--Limitation on Restricted Payments."
"REFINANCE" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of Indebtedness incurred in accordance with "Certain
Covenants--Limitation on the Incurrence of Additional Indebtedness" (other than
Permitted Indebtedness) or clause (a) or (c) of the definition of "Permitted
Indebtedness," in each case that does not:
(a) result in an increase in the aggregate principal amount of any
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium reasonably necessary to Refinance such
Indebtedness and plus the amount of reasonable expenses incurred by the
Company in connection with such Refinancing); or
(b) create Indebtedness with:
(1) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or
(2) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided that if such Indebtedness being Refinanced
is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated the Issue Date by and among the Company and Salomon Smith Barney Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation, as Initial Purchasers.
"REORGANIZATION" means, as described in this prospectus, the creation of the
Company as a holding company for LaB Investing Co. L.L.C. and LaBranche, the
acquisition by the Company on the Issue Date of all of the limited partnership
interests in LaBranche and the entire membership interest in LaB Investing Co.
L.L.C., the issuance by the Company of the initial notes and the Incurrence by
the Company and LaBranche of other Indebtedness as described in this prospectus.
"REPLACEMENT ASSETS" means assets and property that will be used in the
business of the Company and/or its Restricted Subsidiaries as such business is
then being conducted (including Capital Stock of a Person that becomes a Wholly
Owned Restricted Subsidiary).
"RESTRICTED PAYMENT" has the meaning set forth under "--Certain
Covenants--Limitations on Restricted Payments."
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted
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Subsidiary pursuant to and in compliance with the covenant described under
"--Certain Covenants-- Limitation on Designations of Unrestricted Subsidiaries."
Any such Designation may be revoked by a Board Resolution of the Company
delivered to the Trustee, subject to the provisions of such covenant.
"REVOCATION" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"RULE 15C3-1" means Rule 15c3-1 under the Exchange Act (or any successor
provision).
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"SIPA" means the Securities Investor Protection Act of 1970, as amended, or
any successor statute or statutes thereto, and the rules and regulations
promulgated thereunder.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Section 1.02(w) of Regulation S-X under the Securities
Act as in effect on the Issue Date, except that all references to 10% in Section
1.02(w) shall be changed to 5%.
"STATED MATURITY" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"SUBSIDIARY" with respect to any Person, means:
(a) any corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of directors
under ordinary circumstance shall at the time be owned, directly or
indirectly, by such Person; or
(b) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"SURVIVING ENTITY" has the meaning set forth under "--Certain
Covenants--Merger, Consolidation and Sale of Assets."
"TRANSACTION DATE" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"TREASURY RATE" means the yield to maturity at the time of computation of
U.S. Treasury securities with a constant maturity, as compiled in the most
recent Federal Reserve Release H.15 (519) which has become publicly available at
least two business days prior to the relevant Redemption Date (or, if such
statistical release is no longer published, any publicly available source of
similar market data), closest to the period from such Redemption Date to the
maturity date for the exchange notes, provided that, if the period from such
Redemption Date to the maturity date is, not equal to the constant maturity of a
U.S. Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of one year) from the weekly average yields of U.S. Treasury
securities for which such yields are given, except that if the period from such
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Redemption Date to the maturity date is less than one year, the weekly average
yield on actually traded U.S. Treasury securities adjusted to a constant
maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(a) the then outstanding aggregate principal amount of such Indebtedness
into
(b) the sum of the total of the products obtained by multiplying:
(1) the amount of each then remaining installment, sinking fund, serial
maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by
(2) the number of years (calculated to the nearest one-twelfth) which
will elapse between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of the Company means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a Subsidiary not organized under the laws of a State of the United
States, directors' qualifying shares or an immaterial amount of shares required
to be owned by other Persons pursuant to applicable law) are owned directly or
indirectly by the Company or any Wholly Owned Restricted Subsidiary.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will be issued in the form of a global note (the "Global
Note"). The Global Note will be deposited with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of DTC or its nominee. Except
as set forth below, the Global Note may be transferred in whole and not in part,
only to DTC or another nominee of DTC. Investors may hold their beneficial
interests in the Global Note directly through DTC if they have an account with
DTC or indirectly through Euroclear System ("Euroclear") or Cedel Bank, N.A.
("Cedel Bank"), organizations which have accounts with DTC.
Exchange notes that are issued as described below under "--Certificated
Exchange Notes" will be issued in definitive form. Upon the transfer of an
exchange note in definitive form, such exchange note will, unless the Global
Note has previously been exchanged for exchange notes in definitive form, be
exchanged for an interest in the Global Note representing the principal amount
of exchange notes being transferred.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTE
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel Bank set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. The
Company takes no responsibility for these operations or procedures, and
investors are urged to contact the relevant system or its participants directly
to discuss these matters.
DTC has advised the Company that it is:
- a limited purpose trust company organized under the laws of the State of
New York,
- a "banking organization" within the meaning of the New York Banking Law,
- a member of the Federal Reserve System,
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- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended and
- a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
DTC was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of Participants, thereby eliminating the need for physical transfer and
delivery of certificates. DTC Participants include securities brokers and
dealers (including the initial purchasers), banks and trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Investors who are not Participants may beneficially own securities
held by or on behalf of DTC only through Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC
- upon deposit of the Global Note, DTC will credit the accounts of
Participants with an interest in the Global Note, and
- ownership of the exchange notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC
(with respect to the interests of Participants) and the records of
Participants and the Indirect Participants (with respect to the interests
of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the exchange notes represented
by a Global Note to such persons may be limited. In addition, because DTC can
act only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in exchange notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of such interest, may be affected by the lack
of a physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the exchange notes resented by the Global Note for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in the
Global Note will not be entitled to have exchange notes represented by such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated notes, and will not be considered the
owners or holders thereof under the Indenture for any purpose, including with
respect to the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in the Global
Note must rely on the procedures of DTC and, if such holder is not a Participant
or an Indirect Participant, on the procedures of the Participant through which
such holder owns its interest, to exercise any rights of a holder of exchange
notes under the Indenture of such Global Note. The Company understands that
under existing industry practice, in the event that the Company requests any
action of holders of exchange notes, or a holder that is an owner of a
beneficial interest in the Global Note desires to take any action that DTC, as
the holder of such Global Note, is entitled to take, DTC could authorize the
Participants to take such action and the Participants would authorize holders
owning through such Participants to take such action or would otherwise act upon
the instruction of such holders. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of exchange notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such exchange notes.
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The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest on the Global Note, will credit Participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the Global Note as shown on the records of DTC or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in the Global Note held through such Participants will be
governed by standing instructions and customary practices and will be the
responsibility of such Participants. The Company will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global Note
for any exchange note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between DTC and Participants or the relationship between such
Participants and the owners of beneficial interests in the Global Note owning
through such Participants.
Transfers between Participants will be effected in accordance with DTC's
procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel Bank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
or Cedel Bank participants, on the other hand, will be effected through DTC in
accordance with DTC's rules on behalf of Euroclear or Cedel Bank, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel Bank, as the case
may be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system.
Euroclear or Cedel Bank, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Notes in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and Cedel Bank participants may not deliver
instructions directly to the depositaries for Euroclear or Cedel Bank.
Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a Global Note from a
Participant will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel Bank participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel Bank)
immediately following the settlement date of DTC. Cash received in Euroclear or
Cedel Bank as a result of sales of interests in the Global Note by or through a
Euroclear or Cedel Bank participant to a Participant will be received with value
on the settlement date of DTC but will be available in the relevant Euroclear or
Cedel Bank cash account only as of the business day for Euroclear or Cedel Bank
following DTC's settlement date.
Although DTC, Euroclear and Cedel Bank have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Note among
participants in DTC, Euroclear and Cedel Bank, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel Bank or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE NOTES
If:
- DTC (1) notifies the Company that it is no longer willing or able to act
as a depositary and the Company fails to appoint a successor depositary or
(2) ceases to be registered as a clearing agency under the Exchange Act;
- the Company, at its option, notifies the Trustee in writing that it elects
to cause the issuance of exchange notes in certificated form; or
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- at the request of DTC, if there shall have occurred and be continuing an
event of default with respect to the exchange notes,
then, upon surrender by DTC of the Global Note, certificated exchange notes
in definitive form in denominations of U.S. $1,000 and integral multiples
thereof will be issued to each person that DTC identifies as the beneficial
owner of the exchange notes represented by the Global Note. Upon any such
issuance, the Trustee is required to register such certificated exchange
notes in the name of such person or persons (or the nominee of any thereof)
and cause the same to be delivered thereto. Subject to the foregoing, the
Global Note is not exchangeable, except for a Global Note of the same
aggregate denomination to be registered in the name of DTC or its nominee.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related exchange notes and each such person may conclusively rely on, and
shall be protected in relying on, instructions from DTC for all purposes,
including with respect to the registration and delivery, and the respective
principal amounts, of the exchange notes to be issued.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We entered into a registration rights agreement with the initial purchasers
concurrently with the issuance of the initial notes. You may obtain a copy of
the agreement by calling or writing to us at One Exchange Plaza, New York, New
York 10006; (212) 425-1144. Under the agreement, we agreed to file with the SEC
an exchange offer registration statement of which this prospectus is a part with
respect to an offer to exchange the initial notes for a new series of exchange
notes with terms substantially identical to the initial notes. We will also file
a shelf registration statement to cover resales of initial notes or exchange
notes by holders who provide us with certain information if:
a) we are not permitted to effect the exchange offer because the exchange
offer is not permitted by applicable law or SEC policy;
b) the exchange offer is not completed within 120 days of the Issue Date;
c) any holder of any private exchange notes so requests in writing to us
within 30 days after the completion of the exchange offer; or
d) in the case of any holder that participates in the exchange offer, such
holder does not receive exchange notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than due
solely to the status of such holder as an affiliate of the Company within the
meaning of the Securities Act).
We will use our best efforts to obtain effectiveness of the applicable
registration statement as promptly as possible.
UNDER EXISTING INTERPRETATIONS OF THE STAFF OF THE DIVISION OF CORPORATION
FINANCE OF THE SEC, THE EXCHANGE NOTES WOULD IN GENERAL BE FREELY TRADABLE AFTER
THE COMPLETION OF THE EXCHANGE OFFER WITHOUT FURTHER COMPLIANCE WITH THE
REGISTRATION AND DELIVERY REQUIREMENTS OF THE SECURITIES ACT. HOWEVER, THE SEC
INDICATED THAT IT MAY REPEAL THESE INTERPRETATIONS. FURTHERMORE, THE SEC MAY
ADOPT CERTAIN PROPOSED RULE CHANGES UNDER THE SECURITIES ACT. IF THE
INTERPRETATIONS REFERRED TO ABOVE ARE REPEALED BEFORE THE EXCHANGE OFFER IS
COMPLETED SO THAT THE EXCHANGE OFFER WOULD NO LONGER BE PERMISSIBLE, THEN
HOLDERS OF THE INITIAL NOTES WILL NOT BE ABLE TO RECEIVE EXCHANGE NOTES PURSUANT
TO AN EXCHANGE OFFER. RATHER, THE INITIAL NOTES WILL ONLY BE REGISTERED IN
CONNECTION WITH RESALES BY THE HOLDERS. IN CONNECTION WITH SUCH RESALES, THE
HOLDERS WILL BE REQUIRED TO DELIVER A PROSPECTUS TO THE PURCHASERS AND WILL BE
SUBJECT TO CERTAIN OF THE CIVIL LIABILITY PROVISIONS UNDER THE SECURITIES ACT.
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Under the registration rights agreement we agreed to:
- file the exchange offer registration statement with the SEC by the 45th
day after the closing of our initial note offering;
- use our best efforts to obtain effectiveness of the exchange offer
registration statement by the 90th day after the closing for our initial
note offering;
- unless the exchange offer would not be permitted by applicable law or SEC
policy, commence the exchange offer and use our best efforts to issue by
the 120th day after the closing of our initial note offering exchange
notes in exchange for all initial notes tendered in the exchange offer;
- if obligated to file a shelf registration statement, use our best efforts
to file such shelf registration statement with the SEC by the 45th day
following the date of the occurrence of one of the events specified in the
registration rights agreement which gives rise to our obligation to file a
shelf registration statement; and
- if obligated to file a shelf registration statement, use our best efforts
to obtain effectiveness of such shelf registration statement by the 45th
day after the initial shelf registration filing date.
We agreed to pay additional interest if:
- we fail to file the exchange offer registration statement by the 45th day
after the closing of our initial note offering;
- the exchange offer registration statement is not declared effective by the
SEC by the 90th day after the closing of our initial note offering;
- we fail to consummate the exchange offer by the 120th day after the
closing of our initial note offering;
- the exchange offer registration statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
exchange notes in accordance with and during the periods specified in the
registration rights agreement;
- we fail to file a shelf registration statement by the 45th day following
the date of the occurrence of one of the events specified in the
registration rights agreement which gives rise to our obligation to file a
shelf registration statement;
- the shelf registration statement is not declared effective by the SEC by
the 45th day following the initial shelf registration filing date; or
- the shelf registration statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities (as defined below) in accordance with and during the
periods specified in the registration rights agreement.
Each event described above is a "Registration Default." The term "Transfer
Restricted Securities" means each initial note, or exchange note, until:
- in the case of an initial note, the date on which such initial note has
been exchanged by a person other than a broker-dealer for an exchange note
in the exchange offer;
- in the case of an exchange note received by a broker-dealer in the
exchange offer in exchange for an initial note, the date on which the
exchange note is sold to a purchaser who receives from the broker-dealer
on or prior to the date of sale a copy of the exchange offer prospectus;
- in the case of an initial note, the date on which the initial note has
been effectively registered under the Securities Act and disposed of under
the shelf registration statement; or
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- in the case of an initial note, the date on which the initial note is
publicly sold under Rule 144 under the Act.
If a Registration Default occurs, we will pay to each holder of initial
notes or exchange notes, as liquidated damages and not as a penalty, additional
interest equal to 0.25% per annum of the aggregate principal amount of the
initial notes or exchange notes held by such holder, during the 90-day period
immediately following the occurrence of the first Registration Default. The
amount of additional interest will increase by an additional 0.25% per annum at
the beginning of each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum aggregate amount of additional interest equal
to 1.00% per annum. All accrued additional interest with respect to initial
notes or exchange notes held in global form will be paid by wire transfer of
immediately available funds or by federal funds check. All accrued additional
interest with respect to initial notes or exchange notes held in certificated
form will be paid by wire transfer to the accounts specified by the relevant
holder or by mailing checks to their registered addresses if no such accounts
have been specified. Following the cure of all Registration Defaults, the
accrual of additional interest will cease.
Holders of initial notes have made certain representations to us (as
described in the registration rights agreement) to participate in the exchange
offer. Holders of initial notes and/or exchange notes must also deliver
information required to be included in the shelf registration statement and
provide comments on the shelf registration statement within the time periods set
forth in the registration rights agreement in order to have their initial notes
and/or exchange notes included in the registration statement and receive
liquidated damages as described above.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following summarizes the principal terms of the other indebtedness of
LaBranche & Co Inc., LaBranche & Co. and LaB Investing Co. L.L.C. Copies of the
material agreements relating to the other indebtedness have been filed with the
SEC and the description below is qualified in its entirety by reference to the
agreements. See "Where You Can Find Additional Information."
CREDIT AGREEMENT WITH THE BANK OF NEW YORK
Effective as of June 23, 1999, the Credit Agreement between LaBranche & Co.
and The Bank of New York was extended for an additional one-year term, and
amended in order to increase the credit facility available thereunder from $75.0
million to $100.0 million. Borrowings under the Credit Agreement are secured by
a pledge of the investment securities of LaBranche & Co. identified in the
Credit Agreement. Loans under the Credit Agreement will bear interest at The
Bank of New York's broker loan rate. All loans under the Credit Agreement will
become due on June 23, 2000.
The Credit Agreement contains covenants that require LaBranche & Co., among
other things, to
- maintain net capital of not less than $75.0 million, and
- maintain a net worth of not less than $100.0 million.
The Credit Agreement also restricts LaBranche & Co.'s ability to incur
additional indebtedness, including guarantee liabilities, certain mortgages or
other encumbrances or the assets pledged under the Credit Agreement.
LABRANCHE & CO.'S PRIVATE PLACEMENT DEBT
LaBranche & Co. has two series of outstanding unsecured senior subordinated
notes in the aggregate principal amounts of $20.0 million and $15.0 million,
respectively. These notes mature on September 15, 2002 and June 3, 2008,
respectively, and bear interest payable quarterly at respective annual rates of
8.17% and 7.69%.
LaBranche & Co. may prepay, at a premium, all or any part of the senior
subordinated notes at any time, provided that the amount prepaid is not less
than 5% of the aggregate principal amount of the senior subordinated notes then
outstanding.
Upon the occurrence of a change of control, LaBranche & Co. may, but is not
required to, make one irrevocable separate offer to each holder of the senior
subordinated notes to prepay all of the senior subordinated notes then held by
that holder. The occurrence of a change of control also constitutes an event of
acceleration under each of the series of senior subordinated notes.
Among other things, the agreements relating to the senior subordinated notes
require that LaBranche & Co. comply with certain covenants including covenants
that
- restrict the type of businesses in which it may engage;
- require its net capital to be at least 150% of the net capital required by
the NYSE or the SEC and its adjusted partners' capital to be at least
$40.0 million; and
- prohibit it from making restricted payments.
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A failure to make timely payments of principal and/or interest on the senior
subordinated notes or the occurrence of certain other events may result in a
default under, or an acceleration of, the senior subordinated notes. These
events include:
- the Securities Investor Protection Corporation makes an application
stating that the customers of LaBranche & Co. are in need of protection
under the Securities Investor Protection Act, and the application is not
dismissed within 30 days;
- the SEC revokes the registration of LaBranche & Co. as a broker-dealer;
- the NYSE suspends the status of LaBranche & Co. as a member organization;
and
- LaBranche & Co. fails to meet its net capital requirements.
CASH SUBORDINATED LOAN AGREEMENTS
LaBranche & Co. is a party to a number of separate cash subordinated loan
agreements with current employees, former partners and family members or
affiliates of current and former partners of the firm. These cash subordinated
loan agreements represent junior subordinated debt of LaBranche & Co. The
current aggregate principal amount of such subordinated indebtedness is
approximately $16.2 million. This debt bears interest payable quarterly at an
annual rate of 10.0%. LaBranche & Co. has the option to prepay all or a portion
of this debt, subject to the approval of the NYSE and the application of
regulatory net capital requirements. The indebtedness represented by these cash
subordinated loan agreements generally matures one year from the date of
issuance, subject to automatic rollover for additional one-year terms, unless
notice is given by either party not to renew the term at least seven months
prior to the scheduled maturity date.
As part of the reorganization of our firm from partnership to corporate
form, LaBranche & Co. repaid $5.0 million in satisfaction of one of these cash
subordinated loan agreements and incurred $350,000 of subordinated indebtedness
pursuant to a new cash subordinated loan agreement in connection with the
redemption of a limited partnership interest which bears interest at an annual
rate of 8.0%.
NOTE ISSUED TO MILL BRIDGE
In connection with the reorganization of our firm from partnership to
corporate form, we acquired the limited partnership interest in LaBranche & Co.
held by Mill Bridge, Inc. for $90.0 million, of which $74.0 million was paid in
cash upon the consummation of our initial note offering and our common stock
offering and $16.0 million was satisfied by the issuance by us of a note which
is payable over three years. This $16.0 million obligation is a senior unsecured
obligation of LaBranche & Co Inc. and is payable as to $5.0 million on the first
anniversary of the completion of our initial note offering and our common stock
offering, $5.0 million on the second anniversary of the completion of our
initial note offering and our common stock offering and $6.0 million on the
third anniversary of the completion of our initial note offering and our common
stock offering, and bears interest at an annual rate of 9.5%. This obligation
ranks pari passu with the exchange notes.
RETIREMENT PLAN OBLIGATIONS
Upon the completion of our initial note offering and our common stock
offering, LaBranche & Co. repaid approximately $1.1 million in indebtedness owed
to participants in LaBranche & Co.'s retirement plan, which amount has been
accrued in the historical consolidated statement of financial condition.
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UNITED STATES INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. federal income tax
consequences of the exchange of the initial notes for exchange notes that may be
relevant to a beneficial owner of initial notes that is a citizen or resident of
the United States or a U.S. domestic corporation or that otherwise is subject to
United States federal income taxation on a net income basis in respect of such
initial notes. This summary is based on laws, regulations, rulings and judicial
and administrative decisions now in effect, all of which are subject to change.
This summary deals only with investors that hold the initial notes as capital
assets, and does not address tax considerations applicable to investors that may
be subject to special tax rules, such as, but not limited to, banks, tax-exempt
entities, insurance companies or dealers in securities or currencies, traders in
securities electing to mark to market, persons that hold the initial notes as a
position in a "straddle" or conversion transaction, or as part of a "synthetic
security" or other integrated financial transaction or persons that have a
"functional currency" other than the U.S. dollar.
The exchange of initial notes for exchange notes pursuant to the exchange
offer will not be a taxable event for U.S. federal income tax purposes. As a
result, a U.S. holder of an initial note whose initial note is accepted in the
exchange offer will not recognize gain or loss on the exchange for U.S. federal
income tax purposes. Such holder's tax basis in the exchange notes will be equal
to such holder's tax basis in the initial notes exchanged therefor, and the
holding period for the exchange notes received pursuant to the exchange offer
will include the holder's holding period for the initial notes surrendered
therefor.
Investors should consult their own tax advisors in determining the tax
consequences to them, as a result of their individual circumstances, of the
exchange of initial notes for exchange notes and of the ownership and
disposition of exchange notes received in the exchange offer, including the
application of state, local, foreign or other tax laws.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in
exchange for initial notes pursuant to the exchange offer, where such initial
notes were acquired by such broker-dealer as a result of market making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for initial notes where such initial notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for a
period of up to six-months, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1999, all dealers effecting transactions in
the exchange notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and that participates in a distribution of such
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of exchange notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under
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the Securities Act. The letter of transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of up to six-months, the Company will promptly send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any broker-dealer that requests such documents in the letter of transmittal. The
Company has agreed to pay all expenses incident to the exchange offer, including
the expenses of one special counsel for all of the holders of the initial notes,
other than commissions or concessions of any broker-dealers. The Company will
indemnify the holders of the initial notes, including any broker-dealers,
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of issuance of the exchange notes offered hereby will be passed
upon for LaBranche & Co Inc. by Fulbright & Jaworski L.L.P., New York, New York.
EXPERTS
The audited financials statements and schedules of LaB Investing Co. L.L.C.
and Subsidiary and the audited financial statements of LaBranche & Co. included
in this prospectus have been audited by Arthur Andersen LLP, independent
auditors, as stated in their reports appearing herein.
The audited financial statements of Fowler, Rosenau & Geary, LLC included in
this prospectus have been audited by Sugarman & Thrope, P.C., independent
auditors, as stated in their report appearing herein.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement under the Securities Act
on Form S-4 with respect to the exchange notes (together with all amendments and
exhibits thereto, the "Registration Statement") and are subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports, proxy statements and other information with the SEC. For
further information with respect to LaBranche & Co Inc., please refer to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this prospectus as to the
contents of any contract, agreement of any other document referred to are not
necessarily complete; reference is made in each instance to the copy of such
contract or document filed as an exhibit to the Registration Statement. Each
such statement is qualified in all respects by such reference to such exhibit. A
copy of the Registration Statement, including exhibits and schedules thereto,
may be inspected without charge and obtained at prescribed rates at the Public
Reference Section of the SEC at its principal offices, located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and may be inspected without charge at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Registration Statement, including the exhibits and
schedules thereto, is also available at the SEC's site on the World Wide Web at
http://www.sec.gov.
(Remainder of this page has been left blank intentionally.)
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
<TABLE>
<CAPTION>
PAGE
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<S> <C>
LABRANCHE & CO INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Consolidated Financial Information (Overview) (unaudited)........................................ F-3
Pro Forma Consolidated Statement of Financial Condition as of June 30, 1999 (unaudited).................... F-5
Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 1999 (unaudited).......... F-6
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1998 (unaudited)............ F-7
Notes to Pro Forma Consolidated Financial Information (unaudited).......................................... F-8
LAB INVESTING CO. L.L.C. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................................................... F-9
Consolidated Statements of Financial Condition as of June 30, 1999 (unaudited) and as of December 31, 1998
and 1997................................................................................................. F-10
Consolidated Statements of Operations for the Six Months Ended June 30, 1999 and 1998 (unaudited) and the
Years Ended December 31, 1998, 1997 and 1996............................................................. F-11
Consolidated Statements of Changes in Members' Capital for the Six Months Ended June 30, 1999 (unaudited)
and the Years Ended December 31, 1998, 1997 and 1996..................................................... F-12
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 (unaudited) and the
Years Ended December 31, 1998, 1997 and 1996............................................................. F-13
Notes to Consolidated Financial Statements................................................................. F-14
LAB INVESTING CO. L.L.C. (PARENT COMPANY ONLY) CONDENSED FINANCIAL STATEMENTS
Condensed Statements of Financial Condition as of December 31, 1998 and 1997............................... F-19
Condensed Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996.................... F-20
Condensed Statements of Changes in Members' Capital for the Years Ended December 31, 1998, 1997 and 1996... F-21
Condensed Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996.................... F-22
Note to Condensed Financial Statements..................................................................... F-23
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
LABRANCHE & CO. FINANCIAL STATEMENTS
Report of Independent Public Accountants................................................................... F-24
Statements of Financial Condition as of June 30, 1999 (unaudited) and as of December 31, 1998 and 1997..... F-25
Statements of Operations for the Six Months Ended June 30, 1999 and 1998 (unaudited) and the Years Ended
December 31, 1998, 1997 and 1996......................................................................... F-26
Statements of Changes in Partners' Capital for the Six Months Ended June 30, 1999 (unaudited) and the Years
Ended December 31, 1998, 1997 and 1996................................................................... F-27
Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998 (unaudited) and the Years Ended
December 31, 1998, 1997 and 1996......................................................................... F-28
Notes to Financial Statements.............................................................................. F-29
FOWLER, ROSENAU & GEARY, LLC FINANCIAL STATEMENTS
Independent Auditor's Report............................................................................... F-35
Statements of Financial Condition as of June 30, 1998, November 30, 1997 and 1996.......................... F-36
Statements of Income for the Seven Months Ended June 30, 1998 and the Years Ended November 30, 1997 and
1996..................................................................................................... F-37
Statements of Changes in Members' Capital for the Seven Months Ended June 30, 1998 and the Years Ended
November 30, 1997 and 1996............................................................................... F-38
Statements of Cash Flows for the Seven Months Ended June 30, 1998 and the Years Ended November 30, 1997 and
1996..................................................................................................... F-39
Notes to Financial Statements.............................................................................. F-40
</TABLE>
F-2
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PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
OVERVIEW
The following pro forma consolidated financial information is based on the
historical consolidated financial statements of LaBranche & Co. and LaB
Investing Co. L.L.C., its sole general partner (together, the "Partnership"),
after giving effect to the acquisition of Fowler, Rosenau & Geary, LLC ("Fowler,
Rosenau") and the reorganization and related transactions (the "Reorganization
Transactions") to convert the Partnership to corporate form. The Reorganization
Transactions are described in greater detail below. The pro forma consolidated
statement of financial condition presents the Reorganization Transactions as if
they occurred on June 30, 1999 and gives effect to the completion of the initial
public offering. The pro forma consolidated statement of operations for the six
months ended June 30, 1999 and for the year ended December 31, 1998 present the
results of the Partnership as if the Reorganization Transactions had occurred on
January 1, 1998. Additionally, the pro forma consolidated statement of
operations for the year ended December 31, 1998 present the results of the
Partnership as if the acquisition of Fowler, Rosenau had occurred on January 1,
1998.
Effective July 1, 1998, the Partnership acquired the specialist operations
of Fowler, Rosenau for an aggregate purchase price of approximately $45.0
million, representing a 22.4% total general and limited partners' interest in
the Partnership. The acquisition of Fowler, Rosenau was accounted for under the
purchase method of accounting. The purchase price consisted of general and
limited partnership interests issued to new partners admitted into the
Partnership. The limited partners' interests were issued by LaBranche & Co. The
excess purchase price over fair value of net assets acquired of approximately
$25.8 million has been allocated to goodwill, which is being amortized over a
15-year period. The following unaudited pro forma consolidated financial
statement of operations for the year ended December 31, 1998 gives effect to
this acquisition as if it had occurred on January 1, 1998, by consolidating the
results of operations of Fowler, Rosenau for the six months ended June 30, 1998
with the results of operations of the Partnership, which include the results of
Fowler, Rosenau after June 30, 1998, for the year ended December 31, 1998.
The Partnership is not currently subject to federal or state income taxes,
but is currently subject to New York City unincorporated business tax. LaBranche
& Co Inc., on a consolidated basis, is subject to federal, state and local
income taxes. Concurrently with the closing of the common stock offering, the
Partnership completed the following Reorganization Transactions:
- The limited partners of LaBranche & Co. redeemed their interests for
$140.2 million in cash, a $16.0 million note, $350,000 of subordinated
indebtedness and 558,666 shares of common stock of LaBranche & Co Inc.
with a value of $7.8 million, for a total purchase price of $164.4
million.
- The members of LaB Investing Co. L.L.C. exchanged their membership
interests in LaB Investing Co. L.L.C. for $9.0 million in cash and
34,816,334 shares of common stock of LaBranche & Co Inc.
- $5.0 million of subordinated debt at an interest rate of 10.0% was repaid.
In addition, simultaneously with the initial public offering, LaBranche & Co
Inc. incurred indebtedness with a principal amount of $100.0 million. The
proceeds of the indebtedness, net of estimated issuance costs of approximately
$2.5 million, were used to redeem a portion of the limited partners' interests
in LaBranche & Co. and withdrawing members' interests.
F-3
<PAGE>
The redemption of the limited partners' interest is accounted for as a step
acquisition under the purchase method of accounting. The excess of purchase
price over the limited partners' capital accounts is allocated to intangible
assets with corresponding respective lives as follows:
<TABLE>
<CAPTION>
INTANGIBLE ASSET AMOUNT LIFE
- -------------------------------------------------------------------------- ---------------- ---------
<S> <C> <C>
Specialist Stock List..................................................... $ 93.6 million 40 years
Trade Name................................................................ 26.6 million 40 years
Goodwill.................................................................. 7.1 million 15 years
----------------
$ 127.3 million
----------------
----------------
</TABLE>
The allocation of purchase price and determination of useful lives was based
upon an independent appraisal. The useful life of the specialist stock list was
determined based upon analysis of historical turnover characteristics of the
specialist stocks.
Historically, the Partnership paid substantially all its earnings to its
members as managing directors' compensation. Upon reorganization to corporate
form, managing directors became employees of the corporation. The Board of
Directors of LaBranche & Co Inc. approved the LaBranche & Co Inc. Annual
Incentive Plan (the "Plan"). Under the Plan, a compensation pool of up to 30% of
pre-tax income, which is assumed to include related employee benefits, will be
set aside for managing directors and other employees. In determining the 30%
compensation pool, compensation expenses relating to the grant of restricted
stock units at the time of the common stock offering will be deducted. Managing
directors will also be paid base annual compensation of amounts ranging between
$150,000 to $250,000. Such base amounts are considered to be drawn against the
30% compensation pool.
The pro forma consolidated financial information has been prepared by the
Partnership's management and is not necessarily indicative of the results that
would have been achieved had the acquisition of Fowler, Rosenau and the
Reorganization Transactions occurred on the dates indicated or that may be
achieved in the future. The pro forma consolidated financial information should
be read in conjunction with the audited consolidated financial statements of the
Partnership as of December 31, 1998 and 1997 and the three years in the period
ended December 31, 1998, the notes thereto, and the unaudited consolidated
financial statements as of June 30, 1999 and the six months in the periods ended
June 30, 1999 and 1998, and the notes thereto.
F-4
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1999
(UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
REORGANIZATION OFFERING
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
----------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS............................. $ 2,763 $ 97,500(A) $ 134,710(I) $ 80,763
(140,210)(B)
(9,000)(C)
(5,000)(D)
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL....... 35,300 -- -- 35,300
RECEIVABLE FROM BROKERS AND DEALERS................... 115,467 -- -- 115,467
SECURITIES OWNED, at market value:
Corporate equities.................................. 106,247 -- -- 106,247
United States Government obligations................ 1,436 -- -- 1,436
Other............................................... 1,500 -- -- 1,500
COMMISSIONS RECEIVABLE................................ 3,265 -- -- 3,265
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market
value............................................... 20,000 -- -- 20,000
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of
$8,000)............................................. 6,300 -- -- 6,300
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost,
less accumulated depreciation and amortization...... 1,469 -- -- 1,469
INTANGIBLE ASSETS..................................... 45,838 127,287(E) -- 173,125
OTHER ASSETS.......................................... 6,516 2,500(A) -- 9,016
----------- -------------- ----------- -----------
Total assets...................................... $ 346,101 $ 73,077 $ 134,710 $ 553,888
----------- -------------- ----------- -----------
----------- -------------- ----------- -----------
LIABILITIES AND MEMBERS' CAPITAL/ STOCKHOLDERS' EQUITY
LIABILITIES:
Payable to brokers and dealers...................... $ 3,347 $ -- $ -- $ 3,347
Securities sold, but not yet purchased, at market
value............................................. 90,578 -- -- 90,578
Accrued compensation................................ 35,208 -- -- 35,208
Accounts payable and other accrued expenses......... 12,042 -- -- 12,042
Other liabilities................................... 1,105 -- -- 1,105
----------- -------------- ----------- -----------
142,280 -- -- 142,280
----------- -------------- ----------- -----------
LONG TERM DEBT........................................ -- 100,000(F) -- 100,000
-- 16,000(G) -- 16,000
----------- -------------- ----------- -----------
-- 116,000 -- 116,000
-------------- -----------
COMMITMENTS........................................... -- -- -- --
SUBORDINATED LIABILITIES:
Exchange memberships, at market value............... 20,000 -- -- 20,000
350(H) -- 350
Other subordinated indebtedness..................... 51,158 (5,000)(D) -- 46,158
----------- -------------- ----------- -----------
71,158 (4,650) -- 66,508
----------- -------------- ----------- -----------
LIMITED PARTNERS' INTEREST IN SUBSIDIARY.............. 37,094 (37,094)(B) -- --
----------- -------------- ----------- -----------
(9,000)(C)
MEMBERS' CAPITAL/STOCKHOLDERS' EQUITY................. 95,569 7,821(B) 134,710(I) 229,100
----------- -------------- ----------- -----------
Total liabilities and members'
capital/stockholders' equity.................... $ 346,101 $ 73,077 $ 134,710 $ 553,888
----------- -------------- ----------- -----------
----------- -------------- ----------- -----------
</TABLE>
See notes to pro forma consolidated financial information.
F-5
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Net gain on principal transactions............................. $78,666 $ -- $ 78,666
Commissions.................................................... 17,885 -- 17,885
Other.......................................................... 6,942 -- 6,942
---------- ----------- -----------
Total revenues............................................... 103,493 -- 103,493
---------- ----------- -----------
EXPENSES:
Employee compensation and benefits............................. 11,299 21,701(J) 33,000
Lease of exchange memberships.................................. 4,165 -- 4,165
Interest....................................................... 2,195 4,750(K) 7,469
760(L)
14(M)
(250)(N)
Exchange, clearing and brokerage fees.......................... 1,997 -- 1,997
Amortization of intangibles.................................... 1,693 1,738(O) 3,431
Occupancy...................................................... 725 -- 725
Communications................................................. 538 -- 538
Legal and professional fees.................................... 466 -- 466
Other.......................................................... 1,066 -- 1,066
---------- ----------- -----------
Total expenses before managing directors' compensation,
limited partners' interest in earnings of subsidiary and
provision for income taxes................................. 24,144 28,713 52,857
---------- ----------- -----------
Income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and provision
for income taxes............................................. 79,349 (28,713) 50,636
MANAGING DIRECTORS' COMPENSATION................................. 48,214 (48,214)(P) --
---------- ----------- -----------
Income before limited partners' interest in earnings of
subsidiary and provision for income taxes.................... 31,135 19,501 50,636
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY............. 21,054 (21,054)(Q) --
---------- ----------- -----------
Income before provision for income taxes....................... 10,081 40,555 50,636
PROVISION FOR INCOME TAXES....................................... 3,789 19,235(R) 23,024
---------- ----------- -----------
Net income..................................................... 6,292 21,320 27,612
---------- ----------- -----------
---------- ----------- -----------
Pro forma weighted average shares outstanding.................... 45,875,000(S)
-----------
-----------
Pro forma basic and diluted net earnings per share............... $ 0.60(S)
-----------
-----------
</TABLE>
See notes to pro forma consolidated financial information.
F-6
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-------------------------------
FOWLER REORGANIZATION PRO
HISTORICAL ACQUISITION(T) TRANSACTIONS FORMA
---------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Net gain on principal transactions................... $95,048 $ 3,688 $ -- $ 98,736
Commissions.......................................... 26,576 7,387 -- 33,963
Other................................................ 4,787 364 -- 5,151
---------- ------- -------------- -----------
Total revenues..................................... 126,411 11,439 -- 137,850
---------- ------- -------------- -----------
EXPENSES:
Employee compensation and benefits................... 13,921 1,055 25,469(J) 40,445
Lease of exchange memberships........................ 6,568 496 -- 7,064
Interest............................................. 3,577 410 9,500(K) 14,535
1,520(L)
28(M)
(500) (N)
Exchange, clearing and brokerage fees................ 2,898 335 -- 3,233
Amortization of intangibles.......................... 2,526 860(U) 3,477(O) 6,863
Occupancy............................................ 1,121 111 -- 1,232
Communications....................................... 964 26 -- 990
Legal and professional fees.......................... 916 198 -- 1,114
Other................................................ 2,285 660 -- 2,945
---------- ------- -------------- -----------
Total expenses before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and provision for income
taxes............................................ 34,776 4,151 39,494 78,421
---------- ------- -------------- -----------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary and provision for income taxes.......... 91,635 7,288 (39,494) 59,429
MANAGING DIRECTORS' COMPENSATION....................... 58,783 1,387 (60,170)(P) --
---------- ------- -------------- -----------
Income before limited partners' interest in earnings
of subsidiary and provision for income taxes....... 32,852 5,901 20,676 59,429
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY... 26,292 -- (26,292)(Q) --
---------- ------- -------------- -----------
Income before provision for income taxes............. 6,560 5,901 46,968 59,429
PROVISION FOR INCOME TAXES............................. 3,900 200 23,538(R) 27,638
---------- ------- -------------- -----------
Net income........................................... $ 2,660 $ 5,701 $ 23,430 $ 31,791
---------- ------- -------------- -----------
---------- ------- -------------- -----------
Pro forma weighted average shares outstanding.......... 45,875,000(S)
-----------
-----------
Pro forma basic and diluted net earnings per share..... $ 0.69(S)
-----------
-----------
</TABLE>
See notes to pro forma consolidated financial information.
F-7
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(A) Reflects net proceeds received for issuance of the long-term indebtedness
which does not reflect the debt discount of approximately $200,000. Debt
issuance costs of approximately $2.5 million have been reflected.
(B) Reflects the redemption of limited partnership interests in exchange for
$164.4 million, comprised of $140.2 million in cash, a $16.0 million note
and $350,000 of subordinated indebtedness and $7.8 million in common stock.
(C) Reflects redemption of members' interest for $9.0 million in cash.
(D) Reflects pro forma repayment of $5.0 million of subordinated liabilities
owed to a limited partner.
(E) Reflects $127.3 million of purchase price allocated to intangibles for the
redemption of limited partnership interests.
(F) Reflects the issuance of $100.0 million of long-term indebtedness at the
principal amount. The net proceeds are assumed to be used for redemption of
limited partners' and members' interest.
(G) Reflects the issuance of a $16.0 million note assumed to be used for
redemption of limited partners' interest.
(H) Reflects the issuance of $350,000 of subordinated indebtedness assumed to be
used for the redemption of a limited partners' interest.
(I) Reflects net proceeds of $134.7 million to be received upon completion of
the initial public offering.
(J) Employee compensation and benefits was adjusted to reflect managing
directors' compensation based on new authorized revised compensation
policies which will be implemented at the time of the reorganization. Under
this policy, a compensation pool of up to 30% of pre-tax income, which is
assumed to include related employee benefits, will be set aside for managing
directors and other employees. The pro forma compensation adjustment
reflects managing directors' compensation, which is comprised of an annual
base salary of approximately $6.3 million (36 managing directors at
approximately $175,000, on average), employee benefits of approximately $1.1
million (2.5% of total managing directors' compensation) and the remaining
balance as bonus, as well as compensation expenses related to employee
restricted stock awards of $17.0 million which vest over 5 years and result
in an annual expense of $3.4 million. The pro forma adjustment does not
include any other compensation expenses related to employees who are not
managing directors.
(K) Reflects interest expense for the $100.0 million of long-term indebtedness
based upon an interest rate of 9.5%.
(L) Reflects interest expense for the $16.0 million note based upon an interest
rate of 9.5%.
(M) Reflects interest expense for the $350,000 of subordinated indebtedness
based upon an interest rate of 8.0%.
(N) Reflects the reversal of the interest expense related to the $5.0 million of
subordinated indebtedness based upon an interest rate of 10.0%.
(O) Reflects pro forma amortization of intangibles related to redemption of
limited partners' interests.
(P) Managing directors' compensation was adjusted to reverse the actual amounts
previously recorded.
(Q) Reflects reversal of limited partners' interest in earnings of subsidiary.
(R) Reflects federal, state and local income taxes at an estimated effective tax
rate of approximately 44%.
(S) Based on 45,875,000 shares outstanding immediately after the offerings.
Excludes (1) 1,200,000 shares of common stock subject to options and (2)
restricted stock units for 1,059,000 shares of common stock, in each case
granted under the Equity Incentive Plan.
(T) Reflects the pro forma pre-acquisition results of operations of Fowler,
Rosenau for the six months ended June 30, 1998.
(U) Reflects the pro forma amortization of intangibles for the six months ended
June 30, 1998 related to the Fowler, Rosenau acquisition.
F-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
LaB Investing Co. L.L.C. and Subsidiary:
We have audited the accompanying consolidated statements of financial
condition of LaB Investing Co. L.L.C. and Subsidiary as of December 31, 1998 and
1997, and the related consolidated statements of operations, changes in members'
capital and cash flows for the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LaB Investing Co. L.L.C. and
Subsidiary as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for the three years in the period ended December 31, 1998
in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The parent company only condensed
financial statements appearing on pages F-19 through F-23 are presented for the
purpose of complying with the Securities and Exchange Commission's rules and are
not part of the basic financial statements. Such statements have been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
January 25, 1999
F-9
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
JUNE 30, 1999 1998 1997
-------------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CASH AND CASH EQUIVALENTS................................................ $ 2,763 $ 4,722 $ 2,989
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL.......................... 35,300 21,100 15,000
RECEIVABLE FROM BROKERS AND DEALERS...................................... 115,467 54,808 58,174
SECURITIES OWNED, at market value:
Corporate equities..................................................... 106,247 114,994 37,027
United States Government obligations................................... 1,436 1,468 2,466
Other.................................................................. 1,500 1,360 868
COMMISSIONS RECEIVABLE................................................... 3,265 3,009 1,737
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market value................ 20,000 12,250 12,250
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of $8,000 and $4,900 at
June 30, 1999 and December 31, 1998, respectively)..................... 6,300 6,300 --
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less accumulated
depreciation and amortization of $973, $729 and $346, respectively..... 1,469 1,647 586
INTANGIBLE ASSETS........................................................ 45,838 47,532 24,243
OTHER ASSETS............................................................. 6,516 3,011 2,414
-------------- ---------- ----------
Total assets....................................................... $ 346,101 $ 272,201 $ 157,754
-------------- ---------- ----------
-------------- ---------- ----------
LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES:
Payable to brokers and dealers......................................... $ 3,347 $ 3,892 $ 1,661
Securities sold, but not yet purchased, at market value................ 90,578 67,896 39,327
Accrued compensation................................................... 35,208 17,735 9,894
Accounts payable and other accrued expenses............................ 12,042 6,347 3,476
Other liabilities...................................................... 1,105 1,341 1,341
-------------- ---------- ----------
142,280 97,211 55,699
-------------- ---------- ----------
COMMITMENTS.............................................................. -- -- --
SUBORDINATED LIABILITIES:
Exchange memberships, at market value.................................. 20,000 12,250 12,250
Other subordinated indebtedness........................................ 51,158 48,073 31,423
-------------- ---------- ----------
71,158 60,323 43,673
-------------- ---------- ----------
LIMITED PARTNERS' INTEREST IN SUBSIDIARY................................. 37,094 37,574 20,724
-------------- ---------- ----------
MEMBERS' CAPITAL......................................................... 95,569 77,093 37,658
-------------- ---------- ----------
Total liabilities and members' capital............................. $ 346,101 $ 272,201 $ 157,754
-------------- ---------- ----------
-------------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-10
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
FOR THE SIX MONTHS ENDED --------- --------- ---------
JUNE 30,
------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net gain on principal transactions.................. $ 78,666 $ 40,825 $ 95,048 $ 47,817 $ 37,113
Commissions......................................... 17,885 10,412 26,576 15,186 10,180
Other............................................... 6,942 902 4,787 4,637 2,643
----------- ----------- --------- --------- ---------
Total revenues.................................... 103,493 52,139 126,411 67,640 49,936
----------- ----------- --------- --------- ---------
EXPENSES:
Employee compensation and benefits.................. 11,299 5,229 13,921 8,108 5,723
Severance........................................... -- -- -- 300 5,375
Lease of exchange memberships....................... 4,165 2,777 6,568 3,727 2,468
Interest............................................ 2,195 1,494 3,577 1,566 331
Exchange, clearing and brokerage fees............... 1,997 1,360 2,898 2,042 1,514
Amortization of intangibles......................... 1,693 834 2,526 737 --
Occupancy........................................... 725 415 1,121 465 435
Communications...................................... 538 432 964 709 495
Legal and professional fees......................... 466 265 916 620 170
Other............................................... 1,066 1,615 2,285 1,634 642
----------- ----------- --------- --------- ---------
Total expenses before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and unincorporated
business taxes.................................. 24,144 14,421 34,776 19,908 17,153
----------- ----------- --------- --------- ---------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary and unincorporated business taxes...... 79,349 37,718 91,635 47,732 32,783
MANAGING DIRECTORS' COMPENSATION...................... 48,214 23,725 58,783 30,008 23,235
----------- ----------- --------- --------- ---------
Income before limited partners' interest in earnings
of subsidiary and unincorporated business taxes... 31,135 13,993 32,852 17,724 9,548
LIMITED PARTNERS' INTEREST IN EARNINGS OF
SUBSIDIARY.......................................... 21,054 10,848 26,292 14,354 9,638
----------- ----------- --------- --------- ---------
Income (loss) before unincorporated business
taxes............................................. 10,081 3,145 6,560 3,370 (90)
UNINCORPORATED BUSINESS TAXES......................... 3,789 1,900 3,900 1,881 1,602
----------- ----------- --------- --------- ---------
Net income (loss)................................... $ 6,292 $ 1,245 $ 2,660 $ 1,489 $ (1,692)
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-11
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
(000'S OMITTED)
<TABLE>
<CAPTION>
MEMBERS'
CAPITAL
----------
<S> <C>
BALANCE, January 1, 1996.............................................................................. $ 18,270
Net (loss).......................................................................................... (1,692)
Contributions to capital............................................................................ 6,092
Distributions of capital............................................................................ (8,935)
----------
BALANCE, December 31, 1996............................................................................ 13,735
Net income.......................................................................................... 1,489
Contributions to capital............................................................................ 28,574
Distributions of capital............................................................................ (6,140)
----------
BALANCE, December 31, 1997............................................................................ 37,658
Net income.......................................................................................... 2,660
Contributions to capital............................................................................ 66,563
Distributions of capital............................................................................ (29,788)
----------
BALANCE, December 31, 1998............................................................................ 77,093
Net income.......................................................................................... 6,292
Contributions to capital............................................................................ 18,096
Distributions of capital............................................................................ (5,912)
----------
BALANCE, June 30, 1999 (unaudited).................................................................... $ 95,569
----------
----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-12
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
FOR THE SIX MONTHS ENDED JUNE ---------- ---------- ----------
30,
------------------------------
1999 1998
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ 6,292 $ 1,245 $ 2,660 $ 1,489 $ (1,692)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities--
Depreciation and amortization......................... 1,887 971 3,020 909 131
Undistributed limited partners interest in earnings of
subsidiary.......................................... (2,148) (704) 3,646 1,241 (2,098)
Changes in assets and liabilities--
Securities purchased under agreements to resell....... (14,200) (19,800) (6,100) (8,500) 800
Receivable from brokers and dealers................... (60,659) 21,108 3,366 (40,188) 6,085
Corporate equities.................................... 8,747 (24,209) (77,967) (6,338) (16,132)
United States Government obligations.................. 32 1,037 998 1 3,577
Other assets.......................................... (873) (1,231) (1,970) (2,047) (255)
Payable to brokers and dealers........................ (545) (200) 2,231 (2,731) 4,202
Securities sold, but not yet purchased................ 22,682 (9,003) 28,569 20,591 2,935
Accrued compensation.................................. 17,473 8,902 8,891 (5,322) 11,068
Accounts payable and other liabilities................ 5,459 425 2,379 1,371 1,210
-------------- -------------- ---------- ---------- ----------
Net cash (used in) provided by operating
activities........................................ (15,853) (21,459) (30,277) (39,524) 9,831
-------------- -------------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in office equipment and leasehold
improvements.......................................... (74) (1,034) (1,550) (278) (449)
-------------- -------------- ---------- ---------- ----------
Net cash (used in) investing activities............. (74) (1,034) (1,550) (278) (449)
-------------- -------------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of subordinated debt......... 1,784 16,300 16,750 28,004 1,769
Proceeds from contributions to capital.................. 18,096 7,234 46,598 10,948 6,092
Payments for distributions of capital................... (5,912) (1,518) (29,788) (6,140) (8,935)
-------------- -------------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities........................................ 13,968 22,016 33,560 32,812 (1,074)
-------------- -------------- ---------- ---------- ----------
(Decrease) increase in cash and cash equivalents.... (1,959) (477) 1,733 (6,990) 8,308
CASH AND CASH EQUIVALENTS, beginning of period............ 4,722 2,989 2,989 9,979 1,671
-------------- -------------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period.................. $ 2,763 $ 2,512 $ 4,722 $ 2,989 $ 9,979
-------------- -------------- ---------- ---------- ----------
-------------- -------------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH
PAID FOR:
Interest................................................ $ 6,344 $ 3,461 $ 8,788 $ 4,360 $ 2,764
Unincorporated business taxes........................... 5,339 920 2,244 2,161 1,092
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES
Excess of purchase price over fair value of assets
acquired................................................ $ -- $ -- $ 25,815 $ 24,980 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-13
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of LaB Investing
Co. L.L.C. ("LaB Investing"), a New York limited liability company and its
subsidiary LaBranche & Co., a New York limited partnership (collectively, the
"Partnership"). LaB Investing is the general partner of LaBranche & Co. and has
a partnership interest in LaBranche & Co. of 69.7%. Limited partners own the
remaining 30.3% of LaBranche & Co. LaBranche & Co. operates primarily as a
specialist on the New York Stock Exchange, Inc. ("NYSE").
2. INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL INFORMATION
The unaudited interim consolidated financial information as of June 30, 1999
and for the six months ended June 30, 1999 and 1998, are presented in the
accompanying consolidated financial statements. The unaudited interim
consolidated financial information reflects all adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for such
periods. Results of the interim periods are not necessarily indicative of
results to be obtained for a full fiscal year.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Management does not believe
that actual results will differ materially from these estimates.
INTANGIBLE ASSETS
Intangible assets are soley comprised of goodwill. Goodwill is being
amortized on a straight-line basis over 15 years. Subsequent to its acquisition,
the Partnership continually evaluates whether later events and circumstances
have occurred that indicate the remaining estimated useful life may warrant
revision or that the remaining balance may not be recoverable. When factors
indicate that intangible assets should be evaluated for possible impairment, the
Partnership uses an estimate of the undiscounted net income over the remaining
life in measuring whether the assets are recoverable.
EXCHANGE MEMBERSHIPS
Exchange memberships owned by the Partnership are carried at cost.
Certain members of the Partnership have contributed the use of 10
memberships on the NYSE to the Partnership. These memberships are subordinated
to claims of general creditors and are carried at market value with a
corresponding amount recorded in subordinated liabilities. Lease payments are
paid by the Partnership to the members and limited partners for the use of the
exchange memberships at a rate management believes is commensurate with the rent
paid to nonaffiliated parties for the use of their exchange memberships.
F-14
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments with
maturities of less than three months.
SECURITIES TRANSACTIONS
Securities transactions and the related revenues and expenses are recorded
on a trade date basis. Securities owned and securities sold, but not yet
purchased are reflected at market value and unrealized gains and losses are
reflected in net gain on principal transactions. Dividends and Securities and
Exchange Commission (the "SEC") fees are also included in net gain on principal
transactions. Dividend income and expense is recognized on the payable date
which does not differ materially from the ex-date.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of office equipment and leasehold improvements.
COLLATERALIZED FINANCING TRANSACTIONS
Securities purchased and sold under agreements to resell and repurchase, as
well as securities borrowed and loaned for which cash is deposited or received,
are treated as collateralized financing transactions and are recorded at
contract amount.
COLLATERAL
The Partnership continues to report assets as owned when they are pledged as
collateral in secured financing arrangements and the secured party cannot sell
or repledge the assets or the Partnership can substitute collateral or otherwise
redeem it on short notice. The Partnership continues not to report securities
received as collateral in secured financing arrangements because the debtor
typically has the right to substitute or redeem the collateral on short notice.
REPORTABLE OPERATING SEGMENT
The Partnership considers its present operations to be one reportable
segment for purposes of presenting consolidated financial information and for
evaluating its performance. The financial statement information presented in the
accompanying consolidated financial statements is consistent with the
preparation of financial information for the purpose of internal use.
MANAGING DIRECTORS' COMPENSATION
The managing directors of LaBranche & Co. are the members of LaB Investing.
The Partnership pays out substantially all of its earnings as compensation
expense to its managing directors.
F-15
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS
The balances presented as receivable from, and payable to, brokers and
dealers consist of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Receivable from brokers and dealers:
Pending trades, net................................................................ $ 34,390,173 $ 42,858,436
Securities borrowed................................................................ 17,386,200 13,410,300
Receivable from clearing organizations............................................. 1,812,999 1,905,532
Securities failed to deliver....................................................... 1,218,950 --
------------- -------------
$ 54,808,322 $ 58,174,268
------------- -------------
------------- -------------
Payable to brokers and dealers:
Securities failed to receive....................................................... $ 3,892,030 $ 1,661,359
------------- -------------
------------- -------------
</TABLE>
5. TAXES
The Partnership is not subject to federal or state income taxes. Such taxes,
if any, are the responsibility of the individual members. The Partnership is
subject to the New York City Unincorporated Business Tax.
6. CAPITAL AND NET LIQUID ASSET REQUIREMENTS
As a specialist and member of the NYSE, LaBranche & Co. is subject to SEC
Rule 15c3-1 adopted and administered by the NYSE and the SEC. LaBranche & Co. is
required to maintain minimum net capital, as defined, equivalent to the greater
of $100,000 or 1/15 of aggregate indebtedness, as defined.
As of June 30, 1999 (unaudited) and as of December 31, 1998, LaBranche &
Co.'s net capital, as defined under SEC Rule 15c3-1, was $99,993,833 and
$86,545,533, respectively, and exceeded minimum requirements by $96,820,130 and
$85,169,019, respectively. LaBranche & Co.'s aggregate indebtedness to net
capital ratio was .48 to 1 and .24 to 1, respectively.
The NYSE also requires members registered as regular specialists to
establish that they can meet, with their own net liquid assets, a minimum dollar
amount which shall be the greater of $1,000,000 or 25% of their position
requirement ("Rule 104.2"). In 1998, due to the market share represented by the
Partnership's specialist book, the NYSE mandated the firm to maintain minimum
net liquid assets of the greater of 120% of LaBranche & Co.'s Rule 104.2
position requirement, or $90.0 million, adjusted by the amount of the position
requirement for any new stock allocations. The position requirement is the
ability to assume positions in stocks in which they are registered, of 30,000
shares of each S&P 500 common stock, 22,500 shares in all other common stocks,
4,500 shares in each convertible preferred stock and 1,800 shares in each
nonconvertible preferred stock. The term "net liquid assets" for a specialist
which also engages in transactions other than specialist activities is based
upon its excess net capital determined in accordance with SEC Rule 15c3-1.
As of June 30, 1999 (unaudited) and as of December 31, 1998, the
Partnership's NYSE minimum required dollar amount of net liquid assets, as
defined, was $91.5 million and $90.6 million, respectively, compared to actual
net liquid assets, as defined, of $116,251,755 and $103,134,594, respectively.
F-16
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ACQUISITIONS
The acquisitions of the specialist operations described below were accounted
for under the purchase method of accounting. The purchase price associated with
each acquisition consisted of general partnership and limited partnership
interests issued to new partners admitted into the Partnership. Such partnership
interests were valued based upon an independent appraisal. Excess purchase price
over fair value of net assets acquired has been allocated to goodwill.
Effective July 1, 1997, the Partnership acquired a portion of the specialist
operations of Stern Bros., LLC for an aggregate purchase price of approximately
$9.3 million representing an 8.3% total general partners' interests in the
Partnership. The goodwill associated with the acquisition was approximately $7.8
million.
Effective August 1, 1997, the Partnership acquired the specialist operations
of Ernst, Homans, Ware & Keelips for an aggregate purchase price of
approximately $18.5 million representing general and limited partnership
interest totaling 16.4%. The excess purchase price over fair value of net assets
acquired was approximately $17.2 million.
Effective July 1, 1998, the Partnership acquired the specialist operations
of Fowler, Rosenau & Geary, LLC ("Fowler, Rosenau") for an aggregate purchase
price of approximately $45.0 million representing a 22.4% total general and
limited partners' interest in the Partnership. The excess purchase price over
fair value of net assets acquired was approximately $25.8 million (The audited
financial statements of Fowler, Rosenau have been included elsewhere in this
prospectus).
8. COMMITMENTS
During 1998, the Partnership secured a $75.0 million committed line of
credit with The Bank of New York. The agreement matured on June 25, 1999. In
June 1999, the Partnership amended and extended the committed line of credit to
$100.0 million through June 23, 2000 (unaudited). In addition, the Partnership
has outstanding letter of credit agreements with U.S. Trust aggregating
approximately $1,581,000. Such letter of credit agreements are collateralized
with U.S. Trust by a Treasury bill with a face value of $1.5 million and a cash
balance of approximately $179,000.
Minimum rental commitments under existing noncancelable leases for office
space and equipment are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 684,000
2000............................................................................ 468,000
2001............................................................................ 540,000
2002............................................................................ 540,000
2003............................................................................ 540,000
Thereafter...................................................................... 2,304,000
</TABLE>
These leases contain escalation clauses providing for increased rentals
based upon maintenance and tax increases.
9. SUBORDINATED LIABILITIES
The Partnership has subordinated indebtedness agreements approved by the
NYSE for inclusion as net capital, as defined. Interest is payable quarterly at
various annual rates. Eleven of the agreements
F-17
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SUBORDINATED LIABILITIES (CONTINUED)
representing $11,473,000 mature within the last six months of 1999, and the
remaining four agreements representing $1,200,000 mature within the first six
months of 2000. These agreements all have automatic rollover provisions as long
as at least six months notice is given by the lender.
Seven agreements representing $20,000,000 mature on September 15, 2002 with
an annual rate of 8.17% paid on a quarterly basis. Five agreements representing
$15,000,000 mature on June 3, 2008 with an annual rate of 7.69% paid on a
quarterly basis. These notes are senior to all other subordinated notes.
The Partnership entered into a subordinated liability related to a Secured
Demand Note Receivable for $300,000 due July 15, 1999 and $100,000 due May 1,
1999 both with an annual rate of 10.0% paid on a quarterly basis. These
agreements have automatic rollover provision unless at least seven months notice
is given by the lender.
Interest expense related to the above subordinated liabilities primarily
comprises interest expense in the accompanying statements of operations.
Exchange membership contributed pursuant to subordination agreements in the
amount of $12,250,000 comprise the remaining subordinated liabilities.
10. SEVERANCE ARRANGEMENTS
For the years ended December 31, 1997 and 1996, the Partnership entered into
severance arrangements with two of their former members. The Partnership
recorded the full amount of severance upon termination of these individuals in
1997 and 1996.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires companies to report the fair value of
financial instruments for certain assets and liabilities. Substantially all of
the Partnership's financial instruments are short-term in nature or carry market
interest rates and, accordingly, approximate fair value.
12. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET
RISK
As a specialist on the NYSE, the Partnership is engaged in various
securities trading and lending activities. In connection with its activities as
a specialist, the Partnership assumes positions in the stocks for which it is
responsible. The Partnership is exposed to credit risk associated with the
nonperformance of counterparties in fulfilling their contractual obligations
pursuant to these securities transactions. The Partnership is exposed to market
risk associated with the sale of securities not yet purchased, which can be
directly impacted by volatile trading on the NYSE. Additionally, in the event of
nonperformance and unfavorable market price movements, the Partnership may be
required to purchase or sell financial instruments, which may result in a loss
to the Partnership.
The Partnership enters into collateralized financing agreements in which it
extends short-term credit to major financial institutions. The Partnership
controls access to the collateral pledged by the counterparties, which generally
consists of U.S. equity and government securities. The value and adequacy of the
collateral are continually monitored. Consequently, the risk of credit loss from
counterparties' failure to perform in connection with collateralized lending
activities is minimal.
F-18
<PAGE>
LAB INVESTING CO. L.L.C.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CASH........................................................................................ $ 21 $ 15
DUE FROM SUBSIDIARY......................................................................... -- 13
INVESTMENT IN SUBSIDIARY, AT EQUITY VALUE................................................... 77,072 37,630
--------- ---------
Total Assets.............................................................................. $ 77,093 $ 37,658
--------- ---------
--------- ---------
MEMBERS' CAPITAL
MEMBERS' CAPITAL............................................................................ 77,093 37,658
--------- ---------
Total Members' Capital.................................................................... $ 77,093 $ 37,658
--------- ---------
--------- ---------
</TABLE>
See accompanying note to condensed financial statements.
F-19
<PAGE>
LAB INVESTING CO. L.L.C.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUE:
Equity earnings (losses) in investment in subsidary.............................. $ 2,663 $ 1,480 $ (1,704)
--------- --------- ---------
Total revenue.................................................................. 2,663 1,480 (1,704)
--------- --------- ---------
EXPENSES:
Other expenses................................................................... 3 1 --
--------- --------- ---------
Total expenses................................................................. 3 1 --
--------- --------- ---------
Income (loss) before unincorporated business tax................................. 2,660 1,479 (1,704)
--------- --------- ---------
UNINCORPORATED BUSINESS TAX BENEFIT................................................ -- (10) (12)
--------- --------- ---------
Net income (loss)................................................................ $ 2,660 $ 1,489 $ (1,692)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying note to condensed financial statements.
F-20
<PAGE>
LAB INVESTING CO. L.L.C.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
(000'S OMITTED)
<TABLE>
<CAPTION>
MEMBERS'
CAPITAL
-----------
<S> <C>
BALANCE, January 1, 1996............................................................................. $ 18,270
Net (loss)......................................................................................... (1,692)
Contributions to capital........................................................................... 6,092
Distributions of capital........................................................................... (8,935)
-----------
BALANCE, December 31, 1996........................................................................... 13,735
Net income......................................................................................... 1,489
Contributions to capital........................................................................... 28,574
Distributions of capital........................................................................... (6,140)
-----------
BALANCE, December 31, 1997........................................................................... 37,658
Net income......................................................................................... 2,660
Contributions to capital........................................................................... 66,563
Distributions of capital........................................................................... (29,788)
-----------
BALANCE, December 31, 1998........................................................................... $ 77,093
-----------
-----------
</TABLE>
See accompanying note to condensed financial statements.
F-21
<PAGE>
LAB INVESTING CO. L.L.C.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOW
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................. $ 2,660 $ 1,489 $ (1,692)
Changes in assets and liabilities--
Due from subsidiary......................................................... 13 26 52
(Increase) decrease in investment in subsidiary............................. (19,477) (6,343) 4,812
Other liabilities........................................................... -- (10) (360)
---------- ---------- ---------
(16,804) (4,838) 2,812
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from contributions to capital........................................ 46,598 10,948 6,092
Payments for distributions of capital......................................... (29,788) (6,140) (8,935)
---------- ---------- ---------
Net change in cash.............................................................. 6 (30) (31)
Cash, beginning of year......................................................... 15 45 76
---------- ---------- ---------
Cash, end of year............................................................... $ 21 $ 15 $ 45
---------- ---------- ---------
---------- ---------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Unincorporated business tax................................................... $ 3 $ 11 $ 344
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Excess of purchase price over fair value of assets acquired................... $ 19,965 $ 17,626 $ --
</TABLE>
See accompanying note to condensed financial statements.
F-22
<PAGE>
LAB INVESTING CO. L.L.C.
(PARENT COMPANY ONLY)
NOTE TO CONDENSED FINANCIAL STATEMENTS
1. NOTE TO CONDENSED FINANCIAL STATEMENTS
The condensed financial statements of LaB Investing Co. L.L.C. (parent
company only) should be read in conjunction with the consolidated financial
statements of LaB Investing Co. L.L.C. and Subsidiary and the notes thereto
contained elsewhere in this prospectus.
F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
LaBranche & Co.:
We have audited the accompanying statements of financial condition of
LaBranche & Co. (a New York limited partnership) as of December 31, 1998 and
1997, and the related statements of operations, changes in partners' capital and
cash flows for the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LaBranche & Co. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
New York, New York
January 25, 1999
F-24
<PAGE>
LABRANCHE & CO.
STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
JUNE 30, ------------ ----------
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS................................................. $ 2,739 $ 4,701 $ 2,974
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL........................... 35,300 21,100 15,000
RECEIVABLE FROM BROKERS AND DEALERS....................................... 115,467 54,808 58,174
SECURITIES OWNED, at market value:
Corporate equities.................................................... 106,247 114,994 37,027
United States Government obligations.................................. 1,436 1,468 2,466
Other................................................................. 1,500 1,360 868
COMMISSIONS RECEIVABLE.................................................... 3,265 3,009 1,737
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market value................. 20,000 12,250 12,250
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of $8,000 and $4,900 at
June 30, 1999 and December 31, 1998, respectively)...................... 6,300 6,300 --
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less accumulated
depreciation and amortization of $973, $729 and $346, respectively...... 1,469 1,647 586
INTANGIBLE ASSETS......................................................... 45,838 47,532 24,243
OTHER ASSETS.............................................................. 5,852 3,011 2,414
----------- ------------ ----------
Total assets........................................................ $ 345,413 $ 272,180 $ 157,739
----------- ------------ ----------
----------- ------------ ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Payable to brokers and dealers........................................ $ 3,347 $ 3,892 $ 1,661
Securities sold, but not yet purchased, at market value............... 90,578 67,896 39,327
Accrued compensation.................................................. 35,208 17,735 9,894
Accounts payable and other accrued expenses........................... 11,378 6,347 3,489
Other liabilities..................................................... 1,105 1,341 1,341
----------- ------------ ----------
141,616 97,211 55,712
COMMITMENTS............................................................... -- -- --
SUBORDINATED LIABILITIES:
Exchange memberships, at market value................................. 20,000 12,250 12,250
Other subordinated indebtedness....................................... 51,158 48,073 31,423
----------- ------------ ----------
71,158 60,323 43,673
----------- ------------ ----------
PARTNERS' CAPITAL:
General partner....................................................... 95,545 77,072 37,630
Limited partners...................................................... 37,094 37,574 20,724
----------- ------------ ----------
Total partners' capital............................................. 132,639 114,646 58,354
----------- ------------ ----------
Total liabilities and partners' capital............................. $ 345,413 $ 272,180 $ 157,739
----------- ------------ ----------
----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
LABRANCHE & CO.
STATEMENTS OF OPERATIONS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
---------------------- -------------------------------
1999 1998 1998 1997 1996
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Net gain on principal transactions.................... $ 78,666 $ 40,825 $ 95,048 $ 47,817 $ 37,113
Commissions........................................... 17,885 10,412 26,576 15,186 10,180
Other................................................. 6,942 902 4,787 4,627 2,617
----------- --------- --------- --------- ---------
Total revenues...................................... 103,493 52,139 126,411 67,630 49,910
----------- --------- --------- --------- ---------
EXPENSES:
Employee compensation and benefits.................... 11,299 5,229 13,921 8,108 5,723
Severance............................................. -- -- -- 300 5,375
Lease of exchange memberships......................... 4,165 2,777 6,568 3,727 2,468
Interest.............................................. 2,195 1,494 3,577 1,566 331
Exchange, clearing and brokerage fees................. 1,997 1,360 2,898 2,042 1,514
Amortization of intangibles........................... 1,693 834 2,526 737 --
Occupancy............................................. 725 415 1,121 465 435
Communications........................................ 538 432 964 709 495
Legal and professional fees........................... 466 265 916 620 170
Other................................................. 1,064 1,614 2,282 1,633 638
----------- --------- --------- --------- ---------
Total expenses before managing directors'
compensation, and unincorporated business taxes... 24,142 14,420 34,773 19,907 17,149
----------- --------- --------- --------- ---------
Income before managing directors' compensation, and
unincorporated business taxes..................... 79,351 37,719 91,638 47,723 32,761
MANAGING DIRECTORS' COMPENSATION........................ 48,214 23,725 58,783 30,008 23,235
----------- --------- --------- --------- ---------
Income before unincorporated business taxes......... 31,137 13,994 32,855 17,715 9,526
UNINCORPORATED BUSINESS TAXES........................... 3,789 1,900 3,900 1,881 1,592
----------- --------- --------- --------- ---------
Net income.......................................... $ 27,348 $ 12,094 $ 28,955 $ 15,834 $ 7,934
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
LABRANCHE & CO.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(000'S OMITTED)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ---------- ----------
<S> <C> <C> <C>
BALANCE, January 1, 1996....................................................... $ 18,473 $ 14,227 $ 32,700
Net income (loss)............................................................ (1,704) 9,638 7,934
Contributions to capital..................................................... 3,243 1,770 5,013
Distributions of capital..................................................... (6,351) (13,506) (19,857)
--------- ---------- ----------
BALANCE, December 31, 1996..................................................... 13,661 12,129 25,790
Net income................................................................... 1,480 14,354 15,834
Contributions to capital..................................................... 26,555 10,572 37,127
Distributions of capital..................................................... (4,066) (16,331) (20,397)
--------- ---------- ----------
BALANCE, December 31, 1997..................................................... 37,630 20,724 58,354
Net income................................................................... 2,663 26,292 28,955
Contributions to capital..................................................... 42,630 18,324 60,954
Distributions of capital..................................................... (5,851) (27,766) (33,617)
--------- ---------- ----------
BALANCE, December 31, 1998..................................................... 77,072 37,574 114,646
Net income................................................................... 3,939 23,409 27,348
Contributions to capital..................................................... 17,395 1,028 18,423
Distributions of capital..................................................... (2,861) (24,917) (27,778)
--------- ---------- ----------
BALANCE, June 30, 1999 (unaudited)............................................. $ 95,545 $ 37,094 $ 132,639
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
LABRANCHE & CO.
STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
--------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996
--------- ---------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 27,348 $ 12,094 $ 28,955 $ 15,834 $ 7,934
Adjustments to reconcile net income to net cash (used in)
provided by operating activities-
Depreciation and amortization............................. 1,887 971 3,020 909 131
Changes in assets and liabilities-
Securities purchased under agreements to resell........... (14,200) 21,108 (6,100) (8,500) 800
Receivable from brokers and dealers....................... (60,659) (19,800) 3,366 (40,188) 6,085
Corporate equities........................................ 8,747 (24,209) (77,967) (6,338) (16,132)
United States Government obligations...................... 32 1,037 998 1 3,577
Commissions receivable.................................... (256) (225) (1,272) (742) (240)
Other assets.............................................. (2,622) (1,015) (1,089) (1,598) 1,333
Payable to brokers and dealers............................ (545) (200) 2,231 (2,731) 4,202
Securities sold, but not yet purchased.................... 22,682 (9,003) 28,569 20,591 2,935
Accrued compensation...................................... 17,473 8,902 7,841 (5,322) 11,032
Accounts payable and other liabilities.................... 5,796 425 2,858 1,181 381
--------- ---------- --------- --------- ---------
Net cash (used in) provided by operating activities... 5,683 (9,915) (8,590) (26,903) 22,038
--------- ---------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in office equipment and leasehold
improvements............................................ (74) (1,034) (1,555) (278) (449)
--------- ---------- --------- --------- ---------
Net cash (used in) investing activities..................... (74) (1,034) (1,555) (278) (449)
--------- ---------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of subordinated debt........... 1,784 16,300 16,650 28,471 1,594
Proceeds from contributions to capital.................... 18,423 8,029 28,840 12,147 5,013
Payments for distributions of capital..................... (27,778) (13,842) (33,618) (20,397) (19,857)
--------- ---------- --------- --------- ---------
Net cash provided by (used in) financing activities... (7,571) 10,487 11,872 20,221 (13,250)
--------- ---------- --------- --------- ---------
(Decrease) increase in cash and cash equivalents...... (1,962) (462) 1,727 (6,960) 8,339
CASH AND CASH EQUIVALENTS, beginning of period.............. 4,701 2,974 2,974 9,934 1,595
--------- ---------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 2,739 $ 2,512 $ 4,701 $ 2,974 $ 9,934
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest.................................................. $ 6,344 $ 3,461 $ 8,788 $ 4,360 $ 2,764
Unincorporated business taxes............................. 5,339 920 2,244 2,161 1,092
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Excess of purchase price over fair value of assets
acquired................................................ $ -- $ -- $ 25,815 $ 24,980 $ --
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE>
LABRANCHE & CO.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
LaBranche & Co. ("LaBranche") was formed as a limited partnership, under the
New York Uniform Limited Partnership Act. LaBranche operates primarily as a
specialist in certain equity securities listed on the New York Stock Exchange,
Inc. ("NYSE").
LaBranche's general partner is LaB Investing Co. L.L.C. ("LaB"), a New York
limited liability company, which owns 69.7% of LaBranche. The remaining 30.3% is
owned by limited partners. The individual members of LaB are managing directors
of LaBranche.
2. INTERIM FINANCIAL STATEMENTS AND FINANCIAL INFORMATION
The unaudited interim financial information as of June 30, 1999 and for
the six months ended June 30, 1999 and 1998, is presented in the accompanying
financial statements. The unaudited interim financial information reflects
all adjustments, which are, in the opinion of management, necessary for a
fair presentation of the results for such periods. Results of the interim
periods are not necessarily indicative of results to be obtained for a full
fiscal year.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management does not believe that actual
results will differ materially from these estimates.
INTANGIBLE ASSETS
Intangible assets are soley comprised of goodwill. Goodwill is being
amortized on a straight-line basis over 15 years. Subsequent to its acquisition,
LaBranche continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life may warrant revision
or that the remaining balance may not be recoverable. When factors indicate that
intangible assets should be evaluated for possible impairment, LaBranche uses an
estimate of undiscounted net income over the remaining life in measuring whether
the assets are recoverable.
EXCHANGE MEMBERSHIPS
Exchange memberships owned by LaBranche are carried at cost.
Certain members of LaBranche have contributed the use of 10 memberships on
the NYSE to LaBranche. These memberships are subordinated to claims of general
creditors and are carried at market value with a corresponding amount recorded
in subordinated liabilities. Lease payments are paid by LaBranche to certain
managing directors for the use of the exchange memberships at a rate management
believes is commensurate with the rent paid to nonaffiliated parties for the use
of their exchange memberships.
F-29
<PAGE>
LABRANCHE & CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments with
maturities of less than three months.
SECURITIES TRANSACTIONS
Securities transactions and the related revenues and expenses are recorded
on a trade date basis. Securities owned and securities sold, but not yet
purchased are reflected at market value and unrealized gains and losses are
reflected in net gain on principal transactions. Dividends and Securities and
Exchange Commission (the "SEC") fees are also included in net gain on principal
transactions. Dividend income and expense are recognized on the payable date,
which does not differ materially from the ex-date.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of office equipment and leasehold improvements.
COLLATERALIZED FINANCING TRANSACTIONS
Securities purchased and sold under agreements to resell and repurchase, as
well as securities borrowed and loaned for which cash is deposited or received,
are treated as collateralized financing transactions and are recorded at
contract amount.
COLLATERAL
LaBranche continues to report assets as owned when they are pledged as
collateral in secured financing arrangements and the secured party cannot sell
or repledge the assets or LaBranche can substitute collateral or otherwise
redeem it on short notice. LaBranche continues not to report securities received
as collateral in secured financing arrangements because the debtor typically has
the right to substitute or redeem the collateral on short notice.
MANAGING DIRECTORS' COMPENSATION
LaBranche pays out substantially all of its earnings as compensation expense
to its managing directors.
F-30
<PAGE>
LABRANCHE & CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS
The balances presented as receivable from and payable to brokers and dealers
consist of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Receivable from brokers and dealers:
Pending trades, net................................................................ $ 34,390,173 $ 42,858,436
Securities borrowed................................................................ 17,386,200 13,410,300
Receivable from clearing organizations............................................. 1,812,999 1,905,532
Securities failed to deliver....................................................... 1,218,950 --
------------- -------------
$ 54,808,322 $ 58,174,268
------------- -------------
------------- -------------
Payable to brokers and dealers:
Securities failed to receive....................................................... $ 3,892,030 $ 1,661,359
------------- -------------
------------- -------------
</TABLE>
5. TAXES
LaBranche is not subject to federal or state income taxes. Such taxes, if
any, are the responsibility of the individual members. LaBranche is subject to
the New York City Unincorporated Business Tax.
6. CAPITAL AND NET LIQUID ASSET REQUIREMENTS
As a specialist and member of the NYSE, LaBranche is subject to SEC Rule
15c3-1 adopted and administered by the NYSE and the SEC. LaBranche is required
to maintain minimum net capital, as defined, equivalent to the greater of
$100,000 or 1/15 of aggregate indebtedness, as defined.
As of June 30, 1999 (unaudited) and as of December 31, 1998, LaBranche's net
capital, as defined under SEC Rule 15c3-1, was $99,993,833 and $86,545,533,
respectively, and exceeded minimum requirements by $96,820,130 and $85,169,019,
respectively. LaBranche's aggregate indebtedness to net capital ratio was .48 to
1 and .24 to 1, respectively.
The NYSE also requires members registered as regular specialists to
establish that they can meet, with their own net liquid assets, a minimum dollar
amount which shall be the greater of $1,000,000 or 25% of their position
requirement ("Rule 104.2"). In 1998, due to the concentration of LaBranche's
specialist book, the NYSE mandated the firm to maintain minimum net liquid
assets of the greater of 120% of the LaBranche's Rule 104.2 position
requirement, or $90.0 million, adjusted by the amount of the position
requirement for any new stock allocations. The position requirement is the
ability to assume positions in stocks in which they are registered of 30,000
shares of each S&P 500 common stock, 22,500 shares in all other common stocks,
4,500 shares in each convertible preferred stock and 1,800 shares in each
nonconvertible preferred stock. The term "net liquid assets" for a specialist
who also engages in transactions other than specialist activities is based upon
its excess net capital determined in accordance with SEC Rule 15c3-1.
As of June 30, 1999 (unaudited) and as of December 31, 1998, LaBranche's
NYSE minimum required dollar amount of net liquid assets, as defined, was $91.5
million and $90.6 million, respectively, compared to actual net liquid assets,
as defined, of $116,251,755 and $103,134,594, respectively.
F-31
<PAGE>
LABRANCHE & CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. ACQUISITIONS
The acquisitions of the specialist operations described below were accounted
for under the purchase method of accounting. The purchase price of the
acquisitions have been pushed down and reflected in LaBranche's financial
statements. The purchase price associated with each acquisition consisted of
general partnership and limited partnership interests issued to new members
admitted into LaB and new partners admitted into LaBranche. Such partnership
interests were valued based upon an independent appraisal. Excess purchase price
over fair value of net assets acquired has been allocated to goodwill.
Effective July 1, 1997, LaBranche acquired a portion of the specialist
operations of Stern Bros., LLC for an aggregate purchase price of approximately
$9.3 million, representing an 8.3% total general partners' interest in
LaBranche. The goodwill associated with the acquisition was approximately $7.8
million.
Effective August 1, 1997, LaBranche acquired the specialist operations of
Ernst, Homans, Ware & Keelips for an aggregate purchase price of approximately
$18.5 million, representing general and limited partnership interests totaling
16.4%. The excess purchase price over fair value of net assets acquired was
approximately $17.2 million.
Effective July 1, 1998, LaBranche acquired the specialist operations of
Fowler, Rosenau & Geary, LLC ("Fowler, Rosenau") for an aggregate purchase price
of approximately $45.0 million, representing a 22.4% total general and limited
partners' interest in LaBranche. The excess purchase price over fair value of
net assets acquired was approximately $25.8 million.
8. COMMITMENTS
During 1998, LaBranche secured a $75.0 million committed line of credit with
The Bank of New York. The agreement matured on June 25, 1999. In June 1999, the
Partnership amended and extended the committed line of credit to $100.0 million
through June 23, 2000 (unaudited). In addition, LaBranche has outstanding letter
of credit agreements with U.S. Trust aggregating approximately $1,581,000. Such
letter of credit agreements are collateralized with U.S. Trust by a Treasury
bill with a face value of $1.5 million and a cash balance of approximately
$179,000.
Minimum rental commitments under existing noncancelable leases for office
space and equipment are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999............................................................ $ 684,000
2000............................................................ 468,000
2001............................................................ 540,000
2002............................................................ 540,000
2003............................................................ 540,000
Thereafter...................................................... 2,304,000
</TABLE>
These leases contain escalation clauses providing for increased rentals
based upon maintenance and tax increases.
F-32
<PAGE>
LABRANCHE & CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. SUBORDINATED LIABILITIES
LaBranche has subordinated indebtedness agreements approved by the NYSE for
inclusion as net capital, as defined. Interest is payable quarterly at various
annual rates. Eleven of the agreements representing $11,473,000 mature within
the last six months of 1999, and the remaining four agreements representing
$1,200,000 mature within the first six months of 2000. These agreements all have
automatic rollover provisions as long as at least six months' notice is given by
the lender.
Seven agreements representing $20,000,000 mature on September 15, 2002 with
an annual rate of 8.17% paid on a quarterly basis. Five agreements representing
$15,000,000 mature on June 3, 2008 with an annual rate of 7.69% paid on a
quarterly basis. These notes are senior to all other subordinated notes.
LaBranche entered into a subordinated liability related to a Secured Demand
Note Receivable for $300,000 due July 15, 1999 and $100,000 due May 1, 1999,
both with an annual rate of 10.0% paid on, a quarterly basis. These agreements
have automatic rollover provisions unless at least seven months notice is given
by the lender.
Interest expense related to the subordinated liabilities comprises interest
expense in the accompanying statements of operations.
Exchange memberships contributed pursuant to subordination agreements in the
amount of $12,250,000 comprise the remaining subordinated liabilities.
10. SEVERANCE ARRANGEMENTS
For the years ended December 31, 1997 and 1996, LaBranche entered into
severance arrangements with two of its former members. LaBranche recorded the
full amount of severance upon termination of these individuals in 1997 and 1996.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires companies to report the fair value of
financial instruments for certain assets and liabilities. Substantially all of
LaBranche's financial instruments are short-term in nature or carry market
interest rates and, accordingly, approximate fair value.
12. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET
RISK
As a specialist on the NYSE, LaBranche is engaged in various securities
trading and lending activities. In connection with its activities as a
specialist, LaBranche assumes positions in stocks for which it is
responsible. LaBranche is exposed to credit risk associated with the
nonperformance of counterparties in fulfilling their contractual obligations
pursuant to these securities transactions. LaBranche is exposed to market
risk associated with the sale of securities not yet purchased, which can be
directly impacted by volatile trading on the NYSE. Additionally, in the
event of nonperformance and unfavorable market price movements, LaBranche
may be required to purchase or sell financial instruments, which may result
in a loss to LaBranche.
F-33
<PAGE>
LABRANCHE & CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET
RISK (CONTINUED)
LaBranche enters into collateralized financing agreements in which it
extends short-term credit to major financial institutions. LaBranche controls
access to the collateral pledged by the counterparties, which generally consists
of U.S. equity and government securities. The value and adequacy of the
collateral are continually monitored. Consequently, the risk of credit loss from
counterparties' failure to perform in connection with collateralized lending
activities is minimal.
F-34
<PAGE>
INDEPENDENT AUDITOR'S REPORT:
To the Members of Fowler, Rosenau & Geary, LLC
We have audited the accompanying statements of financial condition of
Fowler, Rosenau & Geary, LLC as of November 30, 1997 and 1996, and June 30, 1998
and the related statements of income, changes in members' capital, and cash
flows for the periods then ended. The financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fowler, Rosenau & Geary, LLC
as of November 30, 1997 and 1996, and June 30, 1998, and the results of its
operations and its cash flows for the periods then ended in conformity with
generally accepted accounting principles.
/s/ Sugarman & Thrope, P.C.
January 20, 1999
New York, NY
F-35
<PAGE>
FOWLER, ROSENAU & GEARY, LLC
STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED)
<TABLE>
<CAPTION>
NOVEMBER 30,
JUNE 30, --------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash........................................................................... $ 312 $ 189 $ 69
Commissions Receivable......................................................... 2,698 817 875
Inventory of Specialist Stocks--at market...................................... 15,486 9,482 8,315
Receivable from Broker Dealers................................................. 7,163 14,040 12,643
Deposits and Rent Security..................................................... 606 752 550
Memberships (four) in New York Stock Exchange--at cost......................... 3,414 2,209 2,209
Furniture, Equipment and Leasehold Improvements at cost, Net of Accumulated
Depreciation and Amortization................................................ -- 124 161
Investment in Clearing Broker.................................................. -- -- 509
Other Assets................................................................... 26 33 47
--------- --------- ---------
Total assets................................................................. $ 29,705 $ 27,646 $ 25,378
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND CAPITAL
Short Sales of Specialist Stocks--at market.................................... $ 7,084 $ 2,848 $ 4,188
Accounts Payable and Accrued Expenses.......................................... 618 1,365 1,311
--------- --------- ---------
Total Liabilities............................................................ 7,702 4,213 5,499
Members' Capital............................................................... 22,003 23,433 19,879
--------- --------- ---------
Total liabilities and members' capital....................................... $ 29,705 $ 27,646 $ 25,378
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes.
F-36
<PAGE>
FOWLER, ROSENAU & GEARY, LLC
STATEMENTS OF INCOME
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE
SEVEN MONTHS FOR THE YEARS ENDED
ENDED NOVEMBER 30,
JUNE 30, --------------------
1998 1997 1996
------------- --------- ---------
<S> <C> <C> <C>
REVENUES
Principal Transactions, net............................................ $ 4,664 $ 11,874 $ 9,396
Commissions............................................................ 8,300 10,909 9,786
Other.................................................................. 367 773 217
------------- --------- ---------
Total Revenues....................................................... 13,331 23,556 19,399
------------- --------- ---------
EXPENSES
Employee Compensation and Related Expenses............................. 1,233 2,192 1,828
Severance.............................................................. 54 281 281
Rental of Exchange Memberships......................................... 577 547 505
Seat Interest Paid to Members.......................................... 233 420 200
Unincorporated Business Tax............................................ 465 713 591
Brokerage, Clearing and Exchange Fees.................................. 401 1,225 802
Occupancy.............................................................. 129 214 211
Communications......................................................... 31 50 24
Legal and Professional Fees............................................ 208 100 159
Insurance.............................................................. 199 323 321
Other.................................................................. 546 709 614
------------- --------- ---------
Total expenses before members' compensation.......................... 4,076 6,774 5,536
------------- --------- ---------
Net Income before members' compensation.............................. 9,255 16,782 13,863
Members' Compensation................................................ 1,626 2,987 2,825
------------- --------- ---------
Net Income........................................................... $ 7,629 $ 13,795 $ 11,038
------------- --------- ---------
------------- --------- ---------
</TABLE>
See the accompanying notes.
F-37
<PAGE>
FOWLER, ROSENAU & GEARY, LLC
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE SEVEN
MONTHS FOR THE YEARS ENDED
ENDED NOVEMBER 30,
JUNE 30, ---------------------
1998 1997 1996
------------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of period.......................................... $ 23,433 $ 19,879 $ 18,563
Net income............................................................ 7,629 13,795 11,038
------------- ---------- ---------
31,062 33,674 29,601
Additions (withdrawals) of capital, net............................... (9,059) (10,241) (9,722)
------------- ---------- ---------
Balance, end of period................................................ $ 22,003 $ 23,433 $ 19,879
------------- ---------- ---------
------------- ---------- ---------
</TABLE>
See the accompanying notes.
F-38
<PAGE>
FOWLER, ROSENAU & GEARY, LLC
STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE FOR THE
SEVEN MONTHS YEARS ENDED NOVEMBER
ENDED 30,
JUNE 30, ---------------------
1998 1997 1996
------------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................................ $ 7,629 $ 13,795 $ 11,038
Adjustments to Reconcile to Net Cash Provided by Operating Activities:
Depreciation............................................................ 134 71 41
Changes in Assets and Liabilities:
Commissions and Dividends Receivable.................................... (1,881) 58 (195)
Inventory of Specialist Stocks.......................................... (6,004) (1,167) 1,354
Clearing Accounts--net.................................................. 6,877 (1,397) (2,435)
Other Assets............................................................ 7 14 (2)
Short Inventory of Specialist Stocks.................................... 4,236 (1,340) (720)
Accounts Payable and Accrued Expenses................................... (747) 54 476
------------- ---------- ---------
Net Cash Provided by Operating Activities................................. 10,251 10,088 9,557
------------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Office Furniture and Equipment Purchase................................... (10) (34) (194)
Investment in Clearing Broker............................................. -- 509 1,475
Rent, Security and Deposits............................................... 146 (202) (240)
Increase in Exchange Memberships.......................................... (1,205) -- (921)
------------- ---------- ---------
Net Cash (used in) provided by Investing Activities....................... (1,069) 273 120
------------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Withdrawal of Capital................................................. (9,059) (10,241) (9,722)
------------- ---------- ---------
Increase (decrease) in cash............................................... 123 120 (45)
Cash, beginning of period................................................. 189 69 114
------------- ---------- ---------
Cash, end of period....................................................... $ 312 $ 189 $ 69
------------- ---------- ---------
------------- ---------- ---------
</TABLE>
See the accompanying notes.
F-39
<PAGE>
FOWLER, ROSENAU & GEARY, LLC
NOTES TO FINANCIAL STATEMENTS
(1) Accounting policies followed by the Firm:
As of December 1, 1995, the firm changed from a limited partnership
(L.P.) to a limited liability company (LLC)
Security transactions are recorded on a trade date basis.
The inventory of securities in the firm's specialist trading account was
valued under the last in first out, (LIFO) method of valuation until
November 30, 1993. Thereafter, the securities inventory is valued at market.
Federal, State and City income taxes have not been provided for since
each member is individually liable for his own tax payments. The firm is
liable for New York City Unincorporated Business Tax and has filed returns
and paid the tax to November 30, 1998.
The company's business operations were "merged" into LaBranche & Co. as
of the close of business on June 30, 1998. At that time the Specialist
securities, (long and short), and four memberships were transferred to
LaBranche & Co. All other assets and liabilities were retained by Fowler,
Rosenau & Geary, LLC
(2) In addition to the three New York Stock Exchange memberships, the use of
which is contributed to the parternship, the firm holds four other
memberships subject to ABC agreements. An ABC agreement is an agreement
under which a membership is held in the name of an individual affiliated
with the broker-dealer and typically the purchase of the seat is financed by
the broker-dealer. An ABC agreement provides that if the affiliated person
leaves the broker-dealer, he or she can retain title to the membership if he
or she pays the broker-dealer the replacement value of the membership or the
sales proceeds thereof; otherwise the broker-dealer will be entitled to
transfer title to another affiliated individual.
(3) The investment in clearing broker Murphey, Marseilles, Smith & Nammack, Inc.
became worthless in December, 1996 and was written off as a loss in the year
ended November 30, 1997.
(4) The Deposit and rent security is comprised of:
<TABLE>
<S> <C>
Internal Revenue Service -- certain deposit attributable to the
use of a fiscal year other than the calendar year............... $ 581,144
Rent security deposit............................................. 25,000
---------
$ 606,144
---------
---------
</TABLE>
(5) Off Balance Sheet Risk -- the firm is subject to the risks of fluctuation in
the value of its long and short positions, which positions it is required to
take as part of its functioning as a NYSE specialist.
F-40
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALERPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS OR IN THE ACCOMPANYING
LETTER OF TRANSMITTAL. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION OR
REPRESENTATIONS. THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL ARE
AN OFFER TO SELL OR TO BUY ONLY THE SECURITIES OFFERED HEREBY, BUT ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION
CONTAINED IN THIS PROSPECTUS AND IN THE ACCOMPANYING LETTER OF TRANSMITTAL ARE
CURRENT ONLY AS OF THEIR RESPECTIVE DATES.
- --------------------------------------------------------------------------------
[LOGO]
THROUGH AND INCLUDING , 1999 (THE 40(TH) DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
, 1999
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
("DGCL") provides that a Delaware corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise, against any liability asserted
against him or incurred by him in any such capacity or arising out of his status
as such whether or not the corporation would have the power to indemnify him
against such liabilities under such Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit.
Article Tenth of the certificate of incorporation of LaBranche & Co Inc.
(the "Company"), states that to the fullest extent permitted by the DGCL, no
director of the Company shall be personally liable to the Company, any of its
stockholders or any other person or entity for monetary damages for breach of
fiduciary duty owed to the Company, its stockholders or such other person or
entity owing to such director's position as a director of the Company.
II-1
<PAGE>
Article Eleventh of the Company's certificate of incorporation, contains
substantially the same provisions for indemnification as those contained in
Section 145 of the DGCL.
The Company has entered into indemnification agreements with its current
directors and executive officers. The Company has agreed to insure its directors
and officers against losses arising from any claim against them as such for
wrongful acts or omission, subject to certain limitations.
Under the underwriting agreement, the underwriters are obligated, under
certain circumstances, to indemnify officers, directors and controlling persons
of the Company against certain liabilities, including liabilities under the
Securities Act of 1933. Reference is made to the underwriting agreement filed as
Exhibit 1.1 hereto.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
1.1 Underwriting Agreement.
2.1 Plan of Incorporation of LaBranche & Co.
2.2 Exchange Agreement by and among LaBranche & Co Inc., LaB Investing Co., L.L.C. and
the members of LaB Investing Co. L.L.C. listed on Schedule A thereto.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1 Indenture, dated as of August 24, 1999, among LaBranche & Co Inc., as issuer, and
Firstar Bank, N.A., as trustee, relating to the 9 1/2% Senior Notes due 2004.
4.2 Form of 9 1/2% Senior Notes due 2004 of LaBranche & Co Inc. (the "Initial Notes")
(included as Exhibit A to the Indenture filed as Exhibit 4.1).
4.3 Form of 9 1/2% Senior Notes due 2004 of LaBranche & Co Inc. (the "Exchange Notes")
(included as Exhibit A to the Indenture filed as Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of August 24, 1999, by and among LaBranche &
Co Inc., as issuer, and Salomon Smith Barney Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchasers.
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality of the Exchange Notes.*
10.1 Agreement of Lease between Aetna Life Insurance Company and LaBranche & Co., dated
January 6, 1984, as amended to date.**
10.2 Second Amendment to Lease Agreement by and between Bank of Communications and
LaBranche & Co. dated July 1995, as amended to date.**
10.3 Equity Incentive Plan of the Company.**
10.4 Annual Incentive Plan.**
10.5 Form of Employment Letter between the Company and its executive officers.**
10.6 Form of Agreement Relating to Noncompetition and Other Covenants.**
10.7 Form of Pledge Agreement.**
10.8 Stockholders' Agreement by and among LaBranche & Co Inc. and the Stockholders listed
on Schedule I thereto.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.9 LaBranche & Co. Note Purchase Agreement, dated September 15, 1997, relating to the
issuance of $20,000,000 aggregate principal amount of 8.17% Subordinated Notes, as
amended.**
10.10 LaBranche & Co. Note Purchase Agreement, dated June 3, 1998, relating to the issuance
of $15,000,000 aggregate principal amount of 7.69% Subordinated Notes.**
10.11 Amendment to Note Purchase Agreements, dated as of August 23, 1999, relating to the
issuance of $20,000,000 aggregate principal amount of 8.17% Subordinated Notes and
$15,000,000 aggregate principal amount of 7.69% Subordinated Notes.
10.12 Form of Subordinated Note.**
10.13 Credit Agreement, dated as of June 26, 1998, by and among LaBranche & Co. and The
Bank of New York.**
10.14 Amendment No. 1 to Credit Agreement, dated as of June 23, 1999, by and among
LaBranche & Co. and The Bank of New York.
10.15 Amendment No. 2 to Credit Agreement, dated as of August 24, 1999, by and among
LaBranche & Co. and The Bank of New York.
10.16 Form of Indemnification Agreement.**
10.17 Note Purchase Agreement, dated August 18, 1999, by and among LaBranche & Co Inc. and
the initial purchasers.
10.18 Amended and Restated Articles of Partnership of LaBranche & Co.
10.19 LaB Investing Co., L.L.C. Amended and Restated Operating Agreement.
10.20 Acquisition Agreement, dated August 16, 1999, by and between Ernst & Company and
LaBranche & Co.
10.21 Acquisition Agreement, dated August 16, 1999, by and between Mill Bridge Inc., LaB
Investing Co. L.L.C., LaBranche & Co Inc. and LaBranche & Co.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Sugarman & Thrope, P.C.
24.1 Power of attorney (included on signature page).
25.1 Form T-1.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- ------------------------
* To be filed by amendment.
** Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 333-81079), as amended, effective August 18, 1999.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to
II-3
<PAGE>
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York on September 30, 1999.
<TABLE>
<S> <C> <C>
LaBRANCHE & CO INC.
By: /s/ GEORGE M.L. LABRANCHE, IV
-----------------------------------------
George M.L. LaBranche, IV
Chairman and Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each individual whose
signature appears below constitutes and appoints each of George M.L. LaBranche,
IV and Todd Graber as his true and lawful attorney-in-fact and agent, each
acting alone, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments to this registration statement, including post-effective amendments,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that any said attorney-in-fact and
agent, each acting alone, or his substitutes or resubstitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ GEORGE M.L. LABRANCHE, Chief Executive Officer,
IV President and Chairman
- ------------------------------ of the Board (Principal September 30, 1999
George M.L. LaBranche, IV Executive Officer)
/s/ TODD GRABER
- ------------------------------ Controller (Principal September 30, 1999
Todd Graber Accounting Officer)
/s/ JAMES G. GALLAGHER
- ------------------------------ Director September 30, 1999
James G. Gallagher
/s/ ALFRED O. HAYTWARD, JR.
- ------------------------------ Director September 30, 1999
Alfred O. Haytward, Jr.
/s/ S. LAWRENCE PRENDERGAST
- ------------------------------ Executive Vice President, September 30, 1999
S. Lawrence Prendergast Finance and Director
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement.
2.1 Plan of Incorporation of LaBranche & Co.
2.2 Exchange Agreement by and among LaBranche & Co Inc., LaB Investing Co. L.L.C. and the
members of LaB Investing Co., L.L.C. listed on Schedule A thereto.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1 Indenture, dated as of August 24, 1999, among LaBranche & Co Inc., as issuer, and
Firstar Bank, N.A., as trustee, relating to the 9 1/2% Senior Notes due 2004.
4.2 Form of 9 1/2% Senior Notes due 2004 of LaBranche & Co Inc. (the "Initial Notes")
(included as Exhibit A to the Indenture filed as Exhibit 4.1).
4.3 Form of 9 1/2% Senior Notes due 2004 of LaBranche & Co Inc. (the "Exchange Notes")
(included as Exhibit A to the Indenture filed as Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of August 24, 1999, by and among LaBranche &
Co Inc., as issuer, and Salomon Smith Barney Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchasers.
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality of the Exchange Notes.*
10.1 Agreement of Lease between Aetna Life Insurance Company and LaBranche & Co., dated
January 6, 1984, as amended to date.**
10.2 Second Amendment to Lease Agreement by and between Bank of Communications and
LaBranche & Co. dated July 1995, as amended to date.**
10.3 Equity Incentive Plan of the Company.**
10.4 Annual Incentive Plan**
10.5 Form of Employment Letter between the Company and its executive officers.**
10.6 Form of Agreement Relating to Noncompetition and Other Covenants.**
10.7 Form of Pledge Agreement.**
10.8 Stockholders' Agreement by and among LaBranche & Co Inc. and the Stockholders listed
on Schedule I thereto.
10.9 LaBranche & Co. Note Purchase Agreement, dated September 15, 1997, relating to the
issuance of $20,000,000 aggregate principal amount of 8.17% Subordinated Notes, as
amended.**
10.10 LaBranche & Co. Note Purchase Agreement, dated June 3, 1998, relating to the issuance
of $15,000,000 aggregate principal amount of 7.69% Subordinated Notes.**
10.11 Amendment to Note Purchase Agreements, dated as of August 23, 1999, relating to the
issuance of $20,000,000 aggregate principal amount of 8.17% Subordinated Notes and
$15,000,000 aggregate principal amount of 7.69% Subordinated Notes.
10.12 Form of Subordinated Note.**
10.13 Credit Agreement, dated as of June 26, 1998, by and among LaBranche & Co. and The
Bank of New York.**
10.14 Amendment No. 1 to Credit Agreement, dated as of June 23, 1999, by and among
LaBranche & Co. and The Bank of New York.
10.15 Amendment No. 2 to Credit Agreement, dated as of August 24, 1999, by and among
LaBranche & Co. and The Bank of New York.
10.16 Form of Indemnification Agreement.**
10.17 Note Purchase Agreement, dated August 18, 1999, by and among LaBranche & Co Inc. and
the initial purchasers.
10.18 Amended and Restated Articles of Partnership of LaBranche & Co.
10.19 LaB Investing Co. L.L.C. Amended and Restated Operating Agreement.
10.20 Acquisition Agreement by, dated August 16, 1999, and between Ernst & Company and
LaBranche & Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------
<S> <C>
10.21 Acquisition Agreement by, dated August 16, 1999, and between Mill Bridge Inc., LaB
Investing Co. L.L.C., LaBranche & Co Inc. and LaBranche & Co.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Fulbright & Jaworski L.L.P. (Included in Exhibit 5.1).
23.2 Consent of Arthur Andersen L.L.P.
23.3 Consent of Sugarman & Thorpe, RC.
24.1 Power of attorney (included on signature page).
25.1 Form T-1.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- ------------------------
* To be filed by amendment.
** Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 333-81079), as amended, effective August 18, 1999.
<PAGE>
Exhibit 1.1
EXECUTION COPY
LaBranche & Co Inc.
10,500,000 Shares(1)
Common Stock
($0.01 par value)
Underwriting Agreement
New York, New York
August 18, 1999
Salomon Smith Barney Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
ABN AMRO Incorporated
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
LaBranche & Co Inc., a corporation organized under the laws of
Delaware ("LABINC."), proposes to sell to the several underwriters named in
Schedule I hereto (the "UNDERWRITERS"), for whom you (the "REPRESENTATIVES") are
acting as representatives, 10,500,000 shares of Common Stock, $0.01 par value
("COMMON Stock") of the Company (said shares to be issued and sold by the
Company being hereinafter called the "UNDERWRITTEN SECURITIES"). The Company
also proposes to grant to the Underwriters an option to purchase up to 1,575,000
additional shares of Common Stock to cover over-allotments (the "OPTION
SECURITIES"; the Option Securities, together with the Underwritten Securities,
being hereinafter called the "SECURITIES"). To the extent there are no
additional Underwriters listed on Schedule I other than you, the term
Representatives as used herein shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean either the singular or plural as the
context requires. Certain terms used herein are defined in Section 17 hereof.
For purposes of the representations and warranties set forth
in Section 1 and the conditions set forth in Section 6, unless the context
otherwise requires, prior to the consummation of the Reorganization Transactions
(as defined below), references to the "COMPANY" shall be deemed to be references
to LaBranche & Co., a New York limited partnership ("LABCO."), and after
consummation of the Reorganization Transactions, references to the "Company"
shall be deemed to be references to LaBInc.
- --------
(1) Plus an option to purchase from the Company, up to 1,575,000 additional
Securities to cover over-allotments.
<PAGE>
It is understood and agreed to by all parties that in
connection with the reorganization of the business of LaBCo. from partnership to
corporate form, a series of transactions that are described in the Prospectus
(as defined below) under the caption "Certain Transactions--Reorganization and
Related Transactions" in the Prospectus will occur not later than concurrent
with the Closing Date (as defined below). Such transactions are hereinafter
referred to as the "REORGANIZATION TRANSACTIONS"). The award of restricted stock
units to employees, the award of options for Common Stock to employees on a
discretionary basis, and the issuance of Common Stock to certain individuals and
entities in exchange for their limited partnership interests in LaBCo. or their
membership interests in LaB Investing Co. L.L.C. ("LABLLC"), as described in the
Prospectus under the heading "Certain Transactions--Reorganization and Related
Transactions," the offer and sale of $100 million in aggregate principal amount
of senior notes by the Company pursuant to a Purchase Agreement, dated August
18, 1999, the issuance of $16.4 million of indebtedness by LaBInc. and the
repayment of $5.0 million of subordinated indebtedness by LaBCo. are hereinafter
referred to as the "RELATED TRANSACTIONS."
As part of the offering contemplated by this Agreement,
Salomon Smith Barney Inc. ("SALOMON SMITH BARNEY") has agreed to reserve out of
the Underwritten Securities set forth opposite its name on the SCHEDULE I to
this Agreement, up to 525,000 shares, for sale to the Company's employees,
officers, and directors and other parties associated with the Company
(collectively, "PARTICIPANTS"), as set forth in the Prospectus under the heading
"Underwriting" (the "DIRECTED SHARE PROGRAM"). The Underwritten Securities to be
sold by Salomon Smith Barney pursuant to the Directed Share Program (the
"DIRECTED SHARES") will be sold by Salomon Smith Barney pursuant to this
Agreement at the public offering price. Any Directed Shares not orally confirmed
for purchase by any Participants by the end of the business day on which this
Agreement is executed will be offered to the public by Salomon Smith Barney as
set forth in the Prospectus.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, each Underwriter as set forth below in this
Section 1.
(a) The Company has prepared and filed with the Commission a
registration statement (file number 333-81079) on Form S-1, including a
related preliminary prospectus, for registration under the Act of the
offering and sale of the Securities. The Company may have filed one or
more amendments thereto, including a related preliminary prospectus,
each of which has previously been furnished to you. The Company will
next file with the Commission either (1) prior to the Effective Date of
such registration statement, a further amendment to such registration
statement (including the form of final prospectus) or (2) after the
Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (2), the
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in such
registration statement and the Prospectus. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all
Rule 430A Information, together with all other such required
information, and, except to the extent the Representatives shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to you prior to the Execution Time or, to the
2
<PAGE>
extent not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company has
advised you, prior to the Execution Time, will be included or made
therein;
(b) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined herein)
and on any date on which Option Securities are purchased, if such date
is not the Closing Date (a "SETTLEMENT DATE"), the Prospectus (and any
supplements thereto) will, comply in all material respects with the
applicable requirements of the Act and the rules thereunder; on the
Effective Date and at the Execution Time, the Registration Statement
did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and,
on the Effective Date, the Prospectus, if not filed pursuant to Rule
424(b), will not, and on the date of any filing pursuant to Rule 424(b)
and on the Closing Date and any settlement date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the Company makes no representations or warranties as to
the information contained in or omitted from the Registration
Statement, or the Prospectus (or any supplement thereto) in reliance
upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the Registration Statement or the
Prospectus (or any supplement thereto);
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate
power and authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the Prospectus,
and is duly registered and qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
which requires such registration or qualification, except where the
failure to so register or qualify could not reasonably be expected to
have a material adverse effect on the condition (financial or other)
business, earnings, prospects, properties, net worth or results of
operations of the Company and its Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT"); each of LaBCo. and LaBLLC has been duly
organized and is validly existing as a limited partnership and a
limited liability company, respectively, in good standing under the
laws of the jurisdiction in which it is organized with the necessary
power and authority to own its properties and conduct its business as
described in the Prospectus; LaBCo. and LaBLLC are the only
subsidiaries (the "SUBSIDIARIES") of the Company;
(d) After giving effect to the Reorganization Transactions and
the Related Transactions, the Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and conform to the description of the
capital stock contained in the Prospectus; all of the membership
interests in LaBLLC
3
<PAGE>
have been duly and validly authorized and issued, are fully paid and,
are non-assessable and, after giving effect to the Reorganization
Transactions and the Related Transactions, are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims; and all of the partnership interests in LaBCo. have
been duly and validly created and, after giving effect to the
Reorganization Transactions and the Related Transactions, are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(e) The Securities to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued and fully paid and non-assessable and will
conform to the description of the capital stock of the Company
contained in the Prospectus;
(f) Each of this Agreement and each of the stockholders'
agreement, each employment agreement, each noncompetition agreement and
each pledge agreement (each as described in the Prospectus, and
together, the "RELATED AGREEMENTS") as of the Closing Date will have
been duly authorized, executed and delivered and will as of the Closing
Date constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Company will have obtained as of the Closing Date
the signature of each other party to each of the Related Agreements;
PROVIDED, HOWEVER, that the Company, makes no representation or
warranty as to the authorization, execution or delivery of any such
agreement by any other party thereto;
(g) There is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required (such franchises, contracts or other
documents as filed as exhibits or as described in the Prospectus under
the headings "Certain Transactions --Reorganization and Related
Transactions--Reorganization" and "--Interest on Indebtedness" to be
hereinafter referred to as the "MATERIAL CONTRACTS"); and the
statements set forth in the Prospectus under the headings "Description
of Capital Stock," "Business--Regulatory Matters" and
"--Operations--NYSE Rules Governing Our Specialist Activities" and
"--Legal Proceedings," "Certain Transactions," "Employment Agreements
and Noncompetition Agreements," "Incentive Awards to Our Employees" and
"Shares Eligible for Future Sale" fairly summarize the matters
described therein;
(h) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company," as such term is defined the Investment Company Act of 1940,
as amended (the "INVESTMENT COMPANY ACT");
(i) No consent, approval, authorization, filing with, or order
of any court or governmental agency or body is required in connection
with the transactions
4
<PAGE>
contemplated herein, except such as have been obtained under the Act
and such as may be required under the blue sky laws of any jurisdiction
in connection with the purchase and distribution of the Securities by
the Underwriters in the manner contemplated herein and in the
Prospectus;
(j) No holders of securities of the Company have any
preemptive rights to acquire any securities of the Company or any
rights to the registration of any securities under the Registration
Statement;
(k) The consolidated historical financial statements and
schedule of the Company and its consolidated Subsidiary included in the
Prospectus and the Registration Statement present fairly in all
material respects the financial condition, results of operations and
cash flows of the Company as of the dates and for the periods
indicated, comply as to form with the applicable accounting
requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The selected financial data set forth
under the captions "Summary--Summary Historical Consolidated Financial
Data" and "Selected Historical Consolidated Financial Data" in the
Prospectus and Registration Statement fairly present, on the basis
stated in the Prospectus and the Registration Statement, the
information included therein. The pro forma financial statements
included in the Prospectus and the Registration Statement are based on
assumptions that provide a reasonable basis for presenting the
significant effects directly attributable to the transactions and
events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma adjustments
reflect the proper application of those adjustments to the historical
financial statement amounts in the pro forma financial statements
included in the Prospectus and the Registration Statement. The pro
forma financial statements included in the Prospectus and the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of Regulation S-X under the Act
and the pro forma adjustments have been properly applied to the
historical amounts in the compilation of those statements;
(l) There are no legal or governmental proceedings pending
against the Company or, to the knowledge of the Company, threatened
against it or either of its Subsidiaries or to which any of the
respective properties of the Company or its Subsidiaries is subject
that are not adequately disclosed in the Registration Statement or the
Prospectus and that, if adversely decided would be expected to have a
Material Adverse Effect or materially adversely affect the issuance of
the Securities or the consummation of any of the transactions
contemplated by this Agreement or the Reorganization Transactions or
the Related Transactions. There are no agreements, contracts,
indentures, leases or other instruments of the Company or either of its
Subsidiaries that are material to the Company and its Subsidiaries,
taken as a whole, that are not described in the Prospectus. Except as
disclosed in the Prospectus, neither the Company nor either of its
Subsidiaries is involved in any strike, job action or labor dispute
with any group of its employees that would reasonably be expected to
have a Material Adverse Effect, and, to the knowledge of the Company,
no such action or dispute is threatened;
5
<PAGE>
(m) Each of the Company and each of its Subsidiaries owns or
leases all such properties as are materially necessary to the conduct
of its operations as presently conducted, and all of the property held
under lease by the Company or its Subsidiaries is held by it under
valid, subsisting and enforceable leases, except as the enforcement
thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally and subject to
applicability of general principles of equity;
(n) Neither the Company nor any Subsidiary is in violation or
default of, and none of (x) the issuance, offer, sale or delivery of
the Securities, (y) the execution, delivery or performance of this
Agreement and the Related Agreements by the Company to the extent a
party thereto, or (z) the consummation by the Company of the
Reorganization Transactions, the Related Transactions or the
transactions contemplated hereby or thereby will conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, (i) the organizational documents of the Company or any of its
Subsidiaries, or, (ii) any agreement, indenture, lease or other
instrument to which any of the Company or its Subsidiaries is a party
or by which any of them or any of their respective properties may be
bound, except as disclosed in the Prospectus or any such conflicts,
breaches or defaults that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect, or (iii) any
statute, law, regulation or judgment, injunction, order or decree
applicable to the Company or either of its Subsidiaries or any of their
respective properties, except any such violations that in the aggregate
could not reasonably be expected to have a Material Adverse Effect; the
consummation of the transactions contemplated in this Agreement, the
Reorganization Transactions and the Related Transactions will not
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of any of the Company or its Subsidiaries
pursuant to the terms of any agreement or instrument to which any of
them may be bound or to which any of their respective properties or
assets is subject, other than liens, charges and encumbrances disclosed
in the Prospectus or which could not reasonably be expected to have a
Material Adverse Effect;
(o) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its consolidated Subsidiary and delivered
their reports with respect to the audited consolidated financial
statements and schedule included in the Prospectus, are independent
public accountants with respect to the Company within the meaning of
the Act and the applicable published rules and regulations thereunder;
(p) Sugarman & Thrope, P.C., who have certified certain
financial statements of Fowler, Rosenau & Geary LLC ("FOWLER")
delivered their report with respect to the audited financial statements
included in the Prospectus, are independent public accountants with
respect to Fowler within the meaning of the Act and the applicable
published rules and regulations thereunder;
(q) There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the Company
or sale by the Company of the Securities;
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(r) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; all policies of insurance and
fidelity or surety bonds insuring the Company or any of its
Subsidiaries or their respective businesses, assets, employees,
officers and directors are in full force and effect; the Company and
its Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the
Company or any of its Subsidiaries under any such policy or instrument
as to which any insurance company is denying liability or defending
under a reservation of rights clause; neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto);
(s) No Subsidiary of the Company is currently prohibited,
directly or indirectly, from making any distribution in respect of its
membership or partnership interests, as the case may be, from repaying
to the Company any loans or advances to such Subsidiary from the
Company or from transferring any of such Subsidiary's property or
assets to the Company or any other Subsidiary of the Company, except as
described in or contemplated by the Prospectus;
(t) The Company and its Subsidiaries (i) have such
concessions, permits, licenses, consents, exemptions, franchises,
authorizations, orders, registrations, qualifications and other
approvals (each, an "AUTHORIZATION") of, and have made all material
filings with and notices to, all Federal, state and foreign
governments, governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals and (ii) are members
in good standing of each Federal, state or foreign exchange, board of
trade, clearing house or association and self-regulatory or similar
organization, in each case, as are necessary to consummate the
Reorganization Transactions and the Related Transactions and to conduct
their respective businesses as described in the Prospectus. Each such
Authorization is valid and in full force and effect and the Company and
each of its Subsidiaries is in material compliance with all of the
terms and conditions thereof; and no event has occurred (including,
without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both,
would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both,
would result in any other limitation of the rights of the holder of any
such Authorization; and other than as disclosed in the Prospectus, such
Authorizations do not contain net capital or other requirements which
are materially more burdensome than those imposed on LaBCo. and LaBLLC
immediately prior to the consummation of the Reorganization
Transactions and Related Transactions;
(u) The statistical and market-related data included in the
Prospectus are based on or derived from sources that the Company
believes to be reliable and accurate;
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(v) The Company and each of its Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences;
(w) The Company has not taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities;
(x) Each of the Company, its Subsidiaries and its ERISA
Affiliates has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of the United States Employee
Retirement Income Security Act of 1974 ("ERISA") and Section 412 of the
Internal Revenue Code of 1986, as amended (the "CODE") and the
regulations and published interpretations thereunder with respect to
each "plan" (as defined in Section 3(3) of ERISA) for which the Company
or any of its Subsidiaries or ERISA Affiliates have or may have any
liability (contingent or otherwise) and each such plan is in compliance
in all material respects with the applicable provisions of ERISA and
the Code and such regulations and published interpretations thereunder.
Neither the Company nor any of its Subsidiaries or ERISA Affiliates
have incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the ordinary
course) or to any such plan under Title IV of ERISA. Neither the
Company nor any of its Subsidiaries has engaged in any non-exempt
"prohibited transaction" under ERISA or the Code. The term "ERISA
AFFILIATE" means each trade or business (whether or not incorporated)
that would be treated as a single employer with the Company under Title
IV of ERISA or Section 412 of the Code;
(y) All stockholder, partnership and limited liability company
member approvals necessary for the Company and each Subsidiary to
consummate the Reorganization Transactions and the Related Transactions
have been obtained and are in full force and effect;
(z) The statements set forth under the headings "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000" and "Risk Factors--Year 2000 compliance problems
could cause our trading-related communications and data processing
systems to fail, which could result in losses" accurately and fairly
set forth the current state of the Company's efforts to address the
Year 2000 Problem and the risks and costs of the Company relating to
the Year 2000 Problem. The "YEAR 2000 PROBLEM" as used herein means any
significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
transmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or
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<PAGE>
time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000;
(aa) It is not necessary in connection with the grant,
issuance, offer, sale and delivery of the securities to be issued by
the Company pursuant to the Reorganization Transactions or the Related
Transactions, to register any such securities under the Act, or to
qualify any indenture under the Trust Indenture Act of 1939, as
amended;
(bb) LaBCo. is registered as a broker-dealer with the SEC
under the Exchange Act and LaBCo. is a member organization in good
standing with the NYSE. LaBCo. is not required to be registered with
the Securities authorities of any state;
(cc) LaBCo. is a broker-dealer subject to the provisions of
Regulation T (12 C.F.R. Section 220) of the Board of Governors of the
Federal Reserve System. LaBCo. maintains procedures and internal
controls designed to ensure that it does not extend or maintain credit
to or for its customers other than in accordance with the provisions of
Regulation T, and management officials of the Company regularly
supervise the activities of LaBCo., and the activities of its
employees, to ensure that LaBCo. does not extend or maintain credit to
or for its customers other than in accordance with the provisions of
said Regulation T;
(dd) The Company and its Subsidiaries own, possess, license or
have other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "INTELLECTUAL PROPERTY") necessary for the conduct
of the Company's business as now conducted or as proposed in the
Prospectus to be conducted, except any failure to so own, possess,
license or have rights to use Intellectual Property which would not
have a Material Adverse Effect; and
(ee) The Company has not offered, or caused the Underwriters
to offer, Shares to any person pursuant to the Directed Share Program
with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter the customer's or supplier's level or
type of business with the Company, or (ii) a trade journalist or
publication to write or publish favorable information about the Company
or its products.
Furthermore, in the event that Directed Shares are sold
outside the United States, the Company represents and warrants to Salomon Smith
Barney that (i) the Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program,
and that (ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the securities
laws and regulations of foreign jurisdictions in which the Directed shares are
offered outside the United States.
9
<PAGE>
Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each Underwriter.
2. PURCHASE AND SALE. (a) Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$14.00 per share, the amount of the Underwritten Securities set forth opposite
such Underwriter's name in SCHEDULE I hereto.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to 1,575,000 Option Securities at the same purchase price per share as the
Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in part
at any time (but not more than once) on or before the 30th day after the date of
the Prospectus upon written or telegraphic notice by the Representatives to the
Company setting forth the number of shares of the Option Securities as to which
the several Underwriters are exercising the option and the settlement date. The
number of Option Securities to be purchased by each Underwriter shall be the
same percentage of the total number of shares of the Option Securities to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Securities, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares.
3. DELIVERY AND PAYMENT. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
August 24, 1999, or at such time on such later date not more than three Business
Days after the foregoing date as the Representatives shall designate, which date
and time may be postponed by agreement between the Representatives and the
Company or as provided in Section 9 hereof (such date and time of delivery and
payment for the Securities being herein called the "CLOSING DATE"). Delivery of
the Securities shall be made to the Representatives for the respective accounts
of the several Underwriters against payment by the several Underwriters through
the Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to an account specified by
the Company. Delivery of the Underwritten Securities and the Option Securities
shall be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised
after the third Business Day prior to the Closing Date, the Company will deliver
the Option Securities (at the expense of the Company) to the Representatives, at
388 Greenwich Street, New York, New York, on the date specified by the
Representatives (which shall be within three Business Days after exercise of
said option) for the respective accounts of the several Underwriters, against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of the Company by wire transfer payable in
same-day funds to an account
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<PAGE>
specified by the Company. If settlement for the Option Securities occurs after
the Closing Date, the Company will deliver to the Representatives on the
settlement date for the Option Securities, and the obligation of the
Underwriters to purchase the Option Securities shall be conditioned upon receipt
of, supplemental opinions, certificates and letters confirming as of such date
the opinions, certificates and letters delivered on the Closing Date pursuant to
Section 6 hereof.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. AGREEMENTS. The Company agrees with the several
Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished you a
copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The Company
will promptly advise the Representatives (1) when the Registration
Statement, if not effective at the Execution Time, shall have become
effective, (2) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule
424(b) or when any Rule 462(b) Registration Statement shall have been
filed with the Commission, (3) when, prior to termination of the
offering of the Securities, any amendment to the Registration Statement
shall have been filed or become effective, (4) of any request by the
Commission or its staff for any amendment of the Registration
Statement, or any Rule 462(b) Registration Statement, or for any
supplement to the Prospectus or for any additional information, (5) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (6) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act or the rules thereunder, the Company
promptly will (1) notify the Representatives of any such event,
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<PAGE>
(2) prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Section 5, an amendment or supplement
which will correct such statement or omission or effect such
compliance; and (3) supply any supplemented Prospectus to you in such
quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its Subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
(d) The Company will furnish to the Representatives and
counsel for the Underwriters signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Act, as many copies of each Preliminary Prospectus and
the Prospectus and any supplement thereto as the Representatives may
reasonably request.
(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the Representatives may designate and will maintain
such qualifications in effect so long as required for the distribution
of the Securities; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to service
of process in suits, other than those arising out of the offering or
sale of the Securities, in any jurisdiction where it is not now so
subject.
(f) The Company will not, without the prior written consent of
Salomon Smith Barney, offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the Company or any affiliate of the
Company or any person in privity with the Company or any affiliate of
the Company) directly or indirectly, including the filing (or
participation in the filing) of a registration statement with the
Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act, any other shares of Common
Stock or any securities convertible into, or exercisable, or
exchangeable for, shares of Common Stock; or publicly announce an
intention to effect any such transaction, for a period of 180 days
after the date of the Underwriting Agreement, PROVIDED, HOWEVER, that
the Company may issue and sell Common Stock pursuant to any employee
stock option plan, stock ownership plan or dividend reinvestment plan
of the Company in effect at the Execution Time and the Company may
issue Common Stock issuable upon the conversion of securities or the
exercise of warrants outstanding at the Execution Time.
(g) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
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<PAGE>
(h) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation, printing or reproduction
and filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), each Preliminary
Prospectus, the Prospectus, and each amendment or supplement to any of
them; (ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of
such copies of the Registration Statement, each Preliminary Prospectus,
the Prospectus, and all amendments or supplements to any of them, as
may, in each case, be reasonably requested for use in connection with
the offering and sale of the Securities; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the
Securities, including any stamp or transfer taxes in connection with
the original issuance and sale of the Securities; (iv) the printing (or
reproduction) and delivery of this Agreement, any blue sky memorandum
and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the
registration of the Securities under the Exchange Act and the listing
of the Securities on the New York Stock Exchange; (vi) any registration
or qualification of the Securities for offer and sale under the
securities or blue sky laws of the several states (including filing
fees and the reasonable fees and expenses of counsel for the
Underwriters relating to such registration and qualification); (vii)
any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD") (including filing fees and the
reasonable fees and expenses of counsel for the Underwriters relating
to such filings); (viii) the transportation and other expenses incurred
by or on behalf of the Company or its officers, employees or other
representatives (other than the Underwriters) in connection with
presentations to prospective purchasers of the Securities; (ix) the
fees and expenses of the Company's accountants and the fees and
expenses of counsel (including local and special counsel) for the
Company; (x) all other costs and expenses incident to the performance
by the Company of its obligations hereunder; and (xi) all fees and
disbursements of counsel incurred by the Underwriters in connection
with the Directed Share Program and stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in
connection with the Directed Share Program.
(i) In connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the NASD or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the date
of the effectiveness of the Registration Statement. Salomon Smith
Barney will notify the Company as to which Participants will need to be
so restricted. The Company will direct the removal of such transfer
restrictions upon the expiration of such period of time.
Furthermore, in the event that Directed Shares are sold outside the United
States, the Company covenants with Salomon Smith Barney that the Company will
comply with all applicable securities and other applicable laws, rules and
regulations in each foreign jurisdiction in which the Directed Shares are
offered in connection with the Directed Share Program.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the
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<PAGE>
Company contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become
effective not later than (i) 6:00 PM New York City time on the date of
determination of the public offering price, if such determination
occurred at or prior to 3:00 PM New York City time on such date or (ii)
9:30 AM on the Business Day following the day on which the public
offering price was determined, if such determination occurred after
3:00 PM New York City time on such date; if filing of the Prospectus,
or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and
within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have requested and caused Fulbright &
Jaworski L.L.P., counsel for the Company, to have furnished to the
Representatives their opinion, dated the Closing Date and addressed to
the Representatives, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction in which it is chartered or
organized, with full corporate power and authority to own or
lease, as the case may be, and to operate its properties and
conduct its business as described in the Prospectus, and is
duly registered and qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such registration or
qualification, except to the extent where the failure to so
register or qualify could not reasonably be expected to have a
Material Adverse Effect;
(ii) each of LaBCo. and LaBLLC has been duly
organized and is validly existing as a limited partnership and
a limited liability company, respectively, in good standing
under the laws of its jurisdiction of formation; and the
partnership interests in LaBCo. and the membership interests
in LaBLLC have been duly and validly authorized and issued and
are fully paid and nonassessable and are owned of record
directly or indirectly by the Company, to the knowledge of
such counsel, free and clear of all liens, encumbrances,
equities or claims;
(iii) the Company's authorized equity capitalization
is as set forth in the Prospectus; the capital stock of the
Company conforms in all material respects to the description
thereof contained in the Prospectus under the heading
"Description of Capital Stock"; the outstanding shares of
Common Stock have been duly and validly authorized and issued
and are fully paid and nonassessable; the Securities have been
duly and validly authorized, and, when issued and delivered to
and paid for by the Underwriters pursuant to this Agreement,
will be fully paid and
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nonassessable; the Securities are duly listed, and
admitted and authorized for trading, subject to official
notice of issuance on the New York Stock Exchange; the
certificates for the Securities are in valid and sufficient
form; and, except as set forth in the Prospectus, to the
knowledge of such counsel, no options, warrants or other
rights to purchase, agreements or other obligations to issue,
or rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership
interests in the Company are outstanding;
(iv) to the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding by or before
any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its Subsidiaries or
its or their property of a character required to be disclosed
in the Registration Statement which is not adequately
disclosed in the Prospectus, and there is no franchise,
contract or other document of a character required to be
described in the Registration Statement or Prospectus, or to
be filed as an exhibit thereto, which is not described or
filed as required; and the statements included in the
Prospectus under the headings "Description of Capital Stock,"
"Business--Regulatory Matters" and "--Operations--NYSE Rules
Governing Our Specialist Activities," "Certain Transactions,"
"Employment and Noncompetition Agreements," "Incentive Awards
to Our Employees" and "Shares Eligible for Future Sale" fairly
summarize the matters therein described;
(v) the Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) have been made in
the manner and within the time period required by Rule 424(b);
to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued,
no proceedings for that purpose have been instituted or
threatened and the Registration Statement and the Prospectus
(other than the financial statements and other financial
information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules
thereunder;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company;
(vii) each of the Related Agreements has been duly
authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
(viii) the Company is not and, after giving effect to
the offering and sale of the Securities and the application of
the proceeds thereof as described in the Prospectus, will not
be, an "investment company" as defined in the Investment
Company Act;
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(ix) the Company and its Subsidiaries (i) have such
Authorizations of, and have made all filings with and notices
to, the courts and the governmental agencies or bodies of the
United States of America and the State of New York and all
applicable self-regulatory organizations and (ii) are members
in good standing of each Federal, state or foreign exchange,
board of trade, clearing house or association and
self-regulatory or similar organization, in each case, as are
necessary to consummate the Reorganization Transactions and
the Related Transactions. Each such Authorization is valid and
in full force and effect; and, to the best of such counsel's
knowledge, no event has occurred that would reasonably be
expected to result in the revocation, suspension or
termination of any such Authorization; and other than as
disclosed in the Prospectus, such Authorizations contain no
net capital or other requirements or conditions that are
materially more burdensome than those imposed on LaBCo. or
LaBLLC immediately prior to the consummation of the
Reorganization Transactions;
(x) all stockholder, partnership and limited
liability company member approvals necessary for LaBInc.,
LaBCo. and LaBLLC to consummate the Reorganization
Transactions and the Related Transactions have been obtained
and are in full force and effect.
(xi) (x) the issuance and sale of the Securities, (y)
the execution, delivery or performance of this Agreement and
the Related Agreements by the Company to the extent a party
thereto or (z) the consummation of the Reorganization
Transactions and the Related Transactions will not conflict
with or constitute a breach of any of the terms or provisions
of, or a default under, (i) the organizational documents of
the Company or any of its Subsidiaries, or (ii) any of the
Material Contracts or (iii) any statute, law, ordinance or
administrative, governmental or self-regulatory organization,
rule or regulation known to such counsel to be applicable to
the Company or any Subsidiary or any of their respective
properties or any filing of judgment, injunction, order or
decree of any court or governmental agency or body having
jurisdiction over the Company or any Subsidiary or any of
their properties; and the consummation of the transactions
contemplated herein, the Reorganization Transactions and the
Related Transactions will not result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Subsidiary pursuant
to the terms of any Material Contract, other than as disclosed
in the Prospectus; PROVIDED, HOWEVER, that, for the purposes
of this paragraph (xi), insofar as the consummation of the
Reorganization Transactions and Related Transactions are
concerned, such counsel need not express any opinion with
respect to Federal or state securities laws, other antifraud
laws, and fraudulent transfer laws, or as to bankruptcy,
insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights;
(xii) no consent, approval, authorization, filing
with or order of any court or governmental agency or body is
required in connection with the transactions contemplated
herein, except such as have been obtained under the Act and
such as may be required under the blue sky laws of any
jurisdiction in connection with the
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purchase and distribution of the Securities by the
Underwriters in the manner contemplated in this Agreement and
in the Prospectus and such other approvals (specified in such
opinion) as have been obtained;
(xiii) there are no transfer taxes or other similar
fees or charges under Federal law or the laws of any state, or
any political subdivision thereof, required to be paid in
connection with the execution and delivery of this Agreement
or the issuance by the Company or sale by the Company of the
Securities;
(xiv) the Material Contracts do not contain any
provisions that prohibit any Subsidiary of the Company,
directly or indirectly, from making any distribution in
respect of its membership or partnership interests, as the
case may be, from repaying to the Company any loans or
advances to such Subsidiary from the Company or from
transferring any of such Subsidiary's property or assets to
the Company or any other Subsidiary of the Company, except as
described in or contemplated by the Prospectus;
(xv) it is not necessary in connection with the
grant, issuance, offer, sale and delivery of the securities to
be issued by the Company pursuant to the Reorganization
Transactions and the Related Transactions, to register any
such securities under the Act, or to qualify any indenture
under the Trust Indenture Act of 1939, as amended;
(xvi) LaBCo. is registered as a broker-dealer with
the SEC under the Exchange Act and is a member organization in
good standing with the NYSE. LaBCo. is not required to be
registered with the securities authorities of any state; and
(xvii) to the knowledge of such counsel, no holders
of securities of the Company have any preemptive rights to
acquire any securities of the Company or any rights to the
registration of such securities under the Registration
Statement.
Such counsel's opinion shall also include a paragraph substantially in
the form set forth in EXHIBIT B hereto.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
State of New York or the Federal laws of the United States, to the
extent they deem proper and specified in such opinion, upon the opinion
of other counsel of good standing whom they believe to be reliable and
who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to
the Prospectus in this paragraph (b) include any supplements thereto at
the Closing Date.
(c) The Representatives shall have received from Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters, such opinion
or opinions, dated the Closing Date and addressed to the
Representatives, with respect to the issuance and sale of the
Securities, the Registration Statement, the Prospectus (together with
any supplement
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<PAGE>
thereto) and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman, Chief Executive
Officer and President and the principal financial officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplements to the Prospectus and this Agreement and
that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Company has complied with
all the agreements and satisfied in all material respects all
the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no Material Adverse
Effect, whether or not arising from transactions in the
ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement
thereto).
(e) The Company shall have requested and caused Arthur
Andersen LLP to have furnished to the Representatives, at the Execution
Time and at the Closing Date, letters, dated respectively as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the
applicable rules and regulations adopted by the Commission thereunder
and that they have performed a review of the unaudited interim
financial information of the Company for the six-month periods ended
June 30, 1999 and 1998, and as at June 30, 1999, in accordance with
Statement on Auditing Standards No. 71 and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedule included in the Registration
Statement and the Prospectus and reported on by them comply as
to form in all material respects with the applicable
accounting requirements of the Act and the related rules and
regulations adopted by the Commission, and nothing has come to
their attention which caused them to believe that the pro
forma financial statements included in the Registration
Statement and the Prospectus and reported on by them did not
comply as to form with the requirements of Rule 11-02 of
Regulation S-X;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and its Subsidiary; their limited review, in
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<PAGE>
accordance with standards established under Statement on
Auditing Standards No. 71, of the unaudited interim financial
information for the six-month periods ended June 30, 1999 and
1998, and as at June 30, 1999; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes
(if any) of the meetings of the stockholders and directors of
the Company, the partners of LaBCo. and the Managing Committee
of LaBLLC; and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters
of the Company and its Subsidiaries as to transactions and
events subsequent to June 30, 1999, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements
included in the Registration Statement and the
Prospectus do not comply as to form in all material
respects with applicable accounting requirements of
the Act and with the related rules and regulations
adopted by the Commission with respect to
registration statements on Form S-1; and said
unaudited financial statements are not in conformity
with generally accepted accounting principles applied
on a basis substantially consistent with that of the
audited financial statements included in the
Registration Statement and the Prospectus;
(2) with respect to the period subsequent to
June 30, 1999, there was any increase, at a specified
date not more than five days prior to the date of the
letter, in the subordinated indebtedness of the
Company and its Subsidiary or decreases in the
members' capital of the Company as compared with the
amounts shown on the June 30, 1999 consolidated
balance sheet included in the Registration Statement
and the Prospectus, or for the period from July 1,
1999 to such specified date there were any decreases,
as compared with the corresponding period for the
prior fiscal year in total revenues, income before
managing directors' compensation, limited partners'
interest in earnings of subsidiary and provision for
unincorporated business taxes or income before
limited partners' interest in earnings of subsidiary
and provision for unincorporated business taxes
except in all instances for changes or decreases set
forth in such letter, in which case the letter shall
be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is
not deemed necessary by the Representatives;
(3) the financial information included in
the Registration Statement and Prospectus in response
to Regulation S-K, Item 301 (Selected Financial Data)
and Item 302 (Supplementary Financial Information) is
not in conformity with the applicable disclosure
requirements of Regulation S-K; and
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<PAGE>
(iii) they have performed certain other specified
procedures requested by the Underwriters as a result of which
they determined that certain information of an accounting,
financial or statistical nature (which is limited to
accounting, financial or statistical information derived from
the general accounting records of the Company and its
Subsidiaries) set forth in the Registration Statement and the
Prospectus, including the information set forth under the
captions "Summary--Summary Selected Historical Consolidated
Financial Data," "Capitalization," "Selected Historical
Consolidated Financial Data" and "Management Discussion and
Analysis of Financial Condition and Results of Operations" in
the Prospectus, agrees with the accounting records of the
Company and its Subsidiaries, excluding any questions of legal
interpretation.
References to the Prospectus in this paragraph (e) include any
supplement thereto at the date of the letter.
The Company shall have received from Arthur Andersen LLP (and
furnished to the Representatives) a review report with respect to
Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Company for the three fiscal years ending December
31, 1998, and with respect to Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Company for the
six-month period ending June 30, 1999, in respect of which a Statement
on Auditing Standards No. 71 review has been performed and the
corresponding period for the prior fiscal year, each in accordance with
Statement on Standards for Attestation Engagements No. 8 issued by the
Auditing Standards Board of the American Institute of Certified Public
Accountants, and such report shall be included in the Registration
Statement.
The Company shall have received from Arthur Andersen LLP (and
furnished to the Representatives) a review report with respect to the
pro forma adjustments described in the Pro Forma Consolidated Financial
Information (Unaudited)--Overview and the application of those
adjustments to the historical amounts included in the Registration
Statement and the Prospectus.
(f) The Company shall have caused Sugarman & Thrope, P.C. to
have furnished to the Representatives letters, dated respectively as of
the Execution Time and as of the Closing Date, in form and substance
reasonably satisfactory to the Representatives, confirming that they
are independent accountants within the meaning of the Act and the
applicable published rules and regulations adopted by the Commission
thereunder and stating in effect that, in their opinion, the audited
financial statements and financial statement schedules included in the
Registration Statement and the Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations. References to the Prospectus in this paragraph (f) include
any supplement thereto at the date of the letter.
(g) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been
20
<PAGE>
(i) any change or decrease specified in the letter or letters referred
to in paragraph (e) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the
condition (financial or otherwise), earnings, business or properties of
the Company and its Subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto) the effect of which, in any case referred to in
clause (i) or (ii) above, is, in the sole judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities
as contemplated by the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(h) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates
and documents as the Representatives may reasonably request.
(i) The Securities shall have been listed and admitted and
authorized for trading on the New York Stock Exchange, and satisfactory
evidence of such actions shall have been provided to the
Representatives.
(j) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of EXHIBIT A
hereto from each of the individuals listed on Schedule II hereto and
each officer and director of the Company addressed to the
Representatives.
(k) At the Closing Date, the Reorganization Transactions and
the Related Transactions shall have been consummated; and the Company
shall have provided to you or your counsel copies of all closing
documents delivered to the parties to the Reorganization Transactions
and the Related Transactions.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Cleary, Gottlieb Steen & Hamilton, counsel for the
Underwriters, at 1 Liberty Plaza, New York City, NY 10006 on the Closing Date.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally
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<PAGE>
through Salomon Smith Barney on demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein; PROVIDED FURTHER, that with respect to any
untrue statement or omission of material fact made in any Preliminary
Prospectus, the indemnity agreement contained in this Section 8(a) shall not
inure to the benefit of any Underwriter from whom the person asserting any such
loss, claim, damage or liability purchased the securities concerned, to the
extent that any such loss, claim, damage or liability of such Underwriter occurs
under the circumstance where it shall have been determined by a court of
competent jurisdiction by final and nonappealable judgment that (w) the Company
had previously furnished copies of the Prospectus to the Representatives, (x)
delivery of the Prospectus was required by the Act to be made to such person,
(y) the untrue statement or omission of a material fact contained in the
Preliminary Prospectus was corrected in the Prospectus and (z) there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the Prospectus. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
with reference to written information relating to such Underwriter furnished to
the Company by or on behalf of such Underwriter through the Representatives
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any Underwriter may otherwise have. The Company acknowledges that the statements
set forth in the last paragraph of the cover page regarding delivery of the
Securities and, under the heading "Underwriting", (i) the list of Underwriters
and their respective participation in the sale of the Securities, (ii) the
sentences
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<PAGE>
related to concessions and reallowances, (iii) the paragraphs related to
stabilization, syndicate covering transactions and penalty bids and (iv) the
paragraph related to the Directed Share Program of any Preliminary Prospectus
and the Prospectus constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in any Preliminary Prospectus
or the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
Notwithstanding anything contained herein to the contrary, if indemnity may be
sought pursuant to Section 8(e) hereof in respect of such action or proceeding,
then in addition to such separate firm for the indemnified parties, the
indemnifying party shall be liable for the reasonable fees and expenses of not
more than one separate firm (in addition to any local counsel) for Salomon Smith
Barney for the defense of any losses, claims, damages and liabilities arising
out of the Directed Share Program, and all persons, if any, who control Salomon
Smith Barney within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act.
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(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters severally
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "LOSSES") to which the Company
and one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by the Underwriters on the other from the offering of the Securities;
PROVIDED, HOWEVER, that in no case shall any Underwriter (except as may be
provided in any agreement among underwriters relating to the offering of the
Securities) be responsible for any amount in excess of the underwriting discount
or commission applicable to the Securities purchased by such Underwriter
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Underwriters severally shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of the Underwriters on the other in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses) received by
it, and benefits received by the Underwriters shall be deemed to be equal to the
total underwriting discounts and commissions, in each case as set forth on the
cover page of the Prospectus. Relative fault shall be determined by reference
to, among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information provided by the Company on the one hand or the
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The Company agrees to indemnify and hold harmless Salomon
Smith Barney and each person, if any, who controls Salomon Smith Barney within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act ("SALOMON SMITH BARNEY ENTITIES"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) in the event that Directed Shares
are sold outside the United States, caused by any untrue statement or alleged
untrue statement of a material fact contained in the prospectus wrapper material
prepared by or with the consent of the Company for distribution in foreign
jurisdictions in connection with the Directed Share Program attached to the
Prospectus or any preliminary prospectus, or caused by any omission or alleged
omission to
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<PAGE>
state therein a material fact required to be stated therein or necessary to make
the statement therein, when considered in conjunction with the Prospectus or any
applicable preliminary prospectus, not misleading; (ii) caused by the failure of
any Participant to pay for and accept delivery of the shares which immediately
following the effective of the Registration Statement, were subject to a
properly confirmed agreement to purchase; or (iii) related to, arising out of,
or in connection with the Directed Share Program, provided that, the Company
shall not be responsible under this subparagraph (iii) for any losses, claim,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
Salomon Smith Barney Entities.
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; PROVIDED, HOWEVER, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
five Business Days, as the Representatives shall determine in order that the
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company and any nondefaulting Underwriter for damages occasioned by its
default hereunder.
10. TERMINATION. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission or trading in securities generally on the New
York Stock Exchange shall have been suspended or limited or minimum prices shall
have been established on such Exchange, (ii) a banking moratorium shall have
been declared either by Federal or New York State authorities or (iii) there
shall have occurred any outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war, or other calamity or crisis
the effect of which on financial markets is such as to make it, in the sole
judgment of the Representatives, impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Prospectus
(exclusive of any supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and
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effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of the officers, directors, employees, agents or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to the Salomon Smith Barney General Counsel (fax
no.: (212) 816-7912) and confirmed to Salomon Smith Barney, at 388 Greenwich
Street, New York, New York, 10013, Attention: General Counsel; or, if sent to
the Company, will be mailed, delivered or telefaxed to (212) 344-1469 and
confirmed to it at One Exchange Plaza, New York, New York 10006, attention of
the Legal Department.
13. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.
14. APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
15. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. HEADINGS. The section headings used herein are for
convenience only and shall not affect the construction hereof.
17. DEFINITIONS. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City.
"COMMISSION" shall mean the Securities and Exchange
Commission.
"EFFECTIVE DATE" shall mean each date and time that the
Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Registration Statement became or become
effective.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
26
<PAGE>
"EXECUTION TIME" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"PRELIMINARY PROSPECTUS" shall mean any preliminary prospectus
referred to in paragraph 1(a) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that omits
Rule 430A Information.
"PROSPECTUS" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Securities
included in the Registration Statement at the Effective Date.
"REGISTRATION STATEMENT" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at
the Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto or any Rule
462(b) Registration Statement becomes effective prior to the Closing
Date, shall also mean such registration statement as so amended or such
Rule 462(b) Registration Statement, as the case may be. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A.
"RULE 424", "RULE 430A" and "RULE 462" refer to such rules
under the Act.
"RULE 430A INFORMATION" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A.
"RULE 462(B) REGISTRATION STATEMENT" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement referred
to in Section 1(a) hereof.
[Rest of Page Intentionally Left Blank.]
27
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
LaBranche & Co Inc.
By: /s/ George M.L. Labranche, IV
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman, Chief Executive Officer
and President
The foregoing Agreement is hereby confirmed
and accepted as of the date first above
written.
Salomon Smith Barney Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
ABN AMRO Incorporated
By: Salomon Smith Barney Inc.
By:
/s/ Anthony Calenda
-----------------------------------
Name: Anthony Calenda
Title: Vice President
For themselves and the other several
Underwriters named in Schedule I to the
foregoing Agreement.
28
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITTEN
NUMBER OF SECURITIES
UNDERWRITTEN RESERVED FOR
SECURITIES TO BE THE DIRECTED
UNDERWRITERS PURCHASED SHARE PROGRAM
- ------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
Salomon Smith Barney Inc........................................ 4,552,000 450,000
Donaldson, Lufkin & Jenrette Securities Corporation............. 4,552,000
ABN AMRO Incorporated........................................... 185,000
Allen & Company Incorporated.................................... 63,000
Bear, Stearns & Co. Inc. ....................................... 63,000
CIBC World Markets Corporation.................................. 63,000
Goldman, Sachs & Co. ........................................... 63,000
Lehman Brothers Inc. ........................................... 63,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.............. 63,000
J.P. Morgan Securities Inc. .................................... 63,000
Morgan Stanley & Co. Incorporated............................... 63,000
PaineWebber Incorporated........................................ 63,000
Prudential Securities Incorporated.............................. 63,000
Schroder & Co. Inc. ............................................ 63,000
Warburg Dillon Read LLC......................................... 63,000
J.C. Bradford & Co. ............................................ 35,000
The Chapman Company............................................. 35,000
Doft & Co., Inc. ............................................... 35,000
Doley Securities, Inc. ......................................... 35,000
HSBC Securities (USA) Corp. .................................... 35,000
Jefferies & Company, Inc. ...................................... 35,000
Keefe, Bruyette & Woods, Inc. .................................. 35,000
Legg Mason Wood Walker, Incorporated............................ 35,000
Putnam, Lovell, de la Guardiola & Thornton, Inc. ............... 35,000
The Robinson-Humphrey Company, LLC.............................. 35,000
Sands Brothers & Co., Ltd....................................... 35,000
Muriel Siebert & Co., Inc....................................... 35,000
Southwest Securities, Inc....................................... 35,000
----------
Total......................................... 10,500,000 450,000
---------- -------
---------- -------
</TABLE>
<PAGE>
SCHEDULE II
George M.L. LaBranche, IV Fred DeBoer
Vincent J. Flaherty Karin Gill
James G. Gallagher John M. Dempsey, III
Alfred O. Hayward, Jr. John N. Durante
Michael J. Naughton Gerard A. Competello
John McGraner William J. Burke, III
Vincent Papandrea Christopher Connors
Anthony M. Corso Christopher Keelips
Eugene C. McCarthy Vincent G. Quigley
John O. Pickett, III Anthony Picerni
Michael C. Ziebarth Lauren M. Behn
Anthony Giardina John R. Redmond
Sean M. McCooey Louis V. Henston
Mark Soltz Robert N. Westerlund
Christopher M. Smith Richard E. Crisco
Joseph Corso, Jr. James J. Boyle
Robert A. Conte Jane R. Rosenau Trust B
Paul A. Redmond Joseph L. Gitterman II
Thomas G. McLaughlin Estate of Joseph L. Bruce
Nicholas Caputo Kathryn Gallagher
Joseph R. Dewhurst, II Kevin J. Gallagher Trust
Steven C. Berger Jane R. Rosenau Trust A
John L. McWilliams David A. Gallagher Trust
Thomas J. Shanley Caputo Children's Trust
Kevin R. McMahon Dennis J. Stack
Bob Keelips
<PAGE>
[FORM OF LOCK-UP AGREEMENT] EXHIBIT A
[LETTERHEAD OF OFFICER, DIRECTOR OR MAJOR SHAREHOLDER OF
LABRANCHE & CO INC.]
LaBranche & Co Inc.
PUBLIC OFFERING OF COMMON STOCK
-------------------------------
August , 1999
Salomon Smith Barney Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "UNDERWRITING AGREEMENT"), between
LaBranche & Co Inc., a Delaware corporation (the "COMPANY"), and each of you as
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, $0.01 par value (the "COMMON
STOCK"), of the Company.
In order to induce you and the other Underwriters to enter
into the Underwriting Agreement, the undersigned will not, without the prior
written consent of Salomon Smith Barney Inc., offer, sell, contract to sell,
pledge or otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing of) a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of 180 days after the
date of this Agreement, other than shares of Common Stock disposed of as bona
fide gifts approved by Salomon Smith Barney Inc., which approval shall not be
unreasonably withheld.
A-1
<PAGE>
If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the Underwriting Agreement),
the agreement set forth above shall likewise be terminated.
Yours very truly,
LaBranche & Co Inc.
By:
-------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive
Officer
A-2
<PAGE>
EXHIBIT B
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Underwriters and counsel for
the Underwriters at which conferences the contents of the Prospectus and the
Registration Statement and related matters were discussed, and, although we have
not independently verified and are not passing upon and assume no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus (except to the extent required in paragraph iv of Section 6 of the
Underwriting Agreement ), and that our judgment as to materiality is, to the
extent we deem proper, based in part upon the views of appropriate officers and
other representatives of the Company, nothing has come to our attention that
leads us to believe that the Registration Statement, as of its date and on the
Closing Date, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading or that the Prospectus, as of its
date and on the Closing Date, included or includes an untrue statement of a
material fact or omitted or to omits to state a material fact required to be
stated therein or necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading (in each
case, it being understood that we express no opinion with respect to the
financial statements and related notes thereto and the other financial,
statistical and accounting data included therein).
B-1
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
LaBranche & Co Inc.
By: /s/ George M.L. Labranche, IV
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman, Chief Executive Officer
and President
The foregoing Agreement is hereby confirmed
and accepted as of the date first above
written.
Salomon Smith Barney Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
ABN AMRO Incorporated
By: Salomon Smith Barney Inc.
By:
/s/ Anthony Calenda
-----------------------------------
Name: Anthony Calenda
Title: Vice President
For themselves and the other several
Underwriters named in Schedule I to the
foregoing Agreement.
<PAGE>
Exhibit 2.1
PLAN OF INCORPORATION
LABRANCHE & CO.
THIS PLAN OF INCORPORATION IS BEING MADE AVAILABLE ON A CONFIDENTIAL BASIS
SOLELY FOR THE PURPOSES DESCRIBED HEREIN. BY ACCEPTING ACCESS TO THIS PLAN OF
INCORPORATION, EACH RECIPIENT AGREES NOT TO COPY ALL OR ANY PORTION OF IT AND TO
KEEP ITS CONTENTS CONFIDENTIAL.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction......................................................1
Section 1. General Description of Proposed Transactions......................2
Section 2. Description of Exchange Consideration.............................3
Section 3. Equity Incentives and Compensation Arrangements...................4
Section 4. Employment and Noncompetition Agreements..........................5
Section 5. Certain Transfer Restrictions on Shares...........................5
Section 6. Stockholders' Agreement...........................................7
Section 7. Amendments to this Plan...........................................7
Section 8. Tax Consequences..................................................8
Section 9. Management of the Company.........................................9
Section 10. Other.............................................................9
Section 11. Documents That Exchanging Parties Are Being Asked to Sign........12
Section 12. Copies of Documents and List of Contact Persons..................13
Schedule A Allocation of Exchange Consideration
Exhibit A Registration Statement on Form S-1
Exhibit B Representations and Warranties of the
Participating Limited Partners
Exhibit C Power of Attorney
</TABLE>
-i-
<PAGE>
INTRODUCTION
GENERAL
This is the Plan of Incorporation, dated as of June 17, 1999
(this "PLAN"), of LaBranche & Co., a New York limited partnership ("LABRANCHE
LP"), to facilitate, among other matters, an initial public offering (the "IPO")
of the common stock ("COMMON STOCK") of LaBranche & Co Inc., a Delaware
corporation (the "COMPANY"), which will own, directly or indirectly,
substantially all of the equity interest in LaBranche LP upon consummation of
this Plan. The Managing Committee (the "MANAGING COMMITTEE") of LaB Investing
Co. L.L.C., a New York limited liability company and the General Partner of
LaBranche LP ("INVESTING" or the "GENERAL PARTNER"), has unanimously approved
this Plan and its submission to the limited partners of LaBranche LP
(collectively, the "LIMITED PARTNERS") for their approval in accordance with the
Amended and Restated Articles of Partnership of LaBranche LP, dated as of
January 1, 1998, as amended (the "LABRANCHE PARTNERSHIP AGREEMENT"). If approved
by the Limited Partners, this Plan shall constitute (a) an agreement among
LaBranche LP, Investing, the Company and each of the Participating Limited
Partners (as defined below) to implement this Plan and all the transactions and
agreements related hereto and described herein and (b) effective upon
consummation of the IPO, an amendment of those provisions of the LaBranche
Partnership Agreement which are inconsistent with the provisions hereof.
CHOICES AVAILABLE TO LIMITED PARTNERS
In connection with this Plan, each Limited Partner (other than
Mill Bridge, Inc. ("MILL BRIDGE") and Ernst & Company ("ERNST")) has been
provided with a Limited Partner Election Form ("LIMITED PARTNER ELECTION FORM")
pursuant to which such Limited Partner may elect to receive one of six optional
packages of consideration (the package of consideration selected by such Limited
Partner being referred to herein as the "EXCHANGE CONSIDERATION") in exchange
for his, her or its entire interest in LaBranche LP pursuant to this Plan. By
selecting one of the six optional packages of Exchange Consideration, a Limited
Partner will thereby consent to and approve the terms and conditions of this
Plan, including the provisions constituting an amendment of the LaBranche
Partnership Agreement, and will become bound by all other aspects of this Plan
that may be applicable to such Limited Partner (a "PARTICIPATING LIMITED
PARTNER"). The current assumed value of the Exchange Consideration which is
allocable to each such Limited Partner under this Plan is set forth on SCHEDULE
A hereto.
Under the LaBranche Partnership Agreement, Limited Partners
who formerly were members of Fowler, Rosenau & Geary, LLC (including, in
particular, Hilary Geary Trust, John R. Redmond, Louis V. Henston, Robert N.
Westerlund, The Jane Rosenau Trust A, The Jane Rosenau Trust B and James J.
Boyle) (collectively, the "FRG MEMBERS") may not be required to withdraw from
LaBranche LP for specified periods of time generally ranging from December 31,
2004 through November 30, 2007. Any FRG Member who presently cannot be required
to withdraw as a Limited Partner of LaBranche LP may retain his, her or its
current percentage interest in the profits of LaBranche LP by so indicating on
the Limited Partner Election Form, and by executing and delivering
<PAGE>
the Limited Partner Election Form to LaBranche LP. LaBranche LP, subject to the
approval of the New York Stock Exchange, may, at its discretion, return to any
such FRG Member the amount then credited to such FRG Member's capital account.
Investing and Mill Bridge have entered into an agreement (the
"MILL BRIDGE PURCHASE AGREEMENT"), pursuant to which, among other things,
Investing has agreed to acquire the entire interest of Mill Bridge in LaBranche
LP for an aggregate amount of $90 million upon consummation of the IPO. Of the
amount to be paid to Mill Bridge, $74 million will be paid in cash upon
consummation of the IPO and the remaining $16 million will be paid over three
years in accordance with the Mill Bridge Purchase Agreement. In addition,
LaBranche LP and Ernst have entered into an agreement (the "ERNST PURCHASE
AGREEMENT"), pursuant to which, among other things, LaBranche LP has agreed to
redeem the entire interest of Ernst in LaBranche LP for an aggregate amount of
$28,176,000 to be paid in cash upon consummation of the IPO. In connection with
these agreements, Mill Bridge and Ernst have each agreed to waive their
respective rights to consent to this Plan under the LaBranche Partnership
Agreement. The Company intends to obtain substantially all of the amounts
payable to Mill Bridge and Ernst through a concurrent debt offering.
ACTION REQUIRED BY LIMITED PARTNERS
Each Participating Limited Partner must complete the Limited
Partner Election Form and the Power of Attorney (the "POWER OF ATTORNEY")
provided to such Participating Limited Partner. See Section 11 hereof for a
description of the Power of Attorney that Participating Limited Partners must
provide. Each FRG Member who intends to retain his, her or its current
percentage interest in the profits of LaBranche LP should notify LaBranche LP of
his, her or its intention by so indicating on the Limited Partner Election Form.
If LaBranche LP does not receive a completed and executed Limited Partner
Election Form and Power of Attorney from an FRG Member by 5:00 p.m. on June 14,
1999, such FRG Member will be deemed to have elected to retain his, her or its
current percentage interest in the profits of LaBranche LP. With respect to any
other Limited Partner, if LaBranche LP does not receive a completed and executed
Limited Partner Election Form and Power of Attorney from such Limited Partner by
5:00 p.m. on June 14, 1999, such Limited Partner will be deemed to have elected
Option 6 on the Limited Partner Election Form. Each Participating Limited
Partner will become a party to this Plan.
1. GENERAL DESCRIPTION OF PROPOSED TRANSACTIONS
The incorporation of LaBranche LP will be accomplished by (1)
the transfer by each member of Investing (the "EXCHANGING MEMBERS") of his or
her entire membership interest in Investing to the Company in exchange for
shares of Common Stock and (2) the transfer by each Participating Limited
Partner of his, her or its entire partnership interest in LaBranche LP to the
Company in exchange for Exchange Consideration consisting of (i) Common Stock,
(ii) subordinated debt of the Company ("SUBORDINATED DEBT"), (iii) cash or (iv)
a combination of the foregoing, as provided in such Participating Limited
Partner's completed and executed Limited Partner Election Form. The transactions
described in the preceding sentence are referred to herein to as the
"INCORPORATION TRANSACTIONS." Simultaneously with or immediately following the
Incorporation
-2-
<PAGE>
Transactions, the Company will consummate the IPO and the new debt financing and
transfer funds to Investing and LaBranche LP in order for those entities to make
payment to Mill Bridge and Ernst pursuant to the Mill Bridge Purchase Agreement
and the Ernst Purchase Agreement, respectively. The transactions described in
this paragraph are referred to herein collectively as the "PROPOSED
TRANSACTIONS." The LaBranche Partnership Agreement will be deemed to have been
amended effective upon consummation of the IPO. As described in Section 7 hereof
, the General Partner will have the right under this Plan, subject to certain
limitations, to vary the Proposed Transactions if it deems any such changes to
be reasonably necessary or desirable in order to effectuate the purposes of this
Plan.
The Company is a Delaware corporation organized to be the
direct or indirect owner of 100% of the equity interest in LaBranche LP. The
Company has not conducted any business operations prior to the date of this
Plan.
A current draft of the Company's Registration Statement on
Form S-1 for the IPO is attached hereto as EXHIBIT A.
2. DESCRIPTION OF EXCHANGE CONSIDERATION
Each Participating Limited Partner will receive, in exchange
for his, her or its entire partnership interest in LaBranche LP, Common Stock,
Subordinated Debt, cash or a combination of the foregoing, as specified by each
Participating Limited Partner in his, her or its Limited Partner Election Form,
provided that a Participating Limited Partner may elect to receive Subordinated
Debt in a principal amount up to (but not exceeding) the amount of such Limited
Partner's capital account with LaBranche LP immediately prior to the
Incorporation Transactions, as determined in accordance with the LaBranche
Partnership Agreement. The Company will only issue whole shares of Common Stock
to a Participating Limited Partner. As a result, if a Participating Limited
Partner elects to receive Common Stock in respect of his, her or its capital
account with LaBranche LP, such Participating Limited Partner will receive cash
in lieu of any fractional share interest in Common Stock.
Any Subordinated Debt of the Company or of LaBranche LP (i)
would be issued pursuant to a Cash Subordinated Loan Agreement ("CSLA")
substantially in the form required by the New York Stock Exchange, Inc. ("NYSE")
for inclusion in LaBranche LP's net capital for regulatory purposes, (ii) would
provide for quarterly payments of interest at an annual rate expected to
approximate 8% and (iii) generally would mature one year from the date of
issuance, subject to an automatic rollover provision for additional one-year
terms unless the CSLA holder notifies LaBranche LP of his, her or its intention
not to renew the term of the CSLA at least seven months prior to its scheduled
maturity date. Subject to NYSE approval, consideration may be given to certain
adjustments in the terms and conditions of the CSLA in order to address the
concerns of certain Limited Partners relating to the tax treatment of the
Incorporation Transactions.
A description of the Common Stock of the Company is contained
in the Registration Statement attached hereto as EXHIBIT A.
-3-
<PAGE>
Each Exchanging Member will receive solely Common Stock in
exchange for his, her or its membership interest in Investing pursuant to an
Exchange Agreement of even date herewith. The Participating Limited Partners and
the Exchanging Members are referred to collectively as the "EXCHANGING PARTIES."
None of the Company's securities received by a Participating
Limited Partner in the Incorporation Transactions will be sold in the IPO. In
addition, the shares of Common Stock received by a Participating Limited Partner
in connection with the Incorporation Transactions will be subject to certain
"lock-up" restrictions which will prohibit the transfer of 50% of such shares of
Common Stock for a period of one year after the IPO and the transfer of the
remaining 50% of such shares of Common Stock for a period of two years after the
IPO. Common Stock received by Exchanging Members in the Incorporation
Transactions also will not be sold in the IPO and will be subject to certain
transfer restrictions. Exchanging Parties electing to receive Common Stock will
be deemed to have consented and agreed to the foregoing transfer restrictions,
as applicable. See Section 5 for a more complete description of the lock-up and
transfer restrictions provisions applicable to Participating Limited Partners
and Exchanging Members.
The General Partner generally has the right, subject to
certain limitations, to amend this Plan in any respect that it deems reasonably
necessary or desirable in order to effectuate the purposes of this Plan. See
Section 7 for a discussion of those changes to this Plan that may give a
Participating Limited Partner who or which has previously elected to participate
in this Plan the right to withdraw its consent to this Plan or choose a
different package of Exchange Consideration.
* * * * *
The General Partner has the authority under this Plan not to
offer securities of the Company to or exchange securities of the Company with
any person or other entity if the General Partner determines, in its sole
discretion, that the making of such offer or the consummation of such exchange
could violate any applicable laws or regulations, including securities laws.
3. EQUITY INCENTIVES AND COMPENSATION ARRANGEMENTS
Prior to the date of the closing of the IPO (the "IPO DATE"),
the Company will adopt an equity incentive plan (the "EQUITY INCENTIVE PLAN")
pursuant to which options, restricted stock, restricted stock units and other
equity-based awards may be granted on a discretionary basis to employees and
consultants of the Company and LaBranche LP. Prior to the IPO Date, the Company
expects to grant stock options pursuant to the Equity Incentive Plan to the
Exchanging Members who are employed by LaBranche LP (including as consultants)
immediately following the IPO and to specialists in the employ of LaBranche LP
who are not Exchanging Members (collectively, the "EMPLOYEE STOCKHOLDERS"). The
options will have an exercise price per share equal to the IPO price. The
Company also expects to grant restricted stock units in connection with the IPO
to certain other employees. The options and restricted stock units will be
subject to certain vesting requirements.
-4-
<PAGE>
Prior to the IPO Date, the Company will adopt an annual
incentive plan (the "ANNUAL INCENTIVE PLAN") pursuant to which certain employees
of LaBranche LP, primarily the Employee Stockholders, will participate in an
annual bonus pool established by the Company provided that certain designated
performance goals are attained.
By executing and delivering the Limited Partner Election Form
and Power of Attorney, each Participating Limited Partner thereby consents to
and approves the terms and conditions of the Equity Incentive Plan and the
Annual Incentive Plan.
4. EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Each Exchanging Member who becomes an employee of the Company
and/or LaBranche LP will enter into an employment agreement with the Company
and/or LaBranche LP. The employment agreement will provide that such Exchanging
Member will have such duties and responsibilities as the Company and/or
LaBranche LP may from time to time determine and will devote his or her entire
working time, skill and energies to the business and affairs of the Company
and/or LaBranche LP. The employment agreements will require arbitration of
disputes and will be terminable by either party at any time upon 90 days'
advance notice or by the Company and/or LaBranche LP immediately upon the
termination of the employment of such Exchanging Member for "cause" or due to
"disability" (as such terms are defined in the employment agreements).
The Company expects that each Exchanging Member will also
enter into an Agreement Regarding Noncompetition and Other Covenants
(collectively, the "NONCOMPETITION AGREEMENTS") pursuant to which such
Exchanging Member will be subject to certain restrictive employment covenants,
including those relating to noncompetition and nonsolicitation. Each
Noncompetition Agreement will provide that, in the event of certain breaches of
the restrictive covenants, the Exchanging Member will be liable for liquidated
damages. The liquidated damages obligations will be secured by a pledge of the
Exchanging Member's shares of Common Stock pursuant to a separate pledge
agreement. The liquidated damages and pledge arrangements will not be the sole
or exclusive remedies available to the Company or LaBranche LP for breaches of
the Noncompetition Agreements.
5. CERTAIN TRANSFER RESTRICTIONS ON SHARES
Exchanging Parties will be subject to the following
significant restrictions on the Transfer (as hereinafter defined) of the
Company's securities received by them pursuant to this Plan. The Exchanging
Members and Employee Stockholders also will be parties to the Stockholders'
Agreement described in Section 6 below, which will impose further restrictions
on Transfers of the shares of Common Stock owned by each of them. Exchanging
Parties electing to receive Common Stock will be deemed to have consented and
agreed to the following transfer restrictions, as applicable.
For purposes of the restrictions described in this Plan
(including the Exhibits hereto), the term "TRANSFER" generally includes any
direct or indirect offer, offer to sell, sale, contract of sale
-5-
<PAGE>
or grant of any option to purchase, gift, transfer, pledge or other disposition
of securities of the Company, including any disposition of the economic or other
risks of ownership through hedging transactions or derivatives involving the
Company's securities, including hedging transactions that would constitute a
"constructive sale" within the meaning of Section 1259 of the Code (as defined
below) of the Company's securities.
UNDERWRITERS' LOCK-UP AND FIRM-WIDE TRADING RESTRICTIONS
All shares of Common Stock which an Exchanging Party receives
pursuant to this Plan will be subject to the underwriters' lock-up restrictions
in connection with the IPO and, in the case of Employee Stockholders, to any
trading restrictions applicable to Employee Stockholders.
GENERAL TRANSFER RESTRICTIONS
Subject to applicable securities laws, any securities that an
Exchanging Party receives pursuant to this Plan (other than shares of Common
Stock so designated by the Company prior to the IPO Date to accommodate
particular situations such as those referred to under Section 10) may be
Transferred only as follows (the "GENERAL TRANSFER RESTRICTIONS"):
(a) Participating Limited Partners may Transfer:
- 50% of such shares at any time after the
first anniversary of the IPO Date.
- all of such shares at any time after the
second anniversary of the IPO Date.
(b) Exchanging Members may Transfer:
- 33 1/3% of such shares at any time after the
third anniversary of the IPO Date.
- an additional 33 1/3% of such shares at any
time after the fourth anniversary of the IPO
Date.
- all of such shares at any time after the
fifth anniversary of the IPO Date.
The General Transfer Restrictions may be waived or terminated
only by action of the Board of Directors of the Company (the "BOARD"). The
General Transfer Restrictions as to an Exchanging Party will terminate upon the
death of such Exchanging Party, although the underwriters' lock-up restrictions
in the IPO will continue to apply. If the Stockholders' Agreement is terminated
prior to the expiration or termination of the General Transfer Restrictions, the
General Transfer Restrictions will continue to apply unless waived or terminated
by action of the Board.
-6-
<PAGE>
CUSTODY ARRANGEMENTS
All shares of Common Stock issued to an Exchanging Party must
be held in a brokerage, custody or similar account maintained at a firm approved
by the Board. The Company will be entitled to monitor all activity in each
Exchanging Party account and to enforce applicable transfer and hedging
restrictions and any General Transfer Restrictions applicable to Exchanging
Parties as in effect from time to time. Any Common Stock held in such an account
may be held of record by a custodian or nominee. The Company may require each
Exchanging Party to execute a customary account agreement with the custodian or
other firm, in such reasonable form as the Company and such Exchanging Party
shall mutually determine (which may include customary provisions relating to
indemnification of the custodian or other firm and an undertaking to arbitrate
custody-related disputes).
6. STOCKHOLDERS' AGREEMENT
Each Exchanging Member and Employee Stockholder will be
subject to some or all of the provisions of a Stockholders' Agreement, which
will require, among other things, that all shares covered by the Stockholders'
Agreement (the "RESTRICTED SHARES") be:
(i) held in a custody account until released for Transfer
in accordance with the provisions of the
Stockholders' Agreement and this Plan;
(ii) subject to certain transfer restrictions, including
those described above under Section 5; and
(iii) voted in accordance with the determination by a
majority of the Voting Executives (as defined
therein).
7. AMENDMENTS TO THIS PLAN
If the General Partner determines in good faith that an
amendment to this Plan is necessary or advisable, the General Partner, in its
sole discretion, may amend this Plan in any respect prior to the consummation of
this Plan, including an amendment of any Exhibits to this Plan; provided that an
amendment shall not be binding upon a Participating Limited Partner if it would
(a) change this Plan to lengthen or otherwise change in a manner materially
adverse to such Participating Limited Partner the transfer restrictions
described herein, (b) change the relative share of aggregate Exchange
Consideration (I.E., Common Stock, Subordinated Debt or cash) to be received by
such Participating Limited Partner in a manner that is materially adverse to
such Participating Limited Partner, or (c) amend the LaBranche Partnership
Agreement in a manner that would require the further consent of such
Participating Limited Partner without either (A) obtaining the consent of such
Participating Limited Partner or (B) in the case of an FRG Member, offering such
FRG Member the opportunity to withdraw his, her or its consent to this Plan;
provided, further, that the General Partner shall give each FRG Member prior
notice of any such amendment.
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Following consummation of this Plan, the Board may waive or
amend any aspect of this Plan that has not yet been completed or reflected in a
separate agreement.
8. TAX CONSEQUENCES
TREATMENT OF EXCHANGING PARTIES
The transfer of membership and partnership interests in
Investing and LaBranche LP by the Exchanging Parties to the Company for Common
Stock, Subordinated Debt and/or cash should qualify as contributions to a
controlled corporation under Section 351 of the United States Internal Revenue
Code of 1986, as amended (the "CODE"). As a result, the following U.S. federal
income tax consequences generally will apply to an Exchanging Party:
PARTICIPATING LIMITED PARTNERS WHO DO NOT ELECT TO RECEIVE
SUBORDINATED DEBT. Except as discussed in the next sentence, no gain or loss
will be recognized by a Participating Limited Partner who exchanges his, her or
its interest in LaBranche LP solely for Common Stock, except to the extent cash
is received in lieu of a fractional share interest in Common Stock. If a
Participating Limited Partner elects to receive cash in exchange for all or a
portion of such Participating Limited Partner's interest in LaBranche LP, or
receives cash in lieu of a fractional share interest in Common Stock, such
Participating Limited Partner generally will recognize gain to the extent of the
lesser of the aggregate amount of cash received or the gain realized on the
exchange (that is, the fair market value of the cash and Common Stock received
less the Participating Limited Partner's adjusted tax basis in his, her or its
interest in LaBranche LP). Such a Participating Limited Partner's adjusted tax
basis in the Common Stock generally will be equal to the Participating Limited
Partner's adjusted tax basis in the interest transferred (calculated without
regard to the Participating Limited Partner's direct or indirect share of any
liabilities of LaBranche LP), reduced by the amount of any cash received in the
exchange and increased by any gain recognized in the exchange.
PARTICIPATING LIMITED PARTNERS WHO ELECT TO RECEIVE
SUBORDINATED DEBT. Subordinated Debt received by a Participating Limited Partner
may qualify for installment sale treatment under Section 453 of the Code. If a
Participating Limited Partner elects to receive Common Stock, Subordinated Debt
and cash, and does not elect out of installment sale treatment, his, her or its
adjusted tax basis in the partnership interest relinquished (calculated without
regard to the Participating Limited Partner's (direct or indirect) share of any
liabilities of LaBranche LP) will be reduced by the amount of any cash received
in the exchange and increased by any gain recognized in the exchange. Such
adjusted tax basis will be allocated to the Common Stock received in an amount
up to (but not exceeding) the fair market value of such Common Stock.
If the exchange is viewed as separate transfers by such
Participating Limited Partner of his, her or its interest in the "hot assets"
(I.E., inventory) of LaBranche LP (on the one hand) and the other assets of
LaBranche LP (on the other), the receipt of cash in the exchange and/or the
receipt of payments on, or proceeds from, the sale of Subordinated Debt, to the
extent attributable to such hot assets, generally would not result in gain
recognition, and a Participating Limited Partner's adjusted tax basis in such
Common Stock received would be adjusted accordingly.
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PARTICIPATING LIMITED PARTNERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL (AS WELL AS STATE AND LOCAL) INCOME TAX
CONSEQUENCES TO THEM OF THEIR PARTICULAR PACKAGE OF EXCHANGE CONSIDERATION.
EXCHANGING MEMBERS. No gain or loss will be recognized by an
Exchanging Member who receives Common Stock of the Company in exchange for his
or her membership interest in Investing. The Exchanging Member's tax basis in
the Common Stock will be equal to his or her adjusted tax basis in the
membership interest transferred (calculated without regard to the Exchanging
Member's direct or indirect share of any liabilities of Investing).
9. MANAGEMENT OF THE COMPANY
The Amended and Restated Certificate of Incorporation of the
Company will provide for a classified Board consisting of three classes. It is
anticipated that at the IPO Date a majority of the Board will be drawn from the
current members of the Managing Committee. Beginning in 2000, at each annual
meeting of the stockholders, directors will be elected for three-year terms and
shall hold office until their respective successors have been elected and
qualified. A director may be removed only for cause and only by the affirmative
vote of the holders of not less than 75% of the outstanding shares of capital
stock entitled to vote in the election of directors.
The Company will enter into an indemnification agreement with
each director of the Company and each officer of the Company who signs the
registration statement for the IPO and the other registration statements to be
filed by the Company, to indemnify them for actions taken in consummating the
transactions contemplated by this Plan.
10. OTHER
ARBITRATION
Without diminishing the finality and conclusive effect of any
determination by the Managing Committee or by the Board of any matter under this
Plan which is provided herein to be determined by the Managing Committee or by
the Board, any dispute, controversy or claim arising out of or relating to or
concerning the provisions of this Plan or any Exhibits to this Plan shall be
finally settled by arbitration in New York City before, and in accordance with
the rules then obtaining of, the NYSE or, if the NYSE declines to arbitrate the
matter, the American Arbitration Association ("AAA") in accordance with the
commercial arbitration rules of the AAA; provided however, that, in addition to
the right to compel arbitration of any dispute or controversy, the Company,
Investing or LaBranche LP may bring an action or special proceeding in a state
or federal court of competent jurisdiction sitting in New York City, whether or
not an arbitration proceeding has theretofore been or is ever initiated, for the
purpose of temporarily, preliminarily, or permanently enforcing the provisions
of this Plan or to enforce an arbitration award. For the purposes of this
provision, each participant in this Plan expressly consents to the jurisdiction
of any such court in respect of any such action and waives to the fullest extent
permitted by applicable law any objection to personal jurisdiction or to the
laying of venue of any such suit, action or proceeding in such court, agrees
that
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proof shall not be required to establish that monetary damages for breach of the
provisions of this Plan would be difficult to calculate and that remedies at law
would be inadequate for any such breach and irrevocably appoints George M.L.
LaBranche, IV as the participant's agent for service of process in connection
with any such action or proceeding, who shall promptly notify such participant
of the receipt of any such service of process.
DETERMINATIONS UNDER PLAN
Each party to this Plan agrees that the Managing Committee
and, following the IPO Date, the Board shall have the right to make all
determinations under this Plan and each Exhibit to this Plan.
LABRANCHE PARTNERSHIP AGREEMENT
If adopted, this Plan (including SCHEDULE A hereto) shall
constitute, effective upon consummation of the IPO, an amendment to the
LaBranche Partnership Agreement, and the provisions of this Plan, to the extent
that they are inconsistent with the LaBranche Partnership Agreement, will
control. The provisions of the LaBranche Partnership Agreement will continue to
apply to all partners until the IPO Date. FRG Members who do not elect one of
the six optional packages of Exchange Consideration described in the Limited
Partner Election Form will not be subject to any amendment to the LaBranche
Limited Partnership Agreement effected by this Plan to the extent that such FRG
Member's interest in LaBranche LP is affected by such amendment. For all
purposes hereof, a deceased Limited Partner of LaBranche LP (or the estate of a
deceased Limited Partner of LaBranche LP) will continue to be treated as a
Limited Partner of LaBranche LP under this Plan.
ABANDONMENT AND TERMINATION OF PLAN
This Plan may be abandoned at any time prior to the IPO by the
Managing Committee. If the IPO has not been consummated by December 31, 1999,
unless re-approved, this Plan will be automatically abandoned and will be of no
further force and effect.
RELEASE
Each Participating Limited Partner will, by virtue of such
participation, irrevocably release the Company, Investing, LaBranche LP, each
and every affiliate, stockholder, subsidiary, partner, officer, member, director
and employee of the Company, Investing and LaBranche LP in their capacities as
such and each other participant in this Plan ("RELEASEES") from any claims,
liabilities, costs, expenses, actions, suits or demands however arising, whether
at law or in equity, contingent, known or unknown, which any such participant
may have or assert, in respect of any interest in LaBranche LP or Investing or
arising out of any partnership or employment relationship with LaBranche LP or
Investing that such participant or such participant's heirs, successors or
assigns had with any such Releasee on or prior to the IPO Date; provided that
this release shall not extend to (i) indebtedness owing to a participant in this
Plan by any Releasee, (ii) representations or warranties
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made or agreements entered into by a Releasee in connection with this Plan, and
(iii) any conduct that resulted from Releasee's bad faith, fraud or criminal act
or omission.
REPRESENTATIONS AND WARRANTIES
Each Participating Limited Partner will, by executing and
delivering a Limited Partner Election Form and Power of Attorney, be deemed to
make the representations and warranties set forth on EXHIBIT B attached hereto.
RIGHT OF GENERAL PARTNER OR THE COMPANY
TO MAKE SPECIAL ARRANGEMENTS
The transactions included in this Plan have been structured in
a manner that is expected not to result in a significantly disproportionate tax
or other burden to any Exchanging Party in any jurisdiction. If it develops that
the consummation of this Plan would, in fact, have (or had) such an impact, the
Managing Committee and the Board will have the right, but not the obligation, at
any time either before or after the IPO Date to make special arrangements with
any Exchanging Party or such Exchanging Party's estate or legal representative
(including special payments) to ameliorate, in whole or in part, such adverse
impact. Each party to this Plan recognizes, acknowledges and agrees that this
paragraph shall not create any right on the part of such party to any such
special arrangement or accommodation.
Each party to this Plan hereby waives, and each future
stockholder of the Company will be deemed to have waived, any right to object to
a decision by the Managing Committee or the Board to make such special
arrangements.
BENEFIT
Nothing in this Plan, express or implied, is intended or shall
be construed to confer upon or give to any person or other entity other than
LaBranche LP, Investing, the Company and, to the extent expressly provided
herein, the Exchanging Parties and any other person participating in this Plan
any remedy or claim under or by reason of this Plan or any term, covenant or
condition hereof, all of which shall be for the sole and exclusive benefit of
the parties mentioned above in this paragraph; except that the provision set
forth above in this Section 10 under "Release" shall be enforceable by the
Releasees mentioned therein.
HEADINGS
The headings of the Sections and paragraphs of this Plan are
inserted as a matter of convenience and for reference purposes only, are of no
binding effect, and in no respect define, limit or describe the scope of this
Plan or the intent of any Section or paragraph.
NOTICES
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Except for those notices specifically permitted to be given to
George M.L. LaBranche, IV, as agent or attorney-in-fact for the participants in
this Plan, any notices, demands, requests and other communications required or
permitted to be given to an Exchanging Party or other participant in this Plan
shall be deemed duly given if communicated directly to such party or if sent to
the address of such party as set forth on the records of LaBranche LP, Investing
or the Company.
ENTIRE AGREEMENT
This Plan, including the Exhibits hereto, supersedes all prior
negotiations among such parties hereto and thereto with respect to such subject
matter. Each Participating Limited Partner consenting to this Plan or other
person who accepts this Plan expressly agrees that none of LaBranche LP,
Investing or the Company has made representations, warranties, promises or
inducements in connection with this Plan other than as provided herein.
GOVERNING LAW
THIS PLAN WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS. THE MANAGING COMMITTEE IS EXPRESSLY AUTHORIZED TO MAKE ANY CHANGES TO THIS
GOVERNING LAW PROVISION AND THE GOVERNING LAW PROVISIONS OF ANY EXHIBIT AS IT
SHALL DEEM NECESSARY OR DESIRABLE PRIOR TO THE IPO DATE.
THE COMPANY TO BE BOUND BY PLAN
By executing a copy of this Plan, each of the Company,
LaBranche LP and Investing agrees to be bound by all of the provisions of this
Plan (and related documents and agreements) applicable to it. It is further
agreed as part of this Plan that each of the Company, LaBranche LP and Investing
shall have the benefit of and shall be entitled to enforce all of its rights
under this Plan (and related documents and agreements) applicable to it.
11. DOCUMENTS EXCHANGING PARTIES ARE BEING ASKED TO SIGN
POWER OF ATTORNEY
Each Participating Limited Partner must complete, execute and
deliver a Limited Partner Election Form, and each Exchanging Party must
complete, execute and deliver a Power of Attorney in substantially the form
attached hereto as EXHIBIT C, authorizing designated officers of LaBranche LP
and/or the Company to take any and all actions on such Exchanging Party's behalf
to implement this Plan and related arrangements and execute other documents on
behalf of such Exchanging Party.
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AGREEMENT TO ASSIST IN CONSUMMATING TRANSACTIONS
In addition to signing the Limited Partner Election Form and
the Power of Attorney, each Participating Limited Partner agrees to execute and
deliver, or cause to be executed and delivered, or to obtain and provide such
additional information, documents, instruments and agreements as the Managing
Committee or the Board may reasonably request in order to implement this Plan.
Among other things, the Managing Committee or the Board may require additional
information and documentation in connection with interests and securities held
in trust or by related entities and in connection with transfers having a
relationship to community property jurisdictions.
12. COPIES OF DOCUMENTS AND CONTACT PERSONS
Additional copies of this Plan (including all Exhibits hereto)
will be made available for inspection by Limited Partners of LaBranche LP and
members of Investing at the following times:
- Weekdays from 9:00 a.m. (local time) until 5:00 p.m. (local
time);
- Weekends from noon (local time) until 5:00 p.m. (local time);
and
- By any other prior arrangement, at the following location:
LaBranche & Co.
One Exchange Plaza
New York, New York 10006
THE SECURITIES TO BE DISTRIBUTED HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
OR BLUE SKY LAWS OF ANY STATE OR OTHER JURISDICTION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR THE REGULATORY AUTHORITY OF ANY STATE OR OTHER
JURISDICTION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PLAN OR ANY OTHER
DOCUMENT IN CONNECTION HEREWITH OR RECOMMENDED THE APPROVAL OF THIS PLAN OR THE
ACQUISITION OF ANY SUCH SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
IN MAKING A DECISION TO PARTICIPATE IN THIS PLAN AND ACQUIRE
THESE SECURITIES, LIMITED PARTNERS AND MEMBERS MUST RELY ON THEIR OWN
EXAMINATION OF LaBRANCHE LP AND THE COMPANY.
* * *
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ACKNOWLEDGMENT
By executing this Plan, the undersigned and each Participating
Limited Partner who has signed a Limited Partner Election Form selecting one of
the six Exchange Consideration options agree that this Plan shall constitute an
agreement among LaBranche LP, Investing, as General Partner of LaBranche LP,
Investing, the Company and the other participants herein and, as provided above,
effective upon consummation of the IPO, an amendment to the LaBranche
Partnership Agreement.
LaBRANCHE & CO.
By: LaB Investing Co. L.L.C.
By: /s/ George M. L. LaBranche
----------------------------
Name:
Title:
LaB INVESTING CO. L.L.C
By: /s/ George M. L. LaBranche
--------------------------------------
Name:
Title:
LaBRANCHE & CO INC.
By: /s/ George M. L. LaBranche
--------------------------------------
Name:
Title:
<PAGE>
Exhibit 2.2
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "AGREEMENT") is dated as of June 17,
1999, by and among (i) LaBranche & Co Inc., a Delaware corporation (the
"COMPANY"), (ii) LaB Investing Co. L.L.C., a New York limited liability company
("INVESTING"), and (iii) the members of Investing listed on SCHEDULE A hereto
(collectively, the "EXCHANGING MEMBERS" and, each, an "EXCHANGING MEMBER").
W I T N E S S E T H :
WHEREAS, the Company is contemplating an initial public offering (the
"IPO") of its common stock, $.01 par value per share ("COMMON STOCK");
WHEREAS, in contemplation of the IPO, the Company, Investing, LaBranche
& Co., a New York limited partnership ("LABRANCHE LP"), and the limited partners
of LaBranche LP (collectively, the "PARTICIPATING LIMITED PARTNERS") have
simultaneously herewith approved, adopted and entered into a Plan of
Incorporation, (the "PLAN"), dated as of June 17, 1999, pursuant to which, among
other things, the Participating Limited Partners have agreed to exchange their
partnership interests in LaBranche LP for cash and/or securities of the Company
and/or LaBranche LP; and
WHEREAS, in contemplation of the IPO, the Exchanging Members desire to
transfer their respective membership interests in Investing (collectively,
"MEMBERSHIP INTERESTS") to the Company in exchange for shares of Common Stock
or, in the case of certain Exchanging Members, a combination of cash and/or
securities of the Company (the "LLC EXCHANGE");
NOW THEREFORE, in consideration of the premises and of the mutual
agreements, covenants and provisions herein contained and for good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
LLC EXCHANGE
Section 1.1. LLC EXCHANGE.
(a) As of the Effective Time (as defined below), each
Exchanging Member hereby assigns and transfers to the Company all right, title
and interest in, to and with respect to his or her entire Membership Interest.
(b) As of the Effective Time, the Company hereby accepts the
assignment and transfer by each Exchanging Member of his or her Membership
Interest and hereby assumes and
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agrees to perform and be bound by any and all of the conditions, covenants and
obligations of such Exchanging Member pursuant to the LaB Investing Co. L.L.C.
Amended and Restated Operating Agreement, dated as of January 1, 1998, as
amended to date (the "LLC AGREEMENT").
(c) Immediately after the Effective Time, each Exchanging
Member shall receive, in consideration for the exchange of his or her Membership
Interest, the number of shares of Common Stock (or, in the case of Steven C.
Berger, Paul Redmond and Robert W. Keelips, III , a combination of shares of
Common Stock and cash) with a value, based upon the per share price of the
Common Stock in the IPO, equal to such Exchanging Member's interest in that
portion of the public market valuation of the Company available to the members
of Investing.1/
(d) The Company will issue to an Exchanging Member, as
applicable, only whole shares of Common Stock. As a result, such an Exchanging
Member will receive cash in lieu of any fractional share interest in Common
Stock.
Section 1.2. TERMINATION OF RIGHTS. From and after the Effective Time,
the entire capital account and share of profits and losses of each Exchanging
Member shall be deemed to be the capital account and share of profits and losses
of the Company, and such Exchanging Member shall have no further interest or
rights of any kind in or with respect to his or her Membership Interest or under
the LLC Agreement. From and after the Effective Time, the Company shall be the
sole member of Investing, and each Exchanging Member shall be released from all
further obligations under the LLC Agreement.
Section 1.3. CONSENT OF MANAGING COMMITTEE. By its execution hereof,
Investing acknowledges that the Managing Committee of Investing (the "MANAGING
COMMITTEE") (i) has approved the form of this Agreement, (ii) acknowledges
receipt of a duly executed copy of this Agreement and (iii) in accordance with
the provisions of the LLC Agreement, consents to the assignment and transfer of
the Exchanging Members' Membership Interests to the Company and to the admission
of the Company as a new member of Investing.
Section 1.4. EFFECTIVE TIME. Subject to the consummation of the IPO,
the LLC Exchange shall be deemed to occur immediately prior to the IPO. The date
and time when the LLC Exchange shall be deemed to occur is referred to in this
Agreement as the "EFFECTIVE TIME."
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1/ An estimated value of each Exchanging Member's interest is set forth on
SCHEDULE A hereto opposite such Exchanging Member's name under the column
entitled "Total Assumed Value." These estimated values are based on a current
estimate of $425 million, which is subject to change, as the portion of the
public market valuation of the Company available to the members of Investing.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
As of the date hereof and as of the Effective Time, each Exchanging
Member severally represents and warrants to the Company as follows:
Section 2.1. ENFORCEABILITY. Such Exchanging Member is of sound mind
and has full legal capacity to enter into, execute and deliver this Agreement
and the other documents contemplated hereby and perform his or her obligations
hereunder and thereunder, and each of this Agreement and the other documents
contemplated hereby has been duly executed and delivered by such Exchanging
Member and constitutes a legal, valid and binding obligation of such Exchanging
Member, enforceable against such Exchanging Member in accordance with its terms,
except as such enforceability may be limited by any applicable bankruptcy,
insolvency, moratorium or other laws relating to or affecting creditors' rights
generally and the exercise of judicial discretion in accordance with general
equitable principles.
Section 2.2. TITLE. Such Exchanging Member owns, beneficially and of
record, his or her Membership Interest, free and clear of any claim, lien,
pledge, deed of trust, option, charge, security interest, hypothecation,
encumbrance, right of first offer, voting trust, proxy, right of third parties
or other restriction or limitation of any nature whatsoever (collectively,
"LIENS" and each, a "LIEN"). At the Effective Time, the Company will acquire
good and valid title to such Membership Interest, free and clear of any Liens
other than any Lien created by the Company.
Section 2.3. NO CONFLICTS. Subject to compliance with the rules and
regulations of the New York Stock Exchange (the "NYSE") and federal and state
securities laws, the execution, delivery and performance of this Agreement and
the other documents contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, will not conflict with,
contravene, result in a violation or breach of or default under (with or without
the giving of notice or the lapse of time or both), permit any party to
terminate, amend or accelerate the provisions of, or result in the imposition of
any Lien (or any obligation to create any Lien) upon any of the property or
assets of such Exchanging Member under any contract, agreement, indenture,
letter of credit, mortgage, security agreement, pledge agreement, deed of trust,
bond, note, guarantee, surety obligation, warranty, license, franchise, permit,
power of attorney, lease, instrument or other agreement to which such Exchanging
Member is a party or by which any of his or her property or assets may be bound.
Section 2.4. ACCREDITED INVESTOR. Such Exchanging Member is an
"accredited investor," as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
Section 2.5. INVESTMENT PURPOSE. Such Exchanging Member is acquiring
shares of Common Stock under this Agreement for his or her own account for
investment purposes, and not with a view to, or for resale in connection with,
any distribution thereof other than in compliance with
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the Securities Act and other applicable securities laws. Such Exchanging Member
acknowledges that he or she must bear the economic risk of an investment in the
Common Stock for an indefinite period of time because, among other reasons, the
shares of Common Stock received by such Exchanging Member have not been
registered under the Securities Act and, therefore, such securities cannot be
sold unless subsequently registered under the Securities Act or an exemption
from such registration is available. Such Exchanging Member also acknowledges
that transfers of the shares of Common Stock received are further restricted by
applicable United States federal and state and foreign securities laws.
Section 2.6. ACCESS TO INFORMATION. Such Exchanging Member understands
the risks of, and other considerations relating to his or her acquisition and
ownership of the shares of Common Stock received. Such Exchanging Member has
been provided an opportunity to ask questions of, and has received answers
satisfactory to him or her from, the Company, LaBranche LP, Investing and their
representatives regarding the shares of Common Stock received, and has obtained
any and all additional information from the Company and its representatives that
such Exchanging Member deems necessary regarding the shares of Common Stock
received.
Section 2.7. EVALUATION OF AND ABILITY TO BEAR RISKS. Such Exchanging
Member has such knowledge and experience in financial affairs that he or she is
capable of evaluating the merits and risks of, and other considerations relating
to, the ownership of the shares of Common Stock received, and has not relied in
connection with his or her acquisition of the shares of Common Stock received
upon any representations, warranties or agreements other than those set forth in
this Agreement. Such Exchanging Member's financial situation is such that he or
she can afford to bear the economic risk of holding the shares of Common Stock
for an indefinite period of time, and such Exchanging Member can afford to
suffer the complete loss of his or her investment in such securities.
Section 2.8. NO DISPOSITIONS. Such Exchanging Member does not currently
have, and at the Effective Time will not have, any plan, agreement, commitment,
intention or arrangement, whether written or oral, to dispose of any of the
shares of Common Stock to be received by such Exchanging Member. For purposes of
this representation, a "disposition" shall include any direct or indirect offer,
offer to sell, sale, contract of sale or grant of any option to purchase, gift,
transfer, pledge or other disposition, including any disposition of the economic
or other risks of ownership through hedging transactions or derivatives and any
other transaction that would constitute a "constructive sale" within the meaning
of Section 1259 of the United States Internal Revenue Code of 1986, as amended
(the "CODE"), including, without limitation, a short-sale, forward sale, equity
swap or other derivative contract with respect to the Common Stock or
substantially identical property, or other transaction having substantially the
same effect as the foregoing.
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ARTICLE III
ADDITIONAL INFORMATION AND AGREEMENTS
Section 3.1. COMPANY. Each Exchanging Member understands and
acknowledges that the Company is a Delaware corporation organized to be the
direct or indirect owner of all or substantially all of the equity interest in
LaBranche LP and Investing. Each Exchanging Member further understands and
acknowledges that the Company has not conducted any business operations prior to
the date of this Agreement.
Section 3.2. AMENDMENT TO LLC AGREEMENT. Each Exchanging Member
acknowledges and agrees that, at the Effective Time, this Agreement shall
constitute an amendment of those provisions of the LLC Agreement which are
inconsistent with the provisions of this Agreement. Each Exchanging Member
consents to and approves such amendment, subject to its effectiveness. The
provisions of the LLC Agreement as in effect on the date hereof will continue to
apply to all Exchanging Members until the Effective Time.
Section 3.3. IPO REGISTRATION STATEMENT. A current draft of the
Company's Registration Statement on Form S-1 for the IPO (the "REGISTRATION
STATEMENT") to be filed with the Securities and Exchange Commission is attached
hereto as EXHIBIT A. A description of the Common Stock is included therein.
Section 3.4. PLAN OF INCORPORATION. A copy of the Plan is attached
hereto as EXHIBIT B. Each Exchanging Member consents to and approves the terms
and conditions of the Plan.
Section 3.5. EMPLOYMENT AGREEMENTS. In connection herewith, the each of
the Exchanging Members (other than Steven C. Berger, Paul Redmond and Robert W.
Keelips, III) (each, an "EMPLOYEE MEMBER") shall execute and deliver an
Employment Agreement, in a form reasonably satisfactory to such Exchanging
Member and the Company.
Section 3.6. BENEFIT PLANS. By executing this Agreement, each
Exchanging Member hereby consents to and approves the terms and conditions of
each of the Company's Equity Incentive Plan and Annual Incentive Plan (as each
is defined and described in the Plan).
Section 3.7. ADDITIONAL AGREEMENTS. In connection herewith, each
Exchanging Member shall execute and deliver each of the following:
(a) Stockholders' Agreement, in a form reasonably satisfactory
to such Exchanging Member and the Company, pursuant to which such Exchanging
Member will be subject to, among other things, certain transfer and voting
restrictions;
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<PAGE>
(b) Power of Attorney, in substantially the form attached as
EXHIBIT C hereto, appointing George M.L. LaBranche, IV and James G. Gallagher as
agents and attorneys-in-fact for such Exchanging Member;
(c) Agreement Regarding Noncompetition and Other Covenants, in
a form reasonably satisfactory to such Exchanging Member and the Company (the
"NONCOMPETITION AGREEMENT"), pursuant to which such Exchanging Member will be
subject to certain restrictive covenants, including those relating to
noncompetition and nonsolicitation; and
(d) Pledge Agreement, in a form reasonably satisfactory to
such Exchanging Member and the Company, pursuant to which such Exchanging Member
will pledge shares of Common Stock to secure certain of his or her obligations
under his or her Noncompetition Agreement.
Section 3.8. TRANSFER RESTRICTIONS.
(a) Each Exchanging Member hereby agrees to be bound by and
subject to any and all transfer restrictions set forth in the Stockholders'
Agreement referred to in Section 3.7(a) above.
(b) Each Exchanging Member hereby agrees to execute and
deliver a "lock-up" agreement if and when required by the underwriters of the
IPO.
(c) Each Employee Member hereby agrees to comply in all
respects with any trading restrictions generally applicable to employees of the
Company or LaBranche LP.
Section 3.9. CUSTODY ARRANGEMENTS. All shares of Common Stock issued to
an Exchanging Member must be held in a brokerage, custody or similar account
maintained at a firm approved by the Board. The Company will be entitled to
monitor all activity in each Exchanging Member's account and to enforce
applicable transfer and hedging restrictions applicable to such Exchanging
Member as in effect from time to time. Any Common Stock held in such an account
may be held of record by a custodian or nominee. The Company may require each
Exchanging Member to execute a customary account agreement with the custodian or
other firm, in such reasonable form as the Company and such Exchanging Member
shall mutually determine (which may include customary provisions relating to
indemnification of the custodian or other firm and an undertaking to arbitrate
custody-related disputes).
Section 3.10. INDEMNIFICATION AGREEMENTS. In connection with the IPO,
the Company will enter into an indemnification agreement with each director and
each officer of the Company who signs the Registration Statement and any other
registration statements to be filed by the Company, to indemnify them for
actions taken in consummating the transactions contemplated by the IPO.
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<PAGE>
Section 3.11. RELEASE. Each Exchanging Member (the "RELEASOR") hereby
irrevocably releases the Company, LaBranche LP and Investing, each and every
affiliate, stockholder, subsidiary, partner, officer, member, director and
employee of the Company and Investing in their capacities as such, and each
other Exchanging Member (each, a "RELEASEE") from any claims, liabilities,
costs, expenses, actions, suits or demands however arising, whether at law or in
equity, contingent, known or unknown, which such Releaseor may have or assert,
in respect of any interest in Investing or arising out of any membership or
employment relationship with LaBranche LP or Investing that such Releasor or
such Releasor's heirs, successors or assigns had with any such Releasee on or
prior to the Effective Time; PROVIDED that this release shall not extend to (i)
indebtedness owing to such Releasor by any Releasee, (ii) representations or
warranties made, or agreements entered into by, a Releasee in connection with
this Agreement, and (iii) any conduct that resulted from a Releasee's bad faith,
fraud or criminal act or omission.
ARTICLE IV
TAX CONSEQUENCES
Section 4.1. TAX MATTERS. The parties hereto intend the LLC Exchange to
qualify under Section 351 of the Code and will use all reasonable efforts to
cause the LLC Exchange to so qualify. Each party hereto will not take, and will
cause such party's affiliates and representatives not to take, any actions or
positions which may be expected to cause the LLC Exchange not to so qualify.
Section 4.2. ADDITIONAL INFORMATION. For additional information
regarding the tax consequences to the Exchanging Members of the transactions
contemplated hereby, see Section 8 of the Plan, entitled "Tax Consequences."
ARTICLE V
MISCELLANEOUS
Section 5.1. AMENDMENTS.
(a) The Managing Committee, in its sole discretion, may amend
this Agreement in any respect prior to the Effective Time, including making any
amendments to the Exhibits hereto; provided that an amendment shall not be
binding upon an Exchanging Member if it would (a) disproportionately reduce the
value of the shares of Common Stock and/or cash, as the case may be, to be
received by such Exchanging Member in the LLC Exchange relative to the other
Exchanging Members (other than Steven C. Berger, Paul Redmond and Robert W.
Keelips, III), or (b) amend the LLC Agreement in a manner that would require the
further consent of such Exchanging Member without obtaining the consent of such
Exchanging Member.
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<PAGE>
(b) The Managing Committee has the authority under this
Agreement not to offer securities of the Company to or exchange securities of
the Company with any member of Investing if the Managing Committee determines,
in its sole discretion, that the making of such offer or the consummation of
such exchange could violate any applicable laws or regulations, including
securities laws. In the event the Managing Committee does not so offer or
exchange, the Managing Committee may, pursuant to Section 10(b) of the Amended
and Restated Operating Agreement of Investing, dated as of January 1, 1998, as
amended (the "INVESTING OPERATING AGREEMENT"), require such member of Investing
to withdraw from Investing, and such member will receive his, her or its Final
Payment (as defined and determined in accordance with the Investing Operating
Agreement).
(c) Following consummation of the LLC Exchange, the Managing
Committee may waive or amend any aspect of this Agreement that has not yet been
completed or reflected in a separate agreement.
Section 5.2. EXPENSES. Each party hereto shall be responsible for all
expenses of such party incurred in connection with the transactions contemplated
by this Agreement. In addition, each Exchanging Member shall be responsible for
any and all expenses incurred by the Company in enforcing the provisions of this
Agreement against such Exchanging Member.
Section 5.3. NOTICES.
(a) All notices, requests, demands, waivers and other
communications to be given by any party hereunder shall be in writing and shall
be (i) mailed by first-class, registered or certified mail, postage prepaid,
(ii) sent by hand delivery or reputable overnight delivery service or (iii)
transmitted by telecopy (provided that a copy is also sent by reputable
overnight delivery service) addressed, in the case of any Exchanging Member, to
such Exchanging Member at the address set forth on the current records of
Investing or, in the case of the Company or Investing, to One Exchange Plaza,
New York, NY 10006, Attention: Chief Executive Officer, or, in each case, to
such other address as may be specified in writing to the other parties hereto.
(b) All such notices, requests, demands, waivers and other
communications shall be deemed to have been given and received (i) if by
personal delivery or telecopy, on the day of such delivery, (ii) if by
first-class, registered or certified mail, on the fifth business day after the
mailing thereof or (iii) if by reputable overnight delivery service, on the day
delivered.
Section 5.4. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time by the Managing Committee. If the IPO has not been
consummated by December 31, 1999, unless re-executed, this Agreement will be
automatically terminated and will be of no further force and effect.
Section 5.5. REPRESENTATIVES, SUCCESSORS AND ASSIGNS. This Agreement
shall be binding upon and inure to the benefit of the respective parties hereto
and their respective legatees, legal representatives, successors and assigns;
provided that an Exchanging Member may not assign,
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<PAGE>
delegate or otherwise transfer any of his or her rights or obligations under
this Agreement except with the prior written consent of the Company, and any
assignment without such consent by the Company shall be void.
Section 5.6. BENEFIT. Nothing in this Agreement, express or implied, is
intended or shall be construed to confer upon or give to any person or other
entity (other than Investing or the Company and, to the extent expressly
provided herein, an Exchanging Member) any remedy or claim under or by reason of
this Agreement or any term, covenant or condition hereof, all of which shall be
for the sole and exclusive benefit of the parties mentioned above in this
Section, except that the provision set forth above in Section 3.10, entitled
"Release," shall be enforceable by the Releasees mentioned therein.
Section 5.7. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS. THE MANAGING COMMITTEE IS EXPRESSLY
AUTHORIZED TO MAKE ANY CHANGES TO THIS GOVERNING LAW PROVISION AND THE GOVERNING
LAW PROVISIONS OF ANY EXHIBIT AS IT SHALL DEEM NECESSARY OR DESIRABLE PRIOR TO
THE EFFECTIVE TIME.
Section 5.8. ARBITRATION. Without diminishing the finality and
conclusive effect of any determination by the Managing Committee of any matter
under this Agreement, which is provided herein to be determined by the Managing
Committee, any dispute, controversy or claim arising out of or relating to or
concerning the provisions of this Agreement or any of the Exhibits hereto shall
be finally settled by arbitration in New York City before, and in accordance
with the rules then obtaining of, the NYSE or, if the NYSE declines to arbitrate
the matter, the American Arbitration Association ("AAA") in accordance with the
commercial arbitration rules of the AAA; PROVIDED HOWEVER, that, in addition to
the right to compel arbitration of any dispute or controversy, the Company or
Investing may bring an action or special proceeding in a state or federal court
of competent jurisdiction sitting in New York City, whether or not an
arbitration proceeding has theretofore been or is ever initiated, for the
purpose of temporarily, preliminarily, or permanently enforcing the provisions
of this Agreement or to enforce an arbitration award and, for the purposes of
this provision, each Exchanging Member expressly consents to the jurisdiction of
any such court in respect of any such action and waives to the fullest extent
permitted by applicable law any objection to personal jurisdiction or to the
laying of venue of any such suit, action or proceeding in such court, agrees
that proof shall not be required that monetary damages for breach of the
provisions of this Agreement would be difficult to calculate and that remedies
at law would be inadequate and irrevocably appoints George M.L. LaBranche, IV as
such Exchanging Member's agent for service of process in connection with any
such action or proceeding, who shall promptly advise such participant of any
such service of process.
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<PAGE>
Section 5.9. FURTHER ASSURANCES. Each Exchanging Member agrees to
execute such additional documents and take such further action as may be
requested by the Company to effect the provisions of this Agreement.
Section 5.10. HEADINGS. The headings of the Sections of this Agreement
are inserted as a matter of convenience and for reference purposes only, are of
no binding effect, and in no respect define, limit or describe the scope of this
Agreement or the intent of any Section.
Section 5.11. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 5.12. ENTIRE AGREEMENT. This Agreement, including the Exhibits
hereto, supersedes all prior negotiations, agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
Each Exchanging Member expressly agrees that neither LaBranche LP, Investing,
nor the Company has made representations, warranties, promises or inducements in
connection with this Agreement other than as provided herein.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
LABRANCHE & CO INC.
--------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
INVESTING CO. L.L.C.
/s/ George M.L. LaBranche
--------------------------------------------
Name: George M.L. LaBranche
Title: Managing Committee member
/s/ George M.L. LaBranche, IV
--------------------------------------------
George M.L. LaBranche, IV
/s/ Vincent J. Flaherty
--------------------------------------------
Vincent J. Flaherty
/s/ James G. Gallagher
--------------------------------------------
James G. Gallagher
/s/ Alfred O. Hayward, Jr.
--------------------------------------------
Alfred O. Hayward, Jr.
/s/ Michael J. Naughton
--------------------------------------------
Michael J. Naughton
/s/ John McGraner
--------------------------------------------
John McGraner
/s/ Vincent Papandrea
--------------------------------------------
Vincent Papandrea
<PAGE>
/s/ Anthony M. Corso
--------------------------------------------
Anthony M. Corso
/s/ Eugene C. McCarthy
--------------------------------------------
Eugene C. McCarthy
/s/ John O. Pickett, III
--------------------------------------------
John O. Pickett, III
/s/ Michael C. Ziebarth
--------------------------------------------
Michael C. Ziebarth
/s/ Anthony Giardina
--------------------------------------------
Anthony Giardina
/s/ Sean M. McCooey
--------------------------------------------
Sean M. McCooey
/s/ Mark Soltz
--------------------------------------------
Mark Soltz
/s/ Christopher M. Smith
--------------------------------------------
Christopher M. Smith
/s/ Joseph Corso, Jr.
--------------------------------------------
Joseph Corso, Jr.
/s/ Robert A. Conte
--------------------------------------------
Robert A. Conte
/s/ Paul A. Redmond
--------------------------------------------
Paul A. Redmond
<PAGE>
/s/ Thomas G. McLaughlin
--------------------------------------------
Thomas G. McLaughlin
/s/ Nicholas Caputo
--------------------------------------------
Nicholas Caputo
/s/ Joseph R. Dewhurst, II
--------------------------------------------
Joseph R. Dewhurst, II
/s/ Steven C. Berger
--------------------------------------------
Steven C. Berger
/s/ John L. McWilliams
--------------------------------------------
John L. McWilliams
/s/ Thomas J. Shanley
--------------------------------------------
Thomas J. Shanley
/s/ Kevin R. McMahon
--------------------------------------------
Kevin R. McMahon
/s/ Fred DeBoer
--------------------------------------------
Fred DeBoer
/s/ Robert W. Keelips, III
--------------------------------------------
Robert W. Keelips, III
/s/ Karin Gill
--------------------------------------------
Karin Gill
/s/ John M. Dempsey, III
--------------------------------------------
John M. Dempsey, III
<PAGE>
/s/ John N. Durante
--------------------------------------------
John N. Durante
/s/ Gerard A. Competello
--------------------------------------------
Gerard A. Competello
/s/ William J. Burke, III
--------------------------------------------
William J. Burke, III
/s/ Christopher Connors
--------------------------------------------
Christopher Connors
/s/ Christopher Keelips
--------------------------------------------
Christopher Keelips
/s/ Vincent G. Quigley
--------------------------------------------
Vincent G. Quigley
/s/ Anthony Picerni
--------------------------------------------
Anthony Picerni
[cad 228]
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LABRANCHE & CO INC.
(Under Sections 242 and 245 of the Delaware General Corporation Law)
It is hereby certified that:
1. The name of the Corporation is LaBranche & Co Inc.
(the "Corporation").
2. The Certificate of Incorporation of the Corporation originally
filed with the Secretary of State of the State of Delaware on
June 15, 1999 is hereby amended and restated in its entirety
to read as follows:
"FIRST: The name of the corporation is LaBRANCHE & CO INC. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is United Corporate Services, Inc., 15 East North Street, Dover, DE
19901. The name of the Corporation's registered agent at such address is United
Corporate Services.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "GCL").
FOURTH: Section 1. CLASSES AND NUMBER OF SHARES. The total number of
shares of all classes of stock which the Corporation has authority to issue is
two hundred ten million (210,000,000) shares, consisting of two hundred million
(200,000,000) shares of Common Stock, par value $.01 per share (the "Common
Stock"), and ten million (10,000,000) shares of Preferred Stock, par value $.01
per share, which shall have such designations as may be authorized by the Board
of Directors from time to time (the "Preferred Stock").
Section 2. PREFERRED STOCK. The Board of Directors is hereby
authorized, subject to the provisions contained in this Article Fourth, to issue
the Preferred Stock from time to time in one or more series, which Preferred
Stock shall rank senior to the Common Stock as to dividends and distribution of
assets of the Corporation on dissolution, as hereinafter provided, and shall
have such distinctive designations as may be stated in the resolution or
resolutions providing for the issue of such stock adopted by the Board of
Directors. In such resolution or resolutions providing for
<PAGE>
the issuance of shares of a particular series of Preferred Stock, the Board
of Directors is hereby expressly authorized and empowered to fix the number
of shares constituting such series and to fix the relative rights and
preferences of the shares of the series so established to the full extent
allowable by law except insofar as such rights and preferences are fixed
herein. Such authorization of the Board of Directors shall expressly include
the authority to fix and determine the relative rights and preferences of
such shares in all respects including, without limitation, the following:
1. the rate of dividend;
2. whether shares can be redeemed or called and, if so, the
redemption or call price and terms and conditions of
redemption or call;
3. the amount payable upon shares in the event of dissolution,
voluntary and involuntary liquidation or winding up of the
affairs of the Corporation;
4. purchase, retirement or sinking fund provisions, if any, for
the call, redemption or purchase of shares;
5. the terms and conditions, if any, on which shares may be
converted into Common Stock or any other securities;
6. whether or not shares have voting rights, and the extent of
such voting rights, if any; and
7. whether shares shall be cumulative, noncumulative, or
partially cumulative as to dividends and the date from which
any cumulative dividends are to accumulate.
FIFTH: Meetings of the stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws may provide. The books of
the Corporation may be kept (subject to any provisions contained in the
statutes) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation. Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
SIXTH: In the furtherance and not in limitation of objects, purposes
and powers conferred by statute, the Board of Directors is expressly authorized
to make, alter or repeal the Bylaws of the Corporation. Notwithstanding anything
in this Amended and Restated Certificate of Incorporation to the contrary, Bylaw
Sections 2.04, 3.02, 3.03, and Article XII may not be repealed or amended in any
respect, and no provision inconsistent therewith may be adopted by the
stockholders unless such action is approved by either (a) a majority of the
Continuing Directors ( in addition to the vote otherwise required by the GCL) or
(b) the affirmative vote of the holders of (i)
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<PAGE>
eighty percent (80%) of the outstanding Voting Shares voting as a single class
and (ii) if an Interested Stockholder, either directly or indirectly, through
agreement or any other arrangement, proposes such amendment, sixty-six and
two-thirds percent (66 2/3%) of the outstanding Voting Shares which are not
beneficially owned, directly or indirectly, by such Interested Stockholder,
voting as a single class.
SEVENTH: Subject to the rights of the holders of any series of
Preferred Stock:
(a) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing
of such stockholders and
(b) special meetings of stockholders of the Company may be called
only by (i) the Chairman of the Board or (ii) the Secretary of
the Corporation within 10 calendar days after receipt of the
written request of a majority of the total number of Directors
which the Corporation would have if there were no vacancies.
At any annual or special meeting of stockholders of the Corporation,
only such business will be conducted or considered as has been brought before
such meeting in the manner provided in the By Laws of the Corporation.
Notwithstanding anything in this Amended and Restated Certificate of
Incorporation to the contrary, the provisions set forth in this Article Seventh
may not be repealed or amended in any respect, unless such action is approved by
either (a) a majority of the Continuing Directors (in addition to the vote
otherwise required by the GCL) or (b) the affirmative vote of the holders of (i)
eighty percent (80%) of the Voting Shares voting as a single class, and (ii) if
an Interested Stockholder, either directly or indirectly, through agreement or
any or arrangement, proposes such amendment, sixty-six and two-thirds percent
(66 2/3%) of the Voting Shares which are not beneficially owned, directly or
indirectly, by such Interested Stockholder, voting as a single class.
EIGHTH: (a) CLASSIFICATION OF BOARD OF DIRECTORS. Upon the consummation
of the Corporation's initial public offering of its Common Stock, directors
shall be divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. Class I
directors shall serve until the 2000 Annual Meeting of Stockholders, Class II
directors shall serve until the 2001 Annual Meeting of Stockholders and Class
III directors shall serve until the 2002 Annual Meeting of Stockholders. At each
annual meeting of stockholders beginning in 2000, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of the class,
but in no
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<PAGE>
case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor shall
be elected and qualified. Any vacancy on the Board of Directors for any reason,
and anydirectorships resulting from any increase in the number of directors of
the Board of Directors, may be filled by a majority of the Board of Directors
then in office, although less than a quorum, or a sole remaining director and
any directors so chosen shall hold office until the next election of the class
for which such directors shall have been chosen and until their successors shall
be elected and qualified. Notwithstanding the foregoing, whenever the holders of
any one or more classes or series of stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Amended and Restated Certificate of Incorporation applicable
thereto, such directors so elected shall not be divided into classes pursuant to
this Article Eighth, Section(a), and the number of such directors shall not be
counted in determining the maximum number of directors permitted under the
foregoing provision of this Article Eighth, Section (a), in each case unless
expressly provided by such terms.
(b) AMENDMENT OR REPEAL. Notwithstanding anything in this Amended and
Restated Certificate of Incorporation to the contrary, the provisions set forth
in this Article Eighth may not be repealed or amended in any respect, unless
such action is approved by either (a) a majority of the Continuing Directors (in
addition to the vote otherwise required by the GCL) or (b) the affirmative vote
of the holders of (i) eighty percent (80%) of the Voting Shares voting as a
single class, and (ii) if an Interested Stockholder, either directly or
indirectly, through agreement or any other arrangement, proposes such amendment,
sixty-six and two-thirds percent (66 2/3%) of the Voting Shares which are not
beneficially owned, directly or indirectly, by such Interested Stockholder,
voting as a single class.
(c) REMOVAL OF DIRECTORS. Notwithstanding anything in this Amended and
Restated Certificate of Incorporation to the contrary, the Corporation's
Certificate of Incorporation may not be amended to provide for removal of
directors without cause as permitted by the GCL, unless such action is approved
by either (a) a majority of the Continuing Directors (in addition to the vote
otherwise required by the GCL) or (b) the affirmative vote of the holders of (i)
eighty percent (80%) of the Voting Shares voting as a single class, and (ii) if
an Interested Stockholder, either directly or indirectly, through agreement or
any other arrangement, proposes such amendment, sixty-six and two-thirds percent
(66 2/3%) of the Voting Shares which are not beneficially owned, directly or
indirectly, by such Interested Stockholder, voting as a single class; PROVIDED,
HOWEVER, whenever the holders of any class or series of the Corporation's
outstanding securities are entitled to elect one or more directors by this
Amended and Restated Certificate of Incorporation, this subsection shall apply,
in respect to the removal without cause of a director or directors so elected,
to the vote of the holders of the outstanding shares of that class or series and
not to the vote of the outstanding Voting Shares as a whole.
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<PAGE>
(d) DEFINITIONS. A majority of the Continuing Directors shall have the
power and duty to determine for purposes of Article Sixth through Article
Eighth, on the basis of information known to them, the applicability of certain
defined terms used in Article Sixth through Article Eighth, in addition to such
other matters with respect to which a determination is required under Article
Sixth through Article Eighth. Any such determination shall be conclusive and
binding for all purposes of Article Sixth through Article Eighth.
For purposes of Article Sixth through Article Eighth, the following
definitions shall apply:
"Affiliate" and "Associate" shall have the respective meanings ascribed
to them in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
A person shall be a "beneficial owner" of any Voting Shares:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(1) the right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise or (2) the right to
vote or to direct the voting thereof pursuant to any agreement,
arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Voting
Shares.
A "Continuing Director" is any member of the Corporation's Board of
Directors who is unaffiliated with, and not a nominee of, an Interested
Stockholder, and any successor of a Continuing Director who is
unaffiliated with, and not a nominee of, an Interested Stockholder and
is approved to succeed a Continuing Director by a majority of
Continuing Directors then on the Board of Directors.
"Interested Stockholder" shall mean any Person (other than (i) the
Corporation, (ii) any Subsidiary (or any successor in interest to any
Subsidiary) of the Corporation, (iii) any member of the group of
stockholders (or any successor in interest to such group), including
the Chief Executive Officer, who, pursuant to Article II of the
Stockholders' Agreement, has a power to direct the vote of the
stockholders who are or become parties thereto, (iv) any employee
benefit plan of the Corporation or any
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<PAGE>
Subsidiary of the Corporation or any entity holding shares of
Common Stock for or pursuant to the terms of any such plan or (v) any
person who acquires more than 10% of the outstanding Voting Shares with
the prior approval of a majority of the Continuing Directors), who or
which:
(i) is the beneficial owner, directly or indirectly, of more than
10% of the combined voting power of the then outstanding Voting Shares;
or
(ii) is an assignee of or has otherwise succeeded to the
beneficial ownership of any Voting Shares which were at any time within
the three-year period immediately prior to the date in question
beneficially owned by an Interested Stockholder.
For the purposes of determining whether a person is an Interested
Stockholder, the number of Voting Shares deemed to be outstanding shall
include shares deemed owned through application of the definition of
beneficial ownership provided above but shall not include any Voting
Shares beneficially owned by any person other than the Interested
Stockholder which may be issuable pursuant to any agreement,
arrangement or understanding or upon exercise of conversion rights,
warrants or options, or otherwise.
"Person" shall mean any individual, firm, trust, partnership,
association, corporation, unincorporated organization or other entity
(other than the Corporation, any Subsidiary of the Corporation for
itself or a trustee holding stock for the benefit of the employees of
the Corporation or its Subsidiaries, or any one of them, pursuant to
one or more employee benefit plans or arrangements), as well as two or
more persons acting as a partnership, limited partnership, syndicate,
association or other group for the purpose of acquiring, holding or
disposing of shares of stock.
"Subsidiary" shall mean any corporation, limited liability company,
partnership or other entity of which a majority of any class of equity
security (as defined in Rule 3a11-1 of the General Rules and
Regulations under the Exchange Act), is owned, directly or indirectly,
by the Corporation; provided, however, that for purposes of the
definition of Interested Stockholder set forth above, the term
"Subsidiary" shall mean only a corporation, limited liability company,
partnership or other entity of which a majority of each class of equity
security is beneficially owned, directly or indirectly, by the
Corporation.
"Voting Shares" shall mean shares of all classes and series of the
Corporation entitled to vote generally in the election of the
Corporation's directors.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
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application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
TENTH: A director of the Corporation shall have no personal liability
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, this Article Tenth shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
GCL is hereafter amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the Corporation,
in addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended GCL. Any repeal or
modification of this Article Tenth by the stockholders of the Corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
ELEVENTH: The Corporation shall have the power to provide
indemnification to the fullest extent permitted by Section 145 of the GCL.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation."
3. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections
242 and 245 of the GCL by written consent of a majority of
the stockholders outstanding and entitled to vote thereon in
accordance with Section 228 of the GCL.
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IN WITNESS WHEREOF, said LaBranche & Co Inc. has caused this
certificate to be signed by George M.L. LaBranche, IV, its Chairman and Chief
Executive Officer, this 18th day of August, 1999.
LaBRANCHE & CO INC.
By: /s/ George M.L. LaBranche, IV
---------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
LABRANCHE & CO INC.
Adopted on August 16, 1999
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of LaBranche
& Co Inc. (the "Corporation") in the State of Delaware shall be in the City of
Dover, County of Kent, and the name of its registered agent shall be United
Corporate Services, Inc.
SECTION 1.02. OTHER OFFICES. The Corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. PLACE OF MEETING. All meetings of stockholders for the
election of directors shall be held at such place, either within or without the
State of Delaware, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting.
SECTION 2.02. ANNUAL MEETING. The annual meeting of stockholders
shall be held at such date and time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting.
SECTION 2.03. VOTING LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice, or if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
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SECTION 2.04. SPECIAL MEETING. Special meetings of the stockholders
of the Corporation, for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called only by the
Chairman of the Board of Directors of the Corporation or by the Secretary of the
Corporation within ten (10) calendar days after receipt of the written request
of a majority of the total number of directors which the Corporation would have
if there were no vacancies. Such request or order shall state the purposes of
the proposed meeting. The Chairman of the Board of Directors of the Corporation
or directors so calling any such meeting shall fix the time and any place,
either within or without the State of Delaware, as the place for holding such
meeting.
SECTION 2.05. NOTICE OF MEETING. Written notice of the annual, and
each special meeting of stockholders, stating the time, place, and purpose or
purposes thereof, shall be given to each stockholder entitled to vote thereat,
not less than 10 nor more than 60 days before the meeting.
SECTION 2.06. QUORUM. The holders of a majority of the shares of the
Corporation's capital stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at any
meeting of stockholders for the transaction of business, except as otherwise
provided by statute or by the Certificate of Incorporation. Notwithstanding the
other provisions of the Certificate of Incorporation or these bylaws, the
holders of a majority of the shares of the Corporation's capital stock entitled
to vote thereat, present in person or represented by proxy, whether or not a
quorum is present, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 2.07. VOTING. When a quorum is present at any meeting of the
stockholders, the vote of the holders of a majority of the shares of the
Corporation's capital stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the statutes, of the
Certificate of Incorporation or of these bylaws, a different vote is required,
in which case such express provision shall govern and control the decision of
such question. Every stockholder having the right to vote shall be entitled to
vote in person, or by proxy appointed by an instrument in writing subscribed by
such stockholder, bearing a date not more than three years prior to voting,
unless such instrument provides for a longer period, and filed with the
Secretary of the corporation before, or at the time of, the meeting. If such
instrument shall designate two or more persons to act as proxies, unless such
instrument shall provide the contrary, a majority of such persons present at any
meeting at which their powers thereunder are to be exercised shall have and may
exercise all the powers of voting or giving consents thereby conferred, or if
only one be present, then such powers may be exercised by that one; or, if an
even number attend and a majority do not agree on any particular
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issue, each proxy so attending shall be entitled to exercise such powers in
respect of the same portion of the shares as such proxy is of the proxies
representing such shares.
SECTION 2.08. VOTING OF STOCK OF CERTAIN HOLDERS. Shares of the
Corporation's capital stock standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent, or proxy as the bylaws
of such corporation may prescribe, or in the absence of such provision, as the
Board of Directors of such corporation may determine. Shares standing in the
name of a deceased person may be voted by the executor or administrator of such
deceased person, either in person or by proxy. Shares standing in the name of a
guardian, conservator, or trustee may be voted by such fiduciary, either in
person or by proxy, but no such fiduciary shall be entitled to vote shares held
in such fiduciary capacity without a transfer of such shares into the name of
such fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledgor on the books of the corporation,
the pledgor has expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent the stock and vote thereon.
SECTION 2.09. TREASURY STOCK. The Corporation shall not vote,
directly or indirectly, shares of its own capital stock owned by it; and such
shares shall not be counted in determining the total number of outstanding
shares of the Corporation's capital stock.
SECTION 2.10. FIXING RECORD DATE. The Board of Directors may fix in
advance a date, which shall not be more than 60 days nor less than 10 days
preceding the date of any meeting of stockholders, nor more than 60 days
preceding the date for payment of any dividend or distribution, or the date for
the allotment of rights, or the date when any change, or conversion or exchange
of capital stock shall go into effect, or a date in connection with obtaining a
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend or distribution, or to receive
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed, shall be entitled to such notice of, and to vote
at, any such meeting and any adjournment thereof, or to receive payment of such
dividend or distribution, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
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SECTION 3.02. NUMBER, ELECTION AND TERM. The number of directors
that shall constitute the whole Board of Directors shall be not less than one.
Such number of directors shall from time to time be fixed and determined by the
directors and shall be set forth in the notice of any meeting of stockholders
held for the purpose of electing directors. The Board of Directors will be
divided into three classes which will serve staggered three year terms as set
forth in Article Eighth of the Certificate of Incorporation. The directors shall
be elected at the annual meeting of stockholders in the manner provided in
Article Eighth of the Certificate of Incorporation, except as provided in
Section 3.03 hereof, and each director elected shall hold office until his
successor shall be elected and shall qualify. Directors need not be residents of
Delaware or stockholders of the Corporation.
SECTION 3.03. VACANCIES, ADDITIONAL DIRECTORS, AND REMOVAL FROM
OFFICE. If any vacancy occurs in the Board of Directors caused by death,
resignation, retirement, disqualification, or removal from office of any
director, or otherwise, or if any new directorship is created by an increase in
the authorized number of directors, a majority of the directors then in office,
though less than a quorum, or a sole remaining director, may choose a successor
or fill the newly created directorship; and a director so chosen shall hold
office until the next election and until his successor shall be duly elected and
shall qualify, unless sooner displaced. Directors may only be removed in
accordance with Article Eighth of the Certificate of Incorporation.
SECTION 3.04. REGULAR MEETING. A regular meeting of the Board of
Directors shall be held each year, without other notice than this bylaw, at the
place of, and immediately following, the annual meeting of stockholders; and
other regular meetings of the Board of Directors shall be held each year, at
such time and place as the Board of Directors may provide, by resolution, either
within or without the State of Delaware, without other notice than such
resolution.
SECTION 3.05. SPECIAL MEETING. A special meeting of the Board of
Directors may be called by the Chairman of the Board of Directors or by the
President of the Corporation and shall be called by the Secretary on the written
request of any two directors. The Chairman or President so calling, or the
directors so requesting, any such meeting shall fix the time and any place,
either within or without the State of Delaware, as the place for holding such
meeting.
SECTION 3.06. NOTICE OF SPECIAL MEETING. Written notice of special
meetings of the Board of Directors shall be given to each director in a manner
reasonably calculated to reach such director at least 48 hours prior to the time
of such meeting. Any director may waive notice of any meeting. The attendance of
a director at any meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting, except that notice shall be given of any
proposed amendment to the bylaws if it is to be adopted at any special meeting
or with respect to any other matter where notice is required by statute.
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SECTION 3.07. QUORUM. A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute, by the Certificate of
Incorporation or by these bylaws. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 3.08. ACTION WITHOUT MEETING. Unless otherwise restricted by
the Certificate of Incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof as provided in Article IV of these bylaws, may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board of Directors or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board of Directors or
such committee.
SECTION 3.09. COMPENSATION. Directors, as such, shall not be
entitled to any stated salary for their services unless voted by the
stockholders or the Board of Directors; but by resolution of the Board of
Directors, a fixed annual retainer and a fixed sum and expenses of attendance
may be allowed for attendance at each regular or special meeting of the Board of
Directors or any meeting of a committee of directors and equity incentive awards
may be granted. No provision of these bylaws shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 3.10. MANDATORY RETIREMENT. Directors shall be required to
retire from the Board of Directors of the Corporation upon reaching the age of
sixty-five (65).
ARTICLE IV
COMMITTEE OF DIRECTORS
SECTION 4.01. DESIGNATION, POWERS AND NAME. The Board of Directors
may, by resolution passed by a majority of the whole Board of Directors,
designate one or more committees, including, if they shall so determine, an
Executive Committee, each such committee to consist of two or more of the
directors of the corporation. The committee shall have and may exercise such of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation as may be provided in such resolution. The committee
may authorize the seal of the Corporation to be affixed to all papers that may
require it. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or disqualification of
any member of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Such committee or committees shall have such name or
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names and such limitations of authority as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 4.02. MINUTES. Each committee of directors shall keep
regular minutes of its proceedings and report the same to the Board of Directors
when required.
SECTION 4.03. COMPENSATION. Members of special or standing
committees may be allowed compensation for attending committee meetings, if the
Board of Directors shall so determine.
ARTICLE V
NOTICE
SECTION 5.01. METHODS OF GIVING NOTICE. Whenever under the
provisions of applicable statutes, the Certificate of Incorporation or these
bylaws, notice is required to be given to any director, member of any committee,
or stockholder, such notice shall be in writing and delivered personally or
mailed to such director, member, or stockholder; provided that in the case of a
director or a member of any committee such notice may be given by telephone,
facsimile or telegram. If mailed, notice to a director, member of a committee,
or stockholder shall be deemed to be given when deposited in the United States
mail first class in a sealed envelope, with postage thereon prepaid, addressed,
in the case of a stockholder, to the stockholder at the stockholder's address as
it appears on the records of the corporation or, in the case of a director or a
member of a committee, to such person at his business address. If sent by
telegraph, notice to a director or member of a committee shall be deemed to be
given when the telegram, so addressed, is delivered to the telegraph company. If
sent by facsimile, notice to a director or member of a committee shall be deemed
given when sender receives confirmation of receipt of the facsimile by the other
party.
SECTION 5.02. WRITTEN WAIVER. Whenever any notice is required to be
given under the provisions of an applicable statute, the Certificate of
Incorporation, or these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VI
OFFICERS
SECTION 6.01. OFFICERS. The officers of the corporation shall be a
Chairman of the Board of Directors and a Vice Chairman of the Board of Directors
(if such office is created by the Board of Directors), a Chief Executive Officer
and a President, one or more Vice Presidents, any one or more of which may be
designated Executive Vice President or Senior Vice President, a Secretary and a
Treasurer. The Board of Directors may appoint such other officers and agents,
including Assistant Vice Presidents, Assistant Secretaries, and Assistant
Treasurers, in each case as the Board of Directors shall deem necessary, who
shall hold their offices for such terms and shall
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exercise such powers and perform such duties as shall be determined by the Board
of Directors. Any two or more offices may be held by the same person. No officer
shall execute, acknowledge, verify or countersign any instrument on behalf of
the Corporation in more than one capacity, if such instrument is required by
law, by these bylaws or by any act of the Corporation to be executed,
acknowledged, verified, or countersigned by two or more officers. The Chairman
and Vice Chairman of the Board of Directors shall be elected from among the
directors. With the foregoing exceptions, none of the other officers need be a
director, and none of the officers need be a stockholder of the Corporation.
SECTION 6.02. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected annually by the Board of Directors at its first
regular meeting held after the annual meeting of stockholders or as soon
thereafter as conveniently possible. Each officer shall hold office until such
officer's successor shall have been chosen and shall have qualified or until
such officer's death or the effective date of such officer's resignation or
removal, or until the person shall cease to be a director in the case of the
Chairman and the Vice Chairman.
SECTION 6.03. REMOVAL AND RESIGNATION. Any officer or agent elected
or appointed by the Board of Directors may be removed without cause by the
affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the Corporation shall be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed. Any officer may resign at any time by giving written
notice to the Corporation. Any such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 6.04. VACANCIES. Any vacancy occurring in any office of the
Corporation by death, resignation, removal, or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 6.05. SALARIES. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors or pursuant to its
direction; and no officer shall be prevented from receiving such salary by
reason of his also being a director.
SECTION 6.06. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall preside at all meetings of the Board of Directors or of the
stockholders of the corporation. The Chairman shall formulate and submit to the
Board of Directors or the Executive Committee matters of general policy for the
Corporation and shall perform such other duties as usually appertain to the
office or as may be prescribed by the Board of Directors or the Executive
Committee.
SECTION 6.07. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of Directors (if such office is created by the Board of Directors) shall,
in the absence or disability of the Chairman of the Board of Directors, perform
the duties and exercise the powers of the Chairman of the Board of Directors.
The Vice Chairman shall perform such other duties as from
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time to time may be prescribed by the Board of Directors or the Executive
Committee or assigned by the Chairman of the Board of Directors.
SECTION 6.08. CHIEF EXECUTIVE OFFICER. The chief executive officer,
subject to the control of the Board of Directors, shall in general supervise and
control the business and affairs of the Corporation. In the absence of the
Chairman of the Board of Directors or the Vice Chairman of the Board of
Directors (if such office is created by the Board of Directors), the Chief
Executive Officer shall preside at all meetings of the Board of Directors and of
the stockholders. The Chief Executive Officer may also preside at any such
meeting attended by the Chairman or Vice Chairman of the Board of Directors if
the Chief Executive Officer is so designated by the Chairman, or in the
Chairman's absence by the Vice Chairman. The Chief Executive Officer shall have
the power to appoint and remove subordinate officers, agents and employees,
except those elected or appointed by the Board of Directors. The Chief Executive
Officer shall keep the Board of Directors and the Executive Committee fully
informed and shall consult them concerning the business of the Corporation. The
Chief Executive Officer may sign with the Secretary or any other officer of the
Corporation thereunto authorized by the Board of Directors, certificates for
shares of the Corporation and any deeds, bonds, mortgages, contracts, checks,
notes, drafts, or other instruments that the Board of Directors has authorized
to be executed, except in cases where the signing and execution thereof has been
expressly delegated by these bylaws or by the Board of Directors to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
executed. The Chief Executive Officer shall vote, or give a proxy to any other
officer of the Corporation to vote, all shares of stock of any other Corporation
standing in the name of the Corporation and in general the Chief Executive
Officer shall perform all other duties normally incident to the office of Chief
Executive Officer and such other duties as may be prescribed by the
stockholders, the Board of Directors, or the Executive Committee from time to
time.
SECTION 6.09. PRESIDENT. If the Board of Directors does not create
the independent position of Chief Executive Officer, the President shall be the
chief executive officer of the Corporation, subject to the control of the Board
of Directors, and shall have all of the powers of the chief executive officer as
set forth in Section 6.08. In addition, the President shall also be the chief
operating officer of the Corporation and shall report directly to the Chief
Executive Officer, if the Board of Directors creates such a position. The
President shall perform such other duties as from time to time are assigned to
the President by the Chief Executive Officer, the Board of Directors or the
Executive Committee.
SECTION 6.10. VICE PRESIDENTS. In the absence of the Chief Executive
Officer and/or the President, or in the event of the Chief Executive Officer
and/or President's inability or refusal to act, the Executive Vice President (or
in the event there shall be no Vice President designated Executive Vice
President, any Vice President designated by the Board of Directors) shall
perform the duties and exercise the powers of the Chief Executive Officer and/or
the President. Any Vice President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the Corporation. The Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
Chief Executive Officer, the President, the Board of Directors or the Executive
Committee.
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SECTION 6.11. SECRETARY. The Secretary shall (a) keep the minutes of
the meetings of the stockholders, the Board of Directors and committees of
directors; (b) see that all notices are duly given in accordance with the
provisions of these bylaws and as required by law; (c) be custodian of the
corporate records and of the seal of the Corporation, and see that the seal of
the Corporation or a facsimile thereof is affixed to all certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the Corporation under its seal is duly authorized in accordance with
the provisions of these bylaws; (d) keep or cause to be kept a register of the
post office address of each stockholder which shall be furnished by such
stockholder; (e) sign with the Chief Executive Officer, the President, or an
Executive Vice President or Vice President, certificates for shares of the
Corporation, the issue of which shall have been authorized by resolution of the
Board of Directors; (f) have general charge of the stock transfer books of the
Corporation; and (g) in general, perform all duties normally incident to the
office of Secretary and such other duties as from time to time may be assigned
to the Secretary by the Chief Executive Officer, the President, the Board of
Directors or the Executive Committee.
SECTION 6.12. TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. The
Treasurer shall (a) have charge and custody of and be responsible for all funds
and securities of the Corporation; (b) receive and give receipts for moneys due
and payable to the Corporation from any source whatsoever and deposit all such
moneys in the name of the Corporation in such banks, trust companies, or other
depositories as shall be selected in accordance with the provisions of Section
7.03 of these bylaws; (c) prepare, or cause to be prepared, for submission at
each regular meeting of the Board of Directors, at each annual meeting of the
stockholders, and at such other times as may be required by the Board of
Directors, the Chief Executive Officer, the President or the Executive
Committee, a statement of financial condition of the Corporation in such detail
as may be required; and (d) in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to the Treasurer by the Chief Executive Officer, the President, the Board of
Directors or the Executive Committee.
SECTION 6.13. ASSISTANT SECRETARY AND TREASURER. The Assistant
Secretaries and Assistant Treasurers shall, in general, perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the Chief Executive Officer, the President, the Board of Directors, or the
Executive Committee. The Assistant Secretaries and Assistant Treasurers shall,
in the absence of the Secretary or Treasurer, respectively, perform all
functions and duties which such absent officers may delegate, but such
delegation shall not relieve the absent officer from the responsibilities and
liabilities of his office. The Assistant Secretaries may sign, with the Chief
Executive Officer, the President or a Vice President, certificates for shares of
the Corporation, the issue of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors shall
determine.
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ARTICLE VII
CONTRACTS, CHECKS AND DEPOSITS
SECTION 7.01. CONTRACTS. Subject to the provisions of Section 6.01,
the Board of Directors may authorize any officer, officers, agent, or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.
SECTION 7.02. CHECKS. All checks, demands, drafts, or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by such officer or officers or such
agent or agents of the Corporation, and in such manner, as shall be determined
by the Board of Directors.
SECTION 7.03. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies, or other depositories as the Board of Directors
may select.
ARTICLE VIII
CERTIFICATES OF STOCK
SECTION 8.01. ISSUANCE. Each stockholder of this Corporation shall
be entitled to a certificate or certificates showing the number of shares of
capital stock registered in his name on the books of the Corporation. The
certificates shall be in such form as may be determined by the Board of
Directors, shall be issued in numerical order and shall be entered in the books
of the Corporation as they are issued. They shall exhibit the holder's name and
number of shares and shall be signed by the Chief Executive Officer, the
President or a Vice President and by the Secretary or an Assistant Secretary. If
any certificate is countersigned (1) by a transfer agent other than the
Corporation or any employee of the Corporation, or (2) by a registrar other than
the Corporation or any employee of the Corporation, any other signature on the
certificate may be a facsimile. If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the
designations, preferences, and relative participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations, or restrictions of such preferences and rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class of stock; provided that, except
as otherwise provided by statute, in lieu of the foregoing requirements there
may be set forth on the face or back of the certificate which the Corporation
shall issue to represent such class or series of stock, a statement that the
Corporation will furnish to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and rights. All certificates surrendered to the
Corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in the case of a lost, stolen, destroyed,
or mutilated certificate a new one may
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be issued therefor upon such terms and with such indemnity, if any, to the
Corporation as the Board of Directors may prescribe. Certificates shall not be
issued representing fractional shares of stock.
SECTION 8.02. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require (1) the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require, (2) such owner to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate or certificates alleged to have been
lost, stolen, or destroyed, or (3) both.
SECTION 8.03. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction upon its books. Transfers of shares shall be made only on the books
of the Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney and filed with the Secretary of the
Corporation or the Transfer Agent.
SECTION 8.04. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to treat the holder of record of any share or shares of the
Corporation's capital stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.
ARTICLE IX
DIVIDENDS
SECTION 9.01. DECLARATION. Dividends with respect to the shares of
the Corporation's capital stock, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to applicable law. Dividends may be paid in cash,
in property, or in shares of capital stock, subject to the provisions of the
Certificate of Incorporation.
SECTION 9.02. RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interest
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of the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. THIRD PARTY ACTIONS. The Corporation shall indemnify
any director or officer of the Corporation, and may indemnify any other person,
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that the person is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit, or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
SECTION 10.02. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any director or officer and may indemnify any other
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee, or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the Court of Chancery or such other court shall
deem proper.
SECTION 10.03. MANDATORY INDEMNIFICATION. To the extent that a
director, officer, employee, or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit, or proceeding referred
to in Sections 10.01 and 10.02, or in defense of
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<PAGE>
any claim, issue, or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
SECTION 10.04. DETERMINATION OF CONDUCT. Any indemnification under
Section 10.01 or 10.02 of this Article X (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because the person has met the applicable
standard of conduct set forth in Section 10.01 or 10.02 of this Article X. Such
determination shall be made (a) by a majority vote of directors who were not
parties to such action, suit or proceeding, even though less than a quorum, or
(b) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (c) by the stockholders.
SECTION 10.05. PAYMENT OF EXPENSES IN ADVANCE. Expenses (including
attorneys' fees) incurred in defending a civil or criminal action, suit, or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit, or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee, or agent to repay such amount if it shall
ultimately be determined that the person is not entitled to be indemnified by
the Corporation as authorized in this Article X.
SECTION 10.06. INDEMNITY NOT EXCLUSIVE. The indemnification and
advancement of expenses provided or granted hereunder shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Certificate of Incorporation,
any other bylaw, agreement, vote of stockholders, or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 10.07. DEFINITIONS. For purposes of this Article X:
(a) "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger that, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee, or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, shall stand in the same position under this Article
X with respect to the resulting or surviving corporation as the person would
have with respect to such constituent corporation if its separate existence had
continued;
(b) "other enterprises" shall include employee benefit plans;
(c) "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan;
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(d) "serving at the request of the Corporation" shall include any
service as a director, officer, employee, or agent of the Corporation that
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and
(e) a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
SECTION 10.08. CONTINUATION OF INDEMNITY. The indemnification and
advancement of expenses provided or granted hereunder shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. SEAL. The corporate seal, if one is authorized by the
Board of Directors, shall have inscribed thereon the name of the Corporation,
and the words "Corporate Seal, Delaware." The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or otherwise reproduced.
SECTION 11.02. BOOKS. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at the offices of the Corporation, or at such other place or places as
may be designated from time to time by the Board of Directors.
ARTICLE XII
AMENDMENT
Except as provided in Article Sixth of the Certificate of
Incorporation, these bylaws may be altered, amended, or repealed by a majority
of the number of directors then constituting the Board of Directors at any
regular meeting of the Board of Directors without prior notice, or at any
special meeting of the Board of Directors if notice of such alteration,
amendment, or repeal be contained in the notice of such special meeting.
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Exhibit 4.1
EXECUTION COPY
LaBRANCHE & CO INC.,
as Issuer
and
FIRSTAR BANK, N.A.,
as Trustee
--------------------
INDENTURE
Dated as of August 24, 1999
--------------------
9 1/2% Senior Notes due 2004
------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE...........................................................1
Section 1.1. Definitions....................................................................................1
Section 1.2. Other Definitions.............................................................................24
Section 1.3. Incorporation by Reference of Trust Indenture Act.............................................25
Section 1.4. Rules of Construction.........................................................................26
ARTICLE II. THE NOTES..........................................................................................26
Section 2.1. Form and Dating...............................................................................26
Section 2.2. Execution and Authentication..................................................................27
Section 2.3. Registrar and Paying Agent....................................................................28
Section 2.4. Paying Agent to Hold Money in Trust...........................................................29
Section 2.5. Holder Lists..................................................................................29
Section 2.6. Global Note Provisions........................................................................29
Section 2.7 Legends.......................................................................................30
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes....................................................34
Section 2.10. Temporary Notes...............................................................................35
Section 2.11. Cancellation..................................................................................35
Section 2.12. Defaulted Interest............................................................................35
Section 2.13. Additional Amounts Under Registration Rights Agreements.......................................36
ARTICLE III. REDEMPTION........................................................................................36
Section 3.1. Optional Redemption...........................................................................36
Section 3.2. Notices to Trustee............................................................................37
Section 3.3. Selection by Trustee of Notes to Be Redeemed..................................................37
Section 3.4. Notice of Redemption..........................................................................37
Section 3.5. Effect of Notice of Redemption................................................................38
Section 3.6. Deposit of Redemption Price...................................................................38
Section 3.7. Notes Redeemed in Part........................................................................39
ARTICLE IV. COVENANTS..........................................................................................39
Section 4.1. Payment of Notes..............................................................................39
Section 4.2. SEC Reports...................................................................................39
Section 4.3. Waiver of Stay, Extension or Usury Laws.......................................................40
Section 4.4. Compliance Certificate........................................................................40
Section 4.5. Taxes.........................................................................................41
Section 4.6. Limitation on Incurrence of Additional Indebtedness...........................................41
Section 4.7. Limitation on Restricted Payments.............................................................41
Section 4.8. Limitation on Asset Sales.....................................................................44
Section 4.9. Limitation on Distributions and Other Restrictions Affecting Subsidiaries.....................46
Section 4.10. Limitation on Issuance and Sale of Capital Interests in Restricted Subsidiaries...............47
i
<PAGE>
<S> <C>
Section 4.11. Limitations on Liens..........................................................................47
Section 4.12. Limitations on Transactions with Affiliates...................................................49
Section 4.13. Limitation On Designations of Unrestricted Subsidiaries.......................................50
Section 4.14. Change of Control.............................................................................51
Section 4.15. Maintenance of Office or Agency...............................................................53
Section 4.16. Maintenance of Properties and Insurance.......................................................53
ARTICLE V. SUCCESSOR CORPORATION...............................................................................54
Section 5.1. Limitation on Merger, Consolidation and Sale of Assets........................................54
Section 5.2. Successor Person Substituted..................................................................55
ARTICLE VI. DEFAULTS AND REMEDIES..............................................................................55
Section 6.1. Events of Default.............................................................................55
Section 6.2. Acceleration..................................................................................58
Section 6.3. Other Remedies................................................................................59
Section 6.4. Waiver of Past Defaults and Events of Default.................................................59
Section 6.5. Control by Majority...........................................................................59
Section 6.6. Limitation on Suits...........................................................................60
Section 6.7. Rights of Holders To Receive Payment..........................................................60
Section 6.8. Collection Suit by Trustee....................................................................60
Section 6.9. Trustee May File Proofs of Claim..............................................................60
Section 6.10. Priorities....................................................................................61
Section 6.11. Undertaking for Costs.........................................................................61
Section 6.12. Restoration of Rights and Remedies............................................................61
ARTICLE VII. TRUSTEE...........................................................................................62
Section 7.1. Duties of Trustee.............................................................................62
Section 7.2. Rights of Trustee.............................................................................63
Section 7.3. Individual Rights of Trustee..................................................................64
Section 7.4. Trustee's Disclaimer..........................................................................64
Section 7.5. Notice of Defaults............................................................................64
Section 7.6. Reports by Trustee to Holders.................................................................64
Section 7.7. Compensation and Indemnity....................................................................64
Section 7.8. Replacement of Trustee........................................................................65
Section 7.9. Successor Trustee by Consolidation, Merger or Conversion......................................66
Section 7.10. Eligibility; Disqualification.................................................................66
Section 7.11. Preferential Collection of Claims Against Company.............................................66
Section 7.12. Paying Agents.................................................................................67
ARTICLE VIII. AMENDMENT, SUPPLEMENT AND WAIVER.................................................................67
Section 8.1. Without Consent of Holders....................................................................67
Section 8.2. With Consent of Holders.......................................................................68
Section 8.3. Compliance with Trust Indenture Act...........................................................69
Section 8.4. Revocation and Effect of Consents.............................................................69
Section 8.5. Notation on or Exchange of Notes..............................................................70
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<S> <C>
Section 8.6. Trustee To Sign Amendments, etc...............................................................70
ARTICLE IX. DISCHARGE OF INDENTURE; DEFEASANCE.................................................................70
Section 9.1. Discharge of Indenture........................................................................70
Section 9.2. Legal Defeasance..............................................................................71
Section 9.3. Covenant Defeasance...........................................................................71
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance.........................................72
Section 9.5. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other
Miscellaneous Provisions..................................................................73
Section 9.6. Reinstatement.................................................................................74
Section 9.7. Moneys Held by Paying Agent...................................................................74
Section 9.8. Moneys Held by Trustee........................................................................74
ARTICLE X. MISCELLANEOUS.......................................................................................75
Section 10.1. Trust Indenture Act Controls..................................................................75
Section 10.2. Notices.......................................................................................75
Section 10.3. Communications by Holders with Other Holders..................................................76
Section 10.4. Certificate and Opinion as to Conditions Precedent............................................76
Section 10.5. Statements Required in Certificate and Opinion................................................76
Section 10.6. When Treasury Notes Disregarded...............................................................77
Section 10.7. Rules by Trustee and Agents...................................................................77
Section 10.8. Business Days; Legal Holidays.................................................................77
Section 10.9. Governing Law.................................................................................78
Section 10.10. No Adverse Interpretation of Other Agreements.................................................78
Section 10.11. No Recourse Against Others....................................................................78
Section 10.12. Successors....................................................................................79
Section 10.13. Multiple Counterparts.........................................................................79
Section 10.14. Qualification of Indenture....................................................................79
Section 10.15. Table of Contents, Headings, etc..............................................................79
Section 10.16. Separability..................................................................................79
</TABLE>
EXHIBIT A FORM OF NOTE
EXHIBIT B-1 FORM OF NON-U.S. BENEFICIAL OWNERSHIP CERTIFICATION BY
EUROCLEAR AND CEDELBANK
EXHIBIT B-2 FORM OF NON-U.S. BENEFICIAL OWNERSHIP CERTIFICATION
BY MEMBER ORGANIZATION
EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QIB
EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFER PURSUANT TO REGULATION S
EXHIBIT E FORM OF RULE 144 CERTIFICATION
iii
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
<S> <C>
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.8; 7.10
(b)(1) 7.10
(b)(9) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
(c) N.A.
312 (a) 2.5
(b) 10.3
(c) 10.3
313 (a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6; 10.2
(d) 7.6
314 (a) 4.2; 4.4; 10.2
(b) N.A.
(c)(1) 10.4; 10.5
(c)(2) 10.4; 10.5
(c)(3) N.A.
(d) N.A.
(e) 10.5
(f) N.A.
315 (a) 7.1; 7.2
(b) 7.5; 10.2
(c) 7.1
(d) 6.5; 7.1; 7.2
(e) 6.11
316 (a)(last sentence) 10.6
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
(c) 8.4
317 (a)(1) 6.8
(a)(2) 6.9
(b) 7.12
318 (a) 10.1
N.A. means Not Applicable
</TABLE>
- ---------
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
iv
<PAGE>
INDENTURE, dated as of August 24, 1999, between LaBranche & Co
Inc., a Delaware corporation, as Issuer (the "COMPANY"), and Firstar Bank, N.A.,
as Trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's 9
1/2% Senior Notes due 2004 (the "NOTES").
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
Section 1.1. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
the Restricted Subsidiaries or assumed by the Company or any Restricted
Subsidiary in connection with the acquisition of assets from such Person and in
each case whether or not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
or such acquisition, merger or consolidation.
"AFFILIATE" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative of the foregoing.
"AGENT" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"ANNUAL INCENTIVE PLAN" means the LaBranche & Co Inc. Annual
Incentive Plan as in effect on the Issue Date or as amended from time to time as
approved by majority of the disinterested members of the Board of Directors (or
a majority of the disinterested members of a committee thereof).
"ASSET ACQUISITION" means:
(a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or shall be merged with or into the Company or any
Restricted Subsidiary, or
(b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary) that
constitute all or substantially all of the assets of such Person or comprises
any division or line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of business.
<PAGE>
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, lease, assignment or other transfer (other than the granting of a
Lien in accordance with this Indenture) for value by the Company or any of the
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Restricted Subsidiary of:
(a) any Capital Stock of any Restricted Subsidiary; or
(b) any other property or assets (excluding Capital Stock) of
the Company or any Restricted Subsidiary;
provided, however, that "Asset Sale" shall not include:
(i) a transaction or series of related transactions
for which the Company or the Restricted Subsidiaries receive aggregate
consideration of less than $2 million;
(ii) the sale, lease, conveyance, disposition or
other transfer of all or substantially all of the assets of the Company as
permitted under Section 5.1 hereof;
(iii) any Restricted Payment made in accordance with
the covenant described under Section 4.7 hereof;
(iv) the sale or lending of Investment Securities in
the ordinary course of business of the Company and its Restricted Subsidiaries;
(v) Sale and Leaseback Transactions involving up to
$15.0 million in the aggregate after the Issue Date; or
(vi) the disposition of obsolete or worn-out
equipment or entering into operating leases for real property or equipment or
subleases in respect thereof, in each case in the ordinary course of business.
"BANKRUPTCY CUSTODIAN" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy
of a resolution certified by the secretary or an assistant secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
2
<PAGE>
"CAPITAL STOCK" means:
(a) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person; and
(b) with respect to any Person that is not a corporation,
any and all partnership, limited liability company interests or other equity
interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means:
(a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof;
(b) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within twelve months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's.
(c) commercial paper maturing no more than one year from
the date of creation thereof and, at the time of acquisition, having a rating of
at least A-1 from S&P or at least P-l from Moody's;
(d) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than
$500,000,000;
(e) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (a)
entered into with any bank meeting the qualifications specified in clause (d)
above; and
(f) investments in money market funds that invest
substantially all their assets in securities of the types described in clauses
(a) through (e) above.
"CEDELBANK" means Cedelbank, a societe anonyme, or its
successor in such capacity.
3
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"CERTIFICATED NOTE" means any Note issued in fully-registered
certificated form (other than a Global Note), which shall be substantially in
the form of EXHIBIT A hereto, with appropriate legends as specified in Section
2.7 and EXHIBIT A hereto.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events:
(a) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company (determined on a consolidated basis) to any Person or
group of related Persons for purposes of Section 13(d) of the Exchange Act (a
"GROUP") (whether or not otherwise in compliance with the provisions of this
Indenture);
(b) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Indenture);
(c) any Person or Group, other than the Permitted
Holders, becomes the beneficial owner (as defined by Section 13(d) of the
Exchange Act), directly or indirectly, of more than 35% of the total voting
power of the Capital Stock of the Company, and the Permitted Holders
beneficially own, directly or indirectly in the aggregate, a lesser percentage
of the total voting power of the Capital Stock of the Company than such Person
or Group and do not have the right or ability by voting power, contract, or
otherwise to elect or designate for election a majority of the Board of
Directors (or any analogous governing body) of the Company; or
(d) the replacement of a majority of the Board of
Directors of the Company over a consecutive 24-month period from the directors
who constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company, then still in office, who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"CHANGE OF CONTROL OFFER" has the meaning set forth in the
definition of "Change of Control Offer to Purchase".
"CHANGE OF CONTROL OFFER TO PURCHASE" means a written notice
(the "CHANGE OF CONTROL OFFER") sent by first class mail, postage prepaid, to
each Holder at his address appearing in the security register on the date of the
Change of Control Offer offering to purchase the Notes held by such Holder at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest, if any, to the Purchase Date (as defined below) (the "CHANGE OF
CONTROL PURCHASE PRICE"). Unless otherwise required by applicable law, the
Change of Control Offer shall specify an expiration date (the "EXPIRATION DATE")
of the Offer to Purchase which shall be, subject to any contrary requirements of
applicable law, not less than 30 days or more than 60 days after the date of
mailing of such Change of Control Offer and a settlement date (the "CHANGE OF
CONTROL PURCHASE DATE") for the purchase of Notes which must be within three
business days after the Expiration Date. The Change of Control Offer shall
contain all
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instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer to Purchase. The Change of Control Offer
shall also state:
(1) that the Holder may tender all or any portion of the
Notes registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal amount;
(2) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(3) that, unless the Company defaults in making such
purchase, any Note accepted for purchase pursuant to the Change of Control Offer
to Purchase will, after the Change of Control Purchase Date, cease to accrue
interest but that any Note not tendered or tendered but not purchased by the
Company pursuant to the Change of Control Offer to Purchase will continue to
accrue interest at the same rate;
(4) that, on the Change of Control Purchase Date, the
Change of Control Purchase Price will become due and payable upon each Note
accepted for payment pursuant to the Change of Control Offer to Purchase;
(5) that each Holder electing to tender a Note pursuant
to the Change of Control Offer to Purchase will be required to surrender such
note at the place or places set forth in the Change of Control Offer prior to
the close of business on the Expiration Date (such Note being accompanied by a
written instrument of transfer in the form provided in the form of Notes
attached as EXHIBIT A hereto duly executed by the Holder thereof or his attorney
duly authorized in writing);
(6) that Holders will be entitled to withdraw all or any
portion of Notes tendered if the Company (or its paying agent) receives, not
later than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
aggregate principal amount of the Notes the Holder tendered, the certificate
number of the Note the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender; and
(7) that, in the case of any Holder whose Note is
tendered only in part, the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder,
in the aggregate principal amount equal to and in exchange for the untendered
portion of the aggregate principal amount of the Notes so tendered.
Any Change of Control Offer to Purchase shall be governed by
and effected in accordance with the Offer for such Offer to Purchase.
"CHANGE OF CONTROL PURCHASE DATE" has the meaning set forth in
the definition of "Change of Control Offer to Purchase."
"CHANGE OF CONTROL PURCHASE PRICE" has the meaning set forth
in the definition of "Change of Control Offer to Purchase."
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION NET CAPITAL" means, at any time, the "net capital"
of LaBranche computed in accordance with Rule 15c3-1.
"COMMISSION REQUIRED NET CAPITAL" means, at any time, the
minimum amount to which Commission Net Capital must be equal pursuant to Rule
15c3-1 in order to remain in compliance with all provisions thereof.
"COMMON STOCK" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"COMPANY" means the party named as such in the first paragraph
of this Indenture until a successor(s) replaces such party pursuant to Article V
of this Indenture and, thereafter, means the successor.
"COMPANY ORDER" means any written request signed in the name
of the Company by an Officer of the Company.
"CONSOLIDATED EBITDA" means, with respect to the Company, for
any period, the sum (without duplication) of:
(a) Consolidated Net Income; and
(b) to the extent Consolidated Net Income has been reduced
thereby;
(i) all income taxes of the Company and the
Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to
extraordinary or nonrecurring gains or taxes attributable to
Asset Sales outside the ordinary course of business);
(ii) Consolidated Interest Expense; and
(iii) Consolidated Non-cash Charges, less any
non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for the
Company and the Restricted Subsidiaries in accordance with
GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect
to the Company, the ratio of Consolidated EBITDA of the Company during the four
full fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "TRANSACTION DATE") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to:
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(a) the Incurrence or repayment of any Indebtedness of
the Company or any of the Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
Incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the Incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period;
(b) any Asset Sales, any disposition of assets excluded
from the definition of Asset Sale pursuant to (b)(iii) thereof or any Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of the Company or one of the
Restricted Subsidiaries (including any Person that becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA attributable to the assets which are the subject of the
Asset Acquisition or Asset Sale or other disposition during the Four Quarter
Period, provided that such Consolidated EBITDA shall be included only to the
extent includible pursuant to the definition of "CONSOLIDATED NET INCOME")
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date as if
such Asset Sale, other disposition or Asset Acquisition (including the
Incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If the Company or any of the
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the Incurrence of such
guaranteed Indebtedness as if the Company or any Restricted Subsidiary had
directly incurred or otherwise assumed such guaranteed Indebtedness; and
(c) the Reorganization.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of the "Consolidated Fixed
Charge Coverage Ratio":
(i) interest on outstanding Indebtedness determined
on a fluctuating basis as of the Transaction Date and which
will continue to be so determined thereafter shall be deemed
to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction
Date;
(ii) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined
at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will
be deemed to have been in effect during the Four Quarter
Period; and
(iii) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent
such interest is covered by agreements relating to Interest
Swap Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such
agreements.
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"CONSOLIDATED FIXED CHARGES" means, with respect to the
Company for any period, the sum, without duplication, of:
(a) Consolidated Interest Expense; plus
(b) the product of:
(i) the amount of all dividend payments on any series
of Preferred Stock of the Company (other than dividends paid
in Qualified Capital Stock) paid, accrued or scheduled to be
paid or accrued during such period times; and
(ii) a fraction, the numerator of which is one and
the denominator of which is one minus the then current
effective consolidated federal, state and local income tax
rate of the Company, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the
Company for any period, the sum of, without duplication:
(a) the aggregate of the interest expense of the Company
and the Restricted Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including without limitation, whether or not
constituting interest expense in accordance with GAAP:
(i) any amortization of debt discount,
(ii) the net costs under Interest Swap Obligations,
(iii) all capitalized interest and
(iv) the interest portion of any deferred payment
obligation; and
(b) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the Company
and the Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to the Company,
for any period, the aggregate net income (or loss) of the Company and the
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom:
(a) after-tax gains (but not losses) from Asset Sales or
reserves relating thereto;
(b) extraordinary gains or losses;
(c) for purposes of calculating Consolidated Net Income
pursuant to clause (C) of paragraph (a) of Section 4.7 hereof only, the net
income of any Person acquired in a
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"pooling of interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary or is merged or consolidated with the Company or any
Restricted Subsidiary;
(d) the net income (but not loss) of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise;
(e) any increase (but not decrease) in net income attributable
to minority interests in Restricted Subsidiaries;
(f) the net income of any Person, other than a Restricted
Subsidiary, except to the extent of cash dividends or distributions paid to the
Company or to a Restricted Subsidiary by such Person;
(g) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date;
(h) in the case of a successor to the Company by
consolidation or merger or as a transferee of the Company's assets, for purposes
of calculating Consolidated Net Income pursuant to clause (C) of paragraph (a)
of Section 4.7 hereof only, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets; and
(i) the cumulative effect of changes in accounting principles.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the
Company, for any period, the aggregate depreciation, amortization and other
non-cash expenses of the Company and the Restricted Subsidiaries reducing
Consolidated Net Income of the Company for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charge that
requires an accrual of or a reserve for cash charges for any future period).
"CORPORATE TRUST OFFICE" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is:
Firstar Bank, N.A., Corporate Trust Services, 425 Walnut Street, 6th Floor ML
5125 Cincinnati, OH 45202.
"CREDIT AGREEMENT" means the Credit Agreement between
LaBranche and The Bank of New York, dated June 26, 1998, as amended.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
currency values.
"CUSTODIAN" means the custodian with respect to any Global
Note appointed by the Depository, or any successor Person thereto, and shall
initially be the Trustee.
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"DAMAGE AMOUNT" means the amount of additional interest to be
paid as liquidated damages by the Company to each Holder of Notes under certain
circumstances in accordance with the terms of the Registration Rights Agreement.
"DEFAULT" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice of both would be, an Event
of Default.
"DEPOSITORY" means The Depository Trust Company, its nominees
and their respective successors and assigns, or such other depositary
institution hereinafter appointed by the Company that is a clearing agency
registered under the Exchange Act.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital
Stock that, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is mandatorily exchangeable for Indebtedness, or is
redeemable, or exchangeable for Indebtedness, at the sole option of the holder
thereof on or prior to the 91st day after the final maturity date of the Notes.
"DISTRIBUTION COMPLIANCE PERIOD" means, in respect of any
Regulation S Global Note, the 40 consecutive days beginning on and including the
later of (a) the day on which any Notes represented thereby are offered to
persons other than distributors (as defined in Regulation S under the Securities
Act) pursuant to Regulation S and (b) the issue date for such Notes.
"EQUITY INCENTIVE PLAN" means the LaBranche & Co. Inc. Equity
Incentive Plan as in effect on the Issue Date or as amended from time to time as
approved by a majority of the disinterested members of the Board of Directors
(or a majority of the disinterested members of a committee thereof).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System, or its successor in such
capacity.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto, and the rules and
regulations of the SEC promulgated thereunder.
"EXCHANGE NOTES" means Notes issued in a Registered Exchange
Offer in exchange for a like principal amount of Notes originally issued
pursuant to an exemption from registration under the Securities Act, and
replacement Notes issued therefor in accordance with this Indenture.
"EXPIRATION DATE" has the meaning set forth in the definition
of "Change of Control Offer to Purchase."
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"FAIR MARKET VALUE" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"FOUR QUARTER PERIOD" has the meaning set forth in the
definition of "Consolidated Fixed Charge Coverage Ratio."
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accounts and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"GLOBAL NOTES" means any Note issued in fully-registered
certificated form to the Depository (or its nominee), as depositary for the
beneficial owners thereof, which shall be substantially in the form of EXHIBIT A
hereto, with appropriate legends as specified in Section 2.7 hereof and EXHIBIT
A hereto.
"HOLDER" means a Person in whose name a Note is registered in
the security register.
"INCUR" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable,
contingently or otherwise, in respect of such Indebtedness or other obligation
on the balance sheet of such Person. Indebtedness of any Acquired Person or any
of its Subsidiaries existing at the time such Acquired Person becomes a
Restricted Subsidiary (or is merged into or consolidated with the Company or any
Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Restricted Subsidiary (or being merged into or consolidated with the
Company or any Restricted Subsidiary), shall be deemed Incurred at the time any
such Acquired Person becomes a Restricted Subsidiary or merges into or
consolidates with the Company or any Restricted Subsidiary.
"INDEBTEDNESS" means, with respect to any Person, without
duplication:
(a) all Obligations of such Person for borrowed money;
(b) all Obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(c) all Capitalized Lease Obligations of such Person;
(d) all Obligations of such Person issued or assumed as
the deferred purchase price of property, all conditional sale obligations and
all Obligations under any title retention
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<PAGE>
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted);
(e) all letters of credit, banker's acceptances or similar
credit transactions (including any Obligations for reimbursement in respect
thereof);
(f) guarantees and other contingent obligations in
respect of Indebtedness of any other Person referred to in clauses (a) through
(e) above and clause (h) below;
(g) all Obligations of any other Person of the type
referred to in clauses (a) through (e) that are secured by any Lien on any
property or asset of such Person, the amount of such Obligation being deemed to
be the lesser of the fair market value of such property or asset or the amount
of the Obligation so secured;
(h) all Obligations under Currency Agreements and Interest
Swap Obligations of such Person; and
(i) all Disqualified Capital Stock issued by such Person
with the amount of Indebtedness represented by such Disqualified Capital Stock
being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any.
Notwithstanding anything to the contrary herein, "Indebtedness" shall not
include any overnight borrowings by the Company or any Restricted Subsidiary
Incurred in connection with the lending of Investment Securities which does not
constitute indebtedness under GAAP.
For purposes hereof, the "MAXIMUM FIXED REPURCHASE PRICE" of
any Disqualified Capital Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock as
if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the Company of such
Disqualified Capital Stock.
"INDENTURE" means this Indenture as amended, restated or
supplemented from time to time.
"INDEPENDENT FINANCIAL ADVISOR" means a qualified accounting,
appraisal or investment banking firm of national standing that does not, and
whose directors, officers and employees and Affiliates do not, have a direct or
indirect financial interest in the Company.
"INTEREST SWAP OBLIGATIONS" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional
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<PAGE>
amount and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"INVESTMENT" means, with respect to any Person:
(a) any direct or indirect advance, loan or other
extension of credit (including, without limitation, a guarantee) or capital
contribution to any other Person (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others); or
(b) any purchase or acquisition by such Person of any
Capital Stock (or warrants, rights or options to purchase Capital Stock) bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
any other Person.
"INVESTMENT" shall exclude extensions of trade credit by the
Company and the Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
(the "REFERENT SUBSIDIARY") such that, after giving effect to any such sale or
disposition the Referent Subsidiary shall cease to be a Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Capital Stock of the
Referent Subsidiary not sold or disposed of.
"INVESTMENT SECURITIES" means marketable securities of a
Person (other than an Affiliate or joint venture of the Company or any
Restricted Subsidiary) acquired by the Company or any of its Restricted
Subsidiaries in the ordinary course of its specialist or related businesses.
"ISSUE DATE" means August 24, 1999.
"LABRANCHE" means LaBranche & Co., a New York limited
partnership, or any other Wholly-Owned Subsidiary registered as a broker-dealer
under the Exchange Act which succeeds to the business of LaBranche & Co.
"LIEN" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature hereof and any
agreement to give any security interest).
"MAKE-WHOLE PREMIUM" means, with respect to any Note on any
Redemption Date, the greater of (i) 1.0% of the principal amount of such Note
and (ii) the excess, if any, of (A) the present value at such time of the
payment of the outstanding principal amount of such Note on the Maturity Date
therefor and the remaining scheduled payments of interest on such Note to the
maturity date therefor, computed using a discount rate equal to the Treasury
Rate plus .50% per annum, over (B) the outstanding principal amount of such
Note.
"MATURITY Date" means August 15, 2004.
"MOODY'S" means Moody's Investors Service, Inc. and its
successors.
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"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest), received by the Company or any of the Restricted Subsidiaries from
such Asset Sale net of:
(a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, sales commissions and relocation expenses);
(b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements;
(c) repayments of Indebtedness secured by the property or
assets subject to such Asset Sale that is required to be repaid in connection
with such Asset Sale; and
(d) appropriate amounts to be determined by the Company
or any Restricted Subsidiary, as the case may be, as a reserve, in accordance
with GAAP, against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"NOTES" means any of the Company's 9 1/2% Senior Notes due
2004 originally issued on the Issue Date, and any replacement Notes, Private
Exchange Notes and Exchange Notes issued therefor in accordance with this
Indenture.
"NYSE" means the New York Stock Exchange, Inc. or any
successor operator of the New York Stock Exchange.
"NYSE NET CAPITAL" means, at any time, the "net capital" of
LaBranche computed in accordance with Rule 326(a) of the NYSE (or any successor
provision).
"NYSE REQUIRED NET CAPITAL" means, at any time, the minimum
amount of NYSE Net Capital necessary at such time in order to permit LaBranche
to "expand its business" pursuant to Rule 326(a) of the NYSE (or any successor
provision).
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any indebtedness.
"OFFERING" means the offering of the Notes as described in the
Offering Memorandum.
"OFFERING MEMORANDUM" means the Offering Memorandum dated
August , 1999, pursuant to which the Notes were offered.
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<PAGE>
"OFFICER" means, (i) with respect to the Company, the Chairman
and the Chief Executive Officer, any Vice President, the chief financial
officer, the controller, the chief accounting officer, the treasurer or the
secretary of the Company, and (ii) with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
chief financial officer, the controller, the chief accounting officer, the
treasurer or secretary of such Person (or, in the case of a Person that is a
partnership or a limited liability company, a general partner or managing member
of such Person in such capacity, as the case may be), and (iii) with respect to
the Trustee, a Trust Officer.
"OFFICERS' CERTIFICATE" means, (i) with respect to the
Company, a certificate signed by the Chairman and the Chief Executive Officer or
any Vice President and the chief financial officer, the controller or the chief
accounting officer of the Company and (ii) with respect to any Person, a
certificate signed by the Chairman of the Board, Chief Executive Officer, or
President and the chief financial officer, the controller or the chief
accounting officer, that shall comply with applicable provisions of this
Indenture, and (iii) with respect to the Trustee, a certificate signed by a
Trust Officer.
"OPINION OF COUNSEL" means a written opinion from legal
counsel, who may be an employee of the Company, which counsel is reasonably
acceptable to the Trustee.
"PERMITTED HOLDERS" means:
(a) individually or a combination of any of the following
individuals: George M.L. LaBranche, IV, James G. Gallagher, Alfred O. Hayward,
Jr., Vincent J. Flaherty or Michael J. Naughton;
(b) a spouse of any of the Persons referred to in clause (a)
or any of his or her lineal descendants;
(c) the trustee(s) of any trust established solely for the
benefit of Persons referred to in clause (a) or (b) above;
(d) any organization to which contributions by any of the
Persons referred to in clause (a), (b) or (c) above are deductible for federal
income, estate or gift tax purposes or any split-interest trust described in
Section 4947 of the Internal Revenue Code of 1986, as amended, provided that, in
each case, such Person is a trustee or a member of the board of directors,
trustees or other governing body or group having the ultimate authority, INTER
ALIA, to vote, dispose or direct the voting or distribution of Capital Stock of
the Company held by such Person; and
(e) a corporation of which a majority of the voting power
of its outstanding Capital Stock is beneficially owned by, or a partnership or
limited liability company of which a majority of the partnership or limited
liability company interests entitled to vote and participate in the management
of the partnership or limited liability company are beneficially owned by, a
Person described in clause (a), (b), (c) or (d) of this definition.
15
<PAGE>
"PERMITTED INDEBTEDNESS" means, without duplication, each of
the following:
(a) Indebtedness under the Notes (including Exchange Notes
issued therefor);
(b) Indebtedness of the Company and the Restricted
Subsidiaries Incurred pursuant to working capital facilities (including, without
limitation, the Credit Agreement) in an amount not to exceed 70% of the market
value of the Investment Securities securing such facilities constituting equity
securities listed on the NYSE or the NASDAQ National Market System, less the
amount of any permanent prepayments or reductions of commitments in respect of
any such Indebtedness made pursuant to Section 4.8 hereof;
(c) Indebtedness of the Company and the Restricted
Subsidiaries outstanding on the Issue Date (excluding Indebtedness under the
Credit Agreement but including Indebtedness owed to Mill Bridge, Inc. and
Kathryn Gallagher and other Indebtedness Incurred on the Issue Date pursuant to
the Reorganization) reduced by the amount of any scheduled amortization payments
or mandatory prepayments when actually paid or permanent reductions thereon;
(d) Permitted Subordinated Indebtedness Incurred after the
Issue Date not to exceed $50.0 million at any one time outstanding;
(e) Interest Swap Obligations of the Company covering
Indebtedness of the Company and Interest Swap Obligations of any Restricted
Subsidiary covering Indebtedness of such Restricted Subsidiary; PROVIDED,
HOWEVER, that such Interest Swap Obligations are entered into to protect the
Company and the Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture to the extent the
notional principal amount of such Interest Swap Obligations does not exceed the
principal amount of the indebtedness to which such Interest Swap Obligations
relates;
(f) Indebtedness under Currency Agreements; PROVIDED that
in the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(g) Indebtedness of a Restricted Subsidiary to the
Company or another Restricted Subsidiary for so long as the Indebtedness is held
by the Company or a Restricted Subsidiary, in each case subject to no Lien held
by a Person other than the Company or a Restricted Subsidiary; provided that if
as of any date any Person other than the Company or a Restricted Subsidiary owns
or holds any such Indebtedness or holds a Lien in respect of such Indebtedness,
such Indebtedness shall be deemed to be Incurred on such date and not constitute
Permitted Indebtedness under this clause (g);
(h) Indebtedness of the Company to a Restricted Subsidiary,
PROVIDED that:
(i) any Indebtedness of the Company to any
Restricted Subsidiary is subordinate in right of payment to
the Notes; and
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<PAGE>
(ii) if as of any date any Person other than a
Restricted Subsidiary owns or holds any such Indebtedness or
any Person holds a Lien in respect of such Indebtedness, such
date shall be deemed the date of Incurrence of Indebtedness
not constituting Permitted Indebtedness by the Company;
(i) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar installment
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that
such indebtedness is extinguished within five business days of Incurrence;
(j) Indebtedness of the Company or any of the Restricted
Subsidiaries represented by letters of credit for the account of the Company or
such Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation clams, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(k) Refinancing Indebtedness;
(l) Purchase Money Indebtedness and Capitalized Lease
Obligations (and any Indebtedness incurred to Refinance such Purchase Money
Indebtedness or Capitalized Lease Obligations) of the Company or any Restricted
Subsidiary not to exceed $20.0 million at any one time outstanding; and
(m) additional Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount not to exceed $15.0
million at any one time outstanding.
"PERMITTED INVESTMENTS" means:
(a) Investments by the Company or any Restricted
Subsidiary in any Person that is or will become immediately after such
Investment a Restricted Subsidiary or that will merge or consolidate into the
Company or a Restricted Subsidiary;
(b) Investments in the Company by any Restricted Subsidiary;
PROVIDED that any Indebtedness evidencing such Investment is unsecured and
subordinate to the Notes;
(c) Investments in cash and Cash Equivalents;
(d) loans and advances to employees, officers and
directors of the Company and the Restricted Subsidiaries in the ordinary course
of business for bona fide business purposes not in excess of $5.0 million at any
time outstanding in the aggregate;
(e) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or a Restricted
Subsidiary's businesses and otherwise in compliance with this Indenture;
(f) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
17
<PAGE>
(g) Investments made by the Company or the Restricted
Subsidiaries as a result of noncash consideration received in connection with an
Asset Sale made in compliance with Section 4.8 hereof;
(h) Investments in Investment Securities (including
borrowings or loans of Investment Securities) in the ordinary course of business
of the Company and its Restricted Subsidiaries; or
(i) additional Investments not to exceed $10.0 million at any
one time outstanding in the aggregate.
"PERMITTED LIENS" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or
claims either:
(i) not delinquent; or
(ii) contested in good faith by appropriate
proceedings and as to which the Company or any Restricted
Subsidiary shall have set aside on its books such reserves as
may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law or pursuant to customary reservations or retentions of title, in
each case arising in the ordinary course of business for sums not yet delinquent
or being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in respect
thereof;
(c) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien securing
letters of credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default
so long as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions, minor
defects or irregularities in title and other similar charges or encumbrances in
respect of real property not impairing in any material respect the ordinary
conduct of the business of the Company or any Restricted Subsidiary;
18
<PAGE>
(f) any interest or title of a lessor under any
Capitalized Lease Obligation; provided that such Liens do not extend to any
property or assets which is not leased property subject to such Capitalized
Lease Obligation;
(g) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods;
(h) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset and
set-off;
(j) leases or subleases in respect of real property or
equipment granted to others not interfering in any material respect with the
ordinary conduct of the business of the Company or any Restricted Subsidiary;
(k) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; and
(l) normal and customary rights of setoff upon deposits
of cash in favor of banks or other depositary institutions.
"PERMITTED SUBORDINATED INDEBTEDNESS" means Indebtedness of
the Company Incurred at a time when no Default or Event of Default has occurred
and is continuing:
(a) which matures at least 91 days after the final
maturity date for the Notes and is not prior to that time (i) mandatorily
redeemable, or (ii) exchangeable for Indebtedness other than Permitted
Subordinated Indebtedness, pursuant to a sinking fund obligation or otherwise or
upon the occurrence of any event;
(b) which has a Weighted Average Life greater than that of the
Notes;
(c) which is subordinate in right of payment to the Notes
with payment blockage rights in favor of the Holders of the Notes as set forth
in this Indenture; and
(d) the proceeds of which are loaned by the Company to
LaBranche pursuant to clause (g) of the definition of "Permitted Indebtedness"
and a subordinated loan agreement (as defined in Appendix D to Rule 15c3-1) for
use by LaBranche for net capital purposes and properly accounted for by
LaBranche as Commission Net Capital and NYSE Net Capital; provided that any
subordination of the loan by the Company will apply only to the extent required
to permit the loan to qualify as Commission Net Capital and NYSE Net Capital.
19
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"PERSON" means an individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint venture,
or a governmental agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"PRIVATE EXCHANGE NOTES" shall have the meaning assigned to it
in the Registration Rights Agreement.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the
Company or any Restricted Subsidiary incurred for the purpose of financing all
or any part of the purchase price or the cost of construction or improvement of
any property, provided that the aggregate principal amount of such Indebtedness
does not exceed such purchase price or cost.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the
meaning set forth in Rule 144A.
"REDEMPTION DATE" when used with respect to any Note to be
redeemed, means the date on which it is to be redeemed pursuant to this
Indenture.
"REFINANCE" means in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the
Company or any Restricted Subsidiary of Indebtedness incurred in accordance with
Section 4.6 hereof (other than Permitted Indebtedness) or clause (a) or (c) of
the definition of "Permitted Indebtedness," in each case that does not:
(a) result in an increase in the aggregate principal
amount of any Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium reasonably necessary to Refinance
such Indebtedness and plus the amount of reasonable expenses incurred by the
Company in connection with such Refinancing); or
(b) create Indebtedness with:
(i) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced, or
(ii) a final maturity earlier than the final maturity
of the Indebtedness being Refinanced; provided that if such
Indebtedness being Refinanced is
20
<PAGE>
Indebtedness of the Company, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company.
"REGISTERED EXCHANGE OFFER" means an exchange offer by the
Company registered under the Securities Act pursuant to which Notes originally
issued pursuant to an exemption from registration under the Securities Act are
exchanged for Notes of like principal amount not bearing the private placement
legend.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the Issue Date by and among the Company and Salomon Smith
Barney Inc. and Donaldson, Lufkin & Jenrette Securities Corporation.
"REGISTRATION STATEMENT" means an effective shelf registration
statement under the Securities Act that registers the resale by Holders (or
beneficial owners) of Notes (or beneficial interests therein) originally issued
pursuant to an exemption from registration under the Securities Act.
"REGULATION S" means Regulation S under the Securities Act (or
any successor regulation thereto), as it may be amended from time to time.
"REORGANIZATION" means, as described in the Offering
Memorandum, the creation of the Company as a holding company for LaB Investing
Co. L.L.C. and LaBranche, the acquisition by the Company on the Issue Date of
all of the limited partnership interests in LaBranche and the entire membership
interests in LaB Investing Co. L.L.C., the issuance by the Company of the Notes
and the Incurrence by the Company and LaBranche of other Indebtedness as
described in the Offering Memorandum.
"REPLACEMENT ASSETS" means assets and property that will be
used in the business of the Company and/or its Restricted Subsidiaries
(including Capital Stock of a Person that becomes a Wholly Owned Restricted
Subsidiary).
"RESALE RESTRICTION TERMINATION DATE" means for any Restricted
Note (or beneficial interest therein) other than a Regulation S Temporary Global
Note (which shall have no Resale Restriction Termination Date), two years (or
such other period specified in Rule 144(k)) from the Issue Date.
"RESTRICTED NOTE" means any Note (or beneficial interest
therein) other than the Regulation S Permanent Global Note or any Exchange Note,
until such time as:
(a) such Note (or beneficial interest therein) has been
transferred pursuant to a Registration Statement;
(b) the Resale Restriction Termination Date therefor has
passed; or
(c) the Private Placement Legend therefor has otherwise
been removed pursuant to Section 2.8(d) or, in the case of a beneficial interest
in a Global Note, such beneficial interest has been exchanged for an interest in
a Global Note not bearing a Private Placement Legend.
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<PAGE>
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company
that has not been designated by the Board of Directors of the Company, by a
Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary
pursuant to and in compliance with Section 4.13 hereof. Any such Designation may
be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"RULE 15c3-1" means Rule 15c3-1 under the Exchange Act (or any
successor provision).
"RULE 144" means Rule 144 under the Securities Act (or any
successor rule).
"RULE 144A" means Rule 144A under the Securities Act (or any
successor rule).
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SEC" means the Securities and Exchange Commission, as from
time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any successor statute or statues thereto, and the rules and regulations of
the SEC promulgated thereunder.
"SIPA" means the Securities Investor Protection Act of 1970,
as amended, or any successor statute or statutes thereto, and the rules and
regulations of promulgated thereunder.
"SIPC" means the Securities Investor Protection Corporation
and any successor organization discharging the responsibilities of the
Securities Investor Protection Corporation.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person,
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act as in effect on the Issue Date, except that all references to 10%
in Section 1.02(w) shall be changed to 5%.
"S&P" means Standard & Poor's Ratings Group and its
successors.
"STATED MATURITY" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
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<PAGE>
"SUBSIDIARY" with respect to any Person, means:
(a) any corporation of which the outstanding Capital
Stock having at least a majority of the votes entitled to be cast in the
election of directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by such Person; or
(b) any other Person of which at least a majority of the
voting interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"TIA" or "TRUST INDENTURE ACT" means the Trust Indenture Act
of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this
Indenture (except as provided in Section 8.3 hereof).
"TRANSACTION DATE" has the meaning set forth in the definition
of "Consolidated Fixed Charge Coverage Ratio."
"TREASURY RATE" means the yield to maturity at the time of
computation of U.S. Treasury securities with a constant maturity, as compiled in
the most recent Federal Reserve Release H.15 (519) which has become publicly
available at least two business days prior to the relevant Redemption Date (or,
if such statistical release is no longer published, any publicly available
source of similar market data), closest to the period from such Redemption Date
to the maturity date for the Notes, provided that, if the period from such
Redemption Date to the maturity date is not equal to the constant maturity of a
U.S. Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of one year) from the weekly average yields of U.S. Treasury
securities for which such yields are given, except that if the period from such
Redemption Date to the maturity date is less than one year, the weekly average
yield on actually traded U.S. Treasury securities adjusted to a constant
maturity of one year shall be used.
"TRUST OFFICER" when used with respect to the Trustee, means
any officer or assistant officer of the Trustee assigned to the corporate trust
administration department or similar department performing corporate trust work
of the Trustee or any successor to such department or, in the case of a
successor Trustee, any officer of such successor Trustee performing corporate
trust functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.13 hereof. Any
such designation may be revoked by a Board Resolution of the Company delivered
to the Trustee, subject to the provisions of Section 4.13 hereof.
"U.S. GOVERNMENT OBLIGATIONS" means (i) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (ii)
23
<PAGE>
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the Company thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government Obligation held
by such custodian for the account of the holder of such depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or a specific payment of principal or interest on any such
U.S. Government Obligation held by such custodian for the account of the holder
of such depository receipt.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to
any Indebtedness at any date, the number of years obtained
dividing:
(a) the then outstanding aggregate principal amount of such
Indebtedness into
(b) the sum of the total of the products obtained by
multiplying:
(i) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect
thereof, by
(ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the
making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of the Company means any
Restricted Subsidiary of which all the outstanding voting securities (other than
in the case of a Subsidiary not organized under the laws of a State of the
United States, directors' qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable law) are owned by
the Company or any Wholly Owned Restricted Subsidiary.
Section 1.2. OTHER DEFINITIONS.
The definitions of the following terms may be found in the
Sections indicated as follows:
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
<S> <C>
"AFFILIATE TRANSACTION" .........................................4.12
"AGENT MEMBERS" ..................................................2.6
"AUTHENTICATING AGENT" ...........................................2.2
"BUSINESS DAY" ..................................................10.8
"COMPANY ORDER" ..................................................2.2
"COVENANT DEFEASANCE" ............................................9.3
"DEFAULTED INTEREST" .......................................EXHIBIT A
"DESIGNATION" ...................................................4.13
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
"DESIGNATION AMOUNT" ............................................4.13
"DISCHARGE" ......................................................9.1
"EVENT OF DEFAULT" ...............................................6.1
"LEGAL DEFEASANCE" ...............................................9.2
"LEGAL HOLIDAY" .................................................10.8
"NET PROCEEDS OFFER" .............................................4.8
"NET PROCEEDS OFFER AMOUNT" ......................................4.8
"NET PROCEEDS OFFER PAYMENT DATE" ................................4.8
"NET PROCEEDS OFFER TRIGGER DATE" ................................4.8
"NON-U.S. BENEFICIAL OWNERSHIP CERTIFICATION" ....................2.1
"NON-U.S. PERSON" ................................................2.8
"PAYING AGENT" ...................................................2.3
"PRIVATE PLACEMENT LEGEND" .......................................2.7
"REDEMPTION PRICE" ...............................................3.1
"REFERENCE DATE" .................................................4.7
"REGISTRAR" ......................................................2.3
"REGULATION S GLOBAL NOTE" .......................................2.1
"REGULATION S PERMANENT GLOBAL NOTE" .............................2.1
"REGULATION S TEMPORARY GLOBAL NOTE" .............................2.1
"REQUIRED FILING DATES" ..........................................4.2
"RESTRICTED PAYMENT" .............................................4.7
"REVOCATION" ....................................................4.13
"RULE 144A GLOBAL NOTE" ..........................................2.1
"SPECIAL RECORD DATE" ...........................................2.12
"SURVIVING ENTITY" ...............................................5.1
</TABLE>
Section 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITYHOLDER" means a Holder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee.
"OBLIGOR ON THE INDENTURE SECURITIES" means the Company or any
other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
25
<PAGE>
Section 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) words used herein implying any gender shall apply to every
gender;
(d) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
Subdivision, unless expressly stated otherwise; and
(e) the term "interest" shall include all additional
interest as provided in the Registration Rights Agreement for purposes of this
Indenture and the Notes.
ARTICLE II.
THE NOTES
Section 2.1. FORM AND DATING.
(a) The Notes are being originally offered and sold by
the Company pursuant to a purchase agreement, dated August 18, 1999 among the
Company, Salomon Smith Barney Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation. The Company may issue up to $100,000,000 aggregate principal amount
of the Notes as provided in this Indenture. The Notes will be issued in
fully-registered form without coupons, and only in denominations of $1,000 and
any integral multiple thereof. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of EXHIBIT A hereto.
(b) The terms and provisions of the Notes, the form of
which is in EXHIBIT A hereto, shall constitute, and are hereby expressly made, a
part of this Indenture, and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. Except as otherwise expressly
permitted in this Indenture, all Notes shall be identical in all respects.
Notwithstanding any differences among them, all Notes issued under this
Indenture shall vote and consent together on all matters as one class.
(c) The Notes may have notations, legends or endorsements
as specified in Section 2.7 or as otherwise required by law, stock exchange rule
or the Depository rule or usage. The Company and the Trustee shall approve the
form of the Notes and any notation, legend or endorsement on them. Each Note
shall be dated the date of its authentication.
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<PAGE>
(d) Notes originally offered and sold to QIBs in reliance
on Rule 144A will be issued on the issue date therefor in the form of a
permanent Global Note ("RULE 144A GLOBAL NOTES").
(e) Notes originally offered and sold outside the United
States of America in reliance on Regulation S will be issued on the issue date
therefor in the form of a temporary Global Note (a "REGULATION S TEMPORARY
GLOBAL NOTE"). An interest in a Regulation S Temporary Global Note will be
exchangeable for an interest in a permanent Global Note (a "REGULATION S
PERMANENT GLOBAL NOTE", and together with the Regulation S Temporary Global
Note, a "REGULATION S GLOBAL NOTE") on or after the expiration of the
Distribution Compliance Period upon the receipt by the Registrar of a
certificate in the form of EXHIBIT B-1 hereto (a "NON-U.S. BENEFICIAL OWNERSHIP
CERTIFICATION") to the effect that Euroclear or Cedelbank, as applicable, has
received a certificate in the form of EXHIBIT B-2 hereto, from the holder of a
beneficial interest in such Regulation S Temporary Global Note (or its agent) in
the principal amount to be exchanged. Upon receipt by the Registrar of a
Non-U.S. Beneficial Ownership Certification, (i) with respect to the first such
Non-U.S. Beneficial Ownership Certification, the Company will execute, and upon
Company Order the Trustee will authenticate and deliver to the Custodian, the
Regulation S Permanent Global Note and (ii) with respect to the first and each
subsequent Non-U.S. Beneficial Ownership Certification, the Registrar and the
Note Custodian shall exchange the interest in the Regulation S Temporary Global
Note covered by such Non-U.S. Beneficial Ownership Certification for an interest
of equal principal amount in the Regulation S Permanent Global Note. Upon any
exchange of an interest in a Regulation S Temporary Global Note for a comparable
interest in the Regulation S Permanent Global Note, the Registrar shall decrease
the Regulation S Temporary Global Note and increase the Regulation S Permanent
Global Note, in each case in an amount equal to the principal amount of Notes
covered by the applicable Non-U.S.
Beneficial Ownership Certification.
Section 2.2. EXECUTION AND AUTHENTICATION.
(a) The Chairman and Chief Executive Officer and the
chief financial officer shall sign the Notes for the Company by manual or
facsimile signature. If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
(b) A Note shall not be valid until an authorized
signatory of the Trustee manually authenticates the Note. The signature of the
Trustee on a Note shall be conclusive evidence that such Note has been duly and
validly authenticated and issued under this Indenture.
(c) At any time and from time to time after the execution
and delivery of this Indenture, the Trustee shall authenticate and make
available for delivery Notes, upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company (the "COMPANY ORDER"). A Company Order shall specify
the amount of the Notes to be authenticated and the date on which the original
issue of Notes is to be authenticated.
(d) The Trustee may appoint an agent (the "AUTHENTICATING
AGENT") reasonably acceptable to the Company to authenticate the Notes. Unless
limited by the terms of such
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appointment, any such Authenticating Agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by the Authenticating Agent.
(e) In event that the Company:
(i) shall be consolidated with or merged into any
other Person, or
(ii) shall convey, transfer, lease or otherwise
dispose of its properties and assets substantially as an
entirety to any Person,
and the Surviving Entity resulting from such consolidation, or surviving such
merger, or which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article V; then any of the Notes authenticated or
delivered prior to such transaction may, from time to time, at the request of
the Surviving Entity, be exchanged for other Notes executed in the name of the
Surviving Entity with such changes in phraseology and form as may be
appropriate, but otherwise identical to the Notes surrendered for such exchange
and of like principal amount; and the Trustee, upon Company Order of the
Surviving Entity, shall authenticate and deliver Notes as specified in such
order for the purpose of such exchange. If Notes shall at any time be
authenticated and delivered in any new name of a Surviving Entity pursuant to
this Section 2.2 in exchange or substitution for or upon registration of
transfer of any Notes, such Surviving Entity, at the option of the Holders but
without expense to them, shall provide for the exchange of all Notes at the time
outstanding for Notes authenticated and delivered in such new name.
Section 2.3. REGISTRAR AND PAYING AGENT.
(a) The Company shall maintain an office or agency in the
Borough of Manhattan, City of New York, where Notes may be presented for
registration of transfer or for exchange (the "REGISTRAR"), where Notes may be
presented for payment (the "PAYING AGENT") and for the service of notices and
demands to or upon the Company in respect of the Notes and this Indenture. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
(b) The Company shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-Registrar not a party to this
Indenture, which shall incorporate the terms of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of each such agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.7 hereof. The Company may act as Paying Agent, Registrar, co-Registrar
or transfer agent.
(c) The Company initially appoints the Trustee at its
principal Corporate Trust Office as Registrar, Paying Agent and agent for
service of demands and notices in connection with the Notes and this Indenture,
until such time as the Trustee has resigned or a successor Trustee has been
appointed.
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Section 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that such Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by such Paying Agent for the
payment of principal of or interest on the Notes and shall notify the Trustee in
writing of any default by the Company in making any such payment. If the Company
acts as Paying Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund. The Company at any time may require a
Paying Agent (other than the Trustee) to pay all money held by it to the Trustee
and to account for any funds disbursed by such Paying Agent. Upon complying with
this Section 2.4, the Paying Agent (if other than the Company) shall have no
further liability for the money delivered to the Trustee. Upon any proceeding
under any Bankruptcy Law with respect to the Company or any Affiliate of the
Company, if the Company is then acting as Paying Agent, the Trustee shall
replace the Company as Paying Agent.
Section 2.5. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, or to the extent
otherwise required under the TIA, the Company shall furnish to the Trustee, in
writing at least seven Business Days before each Interest Payment Date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Holders.
Section 2.6. GLOBAL NOTE PROVISIONS.
(a) Each Global Note initially shall: (i) be registered
in the name of the Depository or the nominee of the Depository, (ii) be
delivered to the Custodian, and (iii) bear the appropriate legend, as set forth
in Section 2.7 and EXHIBIT A hereto. Any Global Note may be represented by more
than one certificate. The aggregate principal amount of each Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Custodian, as provided in this Indenture.
(b) Members of, or participants in, the Depository
("AGENT MEMBERS") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository or by the Custodian under
such Global Note, and the Depository may be treated by the Company, the Trustee,
the Paying Agent and the Registrar and any of their agents as the absolute owner
of such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee, the Paying Agent or the
Registrar or any of their agents from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the operation of
customary practices of the Depository governing the exercise of the rights of an
owner of a beneficial interest in any Global Note. The registered Holder of a
Global Note may grant proxies and otherwise authorize any person, including
Agent Members and persons that may hold interests through Agent Members, to take
any action that a Holder is entitled to take under this Indenture or the Notes.
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(c) Except as provided in Section 2.8 and below, owners
of beneficial interests in Global Notes will not be entitled to receive
Certificated Notes. Certificated Notes shall be issued to all owners of
beneficial interests in a Global Note in exchange for such interests if:
(i) the Depository notifies the Company that it is
unwilling or unable to continue as depositary for such Global
Note or the Depository ceases to be a clearing agency
registered under the Exchange Act, at a time when the
Depository is required to be so registered in order to act as
depositary, and in each case a successor depositary is not
appointed by the Company within 90 days of such notice, or
(ii) the Company executes and delivers to the Trustee
and Registrar an Officers' Certificate stating that such
Global Note shall be so exchangeable.
In connection with the exchange of an entire Global Note for Certificated Notes
pursuant to this subsection (c), such Global Note shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
upon Company Order the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in such Global Note, an equal aggregate principal amount of
Certificated Notes of authorized denominations.
(d) In connection with the exchange of a portion of a
Certificated Note for a beneficial interest in a Global Note, the Trustee shall
cancel such Certificated Note, and the Company shall execute, and upon Company
Order the Trustee shall authenticate and deliver, to the exchanging Holder a new
Certificated Note representing the principal amount not so exchanged.
Section 2.7 LEGENDS.
(a) Each Global Note shall bear the legend specified therefor
in EXHIBIT A on the face thereof.
(b) Each Restricted Note shall bear the private placement
legend specified therefor in EXHIBIT A on the face thereof (together with, if
applicable, the legend specified in clause (d) below, the "PRIVATE PLACEMENT
LEGEND").
(c) Each Regulation S Temporary Global Note shall bear
the legend specified therefor in EXHIBIT A on the face thereof.
(d) Each Certificated Note that is a Restricted Note
shall bear the legend specified therefor in EXHIBIT A on the face thereof.
Section 2.8 TRANSFERS AND EXCHANGES.
(a) The following provisions shall apply with respect to any
proposed transfer of an interest in a Rule 144A Global Note that is a Restricted
Note:
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(i) If (1) the owner of a beneficial interest in a Rule 144A
Global Note wishes to transfer such interest (or portion thereof) to a
Non-U.S. Person pursuant to Regulation S and (2) such Non-U.S. Person
wishes to hold its interest in the Notes through a beneficial interest
in the Regulation S Global Note, (x) upon receipt by the Custodian and
Registrar of:
(A) instructions from the Holder of the Rule 144A
Global Note directing the Custodian and Registrar to
credit or cause to be credited a beneficial interest
in the Regulation S Global Note equal to the
principal amount of the beneficial interest in the
Rule 144A Global Note to be transferred, and
(B) a certificate in the form of EXHIBIT D from the
transferor,
and (y) subject to the rules and procedures of DTC, the Custodian and
Registrar shall increase the Regulation S Global Note and decrease the
Rule 144A Global Note by such amount in accordance with the foregoing.
(b) The following provisions shall apply with respect to any
proposed transfer of an interest in a Regulation S Temporary Global:
(i) If the owner of an interest in a Regulation S Temporary
Global Note wishes to transfer such interest (or any portion thereof)
to a QIB pursuant to Rule 144A, (x) upon receipt by the Custodian and
Registrar of:
(A) instructions from the Custodian and Holder of
the Regulation S Temporary Global Note directing the
Registrar to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal
to the principal amount of the beneficial interest in
the Regulation S Temporary Global Note to be
transferred, and
(B) a certificate in the form of EXHIBIT C duly
executed by the transferor, and
(y) in accordance with the rules and procedures of DTC, the Custodian
and Registrar shall increase the Rule 144A Global Note and decrease the
Regulation S Temporary Global Note by such amount in accordance with
the foregoing.
(ii) No interest in a Regulation S Temporary Global Note will
be transferred to a holder of an interest in the Regulation S Permanent
Global Note except pursuant to SECTION 2.1(E).
(c) OTHER TRANSFERS. Any transfer of Restricted Notes not
described above (other than a transfer of a beneficial interest in a Global Note
that does not involve an exchange of such interest for a Certificated Note or a
beneficial interest in another Global Note, which must be effected in accordance
with applicable law and the rules and procedures of DTC, but is not subject to
any procedure required by this Indenture) shall be made only upon receipt by the
Registrar of such opinions of counsel, certificates and/or other information
reasonably required
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by and satisfactory to it in order to ensure compliance with the Securities Act
or in accordance with SECTION 2.8(D).
(d) USE AND REMOVAL OF PRIVATE PLACEMENT LEGENDS. Upon
the transfer, exchange or replacement of Certificated Notes (or beneficial
interests in a Global Note) not bearing a Private Placement Legend, the
Registrar (and the Custodian, in the case of beneficial interests in a Global
Note) shall exchange such Notes (or beneficial interests) for Certificated Notes
(or beneficial interests in a Global Note) that do not bear a Private Placement
Legend. Upon the transfer, exchange or replacement of Certificated Notes (or
beneficial interests in a Global Note) bearing a Private Placement Legend, the
Registrar (and the Custodian, in the case of beneficial interests in a Global
Note) shall deliver only Certificated Notes (or beneficial interests in a Global
Note) that bear a Private Placement Legend unless:
(i) such Notes (or beneficial interests) are
exchanged in a Registered Exchange Offer;
(ii) such Notes (or beneficial interests) are
transferred pursuant to a Registration Statement;
(iii) such Notes (or beneficial interests) are
transferred pursuant to Rule 144 upon delivery to the
Registrar of a certificate of the transferor in the form of
EXHIBIT E hereto, and an Opinion of Counsel reasonably
satisfactory to the Registrar;
(iv) such Notes (or beneficial interests) are
transferred, replaced or exchanged after the Resale
Restriction Termination Date therefor; or
(v) in connection with such transfer, exchange or
replacement the Registrar shall have received an Opinion of
Counsel and other evidence reasonably satisfactory to it to
the effect that neither such Private Placement Legend nor the
related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
The Private Placement Legend on any Note shall be removed at the request of the
Holder on or after the Resale Restriction Termination Date therefor. The Holder
of a Global Note may exchange an interest therein for an equivalent interest in
a Global Note not bearing a Private Placement Legend upon transfer of such
interest pursuant to any clauses (i)-(v) above. The Company shall deliver to the
Trustee an Officers' Certificate promptly upon effectiveness, withdrawal or
suspension of any Registration Statement.
(e) CONSOLIDATION OF GLOBAL NOTES AND EXCHANGE OF
CERTIFICATED NOTES FOR BENEFICIAL INTEREST IN GLOBAL NOTES. If a Global Note not
bearing a Private Placement Legend (other than a Regulation S Global Note) is
outstanding at the time of a Registered Exchange Offer, any interests in a
Global Note exchanged in such Registered Exchange Offer shall be exchanged for
interests in such outstanding Global Note.
(f) RETENTION OF DOCUMENTS. The Registrar shall retain
copies of all letters, notices and other written communications received
pursuant to this Article II. The Company
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shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.
(g) EXECUTION, AUTHENTICATION OF NOTES, ETC.
(i) Subject to the other provisions of this Section
2.8, when Notes are presented to the Registrar or a
co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or
co-Registrar shall register the transfer or make the exchange
as requested if its requirements for such transaction are met;
PROVIDED that any Notes presented or surrendered for
registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form
satisfactory to the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in
writing. To permit registrations of transfers and exchanges
and subject to the other terms and conditions of this Article
II, the Company will execute and upon Company Order the
Trustee will authenticate Certificated Notes and Global Notes
at the Registrar's or co-Registrar's request. In accordance
with the Registration Rights Agreement, the Company will
execute and upon Company Order the Trustee will authenticate
Exchange Notes or Private Exchange Notes, as the case may be,
in exchange for Notes.
(ii) No service charge shall be made to a Holder for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes,
assessments or similar governmental charges payable upon
exchange or transfer pursuant to a Registered Exchange Offer,
or Section 4.8, Section 4.14, Section 5.1 or Section 9.5).
(iii) The Registrar or co-Registrar shall not be
required to register the transfer of or exchange of any Note
for a period beginning: (A) 15 days before the mailing of a
notice of an offer to repurchase or redeem Notes and ending at
the close of business on the day of such mailing or (B) 15
days before an Interest Payment Date and ending on such
Interest Payment Date.
(iv) Prior to the due presentation for registration
of transfer of any Note, the Company, the Trustee, the Paying
Agent, the Registrar or any co-Registrar may deem and treat
the person in whose name a Note is registered as the absolute
owner of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and
none of the Company, the Trustee, the Paying Agent, the
Registrar or any co-Registrar shall be affected by notice to
the contrary.
(v) All Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the
same debt and shall be entitled to the
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same benefits under this Indenture as the Notes surrendered
upon such transfer or exchange.
(h) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of interest in a Global
Note, a member of, or a participant in, the Depository or
other Person with respect to the accuracy of the records of
the Depository or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes
or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository)
of any notice (including any notice of redemption) or the
payment of any amount or delivery of any Notes (or other
security or property) under or with respect to such Notes. All
notices and communications to be given to the Holders and all
payments to be made to Holders in respect of the Notes shall
be given or made only to or upon the order of the registered
Holders (which shall be the Depository or its nominee in the
case of a Global Note). The Trustee may rely and shall be
fully protected in relying upon information furnished by the
Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Note (including any transfers between or among the
Depository participants, members or beneficial owners in any
Global Note) other than to require delivery of such
certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the
express requirements hereof.
Section 2.9. MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
(a) If a mutilated Note is surrendered to the Registrar
or if the Holder of a Note claims that the Note has been lost, destroyed or
stolen, the Company shall execute and upon Company Order the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the
Uniform Commercial Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the Company, such
Holder shall furnish an affidavit of loss and indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-Registrar from any loss that any of them
may suffer if a Note is replaced, and, in the absence of notice to the Company
or the Trustee that such Note has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
make available for delivery, in exchange for any such mutilated Note or in lieu
of any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
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(b) Upon the issuance of any new Note under this Section
2.9, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
(c) Every new Note issued pursuant to this Section in
exchange for any mutilated Note, or in lieu of any destroyed, lost or stolen
Note, shall constitute an original additional contractual obligation of the
Company and any other obligor upon the Notes, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
Section 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
execute and upon Company Order the Trustee will authenticate temporary Notes.
Temporary Notes will be substantially in the form of definitive Notes but may
have variations that the Company consider appropriate for temporary Notes.
Without unreasonable delay, the Company will prepare and execute and upon
Company Order the Trustee will authenticate definitive Notes. After the
preparation of definitive Notes, the temporary Notes will be exchangeable for
definitive Notes representing an equal principal amount upon surrender of the
temporary Notes at any office or agency maintained by the Company for that
purpose and such exchange shall be without charge to the Holder. Until so
exchanged, the Holder of temporary Notes shall in all respects be entitled to
the same benefits under this Indenture as a Holder of definitive Notes.
Section 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel and return to the Company all Notes
surrendered for registration of transfer, exchange or payment. The Company may
not issue new Notes to replace Notes that have been paid or delivered to the
Trustee for cancellation for any reason other than in connection with a transfer
or exchange.
Section 2.12. DEFAULTED INTEREST.
When any installment of interest becomes Defaulted Interest
(as defined in the form of Note), such installment shall forthwith cease to be
payable to the Holders in whose names the Notes were registered on the record
date applicable to such installment of interest. Defaulted Interest, and any
interest payable on such Defaulted Interest, may be paid by the Company, at its
election, as provided in clause (i) or (ii) below.
(i) The Company may elect to make payment of any
Defaulted Interest, and any interest payable on such Defaulted
Interest, to the Holders in whose names the Notes are
registered at the close of business on a special record date
for the payment of such Defaulted Interest (a "SPECIAL RECORD
DATE"), which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on the Notes and
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the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect
of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held
in trust for the benefit of the Holders entitled to such
Defaulted Interest as provided in this clause (i). Thereupon
the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest, which shall be not more than 15
calendar days and not less than ten calendar days prior to the
date of the proposed payment and not less than ten calendar
days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be sent, first-class mail, postage prepaid, to
each Holder at such Holder's address as it appears in the
registration books of the Registrar, not less than ten
calendar days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Holders in whose names
the Notes are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to
the following clause (ii); or
(ii) The Company may make payment of any Defaulted
Interest, and any interest payable on such Defaulted Interest,
on the Notes in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Notes
may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause (ii), such
manner of payment shall be deemed practicable by the Trustee.
Section 2.13. ADDITIONAL AMOUNTS UNDER REGISTRATION RIGHTS
AGREEMENTS.
Under certain circumstances, the Company may be obligated to
pay additional interest to Holders, all as and to the extent set forth in the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference and such additional interest is deemed to be interest for purposes
of this Indenture.
ARTICLE III.
REDEMPTION
Section 3.1. OPTIONAL REDEMPTION.
The Company may redeem the Notes, as a whole or, from time to
time, in part, subject to this Article III and at a redemption price equal to
100% of the outstanding principal amount of the Notes plus a Make-Whole Premium,
plus any accrued and unpaid interest to the
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Redemption Date, if any (the "REDEMPTION Price"). The Company shall evidence its
election to redeem any Notes pursuant to this Section 3.1 by a Board Resolution.
Section 3.2. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes, either in whole or in
part, pursuant to Section 3.1 hereof, the Company shall notify the Trustee in
writing, at least 15 days prior to the date upon which notice of redemption is
to be given to Holders pursuant to Section 3.4 hereof, of the Redemption Date,
the principal amount of Notes to be redeemed and the Redemption Price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in this Article III, as appropriate.
Section 3.3. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.
In the event that fewer than all of the Notes are to be
redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Notes are not so listed, by lot, PRO RATA or by such other
method as it shall deem fair and reasonable. The Trustee shall promptly notify
the Company of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
The Trustee may select for redemption portions of the principal of the Notes
that have denominations larger than $1,000. Notes and portions thereof that the
Trustee selects shall be redeemed in amounts of $1,000 or whole multiples of
$1,000. For all purposes of this Indenture unless the context otherwise
requires, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
Section 3.4. NOTICE OF REDEMPTION.
(a) At least 30 days, but no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.3 hereof.
(b) The notice shall identify the Notes to be redeemed
(including the CUSIP numbers thereof) and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if any Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed
and that, after the Redemption Date and upon surrender of such
Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued;
(iv) the name and address of the Paying Agent;
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(v) that Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price;
(vi) that unless the Company defaults in making the
redemption payment, interest will cease to accrue on Notes or
portions thereof called for redemption on and after the
Redemption Date; and
(vii) the aggregate principal amount of Notes that
are being redeemed.
(c) At the request of the Company, the Trustee shall give
the notice of redemption in the name of the Company and at the sole expense of
the Company.
Section 3.5. EFFECT OF NOTICE OF REDEMPTION.
Once the notice of redemption described in Section 3.4 hereof
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price plus interest accrued to the Redemption Date.
Upon surrender to the Paying Agent, such Notes shall be paid at the Redemption
Price plus interest accrued to the Redemption Date; PROVIDED, that if the
Redemption Date is after a regular interest payment record date and on or prior
to the Interest Payment Date, any accrued interest shall be payable to the
Holder of the redeemed Notes registered on the relevant record date, and
PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday, payment shall
be made on the next succeeding Business Day and no interest shall accrue for the
period from such Redemption Date to such succeeding Business Day. Failure to
give notice or any defect in the notice to any Holder shall not affect the
validity of the notice to any other Holder.
Section 3.6. DEPOSIT OF REDEMPTION PRICE.
(a) On or prior to 10:00 A.M., New York City time, on
each Redemption Date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to pay the Redemption Price of, and
accrued and unpaid interest to the Redemption Date on, all Notes to be redeemed
on that date other than Notes or portions thereof called for redemption on that
date which have been delivered by the Company to the Trustee for cancellation.
(b) On and after any Redemption Date, if money sufficient
to pay the Redemption Price of, and accrued and unpaid interest to the
Redemption Date on, the Notes called for redemption shall have been made
available in accordance with the preceding paragraph and payment thereof is not
prohibited pursuant to the terms of this Indenture, then the Notes called for
redemption will cease to accrue interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price of and, subject to
the first proviso in Section 3.5 hereof, accrued interest to the Redemption Date
on, such Notes to the Redemption Date. If any Note called for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid Redemption Price of the Note and any
interest not paid on such unpaid amount at the rate and in the manner provided
in the Notes.
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Section 3.7. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
ARTICLE IV.
COVENANTS
Section 4.1. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal,
Redemption Price or Change of Control Purchase Price of, and any accrued
interest, as the case may be (which shall include any Damage Amount as provided
in the Registration Rights Agreement) on, the Notes on the dates and in the
manner provided in the Notes and this Indenture. An installment of principal,
Redemption Price or Change of Control Purchase Price of, or accrued interest on,
the Notes shall be considered paid on the date it is due if the Trustee or a
Paying Agent holds on that date money designated for and sufficient to pay such
installment. The Company shall pay interest on overdue principal, Redemption
Price and Change of Control Purchase Price (including post-petition interest in
a proceeding under any Bankruptcy Law) and overdue interest, to the extent
lawful, at the rate specified in the Notes.
Section 4.2. SEC REPORTS.
(a) Whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the
Company will, to the extent accepted by the SEC and not prohibited under the
Exchange Act, file with the SEC the annual reports, quarterly reports and other
documents which the Company would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Company was subject thereto, on or prior to the respective dates by which
the Company would have been required to file them (the "REQUIRED FILING DATES").
The Company will also, in any event, (i) within 15 days of each Required Filing
Date (A) transmit by mail to all Holders, as their names and addresses appear in
the Security register maintained by the Registrar, without cost to such Holders
copies of those annual reports, quarterly reports and other documents which the
Company files with the SEC, and (B) file with the Trustee, copies of the annual
reports, quarterly reports and other documents which the Company files with the
SEC and (ii) if filing such documents by the Company with the SEC is not
accepted by the SEC or is prohibited under the Exchange Act, promptly upon
written request, supply copies of such documents to any Holder.
(b) The Company will, upon request, provide to any Holder
of Notes or any prospective transferee of any such Holder any information
concerning the Company (including financial statements) necessary in order to
permit such Holder to sell or transfer Notes in compliance with Rule 144A under
the Securities Act, if applicable; PROVIDED, HOWEVER, that the Company shall not
be required to furnish such information in connection with any request made on
or after the date which is two years from the later of (i) the date such Note
(or any predecessor
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Note) was acquired from the Company or (ii) the date such Note (or any
predecessor Note) was last acquired from an "affiliate" of the Company within
the meaning of Rule 144 under the Securities Act.
Section 4.3. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal,
Redemption Price or Change of Control Purchase Price of, or accrued interest on,
the Notes as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this
Indenture. The Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during such fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions hereof (or, if a Default or Event of
Default shall have occurred, describing all Defaults or Events of Default of
which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal, Redemption Price or Change of Control
Purchase Price of, and accrued interest on, the Notes are prohibited or, if such
event has occurred, a description of the event and what action each of the
Company is taking or proposes to take with respect thereto.
(b) So long as (and to the extent) not contrary to the
then current recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to Section 4.2
above shall be accompanied by a written statement of the Company's independent
public accountants (who shall be a firm of established national reputation) that
in making the examination necessary for certification of such financial
statements nothing has come to their attention which would lead them to believe
that the Company has violated any provisions of this Article IV or Article V of
this Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly for any failure to obtain knowledge of any such
violation.
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(c) The Company will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.5. TAXES.
The Company shall, and shall cause each of its Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
Section 4.6. LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness,
other than Permitted Indebtedness; PROVIDED, HOWEVER, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the Incurrence of any such Indebtedness, the Company may Incur
Indebtedness and the Restricted Subsidiaries may Incur Acquired Indebtedness, in
each case if on the date of the Incurrence of such Indebtedness, after giving
effect to the Incurrence thereof, the Consolidated Fixed Charge Coverage Ratio
of the Company is greater than 2.75 to 1.
Section 4.7. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not cause or permit
any of the Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any
distribution, other than dividends or distributions payable in
Qualified Capital Stock of the Company, on or in respect of
shares of the Company's Capital Stock;
(ii) purchase, redeem or otherwise acquire or retire
for value any Capital Stock of the Company or any warrants,
rights or options to purchase or acquire shares of any class
of such Capital Stock;
(iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness which is subordinated in right of
payment to the Notes, except a payment of interest or any
principal payment at the Stated Maturity thereof;
(iv) make any Investment, other than a
Permitted Investment; or
(v) make compensation or consulting payments in
excess of base salaries limited to $250,000 to managing
directors and other executive officers (as defined in Rule
3b-7 under the Exchange Act) of the Company or any of its
Restricted Subsidiaries, except to the extent authorized under
the Annual Incentive Plan or the Equity Incentive Plan or
otherwise approved by a majority of the disinterested members
of the Board of Directors of the Company or a duly
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authorized committee thereof comprised of individuals who are
not managing directors or other executive officers of the
Company or any of its Affiliates;
(each of the foregoing actions set forth in clauses (i), (ii), (iii), (iv) and
(v) being referred to as a "RESTRICTED PAYMENT"), if at the time of such
Restricted Payment or immediately after giving effect thereto:
(A) a Default or an Event of Default shall
have occurred and be continuing; or
(B) the Company is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the covenant described under
Section 4.6 hereof; or
(C) the aggregate amount of Restricted
Payments, including the proposed Restricted Payment, made
subsequent to the Issue Date (the amount expended for such
purpose, if other than in cash, being the fair market value of
such property as determined reasonably and in good faith by
the Board of Directors of the Company) shall exceed the sum
of:
(1) 50% of the cumulative
Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned from the
beginning of the first full fiscal quarter following
the Issue Date and through the end of the most recent
fiscal quarter for which financial statements are
available prior to the date such Restricted Payment
occurs (the "REFERENCE DATE"), treating such period
as a single accounting period; plus
(2) 100% of the aggregate net cash
proceeds received by the Company from any Person,
other than a Subsidiary of the Company, from the
issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Capital
Stock of the Company or of other securities that have
been converted into Qualified Capital Stock of the
Company; plus
(3) without duplication of any
amounts included in clause (C)(2) above, 100% of the
aggregate net cash proceeds of any contribution to
the common equity capital of the Company received by
the Company from a holder of the Company's Qualified
Capital Stock; excluding, in the case of clauses
(C)(2) and (3), any net proceeds from a sale of
Qualified Capital Stock received from a Subsidiary of
the Company or applied in accordance with clause
(ii)(B) of paragraph (b) of this Section 4.7; plus
(4) an amount equal to the lesser
of:
(x) the sum of the fair
market value of the Capital Stock of an
Unrestricted Subsidiary owned by the
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Company and/or the Restricted Subsidiaries
and the aggregate amount of all Indebtedness
of such Unrestricted Subsidiary owed to the
Company and each Restricted Subsidiary on
the date of Revocation of such Unrestricted
Subsidiary as an Unrestricted Subsidiary in
accordance with Section 4.13 hereof; and (y)
the Designation Amount treated as a
Restricted Payment pursuant to clause (iv)
above with respect to such Unrestricted
Subsidiary on the date of the Designation of
such Subsidiary as an Unrestricted
Subsidiary in accordance with the covenant
described under Section 4.13 hereof; plus
(5) in the case of the disposition
of an Investment treated as a Restricted Payment
pursuant to clause (iv) above to a Person other than
the Company or one of its Subsidiaries, an amount
equal to the lesser of:
(x) the amount of such
Investment treated as a Restricted Payment
pursuant to clause (iv) above, and
(y) the amount in cash
received by the Company or any Restricted
Subsidiary upon such disposition; plus
(F) $10.0 million.
(b) The provisions set forth in paragraph (a) do not prohibit:
(i) the payment of any dividend within 60 days after
the date of declaration of such dividend if the dividend would
have been permitted on the date of declaration;
(ii) the redemption, repurchase, retirement,
defeasance or other acquisition of Indebtedness of the Company
or any Restricted Subsidiary or of Capital Stock of the
Company, in each case to the extent constituting a Restricted
Payment pursuant to clause (ii) or (iii) of paragraph (a) of
this Section 4.7 either:
(A) solely in exchange for shares of
Qualified Capital Stock of the Company, or
(B) through the application of net proceeds
of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company or of any contribution to the common
equity capital of the Company received by the Company from a
holder of the Company's Qualified Capital Stock;
(iii) the defeasance, redemption, repurchase or other
acquisition of Indebtedness of the Company or any Restricted
Subsidiary with the net cash proceeds from an Incurrence of
Permitted Refinancing Indebtedness therefor; and
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(iv) so long as no Default or Event of Default shall
have occurred and be continuing, repurchases of Capital Stock
(or options therefor) of the Company from officers, directors,
employees, consultants or former officers, directors,
employees or consultants of the Company (or any of its
Subsidiaries) pursuant to equity ownership or compensation
plans or stockholders agreements not to exceed $5.0 million in
any year.
(c) In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii)(C) of
paragraph (a) of this Section 4.7, amounts expended pursuant to clauses (i) and
(iv) of paragraph (b) of this Section 4.7 shall be included in the calculation.
Section 4.8. LIMITATION ON ASSET SALES.
(a) The Company will not, and will not permit any of the
Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the
time of the Asset Sale at least equal to the fair market value
of the assets sold or otherwise disposed of as determined in
good faith by the Board of Directors of the Company;
(ii) at least 75% of the consideration received by
the Company or the Restricted Subsidiary, as the case may be,
from the Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such Asset Sale;
and
(iii) upon the consummation of an Asset Sale, the
Company may apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale
within 360 days of receipt thereof either:
(A) to repay any Indebtedness of the Company
to the extent secured by a Lien pursuant to clause (i), (ii),
(iii), (iv), (v) or (viii) of paragraph (b) of Section 4.11
hereof and effect a permanent reduction in the availability in
respect of the Indebtedness (without refinancing the
Indebtedness);
(B) to repay any Indebtedness of a Wholly
Owned Restricted Subsidiary owed to any Person other than the
Company or any of its Affiliates and effect a permanent
reduction in any availability in respect of the Indebtedness
(without refinancing the Indebtedness);
(C) to acquire Replacement Assets; or
(D) a combination of prepayment and
investment permitted by the preceding clauses (iii)(A), (B)
and (C).
The assumption by the transferee in an Asset Sale (and release of the Company
and its Restricted Subsidiaries of further liability) of Indebtedness for
borrowed money of the Company or any Restricted Subsidiary other than
Disqualified Capital Stock or Indebtedness subordinated in right
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of payment to the Notes shall be deemed to be cash applied in accordance
with this covenant. The receipt by the Company or the applicable Restricted
Subsidiary of marketable securities of a company subject to and then current in
its obligations as a reporting company under Section 13 or 15 under the Exchange
Act, which are resold for cash or Cash Equivalents by the Company or the
Restricted Subsidiary within 120 days of the relevant Asset Sale and applied in
accordance with this covenant, shall be deemed to be cash received pursuant to
clause (ii) of this paragraph (a).
(b) On the 361st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to the Asset
Sale as set forth in clause (iii) of paragraph (a) of this Section 4.8 (each, a
"NET PROCEEDS OFFER TRIGGER DATE"), the aggregate amount of Net Cash Proceeds
that have not been applied on or before the Net Proceeds Offer Trigger Date as
permitted in that clause (iii) (a "NET PROCEEDS OFFER AMOUNT") shall be applied
by the Company to make an offer to purchase (the "NET PROCEEDS OFFER") on a date
(the "NET PROCEEDS OFFER PAYMENT DATE") not less than 30 nor more than 60 days
following the Net Proceeds Offer Trigger Date, from all Holders on a PRO RATA
basis, that principal amount of Notes equal to the Net Proceeds Offer Amount at
a price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest, if any, thereon to the date of purchase; PROVIDED
that the Company may make a concurrent offer to repurchase on a PRO RATA basis
Indebtedness of a Wholly Owned Restricted Subsidiary or Indebtedness of the
Company ranking PARI PASSU with the Notes.
(c) If at any time any non-cash consideration received by
the Company or any Restricted Subsidiary, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration)
or Cash Equivalents, then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this Section 4.8. Pending application in accordance
with this Section 4.8, Net Cash Proceeds may be used to repay revolving credit
borrowings without reducing commitments thereunder.
(d) The Company may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess
of $5.0 million resulting from one or more Asset Sales or deemed Asset Sales (at
which time, the entire unutilized Net Proceeds Offer Amount, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
Section 4.8).
(e) In the event of the transfer of substantially all
(but not all) of the property and assets of the Company and the Restricted
Subsidiaries as an entirety to a Person in a transaction permitted under Section
5.1 hereof, the successor corporation shall be deemed to have sold the
properties and assets of the Company and the Restricted Subsidiaries not
transferred for purposes of this Section 4.8 and shall comply with the
provisions of this Section 4.8 with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value (as determined in good faith by
the Board of Directors of the Company) of such properties and assets of the
Company or the Restricted Subsidiaries deemed to be sold shall be deemed to be
Net Cash Proceeds for purposes of this Section 4.8.
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(f) Each Net Proceeds Offer will be mailed to the record
Holders as shown on the register of Holders within 30 days following the Net
Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with
the procedures set forth in this Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders will be purchased on a PRO RATA basis based on the
principal amount of Notes (and other Indebtedness for which a concurrent offer
is being made as permitted by this Section 4.8) tendered. A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
(g) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent
that the provisions of any securities laws or regulations conflict with this
Section 4.8, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.8 by virtue thereof.
Section 4.9. LIMITATION ON DISTRIBUTIONS AND OTHER
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on or in
respect of its Capital Stock;
(b) make loans or advances or pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary; or
(c) transfer any of its property or assets to the Company or
any other Restricted Subsidiary,
except for such encumbrances or restrictions existing under or by reasons of:
(i) applicable law or regulation or NYSE regulations;
(ii) this Indenture;
(iii) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of any
Restricted Subsidiary;
(iv) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so
acquired;
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(v) agreements existing on the Issue Date to the
extent and in the manner such agreements are in effect on the
Issue Date;
(vi) any other agreement entered into after the Issue
Date that contains encumbrances and restrictions that are not
materially more restrictive with respect to any Restricted
Subsidiary than those in effect with respect to such
Restricted Subsidiary pursuant to agreements as in effect on
the Issue Date so long as any such restrictions expressly
permit scheduled payments on the Notes;
(vii) customary restrictions on the transfer of any
property or assets arising under a security agreement
governing a Lien permitted under this Indenture; and
(viii) any agreement governing Refinancing
Indebtedness incurred to Refinance the Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in
clause (ii), (iv) or (v) above; PROVIDED, HOWEVER, that the
provisions relating to such encumbrance or restriction
contained in any such Refinancing Indebtedness are not
materially more restrictive than the provisions relating to
such encumbrance or restriction contained in agreements
referred to in such clause (ii), (iv) or (v) and expressly
permit dividends and other distributions for scheduled
payments on the Notes.
Section 4.10. LIMITATION ON ISSUANCE AND SALE OF CAPITAL
INTERESTS IN RESTRICTED Subsidiaries.
The Company will not permit:
(a) any Restricted Subsidiary to issue any Capital Stock other
than to the Company or a Restricted Subsidiary; or
(b) any Person (other than the Company or a Restricted
Subsidiary) to own or control any Capital Stock of any Restricted Subsidiary
(other than directors' qualifying shares or as may be required by law);
PROVIDED that clauses (a) and (b) will not prohibit:
(1) any sale of 100% of the shares of the Capital
Stock of any Restricted Subsidiary owned by the Company or any Restricted
Subsidiary effected in accordance with Section 4.8 hereof; or
(2) any sale of 100% of the shares of the Capital
Stock of any Restricted Subsidiary owned by the Company or any Restricted
Subsidiary effected in accordance with Section 5.1 hereof.
Section 4.11. LIMITATIONS ON LIENS.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens
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of any kind against or upon, or enter into or otherwise become liable in respect
of, a Sale and Leaseback Transaction with respect to, any property or assets of
the Company or any of the Restricted Subsidiaries, whether owned on the Issue
Date or acquired after the Issue Date, or any proceeds therefrom or assign or
otherwise convey any right to receive income or profit therefrom unless:
(a) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; and
(b) in all other cases, the Notes are equally and ratably
secured, except for:
(i) Liens existing as of the Issue Date to
the extent and in the manner such Liens are in effect on the
Issue Date;
(ii) Liens on Investment Securities securing
Indebtedness incurred pursuant to clause (b) of the definition
of "Permitted Indebtedness" and Interest Swap Obligations and
Currency Agreements related thereto;
(iii) Liens on Capital Stock of Subsidiaries securing
a bank credit facility of the Company and Interest Swap
Obligations and Currency Agreements related thereto;
(iv) Liens securing Purchase Money Indebtedness (or
Refinancing Indebtedness in respect thereof) or Sale and
Leaseback Transactions involving Capitalized Lease
Obligations, in each case, Incurred pursuant to clause (1) of
the definition of "Permitted Indebtedness"; PROVIDED, HOWEVER,
that:
(A) the Purchase Money Indebtedness (or
Refinancing Indebtedness) or Capitalized Lease Obligation
shall not exceed the cost of the property or assets to be
acquired or which is the subject of the Sale and Leaseback
Transaction, and shall not be secured by any property or
assets of the Company or any Restricted Subsidiary other than
the property and assets to be acquired or which is the subject
of the Sale and Leaseback Transaction, and
(B) the Lien securing any Purchase Money
Indebtedness shall be created within 90 days of such
acquisition;
(v) Liens securing Acquired Indebtedness (and any
Refinancing Indebtedness in respect thereof); PROVIDED that:
(A) the Liens secured the Acquired
Indebtedness at the time of and prior to the Incurrence of the
Acquired Indebtedness by the Company or a Restricted
Subsidiary and were not granted in connection with, or in
anticipation of the Incurrence of the Acquired Indebtedness by
the Company or a Restricted Subsidiary, and
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(B) the Liens do not extend to or cover any
property or assets of the Company or of any of the Restricted
Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time the Indebtedness
became Acquired Indebtedness of the Company or a Restricted
Subsidiary;
(vi) Liens securing the Notes;
(vii) Liens in favor of the Company;
(viii) Liens securing Refinancing Indebtedness
incurred to Refinance any Indebtedness, which Refinanced
Indebtedness had been secured by a Lien permitted under this
Indenture; PROVIDED, HOWEVER, that such Liens do not extend to
or cover any property or assets of the Company or any of the
Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and
(ix) Permitted Liens.
Section 4.12. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "AFFILIATE TRANSACTION") unless the Affiliate Transaction is on terms
that are not materially less favorable than those that would have reasonably
been expected in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company or such Restricted
Subsidiary. Prior to the consummation by the Company or any Restricted
Subsidiary of any Affiliate Transactions (or series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of:
(i) $5.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall obtain the approval of
its Board of Directors (including a majority of the
independent directors) of such transaction or series of
related transactions evidenced by a Board Resolution stating
that such Board of Directors (including a majority of the
independent directors) has determined that such transaction
complies with the foregoing provisions, and
(ii) $10.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall obtain a favorable
opinion as to the fairness of such transaction or series of
related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of
view, from an Independent Financial Advisor, and file it with
the Trustee.
(b) The restrictions set forth in paragraph (a) above shall
not apply to:
(i) employment, stock option, consulting, agency or
other compensation or benefit plans, arrangements and
agreements of the Company or
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any Restricted Subsidiary in accordance with the Annual
Incentive Plan or the Equity Incentive Plan or as approved by
a majority of the disinterested members of the Board of
Directors (or a majority of the disinterested members of a
committee thereof);
(ii) reasonable fees and compensation paid to
directors, and reasonable indemnity provided on behalf of
officers, directors, employees, consultants or agents, of the
Company or any Restricted Subsidiary as determined in good
faith by the Company's Board of Directors or senior
management;
(iii) transactions exclusively between or among the
Company and any Restricted Subsidiaries or exclusively between
or among Restricted Subsidiaries, provided such transactions
are not otherwise prohibited by this Indenture; and
(iv) Restricted Payments permitted to be made
pursuant to Section 4.7 hereof.
Section 4.13. LIMITATION ON DESIGNATIONS OF UNRESTRICTED
SUBSIDIARIES.
(a) The Company may designate any Subsidiary of the
Company, other than LaBranche or a Person holding Capital Stock of LaBranche, as
an "UNRESTRICTED SUBSIDIARY" under this Indenture (a "DESIGNATION") only if:
(i) no Default shall have occurred and be
continuing at the time of or after giving effect to such
Designation; and
(ii) the Company would be permitted under this
Indenture to make an Investment at the time of Designation
assuming the effectiveness of the Designation in an amount
(the "DESIGNATION AMOUNT") equal to the sum of:
(A) the fair market value of the Capital
Stock of the Subsidiary owned by the Company and/or any of the
Restricted Subsidiaries on such date and
(B) the aggregate amount of Indebtedness of
the Subsidiary owed to the Company and the Restricted
Subsidiaries on that date; and
(iii) the Company would be permitted to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under Section 4.6 hereof at
the time of Designation assuming the effectiveness of the
Designation.
(b) In the event of any such Designation, the Company
shall be deemed to have made an Investment constituting a Restricted Payment in
the Designation Amount pursuant to Section 4.7 hereof for all purposes of this
Indenture. Furthermore, the Company shall not, and shall not permit any
Restricted Subsidiary to, at any time:
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(i) provide direct or indirect credit support for or
a guarantee of any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing
such Indebtedness),
(ii) be directly or indirectly liable for
any Indebtedness of any Unrestricted Subsidiary or
(iii) be directly or indirectly liable for any
Indebtedness that provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or
cause the payment thereof to be accelerated or payable prior
to its final scheduled maturity upon the occurrence of a
default with respect to any Indebtedness of any Unrestricted
Subsidiary (including any right to take enforcement action
against the Unrestricted Subsidiary).
(c) The Company may revoke any Designation of a
Subsidiary as an Unrestricted Subsidiary ("REVOCATION"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if:
(i) no Default shall have occurred and be
continuing at the time and after giving effect to such
Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiaries outstanding immediately following such Revocation
would, if incurred at such time, have been permitted to be
incurred for all purposes of this Indenture.
(d) All Designations and Revocations must be evidenced by
an Officers' Certificate of the Company delivered to the Trustee certifying
compliance with the foregoing provisions.
Section 4.14. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the
Company will make a Change of Control Offer to Purchase all of the outstanding
Notes at the Change of Control Purchase Price.
For purposes of the foregoing, a Change of Control Offer to Purchase shall be
deemed to have been made if:
(i) within 30 days following the date of the
consummation of a transaction or series of transactions that constitutes a
Change of Control, the Company commences a Change of Control Offer to Purchase
for all outstanding Notes at the Change of Control Purchase Price (provided that
the running of such 30-day period shall be suspended, for up to a maximum of 30
days, during any period when the commencement of such Change of Control Offer to
Purchase is delayed or suspended by reason of any court's or governmental
authority's review of or ruling on any materials being employed by the Company
to effect such Change of Control Offer to Purchase, so long as the Company has
used and continues to use its best efforts to make and conclude such Change of
Control Offer to Purchase promptly); and
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(ii) all Notes properly tendered pursuant to the
Change of Control Offer to Purchase are purchased on the terms of such Change of
Control Offer to Purchase.
(b) The Company will not be required to make a Change of
Control Offer to Purchase upon a Change of Control if a third party makes a
Change of Control Offer to Purchase contemporaneously with or upon a Change of
Control in the manner, at the times and otherwise in compliance with the
requirements of this Indenture and purchases all Notes validly tendered and not
withdrawn under its Change of Control Offer to Purchase.
(c) On the Change of Control Purchase Date, the Company
shall, to the extent lawful, (i) accept for payment Notes or portions thereof or
beneficial interests under a Global Note properly tendered pursuant to the Offer
to Purchase, (ii) deposit with the Paying Agent (by no later than 11:00 a.m. on
such date) money sufficient to pay the Change of Control Purchase Price of all
Notes or portions thereof or beneficial interests so tendered and (iii) deliver
or cause to be delivered to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly (1) mail to each holder of Notes so
accepted and (2) remit to the Depository for crediting to the respective
accounts of the Holders under a Global Note of beneficial interest so accepted,
payment in an amount equal to the purchase price for such Notes (which payment
shall, in the case of the Holders of beneficial interests in a Global Note, be
through the facilities of the Depository), and the Company shall execute and
issue, and the Trustee shall promptly authenticate and mail to such holder, a
new Note equal in principal amount to any untendered portion of the Notes
surrendered and shall issue a Global Note equal in principal amount to any
untendered portion of beneficial interest so surrendered; PROVIDED that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
(d) If the Company or any Subsidiary thereof has issued
any outstanding Indebtedness that is subordinated in right of payment to the
Notes, and the Company or such Subsidiary is required to make an offer to
purchase upon a Change of Control or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a Change of
Control, the Company shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted the Company's Change of Control Offer to
Purchase and shall otherwise have consummated the Change of Control Offer to
Purchase made to holders of the Notes. The Company will not issue Indebtedness
that is subordinated in right of payment to the Notes or Preferred Stock with
change of control provisions requiring the payment of such Indebtedness or
Preferred Stock prior to making and consummating an offer to purchase the Notes
in the event of a Change of Control under this Indenture.
(e) The Company will comply, to the extent applicable,
with the requirements of Rule l4e-1 under the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are
applicable in connection with any repurchase of the Notes as described above. To
the extent that the provisions of any securities laws or regulations conflict
with any repurchase of the Notes as described above, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.14 by virtue thereof.
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Section 4.15. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in New York, New York an office or
agency where Notes may be surrendered for registration of transfer or exchange
or for presentation for payment and where notices and demands to or upon the
Company in respect of the Notes and this Indenture may be served. The Company
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee as set forth in
Section 10.2. The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations, PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in New York, New York
for such purposes. The Company shall give prompt written notice to the Trustee
of such designation or rescission and of any change in the location of any such
other office or agency. The Company hereby initially designates the Corporate
Trust Office of the Trustee as such office of the Company.
Section 4.16. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all material properties used
or useful to the conduct of its business or the business of any of its
Restricted Subsidiaries to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
equipment deemed necessary in the good faith judgment of the Officers of the
Company and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof; PROVIDED, HOWEVER, that
nothing in this Section 4.16 shall prevent the Company or any Restricted
Subsidiary from discontinuing the operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is
in the good faith judgment of the Board of Directors of the Company or the
Restricted Subsidiary concerned, as the case may be, desirable in the conduct of
the business of the Company or such Restricted Subsidiary, as the case may be,
and is not adverse in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for
itself and each of its Restricted Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds that are
adequate and appropriate for the conduct of the business of the Company and
such Restricted Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the Company, for
corporations similarly situated in the industry.
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ARTICLE V.
SUCCESSOR CORPORATION
Section 5.1. LIMITATION ON MERGER, CONSOLIDATION AND SALE OF
ASSETS.
(a) The Company will not, in a single transaction or
series of related transactions, consolidate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless:
(i) either:
(A) the Company shall be the surviving or
continuing corporation; or
(B) the Person (if other than the Company)
formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the
properties and assets of the Company and the Restricted
Subsidiaries substantially as an entirety (the "SURVIVING
ENTITY"):
(x) shall be a corporation organized
and validly existing under the laws of the United
States or any Sate thereof or the District of
Columbia; and
(y) shall expressly assume, by
supplemental indenture (in form and substance
reasonably satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of
every covenant of the Notes, this Indenture and the
Registration Rights Agreement on the part of the
Company to be performed or observed;
(ii) immediately after giving effect to such
transaction and the assumption contemplated by clause
(i)(B)(y) above (including giving effect to any Indebtedness
and Acquired Indebtedness Incurred or anticipated to be
Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the
case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under Section 4.6 hereof;
(iii) immediately before and immediately after giving
effect to such transaction and the assumption contemplated by
clause (i)(B)(y) of this paragraph (a) (including, without
limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any
Lien granted in
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connection with or in respect of the transaction), no Default
or Event of Default shall have occurred or be continuing; and
(iv) the Company or the Surviving Entity shall have
delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture
comply with the applicable provisions of this Indenture and
that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
(b) Paragraph (a) of this Section 5.1 will not apply to a
merger or consolidation between the Company and a Restricted Subsidiary in which
the Company is the surviving company or between one or more Restricted
Subsidiaries to the extent that a Person that is a Restricted Subsidiary
immediately before and after the transaction is the surviving entity, or to the
sale of substantially all of the assets of a Restricted Subsidiary to the
Company or to a Person that is a Restricted Subsidiary immediately before and
after the transaction. For purposes of this Section 5.1, the transfer by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions, of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
Section 5.2. SUCCESSOR PERSON SUBSTITUTED.
Upon any transaction or series of transactions that are of the
type described in and effected in accordance with, Section 5.1, the Surviving
Entity shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
Surviving Entity had been named as the Company herein; and when a Surviving
Entity duly assumes all of the obligations and covenants of the Company pursuant
to this Indenture and the Notes, except in the case of a lease, the predecessor
Person shall be relieved of all such obligations.
ARTICLE VI.
DEFAULTS AND REMEDIES
Section 6.1. EVENTS OF DEFAULT.
(a) Each of the following is an "EVENT OF DEFAULT":
(i) the failure to pay interest (including any
additional interest payable under the Registration Rights
Agreement) on any Notes when the same becomes due and payable
and the default continues for a period of 30 days;
(ii) the failure to pay the principal on any Notes,
when such principal becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a
payment to purchase Notes tendered pursuant to a Change of
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Control Offer or a Net Proceeds Offer), whether or not such
payment shall be prohibited by the subordination provision of
this Indenture;
(iii) a default in the observance or performance of
the covenant described under Section 5.1 hereof;
(iv) a default in the observance or performance of
any other covenant or agreement contained in this Indenture,
which default continues for a period of 45 calendar days after
the Company receives written notice specifying the default
from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes;
(v) a default under any mortgage, indenture or
instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness of the Company or
of any Restricted Subsidiary (or the payment of which is
guaranteed by the Company or any Restricted Subsidiary),
whether such Indebtedness now exists or is created after the
Issue Date, which default:
(A) is caused by failure to pay principal of
such Indebtedness after any applicable grace period provided
in such Indebtedness on the date of such default (a "PAYMENT
DEFAULT"), or
(B) results in the acceleration of such
Indebtedness prior to its express maturity,
and the aggregate principal amount of any Indebtedness to
which clause (A) or (B) applies at the relevant time, exceeds
$5.0 million;
(vi) one or more judgments in an aggregate amount in
excess of $5.0 million shall have been rendered against the
Company or any of the Restricted Subsidiaries and such
judgements remain undischarged, unpaid or unstayed for a
period of 45 calendar days after such judgment or judgments
become final and nonappealable;
(vii) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company or any Significant Subsidiary of the Company in an
involuntary case or proceeding under the SIPA or any
Bankruptcy Law or (B) a decree or order (1) adjudging the
Company or any Significant Subsidiary of the Company bankrupt
or insolvent, (2) approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition
of, or in respect of, the Company or any Significant
Subsidiary of the Company under any Bankruptcy Law, (3)
appointing a Bankruptcy Custodian of the Company or any
Significant Subsidiary of the Company or of any substantial
part of the property of the Company or any Significant
Subsidiary of the Company, or (4) ordering the winding-up or
liquidation of the affairs of the Company or any Significant
Subsidiary of the Company, and in each case, the continuance
of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60
consecutive calendar days;
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(viii) (A) the commencement by the Company or any
Significant Subsidiary of the Company of a voluntary case or
proceeding under the SIPA or any Bankruptcy Law or of any
other case or proceeding to be adjudicated bankrupt or
insolvent, (B) the consent by the Company or any Significant
Subsidiary of the Company to the entry of a decree or order
for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding
under the SIPA or any Bankruptcy Law or to the commencement of
any bankruptcy or insolvency case or proceeding against the
Company or any Significant Subsidiary of the Company, (C) the
filing by the Company or any Significant Subsidiary of the
Company of a petition or answer or consent seeking
reorganization or relief under the SIPA or any Bankruptcy Law,
(D) the consent by the Company or any Significant Subsidiary
of the Company to the filing of such petition or to the
appointment of or taking possession by a Bankruptcy Custodian
of the Company or any Significant Subsidiary of the Company or
of any substantial part of the property of the Company or any
Significant Subsidiary of the Company, (E) the making by the
Company or any Significant Subsidiary of the Company of an
assignment for the benefit of creditors, (F) the admission by
the Company or any Significant Subsidiary of the Company in
writing of its inability to pay its debts generally as they
become due, (G) the approval by stockholders of the Company or
any Significant Subsidiary of the Company of any plan or
proposal for the liquidation or dissolution of the Company or
any Significant Subsidiary of the Company, or (H) the taking
of corporate action by the Company or any Significant
Subsidiary of the Company in furtherance of any such action;
(ix) the making of an application by the SIPC for a
decree adjudicating that customers of the Company are in need
of protection under the SIPA and the failure of the Company to
obtain the dismissal of such application within 30 calendar
days;
(x) LaBranche is not a specialist broker in
good standing with the NYSE;
(xi) the SEC revokes the registration of LaBranche as
a broker-dealer under the Exchange Act or LaBranche fails to
maintain such registration; or
(xii) the Examining Authority (as defined in Rule
15c3-1) for the Company shall suspend (and not reinstate
within 10 calendar days) or revoke LaBranche's status as a
member organization thereof.
The foregoing will constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
(b) The Company shall deliver to the Trustee upon
becoming aware of any Default or Event of Default written notice in the form of
an Officers' Certificate of any Default
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or Event of Default that has occurred and, if applicable, the Company shall also
describe such Default or Event of Default and the status thereof (provided that
the Company shall provide such certification at least annually whether or not it
knows of any Default or Event of Default).
Section 6.2. ACCELERATION.
(a) If an Event of Default (other than an Event of
Default specified in clauses (vii), (viii) or (ix) of Section 6.1) shall occur
and be continuing, the Trustee or the Holders of at least 25% in principal
amount of outstanding Notes may declare the principal of, and accrued interest
on, all the Notes to be due and payable by notice in writing to the Company and
(if given by the Holders) the Trustee, specifying the respective Events of
Default and that it is a "notice of acceleration," and the same shall become
immediately due and payable. If an Event of Default specified in clauses (vii),
(viii) or (ix) of Section 6.1 occurs and is continuing, then all unpaid
principal of, and accrued and unpaid interest on, all of the outstanding Notes
shall become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
(b) At any time after a declaration of acceleration with
respect to the Notes as described in the preceding paragraph, the Holders of a
majority in principal amount of the then outstanding Notes may rescind and
cancel such declaration and its consequences:
(i) if the rescission would not conflict
with any judgment or decree;
(ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration;
(iii) to the extent payment of such interest is
lawful, if interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid;
(iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances; and
(v) in the event of the cure or waiver of an Event of
Default of the type described in clauses (vii), (viii) or (ix)
of Section 6.1, the Trustee shall have received an officers'
certificate and an opinion of counsel that such Event of
Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
(c) The Holders of a majority in principal amount of the
then outstanding Notes may waive any existing Default or Event of Default under
this Indenture, and its consequences, except a default in the payment of the
principal of or interest on any Notes.
(d) Holders of the Notes may not enforce this Indenture
or the Notes except as provided in this Indenture and under the TIA. Subject to
the provisions of this Indenture relating to the duties of the Trustee, the
Trustee is under no obligation to exercise any of its rights or
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powers under this Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable indemnity.
Subject to all provisions of this Indenture and applicable law, the Holders of a
majority in aggregate principal amount of the then outstanding Notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
Section 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal, Redemption Price or Change of Control Purchase Price of,
and accrued interest on, the Notes or to enforce the performance of any
provision of the Notes or this Indenture and may take any necessary action
requested of it as Trustee to settle, compromise, adjust or otherwise conclude
any proceedings to which it is a party. The Trustee may maintain a proceeding
even if it does not possess any of the Notes or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any Holder in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
Section 6.4. WAIVER OF PAST DEFAULTS AND EVENTS OF DEFAULT.
Subject to Sections 6.2, 6.7 and 8.2 hereof, the Holders of
not less than a majority in aggregate principal amount of the outstanding Notes
may on behalf of the Holders of all the Notes waive any past Default under this
Indenture and its consequences, except a Default (1) in any payment in respect
of the principal, Redemption Price or Change of Control Purchase Price of, and
accrued interest on, any Notes (including any Note which is required to have
been purchased pursuant to a Change of Control Offer to Purchase which has been
made by the Company), or (2) in respect of a covenant or provision hereof which
under this Indenture cannot be modified or amended without the consent of the
Holder of each outstanding Note affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of this Indenture, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.
Section 6.5. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another Holder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Trust Officer, determine that the proceedings
so directed, or the exercise of such trust or power, may involve it in personal
liability; PROVIDED that
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the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.6. LIMITATION ON SUITS.
Subject to Section 6.7 hereof, no Holder of any Note will have
any right to institute any proceeding with respect to this Indenture or for any
remedy thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default and unless the Holders of at
least 25% in aggregate principal amount of the outstanding Notes shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the outstanding Notes a
direction inconsistent with such request and the Trustee shall have failed to
institute such proceeding within 60 calendar days. A Holder may not use this
Indenture to prejudice the rights of another Holder or to obtain a preference or
priority over another Holder.
Section 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, Redemption Price
or Change of Control Purchase Price of, and accrued interest on, the Note on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, is absolute
and unconditional and shall not be impaired or affected without the consent of
the Holder.
Section 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, Redemption
Price or Change of Control Purchase Price of, or accrued interest on, the Notes
specified in Section 6.1(a)(i) or (ii) hereof occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company (or any other obligor on the Notes) for the whole amount of
unpaid principal, Redemption Price or Change of Control Purchase Price of, and
accrued interest on, the Notes remaining unpaid, together with interest on
overdue principal, Redemption Price or Change of Control Purchase Price, and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate then borne by the Notes, and
such further amounts as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, including all sums due and
owing to the Trustee pursuant to Section 7.7.
Section 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), their creditors or their property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its reasonable charges and expenses to
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the extent that any such charges and expenses are not paid out of the estate in
any such proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan or
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceedings.
Section 6.10. PRIORITIES.
(a) If the Trustee collects any money pursuant to this
Article VI, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under
Section 7.7 hereof;
SECOND: to Holders for amounts due and
unpaid on the Notes for principal, Redemption Price or Change
of Control Purchase Price of, and accrued interest (which
shall include any Damage Amount as provided in the
Registration Rights Agreement) as to each, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Notes; and
THIRD: to the Company.
(b) The Trustee may fix a record date and payment date
for any payment to Holders pursuant to this Section 6.10.
Section 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all
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rights and remedies of the Trustee and the Holders shall continue as though no
such proceeding had been instituted.
ARTICLE VII.
TRUSTEE
Section 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent man would exercise or use under the same circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that
are specifically set forth in this Indenture and no others and
no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture
but, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of
paragraph (b) of this Section 7.1.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
(iii) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Sections 6.2 and 6.5 hereof.
(iv) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its rights or
powers if it shall have reasonable grounds for believing that
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repayment of such funds or adequate indemnity satisfactory to
it against such risk or liability is not reasonably assured to
it.
(d) Whether or not therein expressly so provided,
paragraphs (a), (b), (c), (e), (f) and (g) of this Section 7.1 shall govern
every provision of this Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or
exercise any right or power unless it receives indemnity reasonably satisfactory
to it against any loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by the law.
(g) The Trustee shall not be deemed to have notice of any
fact or matter with respect hereto, including without limitation, the occurrence
of a Default or Event of Default, unless such fact or matter is actually known
by a Trust Officer charged with responsibility for administering this Indenture
or unless in writing received by a Trust Officer and making specific reference
to this Indenture.
Section 7.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1 hereof:
(a) The Trustee may rely on and shall be protected in
acting or refraining from acting upon any document (including without limitation
any Company Order or Officers' Certificate) reasonably believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in any document.
(b) Before the Trustee acts or refrains from acting,
including whenever the Trustee deems it desirable that a matter be proved or
established prior to it acting or refraining from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both, which shall conform to
the provisions of Section 10.5 hereof. The Trustee shall be protected and shall
not be liable for any action it takes or omits to take in good faith in reliance
on such certificate or opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent (other than the
negligence or willful misconduct of an agent who is an employee of the Trustee)
appointed by it with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers; provided that the Trustee's conduct
does not constitute negligence or bad faith.
(e) The Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel as to matters of law shall
be full and complete authorization and
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protection from liability in respect of any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
Section 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company, or any Affiliates
thereof, with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, shall be subject to
Sections 7.10 and 7.11 hereof.
Section 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company' use of the proceeds from the sale of Notes or any money paid to the
Company pursuant to the terms of this Indenture and it shall not be responsible
for any statement in the Notes or any document used in connection with the sale
of the Notes other than its certificate of authentication.
Section 7.5. NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to
the Trustee, the Trustee shall mail to each Holder notice of the Default within
90 calendar days after it occurs. Except in the case of a Default in payment of
the principal, Redemption Price or Purchase Price of, and accrued interest on,
any Note, the Trustee may withhold the notice if and so long as the board of
directors of the Trustee, the executive committee or any trust committee of such
board and/or its Trust Officers in good faith determine(s) that withholding the
notice is in the interest of the Holders.
Section 7.6. REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA Section 313(a), within 60 calendar days
after May 15 of any year, commencing the May 15th following the date of this
Indenture, the Trustee shall mail to each Holder a brief report dated as of
such May 15 that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c) and TIA Section 313(d). A copy
of each report at the time of its mailing to Holders shall be filed with the
SEC and each stock exchange on which the Notes are listed. The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.7. COMPENSATION AND INDEMNITY.
(a) The Company shall pay to the Trustee from time to
time such reasonable compensation as shall be agreed in writing between the
Company and the Trustee for its services hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust). The Company shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances incurred or made by it in
connection with its duties under this Indenture, including the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
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(b) The Company agrees to indemnify each of the Trustee
and any predecessor Trustee for, and hold it harmless against, any and all loss,
damage, claim, liability, reasonable expense (including but not limited to
reasonable attorneys' fees and expenses) or taxes (other than taxes based on the
income of the Trustee) incurred by it in connection with the acceptance or
performance of its duties under this Indenture including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder
(including, without limitation, settlement costs). The Trustee shall notify the
Company in writing promptly of any claim asserted against the Trustee for which
it may seek indemnity. However, the failure by the Trustee to so notify the
Company shall not relieve the Company of their obligations hereunder unless and
to the extent such failure results in the forfeiture by the Company of
substantial rights and defenses.
(c) Notwithstanding the foregoing, the Company need not
reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To secure
the payment obligations of the Company in this Section 7.7, the Trustee shall
have a lien prior to the Notes on all money or property held or collected by the
Trustee in its capacity as such, except such money or property held in trust to
pay principal, Redemption Price or Change of Control Purchase Price of, and
accrued interest on, particular Notes. The obligations of the Company under this
Section 7.7 to compensate and indemnify the Trustee and each predecessor Trustee
and to pay or reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall survive the satisfaction and discharge of this
Indenture, including the termination or rejection hereof in any bankruptcy
proceeding to the extent permitted by law.
(d) When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.1(a)(vii), (viii) or (ix)
hereof occurs, the expenses and the compensation for the services are intended
to constitute expenses of administration under the SIPA or any Bankruptcy Law.
(e) For purposes of this Section 7.7, the term "Trustee"
shall include any trustee appointed pursuant to Article 9.
Section 7.8. REPLACEMENT OF TRUSTEE.
(a) The Trustee may resign by so notifying the Company in
writing, such resignation to become effective upon the appointment of a
successor Trustee. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by notifying the removed Trustee in
writing and may appoint a successor Trustee with the Company's written consent
which consent shall not be unreasonably withheld. The Company may remove the
Trustee at its election if:
(i) the Trustee fails to comply with Section
7.10 hereof;
(ii) the Trustee is adjudged a bankrupt or
an insolvent;
(iii) a receiver or other public officer takes charge
of the Trustee or its property; or
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(iv) the Trustee otherwise becomes incapable of
acting.
(b) If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall promptly
appoint a successor Trustee.
(c) If a successor Trustee does not take office within 60
calendar days after the retiring Trustee resigns or is removed, the retiring
Trustee, the Company or any Holder of outstanding Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee. If the
Trustee fails to comply with Section 7.10 hereof, any Holder may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(d) A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee and to the Company.
(e) Immediately following such delivery, the retiring
Trustee shall, subject to its rights under Section 7.7 hereof, transfer all
property held by it as Trustee to the successor Trustee, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder. Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company' obligations under Section 7.7 hereof shall continue for the benefit
of the retiring Trustee.
Section 7.9. SUCCESSOR TRUSTEE BY CONSOLIDATION, MERGER OR
CONVERSION.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation or national banking association, subject to Section 7.10 hereof, the
successor corporation or national banking association without any further act
shall be the successor Trustee.
Section 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies
the requirements of TIA Section 310(a)(1), (2) and (5) in every respect. The
Trustee shall have a combined capital and surplus of at least $100,000,000 as
set forth in its most recent published annual report of condition. The
Trustee shall comply with TIA Section 310(b), including the provision in TIA
Section 310(b)(1); PROVIDED that there shall be excluded from the operation
of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or conflicts of interest or participation in other securities, of
the Company are outstanding if the requirements for exclusion set forth in
TIA Section 310(b)(1) are met.
Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
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Section 7.12. PAYING AGENTS.
The Company shall cause each Paying Agent other than the
Trustee or an Affiliate of the Trustee to execute and deliver to it and the
Trustee an instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section 7.12:
(a) that it will hold all sums held by it as agent for
the payment of principal, Redemption Price or Change of Control Purchase Price
of, and accrued interest on, the Notes (whether such sums have been paid to it
by the Company or by any obligor on the Notes) in trust for the benefit of
Holders of the Notes or the Trustee;
(b) that it will at any time during the continuance of
any Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting thereof;
and
(c) that it will give the Trustee written notice within
three (3) Business Days of any failure of the Company (or by any obligor on the
Notes) in the payment of any installment of the principal, Redemption Price or
Change of Control Purchase Price of, and accrued interest on, the Notes when the
same shall be due and payable.
ARTICLE VIII.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 8.1. WITHOUT CONSENT OF HOLDERS.
(a) Without the consent of any Holders, the Company, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to this Indenture for any of the following purposes:
(i) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company in this Indenture and in the Notes;
or
(ii) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power
herein conferred upon the Company; or
(iii) to add additional Events of Default; or
(iv) to provide for uncertificated Notes in
addition to or in place of the certificated Notes; or
(v) to evidence and provide for the acceptance of
appointment under this Indenture by a successor Trustee; or
(vi) to secure the Notes; or
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(vii) to cure any ambiguity, to correct or supplement
any provision in this Indenture which may be defective or
inconsistent with any other provision in this Indenture, or to
make any other provisions with respect to matters or questions
arising under this Indenture, provided that such actions
pursuant to this clause shall not adversely affect the
interests of the Holders in any material respect; or
(viii) to provide for the issuance of the Exchange
Notes and Private Exchange Notes, which will have terms
substantially identical to the other outstanding Notes except
for the requirement of a Private Placement Legend and related
transfer restrictions under the Securities Act and this
Indenture and as to the applicability of additional interest
payable as provided in Section 2.13, and which will be
treated, together with any other outstanding Notes, as a
single issue of securities, or
(ix) to comply with any requirements of the SEC in
order to effect and maintain the qualification of this
Indenture under the Trust Indenture Act.
(b) The Trustee is hereby authorized to join with the
Company in the execution of any supplemental indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture which adversely affects
its own rights, duties or immunities under this Indenture.
Section 8.2. WITH CONSENT OF HOLDERS.
(a) With the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Notes, the Company and
the Trustee may enter into an indenture or indentures supplemental to this
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture, including the definitions
therein; PROVIDED, HOWEVER, that no such supplemental indenture shall, without
the consent of the Holder of each outstanding Note affected thereby:
(i) change the Stated Maturity of any Note or of any
installment of interest on any Note, or reduce the amount
payable in respect of the principal thereof or the rate of
interest thereon or any premium payable thereon, or reduce the
amount that would be due and payable on acceleration of the
maturity thereof, or change the place of payment where, or the
coin or currency in which, any Note or any premium or interest
thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated
Maturity thereof; or
(ii) reduce the percentage in aggregate principal
amount of the outstanding Notes, the consent of whose Holders
is required for any such supplemental indenture, or the
consent of whose Holders is required for any
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waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture; or
(iii) modify in a manner adverse to the Holders the
obligations of the Company to make a Change of Control Offer
to Purchase upon a Change of Control or a Net Proceed Offer
upon an Asset Sale; or
(iv) subordinate, in right of payment, the
Notes to any other Indebtedness of the Company; or
(v) modify any of the provisions of this proviso to
Section 8.2 or provisions relating to waiver of defaults or
certain covenants contained in Section 6.2, 6.4 or 6.7 hereof,
except to increase any such percentage required for such
actions or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of
the Holder of each outstanding Note affected thereby.
(b) After a modification, amendment, supplement or waiver
under this Section 8.2 becomes effective, the Company shall mail to the Holders
a notice briefly describing the modification, amendment, supplement or waiver.
Any failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
(c) It shall not be necessary for the consent of the
Holders under this Section 8.2 to approve the particular form of any proposed
amendment, modification, supplement or waiver, but it shall be sufficient if
such consent approves the substance thereof.
Section 8.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.4. REVOCATION AND EFFECT OF CONSENTS.
(a) Until a modification, amendment, supplement, waiver
or other action becomes effective, a consent to it by a Holder of a Note is a
continuing consent conclusive and binding upon such Holder and every subsequent
Holder of the same Note or portion thereof, and of any Note issued upon the
transfer thereof or in exchange therefor or in place thereof, even if notation
of the consent is not made on any such Note. Any such Holder or subsequent
Holder, however, may revoke the consent as to his Note or portion of a Note, if
the Trustee receives the notice of revocation before the date the modification,
amendment, supplement, waiver or other action becomes effective.
(b) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to consent to
any modification, amendment, supplement, or waiver. If a record date is fixed,
then, notwithstanding the preceding paragraph, those Persons who were Holders at
such record date (or their duly designated proxies), and only such Persons,
shall be entitled to consent to such modification, amendment, supplement, or
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waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 calendar days after such record date unless the
consent of the requisite number of Holders has been obtained. After a
modification, amendment, supplement, waiver or other action becomes effective,
it shall bind every Noteholder.
Section 8.5. NOTATION ON OR EXCHANGE OF NOTES.
If a modification, amendment, supplement or waiver changes the
terms of a Note, the Trustee may request the Holder of the Note to deliver it to
the Trustee. In such case, the Trustee shall place an appropriate notation on
the Note about the changed terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determine, the Company in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such modification, amendment,
supplement or waiver.
Section 8.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any modification, amendment, supplement
or waiver authorized pursuant to this Indenture if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such modification, amendment, supplement or
waiver, the Trustee shall be entitled to receive and, subject to Section 7.1
hereof, shall be fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that such modification, amendment, supplement or
waiver is authorized or permitted by this Indenture and such supplemental
indenture constitutes the legal, valid and binding obligation of the Company
enforceable against each of them in accordance with its terms (subject to
customary exceptions). The Company may not sign a modification, amendment or
supplement until the Board of Directors of the Company approves it.
ARTICLE IX.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.1. DISCHARGE OF INDENTURE.
(a) The Company may terminate its obligations under this
Indenture, except the obligations referred to in the last paragraph of this
Section 9.1 when (i) either: (A) all Notes theretofore authenticated and
delivered have been delivered to the Trustee for cancellation, or (B) all such
Notes not theretofore delivered to the Trustee for cancellation (1) have become
due and payable, or (2) will become due and payable within 60 calendar days or
are to be called for redemption within 60 calendar days (a "DISCHARGE") under
irrevocable arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire indebtedness on
the Notes, not theretofore delivered to the Trustee for cancellation, for
principal, Redemption Price of, and accrued interest on, the Notes to the Stated
Maturity or date of redemption; (ii) the
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Company has paid or caused to be paid all other sums then due and payable
hereunder by the Company; and (iii) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
(b) After such delivery the Trustee upon request shall
acknowledge in writing the satisfaction and discharge of the Company's
obligations under the Notes and this Indenture except for those surviving
obligations specified below.
(c) Notwithstanding the satisfaction and discharge of
this Indenture, the obligations of the Company in Sections 2.2, 2.3, 2.4, 2.5,
2.6, 2.7, 2.8, 2.9, 2.13, 4.15, 9.5, 9.6 and 9.8, the rights, powers, duties and
immunities of the Trustee hereunder (including claims of, or payments to, the
Trustee under or pursuant to Section 7.7 hereof), the provisions of Article III
and the Trustee's and Paying Agent's obligations in Section 9.8 shall survive
until the Notes are no longer outstanding. Upon such satisfaction and discharge,
only the obligations of the Company in Sections 2.9, 7.7, 9.5, 9.6 and 9.8
hereof shall survive.
Section 9.2. LEGAL DEFEASANCE.
The Company may at its option be discharged from its
obligations with respect to the Notes on the date the conditions set forth in
Section 9.4 below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall, subject to Section 9.6 hereof, execute proper instruments acknowledging
the same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
Notes to receive solely from the trust funds described in Section 9.4 hereof and
as more fully set forth in such Section, payments in respect of the principal,
Redemption Price or Purchase Price of, and accrued interest on, such Notes when
such payments are due, (ii) the Company's obligations with respect to such Notes
under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 4.15 hereof, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder (including claims
of, or payments to, the Trustee under or pursuant to Section 7.7 hereof), (iv)
Article III and (v) this Article IX. Subject to compliance with this Article IX,
the Company may exercise their option under this Section 9.2 with respect to the
Notes notwithstanding the prior exercise of its option under Section 9.3 below
with respect to the Notes.
Section 9.3. COVENANT DEFEASANCE.
At the option of the Company, the Company shall be released
from their respective obligations under Sections 4.2 through 4.14 hereof,
inclusive, Section 4.16, clause (a)(ii) of Section 5.1 hereof (with respect to
Sections 4.2 through 4.14 hereof, inclusive, and Section 4.16) and Section
6.1(a)(iii) only to the extent related to compliance with clause (a)(ii) of
Section 5.1 and Section 6.1(a)(vi), with respect to the outstanding Notes on and
after the date the conditions set forth in Section 9.4 hereof are satisfied
(hereinafter, "COVENANT DEFEASANCE"), any omission to comply with such
obligations shall not constitute a Default or Event of Default, and the Notes
shall thereafter be deemed not to be outstanding for purposes of any direction,
waiver,
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consent, declaration or act of the Holders (and the consequences thereof) in
connection with such covenants but shall continue to be outstanding for all
other purposes hereunder. For this purpose, such Covenant Defeasance means that
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such specified Section or
portion thereof, whether directly or indirectly by reason of any reference
elsewhere herein to any such specified Section or portion thereof or by reason
of any reference in any such specified Section or portion thereof to any other
provision herein or in any other document, but the remainder of this Indenture
and the Notes shall be unaffected thereby.
Section 9.4. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The following shall be the conditions to application of
Section 9.2 or Section 9.3 hereof to the outstanding Notes:
(1) the Company must irrevocably have deposited or caused
to be deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 hereof who shall agree to comply with the provisions of this
Article IX applicable to it) as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to the benefits of the Holders of such Notes: (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than the due date of any payment, money in an amount, or (C) a combination
thereof, in each case sufficient without reinvestment, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the entire indebtedness in respect of the principal, Redemption
Price or Change of Control Purchase Price of, and accrued interest on, such
Notes on the Stated Maturity thereof or (if the Company has made irrevocable
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name and at the expense of the Company) the Redemption
Date thereof, as the case may be, in accordance with the terms of this Indenture
and such Notes;
(2) in the case of Legal Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (A) the Company
have received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case (A) or (B) to the effect that,
and based thereon such opinion shall confirm that, the Holders of such Notes
will not recognize gain or loss for federal income tax purposes as a result of
the Legal Defeasance to be effected with respect to such Notes and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would be the case if such Legal Defeasance were not to occur;
(3) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel (i) to the effect that the
Holders of such outstanding Notes will not recognize gain or loss for federal
income tax purposes as a result of the Covenant Defeasance to be effected with
respect to such Notes and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would be the case if such
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Covenant Defeasance were not to occur or (ii) that the Company has received
from, or there has been published by, the Internal Revenue Service a ruling to
the foregoing effect;
(4) no Default or Event of Default with respect to the
outstanding Notes shall have occurred and be continuing at the time of such
deposit after giving effect thereto or, in the case of Legal Defeasance, either:
(A) the Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that, based upon existing precedents, if the matter were properly
briefed, a court should hold that the deposit of moneys and/or U.S. Government
Obligations as provided in clause (1) of this Section 9.4 would not constitute a
preference voidable under Section 547 or 548 of the federal bankruptcy laws; or
(B) no Default or Event of Default relating to bankruptcy or insolvency shall
have occurred and be continuing at any time on or prior to the 91st day after
the date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day);
(5) such Legal Defeasance or Covenant Defeasance shall
not cause the Trustee to have a conflicting interest within the meaning of the
TIA (assuming all Notes are in default within the meaning of such Act);
(6) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it is bound;
(7) such Legal Defeasance or Covenant Defeasance shall
not result in the trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act of 1940, as amended,
unless such trust shall be registered under such Act or exempt from registration
thereunder; and
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Legal Defeasance or Covenant
Defeasance have been complied with.
Section 9.5. DEPOSITED MONEY AND U.S. GOVERNMENT
OBLIGATIONS TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS.
(a) All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee pursuant to Section 9.4 hereof
in respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Notes, of all sums due and to become due
thereon in respect of principal, Redemption Price or Change of Control Purchase
Price of, and accrued interest on, the Notes, but such money need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no duty to invest such money or U.S. Government Obligations. The
Company shall pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.4 hereof or the principal, Redemption Price or Change of
Control Purchase Price of, and accrued interest on, the Notes received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
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(b) Anything in this Article IX to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Order any money or U.S. Government Obligations held by it as
provided in Section 9.4 hereof which, in the opinion of a nationally-recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
Section 9.6. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.1, 9.2 or 9.3 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Company under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to this Article IX until such time as the Trustee or Paying Agent is permitted
to apply all such money or U.S. Government Obligations in accordance with
Section 9.1, 9.2 or 9.3 hereof; PROVIDED, HOWEVER, that if the Company has made
any payment of principal, Redemption Price or Purchase Price of, and accrued
interest on, any Notes because of the reinstatement of its Obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 9.7. MONEYS HELD BY PAYING AGENT.
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.1 or 9.4 hereof, to
the Company, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 9.8. MONEYS HELD BY TRUSTEE.
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company in trust for the payment of the principal, Redemption
Price or Change of Control Purchase Price of, and accrued interest on, any Note
that are not applied but remain unclaimed by the Holder of such Note for two
years after the date upon which the principal, Redemption Price or Change of
Control Purchase Price of, and accrued interest on, such Note shall have
respectively become due and payable shall be repaid to the Company upon Company
Order, or if such moneys are then held by the Company in trust, such moneys
shall be released from such trust; and the Holder of such Note entitled to
receive such payment shall thereafter, as an unsecured general creditor, look
only to the Company for the payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or any such Paying Agent, before being
required to make any such repayment, may, at the expense of the Company either
mail to each Holder affected, at the address shown in the register of the Notes
maintained by the Registrar pursuant to Section 2.3 hereof, or cause to be
published once a week for two successive weeks, in a newspaper published in the
English language, customarily published each Business Day and of general
circulation in
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The City of New York, New York, a notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 calendar
days from the date of such mailing or publication, any unclaimed balance of such
moneys then remaining will be repaid to the Company. After payment to the
Company or the release of any money held in trust by the Company, Holders
entitled to the money must look only to the Company for payment as general
creditors unless applicable abandoned property law designates another person.
ARTICLE X.
MISCELLANEOUS
Section 10.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 10.2. NOTICES.
(a) Any notice or communication shall be given in writing
and delivered in person, sent by facsimile, delivered by commercial courier
service or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
LaBranche & Co Inc.
One Exchange Plaza
New York, New York 10006
Attention:
If to the Trustee:
Firstar Bank, N.A.
Attention: Keith A. Maurmeier
Corporate Trust Services
425 Walnut Street, 6th Floor ML 5125
Cincinnati, OH 45202
Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.
(b) The Company or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication mailed to a Holder shall
be mailed to him by first-class mail, postage prepaid, at his address shown on
the register kept by the Registrar. If a notice or communication to a Holder is
mailed in the manner provided above, it shall be deemed duly given on the date
so deposited in the mail, whether or not the addressee receives it.
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Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders. In case by reason of
the suspension of regular mail service, or by reason of any other cause, it
shall be impossible to mail any notice as required by this Indenture, then such
method of notification as shall be made with the approval of the Trustee shall
constitute a sufficient mailing of such notice.
Section 10.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA ss.312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
Section 10.4. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee at the request of the Trustee:
(a) an Officers' Certificate (which shall include the
statements set forth in Section 10.5 below) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the
statements set forth in Section 10.5 below) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
Section 10.5. STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.
(a) Each certificate and opinion with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(i) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(iii) a statement that, in the opinion of such
Person, it or he has made such examination or investigation as is necessary to
enable it or him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion
of such Person, such covenant or condition has been complied with.
(b) In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person or that they be so certified or
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covered by only one document, but one such Person may certify or give an opinion
with respect to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
(c) Any certificate or opinion of an officer of the
Company may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters, upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of an Company stating
that the information with respect to such factual matters is in the possession
of such Company, unless such counsel knows or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
(d) Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
Section 10.6. WHEN TREASURY NOTES DISREGARDED.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company or by any Affiliate of the Company shall be
disregarded as though they were not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee actually knows are so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Notes.
Section 10.7. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or
meetings of Holders and any Registrar or Paying Agent may make reasonable rules
for their functions provided that no such rule shall conflict with the terms of
this Indenture or the TIA.
Section 10.8. BUSINESS DAYS; LEGAL HOLIDAYS.
A "BUSINESS DAY" is a day that is not a Legal Holiday. A
"LEGAL HOLIDAY" is a Saturday, a Sunday, a federally-recognized holiday or a day
on which banking institutions are not required to be open in the State of New
York or the state in which the Corporate Trust Office is located. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
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Section 10.9. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REGARD TO
CONFLICT OF LAW RULES. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF
THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT
IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
Section 10.10. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Company or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 10.11. NO RECOURSE AGAINST OTHERS.
No recourse for the payment of the principal, Redemption Price
or Change of Control Purchase Price of, and accrued interest on, any of the
Notes, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture, or in any of the Notes, or
because of the creation of any Indebtedness represented thereby, shall be had
against any stockholder, officer, director, partner, affiliate, beneficiary or
employee, as such, past, present or future, of the Company or of any successor
corporation or against the property or assets of any such stockholder, officer,
employee, partner, affiliate, beneficiary or director, either directly or
through the Company, or any successor corporation thereof, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Notes are solely obligations of the Company, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, any
stockholder, officer, employee, partner, affiliate, beneficiary or director of
the Company, or any successor corporation or partnership thereof, because of the
creation of the Indebtedness hereby authorized, or under or by reason of the
obligations, covenants or
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agreements contained in this Indenture or the Notes or implied therefrom, and
that any and all such personal liability of, and any and all claims against
every stockholder, officer, employee, partner, affiliate, beneficiary and
director, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture, and the issuance of the
Notes. It is understood that this limitation on recourse is made expressly for
the benefit of any such shareholder, employee, officer, partner, affiliate,
beneficiary or director and may be enforced by any one or all of them.
Section 10.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its respective successors. All agreements of the Trustee, any
additional trustee and any Paying Agents in this Indenture shall bind its
successor.
Section 10.13. MULTIPLE COUNTERPARTS.
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 10.14. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all reasonable costs and expenses (including attorneys' fees and
expenses for the Company, the Trustee and the Holders) incurred in connection
therewith, including, but not limited to, costs and expenses of qualification of
this Indenture and the Notes and printing this Indenture and the Notes. The
Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.
Section 10.15. TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 10.16. SEPARABILITY.
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date and year first written above.
LaBranche & Co Inc.
By /s/ George M. L. LaBranche, IV
------------------------------
Name: George M. L. LaBranche, IV
Title: Chairman, Chief Executive Officer
and President
Firstar Bank, N.A.,
as Trustee
By: /s/ Keith A. Maurmeir
------------------------
Name: Keith A. Maurmeir
Title: Vice President and
Trust Officer
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EXHIBIT A
FORM OF NOTE
LaBRANCHE & CO INC.
9 1/2% Senior Notes due 2004
[INCLUDE THE FOLLOWING LEGEND FOR GLOBAL NOTES ONLY:
"THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO
HEREINAFTER.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF."]
[INCLUDE THE FOLLOWING LEGEND ON ALL NOTES THAT ARE RESTRICTED NOTES:]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ADOPTED UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
ADOPTED UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
A-1
<PAGE>
BUYER IN COMPLIANCE WITH RULE 144A ADOPTED UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 ADOPTED UNDER THE SECURITIES ACT (IF AVAILABLE) OR
ANOTHER AVAILABLE EXEMPTION UNDER THE SECURITIES ACT, OR (E) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND
(2) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS MAY BE REQUIRED PURSUANT TO THIS
INDENTURE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
BY ITS ACQUISITION HEREOF, THE HOLDER FURTHER REPRESENTS THAT, ON EACH
DAY FROM THE DATE ON WHICH SUCH HOLDER ACQUIRES THE NOTE THROUGH AND
INCLUDING THE DATE ON WHICH SUCH HOLDER DISPOSES OF ITS INTEREST IN THE
NOTE, EITHER THAT (A) IT IS NOT A PLAN, AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE THE ASSETS OF ANY SUCH PLAN, OR A GOVERNMENT PLAN WHICH
IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR (B)
ITS PURCHASE, HOLDING AND DISPOSITION OF SUCH NOTE WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE (OR, IN THE CASE OF A GOVERNMENT PLAN, ANY SIMILAR FEDERAL,
STATE OR LOCAL LAW) FOR WHICH AN EXEMPTION IS NOT AVAILABLE.]
[INCLUDE THE FOLLOWING LEGEND ON ALL CERTIFICATED NOTES THAT ARE
RESTRICTED NOTES:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR SUCH OPINIONS OF COUNSEL, CERTIFICATES AND/OR OTHER
INFORMATION AS IT MAY REASONABLY REQUIRE IN FORM REASONABLY
SATISFACTORY TO IT TO CONFIRM THAT THE TRANSFER COMPLIED WITH THE
FOREGOING RESTRICTIONS AS PROVIDED FOR IN THE INDENTURE."]
A-2
<PAGE>
[INCLUDE THE FOLLOWING LEGEND ON ALL REGULATION S TEMPORARY GLOBAL
NOTES:
"THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION
S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY
BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED ABOVE.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO
RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED
CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE
INDENTURE."]
A-3
<PAGE>
NO. / / PRINCIPAL AMOUNT $/ /
---- [IF THE NOTE IS A GLOBAL NOTE INCLUDE THE FOLLOWING TWO LINES:
as revised by the Schedule of Increases and
Decreases in Global Note attached hereto]
NOTE CUSIP NO. . 505447AA0
UNIT CUSIP NO. .
[IF THE NOTE IS A REGULATION S GLOBAL NOTE, DELETE THE
REFERENCE TO CUSIP NO. AND REPLACE IT WITH:
ISIN No. U49848AA9
LaBranche & Co Inc., a Delaware corporation, promises to pay
to [___________], or its registered assigns, the principal sum of
[__________________] Dollars [IF THE NOTE IS A GLOBAL NOTE, ADD THE FOLLOWING,
as revised by the Schedule of Increases and Decreases in Global Note attached
hereto], on August 24, 2004.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Additional provisions of this Note are set forth on the other
side of this Note.
LaBranche & Co Inc.
By:
-------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman, Chief Executive Officer and
President
By:
-------------------------------------
Name: S. Lawrence Prendergast
Title: Executive Vice President, Finance
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
Firstar Bank, N.A., Trustee, certifies
that this is one of the Notes referred to in the Indenture.
By: Date: , 1999
----------------------- -------------
Authorized Signatory
A-4
<PAGE>
FORM OF REVERSE SIDE OF NOTE
9 1/2% Senior Notes due 2004
1. INTEREST
LaBranche & Co Inc., a Delaware corporation (the "COMPANY"),
promises, subject to the preceding sentence, to pay interest on the principal
amount of this Note at the rate per annum shown above.
The Company will pay interest semiannually in arrears on each
Interest Payment Date of each year commencing February 15, 2000. Interest on the
Notes will accrue from the most recent date to which interest has been paid on
the Notes or, if no interest has been paid, from the Issue Date. The Company
shall pay interest on overdue principal or premium, if any (plus interest on
such interest to the extent lawful), at the rate borne by the Notes to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal and,
to the extent such payments are lawful, interest on overdue installments of
interest, without regard to any applicable grace periods ("DEFAULTED INTEREST")
at a rate equal to the rate shown on this Note, as provided in the Indenture.
2. METHOD OF PAYMENT
By at least 10:00 a.m. (New York City time) on the date on
which any principal of, premium, if any, or interest on any Note is due and
payable, the Company shall irrevocably deposit with the Trustee or the Paying
Agent money sufficient to pay such principal, premium, if any, and/or interest.
The Company will pay interest (except Defaulted Interest) to the Persons who are
registered Holders of Notes at the close of business on the Record Date
preceding the interest payment date even if Notes are canceled, repurchased or
redeemed after the record date and on or before the relevant Interest Payment
Date. Holders must surrender Notes to a Paying Agent to collect principal
payments and premium payments, if any. The Company will pay principal and
interest in U.S. legal tender.
Payments in respect of Notes represented by a Global Note
(including principal, premium, if any, and interest) will be made by the
transfer of immediately available funds to the accounts specified by the
Depository Trust Company. The Company will make all payments in respect of a
Certificated Note (including principal, premium, if any, the Damage Amount, if
any, and interest) at the office or agency of the Company in The City of New
York maintained for such purposes, which, initially, will be the office of the
Trustee or an agent thereof; PROVIDED, HOWEVER, that payment of interest (which
shall include any Damage Amount), if any, may be made at the option of the
Company by check mailed to the Person entitled thereto as shown on the register
of the Notes maintained by the Registrar.
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3. PAYING AGENT AND REGISTRAR
Initially, Firstar Bank, N.A. (the "TRUSTEE"), will act as
Trustee, Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice to any Holder. The
Company may act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
The Company has issued this Note pursuant to an Indenture
dated as of August 24, 1999, (as it may be amended or supplemented from time to
time in accordance with the terms thereof, the "INDENTURE"), between the Company
and the Trustee. The terms of this Note include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture
(the "ACT"). Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture. The Notes are subject to all such
terms, and Holders are referred to the Indenture and the Act for a statement of
those terms. Each Holder by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture.
This Note is a general unsecured senior obligation of the
Company. The Indenture imposes certain limitations on, among other things the
ability of the Company and its Restricted Subsidiaries to: incur Indebtedness,
make Restricted Payments, incur Liens, issue or sell Capital Interests of
Restricted Subsidiaries, consummate Asset Sales, enter into transactions with
Affiliates, enter into Sale and Leaseback transactions, create Unrestricted
Subsidiaries or consolidate or merge or transfer or convey all or substantially
all of the Company's and its Restricted Subsidiaries' assets.
5. REDEMPTION
The Notes are subject to redemption, at the option of the
Company, in whole or in part, at any time, upon not less than 30 nor more than
60 days prior written notice, mailed by first class mail to a holder's address
as it shall appear on the register maintained by the Registrar of the Notes at a
redemption price equal to 100% of the outstanding principal amount of the Notes,
plus a Make-Whole Premium, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
regular record date to receive interest due on an interest payment date that is
on or prior to the Redemption Date).
If the Company does not redeem all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not then listed on a national securities exchange, on a PRO
RATA basis, by lot or in another fair and reasonable manner chosen at the
discretion of the Trustee. On and after any Redemption Date, interest will cease
to accrue on the Notes or portions thereof called for redemption unless the
Company shall fail to redeem any such Note.
6. REPURCHASE PROVISIONS
REPURCHASE UPON A CHANGE OF CONTROL. Upon the occurrence of a
Change of Control, the Company will make a Change of Control Offer to Purchase
all of the outstanding
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Notes at a purchase price in cash equal to 101% of the principal amount at
Stated Maturity thereof, together with accrued interest, if any. For purposes of
the foregoing, a Change of Control Offer to Purchase shall be deemed to have
been made if: (i) within 30 days following the date of the consummation of a
transaction or series of transactions that constitutes a Change of Control, the
Company commences a Change of Control Offer to Purchase all outstanding Notes at
the Change of Control Purchase Price (provided that the running of such 30-day
period shall be suspended, for up to a maximum of 30 days, during any period
when the commencement of such Change of Control Offer to Purchase is delayed or
suspended by reason of any court's or governmental authority's review of or
ruling on any materials being employed by the Company to effect such Change of
Control Offer to Purchase, so long as the Company has used and continues to use
its best efforts to make and conclude such Change of Control Offer to Purchase
promptly) and (ii) all Notes properly tendered pursuant to the Change of Control
Offer to Purchase are purchased on the terms of such Change of Control Offer to
Purchase.
REPURCHASE WITH PROCEEDS FROM ASSET SALES. Any Net Cash
Proceeds from any Asset Sale that are not used to reinvest in Replacement Assets
and/or repay certain Indebtedness of the Company or a Restricted Subsidiary
within 360 days after an Asset Sale shall be applied to the repurchase of the
Notes. When the aggregate amount of unutilized Net Cash Proceeds (the "NET
PROCEEDS OFFER AMOUNT") exceeds $5,000,000, the Company shall make a Net
Proceeds Offer to purchase from all Holders, Notes in an aggregate principal
amount equal to the Net Proceeds Offer Amount, at a purchase price in cash equal
to 100% of the principal amount thereof, together with accrued interest, if any,
to the date of purchase. If the aggregate purchase price of Notes surrendered by
Holders exceeds the amount equal to the Net Proceeds Offer Amount, the Trustee
shall select the Notes to be purchased on a PRO RATA basis.
The Company will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and other securities laws or
regulations in connection with a Change of Control Offer to Purchase or a Net
Proceeds Offer.
7. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in fully-registered form without coupons in
denominations of principal amount of $1,000 and any integral multiple thereof. A
Holder may transfer or exchange Notes only in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Notes selected for redemption (except, in the case of a Note
to be redeemed in part, the portion of the Note not to be redeemed) for a period
beginning 15 days before the mailing of a notice of Notes to be redeemed and
ending on the date of such mailing or (ii) any Notes for a period beginning 15
days before an interest payment date and ending on such interest payment date.
8. PERSONS DEEMED OWNERS
The registered holder of this Note may be treated as the owner
of it for all purposes.
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9. UNCLAIMED MONEY
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of their obligations under the
Notes and the Indenture if the Company deposits with the Trustee U.S. legal
tender or U.S. Government Obligations for the payment of principal of, and
interest on, the Notes to redemption or maturity, as the case may be.
11. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
and (ii) any default (other than with respect to nonpayment or in respect of a
provision that cannot be amended without the written consent of each Holder
affected) or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in principal amount of the then outstanding
Notes. Subject to certain exceptions set forth in the Indenture, without the
consent of any Holder, the Company and the Trustee may amend the Indenture or
the Notes to, among other things, to evidence the succession of another Person
to the Company and the assumption by any such successor of the covenants of the
Company in the Indenture and in the Notes; to add to the covenants of the
Company for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company; to add additional Events of Default; to
provide for uncertificated Notes in addition to or in place of the certificated
Notes; to evidence and provide for the acceptance of appointment under the
Indenture by a successor Trustee; to secure the Notes; to cure any ambiguity, to
correct or supplement any provision in the Indenture which may be defective or
inconsistent with any other provision in the Indenture, or to make any other
provisions with respect to matters or questions arising under the Indenture,
provided that such actions pursuant to this clause shall not adversely affect
the interests of the Holders in any material respect; to issue Exchange Notes or
Private Exchange Notes; or to comply with any requirements of the SEC in order
to effect and maintain the qualification of the Indenture under the Trust
Indenture Act.
12. DEFAULTS AND REMEDIES
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount at Stated Maturity of the
outstanding Notes may declare all the Notes to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Notes being due and payable immediately upon the occurrence of
such Events of Default.
Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in
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principal amount at Stated Maturity of the outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing Default or Event of Default (except a Default
or Event of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
13. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with and collect
obligations owed to it by the Company or their Affiliates and may otherwise deal
with the Company or their affiliates with the same rights it would have if it
were not Trustee.
14. NO RECOURSE AGAINST OTHERS
No recourse for the payment of the principal, Redemption Price
or Purchase Price of, and accrued interest on, any of the Notes, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture or in
any supplemental indenture, or in any of the Notes, or because of the creation
of any Indebtedness represented thereby, shall be had against any stockholder,
officer, director, partner, affiliate, beneficiary or employee, as such, past,
present or future, of the Company or of any successor corporation or against the
property or assets of any such stockholder, officer, employee, partner,
affiliate, beneficiary or director, either directly or through the Company, or
any successor corporation thereof, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that the Indenture and the Notes are
solely obligations of the Company, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, any stockholder, officer,
employee, partner, affiliate, beneficiary or director of the Company, or any
successor corporation or partnership thereof, because of the creation of the
Indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in the Indenture or the Notes or implied
therefrom, and that any and all such personal liability of, and any and all
claims against every stockholder, officer, employee, partner, affiliate,
beneficiary and director, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of the Indenture, and
the issuance of the Notes. It is understood that this limitation on recourse is
made expressly for the benefit of any such shareholder, employee, officer,
partner, affiliate, beneficiary or director and may be enforced by any one or
all of them.
15. AUTHENTICATION
This Note shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Note.
16. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint
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tenants with rights of survivorship and not as tenants in common), CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
17. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on
Uniform security Identification Procedures the Company have caused CUSIP numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
[IF GLOBAL NOTE IS A REGULATION S GLOBAL NOTE, REPLACE WITH
THE FOLLOWING:
17. ISIN NUMBERS
The Company has caused ISIN numbers to be printed on the Notes
and has directed the Trustee to use ISIN numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.]
19. GOVERNING LAW
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REGARD TO
CONFLICT OF LAW RULES.
The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made to:
LaBranche & Co Inc.
One Exchange Place
New York, New York 10006
Attention: Secretary
Telephone: (212) 425-1144
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the
Company. The agent may substitute another to act for him.
Date: Your Signature:
---------------------- -------------------
Signature Guarantee:
------------------------------
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
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[TO BE ATTACHED TO GLOBAL NOTES ONLY:
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have
been made:
<TABLE>
<CAPTION>
Date of Principal Amount of Principal Amount of this Global Note authorized signatory
Exchange this Global Note this Global Note following such of Trustee or Custodian
decrease or increase
<S> <C> <C> <C> <C>
]
- ------------- ----------------------- ----------------------- ------------------------ ------------------------
</TABLE>
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.8 or 4.14 of the Indenture, check either box:
[ ] [ ]
4.8 4.14
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.8 or 4.14 of the Indenture, state the
amount in principal amount (must be integral multiple of $1,000):
$
Date: Your Signature
---------- ----------------------------
(Sign exactly as your name appears on the
other side of the Note)
Signature Guarantee:
---------------------------------------
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
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<PAGE>
EXHIBIT B-1
FORM OF NON-U.S. BENEFICIAL OWNERSHIP
CERTIFICATION BY EUROCLEAR AND CEDELBANK
[Date]
Firstar Bank, N.A.
Attention: Keith A. Maurmeier
Corporate Trust Services
425 Walnut Street, 6th Floor ML 5125
Cincinnati, OH 45202
Re: LaBranche & Co Inc. (the "ISSUER" or "COMPANY")
9 1/2% Senior Notes Due 2004 (The "Notes")
------------------------------------------
This is to certify with respect to $__________ principal
amount of the Notes that, except as set forth below, we have received in
writing, by tested telex or by electronic transmission, from member
organizations appearing in our records as persons being entitled to a portion of
such principal amount (our "MEMBER ORGANIZATIONS") certifications with respect
to such portion, substantially to the effect set forth in the Indenture for the
Notes.
We further certify:
(i) that we are not making available
herewith for exchange (or, if relevant, exercise of any rights
or collection of any interest) any portion of the Temporary
Global Note excepted in such certifications; and
(ii) that as of the date hereof we have not
received any notification from any of our Member Organizations
to the effect that the statements made by such Member
Organizations with respect to any portion of the part
submitted herewith for exchange (or, if relevant, exercise of
any rights or collection of any interest) are no longer true
and cannot be relied upon as the date hereof.
We understand that this certification is required in
connection with certain securities laws of the United States. In connection
therewith, if administrative or legal proceedings are commenced or threatened in
connection with which this certification is or would be relevant, we irrevocably
authorize you or the Company to produce this certification to any interested
party in such proceedings.
Dated: , 19
------------------
Yours faithfully,
[Euroclear or Cedelbank]
By
-----------------------------
B1-1
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EXHIBIT B-2
FORM OF NON-U.S. BENEFICIAL OWNERSHIP
CERTIFICATION BY MEMBER ORGANIZATION
[Date]
[Euroclear or Cedelbank as applicable]
Re: LaBranche & Co Inc. (the "ISSUER" or "COMPANY")
9 1/2% Senior Notes Due 2004 (The "Notes")
------------------------------------------
This is to certify that as of the date hereof, and except as
set forth below, the Notes held by you for our account are beneficially owned by
(a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Notes in
transactions which did not require registration under the Securities Act of
1933, as amended (the "Act"). As used in this paragraph the term "U.S. person"
has the meaning given to it by Regulation S under the Act.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Notes held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certification excepts and does not relate to $________ of
such interest in the above Notes in respect of which we are not able to certify
and as to which we understand exchange and delivery of definitive Notes (or, if
relevant, exercise of any rights or collection of any interest) cannot be made
until we do so certify.
We understand that this certification is required in
connection with certain securities laws of the United States. In connection
therewith, if administrative or legal proceedings are commenced or threatened in
connection with which this certification is or would be relevant, we irrevocably
authorize you, the Company or the Trustee or Registrar for the Notes to produce
this certification to any interested party in such proceedings.
Date:____________, 19 ___. (Not earlier than 15 days prior to the end of the
Distribution Compliance Period).
By:
------------------
[Agent Member]
As, or as agent for, the Beneficial Owner(s) of the Notes to which this
certificate relates.
B2-1
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EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QIB
[Date]
Firstar Bank, N.A.
Attention: Keith A. Maurmeier
Corporate Trust Services
425 Walnut Street, 6th Floor ML 5125
Cincinnati, OH 45202
Re: LaBranche & Co Inc. (the "ISSUER" or "COMPANY")
9 1/2% SENIOR NOTES DUE 2004 (THE "NOTES")
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of August
24, 1999 (as amended and supplemented from time to time, the "INDENTURE"), among
the Company, as issuer and Firstar Bank, N.A., as Trustee. Capitalized terms
used but not defined herein shall have the meanings given them in the Indenture.
This letter relates to $___________ aggregate principal amount
of Notes [IN THE CASE OF A TRANSFER OF AN INTEREST IN A REGULATION S GLOBAL
NOTE: which represents an interest in a Regulation S Global Note beneficially
owned by] the undersigned (the "TRANSFEROR") to effect the transfer of such
Notes in exchange for an equivalent beneficial interest in the Rule 144A Global
Note.
In connection with such request, and with respect to such
Notes, the Transferor does hereby certify that such Notes are being transferred
in accordance with Rule 144A under the Securities Act of 1933, as amended ("RulE
144A"), to a transferee that the Transferor reasonably believes is purchasing
the Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion, and the transferee, as well as any such
account, is a "qualified institutional buyer" within the meaning of Rule 144A,
in a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
----------------------------
-------------------------------
Authorized Signature
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EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
[Date]
Firstar Bank, N.A.
Attention: Keith A. Maurmeier
Corporate Trust Services
425 Walnut Street, 6th Floor ML 5125
Cincinnati, OH 45202
Re: LaBranche & Co Inc. (the "ISSUER" or "COMPANY")
9 1/2% Senior Notes Due 2004 (The "Notes")
-----------------------------------------
Ladies and Gentlemen:
Reference is hereby made to this Indenture, dated as of August
, 1999 (as amended and supplemented from time to time, the "INDENTURE"), between
the Company, as Issuer, Issuer, and Firstar Bank, N.A., as Trustee. Capitalized
terms used but not defined herein shall have the meanings given them in the
Indenture.
In connection with our proposed sale of $________ aggregate
principal amount of the Notes [IN THE CASE OF A TRANSFER OF AN INTEREST IN A
144A GLOBAL NOTE: , which represent an interest in a 144A Global Note
beneficially owned by] the undersigned ("TRANSFEROR"), we confirm that such sale
has been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, we
represent that:
(a) the offer of the Notes was not made to a person in the
United States;
(b) either (i) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States or (ii) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(c) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(d) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(e) we are the beneficial owner of the principal amount of
Notes being transferred.
D-1
<PAGE>
In addition, if the sale is made during a Distribution
Compliance Period and the provisions of Rule 904(b)(1) or Rule 904(b)(2) of
Regulation S are applicable thereto, we confirm that such sale has been made in
accordance with the applicable provisions of Rule 904(b)(1) or Rule 904(b)(2),
as the case may be.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this letter have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------
-------------------------------
Authorized Signature
D-2
<PAGE>
EXHIBIT E
FORM OF RULE 144 CERTIFICATION
------------------------------
[Date]
Firstar Bank, N.A.
Attention: Keith A. Maurmeier
Corporate Trust Services
425 Walnut Street, 6th Floor ML 5125
Cincinnati, OH 45202
Re: LaBranche & Co Inc. (the "ISSUER" or "COMPANY")
9 1/2% Senior Notes Due 2004 (The "Notes")
------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to this Indenture, dated as of August
24, 1999 (as amended and supplemented from time to time, the "INDENTURE"),
between the Company, as Issuer, and Firstar Bank, N.A., as Trustee. Capitalized
terms used but not defined herein shall have the meanings given them in the
Indenture.
This letter relates to $___ aggregate principal amount of
Notes [IN THE CASE OF AN EXCHANGE OR TRANSFER OF AN INTEREST IN A GLOBAL NOTE:
which represents an interest in a Global Note beneficially owned by the
undersigned (the "TRANSFEROR")] [IN THE CASE OF AN EXCHANGE OR TRANSFER OF
CERTIFICATED NOTES: which are held in the name of the undersigned (the
"TRANSFEROR") and evidenced by one or more Certificated Notes]. The Transferor
has requested an exchange or transfer of such [IN THE CASE OF AN EXCHANGE OR
TRANSFER OF AN INTEREST IN A GLOBAL NOTE: beneficial interest in the Global
Note][ IN THE CASE OF AN EXCHANGE OR TRANSFER OF CERTIFICATED NOTES:
Certificated Note(s)] in the form of an equal principal amount of Notes
evidenced by one or more Certificated Notes, to be delivered to such Person as
the Transferor instructs the Trustee. In connection with the foregoing, we
confirm that such sale has been effected pursuant to and in accordance with Rule
144 under the Securities Act.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
----------------------------
-------------------------------
Authorized Signature
E-1
<PAGE>
Exhibit 4.4
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of August 24, 1999
by and among
LaBRANCHE & CO INC.,
as Issuer
and
SALOMON SMITH BARNEY INC.
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
as Initial Purchasers
9 1/2 % Senior Notes due 2004
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is dated
as of August 24, 1999, by and among LaBRANCHE & CO INC., a Delaware corporation
(the "COMPANY"), as issuer, and SALOMON SMITH BARNEY INC. and DONALDSON, LUFKIN
& JENRETTE SECURITIES CORPORATION, as Initial Purchasers (the "INITIAL
PURCHASERS").
This Agreement is entered into in connection with the Purchase
Agreement, dated August 18, 1999, by and among the Company and the Initial
Purchasers (the "PURCHASE AGREEMENT"), which provides for, among other things,
the sale by the Company to the Initial Purchasers of $100,000,000 aggregate
principal amount of the Company's 9 1/2 % Senior Notes due 2004 (the "NOTES").
In order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchasers and any subsequent holder or
holders of each of the Notes. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4 hereof.
ADVICE: See Section 5 hereof.
AGREEMENT: See the introductory paragraphs hereto.
APPLICABLE PERIOD: See Section 3 hereof.
CLOSING: See Purchase Agreement.
COMPANY: See the introductory paragraph hereto.
EFFECTIVENESS DATE: The Exchange Effectiveness Date or the
Initial Shelf Registration Effectiveness Date, as the case may be.
EFFECTIVENESS PERIOD: See Section 3 hereof.
EVENT DATE: See Section 4 hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE EFFECTIVENESS DATE: See Section 2 hereof.
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EXCHANGE FILING DATE: See Section 2 hereof.
EXCHANGE NOTES: The 9 1/2 % Senior Notes due 2004 of the
Company that are identical to the Notes in all material respects, except that
the provisions regarding restrictions on transfer shall be modified, as
appropriate, and the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
EXCHANGE OFFER: See Section 2 hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2 hereof.
FILING DATE: The Exchange Filing Date or Initial Shelf
Registration Filing Date, as the case may be.
HOLDER: Any holder of a Registrable Note.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of August 24, 1999, by and
among the Company and Firstar Bank, N.A, as Trustee, pursuant to which the Notes
are being issued, as the same may be amended or supplemented from time to time
in accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraphs hereto.
INITIAL SHELF REGISTRATION: See Section 3(a) hereof.
INITIAL SHELF REGISTRATION EFFECTIVENESS DATE: See
Section 3(a).
INITIAL SHELF REGISTRATION FILING DATE: See Section 3(a).
INSPECTORS: See Section 5(m) hereof.
ISSUE DATE: August 24, 1999, the date of original issuance of
the Notes.
NASD: See Section 5(5) hereof.
NOTES: See the introductory paragraphs hereto.
OFFERING MEMORANDUM: The final offering memorandum of the
Company dated August 19, 1999, in respect of the offering of the Notes.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2 hereof.
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PERSON: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2 hereof.
PRIVATE EXCHANGE NOTES: See Section 2 hereof.
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 5(m) hereof.
REGISTRABLE NOTES: (a) Each Note upon its original issuance
and at all times subsequent thereto, (b) each Exchange Note as to which Section
2(c) (iv) hereof is applicable upon original issuance and at all times
subsequent thereto and (c) each Private Exchange Note upon original issuance
thereof and at all times subsequent thereto, until (w) a Registration Statement
(other than, with respect to any Exchange Note as to which Section 2(c) (iv)
hereof is applicable, the Exchange Offer Registration Statement) covering such
Note, Exchange Note or Private Exchange Note has been declared effective by the
SEC and such Note, Exchange Note or such Private Exchange Note, as the case may
be, has been disposed of in accordance with such effective Registration
Statement, (x) such Note has been exchanged pursuant to the Exchange Offer for
an Exchange Note or Exchange Notes that may be resold without complying with the
prospectus delivery requirements under the Securities Act, (y) such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or (z) such Note, Exchange Note or
Private Exchange Note, as the case may be, may be resold without restriction
pursuant to Rule 144 under the Securities Act.
REGISTRATION STATEMENT: Any registration statement of the
Company that covers any of the Notes, the Exchange Notes or the Private Exchange
Notes, filed with the SEC under the Securities Act, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
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RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2 hereof.
SHELF REGISTRATION: See Section 3(b) hereof.
SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and the trustee under
any indenture governing the Exchange Notes and Private Exchange Notes.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. EXCHANGE OFFER.
(a) The Company shall (A) prepare and, on or prior to 45 days
after the Issue Date (the "EXCHANGE FILING DATE"), file with the SEC a
Registration Statement under the Securities Act with respect to an offer by the
Company to the holders of the Notes to issue and deliver to such holders, in
exchange for Notes, a like principal amount of Exchange Notes, (B) use its
reasonable best efforts to cause the Registration Statement relating to the
Exchange Offer to be declared effective by the SEC under the Securities Act on
or prior to 90 days after the Issue Date (the "EXCHANGE EFFECTIVENESS DATE") and
(C) commence the Exchange Offer and use its reasonable best efforts to issue, on
or prior to 120 days after the Issue Date, the Exchange Notes. The offer and
sale of the Exchange Notes pursuant to the Exchange Offer shall be registered
pursuant to the Securities Act on the appropriate form (the "EXCHANGE
REGISTRATION STATEMENT") and duly registered or qualified under all applicable
state securities or Blue Sky laws and will comply with all applicable tender
offer rules and regulations under the Exchange Act and state securities or Blue
Sky laws. The Exchange Offer shall not be subject to any condition, other than
that the Exchange Offer does not violate any applicable law or interpretation of
the staff of the SEC. Upon consummation of the Exchange Offer in accordance with
this Section 2, the Company shall have no further registration obligations other
than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held by
Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which
Section 2(c) and Section 3 hereof applies. No securities shall be included in
the Exchange Registration Statement other than the Exchange Notes.
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(b) The Company may require each holder of Notes as a
condition to its participation in the Exchange Offer to represent to the Company
and their counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will have no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and (iii) such holder is not an Affiliate
of the Company, or if it is an Affiliate of the Company, it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable.
If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds any Notes acquired by it and having, or that are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company upon the request of such Initial
Purchaser or any such holder shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser and any such holder, in exchange (the "PRIVATE EXCHANGE") for such
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company that are identical in all material
respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and that are
issued pursuant to the same indenture as the Exchange Notes). The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
The Company and the Initial Purchasers acknowledge that the
staff of the SEC has taken the position that any broker-dealer that owns
Exchange Notes that were received by such broker-dealer for its own account in
the Exchange Offer (a "PARTICIPATING BROKER-DEALER") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Company and the Initial Purchasers also acknowledge that
it is the SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Company agrees (x) to use its reasonable best efforts to keep
the Exchange Registration Statement continuously effective for a period of up to
six months or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has resold
all Exchange Notes acquired in the Exchange Offer, (y) to comply with the
provisions of Section 5 of this Agreement, as they relate to the Exchange Offer
and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Company and a legal opinion as to
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<PAGE>
matters reasonably requested by such Participating Broker-Dealer relating to the
Exchange Registration Statement and the related Prospectus and any amendments or
supplements thereto.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor and (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B), if no interest has been paid on the Notes, from the Issue
Date.
In connection with each Exchange Offer, the Company shall:
(1) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange a copy of the Prospectus
forming part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) use its reasonable best efforts to keep the Exchange Offer
open for not less than 20 business days after the date that notice of
the Exchange Offer is mailed to Holders (or longer if required by
applicable law);
(3) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(4) permit Holders to withdraw validly tendered Notes at any
time prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the applicable
Exchange Offer and the applicable Private Exchange, if any, the Company shall:
(1) accept for exchange all Registrable Notes validly tendered
and not validly withdrawn pursuant to the applicable Exchange Offer and
the applicable Private Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange and cause the Trustee to authenticate
and deliver promptly to each Holder of Registrable Notes, Exchange
Notes or Private Exchange Notes, as the case may be, equal in principal
amount to the securities of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and that, in either case, has been qualified under the
TIA or is exempt from such qualification and shall provide that (a) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (b) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in such indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the
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<PAGE>
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Company is not permitted
to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within
120 days of the Issue Date, (iii) any holder of any Private Exchange Notes so
requests in writing to the Company within 30 days after the consummation of the
Exchange Offer, or (iv) in the case of any Holder that participates in the
Exchange Offer, such Holder does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act), then in the case of each of
clauses (i) to and including (iv) of this sentence, the Company shall promptly
deliver to the Holders and the Trustee written notice thereof (the "SHELF
NOTICE") and shall file a Shelf Registration pursuant to Section 3 hereof.
3. SHELF REGISTRATION.
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) SHELF REGISTRATION. The Company shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c) (iv)
is applicable (the "INITIAL SHELF REGISTRATION"). The Company shall use its
reasonable best efforts to file with the SEC the Initial Shelf Registration on
or before the 45th day after the occurrence of any of the events set forth in
Section 2(c) (the "INITIAL SHELF REGISTRATION FILING DATE"). The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners reasonably designated by them (including, without limitation, one or
more underwritten offerings). The Company shall not permit any securities other
than the Registrable Notes to be included in the Initial Shelf Registration or
any Subsequent Shelf Registration (as defined below).
The Company shall use its reasonable best efforts to cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the 45th day after the Initial Shelf Registration Filing Date (the
"INITIAL SHELF REGISTRATION EFFECTIVENESS DATE") and to keep the Initial Shelf
Registration continuously effective under the Securities Act until the date
which is the earlier of (a) two years from the Issue Date (the "EFFECTIVENESS
PERIOD"), and (b) such shorter period ending when (i) all Registrable Notes
covered by the Initial Shelf Registration have been sold in the manner set forth
and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Notes covered by and not sold under
the Initial Shelf Registration or an earlier Subsequent Shelf Registration has
been declared effective under the Securities Act (the "APPLICABLE PERIOD");
PROVIDED, HOWEVER, that the Effectiveness Period in respect of the Initial Shelf
Registration shall be extended to the extent required to permit dealers to
comply with the applicable prospectus delivery requirements of Rule 174 under
the Securities Act and as otherwise provided herein.
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(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within 60 days of such
cessation of effectiveness amend the Initial Shelf Registration in a manner to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "SUBSEQUENT
SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Company
shall use its reasonable best efforts to cause the Subsequent Shelf Registration
to be declared effective under the Securities Act as soon as practicable after
such filing and to keep such subsequent Shelf Registration continuously
effective for the remainder of the Effectiveness Period. As used herein the term
"SHELF REGISTRATION" means the Initial Shelf Registration and any Subsequent
Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. ADDITIONAL INTEREST.
(a) The Company and the Initial Purchasers agree that the
Holders will suffer damages if the Company fails to fulfill its obligations
under Section 2 or Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Company
agrees to pay, as liquidated damages, additional interest on the Notes
("ADDITIONAL INTEREST") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the applicable
Filing Date or (B) notwithstanding that the Company has consummated or
will consummate the Exchange Offer, the Company is required to file a
Shelf Registration and such Shelf Registration is not filed on or prior
to the Filing Date applicable thereto, then commencing on the day after
any such Filing Date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of .25% per annum for the first 90 days
immediately following each such Filing Date, and such Additional
Interest shall increase by an additional .25% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or
prior to the relevant Effectiveness Date or (B) notwithstanding that
the Company has consummated or will consummate the Exchange Offer, the
Company is required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date in
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respect of such Shelf Registration, then, commencing on the day after
the applicable Effectiveness Date, Additional Interest shall accrue on
the principal amount of the Notes at a rate of .25% per annum for the
first 90 days immediately following the day after such Effectiveness
Date, and the rate of such Additional Interest shall increase by an
additional .25% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 120th day after the Issue Date or (B) if
applicable, a Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period (other than such time as all Notes have been
disposed of thereunder), then Additional Interest shall accrue on the
principal amount of the Notes at a rate of .25% per annum for the first
90 days commencing on the (x) 120th day after such Issue Date, in the
case of (A) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (B) above, such Additional Interest shall
increase by an additional .25% per annum at the beginning of each such
subsequent 90-day period (it being understood and agreed that,
notwithstanding any provision to the contrary, so long as any Note that
is the subject of a Shelf Notice is then covered by an effective Shelf
Registration, no Additional Interest shall accrue or accumulate on such
Notes);
PROVIDED, HOWEVER, that the rate of Additional Interest that shall accrue on the
Notes may not exceed in the aggregate 1.0% per annum; PROVIDED, FURTHER,
HOWEVER, that (1) upon the filing of the applicable Exchange Registration
Statement or the applicable Shelf Registration as required hereunder (in the
case of clause (i) above of this Section 4(a)), (2) upon the effectiveness of
the applicable Exchange Registration Statement or the applicable Shelf
Registration Statement as required hereunder (in the case of clause (ii) of this
Section 4(a)), or (3) upon the exchange of the applicable Exchange Notes for all
Notes validly tendered (in the case of clause (iii) (A) of this Section 4 (a),
or upon the effectiveness of the applicable Shelf Registration Statement which
had ceased to remain effective (in the case of (iii) (B) of this Section 4 (a)),
Additional Interest on the Notes in respect of which such events relate as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue or accumulate, as the case may be.
(b) The Company shall notify the Trustee (who shall be acting
under and protected by the terms of the Indenture) within three business days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of
Additional Interest due pursuant to (a) (i), (a) (ii) or (a) (iii) of this
Section 4 shall be payable in cash semiannually on each February 15 and August
15 (to the holders of record as of the close of business on the February 1 and
August 1 immediately preceding such dates), commencing with the first such date
occurring after any such Additional Interest commences to accrue. The amount of
Additional Interest will be determined by multiplying the applicable rate of
Additional Interest by the principal amount of the Registrable Notes, multiplied
by a fraction, the numerator of which is the number of days such rate of
Additional Interest was applicable during such period (determined on the basis
of a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the denominator of which
is 360.
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5. REGISTRATION PROCEDURES.
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:
(a) Prepare and file with the SEC prior to the applicable
Filing Date, a Registration Statement or Registration Statements as prescribed
by Sections 2 or 3 hereof, and use its reasonable best efforts to cause each
such Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall furnish to and afford the Holders of the Registrable Notes
included in such Registration Statement or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing underwriters,
if any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein and
all exhibits thereto) proposed to be filed (in each case at least five days
prior to such filing, or such later date as is reasonable under the
circumstances). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a majority
in aggregate principal amount of the Registrable Notes included in such
Registration Statement, or any such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall reasonably object
on a timely basis.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Company shall be deemed not to have used its
reasonable best efforts to keep a Registration Statement effective during the
Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if the Company voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable Notes or
such Exchange Notes during that period unless such action is required by
applicable law or permitted by this Agreement.
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(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto from whom the Company has
received written notice that it will be a Participating Broker-Dealer in the
applicable Exchange Offer, notify the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within 2 business
days), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole expense
of the Company, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that purpose,
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Notes or resales of
Exchange Notes by Participating Broker-Dealers the representations and
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated by Section 5(1) hereof cease to be true and correct in
all material respects, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or written threat of any proceeding for
such purpose, (v) of the happening of any event, the existence of any condition
or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its reasonable best efforts to prevent
the issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued,
to use its best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
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(e) If a Shelf Registration is filed pursuant to Section 3 and
if reasonably requested by the managing underwriter or underwriters (if any),
the Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering (i) as promptly as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or underwriters (if any), such
Holders, or counsel for any of them determine is reasonably necessary to be
included therein, (ii) make all required filings of such prospectus supplement
or such post-effective amendment as soon as practicable after the Company have
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so reasonably
requests and to their respective counsel and each managing underwriter, if any,
at the sole expense of the Company, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if reasonably requested, all
documents incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Company, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or
any delivery of a Prospectus contained in the Exchange Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its reasonable best efforts to register or qualify, and
to cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably
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request in writing; PROVIDED, HOWEVER, that where Exchange Notes held by
Participating Broker-Dealers or Registrable Notes are offered other than through
an underwritten offering, the Company agrees to cause their counsel to perform
Blue Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h), keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange held by Participating Broker-Dealers or the
Registrable Notes covered by the Registration Statement; PROVIDED, HOWEVER, that
the Company shall not be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section
3 hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c) (v) or 5(c) (vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at
the sole expense of the Company, a supplement or post-effective amendment to the
applicable Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the purchasers
of the Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Company shall not be required to amend or supplement a
Registration Statement, any related Prospectus or any document incorporated
therein by reference, in the event that, and for a period not to exceed an
aggregate of 90 days in any calendar year if, (i) an event occurs and is
continuing as a result of which a Shelf Registration would, in the Company's
good faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and (ii)
(a) the Company determines in its good faith judgment that the disclosure of
such event at such time would have a material adverse effect on the business,
operations or prospects of the Company or (b) the disclosure otherwise relates
to a pending material business transaction that has not yet been publicly
disclosed.
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(k) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Notes.
(1) In the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) and take all such other
appropriate actions as are reasonably requested in order to expedite or
facilitate the registration or the disposition of such Registrable Notes, and in
such connection, (i) make such representations and warranties to Holders of such
Registrable Notes with respect to the business of the Company and its
subsidiaries as then conducted and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by Company to underwriters in
underwritten offerings, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof in form and substance
reasonably satisfactory to the Holders of a majority in principal amount of the
Registrable Notes being sold, addressed to each selling Holder covering the
matters customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Holders; (iii) obtain
"cold comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to the
selling Holders of Registrable Notes that satisfy the applicable requirements of
Statement of Accounting Standards No. 72, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings and such other matters as reasonably
requested by such selling Holders; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to the Company and the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration with respect to all parties to be indemnified pursuant to said
Section including, without limitation, such selling Holders). The above shall be
done at each closing in respect of the sale of Registrable Notes, or as and to
the extent required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"INSPECTORS"), at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
instruments of the Company and subsidiaries of the Company (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Company and any of its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement and Prospectus.
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Each Inspector shall agree in writing that it will keep the Records confidential
and that it will not disclose any of the Records that the Company determines, in
good faith, to be confidential and notify the Inspectors in writing are
confidential unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or material omission in such Registration
Statement or Prospectus, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, or (iii) the
information in such Records has been made generally available to the public;
provided, however, that prior notice shall be provided as soon as practicable to
the Company of the potential disclosure of any information by such Inspector
pursuant to clauses (i) or (ii) of this sentence to permit the Company to obtain
a protective order (or waive the provisions of this paragraph (m)) and that such
Inspector shall take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such action
is otherwise not inconsistent with, an impairment of or in derogation of the
rights and interests of the Holder or any Inspector.
(n) Provide an indenture trustee for the Registrable
Notes or the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2 (a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use their best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(o) Comply with all applicable rules and regulations of
the SEC and make generally available to their securityholders with regard to any
applicable Registration Statement, a consolidated earning statement satisfying
the provisions of Section 11 (a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any twelve-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which any Registrable Notes are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company addressed to the Trustee
for the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or Private Exchange, as the case may be, that the Exchange Notes
or Private Exchange Notes as the case may be, and the related indenture
constitute legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms subject to customary
exceptions and qualifications.
(q) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Company
(or to such other Person as directed by the Company) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Company
shall mark, or cause to be marked, on such Registrable Notes that such
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Registrable Notes are being canceled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; PROVIDED that in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(s) Use their best efforts to take all other steps
reasonably necessary to effect the registration of the applicable Registrable
Notes covered by a Registration Statement contemplated hereby.
The Company may require each seller of any Registrable Notes
as to which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller for so long
as such seller fails to furnish such information within a reasonable time after
receiving such request and in such event shall have no further obligation under
this Agreement (including without limitation the obligation under Section 4)
with respect to such seller or any subsequent holder of such Registrable Notes.
Each seller as to which any Shelf Registration is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
applicable Registration Statement filed or prepared subsequent to the time that
such reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes, as the case may be, to be sold by such Participating Broker-Dealer, as
the case may be, that, upon actual receipt of any notice from the Company of the
happening of any event of the kind described in Section 5 (c) (ii), 5 (c) (iv),
5(c) (v), or 5(c) (vi) hereof, such Holder or Participating Broker-Dealer, as
the case may be, will forthwith discontinue disposition of such Registrable
Notes or Exchange Notes, as the case may be, covered by such Registration
Statement or Prospectus until such Holder's or Participating Broker-Dealer's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(j) hereof, or until it is advised in writing (the "ADVICE") by the
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or
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supplements thereto. In the event that the Company shall give any such notice,
the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice.
6. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company (other than any underwriting
discounts or commissions) shall be borne by the Company whether or not the
Exchange Registration Statement or any Shelf Registration is filed or becomes
effective or the Exchange Offer is consummated, including, without limitation,
(i) all registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes or Exchange Notes, as
the case may be, are located, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes, as the case may be, to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or to be sold by any Participating
Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company and fees and
disbursements of one special counsel for all of the sellers of each of the
Registrable Notes (exclusive of any counsel retained pursuant to Section 7
hereof), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(1) (iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company desires such insurance, (vii) fees and expenses of all
other Persons retained by the Company, (viii) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (ix) the
expense of any annual audit, (x) any fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and the obtaining of a rating of the securities, in each case, if applicable,
and (xi) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, indentures and any other
documents necessary in order to comply with this Agreement.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless
each Holder of the Registrable Notes and each Participating Broker-Dealer
selling the Exchange Notes during the
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Applicable Period, the affiliates, officers and directors of each such Person,
and each Person, if any, who controls any such Person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "PARTICIPANT"), from and against any and all losses, claims, damages,
judgments, liabilities and expenses (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) or
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by,
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the case of the Prospectus in the light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Company in writing by
such Participant expressly for use therein and with respect to any preliminary
Prospectus, to the extent that any such loss, claim, damage or liability arises
solely from the fact that any Participant sold Registrable Notes or Exchange
Notes to a person to whom there was not sent or given a copy of the Prospectus
(as amended or supplemented) at or prior to the written confirmation of such
sale if the Company shall have previously furnished copies thereof to the
Participant in accordance herewith and the Prospectus (as amended or
supplemented) would have corrected any such untrue statement or omission.
(b) Each Participant agrees, severally and not jointly,
to indemnify and hold harmless the Company, the affiliates, officers and
directors of the Company and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent (but on a several, and not joint, basis) as the foregoing
indemnity from the Company to each Participant, but only with reference to
information relating to such Participant furnished to the Company in writing by
or on behalf of such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "INDEMNIFIED
PERSON") shall promptly notify the Persons against whom such indemnity may be
sought (the "INDEMNIFYING PERSONS") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Persons may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses actually incurred by such counsel
related to such proceeding; PROVIDED, HOWEVER, that the failure to so notify the
Indemnifying Persons will not relieve it from any liability under paragraph (a)
or (b) above unless and to the extent such failure results in the forfeiture by
the Indemnifying Person of substantial rights and defenses and the Indemnifying
Person was not otherwise aware of such action or claim. In any such proceeding,
any Indemnified Person shall have the right to retain its
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own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Persons and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both any Indemnifying Person and the Indemnified Person or any affiliate thereof
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the Indemnifying Persons shall not, in connection with such proceeding or
separate but substantially similar related proceedings in the same jurisdiction
arising out of the same general allegations, be liable for the reasonable fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and expenses shall be
reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and shall be reasonably acceptable
to the Company, and any such separate firm for the Company, their affiliates,
officers, directors, representatives, employees and agents and such control
Persons of such Company shall be designated in writing by such Company and shall
be reasonably acceptable to the Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party to such proceeding, or indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Person or Persons
on the one hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable considerations. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material
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fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such Participant or such
other Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, judgments, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the
amount of any damages that such Participant has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained
in this Section 7 will be in addition to any liability that the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A.
The Company covenants and agrees, for so long as any
Registrable Notes remain outstanding, that they will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner in accordance
with the requirements of the Securities Act and the Exchange Act and, if at any
time the Company is not required to file such reports, the Company will, upon
the request of any Holder or beneficial owner of Registrable Notes, make
available such information necessary to permit sales pursuant to Rule 144A under
the Securities Act. The Company further covenants and agrees, for so long as any
Registrable Notes remain outstanding that it will take such further action as
any Holder of Registrable Notes may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Notes
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not, as
of the date hereof, and the Company shall not, after the date of this Agreement,
enter into any agreement with
21
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respect to any of their securities that is inconsistent with the rights granted
to the Holders of Registrable Notes in this Agreement or otherwise conflicts
with the provisions hereof. The rights granted to the Holders hereunder do not
in any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any such
agreements. The Company will not enter into any agreement with respect to any of
their securities which will grant to any Person piggy-back registration rights
with respect to any Registration Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company
shall not, directly or indirectly, take any action with respect to the
Registrable Notes that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise than with
the prior written consent of (I) the Company and (II) (A) the Holders of not
less than a majority in aggregate principal amount of the then outstanding
Registrable Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; PROVIDED, HOWEVER, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder and each Participating Broker-Dealer (including any
person who was a Holder or Participating Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(d) NOTICES. All notices and other communications
(including, without limitation, any notices or other communications to the
Trustee) provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:
(i) if to a Holder of Registrable Notes or any
Participating Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, the Exchange Indenture or of the Company, as
appropriate.
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(ii) if to the Company, at the address as follows:
LaBranche & Co Inc.,
One Exchange Plaza
New York, New York 10006
Attention: George M.L. LaBranche, IV
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in the Indenture if such communication
relates to the Notes, Exchange Notes or Private Exchange Notes.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto, the Holders and the Participating Broker-Dealers; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder or a Participating Broker-Dealer unless
and to the extent such successor or assign holds Registrable Notes.
(f) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
23
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(j) SECURITIES HELD BY THE COMPANY OR THEIR AFFILIATES.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or their affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(k) THIRD-PARTY BENEFICIARIES. Holders of Registrable
Notes, and Participating Broker-Dealers are intended third-party beneficiaries
of this Agreement, and this Agreement may be enforced by such Persons.
(1) ENTIRE AGREEMENT. This Agreement, the Purchase
Agreement and the Indenture are intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the one hand
and the Company on the other, or between or among any agents, representatives,
parents, subsidiaries, affiliates, predecessors in interest or successors in
interest with respect to the subject matter hereof and thereof are merged herein
and replaced hereby.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
LaBRANCHE & CO INC.
By: /s/ George M. L. LaBranche, IV
-----------------------------------
Name: George M. L. LaBranche, IV
Title: Chairman, Chief Executive Officer and
President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON SMITH BARNEY INC.
Donaldson, Lufkin & Jenrette Securities Corporation
as Initial Purchasers
By: SALOMON SMITH BARNEY INC.
By: /s/ Simon Hewett
-------------------------
Name: Simon Hewett
Title: Managing Director
25
<PAGE>
EXHIBIT 10.8
LABRANCHE & CO INC.
STOCKHOLDERS' AGREEMENT
DATED AS OF AUGUST __, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I LIMITATIONS ON TRANSFER OF SECURITIES...................................1
Section 1.1. General Transfer Restrictions..................................1
Section 1.2. Compliance with Certain Restrictions...........................2
Section 1.3. Transfers Following Death or Disability........................3
Section 1.4. Transfers with the Consent of Board of Directors...............3
Section 1.5. Transfers to Permitted Transferees.............................3
Section 1.6. Compliance with Law and Regulations............................3
Section 1.7. Legend on Certificates; Entry of Stop Transfer Orders..........3
Section 1.8. Certificates to be Held by Company.............................4
Section 1.9. Transfers in Violation of Agreement Void.......................5
ARTICLE II VOTING AGREEMENT........................................................5
Section 2.1. Voting by Stockholders.........................................5
Section 2.2. Designation of Successors......................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES..........................................5
Section 3.1. Representations and Warranties of the Stockholders.............5
ARTICLE IV DEFINITIONS.............................................................6
ARTICLE V MISCELLANEOUS...........................................................9
Section 5.1. Standstill Provisions..........................................9
Section 5.2. Expenses.......................................................9
Section 5.3. Filing of Schedule 13D or 13G.................................10
Section 5.4. Notices.......................................................10
Section 5.5. Term of the Agreement.........................................11
Section 5.6. Amendments; Waivers...........................................11
Section 5.7. Adjustment upon Changes in Capitalization; Adjustments upon
Changes of Control; Representatives, Successors and Assigns...12
Section 5.8. Disinterested Board Members to Make Determinations............12
Section 5.9. Severability..................................................12
Section 5.10. Representatives, Successors and Assigns.......................13
Section 5.11. Governing Law.................................................13
Section 5.12. Specific Performance..........................................13
Section 5.13. Arbitration...................................................13
Section 5.14. Submission to Jurisdiction; Waiver of Immunity................13
Section 5.15. Further Assurances............................................14
Section 5.16. Execution in Counterparts.....................................14
Section 5.17. Entire Agreement..............................................14
</TABLE>
i
<PAGE>
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of August
___, 1999, is by and among (i) LaBranche & Co Inc., a Delaware corporation (the
"COMPANY"), (ii) the Exchanging Members (as defined below) listed on Schedule I
hereto and (iii) Steven C. Berger, Robert W. Keelips, III and Paul A. Redmond
(collectively, the "RETIRING MEMBERS"). The Exchanging Members and the Retiring
Members are collectively referred to herein as the "STOCKHOLDERS." Except as
otherwise provided herein, capitalized terms used herein have the respective
meanings ascribed thereto in Article IV of this Agreement.
W I T N E S S E T H :
WHEREAS, the Company, LaB Investing Co. L.L.C., a New York limited
liability company ("INVESTING"), and the Stockholders have entered into an
Exchange Agreement, dated as of June 15, 1999 (the "EXCHANGE AGREEMENT"),
pursuant to which (i) the Exchanging Members have agreed to contribute their
respective membership interests in Investing to the Company in exchange for
common stock, par value $.01 per share ("COMMON STOCK"), of the Company and (ii)
the Retiring Members have agreed to contribute their respective membership
interests in Investing to the Company in exchange for a combination of shares of
Common Stock and cash (the "LLC EXCHANGE") in connection with the Company's
proposed initial public offering of shares of Common Stock (the "IPO");
WHEREAS, the Company and the Stockholders desire to enter into certain
agreements with respect to the Transfer (as defined below) and voting of their
Common Stock and various other matters in order to continue harmonious
relationships among themselves with respect to the conduct of the business and
affairs of the Company and LaBranche & Co., a New York limited partnership of
which Investing is the sole general partner ("LABRANCHE LP");
WHEREAS, it is a condition under the Exchange Agreement that the
parties hereto enter into this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements, covenants and provisions herein contained and for good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
LIMITATIONS ON TRANSFER OF SECURITIES
Section 1.1. GENERAL TRANSFER RESTRICTIONS.
(a) Each Stockholder agrees that he or she shall not
Transfer any Covered Securities beneficially owned by him or her, except in
accordance with all of the following: (i) the
<PAGE>
terms of this Agreement, (ii) the restrictions on the transfer of the Company's
securities contemplated by the Plan of Incorporation of LaBranche LP, dated as
of June 17, 1999, (iii) any trading restrictions generally applicable to
employees of the Company Group, for so long as such Stockholder remains in the
employ of the Company Group, (iv) the terms of any "lock-up" agreement required
by the underwriters of the IPO and (v) the terms of any other contract or
agreement with the Company or other undertaking by which such Stockholder is
bound and to which such Covered Securities are subject.
(b) Each Exchanging Member agrees that he or she may
Transfer Covered Securities only as follows, subject to applicable securities
laws:
(i) up to 33-1/3% of such Covered Securities at any time
after the third anniversary of the date of the consummation of the
IPO;
(ii) up to an additional 33-1/3% of such Covered
Securities at any time after the fourth anniversary of the date of
the consummation of the IPO; and
(iii) all of such Covered Securities at any time after
the fifth anniversary of the date of the consummation of the IPO.
(c) Notwithstanding the provisions set forth in Section
1.1(b) above, each Exchanging Member agrees that for so long as such Exchanging
Member remains in the employ of any member of the Company Group, such Exchanging
Member shall at all times be the sole beneficial Owner of that number of Covered
Securities equal to 25% or more of the aggregate number of Covered Securities
(i) beneficially owned by such Exchanging Member immediately after the
consummation of the IPO and (ii) beneficial ownership of which is acquired by
such Exchanging Member thereafter, with no reduction in such aggregate number
for Covered Securities disposed of by such Exchanging Member.
(d) Each Retiring Member agrees that he may Transfer Covered
Securities only as follows, subject to applicable securities laws:
(i) up to 50% of such Covered Securities at any time
after the first anniversary of the IPO Date; and
(ii) all of such Covered Securities at any time after
the second anniversary of the IPO Date.
Section 1.2. COMPLIANCE WITH CERTAIN RESTRICTIONS.
(a) Each Stockholder agrees that, with respect to all
Covered Securities beneficially owned by such Stockholder, he or she shall
comply with the restrictions on Transfer imposed by the underwriters of the IPO.
2
<PAGE>
(b) Each Stockholder agrees that he or she shall, at the
request of the Company, comply with any future restrictions on Transfer imposed
by or with the consent of the Company from time to time in connection with any
future offerings of securities of the Company, whether by the Company or by any
securityholder of the Company and whether or not such restrictions on Transfer
refer to such Stockholder by name.
(c) Each Stockholder agrees that, with respect to all
Covered Securities beneficially owned by such Stockholder, he or she will comply
with any restrictions imposed by the Company from time to time to enable the
Company or any party to an agreement with the Company to account for a business
combination by the pooling of interests method.
Section 1.3. TRANSFERS FOLLOWING DEATH OR DISABILITY. Notwithstanding
any other provisions of this Agreement, upon the death or Disability of any
Stockholder, such Stockholder (or his or her estate) may Transfer his or her
Covered Securities free of any provisions of this Agreement, subject to the
provisions of any other agreement relating to this subject matter.
Section 1.4. TRANSFERS WITH THE CONSENT OF BOARD OF DIRECTORS.
Notwithstanding any other provisions of this Agreement, a Stockholder may
Transfer any number of Covered Securities at any time with the prior written
consent of the Board of Directors, which consent may be withheld or delayed, or
granted on such terms and conditions as the Board of Directors may determine, in
its sole discretion.
Section 1.5. TRANSFERS TO PERMITTED TRANSFEREES. Notwithstanding any
other provision of this Agreement, a Stockholder may Transfer any number of
Covered Securities to a Permitted Transferee at any time, provided that it shall
be a condition to any such Transfer that such Permitted Transferee agree in
writing to be bound by all the provisions of this Agreement as if such Permitted
Transferee were a Stockholder from and after the date of such Transfer for all
purposes of this Agreement.
Section 1.6. COMPLIANCE WITH LAW AND REGULATIONS. Each Stockholder
agrees that any Transfer of Covered Securities by such Stockholder shall be in
compliance with any applicable constitution, rule or regulation of, or any
applicable policy of, any of the exchanges or associations or other institutions
with which any member of the Company Group has membership or other privileges
(including, without limitation, the NYSE), federal and securities laws, and any
applicable law, rule or regulation of the Commission or any other governmental
agency having jurisdiction.
Section 1.7. LEGEND ON CERTIFICATES; ENTRY OF STOP TRANSFER ORDERS.
(a) Each Stockholder agrees that each outstanding certificate representing any
Covered Securities that are subject to this Agreement shall bear an endorsement
noted conspicuously on each such certificate reading substantially as follows:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or under any
state securities law and
3
<PAGE>
may not be sold, offered for sale, pledged, hypothecated or otherwise
transferred in the absence of an effective registration statement with
respect thereto under the Act and any applicable state securities law,
or the receipt by the Company of an opinion of counsel, reasonably
satisfactory to the Company, that such registration is not required.
The securities represented by this certificate are subject to the
provisions of a Stockholders' Agreement dated as of August __, 1999
among the Company and certain persons listed on Schedule I to such
agreement, a copy of which is on file at the principal executive office
of the Company, and such securities may be sold, assigned, pledged or
otherwise transferred only in accordance with such agreement."
(b) Each Stockholder agrees to the entry of stop transfer
orders against the Transfer of legended certificates representing securities of
the Company not in compliance with this Agreement.
Section 1.8. CERTIFICATES TO BE HELD BY COMPANY. (a) Each Exchanging
Member agrees that the certificates representing his or her Covered Securities
shall be issued in the name of a nominee holder to be designated by the Company
and shall be held in custody by the Company at its principal office. The Company
shall, upon the request of any such Exchanging Member or the estate of any
Exchanging Member, as the case may be, in writing addressed to the Secretary of
the Company or any officer designated by the Secretary (which request shall
include a representation by such Exchanging Member or his or her estate that he
or she is then permitted to Transfer a specified number of Covered Securities
under the provisions of this Agreement), promptly release from custody the
certificates representing such specified number of such Exchanging Member's
Covered Securities which are then intended and permitted to be Transferred under
the provisions of this Agreement.
(b) Subject to the Exchanging Members having provided
appropriate written direction to the Company, whenever the nominee holder shall
receive any cash dividend or other cash distribution upon any Covered Securities
deposited pursuant to Section 1.8(a), the Company shall cause the nominee holder
to distribute promptly such cash dividend or other distribution (by any other
manner that it may determine, net of its charges and expenses in effecting such
conversion), by checks drawn on a bank in the United States, to the Exchanging
Members in proportion to the number of Covered Securities Owned by each of them
respectively; provided that the Company shall cause the nominee holder to make
appropriate adjustments in the amounts so distributed in respect of any amounts
required to be withheld by the nominee holder from any distribution on account
of taxes. The nominee holder shall distribute only such amount as can be
distributed without distributing to any Exchanging Member a fraction of one
cent, and any balance not so distributable shall be held by the nominee holder
(without liability for interest thereon) and shall be added to and become part
of the next sum received by the nominee holder for distribution to the
Exchanging Members.
4
<PAGE>
Section 1.9. TRANSFERS IN VIOLATION OF AGREEMENT VOID. Any attempted
Transfer of Covered Securities not made in accordance with the provisions of
this Agreement shall be void, and the Company shall not register, or cause or
permit the registration, of Common Stock Transferred in violation of this
Agreement.
ARTICLE II
VOTING AGREEMENT
Section 2.1. VOTING BY STOCKHOLDERS. At any meeting of the
stockholders of the Company called to vote with respect to any corporate action
or where action by stockholders of the Company is taken by written consent, each
Stockholder agrees to vote or act by written consent with respect to all Covered
Securities then Owned by such Stockholder on all such matters in which action is
proposed to be taken as determined by a majority of George M.L. LaBranche, IV,
James G. Gallagher and Alfred O. Hayward, Jr. (or the successors designated in
accordance with Section 2.2 herein to replace them in the event of their death,
disability or resignation) (collectively, the "VOTING EXECUTIVES").
Notwithstanding any other provisions of this Agreement, the power to direct the
vote of each Stockholder with respect to the Covered Securities Owned by such
Stockholder shall remain in full effect until such Stockholder no longer Owns
such Covered Securities.
Section 2.2. DESIGNATION OF SUCCESSORS. In the event of the death,
disability or resignation of any of the Voting Executives, successors shall be
designated as follows:
(a) in the event of such death, disability or resignation of
any one Voting Executive, such Voting Executive's successor shall be designated
by mutual consent of the remaining Voting Executives;
(b) in the event of the simultaneous death, disability or
resignation of any two Voting Executives, such Voting Executives' successors
shall be designated by the sole remaining Voting Executive; or
(c) in the event of the simultaneous death, disability or
resignation of all three Voting Executives, such Voting Executives' successors
shall be designated by a majority in interest of the Stockholders who then Own
Covered Securities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder severally represents and warrants to the Company and to each other
Stockholder that:
5
<PAGE>
(a) he or she has (and with respect to Covered Securities to
be acquired, will have) good, valid and marketable title to the Covered
Securities, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind, other than pursuant to this Agreement,
the Plan of Incorporation of LaBranche LP, the Exchange Agreement or another
agreement with the Company by which such Stockholder is bound and to which the
Covered Securities are subject; and
(b) (i) he or she is of sound mind and has full legal
capacity to enter into, execute and deliver this Agreement and perform his or
her obligations hereunder; (ii) this Agreement constitutes his or her legal,
valid and binding obligation, enforceable against him or her in accordance with
its terms (subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles); (iii) neither
his or her execution and delivery of this Agreement nor the consummation of the
transactions contemplated herein conflicts with or results in a breach of any of
the terms, conditions or provisions of any agreement or instrument to which he
or she is a party or by which his or her assets are bound, or constitutes a
default under any of the foregoing, or violates any law or regulation; (iv) he
or she has obtained all authorizations, consents, approvals and clearances of
all courts, governmental agencies and authorities, and any other person, if any
(including his or her spouse with respect to the interest of such spouse in his
or her Covered Securities if the consent of such spouse is required), required
to permit him or her to enter into this Agreement and to consummate the
transactions contemplated herein; (v) there are no actions, suits or proceedings
pending, or, to his or her knowledge, threatened against or affecting him or her
or his or her assets in any court or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality which, if adversely determined, would impair his or her ability
to perform this Agreement; (vi) the performance of this Agreement will not
violate any order, writ, injunction, decree or demand of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality to which he or she is subject; and (vii) no statement,
representation or warranty made by him or her in this Agreement, nor any
information provided by him or her for inclusion in a report filed pursuant to
Section 5.3 hereof or in a registration statement filed by the Company contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements, representations
or warranties contained herein or information provided therein not misleading.
ARTICLE IV
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"AGREEMENT" has the meaning set forth in the preamble to this
Agreement.
6
<PAGE>
"BOARD OF DIRECTORS" means the Board of Directors of the Company or, to
the extent expressly authorized by the Board of Directors to exercise the powers
of the Board of Directors under this Agreement, (i) any committee of such Board
of Directors or (ii) any board of directors or committee of any Subsidiary of
the Company.
"BUSINESS DAY" means a day on which the NYSE is open for the
transaction of business.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" has the meaning set forth in the recitals to this
Agreement.
"COMPANY" has the meaning set forth in the preamble to this Agreement
and any successors thereof, whether by operation of law or otherwise.
"COMPANY GROUP" means the group comprised of the Company and its
Subsidiaries, including Investing and LaBranche LP.
"COVERED SECURITIES" means, with respect to any Stockholder at the time
in question, subject to Section 5.7, the shares of Common Stock then owned by
such Stockholder which were received by such Stockholder as a result of the LLC
Exchange. Prior to or after the IPO, shares of the Common Stock may be excluded
from the definition of Covered Securities by action of the Board of Directors,
in its sole discretion.
"DISABILITY" means disability as that term is defined under the
Company's long-term disability plan in effect at the date of such determination,
or any other plan or definition designated by the Board of Directors for the
purpose of this provision.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGREEMENT" has the meaning set forth in the recitals to this
Agreement.
"EXCHANGING MEMBERS" mean the holders of membership interests in
Investing listed on Schedule I hereto.
"IPO" has the meaning set forth in the recitals to this Agreement.
"INVESTING" has the meaning set forth in the recitals to this
Agreement.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended.
"LLC EXCHANGE" has the meaning set forth in the recitals to this
Agreement.
"LABRANCHE LP" has the meaning set forth in the recitals to this
Agreement.
7
<PAGE>
"NASD" means the National Association of Securities Dealers, Inc.
"NYSE" means the New York Stock Exchange, Inc.
"OWN" means to own of record or beneficially, whether directly, through
a nominee designated by the Company pursuant to Section 1.8 or through any other
Person.
"PERMITTED TRANSFEREE" means any Person receiving Covered Securities
from a Stockholder that is: (i) a trust for the benefit of any spouse or lineal
descendant (or spouse of such lineal descendant) of such Stockholder, provided
that the controlling trustee of such trust is such Stockholder; (ii) any
organization to which contributions by such Stockholder of Covered Securities
are deductible for federal income, estate or gift tax purposes or any
split-interest trust described in Section 4947 of the Internal Revenue Code of
1986, as amended, provided that, in each case, such Stockholder is a trustee or
a member of the board of directors or other governing body or group having the
ultimate authority, INTER ALIA, to vote, dispose or direct the voting or
disposition of such Covered Securities; or (iii) a corporation of which a
majority of the outstanding shares of capital stock entitled to vote generally
for the election of directors is beneficially owned by, or a partnership or
limited liability company of which a majority of the partnership or limited
liability company interests entitled to vote and participate in the management
of such partnership or limited liability company are beneficially owned by, such
Stockholder.
"PERSON" means any natural person or any firm, partnership, limited
liability partnership, association, corporation, limited liability company,
trust, business trust, governmental authority or other entity.
"RESTRICTED PERSON" means any person that is not (i) a Stockholder or
(ii) a director, officer or employee of any member of the Company Group acting
in such person's capacity as a director, officer or employee.
"RETIRING MEMBERS" means Steven C. Berger, Robert W. Keelips, III and
Paul A. Redmond.
"STOCKHOLDERS" has the meaning set forth in the preamble to this
Agreement.
"SUBSIDIARY" means a corporation, limited liability company, limited
partnership or other entity of which the Company, directly or indirectly, has
the power, whether through the ownership of voting securities, equity interests,
contract or otherwise, (i) to elect at least a majority of the members of such
entity's board of directors or other governing body or (ii) in the absence of a
governing body, to control the business affairs of such entity.
"TRANSFER" means, with respect to any Covered Securities, directly or
indirectly, (i) to sell, assign, transfer, pledge, convey, distribute, mortgage,
encumber, hypothecate or otherwise dispose, whether by gift, for consideration
or for no consideration, or (ii) to grant any right to vote, whether by voting
agreement, voting trust or otherwise. For purposes of this Agreement, Transfer
shall
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include any disposition and any other transaction that would constitute a
"constructive sale" within the meaning of Section 1259 of the Internal Revenue
Code of 1986, as amended, including, without limitation, a short-sale, forward
sale, equity swap or other derivative contract with respect to Common Stock or
substantially identical property, or other transaction having substantially the
same effect as the foregoing.
"VOTING EXECUTIVES" has the meaning set forth in Section 2.1.
ARTICLE V
MISCELLANEOUS
Section 5.1. STANDSTILL PROVISIONS. Each Stockholder agrees that he
or she shall not, directly or indirectly, alone or in concert with any other
person, (a) make, or in any way participate in, any "solicitation" of "proxies"
(as such terms are defined in Exchange Act Rule 14A-1) relating to any
securities of the Company to or with any Restricted Person; (b) except as
contemplated by this Agreement, deposit any Covered Securities in a voting trust
or subject any Covered Securities to any voting agreement or arrangement that
includes as a party any Restricted Person; (c) form, join or in any way
participate in a group (as contemplated by Exchange Act Rule 13d-5(b)) with
respect to any securities of the Company (or any securities the ownership of
which would make the owner thereof a beneficial owner of securities of the
Company (for this purpose as determined by Exchange Act Rule 13d-3 and Exchange
Act Rule 13d-5)) that includes as a party any Restricted Person; (d) make any
announcement subject to Exchange Act Rule 14a-1(1)(2)(iv) to any Restricted
Person; (e) initiate or propose any "shareholder proposal" subject to Exchange
Act Rule 14a-8; (f) together with any Restricted Person, make any offer or
proposal to acquire any securities or assets of any member of the Company Group
or solicit or propose to effect or negotiate any form of business combination,
restructuring, recapitalization or any extraordinary transaction involving, or
any change in control of, any member of the Company Group, any Subsidiaries or
any of its respective securities or assets; (g) together with any Restricted
Person, seek the removal of any directors or a change in the composition or size
of the Board of Directors; (h) together with any Restricted Person, in any way
participate in a call for any special meeting of the stockholders of the
Company; or (i) assist, advise or encourage any Person with respect to, or seek
to do, any of the foregoing.
Section 5.2. EXPENSES.
(a) The Company shall be responsible for all expenses
incurred in the operation and administration of this Agreement, including
expenses incurred in preparing appropriate filings and correspondence with the
Commission or NYSE, lawyers', accountants', agents', consultants', experts',
investment banking and other professionals' fees, expenses incurred in enforcing
the provisions of this Agreement, expenses incurred in maintaining any necessary
or appropriate books and records relating to this Agreement and expenses
incurred in the preparation of amendments to and waivers of provisions of this
Agreement.
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(b) Each Stockholder shall be responsible for all of his or
her expenses incurred in connection with his or her compliance with his or her
obligations under this Agreement, including expenses incurred by the Company in
enforcing the provisions of this Agreement relating to such obligations.
Section 5.3. FILING OF SCHEDULE 13D OR 13G.
(a) In the event that a Stockholder is required to file a
report of beneficial ownership on Schedule 13D or 13G (or any successor forms
thereto) with respect to the Covered Securities beneficially owned by such
Stockholder (for this purpose as determined by Exchange Act Rule 13d-3 and
Exchange Act Rule 13d-5), he or she agrees that, unless otherwise directed by
the Company, he or she will not separately file such a report, but will file a
report together with the other Stockholders, containing the information required
by the Exchange Act, and such Stockholder understands and agrees that such
report shall be filed on his or her behalf by the Company. Such Stockholder
shall cooperate fully with the other Stockholders and the Company to achieve the
timely filing of any such report and any amendments thereto as may be required,
and such Stockholder agrees that any information concerning such Stockholder
which such Stockholder furnishes in connection with the preparation and filing
of such report will be complete and accurate.
(b) Each Stockholder hereby irrevocably makes, constitutes
and appoints each of George M.L. LaBranche, IV, James G. Gallagher, Alfred O.
Hayward, Jr. and any other officer(s) of the Company designated in writing by
George M.L. LaBranche, IV, each with full power of substitution, his or her true
attorney-in-fact and agent, for and in his or her name, place and stead, to
execute a report of beneficial ownership on Schedule 13D or 13G (or any
successor forms thereto) and any and all amendments thereto and to file such
reports with all exhibits thereto and other documents in connection therewith
with the Commission, granting to such attorneys, and each of them, full power
and authority to do and perform each and every act and thing whatsoever that
such attorney or attorneys may deem necessary, advisable or appropriate to carry
out fully the intent of this Section 5.3 as such Stockholder might or could do
personally, hereby ratifying and confirming all acts and things that such
attorney or attorneys may do or cause to be done by virtue of this power of
attorney. Each Stockholder hereby further designates such attorneys as such
Stockholder's agents authorized to receive notices and communications with
respect to such reports and any amendments thereto. It is understood and agreed
by each such Stockholder that this appointment, empowerment and authorization
may be exercised by the aforementioned Persons for the period beginning on the
date hereof and ending on the date such Stockholder is no longer subject to the
provisions of this Agreement (and shall extend thereafter for such time as is
required to reflect that such Stockholder is no longer a party to this
Agreement).
Section 5.4. NOTICES.
(a) All notices, requests, demands, waivers and other
communications to be given by any party hereunder shall be in writing and shall
be (i) mailed by first-class, registered or certified mail, postage prepaid,
(ii) sent by hand delivery or reputable overnight delivery service or (iii)
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transmitted by telecopy (provided that a copy is also sent by reputable
overnight delivery service) addressed, in the case of any Stockholder, to him or
her at his or her last address appearing in the Company Group's employment
records or, in the case of the Company, to One Exchange Plaza, New York, NY
10006, Attention: Secretary, or, in each case, to such other address as may be
specified in writing to the other parties hereto.
(b) All such notices, requests, demands, waivers and other
communications shall be deemed to have been given and received (i) if by
personal delivery or telecopy, on the day of such delivery, (ii) if by
first-class, registered or certified mail, on the fifth Business Day after the
mailing thereof or (iii) if by reputable overnight delivery service, on the day
delivered.
Section 5.5. TERM OF THE AGREEMENT.
(a) This Agreement shall become effective upon the
occurrence of the consummation of the IPO and shall terminate on the earlier to
occur of (i) the first date on which there are no Stockholders who remain bound
by its terms and (ii) the date on which the Company and the Stockholders who Own
a majority of the Covered Securities subject to this Agreement as of such date
agree to terminate this Agreement.
(b) Unless this Agreement is theretofore terminated pursuant
to Section 5.5(a) hereof, a Stockholder shall be bound by its terms until all
Covered Securities owned by such Stockholder are free of the provisions of
Articles I and II hereof.
Section 5.6. AMENDMENTS; WAIVERS.
(a) This Agreement may be amended or modified, and any
provision in this Agreement may be waived, if such amendment, modification or
waiver is approved by the Board of Directors, provided that any amendment that
would materially adversely affect any Stockholder (other than an amendment that,
in the good faith judgment of the Board of Directors, is intended to cure any
ambiguity or correct or supplement any provisions of this Agreement that may be
incomplete or inconsistent with any other provision contained herein) must be
approved by the Stockholders that Own a majority of the Covered Securities
subject to this Agreement as of the date of such amendment or modification,
provided, further, that, without the consent of any Person, the Board of
Directors may permit any Person who executes and delivers a counterpart of this
Agreement to become a party to this Agreement by amending Schedule I or II
hereto, as the case may be.
(b) The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of the breach
of any term contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or the breach of any other term of this
Agreement.
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Section 5.7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION; ADJUSTMENTS
UPON CHANGES OF CONTROL; REPRESENTATIVES, SUCCESSORS AND ASSIGNS.
(a) In the event of any change in the outstanding Common
Stock by reason of stock dividends, stock splits, reverse stock splits,
spin-offs, split-ups, recapitalizations, combinations, exchanges of shares and
the like, the term "Covered Securities" shall refer to and include the
securities received or resulting therefrom, but only to the extent such
securities are received in exchange for or in respect of Covered Securities.
Upon the occurrence of any event described in the immediately preceding
sentence, the Board of Directors shall make such adjustments to or
interpretations of the restrictions of Section 1.1 (and, if it so determines,
any other provisions hereof) as it shall deem necessary or desirable to carry
out the intent of such provision(s). If the Board of Directors deems it
desirable, any such adjustments may take effect from the record date, the "when
issued trading date," the "ex dividend date" or another appropriate date.
(b) In the event of any business combination, restructuring,
recapitalization or other extraordinary transaction involving any member of the
Company Group or any of its respective securities or assets as a result of which
the Stockholders shall hold voting securities of a Person other than the
Company, the Stockholders agree that this Agreement shall also continue in full
force and effect with respect to such voting securities of such other Person
formerly representing or distributed in respect of Covered Securities, and the
terms "Covered Securities," "Common Stock," "Voting Interests," and "Company,"
shall refer to such voting securities formerly representing or distributed in
respect of Covered Securities and such Person, respectively. Upon the occurrence
of any event described in the immediately preceding sentence, the Board of
Directors shall make such adjustments to or interpretations of the restrictions
of Section 1.1 (and, if it so determines, any other provisions hereof) as it
shall deem necessary or desirable to carry out the intent of such provisions(s).
If the Board of Directors deems it desirable, any such adjustments may take
effect from the record date or another appropriate date.
Section 5.8. DISINTERESTED BOARD MEMBERS TO MAKE DETERMINATIONS. In
the event that any Stockholder breaches its obligations under this Agreement,
then the Board of Directors shall have the exclusive right to make (on behalf of
the Company) any and all determinations that may be necessary or appropriate
under this Agreement, including without limitation, determinations relating to
the exercise and enforcement of remedies hereunder. If a Stockholder who is also
a member of the Board of Directors breaches his or her obligations under this
Agreement, such Stockholder must refrain from exercising his or her vote at
meetings of the Board of Directors and general meetings of the Company to give
effect to this Section 5.8.
Section 5.9. SEVERABILITY. If the final determination of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term or provision hereof is invalid or unenforceable, (a) the remaining terms
and provisions hereof shall be unimpaired and (b) the invalid or unenforceable
term or provision shall be deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
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Section 5.10. REPRESENTATIVES, SUCCESSORS AND ASSIGNS. This Agreement
shall be binding upon and inure to the benefit of the respective parties hereto
and their respective legatees, legal representatives, successors and assigns;
provided that Stockholders may not assign, delegate or otherwise Transfer any of
their rights or obligations under this Agreement except with the prior written
consent of the Board of Directors, and any assignment without such consent by
the Board of Directors shall be void.
Section 5.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE CONFLICT OF LAWS PRINCIPLES OR RULES THEREOF).
Section 5.12. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that it will be impossible to measure in money the damage to the
Company or the Stockholders if any party hereto fails to comply with the
provisions of Article I or II and each party hereto agrees that in the event of
any such failure, neither the Company nor any Stockholder will have an adequate
remedy at law. Therefore, the Company and each Stockholder, in addition to all
of the other remedies which may be available, shall have the right to equitable
relief, including, without limitation, the right to enforce specifically the
provisions of Article I and II by obtaining injunctive relief against any
violation thereof, or otherwise. All claims for specific performance of one or
more provisions of this Agreement shall be resolved exclusively by litigation
before a court of competent jurisdiction located in the State of New York.
Section 5.13. ARBITRATION. Except for claims for specific performance
brought in accordance with Section 5.12, all disputes, differences, and
controversies arising out of or in any way related to this Agreement shall be
submitted:
(a) to the NYSE to be heard and decided under the terms of
this Agreement and the then applicable rules of the NYSE or, if those rules as
interpreted by the NYSE do not permit the disputes, differences and
controversies to be submitted to the NYSE for arbitration; then
(b) to the American Arbitration Association in New York,
New York;
to be heard and decided under the terms of this Agreement and in accordance with
the then applicable rules of the hearing body by a panel of three arbitrators
(unless the rules of the hearing body shall require a different number of
arbitrators) chosen in accordance with the then applicable rules of the hearing
body. The decision of the arbitrators shall be final and binding upon the
parties, and an order may be entered upon the award of the arbitrators in any
court of competent jurisdiction.
Section 5.14. SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITY. Each
Stockholder, for himself or herself and his or her successors and assigns,
hereby irrevocably waives (a) any objection, and agrees not to assert, as a
defense in any arbitration or legal or equitable action, suit or proceeding
against such Stockholder arising out of or relating to this Agreement or any
transaction contemplated
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hereby or the subject matter of any of the foregoing, that (i) he or she is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable before such arbitral body or in said courts, (ii) the venue
thereof may not be appropriate and (iii) the internal laws of the State of
Delaware do not govern the validity, interpretation or effect of this Agreement,
(b) any immunity from jurisdiction to which he or she might otherwise be
entitled in any such arbitration, action, suit or proceeding which may be
instituted before any state or federal court in the State of New York in
accordance with Section 5.12 or before any arbitral body in accordance with
Section 5.13 and (c) any immunity from the maintaining of an action against him
or her to enforce any judgment for money obtained in any such arbitration,
action, suit or proceeding and, to the extent permitted by applicable law, any
immunity from execution.
Section 5.15. FURTHER ASSURANCES. Each Stockholder agrees to execute
such additional documents and take such further action as may be requested by
the Company to effect the provisions of this Agreement.
Section 5.16. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 5.17. ENTIRE AGREEMENT. This Agreement, including the
Schedules hereto, contains the entire understanding of the parties with respect
to the subject matter hereof.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
LaBRANCHE & CO INC.
By:/s/ George M.L. LaBranche, IV
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
/s/ George M.L. LaBranche, IV /s/ Vincent J. Flaherty
- ------------------------------------ ------------------------------------
George M.L. LaBranche, IV Vincent J. Flaherty
/s/ James G. Gallagher /s/ Alfred O. Hayward, Jr.
- ------------------------------------ ------------------------------------
James G. Gallagher Alfred O. Hayward, Jr.
/s/ Michael J. Naughton /s/ John McGraner
- ------------------------------------ ------------------------------------
Michael J. Naughton John McGraner
/s/ Vincent Papandrea /s/ Anthony M. Corso
- ------------------------------------ ------------------------------------
Vincent Papandrea Anthony M. Corso
/s/ Eugene C. McCarthy /s/ John O. Pickett, III
- ------------------------------------ ------------------------------------
Eugene C. McCarthy John O. Pickett, III
/s/ Michael C. Ziebarth /s/ Anthony Giardina
- ------------------------------------ ------------------------------------
Michael C. Ziebarth Anthony Giardina
<PAGE>
/s/ Sean M. McCooey /s/ Mark Soltz
- ------------------------------------ ------------------------------------
Sean M. McCooey Mark Soltz
/s/ Christopher M. Smith /s/ Joseph Corso, Jr.
- ------------------------------------ ------------------------------------
Christopher M. Smith Joseph Corso, Jr.
/s/ Robert A. Conte /s/ Paul A. Redmond
- ------------------------------------ ------------------------------------
Robert A. Conte Paul A. Redmond
/s/ Thomas G. McLaughlin /s/ Nicholas Caputo
- ------------------------------------ ------------------------------------
Thomas G. McLaughlin Nicholas Caputo
/s/ Joseph R. Dewhurst, II /s/ Steven C. Berger
- ------------------------------------ ------------------------------------
Joseph R. Dewhurst, II Steven C. Berger
/s/ John L. McWilliams /s/ Thomas J. Shanley
- ------------------------------------ ------------------------------------
John L. McWilliams Thomas J. Shanley
/s/ Kevin R. McMahon /s/ Fred DeBoer
- ------------------------------------ ------------------------------------
Kevin R. McMahon Fred DeBoer
/s/ Robert W. Keelips, III /s/ Karin Gill
- ------------------------------------ ------------------------------------
Robert W. Keelips, III Karin Gill
/s/ John M. Dempsey, III /s/ John N. Durante
- ------------------------------------ ------------------------------------
John M. Dempsey, III John N. Durante
<PAGE>
/s/ Gerard A. Competello /s/ William J. Burke, III
- ------------------------------------ ------------------------------------
Gerard A. Competello William J. Burke, III
/s/ Christopher Connors /s/ Christopher Keelips
- ------------------------------------ ------------------------------------
Christopher Connors Christopher Keelips
/s/ Vincent G. Quigley /s/ Anthony Picerni
- ------------------------------------ ------------------------------------
Vincent G. Quigley Anthony Picerni
<PAGE>
Exhibit 10.11
AMENDMENT
AMENDMENT (this "AMENDMENT") dated as of August 23, 1999 to Note Purchase
Agreements dated September 15, 1997 and June 3, 1998 by and among LABRANCHE &
CO., a New York limited partnership (the "COMPANY"), and CERTAIN OF THE
INSTITUTIONS IDENTIFIED AS A HOLDER OF NOTES ON THE SIGNATURE PAGES HEREOF
(collectively, the "NOTEHOLDERS").
1. PRELIMINARY STATEMENTS
1.1 The Company entered into those separate Note Purchase Agreements,
dated as of September 15, 1997 and June 3, 1998 (as in effect immediately
prior to the date this amendment becomes effective, collectively, the
"EXISTING NOTE PURCHASE AGREEMENT" and as amended hereby, the "NOTE PURCHASE
AGREEMENT"), with, respectively, the purchasers of the Notes signatory
thereto, pursuant to which the Company issued and sold to such purchasers
$20,000,000 in principal amount of the Company's 8.17% Subordinated Notes due
September 15, 2002, and $15,000,000 in principal amount of the Company's
7.69% Subordinated Notes due June 3, 2008, respectively (collectively the
"NOTES").
1.2 The Company and the Noteholders agree to amend the Existing Note
Purchase Agreement as more particularly set forth in this Agreement.
2. DEFINED TERMS
The terms used herein have the meanings specified in the Existing Note
Purchase Agreement unless otherwise defined herein.
3. AMENDMENTS TO TERMS OF EXISTING NOTE PURCHASE AGREEMENT
The terms of the Existing Note Purchase Agreement are hereby amended as
follows:
3.1 A new Section 9.10 is hereby added to the existing Note Purchase
Agreement as follows:
9.10 RIGHTS AS SPECIALIST
The Company will not sell, transfer or permit by inaction the transfer of
any of its rights to act as a specialist on the NYSE in respect of any
particular stock, except
(a) in connection with a regulatory action initiated by the NYSE in
respect of which the Company has made reasonable efforts to contest, or
(b) in an arm's-length exchange with an unrelated, unaffiliated
NYSE specialist firm solely for the right to act as a specialist on the
NYSE in respect of stock in which such other firm is, immediately prior to
such exchange, the specialist.
<PAGE>
3.2 Section 10.1(b) of the Existing Note Purchase Agreements hereby
amended in full to read as follows:
(b) PARTNER'S CAPITAL. The Company will not permit, at any time,
Adjusted Partners' Capital to be less than $94,000,000.
3.3 Section 10.3 of the Existing Note Purchase Agreement is amended to
read in full as follows:
10.3 RESTRICTED PAYMENTS.
The Company will not declare, make or pay any Restricted Payment, if,
(a) after such declaration, making or payment, the amount of
Restricted Payments declared, made or paid during the then current Fiscal
Quarter would exceed an amount equal to
(i) $5,000,000, PLUS
(ii) Operating Income determined in respect of all then
completed Fiscal Quarters from and including the Fiscal Quarter beginning on
July 1, 1997, PLUS
(iii) the book value of the net proceeds of all
(A) sales of partnership interests received by the
Company on or after July 1, 1997
(B) contributions to partnership capital received by the
Company on or after July 1, 1997,
(C) issuances of Permitted Subordinated Debt received
by the Company on or after July 1, 1997 (except to the extent
issued in lieu of a distribution in respect of partnership
capital), MINUS
(iv) the amount of all Restricted Payments made during all
then completed Fiscal Quarters from and including the Fiscal Quarter
beginning on July 1, 1997, or
(b) a Default, Event or Default or Event of Acceleration then
exists or would exist after giving effect thereto.
3.4 Section 10.4 of the Existing Note Purchase Agreement is hereby
amended to read in its entirety as follows:
10.4 TRANSACTIONS WITH AFFILIATES.
The Company will not enter into directly or indirectly any Material
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of
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properties of any kind or the rendering of any service) with any Affiliate,
except in the ordinary course and pursuant to the reasonable requirements of
the Company's business and upon fair and reasonable terms. For purposes of
this Section, borrowings from the Parent shall be considered to be in the
ordinary course of the Company's business, provided that such borrowings are
otherwise in compliance with this Agreement.
3.5 Subsections (h), (i) and (j) of Section 11.1 of the Existing Note
Purchase Agreement are hereby amended to read in full as follows:
(h) INVOLUNTARY BANKRUPTCY PROCEEDINGS-
(i) a receiver, liquidator, custodian or trustee of the
Company, the General Partner or the Parent, or of all or any of the
property of the Company, the General Partner or the Parent, shall be
appointed by court order and such order remains in effect for more
than 60 days; or an order for relief shall be entered with respect
to the Company, the General Partner or the Parent, or the Company,
the General Partner or the Parent shall be adjudicated a bankrupt or
insolvent;
(ii) any of the property of the Company, the General Partner
or the Parent shall be sequestered by court order and such order shall
remain in effect for more than 60 days; or
(iii) a petition shall be filed against the Company, the
General Partner or the Parent under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, and shall not be dismissed within 60 days after such filing;
(i) VOLUNTARY PETITIONS -- the Company, the General Partner or the
Parent shall file a petition in voluntary bankruptcy or seeking relief under
any provision of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, or shall consent to the filing of any
petition against it under any such law;
(j) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the Company, the
General Partner or the Parent shall make an assignment for the benefit of its
creditors, or the Company, the General Partner or the Parent shall fail to
pay its debts generally as they become due, or the Company, the General
Partner or the Parent shall consent to the appointment of a receiver,
liquidator or trustee of all or any part of its property; or
3.6 The following definition is hereby added to Schedule B of the
Existing Note Purchase Agreement in the appropriate alphabetical position:
PARENT -- means LaBranche & Co Inc., a Delaware corporation
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3.7 The following definitions in Schedule B of the Existing Note
Purchase Agreement are amended in their entirety as follows:
"ADJUSTED PARTNERS' CAPITAL" means, at any time, an amount equal
to:
(a) partners' capital as shown on the statement of financial
position of the Company, plus
(b) the net book value (on the books of the Company) of
liabilities owing by the Company in respect of NYSE Exchange
Memberships, to the extent that such liabilities qualify as Net Capital
of the Company at such time, PLUS
(c) the principal amount of all Permitted Subordinated Debt, minus
(d) all intangible assets shown on the statement of financial
position of the Company,
determined at such time, in accordance with GAAP, to the extent applicable.
"CHANGE IN CONTROL"--a change of control shall have occurred if at any
time (a) at least fifty-one percent (51%) of the equity interest of any of
the Company, the General Partner and the Parent is not owned, either directly
or indirectly by attribution through an intermediate Person, by Acceptable
Persons and (b) George M.L. LaBranche IV is not the Chairman of the Board of
Directors and Chief Executive Officer of the Parent.
The amount of equity or partnership interest owned by any Person
shall be determined by reference to the book value on the books of
the Company of such equity or partnership interest. As used in this
definition.
"ACCEPTABLE PERSON" - means a natural person who on August 16, 1999
owned a membership interest in the General Partner, or, in the case
of the Parent, a member of the Family or a Family Trust of such person.
(i) in respect of the Company, on the date of Closing, owned,
directly or indirectly, limited partnership interests in the Company,
or, in each case, a member of the Family or a Family Trust of such
person, or
(ii) in respect of the General Partner and the Parent, on the
date of Closing, owned, directly or indirectly, membership interests
in the General Partner.
"FAMILY"-- means, with respect to any natural person, the heirs,
legatees, descendants and blood relatives to the third degree of
consanguinity of such natural person.
"FAMILY TRUSTS" -- means, with respect to any natural person, any
trusts for the exclusive benefit of such natural person and the
spouse and lineal descendants of such natural person.
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"OPERATING INCOME"--means, in respect of any period, the net income
(or deficit) of the Company, PLUS
(a) any payment made or obligation incurred to any managing
director partner or any holder of any class of equity of the Company or
the General Partner, however classified including, without limitations,
salaries, bonuses, dividends, interest, and payments in respect of taxes,
(b) taxes, and
(c) non cash charges attributable to the amortization of goodwill
acquired subsequent to July 15, 1999
but, in each case, only to the extent that such item included in the
determination of such net income, determined for such period in accordance
with GAAP.
4. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the holders of the Notes as of
the date hereof that:
(a) the Company is duly organized, validly existing and in good
standing in its jurisdiction organization;
(b) the Company has the power to enter into this Amendment and to
perform its obligations hereunder;
(c) this Amendment has been duly authorized by all necessary action
on the part of the Company, and each of this Amendment and the Note
Purchase Agreement constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(d) neither the execution or delivery by the Company of this
Amendment nor the performance by the Company of its obligations
hereunder or under the Existing Note Purchase Agreement, the Note
Purchase Agreement, or the Notes (collectively, "FINANCING DOCUMENTS"):
(i) will adversely affect the enforceability against the
Company of the Financing Documents;
(ii) will require the taking of any action or the giving of
any consent or approval by, or the making or any registration or
filing with, any Governmental
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Authority or other person other than such actions, consents,
approvals, registrations and filings as have heretofore been taken,
given or made (as the case may be):
(iii) will violate any provision of any organizational
document of the Company, or any provision of any law, rule,
regulation, order or decree of any Governmental Authority
applicable to the Company; or
(iv) will violate or constitute a default under any material
agreement to which the Company is a party or by which any of its
properties or assets is or may be bound, or will result in the
creation or imposition of any Lien on the properties or assets of
the Company;
(e) (i) neither this Amendment or any certificate furnished in
connection herewith nor any other document or statement furnished to the
holders of the Notes in connection with the amendments contemplated
hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained herein and therein not misleading;
(ii) there is no fact known to the Company that has had or,
so far as the Company can now reasonably foresee, could reasonably
be expected to have, a Material Adverse Effect that has not been
publicly disclosed;
(f) the Company has received the approval of the Examining
Authority of this Amendment;
(g) immediately after the effectiveness hereof and after giving
effect hereto, there exists no Default or Event of Default, or Event of
Acceleration, and
(h) attached hereto as Schedule 1 is a true and correct list of the
holders of membership interests in the General Partner and their
respective percentage ownership as of August 16, 1999.
5. SCOPE AND EFFECT OF AMENDMENT
The terms of this Amendment shall not operate as or constitute a waiver
by any holder of Notes of, or otherwise prejudice any holder of Notes'
rights, remedies or powers under, the Existing Note Purchase Agreement, any
other Financing Document or under applicable law. Except as expressly
provided herein,
(a) no terms or provisions of the Existing Note Purchase Agreement
are modified or changed by this Amendment, and
(b) the terms and provisions of the Existing Note Purchase Agreement
continue in full force and effect.
The Company hereby acknowledges, confirms, reaffirms and ratifies all of its
obligations and duties under the Financing Documents and all agreements
related thereto. This Amendment does not constitute an agreement or
obligation of any holder of Notes to give its consent to any future
6
<PAGE>
amendment of any Financing Document or to any future transaction that would,
absent consent of the holders of the Notes, constitute a Default or Event of
Default under the Note Purchase Agreement. This Amendment may not be
contradicted by evidence of any actual or alleged prior, contemporaneous or
subsequent understandings or agreements of the parties, written or oral,
express or implied, other than a writing which expressly amends or supersedes
this Amendment or Financing Documents. Upon the effectiveness of this
Amendment, each reference in any Financing Document to any Note Purchase
Agreement shall mean and be a reference to the Note Purchase Agreement as
amended hereby.
6. MISCELLANEOUS
6.1 GOVERNING LAW
This Amendment is governed by the internal laws of the State of New York
and shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of such State.
6.2 SUCCESSORS AND ASSIGNS
This Amendment shall bind and inure to the benefit of the respective
successors and assigns of the Company and the holders of the Notes.
6.3 EXPENSES
The Company will pay, or cause to be paid, the reasonable out-of-pocket
costs and expenses of each holder of Notes in connection with entering into
this Amendment and the consummation of all transactions contemplated hereby.
The obligations of the Company under this Section 6.3 shall survive payment
of any Note issued under the Note Purchase Agreement.
6.4 EFFECTIVENESS
This Amendment may be executed in one or more counterparts and shall be
effective, as of the date hereof, when at least one counterpart shall have
been executed by the Company and holders of Notes constituting the Required
Holders.
[Remainder of page intentionally blank. Next page is signature page.]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. LLC, its General Partner
By: /s/ George M. L. LaBranche IV
---------------------------------
Name: George M. L. LaBranche IV
Title: Senior Managing Director
Holders of Notes:
LION II CUSTOM INVESTMENTS LLC
FIRST COLUMBINE LIFE INSURANCE COMPANY
SOUTHLAND LIFE INSURANCE COMPANY
SECURITY LIFE OF DENVER INSURANCE COMPANY
GOLDEN AMERICA LIFE INSURANCE COMPANY
EQUITABLE AMERICAN INSURANCE COMPANY
USG ANNUITY & LIFE COMPANY
By: ING Investment Management LLC, as Agent
By:
----------------------------------
Name:
Title:
NN LIFE INSURANCE COMPANY WESTERN UNION INSURANCE COMPANY
OF CANADA
By: By:
----------------------------------- ---------------------------------
Name: Name:
Title: Title:
By:
-----------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. LLC., its General Partner
By:
---------------------------------
Name: George M. L. LaBranche IV
Title: Senior Managing Director
Holders of Notes:
LION II CUSTOM INVESTMENTS LLC
FIRST COLUMBINE LIFE INSURANCE COMPANY
SOUTHLAND LIFE INSURANCE COMPANY
SECURITY LIFE OF DENVER INSURANCE COMPANY
GOLDEN AMERICA LIFE INSURANCE COMPANY
EQUITABLE AMERICAN INSURANCE COMPANY
USG ANNUITY & LIFE COMPANY
By: ING Investment Management LLC, as Agent
By: /s/ Randal W. Ralph
----------------------------------
Name: Randal W. Ralph
Title: Vice President
NN LIFE INSURANCE COMPANY WESTERN UNION INSURANCE COMPANY
OF CANADA
By: /s/ Randal W. Ralph By: /s/ Randal W. Ralph
----------------------------------- ---------------------------------
Name: Randal W. Ralph Name: Randal W. Ralph
Title: Authorized Signatory Title: Authorized Signatory
By: /s/ Fred C. Smith
-----------------------------------
Name: Fred C. Smith
Title: Authorized Signatory
<PAGE>
Exhibit 10.14
AMENDMENT NO. 1
AMENDMENT NO. 1 (this "AMENDMENT"), dated as of June 23, 1999, to the
Credit Agreement (the "CREDIT AGREEMENT") dated as of June 26, 1998, and to the
Security Agreement (the "SECURITY AGREEMENT") executed and delivered therewith,
each by and among LABRANCHE & CO., a New York limited partnership (the
"BORROWER") and THE BANK OF NEW YORK, (the "BANK")
RECITALS
I. Capitalized terms used herein which are not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
II. The Borrower has requested that the Credit Agreement be amended to
the extent and in the manner set forth below and the Bank is agreeable to such
amendment subject to the terms and conditions hereof.
Accordingly, in consideration of the terms and conditions hereinafter set
forth, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. Section 1.3 of the Credit Agreement is amended by restating in their
entirely the following definitions:
"COMMITMENT" shall mean $100,000,000, as the same may be (a) reduced from
time to time pursuant to Section 2.3(a)(ii) hereof and/or increased pursuant to
Section 2.4 hereof.
"SPECIAL COUNSEL" shall mean Bryan Cave LLP.
"TERMINATION DATE" shall mean June 23, 2000.
2. Section 3.1 is amended by adding the following subsection at the end of
thereof:
(u) Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Borrower's computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the borrower's systems interact) and
the testing of all such systems and equipment, as so reprogrammed, is expected
to be completed in October of 1999. The cost to the Borrower of such
reprogramming and testing and of the reasonable foreseeable consequences of year
2000 to the Borrower (including
1
<PAGE>
reprogramming errors and the failure of others' systems or equipment) is not
expected to result in a Default or have a material adverse effect on the
business, prospects, operations, properties, assets or condition (financial or
otherwise) of the Borrower. Except for such of the reprogramming referred to in
the preceding sentence as may be necessary, the computer and management
information systems of the Borrower are and, with ordinary course upgrading and
maintenance, are expected to continue for the term of this Credit Agreement to
be, sufficient to permit the Borrower to conduct its business as presently
conducted without a material adverse change in the business, prospects,
operations, properties, assets or condition (financial or otherwise) of the
Borrower.
3. section 5.1 of the Credit Agreement is amended to restate in their
entirety subsections (a) and (b) thereof as follows:
(a) NET CAPITAL. Maintain at all times a net capital (as defined Rule
15c3-1(c)(2) promulgated by the SEC) of not less than $75,000,000.
(b) NET WORTH. Maintain at all times a net worth (computed as required for
reporting on item 5, line 3530 of a FOCUS Report of the Borrower) of
not less than $100,000,000.
4. Schedule 3.1(d) is amended in its entirety to read as set forth in
Schedule 3.1(d) attached hereto.
5. The date contained in the third line of the first paragraph of the
Security Agreement is amended to read "June 26, 1998".
6. This Amendment shall not be effective until such date as the Borrower
and the Bank shall have executed and delivered this Amendment.
7. On and as of the date hereof the Borrower hereby (a) reaffirms and
admits the validity and enforceability of the Loan Documents and all of its
obligations thereunder, (b) agrees and admits that it has no defenses to or
offsets against any such obligation, (c) represents and warrants that no Default
has occurred and is continuing, and that each of the representations and
warranties made by it in the Loan Documents is true and correct with the same
effect as though such representation and warranty had been made on such date,
and (d) agrees to pay the reasonable fees and disbursements of Special Counsel
in connection with this Amendment.
8. In all other respects, the Loan Documents shall remain in full force and
effect, and no amendment in respect of any term or condition of any Loan
Document contained
2
<PAGE>
herein shall be deemed to be an amendment in respect of any other term or
condition contained in any Loan Document.
9. This Amendment may be executed in any number of counterparts all of
which, taken together, shall constitute one amendment. In making proof of this
Amendment, it shall only be necessary to produce the counterpart executed and
delivered by the party to be charged.
10. THIS AMENDMENT IS BEING EXECTUED AND DELIVERED IN, AND IS INTENDED TO
BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THOSE RELATING TO
CONFLICT OF LAWS.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
LaBRANCHE & CO.
By LaB Investing Co. L.L.C.
Its General Partner
By: LaBranche
--------------------------------
Name: G M L LaBranche IV
--------------------------------
Title: Sr Managing Ptr.
--------------------------------
<PAGE>
THE BANK OF NEW YORK
By: /s/ Enrique A. Rivera
--------------------------------
Name: Enrique A. Rivera
------------------------------
Title: Vice President
------------------------------
<PAGE>
SCHEDULE 3.1(d)
PARTNERS IN BORROWER
GENERAL PARTNER
LaB Investing Co. L.L.C.
LIMITED PARTNERS
Gerard T. Cleary
Hilary R. Geary Trust
Lauren M. Behn
John R. Redmod
Louis V. Henston
Robert N. Westerlund
Richard E. Crisco
James J. Boyle
Jane R. Rosenau Trust B
Dennis J. Stack
Joseph L. Gitterman I
Robert J. Vadala
Estate of Joseph L. Bruce
Kathryn Gallagher
Kevin J. Gallagher Trust
Jane R. Rosenau Trust A
David A. Gallagher Trust
Caputo Children's Trust
<PAGE>
EXHIBIT 10.15
AMENDMENT NO. 2
AMENDMENT NO. 2 (this "AMENDMENT"), dated as of August 24, 1999, to the
Credit Agreement, dated as of June 26, 1998, by and among LABRANCHE & CO., a New
York limited partnership (the "BORROWER") and THE BANK OF NEW YORK (the "BANK"),
as amended by Amendment No. 1 thereto, dated as of June 23, 1999 (the "CREDIT
AGREEMENT").
RECITALS
I. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
II. Pursuant to certain reorganization transactions taking place as of
the date hereof (the "REORGANIZATION TRANSACTIONS"), LaBranche & Co Inc., a
newly formed holding corporation (the "PARENT"), is acquiring, directly or
indirectly, 100% of the equity interest of the Borrower.
III. The Borrower has requested that the Credit Agreement be amended to
the extent and in the manner set forth below and the Bank is agreeable to such
amendment subject to the terms and conditions hereof.
Accordingly, in consideration of the terms and conditions hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Section 1.3 is amended to delete the definition of "MANAGING
DIRECTORS".
2. Section 1.3 is further amended to restate in their entirety the
following definitions:
"LAB AGREEMENT" shall mean the Amended and Restated Operating
Agreement of LaB, dated as of August 24, 1999, as amended from time to time.
"NOTE PURCHASE AGREEMENTS" shall mean (i) the several Note Purchase
Agreements, each dated September 15, 1997, among the borrower and the purchasers
party thereto, as the same may be amended, modified or supplemented from time to
time and (ii) the several Note Purchase Agreements, each dated June 3, 1998
among the Borrower and the purchasers party thereto, as the same may be amended,
modified or supplemented from time to time.
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated Articles
<PAGE>
of Partnership of the Borrower dated as of August 24, 1999, as amended from time
to time.
"SPECIAL COUNSEL" shall mean Bryan Cave LLP.
3. Section 2.3 is amended to delete subsection (b) thereof.
4. Section 5.1(m)(iii) is deleted.
5. Section 5.2(c) is restated in its entirety to read as follows:
(c) MERGER, CONSOLIDATION AND ACQUISITION OF ASSETS. Enter into any
merger or consolidation with any Person (other than an Affiliate), or acquire
from such person all or substantially all o the assets of, such person.
6. Section 5.2(d) is restated in its entirety to read as follows:
(d) SALE OF INTERESTS IN BORROWER. Sell, transfer, assign, convert
or otherwise dispose of, or permit any sale, transfer, assignment, conversion or
other disposition of, any partnership interest in the borrower conveying an
interest of more than 10% in the profits of the Borrower (other than in
connection with the Reorganization Transactions).
7. Section 5.2(f) is restated in its entirety to read as follows:
(f) TRANSACTIONS WITH AFFILIATES. Enter into any transactions
(including, without limitation, the purchase, sale or exchange or property or
the rendering of any service) with any Affiliate, except in the ordinary course
and pursuant to the reasonable requirements of its business and upon fair and
reasonable terms no less favorable to the Borrower as would obtain in any
arm's-length transaction with a Person not an Affiliate (other than (i) any
borrowings from the Parent, provided that such borrowings are reasonable
necessary for the conduct of the Borrower's business and are upon fair and
reasonable terms no less favorable to the borrower as would be obtained by the
Borrower in any arm's-length transaction with a Person not an Affiliate, or (ii)
any merger or consolidation with, or any acquisition of all or substantially all
of the assets of, any Affiliate).
8. Section 6.1 is amended to delete the word "or" appearing at the end
of subsection (o) and to delete subsection (p) thereof.
9. Article 6 is further amended by adding the following Section at the
end thereof:
6.2 CONCERNING CERTAIN EXECUTIVE OFFICERS OF THE PARENT
2
<PAGE>
The Borrower agrees to give prompt written notice to the Bank in the
event that George M.L. LaBranche, IV shall no longer have the titles of
and be serving as Chairman and Chief Executive Officer of, and be a
Director of, the Parent. Within 30 days after receipt of such notice by
the Bank (which notice shall specifically refer to this Section) or at
any time after the Bank shall become aware of the foregoing
circumstance, no such notice having been given to the Bank, the Bank
shall be entitled to notify the Borrower that the Commitment has been
terminated and that all Loans shall become due and payable on the day
after the date of such notice to the Borrower, and, in the event of the
giving of such notice by the Bank, the Commitment shall terminate on
the date of such notice and all Loans shall become due and payable on
the day after the date of such notice.
10. Schedules I and II are amended in their entirety to read as set
forth in Schedules I and II attached hereto.
11. This Amendment shall not be effective until such date as the
Borrower and the Bank shall have executed and delivered this Amendment.
12. On and as of the date hereof the Borrower hereby (a) reaffirms and
admits the validity and enforceability of the Loan Documents and all of its
obligations thereunder, (b) agrees and admits that it has no defenses to or
offsets against any such obligation, (c) represents and warrants that no Default
has occurred and is continuing, and that each of the representations and
warranties made by it in the Loan Documents is true and correct with the same
effect as though such representation and warranty had been made on such date,
and (d) agrees to pay the reasonable fees and disbursements of Special Counsel
in connection with this Amendment.
13. In all other respect, the Loan Documents shall remain in full force
and effect, and no amendment in respect of any term or condition of any Loan
Document contained herein shall be deemed to be an amendment in respect of any
other term or condition contained in any Loan Document.
14. This Amendment may be executed in any number of counterparts all of
which, taken together, shall constitute one amendment. In making proof of this
Amendment, it shall only be necessary to produce the counterpart executed and
delivered by the party to be charged.
15. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED
TO BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THOSE RELATING
TO CONFLICT OF LAWS.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
LaBRANCHE & CO.
By LaB Investing Co. L.L.C.
Its General Partner
By: /s/ James G Gallagher
---------------------------
Name: James G. Gallagher
-------------------------
Title: Exec. V.P.
-------------------------
<PAGE>
THE BANK OF NEW YORK,
By: /s/ E.A. Rivera
---------------------------
Name: E.A. Rivera
-------------------------
Title: Vice President
-------------------------
<PAGE>
Exhibit 10.17
EXECUTION COPY
$100,000,000
LABRANCHE & CO INC.
9 1/2% SENIOR NOTES DUE 2004
PURCHASE AGREEMENT
August 18, 1999
SALOMON SMITH BARNEY Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
As Representatives of the
Initial Purchasers
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
LaBranche & Co Inc., a Delaware corporation ("LABINC." or the
"ISSUER"), proposes, upon the terms and conditions set forth herein, to issue
and sell to the several parties named in SCHEDULE I hereto (the "INITIAL
PURCHASERS"), for whom you (the "REPRESENTATIVES") are acting as
representatives, $100,000,000 aggregate principal amount of its 9 1/2 % Senior
Notes due 2004 (the "NOTES"). The Notes are to be issued under an indenture, to
be dated as of August 24, 1999 (the "INDENTURE"), by and between the Company and
Firstar Bank, N.A., as trustee (the "TRUSTEE"). The Notes have the benefit of a
Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated
as of August 24, 1999, among the Issuer and the Initial Purchasers, pursuant to
which the Issuer has agreed to register the Notes under the Securities Act
subject to the terms and conditions specified therein. To the extent there are
no additional parties listed on SCHEDULE I other than you, the term
"Representatives" and Initial Purchasers shall mean you as the Initial
Purchasers, and the terms shall mean either the singular or plural as the
context requires. The use of the neuter in this Agreement shall include the
feminine and masculine wherever appropriate.
For purposes of the representations and warranties set forth
in Section 5 and the conditions set forth in Section 7, unless the context
otherwise requires, prior to the consummation of the Reorganization Transactions
(as defined below), references to the "COMPANY" shall be deemed to be references
to LaBranche & Co., a New York limited partnership ("LABCO."), and after
consummation of the Reorganization Transactions, references to the "COMPANY"
shall be deemed to be references to LaBInc.
<PAGE>
It is understood and agreed to by all parties that in
connection with the reorganization of the business of LaBCo. from partnership to
corporate form, a series of transactions that are described in the Offering
Memorandum (as defined below) under the caption "Certain
Transactions--Reorganization and Related Transactions" in the Offering
Memorandum will occur not later than concurrent with the Closing Date (as
defined below). Such transactions are hereinafter referred to as the
"REORGANIZATION TRANSACTIONS"). The award of restricted stock units to
employees, the award of options for common stock to employees on a discretionary
basis and the issuance of common stock to certain individuals and entities in
exchange for their limited partnership interests in LaBCo. or their membership
interests in LaB Investing Co. L.L.C. ("LABLLC"), as described in the Offering
Memorandum under the heading "Certain Transactions--Reorganization and Related
Transactions," the initial public offering of 10,500,000 shares of common stock
(the "COMMON STOCK") of the Company (with an over-allotment option for an
additional 1,575,000 shares), the issuance of $16.4 million of indebtedness by
LaBInc. and the repayment of $5.0 million of subordinated indebtedness by LaBCo.
are hereinafter referred to as the "RELATED TRANSACTIONS."
The Company wishes to confirm as follows its agreement with
the Initial Purchasers in connection with the purchase and resale of the Notes.
1. PRELIMINARY OFFERING MEMORANDUM AND OFFERING MEMORANDUM.
The Notes will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "ACT"), in
reliance on an exemption pursuant to Section 4(2) under the Act and the rules
and regulations promulgated thereunder. The Company has prepared a preliminary
offering memorandum, dated July 30, 1999 (the "PRELIMINARY OFFERING
MEMORANDUM"), and an offering memorandum, dated August 19, 1999 (the "OFFERING
MEMORANDUM"), setting forth information regarding the Company and the Notes.
Unless stated herein to the contrary, all references herein to the Offering
Memorandum are to the Offering Memorandum at the date thereof and are not meant
to include any supplement or amendment subsequent thereto. The Company hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and Offering Memorandum in connection with the offering and resale of the Notes
by the Initial Purchasers on the terms and subject to the conditions set forth
herein.
The Company understands that the Initial Purchasers propose to
make offers and sales ("EXEMPT RESALES") of the Notes purchased by the Initial
Purchasers hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered, (i) to persons
in the United States who are, or whom the Initial Purchasers reasonably believe
to be, qualified institutional buyers ("QUALIFIED INSTITUTIONAL BUYERS") as
defined in Rule 144A under the Act, as such rule may be amended from time to
time ("RULE 144A"), in transactions under Rule 144A and (ii) outside the United
States to persons other than U.S. persons in reliance upon and in compliance
with Regulation S under the Act, as such regulation may be amended from time to
time ("Regulation S"). The persons specified in clauses (i) and (ii) are
referred to herein as the "ELIGIBLE Purchasers." As used herein, the terms
"UNITED STATES" and "U.S. PERSONS" have the respective meanings given them in
Regulation S.
2
<PAGE>
It is understood and acknowledged that upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Act, each of the Notes (and each note issued in
exchange therefor or in substitution thereof) shall bear the following legend:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO PERSONS OTHER THAN
U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE
904 UNDER REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
2. AGREEMENTS TO SELL, PURCHASE AND RESELL.
(a) Upon the basis of the representations, warranties and
agreements of the Initial Purchasers herein contained and subject to all the
terms and conditions set forth herein, the Company hereby agrees to issue and
sell its Notes to the Initial Purchasers and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, each Initial
Purchaser, severally and not jointly, agrees to purchase from the Company that
principal amount of Notes set forth opposite the name of such Initial Purchaser
on SCHEDULE I attached hereto at a purchase price of 97.811% of the principal
amount thereof.
(b) Each Initial Purchaser represents and warrants to the
Company that it is a Qualified Institutional Buyer with such knowledge and
experience in financial and business
3
<PAGE>
matters as are necessary to evaluate the merits and risks of an investment in
the Notes, it believes it has received all of the information it considers
necessary or appropriate for deciding whether to make an investment in the
Notes, and has advised the Company that it proposes to offer the Notes for
resale upon the terms and conditions set forth in this Agreement and in the
Offering Memorandum in Exempt Resales. Each Initial Purchaser hereby represents
and warrants to, and agrees with, the Company that it (i) will not solicit
offers for, or offer to sell, the Notes by means of any form of general
solicitation or general advertising or in any manner involving a public offering
within the meaning of Section 4(2) of the Act (including, but not limited to,
(A) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(B) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising; PROVIDED, HOWEVER, that such limitation
shall not preclude the Initial Purchasers from placing any tombstone
announcement with respect to the resale by the Initial Purchasers of the Notes,
provided that such announcement is not prohibited by (and is in compliance with)
Regulation S), and (ii) will solicit offers for the Notes only from, and will
offer, sell or deliver the Notes as part of its initial offering, only to (A)
persons in the United States whom such Initial Purchaser reasonably believes to
be Qualified Institutional Buyers, or if any such person is buying for one or
more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to such Initial Purchaser that each
such account is a Qualified Institutional Buyer, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, in each case,
in transactions under Rule 144A and (B) outside the United States to persons
other than U.S. persons in reliance on Regulation S. Each Initial Purchaser has
advised the Company that it will offer the Notes to Eligible Purchasers at a
price initially equal to 99.811% of the principal amount thereof, plus accrued
interest, if any, from August 24, 1999.
(c) Each Initial Purchaser represents and warrants that (i) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
of the Notes in the United Kingdom by means of any document, other than to
persons whose ordinary business it is to buy or sell shares or debentures
whether as principal or agent (except in circumstances that do not constitute an
offer to the public within the meaning of the Companies Act 1985), (ii) it has
complied with and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by such Initial Purchaser in
relation to the Notes in, from or otherwise involving the United Kingdom and
(iii) it has only issued or passed on and will only issue or pass on in or from
the United Kingdom to any persons any document received by such Initial
Purchaser in connection with the issue of the Notes if the recipient is of a
kind described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988, as amended.
(d) Each Initial Purchaser represents and warrants that with
respect to Notes offered and sold or to be offered and sold pursuant to
Regulation S it has offered and sold the Notes and agrees that it will offer and
sell the Notes (i) as part of its initial distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering of
the Notes and the Closing Date (as defined in Section 3 below), only in
accordance with Rule 903 of Regulation S. Accordingly, each Initial Purchaser
represents, warrants and agrees that with respect to Notes offered and sold or
to be offered and sold pursuant to Regulation S none of it, its
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affiliates or any persons acting on its behalf or on behalf of its affiliates
has engaged or will engage in any directed selling efforts in the United States
with respect to the Notes, and it and its affiliates have complied and will
comply with the offering restrictions requirements of Regulation S. Each Initial
Purchaser agrees that, at or prior to confirmation of any sale of Notes pursuant
to Regulation S, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases such
Notes from it during the restricted period a confirmation or notice to
substantially the following effect:
The Notes covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "SECURITIES ACT"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their initial distribution
at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, except in either
case in accordance with Regulation S or Rule 144A under the Securities
Act. Terms used above have the respective meanings given to them in
Regulation S under the Securities Act.
Each Initial Purchaser understands that the Company and, for
the purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 7(d) and Section 7(e) hereof, counsel to the Company and counsel to
the Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and agreements and each Initial Purchaser hereby consents to
such reliance.
3. DELIVERY OF THE NOTES AND PAYMENT THEREFOR. Delivery to the
Initial Purchasers of and payment for the Notes shall be made at the office of
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York, 10006
at 9:00 A.M., New York City time, on August 24, 1999 (the "CLOSING DATE"). The
place of closing for the Notes and the Closing Date may be varied by agreement
between the Initial Purchasers and the Company.
The Notes will be delivered to the Initial Purchasers against
payment of the purchase price therefor by federal funds certified check or wire
transfer, in each case, of immediately available funds payable in accordance
with written instructions from the Company. The Notes will be evidenced by one
or more global notes (each, a "GLOBAL NOTE") and will be registered in the name
of Cede & Co. as nominee of The Depository Trust Company ("DTC"), and in the
other cases, in such names and in such denominations as the Initial Purchasers
shall request prior to 1:00 p.m., New York City time, on the business day
preceding the Closing Date. The Notes to be delivered to the Initial Purchasers
shall be made available to the Initial Purchasers in New York City for
inspection and packaging not later than 9:30 a.m., New York City time, on the
business day next preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY. The Company agrees with the
Initial Purchasers as follows:
(a) Until the completion of the distribution of the Notes by
the Initial Purchasers to Eligible Purchasers, the Company will advise
the Initial Purchasers
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<PAGE>
promptly and, if requested, will confirm such advice in writing, of any
material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of
the Company, taken as a whole, or of the happening of any event or the
existence of any condition that requires any amendment or supplement to
the Offering Memorandum (as then amended or supplemented) so that the
Offering Memorandum (x) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or (y)
will comply with applicable law.
(b) The Company will furnish to the Initial Purchasers,
without charge, such number of copies of the Offering Memorandum, as it
may then be amended or supplemented, as the Initial Purchasers may
reasonably request.
(c) The Company will not make any amendment or supplement to
the Preliminary Offering Memorandum or to the Offering Memorandum of
which the Initial Purchasers shall not previously have been advised or
to which they shall reasonably object in writing after being so advised
unless, in the opinion of counsel to the Company, such amendment or
supplement is necessary to comply with applicable law.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchasers,
without charge, in such reasonable quantities as the Initial Purchasers
shall have requested or may hereafter request, copies of the
Preliminary Offering Memorandum. The Company consents to the use, in
accordance with the securities or Blue Sky laws of the jurisdictions in
which the Notes are offered by the Initial Purchasers and by dealers,
prior to the date of the Offering Memorandum, of each Preliminary
Offering Memorandum so furnished by the Company. The Company consents
to the use of the Offering Memorandum (and of any amendment or
supplement thereto prepared in accordance with Section 4(c)) in
accordance with the securities or Blue Sky laws of the jurisdictions in
which the Notes are offered by the Initial Purchasers and by all
dealers to whom Notes may be sold, in connection with the offering and
sale of the Notes.
(e) If, at any time prior to completion of the distribution of
the Notes by the Initial Purchasers to Eligible Purchasers, any event
shall occur or condition shall exist that in the judgment of the
Company or in the opinion of the Initial Purchasers based on advice of
counsel requires any amendment or supplement to the Offering Memorandum
(as then amended or supplemented) so that the Offering Memorandum (x)
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, or (y) will comply with
applicable law, the Company will, in each such case subject to Section
4(c), forthwith prepare an appropriate supplement or amendment thereto,
and will expeditiously furnish to the Initial Purchasers that number of
copies thereof as they shall reasonably request.
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<PAGE>
(f) The Company will cooperate with the Initial Purchasers and
with their counsel in connection with the qualification of the Notes
for offering and sale by the Initial Purchasers and by dealers under
the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may designate and will file such consents to service of
process or other documents necessary or appropriate in order to effect
such qualification; PROVIDED that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to general
service of process in any jurisdiction where it is not now so subject.
(g) So long as any of the Notes are outstanding, the Company
will furnish to the Initial Purchasers (i) as soon as reasonably
practicable, a copy of each report of the Company filed with the
Securities and Exchange Commission (the "COMMISSION") and (ii) from
time to time such other information concerning the Company as the
Initial Purchasers may reasonably request.
(h) The Company will apply the proceeds from the sale of the
Notes to be sold by them hereunder in accordance with the description
set forth under "Use of Proceeds" in the Offering Memorandum.
(i) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Notes to facilitate the sale or resale of the Notes. Except as
permitted by the Act, the Company will not distribute any offering
material in connection with the Exempt Resales. Except following the
effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement (each as defined in the Registration Rights
Agreement), the Company will not solicit any offers to buy and will not
offer to sell the Notes by means of any form of general solicitation or
general advertising (within the meaning of Regulation D under the Act)
or by means of any directed selling efforts (as defined under
Regulation S and the Commission's releases related thereto).
(j) The Company will assist the Initial Purchasers in causing
the Notes to be eligible for trading on the PORTAL market.
(k) From and after the Closing Date, so long as any of the
Notes are outstanding and are "restricted Notes" within the meaning of
Rule 144(a)(3) under the Act or, if earlier, until two years after the
Closing Date, and during any period in which the Company is not subject
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), the Company will furnish to holders of
the Notes and prospective purchasers of Notes designated by such
holders, upon request of such holders or such prospective purchasers,
the information required to be delivered pursuant to Rule 144A(d)(4)
under the Act to permit compliance with Rule 144A in connection with
resales of the Notes.
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<PAGE>
(l) The Company agrees not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as
defined in the Act) that would be integrated with the sale of the Notes
in a manner that would require the registration under the Act of the
sale by the Company to the Initial Purchasers or by the Initial
Purchasers to the Eligible Purchasers of the Notes.
(m) The Company agrees to comply with all of the terms and
conditions of the Registration Rights Agreement, and all agreements set
forth in the representation letters of the Company to DTC relating to
the approval of the Notes by DTC for "book entry" transfer.
(n) The Company agrees that not later than any registration of
the Notes pursuant to the Registration Rights Agreement, or at such
earlier time as may be so required, the Company shall use its best
efforts to cause the Indenture to be qualified under the Trust
Indenture Act of 1939 (the "1939 ACT") and will cause to be entered
into any necessary supplemental indentures in connection therewith.
(o) The Company shall not resell any Notes that have been
acquired by it.
(p) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as reasonably practicable after they have
been prepared, a copy of any unaudited interim consolidated financial
statements of the Company for any period subsequent to the period
covered by the most recent consolidated financial statements of the
Company appearing in the Offering Memorandum.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company
represents and warrants to the Initial Purchasers that:
(a) No order or decree preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum or any amendment or
supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued and no proceeding for any such
purpose has been commenced or is pending or, to the knowledge of the
Company, is threatened.
(b) The Preliminary Offering Memorandum and Offering
Memorandum, as of their respective dates, and the Offering Memorandum,
as of the Closing Date, did not or will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that this representation and warranty does not apply to
statements in the Preliminary Offering Memorandum and Offering
Memorandum made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing
by the Initial Purchasers through Salomon Smith Barney Inc. expressly
for use therein.
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<PAGE>
(c) As of the Closing Date, the Indenture will have been duly
and validly authorized by the Company and, upon its execution and
delivery by the Company and assuming due authorization, execution and
delivery by the Trustee, will be a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of equity; the
Indenture conforms in all material respects to the description thereof
in the Offering Memorandum; and no qualification of the Indenture under
the 1939 Act is required in connection with the offer and sale of the
Notes contemplated hereby or in connection with the Exempt Resales.
(d) As of the Closing Date, the Notes will have been duly
authorized by the Company and, when executed by the Company and
authenticated by the Trustee in accordance with the Indenture and
delivered to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and
delivered, and will constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the
applicability of general principles of equity; and the Notes conform in
all material respects to the descriptions thereof in the Offering
Memorandum.
(e) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate
power and authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the Offering
Memorandum, and is duly registered and qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such registration or qualification, except
where the failure to so register or qualify could not reasonably be
expected to have a material adverse effect on the condition (financial
or other), business, prospects, properties, net worth or results of
operations of the Company and its Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT"); each of LaBCo. and LaBLLC has been duly
organized and is validly existing as a limited partnership and a
limited liability company, respectively, in good standing under the
laws of the jurisdiction in which it is organized with the power and
authority to own or lease, as the case may be, its properties and
conduct its business as described in the Offering Memorandum; LaBCo.
and LaBLLC are the only subsidiaries (the "SUBSIDIARIES") of the
Company;
(f) After giving effect to the Reorganization Transactions and
the Related Transactions, the Company has an authorized capitalization
as set forth in the Offering Memorandum, and all of the issued shares
of capital stock of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and conform to the
description of the capital stock contained in the Offering Memorandum;
all of the membership interests in LaBLLC have been duly and validly
authorized and issued, are
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<PAGE>
fully paid and, are non-assessable and, after giving effect to the
Reorganization Transactions and the Related Transactions, are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims; and all of the partnership interests
in LaBCo. have been duly and validly created and, after giving effect
to the Reorganization Transactions and the Related Transactions, are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(g) There are no legal or governmental proceedings pending
against the Company or, to the knowledge of the Company, threatened
against it or either of its Subsidiaries or to which the Company or its
Subsidiaries or to which any of the respective properties of the
Company or its Subsidiaries is subject that are not adequately
disclosed in the Offering Memorandum and that, if adversely decided,
would be expected to have a Material Adverse Effect or materially
adversely affect the issuance of the Notes or the consummation of any
of the transactions contemplated by this Agreement, the Indenture, the
Notes or the Registration Rights Agreement (collectively, the
"TRANSACTION DOCUMENTS") or the Reorganization Transactions or the
Related Transactions. There are no agreements, contracts, indentures,
leases or other instruments of the Company or either of its
Subsidiaries that are material to the Company and its Subsidiaries,
taken as a whole, that are not described in the Offering Memorandum.
Except as disclosed in the Offering Memorandum, neither the Company nor
either of its Subsidiaries is involved in any strike, job action or
labor dispute with any group of its employees that would reasonably be
expected to have a Material Adverse Effect, and, to the knowledge of
the Company, no such action or dispute is threatened.
(h) Neither the Company nor any Subsidiary is in violation or
default of, and none of (x) the issuance, offer, sale or delivery of
the Notes, (y) the execution, delivery or performance of the
Transaction Documents and the Related Agreements (as defined below) by
the Company to the extent a party thereto, or (z) the consummation by
the Company of the Transaction Documents, the Reorganization
Transactions, the Related Transactions or the transactions contemplated
hereby or thereby will conflict with or constitute a breach of any of
the terms or provisions of, or a default under, (i) the organizational
documents of the Company or any of its Subsidiaries, or (ii) any
agreement, indenture, lease or other instrument to which any of the
Company or its Subsidiaries is a party or by which any of them or any
of their respective properties may be bound, except as disclosed in the
Offering Memorandum or any such conflicts, breaches or defaults that
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect, or (iii) any statute, law, regulation
or judgment, injunction, order or decree applicable to the Company or
either of its Subsidiaries or any of their respective properties,
except any such violations that in the aggregate could not reasonably
be expected to have a Material Adverse Effect; the consummation of the
transactions contemplated in this Agreement, the Reorganization
Transactions and the Related Transactions will not result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of any of the Company or its Subsidiaries pursuant
to the terms of any agreement or instrument to which any of
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<PAGE>
them is a party or by which any of them may be bound or to which any of
their respective properties or assets is subject, other than liens,
charges and encumbrances disclosed in the Offering Memorandum or which
could not reasonably be expected to have a Material Adverse Effect.
(i) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection
with the transactions contemplated in the this Agreement or in the
Indenture or the Registration Rights Agreement, except such as will be
obtained under the Act and the Trust Indenture Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the Initial
Purchasers in the manner contemplated herein and in the Offering
Memorandum and the Registration Rights Agreement.
(j) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its consolidated Subsidiaries and
delivered their reports with respect to the audited consolidated
financial statements and schedule included in the Offering Memorandum,
are independent public accountants with respect to the Company under
rule 101 of the American Institute of Certified Public Accountants (the
"AICPA") Code of Professional Conduct and the related interpretations
and rulings.
(k) Sugarman & Thrope, P.C., who have certified certain
financial statements of Fowler, Rosenau & Geary LLC ("FOWLER")
delivered their report with respect to the audited financial statements
included in the Offering Memorandum, are independent public accountants
with respect to Fowler within the meaning of the Act and the applicable
published rules and regulations thereunder.
(l) The consolidated historical financial statements and
schedule of the Company and its consolidated Subsidiary included in the
Preliminary Offering Memorandum and Offering Memorandum present fairly
in all material respects the financial condition, results of operations
and cash flows of the Company as of the dates and for the periods
indicated, comply as to form with the applicable accounting
requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The selected financial data set forth
under the captions "Summary--Summary Historical Consolidated Financial
Data" and "Selected Historical Consolidated Financial Data" in the
Preliminary Offering Memorandum and Offering Memorandum fairly present,
on the basis stated in the Preliminary Offering Memorandum and Offering
Memorandum, the information included therein. The pro forma financial
statements included in the Preliminary Offering Memorandum and Offering
Memorandum are based on assumptions that provide a reasonable basis for
presenting the significant effects directly attributable to the
transactions and events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma adjustments reflect the proper application of those adjustments
to the historical financial statement amounts in the pro forma
financial statements included in the Preliminary Offering
11
<PAGE>
Memorandum and Offering Memorandum. The pro forma financial statements
included in the Preliminary Offering Memorandum and Offering Memorandum
comply as to form in all material respects with the applicable
accounting requirements of Regulation S-X under the Act and the pro
forma adjustments have been properly applied to the historical amounts
in the compilation of those statements.
(m) The Company has all the requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement; the execution and
delivery of, and the performance by the Company of its obligations
under, this Agreement and the Registration Rights Agreement have been
duly and validly authorized by the Company and each of this Agreement
and, as of the Closing Date, the Registration Rights Agreement will
have been duly executed and delivered by the Company and will
constitute a valid and legally binding agreement, enforceable against
the Company in accordance with its terms, except as the enforcement
hereof and thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of equity, and
except as rights to indemnity and contribution hereunder and thereunder
may be limited by Federal or state securities laws or principles of
public policy.
(n) Except as disclosed in the Offering Memorandum, subsequent
to the date as of which such information is given in the Offering
Memorandum, neither the Company nor either of its Subsidiaries has
incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material or will be material to the Company, taken as a whole, and
there has not been any material change in the capital stock, or
material increase in the short-term or long-term debt of the Company or
either Subsidiary.
(o) Each of the Company and its Subsidiaries owns or leases
all such properties as are materially necessary to the conduct of its
operations as presently conducted, and all of the property held under
lease by any of the Company or its Subsidiaries is held by it under
valid, subsisting and enforceable leases, except as the enforcement
thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally and subject to
the applicability of general principles of equity.
(p) Except as permitted by the Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Notes, will not distribute any
offering material in connection with the offering and sale of the Notes
other than the Preliminary Offering Memorandum and Offering Memorandum
(and any amendment or supplement thereto in accordance with Section
4(c) hereof).
(q) The Company and its Subsidiaries (i) have such
concessions, permits, licenses, consents, exemptions, franchises,
authorizations, orders, registrations, qualifications and other
approvals (each, an "AUTHORIZATION") of and have made all
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<PAGE>
material filings with and notices to, all Federal, state and foreign
governments, governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, and (ii) are members
in good standing of each Federal, state or foreign exchange, board of
trade, clearing house or association and self-regulatory or similar
organization, in each case, as are necessary to consummate the
Reorganization Transactions and the Related Transactions and to conduct
their respective businesses as described in the Offering Memorandum.
Each such Authorization is valid and in full force and effect and the
Company and each of its Subsidiaries is in material compliance with all
of the terms and conditions thereof; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or
both, would result in any other limitation of the rights of the holder
of any such Authorization; and other than as disclosed in the Offering
Memorandum, such Authorizations do not contain net capital or other
requirements which are materially more burdensome than those imposed on
LaBCo. and LaBLLC immediately prior to the consummation of the
Reorganization Transactions and the Related Transactions
(r) All stockholder, partnership and limited liability company
member approvals necessary for the Company and each Subsidiary to
consummate the Reorganization Transactions and the Related Transactions
have been obtained and are in full force and effect.
(s) The Company's authorized equity capitalization is as set
forth in the Offering Memorandum under the heading "Capitalization."
(t) Neither the Company nor, to the knowledge of the Company,
any employee or agent of the Company has made any payment of funds or
received or retained any funds in violation of any law, rule or
regulation, which violation could reasonably be expected to have a
Material Adverse Effect.
(u) No holder of any security of the Company (other than
holders of the Notes) has any right to request or demand registration
of any security of the Company because of the consummation of the
transactions contemplated by the Transaction Documents.
(v) The Company is not and, upon sale of the Notes to be
issued and sold hereby in accordance herewith and the application of
the net proceeds of such sale as described in the Offering Memorandum
under the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(w) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the meaning
of Rule 144A(d)(3) under the Act) as any security of the Company that
is listed on a national securities exchange
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<PAGE>
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system.
(x) Neither the Company nor any of its affiliates (as defined
in Rule 501(b) of Regulation D under the Act) has directly, or through
any agent (provided that no representation is made as to the Initial
Purchasers or any person acting on their behalf), (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Act) that is or will be integrated with
the offering and sale of the Notes in a manner that would require the
registration of the Notes under the Act or (ii) engaged in any form of
general solicitation or general advertising (within the meaning of
Regulation D under the Act) in connection with the offering of the
Notes.
(y) Assuming (i) the representations and warranties of the
Initial Purchasers in Section 2 hereof are true and correct in all
material respects, (ii) each Initial Purchaser complies with the
covenants set forth in Section 2 hereof, (iii) compliance by each
Initial Purchaser with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (iv) the accuracy of
the representations and warranties deemed to be made in the Offering
Memorandum by purchasers to whom the Initial Purchasers initially
resell Notes and (v) purchasers to whom the Initial Purchasers
initially resell Notes receive a copy of the Offering Memorandum prior
to such sale, the purchase and sale of the Notes pursuant hereto
(including the Initial Purchasers' proposed offering of the Notes on
the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof) do not require registration under the Act.
(z) Each of the Company and its Subsidiaries and ERISA
Affiliates has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of the United States Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and
Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations and published interpretations thereunder
with respect to each "plan" (as defined in Section 3(3) of ERISA) for
which the Company or any of its Subsidiaries or ERISA Affiliates have
or may have any liability (contingent or otherwise) and each such plan
is in compliance in all material respects with the applicable
provisions of ERISA and such regulations and published interpretations
thereunder. Neither the Company nor any of its Subsidiaries or ERISA
Affiliates have incurred any unpaid liability to the Pension Benefit
Guaranty Corporation (other than for the payment of premiums in the
ordinary course) or to any such plan under Title IV of ERISA. Neither
the Company nor any of its Subsidiaries has engaged in any non-exempt
"prohibited transaction" under ERISA or the Code. The term "ERISA
AFFILIATE" means each trade or business (whether or not incorporated)
that would be treated as a single employer with the Company under Title
IV of ERISA or Section 412 of the Code.
(aa) Immediately after the consummation of the purchase and
sale of the Notes, the fair value and present fair saleable value of
the assets of the Company will exceed the sum of its stated liabilities
and identified contingent liabilities; the Company is not, nor will it
be, after giving effect to the consummation of such transactions, (i)
left with
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<PAGE>
unreasonably small capital with which to carry on its business as it is
proposed to be conducted, (ii) unable to pay its debts (contingent or
otherwise) as they mature or (iii) otherwise insolvent.
(bb) The statistical and market-related data included in the
Offering Memorandum are based on or derived from sources that the
Company believes to be reliable and accurate.
(cc) The statements set forth under the captions "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000" and "Risk Factors--Year 2000 compliance problems
could cause our trading-related communications and data processing
systems to fail, which could result in losses" accurately and fairly
set forth the current state of the Company's efforts to address the
Year 2000 Problem and the risks and costs of the Company relating to
the Year 2000 Problem. The "YEAR 2000 PROBLEM" as used herein means any
significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
transmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000.
(dd) Each of the stockholders' agreement, each employment
agreement, each noncompetition agreement and each pledge agreement
(each as described in the Offering Memorandum, together the "RELATED
AGREEMENTS"), as of the Closing Date, will have been duly authorized,
executed and delivered and will as of the Closing Date constitute a
valid and legally binding agreement of the Company enforceable against
the Company in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Company will have obtained as of the Closing Date the signature of each
other party to each of the Related Agreements, PROVIDED, HOWEVER, that
the Company, makes no representation or warranty as to the
authorization, execution or delivery of any such agreement by any other
party thereto.
(ee) The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
15
<PAGE>
(ff) The Company and its Subsidiaries own, possess, license or
have other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "INTELLECTUAL PROPERTY") necessary for the conduct
of the Company's business as now conducted or as proposed in the
Offering Memorandum to be conducted, except to the extent a failure to
so own, possess, license or have rights to use Intellectual Property
could not reasonably be expected have a Material Adverse Effect.
(gg) LaBCo. is registered as a broker-dealer with the SEC
under the Exchange Act and is a member organization in good standing
with the NYSE. LaBCo. is not required to be registered with the
securities authority of any state.
(hh) LaBCo. is a broker-dealer subject to the provisions of
Regulation T (12 C.F.R. Section 220) of the Board of Governors of the
Federal Reserve System. LaBCo. maintains procedures and internal
controls designed to ensure that it does not extend or maintain credit
to or for its customers other than in accordance with the provisions of
Regulation T, and management officials of the Company regularly
supervise the activities of LaBCo., and the activities of its
employees, to ensure that LaBCo. does not extend or maintain credit to
or for its customers other than in accordance with the provisions of
said Regulation T.
(ii) There is no franchise, contract or other document of a
character that would be required to be described in an Offering
Memorandum under the Act, which is not described in the Offering
Memorandum; and the statements set forth in the Offering Memorandum
under the headings "Description of the Capital Stock,"
"Business--Regulatory Matters" and "--Operations--NYSE Rules Governing
Our Specialist Activities," "Certain Transactions," "Employment
Agreements and Noncompetition Agreements," "Incentive Awards to our
Employees," "Description of Notes," "Description of Other Indebtedness"
and "Certain United States Federal Income Tax Consequences to Non-U.S.
Taxpayers" fairly summarize the matters described therein.
(jj) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; all policies of insurance and
fidelity or surety bonds insuring the Company or any of its
Subsidiaries or their respective businesses, assets, employees,
officers and directors are in full force and effect; the Company and
its Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the
Company or any of its Subsidiaries under any such policy or instrument
as to which any insurance company is denying liability or defending
under a reservation of rights clause; neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary
16
<PAGE>
to continue its business at a cost that would not have a Material
Adverse Effect whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the
Offering Memorandum.
(kk) No Subsidiary of the Company is currently prohibited,
directly or indirectly, from making any distribution in respect of its
membership or partnership interests, as the case may be, from repaying
to the Company any loans or advances to such Subsidiary from the
Company or from transferring any of such Subsidiary's property or
assets to the Company or any other Subsidiary of the Company, except as
described in or contemplated by the Offering Memorandum.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls an Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages, liabilities and
out-of-pocket expenses (including reasonable costs of investigation) incurred by
any such persons arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or Offering Memorandum or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating to an
Initial Purchaser furnished in writing to the Company by an Initial Purchaser,
through Salomon Smith Barney Inc., expressly for use in connection therewith;
PROVIDED, HOWEVER, that the indemnification contained in this paragraph (a),
with respect to the Preliminary Offering Memorandum shall not inure to the
benefit of an Initial Purchaser on account of any such loss, claim, damage,
liability or expense arising from the sale of the Notes by such Initial
Purchaser to any person if the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in the Preliminary
Offering Memorandum was corrected in the Offering Memorandum and such Initial
Purchaser sold Notes to that person without sending or giving, at or prior to
the written confirmation of such sale, a copy of the Offering Memorandum (as
then amended or supplemented). The foregoing indemnity agreement shall be in
addition to any liability that the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against
an Initial Purchaser or any person who controls an Initial Purchaser in respect
of which indemnity may be sought against the Company in accordance with this
Section 6, such Initial Purchaser or any such person who controls such Initial
Purchaser shall promptly notify in writing the Company, and the Company shall
assume the defense thereof, including the employment of counsel reasonably
acceptable to such Initial Purchaser or such person who controls such Initial
Purchaser and payment of all fees and expenses relating to the assumption of the
defense by the Company. An
17
<PAGE>
Initial Purchaser or any person who controls an Initial Purchaser shall have the
right to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Initial Purchaser or any such person who
controls an Initial Purchaser unless (i) the Company has agreed in writing to
pay such fees and expenses, (ii) the Company has failed to assume the defense
and employ counsel on a timely basis or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Initial Purchaser or any such person who controls an Initial Purchaser and the
Company and such Initial Purchaser or any such person who controls an Initial
Purchaser shall have been advised by its counsel that representation of such
indemnified party and the Company by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the Company shall not have the
right to assume the defense of such action, suit or proceeding (a "CONFLICTED
ACTION") on behalf of such Initial Purchaser or any such person who controls an
Initial Purchaser). It is understood, however, that the Company shall, in
connection with any such Conflicted Action, be liable for the reasonable fees
and expenses of a single counsel (in addition to any local counsel) for the
Initial Purchasers and each such person who controls an Initial Purchaser, which
firm shall be designated in writing by Salomon Smith Barney Inc., and that all
such reasonable fees and expenses shall be reimbursed as incurred as provided in
paragraph (a) hereof. The Company shall not be liable for any settlement of any
such action, suit or proceeding effected without the written consent of the
Company, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the Company
agrees to indemnify and hold harmless the Initial Purchasers, to the extent
provided in paragraph (a), and any person who controls an Initial Purchaser from
and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company, their respective directors and
officers and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act to the same extent as the
indemnity from the Company to the Initial Purchasers set forth in paragraph (a)
hereof, but only with respect to information relating to such Initial Purchaser
furnished in writing by such Initial Purchaser through Salomon Smith Barney Inc.
expressly for use in the Preliminary Offering Memorandum or Offering Memorandum
or any amendment or supplement thereto. If any action, suit or proceeding shall
be brought against the Company, any of their respective directors or officers or
any such controlling person based on the Preliminary Offering Memorandum or
Offering Memorandum, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against an Initial Purchaser pursuant to this
paragraph (c), such Initial Purchaser shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof, such Initial Purchaser shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Initial
Purchaser's expense), and the Company, its directors and officers and any such
controlling person shall have the rights and duties given to the Initial
Purchasers by paragraph (b) above.
18
<PAGE>
The foregoing indemnity agreement shall be in addition to any liability that an
Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and an Initial Purchaser on the other hand from the
offering of the Notes or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and an Initial Purchaser on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and an Initial Purchaser on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by such Initial Purchaser, in each case as set forth in the table on
the cover page of the Offering Memorandum. The relative fault of the Company on
the one hand and an Initial Purchaser on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by such
Initial Purchaser on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The Company and the Initial Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section 6 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other out-of-pocket expenses reasonably incurred by such
indemnified party in connection with investigating any claim or defending any
such action, suit or proceeding. Notwithstanding the provisions of this Section
6, no Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total price of the Notes purchased by it and distributed
to the public exceeds the amount of any damages that such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 6 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6
19
<PAGE>
and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of an Initial Purchaser or any person who
controls an Initial Purchaser, the Company, its directors or officers or any
person controlling the Company, (ii) acceptance of any Notes and payment
therefor hereunder and (iii) any termination of this Agreement. A successor to
an Initial Purchaser or any person who controls an Initial Purchaser, the
Company, its directors or officers or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligations of each Initial Purchaser to purchase and pay for the Notes to be
purchased by it on the Closing Date hereunder are subject to the fulfillment, in
such Initial Purchaser's sole discretion, of the following conditions:
(a) At the time of execution of this Agreement and on the
Closing Date, no order or decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any order
asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act shall have been
issued and no proceedings for those purposes shall have been commenced
or shall be pending or, to the knowledge of the Company, threatened. No
order suspending the sale of the Notes in any jurisdiction shall have
been issued and no proceedings for that purpose shall have been
commenced or shall be pending or, to the knowledge of the Company,
threatened.
(b) At the Closing Date, the Reorganization Transactions and
the Related Transactions shall have been consummated; and the Company
shall have provided to the Initial Purchasers or counsel for the
Initial Purchasers copies of all closing documents delivered to the
parties to the Reorganization Transactions and the Related
Transactions.
(c) Subsequent to the date hereof, (i) except as disclosed or
contemplated in the Offering Memorandum, there shall not have occurred
any material adverse change in the condition (financial or other),
business, prospects, properties, assets, net worth or results of
operations of the Company, taken as a whole, which, in the opinion of
the Initial Purchasers, would materially adversely affect the market
for the Notes, or (ii) the Offering Memorandum shall not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, if amending or supplementing the Offering
Memorandum to correct any such
20
<PAGE>
misstatement or omission could, in the sole judgment of the Initial
Purchasers, materially adversely affect the marketability of the Notes.
(d) The Initial Purchasers shall have received on the Closing
Date an opinion of Fulbright & Jaworski LLP, counsel for the Company,
dated the Closing Date and addressed to the Initial Purchasers,
substantially in the form of EXHIBIT A hereto.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion of Cleary, Gottlieb, Steen & Hamilton, counsel for the
Initial Purchasers, dated the Closing Date and addressed to the Initial
Purchasers, with respect to such matters as the Initial Purchasers may
request.
(f) The Initial Purchasers shall have received a "cold
comfort" letter addressed to the Initial Purchasers, and dated the date
hereof and the Closing Date, from each of Arthur Andersen LLP and
Sugarman & Thrope, P.C., substantially to the effect set forth in
EXHIBIT B hereto.
(g) (i) There shall not have been any material change in the
capital stock of the Company or any Subsidiary nor any material
increase in the short-term or long-term debt of the Company or any
Subsidiary from that set forth or contemplated in the Offering
Memorandum; (ii) except as disclosed or contemplated by the Offering
Memorandum, the Company and the Subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole; (iii) all the representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the date hereof and on
and as of the Closing Date as if made on and as of the Closing Date;
and (iv) the Initial Purchasers shall have received a certificate,
dated the Closing Date and signed by the Chairman, Chief Executive
Officer and President and the chief accounting officer of the Company
(or such other officers as are reasonably acceptable to the Initial
Purchasers), to the effect set forth in this Section 7(g) and in
Section 7(h) hereof.
(h) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of their respective
agreements herein contained and required to be performed or complied
with by them hereunder at or prior to the Closing Date.
(i) There shall not have been any announcement by any
"nationally recognized statistical rating organization," as defined for
purposes of Rule 436(g) under the Act, that (i) it is downgrading its
rating assigned to any class of Notes of the Company (including the
Notes), or (ii) it is reviewing its ratings assigned to any class of
Notes of the Company (including the Notes) with a view to possible
downgrading, with negative implications or direction not determined.
(j) The Notes shall have been approved for trading on PORTAL.
21
<PAGE>
(k) The Company shall have furnished or caused to be furnished
to the Initial Purchasers such further certificates and customary
closing documents as the Initial Purchasers shall have reasonably
requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers.
Any certificate or document signed by any officer of the
Company and delivered to the Initial Purchasers, or to counsel for the Initial
Purchasers, shall be deemed a representation and warranty by the Company to the
Initial Purchasers as to the statements made therein.
8. EXPENSES.
(a) Whether or not the purchase and sale of the Notes
hereunder is consummated or this Agreement is terminated pursuant to Section 9
hereof, the Company agrees to pay the following costs and expenses and all other
costs and expenses incident to the performance by them of their obligations
hereunder: (i) the printing or reproduction of the Preliminary Offering
Memorandum and Offering Memorandum (including financial statements thereto), and
each amendment or supplement to any of them, this Agreement, the Registration
Rights Agreement and the Indenture; (ii) the delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
Offering Memorandum, the Preliminary Offering Memorandum and all amendments or
supplements thereto as may be reasonably requested for use in connection with
the offering and sale of the Notes; (iii) the printing, authentication, issuance
and delivery of certificates for the Notes, including any stamp taxes in
connection with the original issuance and sale of the Notes; (iv) the printing
(or reproduction) and delivery of the preliminary and supplemental Blue Sky
Memoranda and all other agreements and documents printed (or reproduced) and
delivered in connection with the offering of the Notes; (v) the application for
quotation of the Notes on PORTAL; (vi) the qualification of the Notes for offer
and sale under the securities or Blue Sky laws of the several states as provided
in Section 4(f) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Initial Purchasers relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental Blue
Sky Memoranda and such qualification); and (vii) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company.
(b) If the purchase and sale of the Notes hereunder is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on their part to
be performed or satisfied hereunder other than by reason of a default by an
Initial Purchaser in payment for the Notes on the Closing Date, the Company
shall reimburse the Initial Purchasers promptly upon demand for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Notes and the other transactions contemplated hereby; PROVIDED
that the
22
<PAGE>
defaulting Initial Purchaser shall reimburse the Company upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and expenses for
law and accounting services and printing costs) that shall have been incurred by
it in connection with the proposed purchase and sale of the Notes and the
transactions contemplated hereby.
9. TERMINATION OF AGREEMENT. (a) This Agreement shall be
subject to termination in the absolute discretion of the Initial Purchasers,
without liability on the part of the Initial Purchasers to the Company, by
notice to the Company, if prior to the Closing Date, (i) trading in securities
generally on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York state authorities or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States or
the market for the Notes is such as to make it, in the sole judgment of the
Initial Purchasers, impracticable or inadvisable to commence or continue the
offering of the Notes on the terms set forth on the cover page of the Offering
Memorandum (or if not yet in existence then the Preliminary Offering Memorandum)
or to enforce contracts for the resale of the Notes by the Initial Purchasers.
Notice of such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
(b) If any Initial Purchaser shall fail to purchase and pay
for any of the Notes agreed to be purchased by such Initial Purchaser hereunder
and such failure to purchase shall constitute a default in the performance of
its obligations under this Agreement, the remaining Initial Purchaser shall be
obligated to take up and pay for the Notes which the defaulting Initial
Purchaser agreed but failed to purchase; PROVIDED, HOWEVER, that in the event
that the aggregate principal amount of Notes which the defaulting Initial
Purchaser agreed but failed to purchase shall exceed 10% of the aggregate
principal amount of Notes set forth in Schedule I hereto, the remaining Initial
Purchaser shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Notes, and if such non-defaulting Initial
Purchaser does not purchase all the Notes, this Agreement will terminate without
liability to the non-defaulting Initial Purchaser or the Company. In the event
of a default by any Initial Purchaser as set forth in this Section 9(b), the
Closing Date shall be postponed for such period, not exceeding seven days, as
the non-defaulting Initial Purchaser shall determine in order that the required
changes in the Offering Memorandum or in any other documents or arrangements may
be effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company or the non-defaulting
Initial Purchaser for damages occasioned by its default hereunder.
10. INFORMATION FURNISHED BY THE INITIAL PURCHASERS. The
statements set forth in the last paragraph on the cover page and in the third
and ninth paragraphs under the caption "Plan of Distribution" in the Preliminary
Offering Memorandum and Offering Memorandum, constitute the only information
furnished by the Initial Purchasers as such information is referred to in
Sections 5(b) and 6 hereof.
23
<PAGE>
11. MISCELLANEOUS. Except as otherwise provided herein, notice
given pursuant to any provision of this Agreement shall be in writing and shall
be delivered (i) if to the Company, at LaBranche & Co Inc., One Exchange Plaza,
New York, New York, 10006, Attention: George M. L. LaBranche, IV or (ii) if to
the Initial Purchasers, to Salomon Smith Barney Inc., 388 Greenwich Street, New
York, NY 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of
the Initial Purchasers, the Company, and its respective directors, officers and
the controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the terms "successors and assigns" as used in this Agreement
shall include a purchaser from an Initial Purchaser of any of the Notes in its
status as such purchaser.
12. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York
without regard to principles of conflicts of law.
24
<PAGE>
This Agreement may be signed in various counterparts which
together constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the Initial Purchasers.
Very truly yours,
LaBRANCHE & CO INC.
By: /s/ George M.L. LaBranche, IV
---------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman, Chief Executive Officer and
President
Confirmed as of the date first above mentioned.
SALOMON SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: SALOMON SMITH BARNEY INC.
By: /s/ Anthony Calenda
------------------------------
Name: ANTHONY CALENDA
Title: VICE PRESIDENT
25
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Notes
INITIAL PURCHASERS To be Purchased
- ------------------ ---------------
<S> <C>
Salomon Smith Barney Inc................................................... $70,000,000
Donaldson, Lufkin & Jenrette Securities Corporation........................ 30,000,000
-----------
Total...................................................................... $100,000,000
------------
------------
</TABLE>
<PAGE>
EXHIBIT A
Form of Opinion of Fulbright & Jaworski LLP
1. The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Indenture; the
execution and delivery of, and the performance by the Company of its obligations
under the Indenture have been duly and validly authorized by the Company; and
the Indenture has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by the Trustee, constitutes the valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability of general
principles of equity.
2. No qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Notes as contemplated by
the Purchase Agreement.
3. The Notes have been duly authorized by the Company and,
when authenticated by the Trustee in accordance with the Indenture and delivered
to the Initial Purchasers against payment therefor in accordance with the terms
of the Purchase Agreement, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company entitled to the benefits
of the Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity.
4. All the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable.
5. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction in
which it is chartered or organized, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Offering Memorandum, and is duly registered and qualified to do business
as a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such registration or qualification, except where the
failure to so register or qualify could not reasonably be expected to have a
Material Adverse Effect.
6. Each of LaBCo. and LaBLLC has been duly organized and is
validly existing as a limited partnership and a limited liability company,
respectively, in good standing under the laws of its jurisdiction of
organization; and the partnership interests in LaBCo. and the membership
interests in LaBLLC have been duly and validly authorized and issued and are
fully paid and nonassessable and are owned of record directly or indirectly by
the Company, to the knowledge of such counsel, to the knowledge of such counsel,
free and clear of all liens, encumbrances, equities or claims.
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7. The Company's authorized equity capitalization is as set
forth in the Offering Memorandum under the heading "Capitalization."
8. (x) The issuance, offer, sale or delivery of the Notes, (y)
the execution, delivery or performance of the Transaction Documents by the
Company, or (z) the consummation by the Company or any Subsidiary of any of the
transactions contemplated by the Transaction Documents, the Reorganization
Transactions or the Related Transactions, will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, (i) the
organizational documents of the Company or any Subsidiary, (ii) any agreement,
indenture, lease or other document described in the Offering Memorandum under
the headings "Certain Transactions--Reorganization and Related Transactions--
Reorganization" and "--Interest on Indebtedness" or filed as an Exhibit to the
Company's Registration Statement on Form S-1 (No. 333-80791) relating to the
initial public offering of its Common Stock (collectively, to be hereinafter
referred to as the "MATERIAL CONTRACTS"), or (iii) any statute, law, ordinance
or administrative, governmental or self-regulatory organization rule or
regulation known to us to be applicable to the Company or any Subsidiary or any
of their respective properties, or any filing or judgment, injunction, order or
decree known to us of any court or governmental agency or body having
jurisdiction over the Company or any Subsidiary, except any which individually
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect; and the consummation of the transactions contemplated by the Transaction
Documents, the Reorganization Transactions and the Related Transactions will not
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Subsidiary pursuant to the terms of any
Material Contract, other than as disclosed in the Offering Memorandum; PROVIDED,
HOWEVER, that, for the purposes of this paragraph 8 insofar as the consummation
of the Reorganization Transactions and Related Transactions are concerned, such
counsel need not express any opinion with respect to Federal or state securities
laws, other antifraud laws, and fraudulent transfer laws, or as to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights.
9. No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection with the
transactions contemplated in the Purchase Agreement or in the Indenture or the
Registration Rights Agreement, except such as will be obtained under the Act and
the Trust Indenture Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of the
Securities by the Initial Purchasers in the manner contemplated herein and in
the Offering Memorandum and the Registration Rights Agreement.
10. The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Purchase
Agreement and the Registration Rights Agreement; the execution and delivery of,
and the performance by the Company of its obligations under, the Purchase
Agreement and the Registration Rights Agreement have been duly and validly
authorized by the Company, and each of the Purchase Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Company. The Registration Rights Agreement constitutes the valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of
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equity, and except as rights to indemnity and contribution thereunder may be
limited by Federal or state securities laws or principles of public policy.
11. Each of the Related Agreements has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
12. All stockholder, partnership and limited liability company
member approvals necessary for LaBInc., LaBCo. and LaBLLC to consummate the
Reorganization Transactions and the Related Transactions have been obtained and
are in full force and effect.
13. The Company and its Subsidiaries (i) have such
Authorizations of, and have made all filings with and notices to, the courts and
the governmental agencies or bodies of the United States of America and the
State of New York and all applicable self-regulatory organizations and (ii) are
members in good standing of each Federal, state or foreign exchange, board of
trade, clearing house or association and self-regulatory or similar
organization, in each case, as are necessary to consummate the Reorganization
Transactions and the Related Transactions. Each such Authorization is valid and
in full force and effect; and, to the best of such counsel's knowledge, no event
has occurred that would reasonably be expected to result in the revocation,
suspension or termination of any such Authorization; and other than as disclosed
in the Offering Memorandum, such Authorizations contain no net capital or other
requirements or conditions that are materially more burdensome than those
imposed on LaBCo. or LaBLLC immediately prior to the consummation of the
Reorganization Transactions.
14. Assuming (i) the representations and warranties of the
Company in Section 5 of the Purchase Agreement are true and correct, (ii) the
representations and warranties of the Initial Purchasers in Section 2 of the
Purchase Agreement are true and correct, (iii) the Company complies with the
covenants set forth in Section 4 of the Purchase Agreement, (iv) the Initial
Purchasers comply with the covenants set forth in Section 2 of the Purchase
Agreement, (v) the Initial Purchasers comply with the offering and transfer
procedures and restrictions described in the Offering Memorandum, (vi) the
representations and warranties deemed to be made in the Offering Memorandum by
purchasers to whom the Initial Purchasers initially resell Notes are true and
correct and (vii) purchasers to whom the Initial Purchasers initially resell
Notes receive a copy of the Offering Memorandum prior to such sale, the purchase
and sale of the Notes pursuant to the Purchase Agreement (including the Initial
Purchasers' offering and sale of the Notes on the terms and in the manner set
forth in the Offering Memorandum and Section 2 of the Purchase Agreement) do not
require registration under the Act.
15. The Indenture, the Notes and the Registration Rights
Agreement conform in all material respects to the descriptions thereof contained
in the Offering Memorandum.
16. To our knowledge, there is no pending or threatened
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries or its or their property of a character which would be required to
be disclosed in a prospectus pursuant to the Act which is not adequately
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disclosed in the Offering Memorandum, and there is no franchise, contract or
other document of a character which would be required to be described in a
prospectus pursuant to the Act which is not described in the Offering
Memorandum. The statements included in the Offering Memorandum under the
headings "Description of Capital Stock," "Business--Regulatory Matters" and
"--Operations--NYSE Rules Governing Our Specialist Activities," "Certain
Transactions," "Employment Agreements and Noncompetition Agreements," Incentive
Awards to Our Employees," "Description of Notes," "Description of Certain Other
Indebtedness" and "Certain United States Federal Income Tax Consequences to
Non-U.S. Persons" fairly summarize the matters therein described.
17. The Company is not, nor immediately after the sale of the
Notes to be sold under the Purchase Agreement and the application of the
proceeds from such sale (as described in the Offering Memorandum under the
caption "Use of Proceeds") will it be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
18. The Material Contracts do not contain any provisions that
prohibit any Subsidiary of the Company, directly or indirectly, from making any
distribution in respect of its membership or partnership interests, as the case
may be, from repaying to the Company any loans or advances to such Subsidiary
from the Company or from transferring any of such Subsidiary's property or
assets to the Company or any other Subsidiary of the Company, except as
described in or contemplated by the Offering Memorandum.
19. It is not necessary in connection with the grant,
issuance, offer, sale and delivery of the securities to be issued by the Company
pursuant to the Reorganization Transactions and the Related Transactions, to
register any such securities under the Act, or to qualify any indenture under
the 1939 Act.
20. LaBCo. is registered as a broker-dealer with the SEC under
the Exchange Act and is a member organization in good standing with the NYSE.
LaBCo. is not required to be registered with the securities authority of any
state.
21. Neither the consummation of the transactions contemplated
by the Purchase Agreement nor the sale, issuance, execution or delivery of the
Notes will violate Regulation T, U or X of the Board of Governors of the Federal
Reserve system.
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and
counsel for the Initial Purchasers at which conferences the contents of the
Offering Memorandum and related matters were discussed, and, although we have
not independently verified and are not passing upon and assume no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (except to the extent specified in paragraph 16), and that
our judgment as to materiality is, to the extent we deem proper, based in part
upon the views of appropriate officers and other representatives of the Company,
nothing has come to our attention that leads us to believe that the Offering
Memorandum, as of its date or as of the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in the light of
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the circumstances under which they were made, not misleading (it being
understood that we express no opinion with respect to the financial statements
and related notes thereto and the other financial, statistical and accounting
data included in the Offering Memorandum).
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Exhibit 10.18
AMENDED AND RESTATED
ARTICLES OF PARTNERSHIP
OF
LABRANCHE & CO.
Amended and Restated Articles of Partnership of LaBranche & Co., a New
York limited partnership, made as of August 24, 1999, by and among, LaB
Investing Co. L.L.C., a New York limited liability company, as the general
partner (the "GENERAL PARTNER"), and LaBranche & Co Inc., a Delaware
corporation, as the limited partner (the "LIMITED PARTNER") (the General Partner
and the Limited Partner being collectively referred to herein as the
"PARTNERS").
W I T N E S S E T H
WHEREAS, LaBranche & Co. (the "PARTNERSHIP") has conducted business as
a New York limited partnership pursuant to Articles of Partnership dated as of
January 1, 1989, which were amended as of January 1, 1990, January 1, 1991,
January 1, 1992, July 1, 1992, January 1, 1993, January 1, 1994, January 1,
1995, April 1, 1995, January 1, 1996, July 1, 1996, January 1, 1997, July 1,
1997 and August 1, 1997, amended and restated as of January 1, 1998 and further
amended as of July 1, 1998 and January 1, 1999 (the Articles of Partnership, as
amended, are referred to as the "AGREEMENT");
WHEREAS, the General Partner, the Limited Partner and the former
limited partners of the Partnership entered into a Plan of Incorporation, dated
as of June 17, 1999 (the "PLAN OF INCORPORATION"), pursuant to which each of the
former limited partners exchanged his, her or its entire limited partnership
interest in the Partnership for cash and/or securities of the Limited Partner;
WHEREAS, the Limited Partner, as a result of the transactions
contemplated by the Plan of Incorporation, has become the sole limited partner
of the Partnership; and
WHEREAS, the Partners now wish to further amend and restate the
Agreement in order to reflect the foregoing and to reflect their agreement
regarding certain other matters pertaining to the operation of the Partnership;
NOW, THEREFORE, it is agreed that the Agreement is hereby amended and
restated in its entirety as follows:
ARTICLE I
ORGANIZATION
SECTION 1.01. The Partnership is organized pursuant to the
provisions of Article 8-A of the Partnership Law of the State of New York, and
the rights and liabilities of the Partners shall be as provided therein, except
as otherwise expressly provided in this Agreement.
<PAGE>
ARTICLE II
NAME
SECTION 2.01. The Partnership shall conduct business under the
name of LaBranche & Co.
ARTICLE III
PURPOSES
SECTION 3.01. The purposes of the Partnership are to carry on
and transact the business of dealers and brokers, for the account of the
Partnership and on commission for others, in stocks, bonds and other securities,
commodities and options, including put and call options or any combination
thereof written by the Partnership or by others, in respect of securities and
commodities, to act as a specialist on the New York Stock Exchange (the
"EXCHANGE"), to engage in a general brokerage business and do all business
necessary or incident thereto as a member firm of the Exchange, to engage as
principal or agent in any other business or activity consistent with the
Constitution and Rules of the Exchange, and to engage in such other related
business as may be determined by the General Partner.
ARTICLE IV
PRINCIPAL PLACE OF BUSINESS; FISCAL YEAR
SECTION 4.01. The principal place of business of the
Partnership shall be at One Exchange Plaza, New York, New York 10006, or at such
other location or locations as may be designated by the General Partner.
SECTION 4.02. Unless changed by the General Partner, the
fiscal and taxable year of the Partnership shall be the calendar year.
ARTICLE V
TERM
SECTION 5.01. The Partnership shall continue until its
termination or dissolution in accordance with the provisions of this Article V
or, if earlier, as required by the laws of the State of New York.
SECTION 5.02. The General Partner may liquidate and dissolve
the Partnership at any time upon notice to the Limited Partner, and the assets
of the Partnership shall then be applied in accordance with Article XX hereof.
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SECTION 5.03. Upon the withdrawal of the General Partner from
the Partnership at any time, notwithstanding anything to the contrary contained
in this Agreement, the Partnership shall be liquidated and dissolved, and the
assets of the Partnership shall be applied in accordance with Article XX.
ARTICLE VI
MANAGEMENT; LIABILITY
SECTION 6.01. The management of the Partnership business shall
be the full and complete responsibility of the General Partner alone, and the
Limited Partner as such shall take no part in or interfere in any manner with
the management, conduct or control of the Partnership business and shall have no
right or authority to act for or bind the Partnership. The management of the
General Partner shall be vested in a Managing Committee, as provided for in the
Amended and Restated Operating Agreement of the General Partner, dated as of the
date hereof, as it may be amended from time to time. The Managing Committee
shall designate two or more persons who are members or allied members of the
Exchange, and who are otherwise acceptable to the Exchange, to act on behalf of
the Partnership in connection with the Partnership's day-to-day dealings with
the Exchange.
SECTION 6.02. The Limited Partner shall have no liability for
the contractual obligations and other liabilities of the Partnership.
ARTICLE VII
CAPITAL CONTRIBUTIONS
SECTION 7.01. As of the date hereof, the Partners shall be
credited with having made the following contributions to the capital of the
Partnership:
<TABLE>
<CAPTION>
<S> <C>
GENERAL PARTNER:
LaB Investing Co. L.L.C. $188,331,000
LIMITED PARTNER:
LaBranche & Co Inc. $70,827,000
</TABLE>
SECTION 7.02. If the General Partner, at any time or from time
to time, determines, in its sole discretion, that the Partnership requires an
additional capital contribution of cash or securities to enable the Partnership
to conduct its business operations, then the Limited Partner shall make such
additional capital contribution at such time or times and in such amounts as
shall be specified by the General Partner.
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<PAGE>
SECTION 7.03. With the prior consent of the General Partner,
the Limited Partner may make an additional capital contribution to the
Partnership. Any additional contributions referred to in the preceding sentence
may be made in cash or in such securities as may be approved by the General
Partner.
SECTION 7.04. No Partner may withdraw any portion of its
capital contribution, and no Partner shall be entitled to the return of its
contribution to capital, except as provided in this Agreement or upon
dissolution.
SECTION 7.05. A capital account shall be maintained for each
Partner and shall be credited with such Partner's contributions of capital to
the Partnership and its allocable share of Partnership income and gain (or items
thereof), and shall be debited by the amount of money distributed to that
Partner by the Partnership, the fair market value of any property distributed to
it by the Partnership, and its allocable share of Partnership loss and deduction
(or items thereof), both as determined under Section 8.02 hereof.
SECTION 7.06. Notwithstanding anything to the contrary
contained in this Agreement, all withdrawals of capital shall be subject to the
limitations set forth in Section 14.01 hereof.
SECTION 7.07. The Partners shall not be paid interest on their
capital contributions.
ARTICLE VIII
PROFITS AND LOSSES
SECTION 8.01. Net profits or net losses of the Partnership
shall be determined in accordance with generally accepted accounting principles,
and shall be allocated to the Partners for each calendar quarter or for any
shorter period as the General Partner may determine from time to time. Allocated
profits shall be distributed to each of the Partners at such times as the
General Partner shall determine.
SECTION 8.02. Net profits and net losses of the Partnership
for each fiscal year or portion thereof shall be allocated among the Partners in
the following percentages:
<TABLE>
<CAPTION>
<S> <C>
GENERAL PARTNER:
LaB Investing Co. L.L.C. 84.0592%
LIMITED PARTNER:
LaBranche & Co Inc. 15.9408%
</TABLE>
SECTION 8.03. Notwithstanding anything to the contrary
contained in this Agreement, if the Limited Partner unexpectedly receives an
adjustment, allocation or distribution
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described in Treas. Reg. section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which
creates or increases a deficit balance in its capital account, it shall be
allocated all income (gross income if required by Treasury Regulations and net
profits if not so required) of the Partnership in proportion to its negative
capital account balance in an amount and manner sufficient to eliminate such
deficit balance as quickly as possible. Such allocation of net profits or income
is herein termed a "QUALIFIED INCOME OFFSET" within the meaning of Treas. Reg.
section 1.704-1(b)(2)(ii)(d), and shall comply with such provision in all
respects. In any such case, the General Partner shall be allocated in each
subsequent period all net profits otherwise allocable to the Limited Partner
until the aggregate amount of the net profits so allocated to the General
Partner shall equal the amount of net profits which would otherwise have been
allocated to the General Partner absent the allocation of net profits or gross
income to the Limited Partner pursuant to the Qualified Income Offset, after
which allocations of net profits and net losses of the Partnership shall be made
in accordance with Section 8.02 hereof.
SECTION 8.04. For Federal income tax purposes, net profits and
net losses, and any item of income, gain, loss, deduction or credit, including,
without limitation, net long-term capital gain, net long-term capital loss, net
short-term capital gain, net short-term capital loss, ordinary income and
ordinary loss shall be allocated so as to take account of the variation between
the adjusted tax basis and the book value of any property contributed by the
Partners to the Partnership in accordance with the principles of Section 704(c)
of the Internal Revenue Code of 1986, as amended (the "CODE"), as prescribed by
Treas. Reg. section 1.704-1(b)(4)(i), and subject to the limitations of Treas.
Reg. section 1.704-1(c)(2). All such allocations shall, in addition, take
account of each Partner's varying interest for any particular fiscal year and
withdrawals made under this Agreement in accordance with Section 706 of the
Code.
SECTION 8.05. The provisions of this Agreement are intended to
comply with Treas. Reg. section 1.704-1(b) issued pursuant to Section 704(b) of
the Code and shall be interpreted in a manner consistent with such Treasury
Regulations. The General Partner may, without the consent of the Limited
Partner, amend the provisions of this Agreement and the manner in which net
profits and net losses (or other items) are allocated to the extent (but only to
the extent) necessary to comply with Treas. Reg. section 1.704-1(b). In
addition, the capital accounts of the Partners shall at all times be adjusted
and maintained in accordance with the requirements of Treas. Reg. section
1.704-1(b)(2)(iv), and the provisions of this Agreement shall be construed in
a manner consistent therewith, and shall be adjusted as required by Treas. Reg.
section 1.704- 1(b)(2)(iv)(G).
ARTICLE IX
ADMISSION OF ADDITIONAL PARTNERS
SECTION 9.01. Subject to compliance with the foregoing terms
of this Agreement, additional limited partners may be admitted to the
Partnership upon such terms and conditions as the General Partner shall
determine, such admission shall occur immediately upon the consent of the
General Partner, and no other consent of the Limited Partner shall be required
for the admission of additional limited partners. Upon the admission of a new
limited partner to the Partnership, the existing Partners' respective percentage
interests in the profits and losses of the
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<PAGE>
Partnership, as determined pursuant to Article VIII hereof, shall be adjusted
proportionately to reflect the admission of such new limited partner and the
dilution of the respective percentage interests of all the other existing
Partners. The admission of a new limited partner shall not dissolve the
Partnership, and the continuing Partnership shall be the same firm for all
purposes.
SECTION 9.02. The consent of the Limited Partner will be
required for the admission of a new or additional general partner, other than in
accordance with Article XVI hereof.
ARTICLE X
WITHDRAWAL
SECTION 10.01. With the prior written consent of the General
Partner, the Limited Partner may withdraw from the Partnership effective as of
the end of any calendar quarter, or effective as of such other date as the
General Partner and the Limited Partner may mutually agree, provided, however,
that any withdrawal of capital hereunder shall be subject to the limitations set
forth in Section 14.01 hereof.
SECTION 10.02. At any time, the General Partner may, by
written notice (a "WITHDRAWAL NOTICE") given to the Limited Partner, require the
Limited Partner to withdraw from the Partnership effective upon the close of
business on the date specified in the Withdrawal Notice.
SECTION 10.03. The term "INVENTORY DATE" shall mean the
effective date of the Limited Partner's withdrawal.
SECTION 10.04. The General Partner shall not withdraw from the
Partnership without the consent of the Limited Partner.
ARTICLE XI
FINAL PAYMENT
SECTION 11.01. In the event the Limited Partner withdraws from
the Partnership, a payment (the "FINAL PAYMENT") shall be made to the Limited
Partner in an amount representing the value of its interest in the Partnership.
The Final Payment shall be determined as of the Inventory Date applicable to the
Limited Partner and, subject to the provisions of Article XIV hereof, shall be
made ninety (90) days after the Inventory Date or on such earlier date as the
General Partner shall determine. The Final Payment shall be made without
interest, except that payment of the capital account of the Limited Partner
shall be made with interest from the Inventory Date at the broker's call rate,
as in effect from time to time. The Final Payment shall be made in cash, unless
the General Partner determines to make payment, in whole or in part, in kind.
SECTION 11.02. The amount of the Final Payment shall be
determined by the General Partner in accordance with generally accepted
accounting principles consistently applied
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<PAGE>
and with such reserves for any obligations, claims, causes of action,
liabilities or other contingencies as the General Partner may deem necessary or
proper, subject to the following provisions: (i) each position in listed
securities, whether long or short, shall be marked to market on the Inventory
Date at the closing price on the principal exchange on which such securities are
traded, but, if there were no sales in such securities on the Inventory Date,
then such securities shall be marked to either the mean between the bid and
asked prices thereof on such date or, in the sole discretion of the General
Partner, the last closing price of such securities on the principal exchange on
which such securities are traded; (ii) each position in over-the-counter
securities, whether long or short, shall be marked to the market on the
Inventory Date at the last sales price thereof as reported by the National
Association of Securities Dealers Automated Quotation System or, if not so
reported, to the mean between the high bid and low asked prices in the
quotations furnished by the National Association of Securities Dealers, Inc.,
where available, or in the quotations furnished by one or more of the principal
dealers in such securities; (iii) each position in securities which are not
readily marketable shall be valued as of the Inventory Date by the General
Partner in its sole, absolute and final discretion; (iv) although the
Partnership's fiscal year may not have closed for other purposes, the
Partnership's fiscal year shall be deemed to have closed on the Inventory Date
for the limited purpose of determining the value of the interest of the Limited
Partner; (v) allocation of unrealized gains or losses in securities held by the
Partnership shall be made on the basis that such securities were sold on the
Inventory Date at the market value thereof; (vi) no value will be placed upon or
will any allowance be made for or on account of the goodwill or trade name of
the Partnership; and (vii) all furniture, fixtures, leasehold improvements,
prepaid expenses and similar items capitalized on the books of the Partnership
and any memberships purchased by the Partnership will be valued at the book
value thereof, except that depreciation, amortization or other allowances for
exhaustion of such items between the first day of the fiscal year in which the
Inventory Date occurs and the Inventory Date shall be taken into account at the
rates then employed by the Partnership for such items, whether or not the books
of the Partnership actually reflect such depreciation, amortization or other
allowance on the Inventory Date. No value will be placed upon nor will allowance
be made for or on account of printing and stationery and other consumable assets
charged as an expense by the Partnership upon acquisition.
SECTION 11.03. In determining the value of the interest in the
Partnership of the Limited Partner, the General Partner may establish such
reserves as it deems prudent to provide for items of expense and loss relating
to the portion of the fiscal year of the Partnership prior to the Inventory
Date, and for all liabilities, contingent or otherwise, attributable to such
period or to any or all prior periods during which the Limited Partner was a
Partner or the interest of the Limited Partner continued at the risk of the
business of the Partnership.
SECTION 11.04. A statement of the amount due from the
Partnership in respect of the Final Payment of the Limited Partner shall be
promptly prepared. A copy of the statement shall be furnished to the Limited
Partner. In the event any amount shall be due from the Limited Partner to the
Partnership, the same shall be remitted to the Partnership promptly.
SECTION 11.05. Reserve accounts shall be applied or liquidated
with all due expedition, as determined by the General Partner in conjunction
with the Partnership's accountants.
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<PAGE>
To the extent that any reserve account shall exceed, or shall be estimated by
the General Partner to exceed, the amount of the obligations, claims, causes of
action or other contingencies for which it was established, the Limited Partner
shall be paid its share of any such excess without interest. To the extent, if
at all, that the reserve account proves insufficient or no reserve account was
established therefor, the Limited Partner shall promptly remit to the
Partnership its share of such shortfall, without interest.
SECTION 11.06. Any dispute arising out of, or connected with,
determinations reflected in any statement furnished pursuant to this Article XI
shall, unless resolved by the parties, be submitted to the Partnership's
accountants, and any determination by such accountants shall be final, binding
and conclusive on the Partnership and the Limited Partner.
SECTION 11.07. In no event shall the Limited Partner be
required to remit to the Partnership any amount in excess of the Final Payment,
or to remit any amount to the Partnership after the expiration of the statute of
limitations applicable to any claim or potential claim with respect to an
action, omission to act, event or occurrence which took place prior to the
Limited Partner's withdrawal from the Partnership.
ARTICLE XII
ALLOCATION OF FORMER PARTNERS' PROFITS AND LOSSES
SECTION 12.01. At such time as the Limited Partner shall no
longer be entitled to participate in the profits and losses of the Partnership,
its interest in future profits and losses of the Partnership shall be allocated
in such manner and in such proportions as shall be determined by the General
Partner, provided, however, that no allocation shall be made to the Limited
Partner without its consent.
ARTICLE XIII
BOOKS OF ACCOUNT
SECTION 13.01. Complete and accurate books of account of the
business of the Partnership shall be kept by or under the supervision of the
General Partner at the principal place of business of the Partnership and shall
be open to inspection by the Limited Partner, or by its accredited
representatives, at any reasonable time during normal business hours.
ARTICLE XIV
POSTPONEMENT OF PAYMENT
SECTION 14.01. Notwithstanding any other provision of this
Agreement, in accordance with Rule 313.11 of the Exchange, all withdrawals of
capital hereunder shall be made only with the prior written approval of the
Exchange and upon six months written notice to the
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<PAGE>
Partnership given no sooner than six months after such contribution was first
made, unless a different period of notice is consented to by the General Partner
and approved by the Exchange. In addition, any payment to be made by the
Partnership pursuant to Article XI hereof or otherwise hereunder to, or
withdrawal of capital by, any Partner shall be postponed if, but only to the
extent that, after giving effect to the payment or withdrawal, such payment or
withdrawal, or any part thereof, would be prohibited by the provisions of
Securities and Exchange Commission Rule 15c3-1 (or any successor Rule), or any
Rule of the Exchange, or would render the Partnership unable to meet its capital
requirements as a specialist firm on the Exchange. Any such postponement shall
be until such time as the payment or withdrawal could be made pursuant to the
provisions of said Rule 15c3-1 (or any successor Rule) and any Rule of the
Exchange and until the Partnership, after giving effect to the payment or
withdrawal, would be in compliance with its capital requirements as a specialist
firm on the Exchange. In addition, any payment to be made by the Partnership
pursuant to Article XI hereof or otherwise hereunder to, or withdrawal of
capital by, any Partner shall be postponed if, but only to the extent that,
after giving effect to the payment or withdrawal, such payment or withdrawal, or
any part thereof, would contravene, result in any breach of, or constitute a
default under, or result in the creation of any lien in respect of the property
of the Partnership under, any indenture, mortgage, deed of trust, loan, purchase
or credit agreement, lease, organizational document, or any other agreement or
instrument to which the Partnership is bound or by which the Partnership or any
of its properties may be bound or affected.
SECTION 14.02. In determining for purposes of Section 14.01
hereof whether any payment or withdrawal can be made and the extent thereof, any
amounts due from the Partnership to or in respect of any Partner which other
amounts are payable at or prior to the date on which such payment or withdrawal
was initially scheduled (disregarding any postponement of the Partnership's
obligation to make such payment), shall be deemed to have been paid and the net
capital of the Partnership appropriately reduced.
SECTION 14.03. Interest at the broker's call rate, as in
effect from time to time, shall be payable in respect of payments postponed
pursuant to the provisions of this Article XIV.
ARTICLE XV
COMPLIANCE WITH THE EXCHANGE
SECTION 15.01. This Agreement and all matters and things to be
done and performed in connection with the Partnership business shall be subject
to the Constitution, Rules, requirements and regulations, so far as applicable
thereto, of the Exchange and shall be conducted strictly in compliance
therewith. If any of the terms, covenants and conditions of this Agreement shall
be in conflict with any provision of the Constitution, Rules, requirements or
regulations of the Exchange, the same shall be deemed modified so as to conform
therewith.
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<PAGE>
ARTICLE XVI
INSOLVENCY OF GENERAL PARTNER; USE OF NAME
SECTION 16.01. Notwithstanding any other provision in this
Agreement, if at any time it shall be determined that the General Partner is
insolvent (as such term is used in Title 11 of the United States Code), the
Partnership shall be dissolved, unless the Limited Partner appoints another
subsidiary of the Limited Partner to serve as the general partner of the
Partnership and such subsidiary is admitted as the general partner of the
Partnership.
SECTION 16.02. No person, other than the General Partner, the
Limited Partner or a subsidiary or affiliate of either of them shall have any
rights to the use of the name "LaBranche" or "LaBranche & Co." in any business
other than the business of the Partnership.
ARTICLE XVII
ASSIGNMENT
SECTION 17.01. No Partner may assign or encumber its interest
in the Partnership without the prior written consent of the Exchange and of the
General Partner.
ARTICLE XVIII
ARBITRATION
SECTION 18.01. In the event that any dispute or controversy
arises under or in connection with this Agreement, such dispute or controversy,
except as otherwise expressly provided herein, shall be submitted for binding
arbitration to the Exchange in accordance with the Rules and Procedures of the
Exchange then obtaining.
ARTICLE XIX
ADMINISTRATIVE CONVENIENCE
SECTION 19.01. The General Partner has full power and
authority on behalf of all the Partners, at any time and from time to time, in
accordance with the rules of any national securities exchange (a) to designate
one or more persons (i) to assign securities registered in the name of the
Partnership, (ii) to execute powers of substitution, (iii) to guarantee the
signatures of others to assignments of securities, and (iv) to make any
certification or guarantee of any signature on documents submitted in support of
the transfer of any securities, all with the same effect as if the name of the
Partnership had been signed under like circumstances by the General Partner, (b)
to adopt and authorize the use of a mechanically reproduced facsimile signature
of the Partnership in connection with (i) the assignment of securities
registered in the name of the Partnership, and (ii) the execution of powers of
substitution, (c) to designate one or more of the employees of the
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<PAGE>
Partnership to sign written contracts covering "seller option", "when issued"
and "when distributed" transactions in the name of the Partnership with the same
effect as if the name of the Partnership had been signed under like
circumstances by the General Partner, and (d) to execute and file with any
national securities exchange, in the name and on behalf of the Partnership, and
the Partners severally, any and all such powers of attorney, agreements and
other instruments (including agreements of indemnification) as may by such
exchange be required to evidence or support action under Section 20.01(a), (b)
or (c) hereof. The Limited Partner, by its execution of this Agreement,
specifically ratifies and approves all such powers of attorney, agreements and
other instruments (including agreements of indemnification) as may heretofore
have been executed and filed on behalf of the Partnership with any national
securities exchange and which are still in force in connection with any matter
described in Section 20.01(a), (b) or (c) hereof.
ARTICLE XX
DISSOLUTION
SECTION 20.01. In the event of the dissolution of the
Partnership, (i) the Managing Committee shall select one or more of its members
or one or more others to act as liquidators; (ii) the liquidators shall promptly
marshal the Partnership assets and pay the Partnership debts; (iii) the
respective interests of the Partners shall be determined on the date of
dissolution; (iv) the proceeds of liquidation shall be distributed in the
following order: (A) to creditors of the Partnership, (B) to the Limited Partner
in respect of its contribution to the capital of the Partnership, (C) to the
General Partner in respect of its capital contribution to the Partnership, and
(D) to each Partner in accordance with its positive capital account balance; (v)
any interest in the Partnership of the Limited Partner held at the risk of the
business pursuant to Article XI hereof shall not be given the status of the
Limited Partner's contribution of capital for purposes of distribution of the
proceeds of liquidation; (vi) the liquidators shall pay or distribute to the
Partners their respective interests in the Partnership, less the aggregate of
reserves which have been established to pay or provide for creditors, as soon as
possible and shall have the right to make distributions of assets in cash or in
kind; (vii) the liquidators shall receive reasonable compensation and the
necessary and reasonable out-of-pocket expenses of dissolution and liquidation,
all of which shall be a charge against the Partnership assets in liquidation;
and (viii) the liquidators shall render an account to the Partnership.
SECTION 20.02. Notwithstanding anything to the contrary
contained herein, in the event of the dissolution of the Partnership upon the
expiration of the term of this Agreement, or any extension or renewal thereof,
each Partner agrees that any withdrawal of capital upon any such dissolution
which would cause the Partnership's "aggregate indebtedness" to exceed the
percentages specified in Rules 326(a) and 326(b) of the Rules of the Board of
Directors of the Exchange during the six months immediately preceding the date
of the dissolution, may be postponed for a period of up to (6) six months of the
stated date of dissolution, as the General Partner may deem necessary to ensure
compliance with said rules, and any such capital so retained by the Partnership
after the date of dissolution shall continue to be subject to all debts and
obligations of the Partnership.
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<PAGE>
ARTICLE XXI
NOTICE
SECTION 21.01. All notices permitted or required hereunder
shall be in writing and shall be deemed duly given if (a) delivered personally
to the person for whom intended or (b) mailed to the person for whom intended,
by registered or certified mail, return receipt requested, addressed to the
address shown on the Partnership records to be the addressee's then current
address. Such notice shall be deemed to have been given when so delivered
personally or upon mailing. Notice given to any two members of the Managing
Committee shall constitute notice to the Partnership.
ARTICLE XXII
MISCELLANEOUS
SECTION 22.01. ENTIRE AGREEMENT. This Agreement (i) reflects
the entire agreement among the parties and the breach by any party of any one of
such agreements shall constitute a breach of all such agreements, (ii) from and
after the effective date hereof, supersedes all prior partnership agreements
among the parties hereto, (iii) shall be construed in accordance with the laws
of the State of New York, and (iv) shall be binding upon and inure to the
benefit of the parties hereto, their respective legal representatives, heirs,
executors and administrators and any continuing or successor partnerships or
corporation succeeding to substantially all the business of the Partnership.
Terms such as "herein", "hereof," "hereinafter" refer to this Agreement as a
whole and not to the particular sentence or paragraph where they appear, unless
the context otherwise requires. Terms used in the plural include the singular
and vice versa unless the context otherwise requires. The term "person" or
"persons" includes natural persons, corporations and other legal entities unless
the context otherwise requires. For purposes of this Agreement, the term
"affiliate" shall mean any person directly or indirectly controlling, controlled
by or under direct or indirect common control with any other person and shall
include any person who is a partner, officer or director of any other person,
and the term "control" shall have the meaning ascribed to it in Rule 405 under
the Securities Act of 1933.
SECTION 22.02. AMENDMENT. No provision of this Agreement
shall be amended without the written consent of each of the Partners.
SECTION 22.03. MEANINGS. As used herein, unless the context
otherwise requires, the singular shall include the plural, and the term legal
representatives shall include testamentary trustees or the curator, committee or
other representative of an incompetent or bankrupt Partner.
SECTION 22.04. EFFECTIVE DATE. This Agreement shall be and
becomes effective as of the date first above written, subject to approval by the
Exchange.
SECTION 22.05. COUNTERPARTS. This Agreement may be signed in
any number of counterparts, all of which taken together shall constitute but one
and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the General Partner and the Limited Partner have
executed this Agreement as of the date first set forth hereinabove.
LaB INVESTING CO. L.L.C., as general partner
By: /s/ George M.L. LaBranche, IV
-----------------------------------
Name: George M.L. LaBranche, IV
Title: Managing Committee member
By: /s/ Alfred O. Hayward, Jr.
-----------------------------------
Name: Alfred O. Hayward, Jr.
Title: Managing Committee member
By: /s/ James G. Gallagher
-----------------------------------
Name: James G. Gallagher
Title: Managing Committee member
LaBRANCHE & CO INC., as limited partner
By: /s/ George M.L. LaBranche, IV
----------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman, Chief Executive Officer
and President
<PAGE>
Exhibit 10.19
LAB INVESTING CO. L.L.C.
AMENDED AND RESTATED OPERATING AGREEMENT
Amended and Restated Operating Agreement of LaB Investing Co. L.L.C.,
made as of August 24, 1999, by LaBranche & Co Inc., a Delaware corporation
located at One Exchange Plaza, New York, New York 10006 (the "MEMBER"), and LaB
Investing Co. L.L.C., a New York limited liability company with an address at
One Exchange Plaza, New York, New York 10006 (the "COMPANY").
W I T N E S S E T H
WHEREAS, the Company has conducted business pursuant to an Operating
Agreement, dated as of January 1, 1995, which was amended as of January 1, 1996,
July 1, 1996, January 1, 1997, July 1, 1997 and August 1, 1997, amended and
restated as of January 1, 1998 and further amended as of January 1, 1999 (the
Operating Agreement, as thus amended, is referred to herein as the "AGREEMENT");
WHEREAS, the Member, the Company and the former members of the Company
entered into an Exchange Agreement, dated as of June 17, 1999 (the "EXCHANGE
AGREEMENT"), whereby each of the former members agreed to exchange his entire
membership interest in the Company for cash and/or securities of the Member;
WHEREAS, the Member, as a result of the completion of the transactions
contemplated by the Exchange Agreement, has become the sole member of the
Company; and
WHEREAS, the Member now wishes to further amend and restate the
Agreement in order to reflect the foregoing and to reflect its agreement
regarding certain other matters pertaining to the operation of the Company;
NOW, THEREFORE, the Agreement is hereby amended and restated in its
entirety as follows:
ARTICLE I
NAME; OFFICE; PURPOSE; TERM
SECTION 1.01. NAME. The Company shall do business under the
name "LaB Investing Co. L.L.C." The Managing Committee (as defined below) may
change the name of the Company at any time or adopt such trade or fictitious
names as it may determine in its sole discretion. If the Company does business
under a name other than LaB Investing Co. L.L.C., then the Company shall file an
assumed-name certificate as required by Section 130 of the New York General
Business Law.
<PAGE>
SECTION 1.02. OFFICE. The Company's principal office shall be
located at One Exchange Plaza, New York, New York 10006 or at such other place
or places as the Managing Committee shall designate from time to time.
SECTION 1.03. PURPOSE. The Company is organized for the
following purposes:
(a) to hold a general partnership interest in
LaBranche & Co., a New York limited partnership (the "FIRM"), or any successor
partnership, or shares of capital stock of any successor corporation, and to
exercise all rights, powers and privileges with respect thereto, including,
without limitation, acting as the General Partner of the Firm;
(b) to engage in such other activities and to have
such other objects and purposes, consistent with the Constitution, Rules and
Regulations of the New York Stock Exchange, Inc. (the "EXCHANGE"), as the
Managing Committee may from time to time determine; and
(c) to carry on any business designated by the
Managing Committee which may lawfully be carried on by an affiliate of a member
firm of the Exchange in accordance with the Rules of the Exchange.
SECTION 1.04. TERM. The term of the Company shall continue
through the earlier of the termination or dissolution of the Firm in accordance
with the provisions of the Firm Agreement (as hereinafter defined) or the
termination or dissolution of the Company pursuant to the laws of the State of
New York, unless its existence is sooner terminated pursuant to Article VII of
this Agreement.
ARTICLE II
MEMBER; CAPITAL
SECTION 2.01. MEMBER. The name, present mailing address and
taxpayer identification number of the Member are as follows:
<TABLE>
<CAPTION>
Name Address Taxpayer Identification Number
- ---- ------- ------------------------------
<S> <C> <C>
LaBranche & Co Inc. One Exchange Plaza 13-4064735
New York, NY 10006
</TABLE>
SECTION 2.02. CAPITAL. As of the date hereof, the Member shall
be credited with a capital contribution to the Company in the amount of
$188,331,000.
SECTION 2.03. CAPITAL CONTRIBUTION DEFINED. For purposes of
this Agreement, the term "CAPITAL CONTRIBUTION" shall mean any contribution of
cash or securities to the Company.
SECTION 2.04. ADDITIONAL CAPITAL CONTRIBUTIONS. With the prior
consent of the Managing Committee, the Member may make additional Capital
Contributions. If the Managing Committee, at any time or from time to time,
determines, in its sole discretion, that the Company
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<PAGE>
requires an additional Capital Contribution to enable the Company or the Firm to
conduct its business operations, then the Member shall make such additional
Capital Contribution at such time or times as shall be specified by the Managing
Committee.
SECTION 2.05. NO INTEREST ON CAPITAL CONTRIBUTIONS. The Member
shall not be paid interest on its Capital Contribution.
SECTION 2.06. RETURN OF CAPITAL CONTRIBUTIONS. Except as
otherwise provided in this Agreement, the Member shall not have the right to
receive any return of its Capital Contribution.
SECTION 2.07. LOANS. The Member may make or cause a loan to be
made to the Company at such times, in such amounts and on such terms and
conditions as shall be approved by the Managing Committee.
ARTICLE III
PROFIT, LOSS AND DISTRIBUTION
SECTION 3.01. PROFIT AND LOSS. Net profit or net loss of the
Company shall be determined for each taxable year of the Company or for any
shorter period as the Managing Committee may determine from time to time, and
shall be equal to the Company's taxable income or loss for such year or period,
as determined pursuant to applicable tax laws, but as adjusted to (i) include
income exempt from income tax (and not otherwise taken into account in computing
net profit and net loss), (ii) include Company expenditures which are not
deductible under applicable tax laws and not properly chargeable to capital
accounts (and not otherwise taken into account in computing net profit or net
loss), (iii) take into account any adjustments to depreciation for such taxable
year or shorter period and any variation between the adjusted tax basis and the
book value of any property contributed by the Member to the Company in
accordance with the principles of applicable tax laws, and (iv) not include any
items which are specially allocated to the Member pursuant to applicable tax
laws.
SECTION 3.02. ALLOCATION AND DISTRIBUTION. 100% of the net
profit and net loss of the Company for each fiscal year of the Company or
portion thereof shall be allocated and distributed to the Member at such times
and in such amounts as shall be determined by the Managing Committee.
ARTICLE IV
MANAGEMENT
SECTION 4.01. MANAGEMENT. The management of the Company shall
be vested in a Managing Committee (the "MANAGING COMMITTEE") which shall be
responsible for the determination of all questions of business, policy and
operation of the Company. The duties of the Managing Committee shall include,
but not be limited to, the management of the Firm on behalf of the Company, as
provided in Article VI of the Amended and Restated Articles of Partnership of
the Firm, dated as of the date hereof, and as subsequently amended (the "FIRM
AGREEMENT"), and the
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designation of two or more persons who are members or allied members of the
Exchange, and who are otherwise acceptable to the Exchange, to act on behalf of
the Firm in connection with the Firm's day-to-day dealings with the Exchange.
Without limiting the foregoing, the Managing Committee shall have full power and
authority on behalf of the Member, at any time and from time to time, in
accordance with the rules of any national securities exchange, to determine in
good faith the value of Company and Firm assets in those cases where such assets
do not have readily ascertainable market values, and to review and determine
salaries of employees of the Company and the Firm. Decisions of the Managing
Committee shall be presumed to be within its scope of authority and shall be
binding upon the Company and the Member. The Managing Committee shall be
composed of George M.L. LaBranche, IV, Alfred O. Hayward, Jr. and James G.
Gallagher. The Member may remove one or more members of the Managing Committee
at such time or times as it shall determine in its sole discretion or increase
the membership thereof by designating one or more additional persons for
membership on the Managing Committee for such terms as it may specify. Whenever,
by the terms of this Agreement, any matter is subject to action or determination
by the Managing Committee, such action or determination shall by approved or
made by a majority of the persons constituting the Managing Committee.
SECTION 4.02. LIABILITY AND INDEMNIFICATION.
(a) Except as otherwise provided by law, no member of
the Managing Committee shall be liable, responsible or accountable in any way
for damages or otherwise to the Company or to the Member for any act or failure
to act pursuant to this Agreement unless there is a judicial determination that
(i) such person acted in bad faith, (ii) the conduct of such person constituted
intentional misconduct or a knowing violation of law, (iii) such person gained a
financial benefit to which he or she was not legally entitled or (iv) such
person failed to perform his or her duties, specifically with respect to
distributions under Section 508(a) of the New York Limited Liability Company
Law, in good faith and with that degree of care that an ordinarily prudent
person in a like position would use under similar circumstances.
(b) The Company shall indemnify, defend and hold
harmless each member of the Managing Committee (severally, an "INDEMNITEE" and
collectively, the "INDEMNITEES"), from and against any claims, losses,
liabilities, damages, fines, penalties, costs and expenses (including, without
limitation, reasonable fees and disbursements of counsel and other
professionals) arising out of or in connection with any act or failure to act by
an Indemnitee pursuant to this Agreement, or the business and affairs of the
Company, to the fullest extent permitted by law; provided, however, that an
Indemnitee shall not be entitled to indemnification hereunder if there is a
judicial determination that (i) such Indemnitee's actions or omissions to act
were made in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or (ii) such Indemnitee
personally gained a financial benefit to which the Indemnitee was not legally
entitled.
SECTION 4.03. ACTIONS OF MEMBER REQUIRING MANAGING COMMITTEE
CONSENT. The Member shall not, without the prior written consent of the Managing
Committee, (i) assign, transfer or pledge any of the claims of, or debts due to,
the Company or the Firm, except upon payment in full; (ii) make, execute or
deliver any assignment for the benefit of creditors or any bond, confession of
judgment, or indemnity bond (except pursuant to Section 8.04) (iii) make,
execute or deliver in the name of the Company or the Firm any chattel mortgage,
security agreement or financing statement; (iv) become a surety, guarantor or
accommodation party to any obligations in
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<PAGE>
the name or in the credit of the Company or the Firm; (v) lend any money of the
Company or the Firm or extend any credit of the Company or the Firm except in
the regular course of business; and (vi) without being limited by the foregoing,
do any act or enter into transactions on behalf of the Company or the Firm
except in the regular course of business and consistent with the terms of this
Agreement.
ARTICLE V
TRANSFERS OF INTEREST; WITHDRAWAL OF MEMBER
SECTION 5.01. TRANSFER OF INTEREST. The Member may not
Transfer in whole or in part its interest in the Company without the prior
written consent of the Managing Committee. For purposes of this Agreement, the
term "TRANSFER" means, - when used as a noun - any sale, hypothecation, pledge,
assignment, gift, bequest, attachment, or other transfer, including transfers by
operation of law, and - when used as a verb - means to sell, hypothecate,
pledge, assign, give, bequeath, or otherwise transfer.
SECTION 5.02. WITHDRAWAL OF MEMBER. The Member may not
withdraw any portion of its interest in the Company without the prior written
consent of the Managing Committee.
ARTICLE VI
ADMISSION OF ADDITIONAL MEMBERS
SECTION 6.01. ADMISSION OF NEW MEMBERS. New members may be
admitted to the Company upon such terms and conditions as the Managing Committee
shall determine. The admission of a new member or members shall not dissolve the
Company, and the Company shall be the same firm for all purposes.
ARTICLE VII
DISSOLUTION
SECTION 7.01. EVENT OF DISSOLUTION OF THE COMPANY. The Company
shall be dissolved upon the happening of the earlier of the following events:
(a) when the period fixed for its duration in Section
1.04 has expired; or
(b) upon the determination of the Managing Committee,
in its sole discretion, to dissolve the Company, by giving written notice to the
Member specifying the date upon which the Company shall dissolve.
SECTION 7.02. BANKRUPTCY. Any bankruptcy of the Member shall
not dissolve the Company.
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SECTION 7.03. EVENT OF DISSOLUTION OF THE FIRM.
Notwithstanding anything to the contrary contained herein, in the event of the
dissolution of the Firm upon the expiration of the term of the Firm Agreement,
or any extension or renewal thereof, the Member agrees that any withdrawal of
capital upon any such dissolution which would cause the Firm's "aggregate
indebtedness" to exceed the percentages specified in Rules 326(a) and 326(b) of
the Rules of the Board of Directors of the Exchange during the six months
immediately preceding the date of the dissolution, may be postponed for a period
of up to (6) six months of the stated date of dissolution, as the Managing
Committee may deem necessary to ensure compliance with said rules, and any such
capital so retained by the Firm after the date of dissolution shall continue to
be subject to all debts and obligations of the Firm.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. CONFORMITY OF COMPANY AGREEMENT TO EXCHANGE
REQUIREMENTS. This Agreement and all matters and things to be done and performed
in connection with the Company business shall be subject to the Constitution,
Rules, Regulations and requirements, so far as applicable thereto, of the
Exchange and shall be conducted strictly in compliance therewith. If any of the
terms, covenants and conditions of this Agreement shall be in conflict with any
provision of the Constitution, Rules, Regulations or requirements of the
Exchange, the same shall be deemed modified so as to conform therewith.
SECTION 8.02. NO ASSIGNMENT. The Member may not assign or
encumber its interest in the Company without the prior written consent of the
Exchange and of the Managing Committee.
SECTION 8.03. ARBITRATION. In the event that any dispute or
controversy arises under or in connection with this Agreement, such dispute or
controversy, except as otherwise expressly provided herein, shall be submitted
for binding arbitration to the Exchange in accordance with the Rules and
procedures of the Exchange then obtaining.
SECTION 8.04. PROVISIONS FOR ADMINISTRATIVE CONVENIENCE. The
members of the Managing Committee shall have full power and authority on behalf
of the Member, at any time and from time to time, in accordance with the rules
of any national securities exchange (a) to designate one or more persons (i) to
assign securities registered in the name of the Company, (ii) to execute powers
of substitution, (iii) to guarantee the signatures of others to assignments of
securities, and (iv) to make any certification or guarantee of any signature on
documents submitted in support of the transfer of any securities, all with the
same effect as if the name of the Company had been signed under like
circumstances by the Managing Committee, (b) to adopt and authorize the use of a
mechanically reproduced facsimile signature of the Company in connection with
(i) the assignment of securities registered in the name of the Company, and (ii)
the execution of powers of substitution, (c) to designate one or more of the
employees of the Member or the Firm to sign written contracts covering "seller
option", "when issued" and "when distributed" transactions in the name of the
Company with the same effect as if the name of the Company had been signed under
like circumstances by the Managing Committee, and (d) to execute and file with
any national securities exchange, in the name and on behalf of the Company, and
the Member, any and all such powers of
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attorney, agreements and other instruments (including agreements of
indemnification) as may by such exchange be required to evidence or support
action under subsection (a), (b) or (c) of this Section 8.04.
SECTION 8.05. NOTICES. All notices permitted or required
hereunder shall be in writing and shall be deemed duly given if (a) delivered
personally to the person for whom intended or (b) mailed to the person for whom
intended, by registered or certified mail, return receipt requested, addressed
to the Member's address set forth in this Agreement. Such notice shall be deemed
to have been given when so delivered personally or upon mailing. Notice given to
any two members of the Managing Committee shall constitute notice to the
Company.
SECTION 8.06. GENERAL PROVISIONS. This Agreement (a) reflects
the entire agreement among the parties, (b) from and after the effective date
hereof, supersedes all prior partnership or limited liability company operating
agreements among the parties hereto, (c) shall be construed in accordance with
the internal law, not the law of conflicts, of the State of New York, and (d)
shall be binding upon and inure to the benefit of the parties hereto, their
respective legal representatives, heirs, executors and administrators and any
continuing or successor partnership, corporation, limited liability company or
other entity succeeding to substantially all the business of the Company.
SECTION 8.07. ARTICLE AND SECTION TITLES. The headings used
herein are for convenience only and shall not be resorted to for interpretation
of this Agreement.
SECTION 8.08. SEPARABILITY OF PROVISIONS. Each provision of
this Agreement shall be considered separable, and if, for any reason, any
provision or provisions herein are determined to be invalid and contrary to any
existing or future law, such invalidity shall not impair the operation of or
affect those portions of this Agreement which are valid.
SECTION 8.09. EFFECTIVE DATE. This Agreement shall be and
becomes effective as of the date first above written, subject to approval by the
Exchange.
SECTION 8.10. COUNTERPARTS. This Agreement may be signed in
any number of counterparts, all of which taken together shall constitute but one
and the same agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Member and the Company have executed this
Agreement as of the date set forth hereinabove.
LaBRANCHE & CO
INC.
By: George M.L. LaBranche, IV, Chairman,
-------------------------------------
Name: George M.L. LaBranche, IV, Chairman,
Chief Executive Officer and President
LaB INVESTING CO. L.L.C.
By: George M.L. LaBranche, IV
-------------------------------------
Name: George M.L. LaBranche, IV
Title: Managing Committee member
By: Alfred O. Hayward, Jr.
-------------------------------------
Name: Alfred O. Hayward, Jr.
Title: Managing Committee member
By: James G. Gallagher
-------------------------------------
Name: James G. Gallagher
Title: Managing Committee member
<PAGE>
Exhibit 10.20
ACQUISITION AGREEMENT
AGREEMENT, dated this 16th day of August, 1999, by and between Ernst &
Company, a Delaware corporation ("Seller"), and LaBranche & Co., a New York
limited partnership ("Purchaser").
WHEREAS, Purchaser has taken steps to complete an ownership
restructuring (the "Restructuring") involving the organization of LaBranche & Co
Inc., a Delaware corporation which will hold 100% of the equity interest in
Purchaser ("Newco"), and an initial public offering of the shares of stock of
Newco (the "IPO") to occur simultaneously with the Restructuring;
WHEREAS, Seller is a limited partner of Purchaser and owns an interest
in capital and a 5.3685% interest in the profits of Purchaser (the "LP
Interest"), but does not intend to participate in the IPO and become a
stockholder of Newco;
WHEREAS, Seller has previously agreed to sell, and Purchaser has
previously agreed to acquire, the entire LP Interest (including the balance in
Seller's capital account with Purchaser); and
WHEREAS, Seller and Purchaser wish to formalize the terms and
conditions of their agreement by hereinafter setting forth such terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows (with all
capitalized terms used herein and not otherwise defined herein having the
respective meanings ascribed thereto in the Amended and Restated Articles of
Partnership of Purchaser, as amended to the date hereof (the "Partnership
Agreement")):
1. PURCHASE AND SALE OF THE LP INTEREST. Subject to the terms and
conditions hereof, Seller shall sell, assign, transfer, convey and deliver to
Purchaser, and Purchaser will acquire from Seller, the LP Interest for a
purchase price of $28,176,000 (the "Purchase Price"), payable by wire transfer
of immediately available funds to the order of Seller immediately after the
closing of the IPO.
2. PRE-CLOSING CONDITIONS. Purchaser's and Seller's mutual
obligations to consummate the transactions contemplated hereby will be subject
to the conditions that (i) the IPO shall have been consummated on or before
December 31, 1999, and (ii) no injunction or order shall be in effect
prohibiting consummation of the transactions contemplated hereby or which would
make the consummation of such transactions unlawful, and no action or proceeding
shall have been instituted and remain pending before a court, governmental body
or regulatory authority or shall be threatened to restrain or prohibit such
transactions.
<PAGE>
3. CAPITAL CONTRIBUTIONS. Notwithstanding the provisions of Section
4(b) of the Partnership Agreement, Seller will not be required to make any
additional capital contributions to Purchaser pursuant to such provision prior
to the consummation of the IPO and the transactions contemplated hereby;
PROVIDED, HOWEVER, that if the IPO has not been consummated on or before
December 31, 1999, unless otherwise agreed by the parties (i) Seller's
obligation to make such additional capital contributions to Purchaser shall be
reinstated immediately, retroactive to the date of this Agreement, and (ii)
Purchaser shall be entitled to retain that portion of Seller's share of the
previously undistributed profits of Purchaser for the fiscal year ended December
31, 1999 (as an additional capital contribution to Purchaser by Seller) which is
equal to the amounts which otherwise would have been retained by Purchaser
pursuant to Section 4(b) of the Partnership Agreement. Effective upon the
consummation of the transactions contemplated hereby, Seller shall have no
further obligations to Owen J. DeCoursey under the provisions of the Partnership
Agreement.
4. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents
and warrants to Purchaser as follows:
(a) upon the transfer of the LP Interest under this Agreement to
Purchaser, Purchaser will acquire good and marketable title to the LP Interest
free and clear of any pledge, security interest or other encumbrance, or any
restriction or claim;
(b) Seller has good and marketable title to the LP Interest, and
there are no options, warrants, calls, commitments or agreements of any type to
which Seller is a party or by which Seller may be bound under which any person
or entity has a right to purchase or acquire, own or maintain any rights in, of
or to any of the LP Interest;
(c) the execution, delivery and performance of this Agreement,
the consummation of the transactions contemplated hereby and the compliance with
the provisions hereof by Seller will not (i) conflict with, result in the breach
of, or constitute a default under the certificate of incorporation, bylaws or
other organizational documents of Seller or any agreement or other instrument to
which Seller is a party or by which the property of Seller is bound or affected,
(ii) result in the creation of any lien, security interest, charge or
encumbrance upon the LP Interest, (iii) require any authorization, consent,
approval, exemption or other action by, or notice to, any third party, court or
other governmental or administrative body, or (iv) violate any laws, statutes,
regulations, orders or judgments applicable to Seller or the LP Interest;
(d) Seller has full, absolute and entire power and legal right to
execute, deliver and perform this Agreement;
(e) the execution, delivery and performance by Seller of this
Agreement have been duly and validly authorized by all necessary corporate
action on behalf of Seller;
-2-
<PAGE>
(f) this Agreement has been duly executed and delivered by Seller
and constitutes the valid and binding agreement of Seller, enforceable in
accordance with its terms, except as its enforceability may be limited by
bankruptcy, insolvency, moratorium or other laws relating to or affecting
creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles; and
(g) Seller has been afforded the opportunity to ask questions of,
and receive answers from, the management of Purchaser about the business and
affairs of Purchaser, LaB Investing Co. L.L.C., the general partner of Purchaser
(the "General Partner"), and Newco and the terms of the Restructuring and the
IPO and to obtain any additional information related thereto, to the extent
available and appropriate; Purchaser, the General Partner and Newco have
furnished to Seller all information which Seller considers necessary to form a
decision concerning the disposition of the LP Interest; and no valid request to
Purchaser, the General Partner or Newco by Seller for information of any kind
about Purchaser, the General Partner and Newco and the terms of the
Restructuring and the IPO has been refused or denied or remains unfulfilled as
of the date hereof.
5. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser hereby
represents and warrants to Seller as follows:
(a) Purchaser has full, absolute and entire power and legal right
to execute, deliver and perform this Agreement;
(b) the execution, delivery and performance by Purchaser of this
Agreement have been duly and validly authorized by all necessary action on
behalf of Purchaser;
(c) this Agreement has been duly executed and delivered by
Purchaser and constitutes the valid and binding agreement of Purchaser,
enforceable in accordance with its terms, except as its enforceability may be
limited by bankruptcy, insolvency, moratorium or other laws relating to our
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles; and
(d) the execution, delivery and performance of this Agreement,
the consummation of the transactions contemplated hereby and the compliance with
the provisions hereof by Purchaser will not (i) conflict with, result in the
breach of, or constitute a default under the certificate of incorporation,
bylaws or other organizational documents of Purchaser or any agreement or other
instrument to which Purchaser is a party or by which the property of Purchaser
is bound or affected, (ii) require any authorization, consent, approval,
exemption or other action by, or notice to, any third party, court or other
governmental or administrative body, or (iii) violate any laws, statutes,
regulations, orders or judgments applicable to Purchaser.
-3-
<PAGE>
6. CONSENT OF GENERAL PARTNER. By signing below on behalf of
Purchaser, the General Partner consents to the sale of the LP Interest by Seller
to Purchaser pursuant to, and on the terms and conditions set forth in, this
Agreement.
7. TERMINATION OF LIMITED PARTNER STATUS. Effective upon the
consummation of the transactions contemplated hereby, Seller shall cease to be a
Limited Partner of Purchaser.
8. RELEASES. Effective upon the consummation of the transactions
contemplated hereby, (i) Seller hereby releases Purchaser, Newco and the General
Partner, and any of their respective affiliates, partners, predecessors,
administrators, successors and assigns from any and all causes of action, suits,
debts, demands, covenants, contracts, agreements, damages, liabilities and
claims of any nature whatsoever (collectively, "Claims") that could ever be
asserted by Seller, whether presently known or unknown, accrued or unaccrued,
which pertain to Purchaser or Seller's acquisition, ownership and disposition of
the LP Interest, and (ii) Purchaser hereby releases Seller and any of its
affiliates, predecessors, administrators, successors and assigns from any and
all Claims that could ever be asserted by Purchaser, whether presently known or
unknown, accrued or unaccrued, which pertain to Purchaser or Seller's
acquisition ownership and disposition of the LP Interest. The foregoing releases
are not intended to affect the obligations of the parties under this Agreement.
9. ENTIRE AGREEMENT. This Agreement and that certain waiver letter,
dated June 11, 1999, from Purchaser to Seller state the entire agreement between
the parties with respect to the subject matter hereof (other than the
Partnership Agreement), and the provisions hereof may only be modified, waived
or terminated by a writing signed by the party or parties to be bound thereby.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York, without regard to the principles of conflicts of laws
thereof.
11. BINDING EFFECT. This Agreement and all the terms and conditions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
12. FURTHER ASSURANCES. The parties hereto will execute, acknowledge
and deliver such further instruments and do such further acts and things as may
be required to carry out the intent and purpose of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
[The remainder of this page intentionally left blank.]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ERNST & COMPANY
By: S.D. Solomon
----------------------------------------
Name: S.D. Solomon
Title: Vice Chariman
LABRANCHE & CO.
By: LaB Investing Co. L.L.C.,
As General Partner
By: George M.L. LaBranche, IV
----------------------------------------
George M.L. LaBranche, IV, Member
-5-
<PAGE>
Exhibit 10.21
ACQUISITION AGREEMENT
AGREEMENT, dated this 16th day of August, 1999, by and between Mill
Bridge, Inc., a Delaware corporation ("Seller"), LaB Investing Co. L.L.C., a New
York limited liability company ("Purchaser"), LaBranche & Co Inc., a Delaware
corporation ("Newco"), and, for purposes of Section 6 hereof, LaBranche & Co., a
New York limited partnership ("LaBranche").
WHEREAS, Purchaser is the general partner of LaBranche;
WHEREAS, LaBranche has taken steps to complete an ownership
restructuring (the "Restructuring") involving the organization of Newco, which
will hold 100% of the equity interest in LaBranche ("Newco"), and an initial
public offering of the shares of stock of Newco (the "IPO") to occur
simultaneously with the Restructuring;
WHEREAS, Seller is a limited partner of LaBranche and owns an interest
in capital and an approximately 14.2% interest in the profits and losses of
LaBranche (the "LP Interest"), but does not intend to participate in the IPO and
become a stockholder of Newco;
WHEREAS, Seller has previously agreed to sell, and Purchaser has
previously agreed to acquire, the entire LP Interest (including the balance in
Seller's capital account with LaBranche, but excluding Seller's share of the
undistributed net profits of LaBranche for the portion of the 1999 fiscal year
ending on the date of the closing of the transactions contemplated hereby (the
"Closing")); and
WHEREAS, Seller and Purchaser wish to formalize the terms and
conditions of their agreement by hereinafter setting forth such terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows (with all
capitalized terms used herein and not otherwise defined herein having the
respective meanings ascribed thereto in the Amended and Restated Articles of
Partnership of LaBranche, as amended to the date hereof (the "Partnership
Agreement")):
1. PURCHASE AND SALE OF THE LP INTEREST.
(a) On the date of, and immediately after, the closing of
the IPO (the "Closing Date") and subject to the terms and conditions hereof,
Seller shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser will acquire from Seller, the LP Interest for an aggregate purchase
price of $90,000,000, of which (i) $74,000,000 shall be payable by wire transfer
of immediately available funds to the order of Seller, and (ii) $16,000,000
shall be payable by Purchaser's delivery to Seller of Newco's $16,000,000 note
(the "Note") substantially in the form attached as EXHIBIT A hereto
(collectively, the "Purchase Price"). The Note shall provide for the payment of
interest at a rate equal to the actual stated interest rate that is payable
under, and shall rank PARI PASSU with, the Senior Notes due 2004 in the
aggregate principal amount of up to $100,000,000 which Newco intends to issue as
of the Closing Date.
<PAGE>
(b) Within a reasonable period of time after the Closing Date,
Purchaser shall cause LaBranche to determine the amount of LaBranche's net
profit or net loss for the portion of its 1999 fiscal year ending on the Closing
Date and, within fifteen (15) days after such determination, shall cause
LaBranche to pay to Seller an amount equal to Seller's share of any previously
undistributed net profit of LaBranche for the portion of the 1999 fiscal year
ending on the Closing Date. On the Closing Date, Purchaser also shall cause
LaBranche to pay to Van der Moolen USA, Inc., an affiliate of Seller ("VDM"), by
wire transfer of immediately available funds, the sum of $5,000,000 plus the
amount of any accrued but unpaid interest in full satisfaction of LaBranche's
obligations under that certain Cash Subordination Agreement in the principal
amount of $5,000,000, dated as of December 30, 1996, between LaBranche and
Seller, which was assigned to VDM by Seller pursuant to an Assignment and
Assumption of Cash Subordination Agreement made as of December 31, 1997 between
Seller and VDM.
2. PRE-CLOSING CONDITIONS. Purchaser's and Seller's mutual
obligations to consummate the transactions contemplated hereby will be subject
to the conditions that (i) the IPO shall have been consummated on or before
December 31, 1999, and (ii) no injunction or order shall be in effect
prohibiting consummation of the transactions contemplated hereby or which would
make the consummation of such transactions unlawful, and no action or proceeding
shall have been instituted and remain pending before a court, governmental body
or regulatory authority or shall be threatened to restrain or prohibit such
transactions.
3. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents
and warrants to Purchaser as follows:
(a) except as otherwise provided in the Partnership Agreement,
upon the transfer of the LP Interest under this Agreement to Purchaser,
Purchaser will acquire good and marketable title to the LP Interest free and
clear of any pledge, security interest or other encumbrance, or any restriction
or claim;
(b) Seller has good and marketable title to the LP Interest, and
there are no options, warrants, calls, commitments or agreements of any type to
which Seller is a party or by which Seller may be bound under which any person
or entity has a right to purchase or acquire, own or maintain any rights in, of
or to any of the LP Interest;
(c) the execution, delivery and performance of this Agreement,
the consummation of the transactions contemplated hereby and the compliance with
the provisions hereof by Seller will not (i) conflict with, result in the breach
of, or constitute a default under the certificate of incorporation, bylaws or
other organizational documents of Seller or any agreement or other instrument to
which Seller is a party or by which the property of Seller is bound or affected,
(ii) result in the creation of any lien, security interest, charge or
encumbrance upon the LP Interest, (iii) require any authorization, consent,
approval, exemption or other action by, or notice to, any third party, court or
other governmental or administrative body, or (iv) violate any laws, statutes,
regulations, orders or judgments applicable to Seller or the LP Interest;
-2-
<PAGE>
(d) Seller is a duly organized and validly existing corporation
under the laws of the State of Delaware and has the full, absolute and entire
power and legal right to execute, deliver and perform this Agreement;
(e) the execution, delivery and performance by Seller of this
Agreement have been duly and validly authorized by all necessary corporate
action on behalf of Seller;
(f) this Agreement has been duly executed and delivered by Seller
and constitutes the valid and binding agreement of Seller, enforceable in
accordance with its terms, except as its enforceability may be limited by
bankruptcy, insolvency, moratorium or other laws relating to or affecting
creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles; and
(g) Seller has been afforded the opportunity to ask questions of,
and receive answers from, the management of LaBranche about the business and
affairs of Purchaser, LaBranche and Newco and the terms of the Restructuring and
the IPO and to obtain any additional information related thereto, to the extent
available and appropriate; Purchaser, LaBranche and Newco have furnished to
Seller all information which Seller considers necessary to form a decision
concerning the disposition of the LP Interest; and no valid request to
Purchaser, LaBranche or Newco by Seller for information of any kind about
Purchaser, LaBranche and Newco and the terms of the Restructuring and the IPO
has been refused or denied or remains unfulfilled as of the date hereof.
4. PURCHASER'S AND NEWCO'S REPRESENTATIONS AND WARRANTIES. Purchaser
and Newco, jointly and severally, hereby represent and warrant to Seller as
follows:
(a) Purchaser is a duly organized and validly existing limited
liability company under the laws of the State of New York and Newco is a duly
organized and validly existing corporation under the laws of the State of
Delaware and each has the full, absolute and entire power and legal right to
execute, deliver and perform this Agreement, and Newco has the full, absolute
and entire power and legal right to execute, deliver and perform the Note;
(b) the execution, delivery and performance by Purchaser and
Newco of this Agreement and by Newco of the Note have been duly and validly
authorized by all necessary action on behalf of Purchaser and Newco;
(c) this Agreement has been duly executed and delivered by
Purchaser and Newco and constitutes the valid and binding agreement of Purchaser
and Newco, enforceable in accordance with its terms, except as its
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws relating to or affecting creditors' rights generally and the exercise of
judicial discretion in accordance with general equitable principles;
(d) upon its execution and delivery, the Note will constitute the
valid and binding agreement of Newco, enforceable in accordance with its terms,
except as its enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws relating to or affecting creditors' rights generally
and the exercise of judicial discretion in accordance with general equitable
principles; and
-3-
<PAGE>
(e) the execution, delivery and performance of this Agreement and
the Note, the consummation of the transactions contemplated hereby and the
compliance with the provisions hereof and the Note by Purchaser and Newco, as
the case may be, will not (i) conflict with, result in the breach of, or
constitute a default under the certificate of incorporation, bylaws or other
organizational documents of Purchaser or Newco or any agreement or other
instrument to which Purchaser or Newco is a party or by which the property of
Purchaser or Newco is bound or affected, (ii) require any authorization,
consent, approval, exemption or other action by or notice to any third party,
court or other governmental or administrative body which has not been obtained,
or (iii) violate any laws, statutes, regulations, orders or judgments applicable
to Purchaser or Newco.
5. TERMINATION OF LIMITED PARTNER STATUS. Effective upon the
consummation of the transactions contemplated hereby, Seller shall cease to be a
Limited Partner of LaBranche.
6. RELEASES. Effective upon the consummation of the transactions
contemplated hereby, (i) Seller hereby releases Purchaser, Newco and LaBranche,
and any of their respective affiliates, partners, predecessors, administrators,
successors and assigns from any and all causes of action, suits, debts, demands,
covenants, contracts, agreements, damages, liabilities and claims of any nature
whatsoever (collectively, "Claims") that could ever be asserted against
Purchaser, Newco or LaBranche by Seller, whether presently known or unknown,
accrued or unaccrued, which pertain to LaBranche or Seller's investment therein,
and (ii) Purchaser, LaBranche and Newco hereby release Seller and any of its
affiliates, predecessors, administrators, successors and assigns from any and
all Claims that could ever be asserted against Seller by Purchaser, LaBranche or
Newco, whether presently known or unknown, accrued or unaccrued, which pertain
to LaBranche or Seller's investment therein. The foregoing releases are not
intended to affect the obligations of the parties under this Agreement or of
Newco under the Note.
7. ENTIRE AGREEMENT. This Agreement, the Note and that certain waiver
letter, dated June 11, 1999, from LaBranche to Seller state the entire agreement
between the parties with respect to the subject matter hereof (other than the
Partnership Agreement), and the provisions hereof may only be modified, waived
or terminated by a writing signed by the party or parties to be bound thereby.
8. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York, without regard to the principles of conflicts of laws
thereof.
9. BINDING EFFECT. This Agreement and all the terms and conditions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
10. FURTHER ASSURANCES. The parties hereto will execute, acknowledge
and deliver such further instruments and do such further acts and things as may
be required to carry out the intent and purpose of this Agreement.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
-4-
<PAGE>
12. TERMINATION. This Agreement shall terminate and be of no further
force or effect in the event the Closing has not taken place by 11:59 p.m. on
December 31, 1999.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MILL BRIDGE, INC.
By: Sal Somma
------------------------------
Name: Sal Somma
Title: Managing Directors
LAB INVESTING CO. L.L.C.
By: George M.L. LaBranche, IV
------------------------------
Name:
Title:
LABRANCHE & CO INC.
By: George M.L. LaBranche, IV
------------------------------
Name:
Title:
For purposes of Section 6 hereof:
LABRANCHE & CO.
By: George M.L. LaBranche, IV
------------------------------
Name:
Title:
-5-
<PAGE>
Exhibit 12.1
RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------
<TABLE>
<CAPTION>
1994
----
Earnings Fixed Charges
-------- -------------
<S> <C> <C> <C>
Pre-Tax Income 2,843 Interest Exp 223
LP's Interest 2,754
--------------
Total 223
---------------
Subtotal 5,597
Fixed Charges 223
---------------
Total 5,820
Ratio of E to FC: 26.10
1995
----
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 2,313 Interest Exp 294
LP's Interest 7,046
--------------
Total 294
---------------
Subtotal 9,359
Fixed Charges 294
---------------
Total 9,653
Ratio of E to FC: 32.83
1996
----
Earnings Fixed Charges
-------- -------------
Pre-Tax Income (90) Interest Exp 502
LP's Interest 9,638
--------------
Total 502
---------------
Subtotal 9,548
Fixed Charges 502
---------------
Total 10,050
Ratio of E to FC: 20.02
1997
----
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 3,370 Interest Exp 1,777
LP's Interest 14,354 ING Fee 53
--------------
1,830
---------------
Subtotal 17,724
Fixed Charges 1,830
---------------
Total 19,554
Ratio of E to FC: 10.69
<PAGE>
6/30/98 HISTORICAL
------------------
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 3,145 Interest Exp 1,609
LP's Interest 10,848 ING Fee 84
--------------
--------------- 1,693
Subtotal 13,993
Fixed Charges 1,693
---------------
Total 15,686
Ratio of E to FC: 9.27
1998 HISTORICAL
---------------
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 6,560 Interest Exp 3,899
LP's Interest 26,292 ING Fee 186
--------------
--------------- 4,085
Subtotal 32,852
Fixed Charges 4,085
---------------
Total 36,937
Ratio of E to FC: 9.04
1998 PRO FORMA
--------------
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 59,429 Interest Exp 14,858
Fixed Charges 15,582 ING Fee 186
--------------- Bond Discount 38
Total 75,011 Def Offering Costs 500
--------------
15,582
Ratio of E to FC: 4.81
6/30/99 HISTORICAL
------------------
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 10,081 Interest Exp 2,310
LP's Interest 21,054 ING Fee 103
--------------
Fixed Charges 2,413 2,413
---------------
Total 33,548
Ratio of E to FC: 13.90
6/30/99 PRO FORMA
-----------------
Earnings Fixed Charges
-------- -------------
Pre-Tax Income 50,636 Interest Exp 7,584
Fixed Charges 7,956 ING Fee 103
---------------
Total 58,592 Bond Discount 19
Def Offering Costs 250
--------------
7,956
Ratio of E to FC: 7.36
</TABLE>
<PAGE>
Exhibit 23.2
[LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated January 25, 1999 and to all references to our Firm included in, or made
part of, this registration statement.
[LOGO]
New York, New York
September 29, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports dated January 20, 1999 and to all references to our Firm included in or
made part of this registration statement.
New York, New York
September 24, 1999
<PAGE>
Exhibit 25.1
Securities Act of 1933 File No.______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------------------------------------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
PURSUANT TO SECTION 305(b) (2) / X /
--------------------------------------------------
FIRSTAR BANK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A National Banking Association 31-0841368
------------------------------
(IRS Employer Identification No.)
425 Walnut Street
Cincinnati, Ohio 45202
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
KEITH A. MAURMEIER
VICE PRESIDENT AND TRUST OFFICER
Firstar Bank, National Association
425 Walnut Street
Cincinnati, Ohio 45202
(513) 632-4843
(Name, address, and telephone number of agent for services)
-----------------------------------------------------------
LABRANCHE & CO., INC.
---------------------
(Exact name of obligor as specified in its charter)
DELAWARE 13-3496435
- -------------------------------------- ----------
(State of Incorporation) (IRS Employer Identification No.)
1 EXCHANGE PLAZA, 25TH FLOOR, NEW YORK, NY 10006-3008
- ------------------------------------------ --------------
(Address of principal executive offices) (Zip Code)
9 1/2% SENIOR NOTES DUE 2004
---------------------------------
(Title of the Indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as Trustee --
(a) Name and address of each examining or supervising authority to
which it is subject.
COMPTROLLER OF THE CURRENCY, WASHINGTON, D.C.
FEDERAL RESERVE BANK OF CLEVELAND, OHIO
FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
THE TRUSTEE IS AUTHORIZED TO EXERCISE CORPORATE TRUST
POWERS.
2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
THE OBLIGOR IS NOT AN AFFILIATE OF THE TRUSTEE
(INCLUDING ITS PARENT AND ANY AFFILIATES).
3.- 15. N/A
16. LIST OF EXHIBITS. List below all exhibits filed as part of this s
tatement of eligibility.
1. Office of the Comptroller of the Currency Amendment Letter
2. A copy of the Articles of Association of Firstar Bank, National
Association, as now in effect
3. A copy of the certificate of authority of The First National Bank
of Cincinnati (now Firstar Bank, National Association) to commence
business dated September 1, 1922.
4. A copy of the authorization of The First National Bank of
Cincinnati (now Firstar Bank, National Association) to exercise
corporate trust powers.
5. A copy of existing By-Laws to Star Bank, National Association (now
Firstar Bank, National Association)
6. The consent of the Trustee required by section 321 (b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of Firstar Bank, National
Association, published pursuant to law or the requirements of its
supervising or examining authority.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, the Trustee, Firstar Bank, National Association, a national
banking association organized and existing under the laws of the United
States of America, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Cincinnati and State of Ohio on the 27TH DAY OF
SEPTEMBER, 1999.
FIRSTAR BANK, NATIONAL ASSOCIATION
By: /s/ KEITH A. MAURMEIER
-----------------------------------------
KEITH A. MAURMEIER
VICE PRESIDENT & TRUST OFFICER
3
<PAGE>
EXHIBIT 1
Comptroller of the Currency
Administrator of National Banks
Central District Office
One Financial Place, Suite 2700
440 South LaSalle Street
Chicago, Illinois 60605
February 11, 1999
Mr. Richard J. Hidy
Vise president and
Deputy General Counsel
StarBanc Corporation
425 Walnut Street
P.O. Box 1038, ML 9140
Cincinnati, OH 45201-1038
Dear Mr. Hidy:
The Office of the Comptroller of the Currency has received your letter
concerning the title change and the appropriate amendment to the bank's articles
of association. The Office has recorded that as of FEBRUARY 12, 1999, the title
of STAR BANK, NATIONAL ASSOCIATION, CINCINNATI, OHIO, Charter No. 24, was
changed to "FIRSTAR BANK, NATIONAL ASSOCIATION."
As a result of the Garn-St. Germain Depository Institutions Act of 1982, the OCC
is no longer responsible for the approval of national bank name changes nor does
it maintain official records on the use of alternate titles. The use of other
titles or the retention of the rights to any previously used title is the
responsibility of the bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal and state law.
Sincerely,
/s/ David J. Rogers
National Bank Examiner
4
<PAGE>
EXHIBIT 2
FIRSTAR BANK, NATIONAL ASSOCIATION
CHARTER NO. 24
ARTICLES OF ASSOCIATION
FIRST: The title of this Association shall be "Firstar Bank, National
Association".
SECOND: The main office of the Association shall be in the city of Cincinnati,
County of Hamilton, State of Ohio. The general business of the Association shall
be conducted at its main office and its branches.
THIRD: The Board of Directors of this Association shall consist of not less than
five (5) nor more than twenty-five (25) shareholders, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time to time by resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting thereof. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
FOURTH: The annual meeting of the shareholders for the election of Directors and
the transaction of whatever other business may be brought before said meeting
shall be held at the main office or such other place as the Board of Directors
may designate, on the day of each year specified thereof by the Bylaws, but of
no election is held on that day, it may be held on any subsequent day according
to the provisions of law; and all elections shall be held according to the
provisions of law; and all elections shall be held according to such lawful
regulations as may be prescribed by the Board of Directors.
FIFTH: The authorized amount of capital stock of this Association shall be
3,640,000 shares of common stock of the par value of five dollars ($5.00) each,
but said capital stack may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association issued or sold, nor
any right of subscription to any thereof other than such, if any, as the Board
of Directors, in its discretion, may from time to time determine and at such
price as the Board of Directors may from time to time fix.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
5
<PAGE>
SIXTH: The Board of Directors shall appoint one of its members President of this
Association, who shall be Chairman of the Board, unless the Board appoints
another Director to be the Chairman. The Board of Directors shall have the power
to appoint one or more Vice Presidents; and to appoint a Cashier and such other
officers and employees as may be required to transact the business of this
Association. The Board of Directors shall have the power to define the duties of
the officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH: The Board of Directors, without need for approval of shareholders,
shall have the power to change the location of the main office of this
Association, subject to such limitations as from time to time may be provided by
law; and shall have the power to establish or change the location of any branch
or branches of the Association to any other location, without the approval of
the shareholders, but subject to the approval of the Comptroller of the
Currency.
EIGHTH: The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH: The Board of Directors of this Association, the Chairman of the Board,
the President, or any three of more shareholders owning, in the aggregate, not
less than twenty-five percent of the stock of this Association, may call a
special meeting of shareholders at any time. Unless otherwise provided by the
laws of the United States, a notice of the time, place, and purpose of every
annual and special meeting of the shareholders shall be given by first-class
mail, postage prepaid, mailed at least ten days prior to the date of such
meeting to each shareholder of record at his address as shown upon the books of
this Association.
TENTH: Any person, his heirs, executors, or administrators, may be indemnified
or reimbursed by the Association for reasonable expenses actually incurred in
connection with any action, suit, or proceeding, civil or criminal, to which he
or they shall be made a party by reason of his being or having been a director,
officer, or employee of the Association or of any firm, corporation, or
organization which he served in any such capacity at the request of the
Association. Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for gross
negligence, willful misconduct or criminal acts in the performance of his duties
to the Association. And, provided further, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding which has been made the subject of a compromise settlement except
with the approval of a court of competent jurisdiction, or the holders of record
of a majority of the outstanding shares of the Association, or the Board of
Directors, acting by vote of Directors not parties to the same or substantially
the same action, suit or proceeding, constituting a majority of the whole number
of Directors. And, provided further, that no director, officer or employee shall
be so indemnified or reimbursed for expenses, penalties or other payments
incurred in an administrative proceeding or action instituted by an appropriate
bank regulatory agency where said proceeding or action results in a final order
6
<PAGE>
TENTH (continued) assessing civil money penalties or requiring affirmative
action by an individual or individuals in the form of payments to this
Association. The foregoing right of indemnification shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators, may
be entitled as a matter of law. The Association may, upon the affirmative vote
of a majority of its Board of Directors, purchase insurance for the purpose of
indemnifying its directors, officers and other employees to the extent that such
indemnification is allowed in the preceding paragraph. Such insurance may, but
need not, be for the benefit of all directors, officers, or employees.
ELEVENTH: These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law and in that case by the vote of the holders
of such greater amount.
7
<PAGE>
EXHIBIT 3
COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS:
NO. 24
E Pluribus Unum
TREASURY DEPARTMENT
Office of Comptroller of the Currency
Washington, D.C., September 1, 1992
WHEREAS, the Act of Congress of the United States, entitled, "An Act to
amend section 5136, Revised Statutes of the United States, relating to corporate
powers of associations, so as to provide succession thereof for a period of
ninety-nine years or until dissolved, and to apply said section as so amended to
all national banking association", approved by the President on July 1, 1922,
provided that all national banking associations organized and operating under
any law of the United States on July 1, 1922 should have succession until
ninety-nine years from that date, unless such association should be sooner
dissolved by the act of its shareholders owning two-thirds of its stock, or
unless its franchise should become forfeited by reason of violation of law, or
unless it should be terminated by an Act of Congress hereinafter enacted;
NOW THEREFORE, I, D. R. CRISSINGER Comptroller of the Currency, do
hereby certify that THE FIRST NATIONAL BANK OF CINCINNATI and State of OHIO ,
was organized and operating under the laws of the United States on July 1, 1922,
and that its corporate existence was extended for the period of ninety-nine
years from that date in accordance with and subject to the condition in the Act
of Congress hereinbefore recited.
(SEAL) IN TESTIMONY WHEREOF, witness my hand
& seal of office this FIRST day of
SEPTEMBER, 1922
(Signed) D. R. CRISSINGER
-----------------------------
Comptroller of the Currency
8
<PAGE>
EXHIBIT 4
THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS:
FEDERAL RESERVE BOARD
Washington, D.C.
October 9, 1919
Pursuant to authority vested in the Federal Reserve Board by the Act of
Congress approved December 23, 1913, known as the Federal Reserve Act, as
amended by the Act of September 26, 1918, the
FIRST NATIONAL BANK OF CINCINNATI
has been granted the right to act, when not in contravention of State or local
law, as TRUSTEE, EXECUTOR, ADMINISTRATOR, REGISTRAR OF STOCKS AND BONDS,
GUARDIAN OF ESTATES, ASSIGNEE, RECEIVER OR IN ANY OTHER FIDUCIARY CAPACITY IN
WHICH STATE BANKS, TRUST COMPANIES OR OTHER CORPORATIONS WHICH COME INTO
COMPETITION WITH NATIONAL BANKS ARE PERMITTED TO ACT UNDER THE LAWS OF THE STATE
OF OHIO. The exercise of such rights shall be subject to regulations prescribed
by the Federal Reserve Board.
Federal Reserve Board,
By W. P. G. Harding
Governor.
ATTEST:
W. T. Chapman
Secretary.
STATE OF OHIO
DEPARTMENT OF BANKS AND BANKING
Certificate of Authority No. 17
NATIONAL BANKS
I, Philip C. Berg, Superintendent of Banks, do hereby certify that the
First National Bank of Cincinnati, Hamilton County, Ohio has complied with all
the requirements provided by law and is authorized to transact the business of a
trust company and to perform all the functions granted to such companies by the
laws of this state.
Given under my hand and official Seal at Columbus,
Ohio, this twenty-fifth day of November, A.D. 1919
Philip C. Berg,
Superintendent of Banks.
(SEAL)
9
<PAGE>
EXHIBIT 5
BY-LAWS
STAR BANK, N.A.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING
The annual meeting of shareholders shall be held in the main banking house of
the Association at 11:00 a.m. on the second Tuesday in February of each year.
Notice of such meeting shall be mailed to shareholders not less than ten (10)
nor more than sixty (60) days prior to the meeting date.
SECTION 2. SPECIAL MEETINGS
Special meetings of shareholders may be called and held at such times and upon
such notice as is specified in the Articles of Association.
SECTION 3. QUORUM
A majority of the outstanding capital stock represented in person or by proxy
shall constitute a quorum of any meeting of the shareholders, unless otherwise
provided by law, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held as adjourned without further notice.
SECTION 4. INSPECTORS
The Board of Directors may, and in the event of its failure so to do, the
Chairman of the Board shall appoint Inspectors of Election who shall determine
the presence of a quorum, the validity of proxies, and the results of all
elections and all other matters voted upon by shareholders at all annual and
special meetings of shareholders.
SECTION 5. VOTING
In deciding on questions at meetings of shareholders, except in the election of
directors, each shareholder shall be entitled to one vote for each share of
stock held. A majority of votes cast shall decide each matter submitted to the
shareholders, except where by law a larger vote is required. In all elections of
directors, each shareholder shall have the right to vote the number of shares
owned by him for as many persons as there are directors to be elected, or to
cumulate such shares and give one candidate as many votes as the number of
directors multiplied by the number of his shares equal, or to distribute them on
the same principle among as many candidates as he shall think fit.
10
<PAGE>
SECTION 6. WAIVER AND CONSENT
The shareholders may act without notice and/or a meeting by a unanimous written
consent by all shareholders.
ARTICLE II
SECTION 1. TERM OF OFFICE
The directors of this Association shall hold office for one year and until their
successors are duly elected and qualified.
SECTION 2. REGULAR MEETINGS
The organization meeting of the Board of Directors shall be held as soon as
practical following the annual meeting of shareholders at the main banking
house. Other regular meetings of the Board of Directors shall be held without
notice at 11:00 a.m. on the second Tuesday of each month except February, at the
main banking house, or, provided notice is given by telegram, letter, telephone
or in person to every Director, at such time and place as may be designated in
the notice of the meeting. When any regular meeting of the Board falls on a
holiday, the meeting shall be held on the next banking business day, unless the
Board shall designate some other day.
SECTION 3. SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by the Chairman of the
Board of the Association, or at the request of three or more Directors. Notice
of the time, place and purposes of such meetings shall be given by telegram,
letter, telephone or in person to every Director.
SECTION 4. QUORUM
A majority of the entire membership of the Board shall constitute a quorum at
any meeting of the Board.
SECTION 5. NECESSARY VOTE
A majority of those Directors present and voting at any meeting of the Board of
Directors shall decide each matter considered, except where otherwise required
by law or the Articles or By-Laws of this Association.
SECTION 6. COMPENSATION
Directors, excluding full-time employees of the Bank, shall receive such
reasonable compensation as may be fixed from time to time by the Board of
Directors.
SECTION 7. ELECTION-AGE LIMITATION
No person shall be elected or reelected a Director after reaching his seventieth
(70th) birthday, provided that any person who is a Director on December 10,
1985, may continue to be reelected
11
<PAGE>
SECTION 7. ELECTION-AGE LIMITATION (continued)
a Director until he reaches his seventy-fifth (75th) birthday.
SECTION 8 RETIREMENT-AGE LIMITATION
Every Director of the Bank shall retire no later than the first month next
following his seventieth (70th) birthday, except for any person who was a
Director on December 10, 1985, who shall retire not later that the first of the
next month following his seventy-fifth (75th) birthday.
SECTION 9 DIRECTORS EMERITUS
The Board shall have the right from time to time to choose as Directors Emeritus
persons who have had prior service as members of the Board and who may receive
such compensation as shall be fixed from time to time by the Board of Directors.
ARTICLE III
OFFICERS
SECTION 1 WHO SHALL CONSTITUTE
The Officers of the Association shall be a Chairman of the Board, a President, a
Secretary, and other officers such as Chairman of the Executive Committee, Vice
Chairman of the Board, Executive Vice Presidents, Senior Vice Presidents, Vice
Presidents, Assistant Secretaries, Trust Officers, Trust Investment Officers,
Trust Real Estate Officers, Assistant Trust Officers, a Controller, Assistant
Controller, an Auditor and Assistant Auditors, as the Board may appoint from
time to time. Any person may hold two offices. The Chairman of the Board, all
Vice Chairmen of the Board and the President shall at all times be members of
the Board of Directors.
SECTION 2 TERM OF OFFICE
All officers shall be elected for and shall hold office for one year and until
their successors are elected and qualified, subject to the right in the Board of
Directors by a majority vote of the entire membership to discharge any officer
at any time.
SECTION 3. CHAIRMAN OF THE BOARD
The Chairman of the Board shall have general executive powers and duties and
shall perform such other duties as may be assigned from time to time by the
Board of Directors. In addition, unless the Board of Directors shall have
designated the President to be the Chief Executive Officer, the Chairman of the
Board shall be the Chairman Executive Officer and shall have all the powers and
duties of the Chief Executive Officer. He shall, when present, preside at all
meetings of shareholders and directors and shall be ex officio a member of all
committees of the Board. He shall name all members of the committees of the
Board, subject to the confirmation thereof by the Board.
12
<PAGE>
SECTION 3. CHAIRMAN OFTHE BOARD (continued)
If he is Chief Executive Officer, in the event that there is a vacancy in the
position of President or in the event of the absence or incapacity of the
President, the Chairman may appoint, or in the event of his failure to do so,
the Board of Directors or the Executive Committee thereof may designate any Vice
Chairman of the Board, any Executive Vice President or any Senior Vice President
of the Association temporarily to exercise the powers and perform the duties of
the Chairman as Chief Executive Officer when the Chairman is absent or
incapacitated.
If the President has been designated Chief Executive Officer by the Board of
Directors, in the event that there is a vacancy in the position of the President
or in the event of the absence or incapacity of the President, the Chairman
shall be the Chief Executive Officer of the Association and shall have all the
powers and perform all the duties of the President, including the powers to name
temporarily a Chief Executive Officer to serve in the absence of the Chairman.
SECTION 4 PRESIDENT
The President shall have general executive powers and duties and shall perform
such other duties as may be assigned from time to time by the Board of
Directors. In addition, if designated by the Board of Directors, the President
shall be the Chief Executive Officer and shall have all the powers and duties of
the Chief Executive Officer, including the same power to name temporarily a
Chief Executive Officer to serve in the absence of the president if there is a
vacancy in the position of the Chairman or in the event of the absence or
incapacity of the Chairman.
If the Chairman has been designated Chief Executive Officer by the Board of
Directors, in the event that there is a vacancy in the position of the Chairman
of the Board or in the event of the absence or incapacity of the Chairman of the
Board, the President shall be the Chief Executive Officer of the Association and
shall have all the powers and perform all the duties of the Chairman of the
Board, including the same power to name temporarily a Chief Executive Officer to
serve in the absence of the President.
SECTION 5 CHAIRMAN OF THE EXECUTIVE COMMITTEE
The Board of Directors shall have the power to elect a Chairman of the Executive
Committee. Any such Chairman of the Executive Committee shall participate in the
formation of the policies of the Association and shall have such other duties as
may be assigned to him from time to time by the President or by the Board of
Directors.
SECTION 6 VICE CHAIRMEN OF THE BOARD
The Board of Directors shall have the power to elect one or more Vice Chairmen
of the Board of Directors. Any such Vice Chairmen of the Board shall participate
in the formation of the policies of the Association and shall have such other
duties as may be assigned to him from time to time by the Chairman of the Board
or by the Board of Directors.
13
<PAGE>
SECTION 7 OTHER OFFICERS
The Secretary and all other officers appointed by the Board of Directors shall
have such duties as defined by law and as may from time to time be assigned to
them by the Chief Executive Officer or the Board of Directors.
SECTION 8 RETIREMENT
Every officer of the Association shall retire not later than the first of the
month next following his sixty-fifth (65th) birthday. The Board of Directors
may, in its discretion, set the retirement date and terms of retirement of an
officer at a date later than provided above.
ARTICLE IV
COMMITTEES
SECTION 1 EXECUTIVE COMMITTEE
There shall be a standing committee of Directors in this Association to be known
as the Executive Committee. This Committee shall meet at 11:00 a.m. on the first
and fourth Tuesday of each month. It shall have all of the powers of the Board
of Directors between meetings of the Board, except as the Board only by law is
authorized to perform or exercise. All actions of the Executive Committee shall
be reported to the Board of Directors.
In the event that any member of the Executive Committee is unable to attend a
meeting of that committee, the Chairman of the Board or the President may, at
his discretion, appoint another Director to attend said meeting of the Executive
Committee and for that meeting to serve as a member of the Executive Committee
with full power to act in place of the absent regular member of the committee.
SECTION 2 COMPENSATION COMMITTEE
There shall be a standing committee of directors of this Association to be known
as the Compensation Committee who shall review the compensation of all Executive
Officers and those officers who participate in the Profit Sharing Pool as well
as fees for directors of the Association. They will recommend specific
compensation arrangements to the Board of Directors for their confirmation.
SECTION 3 COMMITTEE ON AUDIT
There shall be a standing committee of Directors of this Association to be known
as the Committee on Audit, none of whose members shall be active officers of the
Association. This Committee shall make or cause to be made a suitable
examination of the affairs of the
14
<PAGE>
SECTION 3. COMMITTEE ON AUDIT (continued)
Association and the Trust Department at least once during each period of twelve
months. The results of such examination shall be reported in writing to the
Board at the next regular meeting thereafter stating whether the Association
and/or Trust Department is in a sound solvent condition, whether adequate
internal audit controls and procedures are being maintained and make such
recommendations as it deems advisable.
SECTION 4 TRUST COMMITTEE
There shall be a standing committee of Directors of this Association to be known
as the Trust Committee. The Trust Committee shall determine policies of the
Department and review actions of the Trust Investment Committee. All actions of
the Trust Committee shall be reported to the Board of Directors.
SECTION 5 TRUST INVESTMENT COMMITTEE
There shall be a standing committee of this Association to be known as the Trust
Investment Committee composed of officers of the Association. The Trust
Investment Committee OR SUCH OFFICERS AS MAY BE DULY DESIGNATED BY THE TRUST
INVESTMENT COMMITTEE, shall pass upon the acceptance of all trusts, the closing
out or relinquishment of all trusts and the making, retention, or disposition of
all investments of trust funds in conformity with policies established by the
Trust Committee. Actions of the Trust Investment Committee shall be reported to
the Trust Committee.
SECTION 6 PENSION COMMITTEE
There shall be a standing committee of directors or officers of this Association
to be known as the Pension Committee, who shall have the powers and duties as
set forth in the Association's Employees' Pension Plan. A report of the
condition of the pension fund shall be submitted annually to the Board of
Directors.
SECTION 7 OTHER COMMITTEES
The Chairman may appoint, from time to time, other committees for such purposes
and with such powers as he or the Board may direct.
15
<PAGE>
ARTICLE V
SEAL
SECTION 1 IMPRESSION
The following is an impression of the seal of this Association.
February 27, 1992
RESOLVED, That Article I, Section 1, Article II, Section 2 and Article IV,
Section 5 of the By-Laws of the Association be amended to state as follows:
ARTICLE I
SECTION 1 ANNUAL MEETING
The annual meeting of the shareholders shall be held in the main banking house
of the Association at 11:00 a.m. on the second Tuesday in March of each year.
Notice of such meeting shall be mailed to shareholders not less than ten (10)
nor more than sixty (60) days prior to the meeting date.
ARTICLE II
SECTION 2. REGULAR MEETINGS
The organizational meeting of the Board of directors shall be held on the same
date as soon as practical following the annual meeting of shareholders at the
main banking house. Other regular meetings of the Board of Directors shall be
held without notice at 11:00 a.m. on the second Tuesday of June, September, and
December, at the main banking house, or, provided notice given by telegram,
letter, telephone or in person to every Director, at such time and place as may
be designated in the notice of the meeting. When any regular meeting of the
Board falls on a holiday, the meeting shall be held on the next banking business
day, unless the Board shall designate some other day.
ARTICLE IV
SECTION 5. TRUST POLICY COMMITTEE
There shall be a standing committee of this association to be known as the Trust
Policy Committee composed of officers of the Association. The Trust Policy
Committee OR SUCH OFFICERS AS MAY BE DULY DESIGNATED BY THE TRUST POLICY
COMMITTEE, shall pass upon the acceptance of all trusts, the closing out or
relinquishment of all trusts and the making, retention, or disposition of all
investments of trust funds in conformity with policies established by the Trust
Committee. Actions of the Trust policy committee shall be reported to the Trust
Committee.
16
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE
REQUIRED BY 321 (B) OF THE ACT
Firstar Bank, National Association, the Trustee executing the statement
of eligibility and qualification to which this Exhibit is attached does hereby
consent that reports of examinations of the undersigned by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor in accordance with the
provisions of 321 (b) of the Trust Indenture Act of 1939.
FIRSTAR BANK, NATIONAL ASSOCIATION
SEPTEMBER 27, 1999 BY: /s/ KEITH A. MAURMEIER
------------------ --------------------------------
Date KEITH A. MAURMEIER
VICE PRESIDENT & TRUST OFFICER
17
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION
FIRSTAR BANK, N. A.
FOR JUNE 30, 1999
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, report the amount outstanding
as of the last business day of the quarter.
BALANCE SHEET
<TABLE>
<CAPTION>
Dollar Amounts in
Thousands
<S> <C>
ASSETS
1. Cash and balances due from depository institutions
a. Noninterest-bearing balances and currency and coin $1,230,334
b. Interest-bearing balances 63,430
2. Securities:
a. Held-to-maturity securities 131,479
b. Available-for-sale securities 3,348,238
3. Federal funds sold and securities purchased under agreements to resell 638,933
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income 15,955,793
b. LESS: Allowance for loan and lease losses 211,901
c. LESS: Allocated transfer risk reserve 0
d. Loans and leases, net of unearned income, allowance, and reserve 15,743,892
5. Trading assets 1,001
6. Premises and fixed assets (including capitalized leases) 361,606
7. Other real estate owned 5,321
8. Investments in unconsolidated subsidiaries and associated companies 5,689
9. Customers' liability to this bank on acceptances outstanding 13,419
10. Intangible assets 797,761
11. Other assets 964,742
12. Total assets $23,305,845
</TABLE>
18
<PAGE>
EXHIBIT 7 CONTINUED
CONSOLIDATED REPORT OF CONDITION
FIRSTAR BANK, N. A.
FOR JUNE 30, 1999 CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices $17,348,305
(1) Noninterest-bearing 2,831,146
(2) Interest-bearing 14,517,159
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs 67,135
(1) Noninterest-bearing 0
(2) Interest-bearing 67,135
14. Federal funds purchased and securities sold under agreements 1,880,867
to repurchase
15. a. Demand notes issued to the U.S. Treasury 93,837
b. Trading liabilities 0
16. Other borrowed money:
a. With a remaining maturity of one year or less 428,855
b. With a remaining maturity of more than one year through 350,835
three years
c. With a remaining maturity of more than three years 101,550
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 13,419
19. Subordinated notes and debentures 460,092
20. Other liabilities 435,036
21. Total liabilities 21,179,931
22. Not applicable
23. Perpetual preferred stock and related surplus 0
24. Common Stock 89,800
25. Surplus [exclude all surplus related to preferred stock] 1,187,086
26. a. Undivided profits and capital reserves 839,211
b. Net unrealized holding gains (losses) on 9,817
available-for-sale securities
b. Net unrealized holding gains (losses) on 0
available-for-sale securities
27. Cumulative foreign currency translation adjustments 0
28. Total equity capital 2,125,914
29. Total liabilities, limited-life preferred stock, and equity $23,305,845
capital
</TABLE>
19
